<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

(Mark One)
[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 [Fee Required]

For the fiscal year ended    December 31, 2000                             or
                           -----------------------------------------------

[_]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 [No Fee Required]

For the transition period from to __________________ to _______________________
Commission file number            0-17876

                         WELLS REAL ESTATE FUND II-OW
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                        <C>
                              Georgia                                                         58-1754703
-----------------------------------------------------------------          ------------------------------------------------
(State or other jurisdiction of incorporation or organization)                 (I.R.S. Employer Identification Number)


6200 The Corners Parkway, Norcross, Georgia                                                     30092
-----------------------------------------------------------------          ------------------------------------------------
(Address of principal executive offices)                                                      (Zip Code)

Registrant's telephone number, including area                                               (770) 449-7800
code Securities registered pursuant to Section 12 (b) of the Act:          ------------------------------------------------

                       Title of each class                                       Name of exchange on which registered
-----------------------------------------------------------------          ------------------------------------------------
                              NONE                                                               NONE
-----------------------------------------------------------------          ------------------------------------------------
</TABLE>

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

                                 CLASS A UNITS
--------------------------------------------------------------------------------
                               (Title of Class)
--------------------------------------------------------------------------------
                                 CLASS B UNITS
--------------------------------------------------------------------------------
                               (Title of Class)

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 ____
    ----

Aggregate market value of the voting stock held by nonaffiliates: Not Applicable
                                                                  --------------
<PAGE>

                                    PART I

ITEM 1.  BUSINESS

General

Wells Real Estate Fund II-OW (the "Partnership") is a Georgia public limited
partnership having Leo F. Wells, III and Wells Capital, Inc., a Georgia
corporation, as General Partners. The Partnership was formed on October 13,
1987, for the purpose of acquiring, developing, constructing, owning, operating,
improving, leasing and otherwise managing for investment purposes income-
producing commercial or industrial properties.

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, and received gross proceeds of $1,922,000 representing subscriptions
from 219 Limited Partners, composed of two classes of limited partnership
interests, Class A and Class B limited partnership units.

The Partnership owns equity interests in properties through its ownership in the
following joint ventures: (i) Fund II-Fund II-OW Joint Venture, a joint venture
between the Partnership and Wells Real Estate Fund II (the "Fund II-Fund II-OW
Joint Venture"); (ii) Fund II-Fund III Joint Venture, a joint venture between
the Fund II-Fund II-OW Joint Venture and Wells Real Estate Fund III, L.P. (the
"Fund II-Fund III Joint Venture"); (iii) Fund II-III-VI-VII Associates, a joint
venture among the Fund II-Fund III Joint Venture, Wells Real Estate Fund VI,
L.P., and Wells Real Estate Fund VII, L.P. (the "Fund II, III, VI, VII Joint
Venture"); (iv) Fund I-Fund II Joint Venture, a joint venture between the Fund
II-Fund II-OW Joint Venture and Wells Real Estate Fund I ("the Tucker Joint
Venture"); and (v) Fund I, II, II-OW, VI, VII Associates, a joint venture among
Wells Real Estate Fund I, the Fund II-Fund II-OW Joint Venture, Wells Real
Estate Fund VI, L.P., and Wells Real Estate Fund VII, L.P. (the "Fund I, II, II-
OW, VI, VII Joint Venture").

As of December 31, 2000 the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a two-
story office building located in Charlotte, North Carolina ("First Union at
Charlotte"); (ii) a four-story office building located in metropolitan Houston,
Texas (the "Atrium"); (iii) a restaurant located in Fulton County, Georgia ("the
Brookwood Grill"); (iv) an office/retail center in Fulton County, Georgia
("Holcomb Bridge Road"); (v) a retail shopping and commercial office complex
located in Tucker, Georgia ("Heritage Place at Tucker"); and (vi) a shopping
center located in Cherokee County, Georgia ("Cherokee Commons").  All of the
foregoing properties were acquired on an all cash basis.

Employees

The Partnership has no direct employees. The employees of Wells Capital, Inc., a
General Partner of the Partnership, perform a full range of real estate services
including leasing and property management, accounting, asset management and
investor relations for the Partnership. See Item 11--"Compensation of General
Partners and Affiliates" for a summary of the fees paid to the General Partners
and their affiliates during the fiscal year ended December 31, 2000.

                                      -2-
<PAGE>

Insurance

Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all the properties
owned directly or indirectly by the Partnership.  In the opinion of management,
the properties are adequately insured.

Competition

The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the General Partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements, and other inducements, all of which may
have an adverse impact on results of operations. At the time the Partnership
elects to dispose of its properties, the Partnership will also be in competition
with sellers of similar properties to locate suitable purchasers for its
properties.

ITEM 2.  PROPERTIES

The Partnership owns all of its properties through a joint venture (the "Fund
II-Fund II-OW Joint Venture") formed on March 1, 1988, between the Partnership
and Wells Real Estate Fund II ("Well Fund II"). Wells Fund II is a Georgia
public limited partnership affiliated with the Partnership through common
general partners. The investment objectives of Wells Fund II are substantially
identical to those of the Partnership. As of December 31, 2000, the
Partnership's equity interest in the Fund II-Fund II-OW Joint Venture was
approximately 5% and the equity interest of Wells Fund II was approximately 95%.
The Partnership does not have control over the operations of the joint ventures;
however, it does exercise significant influence. Accordingly, investment in
joint ventures is recorded on the equity method.

Of the six properties owned by the joint venture, three are retail shopping
centers, two are office buildings and one is a restaurant. As of December 31,
2000, these properties were 98% occupied. As of December 31, 1999, these
properties were 97% occupied. As of December 31, 1998, these properties were 95%
occupied.

                                      -3-
<PAGE>

The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 2000, assuming no exercise of renewal options
or termination rights:

<TABLE>
<CAPTION>
                                                                            Partnership          Percentage           Percentage
                      Number                                                  Share of            of Total             of Total
   Year of              of             Square            Annualized          Annualized            Square             Annualized
    Lease             Leases            Feet             Gross Base          Gross Base             Feet              Gross Base
 Expiration          Expiring         Expiring            Rent (1)            Rent (1)            Expiring               Rent
-------------       ----------       -----------        ------------          --------            ---------           -----------
<S>                 <C>              <C>                <C>                   <C>                 <C>                 <C>
    2001(2)             17             105,196          $ 1,407,088           $ 56,240                31.0%                30.1%
    2002(3)             18             164,079            2,232,883             59,368                48.4                 47.7
    2003                15              24,222              325,979              8,308                 7.1                  7.0
    2004                12              25,641              387,017              7,712                 7.7                  8.3
    2005                 2               4,540               61,629              1,575                 1.3                  1.3
    2006                 1               5,935              127,575              1,008                 1.7                  2.7
    2007                 1               3,600               46,793              1,357                 1.1                  1.0
    2008                 1               2,400               27,384                652                 0.7                  0.6
    2009                 0                   0                    0                  0                 0.0                  0.0
    2010                 1               3,531               61,969              1,475                 1.0                  1.3
                    -----------      ------------       ------------          ----------          ------------        -----------
                        68             339,144          $ 4,678,317           $137,695               100.0%               100.0%
                    ===========      ============       ============          ==========          ============        ===========
</TABLE>

               (1)  Average monthly gross rent over the life of the lease,
                    annualized.

               (2)  Expiration of First Union Bank with 70,752 square feet at
                    the First Union project.

               (3)  Expiration of Boeing Company lease with 119,040 square feet
                    at the Atrium.

The following describes the properties in which the Partnership owns an interest
as of December 31, 2000:

          The First Union Property/Fund II-Fund II-OW Joint Venture

          On May 9, 1988, the Fund II-Fund II-OW Joint Venture acquired a two-
          story building containing approximately 70,752 net leaseable square
          feet, located on a 9.54 acre tract of land located in Charlotte,
          Mecklenburg County, North Carolina (the "Charlotte Property") for a
          purchase price of $8,550,000.

          On May 1, 1994, First Union Bank assumed occupancy of the First Union
          Property under a lease which expires April 30, 2001. The principal
          terms of the lease provide for First Union's sole tenancy of the
          project as a regional operations center for the initial term of seven
          years. Because First Union Bank invested approximately $1 million on
          tenant improvements at the First Union Property, a lower rental rate
          was accepted for the first five years of the lease term.

          The annual base rent during the initial term is $412,705 payable in
          equal monthly installments of $34,392 during the first two years,
          annual base rent of $454,651 payable in equal monthly installments of
          $37,887 during the third year, annual base rent of $489,650 payable in
          equal monthly installments of $40,804 during the fourth year and
          annual base rent of $524,625 payable in equal monthly installments of
          $43,718 during the fifth year. Rental rates during the remaining two
          years of the lease term will be determined by market rates which is
          $844,071 payable in equal monthly installments of $70,339 for the last
          two years.

          The occupancy rates at the Charlotte Property as of December 31 were
          100% in 2000, 1999, and 1998.

                                      -4-
<PAGE>

          The average effective annual rental per square foot at the First Union
          Property was $11.93 for 2000, $10.14 for 1999, $6.49 for 1998 and
          1997, and $6.51 for 1996.

          The Atrium/Fund II--Fund III Joint Venture

          On April 3, 1989, the Fund II-Fund II-OW Joint Venture formed a joint
          venture (the "Fund II-Fund III Joint Venture") with Wells Real Estate
          Fund III, L.P. ("Wells Fund III"), a public Georgia limited
          partnership affiliated with the Partnership through common general
          partners. The investment objectives of Wells Fund III are
          substantially identical to those of the Partnership.

          In April 1989, the Fund II-Fund III Joint Venture acquired a four-
          story office building located on a 5.6 acre tract of land adjacent to
          the Johnson Space Center in metropolitan Houston, in the City of
          Nassau Bay, Harris County, Texas, know as "The Atrium at Nassau Bay"
          (the "Atrium").

          The funds used by the Fund II-Fund III Joint Venture to acquire the
          Atrium were derived from capital contributions made to the Fund II-
          Fund III Joint Venture by the Fund II-Fund II-OW Joint Venture and
          Wells Fund III in the amounts of $8,327,856 and $2,538,000,
          respectively, for total initial capital contributions of $10,865,856.
          As of December 31, 2000, the Fund II-Fund II-OW Joint Venture and
          Wells Fund III had made total capital contributions to the Fund II-
          Fund III Joint Venture of approximately $8,330,000 and $4,448,000,
          respectively, for the acquisition and development of the Atrium.

          The Atrium was first occupied in 1987 and contains approximately
          119,000 net leaseable square feet. Each floor of the Atrium was
          originally under a separate lease to Lockheed Engineering and Science
          Company, Inc., a wholly-owned subsidiary of the Lockheed Company, each
          of which leases had terms of approximately eight years and expired
          June 30, 1996, and upon which date Lockheed vacated the property.

          On March 3, 1997, a lease was signed with The Boeing Company for the
          entire Atrium building. The lease is for a period of five years with
          an option to renew for an additional five year term. The rental rate
          for the first three years of the lease term is $12.25 per square foot
          and $12.50 per square foot for the final two years of initial lease
          term. The rate for the optional five year term will be determined
          based upon then current market rates. Upon 150 day prior written
          notice, Boeing has the right to cancel its lease in the event that
          NASA or another prime contractor were to cancel or substantially
          reduce its contract. In addition, there is a no-cause cancellation
          provision at the end of the first three year period. This no-cause
          cancellation was not exercised. The lease also provides that tenant
          will pay certain operating expenses in excess of $5.50 per square foot
          on an annual basis.

          Boeing began the move-in phase of its occupancy on April 15, 1997, and
          occupied the Atrium and began paying rent on May 15, 1997. The total
          cost of completing the required tenant improvements and outside broker
          commissions of approximately $1.4 million was funded out of reserves
          and cash flows of the Partnership, Wells Fund II-OW and Wells Fund
          III. As of December 31, 2000, the Partnership had contributed
          approximately $21,744, Wells Fund II had contributed approximately
          $387,752, Wells Fund III had contributed approximately $659,810, and
          the Fund II - Fund III Joint Venture had contributed $330,694 to Fund
          the tenant improvements and outside broker commissions required. As of
          December 31, 2000, the Fund II- Fund II-OW Joint Venture holds
          approximately 61%, and Wells Fund III holds approximately 39%.

                                      -5-
<PAGE>

          The occupancy rate at the Atrium property was 100% as of December 31,
          2000, 1999, and 1998. The average effective rental per square foot at
          the Atrium is $12.34 for 2000, $12.35 for 1999 and 1998, $7.77 for
          1997, and $8.81 for 1996.

          The Brookwood Grill Property/Fund II - Fund III Joint Venture

          On January 31, 1990, the Fund II-Fund II-OW Joint Venture acquired a
          5.8 acre tract of undeveloped real property at the intersection of
          Warsaw Road and Holcomb Bridge Road in Roswell, Fulton County, Georgia
          (the "Holcomb Bridge Road Property"). The Fund II - Fund II-OW Joint
          Venture paid $1,848,561, including acquisition expenses, for the 5.8
          acre tract of undeveloped property.

          On September 20, 1991, the Fund II-Fund II-OW Joint Venture
          contributed approximately 1.5 acres of the Holcomb Bridge Road
          Property (the "Brookwood Grill Property"), along with its interest as
          landlord under the lease agreement referred to below, as a capital
          contribution to the Fund II-Fund III Joint Venture. As of September
          20, 1991, the Fund II-Fund II-OW Joint Venture had expended
          approximately $2,128,000 for the land acquisition and development of
          the Brookwood Grill Property.

          As of September 20, 1991, a lease agreement was entered into with the
          Brookwood Grill of Roswell, Inc. for the development of approximately
          1.5 acres and the construction of a 7,440 square foot restaurant. This
          restaurant, which opened early in March 1992, is similar in concept to
          Houston's, Ruby Tuesday, and Friday's. It is principally owned by
          David Rowe, an Atlanta real estate developer of Kroger shopping
          centers, and several operating partners, formerly with Houston's. The
          terms of the lease call for an initial term of 9 years and 11 months,
          with two additional 10-year option periods. In January 2001, the
          tenant renewed a ten-year lease with a base rental of $286,983 per
          year for years one through five, and $330,030 per year for years six
          through ten. The Fund II-Fund III Joint Venture has expended
          approximately $1,100,000 for the development and construction of the
          restaurant building together with parking areas, driveways,
          landscaping, and other improvements. In addition to the base rent
          described above, the tenant is required to pay additional rent in
          amounts equal to a 12% per annum return on all amounts expended for
          such improvements.

          The occupancy rate for the Brookwood Grill, a sole tenant, was 100% as
          of December 31, 2000, 1999, and 1998. The average effective rental per
          square foot at the Brookwood Grill is $30.22 for 2000 and 1999, $30.26
          for 1998 and 1997, and $30.29 for 1996.

          As of December 31, 1999, the Fund II-Fund II-OW Joint Venture and
          Wells Fund III had made total contributions to the Fund II-Fund III
          Joint Venture of approximately $2,128,000 and $1,330,000,
          respectively, for the acquisition and development of the Brookwood
          Grill. The Fund II-Fund II-OW Joint Venture holds an approximately 62%
          equity interest in the Brookwood Grill Property, and Wells Fund III
          holds an approximately 38% equity interest in the project.

          On January 10, 1995, the remaining 4.3 undeveloped acres of land
          comprising the Holcomb Bridge Road Property was contributed to a new
          joint venture, Fund II, III, VI, and VII Associates by Fund II-Fund
          III Joint Venture. This property is described below.

          Holcomb Bridge Road Property/Fund II, III, VI and VII Associates

          On January 10, 1995, Fund II-Fund III Joint Venture, Wells Real Estate
          Fund VI , L.P. ("Wells Fund VI"), a Georgia public limited partnership
          having Leo F. Wells, III and Wells Partners,

                                      -6-
<PAGE>

          L.P., a Georgia limited partnership, as general partners, and Wells
          Real Estate Fund VII, L.P. ("Wells Fund VII"), a Georgia public
          limited partnership having Leo F. Wells, III and Wells Partners, L.P.,
          a Georgia limited partnership, as general partners, entered into a
          Joint Venture Agreement known as Fund II, III, VI and VII Associates
          ("Fund II, III, VI and VII Joint Venture"). Wells Partners, L.P. is a
          private limited partnership having Wells Capital, Inc., a General
          Partner of the Partnership, as its sole general partner. The
          investment objectives of Wells Fund VI and Wells Fund VII are
          substantially identical to those of the Partnership.

          In January 1995, the Fund II-Fund III Joint Venture contributed to the
          Fund II-III-VI-VII Joint Venture approximately 4.3 acres of land at
          the intersection of Warsaw Road and Holcomb Bridge Road in Roswell,
          Fulton County, Georgia (the "Holcomb Bridge Road Property") including
          land improvements for the development and construction on two
          buildings with a total of 49,534 square feet. Fourteen tenants
          occupied the Holcomb Bridge Road Property as of December 31, 2000 for
          an occupancy rate of 92% in 2000, 100% in 1999, and 94% in 1998. The
          average effective annual rental per square foot at the Holcomb Bridge
          Property was $17.55 for 2000, $19.36 for 1999, $17.63 for 1998, $13.71
          for 1997, and $9.87 for 1996.

          As of December 31, 2000, Fund II and Fund III Joint Venture had
          contributed $1,729,116 in land and improvements for an equity interest
          of approximately 24.1%, Wells Fund VI had contributed $1,929,541 for
          an equity interest of approximately 26.9%, and Wells Fund VII had
          contributed $3,525,041 for an equity interest of approximately 49.0%.
          The total cost to develop the Holcomb Bridge Road Property was
          $5,454,582, excluding land.

          Tucker Property/Fund I - Fund II Joint Venture

          The Tucker Property consists of a retail shopping center and a
          commercial office building complex located in Tucker, DeKalb County,
          Georgia (the "Tucker Property"). The retail shopping center at the
          Tucker Property contains approximately 29,858 net leaseable square
          feet. The commercial office space at the Tucker Property, which is
          divided into seven separate buildings, contains approximately 67,465
          net leaseable square feet.

          On January 9, 1987, the Partnership acquired an interest in the Tucker
          Property which was acquired by a joint venture (the "Tucker Joint
          Venture") originally between the Partnership and Wells Real Estate
          Fund I ("Wells Fund I"). Wells Fund I is a Georgia public limited
          partnership affiliated with the Partnership through common general
          partners. The investment objectives of Wells Fund I are substantially
          identical to those of the Partnership. Upon the formation of the Fund
          II-Fund II-OW Joint Venture in March 1988, the Partnership contributed
          its joint venture interest in the Tucker Joint Venture to the Fund II-
          Fund II-OW Joint Venture as a part of its capital contribution. On
          January 1, 1991, the Cherokee Joint Venture, which is defined below,
          was merged into the Tucker Joint Venture forming a new joint venture
          (the "Tucker-Cherokee Joint Venture"). As described below, the
          Cherokee Joint Venture was also a joint venture between the Fund II-
          Fund II-OW Joint Venture and Wells Fund I. Under the terms of the
          Amended and Restated Joint Venture Agreement of Fund I and Fund II
          Tucker-Cherokee, the percentage interest of the Fund II-Fund II-OW
          Joint Venture in the Tucker Project remained unchanged as a result of
          the merger of the Tucker Joint Venture into the Tucker-Cherokee Joint
          Venture.

          On August 1, 1995, Wells Fund I and the Fund II-Fund-II-OW Joint
          Venture entered into another amendment to effect the contribution of
          the Cherokee Project to the Fund I, II, II-OW, VI, VII Joint Venture,
          as described below. As a result, the name of the joint venture owning
          the Tucker Property was changed back to "Fund I and Fund II Tucker,"
          and is therefore no longer merged

                                      -7-
<PAGE>

          with the Cherokee Joint Venture. The Partnership's percentage interest
          in the Tucker Project remained unchanged as a result of the
          transaction.

          Both Wells Fund I and the Fund II-Fund II-OW Joint Venture have funded
          the cost of completing the Tucker Property through capital
          contributions which have been paid as progressive stages of
          construction were completed. As of December 31, 2000, Wells Fund I had
          contributed a total of $6,194,634, and the Fund II-Fund II-OW Joint
          Venture had contributed a total of $4,764,585 for the acquisition and
          development of the Tucker Property. As of December 31, 2000, Wells
          Fund I had an approximate 55% equity interest in the Tucker Property
          and the Fund II-Fund II-OW Joint Venture had an approximate 45% equity
          interest in the Tucker Property. As of December 31, 2000, the Tucker
          Property was 89% occupied by 36 tenants.

          There are no tenants in the property occupying ten percent or more of
          the rentable square footage. The principal businesses, occupations,
          and professions carried on in the building are typical retail
          shopping/commercial office services.

          The occupancy rate at the Tucker Property was 89% in 2000, 87% in
          1999, and 94% in 1998.

          The average effective annual rental per square foot at the Tucker
          Property was $14.29 for 2000, $14.11 for 1999, $12.76 for 1998, $11.08
          for 1997, and $13.78 for 1996.

          This property is currently being marketed for sale by The First
          Fidelity Companies. The management team is considering separating the
          retail and creating a condominium for the office buildings. The legal
          and site work have been completed so that the management team can
          market this property to investors. The Partnership's goal is to have
          this property sold by the end of 2002.

          Cherokee Property/Fund I, II, II-OW, VI, VII Joint Venture

          The Cherokee Property consists of a retail shopping center known as
          "Cherokee Commons Shopping Center" located in metropolitan Atlanta,
          Cherokee County, Georgia (the "Cherokee Property"). The Cherokee
          Property consists of approximately 103,755 net leaseable square feet.

          On June 30, 1987, the Partnership acquired an interest in the Cherokee
          Property through a joint venture (the "Cherokee Joint Venture")
          between the Wells Fund I and Wells Fund II-Fund II-OW Joint Venture.
          On January 1, 1991, the Cherokee Joint Venture merged with the Tucker
          Joint Venture to form the Tucker-Cherokee Joint Venture. As described
          above, the Tucker Joint Venture was also a joint venture between the
          Wells Fund I and the Fund II-Fund II-OW Joint Venture. Under the terms
          of the Amended and Restated Joint Venture Agreement of Fund I and Fund
          II Tucker-Cherokee, the Fund II-Fund II-OW Joint Venture's percentage
          interest in the Cherokee Property remained unchanged as a result of
          the merger of the Cherokee Joint Venture into the Tucker-Cherokee
          Joint Venture.

          On August 1, 1995, the Fund II-Fund II-OW Joint Venture, Wells Fund I,
          Wells Real Estate Fund VI, L.P. ("Wells Fund VI"), a Georgia public
          limited partnership having Leo F. Wells, III and Wells Partners, L.P.,
          a Georgia limited partnership, as general partners, and Wells Real
          Estate Fund VII, L.P. ("Wells Fund VII"), a Georgia public limited
          partnership having Leo F. Wells, III and Wells Partners, L.P., a
          Georgia limited partnership, as general partners entered into a joint
          venture agreement known as Fund I, II, II-OW, VI, VII Associates (the
          "Fund I, II, II-OW, VI, VII Joint Venture"), which was formed to own
          and operate the Cherokee Project. Wells Partners, L.P. is a private
          limited partnership having Wells Capital, Inc., a General Partner, as
          its

                                      -8-
<PAGE>

          sole general partner. The investment objectives of Wells Fund I, Wells
          Fund VI, and Wells Fund VII are substantially identical to those of
          the Partnership.

          As of December 31, 2000, Wells Fund I had contributed property with a
          book value of $2,139,900, the Fund II-Fund II-OW Joint Venture had
          contributed property with a book value of $4,860,100, Wells Fund VI
          had contributed cash in the amount of $953,798 and Wells Fund VII had
          contributed cash in the amount of $953,798 to the Fund I, II, II-OW,
          VI, VII Joint Venture. As of December 31, 2000, the equity interests
          in the Fund I, II, II-OW, VI, VII Joint Venture were approximately as
          follows: Wells Fund I--24%, Fund II-Fund II-OW Joint Venture--54%,
          Wells Fund VI--11% and Wells Fund VII--11%.

          The Cherokee Property is anchored by a 67,115 square foot lease with
          Kroger Food/Drug which expires in 2011. Kroger's original lease was
          for 45,528 square feet. In 1994, Kroger expanded to the current 67,115
          square feet which is approximately 65% of the total rentable square
          feet in the property. Kroger, a retail grocery chain, is the only
          tenant occupying ten percent or more of the rentable square footage.
          The other tenants in the shopping center provide typical retail
          shopping services.

          The Kroger lease provides for an annual rent of $392,915 which
          increased to $589,102 on August 16, 1995 due to the expansion from
          45,528 square feet to 67,115 square feet. The lease expires March 31,
          2011 with Kroger entitled to five successive renewals each for a term
          of five years at the same rental rate as the original lease.

          The occupancy rate at the Cherokee Property was 98% in 2000, 97% in
          1999, and 91% in 1998.

          The average effective annual rental per square foot at the Cherokee
          Property was $9.31 for 2000, $9.11 for 1999, $8.78 for 1998, $8.49 for
          1997, and $8.59 for 1996.

          This property is currently being marketed for sale by CB Richard
          Ellis. The marketing piece is being broadly distributed to investors
          throughout the country. The Partnership's goal is to have this
          property sold by the end of 2002.

ITEM 3.  LEGAL PROCEEDINGS

There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 2000.

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

No matters were submitted to a vote of the Limited Partners during 2000.

                                      -9-
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS

As of February 28, 2001, the Partnership had 6,062 outstanding Class A Units
held by a total of 179 Limited Partners and 1,626 outstanding Class B Units held
by a total of 41 Limited Partners.  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.

The General Partners have estimated the investment value of properties held by
the Partnership as of December 31, 2000 to be $158.82 per Class A Unit and
$358.59 per Class B Unit based on market conditions existing in early December
2000.  The methodology used for this valuation was to estimate the amount a
holder of Partnership Unites would receive if the Partnership's properties were
all sold in the ordinary course of business as of December 31, 2000, and the
proceeds from such sales (without reduction for selling expenses), together with
Partnership funds held as of such date, were distributed in a liquidation of the
Partnership.  This value was confirmed as reasonable by an independent MAI
appraiser, David L. Beal Company, although no actual MAI appraisal was performed
due to the inordinate expense involved with such an undertaking.  The valuation
does not include any fractional interest valuation.

Class A Unit holders are entitled to an annual 8% non-cumulative 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.

Cash distributions from Net Cash from Operations to the Limited Partners is
distributed on a quarterly basis unless Limited Partners elect to have their
cash distributions paid monthly.  Cash distributions made to the Limited
Partners for the two most recent fiscal years were as follows:

<TABLE>
<CAPTION>
                                                    Per Class A          Per Class A         Per Class B          Per Class B
     Distribution                 Total                Unit                  Unit                Unit                 Unit
     for Quarter                  Cash              Investment            Return of           Return of             General
        Ended                  Distributed            Income               Capital             Capital              Partner
----------------------       ---------------      ---------------       --------------      -------------       ---------------
<S>                          <C>                  <C>                   <C>                 <C>                 <C>
March 31, 1999                  $22,662               $0.59                 $3.14               $0.00               $0.00
June 30, 1999                    20,864                0.67                  2.78                0.00                0.00
September 30, 1999               24,665                1.38                  2.69                0.00                0.00
December 31, 1999                26,535                0.82                  3.56                0.00                0.00
March 31, 2000                   26,527                1.43                  2.95                0.00                0.00
June 30, 2000                    27,474                1.20                  3.33                0.00                0.00
September 30, 2000               27,474                0.96                  3.57                0.00                0.00
December 31, 2000                26,342                1.05                  3.30                0.00                0.00
</TABLE>

The fourth quarter distributions of cash available for distribution were accrued
for accounting purposes in 2000 and were not actually paid until February 2001.

                                      -10-
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

The following sets forth a summary of the selected financial data for the fiscal
years ended December 31, 2000, 1999, 1998, 1997, and 1996:

<TABLE>
<CAPTION>
                                                 2000          1999           1998          1997           1996
                                              ----------    ----------     ----------    ----------    -----------
<S>                                           <C>           <C>            <C>           <C>           <C>
Total assets                                  $1,109,652    $1,189,195     $1,255,377    $1,334,105     $1,379,623
Total revenues                                    28,101        20,918          5,190       (18,601)         6,273
Net income (loss)                                 28,101        20,918          5,190       (18,601)         6,273
Net income (loss) allocated to Class A
   limited partners                               28,101        20,918          5,190       (18,601)        68,549
Net loss allocated to Class B limited
   partners                                            0             0              0             0        (62,276)
Net income (loss) allocated to Class A
   limited partner unit                       $     4.64    $     3.45     $     0.86    $    (3.07)    $    11.31
Net loss per Class B limited partner
   unit                                             0.00          0.00           0.00          0.00         (38.30)
Cash distribution per Class A limited
   partner unit                                    17.79         15.63          13.96          6.03          11.61
Cash distribution per Class B limited
   partner unit                                     0.00          0.00           0.00          0.00           0.00
</TABLE>

Cash distributions per unit were comprised of $4.64 paid from net cash from
operations and $13.15 paid from capital in 2000.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND CONDITIONS
          RESULTS OF OPERATION

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

This Report contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of
1934, including discussion and analysis of the financial condition of the
Partnership, anticipated capital expenditures required to complete certain
projects, amounts of cash distributions anticipated to be distributed to Limited
Partners in the future and certain other matters. Readers of this Report should
be aware that there are various factors that could cause actual results to
differ materially from any forward-looking statement made in this Report, which
include construction costs which may exceed estimates, construction delays,
lease-up risks, inability to obtain new tenants upon the expiration of existing
leases, and the potential need to fund tenant improvements or other capital
expenditures out of operating cash flow.

Results of Operations and Changes in Financial Conditions

General

As of December 31, 2000, the properties owned by the Fund II-Fund II-OW Joint
Venture were 97% occupied, as compared to 97% in 1999, and 95% in 1998.

Gross revenues of the Partnership were $28,101 for the year ended December 31,
2000 compared to $20,918 for the year ended December 31, 1999, and $5,190 for
the fiscal year ended December 31, 1998. The increase in gross revenues is
primarily due to increased rental renewal rates in April 1999 for First Union at
Charlotte.

                                      -11-
<PAGE>

Administrative expenses of the Partnership are incurred at the joint venture
level.

The Partnership made cash distributions to Limited Partners holding Class A
units of $17.79 per unit for fiscal year ended December 31, 2000, $15.63 per
unit for fiscal year ended December 31, 1999, and $13.96 per unit for fiscal
year ended December 31, 1998. The Partnership made no cash distributions to
Limited Partners holding Class B units for fiscal year ended 2000, 1999, and
1998.

Property Operations

As of December 31, 2000, the Partnership's percentage ownership in properties
was as follows: 5.3% in the First Union Property, 3.26% in the Atrium, 3.31% in
the Brookwood Grill Property, 0.79% in the Holcomb Bridge Road Property, 2.38%
in the Tucker Property and 2.90% in the Cherokee Property.

As of December 31, 2000, the Partnership owned interests in the following
properties through the Fund II-Fund II-OW Joint Venture:

            First Union Property/Fund II - Fund II-OW Joint Venture

<TABLE>
<CAPTION>
                                                                             For the Year Ended December 31
                                                                      ---------------------------------------------
                                                                          2000            1999             1998
                                                                      ------------    ------------   --------------
<S>                                                                   <C>             <C>            <C>
Revenues:
    Rental income                                                         $844,071        $717,676         $458,867
                                                                      ------------    ------------   --------------
Expenses:
    Depreciation                                                           367,667         367,667          367,667
    Management and leasing expenses                                         69,128          61,295           45,887
    Other operating expenses                                                16,105          17,797           14,932
                                                                      ------------    ------------   --------------
                                                                           452,900         446,759          428,486
                                                                      ------------    ------------   --------------
Net income                                                                $391,171        $270,917         $ 30,381
                                                                      ============    ============   ==============

Occupied percentage                                                            100%            100%             100%
                                                                      ============    ============   ==============

Partnership ownership percentage                                               5.3%            5.3%             5.3%
                                                                      ============    ============   ==============

Cash generated to the Fund II-Fund II-OW Joint Venture*                   $777,192        $677,542         $467,262
                                                                      ============    ============   ==============

Net income allocated to the Fund II-Fund II-OW Joint Venture*             $391,171        $270,917         $ 30,381
                                                                      ============    ============   ==============
</TABLE>

*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.

Rental income and net income increased, as compared to 1999 and 1998, due
primarily to increased rental renewal rates in April 1999. Management and
leasing expenses increased due primarily to increased rental income.

Real estate taxes and all operational expenses for the building are the
responsibility of the tenant.

For comments on the general conditions to which the property may be subject, see
Item 1, Business, page 1. For additional information on the property, tenants,
etc., see Item 2, Properties, page 3.

                                      -12-
<PAGE>

                   The Atrium/Fund II-Fund III Joint Venture

<TABLE>
<CAPTION>
                                                                           For the Year Ended December 31
                                                                   -----------------------------------------------
                                                                      2000              1999              1998
                                                                   -----------       -----------      ------------
<S>                                                                <C>               <C>              <C>
Revenues:
    Rental income                                                  $ 1,468,784       $ 1,470,144      $  1,470,144
    Other income                                                             0             4,000            13,280
                                                                   -----------       -----------      ------------
                                                                     1,468,784         1,474,144         1,483,424
                                                                   -----------       -----------      ------------
Expenses:
    Depreciation                                                       877,240           867,720           866,778
    Management and leasing expenses                                    185,035           179,762           186,102
    Other operating expenses                                           743,835           720,594           713,955
                                                                   -----------       -----------      ------------
                                                                     1,806,110         1,768,076         1,766,835
                                                                   -----------       -----------      ------------
Net loss                                                           $  (337,326)      $  (293,932)     $   (283,411)
                                                                   ===========       ===========      ============

Occupied percentage                                                        100%              100%              100%
                                                                   ===========       ===========      ============

Partnership ownership percentage                                           3.3%              3.3%              3.3%
                                                                   ===========       ===========      ============

Cash distributed to the Fund II-Fund II-OW Joint Venture*          $   354,232       $   385,541      $    405,758
                                                                   ===========       ===========      ============

Net loss allocated to the Fund II-Fund II-OW Joint Venture*        $  (206,781)      $  (180,180)     $   (173,731)
                                                                   ===========       ===========      ============
</TABLE>

*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.

Rental income remained relatively stable in 2000, as compared to 1999 and 1998.
Management and leasing expenses increased, as compared to 1999, due to a change
in estimated fees recorded in 1998, which resulted in decreased fees in 1999.
Other operating expenses increased due primarily to increased expenditures in
electricity, HVAC repairs, plumbing repairs, and glass maintenance in the
building. As a result, net income and cash distribution to the Fund II-Fund II-
OW Joint Venture decreased.

The Atrium property incurred property taxes of $187,536 for 2000, $175,360 for
1999, and $148,006 for 1998.

For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc. see Item 2, Properties, page 3.

                                      -13-
<PAGE>

          The Brookwood Grill Property/Fund II-Fund III Joint Venture

<TABLE>
<CAPTION>
                                                                             For the Year Ended December 31
                                                                      ---------------------------------------------
                                                                          2000              1999             1998
                                                                      ------------      -----------      ----------
<S>                                                                   <C>               <C>            <C>
Revenues:
    Rental income                                                         $224,801         $224,801        $225,100
    Equity in income of joint venture                                       55,489           81,669          78,791
                                                                      ------------      -----------      ----------
                                                                           280,290          306,470         303,891
                                                                      ------------      -----------      ----------
Expenses:
    Depreciation                                                            54,014           54,014          54,012
    Management and leasing expenses                                         25,320           30,096          23,349
    Other operating expenses                                                 6,513             (460)        (24,632)
                                                                      ------------      -----------      ----------
                                                                            85,847           83,650          52,729
                                                                      ------------      -----------      ----------
Net income                                                                $194,443         $222,820        $251,162
                                                                      ============      ===========      ==========

Occupied percentage                                                            100%             100%            100%
                                                                      ============      ===========      ==========

Partnership ownership percentage in the Fund II-Fund III Joint
    Venture                                                                    3.3%             3.3%            3.3%
                                                                      ============      ===========      ==========

Cash distributed to the Fund II-Fund II-OW Joint Venture*                 $236,064         $253,723        $270,886
                                                                      ============      ===========      ==========

Income allocated to the Fund II-Fund II-OW Joint Venture*                 $121,235         $138,928        $156,599
                                                                      ============      ===========      ==========
</TABLE>

*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.

Although rental income remained relatively stable in 2000, 1999, and 1998 total
revenues decreased in 2000 due to the decrease in equity income from Fund II,
III, VI, VII Joint Venture, as the Holcomb Bridge Property decreased its
occupancy rate.

Management and leasing expenses decreased in 2000, as compared to 1999, due to a
change in estimated fees recorded in 1999. Other operating expenses increased
due primarily to appraisal fees for this property and increased administrative
salaries.

The Brookwood Grill Property incurred property taxes of $17,973 for 2000,
$18,055 for 1999, and $16,270 for 1998.

This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.

For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.

                                      -14-
<PAGE>

       Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture

<TABLE>
<CAPTION>
                                                                             For the Year Ended December 31
                                                                        -------------------------------------------
                                                                          2000            1999             1998
                                                                        ----------     -----------    -------------
<S>                                                                     <C>            <C>            <C>
Revenues:
    Rental income                                                         $869,390        $953,952         $872,978
    Other income                                                                 0          23,843           36,000
                                                                        ----------     -----------    -------------
                                                                           869,390         977,795          908,978
                                                                        ----------     -----------    -------------
Expenses:
    Depreciation                                                           355,293         415,165          376,290
    Management and leasing expenses                                        111,567         129,798           97,701
    Other operating expenses                                               171,997          93,534          107,418
                                                                        ----------     -----------    -------------
                                                                           638,857         638,497          581,409
                                                                        ----------     -----------    -------------
Net income                                                                $230,533        $339,298         $327,569
                                                                        ==========     ===========    =============

Occupied percentage                                                             92%            100%              94%
                                                                        ==========     ===========    =============

Partnership ownership percentage in the Fund II, III, VI, VII
    Joint Venture                                                              0.8%            0.8%             0.8%
                                                                        ==========     ===========    =============

Cash distribution to the Fund II-Fund III Joint Venture*                  $156,763        $182,886         $179,198
                                                                        ==========     ===========    =============

Net income allocated to the Fund II-Fund III Joint Venture*               $ 55,489        $ 81,669         $ 78,791
                                                                        ==========     ===========    =============
</TABLE>

*The Partnership holds a 3.30% ownership in the Fund II-Fund III Joint Venture.

Rental income decreased in 2000, as compared to 1999 and 1998, due to decreased
occupancy. Depreciation expense was higher in 1999, as compared to 1998 and
2000, due to increased tenant improvement for new tenants for 1999 and some
tenant improvement becoming fully depreciated in 1999. Other operating expenses
increased due to appraisal fees for this property and a bad debt recorded in
this year.

The Holcomb Bridge Property incurred property taxes of $52,887 for 2000, $53,896
for 1999, and $52,162 for 1998.

This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.

For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.

                                      -15-
<PAGE>

                 Tucker Property/Fund I--Fund II Joint Venture

<TABLE>
<CAPTION>
                                                                           For the Year Ended December 31
                                                                 -------------------------------------------------
                                                                      2000              1999              1998
                                                                 -------------       -----------     -------------
<S>                                                              <C>                 <C>             <C>
Revenues:
    Rental income                                                    1,390,599        $1,373,213       $ 1,242,332
    Interest income                                                        601               447                 0
                                                                 -------------       -----------     -------------
                                                                     1,391,200         1,373,660         1,242,332
                                                                 -------------       -----------     -------------
Expenses:
    Depreciation                                                       491,806           491,385           440,099
    Management and leasing expenses                                    121,946           158,270           164,378
    Other operating expenses                                           506,139           498,849           532,985
                                                                 -------------       -----------     -------------
                                                                     1,119,891         1,148,504         1,137,462
                                                                 -------------       -----------     -------------
Net income                                                         $   271,309        $  225,156       $   104,870
                                                                 =============       ===========     =============

Occupied percentage                                                         89%               87%               94%
                                                                 =============       ===========     =============

Partnership ownership percentage                                           2.4%              2.4%              2.4%
                                                                 =============       ===========     =============

Cash distribution to the Fund II-Fund II-OW Joint Venture*         $   285,191        $  199,737       $   170,937
                                                                 =============       ===========     =============

Net income allocated to the Fund II-Fund II-OW Joint
    Venture*                                                       $   121,845        $  101,117       $    47,097
                                                                 =============       ===========     =============
</TABLE>

*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.

Rental income increased in 1999, compared to 1998, even though occupancy
decreased due to increased rental renewal rates and the decrease in occupancy
moving slowly downward throughout the year. The rental income increase in 2000,
as compared to 1999, was due to increased tenant occupancy at the property. The
increase in depreciation expense for 1999 was due to capitalized building
repairs. The management and leasing expenses decreased in 2000, as compared to
1999, due to an adjustment of the estimated tenant billings. Other operating
expenses decreased for 1999, as compared to 1998, due to significant variable
expenses for those years. Expenses were higher in 1998 due to sewer and main
water line repairs. The cash distribution increased in 2000, as compared to
1999, due to a decrease in capital expenditures in 2000.

Real estate taxes were $111,946 in 2000, $91,970 in 1999, and $93,697 in 1998.

This property is currently being marketed for sale by The First Fidelity
Companies. The management team is considering separating the retail and creating
a condominium for the office buildings. The legal and site work has been
completed so that the management team can market this property to investors. The
Partnership's goal is to have this property sold by the end of 2002.

For comments on the general conditions to which the property may be subject, see
Item 1, Business, page 2. For additional information on the property, tenants,
etc., see Item 2, Properties, page 3.

                                      -16-
<PAGE>

 Cherokee Commons Shopping Center/Fund I, II, II-OW, VI, and VII Joint Venture

<TABLE>
<CAPTION>
                                                                             For the Year Ended December 31
                                                                      ---------------------------------------------
                                                                          2000            1999             1998
                                                                      ------------      ----------    -------------
<S>                                                                   <C>               <C>           <C>
Revenues:
    Rental income                                                         $965,305        $945,222         $909,831
    Interest income                                                             78              68               84
                                                                      ------------      ----------    -------------
                                                                           965,383         945,290          909,915
                                                                      ------------      ----------    -------------
Expenses:
    Depreciation                                                           442,250         447,969          444,660
    Management and leasing expenses                                         74,422          94,149           82,517
    Other operating expenses                                                54,089          68,089           84,676
                                                                      ------------      ----------    -------------
                                                                           570,761         610,207          611,853
                                                                      ------------      ----------    -------------
Net income                                                                $394,622        $335,083         $298,062
                                                                      ============      ==========    =============

Occupied percentage                                                             98%             97%              91%
                                                                      ============      ==========    =============

Partnership ownership percentage                                               2.9%            2.9%             2.9%
                                                                      ============      ==========    =============

Cash distributed to the Fund II-Fund II-OW Joint Venture*                 $453,678        $425,382         $403,744
                                                                      ============      ==========    =============

Net income allocated to the Fund II-Fund II-OW Joint Venture*             $215,310        $182,825         $162,626
                                                                      ============      ==========    =============
</TABLE>

*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.

Rental income increased in 2000, as compared to 1999 and 1998, due to an
increase in occupancy and rental renewals. Management and leasing expenses
decreased in 2000, as compared to 1999, due to decreased leasing commission.
Management and leasing expenses increased in 1999, as compared to 1998, due to
an increase in occupancy and rental renewal rates. Depreciation expense
decreased in 2000, as compared to 1999, due to some tenant improvements becoming
fully depreciated in 1999. Operating expenses decreased in 2000, as compared to
1999, due to a reimbursable tenant improvement write-off in 1999, and decreased
in 1999, as compared to 1998, due to differences and adjustments of CAM billings
to tenants offset by increased expenses for tenant improvements, HVAC repairs,
and a partial demolition of a tenant suite in 1999. Tenants are billed an
estimated amount for the current year common area maintenance which is ten
reconciled the next year and the difference is billed to the tenant.

Real estate taxes were $82,048 for 2000, $87,411 for 1999, and $77,311 for 1998.

For comments on the general conditions to which the property may be subject, see
Item 1, Business, page 2. For additional information on the property, tenants,
etc., see Item 2, Properties, page 3.

                                      -17-
<PAGE>

Liquidity and Capital Resources

During its offering, which terminated on September 7, 1988, the Partnership
raised a total of $1,921,600 through the sale of 7,688 units. No additional
units will be sold by the Partnership. As of December 31, 2000, the Partnership
contributed an aggregate of $1,537,600 in capital contributions to the Fund II -
Fund II-OW Joint Venture, after incurring approximately $384,000 in offering
costs, commissions and acquisitions and advisory fees.

Since the Partnership is an investment partnership formed for the purpose of
acquiring, owning and operating income-producing real property and has invested
all of its funds available for investment, it is unlikely that the Partnership
will acquire interests in any additional properties, and the Partnership's
capital resources are anticipated to remain relatively stable over the holding
period of its investments.

Net cash provided by investing activities increased from $90,167 to $104,801 in
2000, and net cash used in financing activities increased from $87,200 to
$108,010 in 2000 due to the increase in distributions from joint ventures as net
income increased.

The Partnership's cash distribution to Class A Unit holders paid and payable
through the fourth quarter of 2000 have been paid from Net Cash from Operations
and a Return of Capital. The Partnership anticipates that distributions will
continue to be paid on a quarterly basis from such sources. No cash
distributions were paid to Class B Unit holders for 2000.

The Partnership expects to meet liquidity requirements and budget demands
through cash flow from operations. The Partnership is unaware of any known
demands, commitments, events or capital expenditures other than that which is
required for the normal operation of its properties that will result in the
Partnership's liquidity increasing or decreasing in any material way.

The Partnership has recently made the decision to begin selling its properties.
At this time, two properties have been identified that will be offered for sale
within the next several months. The Partnership's goal is to have all Fund II-OW
properties sold by the end of 2002. As the properties are sold, all proceeds
will be returned to limited partners in accordance with the Partnership's
prospectus. Management estimates that the net realizable value of each of the
properties exceeds the carrying value of the corresponding real estate assets;
consequently, no impairment loss has been recorded. In the event that the net
sales proceeds are less than the carrying value of the property sold, the
Partnership would recognize a loss on the sale. Management is not contractually
or financially obligated to sell any of its properties, and it is management's
current intent to fully realize the Partnership's investment in real estate. The
success of the partnership's future operations and the ability to realize the
investment in its assets will be dependent on the Partnership's ability to
maintain rental rates, occupancy, and an appropriate level of operating expenses
in future years. Management believes that the steps that it is taking will
enable the Partnership to realize its investment in its assets.

Inflation

Real estate has not been affected significantly by inflation in the past three
years due to the relatively low inflation rate. There are provisions in the
majority of tenant leases executed by the Partnership to protect the Partnership
from the impact of inflation. Most leases contain common area maintenance
charges ("CAM charges"), real estate tax and insurance reimbursements on a per
square foot bases, or in some cases, annual reimbursement of operating expenses
above a certain per square foot allowance. These provisions should reduce the
Partnership's exposure to increases in costs and operating expenses resulting
from inflation. In addition, a number of the Partnership's leases are for terms
of less than five years which may permit the Partnership to replace existing
leases with new leases at higher base rental rates if

                                      -18-
<PAGE>

the existing leases are below market rate. There is no assurance, however, that
the Partnership would be able to replace existing leases with new leases at
higher base rentals.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements of the Registrant and supplementary data are detailed
under Item 14(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

There were no disagreements with the Partnership's accountants or other
reportable events during 2000.

                                      -19-
<PAGE>

                                   PART III

ITEM 10.  GENERAL PARTNERS OF THE PARTNERSHIP

Wells Capital, Inc.

Wells Capital, Inc. ("Capital") is a Georgia corporation formed in April 1984.
The executive offices of Capital are located at 6200 The Corners Parkway,
Norcross, Georgia 30092. Leo F. Wells, III is the sole Director and the
President of Capital.

Leo F. Wells, III.

Mr. Wells is a resident of Atlanta, Georgia, is 57 years of age and holds a
Bachelor of Business Administration Degree in Economics from the University of
Georgia. Mr. Wells is the President and sole Director of Wells Capital. Mr.
Wells is the President of Wells & Associates, Inc., a real estate brokerage and
investment company formed in 1976 and incorporated in 1978, for which he serves
as principal broker. Mr. Wells is also currently the sole Director and President
of Wells Management Company, Inc., a property management company he founded in
1983. In addition, Mr. Wells is the President and Chairman of the Board of Wells
Investment Securities, Inc., Wells & Associates, Inc., and Wells Management
Company, Inc. which are affiliates of the General Partners. From 1980 to
February 1985, Mr. Wells served as Vice-President of Hill-Johnson, Inc., a
Georgia corporation engaged in the construction business. From 1973 to 1976, he
was associated with Sax Gaskin Real Estate Company and from 1970 to 1973, he was
a real estate salesman and property manager for Roy D. Warren & Company, an
Atlanta real estate company.

ITEM 11.  COMPENSATION OF GENERAL PARTNERS AND AFFILIATES

The following table summarizes the compensation and fees paid to the General
Partners and their affiliates during the year ended December 31, 2000:

<TABLE>
<CAPTION>
                                                                                                      (C)
                                                                                               -----------------
                (A)                                                 (B)                               Cash
        Name of Individual                              Capacities in Which Served             -----------------
        or Number in Group                                 Form of Compensation                   Compensation
----------------------------------                -------------------------------------        ------------------
<S>                                               <C>                                          <C>
                                                  Property Manager-Management
Wells Management Company, Inc.                    And Leasing Fees                                   $12,565(1)

                                                  General Partner-Partnership
Wells Capital, Inc.                               Cash Flow Distributions                                  0

                                                  General Partner-Partnership
Leo F. Wells, III                                 Cash Flow Distributions                                  0
</TABLE>


        (1)   The majority of these fees are not paid directly by the
              Partnership but are paid by the joint venture entities which own
              properties to which the property management and leasing services
              relate and include management and leasing fees.

                                      -20-
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.

Set forth below is the security ownership of management as of December 31, 2000:

<TABLE>
<CAPTION>
                                          (2)                            (3)
            (1)                   Name and Address of            Amount and Nature of                 (4)
      Title of Class               Beneficial Owner              Beneficial Ownership           Percent of Class
--------------------------   -----------------------------  ------------------------------  ------------------------
<S>                          <C>                            <C>                             <C>
                                                            0 Units (IRA, 401 (k) and
Class A units                Leo F. Wells, III              Profit Sharing)                 Less than 1%
                                                            0 Units (401 (k) and Profit
Class B units                Leo F. Wells, III              Sharing)                        Less than 1%
</TABLE>

The General Partners did not receive any distributions from cash flows or sale
proceeds in 2000.

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following are compensation and fees paid or to be paid by the Partnership to
the General Partners and their affiliates in connection with the operation of
the Partnership.

Interest in Partnership Cash Flow and Net Sale Proceeds

The General Partners will receive a subordinated participation in net cash flow
from operations equal to 10% of net cash flow after the Limited Partners have
received preferential distributions equal to 9% of their adjusted capital
accounts in each fiscal year. In addition, after the Limited Partners receive
their distributions equal to 9% of their 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 will also receive a 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 15% cumulative return on their adjusted capital
contributions. The General Partners received no partnership cash flow or net
sale proceeds during 2000.

Property Management and Leasing Fees

Wells Management Company, Inc., an affiliate of the General Partners, will
receive compensation for supervising the management of the Partnership
properties equal to 6% (3% management and 3% leasing) of rental income. In no
event will such fees exceed the sum of (i) 6% of the gross receipts of each
property, plus (ii) a separate one-time fee for initial rent-up or leasing-up of
development 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. With respect to properties leased on a
net basis for a period of ten years or longer, property management fees will not
exceed 1% of gross revenues

                                      -21-
<PAGE>

from such leases, plus a one-time initial leasing fee of 3% of the gross
revenues which are payable over the first five years of the term of such net
leases. Management and leasing fees are not paid directly by the Partnership but
by the joint venture entities which own the properties. The Partnership's share
of these fees which were paid to Wells Management Company, Inc. totaled $12,565
for the year ended December 31, 2000.

Real Estate Commissions

In connection with the sale of Partnership 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. During 2000, no real estate
commissions were paid to the General Partners or their affiliates.

           (THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.)

                                      -22-
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)1.   The financial statements are contained on pages F-2 through F-46 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.

(a)2.   The Exhibits filed in response to Item 601 of Regulation S-K are listed
        on the Exhibit Index attached hereto.

(b)     No reports on Form 8-K were filed with the commission during the year of
        2000.

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

(d)     See (a) 2 above.


           (THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

                                      -23-
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 27th day of March
2001.

                                        Wells Real Estate Fund II-OW
                                        (Registrant)

                                        By: /s/Leo F. Wells, III
                                            ------------------------------------
                                            Leo F. Wells, III
                                        Individual General Partner and as
                                        President and Chief Financial Officer of
                                        Wells Capital, Inc., the Corporate
                                        General Partner

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.

<TABLE>
<CAPTION>
            Signature                                 Title                                    Date
---------------------------------       ---------------------------------       ---------------------------------
<S>                                     <C>                                     <C>
/s/Leo F. Wells, III
---------------------------------
Leo F. Wells, III                       Individual General Partner,             March 27, 2001
                                        President and Sole Director of Wells
                                        Capital, Inc., the Corporate General
                                        Partner
</TABLE>

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.

No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.

                                      -24-
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                    Financial Statements                                        Page
------------------------------------------------------------------------------------------     ------
<S>                                                                                            <C>
Independent Auditors' Report                                                                     F2

Balance Sheets as of December 31, 2000 and 1999                                                  F3

Statements of Income (Loss) for the Years ended December 31, 2000, 1999, and 1998                F4

Statements of Partners' Capital for the Years Ended December 31, 2000, 1999, and 1998            F5

Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998                   F6

Notes to Financial Statements for December 31, 2000, 1999, and 1998                              F7
</TABLE>

                                      F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To Wells Real Estate Fund II-OW:


We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND II-OW
(a Georgia public limited partnership) as of December 31, 2000 and 1999 and the
related statements of income, partners' capital, and cash flows for each of the
three years in the period ended December 31, 2000. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund II-OW as
of December 31, 2000 and 1999 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States.


ARTHUR ANDERSEN LLP





Atlanta, Georgia
January 30, 2001

                                      F-2
<PAGE>

                         WELLS REAL ESTATE FUND II-OW

                    (A Georgia Public Limited Partnership)


                                BALANCE SHEETS

                          DECEMBER 31, 2000 AND 1999





                                    ASSETS

                                                         2000          1999
                                                      ----------    ----------
INVESTMENT IN JOINT VENTURE                           $1,082,280    $1,159,995

CASH AND CASH EQUIVALENTS                                  1,127         3,865

DUE FROM AFFILIATE                                        26,245        25,335
                                                      ----------    ----------
          Total assets                                $1,109,652    $1,189,195
                                                      ==========    ==========


                       LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
   Accounts payable                                   $      630    $      264
   Partnership distributions payable                      26,342        26,536
                                                      ----------    ----------
          Total liabilities                               26,972        26,800
                                                      ----------    ----------

COMMITMENTS AND CONTINGENCIES

PARTNERS' CAPITAL
   Limited partners:
      Class A--6,062 units                             1,082,680     1,162,395
      Class B--1,626 units                                     0             0
                                                      ----------    ----------
          Total partners' capital                      1,082,680     1,162,395
                                                      ----------    ----------
          Total liabilities and partners' capital     $1,109,652    $1,189,195
                                                      ==========    ==========




     The accompanying notes are an integral part of these balance sheets.

                                      F-3
<PAGE>

                         WELLS REAL ESTATE FUND II-OW

                    (A Georgia Public Limited Partnership)


                             STATEMENTS OF INCOME

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                           2000       1999      1998
                                                         -------    -------    ------
<S>                                                      <C>        <C>        <C>
REVENUES:
   Equity in income of joint venture                     $27,996    $20,789    $5,190
   Interest income                                           105          0         0
   Other income                                                0        129         0
                                                         -------    -------    ------
                                                          28,101     20,918     5,190

EXPENSES                                                       0          0         0
                                                         -------    -------    ------
NET INCOME                                               $28,101    $20,918    $5,190
                                                         =======    =======    ======

NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS         $28,101    $20,918    $5,190
                                                         =======    =======    ======

NET INCOME PER CLASS A LIMITED PARTNER UNIT              $  4.64    $  3.45    $ 0.86
                                                         =======    =======    ======

CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT       $ 17.79    $ 15.63    $13.96
                                                         =======    =======    ======
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-4
<PAGE>

                         WELLS REAL ESTATE FUND II-OW

                    (A Georgia Public Limited Partnership)


                        STATEMENTS OF PARTNERS' CAPITAL

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998


<TABLE>
<CAPTION>
                                                     Limited Partners                 Total
                                        ---------------------------------------
                                                Class A             Class B         Partners'
                                        ---------------------  ----------------
                                          Units      Amount     Units    Amount      Capital
                                        ---------  ----------  -------   ------    ----------
<S>                                     <C>        <C>         <C>       <C>       <C>
BALANCE, December 31, 1997                  6,062  $1,315,655    1,626   $    0    $1,315,655

   Net income                                   0       5,190        0        0         5,190
   Partnership distributions                    0     (84,606)       0        0       (84,606)
                                        ---------  ----------  -------   ------    ----------
BALANCE, December 31, 1998                  6,062   1,236,239    1,626        0     1,236,239

   Net income                                   0      20,918        0        0        20,918
   Partnership distributions                    0     (94,762)       0        0       (94,762)
                                        ---------  ----------  -------   ------    ----------
BALANCE, December 31, 1999                  6,062   1,162,395    1,626        0     1,162,395

   Net income                                   0      28,101        0        0        28,101
   Partnership distributions                    0    (107,816)       0        0      (107,816)
                                        ---------  ----------  -------   ------    ----------
BALANCE, December 31, 2000                  6,062  $1,082,680    1,626   $    0    $1,082,680
                                        =========  ==========  =======   ======    ==========
</TABLE>


       The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>

                         WELLS REAL ESTATE FUND II-OW

                    (A Georgia Public Limited Partnership)


                           STATEMENTS OF CASH FLOWS

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998


<TABLE>
<CAPTION>
                                                                           2000       1999       1998
                                                                        ----------  --------  ---------
<S>                                                                      <C>         <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                           $   28,101   $20,918   $  5,190
                                                                        ----------  --------  ---------
   Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
         Equity in income of joint venture                                 (27,996)  (20,789)    (5,190)
         Changes in accounts payable                                           366       100        (73)
                                                                        ----------  --------  ---------
              Total adjustments                                            (27,630)  (20,689)    (5,263)
                                                                        ----------  --------  ---------
              Net cash provided by (used in) operating
                 activities                                                    471       229        (73)
                                                                        ----------  --------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Distributions received from joint venture                               104,801    90,167     83,846
                                                                        ----------  --------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Distributions to partners in excess of accumulated earnings             (81,298)  (76,671)   (73,220)
   Distributions to partners from accumulated earnings                     (26,712)  (10,529)   (10,625)
                                                                        ----------  --------  ---------
              Net cash used in financing activities                       (108,010)  (87,200)   (83,845)
                                                                        ----------  --------  ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                        (2,738)    3,196        (72)

CASH AND CASH EQUIVALENTS, beginning of year                                 3,865       669        741
                                                                        ----------  --------  ---------
CASH AND CASH EQUIVALENTS, end of year                                  $    1,127  $  3,865  $     669
                                                                        ==========  ========  =========
</TABLE>



       The accompanying notes are an integral part of these statements.

                                      F-6
<PAGE>

                         WELLS REAL ESTATE FUND II-OW

                    (A Georgia Public Limited Partnership)


                         NOTES TO FINANCIAL STATEMENTS

                       DECEMBER 31, 2000, 1999, AND 1998



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     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. The general partners are Leo F. Wells, III and Wells Capital, Inc.
     (the "Company"). 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.

     The Partnership was formed to acquire and operate commercial real
     properties, including properties which are either to be developed,
     currently under development or construction, newly constructed, or have
     operating histories. The Partnership owns an interest in several properties
     through a joint venture between the Partnership and Wells Real Estate Fund
     II ("Wells Fund II"), referred to as "Fund II and II-OW."

     Through its investment in Fund II and II-OW, the Partnership owns interests
     in the following properties: (i) a retail shopping and commercial office
     complex located in Tucker, Georgia, Heritage Place at Tucker ("Tucker");
     (ii) a shopping center located in Cherokee County, Georgia, the Cherokee
     Commons Shopping Center ("Cherokee Commons"); (iii) a four-story office
     building located in metropolitan Houston, Texas, the Atrium at Nassau Bay
     ("The Atrium"); (iv) a restaurant located in Fulton County, Georgia, and
     (v) two retail and office buildings in Fulton County, Georgia. Fund II and
     II-OW joint venture owns 100% of the First Union Property. All remaining
     properties are owned by Fund II and II-OW through investments in joint
     ventures with other Wells Real Estate Funds.

     Use of Estimates and Factors Affecting the Partnership

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States requires management to
     make estimates and assumptions that affect the reported amounts of assets
     and liabilities and disclosure of contingent assets and liabilities at the
     date of the financial statements and the reported amounts of revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates.

     The Partnership recently began considering selling its properties.
     Management estimates that the net realizable value of each of the
     properties exceeds the carrying value of the corresponding real estate
     assets; consequently, no impairment loss has been recorded. In the event
     that the net sales proceeds are less than the carrying value of the
     property sold, the Partnership would recognize a loss on the sale.
     Management is not contractually or financially obligated to sell any of its
     properties, and it is management's current intent to fully realize the
     Partnership's investment in real estate. The success of the Partnership's
     future operations and the ability to realize the investment in its assets
     will be dependent on the Partnership's ability to maintain rental rates,
     occupancy, and an appropriate level of operating

                                      F-7
<PAGE>

     expenses in future years. Management believes that the steps that it is
     taking will enable the Partnership to realize its investment in its assets.

     Income Taxes

     The Partnership is not subject to federal or state income taxes, and
     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.

     Distribution of Net Cash From Operations

     Cash available for distribution is distributed on a cumulative
     noncompounded basis to limited partners quarterly. In accordance with the
     partnership agreement, distributions are paid first to limited partners
     holding Class A units until they have received an 8% per annum return on
     their adjusted capital contributions, as defined. Cash available for
     distribution is then distributed to limited partners holding Class B units
     until they have received an 8% per annum return on their adjusted capital
     contributions, as defined. Excess cash available for distribution will be
     distributed to the general partners until each has received 10% of total
     distributions to limited partners for the year. Any remaining cash
     available for distribution is distributed 90% to the limited partners and
     10% to the general partners.

     Distribution of Sales Proceeds

     Upon sales of properties, the net sales proceeds are distributed in the
     following order:

          .    To limited partners until each limited partner has received 100%
               of his adjusted capital contribution, as defined

          .    To limited partners holding Class B units until they receive an
               amount equal to the net cash available for distribution received
               by the limited partners holding Class A units

          .    To all limited partners until they receive a cumulative 12% per
               annum return on their adjusted capital contributions, as defined

          .    To all limited partners until they receive an amount equal to
               their respective cumulative distributions, as defined

          .    To all general partners until they have received 100% of their
               capital contributions, as defined

          .    Thereafter, 85% to the limited partners and 15% to the general
               partners

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

     Net income is defined as net income recognized by the Partnership,
     excluding deductions for depreciation and amortization. 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 that 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.

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

                                      F-8
<PAGE>

     partnership agreement, (b) allocations to partners having negative capital
     accounts until all negative capital accounts have been restored to zero,
     and (c) allocations to Class B limited partners in amounts equal to
     deductions for depreciation and amortization previously allocated to them
     with respect to the specific partnership property sold but not in excess of
     the amount of gain on sale recognized by the Partnership with respect to
     the sale of such property.

     Investment in Joint Venture

             Basis of Presentation

             The Partnership does not have control over the operations of the
             joint venture; however, it does exercise significant influence.
             Accordingly, the Partnership's investment in the joint venture is
             recorded using the equity method of accounting. The joint ventures
             in which Fund II and II-OW hold an ownership interest follow the
             same accounting policies as the Partnership.

             Real Estate Assets

             Real estate assets held by Fund II and II-OW are stated at cost
             less accumulated depreciation. Major improvements and betterments
             are capitalized when they extend the useful life of the related
             asset. All repairs and maintenance are expensed as incurred.

             Management continually monitors events and changes in circumstances
             which could indicate that carrying amounts of real estate assets
             may not be recoverable. When events or changes in circumstances are
             present which indicate that the carrying amounts of real estate
             assets may not be recoverable, management assesses the
             recoverability of real estate assets by determining whether the
             carrying value of such real estate assets will be recovered through
             the future cash flows expected from the use of the asset and its
             eventual disposition. Management has determined that there has been
             no impairment in the carrying value of real estate assets held by
             Fund II and II-OW or its affiliated joint ventures as of December
             31, 2000.

             Depreciation is calculated using the straight-line method over 25
             years.

             Revenue Recognition

             All leases on real estate assets held by the joint venture are
             classified as operating leases, and the related rental income is
             recognized on a straight-line basis over the terms of the
             respective leases.

             Partners' Distributions and Allocations of Profit and Loss

             Cash available for distribution and allocations of profit and loss
             to the Partnership by Fund II and II-OW are made in accordance with
             the terms of the individual joint venture agreement. Generally,
             these items are allocated in proportion to the partners' respective
             ownership interests. Cash is paid from the joint venture to the
             Partnership on a quarterly basis.

             Deferred Lease Acquisition Costs

             Costs incurred to procure operating leases are capitalized and
             amortized on a straight-line basis over the terms of the related
             leases.

Cash and Cash Equivalents

     For the purposes of the statements of cash flows, 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.

                                      F-9
<PAGE>

     Reclassifications

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

2.   RELATED-PARTY TRANSACTIONS

     Due from affiliate at December 31, 2000 and 1999 represents the
     Partnership's share of cash to be distributed from Fund II and II-OW for
     the fourth quarters of 2000 and 1999.

     The Partnership entered into a property management agreement with Wells
     Management Company, Inc. ("Wells Management"), an affiliate of the general
     partners. In consideration for supervising the management of the
     Partnership's properties, the Partnership will generally pay Wells
     Management management and leasing fees equal to (a) 3% of the gross
     revenues for management and 3% of the gross revenues for leasing (aggregate
     maximum of 6%) 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 or (b) in the case of
     industrial and 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.

     The Partnership incurred management and leasing fees and lease acquisition
     costs, at the joint venture level, of $12,565, $12,033, and $10,264 for the
     years ended December 31, 2000, 1999, and 1998, respectively, which were
     paid to Wells Management.

     The Company performs certain administrative services for the Partnership,
     such as accounting and other Partnership administration, and incurs the
     related expenses. Such expenses are allocated among the various Wells Real
     Estate Funds based on time spent on each fund by individual administrative
     personnel. In the opinion of management, such allocation is a reasonable
     estimation of such expenses.

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

3.   INVESTMENT IN JOINT VENTURE

     On March 1, 1988, the Partnership entered into a joint venture agreement
     with Wells Fund II. The joint venture, Fund II and II-OW, was formed for
     the purpose of investing in commercial real properties. Fund II and II-OW
     owns the First Union Property directly and has investments in several other
     joint ventures. The Partnership's ownership percentage interest in Fund II
     and II-OW was approximately 5% at December 31, 2000 and 1999.

     The following is a rollforward of the Partnership's investment in joint
     venture for the years ended December 31, 2000 and 1999:


<TABLE>
<CAPTION>
                                                                    2000          1999
                                                                ------------  ------------
          <S>                                                   <C>            <C>
          Investment in joint venture, beginning of year         $1,159,995    $1,235,838
          Equity in income of joint venture                          27,996        20,789
          Distributions from joint venture                         (105,711)      (96,632)
                                                                 ----------    ----------
          Investment in joint venture, end of year               $1,082,280    $1,159,995
                                                                 ==========    ==========
</TABLE>

                                     F-10
<PAGE>

Following are the financial statements for Fund II and II-OW:

                               Fund II and II-OW
                           (A Georgia Joint Venture)
                                Balance Sheets
                          December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                    Assets

                                                                              2000           1999
                                                                           -----------    -----------
<S>                                                                        <C>            <C>
Real estate assets, at cost:
   Land                                                                    $ 1,367,856    $ 1,367,856
   Building and improvements, less accumulated depreciation of
      $3,359,119 in 2000 and $2,991,452 in 1999                              4,411,999      4,779,666
                                                                           -----------    -----------
           Total real estate assets                                          5,779,855      6,147,522
Investment in joint ventures                                                14,576,863     15,654,420
Cash and cash equivalents                                                      144,731        162,241
Due from affiliates                                                            352,673        312,901
Accounts receivable                                                                  0          2,149
Prepaid expenses and other assets                                                8,234         24,473
                                                                           -----------    -----------
           Total assets                                                    $20,862,356    $22,303,706
                                                                           ===========    ===========

                       Liabilities and Partners' Capital

Liabilities:
   Accounts payable and accrued expenses                                   $     5,089    $         0
   Partnership distributions payable                                           494,260        477,122
                                                                           -----------    -----------
           Total liabilities                                                   499,349        477,122
                                                                           -----------    -----------
Partners' capital:
   Wells Real Estate Fund II                                                19,280,727     20,666,589
   Wells Real Estate Fund II-OW                                              1,082,280      1,159,995
           Total partners' capital                                          20,363,007     21,826,584
                                                                           -----------    -----------
           Total liabilities and partners' capital                         $20,862,356    $22,303,706
                                                                           ===========    ===========
</TABLE>

                                      F-11
<PAGE>

                               Fund II and II-OW
                           (A Georgia Joint Venture)
                             Statements of Income
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                              2000            1999            1998
                                                           -----------     -----------     -----------
<S>                                                        <C>             <C>             <C>
Revenues:
   Rental income                                           $   844,071     $   717,676     $   458,867
   Equity in income of joint ventures                          251,609         242,690         192,591
   Interest income                                              11,806             367             481
                                                           -----------     -----------     -----------
                                                             1,107,486         960,733         651,939
                                                           -----------     -----------     -----------
Expenses:
   Depreciation                                                367,667         367,667         367,667
   Partnership administration                                   83,868          88,859          88,632
   Legal and accounting                                         45,824          42,899          43,175
   Management and leasing fees                                  69,128          61,295          45,887
   Operating costs                                               1,484             366           2,914
   Computer costs                                               12,273           8,148           5,906
                                                           -----------     -----------     -----------
                                                               580,244         569,234         554,181
                                                           -----------     -----------     -----------
Net income                                                 $   527,242     $   391,499     $    97,758
                                                           ===========     ===========     ===========

Net income allocated to Wells Real Estate Fund II          $   499,246     $   370,710     $    92,568
                                                           ===========     ===========     ===========

Net income allocated to Wells Real Estate Fund II-OW       $    27,996     $    20,789     $     5,190
                                                           ===========     ===========     ===========
</TABLE>

                               Fund II and II-OW
                           (A Georgia Joint Venture)
                        Statements of Partners' Capital
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                   Wells Real        Wells Real          Total
                                                     Estate            Estate          Partners'
                                                     Fund II         Fund II-OW         Capital
                                                   -----------       -----------      -----------
<S>                                                <C>               <C>              <C>
Balance, December 31, 1997                         $23,435,256       $ 1,315,255      $24,750,511
   Net income                                           92,568             5,190           97,758
   Partnership distributions                        (1,508,760)          (84,607)      (1,593,367)
                                                   -----------       -----------      -----------
Balance, December 31, 1998                          22,019,064         1,235,838       23,254,902
   Net income                                          370,710            20,789          391,499
   Partnership distributions                        (1,723,185)          (96,632)      (1,819,817)
                                                   -----------       -----------      -----------
Balance, December 31, 1999                          20,666,589         1,159,995       21,826,584
   Net income                                          499,246            27,996          527,242
   Partnership distributions                        (1,885,108)         (105,711)      (1,990,819)
                                                   -----------       -----------      -----------
Balance, December 31, 2000                         $19,280,727       $ 1,082,280      $20,363,007
                                                   ===========       ===========      ===========
</TABLE>

                                      F-12
<PAGE>

                               Fund II and II-OW
                           (A Georgia Joint Venture)
                           Statements of Cash Flows
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                                   2000              1999              1998
                                                                -----------       -----------      ------------
<S>                                                             <C>               <C>              <C>
Cash flows from operating activities:
   Net income                                                   $   527,242       $   391,499      $    97,758
                                                                -----------       -----------      -----------
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation                                               367,667           367,667          367,667
         Equity in income of joint ventures                        (251,609)         (242,690)        (192,591)
         Changes in assets and liabilities:
           Accounts receivable                                        2,149            21,035           61,023
           Prepaid expenses and other assets                         16,239            18,355           18,355
           Accounts payable                                           5,089                 0                0
           Due to affiliates                                              0            (8,988)           4,427
                                                                -----------       -----------      -----------
               Total adjustments                                    139,535           155,379          258,881
                                                                -----------       -----------      -----------
               Net cash provided by operating activities            666,777           546,878          356,639
                                                                -----------       -----------      -----------
Cash flows from investing activities:
   Distributions received from joint ventures                     1,289,394         1,219,061        1,232,367
                                                                -----------       -----------      -----------
Cash flows from financing activities:
   Distributions to joint venture partners                       (1,973,681)       (1,698,065)      (1,579,031)
                                                                -----------       -----------      -----------
Net (decrease) increase in cash and cash equivalents                (17,510)           67,874            9,975
Cash and cash equivalents, beginning of year                        162,241            94,367           84,392
                                                                -----------       -----------      -----------
Cash and cash equivalents, end of year                          $   144,731       $   162,241      $    94,367
                                                                ===========       ===========      ===========
</TABLE>

     The following is a rollforward of Fund II and II-OW investment in joint
     venture for the years ended December 31, 2000 and 1999.

                                                        2000           1999
                                                     -----------    -----------
   Investment in joint venture, beginning of year    $15,654,420    $16,676,111
   Equity in income of joint venture                     251,609        242,690
   Distributions from joint venture                   (1,329,166)    (1,264,381)
                                                     -----------    -----------
   Investment in joint venture, end of year          $14,576,863    $15,654,420
                                                     ===========    ===========

     Fund II and II-OW's investment and percentage ownership in other joint
     ventures at December 31, 2000 and 1999 are summarized as follows:

<TABLE>
<CAPTION>
                                                          2000                         1999
                                                 ----------------------       ----------------------
                                                   Amount       Percent         Amount       Percent
                                                 -----------    -------       -----------    -------
<S>                                              <C>            <C>           <C>            <C>
Fund I and II Tucker                             $ 3,894,846      45%         $ 4,058,192      45%
Fund I, II, II-OW, VI, and VII
   Associates--Cherokee                            3,814,737      54            4,053,105      54
Fund II and III Associates--The Atrium             5,054,727      61            5,615,740      61
Fund II and III Associates-- Brookwood
   Grill                                           1,812,553      62            1,927,383      62
                                                 -----------                  -----------
                                                 $14,576,863                  $15,654,420
                                                 ===========                  ===========
</TABLE>

     The following are descriptions of the joint ventures in which Fund II and
     II-OW has investments.

                                      F-13
<PAGE>

     Fund I and II Tucker

     Tucker and Cherokee Commons were previously held in joint ventures between
     Wells Real Estate Fund I ("Fund I") and Fund II and II-OW. The joint
     ventures were formed for the purpose of owning, developing, and operating
     Cherokee Commons and Tucker. In 1991, the Tucker and Cherokee Commons joint
     ventures were merged into a new joint venture, the Fund I and II Tucker-
     Cherokee Joint Venture. Under the terms of the joint venture agreement, the
     ownership interests of Fund I and Fund II and II-OW in each individual
     property remained unchanged.

     On August 1, 1995, the Fund I and II Tucker-Cherokee joint venture assigned
     its ownership in Cherokee Commons to the Fund I, II, II-OW, VI, and VII
     Associates--Cherokee joint venture. Upon the assignment of Cherokee
     Commons, the joint venture was renamed Fund I and II Tucker. Tucker is a
     retail shopping center containing approximately 29,858 square feet and a
     commercial office building complex containing approximately 67,465 square
     feet in Tucker, DeKalb County, Georgia.

     In 1996, one of the tenants in Tucker experienced a fire. In 1996, Fund I
     and II Tucker received an initial insurance settlement of $143,944 for
     damages to the building. In 1997, an additional $104,895 was received as a
     final insurance settlement for the fire damages discussed above and storm
     damages that occurred in 1997. In addition, a loss from the retirement of
     real estate assets of $58,952 was incurred. Additional insurance proceeds
     of $27,319 related to these damages were received in 1998 and are reflected
     as a gain on real estate assets in the following statement of income.

                                      F-14
<PAGE>

Following are the financial statements for Fund I and II Tucker:

                             Fund I and II Tucker
                           (A Georgia Joint Venture)
                                Balance Sheets
                          December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                    Assets

                                                                        2000         1999
                                                                     ----------   ----------
<S>                                                                  <C>          <C>
Real estate assets, at cost:
   Land                                                              $3,260,887   $3,260,887
   Building and improvements, less accumulated depreciation of
      $3,896,844 in 2000 and $3,405,038 in 1999                       5,459,417    5,835,882
   Construction in progress                                                   0            0
                                                                     ----------   ----------
           Total real estate assets                                   8,720,304    9,096,769
Cash and cash equivalents                                               117,239      123,617
Accounts receivable                                                     222,778      125,772
Prepaid expenses and other assets                                       110,525      115,865
                                                                     ----------   ----------
           Total assets                                              $9,170,846   $9,462,023
                                                                     ==========   ==========

                       Liabilities and Partners' Capital

Liabilities:
   Accounts payable and accrued expenses                             $   69,099   $   67,797
   Partnership distributions payable                                    236,990      165,750
   Due to affiliates                                                    632,762      588,344
                                                                     ----------   ----------
           Total liabilities                                            938,851      821,891
                                                                     ----------   ----------
Partners' capital:
   Wells Real Estate Fund I                                           4,337,149    4,581,940
   Fund II and II-OW                                                  3,894,846    4,058,192
                                                                     ----------   ----------
           Total partners' capital                                    8,231,995    8,640,132
                                                                     ----------   ----------
           Total liabilities and partners' capital                   $9,170,846   $9,462,023
                                                                     ==========   ==========
</TABLE>

                                      F-15
<PAGE>

                             Fund I and II Tucker
                           (A Georgia Joint Venture)
                             Statements of Income
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                           2000          1999         1998
                                                        ----------    ----------   ----------
<S>                                                     <C>           <C>          <C>
Revenues:
   Rental income                                        $1,390,599    $1,373,213   $1,242,332
   Interest income                                             601           447            0
                                                        ----------    ----------   ----------
                                                         1,391,200     1,373,660    1,242,332
                                                        ----------    ----------   ----------
Expenses:
   Operating costs, net of reimbursements                  434,738       464,001      515,791
   Depreciation                                            491,806       491,386      440,099
   Management and leasing fees                             121,946       158,269      164,378
   Partnership administration                               37,480        29,109       32,420
   Legal and accounting                                      6,824         5,739       12,093
   Gain on real estate assets                                    0             0      (27,319)
   Bad debt expense                                         27,097             0            0
                                                        ----------    ----------   ----------
                                                         1,119,891     1,148,504    1,137,462
                                                        ----------    ----------   ----------
Net income                                              $  271,309    $  225,156   $  104,870
                                                        ==========    ==========   ==========

Net income allocated to Wells Real Estate Fund I        $  149,464    $  124,039   $   57,773
                                                        ==========    ==========   ==========

Net income allocated to Fund II and II-OW               $  121,845    $  101,117   $   47,097
                                                        ==========    ==========   ==========
</TABLE>

                             Fund I and II Tucker
                           (A Georgia Joint Venture)
                        Statements of Partners' Capital
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                        Wells Real     Fund II        Total
                                                          Estate         and        Partners'
                                                          Fund I        II-OW        Capital
                                                        ----------    ----------   ----------
<S>                                                     <C>           <C>          <C>
Balance, December 31, 1997                              $4,969,956    $4,280,651   $9,250,607
   Net income                                               57,773        47,097      104,870
   Partnership distributions                              (269,138)     (170,937)    (440,075)
                                                        ----------    ----------   ----------
Balance, December 31, 1998                               4,758,591     4,156,811    8,915,402
   Net income                                              124,039       101,117      225,156
   Partnership distributions                              (300,690)     (199,736)    (500,426)
                                                        ----------    ----------   ----------
Balance, December 31, 1999                               4,581,940     4,058,192    8,640,132
   Net income                                              149,464       121,845      271,309
   Partnership distributions                              (394,255)     (285,191)    (679,446)
                                                        ----------    ----------   ----------
Balance, December 31, 2000                              $4,337,149    $3,894,846   $8,231,995
                                                        ==========    ==========   ==========
</TABLE>

                                      F-16
<PAGE>

                             Funds I and II Tucker
                           (A Georgia Joint Venture)
                           Statements of Cash Flows
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                               2000        1999        1998
                                                             ---------   ---------   ---------
<S>                                                          <C>         <C>         <C>
Cash flows from operating activities:
   Net income                                                $ 271,309   $ 225,156   $ 104,870
                                                             ---------   ---------   ---------
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation                                          491,806     491,386     440,099
         Gain on real estate assets                                  0           0     (27,319)
         Changes in assets and liabilities:
           Accounts receivable                                 (97,006)    (29,410)    (16,647)
           Prepaid expenses and other assets                     5,340       6,316     (17,585)
           Accounts payable and accrued expenses                 1,302       2,833      (9,054)
           Due to affiliates                                    44,418      39,712      67,404
                                                             ---------   ---------   ---------
              Total adjustments                                445,860     510,837     436,898
                                                             ---------   ---------   ---------
              Net cash provided by operating activities        717,169     735,993     541,768
                                                             ---------   ---------   ---------
Cash flows from investing activities:

   Investment in real estate                                  (115,341)   (260,522)   (142,814)
   Insurance proceeds                                                0           0      27,319
                                                             ---------   ---------   ---------
              Net cash used in investing activities           (115,341)   (260,522)   (115,495)
                                                             ---------   ---------   ---------
Cash flows from financing activities:
   Distributions to joint venture partners                    (608,206)   (401,234)   (389,577)
                                                             ---------   ---------   ---------
Net (decrease) increase in cash and cash equivalents            (6,378)     74,237      36,696
Cash and cash equivalents, beginning of year                   123,617      49,380      12,684
                                                             ---------   ---------   ---------
Cash and cash equivalents, end of year                       $ 117,239   $ 123,617   $  49,380
                                                             =========   =========   =========
</TABLE>

     Fund I, II, II-OW, VI, and VII Associates--Cherokee

     In August 1995, Cherokee Commons was transferred to a new joint venture
     between Fund I, Fund II and II-OW, Wells Real Estate Fund VI, L.P. ("Fund
     VI"), and Wells Real Estate Fund VII, L.P. ("Fund VII"). The joint venture,
     Fund I, II, II-OW, VI, and VII Associates--Cherokee, was formed for the
     purpose of owning and operating Cherokee Commons, a retail shopping center
     containing approximately 103,755 square feet located in Cherokee County,
     Georgia. Percentage ownership interests in Fund I, II, II-OW, VI, and VII
     Associates--Cherokee were determined at the time of formation based on
     contributions. Under the terms of the joint venture agreement, Fund VI and
     Fund VII each contributed approximately $1 million to the new joint venture
     in return for a 10.7% ownership interest. Fund I's ownership interest in
     the Cherokee joint venture changed from 30.6% to 24%, and Fund II and II-OW
     joint venture's ownership interest changed from 69.4% to 54.6%. The $2
     million in cash contributed to Cherokee was used to fund an expansion of
     the property for an existing tenant.

                                      F-17
<PAGE>

     Following are the financial statements for Fund I, II, II-OW, VI, and VII
     Associates--Cherokee:

              Fund I, II, II-OW, VI, and VII Associates--Cherokee
                           (A Georgia Joint Venture)
                                Balance Sheets
                          December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                    Assets

                                                                         2000          1999
                                                                      ----------    ----------
<S>                                                                   <C>           <C>
Real estate assets, at cost:
   Land                                                               $1,219,704    $1,219,704
   Building and improvements, less accumulated depreciation of
      $3,606,079 in 2000 and $3,163,829 in 1999                        5,624,924     6,067,174
                                                                      ----------    ----------
           Total real estate assets                                    6,844,628     7,286,878
Cash and cash equivalents                                                214,940       206,540
Accounts receivable                                                       31,356        27,703
Prepaid expenses and other assets                                        100,866        89,846
                                                                      ----------    ----------
           Total assets                                               $7,191,790    $7,610,967
                                                                      ==========    ==========

                       Liabilities and Partners' Capital

Liabilities:
   Accounts payable and accrued expenses                              $   23,716    $   16,295
   Refundable security deposits                                           23,839        18,562
   Partnership distributions payable                                     197,191       192,184
   Due to affiliates                                                     137,334       122,272
                                                                      ----------    ----------
           Total liabilities                                             382,080       349,313
                                                                      ----------    ----------
Partners' capital:
   Wells Real Estate Fund I                                            1,498,120     1,618,133
   Fund II and II-OW                                                   3,814,737     4,053,105
   Wells Real Estate Fund VI                                             749,777       796,558
   Wells Real Estate Fund VII                                            747,076       793,858
                                                                      ----------    ----------
           Total partners' capital                                     6,809,710     7,261,654
                                                                      ----------    ----------
           Total liabilities and partners' capital                    $7,191,790    $7,610,967
                                                                      ==========    ==========
</TABLE>

                                      F-18
<PAGE>

              Fund I, II, II-OW, VI and VII Associates--Cherokee
                           (A Georgia Joint Venture)
                             Statements of Income
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                                 2000        1999        1998
                                                               --------    --------    --------
<S>                                                            <C>         <C>         <C>
Revenues:
   Rental income                                               $965,305    $945,222    $909,831
   Interest income                                                   78          68          84
                                                               --------    --------    --------
                                                                965,383     945,290     909,915
                                                               --------    --------    --------
Expenses:
   Depreciation                                                 442,250     447,969     444,660
   Operating costs, net of reimbursements                        24,557      37,583      35,715
   Partnership administration                                    23,352      24,882      22,934
   Management and leasing fees                                   74,422      94,149      82,517
   Legal and accounting                                           6,180       5,624       7,363
   Bad debt expense                                                   0           0      18,664
                                                               --------    --------    --------
                                                                570,761     610,207     611,853
                                                               --------    --------    --------
Net income                                                     $394,622    $335,083    $298,062
                                                               ========    ========    ========

Net income allocated to Wells Real Estate Fund I               $ 94,800    $ 80,496    $ 71,604
                                                               ========    ========    ========

Net income allocated to Fund II and II-OW                      $215,310    $182,825    $162,626
                                                               ========    ========    ========

Net income allocated to Wells Real Estate Fund VI              $ 42,256    $ 35,881    $ 31,916
                                                               ========    ========    ========

Net income allocated to Wells Real Estate Fund VII             $ 42,256    $ 35,881    $ 31,916
                                                               ========    ========    ========
</TABLE>

              Fund I, II, II-OW, VI and VII Associates--Cherokee
                           (A Georgia Joint Venture)
                        Statements of Partners' Capital
             for the Years Ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                                    Wells Real    Fund II     Wells Real   Wells Real     Total
                                      Estate        and         Estate       Estate     Partners'
                                      Fund I       II-OW       Fund VI      Fund VII     Capital
                                    ----------   ----------   ----------   ----------   ----------
<S>                                 <C>          <C>          <C>          <C>          <C>
Balance, December 31, 1997          $1,863,173   $4,536,781   $  891,482   $  888,782   $8,180,218
   Net income                           71,604      162,626       31,916       31,916      298,062
   Partnership distributions          (193,285)    (403,744)     (79,238)     (79,238)    (755,505)
                                    ----------   ----------   ----------   ----------   ----------
Balance, December 31, 1998           1,741,492    4,295,663      844,160      841,460    7,722,775
   Net income                           80,496      182,825       35,881       35,881      335,083
   Partnership distributions          (203,855)    (425,383)     (83,483)     (83,483)    (796,204)
                                    ----------   ----------   ----------   ----------   ----------
Balance, December 31, 1999           1,618,133    4,053,105      796,558      793,858    7,261,654
   Net income                           94,800      215,310       42,256       42,256      394,622
   Partnership distributions          (214,813)    (453,678)     (89,037)     (89,038)    (846,566)
                                    ----------   ----------   ----------   ----------   ----------
Balance, December 31, 2000          $1,498,120   $3,814,737   $  749,777   $  747,076   $6,809,710
                                    ==========   ==========   ==========   ==========   ==========
</TABLE>

                                      F-19
<PAGE>

              Fund I, II, II-OW, VI, and VII Associates--Cherokee
                           (A Georgia Joint Venture)
                           Statements of Cash Flows
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                               2000        1999        1998
                                                             ---------   ---------   ---------
<S>                                                          <C>         <C>         <C>
Cash flows from operating activities:
   Net income                                                $ 394,622   $ 335,083   $ 298,062
                                                             ---------   ---------   ---------
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation                                          442,250     447,969     444,660
         Changes in assets and liabilities:
           Accounts receivable                                  (3,653)      7,814      56,999
           Prepaid expenses and other assets                   (11,020)      1,133       8,890
           Accounts payable, accrued expenses, and
              refundable security deposits                      12,694     (72,272)     70,278
           Due to affiliates                                    15,062      13,005      15,327
                                                             ---------   ---------   ---------
               Total adjustments                               455,333     397,649     596,154
                                                             ---------   ---------   ---------
               Net cash provided by operating activities       849,955     732,732     894,216
                                                             ---------   ---------   ---------
Cash flows from investing activities:
   Investment in real estate                                         0     (14,148)     (5,771)
                                                             ---------   ---------   ---------
Cash flows from financing activities:
   Distributions to joint venture partners                    (841,555)   (734,858)   (818,790)
                                                             ---------   ---------   ---------
Net increase (decrease) in cash and cash equivalents             8,400     (16,274)     69,655
Cash and cash equivalents, beginning of year                   206,540     222,814     153,159
                                                             ---------   ---------   ---------
Cash and cash equivalents, end of year                       $ 214,940   $ 206,540   $ 222,814
                                                             =========   =========   =========
</TABLE>

     Fund II and III Associates

     On April 3, 1989, Fund II and II-OW entered into a joint venture agreement
     with Wells Real Estate Fund III, L.P ("Fund III"). The new joint venture,
     Fund II and III Associates, was formed for the purpose of investing in
     commercial and industrial real properties. In April 1989, Fund II and III
     Associates acquired The Atrium. In 1991, Fund II and II-OW contributed its
     interest in a parcel of land known as the 880 Property located in Roswell,
     Georgia, to Fund II and III Associates. The property is a 5.8-acre tract of
     land. A restaurant was developed on 1.5 acres of the 880 Property and is
     currently operating as the Brookwood Grill restaurant ("Fund II and III
     Associates--Brookwood Grill"). The remaining 4.3 acres of the 880 Property
     was transferred at cost to the Fund II, III, VI, and VII Associates joint
     venture during 1995. Fund II and III Associates' investment in this
     transferred parcel of the 880 Property was $1,305,317 and $1,406,591 at
     December 31, 2000 and 1999, respectively, which represented a 24% interest
     for each year.

     The Atrium was fully occupied from inception through June 1996, at which
     time the previous tenant's lease expired. In March 1997, a lease was signed
     with a new tenant for the entire building and the new tenant began paying
     rent in May 1997. The lease term is for five years with an option to renew
     for an additional five years. There is a no-cause cancellation provision at
     the end of the first three-year period. If this no-cause cancellation is
     exercised, the tenant would be required to pay unamortized, up-front tenant
     improvement costs. The cost of completing the required tenant improvements
     and outside broker commissions was funded out of reserves and contributions
     by Fund II and II-OW and Fund III.

                                      F-20
<PAGE>

     Following are the financial statements for Fund II and III Associates--The
     Atrium:

                    Fund II and III Associates--The Atrium
                           (A Georgia Joint Venture)
                                Balance Sheets
                          December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                    Assets

                                                                        2000          1999
                                                                     ----------    ----------
<S>                                                                  <C>           <C>
Real estate assets, at cost:
   Land                                                              $1,504,743    $1,504,743
   Building and improvements, less accumulated depreciation of
      $7,113,487 in 2000 and $6,301,682 in 1999                       6,274,702     7,093,742
                                                                     ----------    ----------
           Total real estate assets                                   7,779,445     8,598,485
Cash and cash equivalents                                               240,314        89,170
Accounts receivable                                                      23,202        30,018
Prepaid expenses and other assets                                       123,399       213,143
                                                                     ----------    ----------
           Total assets                                              $8,166,360    $8,930,816
                                                                     ==========    ==========

                       Liabilities and Partners' Capital

Liabilities:
   Accounts payable                                                  $  104,321    $    1,801
   Partnership distributions payable                                    149,227       101,012
                                                                     ----------    ----------
           Total liabilities                                            253,548       102,813
                                                                     ----------    ----------
Partners' capital:
   Fund II and II-OW                                                  5,054,727     5,615,740
   Wells Real Estate Fund III                                         2,858,085     3,212,263
                                                                     ----------    ----------
           Total partners' capital                                    7,912,812     8,828,003
                                                                     ----------    ----------
           Total liabilities and partners' capital                   $8,166,360    $8,930,816
                                                                     ==========    ==========
</TABLE>

                                      F-21
<PAGE>

                    Fund II and III Associates--The Atrium
                           (A Georgia Joint Venture)
                              Statements of Loss
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                           2000         1999         1998
                                                        ----------   ----------   ----------
<S>                                                     <C>          <C>          <C>
Revenues:
   Rental income                                        $1,468,784   $1,470,144   $1,470,144
   Other income                                                  0        4,000       13,280
                                                        ----------   ----------   ----------
                                                         1,468,784    1,474,144    1,483,424
                                                        ----------   ----------   ----------
Expenses:
   Depreciation                                            877,240      867,720      866,778
   Operating costs, net of reimbursements                  723,744      692,066      699,550
   Management and leasing fees                             185,035      179,762      186,102
   Partnership administration                               14,841       23,278       11,095
   Legal and accounting                                      5,250        5,250        3,310
                                                        ----------   ----------   ----------
                                                         1,806,110    1,768,076    1,766,835
                                                        ----------   ----------   ----------
Net loss                                                $ (337,326)  $ (293,932)  $ (283,411)
                                                        ==========   ==========   ==========

Net loss allocated to Fund II and II-OW                 $ (206,781)  $ (180,180)  $ (173,731)
                                                        ==========   ==========   ==========

Net loss allocated to Wells Real Estate Fund III        $ (130,545)  $ (113,752)  $ (109,680)
                                                        ==========   ==========   ==========
</TABLE>

                    Fund II and III Associates--The Atrium
                           (A Georgia Joint Venture)
                        Statements of Partners' Capital
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                         Fund II     Wells Real      Total
                                                           and         Estate      Partners'
                                                          II-OW       Fund III      Capital
                                                        ----------   ----------   -----------
<S>                                                     <C>          <C>          <C>
Balance, December 31, 1997                              $6,760,950   $3,935,261   $10,696,211
   Net loss                                               (173,731)    (109,680)     (283,411)
   Partnership distributions                              (405,758)    (256,165)     (661,923)
                                                        ----------   ----------   -----------
Balance, December 31, 1998                               6,181,461    3,569,416     9,750,877
   Net loss                                               (180,180)    (113,752)     (293,932)
   Partnership distributions                              (385,541)    (243,401)     (628,942)
                                                        ----------   ----------   -----------
Balance, December 31, 1999                               5,615,740    3,212,263     8,828,003
   Net loss                                               (206,781)    (130,545)     (337,326)
   Partnership distributions                              (354,232)    (223,633)     (577,865)
                                                        ----------   ----------   -----------
Balance, December 31, 2000                              $5,054,727   $2,858,085   $ 7,912,812
                                                        ==========   ==========   ===========
</TABLE>

                                      F-22
<PAGE>

                    Fund II and III Associates--The Atrium
                           (A Georgia Joint Venture)
                           Statements of Cash Flows
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                               2000         1999         1998
                                                            ----------   ----------   ----------
<S>                                                         <C>          <C>          <C>
Cash flows from operating activities:
   Net loss                                                 $ (337,326)  $ (293,932)  $ (283,411)
                                                            ----------   ----------   ----------
   Adjustments to reconcile net loss to net cash
      provided by operating activities:
         Depreciation                                          877,240      867,720      866,778
         Changes in assets and liabilities:
           Accounts receivable                                   6,816      (11,904)         836
           Prepaid expenses and other assets                    89,744       89,745       89,745
           Accounts payable                                    102,520       (2,786)    (146,779)
           Due to affiliates                                         0            0       (3,829)
                                                            ----------   ----------   ----------
              Total adjustments                              1,076,320      942,775      806,751
                                                            ----------   ----------   ----------
              Net cash provided by operating activities        738,994      648,843      523,340
                                                            ----------   ----------   ----------
Cash flows from investing activities:
   Investment in real estate assets                            (58,200)     (23,401)           0
                                                            ----------   ----------   ----------
Cash flows from financing activities:
   Distributions to joint venture partners                    (529,650)    (665,154)    (675,743)
                                                            ----------   ----------   ----------
Net increase (decrease) in cash and cash equivalents           151,144      (39,712)    (152,403)
Cash and cash equivalents, beginning of year                    89,170      128,882      281,285
                                                            ----------   ----------   ----------
Cash and cash equivalents, end of year                      $  240,314   $   89,170   $  128,882
                                                            ==========   ==========   ==========

Supplemental disclosure of noncash activities:
   Write-off of fully depreciated fixed assets              $   65,435   $        0   $        0
                                                            ==========   ==========   ==========
</TABLE>

                                      F-23
<PAGE>

     Following are the financial statements for Fund II and III Associates--
     Brookwood Grill:

                  Fund II and III Associates--Brookwood Grill
                           (A Georgia Joint Venture)
                                Balance Sheets
                          December 31, 2000 and 1999

                                    Assets

<TABLE>
<CAPTION>
                                                                         2000         1999
                                                                      ----------   ----------
<S>                                                                   <C>          <C>
Real estate assets, at cost:
   Land                                                               $  745,223   $  745,223
   Building and improvements, less accumulated depreciation of
      $437,759 in 2000 and $383,745 in 1999                              835,054      889,068
                                                                      ----------    ---------
           Total real estate assets                                    1,580,277    1,634,291
Investment in joint venture                                            1,305,317    1,406,591
Cash and cash equivalents                                                 57,515       65,627
Due from affiliate                                                        69,758       60,193
Accounts receivable                                                       38,714       41,060
Prepaid expenses and other assets                                          6,344       11,912
                                                                      ----------   ----------
           Total assets                                               $3,057,925   $3,219,674
                                                                      ==========   ==========

                       Liabilities and Partners' Capital

Liabilities:
   Accounts payable                                                   $    4,580   $        0
   Due to affiliate                                                          917        2,405
   Partnership distributions payable                                     145,528      126,201
                                                                      ----------   ----------
           Total liabilities                                             151,025      128,606
                                                                      ----------   ----------
Partners' capital:
   Fund II and II-OW                                                   1,812,553    1,927,383
   Wells Real Estate Fund III                                          1,094,347    1,163,685
                                                                      ----------   ----------
           Total partners' capital                                     2,906,900    3,091,068
                                                                      ----------   ----------
           Total liabilities and partners' capital                    $3,057,925   $3,219,674
                                                                      ==========   ==========
</TABLE>

                                     F-24
<PAGE>

                  Fund II and III Associates--Brookwood Grill
                           (A Georgia Joint Venture)
                             Statements of Income
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                                2000        1999        1998
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
Revenues:
   Rental income                                              $224,801    $224,801    $225,100
   Equity in income of joint venture                            55,489      81,669      78,791
                                                              --------    --------    --------
                                                               280,290     306,470     303,891
                                                              --------    --------    --------
Expenses:
   Depreciation                                                 54,014      54,014      54,014
   Operating costs, net of reimbursements                      (13,375)    (11,565)    (31,540)
   Management and leasing fees                                  25,320      30,096      23,348
   Partnership administration                                   14,019       5,853       3,708
   Legal and accounting                                          5,869       5,252       3,200
                                                              --------    --------    --------
                                                                85,847      83,650      52,730
                                                              --------    --------    --------
Net income                                                    $194,443    $222,820    $251,161
                                                              ========    ========    ========

Net income allocated to Fund II and II-OW                     $121,235    $138,928    $156,599
                                                              ========    ========    ========

Net income allocated to Wells Real Estate Fund III            $ 73,208    $ 83,892    $ 94,562
                                                              ========    ========    ========
</TABLE>

                  Fund II and III Associates--Brookwood Grill
                           (A Georgia Joint Venture)
                        Statements of Partners' Capital
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                              Fund II     Wells Real      Total
                                                                and         Estate      Partners'
                                                               II-OW       Fund III      Capital
                                                            ----------    ----------    ----------
<S>                                                         <C>           <C>           <C>
Balance, December 31, 1997                                  $2,156,463    $1,302,017    $3,458,480
   Net income                                                  156,599        94,562       251,161
   Partnership distributions                                  (270,886)     (163,576)     (434,462)
                                                            ----------    ----------    ----------
Balance, December 31, 1998                                   2,042,176     1,233,003     3,275,179
   Net income                                                  138,928        83,892       222,820
   Partnership distributions                                  (253,721)     (153,210)     (406,931)
                                                            ----------    ----------    ----------
Balance, December 31, 1999                                   1,927,383     1,163,685     3,091,068
   Net income                                                  121,235        73,208       194,443
   Partnership distributions                                  (236,065)     (142,546)     (378,611)
                                                            ----------    ----------    ----------
Balance, December 31, 2000                                  $1,812,553    $1,094,347    $2,906,900
                                                            ==========    ==========    ==========
</TABLE>

                                     F-25
<PAGE>

                  Fund II and III Associates--Brookwood Grill
                           (A Georgia Joint Venture)
                           Statements of Cash Flows
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                                  2000        1999       1998
                                                               ---------   ---------  ---------
<S>                                                            <C>         <C>        <C>
Cash flows from operating activities:
   Net income                                                  $ 194,443   $ 222,820  $ 251,161
                                                               ---------   ---------  ---------
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation                                             54,014      54,014     54,014
         Equity in income of joint venture                       (55,489)    (81,669)   (78,791)
         Changes in assets and liabilities:
           Accounts receivable                                     2,346      25,958     22,739
           Prepaid expenses and other assets                       5,568       5,568      5,568
           Accounts payable                                        4,580      (1,200)    (2,679)
           Due to affiliates                                      (1,488)     (1,489)    (1,487)
                                                               ---------   ---------  ---------
              Total adjustments                                    9,531       1,182       (636)
                                                               ---------   ---------  ---------
              Net cash provided by operating activities          203,974     224,002    250,525
                                                               ---------   ---------  ---------
Cash flows from investing activities:
   Distributions received from joint venture                     147,198     173,171    160,812
                                                               ---------   ---------  ---------
Cash flows from financing activities:
   Distributions to joint venture partners                      (359,284)   (405,502)  (391,702)
                                                               ---------   ---------  ---------
Net (decrease) increase in cash and cash equivalents              (8,112)     (8,329)    19,635
Cash and cash equivalents, beginning of year                      65,627      73,956     54,321
                                                               ---------   ---------  ---------
Cash and cash equivalents, end of year                         $  57,515   $  65,627  $  73,956
                                                               =========   =========  =========
</TABLE>

     Fund II, III, VI, and VII Associates

     On January 1, 1995, the Fund II and III Associates joint venture entered
     into a joint venture agreement with Fund VI and Fund VII. The joint
     venture, Fund II, III, VI, and VII Associates, was formed for the purpose
     of acquiring, developing, operating, and selling real properties. During
     1995, Fund II and III Associates contributed a 4.3-acre tract of land from
     its 880 Property--Holcomb Bridge to the Fund II, III, VI, and VII
     Associates joint venture. During 1996, 1997, and 1998, Fund VI and Fund VII
     made contributions to the joint venture. Ownership percentage interests
     were recomputed accordingly. Development was substantially completed in
     1996 on two retail and office buildings containing a total of approximately
     49,500 square feet.

                                     F-26
<PAGE>

     The following are the financial statements for Fund II, III, VI, and VII
     Associates:

                     Fund II, III, VI, and VII Associates
                           (A Georgia Joint Venture)
                                Balance Sheets
                          December 31, 2000 and 1999

                                    Assets

<TABLE>
<CAPTION>
                                                                        2000          1999
                                                                     ----------    ----------
<S>                                                                  <C>           <C>
Real estate assets, at cost:
   Land                                                              $1,325,242    $1,325,242
   Building and improvements, less accumulated depreciation of
      $1,654,520 in 2000 and $1,299,227 in 1999                       4,063,639     4,418,932
                                                                     ----------    ----------
           Total real estate assets                                   5,388,881     5,744,174
Cash and cash equivalents                                                88,044       189,404
Accounts receivable                                                     151,886       162,464
Prepaid expenses and other assets                                       158,872       213,443
                                                                     ----------    ----------
           Total assets                                              $5,787,683    $6,309,485
                                                                     ==========    ==========

                       Liabilities and Partners' Capital

Liabilities:
   Accounts payable and accrued expenses                             $   82,072    $   87,926
   Partnership distributions payable                                    154,874       250,075
                                                                     ----------    ----------
                                                                        236,946       338,001
                                                                     ----------    ----------
Partners' capital:
   Fund II and III Associates                                         1,305,317     1,406,591
   Wells Real Estate Fund VI                                          1,456,417     1,569,430
   Wells Real Estate Fund VII                                         2,789,003     2,995,463
                                                                     ----------    ----------
           Total partners' capital                                    5,550,737     5,971,484
                                                                     ----------    ----------
           Total liabilities and partners' capital                   $5,787,683    $6,309,485
                                                                     ==========    ==========
</TABLE>

                                     F-27
<PAGE>

                     Fund II, III, VI, and VII Associates
                           (A Georgia Joint Venture)
                             Statements of Income
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                                2000        1999        1998
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
Revenues:
   Rental income                                              $869,390    $953,952    $872,978
   Other income                                                      0      23,843      36,000
                                                              --------    --------    --------
                                                               869,390     977,795     908,978
                                                              --------    --------    --------
Expenses:
   Depreciation                                                355,293     415,165     376,290
   Operating costs, net of reimbursements                       70,693      68,691      85,983
   Management and leasing fees                                 111,567     129,798      97,701
   Legal and accounting                                          4,513       4,952       6,509
   Partnership administration                                   22,646      19,891      14,926
   Bad debt expense                                             74,145           0           0
                                                              --------    --------    --------
                                                               638,857     638,497     581,409
                                                              --------    --------    --------
Net income                                                    $230,533    $339,298    $327,569
                                                              ========    ========    ========

Net income allocated to Fund II and III Associates            $ 55,489    $ 81,669      78,791
                                                              ========    ========    ========

Net income allocated to Wells Real Estate Fund VI             $ 61,921    $ 91,135      87,914
                                                              ========    ========    ========

Net income allocated to Wells Real Estate Fund VII            $113,123    $166,494    $160,864
                                                              ========    ========    ========
</TABLE>

                     Fund II, III, VI, and VII Associates
                           (A Georgia Joint Venture)
                        Statements of Partners' Capital
             for the Years Ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                            Fund II       Wells      Wells Real      Total
                                            and III    Real Estate     Estate      Partners'
                                           Associates    Fund VI      Fund VII      Capital
                                           ----------  -----------   ----------    ----------
<S>                                        <C>         <C>           <C>           <C>
Balance, December 31, 1997                 $1,608,215   $1,789,811   $3,252,856    $6,650,882
   Partnership contributions                        0        4,600      154,049       158,649
   Net income                                  78,791       87,914      160,864       327,569
   Partnership distributions                 (179,199)    (199,945)    (365,964)     (745,108)
                                           ----------   ----------   ----------    ----------
Balance, December 31, 1998                  1,507,807    1,682,380    3,201,805     6,391,992
   Net income                                  81,669       91,135      166,494       339,298
   Partnership distributions                 (182,885)    (204,085)    (372,836)     (759,806)
                                           ----------   ----------   ----------    ----------
Balance, December 31, 1999                  1,406,591    1,569,430    2,995,463     5,971,484
   Net income                                  55,489       61,921      113,123       230,533
   Partnership distributions                 (156,763)    (174,934)    (319,583)     (651,280)
                                           ----------   ----------   ----------    ----------
Balance, December 31, 2000                 $1,305,317   $1,456,417   $2,789,003    $5,550,737
                                           ==========   ==========   ==========    ==========
</TABLE>

                                     F-28
<PAGE>

                     Fund II, III, VI, and VII Associates
                           (A Georgia Joint Venture)
                           Statements of Cash Flows
             for the Years Ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                                                                2000        1999       1998
                                                              --------    --------   --------
<S>                                                           <C>         <C>        <C>
Cash flows from operating activities:
   Net income                                                 $230,533    $339,298   $327,569
                                                              --------    --------   --------
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation                                          355,293     415,165    376,290
         Changes in assets and liabilities:
           Accounts receivable                                  10,578     (51,004)   (56,936)
           Prepaid expenses and other assets                    54,571      20,522     35,603
           Accounts payable and accrued expenses                (5,854)   (104,146)    21,296
                                                              --------    --------   --------
              Total adjustments                                414,588     280,537    376,253
                                                              --------    --------   --------
              Net cash provided by operating activities        645,121     619,835    703,822
                                                              --------    --------   --------
Cash flows from investing activities:

   Investment in real estate                                         0     (19,772)  (102,122)
                                                              --------    --------   --------
Cash flows from financing activities:
   Contributions from joint venture partners                         0           0    154,996
   Distributions to joint venture partners                    (746,481)   (719,447)  (667,299)
                                                              --------    --------   --------
              Net cash used in financing activities           (746,481)   (719,447)  (512,303)
                                                              --------    --------   --------
Net (decrease) increase in cash and cash equivalents          (101,360)   (119,384)    89,397
Cash and cash equivalents, beginning of year                   189,404     308,788    219,391
                                                              --------    --------   --------
Cash and cash equivalents, end of year                        $ 88,044    $189,404   $308,788
                                                              ========    ========   ========
Supplemental disclosure of noncash activities:


   Deferred project costs contributed to joint venture        $      0    $      0   $  3,653
                                                              ========    ========   ========
</TABLE>

4.   INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL

     The Partnership's income tax basis net income for the years ended December
     31, 2000, 1999, and 1998 is calculated as follows:

<TABLE>
<CAPTION>
                                                                   2000      1999      1998
                                                                 -------   -------    -------
<S>                                                              <C>       <C>        <C>
Financial statement net income (loss)                            $28,101   $20,918    $ 5,190
Increase (decrease) in net income (loss) resulting from:
      Depreciation expense for financial reporting
         purposes in excess of amounts for income tax
         purposes                                                 33,612    35,061     35,189
      Expenses deductible when paid for income tax
         purposes, accrued for financial reporting purposes        1,352     1,149      1,713
      Rental income recognized for income tax purposes
         (less than) in excess of amounts for financial
         reporting purposes                                          116      (349)     1,485
   Loss on retirement for income tax purposes                          0         0          0
   Involuntary conversion for income tax purposes                      0         0          0
   Meals and entertainment                                            38        52          5
                                                                 -------   -------    -------
Income tax basis net income                                      $63,219   $56,831    $43,582
                                                                 =======   =======    =======
</TABLE>

                                     F-29
<PAGE>

     The Partnership's income tax partners' capital at December 31, 2000, 1999,
     and 1998 computed as follows:

<TABLE>
<CAPTION>
                                                           2000          1999         1998
                                                        ----------    ----------   ----------
<S>                                                     <C>           <C>          <C>
Financial statement partners' capital                   $1,082,680    $1,162,395   $1,236,239
Increase (decrease) in partners' capital resulting
   from:
      Depreciation expense for financial reporting
         purposes in excess of amounts for income
         tax purposes                                      171,019       137,407      102,346
      Joint venture change in ownership                     (1,427)       (1,427)      (1,427)
      Accumulated expenses deductible when paid
         for income tax purposes, accrued for
         financial reporting purposes                       32,096        30,744       29,595
      Accumulated rental income accrued for
         financial reporting in excess of amounts
         for income tax purposes                            (6,313)       (6,429)      (6,080)
      Partnership distributions payable                     26,342        26,536       18,974
      Other                                                 (3,095)       (3,133)      (3,184)
                                                        ----------    ----------   ----------
Income tax basis partners' capital                      $1,301,302    $1,346,093   $1,376,463
                                                        ==========    ==========   ==========
</TABLE>

5.   RENTAL INCOME

     The future minimum rental income due from the Partnership's respective
     ownership interest in the joint venture under noncancelable operating
     leases at December 31, 2000 is as follows:

              Year ending December 31:
                 2001                                             $138,610
                 2002                                               75,982
                 2003                                               38,724
                 2004                                               28,228
                 2005                                               23,809
              Thereafter                                           100,227
                                                                  --------
                                                                  $405,580
                                                                  ========


     Three tenants contributed approximately 28%, 26%, and 10% of rental income.
     In addition, two tenants will contribute approximately 43% and 17% of
     future minimum rental income.

     The future minimum rental income due Fund II and II-OW for the First Union
     Property under noncancelable operating leases at December 31, 2000 is as
     follows:

              Year ending December 31:
                 2001                                             $281,357

     One tenant at the First Union Property contributed 100% of rental income
     for the year ended December 31, 2000 and will contribute 100% of future
     minimum rental income.

                                     F-30
<PAGE>

     The future minimum rental income due Fund I and II Tucker under
     noncancelable operating leases at December 31, 2000 is as follows:

              Year ending December 31:
                 2001                                               $1,105,038
                 2002                                                  842,503
                 2003                                                  463,520
                 2004                                                  206,361
                 2005                                                  122,848
              Thereafter                                               344,503
                                                                    ----------
                                                                    $3,084,773
                                                                    ==========

     One tenant contributed 10% of rental income for the year ended December 31,
     2000 and will contribute approximately 19% of future minimum rental income.

     The future minimum rental income due Fund I, II, II-OW, VI, and VII
     Associates--Cherokee under noncancelable operating leases at December 31,
     2000 is as follows:

              Year ending December 31:
                 2001                                               $  951,376
                 2002                                                  908,795
                 2003                                                  819,757
                 2004                                                  689,164
                 2005                                                  653,219
              Thereafter                                             3,159,986
                                                                    ----------
                                                                    $7,182,297
                                                                    ==========

     One tenant contributed approximately 61% of rental income for the year
     ended December 31, 2000 and will contribute approximately 84% of future
     minimum rental income.

     The future minimum rental income due Fund II and III Associates--The Atrium
     under noncancelable operating leases at December 31, 2000 is as follows:

              Year ending December 31:
                 2001                                               $1,488,000
                 2002                                                  620,000
                                                                    ----------
                                                                    $2,108,000
                                                                    ==========

     One tenant at The Atrium contributed 100% of rental income for the year
     ended December 31, 2000 and will contribute 100% of future minimum rental
     income.

     The future minimum rental income due Fund II and III Associates--Brookwood
     Grill under noncancelable operating leases at December 31, 2000 is as
     follows:

              Year ending December 31:
                 2001                                                 $249,550
                 2002                                                   25,995
                                                                      ========
                                                                      $275,545
                                                                      ========

     One tenant contributed 100% of rental income for the year ended December
     31, 2000 and will contribute 100% of future minimum rental income.

                                     F-31
<PAGE>

     The future minimum rental income due Fund II, III, VI, and VII Associates
     under noncancelable operating leases at December 31, 2000 is as follows:

              Year ending December 31:
                 2001                                               $  816,533
                 2002                                                  539,270
                 2003                                                  255,097
                 2004                                                  219,315
                 2005                                                  127,850
              Thereafter                                                21,308
                                                                    ----------
                                                                    $1,979,377
                                                                    ==========

     Three tenants contributed approximately 15%, 14%, and 13% of rental income
     for the year ended December 31, 2000. In addition, four tenants will
     contribute approximately 33%, 13%, 13%, and 11% of future minimum rental
     income.


6.   QUARTERLY RESULTS (UNAUDITED)

     Presented below is a summary of the unaudited quarterly financial
     information for the years ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                            2000 Quarters Ended
                                             -------------------------------------------------
                                              March 31   June 30   September 30    December 31
                                             ---------  --------- --------------  ------------
<S>                                          <C>        <C>       <C>             <C>
Revenues                                       $8,632    $7,300       $5,825          $6,344
Net income                                      8,632     7,300        5,825           6,344
Net income allocated to Class A limited
   partners                                     8,632     7,300        5,825           6,344
Net income per Class A limited partner
   unit outstanding                            $ 1.42    $ 1.21       $ 0.96          $ 1.05
Cash distribution per Class A limited

   partner unit outstanding                      4.38      4.53         4.53            4.35

                                                            1999 Quarters Ended
                                             -------------------------------------------------
                                              March 31   June 30   September 30    December 31
                                             ---------  --------- --------------  ------------
<S>                                          <C>        <C>       <C>             <C>
Revenues                                       $3,551    $4,037       $8,376          $4,954
Net income                                      3,551     4,037        8,376           4,954
Net income allocated to Class A limited
   partners                                     3,551     4,037        8,376           4,954
Net income per Class A limited partner
   unit                                        $ 0.59    $ 0.66       $ 1.38          $ 0.82
Cash distribution per Class A limited
   partner unit                                  3.73      3.45         4.07            4.38
</TABLE>

7.   COMMITMENTS AND CONTINGENCIES

     Management, after consultation with legal counsel, is not aware of any
     significant litigation or claims against the Partnership or the Company. In
     the normal course of business, the Partnership or the Company may become
     subject to such litigation or claims.

                                     F-32
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Wells Real Estate Fund II,
Wells Real Estate Fund II-OW, and
Wells Real Estate Fund III, L.P.:

We have audited the accompanying balance sheets of THE ATRIUM BUILDING as of
December 31, 2000 and 1999 and the related statements of loss, partners'
capital, and cash flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the building's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Atrium Building as of
December 31, 2000 and 1999 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2000 in conformity
with accounting principles generally accepted in the United States.


ARTHUR ANDERSEN LLP


Atlanta, Georgia
January 30, 2001

                                      F-33
<PAGE>

                              THE ATRIUM BUILDING

                                BALANCE SHEETS

                          DECEMBER 31, 2000 AND 1999


<TABLE>
<CAPTION>
                                     ASSETS

                                                                                         2000             1999
                                                                                      ----------       ----------
<S>                                                                                   <C>              <C>
REAL ESTATE ASSETS:
  Land                                                                                $1,504,743       $1,504,743
  Building and improvements, less accumulated depreciation of $7,113,487 in
     2000 and $6,301,681 in 1999                                                       6,274,702        7,093,742
                                                                                      ----------       ----------
          Total real estate assets                                                     7,779,445        8,598,485

CASH AND CASH EQUIVALENTS                                                                240,314           89,170

ACCOUNTS RECEIVABLE                                                                       23,202           30,018

PREPAID AND OTHER ASSETS, net                                                            123,399          213,143
                                                                                      ----------       ----------
          Total assets                                                                $8,166,360       $8,930,816
                                                                                      ==========       ==========

                       LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
                                                                                      $  149,227       $  101,012
  Distributions payable to partners                                                      104,321            1,801
  Accounts payable                                                                    ----------       ----------
          Total liabilities                                                              253,548          102,813
                                                                                      ----------       ----------
COMMITMENTS AND CONTINGENCIES (Note 4)

PARTNERS' CAPITAL:
  Wells Real Estate Fund II                                                            4,631,085        5,162,262
  Wells Real Estate Fund II-OW                                                           423,642          453,477
  Wells Real Estate Fund III, L.P.                                                     2,858,085        3,212,264
                                                                                      ----------       ----------
          Total partners' capital                                                      7,912,812        8,828,003
                                                                                      ----------       ----------
          Total liabilities and partners' capital                                     $8,166,360       $8,930,816
                                                                                      ==========       ==========
</TABLE>

     The accompanying notes are an integral part of these balance sheets.

                                      F-34
<PAGE>

                              THE ATRIUM BUILDING

                              STATEMENTS OF LOSS

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                          2000             1999                 1998
                                                                      ----------       -----------       -----------
<S>                                                                   <C>              <C>               <C>
REVENUES:
  Rental income                                                       $1,468,784       $ 1,470,144       $ 1,470,144
                                                                      ----------       -----------       -----------
EXPENSES:
  Depreciation                                                           877,240           867,719           866,778
  Operating costs, net of reimbursements                                 738,585           711,346           697,365
  Management and leasing fees                                            185,035           179,762           186,102
  Legal and accounting                                                     5,250             5,250             3,310
                                                                      ----------       -----------       -----------
                                                                       1,806,110         1,764,077         1,753,555
                                                                      ----------       -----------       -----------
NET LOSS                                                              $ (337,326)      $  (293,933)      $  (283,411)
                                                                      ==========       ===========       ===========

NET LOSS ALLOCATED TO WELLS REAL ESTATE FUND II                       $ (195,784)      $  (170,613)      $  (164,506)
                                                                      ==========       ===========       ===========

NET LOSS ALLOCATED TO WELLS REAL ESTATE FUND II-OW                    $  (10,997)      $    (9,568)      $    (9,225)
                                                                      ==========       ===========       ===========

NET LOSS ALLOCATED TO WELLS REAL ESTATE FUND III, L.P.                $ (130,545)      $  (113,752)      $  (109,680)
                                                                      ==========       ===========       ===========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-35
<PAGE>

                              THE ATRIUM BUILDING

                        STATEMENTS OF PARTNERS' CAPITAL

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                   Wells Real        Wells Real          Wells Real           Total
                                                     Estate            Estate              Estate           Partners'
                                                     Fund II         Fund II-OW        Fund III, L.P.        Capital
                                                  ------------      -------------      --------------     -------------
<S>                                               <C>               <C>                <C>                <C>
BALANCE, December 31, 1997                          $6,246,662           $514,288         $3,935,260        $10,696,210

  Net loss                                            (164,506)            (9,225)          (109,680)          (283,411)
  Distributions                                       (384,212)           (21,546)          (256,164)          (661,922)
                                                  ------------      -------------      --------------     -------------
BALANCE, December 31, 1998                           5,697,944            483,517          3,569,416          9,750,877

  Net loss                                            (170,613)            (9,568)          (113,752)          (293,933)
  Distributions                                       (365,069)           (20,472)          (243,400)          (628,941)
                                                  ------------      -------------      --------------     -------------
BALANCE, December 31, 1999                           5,162,262            453,477          3,212,264          8,828,003
                                                  ------------      -------------      --------------     -------------

  Net loss                                            (195,784)           (10,997)          (130,545)          (337,326)
  Distributions                                       (335,393)           (18,839)          (223,633)          (577,865)
                                                  ------------      -------------      --------------     -------------
BALANCE, December 31, 2000                          $4,631,085           $423,641         $2,858,086        $ 7,912,812
                                                  ============      =============      ==============     =============
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-36
<PAGE>

                              THE ATRIUM BUILDING

                           STATEMENTS OF CASH FLOWS

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998


<TABLE>
<CAPTION>
                                                                               2000             1999             1998
                                                                            ----------        ---------        ---------
<S>                                                                          <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                  $ (337,326)       $(293,933)       $(283,411)
                                                                            ----------        ---------        ---------
  Adjustments to reconcile net loss to net cash provided by
     operating activities:
        Depreciation                                                           877,240          867,719          866,778
        Changes in assets and liabilities:
           Accounts receivable                                                   6,816          (11,904)             836
           Prepaid expenses and other assets, net                               89,744           89,745           89,745
           Accounts payable                                                    102,520           (2,786)        (146,779)
           Due to affiliates                                                         0                0           (3,829)
                                                                            ----------        ---------        ---------
             Total adjustments                                               1,076,320          942,774          806,751
                                                                            ----------        ---------        ---------
             Net cash provided by operating activities                         738,994          648,841          523,340
                                                                            ----------        ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in real estate assets                                             (58,200)         (23,400)               0
                                                                            ----------        ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Distributions paid to partners                                              (529,650)        (665,153)        (675,743)
                                                                            ----------        ---------        ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           151,144          (39,712)        (152,403)

CASH AND CASH EQUIVALENTS, beginning of year                                    89,170          128,882          281,285
                                                                            ----------        ---------        ---------
CASH AND CASH EQUIVALENTS, end of year                                      $  240,314        $  89,170        $ 128,882
                                                                            ==========        =========        =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-37
<PAGE>

                              THE ATRIUM BUILDING

                         NOTES TO FINANCIAL STATEMENTS

                       DECEMBER 31, 2000, 1999, AND 1998

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization and Business

     The Atrium Building ("Atrium") is a four-story office building located in
     Houston, Harris County, Texas. The building is owned by Fund II and III
     Associates, a joint venture between Wells Real Estate Fund II ("Fund II"),
     Wells Real Estate Fund II-OW ("Fund II-OW"), and Wells Real Estate Fund
     III, L.P. ("Fund III). Fund II owns 58% of Atrium, Fund II-OW owns 3% of
     Atrium, and Fund III owns 39% of Atrium at December 31, 2000. Allocation of
     net loss and distributions are made in accordance with ownership
     percentages.

     Use of Estimates

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     Income Taxes

     Atrium is not deemed to be a taxable entity for federal income tax
     purposes.

     Real Estate Assets

     Real estate assets are stated at cost, less accumulated depreciation. Major
     improvements and betterments are capitalized when they extend the useful
     life of the related asset. All repairs and maintenance are expensed as
     incurred.

     Management continually monitors events and changes in circumstances which
     could indicate that carrying amounts of real estate assets may not be
     recoverable. When events or changes in circumstances are present which
     indicate that the carrying amounts of real estate assets may not be
     recoverable, management assesses the recoverability of real estate assets
     by determining whether the carrying value of such real estate assets will
     be recovered through the future cash flows expected from the use of the
     asset and its eventual disposition. Management has determined that there
     has been no impairment in the carrying value of Atrium as of December 31,
     2000.

     Depreciation is calculated using the straight-line method over 25 years.

     Revenue Recognition

     The lease on Atrium is classified as an operating lease, and the related
     rental income is recognized on a straight-line basis over the term of the
     lease.

                                      F-38
<PAGE>

     Deferred Lease Acquisition Costs

     Costs incurred to procure operating leases are capitalized and amortized on
     a straight-line basis over the terms of the related leases.

     Cash and Cash Equivalents

     For the purposes of the statements of cash flows, Atrium 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.

2.   RENTAL INCOME

     The future minimum rental income due to Atrium under noncancelable
     operating leases at December 31, 2000 is as follows:

               Year ending December 31:
                     2001                       $1,488,000
                     2002                          620,000
                                                ----------
                                                $2,108,000
                                                ==========

     One tenant contributed 100% of rental income for the year ended December
     31, 2000 and represents 100% of the future minimum rental income above.
     This tenant has the option to renew an additional five-year lease term upon
     the expiration of the current lease during 2002.

3.   RELATED-PARTY TRANSACTIONS

     Fund II and II-OW and Fund III entered into a property management agreement
     with Wells Management Company, Inc. ("Wells Management"), an affiliate of
     Fund II and II-OW and Fund III. In consideration for supervising the
     management of Atrium, Fund II and II-OW and Fund III will generally pay
     Wells Management management and leasing fees equal to (a) 3% of the gross
     revenues for management and 3% of the gross revenues for leasing (aggregate
     maximum of 6%) plus a separate fee for the one-time initial lease-up of
     newly constructed properties in an amount not to exceed the fee customarily
     charged in arm's-length transactions by others rendering similar services
     in the same geographic area for similar properties or (b) in the case of
     commercial properties which are leased on a long-term net basis (ten or
     more years), 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.

     Atrium incurred management and leasing fees of $95,290, $90,018, and
     $186,102, for the years ended December 31, 2000, 1999, and 1998,
     respectively, which were paid to Wells Management.

4.   COMMITMENTS AND CONTINGENCIES

     Management, after consultation with legal counsel, is not aware of any
     significant litigation or claims against Atrium or its partners. In the
     normal course of business, Atrium or its partners may become subject to
     such litigation or claims.

                                      F-39
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Wells Real Estate Fund II
and Wells Real Estate Fund II-OW:

We have audited the accompanying balance sheets of THE FIRST UNION PROPERTY as
of December 31, 2000 and 1999 and the related statements of income, partners'
capital, and cash flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the property's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Union Property as of
December 31, 2000 and 1999 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2000 in conformity
with accounting principles generally accepted in the United States.


ARTHUR ANDERSEN LLP



Atlanta, Georgia
January 30, 2001

                                      F-40
<PAGE>

                           THE FIRST UNION PROPERTY


                                BALANCE SHEETS

                          DECEMBER 31, 2000 AND 1999


<TABLE>
<CAPTION>
                             ASSETS

                                                                        2000             1999
                                                                    ------------     ------------
<S>                                                                 <C>              <C>
REAL ESTATE ASSETS:
 Land                                                                 $1,367,856       $1,367,856
 Building and improvements, less accumulated depreciation of
  $3,359,119 in 2000 and $2,991,452 in 1999                            4,411,999        4,779,666
                                                                    ------------     ------------
       Total real estate assets                                        5,779,855        6,147,522

CASH AND CASH EQUIVALENTS                                                140,391          193,979

ACCOUNTS RECEIVABLE                                                            0            2,149

PREPAID EXPENSES AND OTHER ASSETS                                          6,118           24,473
                                                                    ------------     ------------
       Total assets                                                   $5,926,364       $6,368,123
                                                                    ============     ============

                       LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
 Accrued payables                                                     $      625       $        0
 Distributions payable to partners                                       139,764          196,127
                                                                    ------------     ------------
       Total liabilities                                                 140,389          196,127
                                                                    ------------     ------------
COMMITMENTS AND CONTINGENCIES (Note 4)

PARTNERS' CAPITAL:
 Wells Real Estate Fund II                                             5,493,579        5,859,102
 Wells Real Estate Fund II-OW                                            292,396          312,894
                                                                    ------------     ------------
       Total partners' capital                                         5,785,975        6,171,996
                                                                    ------------     ------------
       Total liabilities and partners' capital                        $5,926,364       $6,368,123
                                                                    ============     ============
</TABLE>

     The accompanying notes are an integral part of these balance sheets.

                                      F-41
<PAGE>

                           THE FIRST UNION PROPERTY


                             STATEMENTS OF INCOME

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998


<TABLE>
<CAPTION>
                                                                               2000            1999            1998
                                                                             --------        --------        --------
<S>                                                                          <C>             <C>             <C>
REVENUES:
 Rental income                                                               $844,071        $717,676        $458,867
                                                                             --------        --------        --------
EXPENSES:
 Depreciation                                                                 367,667         367,667         367,667
 Legal and accounting                                                           3,375           3,375           4,050
 Management and leasing fees                                                   69,128          61,295          45,887
 Operating costs                                                               12,730          13,797          10,878
 Computer costs                                                                     0             625               0
                                                                             --------        --------        --------
                                                                              452,900         446,759         428,482
                                                                             --------        --------        --------
NET INCOME                                                                   $391,171        $270,917        $ 30,385
                                                                             ========        ========        ========

NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND II                            $370,400        $256,531        $ 28,772
                                                                             ========        ========        ========

NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND II-OW                         $ 20,771        $ 14,386        $  1,613
                                                                             ========        ========        ========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-42
<PAGE>

                           THE FIRST UNION PROPERTY


                        STATEMENTS OF PARTNERS' CAPITAL

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                    Wells Real        Wells Real          Total
                                                                      Estate            Estate          Partners'
                                                                     Fund II          Fund II-OW         Capital
                                                                 ---------------   ---------------   ---------------
<S>                                                              <C>               <C>               <C>
BALANCE, December 31, 1997                                            $6,657,813          $357,684        $7,015,497

 Net income                                                               28,772             1,613            30,385
 Distributions                                                          (442,449)          (24,812)         (467,261)
                                                                    ------------        ----------      ------------
BALANCE, December 31, 1998                                             6,244,136           334,485         6,578,621

 Net income                                                              256,531            14,386           270,917
 Distributions                                                          (641,565)          (35,977)         (677,542)
                                                                    ------------        ----------      ------------
BALANCE, December 31, 1999                                             5,859,102           312,894         6,171,996

 Net income                                                              370,400            20,771           391,171
 Distributions                                                          (735,923)          (41,269)         (777,192)
                                                                    ------------        ----------      ------------
BALANCE, December 31, 2000                                            $5,493,579          $292,396        $5,785,975
                                                                    ============        ==========      ============
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-43
<PAGE>

                           THE FIRST UNION PROPERTY


                           STATEMENTS OF CASH FLOWS

             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998


<TABLE>
<CAPTION>
                                                                               2000              1999              1998
                                                                             ---------         ---------         ---------
<S>                                                                          <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                                  $ 391,171         $ 270,917         $  30,385
                                                                             ---------         ---------         ---------
 Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation                                                              367,667           367,667           367,667
     Changes in assets and liabilities:
       Accounts receivable                                                       2,149            21,035            61,024
       Prepaid expenses and other assets                                        18,355            18,355            18,355
       Accrued payables                                                            625                 0                 0
       Due to affiliate                                                              0            (1,315)           (3,246)
                                                                             ---------         ---------         ---------
         Total adjustments                                                     388,796           405,742           443,800
                                                                             ---------         ---------         ---------
         Net cash provided by operating activities                             779,967           676,659           474,185

CASH FLOWS FROM FINANCING ACTIVITIES:
 Distributions paid to partners                                               (833,555)         (599,540)         (460,563)
                                                                             ---------         ---------         ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                           (53,588)           77,119            13,622

CASH AND CASH EQUIVALENTS, beginning of year                                   193,979           116,860           103,238
                                                                             ---------         ---------         ---------
CASH AND CASH EQUIVALENTS, end of year                                       $ 140,391         $ 193,979         $ 116,860
                                                                             =========         =========         =========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-44
<PAGE>

                           THE FIRST UNION PROPERTY


                         NOTES TO FINANCIAL STATEMENTS

                       DECEMBER 31, 2000, 1999, AND 1998

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization and Business

     The First Union Property ("First Union") is a two-story office building
     located in Charlotte, North Carolina. The property is owned by Fund II and
     Fund II-OW, a joint venture between Wells Real Estate Fund II ("Fund II")
     and Wells Real Estate Fund II-OW ("Fund II-OW"). Fund II owns 95% of Fund
     II and Fund II-OW and Fund II-OW owns 5% of Fund II and Fund II-OW at
     December 31, 2000. Allocation of net income and distributions are made in
     accordance with ownership percentages.

     Use of Estimates

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     Income Taxes

     First Union is not deemed to be a taxable entity for federal income tax
     purposes.

     Real Estate Assets

     Real estate assets held by First Union are stated at cost, less accumulated
     depreciation. Major improvements and betterments are capitalized when they
     extend the useful life of the related asset. All repairs and maintenance
     are expensed as incurred.

     Management continually monitors events and changes in circumstances which
     could indicate that carrying amounts of real estate assets may not be
     recoverable. When events or changes in circumstances are present which
     indicate that the carrying amounts of real estate assets may not be
     recoverable, management assesses the recoverability of real estate assets
     by determining whether the carrying value of such real estate assets will
     be recovered through the future cash flows expected from the use of the
     asset and its eventual disposition. Management has determined that there
     has been no impairment in the carrying value of First Union as of December
     31, 2000.

     Depreciation is calculated using the straight-line method over 25 years.

     Revenue Recognition

     The lease on First Union is classified as an operating lease, and the
     related rental income is recognized on a straight-line basis over the term
     of the lease.

                                      F-45
<PAGE>

     Deferred Lease Acquisition Costs

     Costs incurred to procure operating leases are capitalized and amortized on
     a straight-line basis over the terms of the related leases.

     Cash and Cash Equivalents

     For the purposes of the statements of cash flows, First Union 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.

2.   RENTAL INCOME

     The future minimum rental income due to First Union under noncancelable
     operating leases at December 31, 2000 is as follows:

               Year ended December 31:
                    2001                                    $281,357

     One tenant at First Union contributed 100% of rental income for the year
     ended December 31, 2000 and represents 100% of the future minimum rental
     income above. The lease for this tenant expires on April 30, 2001.
     Management is currently negotiating with prospective tenants to lease 100%
     of the space at this property effective May 1, 2001.

3.   RELATED-PARTY TRANSACTIONS

     Fund II and Fund II-OW entered into a property management agreement with
     Wells Management Company, Inc. ("Wells Management"), an affiliate of Fund
     II and Fund II-OW. In consideration for supervising the management of First
     Union, Fund II and Fund II-OW will generally pay Wells Management
     management and leasing fees equal to (a) 3% of the gross revenues for
     management and 3% of the gross revenues for leasing (aggregate maximum of
     6%) plus a separate fee for the one-time initial lease-up of newly
     constructed properties in an amount not to exceed the fee customarily
     charged in arm's-length transactions by others rendering similar services
     in the same geographic area for similar properties or (b) in the case of
     commercial properties which are leased on a long-term net basis (ten or
     more years), 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.

     First Union incurred management and leasing fees and lease acquisition
     costs of $50,773, $61,295, and $45,887, respectively, for the years ended
     December 31, 2000, 1999, and 1998, respectively, which were paid to Wells
     Management.

4.   COMMITMENTS AND CONTINGENCIES

     Management, after consultation with legal counsel, is not aware of any
     significant litigation or claims against First Union and its partners. In
     the normal course of business, First Union and its partners may become
     subject to such litigation or claims.

                                      F-46
<PAGE>

                                 EXHIBIT INDEX
                                 -------------

                         (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
-------        -----------------------

*4             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)

                                       1
<PAGE>

*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)

*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)

                                       2
<PAGE>

*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 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 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 (filed herewith)

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