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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)



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



For the quarterly period ended September 30, 2003



OR



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



For the transition period
from to



Commission file number 0-17876



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WELLS REAL ESTATE FUND II-OW

(Exact name of registrant as specified in its
charter)



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|Georgia                                                        |  | 58-1754703                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|6200 The Corners Pkwy.,Norcross, Georgia                       |  | 30092                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                         



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



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



Yes x     No ̈



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TABLE OF CONTENTS



|         |  |                                                                                                                               |  | Page No.
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                                                                                                                              
|PART I.  |  | FINANCIAL INFORMATION                                                                                                         |  |         
|         |  |                                                                                                                              
|Item 1.  |  | Financial Statements                                                                                                          |  |         
|         |  |                                                                                                                              
|         |  | Balance SheetsSeptember 30, 2003 (unaudited) and December 31, 2002                                                           |  | 3       
|         |  |                                                                                                                              
|         |  | Statements of Loss for the Three Months and Nine Months Ended September 30, 2003(unaudited) and 2002 (unaudited)              |  | 4       
|         |  |                                                                                                                              
|         |  | Statements of Partners Capital for the Nine Months Ended September 30, 2003 (unaudited) and the Year Ended December 31, 2002 |  | 5       
|         |  |                                                                                                                              
|         |  | Statements of Cash Flows for the Nine Months Ended September 30, 2003 (unaudited) and 2002 (unaudited)                        |  | 6       
|         |  |                                                                                                                              
|         |  | Condensed Notes to Financial Statements (unaudited)                                                                           |  | 7       
|         |  |                                                                                                                              
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                         |  | 12      
|         |  |                                                                                                                              
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risks                                                                   |  | 16      
|         |  |                                                                                                                              
|Item 4.  |  | Controls and Procedures                                                                                                       |  | 16      
|         |  |                                                                                                                              
|PART II. |  | OTHER INFORMATION                                                                                                             |  | 17      



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WELLS REAL ESTATE FUND II-OW

BALANCE SHEETS



|                                                                               |  | (unaudited) September 30,2003 |           | December 31,2002
|------------------------------------------------------------------------------ |  | ----------------------------- | --------- | ----------------
|ASSETS:                                                                        |  |                               |           |                 
|Investments in Fund II and Fund II-OW (Note 2)                                 |  | $                             | 825,090   |                 
|Due from Fund II and Fund II-OW                                                |  |                               | 173,780   |                 
|Cash and cash equivalents                                                      |  |                               | 6,041     |                 
|                                                                               |  |                               |           |                 
|Total assets                                                                   |  | $                             | 1,004,911 |                 
|                                                                               |  |                               |           |                 
|LIABILITIES AND PARTNERS CAPITAL:                                             |  |                               |           |                 
|Liabilities:                                                                   |  |                               |           |                 
|Accounts payable                                                               |  | $                             | 872       |                 
|                                                                               |  |                               |           |                 
|Partners capital:                                                             |  |                               |           |                 
|Limited partners:                                                              |  |                               |           |                 
|Class A6,062 units outstanding as of September 30, 2003 and December 31, 2002 |  |                               | 1,004,039 |                 
|Class B1,626 units outstanding as of September 30, 2003 and December 31, 2002 |  |                               | 0         |                 
|General Partners                                                               |  |                               | 0         |                 
|                                                                               |  |                               |           |                 
|Total partners capital                                                        |  |                               | 1,004,039 |                 
|                                                                               |  |                               |           |                 
|Total liabilities and partners capital                                        |  | $                             | 1,004,911 |                 
|                                                                               |  |                               |           |                 



See accompanying notes





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WELLS REAL ESTATE FUND II-OW

STATEMENTS OF LOSS



|                                                   |  | (unaudited) Three Months EndedSeptember 30, |        |   | (unaudited) Nine Months EndedSeptember 30, |  
|-------------------------------------------------- |  | ------------------------------------------- | ------ | - | ------------------------------------------ | -
|                                                   |  | 2003                                        |        |   | 2002                                       |  
|REVENUES:                                          |  |                                             |        |   |                                            |  
|Interest and other income                          |  | $                                           | 2      |   |                                            | $
|                                                   |  |                                             |        |   |                                            |  
|EXPENSES:                                          |  |                                             |        |   |                                            |  
|Equity in loss of Fund II and Fund II-OW (Note 2)  |  |                                             | 7,940  |   |                                            |  
|                                                   |  |                                             |        |   |                                            |  
|NET LOSS                                           |  | $                                           | (7,938 | ) |                                            | $
|                                                   |  |                                             |        |   |                                            |  
|NET LOSS ALLOCATED TO CLASS A LIMITED PARTNERS     |  | $                                           | (7,938 | ) |                                            | $
|                                                   |  |                                             |        |   |                                            |  
|NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS     |  | $                                           | 0      |   |                                            | $
|                                                   |  |                                             |        |   |                                            |  
|NET LOSS PER CLASS A LIMITED PARTNER UNIT          |  | $                                           | (1.31  | ) |                                            | $
|                                                   |  |                                             |        |   |                                            |  
|NET LOSS PER CLASS B LIMITED PARTNER UNIT          |  | $                                           | 0.00   |   |                                            | $
|                                                   |  |                                             |        |   |                                            |  
|CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT |  | $                                           | 0.00   |   |                                            | $
|                                                   |  |                                             |        |   |                                            |  



See accompanying notes





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WELLS REAL ESTATE FUND II-OW

STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2002 AND

NINE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)



|                                        |  | Limited Partners |  | General Partners |           | Total Partners Capital |      
|--------------------------------------- |  | ---------------- |  | ---------------- | --------- | ----------------------- | -----
|                                        |  | Class A          |  |                  | Class B   |                         |      
|                                        |  | Units            |  | Amounts          |           |                         | Units
|BALANCE, December 31, 2001              |  | 6,062            |  | $                | 1,082,635 |                         |      
|Net loss                                |  | 0                |  |                  | (61,423   | )                       |      
|                                        |  |                  |  |                  |           |                         |      
|BALANCE, December 31, 2002              |  | 6,062            |  |                  | 1,021,212 |                         |      
|Net loss                                |  | 0                |  |                  | (17,173   | )                       |      
|                                        |  |                  |  |                  |           |                         |      
|BALANCE, September 30, 2003 (unaudited) |  | 6,062            |  | $                | 1,004,039 |                         |      
|                                        |  |                  |  |                  |           |                         |      



See accompanying notes





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WELLS REAL ESTATE FUND II-OW

STATEMENTS OF CASH FLOWS



|                                                                            |  | (unaudited) Nine Months Ended |        
|--------------------------------------------------------------------------- |  | ----------------------------- | -------
|                                                                            |  | September 30,2003             |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  |                               |        
|Net loss                                                                    |  | $                             | (17,173
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                               |        
|Equity in loss of Fund II and Fund II-OW                                    |  |                               | 17,251 
|Changes in assets and liabilities:                                          |  |                               |        
|Due from Fund II and Fund II-OW                                             |  |                               | (78    
|Accounts payable                                                            |  |                               | (1,166 
|                                                                            |  |                               |        
|Net cash used in operating activities                                       |  |                               | (1,166 
|                                                                            |  |                               |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |  |                               |        
|Investment in Fund II and Fund II-OW                                        |  |                               | (15,903
|Distributions received from Fund II and Fund II-OW                          |  |                               | 0      
|                                                                            |  |                               |        
|Net cash (used in) provided by operating activities                         |  |                               | (15,903
|                                                                            |  |                               |        
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                        |  |                               | (17,069
|                                                                            |  |                              
|CASH AND CASH EQUIVALENTS, beginning of period                              |  |                               | 23,110 
|                                                                            |  |                               |        
|CASH AND CASH EQUIVALENTS, end of period                                    |  | $                             | 6,041  
|                                                                            |  |                               |        
|SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:                             |  |                               |        
|Due from Joint Venture                                                      |  | $                             | 173,780
|                                                                            |  |                               |        



See accompanying notes





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WELLS REAL ESTATE FUND II-OW

CONDENSED NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2003 (unaudited)



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



|(a) |  | General
|--- |  | -------



Wells Real Estate Fund II-OW (the Partnership) is a Georgia public limited partnership with Leo F. Wells, III and Wells Capital, Inc. (Wells Capital), a Georgia corporation, serving as its
general partners (the General Partners). The Partnership was formed on October 13, 1987 for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing, and managing income-producing properties for
investment purposes. The Partnership has two classes of limited partnership interests, Class A and Class B Units. Limited partners may vote to, among other things, (a) amend the partnership agreement, subject to certain limitations, (b) change
the business purpose or investment objectives of the Partnership, and (c) remove a general partner. A majority vote on any of the above-described matters will bind the Partnership without the concurrence of the General Partners. Each limited
partnership unit has equal voting rights regardless of class.



On November 6,
1987, the Partnership commenced a public offering of its limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership terminated its offering on September 7, 1988, upon receiving
gross offering proceeds of $1,922,000 for 7,688 Class A and Class B limited partner units at $250 per unit from 219 limited partners.



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



|                                                                     
|---------------------------------------------------------------------
|Joint Venture                                                        
|                                                                     
|Fund II and Fund II-OW (Fund II-IIOW Associates)                   
|                                                                     
|Fund I and Fund II (Fund I-II Tucker Associates)                   
|                                                                     
|Fund II and Fund III Associates (Fund II-III Associates )          
|                                                                     
|Fund II, III, VI and VII Associates (Fund II-III-VI-VII Associates)
|                                                                     



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Each of the above properties was acquired on
an all cash basis. For further information regarding the foregoing Joint Ventures and properties, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2002.



On October 1, 2001, Fund I, II, II-OW, VI and VII Associates (Fund I-II-IIOW-VI-VII
Associates), a joint venture between Fund II-IIOW Associates, Wells Real Estate Fund I, Wells Real Estate Fund VI, L.P., and Wells Real Estate Fund VII, L.P., sold the Cherokee Commons property to an unrelated third party. Fund
I-II-IIOW-VI-VII Associates was liquidated during the fourth quarter of 2002.



On April 7, 2003, Fund I-II Tucker Associates sold the retail portion of Heritage Place, which comprises approximately 30% of the total premises, to an unrelated third party for a gross selling price of $3,400,000. As a result of this sale,
net sales proceeds of approximately $81,000 and a gain of approximately $7,000 were allocated to the Partnership.



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



The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including the
instructions to Form 10-Q and Article 10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by accounting principles generally accepted in the United States
(GAAP) for complete financial statements. The quarterly statements included herein have not been examined by independent auditors. In the opinion of the General Partners, the statements for the unaudited interim periods presented include
all adjustments that are of a normal and recurring nature and necessary to fairly present the results for such periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial
statements and footnotes included in the Partnerships Form 10-K for the year ended December 31, 2002.



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



For the purpose of determining allocations per the partnership agreement, net income is defined generally 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 limited partners holding Class A Units and the General
Partners. To the extent the Partnerships net income in any year exceeds net cash from operations, it will be allocated 99% to the limited partners and 1% to the General Partners.



Net loss, depreciation, and amortization deductions for each fiscal year are 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/her capital account in an amount not to exceed such positive balance; and (c) thereafter to the
General Partners.



Gains on the sale or exchange of the Partnerships
properties will be allocated as follows: (a) first to partners having negative capital accounts, if any, until all negative capital accounts have been restored to zero; (b) then to the limited partners in proportion to and to the extent of the
excess of (i) each limited partners adjusted Capital Contribution, plus a cumulative 12% per annum return on his/her adjusted Capital Contribution, less the sum of all prior distributions of cash flow from operations previously made to such
limited partner, over (ii) such limited partners capital account balance as of the sale date, subject to the requirement to initially allocate gain on sale to limited partners holding Class B Units until they have been allocated an amount
equal to the net cash available for distribution previously received by limited partners holding Class A Units on a per-unit basis; (c) then to the General Partners in proportion to and to the extent of the excess of (i) each general partners
adjusted Capital



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Contribution, over (ii) such General Partners capital account balance as of the sale date; and (d) thereafter 85% to the limited partners and 15% to
the General Partners.



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



Cash available for distribution is distributed on a cumulative non-compounded 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. Thereafter, cash available for distribution is distributed 90% to the limited partners and 10% to the General Partners.



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



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



The Partnership does not have control over the operations of Fund II-IIOW Associates or the Joint Ventures; however, it does exercise significant influence. Accordingly,
the Partnerships investment in Fund II-IIOW Associates and the Joint Ventures are recorded using the equity method of accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and
net income (loss) attributable to the Partnership. For further information, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2002.



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



The following information summarizes the operations of the Fund II-IIOW Associates for the three months and nine months ended September 30, 2003 and 2002, respectively:



|                        |  | Total Revenues                  |         |   | Net Loss                        |   |          | Partnerships Share of Net Loss | 
|----------------------- |  | ------------------------------- | ------- | - | ------------------------------- | - | -------- | ------------------------------- | 
|                        |  | Three Months EndedSeptember 30, |         |   | Three Months EndedSeptember 30, |   |          | Three Months EndedSeptember 30, | 
|                        |  | 2003                            |         |   | 2002                            |   |          | 2003                            | 
|Fund II-IIOW Associates |  | $                               | 46,327  | * |                                 | $ | (88,508  | )*                              | 
|                        |  |                                 |         |   |                                 |   |          |                                 | 
|                        |  |                                 |        
|                        |  | Total Revenues                  |         |   | Net Loss                        |   |          | Partnerships Share of Net Loss | 
|                        |  | Nine Months EndedSeptember 30,  |         |   | Nine Months EndedSeptember 30,  |   |          | Nine Months EndedSeptember 30   | 
|                        |  | 2003                            |         |   | 2002                            |   |          | 2003                            | 
|Fund II-IIOW Associates |  | $                               | 294,530 | * |                                 | $ | (411,407 | )*                              | 
|                        |  |                                 |         |   |                                 |   |          |                                 | 



|* |  | The Partnerships share of loss earned from its investments in the Joint Ventures presented in section (c) is recorded by Fund II-IIOW Associates as equity in loss of Joint
Ventures, which is classified as an expense.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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(c)    Summary of
Operations



The following information summarizes the operations of the
Joint Ventures in which the Partnership holds interests through its ownership in Fund II-IIOW Associates for the three months and nine months ended September 30, 2003 and 2002, respectively:



|                                 |  | Total Revenues                   |         |    | Income (Loss) FromContinuing Operations |   |         | Income FromDiscontinuedOperations |  | Net Income (Loss)              |         |   | Fund II-IIOWAssociates Share ofNet Income (Loss)* |     
|-------------------------------- |  | -------------------------------- | ------- | -- | --------------------------------------- | - | ------- | --------------------------------- |  | ------------------------------ | ------- | - | -------------------------------------------------- | ----
|                                 |  | Three Months Ended September 30, |         |    | Three Months Ended September 30,        |   |         | Three MonthsEndedSeptember 30,    |  | Three MonthsEndedSeptember 30, |         |   | Three MonthsEndedSeptember 30,                     |     
|                                 |  | 2003                             |         |    | 2002                                    |   |         | 2003                              |  |                                | 2002    |   |                                                    | 2003
|Fund I-II Tucker Associates      |  | $                                | 184,486 |    |                                         | $ | 199,783 |                                   |  | $                              | (20,893 | ) |                                                    | $   
|Fund I-II-IIOW-VI-VII Associates |  |                                  | 0       |    |                                         |   | 37,846  |                                   |  |                                | 0       |   |                                                    |     
|Fund II-III Associates           |  |                                  | 521,818 | ** |                                         |   | 200,663 | **                                |  |                                | 73,209  |   |                                                    |     
|                                 |  |                                  |         |    |                                         |   |         |                                   |  |                                |         |   |                                                    |     
|                                 |  | $                                | 706,304 |    |                                         | $ | 438,292 | (1)                               |  | $                              | 52,316  |   |                                                    | $   
|                                 |  |                                  |         |    |                                         |   |         |                                   |  |                                |         |   |                                                    |     



|(1) |  | Amounts have been restated to reflect tenant reimbursements of $16,139 as revenues for the three months ended September 30, 2002, which has no impact on net loss.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  | Total Revenues                |           |    | Income (Loss) FromContinuing Operations |   |           | Income FromDiscontinuedOperations |  | Net Income (Loss)             |          |   | Fund II-IIOWAssociates Share ofNet Income (Loss)* |     
|-------------------------------- |  | ----------------------------- | --------- | -- | --------------------------------------- | - | --------- | --------------------------------- |  | ----------------------------- | -------- | - | -------------------------------------------------- | ----
|                                 |  | Nine MonthsEndedSeptember 30, |           |    | Nine MonthsEndedSeptember 30,           |   |           | Nine MonthsEndedSeptember 30,     |  | Nine MonthsEndedSeptember 30, |          |   | Nine MonthsEndedSeptember 30,                      |     
|                                 |  | 2003                          |           |    | 2002                                    |   |           | 2003                              |  |                               | 2002     |   |                                                    | 2003
|Fund I-II Tucker Associates      |  | $                             | 567,870   |    |                                         | $ | 657,591   |                                   |  | $                             | (159,926 | ) |                                                    | $   
|Fund I-II-IIOW-VI-VII Associates |  |                               | 0         |    |                                         |   | 108,124   |                                   |  |                               | 0        |   |                                                    |     
|Fund II-III Associates           |  |                               | 1,558,642 | ** |                                         |   | 349,510   | **                                |  |                               | 179,865  |   |                                                    |     
|                                 |  |                               |           |    |                                         |   |           |                                   |  |                               |          |   |                                                    |     
|                                 |  | $                             | 2,126,512 | ** |                                         | $ | 1,115,225 | (2)                               |  | $                             | 19,939   |   |                                                    | $   
|                                 |  |                               |           |    |                                         |   |           |                                   |  |                               |          |   |                                                    |     



|(2) |  | Amounts have been restated to reflect tenant reimbursements of $89,231 as revenues for the nine months ended September 30, 2002, which has no impact on net loss.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



|* |  | The Partnerships share of income (loss) earned from its investments in the Joint Ventures presented above is recorded by Fund II-IIOW Associates as equity in income (loss)
of Joint Ventures, which is classified as an expense.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|** |  | The Partnerships share of income earned from its investment in Fund II-III-VI-VII Associates is recorded by Fund II-III Associates as equity in income (loss) of Joint
Venture, which is classified as an expense.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(d) |  | Summary of Operations
|--- |  | ---------------------



The following information summarizes the operations of the joint venture in which the Partnership holds an interest through its ownership in Fund II-III Associates for
the three months and nine months ended September 30, 2003 and September 30, 2002, respectively:



|                              |  | Total Revenues                  |         |      | Net Income                      |         | Fund II-III AssociatesShare of Net Income**
|----------------------------- |  | ------------------------------- | ------- | ---- | ------------------------------- | ------- | -------------------------------------------
|                              |  | Three Months EndedSeptember 30, |         |      | Three Months EndedSeptember 30, |         | Three Months EndedSeptember 30,            
|                              |  | 2003                            |         | 2002 |                                 |         | 2003                                       
|Fund II-III-VI-VII Associates |  | $                               | 194,228 |      | $                               | 161,289 | (3)                                        
|                              |  |                                 |         |      |                                 |         |                                            



|(3) |  | Amounts have been restated to reflect tenant reimbursements of $21,189 as revenues for the three months ended September 30, 2002, which has no impact on net loss.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                              |  | Total Revenues                  |         |      | Net Income                     |         | Fund II-III AssociatesShare of Net Income**
|----------------------------- |  | ------------------------------- | ------- | ---- | ------------------------------ | ------- | -------------------------------------------
|                              |  | Nine Months Ended September 30, |         |      | Nine Months EndedSeptember 30, |         | Nine Months EndedSeptember 30              
|                              |  | 2003                            |         | 2002 |                                |         | 2003                                       
|Fund II-III-VI-VII Associates |  | $                               | 476,085 |      | $                              | 549,417 | (4)                                        
|                              |  |                                 |         |      |                                |         |                                            



|(4) |  | Amounts have been restated to reflect tenant reimbursements of $50,850 as revenues for the nine months ended September 30, 2002, which has no impact on net loss.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



|** |  | The Partnerships share of income earned from its investment in Fund II-III-VI-VII Associates is recorded by Fund II-III Associates as equity in income (loss)
of Joint Ventures, which is classified as an expense.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | RECENT ACCOUNTING PRONOUNCEMENTS
|-- |  | --------------------------------



In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, which clarifies
the application of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements, relating to consolidation of certain entities. FIN 46 requires the identification of the Partnerships participation in variable
interest entities (VIEs), which are defined as entities with a level of invested equity that is not sufficient to fund future activities to permit them to operate on a stand-alone basis, or whose equity holders lack certain
characteristics of a controlling financial interest. For entities identified as VIEs, FIN 46 sets forth a model to evaluate potential consolidation based on an assessment of which party to the VIE, if any, bears a majority of the exposure to its
expected losses, or stands to gain from a majority of its expected returns. FIN 46 is effective for all new VIEs created or acquired after January 31, 2003. For VIEs created or acquired prior to February 1, 2003, the Partnership has adopted the
provisions of FIN 46 commencing on June 15, 2003. FIN 46 also sets forth certain disclosures regarding interests in VIEs that are deemed significant, even if consolidation is not required. As the Joint Ventures do not fall under the definition of
VIEs provided above, the adoption of FIN 46 has not resulted in the consolidation of any previously unconsolidated entities.



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



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



Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, is entitled to compensation for the management and leasing of the
Partnerships properties owned through Joint Ventures 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 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 properties in which the Partnership owns an interest incurred
management and leasing fees payable to Wells Management of $44,386 and $14,983 for the three months ended September 30, 2003 and 2002, respectively, and $132,381 and $93,607 for the nine months ended September 30, 2003 and 2002, respectively.



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



Wells Capital and its affiliates perform certain administrative services for the Partnership, such as accounting and other partnership administration, and incur 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. Fund II-IIOW Associates and the Joint Ventures have reimbursed $53,254 and $42,183 for
the three months ended September 30, 2003 and 2002, respectively, and $177,193 and $166,939 for the nine months ended September 30, 2003 and 2002, respectively, to Wells Capital and its affiliates for these services and expenses.



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



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



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



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



|(a) |  | Forward-Looking Statements
|--- |  | --------------------------



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 statements made in this report, including lease-up risks, inability to obtain new
tenants upon



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the expiration of existing leases, and the potential need to fund tenant improvements, leasing commissions or other capital expenditures or lease-up costs
out of operating cash flows or sales proceeds.



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



Gross Revenues



Gross revenues of the Partnership were $2 and $123 for the three months ended September 30, 2003 and 2002, respectively, and $78 and $123 for the nine months ended September 30, 2003 and 2002, respectively. The 2003
decrease in revenues is primarily attributable to the decrease in interest income, as a portion of the net proceeds from held from the sale of the Cherokee Commons property were used to fund tenant improvements for Boeing at the Atrium during the
latter half of 2002 and in 2003.



Expenses



Expenses of the Partnership were $7,940 and $14,990 for the three months ended September 30,
2003 and 2002, respectively, and $17,251 and $54,080 for the nine months ended September 30, 2003 and 2002, respectively, and comprised solely of equity in loss of Fund II-IIOW Associates, which is further described below.



Equity In Loss of Fund II-IIOW Associates



Gross Revenues of Fund II-IIOW Associates



Gross revenues of the Joint Ventures increased in 2003, as compared to 2002,
primarily due to a significant increase in occupancy for Boeing at the Atrium beginning in the second half of 2002, partially offset by (i) a decrease in occupancy at the office portion of Heritage Place during 2003, and (ii) a reduction in interest
income earned by Fund I-II-IIOW-VI-VII Associates as a result of liquidating this joint venture during the fourth quarter of 2002.



Expenses of Fund II-IIOW Associates



Expenses of the Joint Ventures increased in 2003, as compared to 2002, primarily as a result of (i) the aforementioned increase in occupancy of Boeing at
the Atrium, resulting in increases in management and other operational expenses relating to this property, and (ii) an increase in administrative costs incurred in response to new reporting and regulatory requirements. We anticipate additional
increases related to implementing and adhering to such reporting and regulatory requirements on a going forward basis.



Equity in Income of Fund II-IIOW Associates From Discontinued Operations of the Joint Ventures



Equity in income of Fund II-IIOW Associates from discontinued operations of
the Joint Ventures decreased for three months ended September 30, 2003, as compared to the same period in 2002, and increased for the nine months ended September 30, 2003, as compared to the same period in 2002, primarily as a result of the gain
recognized on the sale of the retail portion of Heritage Place in the second quarter of 2003.



As a result of the increase in gross revenues of Fund II-IIOW Associates and equity in income of Fund II-IIOW Associates from discontinued operations for the nine months ended September 30, 2003, partially offset
by the increase in expenses of Fund II-IIOW Associates, as described above, equity in loss of Fund II-IIOW Associates decreased from $14,990 to $7,490 for the three months ended September 30, 2002 and 2003, respectively and decreased from $54,080 to
$17,251 for the nine months ended September 30, 2002 and 2003, respectively.



Net Loss



As a result of the factors described above,
the Partnership reported net loss of $7,938 and $14,867 for the three months ended September 30, 2003 and 2002, respectively, and $17,173 and $53,957 for the nine months ended September 30, 2003 and 2002, respectively.



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



Cash Flows From Operating Activities



Net cash flows from operating activities increased to $1,166 for the nine months ended September 30, 2003, as compared to $450 for the nine months ended September 30,
2002, primarily due to a change in the timing of (i) paying accounts payable and (ii) and collecting amounts due from Fund II-IIOW Associates in 2003, as compared to 2002.



Cash Flows From Investing Activities



Net cash flows from investing activities were $(15,903) and $28,114 for the nine months ended September 30, 2003 and 2002, respectively. The 2003 decrease is primarily
attributable to Fund II-IIOW Associates reserving cash flows otherwise distributable to the Partnership and Wells Real Estate Fund II-OW in order to fund future anticipated tenant improvements and leasing costs anticipated in connection with
re-leasing of the currently vacant Louis Rose Building, partially offset by a reduction in investment in Fund II-IIOW Associates due to funding the majority of tenant improvements and re-leasing costs related to the increase in occupancy of Boeing
at the Atrium in 2002.



Distributions



No distributions of operating cash flows were paid to the limited partners holding Class A
Units during either the third quarter of 2003 or the third quarter of 2002 in order to reserve cash flows to fund tenant improvements and releasing costs for Boeing at the Atrium and Holcomb Bridge property in 2002, and to reserve funds for future
tenant improvements and leasing costs anticipated in connection with the re-leasing of the currently vacant Louis Rose Building. The General Partners anticipate that distributions per unit to limited partners holding Class A Units will be reinstated
upon re-leasing the Louis Rose Building and funding all related re-leasing costs. No distributions were made to limited partners holding Class B Units.



Sales Proceeds



Rather than distributing to the limited partners, the Partnerships share of the net proceeds generated from the sales of the Cherokee Commons property and the retail portion of the Heritage Place property are
being held in reserve as the General Partners continue to evaluate the capital needs of the existing properties in which the Partnership holds an interest in consideration of the best interests of the limited partners.



Capital Resources



The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and
operating income-producing real properties and has invested all of its funds available for investment. Accordingly, it is unlikely that the Partnership will acquire interests in any additional properties. In the fourth quarter of 2002, American
Trust Bancorp entered into a 10-year lease agreement for approximately 13,000 square feet of the Holcomb Bridge Property at an estimated cost of $207,000 for tenant improvements and leasing costs. As of September 30, 2003, Fund II-III-VI-VII
Associates has funded approximately $80,000 of these costs and anticipates funding the remainder during the fourth quarter of 2003. Of the remainder to be funded, approximately $1,000 is attributable to the Partnerships interest in Fund
II-III-VI-VII Associates.



(d) Related-Party Transactions



The Partnership and the Joint Ventures have entered into agreements
with Wells Capital and its affiliates, whereby the Partnership or the Joint Ventures pay certain fees or reimbursements to Wells Capital or its affiliates for property management and leasing fees, and reimbursement of operating and administrative
costs. See Note 4 to the Partnerships financial statements included in this report for a discussion of the various related party transactions, agreements, and fees.



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



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



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



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



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



Investment in Real Estate Assets



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



|Building              |  | 25 years   
|--------------------- |  | -----------
|Building improvements |  | 10-25 years
|Land improvements     |  | 20-25 years
|Tenant improvements   |  | Lease term 



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



Valuation of Real Estate Assets



Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which the Partnership has an ownership interest, either directly or through investments in Joint
Ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by
determining whether the carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted
future cash flows do not exceed the carrying



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value, management adjusts the real estate assets to the fair value and recognizes an impairment loss. Management has determined that there has been no
impairment in the carrying value of real estate assets held by the Partnership to date.



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



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



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



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



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



There were no significant changes in the Partnerships internal controls over financial
reporting that have materially affected, or are reasonably likely to materially affect, the Partnerships internal control over financial reporting.





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PART II.    OTHER INFORMATION



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



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



|(b) |  | During the third quarter of 2003, the Registrant filed a Current Report on Form 8-K dated August 4, 2003 disclosing a letter to the investors indicating the General Partners
intention to reserve operating distributions otherwise payable to the limited partners.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



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



|                 |  |  |  | WELLS REAL ESTATE FUND II-OW (Registrant)                                                       
|---------------- |  |  |  | ------------------------------------------------------------------------------------------------
|                 |  | 
|                 |  |  |  | By: WELLS CAPITAL, INC. (Corporate General Partner)                                             
|                 |  | 
|November 7, 2003 |  |  |  | /s/    LEO F. WELLS, IIILeo F. Wells, III President                                             
|November 7, 2003 |  |  |  | /s/    DOUGLAS P. WILLIAMSDouglas P. Williams Principal Financial Officer of Wells Capital, Inc.







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EXHIBIT INDEX



TO THIRD QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND II-OW



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