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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[Fee Required]

For the fiscal year ended December 31, 2003

[No Fee Required]

For the transition period from                          to                         

Commission file number 0-30287

WELLS REAL ESTATE FUND XII, L.P.

(Exact name of registrant as specified in its charter)

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 non-affiliates:    Not Applicable

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-K of Wells Real Estate Fund XII, L.P. (the “Partnership”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in particular, statements about our plans, strategies and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the Securities and Exchange Commission. Neither the Partnership nor the general partners make any representations or warranties (expressed or implied) about the accuracy of any such forward-looking statements. Actual results could differ materially from any forward-looking statements contained in this Form 10-K, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

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

General economic risks

Real estate risks

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Other operational risks

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PART I

ITEM 1.    BUSINESS.

General

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

On March 22, 1999, the Partnership commenced an offering of up to $70,000,000 of Cash Preferred or Tax Preferred limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership commenced active operations upon receiving and accepting subscriptions for 125,000 Units on June 1, 1999. The offering was terminated on March 21, 2001 at which time the Partnership had sold approximately 2,688,861 Cash Preferred Status Units and 872,258 Tax Preferred Status Units representing capital contributions of $35,611,192 from investors who were admitted to the Partnership as limited partners.

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

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

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

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

The period during which the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the

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holding phase, the Partnership continues to own and operate the real estate assets, evaluate various options for disposition, and market the real estate assets for sale

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

Management believes that the Partnership is currently in the holding phase. Accordingly, we will focus resources on managing the Partnership’s existing portfolio and locating suitable replacement tenants for vacant space as necessary.

Cash management is a chief area of focus for the Partnership. Historically, the Partnership has not taken out borrowings from third-party lenders and, while operating cash flows and net property sales proceeds are withheld to provide for known events from time to time, the Partnership does not maintain as a general rule cash reserves for unknown events. Instead, during the holding phase, management prefers to maximize operating cash flows distributed to investors commensurate with the period earned; however, it is likely that, during the positioning-for-sale phase, the Partnership will be required to use cash flow from operations and/or net sale proceeds from the sale of the Partnership’s properties, which would otherwise be available for distribution to limited partners, to fund tenant improvements, leasing commissions and other leasing costs associated with the re-leasing of the Partnership’s properties. The Partnership’s cash needs evolve during the course of its life cycle and, accordingly, volatility in operating returns is a natural and expected part of the process.

Employees

The Partnership has no direct employees. The employees of Wells Capital, Inc. (“Wells Capital”), the general partner of Wells Partners, and Wells Management Company, Inc. (“Wells Management”), an affiliate of the General Partners, perform a full range of real estate services including leasing and property management, accounting, and asset management and investor relations for the Partnership. See Item 11, “Compensation of General Partners and Affiliates,” for a summary of the compensation and fees paid to the General Partners and their affiliates during the year ended December 31, 2003.

Insurance

Wells Management carries comprehensive liability and extended coverage with respect to the properties owned by the Partnership through investments in the joint ventures described in Item 2. In the opinion of management, all such 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 provide free rent, reduced charges for tenant improvements and other inducements, all of which may have an adverse impact on the 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.

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ITEM 2.    PROPERTIES.

The Partnership owns interests in all of its real estate assets through joint ventures with other Wells Real Estate Funds. During the periods presented, the Partnership owned interests in the following seven properties through the affiliated joint ventures listed below (the “Joint Ventures”):

Each of the aforementioned properties was acquired on an all-cash basis. The investment objectives of each of the joint venture partners listed in the above table are substantially identical to those of the Partnership. The Partnership does not have control over the operations of the Joint Ventures; however, it does exercise significant influence. Accordingly, investments in Joint Ventures are recorded using the equity method of accounting.

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As of December 31, 2003, the lease expirations scheduled during each of the following ten years for all properties in which the Partnership held an interest through the Joint Ventures, assuming no exercise of renewal options or termination rights, are summarized below:

Additional information about the Joint Ventures and properties in which the Partnership owns interests during the periods presented is provided below:

Fund XI-XII-REIT Associates

On June 21, 1999, the Wells Fund XI-REIT Joint Venture (“Fund XI-REIT Associates”), a joint venture between Wells Real Estate Fund XI, L.P. and Wells Operating Partnership, L.P., was amended and restated to admit the Partnership and became known as Fund XI-XII-REIT Associates. As of December 31, 2003, the Partnership, Wells Real Estate Fund XI, L.P., and Wells Operating Partnership, L.P. owned equity interests of approximately 17%, 26%, and 57%, respectively, in the following four properties based on their respective cumulative capital contributions to Fund XI-XII-REIT Associates:

111 Southchase Boulevard

On May 18, 1999, Fund XI-XII-REIT Associates purchased 111 Southchase Boulevard, a manufacturing and office building located in Fountain Inn, unincorporated Greenville County, South Carolina.

111 Southchase Boulevard is a manufacturing building including approximately 169,000 rentable square feet, comprised of approximately 141,000 square feet of manufacturing space, 25,000 square feet of two-story office space, and 3,000 square feet of cafeteria/training space. The entire 169,000 rentable square feet of 111 Southchase Boulevard was under lease with EYBL CarTex, Inc. (“EYBL CarTex”), a South Carolina corporation, for ten years commencing on March 1, 1998. EYBL CarTex had the right to extend the lease for two additional five-year periods. The annual rent payable was $508,530 for the first four years, $550,907 for years five and six, $593,285 for years seven and eight, and $610,236 for years nine and ten.

The sole tenant of 111 Southchase Boulevard vacated in November 2002 and is currently in default under the terms of the lease agreement as a result of failing to pay rent beginning in December 2002. Fund XI-XII-REIT

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Associates is currently pursuing legal actions to collect the delinquent rent due under this lease, while actively seeking prospective tenants and marketing the property for re-leasing. Rental revenue reductions associated with the vacant space approximate $650,000 annually.

The average effective annual rental rate per square foot at 111 Southchase Boulevard was $0.00 for 2003, $3.29 for 2002, and $3.31 for 2001, 2000, and 1999.

Sprint Building

On July 2, 1999, the Fund XI-XII-REIT Associates acquired the Sprint Building, a three-story office building including approximately 68,900 rentable square feet on a 7.12-acre tract of land located in Leawood, Johnson County, Kansas.

The entire rentable area of the Sprint Building is currently under a net lease with Sprint Communications, Inc. (“Sprint”) for an initial term of ten years, which commenced on May 19, 1997 and expires on May 18, 2007. The monthly base rent payable under the lease is $83,254 through May 18, 2002 and $91,867 for the remainder of the lease term.

On August 19, 2003, Sprint notified Fund XI-XII-REIT Associates of its intention to exercise an early termination option under its lease; accordingly, Sprint is expected to vacate the building on or before May 18, 2004. Under the terms of the lease, Sprint is required to pay Fund XI-XII-REIT Associates a termination payment equal to $6.53 per square foot, or $450,199, upon vacating the premises.

The average effective annual rental rate per square foot at the Sprint Building was $15.45 for 2003, $15.45 for 2002 and 2001, and $15.44 for 2000 and 1999.

Johnson Matthey Building

On August 17, 1999, Fund XI-XII-REIT Associates acquired the Johnson Matthey Building, an office and warehouse building located in Chester County, Pennsylvania.

The Johnson Matthey Building, an office and warehouse building containing approximately 130,000 square-feet, was first constructed in 1973 as a multi-tenant facility and was subsequently converted into a single-tenant facility in 1998. The site consists of a ten-acre tract of land located at 434-436 Devon Park Drive in the Tredyffrin Township, Chester County, Pennsylvania.

The entire rentable area of the Johnson Matthey Building is currently leased to Johnson Matthey, which commenced on July 1, 1998 and will expire on June 30, 2007. The annual base rent payable under the Johnson Matthey lease for the remainder of the lease term is as follows: year seven—$874,250, year eight—$897,000, year nine—$916,500, and year ten—$939,250. Johnson Matthey has the right to extend the lease at the same terms and conditions for one additional three-year period.

Johnson Matthey has a right of first refusal to purchase the Johnson Matthey Building in the event that the Fund XI-XII-REIT Associates desire to sell the building to an unrelated third party. Fund XI-XII-REIT Associates must give Johnson Matthey written notice of its intent to sell the Johnson Matthey Building, and Johnson Matthey will have ten days from the date of such notice to provide written notice of its intent to purchase the building. If Johnson Matthey exercises its right of first refusal, it must purchase the Johnson Matthey Building on the same terms contained in the third-party offer.

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The average effective annual rental rate per square foot at the Johnson Matthey Building was $6.65 for 2003, $6.77 for 2002, and $6.67 for 2001, 2000, and 1999.

Gartner Building

On September 20, 1999, Fund XI-XII-REIT Associates acquired the Gartner Building, a two-story office building with approximately 62,400 rentable square feet on a 4.9-acre tract of land located in Fort Myers, Lee County, Florida.

The entire rentable area of the Gartner Building is currently under a net lease agreement with Gartner. The initial term of the Gartner Lease is ten years, commencing on February 1, 1998 and expiring on January 31, 2008. Gartner has the right to extend the Gartner Lease for two additional five-year periods. The annual base rent payable under the Gartner Lease is $830,668 through January 2003, increased by 2.5% annually through the remainder of the lease term.

The average effective annual rental rate per square foot at the Gartner Building was $13.68 for 2003, $13.73 for 2002, and $13.68 for 2001, 2000, and 1999, the first year of ownership.

Fund XII-REIT Associates

On April 10, 2000, Fund XII-REIT Associates was created for the purpose of acquiring owning, leasing, operating and managing real properties. As of December 31, 2003, the Partnership and Wells Operating Partnership, L.P. owned equity interests of approximately 45% and 55%, respectively, in the following three properties based on their respective cumulative capital contributions to Fund XII-REIT Associates:

Siemens Building

On May 10, 2000, Fund XII-REIT Associates purchased the Siemens Building, a three-story office building containing approximately 77,000 rentable square feet on an approximate 5.3-acre tract of land located in Troy, Oakland County, Michigan.

The entire Siemens Building is currently under a net lease agreement with Siemens Automotive Corporation (“Siemens”), which expires on August 31, 2010. Siemens has the right to extend the lease for two additional five-year periods at 95% of the then current fair market rental rates. The monthly rent payable under the Siemens lease is $117,251 for year one; $119,947 for year two; $122,644 for year three; $125,341 for year four; $128,038 for year five; $130,735 for year six; and $133,432 for year seven and the first eight months of year eight.

Siemens has a one-time right to cancel the lease effective after the 90th month of the term (June 2007) upon (a) providing written notice of such cancellation on or before the last day of the 78th month (June 2006) and (b) paying a cancellation fee to Fund XII-REIT Associates equal to the amount of unamortized cost of brokerage commissions paid by the landlord, plus the amount of unamortized landlord-funded tenant improvements constructed as of the cancellation date.

The average effective annual rental rate per square foot at the Siemens Building was $19.05 for 2003, $18.68 for 2002, and $19.01 for 2001 and 2000, the first year of ownership.

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AT&T Oklahoma Building

On December 28, 2000, Fund XII-REIT Associates purchased the AT&T Oklahoma Building, a one-story office building and a two-story office building containing an aggregate of approximately 128,500 rentable square feet on an approximate 11.34-acre tract of land located in Oklahoma City, Oklahoma County.

The entire 78,500 rentable square feet of the two-story office building and 25,000 rentable-square-feet of the one-story office building are currently under a net lease agreement with AT&T Corporation (“AT&T”). The AT&T lease commenced on April 1, 2000 and expires on November 30, 2010. AT&T has the right to extend the AT&T lease for two additional five-year periods at the then current fair market rental rate upon delivering written notice within 240 days prior to expiration of the lease. Annual base rent is payable in equal monthly installments during the initial term of the AT&T lease as follows: months 1 to 35–$1,242,000, months 36 to 65–$1,293,750; months 66 to 95–$1,345,500 and months 96 to 125–$1,397,250. AT&T has a right of first offer to lease the space currently occupied by Jordan Associates, Inc. (“Jordan”) should Jordan decide to vacate the premises.

Jordan currently occupies the 25,000 rentable square feet within the one-story office building under a net lease agreement. The initial term of the Jordan lease commenced on April 1, 1998 for a period of ten years. Jordan has the right to extend the lease for one five-year period at the then current fair market rental rate upon delivering written notice within 240 days prior to expiration of the initial lease term.

Annual base rent is payable in equal monthly installments during the initial lease term of the Jordan lease as follows: Months 1 to 60–$294,500 and months 61 to 120–$332,000.

The average effective annual rental rate per square foot at the AT&T Oklahoma Building was $12.61 for 2003, $12.46 for 2002, and $12.78 for 2001 and 2000, the first year of ownership.

The Comdata Building

On May 15, 2001, Fund XII-REIT Associates purchased the Comdata Building, a three-story office building containing approximately 201,000 rentable square feet on an approximate 12.3-acre tract of land located at 5301 Maryland Way, Williamson County, Brentwood, Tennessee for a purchase price of $24,950,000, plus acquisition and closing costs of approximately $52,000.

The entire Comdata Building is currently under a triple-net lease agreement with Comdata, a wholly owned subsidiary of Ceridian Corporation. Ceridian Corporation is the guarantor of the Comdata lease. The Comdata lease commenced on April 1, 1997 and expires on May 31, 2016. Comdata has the right to extend the lease for one additional five-year period at a rate equal to the greater of the base rent for the final year of the initial term or 90% of the then-current fair market rental rate. Annual base rent is payable for the current term of the Comdata lease as follows: $2,398,672 for year 1; $2,458,638 for years 2-6; $2,528,605 for years 7-11; and $2,578,572 for years 12-15.

The average effective annual rental rate per square foot at the Comdata Building was $12.46 for 2003, $12.44 for 2002, and $12.47 for 2001, the first year of ownership.

There were no material pending legal proceedings or proceedings known to be contemplated by governmental authorities involving the Partnership during the fourth quarter of 2003.

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No matters were submitted to a vote of the limited partners during the fourth quarter of 2003.

The offering for sale of units in the Partnership terminated on March 21, 2001, at which time the Partnership had sold 2,688,861 Cash Preferred Status Units and 872,258 Tax Preferred Status Units held by a total of 1,227 and 106 limited partners, respectively. As of February 15, 2004, the Partnership had 2,924,050 outstanding Cash Preferred Status Units held by a total of 1,240 limited partners and 637,069 outstanding Tax Preferred Status Units held by a total of 115 limited partners. The capital contribution per unit is $10.00. There is no established public trading 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.

Pursuant to Section 15.2 of the partnership agreement and the Partnership’s prospectus, the General Partners are required to prepare annual statements of estimated unit values to assist fiduciaries of retirement plans subject to the annual reporting requirements of ERISA in the preparation of their reports. Pursuant to Section 15.2 of the partnership agreement and the Partnership’s Prospectus, for the first three fiscal years following the termination of the offering of units in the Partnership, the estimated value of the units shall be deemed to be $10 per unit for these purposes. The basis for this valuation is the fact that the Partnership was recently engaged in a public offering of its units at the price of $10.00 per unit. However, please note that there is no public trading market for the units nor is one ever expected to develop and there can be no assurance that limited partners could receive $10 per unit if such a market did exist and they sold their units or that they will be able to receive such amount for their units in the future. In addition, the Partnership has not performed an evaluation of the Partnership properties and, therefore, this valuation is not based upon the value of the Partnership properties, nor does it represent the amount limited partners would receive if the Partnership properties were sold and the proceeds distributed to the limited partners in a liquidation of the Partnership, which amount would most likely be less than $10.00 per unit as a result of the fact that, at the time the Partnership purchased its properties, the amount of funds available for investment in properties was reduced by the 16% of offering proceeds raised by the Partnership, which are used to pay selling commissions and dealer manager fees, organization and offering expenses and acquisition and advisory fees, as described in more detail in this Annual Report and the Partnership’s Prospectus.

After the expiration of this three-year period, the General Partners are required under the partnership agreement to determine an estimated per unit valuation by estimating the amount a holder of Partnership units would receive if the Partnership properties were sold as of the close of the Partnership’s fiscal year at their estimated fair market values and the proceeds from such sales (without reductions for selling expenses and other costs), together with any other funds of the Partnership, were distributed in a liquidation of the Partnership. Such estimated property values will be based upon annual valuations performed by the General Partners, and no independent property appraisals will be obtained. Accordingly, these estimates, when prepared by the General Partners, should not be viewed as an accurate reflection of the values of the limited partners’ units, what a limited partner might be able to sell his units for, or the fair market value of the Partnership properties, nor will they represent the amount of net proceeds limited partners would receive if the Partnership properties were sold and the proceeds distributed in a liquidation of the Partnership. The valuations to be performed by the General Partners will be estimates only, and will be based a number of assumptions which may not be accurate or complete. In addition, property values are subject to change and could decline after the date of the valuations.

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Limited partners holding Cash Preferred Status Units are entitled to a distribution from Net Cash From Operations, as defined in the partnership agreement to mean cash flow, less adequate cash reserves for other obligations of the Partnership for which there is no provision, on a per unit basis until they have received distributions in each fiscal year of the Partnership equal to 10% of their adjusted capital contributions. After this preference is satisfied, the General Partners will receive an amount of Net Cash From Operations equal to 10% of the total amount of Net Cash From Operations distributed. Thereafter, the limited partners holding Cash Preferred Status Units will receive 90% of Net Cash From Operations and the General Partners will receive 10%. No Net Cash From Operations will be distributed to limited partners holding Tax Preferred Status Units. Holders of Cash Preferred Status Units will, except in limited circumstances, be allocated none of the Partnership’s net loss, depreciation, and amortization deductions. These deductions will be allocated to limited partners holding Tax Preferred Status Units, until their capital account balances have been reduced to zero. No distributions have been made to limited partners holding Tax Preferred Status Units or the General Partners as of December 31, 2003.

Cash available for distribution to the limited partners is distributed on a quarterly basis. Cash distributions made to limited partners holding Cash Preferred Status Units during 2002 and 2003 are summarized below:

The fourth quarter 2003 distribution was accrued for accounting purposes in 2003 and paid to limited partners holding Cash Preferred Status Units in February 2004. No cash distributions were paid to holders of Tax Preferred Status Units in 2003 or 2002.

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The following sets forth a summary of the selected financial data as of and for the years ended December 31, 2003, 2002, 2001, 2000, and the seven months ended December 31, 1999, the first year of operations.

The following discussion and analysis should be read in conjunction with the Selected Financial Data presented in Item 6 and our accompanying financial statements and notes thereto.

(a)    Overview

Currently, management believes that the Partnership is in the holding phase. Upon investing all capital proceeds and exiting the investing phase, the Partnership owned interests in seven properties through interests in affiliated joint ventures. As of the date of this filing, five properties are substantially leased to tenants in the beginning/middle of their respective initial lease terms, the sole tenant of one property, the Sprint Building, has given notice that it is exercising an early termination option under the initial lease term effective May 2004, and one property, 111 Southchase Boulevard, is vacant. Management will continue to actively pursue potential re-leasing strategies for 111 Southchase Boulevard and the Sprint Building during 2004.

As the Partnership evolves through the life cycle detailed in Item 1, our most significant risks and challenges continue to evolve concurrently. At such time as we enter the positioning for sale phase, we anticipate that we will continue to focus on re-leasing vacant space and space that may become vacant upon the expiration of our current leases. In doing so, we will seek to maximize returns to the limited partners by negotiating long-term leases at market rental rates while attempting to minimize downtime, re-leasing expenditures, ongoing property

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level costs and portfolio costs. Later as we embark into the disposition and liquidation phase, our attention will shift to locating suitable acquirers, negotiating purchase-sale contracts that will attempt to maximize the total return to the limited partners, and minimize contingencies and our post-closing involvement with the acquirer.

During 2003, net income decreased primarily due to the vacancy of 111 Southchase Boulevard beginning in November 2002. Cash flows decreased during 2003, primarily due to a change in the timing of paying accounts payable in 2003, as compared to 2002.

The Partnership anticipates focusing resources on re-leasing vacant properties during 2004. Substantially all of our revenues are generated from the operations of the properties in the Partnership’s portfolio. On a quarterly basis, we deduct the expenses related to the recurring operations of the properties and the portfolio from such revenues and assess the amount of the remaining cash flows that will be required to fund known re-leasing costs and other capital improvements. Any residual operating cash flows are considered available for distribution to the limited partners and are generally paid quarterly. As further outlined in section (b) below, we anticipate utilizing operating cash flows to fund the costs necessary to re-lease 111 Southchase Boulevard and the Sprint Building in 2004.

Industry Factors

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

General Economic and Real Estate Market Commentary

The U.S. economy appears to be recovering; however, thus far it has been a jobless recovery, and because of this, real estate office fundamentals may not improve until employment growth strengthens. The economy has shown signs of growth recently, as companies have recommenced making investments in new employees. Job growth is the most significant demand driver for office markets. The jobless recovery has resulted in a demand deficit for office space. In general, the real estate office market lags behind the overall economic recovery and, therefore, recovery is not expected until late 2004 or 2005 at the earliest, and then will vary by market.

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

The office market has significant excess space. Vacancy levels are believed to be at or near their peak. There is some encouraging news, new construction continues to taper off, coming to a complete halt in many markets. As a result of the slow down in new construction and the modest decline in sublease space, net absorption has turned positive, although barely, at year-end. Many industry professionals believe office market fundamentals are bottoming-out; however, a recovery cannot be expected until job growth and corresponding demand for office space increases.

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

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

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

(b)    Results of Operations

Gross Revenues

Gross revenues of the Partnership were $1,634,528, $1,727,330, and $1,661,194, for the years ended December 31, 2003, 2002, and 2001, respectively. The 2003 decrease from 2002 and the 2002 increase from 2001 resulted primarily from the corresponding changes in equity in income of Joint Ventures described below. The 2002 increase from 2001 is partially offset by a decrease in interest income, as all remaining investor proceeds were invested in real estate assets during 2001.

Equity In Income of Joint Ventures

Gross Revenues of Joint Ventures

Gross revenues of the Joint Ventures decreased in 2003, as compared to 2002, primarily as a result the vacancy of 111 Southchase Boulevard owned by Fund XI-XII-REIT Associates beginning in November 2002. Such revenues increased in 2002, as compared to 2001, primarily due to the acquisition of the Comdata Building in December 2001, thereby resulting in a full year of operations for the Comdata Building owned by Fund XII-REIT Associates for the first time in 2002.

Expenses of Joint Ventures

The expenses of the Joint Ventures remained relatively stable in 2003, as compared to 2002. Such expenses increased in 2002, as compared to 2001, primarily due to the acquisition of the Comdata Building in December 2001, thus, resulting in a full year of operating expenses for the Comdata Building for the first time in 2002.

As a result of the aforementioned factors, equity in income of Joint Ventures was $1,634,000, $1,726,553 and $1,577,523 for the years ended December 31, 2003, 2002, and 2001, respectively.

Expenses of the Partnership

Expenses of the Partnership were $183,756, $179,436, and $105,766, for the years ended December 31, 2003, 2002, and 2001, respectively. Expenses remained relatively stable in 2003, as compared to 2002. The 2002 increase from 2001 is primarily a result of Tennessee partnership franchise and excise taxes, which were assessed for the first time in 2002 for both 2001 and 2002.

Net Income of the Partnership

As a result of the aforementioned changes in revenues and expenses, the Partnership recognized net income of $1,450,772, $1,547,894, and $1,555,418 for the years ended December 31, 2003, 2002, and 2001, respectively.

(c)    Liquidity and Capital Resources

On March 22, 1999, the Partnership commenced a public offering of up to $70,000,000 of limited partnership units pursuant to a Registration Statement on filed Form S-11 under the Securities Act of 1933. The Partnership

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commenced active operations on June 1, 1999 upon receiving and accepting subscriptions for 125,000 units. The offering for sale of units in the Partnership terminated on March 21, 2001, at which time the Partnership had received aggregate gross offering proceeds of $35,611,192 from the sale of 2,688,861 Cash Preferred and 872,258 Tax Preferred limited partner units for $10 per unit held by a total of 1,227 and 106 limited partners, respectively, for total limited partner capital contributions of $35,611,192. As of December 31, 2003, the Partnership has paid $4,451,400 in selling commissions and organization and offering expenses, $1,246,391 in acquisition and advisory fees and acquisition expense reimbursements, and invested all remaining investor proceeds into Fund XI-XII-REIT Associates (approximately $5,300,000) and Fund XII-REIT Associates (approximately $24,613,401).

Cash Flows From Operating Activities

Net cash flows from operating activities were $(168,461), $(176,478), and $(73,029) for the years ended December 31, 2003, 2002, and 2001, respectively. Operating cash flows remained relatively stable in 2003, as compared to 2002. The 2002 increase in cash flows used from 2001 is largely due to (i) the assessment of Tennessee partnership taxes for the first time in 2002, as further described above, and (ii) a reduction of interest income received as a result of investing all remaining investor proceeds in properties during 2001.

Cash Flows From Investing Activities

Net cash flows from investing activities were $2,673,330, $2,824,519, and $(7,261,248) for the years ended December 31, 2003, 2002, and 2001, respectively. The 2003 decrease from 2002 is primarily a result of the decline in distributions received from Fund XI-XII-REIT Associates due to the vacancy of 111 Southchase Boulevard beginning in December 2002. The 2002 increase from 2001 is primarily due to: (i) contributing capital to Fund XII-REIT Associates for the purchase of the Comdata Building in 2001; (ii) the payment of acquisition and advisory fees to Wells Capital, pursuant to the terms of the partnership agreement, as capital was raised in 2001; and (iii) receiving additional distributions from Fund XII-REIT Associates in connection with the first full year of operations for the Comdata Building in 2002.

Cash Flows From Financing Activities

Net cash flows from financing activities were $(2,520,418), $(2,650,197), and $7,158,585 for the years ended December 31, 2003, 2002, and 2001, respectively. Cash flows used in financing activities for 2003 and 2002 are solely comprised of distributions paid to limited partners. The decrease in cash flows used for 2003, as compared to 2002 is primarily attributable to the corresponding decline in distributions received from Fund XI-XII-REIT Associates due to the vacancy of 111 Southchase Boulevard. The 2002 decrease, as compared to 2001, is largely a result of terminating the Partnership’s public offering of limited partnership units on March 21, 2001, partially offset by the payment of additional distributions to limited partners commensurate with the increase in cash flows received from Joint Ventures in 2002 due to the first full year of operations for the Comdata Building in 2002.

Distributions

The Partnership made distributions to the limited partners holding Class A Units of $0.87, $0.94, and $0.91 per unit for the years ended December 31, 2003, 2002, and 2001, respectively. Such distributions have been made from net cash from operations and distributions received from investments in joint ventures. No distributions have been made to the limited partners holding Tax Preferred Status Units or to the General Partners. Reductions

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in distributions to the limited partners are anticipated in 2004 primarily due to requirements to fund re-leasing costs for the Sprint Building and 111 Southchase Boulevard as noted below.

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 2004, the General Partners anticipate that the Partnership will be required to fund its pro-rata share of re-leasing costs for 111 Southchase Boulevard, re-leasing costs for the Sprint Building, and building improvements for the Johnson Matthey Building. As a result, cash flows from investing activities are expected to decline in 2004.

(d)    Related-Party Transactions

Offering Expense Reimbursements

The Partnership reimburses Wells Capital for offering expenses equal to the lesser of actual costs incurred or 3% of the aggregate gross offering proceeds, subject to the overall limitations of the partnership agreement. Offering expenses include such costs as legal and accounting fees, printing costs, and other offering expenses, but do not include sales or underwriting commissions. As of December 31, 2003, the Partnership had paid aggregate fees of $1,068,336 to Wells Capital, which amounted to 3% of the gross offering proceeds received to date.

Selling Commissions and Dealer-Manager Fees

The Partnership pays selling commissions and a dealer-manager fee up to 7% and equal to 2.5%, respectively, of aggregate gross offering proceeds to Wells Investment Securities, Inc., an affiliated and registered securities broker-dealer, and/or other broker-dealers participating in the offering of the Partnership’s limited partner units (“Participating Dealers”). Wells Investment Securities may re-allow a portion of its dealer-manager fee to Participating Dealers in the aggregate amount of up to 1.5% of gross offering proceeds as marketing fees, or to reimburse Participating Dealers the costs and expenses of representatives of such Participating Dealers of attending our educational conferences and seminars. As of December 31, 2003, the Partnership had paid aggregate selling commissions of $2,492,783 and dealer-manager fees of $890,280.

Acquisition and Advisory Fees and Acquisition Expense Reimbursements

The Partnership pays Wells Capital for acquisition and advisory services and acquisition expenses equal to the lesser of actual costs incurred or 3.5% of the aggregate gross offering proceeds, subject to certain overall limitations contained in the partnership agreement. As of December 31, 2003, the Partnership had paid aggregate fees of $1,246,391 to Wells Capital, which amounted to 3.5% of the gross offering proceeds received to date.

Management and Leasing Fees

Wells Management, an affiliate of the General Partners, receives compensation for supervising the management of the Partnership’s properties owned through joint ventures equal to (a) 2.5% of the gross revenues for management and 2% of the gross revenues for leasing (aggregate maximum of 4.5%) plus a separate competitive fee for the one-time initial lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s-length transactions by others rendering similar services in the same geographic area for similar properties or (b) in the case of commercial properties which are leased on a long-term net basis (ten or

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more years), the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the life of the leases except for a one-time initial leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term. The Partnership’s share of management and leasing fees and lease acquisition costs incurred through the Joint Ventures was $148,048, $150,048, and $125,302, for the years ended December 31, 2003, 2002, and 2001, respectively.

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. During 2003, 2002, and 2001, the Partnership reimbursed $38,790, $44,712, and $48,548, respectively, to Wells Capital and its affiliates for these services. See Note 7 to the financial statements included with this report for a summary of the Partnership’s administrative costs.

Conflicts of Interest

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

(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. However, due to the long-term nature of the leases, the leases may not reset frequently enough to cover inflation.

(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. Additional discussion of accounting policies that management considers to be significant, including further discussion of the critical accounting policies described below, is presented in Note 1 to the Partnership’s financial statements included in this report.

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Investment in Real Estate Assets

The Partnership’s management is required to make subjective assessments as to the useful lives of its depreciable assets. The Partnership 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 Partnership’s assets by class are as follows:

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 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 at December 31, 2003.

Since the Partnership does not borrow any money or make any foreign investments, it is not subject to risks relating to interest rate or foreign currency exchange rate fluctuations.

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

There were no disagreements with the Partnership’s independent public accountants during the years ended December 31, 2003 and 2002.

On May 16, 2002, the General Partners dismissed Arthur Andersen LLP (Andersen) as the Partnership’s independent public accountants effective immediately.

Andersen’s report on the financial statements of the Partnership for the year ended December 31, 2001 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

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During the year ended December 31, 2001 and through the date of Andersen’s dismissal, there were no disagreements with Andersen on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to Andersen’s satisfaction, would have caused Andersen to make reference to the subject matter in connection with its report on the financial statements of the Partnership for such year and there were no reportable events as set forth in Item 304(a)(1)(v) of Regulation S-K.

On July 3, 2002, the Partnership engaged Ernst & Young, LLP (Ernst & Young) to audit the financial statements of the Partnership, effective immediately. During the fiscal year ended December 31, 2001, and through the date of appointment of Ernst & Young as the Partnership’s independent public accountants, the Partnership did not consult Ernst & Young with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the financial statements of the Partnership, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

The Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, the corporate general partner of one of the General Partners of the Partnership, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a - 14 under 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 control over financial reporting during the Partnership’s fourth fiscal quarter that have materially affected, or are likely to materially affect, the Partnership’s internal control over financial reporting.

PART III

Wells Partners

The sole general partner of Wells Partners is Wells Capital, a Georgia corporation. The executive offices of Wells Capital are located at 6200 The Corners Parkway, Norcross, Georgia, 30092. Wells Capital was organized on April 18, 1984 under the Georgia Business Corporation Code, and is primarily in the business of serving as general partner or as an affiliate to the general partner in affiliated public limited partnerships (“Wells Real Estate Funds”) and as the advisor to the Wells Real Estate Investment Trust, Inc. and Wells Real Estate Investment Trust II, Inc. (“Wells REITs”), each a Maryland corporation which qualifies as a real estate investment trust. In these capacities, Wells Capital performs certain services for Wells Real Estate Funds and the Wells REITs, including presenting, structuring, and acquiring real estate investment opportunities, entering into leases and service contracts on acquired properties, arranging for and completing the disposition of properties, and providing other services such as accounting and administrative functions. Wells Capital is a wholly owned subsidiary of Wells Real Estate Funds, Inc., of which Leo F. Wells, III is the sole stockholder.

Leo F. Wells, III

Mr. Wells, who serves as one of our General Partners, is the President, Treasurer, and sole director of Wells Capital, which is the corporate general partner of our other General Partner. He is also the sole stockholder,

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President, and sole director of Wells Real Estate Funds, Inc., the parent corporation of Wells Capital, Wells Management, Wells Investment Securities, Inc. (“Wells Investment Securities”), and Wells & Associates, Inc., a real estate brokerage and investment company formed in 1976 and incorporated in 1978, for which Mr. Wells serves as principal broker. He is also the President, Treasurer, and sole director of:

Mr. Wells is the President and a director of Wells Real Estate Investment Trust, Inc. and Wells Real Estate Investment Trust II, Inc., which are both real estate investment trusts formed under Maryland law.

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

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

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

Wells Investment Securities consented to a censure and Mr. Wells consented to suspension from acting in a principal capacity with an NASD member firm for one year. Wells Investment Securities and Mr. Wells also agreed to the imposition of a joint and several fine in the amount of $150,000. Although he is temporarily prohibited from acting in a principal capacity with Wells Investment Securities, Mr. Wells continues to engage in selling efforts and other non-principal activities on behalf of Wells Investment Securities.

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Financial Oversight Committee

The Partnership does not have a board of directors or an audit committee. Accordingly, as the corporate general partner of one of the General Partners of the Partnership, Wells Capital has established a Financial Oversight Committee consisting of Leo F. Wells, III, as the Principal Executive Officer, Douglas P. Williams; as the Principal Financial Officer; and Randall D. Fretz, as the Chief of Staff, of Wells Capital. The Financial Oversight Committee serves the equivalent function of an audit committee for, among others, the following purposes: appointment, compensation, review and oversight of the work of our independent public accountant, and establishing and enforcing the code of ethics. However, since the Partnership and General Partners do not have an audit committee and the Financial Oversight Committee is not independent of the Partnership or the General Partners, the Partnership does not have an “audit committee financial expert.”

Code of Ethics

The Financial Oversight Committee has adopted a code of ethics applicable to Wells Capital’s Principal Executive Officer and Principal Financial Officer, as well as the principal accounting officer, controller or other employees of Wells Capital performing similar functions on behalf of the Partnership, if any. You may obtain a copy of this code of ethics, without charge, upon request by calling our Investor Services Department at (800) 557-4830 or (770) 243-8282.

The following table summarizes the compensation and fees (including reimbursement of expenses) paid to the General Partners and their affiliates during the year ended December 31, 2003.

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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 February 15, 2004.

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

The 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 are as follows:

Interest in Partnership Cash Flow and Net Sales 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 holding Cash Preferred Status Units have received preferential distributions equal to 10% of their adjusted capital accounts in each fiscal year. The General Partners will also receive a subordinated participation in net sales proceeds and net financing proceeds equal to 20% of residual proceeds available for distribution after limited partners holding Cash Preferred Status. Units have received a return of their adjusted capital contributions plus a 10% cumulative return on their adjusted capital contributions and limited partners holding Tax Preferred Status Units have received a return of their adjusted capital contributions plus a 15% cumulative return on their adjusted capital contributions; provided, however, that in no event shall the General Partners receive in the aggregate in excess of 15% of net sales proceeds and net financing proceeds remaining after payments to limited partners from such proceeds of amounts equal to the sum of their adjusted capital contributions plus a 6% cumulative return on their adjusted capital contributions. The General Partners did not receive any distributions from net cash flow of operations or net sales proceeds for the year ended December 31, 2003.

Property Management and Leasing Fees

Wells Management, an affiliate of the General Partners, receives compensation for supervising the management of the Partnership’s properties owned through joint ventures equal to the lesser of (a) fees that would be paid to a comparable outside firm or (b) 4.5% of the gross revenues generally paid over the life of the lease plus a separate competitive fee for the one-time initial lease-up of newly constructed properties generally paid in conjunction with the receipt of the first month’s rent. In the case of commercial properties which are leased on a long-term net basis (ten or more years), the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the life of the leases except for a one-time initial leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term. Wells Management has received $148,181 in property management and leasing fee compensation for services rendered during the year ended December 31, 2003.

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

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arm’s-length transactions involving comparable properties in the same geographic area or (b) 3% of the gross sales price of the property, and provided that payments of such commissions will be made only after limited partners have received prior distributions totaling 100% of their capital contributions plus a 6% cumulative return on their adjusted capital contributions. No real estate commissions were paid to the General Partners or affiliates for the year ended December 31, 2003.

Deferred Project Costs

The Partnership pays Acquisition and Advisory Fees and Acquisition Expenses to Wells Capital, the General Partner of Wells Partners, for acquisition and advisory services as a reimbursement for acquisition expenses. These payments, as provided by the partnership agreement, may not exceed 3.5% of the limited partners’ capital contributions. Acquisition and Advisory Fees and Acquisition Expenses paid as of December 31, 2003, amounted to $1,246,391 and represented approximately 3.5% of the limited partners’ capital contributions. These fees are allocated to specific properties as they are purchased.

Deferred Offering Costs

Wells Capital, the General Partner of Wells Partners, pays all the organization and offering expenses for the Partnership. Wells Capital may be reimbursed by the Partnership to the extent that such offering expenses do not exceed 3% of total limited partners’ capital contributions. As of December 31, 2003, the Partnership had reimbursed Wells Capital for $1,068,336 in organization and offering expenses, which amounted to approximately 3% of limited partners’ capital contributions.

Expense Reimbursements

See Note 7 to the Partnership’s financial statements included with this report for a description of the administrative costs and reimbursements made to the General Partners and their affiliates during the year ended December 31, 2003.

Preapproval Policies and Procedures

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

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Fees Paid to the Independent Public Accountants

As indicated in Item 9 above, we engaged Ernst & Young to be our independent public accountants on July 3, 2002. The aggregate fees billed to the Partnership for professional accounting services, including the audit of the Partnership’s annual financial statements by Ernst & Young for the fiscal years ended December 31, 2003 and 2002, are set forth in the table below.

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

Since May 6, 2003, the effective date of the SEC Rules requiring audit committees to approve all services provided by independent public accountants, 100% of the services performed by Ernst & Young described above under the captions “Audit Fees,” “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” were approved in advance by a member of the Financial Oversight Committee.

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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.

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EXHIBIT INDEX

TO

2003 FORM 10-K

OF

WELLS REAL ESTATE FUND XII, L.P.

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.

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WELLS REAL ESTATE FUND XII, L.P.

                                                                       (A Georgia Public Limited Partnership)                                                                       

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REPORT OF INDEPENDENT AUDITORS

The Partners

Wells Real Estate Fund XII, L.P.

We have audited the accompanying balance sheets of Wells Real Estate Fund XII, L.P. (a Georgia public limited partnership) as of December 31, 2003 and 2002, and the related statements of income, partners’ capital, and cash flows for the years then ended. 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. The financial statements of Wells Real Estate Fund XII, L.P. for the year ended December 31, 2001 were audited by other auditors who have ceased operations and whose report dated January 25, 2002 expressed an unqualified opinion on those financial statements before the restatement adjustments and disclosures described in Note 1.

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 2003 and 2002 financial statements referred to above present fairly, in all material respects, the financial position of Wells Real Estate Fund XII, L.P. at December 31, 2003 and 2002 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

As discussed above, the financial statements of Wells Real Estate Fund XII, L.P. for the year ended December 31, 2001 were audited by other auditors who have ceased operations. As described in Note 1, these financial statements have been restated. We audited the adjustments described in Note 1 that were applied to restate the 2001 financial statements. Our procedures included (a) agreeing the restatement adjustment amounts to the corresponding accounts maintained in the underlying records of the Partnership, and (b) testing the application of the adjustments to the previously reported amounts. In our opinion, such adjustments are appropriate and have been properly applied. Additionally, as described in Note 1, these financial statements have been revised to include disclosure of the number of Cash Preferred and Tax Preferred weighted average limited partner units outstanding for the year ended December 31, 2001 on the statement of income. Our procedures with respect to this disclosure included recalculating the number of Cash Preferred and Tax Preferred weighted average limited partner units outstanding for the year ended December 31, 2001 by dividing the net income amount allocated to Cash Preferred limited partners and net loss amount allocated to Tax Preferred limited partners, previously reported on the statement of income in 2001, by the amount of net income per weighted average Cash Preferred limited partner unit and net loss per weighted average Tax Preferred limited partner unit, previously reported on the statement of income in 2001. In our opinion, the disclosure of the number of Cash Preferred and Tax Preferred weighted average limited partner units outstanding on the statement of income for the year ended December 31, 2001 is appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 financial statements of Wells Real Estate Fund XII, L.P. other than with respect to such restatement adjustments and disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 financial statements taken as a whole.

/s/    Ernst & Young LLP

Atlanta, Georgia

February 18, 2004

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(The following is a copy of the audit report previously issued by Arthur Andersen LLP in connection with the financial statements of Wells Real Estate Fund XII, L.P. for the fiscal year ended December 31, 2001 included in the 2001 Form 10-K filing. This audit report has not been reissued by Arthur Andersen in connection with the filing of this form 10-K for the fiscal year ended December 31, 2003.)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Wells Real Estate Fund XII, L.P.:

We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND XII, L.P. (a Georgia public limited partnership) as of December 31, 2001 and 2000 the related statements of income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2001. 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 XII, L.P. as of December 31, 2001 and 2000 the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Atlanta, Georgia

January 25, 2002

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WELLS REAL ESTATE FUND XII, L.P.

                                                                       (A Georgia Public Limited Partnership)                                                                       

BALANCE SHEETS

DECEMBER 31, 2003 AND 2002

See accompanying notes.

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WELLS REAL ESTATE FUND XII, L.P.

                                                                       (A Georgia Public Limited Partnership)                                                                       

STATEMENTS OF INCOME

FOR THE YEARS ENDED

DECEMBER 31, 2003, 2002, AND 2001

See accompanying notes.

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WELLS REAL ESTATE FUND XII, L.P.

                                                                       (A Georgia Public Limited Partnership)                                                                       

STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2003, 2002, AND 2001

See accompanying notes.

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WELLS REAL ESTATE FUND XII, L.P.

                                                                       (A Georgia Public Limited Partnership)                                                                       

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2003, 2002, AND 2001