ITEM 1. BUSINESS.
The Registrant, Dean Witter Realty Yield Plus II, L.P. (the "Partnership"), is a limited partnership formed in February 1988 under the laws of the State of Delaware for the purpose of investing in income- producing commercial and industrial properties. The primary investments are a participating mortgage loan, real estate and a land lease.
The Managing General Partner of the Partnership is Dean Witter Realty Yield Plus II Inc. (the "Managing General Partner"), a Delaware corporation which is wholly-owned by Dean Witter Realty Inc. ("Realty"). The Associate General Partner is Dean Witter Realty Yield Plus Associates II, L.P., a Delaware limited partnership, the general partner of which is the Managing General Partner. The Managing General Partner manages and controls all aspects of the business of the Partnership. The terms of transactions between the Partnership and its affiliates are set forth below in footnote 7 to the financial statements included in Item 8 and in Item 13.
The Partnership issued 173,164 units of limited partnership interest (the "Units") at $500 per Unit for $86,582,000. The offering has been terminated and no additional Units will be sold.
The proceeds from the offering were used to make investments in three participating mortgage loans and land leases secured by interests in three office buildings, one industrial property, and an office and parking garage complex. The Partnership subsequently acquired the real estate securing all but one of the foregoing loans through foreclosure or transfers of ownership in lieu of foreclosure. The Partnership's properties and investment in a participating mortgage loan are described in Item 2

ITEM 2. PROPERTIES.
The Partnership's principal offices are located at Two World Trade Center, New York, New York 10048. The Partnership has no other offices.
The Partnership owns directly or through a partnership interest the following three interests in real estate and real estate loans. Generally, the leases pertaining to the properties provide for pass- throughs to the tenants of their pro-rata share of certain operating expenses. In the opinion of the Managing General Partner, all of the properties are adequately covered by insurance.
Each property has been built with on-site parking facilities.
An affiliate of Realty is the property manager for 2600 Michelson Drive and the Century Alameda Distribution Center.
Further information relating to the Partnership's properties is included in Item 7 and footnotes 4 and 5 to the financial statements included in Item 8 below.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS.
On December 27, 1995, a class action lawsuit (the "Grigsby Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner and Associate General Partner), Realty, Dean Witter Reynolds Inc. and others as defendants was filed in Superior Court in California. The complaint alleges fraud, negligent misrepresentation, intentional and negligent breach of fiduciary duty, unjust enrichment and related claims and seeks compensatory and punitive damages in unspecified amounts and injunctive and other equitable relief. The defendants have removed the case to the United States District Court for the Southern District of California. The parties have signed a stipulation requesting that the action be transferred to the United States District Court for the Southern District of New York. The defendants have not yet responded to the complaint and intend to vigorously defend the action.
On February 14, 1996, a class action lawsuit (the "Schectman Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Discover & Co., and Dean Witter Reynolds Inc. as defendants was filed in the Chancery Court of Delaware for New Castle County. The complaint alleges reckless and/or negligent misrepresentation and nondisclosure, breach of fiduciary duty and related claims and seeks an accounting of profits and rescissory and/or compensatory damages in unspecified amounts. The defendants have not yet responded to the complaint and intend to vigorously defend the action.
On February 23, 1996, a class action lawsuit (the "Dosky Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Discover & Co., Dean Witter Reynolds Inc. and others as defendants was filed in the Chancery Court of Delaware for New Castle County. The complaint alleges breach of fiduciary duty and seeks an accounting of profits, compensatory damages in unspecified amounts, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants have not yet responded to the complaint and intend to vigorously defend the action.
On February 29, 1996, a class action lawsuit (the "Segel Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Reynolds Inc., Dean Witter, Discover & Co. and others as defendants was filed in the Chancery Court of Delaware for New Castle County. The complaint alleges breach of fiduciary duty and seeks an accounting of profits, compensatory damages in unspecified amounts, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants have not yet responded to the complaint and intend to vigorously defend the action.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal year to a vote of Unit holders.
PART II.
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
An established public trading market for the Units does not exist, and it is not anticipated that such a market will develop in the future. Accordingly, information as to the market value of a Unit at any given date is not available. However, the Partnership does allow limited partners (the "Limited Partners") to transfer their Units if a suitable buyer can be located.
As of March 18, 1996, there were 8,394 holders of limited partnership interests.
The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make quarterly distributions of cash to its partners. Pursuant to the Partnership Agreement, distributable cash, as defined, is paid 90% to the Limited Partners and 10% to the general partners (the "General Partners").
The Managing General Partner was obligated to (a) defer receipt of its share of distributable net cash flow, and (b) contribute additional capital to the Partnership, sufficient to fund any shortfalls between cash flow and a 7.5% annual distribution rate to Limited Partners during the offering period (which ended March 1990), and the twelve quarters thereafter. During the offering period, the Managing General Partner deferred receipt of distributions totalling $3,713,000, but was not required to make any additional capital contributions. Thereafter, the Managing General Partner contributed $2,003,710, $2,390,521 and $412,838 with respect to the years ended March 31, 1993, 1992 and 1991, respectively. The amounts with respect to the years ended March 31, 1992 and 1991 were paid in 1992.
During the year ended December 31, 1995, the Partnership paid quarterly cash distributions aggregating $16.25 per Unit to Limited Partners. The total distribution amounted to $3,126,572 with $2,813,915 distributed to the Limited Partners and $312,657 distributed to the General Partners.
During the year ended December 31, 1994, the Partnership paid quarterly cash distributions aggregating $20 per Unit to Limited Partners. The total distribution amounted to $3,848,088, with $3,463,279 distributed to the Limited Partners and $384,809 distributed to the General Partners.
On January 29, 1996, the Partnership paid the fourth quarter distribution of $3.125 per Unit to the Limited Partners. The cash distribution aggregated $601,264 with $541,138 distributed to the Limited Partners and $60,126 distributed to the General Partners.
The Partnership anticipates making regular distributions to its partners in the future.
Sale or financing proceeds will be distributed, to the extent available: first, 97% to the Limited Partners and 3% to the General Partners until each Limited Partner has received a return of their invested capital plus an amount sufficient to provide a 10% cumulative annual return thereon; second, 100% to the General Partners until they have received an amount equal to (i) any portion of their share of net cash flow previously deferred and not distributed, and (ii) any additional capital contributions made by the Managing General Partner to fund distributions to the Limited Partners in respect of the 7.5% minimum annual return described above; and third, 85% to the Limited Partners and 15% to the General Partners. To date, the Partnership has not distributed any sale or financing proceeds.
Taxable income (subject to certain adjustments) will be allocated to the partners in proportion to the distribution of distributable cash or sale or financing proceeds, as the case may be (or 90% to the Limited Partners and 10% to the General Partners if there is no distributable cash or sale or financing proceeds). Tax losses, if any, will be allocated 90% to the Limited Partners and 10% to the General Partners.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership raised $86,582,000 through a public offering which was terminated in 1990. The Partnership has no plans to raise additional capital.
The Partnership committed the gross proceeds raised in the offering to three investments. No additional investments are planned.
Many real estate markets are stabilizing or improving, primarily due to the continued absence of significant construction activity. The relative absence of office construction as well as growth in business services has resulted in absorption of office space in cities such as Boston (the location of One Congress Street). In contrast, office vacancy levels in southern California (the location of 2600 Michelson Drive) remained essentially unchanged from the prior year as certain large corporations and financial companies continued to restructure and consolidate their operations. In most markets, office construction is limited to build-to-suit projects with significant pre-leasing. The overall economic recovery and a lack of warehouse construction over the past several years is benefiting industrial properties such as the Century Alameda Distribution Center. Industrial vacancy rates have declined nationally for the past six quarters. Most new warehouse construction is on a build-to-suit basis.
The Partnership's liquidity depends upon the cash flow from operations of its real estate investments, interest on the participating mortgage loan and expenditures for tenant improvements and leasing commissions in connection with the leasing of space. In 1995, both the Century Alameda property and the Michelson joint venture generated positive cash flow from operations, and it is anticipated that they will continue to do so.
As of December 31, 1995, the Partnership has commitments to fund approximately $282,000 at the Century Alameda property and to contribute approximately $1,055,000 to DW Michelson Associates, primarily for lease- related capital expenditures.
Since existing cash reserves were projected to be insufficient to fund all of the anticipated costs of the properties owned by the Partnership and to accumulate reserves for future contingencies, the Partnership reduced its cash distribution from a 4% annual rate to 2.5% beginning with the second quarter 1995 distribution, which was paid in July.
During the year ended December 31, 1995, Partnership cash flows from operations and distributions from DW Michelson Associates exceeded distributions to investors, capital expenditures and contributions to DW Michelson Associates. The Partnership expects that such cash flows and increased cash reserves resulting from the above-mentioned reduction of the distribution rate will be sufficient to fund capital expenditures, contributions to DW Michelson Associates and cash distributions in 1996.
The Partnership's participating mortgage loan is secured by the One Congress Street property. The General Services Administration ("GSA"), which leases all of the office space at the property, had a one-time option to cancel all or a portion of its lease at any time prior to its lease expiration in August 1997. In March 1996, GSA notified the owner/borrower of the One Congress Street property that it will vacate approximately 67,500 Square feet (approximately 28%) of the office space at the property in June 1996. The borrower continues discussions with the GSA regarding renewal of its remaining space at the property as well as the pending claim against the GSA relating to the original construction of its space. If the borrower can not re-lease the space which GSA will vacate, property cash flow will be reduced, and the borrower may not be able to meet its minimum debt service obligation. See Note 4 to the consolidated financial statements.
On January 29, 1996, the Partnership paid a cash distribution of $3.125 per Unit to the Limited Partners. The cash distribution aggregated $601,264 with $541,138 distributed to the Limited Partners and $60,126 distributed to the General Partners.
Except as discussed above and in the financial statements, the Managing General Partner is not aware of any trends or events, commitments or uncertainties that will have a material impact on liquidity.
Operations
Fluctuations in the Partnership's operating results for the year ended December 31, 1995 compared to 1994, and for 1994 compared to 1993 were primarily attributable to the following:
Rental income increased in 1995 compared to 1994 due to higher occupancy at the Century Alameda property resulting from the leasing to Goldenberg Plywood of approximately 28% of the space which had been vacant from April 1994 until July 1995. The space was vacant as a result of a tenant eviction in 1994.
The increase in equity in earnings of the unconsolidated partnership in 1995 compared to 1994 resulted from higher rental income because of the leasing of 22% of the property's vacant space to AVCO Financial and lower property operating expenses (resulting from a significant refund of prior year real estate taxes). The increase was partially offset by higher depreciation and amortization on expenditures for tenant improvements and leasing commissions. The decrease in 1994 compared to 1993 is due to lower rental income at 2600 Michelson Drive in 1994.
The decrease in interest and other income in 1994 compared to 1993 was primarily due to a fee reimbursement of approximately $219,000 relating to the One Congress Street investment in 1993.
The decreases in property operating expenses in 1995 compared to 1994 and in 1994 compared to 1993 are primarily due to the absence in 1995 of provisions made in 1994 and 1993 for uncollectible rents from a large tenant that was evicted from the Century Alameda property in April 1994.
The loss on impairment of the participating mortgage loan consists of the provision for loss on the One Congress Street loan in 1993.
A summary of the office, retail and industrial building markets where the Partnership's properties, and the property underlying the Partnerships' investment in a participating mortgage loan are located, and the performance of each property, is as follows:
There has been no significant new construction in the industrial building market in Lynwood, California, the location of the Century Alameda Distribution Center. The number of tenants seeking larger space in this market has increased from a year ago, and the recent completion of the Century Freeway is anticipated to increase demand. As a result, space in this market is being absorbed at a slow and steady pace, and the current vacancy rate in this market is 9.5%. During 1995, average occupancy at the property was 86%, and at December 31, 1995, the property was 100% leased to 3 tenants. The leases of Goldenberg Plywood (for approximately 65% of the property's space), Tools Exchange (for approximately 22% of the property's space) and California Feather and Down (for approximately 13% of the space) expire in 2000, 1997 and 1997, respectively.
Favorable lease rates are attracting tenants to the office market in Irvine, California, the location of 2600 Michelson Drive, where the market vacancy rate is approximately 15%. The steady absorption of space and the lack of new construction are leading to a tightening of available quality office space in this market. During 1995, average occupancy at the property was 87%, and at December 31, 1995,the property was 92% leased to 41 tenants. The lease of AVCO Financial (for approximately 22% of the property's space) expires in 2002. No other significant leases are scheduled to expire in the near future.
The vacancy level in the Boston office market, the location of One Congress Street, is approximately 10%, a decrease from approximately 12% at the beginning of the year. However, recent leasing activity has slowed from the 1994 pace and consolidations of banks with major office leases in Boston may add additional space to this market. The property may be affected by this because GSA has announced it will vacate 67,500 square feet of the property's space in June 1996 and its lease on the remaining space terminates in August 1997. Also, the retail space has been difficult to lease. During 1995, occupancy at the office and garage space remained at 100% and the retail space, which is not a significant portion of the overall space, is substantially vacant.
Inflation
Inflation has been consistently low during the periods presented in the financial statements and, as a result, has not had a significant effect on the operations of the Partnership or its properties.
7. Leases
Minimum future rental income under noncancellable operating leases as of December 31, 1995 is as follows: $8,941,582
The Partnership has determined that all leases relating to its properties are operating leases. Lease terms range from five to ten years, and generally provide for fixed minimum rents with rental escalation and/or expense reimbursement clauses.
8. Related Party Transactions
An affiliate of Realty provides property management services for 2600 Michelson Drive and the Century Alameda Distribution Center. For the years ended December 31, 1995, 1994 and 1993, the affiliate received property management fees of $106,543, $101,626 and $119,086, respectively. These amounts are included in property operating expenses.
Realty performs administrative functions and processes certain investor tax information for the Partnership. For each of the three years in the period ended December 31, 1995, the Partnership incurred approximately $212,000, for these services. These amounts are included in general and administrative expenses.
As of December 31, 1995, the affiliates were owed a total of approximately $102,000 for these services.
9. Litigation
Various public partnerships sponsored by Realty (including the Partnership and its Managing General Partner) have been named as defendants in four class actions lawsuits pending in state and federal courts. The complaints allege a variety of claims, including breach of fiduciary duty, fraud, misrepresentation and related claims, and seek compensatory and other damages and equitable relief. The defendants have not yet responded to the complaints and intend to vigorously defend the actions. It is impossible to predict the effect, if any, the outcome of these actions might have on the Partnership's financial statements.
10. Subsequent Event
On January 29, 1996, the Partnership paid a cash distribution of $3.125 per Unit to Limited Partners. The cash distribution aggregated $601,264 with $541,138 distributed to the Limited Partners and $60,126 distributed to the General Partners.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership is a limited partnership which has no directors or officers.
The directors and executive officers of the Managing General Partner are as follows:
All of the directors have been elected to serve until the next annual meeting of the shareholder of the Managing General Partner or until their successors are elected and qualify. Each of the executive officers has been elected to serve until his successor is elected and qualifies.
William B. Smith, age 52, is a Managing Director of Dean Witter Realty Inc. and has been with Dean Witter Realty Inc. since 1982. He is an Executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 46, is a Managing Director of Dean Witter Realty Inc. and has been with Dean Witter Realty Inc. since 1982.
Lawrence Volpe, age 48, is a Director and the Controller of Dean Witter Realty Inc. He is a Senior Vice President and Controller of Dean Witter Reynolds, Inc., which he joined in 1983.
Ronald T. Carman, age 44, is a Director and the Secretary of Dean Witter Realty, Inc. He is a Senior Vice President of Dean Witter, Discover & Co. and Dean Witter Reynolds Inc., which he joined in 1984.
There is no family relationship among any of the foregoing persons.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive cash distributions, when and as cash distributions are made to the Limited Partners, and a share of taxable income or tax loss. Descriptions of such distributions and allocations are contained in Item 5 above. The General Partners received cash distributions of $312,652, $384,809 and $192,404 during the years ended December 31, 1995, 1994 and 1993, respectively.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 8 to the Financial Statements in Item 8

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) No person is known to the Partnership to be the beneficial owner of more than five percent of the Units.
(b) The directors and executive officers of the Managing General Partner own the following Units as of December 31, 1995:
MICHELSON COMPANY LIMITED PARTNERSHIP (A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
1. Organization and restructuring
Michelson Company Limited Partnership (the Partnership) was originally formed as a California general partnership under the name of Michelson Co. The original partnership was formed in 1984 between SC Enterprises (SC) and four individuals for the purpose of constructing and holding for investment a 16-story office building and a five-level parking structure at 2600 Michelson Drive (Michelson). The building and parking structure were completed in 1986. In addition, Michelson Co. acquired adjacent one-story and two-story office buildings at 18581 Teller Avenue (Teller). Michelson and Teller (the office buildings) are located on eight acres of land in Irvine, California.
In 1988, Michelson Co. entered into an arrangement with DW Michelson Associates (DW) whereby Michelson Co. simultaneously sold and leased back the land under a long-term ground lease with DW (Note 3) and refinanced the office buildings under a nonrecourse loan from DW (Note 4). DW is a California general partnership composed of two Dean Witter Realty Inc. affiliated limited partnerships.
Michelson Co. incurred significant cash deficits from operations. These deficits were funded by loan proceeds from DW to the extent of the interest reserve under the loan and thereafter by capital contributions from SC. In November 1990, these fundings stopped and Michelson Co. defaulted on its mortgage note and ground lease obligations. As a consequence, DW took control over the cash and the parties commenced negotiations for restructuring.
In November 1991, the restructuring was completed. Michelson Co. became a limited partnership. DW was admitted as the managing general partner. SC converted to a limited partner, and the four individuals withdrew from the Partnership. DW converted approximately $37.9 million of the mortgage note to capital in the Partnership. The general partners of SC delivered two promissory notes totalling $1.2 million to DW. In July 1994, the note which was due in January 1993, was extended until December 31, 1999. At December 31, 1995, the balance of this note is approximately $1.2 million. In addition, the principal of SC became personally liable for $26 million of the remaining mortgage note payable, subject to certain restrictions and time limitations.
The restructuring also resulted in a revised profit and loss allocation among the partners. In general, profits are first allocated to DW for preferred return on its capital contribution and the balance is allocated to DW and SC in a 90-10 ratio. All losses are allocated to DW except for any losses allocable to SC in connection with its obligation for the mortgage note payable. Also, there was a special allocation of gross revenue of approximately $3 million to SC, which was fully utilized in 1992.
2. Significant accounting policies
The Partnership's records are maintained on the accrual basis of accounting for financial reporting and tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The office buildings and tenant improvements are stated at their original cost, net of depreciation. Costs of improvements to the buildings are capitalized, and repairs are expensed. Depreciation is recorded on the straight-line method over the estimated useful lives of the related assets ranging from 10 to 40 years.
Effective January 1, 1995, the Partnership adopted the provisions of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"); adoption was not required prior to 1995. Pursuant to SFAS 121, at least annually, and more often if circumstances dictate, the Partnership evaluates the recoverability of the net carrying value of its real estate. As part of this evaluation, the fair values of each of the properties are estimated (in some cases with the assistance of independent real estate consultants) based on discounted cash flows. The fair values are compared to the properties' carrying amounts in the financial statements. A deficiency in fair value relative to carrying amount is an indication of the need for a writedown due to impairment.
In such case, the expected future net cash flows from the property are estimated for a period of approximately five years (or a shorter period if the Partnership expects that the property may be disposed of sooner), along with estimated sales proceeds at the end of the period. If the total of these future undiscounted cash flows were less than the carrying amount of the property, the property would be written down to its fair value, and a loss on impairment recognized by a charge to earnings.
Because the determination of fair value is based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying value as of December 31, 1995. The cash flows used to determine fair value are based on good faith estimates and assumptions developed by the Managing General Partner. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore actual results may vary from the estimates and the variances may be material. The Partnership may provide additional write-downs, which could be material in subsequent years if real estate markets or local economic conditions change.
The Partnership has granted free rent periods under certain leases. In order to properly reflect the average rents earned under the leases, the Partnership reports rental revenues during the free rent periods and amortizes the concession amounts as reductions of rental revenues over the terms of the leases. The imputed rents of $710,987, $271,583 and $1,227,569 as of December 31, 1995, 1994 and 1993 respectively, represent the unamortized free rents and are reflected as assets in the accompanying balance sheets.
Leasing commissions are amortized over the applicable lease terms. Leasing costs principally include the net cost of capitalized lease obligations assumed by the Partnership relative to former lessors of relocated tenants.
Loan costs are amortized over the original loan term of ten years.
Cash and cash equivalents consist of cash and highly liquid investments with maturities, when purchased, of three months or less.
No provision for federal and state income taxes has been made in the financial statements, as the liability for such taxes is that of the partners rather than the Partnership.
3. Leasing activities
Leasing Revenues
The Partnership leases, as lessor, commercial office space under operating leases with terms from three to twelve years. Rental revenue is reported ratably over the lease terms. These leases generally provide for minimum rents subject to Consumer Price Index adjustments and for the tenants to reimburse the Partnership for certain operating expenses.
The minimum rents to be received from existing noncancelable operating leases as of December 31, 1995 are as follows:
The office buildings contain a total of approximately 394,000 square feet of rentable space. As of December 31, 1995, the buildings were approximately 90% leased.
Ground Lease
The Partnership has a land lease (the Lease) with DW for a term which expires in 55 years. The Lease provides for an annual base rent of $556,692, additional rent for property taxes and similar assessments, percentage rent representing 40% of net operating cash flows (as defined in the Lease), and participation in refinancing and sale proceeds. There was no percentage rent or participation paid or due as of December 31, 1995 or 1994.
4. Mortgage note payable
The note is payable to DW and is secured by the office buildings and an assignment of rents. The note bears interest at 8.5% per annum and is due March 1998. Interest and principal are payable monthly, with a lump sum payment for unpaid interest and principal due at maturity.
Principal payments due on the mortgage note payable are as follows: $ 26,548,487
5. Related party transactions
DW earns interest as a lender and ground rent as a lessor. An affiliate of DW earns fees and reimbursements for services provided to the Partnership. These amounts are summarized as follows: