SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 1996

OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from                  to
                             Commission file number 0-14217


                          ML VENTURE PARTNERS II, L.P.
===============================================================================
             (Exact name of registrant as specified in its charter)


Delaware                                                             13-3324232
===============================================================================
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

World Financial Center, North Tower
New York, New York                                                   10281-1326
===============================================================================
(Address of principal executive offices)                             (Zip Code)

Registrant's telephone number, including area code:  (212) 449-1000

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

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

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

                      Units of Limited Partnership Interest
===============================================================================
                                (Title of class)


<PAGE>


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of registrant's  knowledge,  in definitive  proxy or information
statements  incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]

At March 21, 1997, 119,866 units of limited partnership  interest ("Units") were
held by non-affiliates of the registrant. There is no established public trading
market for such Units.





                       DOCUMENTS INCORPORATED BY REFERENCE


Portions of the  Prospectus  of the  Registrant  dated  February  10,  1987,  as
supplemented by a supplement  thereto dated April 21, 1987, are  incorporated by
reference in Part I and Part II hereof.

Portions  of the  Registrant's  Form 10-Q for the  quarter  ended March 31, 1996
filed  with  the  Securities  and  Exchange  Commission  on  May  14,  1996  are
incorporated by reference in Part I hereof.



<PAGE>


                                     PART I


Item 1.       Business.

Formation

ML Venture  Partners  II, L.P.  (the  "Partnership"  or the  "Registrant")  is a
Delaware limited partnership organized on February 4, 1986. The General Partners
of  the  Partnership  consist  of  four  individuals  (the  "Individual  General
Partners") and MLVPII Co., L.P. (the  "Managing  General  Partner"),  a New York
limited partnership in which Merrill Lynch Venture Capital Inc. (the "Management
Company")  is  the  general  partner.  The  Management  Company  is an  indirect
subsidiary  of Merrill  Lynch & Co.,  Inc. and an  affiliate  of Merrill  Lynch,
Pierce,  Fenner & Smith Incorporated  ("Merrill Lynch").  DLJ Capital Management
Corporation (the "Sub-Manager"), an affiliate of Donaldson, Lufkin and Jenrette,
Inc., is the sub-manager pursuant to a sub-management  agreement,  dated May 23,
1991,  among the  Partnership,  the Managing  General  Partner,  the  Management
Company and the Sub-Manager.

The Partnership  operates as a business development company under the Investment
Company Act of 1940. The Partnership's investment objective is to seek long-term
capital  appreciation  from its portfolio of venture  capital  investments.  The
Partnership considers this activity to constitute the single industry segment of
venture capital investing.

Through Merrill Lynch, the Partnership publicly offered 120,000 units of limited
partnership interest (the "Units") at $1,000 per Unit. The Units were registered
under the Securities  Act of 1933 pursuant to a  Registration  Statement on Form
N-2 (File No.  33-3220)  which was declared  effective on February 10, 1987. The
Partnership  held its initial and final  closings on March 31, 1987 and June 10,
1987, respectively.  A total of 120,000 Units were accepted at such closings and
the additional  limited  partners (the "Limited  Partners") were admitted to the
Partnership.

The information set forth under the captions "Risk and Other Important  Factors"
(pages 8 through 11), "Investment Objective and Policies" (pages 14 through 16),
"Venture  Capital  Operations"  (pages 17 through 20) and "Portfolio  Valuation"
(pages 27 and 28) in the prospectus of the Partnership  dated February 10, 1987,
filed with the Securities and Exchange  Commission pursuant to Rule 424(b) under
the Securities Act of 1933, as supplemented by a supplement  thereto dated April
21, 1987 and filed pursuant to Rule 424(c) under the Securities Act of 1933 (the
"Prospectus"), is incorporated herein by reference.

The Venture Capital Investments

During the year ended December 31, 1996, the  Partnership  invested  $207,000 in
two existing portfolio  companies.  As of December 31, 1996, the Partnership had
invested  $116.06  million in a  portfolio  of  venture  capital  companies.  At
December 31, 1996, the Partnership's investment portfolio consisted of 15 active
investments with a cost of $27.5 million and a fair value of $37.4 million. From
its inception  through December 31, 1996, the Partnership has fully or partially
liquidated  investments  with an aggregate cost basis of $88.55  million.  These
liquidated investments returned a total of $186.4 million to the Partnership for
a realized gain of $97.84 million.  The Partnership  also realized  interest and
dividend income from its venture capital investments  totaling $4.2 million from
inception to December 31, 1996.

The description of the  Partnership's  follow-on  investments in Neocrin Company
and  ML/MS  Cancer  Research,  Inc.  set  forth  in  Item  5 of  Part  II of the
Partnership's quarterly report on Form 10-Q for the quarter ended March 31, 1996
is incorporated herein by reference.

Competition

The  Partnership  encounters  competition  from other  entities  having  similar
investment objectives,  including other entities affiliated with Merrill Lynch &
Co., Inc.  Primary  competition  for venture  capital  investments has been from
venture capital partnerships, venture capital affiliates of large industrial and
financial   companies,   small   business   investment   companies  and  wealthy
individuals.  Competition  has also been from foreign  investors  and from large
industrial  and  financial  companies  investing  directly  rather than  through
venture  capital  affiliates.  The Partnership has frequently been a co-investor
with other professional venture capital groups and these relationships generally
have expanded the Partnership's access to investment opportunities.

Employees

The Partnership has no employees.  The Partnership  Agreement  provides that the
Managing General Partner,  subject to the supervision of the Individual  General
Partners,  manages and controls the Partnership's  venture capital  investments.
The  Management  Company  performs,  or  arranges  for  others to  perform,  the
management  and  administrative  services  necessary  for the  operation  of the
Partnership  and  is  responsible  for  managing  the  Partnership's  short-term
investments.  The  Sub-Manager,  subject to the  supervision  of the  Management
Company  and  Individual  General  Partners,  provides  management  services  in
connection with the Partnership's venture capital investments and investments of
the Partnership in unaffiliated venture capital funds.

Item 2.       Properties.

The Partnership does not own or lease physical properties.

Item 3.       Legal Proceedings.

The  Partnership  has settled an action in which the  Partnership was named as a
defendant in respect of its  ownership of  securities  of In-Store  Advertising,
Inc.  ("In-Store   Advertising").   In  connection  therewith,  the  Partnership
delivered  $1,000,000 into escrow on September 20, 1996,  representing its share
of the  settlement.  On December 18, 1996, the court entered an order  approving
the settlement and dismissing the action against the  Partnership  and the other
defendants involved in the settlement.

The following is additional information regarding this matter:

On or about July 16, 1993, a Second Amended  Consolidated Class Action Complaint
(the "Amended  Complaint") was filed in the United States District Court for the
Southern  District  of New  York in the In Re  In-Store  Advertising  Securities
Litigation.  The action was a purported class action suit wherein the plaintiffs
(the  "Plaintiffs")  were  persons who  allegedly  purchased  shares of In-Store
Advertising  common  stock in the July 19, 1990  initial  public  offering  (the
"Offering")  and through  November 8, 1990. The defendants  named in the Amended
Complaint  included  former  individual   officers  and  directors  of  In-Store
Advertising,  the  underwriters  involved in the  Offering,  and  certain  other
defendants, including the Partnership, who owned In-Store Advertising securities
prior to the Offering (the "Venture Capital Defendants"). Prior to the filing of
the Amended Complaint,  In-Store  Advertising filed a "prepackaged" plan in U.S.
Bankruptcy  Court pursuant to Chapter XI of the U.S.  Bankruptcy  Code. In their
answers  to  the  Amended  Complaint,  defendants  (including  the  Partnership)
asserted cross-claims for contribution against their then co-defendant KPMG Peat
Marwick (In-Store Advertising's auditors).  Plaintiffs' claims against KPMG Peat
Marwick were dismissed as barred by the statute of limitations.

The Amended Complaint alleged  violations under Sections 11, 12(2) and 15 of the
Securities Act of 1933, as amended (the "1933 Act"), Section 10(b) and 20 of the
Securities  Exchange  Act of 1934,  as amended  (the "1934  Act") and Rule 10b-5
promulgated  thereunder,  and common law claims of negligent  misrepresentation,
fraud and  deceit in  connection  with the sale of  securities.  The  Plaintiffs
sought rescission of the purchases of In-Store Advertising's common stock to the
extent the members of the alleged classes still held their shares, together with
damages and certain costs and expenses.

The Amended  Complaint  alleged that the Venture Capital  Defendants were liable
under  Section  10(b) of the 1934 Act and Rule  10b-5,  and were also  liable as
controlling persons of In-Store  Advertising within the meaning of Section 15 of
the 1933 Act and Section 20(a) of the 1934 Act. The Venture  Capital  Defendants
were also being sued as alleged knowing and  substantial  aiders and abettors of
the other defendants' wrongful conduct and under common law fraud and negligence
theories. An individual director of In-Store  Advertising,  named as a defendant
in the action,  was a Vice President of Merrill Lynch Venture  Capital Inc., the
General Partner of the Managing General Partner of the  Partnership.  See Note 8
of Notes to Financial Statements.

Item 4.       Submission of Matters to a Vote of Security Holders.

No matter was submitted  during the fourth quarter of the fiscal year covered by
this report to a vote of security holders.

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.

The  information  with  respect to the market for the Units set forth  under the
subcaption  "Substituted  Limited Partners" on pages 30 and 31 of the Prospectus
is  incorporated  herein by reference.  There is no  established  public trading
market for the Units as of March 21, 1997. The approximate  number of holders of
Units as of March 21,  1997 is 13,125.  The  Managing  General  Partner  and the
Individual  General  Partners  of the  Partnership  also hold  interests  in the
Partnership.

Effective November 9, 1992,  Registrant was advised that Merrill Lynch,  Pierce,
Fenner  &  Smith  Incorporated   ("Merrill  Lynch")  introduced  a  new  limited
partnership  secondary  service available to its clients through Merrill Lynch's
Limited  Partnership  Secondary  Transaction  Department.   Beginning  with  the
December  1994  client  account   statements,   Merrill  Lynch  implemented  new
guidelines  for providing  estimated  values of limited  partnerships  and other
direct investments reported on client account statements.  As a result,  Merrill
Lynch no longer reports  general  partner  estimates of limited  partnership net
asset  value on its client  account  statements,  although  the  Registrant  may
continue to provide its estimate of net asset value to Unit holders. Pursuant to
the guidelines,  estimated values for limited partnership  interests  originally
sold by Merrill  Lynch (such as  Registrant's  Units) will be provided two times
per year to Merrill Lynch by independent  valuation  services.  These  estimated
values  will be  based on  financial  and  other  information  available  to the
independent  services  on (i) the prior  August 15th for  reporting  on December
year-end and subsequent  client account  statements  through the following May's
month-end client account statement, and on (ii) March 31st for reporting on June
month-end  and  subsequent  client  account   statements  through  the  November
month-end client account statement of the same year.

The Managing General Partner's  estimate of net asset value at December 31, 1996
is $323 per Unit, including an assumed allocation of net unrealized appreciation
of investments.  The Managing General  Partner's  estimate of net asset value as
set forth  above  reflects  the  value of the  Partnership's  underlying  assets
remaining  at fiscal  year-end,  whereas the value  provided by the  independent
services  reflects the estimated value of the Partnership Units themselves based
on  information  that was  available on August 15th.  Merrill  Lynch clients may
contact  their  Merrill  Lynch  Financial  Consultants  or telephone  the number
provided to them on their account statements to obtain a general  description of
the methodology  used by the independent  valuation  services to determine their
estimates of value.  The estimated  values provided by the independent  services
and the  Registrant's  current  net asset  value are not market  values and Unit
holders may not be able to sell their Units or realize either amount upon a sale
of their  Units.  In  addition,  Unit  holders may not  realize the  independent
estimated value or the Registrant's current net asset value upon the liquidation
of the Registrant's assets over its remaining life.

Cash distributions to Partners,  paid or accrued, during 1996, 1995 and 1994 and
cumulative cash  distributions to Partners from the inception of the Partnership
through December 31, 1996 are listed below:
<TABLE>

                                                              General                      Limited              Per $1,000
Distribution Date                                            Partners                     Partners                 Unit
-----------------                                         ---------------            ----------------         ---------
<S>                   <C> <C>                             <C>                        <C>                       <C>
Inception to December 31, 1993                            $             0            $     42,600,000          $     355
May 26, 1994                                                            0                  16,200,000                135
September 1, 1994                                               1,400,000                           0                  0
April 11, 1995                                                  2,234,189                   9,000,000                 75
October 5, 1995                                                 5,001,136                  27,000,000                225
January 12, 1996                                                2,336,506                  12,000,000                100
April 26, 1996                                                  3,378,498                  18,000,000                150
July 29, 1996                                                   4,239,591                  19,200,000                160
October 11, 1996                                                2,547,971                  12,000,000                100
                                                          ---------------            ----------------          ---------
Cumulative totals at December 31, 1996                    $    21,137,891            $    156,000,000          $   1,300
                                                          ===============            ================          =========
</TABLE>


<PAGE>


Item 6.       Selected Financial Data.

($ In Thousands, Except For Per Unit Information)
<TABLE>

                                                                           Years Ended December 31,
                                                           1996           1995            1994           1993           1992
                                                       -----------     -----------    -----------    -----------    --------

<S>                                                    <C>             <C>            <C>            <C>            <C>
Net Realized Gain (Loss) on Investments                $    46,879     $    41,368    $    18,593    $    10,605    $    (5,677)

Net Change in Unrealized Appreciation
of Investments                                             (25,245)         12,661        (29,444)         9,430         11,657

Net Increase (Decrease) in Net Assets
Resulting from Operations                                   20,947          54,512        (11,668)        18,581          4,809

Cash Distributions to Partners                              59,366          57,572         17,600         15,600          9,000

Cumulative Cash Distributions to Partners                  177,138         117,772         60,200         42,600         27,000

Total Assets                                                42,268          95,045         83,796        113,087        110,149

Net Unrealized Appreciation of Investments                   9,880          35,125         22,464         51,908         42,478

Purchase of Portfolio Investments                              207           2,741          2,428          8,050         13,781

Cumulative Cost of Portfolio Investments                   116,059         115,851        113,110        110,682        102,633

PER UNIT OF LIMITED
PARTNERSHIP INTEREST:

Net Realized Gain (Loss) on Investments                   $    309         $   273        $   135          $  87       $    (47)

Net Increase (Decrease) in Net Assets
Resulting from Operations                                      137             358            (79)           120             29

Cash Distributions                                             410             400            135            130             75

Cumulative Cash Distributions                                1,300             890            490            355            225

Net Unrealized Appreciation of Investments                      65             232            148            355            310

Net Asset Value, Including Net Unrealized
Appreciation of Investments                                    323             596            638            852            862

</TABLE>


<PAGE>


Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations.

Liquidity and Capital Resources

At  December  31,  1996,  the  Partnership   held  $4.5  million  in  short-term
investments   with  maturities  of  less  than  one  year  and  $346,000  in  an
interest-bearing  cash account.  For the years ended December 31, 1996, 1995 and
1994, the Partnership  earned interest from such investments  totaling $980,000,
$1.06 million and $373,000,  respectively.  Interest earned in future periods is
subject to  fluctuations  in  short-term  interest  rates and changes in amounts
available  for  investment  in  such  securities.  Funds  needed  to  cover  the
Partnership's  future  operating  expenses  and  follow-on  investments  will be
obtained from these existing cash reserves,  from interest and other  investment
income  received  and  from  proceeds   received  from  the  sale  of  portfolio
investments.  The  Partnership  will  not make  any new  portfolio  investments.
Therefore, generally all cash received from the sale of portfolio investments is
distributed to Partners as soon as practicable after receipt,  after an adequate
reserve for operating  expenses and follow-on  investments in existing portfolio
companies.

In January 1996, the Partnership paid a cash distribution, that had been accrued
at December 31, 1995, totaling $14.3 million.  During 1996, the Partnership made
additional cash distributions to Partners totaling $59.4 million; $49.2 million,
or $410 per Unit, to Limited Partners and $10.2 million to the General Partners.
Cumulative cash  distributions to Partners total $177.1 million;  $156.0 million
to the  Limited  Partners,  or $1,300 per $1,000  Unit and $21.1  million to the
General Partners.

Results of Operations

For the years ended December 31, 1996,  1995 and 1994, the Partnership had a net
realized gain from operations of $46.2 million, $41.9 million and $17.8 million,
respectively.  Net realized gain or loss from  operations is comprised of 1) net
realized gains or losses from portfolio investments and 2) net investment income
or loss (interest, dividend and other income less operating expenses).

Realized  Gains and  Losses  from  Portfolio  Investments  - For the year  ended
December 31, 1996,  the  Partnership  had a $46.9 million net realized gain from
portfolio  investments.  During the year,  the  Partnership  sold  positions  in
several of its  publicly-held  companies for $56.9  million  realizing a gain of
$47.8  million.  See Note 9 of Notes to  Financial  Statements  for a summary of
sales by  investment  completed  in 1996.  This gain was  offset by an  $884,000
realized  loss,  resulting  from  the  write-off  of 75%  of  the  Partnership's
investment in I.D.E.  Corporation due to continued operating difficulties at the
company.

 For the year ended December 31, 1995, the  Partnership  had a $41.4 million net
realized gain from portfolio investments.  During the year, the Partnership sold
positions in several of its publicly-held portfolio companies for $56.8 million,
realizing  a gain of $43.3  million.  On  December  31,  1995,  the  Partnership
wrote-off its $1.8 million investment in Home Express, Inc. due to financial and
operating   difficulties  at  the  company.   Additionally,   during  1995,  the
Partnership  realized a $148,750  loss on its remaining  $395,000  investment in
Target Vision, Inc. which was sold in 1995 for $246,250 plus interest.

For the year ended December 31, 1994, the  Partnership  had an $18.6 million net
realized gain from  portfolio  investments.  During 1994, the  Partnership  sold
positions  in  several  of its  publicly-held  investments  for  $20.2  million,
realizing a gain of $17.5  million.  Additionally,  in two private  transactions
completed  during 1994, the Partnership  sold its 94,435 preferred shares of The
Business Depot Ltd. for $2.8 million, realizing a gain of $1.5 million, and sold
26,570 preferred shares of OccuSystems,  Inc. for $173,000,  realizing a gain of
$40,000.  Also during 1994, the Partnership wrote-off its $100,000 investment in
Research Applications, Inc. and sold its investment in Shared Resource Exchange,
Inc.,  realizing a loss of $250,000.  The Partnership also wrote-off the cost of
its  warrant  to  purchase   380,000  common  shares  of  IDEC   Pharmaceuticals
Corporation,  which expired in February 1995, realizing a loss of $217,000.  The
Partnership  also realized  gains in 1994  totaling  $54,000 from the receipt of
final escrow  payments  relating to the 1992 sale of its  investment  in R-Byte,
Inc.

Investment  Income and  Expenses - For the year ended  December  31,  1996,  the
Partnership had a net investment loss of $688,000.  For the years ended December
31, 1995 and 1994, the  Partnership  had a net investment gain of $482,000 and a
net investment loss of $817,000,  respectively. The $1.2 million increase in net
investment  loss for the 1996 period  compared to the 1995 period was the result
of a $747,000 decrease in investment income and a $423,000 increase in operating
expenses  during 1996 compared to 1995.  The decrease in  investment  income was
comprised of a $664,000  decrease in interest and dividend income from portfolio
investments and an $82,000 decrease in interest from short-term investments. The
decrease in interest and dividend  income from  portfolio  investments  for 1996
compared to 1995 primarily was  attributable to a one-time  dividend from Raytel
Medical Corporation totaling $566,000 received in 1995. The decrease in interest
income  from  short-term  investments  primarily  was due to a decrease in funds
available  for  investment  in such  securities  during  1996.  The  increase in
operating  expenses during 1996 compared to 1995 primarily was attributable to a
$1.0 million  litigation  settlement  expense  incurred in 1996  relating to the
Partnership's investment in In-Store Advertising. See Note 8 of the Notes to the
Financial Statements for more information  regarding this litigation.  Partially
offsetting  the increase in  litigation  expense was a $452,000  decrease in the
management fee as discussed below, and a $144,000 decrease in professional fees,
which  primarily  resulted  from  reduced  legal fees  incurred  during  1996 in
connection with the In-Store Advertising litigation.

The $1.3 million  increase in net  investment  income for 1995  compared to 1994
resulted  from a $1.1  million  increase  in  investment  income  and a $219,000
decrease in operating  expenses during 1995 as compared to 1994. The increase in
investment  income  was due to a  $690,000  increase  in  interest  earned  from
short-term  investments and a $390,000  increase in interest and dividend income
from  portfolio  investments.  The increase in interest  income from  short-term
investments was due to an increase in amounts invested in such securities during
1995,  resulting  from  proceeds  received  from the  liquidation  of  portfolio
investments  during 1995.  Such proceeds are invested in  short-term  securities
until  distributions  are made to Partners.  In 1995, the  Partnership  received
$56.2 million from the  liquidation of portfolio  investments  compared to $23.5
million  received in 1994.  The increase in interest  and  dividend  income from
portfolio  investments for 1995 compared to 1994 was  attributable to a one-time
dividend  totaling  $566,025 from Raytel received in 1995. Such dividend income,
received in the form of 70,753 shares of common stock of Raytel, was offset by a
$152,000  decrease in interest  earned during 1995 on a promissory note due from
SDL,  Inc.,  due to the maturity of such note in March 1995.  The  Partnership's
operating  expenses  declined  for 1995  compared  to 1994,  primarily  due to a
$195,000  decrease in the  management  fee for 1995, as discussed  below,  and a
non-recurring  interest expense charge of $42,000 incurred during 1994, which is
also discussed below.

The  Management  Company is responsible  for the  management and  administrative
services necessary for the operation of the Partnership.  The Management Company
receives  a  management  fee at an  annual  rate of 2.5%  of the  gross  capital
contributions to the Partnership, reduced by selling commissions, organizational
and offering  expenses paid by the  Partnership,  return of capital and realized
capital  losses,  with a minimum annual fee of $200,000.  Such fee is determined
and payable quarterly. The management fee for the years ended December 31, 1996,
1995 and 1994,  was $686,000  $1.1 million and $1.3 million,  respectively.  The
decline  in the  management  fee for  the  years  presented  resulted  from  the
distributions  made to  Partners  during  such years.  The  management  fee will
continue to decline in future periods as the Partnership's  investment portfolio
continues to mature and distributions  are paid to Partners.  The management fee
and other operating expenses are paid with funds provided from operations. Funds
provided from  operations for the periods  presented were obtained from interest
received from short-term  investments,  interest and other income from portfolio
investments and proceeds from the sale of certain portfolio investments.

Unrealized   Gains  and  Losses  and  Changes  in  Unrealized   Appreciation  or
Depreciation  of Portfolio  Investments - For the year ended  December 31, 1996,
the  Partnership  had a $4.9  million  net  unrealized  gain from its  portfolio
investments, primarily resulting from the net upward revaluation of its publicly
traded securities.  Additionally  during 1996, a net $30.1 million of unrealized
gain was transferred to realized gain relating to portfolio investments sold and
written-off  during 1996, as discussed above.  The $4.9 million  unrealized gain
was more than  offset by the $30.1  million  transfer  from  unrealized  gain to
realized  gain,  resulting  in  a  $25.2  million  decrease  to  net  unrealized
appreciation of investments for 1996.

For the year ended  December 31, 1995, the  Partnership  had a $37.9 million net
unrealized gain from its portfolio investments, primarily resulting from the net
upward revaluation of its publicly traded securities.  Additionally during 1995,
a net $25.2 million of unrealized gain was transferred to realized gain relating
to portfolio  investments sold and written-off  during 1995, as discussed above.
The $37.9  million  unrealized  gain offset by the $25.2  million  transfer from
unrealized  gain to realized gain  resulted in a $12.7  million  increase to net
unrealized appreciation of investments for 1995.

For the year ended  December 31, 1994, the  Partnership  had a $14.4 million net
unrealized loss from its portfolio investments, primarily resulting from the net
downward  revaluation of its publicly  traded  securities.  Additionally  during
1994, a net $15 million was  transferred  from  unrealized gain to realized gain
relating to portfolio investments sold and written-off during 1994, as discussed
above.  The $15 million  transfer from unrealized gain to realized gain combined
with the $14.4 million unrealized loss, resulted in a $29.4 million reduction to
the Partnership's net unrealized appreciation of investments for 1994.

Net Assets - Changes to net assets  resulting from  operations is comprised of
1) net realized  gains and losses from  operations and 2) changes to net
unrealized appreciation or depreciation of portfolio investments.

For the year ended  December 31, 1996, the  Partnership  had a $21.0 million net
increase in net assets resulting from operations, comprised of the $46.2 million
net realized gain from operations partially offset by the $25.2 million decrease
in unrealized  appreciation  of investments  for 1996. At December 31, 1996, the
Partnership's  net assets  were $41.9  million,  down $38.4  million  from $80.3
million at December 31, 1995.  This $38.4  million  decrease  resulted  from the
$59.4 million of cash  distributions,  paid or accrued to Partners  during 1996,
exceeding the $21.0 million net increase in net assets resulting from operations
for 1996.

For the year ended  December 31, 1995, the  Partnership  had a $54.5 million net
increase in net assets resulting from operations, comprised of the $41.9 million
net realized gain from  operations and the $12.7 million  increase in unrealized
appreciation  of investments  for 1995. At December 31, 1995, the  Partnership's
net assets were $80.3 million,  down $3.1 million from $83.4 million at December
31, 1994.  This $3.1 million  decrease  resulted  from the $57.6 million of cash
distributions,  paid or accrued to Partners  during  1995,  exceeding  the $54.5
million net increase in net assets resulting from operations for 1995.

Gains and losses from  investments are allocated to Partners'  capital  accounts
when realized, in accordance with the Partnership Agreement (see Note 3 of Notes
to Financial  Statements).  However,  for purposes of calculating  the net asset
value per unit of limited partnership interest,  net unrealized  appreciation of
investments has been included as if the net  appreciation  had been realized and
allocated to the Limited Partners in accordance with the Partnership  Agreement.
Pursuant  to such  calculation,  the net asset value per $1,000 Unit at December
31, 1996, 1995 and 1994, was $323, $596 and $638, respectively.



<PAGE>


Item 8.       Financial Statements and Supplementary Data.


                          ML VENTURE PARTNERS II, L.P.
                                      INDEX

Independent Auditors' Report

Balance Sheets as of December 31, 1996 and 1995

Schedule of Portfolio Investments as of December 31, 1996

Schedule of Portfolio Investments as of December 31, 1995

Statements of Operations for the years ended December 31, 1996, 1995 and 1994

Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994

Statements of Changes in Partners' Capital for the years ended December 31,
1994, 1995 and 1996

Notes to Financial Statements

NOTE - All other  schedules  are omitted  because of the  absence of  conditions
under which they are required or because the required information is included in
the financial statements or the notes thereto.



<PAGE>


INDEPENDENT AUDITORS' REPORT


ML Venture Partners II, L.P.:

We have audited the accompanying  balance sheets of ML Venture Partners II, L.P.
(the  "Partnership"),  including the schedules of portfolio  investments,  as of
December  31, 1996 and 1995,  and the related  statements  of  operations,  cash
flows,  and  changes in  partners'  capital  for each of the three  years in the
period  ended   December  31,  1996.   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  generally   accepted  auditing
standards.  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. Our procedures included
confirmation of securities owned at December 31, 1996 and 1995 by correspondence
with the custodian;  where  confirmation  was not possible,  we performed  other
audit  procedures.  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,  such  financial  statements  present  fairly,  in all material
respects, the financial position of ML Venture Partners II, L.P. at December 31,
1996 and 1995, and the results of its operations, its cash flows and the changes
in its  partners'  capital  for  each of the  three  years in the  period  ended
December 31, 1996 in conformity with generally accepted accounting principles.

As explained in Note 2, the financial  statements  include  securities valued at
$37,386,258  and  $73,125,660  at  December  31,  1996 and  1995,  respectively,
representing  89% and 91% of net assets,  respectively,  whose  values have been
estimated by the  Sub-Manager  under the  supervision of the Individual  General
Partners   and  the  Managing   General   Partner  in  the  absence  of  readily
ascertainable  market  values.  We  have  reviewed  the  procedures  used by the
Sub-Manager  in arriving at its  estimate of value of such  securities  and have
inspected underlying  documentation,  and, in the circumstances,  we believe the
procedures are reasonable and the documentation appropriate. However, because of
the  inherent  uncertainty  of  valuation,  those  estimated  values  may differ
significantly  from the values that would have been used had a ready  market for
the securities existed, and the differences could be material.


Deloitte & Touche LLP

New York, New York
February 18, 1997, except for Note 11 as to which the date is March 24, 1997


<PAGE>


ML VENTURE PARTNERS II, L.P.
BALANCE SHEETS
December 31,

<TABLE>

                                                                                                1996                 1995
                                                                                          ----------------     ----------
ASSETS

Investments - Notes 2 and 9
   Portfolio investments, at fair value
     (cost $27,505,870 at December 31, 1996
<S>      <C>                     <C> <C>                                                  <C>                  <C>
     and $38,000,476 at December 31, 1995)                                                $     37,386,258     $     73,125,660
   Short-term investments, at amortized cost - Note 12                                           4,486,402           17,369,428
Cash and cash equivalents                                                                          346,129              685,917
Accrued interest receivable                                                                         49,442              870,177
Deposit in escrow                                                                                        -              184,502
Receivable from securities sold                                                                          -            2,809,725
                                                                                          ----------------     ----------------

TOTAL ASSETS                                                                              $     42,268,231     $     95,045,409
                                                                                          ================     ================

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
Cash distribution payable - Note 7                                                        $              -     $     14,336,506
Accounts payable                                                                                   183,406              118,288
Due to Management Company - Note 4                                                                 138,389              224,683
Due to Independent General Partners - Note 5                                                        23,400               23,400
                                                                                          ----------------     ----------------
   Total liabilities                                                                               345,195           14,702,877
                                                                                          ----------------     ----------------

Partners' Capital:
Managing General Partner                                                                         1,158,769            1,471,685
Individual General Partners                                                                          1,029                1,457
Limited Partners (120,000 Units)                                                                30,882,850           43,744,206
Unallocated net unrealized appreciation of investments - Note 2                                  9,880,388           35,125,184
                                                                                          ----------------     ----------------
   Total partners' capital                                                                      41,923,036           80,342,532
                                                                                          ----------------     ----------------

TOTAL LIABILITIES AND PARTNERS' CAPITAL                                                   $     42,268,231     $     95,045,409
                                                                                          ================     ================

</TABLE>

See notes to financial statements.


<PAGE>


ML VENTURE PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1996
<TABLE>

Active Portfolio Investments:
                                                                       Initial Investment
Company / Position                                                            Date                 Cost              Fair Value
Biocircuits Corporation*(A)(C)
<C>                                                                           <C>             <C>               <C>
128,817 shares of Common Stock                                            May 1991            $    1,422,501    $       187,171
2,000,000 shares of Preferred Stock                                                                1,000,000            726,500
Warrants to purchase 594,000 shares of Preferred Stock at
   $.60 per share, expiring on 4/15/97                                                                     0                  0
-------------------------------------------------------------------------------------------------------------------------------
Borg-Warner Automotive, Inc.*(A)(B)
251,694 shares of Common Stock                                            Sept. 1988               1,258,470          7,267,664
-------------------------------------------------------------------------------------------------------------------------------
Borg-Warner Security Corporation*(A)
500,000 shares of Common Stock                                            Sept. 1988               2,500,000          4,031,250
-------------------------------------------------------------------------------------------------------------------------------
Brightware, Inc.
   140,485 shares of Common Stock                                         Apr. 1993                   39,252             84,291
   Warrants to purchase 38,737 shares of Common Stock
     at $.40 per share, expiring on 4/19/99                                                            1,138              7,748
   Warrants to purchase 4,846 shares of Common Stock
     at $.40 per share, expiring on 12/16/97                                                             327                969
   Warrants to purchase 59,166 shares of Common Stock
     at $.80 per share, expiring on 6/10/98                                                            3,986              3,986
-------------------------------------------------------------------------------------------------------------------------------
Clarus Medical Systems, Inc.*
179,028 shares of Preferred Stock                                         Jan. 1991                2,389,168            895,152
Warrants to purchase 4,048 shares of Common Stock
   at $18.75 per share, expiring on 7/31/97                                                                0                  0
Warrants to purchase 14,043 shares of Common Stock
   at $.05 per share, expiring between 3/7/00 and 7/3/00                                                   0                  0
Warrants to purchase 2,826 shares of Preferred Stock
   at $5.00 per share, expiring on 3/7/00                                                                  0                  0
-------------------------------------------------------------------------------------------------------------------------------
Corporate Express, Inc.(A)(B)
120,503 shares of Common Stock                                            May 1992                    36,150          2,837,894
-------------------------------------------------------------------------------------------------------------------------------
Diatide, Inc.*(A)(D)
809,704 shares of Common Stock                                            Dec. 1991                2,986,023          3,691,266
-------------------------------------------------------------------------------------------------------------------------------
Elantec, Inc.(A)(B)
23,245 shares of Common Stock                                             Aug. 1988                   60,437             81,655
-------------------------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone Company, L.P:(E)
   HCTC Investment, L.P.
   10% Promissory Note due 3/26/98                                        May 1992                 1,926,168          1,926,168
   SPTHOR Corporation
   10% Promissory Note due 3/26/98                                        May 1992                   580,760            580,760
   34.5 shares of Common Stock                                                                       215,625          2,188,625
-------------------------------------------------------------------------------------------------------------------------------
I.D.E. Corporation(B)(F)
113,322 shares of Common Stock                                            Mar. 1988                  227,000                  0
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


ML VENTURE PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS continued
December 31, 1996
<TABLE>

                                                                       Initial Investment
Company / Position                                                            Date                 Cost              Fair Value
IDEC Pharmaceuticals Corporation(A)(G)
   ML/MS Associates, L.P.*
<S>                                                                            <C>            <C>               <C>
   34.4% Limited Partnership interest                                     June 1989           $    3,960,000    $     6,750,656
   MLMS Cancer Research, Inc.*
   400,000 shares of Common Stock                                         July 1989                   69,566             68,184
-------------------------------------------------------------------------------------------------------------------------------
Neocrin Company*(B)(H)
484,300 shares of Preferred Stock                                         June 1991                4,203,716            193,720
Warrants to purchase 922,050 shares of Common Stock
   at $.40 per share, expiring on 1/3/01                                                                  92                  0
-------------------------------------------------------------------------------------------------------------------------------
Photon Dynamics, Inc.*(A)
425,235 shares of Common Stock                                            Sept. 1988               2,452,226          2,593,934
Warrants to purchase 6,062 shares of Common Stock
   at $5.40 per share, expiring on 6/30/00                                                                 0                  0
-------------------------------------------------------------------------------------------------------------------------------
Raytel Medical Corporation(A)(B)
100,000 shares of Common Stock                                            Feb. 1990                  386,622            557,483
Options to purchase 27,969 shares of Common Stock
   at $1.42 per share, expiring on 10/31/01                                                                0            206,411
-------------------------------------------------------------------------------------------------------------------------------
Sanderling Biomedical, L.P.*(B)
80% Limited Partnership interest                                          May 1988                 1,786,643          2,504,771
-------------------------------------------------------------------------------------------------------------------------------
Totals from Active Portfolio Investments                                                      $   27,505,870    $    37,386,258
                                                                                              ---------------------------------
</TABLE>

Supplemental Information: Liquidated Portfolio Investments(I)
<TABLE>

                                                      Liquidation                              Realized
Company                                                  Date               Cost              Gain (Loss)                Return
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>                   <C>                 <C>
Allez, Inc.                                           1992            $     1,781,320       $   (1,781,320)     $             0
Amdahl Corporation                                    1989                    729,742            1,837,787            2,567,529
Aqua Group, Inc.                                      1990                  2,000,000           (1,999,999)                   1
BBN Advanced Computer Partners, L.P.                  1990                    868,428             (864,028)               4,400
BBN Integrated Switch Partners, L.P.                  1990-1992             5,022,380           (4,822,797)             199,583
Borg-Warner Automotive, Inc.(B)                       1994-1996             1,241,530            6,246,792            7,488,322
Business Depot, Ltd.                                  1994                  1,214,184            1,539,475            2,753,659
CellPro, Incorporated(B)                              1994-1996             1,560,944           15,999,505           17,560,449
Children's Discovery Centers of America, Inc.         1995                  2,000,259             (236,187)           1,764,072
Communications International, Inc.                    1992-1994             1,819,332           (1,819,331)                   1
Computer-Aided Design Group                           1990-1991             1,131,070           (1,131,069)                   1

</TABLE>


<PAGE>


ML VENTURE PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1996
<TABLE>

                                                      Liquidation                              Realized
Company                                                  Date               Cost              Gain (Loss)                Return
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>  <C>          <C>               <C>                  <C>
Corporate Express, Inc.(B)                            1994-1996         $   2,963,761     $     22,937,548     $     25,901,309
Data Recording Systems, Inc.                          1988                  1,615,129           (1,499,999)             115,130
Eckerd Corporation                                    1995                    857,004            2,019,272            2,876,276
Elantec, Inc.(B)                                      1993-1996             1,351,681            2,072,223            3,423,904
Everex Systems, Inc.                                  1991-1992               750,000              447,606            1,197,606
-------------------------------------------------------------------------------------------------------------------------------
Hoffman & Company, L.P.                               1993                     40,000              (40,000)                   0
-------------------------------------------------------------------------------------------------------------------------------
Home Express, Inc.                                    1995                  1,822,751           (1,822,751)                   0
-------------------------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone Company, L.P.(E)           1996                    727,447                    0              727,447
IDE Corporation(B)                                    1996                    883,909             (883,909)                   0
IDEC Pharmaceuticals Corporation                      1994                    217,391             (217,391)                   0
Inference Corporation(B)                              1995-1996               849,362            3,280,433            4,129,795
-------------------------------------------------------------------------------------------------------------------------------
In-Store Advertising, Inc.                            1992                  2,259,741           (2,259,741)                   0
InteLock Corporation                                  1992                  1,254,125           (1,251,274)               2,851
Komag, Incorporated                                   1991-1995             2,365,237            4,477,843            6,843,080
Ligand Pharmaceuticals Inc.(B)                        1992-1996             1,414,435            4,227,245            5,641,680
Magnesys                                              1989                  1,440,997           (1,412,049)              28,948
Meteor Message Corporation                            1990                  1,501,048           (1,501,047)                   1
-------------------------------------------------------------------------------------------------------------------------------
Micro Linear Corporation                              1994-1995             1,120,300            2,897,886            4,018,186
-------------------------------------------------------------------------------------------------------------------------------
Mobile Telecommunications
   Technologies Corporation                           1995                  1,558,155            3,439,923            4,998,078
-------------------------------------------------------------------------------------------------------------------------------
Neocrin Company                                       1996                        130                 (130)                   0
OccuSystems, Inc.(B)                                  1994-1996             2,657,000            9,353,722           12,010,722
Ogle Resources, Inc.                                  1993                  1,974,286           (1,974,186)                 100
-------------------------------------------------------------------------------------------------------------------------------
Pandora Industries, Inc.                              1990                  2,060,139           (2,060,138)                   1
-------------------------------------------------------------------------------------------------------------------------------
Pyxis Corporation                                     1993                    634,598            7,169,424            7,804,022
-------------------------------------------------------------------------------------------------------------------------------
Raytel Medical Corp.(B)                               1996                  1,662,681            4,370,155            6,032,836
R-Byte Inc.                                           1992-1994             1,991,098             (443,566)           1,547,532
Regeneron Pharmaceuticals, Inc.                       1991-1995             2,678,135           30,203,091           32,881,226
Research Applications, Inc.                           1994                    100,000             (100,000)                   0
Ringer Corporation                                    1991-1994             3,029,652           (2,208,012)             821,640
S & J Industries                                      1991-1992             1,600,150           (1,555,149)              45,001

</TABLE>


<PAGE>


ML VENTURE PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1996
<TABLE>

                                                      Liquidation                              Realized
Company                                                  Date               Cost              Gain (Loss)                Return
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>  <C>          <C>                 <C>                 <C>
Sanderling Biomedical, L.P.(B)                        1995-1996         $     213,357       $    1,199,974      $     1,413,331
Saxpy Computer Corporation                            1988                  2,000,000           (2,000,000)                   0
SDL, Inc.(B)                                          1993-1996             4,757,265           10,502,531           15,259,796
SF2 Corporation                                       1991-1994             2,193,293           (1,856,570)             336,723
Shared Resource Exchange, Inc.                        1990-1994               999,999             (999,998)                   1
Special Situations, Inc.                              1988                    215,000             (187,175)              27,825
Storage Technology Corporation                        1990                  2,174,000            1,466,802            3,640,802
-------------------------------------------------------------------------------------------------------------------------------
Target Vision, Inc.                                   1992-1995             1,500,000           (1,253,750)             246,250
-------------------------------------------------------------------------------------------------------------------------------
TCOM Systems, Inc.                                    1990-1992             4,715,384           (4,711,536)               3,848
-------------------------------------------------------------------------------------------------------------------------------
Telecom USA, Inc.                                     1989                  5,000,000            3,361,778            8,361,778
Touch Communications Incorporated                     1991                  1,119,693           (1,119,693)                   0
Viasoft, Inc.(B)                                      1995-1996               915,348            2,801,429            3,716,777

Totals from Liquidated Portfolio Investments                          $    88,552,870       $   97,839,649     $    186,392,519
                                                                      =========================================================

                                                                                            Combined Net               Combined
                                                                                           Unrealized and            Fair Value
                                                                            Cost            Realized Gain            and Return

Totals from Active & Liquidated Portfolio Investments                 $   116,058,740       $  107,720,037     $    223,778,777
                                                                      =========================================================
</TABLE>

(A)  Public company

(B)  During 1996, the Partnership  sold or wrote-off  equity  securities of such
     company.  See  Note 9 of  Notes  to  Financial  Statements  for  summarized
     information.

(C)  The preferred shares of Biocircuits Corporation are convertible into common
     shares  at a ratio of 4 shares  of  preferred  stock  for 1 share of common
     stock.

(D)  During the quarter ended March 31, 1996, Diatech,  Inc. changed its name to
     Diatide,  Inc. On June 13,  1996,  Diatide  completed  its  initial  public
     offering at $8.50 per share. In connection with the offering and a 6-for-10
     reverse split of its outstanding  common stock,  the Partnership  exchanged
     its  1,349,508  preferred  shares  of  Diatide  for  809,704  shares of the
     company's common stock.

(E)  During  1996,  the  Partnership   received  cash   distributions   totaling
     $1,673,826 relating to its Horizon Cellular  investment.  The distributions
     included  $946,379 in payment of accrued  interest and  $727,447  return of
     principal on  promissory  notes due from HCTC  Investment,  L.P. and SPTHOR
     Corporation.
ML VENTURE PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1996


(F)  In  connection  with a  recapitalization  of IDE  Corporation  completed in
     September  1996, the  Partnership's  493,391 shares of IDE preferred  stock
     were converted into 113,322 shares of the company's common stock.

(G)  In January 1996, the Partnership paid $22,609 to MLMS Cancer Research, Inc.
     in  connection  with a call on the  non-interest  bearing  promissory  note
     payable  on demand to MLMS.  The  payment  increased  the cost basis of the
     Partnership's  common  stock  investment  in the  company  from  $46,957 to
     $69,566 and reduced the  outstanding  obligation  under the promissory note
     from $393,043 to $370,434.

(H)  In January 1996,  the  Partnership's  warrant to purchase  13,005 shares of
     Neocrin Company preferred stock at $5 per share expired.  Additionally,  in
     January,  1996, the Partnership  purchased 36,882 shares of preferred stock
     of Neocrin  Company  and a warrant to  purchase  922,050  shares of Neocrin
     preferred stock at $.40 per share for $184,502.

(I)  Amounts  provided  for  "Supplemental  Information:   Liquidated  Portfolio
     Investments" are cumulative from inception through December 31, 1996.




* May be deemed  an  affiliated  person of the  Partnership  as  defined  in the
Investment Company Act of 1940.


See notes to financial statements.



<PAGE>


ML VENTURE PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1995

Active Portfolio Investments:
<TABLE>

                                                                       Initial Investment
Company / Position                                                            Date                 Cost              Fair Value
Biocircuits Corporation*(A)
<C>                                                                           <C>             <C>               <C>
128,817 shares of Common Stock                                            May 1991            $    1,422,501    $       678,223
2,000,000 shares of Preferred Stock                                                                1,000,000          1,000,000
Warrants to purchase 594,000 shares of Preferred Stock at
   $.60 per share, expiring on 12/18/96                                                                    0                  0
-------------------------------------------------------------------------------------------------------------------------------
Borg-Warner Automotive, Inc.*(A)
444,664 shares of Common Stock                                            Sept. 1988               2,223,320         10,505,187
-------------------------------------------------------------------------------------------------------------------------------
Borg-Warner Security Corporation*(A)
500,000 shares of Common Stock                                            Sept. 1988               2,500,000          4,668,750
-------------------------------------------------------------------------------------------------------------------------------
CellPro, Incorporated(A)
50,166 shares of Common Stock                                             Mar. 1989                   93,241            648,145
-------------------------------------------------------------------------------------------------------------------------------
Clarus Medical Systems, Inc.*
179,028 shares of Preferred Stock                                         Jan. 1991                2,389,168            895,152
Warrants to purchase 4,048 shares of Common Stock
   at $18.75 per share, expiring on 7/31/97                                                                0                  0
Warrants to purchase 14,048 shares of Common Stock
   at $.05 per share, expiring between 3/7/00 and 7/3/00                                                   0                  0
Warrants to purchase 2,826 shares of Preferred Stock
   at $5.00 per share, expiring on 3/7/00                                                                  0                  0
-------------------------------------------------------------------------------------------------------------------------------
Corporate Express, Inc.(A)
559,503 shares of Common Stock                                            May 1992                 1,064,481         12,588,818
-------------------------------------------------------------------------------------------------------------------------------
Diatech, Inc.*
1,349,508 shares of Preferred Stock                                       Dec. 1991                2,986,023          4,454,528
-------------------------------------------------------------------------------------------------------------------------------
Elantec, Inc.(A)
243,245 shares of Common Stock                                            Aug. 1988                  886,574          1,334,503
-------------------------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone Company, L.P.:
   HCTC Investment, L.P.
   10% Promissory Note due 3/26/98                                        May 1992                 2,587,500          2,587,500
   SPTHOR Corporation
   10% Promissory Note due 3/26/98                                        May 1992                   646,875            646,875
   34.5 shares of Common Stock                                                                       215,625            215,625
-------------------------------------------------------------------------------------------------------------------------------
I.D.E. Corporation
493,391 shares of Preferred Stock                                         Mar. 1988                1,110,909                  0
-------------------------------------------------------------------------------------------------------------------------------
IDEC Pharmaceuticals Corporation(A):
   ML/MS Associates, L.P.*
   34.4% Limited Partnership interest                                     June 1989                3,960,000          5,995,956
   MLMS Cancer Research, Inc.*
   400,000 shares of Common Stock                                         July 1989                   46,957             60,566
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


ML VENTURE PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1995
<TABLE>

                                                                       Initial Investment
Company / Position                                                            Date                 Cost              Fair Value
Inference Corporation(A)
<C>                                                                            <C>            <C>               <C>
189,424 shares of Common Stock                                            Apr. 1993           $      804,690    $     2,293,214
   Brightware, Inc.
   140,485 shares of Common Stock                                         Apr. 1993                   39,252            100,000
   Warrants to purchase 38,737 shares of Common Stock
     at $.40 per share, expiring on 4/19/99                                                            1,138                  0
   Warrants to purchase 4,846 shares of Common Stock
     at $.40 per share, expiring on 12/16/97                                                             327                  0
   Warrants to purchase 59,166 shares of Common Stock
     at $.80 per share, expiring on 6/10/98                                                            3,986                  0
-------------------------------------------------------------------------------------------------------------------------------
Ligand Pharmaceuticals Inc.(A)
219,775 shares of Common Stock                                            Apr. 1989                  539,686          1,877,893
Warrants to purchase 3,167 shares of Common Stock at
   $7.22 per share to $9.60 per share, expiring between
   5/31/97 and 7/31/97                                                                                     0                  0
-------------------------------------------------------------------------------------------------------------------------------
Neocrin Company*
447,418 shares of Preferred Stock                                         June 1991                4,019,306            559,305
Warrants to purchase 13,005 shares of Preferred Stock
   at $5.00 per share, expiring on 1/20/96                                                               130                  0
-------------------------------------------------------------------------------------------------------------------------------
OccuSystems, Inc.(A)
403,864 shares of Common Stock                                            June 1993                2,019,320          6,292,201
-------------------------------------------------------------------------------------------------------------------------------
Photon Dynamics, Inc.*(A)
425,235 shares of Common Stock                                            Sept. 1988               2,452,226          1,711,571
Warrants to purchase 6,062 shares of Common Stock
   at $5.40 per share, expiring on 6/30/00                                                                 0                  0
-------------------------------------------------------------------------------------------------------------------------------
Raytel Medical Corporation*(A)
695,753 shares of Common Stock                                            Feb. 1990                2,049,303          2,988,374
Options to purchase 27,969 shares of Common Stock
   at $1.42 per share, expiring on 10/31/01                                                                0             81,600
-------------------------------------------------------------------------------------------------------------------------------
Sanderling Biomedical, L.P.*(B)
80% Limited Partnership interest                                          May 1988                 1,786,643          3,352,688
-------------------------------------------------------------------------------------------------------------------------------
SDL, Inc.*(A)
379,155 shares of Common Stock                                            July 1992                  999,015          7,112,948
-------------------------------------------------------------------------------------------------------------------------------
Viasoft, Inc.(A)
47,795 shares of Common Stock                                             Dec. 1987                  152,280            476,038
-------------------------------------------------------------------------------------------------------------------------------

Totals from Active Portfolio Investments                                                      $   38,000,476    $    73,125,660
                                                                                              =================================
</TABLE>



<PAGE>


ML VENTURE PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1995


<TABLE>

Supplemental Information: Liquidated Portfolio Investments(B)


<S>                                                                   <C>                   <C>                <C>
Totals from Liquidated Portfolio Investments                          $    77,851,153       $   50,960,557     $    128,811,710
                                                                      =========================================================

                                                                                            Combined Net               Combined
                                                                                           Unrealized and            Fair Value
                                                                            Cost            Realized Gain            and Return

Totals from Active & Liquidated Portfolio Investments                 $   115,851,629       $   86,085,741     $    201,937,370
                                                                      =========================================================
</TABLE>


(A)  Public company

(B) Amounts  provided  for  "Supplemental  Information:   Liquidated  Portfolio
    Investments" are cumulative from inception through December 31, 1995.

* May be deemed an  affiliated  person of the  Partnership  as  defined  in the
Investment Company Act of 1940.

See notes to financial statements.


<PAGE>


ML VENTURE PARTNERS II, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,

<TABLE>

                                                                               1996               1995               1994
                                                                         ---------------     ---------------    ---------

INVESTMENT INCOME AND EXPENSES

<S>                                                                      <C>                <C>                <C>
   Interest from short-term investments                                  $       979,803    $      1,062,296   $        372,789
   Interest and other income from portfolio investments                          330,436             374,344            537,731
   Dividend income                                                               212,646             832,825            279,298
                                                                         ---------------    ----------------   ----------------
   Total investment income                                                     1,522,885           2,269,465          1,189,818
                                                                         ---------------    ----------------   ----------------

   Expenses:

   Management fee - Note 4                                                       686,493           1,138,000          1,333,363
   Professional fees                                                             175,434             319,424            326,655
   Mailing and printing                                                          220,877             211,662            197,083
   Independent General Partners' fees - Note 5                                   109,262             103,049             92,584
   Custodial fees                                                                 13,930              14,602             14,097
   Miscellaneous                                                                   4,621                 633              1,275
   Interest expense - Note 4                                                           -                   -             41,687
   Litigation settlement - Note 8                                              1,000,000                   -                  -
                                                                         ---------------    ----------------   ----------------
   Total expenses                                                              2,210,617           1,787,370          2,006,744
                                                                         ---------------    ----------------   ----------------

NET INVESTMENT INCOME (LOSS)                                                    (687,732)            482,095           (816,926)

Net realized gain from portfolio investments - Note 9                         46,879,092          41,368,447         18,592,821
                                                                         ---------------    ----------------   ----------------

NET REALIZED GAIN FROM OPERATIONS
   (allocable to Partners) - Note 3                                           46,191,360          41,850,542         17,775,895

Net change in unrealized appreciation of investments                         (25,244,796)         12,661,342        (29,444,350)
                                                                         ---------------    ----------------   ----------------

NET INCREASE (DECREASE) IN NET ASSETS
   RESULTING FROM OPERATIONS                                             $    20,946,564    $     54,511,884   $    (11,668,455)
                                                                         ===============    ================   ================
</TABLE>


See notes to financial statements.


<PAGE>


ML VENTURE PARTNERS II, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,

<TABLE>

                                                                               1996               1995                1994
                                                                         ---------------     ---------------   -----------

CASH FLOWS PROVIDED FROM (USED FOR)
   OPERATING ACTIVITIES

<S>                                                                      <C>                 <C>               <C>
Net investment income (loss)                                             $      (687,732)    $       482,095   $       (816,926)

Adjustments to reconcile  net  investment  income  (loss) to cash  provided from
   (used for) operating activities:

(Increase) decrease in accrued interest and notes receivable                     820,735             (55,706)          (491,825)
Increase in accrued interest on short-term
   investments                                                                   (10,369)             (8,190)           (14,089)
Decrease in payables, net                                                        (21,176)            (27,451)           (22,405)
                                                                         ---------------     ---------------   ----------------
Cash provided from (used for) operating activities                               101,458             390,748         (1,345,245)
                                                                         ---------------     ---------------   ----------------

CASH FLOWS PROVIDED FROM INVESTING
   ACTIVITIES

Net return (purchase) of short-term investments                               12,893,395         (10,426,139)        (2,929,313)
Cost of portfolio investments purchased                                         (207,111)         (2,741,249)        (2,427,981)
Deposits released from (placed in) escrow                                        184,502            (184,502)                 -
Net proceeds from the sale of portfolio investments                           59,663,087          54,223,795         23,528,525
Repayment of investments in notes                                                727,447           2,019,721                  -
                                                                         ---------------     ---------------   ----------------
Cash provided from investing activities                                       73,261,320          42,891,626         18,171,231
                                                                         ---------------     ---------------   ----------------

CASH FLOWS FOR FINANCING ACTIVITIES

Cash distributions to Partners                                               (73,702,566)        (43,235,325)       (17,600,000)
                                                                         ---------------     ---------------   ----------------

Increase (decrease) in cash and cash equivalents                                (339,788)             47,049           (774,014)
Cash and cash equivalents at beginning of period                                 685,917             638,868          1,412,882
                                                                         ---------------     ---------------   ----------------

CASH AND CASH EQUIVALENTS AT END
   OF PERIOD                                                             $       346,129     $       685,917   $        638,868
                                                                         ===============     ===============   ================
</TABLE>


See notes to financial statements.

<PAGE>


-------------------------------------------------------------------------------
ML VENTURE PARTNERS II, L.P.
-------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 1994, 1995 and 1996
<TABLE>

                                                                                              Unallocated
                                         Managing        Individual                         Net Unrealized
                                          General          General           Limited        Appreciation of
                                          Partner         Partners          Partners          Investments           Total
<S>                 <C> <C>            <C>                <C>           <C>                 <C>                <C>
Balance at December 31, 1993           $   1,033,457      $ 3,410       $   59,725,875      $   51,908,192     $    112,670,934
Cash distributions, paid May 26,
1994 and September 1, 1994                (1,400,000)           -          (16,200,000)                  -          (17,600,000)
Net investment loss                          153,602          (32)            (970,496)                  -             (816,926)
Net realized gain on investments           2,404,420          539           16,187,862                   -           18,592,821
Net change in unrealized
appreciation of investments                        -            -                    -         (29,444,350)         (29,444,350)
                                       -------------      -------       --------------      --------------     ----------------
Balance at December 31, 1994               2,191,479        3,917           58,743,241(A)       22,463,842           83,402,479
Cash distributions, paid April 11,
1995 and October 5, 1995                  (7,232,165)      (3,160)         (36,000,000)                  -          (43,235,325)
Accrued cash distribution,
paid January 12, 1996                     (2,336,106)        (400)         (12,000,000)                  -          (14,336,506)
Net investment income                        243,840            7              238,248                   -              482,095
Net realized gain on investments           8,604,637        1,093           32,762,717                   -           41,368,447
Net change in unrealized
appreciation of investments                        -            -                    -          12,661,342           12,661,342
                                       -------------      -------       --------------      --------------     ----------------
Balance at December 31, 1995               1,471,685        1,457           43,744,206(A)       35,125,184           80,342,532
Cash distribution, paid April 26, 1996 (3,377,898)        (600)         (18,000,000)        -                  (21,378,498)
Cash distribution, paid July 29, 1996     (4,238,951)        (640)         (19,200,000)                  -          (23,439,591)
Cash distribution, paid
October 11, 1996                          (2,547,571)        (400)         (12,000,000)                  -          (14,547,971)
Net investment income (loss)                 100,653          (26)            (788,359)                  -             (687,732)
Net realized gain on investments           9,750,851        1,238           37,127,003                   -           46,879,092
Net change in unrealized
appreciation on investments                        -            -                    -         (25,244,796)         (25,244,796)
                                       -------------      -------       --------------      --------------     ----------------
Balance at December 31, 1996           $   1,158,769      $ 1,029       $   30,882,850(A)   $    9,880,388     $     41,923,036
                                       =============      =======       ==============      ==============     ================
</TABLE>


(A)  The net asset value per unit of limited partnership interest,  including an
     assumed allocation of net unrealized appreciation of investments, was $323,
     $596 and $638 at December 31, 1996, 1995 and 1994, respectively. Cumulative
     cash distributions  paid, or payable, to Limited Partners from inception to
     December 31, 1996,  1995 and 1994 totaled  $1,300,  $890 and $490 per Unit,
     respectively.

See notes to financial statements


<PAGE>


-------------------------------------------------------------------------------
ML VENTURE PARTNERS II, L.P.
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS


1.     Organization and Purpose

ML  Venture  Partners  II,  L.P.  (the  "Partnership")  is  a  Delaware  limited
partnership  formed on February 4, 1986.  MLVPII Co., L.P., the managing general
partner  of  the  Partnership  (the  "Managing  General   Partner"),   and  four
individuals (the "Individual  General Partners") are the general partners of the
Partnership.  The general  partner of MLVPII Co.,  L.P. is Merrill Lynch Venture
Capital Inc. (the "Management Company"), an indirect subsidiary of Merrill Lynch
& Co., Inc. DLJ Capital Management Corporation (the "Sub-Manager"),  an indirect
subsidiary of Donaldson,  Lufkin & Jenrette,  Inc.,  is the  sub-manager  of the
Partnership,  pursuant to a sub-management agreement among the Partnership,  the
Management Company, the Managing General Partner and the Sub-Manager.

The Partnership's  objective is to achieve  long-term capital  appreciation from
its portfolio of venture capital investments in new and developing companies and
other special  investment  situations.  The  Partnership  does not engage in any
other  business or  activity.  The  Partnership  is  scheduled  to  terminate on
December  31,  1997.  However,   pursuant  to  the  Partnership  Agreement,  the
Individual  General  Partners  can  extend  the  termination  date for up to two
additional  two-year  periods if they determine that such extensions would be in
the best interest of the Partnership.

2.     Significant Accounting Policies

Valuation of Investments - Short-term  investments are carried at amortized cost
which approximates  market.  Portfolio  investments are carried at fair value as
determined  quarterly by the Sub-Manager under the supervision of the Individual
General  Partners  and  the  Managing   General  Partner.   The  fair  value  of
publicly-held  portfolio  securities  is adjusted to the closing  public  market
price for the last trading day of the accounting  period  discounted by a factor
of 0% to 50% for sales restrictions.  Factors considered in the determination of
an  appropriate  discount  include,  underwriter  lock-up  or Rule  144  trading
restrictions,  insider status where the Partnership  either has a representative
serving  on  the  company's  Board  of  Directors  or  is  greater  than  a  10%
shareholder,  and other liquidity  factors such as the size of the Partnership's
position  in a given  company  compared  to the  trading  history  of the public
security.   Privately-held  portfolio  securities  are  carried  at  cost  until
significant  developments  affecting the portfolio  company  provide a basis for
change in  valuation.  The fair value of private  securities  is  adjusted 1) to
reflect  meaningful  third-party  transactions  in the  private  market or 2) to
reflect  significant  progress or slippage in the  development  of the company's
business  such that cost is no longer  reflective  of fair  value.  As a venture
capital investment fund, the Partnership's  portfolio investments involve a high
degree of business and financial risk that can result in substantial losses. The
Sub-Manager   considers  such  risks  in  determining  the  fair  value  of  the
Partnership's portfolio investments.


<PAGE>


ML VENTURE PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS


Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.  Actual results could differ from those estimates.  Investment
Transactions  -  Investment  transactions  are  recorded on the accrual  method.
Portfolio  investments  are recorded on the trade date, the date the Partnership
obtains an  enforceable  right to demand  the  securities  or payment  therefor.
Realized  gains and  losses  on  investments  sold are  computed  on a  specific
identification basis. Income Taxes - No provision for income taxes has been made
since all income and losses are allocable to the Partners for inclusion in their
respective tax returns.  The  Partnership's  net assets for financial  reporting
purposes   differ  from  its  net  assets  for  tax  purposes.   Net  unrealized
appreciation  of  investments  of $9.9 million at December  31, 1996,  which was
recorded for financial statement purposes,  was not recognized for tax purposes.
Additionally,  from  inception  to December  31,  1996,  timing  differences  of
approximately  $400,000  have  been  deducted  on  the  Partnership's  financial
statements and syndication costs relating to the selling of Units totaling $11.3
million were charged to partners'  capital on the  financial  statements.  These
amounts  have not been  deducted or charged  against  partners'  capital for tax
purposes.   Statements   of  Cash  Flows  -  The   Partnership   considers   its
interest-bearing cash account to be cash equivalents.

3.     Allocation of Partnership Profits and Losses

The  Partnership  Agreement  provides that the Managing  General Partner will be
allocated,  on a cumulative basis over the life of the  Partnership,  20% of the
Partnership's aggregate investment income and net realized gains and losses from
venture capital  investments,  provided that such amount is positive.  All other
gains and  losses  of the  Partnership  are  allocated  among  all the  Partners
(including  the Managing  General  Partner) in  proportion  to their  respective
capital  contributions  to the  Partnership.  From its inception to December 31,
1996,  the  Partnership  had a $102  million net gain from its  venture  capital
investments, which includes interest and other income from portfolio investments
totaling $4.2 million.

4.     Related Party Transactions

The  Management  Company  performs,  or  arranges  for  others to  perform,  the
management  and  administrative  services  necessary  for the  operation  of the
Partnership  and  receives a  management  fee at the annual  rate of 2.5% of the
gross capital contributions to the Partnership,  reduced by selling commissions,
organizational   and  offering   expenses  paid  by  the  Partnership,   capital
distributed  and realized  capital losses with a minimum annual fee of $200,000.
Such fee is determined and payable quarterly.



<PAGE>


ML VENTURE PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS



On November 9, 1994, the Securities and Exchange  Commission  (the "SEC") issued
an exemptive  order  permitting  the  Partnership  to acquire  97,273  shares of
Corporate  Express,  Inc.  common stock from the Management  Company  subject to
certain  conditions,  including  review and approval by the Independent  General
Partners.  On December  13,  1994,  the  Partnership  purchased  such shares for
$1,111,685,  representing  original cost of $1,069,998 plus interest  expense of
$41,687.

5.     Independent General Partners' Fees

As  compensation  for services  rendered to the  Partnership,  each of the three
Independent   General   Partners   receives   $20,000   annually  in   quarterly
installments,  $1,400 for each meeting of the General  Partners  attended or for
each other  meeting,  conference or engagement  in connection  with  Partnership
activities at which attendance by an Independent General Partner is required and
$1,400 for each audit  committee  meeting  attended ($500 if an audit  committee
meeting  is  held  on the  same  day as a  meeting  of the  Independent  General
Partners).

6.     Commitments

The Partnership has a $370,434 non-interest bearing obligation payable on demand
to MLMS Cancer Research, Inc., the general partner of ML/MS Associates, L.P.

7.     Cash Distributions

Cash  distributions  paid or accrued during the periods presented and cumulative
cash  distributions  to  Partners  from  inception  of the  Partnership  through
December 31, 1996 are listed below:

<TABLE>

                                                              General                      Limited              Per $1,000
Distribution Date                                            Partners                     Partners                 Unit
------------------------------------------------          ---------------            ----------------         ---------
<S>                   <C> <C>                             <C>                        <C>                        <C>
Inception to December 31, 1993                            $             0            $     42,600,000           $     355
May 26, 1994                                                            0                  16,200,000                 135
September 1, 1994                                               1,400,000                           0                   0
April 11, 1995                                                  2,234,189                   9,000,000                  75
October 5, 1995                                                 5,001,136                  27,000,000                 225
January 12, 1996 (accrued at 12/31/96)                          2,336,506                  12,000,000                 100
April 26, 1996                                                  3,378,498                  18,000,000                 150
July 29, 1996                                                   4,239,591                  19,200,000                 160
October 11, 1996                                                2,547,971                  12,000,000                 100
                                                          ---------------            ----------------           ---------
Cumulative totals at December 31, 1996                    $    21,137,891            $    156,000,000           $   1,300
                                                          ===============            ================           =========

</TABLE>

<PAGE>


ML VENTURE PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS


8.     Pending Litigation

The  Partnership  has settled an action in which the  Partnership was named as a
defendant,  along  with  other  entities  and  individuals,  in  respect  of its
ownership of securities of In-Store Advertising,  Inc. ("ISA"). The action was a
purported class action suit wherein the plaintiffs,  who purchased shares of ISA
in its July 19, 1990 initial public offering through  November 8, 1990,  alleged
violations  under certain sections of the Securities Act of 1933, the Securities
Exchange Act of 1934 and common law. The plaintiffs  sought  rescission of their
purchases  of ISA common  stock  together  with  damages and  certain  costs and
expenses.   In  connection  with  the  settlement,   the  Partnership  delivered
$1,000,000  into escrow on  September  20, 1996,  representing  its share of the
settlement agreement. On December 18, 1996, the court entered an order approving
the settlement and dismissing the action against the  Partnership  and the other
defendants involved in the settlement.  As of December 31, 1996, the Partnership
had incurred cumulative legal expenses totaling  approximately  $235,000 related
to the litigation.

9.       Portfolio Investments

During  1996,  the  Partnership  sold  or  wrote-off  equity  securities  of the
following portfolio companies:

<TABLE>

                                                                                               Realized
Company                                                    Shares             Cost            Gain (Loss)           Return
--------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>          <C>                 <C>                <C>
Borg-Warner Automotive, Inc.                               192,970      $      964,850      $    5,318,254     $     6,283,104
CellPro, Incorporated                                       50,166              93,241             744,215             837,456
Corporate Express, Inc.                                    439,000           1,028,331          13,143,138          14,171,469
Elantec, Inc.                                              220,000             826,137           1,745,113           2,571,250
I.D.E. Corporation                                               -             883,909            (883,909)                  0
Inference Corporation                                      189,424             804,690           2,848,551           3,653,241
Ligand Pharmaceuticals, Inc.                               222,942             539,686           2,001,156           2,540,842
Neocrin Company                                                  -                 130                (130)                  0
OccuSystems, Inc.                                          403,864           2,019,320           7,708,378           9,727,698
Raytel Medical Corporation                                 595,753           1,662,681           4,370,155           6,032,836
Sanderling Biomedical, L.P. (Neopath)                        6,295                   0             163,163             163,163
SDL, Inc.                                                  379,155             999,015           9,120,519          10,119,534
Viasoft, Inc.                                               47,795             152,280             600,489             752,769
                                                                        --------------      --------------     ---------------
Totals                                                                  $    9,974,270      $   46,879,092     $    56,853,362
                                                                        ==============      ==============     ===============
</TABLE>





<PAGE>


ML VENTURE PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS


10.    Classification of Portfolio Investments


As of December 31, 1996, the  Partnership's  investments in portfolio  companies
were categorized as follows:
<TABLE>

                                                                                                                 % of
Type of Investments                                        Cost                   Fair Value                  Net Assets*
-------------------                                  ----------------           ---------------               -----------
<S>                                                  <C>                        <C>                           <C>
Common Stock                                         $     11,659,323           $    23,808,531               56.79%
Limited Partnerships                                        5,746,643                 9,255,427               22.08%
Preferred Stock                                             7,592,976                 1,815,372                4.33%
Debt Securities                                             2,506,928                 2,506,928                5.98%
                                                     ----------------           ---------------             --------

Total                                                $     27,505,870           $    37,386,258               89.18%
                                                     ================           ===============             ========

Country/Geographic Region
Midwestern U.S.                                      $      6,183,788           $    15,031,960               35.86%
Western U.S.                                               15,386,506                13,967,479               33.31%
Eastern U.S.                                                5,935,576                 8,386,819               20.01%
                                                     ----------------           ---------------             --------

Total                                                $     27,505,870           $    37,386,258               89.18%
                                                     ================           ===============             ========

Industry
Business Services                                    $      2,536,150           $     6,869,144               16.39%
Biotechnology                                               8,802,232                13,014,877               31.04%
Automotive Parts                                            1,258,470                 7,267,664               17.34%
Semiconductors/Electronics                                  2,512,663                 2,675,589                6.38%
Medical Devices and Services                                9,402,099                 2,766,437                6.60%
Telecommunications                                          2,722,553                 4,695,553               11.20%
Computer Hardware/Software                                    271,703                    96,994                 .23%
                                                     ----------------           ---------------             --------

Total                                                $     27,505,870           $    37,386,258               89.18%
                                                     ================           ===============             ========

</TABLE>

* Percentage of net assets is based on fair value.



<PAGE>


ML VENTURE PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS


11.    Subsequent Events

In January 1997,  Corporate Express,  Inc. issued a 50% stock dividend.  The
Partnership received an additional 60,252 shares of the company's common stock.

On February 20, 1997, the Partnership  sold its remaining  251,694 common shares
of Borg Warner  Automotive,  Inc.  The net per share  selling  price was $38.30,
which  yielded net proceeds of $9.6 million to the  Partnership,  resulting in a
realized  gain of $8.4  million.  These  shares were  valued at $7.3  million at
December 31, 1996. The $2.3 million  increase in the  Partnership's  net assets,
representing approximately $15.65 per Unit, will be reflected in net asset value
to be reported as of March 31, 1997.

On March 17, 1997, the Partnership  received an in-kind  distribution of 347,826
common shares of IDEC Pharmaceuticals Corporation from ML/MS Associates, L.P. As
of March 21, 1997,  the  Partnership  had sold 143,902  shares for $3.2 million.
These shares were valued at $1.8 million at December 31, 1996.  The $1.4 million
increase in the Partnership's net assets,  representing  approximately $9.38 per
Unit, will be reflected in the net asset value to be reported March 1997.

12.    Short-Term Investments

At December 31, 1996 and 1995, the  Partnership  had  short-term  investments in
commercial paper as detailed below.
<TABLE>

                                                           Maturity          Purchase          Amortized            Value at
Issuer                                          Yield        Date              Price             Cost               Maturity

December 31, 1996:
<S>                                            <C>          <C>  <C>    <C>                 <C>                <C>
Korean Development Bank                        5.35%        1/17/97     $     2,960,767     $     2,992,421    $      3,000,000

Japan Leasing                                  5.35%        1/27/97           1,481,498           1,493,981           1,500,000
                                                                        ---------------     ---------------    ----------------

Total at December 31, 1996                                              $     4,442,265     $     4,486,402    $      4,500,000
                                                                        ===============     ===============    ================

December 31, 1995:
IES Utilities, Inc.                            5.75%         1/8/96     $    14,358,600     $    14,381,600    $     14,400,000

Golden Managers Acceptance
   Corporation                                 5.75%        1/24/96           2,480,434           2,490,417           2,500,000

BIF, Inc.                                      5.65%         2/2/96             496,626             497,411             500,000
                                                                        ---------------     ---------------    ----------------

Total at December 31, 1995                                              $    17,335,660     $    17,369,428    $     17,400,000
                                                                        ===============     ===============    ================

</TABLE>



<PAGE>


Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosures.

None
                                    PART III

Item 10.      Directors and Executive Officers of the Registrant.

The Partnership

GENERAL PARTNERS

The General Partners of the Partnership  consist of the four Individual  General
Partners  and the  Managing  General  Partner.  The five  General  Partners  are
responsible  for  the  management  and  administration  of the  Partnership.  As
required by the  Investment  Company Act of 1940 (the "1940 Act"), a majority of
the General Partners must be individuals who are not "interested persons" of the
Partnership  as defined in the 1940 Act. In 1987,  the  Securities  and Exchange
Commission  (the "SEC")  issued an order  declaring  that the three  Independent
General Partners of the Partnership (the "Independent General Partners") are not
"interested  persons"  of the  Partnership  as defined in the 1940 Act solely by
reason of their being general partners of the Partnership.

The Individual  General  Partners have full authority over the management of the
Partnership  and provide overall  guidance and  supervision  with respect to the
operations  of the  Partnership  and perform the various  duties  imposed on the
directors  of  business  development  companies  by the 1940 Act. In addition to
general fiduciary duties, the Individual  General Partners,  among other things,
supervise the management arrangements of the Partnership.

The Managing  General  Partner,  subject to the  supervision of the Individual
General  Partners,  has authority to provide, or arrange for the provision of,
management  services in connection with the venture capital  investments of the
Partnership.  The general  partner of the  Managing General  Partner is Merrill
Lynch  Venture  Capital  Inc.  (the  "Management  Company").  The Management
Company is an indirect subsidiary of Merrill Lynch & Co., Inc. ("ML & Co.").

Individual General Partners

Dr. Steward S. Flaschen (1)
592 Weed Street
New Canaan, Connecticut 06840
Age 70
Individual General Partner since 1987
Units of the Partnership beneficially owned at March 21, 1997 - None (3)
         President of Flaschen & Davies,  a management  consulting  firm,  since
         1986;  Corporate  Senior Vice  President  and member of the  Management
         Policy Board of ITT Corporation from 1982 to 1986 and General Technical
         Director from 1969 to 1986; Chairman of Telco Systems Inc.; Chairman of
         TranSwitch  Corp.  from 1989 to present;  Director of Sipex Corp.  from
         1996 to present.

Jerome Jacobson (1)
4200 Massachusetts Avenue, N.W.
Washington, D.C. 20016
Age 75
Individual General Partner since 1987
Units of the Partnership beneficially owned at March 21, 1997 - None (3)
         President of Economic Studies Inc., an economic  consulting firm, since
         1984;  Vice Chairman and a director of the Burroughs  Corporation  from
         1980 to 1984; Director of Cerplex Group, Inc., Datawatch Inc. and Easel
         Corporation.

William M. Kelly (1)
40 Wall Street
New York, New York 10005
Age 53
Individual General Partner since 1991
Units of the Partnership beneficially owned at March 21, 1997 - None (3)
         Managing Associate of Lingold Associates, since 1980; Vice President of
         National  Aviation and  Technology  Company,  a  registered  investment
         company,  from 1977 to 1980; Director of First Eagle International Fund
         from 1994 to present.

Kevin K. Albert (2)
World Financial Center
North Tower
New York, New York 10281-1326
Age 44
Individual General Partner since 1990
Units of the Partnership beneficially owned at March 21, 1997 - None (3)
         Director and President of the Management Company;  Managing Director of
         Merrill Lynch Investment Banking Division ("MLIBK") since 1988.

(1)  Independent General Partner and member of the Audit Committee.
(2)  Interested person of the Partnership as defined in the 1940 Act.
(3)  Messrs.  Flaschen and Jacobson have each  contributed  $1,000 to the
     capital of the  Partnership.  Messrs.  Kelly and Albert succeeded to the
     interest  of prior  Individual  General  Partners  who each  contributed
     $1,000  to the  capital  of the Partnership.

The Management Company

Merrill Lynch  Venture  Capital Inc. (the  "Management  Company")  serves as the
Partnership's  management company and performs,  or arranges for the performance
of, the management and  administrative  services necessary for the operations of
the  Partnership  pursuant  to a  management  agreement  dated May 23, 1991 (the
"Management  Agreement").  The  Management  Company has served as the management
company for the Partnership since the Partnership commenced operations in 1987.

The  Management  Company is a  wholly-owned  subsidiary of ML Leasing  Equipment
Corp.,  which  is an  indirect  subsidiary  of  Merrill  Lynch & Co.,  Inc.  The
Management  Company,  which was  incorporated  under Delaware law on January 25,
1982, maintains its principal office at North Tower, World Financial Center, New
York, New York 10281-1326.

On  May  23,  1991,  the  limited   partners  of  the  Partnership   approved  a
sub-management  agreement among the  Partnership,  the Management  Company,  the
Managing   General  Partner  and  DLJ  Capital   Management   Corporation   (the
"Sub-Manager").   Under  the  terms  of  such  sub-management   agreement,   the
Sub-Manager  agreed to  provide,  subject  to the  supervision  of the  Managing
General Partner,  the Management  Company and the Individual  General  Partners,
certain  of the  management  services  previously  provided  by  the  Management
Company.  Due  to  certain   transactions   involving  The  Equitable  Companies
Incorporated,  the indirect parent of the Sub-Manager,  a substantially  similar
sub-management  agreement (the  "Sub-Management  Agreement") was approved by the
limited partners of the Partnership at their 1992 annual meeting held on May 26,
1992.

The Management  Company has arranged for Palmeri Fund  Administrators,  Inc., an
independent  administrative services company, to provide administrative services
to the  Partnership.  Fees for such services are paid directly by the Management
Company.

The  following  table sets forth  information  concerning  the  directors of the
Management Company and the executive officers of the Management Company involved
with the  Partnership.  Information  concerning  Kevin K.  Albert,  Director and
President of the  Management  Company,  is set forth under  "General  Partners -
Individual General Partners". The address of Mr. Aufenanger, Mr.
Lurie and Ms. Herte is South Tower, World Financial Center, New York,
New York 10080.

Robert F. Aufenanger
Executive Vice President and Director
Age 43
Officer or Director since 1990
         Vice President of Merrill Lynch & Co.  Corporate Credit and Director of
         the  Partnership  Management  Group since 1991;  Director of MLIBK from
         1990 to 1991; Vice President of MLIBK from 1984 to 1990.

Michael E. Lurie
Vice President and Director
Age 53
Officer or Director since 1995
         First Vice President of Merrill Lynch & Co. Corporate Credit and
         Director of the Asset Recovery  Management  Department, joined Merrill
         Lynch in 1970.  Prior to his present  position,  Mr. Lurie was the
         Director of Debt and Equity  Markets Credit  responsible  for the
         global  allocation  of  credit  limits  and  the  approval  and
         structuring  of  specific transactions  related  to  debt  and  equity
         products.  Mr.  Lurie  also  served  as  Chairman  of  the  Merrill
         Lynch International Bank Credit Committee.


<PAGE>


Diane T. Herte
Vice President and Treasurer
Age 36
Officer or Director since 1995
         Vice  President of Merrill Lynch & Co.  Investment  Banking Group since
         1996 and  previously an Assistant Vice President of Merrill Lynch & Co.
         Corporate  Credit Group since 1982,  joined  Merrill Lynch in 1984. Ms.
         Herte's   responsibilities   include   controllership   and   financial
         management functions for certain partnerships for which subsidiaries of
         Merrill Lynch are the general partner.

The directors of the Management  Company will serve as directors  until the next
annual  meeting of  stockholders  and until  their  successors  are  elected and
qualify.  The officers of the Management Company will hold office until the next
annual  meeting of the Board of  Directors of the  Management  Company and until
their successors are elected and qualify.

There are no family  relationships among any of the Individual General Partners
of the Partnership and the officers and directors of the Management Company.

DLJ Capital Management Corporation - The Sub-Management Company

DLJ Capital Management Corporation (the "Sub-Manager"),  a Delaware corporation,
is an indirect  wholly-owned  subsidiary of Donaldson,  Lufkin & Jenrette,  Inc.
("DLJ"),  a holding  company  which  through  its  subsidiaries  engages  in the
following  activities:  investment  banking,  merchant banking,  public finance,
trading,  distribution  and research.  The  Sub-Manager  maintains its principal
office at 277 Park Avenue, New York, New York 10172.

The Sub-Manager is a wholly-owned  subsidiary of DLJ Capital  Corporation  ("DLJ
Capital").  DLJ  Capital,  which  was  founded  in 1969,  has  established  nine
institutional  venture capital funds ("Sprout Funds") and several smaller funds,
with total  committed  capital of over $800 million.  Six of such  institutional
funds,  with capital  exceeding  $750  million,  are  currently  operating.  DLJ
Capital's  most  recent  limited  partnership  is Sprout  VII,  L.P.,  which was
established  in 1994 with an excess of 75  percent of its $250  million  capital
provided by participants in earlier Sprout Funds. DLJ Capital's principal office
is  located at 277 Park  Avenue,  New York,  New York  10172,  and it  maintains
additional offices in Menlo Park, California and Boston, Massachusetts.

The following table sets forth information  concerning the directors,  principal
executive  officers  and other  officers of the  Sub-Manager.  Unless  otherwise
noted,  the address of each such person is 277 Park Avenue,  New York,  New York
10172.

Richard E. Kroon
President, Chief Executive Officer and Director
Age 54
Officer or Director since 1977
         Managing General Partner of Sprout Group, the venture capital affiliate
of DLJ since 1981.


<PAGE>


Janet A. Hickey
Senior Vice President
Age 51
Officer or Director since 1985
         General Partner of Sprout Group since 1985; Vice President and Manager
         of Venture Capital  Division of General  Electric Investment Corp.
         from 1970 to 1985.

Keith B. Geeslin(1)
Senior Vice President
Age 43
Officer or Director since 1984
         General Partner of Sprout Group since 1986.

Dr. Robert E. Curry(1)
Vice President
Age 50
Officer or Director since 1991
         President  and  Director of the  Management  Company from 1989 to 1991;
         Managing  Director  of MLIBK  from 1990 to 1991;  President  of Merrill
         Lynch R&D Management  Inc. ("ML R&D") from 1990 to 1991, Vice President
         of ML R&D from 1984 to 1990 and  Director  of ML R&D from 1987 to 1991;
         General Partner of Sprout Group since 1991.

Robert Finzi(1)
Vice President
Age 43
Officer or Director since 1991
         Vice President of the  Management  Company from 1985 to 1991; Associate
         with Menlo Ventures from 1983 to 1984; General Partner of Sprout Group
         since 1991.

Anthony F. Daddino
Vice President and Director
Age 56
Officer or Director since 1989
         Director, Executive Vice President and Chief Financial Officer of DLJ.

Thomas E. Siegler
Secretary, Treasurer and Director
Age 62
Officer or Director since 1971
         Senior Vice President and Secretary of DLJ.

(1)  The address of these officers is 3000 Sand Hill Road, Menlo Park,
     California 94025.


<PAGE>


The Managing General Partner

MLVPII Co.,  L.P.  (the  "Managing  General  Partner") is a limited  partnership
organized  on  February  4, 1986  under  the laws of the State of New York.  The
Managing General Partner  maintains its principal  office at North Tower,  World
Financial  Center,  New York, New York 10281-1326.  The Managing General Partner
has  acted  as the  managing  general  partner  of  the  Partnership  since  the
Partnership commenced operations.  The Managing General Partner is engaged in no
other activities at the date hereof.

The general partner of the Managing  General Partner is the Management Company.
The limited  partners of the Managing  General Partner include DLJ Capital
Management  Corporation  ("DLJ"),  Dr. Robert E. Curry and Robert Finzi.
Messrs. Curry and Finzi are currently officers of DLJ and were previously
officers of the Management Company.

The Partnership  Agreement  obligates the Managing General Partner to contribute
cash to the capital of the  Partnership so that the Managing  General  Partner's
capital  contribution  at all  times  will be equal to one  percent  (1%) of the
aggregate capital contributions of all partners of the Partnership. The Managing
General Partner has contributed $1,212,162 to the capital of the Partnership.

Item 11.      Executive Compensation.

Compensation - The Partnership pays each  Independent  General Partner an annual
fee of $20,000 in  quarterly  installments  plus $1,400 for each  meeting of the
Individual  General Partners  attended or for each other meeting,  conference or
engagement in connection with Partnership  activities at which attendance by the
Individual  General  Partner  is  required.  The  Partnership  pays  all  actual
out-of-pocket  expenses incurred by the Independent General Partners relating to
attendance at such meetings. The Independent General Partners receive $1,400 for
each meeting of the Audit Committee  attended  unless such committee  meeting is
held on the same day as a meeting of the Individual  General  Partners.  In such
case,  the  Independent  General  Partners  receive $500 for each meeting of the
Audit  Committee  attended.  For the year ended December 31, 1996, the aggregate
fees and expenses paid by the  Partnership to the Independent  General  Partners
totaled $109,262.

Allocations  and  Distributions  - Profits  and  losses of the  Partnership  are
determined and allocated as of the end of and within sixty days after the end of
each calendar year. If the aggregate of the  investment  income and net realized
capital  gains  and  losses  from  venture  capital   investments  is  positive,
calculated on a cumulative  basis over the life of the Partnership  through such
year,  the  Managing  General  Partner is  allocated  investment  income and net
realized capital gains or losses from venture capital  investments for such year
so that,  together with all  investment  income and gains and losses  previously
allocated to the Managing General Partner,  it has received 20% of the aggregate
of such income and gains  calculated on a cumulative  basis over the life of the
Partnership  through  such year.  Such  allocation  is referred to herein as the
"Managing General Partner's Allocation" and is applicable only to the investment
income and net realized  capital gains and losses resulting from venture capital
investments.  The Partnership's investment income and net realized capital gains
and losses in excess of the Managing General Partner's  Allocation and all other
profits and losses,  including interest or other income on funds not invested in
venture capital investments, are allocated among all the Partners (including the
Managing General Partner) in proportion to their capital contributions.  Cash or
other assets  otherwise  distributable  to the Managing  General Partner are not
distributed to the Managing  General Partner to the extent that the net realized
gains allocated to the Managing General Partner are offset by an amount equal to
20% of the net unrealized losses of the Partnership.

For its fiscal year ended December 31, 1996, the  Partnership had a net realized
gain of $46.9 million from  portfolio  investments  sold and  written-off.  On a
cumulative  basis, from inception to December 31, 1996, the Partnership was in a
net gain position of $102.0 million from its investment  income and net realized
gains and losses from its venture capital portfolio investments. The Partnership
made four cash distributions totaling $61.2 million to Limited Partners and four
cash  distributions  totaling $12.5 million to the General  Partners  during the
fiscal year ended December 31, 1996.

Management Fee - Pursuant to the Management Agreement,  the Partnership pays the
Management  Company  a fee at the  annual  rate  of 2.5%  of the  amount  of the
partners' capital  contributions (net of selling  commissions and organizational
and offering expenses paid by the Partnership),  reduced by capital  distributed
to the  Partners  and  realized  capital  losses,  with a minimum  annual fee of
$200,000.  Such fee is  payable  quarterly  on the  basis of the  amount  of the
partners' capital contributions,  adjusted as described above, at the end of the
preceding calendar quarter. As described previously,  the Management Company has
entered  into a  Sub-Management  Agreement  with  DLJ,  pursuant  to  which  the
Management Company compensates DLJ for management  services.  For the year ended
December 31, 1996, management fees incurred by the Partnership to the Management
Company aggregated $686,493.

Item 12.      Security Ownership of Certain Beneficial Owners and Management.

Reference  is  made  to  Item  10  "Individual   General  Partners"   concerning
information with respect to security ownership.

As of March 21, 1997, no person or group is known by the  Partnership  to be the
beneficial  owner of more than 5 percent  of the Units.  Mark Clein and  Stephen
Warner,  limited partners of the Managing  General Partner,  own an aggregate of
134 Units of the Partnership.  The Individual General Partners and the directors
and officers of the Management Company do not own any Units.

The Partnership is not aware of any arrangement which may, at a subsequent date,
result in a change of control of the Partnership.

Item 13.      Certain Relationships and Related Transactions.

Kevin K. Albert, a Director and President of the Management  Company and a
Managing Director of Merrill Lynch Investment  Banking Group ("ML Investment
Banking"),  joined Merrill Lynch in 1981.  Robert F. Aufenanger, a Director and
Executive Vice President of the  Management  Company,  a Vice  President  of
Merrill  Lynch & Co.  Corporate  Credit and a  Director  of the  Partnership
Management  Department,  joined  Merrill  Lynch in 1980.  Michael E.  Lurie,  a
Director  and Vice  President  of the  Management Company,  a First Vice
President  of Merrill  Lynch & Co.  Corporate  Credit and the Director of the
Asset  Recovery Management Department,  joined Merrill Lynch in 1970.  Diane T.
Herte,  a Vice President and Treasurer of the Management  Company and a Vice
President of Merrill Lynch & Co. Investment Banking Group, joined Merrill Lynch
in 1984. Messrs.  Albert,  Aufenanger,  Lurie and Ms. Herte are involved with
certain other entities affiliated with Merrill Lynch or its affiliates.


<PAGE>


                                     PART IV


Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)           1.    Financial Statements

                    Balance Sheets as of December 31, 1996 and 1995

                    Schedule of Portfolio Investments as of December 31, 1996

                    Schedule of Portfolio Investments as of December 31, 1995

                    Statements of Operations for the years ended December 31,
                    1996, 1995 and 1994

                    Statements of Cash Flows for the years ended December 31,
                    1996, 1995 and 1994

                    Statements of Changes in Partners' Capital for the years
                    ended December 31, 1994, 1995 and 1996

                    Notes to Financial Statements

              2.    Exhibits

                    (3)   (a) Amended and Restated  Certificate of Limited
                              Partnership of the Partnership,  dated as of
                              January 12, 1987. (1)

                    (3)  (b)  Amended  and  Restated   Certificate of  Limited
                         Partnership of the Partnership, dated July 27, 1990.
                               (2)

                    (3)   (c)  Amended and  Restated  Certificate  of Limited
                          Partnership  of the  Partnership,  dated March 25,
                          1991. (3)

                    (3)   (d)  Amended and  Restated  Agreement of Limited
                         Partnership  of the  Partnership,  dated as of May 4,
                          1987. (4)

                    (3)   (e)  Amendment No. 1 dated February 14, 1989 to
                         Amended and Restated Agreement of Limited  Partnership
                         of the Partnership. (5)

                    (3)   (f)  Amendment No. 2 dated July 27, 1990 to Amended
                         and Restated  Agreement of Limited  Partnership  of
                         the Partnership. (2)

                    (3)   (g)  Amendment No. 3 dated March 25, 1991 to Amended
                         and Restated  Agreement of Limited  Partnership of
                         the Partnership. (3)
                    (3)   (h)  Amendment  No. 4 dated May 23, 1991 to Amended
                         and Restated  Agreement of Limited  Partnership  of
                         the Partnership. (6)

                    (10)  (a)  Management  Agreement dated as of May 23, 1991
                         among the Partnership,  Management  Company and the
                         Managing General Partner. (6)

                    (10)  (b)  Form of Sub-Management  Agreement among the
                         Partnership,  Management Company, the Managing General
                         Partner and the Sub-Manager. (8)

                    (13)       Page 20 of the Quarterly Report on Form 10-Q for
                               the quarter ended March 31, 1996.

                    (27)       Financial Data Schedule.

                    (28)       Prospectus of the Partnership  dated February 10,
                               1987  filed  with  the  Securities  and  Exchange
                               Commission  pursuant  to Rule  424(b)  under  the
                               Securities  Act of  1933,  as  supplemented  by a
                               supplement  thereto  dated  April 21,  1987 filed
                               pursuant to Rule 424(c) under the  Securities Act
                               of 1933. (7)

(b)                 No reports on Form 8-K have been filed since the  beginning
                    of the last quarter of the period for which this
                    report is filed.

(1)    Incorporated  by  reference to the  Partnership's  Annual  Report on Form
       10-K for the year ended  December 31, 1988 filed
       with the Securities and Exchange Commission on March 27, 1989.

(2)    Incorporated  by reference to the  Partnership's  Quarterly  Report on
       Form 10-Q for the quarter ended  September 30, 1990
       filed with the Securities and Exchange Commission on November 14, 1990.

(3)    Incorporated  by reference to the Partnership's  Annual  Report on Form
       10-K for the year ended  December 31, 1990 filed with the Securities and
        Exchange Commission on March 28, 1991.

(4)  Incorporated  by reference to the  Partnership's  Quarterly  Report on
     Form 10-Q for the quarter ended June 30, 1987 filed
     with the Securities and Exchange Commission on August 14, 1987.

(5)   Incorporated by reference to the  Partnership's  Quarterly  Report on Form
      10-Q for the quarter ended March 31, 1989 filed with the Securities and
     Exchange Commission on May 15, 1989.

(6)  Incorporated  by reference to the  Partnership's  Quarterly  Report on
     Form 10-Q for the quarter ended June 30, 1991 filed with the Securities
     and Exchange Commission on August 14, 1991.

(7)  Incorporated by reference to the  Partnership's  Quarterly  Report on
     Form 10-Q for the quarter ended March 31, 1987 filed with the Securities
     and Exchange Commission on May 15, 1987.

(8)  Incorporated  by  reference to the  Partnership's  Annual  Report on Form
     10-K for the year ended  December 31, 1992 filed with the Securities and
     Exchange Commission on March 26, 1993.


<PAGE>


                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto duly  authorized on the 28th day of March
1997.


         ML VENTURE PARTNERS II, L.P.


         /s/   Kevin K. Albert
By:      Kevin K. Albert
         Individual General Partner


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on the 28th day of March 1997.

<TABLE>

<S>     <C>    <C>    <C>    <C>    <C>    <C>
By:      MLVPII Co., L.P.                                            By:     /s/   Steward S. Flaschen
         its Managing General Partner                                        Steward S. Flaschen
                                                                             Individual General Partner
By:      Merrill Lynch Venture Capital Inc.                                  ML Venture Partners II, L.P.
         its General Partner


By:      /s/   Kevin K. Albert                                       By:     /s/   Jerome Jacobson
         -------------------------------------------------                   ---------------------
         Kevin K. Albert                                                     Jerome Jacobson
         President                                                           Individual General Partner
         (Principal Executive Officer)                                       ML Venture Partners II, L.P.


By:      /s/   Diane T. Herte                                        By:     /s/   William M. Kelly
         Diane T. Herte                                                      William M. Kelly
         Vice President and Treasurer                                        Individual General Partner
         (Principal Financial and Accounting Officer)                ML Venture Partners II, L.P.
</TABLE>