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 0-17198
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Oklahoma 73-1329487
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Meridian Tower, Suite 1060
5100 East Skelly Drive
Tulsa, Oklahoma 74135
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 663-2500
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
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(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]
As of March 21, 1997, 10,248 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 December 1, 1988, filed with
the Securities and Exchange Commission, as supplemented by a supplement dated
April 25, 1989, are incorporated by reference in Part I, Part II and Part III
hereof.
<PAGE>
PART I
Item 1. Business.
Formation
ML Oklahoma Venture Partners, Limited Partnership (the "Partnership" or the
"Registrant") was organized under the Revised Uniform Limited Partnership Act of
the State of Oklahoma on July 15, 1988. MLOK Co., Limited Partnership (the
"Managing General Partner") and four individuals (the "Individual General
Partners") are the general partners of the Partnership. The Managing General
Partner is an Oklahoma 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").
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 by making venture capital investments in new and developing
companies which the Managing General Partner believes offer significant
long-term growth potential. The Partnership considers this activity to
constitute the single industry segment of venture capital investing.
The Partnership was organized as a "qualified venture capital company" under
Oklahoma law and, therefore, was required to invest over 55% of its
capitalization in companies which constitute "Oklahoma business ventures", as
that term is defined under Oklahoma law. Accordingly, the Partnership's limited
partners (the "Limited Partners") were entitled to a credit against their 1989
Oklahoma state income tax in an amount equal to 20% of their original investment
in the Partnership. From its inception through December 31, 1996, the
Partnership had invested $9.3 million in 18 portfolio investments of which
approximately $5.8 million or 62.8% represents investments in Oklahoma business
ventures.
The Partnership publicly offered, through Merrill Lynch, 25,000 units of limited
partnership interest at $1,000 per unit (the "Units"). The Units were registered
under the Securities Act of 1933 pursuant to a Registration Statement on Form
N-2 (File No. 33-24547), which was declared effective on December 1, 1988. The
Partnership completed its offering on August 14, 1989. A total of 10,248 Units
were sold to the Limited Partners. Gross capital contributions to the
Partnership total $10,355,556; $10,248,000 from the Limited Partners, $103,556
from the Managing General Partner and $4,000 from the Individual General
Partners.
The information set forth under the captions "Risk and Other Important Factors"
(pages 11 through 18), "Investment Objective and Policies" (pages 21 through 26)
and "Oklahoma Considerations" (pages 26 through 28) in the Prospectus of the
Partnership dated December 1, 1988 filed with the Securities and Exchange
Commission pursuant to Rule 497(b) under the Securities Act of 1933, as
supplemented by a supplement dated April 25, 1989 filed pursuant to Rule 497(d)
under the Securities Act of 1933 (the "Prospectus"), is incorporated herein by
reference.
<PAGE>
The Venture Capital Investments
During 1996, the Partnership purchased venture capital investments totaling
$151,000 in three existing portfolio companies. From August 14, 1989
(commencement of operations) to December 31, 1996, the Partnership had invested
$9.3 million in 18 portfolio companies. The Partnership has now fully invested
its original net proceeds from the offering of Units and will not make
investments in any new portfolio companies. However, it is anticipated that the
Partnership will make additional follow-on investments in existing portfolio
companies as required. As of December 31, 1996, the Partnership's investment
portfolio consisted of ten active investments with a cost basis of $5.5 million
and a fair value of $10.5 million. From its inception to December 31, 1996, the
Partnership had liquidated investments with an aggregate cost basis of $3.8
million. These liquidated investments returned $3.9 million for a cumulative net
realized gain of $133,000 as of December 31, 1996.
In April 1996, the Partnership acquired an additional 9% promissory note from
Americo Publishing, Inc. for $50,000.
In October 1996, the Partnership purchased 125,000 shares of Series C
convertible participating preferred stock of Data Critical Corp. for $100,000.
In connection with a reverse stock split effetced by ZymeTx, Inc. in May 1996,
the Partnership exchanged its 21,052 shares of the company's common stock for
18,315 common shares. The Partnership purchased an additional 1,200,000 shares
of ZymeTx common stock in December 1996 for $1,200.
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.
Employees
The Partnership has no employees. 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.
<PAGE>
Item 2. Properties.
The Partnership does not own or lease physical properties.
Item 3. Legal Proceedings.
The Partnership is not a party to any material pending legal proceedings.
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 page 40 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 1,131. The Managing General Partner and the four
Individual General Partners of the Partnership also hold interests in the
Partnership.
The Registrant's partnership agreement contains limitations on the
transferability of Units which are designed to prevent the Registrant from being
deemed a "publicly traded partnership" ("PTP") subject to taxation as a
corporation. Such agreement provides that no purported transfer of a Unit will
be recognized if such transfer, together with all other transfers during the
same taxable year of the Registrant, would result in, among other things, the
transfer of more than 5% of the Units (excluding exempt transfers such as gifts,
inheritances or transfers among family members). Through March 24, 1997, 4.01%
of the Units had been transferred during 1997 (excluding exempt transfers). As a
result, if and when transfers (excluding exempt transfers) of Units during 1997
aggregate 5% of the Units, subsequent thereto no further transfers of Units will
be permitted during 1997 (except for exempt transfers).
Effective November 9, 1992, Registrant was advised that 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 as of December 31,
1996 is $1,035 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.
On November 7, 1996, the General Partners approved a cash distribution to
Partners totaling $517,576. The cash distribution was paid on January 21, 1997.
Limited Partners of record on December 31, 1996 received $512,400, or $50 per
Unit, and the General Partners received $5,176. During 1995, the Partnership
made cash distributions to Partners totaling $2,588,889. The Limited Partners
received $2,562,000, or $250 per Unit, and the General Partners received
$26,889. There were no cash distributions to Partners during the period from
August 14, 1989 (commencement of operations) to December 31, 1994. The
information under the heading "Distributions" contained in the section entitled
"Partnership Distributions and Allocations" on pages 35 and 36 of the Prospectus
is incorporated herein by reference.
<PAGE>
Item 6. Selected Financial Data.
($ in thousands, except for per Unit information)
<TABLE>
Years ended December 31,
1996 1995 1994 1993 1992
-------- ---------- --------- -------- ------
<S> <C> <C> <C> <C> <C>
Net investment loss $ (373) $ (289) $ (143) $ (159) $ (110)
Realized gain (loss) on investments 370 1,651 (272) (1,043) -
Net change in unrealized appreciation
(depreciation) of investments 2,046 (950) 3,424 (388) 1,167
Total assets 11,427 9,317 11,472 8,483 10,063
Net unrealized appreciation of investments 5,020 2,974 3,924 500 888
Cash distributions to Partners (paid & accrued) 518 2,589 - - -
Cumulative cash distributions to Partners 3,107 2,589 - - -
Cost of portfolio investments purchased 151 213 1,121 2,543 2,400
Cumulative cost of portfolio investments
purchased 9,269 9,118 8,905 7,784 5,241
PER UNIT OF LIMITED
PARTNERSHIP INTEREST:
Net investment loss $ (37) $ (28) $ (14) $ (15) $ (11)
Realized gain (loss) on investments 36 159 (26) (101) -
Cash distributions to Partners 50 250 - - -
Cumulative cash distributions to Partners 300 250 - - -
Net unrealized appreciation of investments 485 287 379 48 86
Net asset value, including net unrealized
appreciation of investments 1,035 888 1,098 807 961
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
As of December 31, 1996, the Partnership held $499,000 in short-term investments
with maturities of less than one year and $381,000 in an interest-bearing cash
account. Interest earned on such investments for the years ended December 31,
1996, 1995 and 1994 was $36,000, $47,000, and $40,000, respectively. Interest
earned from short-term investments in future periods is subject to fluctuations
in short-term interest rates and changes in amounts available for investment in
such securities.
During 1996, the Partnership made follow-on investments totaling $151,200 in
three existing portfolio companies. The Partnership has fully invested its
original net proceeds and will not make any investments in new portfolio
companies. Generally, the Partnership will distribute to Partners all proceeds
received from the sale of portfolio investments, after an adequate reserve for
future operating expenses, as soon as practicable after receipt. Funds needed to
cover the Partnership's future operating expenses and follow-on investments in
existing companies is expected to be obtained from existing cash reserves,
interest and other investment income and proceeds from the sale of portfolio
investments.
In November 1996, the General Partners approved a cash distribution to Partners
totaling $517,576; $512,400 or $50 per Unit to Limited Partners and $5,176 to
the General Partners. The distribution was paid in January 1997 to Limited
Partners of record on December 31, 1996. Cumulative cash distributions,
including the distribution paid in January 1997, total $3,106,465; $3,074,400 or
$300 per Unit to Limited Partners and $32,065 to the General Partners.
Results of Operations
For the year ended December 31, 1996, the Partnership had a net realized loss
from operations of $2,400. For the years ended December 31, 1995 and 1994, the
Partnership had a net realized gain from operations of $1.4 million and a net
realized loss from operations of $415,000, 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 and
dividend income less operating expenses).
Realized Gains and Losses from Portfolio Investments - For the year ended
December 31, 1996, the Partnership had a net realized gain from portfolio
investments of $370,000. During the year, Enerpro International, Inc. merged
with Energy Ventures, Inc. ("EVI"), a public company. In connection with the
merger, the Partnership received 24,500 shares of EVI common stock for its
Enerpro holdings. The Partnership sold such shares in the public market for
$738,000. Additionally, pursuant to the merger agreement, $72,000 of such
proceeds is being held in escrow, the release of which is contingent upon
certain events. The Partnership recorded a reserve of $22,000 relating to such
contingencies and, therefore, recognized a $366,000 realized gain on a net basis
in connection with this transaction. Additionally during the year, the
Partnership sold 32,000 shares of Envirogen, Inc. in the public market for
$116,000, realizing a gain of $4,000.
For the year ended December 31, 1995, the Partnership had a $1.7 million net
realized gain from its portfolio investments. In February 1995, the Partnership
sold its investment in BACE Manufacturing, Inc., for $2.1 million, realizing a
gain of $1.6 million. In July 1995, the Partnership sold its 15,491 shares of
Eckerd Corporation common stock for $480,000, realizing a gain of $337,000.
Additionally in September 1995, the Partnership sold its remaining 90,000 common
stock warrants of Envirogen for $39,000, realizing a gain of $39,000. Finally,
in December 1995, the Partnership wrote-off its $325,000 investment in Great
Outdoors Publishing Inc. due to continued business and financial difficulties at
the company.
For the year ended December 31, 1994, the Partnership had a $272,000 net
realized loss from its portfolio investments. In June 1994, the Partnership sold
10,000 common stock warrants of Envirogen in the public market for $6,000,
realizing a gain of $6,000. Additionally during June 1994, the Partnership's
warrants to purchase common stock of C.R. Anthony Company expired unexercised,
resulting in a realized loss of $2,175. During 1994, Sports Tactics
International, Inc. ceased operations. In connection with the liquidation of the
company, the Partnership received payments totaling $19,000, resulting in a
realized loss of $81,000 on its investment in the company. Also during 1994,
Symex Corp. ceased operations resulting in the write-off of the Partnership's
remaining $146,000 debt investment in the company. Finally, in December 1994,
the Partnership sold its investment in QuanTem Laboratories, Inc. in a private
transaction for $26,000, realizing a loss of $49,000.
Investment Income and Expenses - For the years ended December 31, 1996, 1995 and
1994, the Partnership had a net investment loss of $373,000, $289,000 and
$143,000, respectively. The $84,000 increase in net investment loss for 1996
compared to 1995 resulted from a $100,000 decline in investment income partially
offset by a $16,000 decline in operating expenses for 1996 compared to 1995. The
decline in investment income primarily resulted from the write-off of a $51,000
accrued interest receivable relating to promissory notes due from Americo
Publishing, Inc., which were fully reserved for in 1996. Also contributing to
the decline in investment income was a $10,000 decrease in interest from
short-term investments resulting from a reduction in funds available for
investment in such securities during 1996. The reduction in operating expenses
for 1996 primarily resulted from a $12,000 decrease in Independent General
Partners ("IGPs") fees and expenses due to a decline in the number of IGP
meetings held during 1996.
The $146,000 increase in net investment loss for 1995 compared to 1994,
resulted from a $100,000 decline in investment income and a $46,000 increase in
operating expenses for 1995 compared to 1994. The decrease in investment income
primarily was the result of a decrease in interest and dividend income from
portfolio investments. Interest from portfolio investments declined from $76,000
in 1994 to $48,000 in 1995 due to a decline in the amount of portfolio debt
securities outstanding during 1995 compared to 1994, resulting from the
conversion or liquidation of several portfolio debt securities during 1995.
Additionally, dividend income declined $79,000 for 1995 compared to 1994. The
Partnership received $43,000 of dividend income in 1994 from its BACE
Manufacturing investment, which was sold in February 1995. Additionally, the
Partnership received a $36,000 one-time dividend from Diagnetics, Inc. in 1994.
The $46,000 increase in operating expenses for 1995 compared to 1994 resulted
from a $53,000 increase in professional fees and Independent General Partners'
fees partially offset by a $7,000 decrease in other expenses.
The Management Company performs, or arranges for others to perform, the
management and administrative services necessary for the operation of the
Partnership. The Management Company receives a management fee of 2.5% of the
gross capital contributions to the Partnership, reduced by selling commissions
and organizational and offering expenses paid by the Partnership, capital
distributed and realized losses, with a minimum fee of $200,000 annually. Such
fee is determined and paid quarterly. The management fee for each year ended
December 31, 1996, 1995 and 1994, was $200,000.
Unrealized Gains and Losses and Changes in Unrealized Appreciation of Portfolio
Investments - For the year ended December 31, 1996, the Partnership had a $2.2
million net unrealized gain from its portfolio investments, primarily resulting
from the net upward revaluation of certain portfolio investments, primarily
UroCor, Inc., which completed its initial public offering in May 1996.
Offsetting the unrealized gain for 1996 was the net transfer of $194,000 from
unrealized gain to realized gain resulting from the sale of the Partnership's
Enerpro and Envirogen securities as discussed above. As a result, net unrealized
appreciation of investments increased $2.0 million for 1996.
For the year ended December 31, 1995, the Partnership had a $465,000 net
unrealized gain resulting from the net upward revaluation of certain portfolio
investments. Additionally during 1995, $1.4 million was transferred to realized
gain from unrealized gain resulting from portfolio investments sold or
written-off during 1995, as discussed above. The $1.4 million net transfer from
unrealized gain to realized gain, offset by the $465,000 addition to unrealized
gain resulted in a $950,000 decrease to net unrealized appreciation of
investments for 1995.
For the year ended December 31, 1994, the Partnership had a $3.1 million net
unrealized gain primarily resulting from the net upward revaluation of certain
portfolio investments, primarily BACE Manufacturing and Silverado Foods, Inc.
Additionally during 1994, $297,000 was transferred from unrealized loss to
realized loss relating to portfolio investments sold and written-off during
1994, as discussed above. The $3.1 million unrealized gain and the $297,000 net
transfer from unrealized loss to realized loss, resulted in a $3.4 million
increase to net unrealized appreciation of investments for 1994.
Net Assets - Changes to net assets resulting from operations are comprised of
(1) net realized gains and losses and (2) changes to net unrealized appreciation
of portfolio investments.
For the year ended December 31, 1996, the Partnership had a $2.0 million
increase in net assets resulting from operations, primarily due to the $2.0
million increase in net unrealized appreciation for 1996. As of December 31,
1996, the Partnership's net assets were $10.7 million, up $1.5 million from $9.2
million as of December 31, 1995. This increase reflects the $2.0 million
increase in net assets from operations exceeding the accrued cash distribution
of $518,000 paid to Partners in January 1997.
As of December 31, 1995, the Partnership had a $412,000 increase in net assets
resulting from operations, comprised of the $1.4 million net realized gain from
operations partially offset by the $950,000 net decrease in unrealized
appreciation for 1995. As of December 31, 1995, the Partnership's net assets
were $9.2 million, down $2.2 million from $11.4 million as of December 31, 1994.
This decrease reflects the $2.6 million of cash distributions paid to Partners
during 1995 exceeding the $412,000 increase in net assets resulting from
operations for 1995.
As of December 31, 1994, the Partnership's net assets were $11.4 million,
reflecting an increase of $3.0 million from $8.4 million at December 31, 1993.
This increase reflects the $3.4 million increase in net unrealized appreciation
of investments partially offset by the $415,000 net realized loss from
operations for 1994.
Gains or losses from investments are allocated to the 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 or
depreciation of investments has been included as if the net appreciation or
depreciation 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 $1,035, $888
and $1,098, respectively.
Summary of Changes to Net Assets for the Year Ended December 31, 1996
Portfolio transactions completed during 1996, resulted in a realized gain of
$370,161. As shown below, these transactions returned $438,896 to the
Partnership and increased its net asset value for the year by $393,265. Net
upward revaluations of the Partnership's remaining portfolio investments during
1996, further increased net asset value by $2,022,528. The completed portfolio
transactions and revaluations increased the Partnership's net asset value on a
net basis by $2,415,793 for 1996. This increase in net assets from portfolio
transactions for 1996 was offset by the $372,550 net investment loss for the
year.
<TABLE>
Return/
Fair Value Fair Value Effect on
Investment at 12/31/95* at 12/31/96 Net Assets
Sales for the year ended 12/31/96:
<S> <C> <C> <C>
Enerpro $ 350,000 $ 716,212 $ 366,212
Envirogen 88,896 115,949 27,053
------------- -------------- ---------------
Sub-total from sales $ 438,896 $ 832,161 393,265
=============== ============== ---------------
Revaluations for the year ended 12/31/96:
Americo 232,000 0 (232,000)
C.R. Anthony 600,191 1,293,990 693,799
Data Critical 1,500,000 1,500,000 0
Diagnetics 813,610 406,805 (406,805)
Envirogen 327,804 398,250 70,446
Excel Energy Tech. 538,907 166,602 (372,305)
Independent Gas Co. 467,336 467,336 0
Silverado 1,614,245 1,455,467 (158,778)
UroCor 2,378,812 4,328,394 1,949,582
ZymeTx 1,411 480,000 478,589
---------------
Sub-total from revaluations 2,022,528
---------------
Sub-total from portfolio transactions 2,415,793
Net investment loss for the year ended 12/31/96 (372,550)
---------------
Net Change to Net Assets for the Year Ended 12/31/96 $ 2,043,243
======================
</TABLE>
* Adjusted for follow-on investments made during 1996.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
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 Oklahoma Venture Partners, Limited Partnership:
We have audited the accompanying balance sheets of ML Oklahoma Venture Partners,
Limited Partnership (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 the Partnership as of 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
$10,098,594 and $8,345,312 as of December 31, 1996 and 1995, respectively,
representing 94.2% and 90.8% of net assets, respectively, whose values have been
estimated by the Managing General Partner in the absence of readily
ascertainable market values. We have reviewed the procedures used by the
Managing General Partner 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 21, 1997
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
BALANCE SHEETS
December 31,
<TABLE>
1996 1995
-------------- ----------
ASSETS
Investments - Notes 2 and 9
Portfolio investments, at fair value (cost $5,477,160 as of
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 and $5,787,960 as of December 31, 1995) $ 10,496,844 $ 8,762,012
Short-term investments, at amortized cost - Note 8 498,737 249,327
Cash and cash equivalents 380,685 261,310
Receivable from securities sold 50,528 -
Accrued interest receivable - 44,653
---------------- ---------------
TOTAL ASSETS $ 11,426,794 $ 9,317,302
================ ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Cash distribution payable $ 517,576
Accounts payable 84,160 $ 39,353
Due to Management Company - Note 4 90,365 69,423
Due to Independent General Partners - Note 6 15,500 15,000
---------------- ---------------
Total liabilities 707,601 123,776
---------------- ---------------
Partners' Capital:
Managing General Partner 57,186 62,194
Individual General Partners 2,213 2,405
Limited Partners (10,248 Units) 5,640,110 6,154,875
Unallocated net unrealized appreciation of investments - Note 2 5,019,684 2,974,052
---------------- ---------------
Total partners' capital 10,719,193 9,193,526
---------------- ---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 11,426,794 $ 9,317,302
================ ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS
<TABLE>
As of December 31, 1996
Initial Investment
Company / Position Date Cost Fair Value
Americo Publishing, Inc.
<C> <C> <C> <C>
8%-10% Promissory Demand Notes Feb. 1994 $ 364,000 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
C.R. Anthony Company(A)(C)
275,317 shares of Common Stock Oct. 1992 600,191 1,293,990
- -------------------------------------------------------------------------------------------------------------------------------
Data Critical Corp.*(B)
762,500 shares of Preferred Stock April 1993 700,000 1,150,000
Warrant to purchase 875,000 shares of Common Stock
at $.40 per share, expiring 10/6/97 0 350,000
- -------------------------------------------------------------------------------------------------------------------------------
Diagnetics, Inc.*(B)(D)
314,807 shares of Preferred Stock April 1991 756,115 406,805
44,227 shares of Common Stock 57,495 0
- -------------------------------------------------------------------------------------------------------------------------------
Envirogen, Inc.(A)(E)
118,000 shares of Common Stock Sept. 1991 413,000 398,250
- -------------------------------------------------------------------------------------------------------------------------------
Excel Energy Technologies, Ltd.*(B)
3,492 shares of Preferred Stock Oct. 1993 663,907 166,602
17 shares of Common Stock 2,500 0
- -------------------------------------------------------------------------------------------------------------------------------
Independent Gas Company Holdings, Inc.*
464 shares of Preferred Stock June 1993 464,000 464,000
5,192 shares of Common Stock 3,336 3,336
- -------------------------------------------------------------------------------------------------------------------------------
Silverado Foods, Inc.*(A)(B)
705,681 shares of Common Stock June 1992 529,900 1,455,467
Warrant to purchase 12,121 shares of Common Stock
at $8.25 per share, expiring 6/2/99 0 0
- -------------------------------------------------------------------------------------------------------------------------------
UroCor, Inc.*(A)(B)(F)
496,635 shares of Common Stock May 1991 921,305 4,274,393
Warrant to purchase 12,539 shares of Common Stock
at $4.30 per share, expiring 10/18/98 0 54,001
- -------------------------------------------------------------------------------------------------------------------------------
ZymeTx, Inc. (B)(G)
1,218,315 shares of Common Stock July 1994 1,411 480,000
- -------------------------------------------------------------------------------------------------------------------------------
Totals(H) $ 5,477,160 $ 10,496,844
===================================
</TABLE>
(A) Public company
(B) Qualifies as an "Oklahoma business venture" under Oklahoma law.
(C) During the year, C.R. Anthony Company common shares became listed securities
on the NASDAQ National Market System.
(D) The Partnership received 22,814 common shares of Diagnetics, Inc. as a
result of stock distributions made by the company in February and May 1996.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
As of December 31, 1996
(E) In September 1996, the Partnership sold 32,000 shares of Envirogen common
stock for $115,949, realizing a gain of $3,949.
(F) In May 1996, UroCor, Inc. completed its initial public offering at $11.00
per share. In connection with the offering, the Partnership exchanged its
474,007 shares of preferred stock for 496,635 common shares of the company.
(G) In connection with a reverse stock split effetced by ZymeTx, Inc. in May
1996, the Partnership exchanged its 21,052 shares of the company's common
stock for 18,315 common shares. The Partnership purchased an additional
1,200,000 shares of ZymeTx common stock in December 1996 for $1,200.
(H) In May 1996, Enerpro International, Inc. was acquired by Energy Ventures,
Inc. ("EVI"), a public company. In exchange for its Enerpro holdings, the
Partnership received 24,500 shares of EVI common stock. In June 1996, the
Partnership sold its EVI shares for $737,867, of which $72,183 remains in
escrow, the release of which is contingent upon certain events. The
Partnership has recorded a reserve of $21,655 relating to such
contingencies.
* 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 OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS
As of December 31, 1995
<TABLE>
Initial Investment
Company / Position Date Cost Fair Value
Americo Publishing, Inc.
<C> <C> <C> <C>
10% Demand Promissory Note Feb. 1994 $ 225,000 $ 112,500
8% Demand Promissory Note 30,000 15,000
9% Demand Promissory Notes 59,000 54,500
- -------------------------------------------------------------------------------------------------------------------------------
C.R. Anthony Company
275,317 shares of Common Stock Oct. 1992 600,191 600,191
- -------------------------------------------------------------------------------------------------------------------------------
Data Critical Corp.*(B)
637,500 shares of Preferred Stock April 1993 600,000 1,050,000
Warrant to purchase 875,000 shares of Common Stock
at $.40 per share, expiring 10/6/97 0 350,000
- -------------------------------------------------------------------------------------------------------------------------------
Diagnetics, Inc.*(B)
314,807 shares of Preferred Stock April 1991 785,753 785,753
21,413 shares of Common Stock 27,857 27,857
- -------------------------------------------------------------------------------------------------------------------------------
Enerpro International, Inc.*
35,000 shares of Preferred Stock Aug. 1993 350,000 350,000
- -------------------------------------------------------------------------------------------------------------------------------
Envirogen, Inc.(A)
150,000 shares of Common Stock Sept. 1991 525,000 416,700
- -------------------------------------------------------------------------------------------------------------------------------
Excel Energy Technologies, Ltd.*(B)
3,492 shares of Preferred Stock Oct. 1993 663,907 538,907
17 shares of Common Stock 2,500 0
- -------------------------------------------------------------------------------------------------------------------------------
Independent Gas Company Holdings, Inc.*
464 shares of Preferred Stock June 1993 464,000 464,000
5,192 shares of Common Stock 3,336 3,336
- -------------------------------------------------------------------------------------------------------------------------------
Silverado Foods, Inc.*(A)(B)
705,681 shares of Common Stock June 1992 529,900 1,614,245
Warrant to purchase 12,121 shares of Common Stock
at $8.25 per share, expiring 6/2/99 0 0
- -------------------------------------------------------------------------------------------------------------------------------
UroCor, Inc.*
474,007 shares of Preferred Stock May 1991 921,305 2,370,035
Warrant to purchase 12,539 shares of Common Stock
at $4.30 per share, expiring 10/18/98 0 8,777
- -------------------------------------------------------------------------------------------------------------------------------
ZymeTx, Inc.(B)
21,052 shares of Common Stock July 1994 211 211
- -------------------------------------------------------------------------------------------------------------------------------
Totals $ 5,787,960 $ 8,762,012
===================================
</TABLE>
(A) Public company
(B) Qualifies as an "Oklahoma business venture" under Oklahoma law.
* 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 OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
===============================================================================
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
<TABLE>
1996 1995 1994
------------- -------------- ---------
INVESTMENT INCOME AND EXPENSES
Income:
<S> <C> <C> <C>
Interest from short-term investments $ 36,435 $ 46,514 $ 40,371
Interest and other income (loss) from portfolio investments (41,709) 48,342 75,684
Dividend income - - 78,890
-------------- ------------ ---------------
Total investment income (5,274) 94,856 194,945
--------------- ------------ ---------------
Expenses:
Management fee - Note 4 200,000 200,000 200,000
Professional fees 82,193 86,850 52,799
Independent General Partners' fees - Note 6 60,183 72,245 52,826
Mailing and printing 16,392 17,483 18,566
Amortization of deferred organizational costs - Note 2 - - 5,964
Custodial fees 5,735 5,938 6,664
Miscellaneous 2,773 1,170 1,180
-------------- ------------ ---------------
Total expenses 367,276 383,686 337,999
-------------- ------------ ---------------
NET INVESTMENT LOSS (372,550) (288,830) (143,054)
Net realized gain (loss) from investments 370,161 1,650,738 (271,775)
-------------- ------------ ---------------
NET REALIZED GAIN (LOSS) FROM OPERATIONS
(allocable to Partners) - Note 3 (2,389) 1,361,908 (414,829)
Net change in unrealized appreciation of investments 2,045,632 (949,912) 3,424,316
-------------- ------------ ---------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,043,243 $ 411,996 $ 3,009,487
============== ============ ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
<TABLE>
1996 1995 1994
-------------- ------------- --------
CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C> <C>
Net investment loss $ (372,550) $ (288,830) $ (143,054)
Adjustments to reconcile net investment loss to cash
used for operating activities:
Increase (decrease) in payables 66,249 22,034 (20,226)
Amortization of deferred organizational costs - - 5,964
(Increase) decrease in accrued interest on short-term investments (4,880) 489 18
Decrease (increase) in receivables and other assets 44,653 5,866 (15,638)
-------------- ------------- -------------
Cash used for operating activities (266,528) (260,441) (172,936)
-------------- ------------- -------------
CASH FLOWS PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES
Cost of portfolio investments purchased (151,200) (212,807) (1,121,489)
Proceeds from the sale of portfolio investments 781,633 2,684,017 25,113
Net return from (purchase of) short-term investments (244,530) 347,922 399,987
Repayment of investments in notes - - 280,000
-------------- ------------- -------------
Cash provided from (used for) investing activities 385,903 2,819,132 (416,389)
-------------- ------------- -------------
CASH FLOWS USED FOR FINANCING ACTIVITIES
Cash distributions paid to Partners - (2,588,889) -
-------------- ---------- ------
Increase (decrease) in cash and cash equivalents 119,375 (30,198) (589,325)
Cash and cash equivalents at beginning of period 261,310 291,508 880,833
-------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 380,685 $ 261,310 $ 291,508
============== ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
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
Partner Partners Partners of Investments Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1993 $ 78,613 $ 3,038 $ 7,779,633(A) $ 499,648 $ 8,360,932
Net investment loss (1,431) (55) (141,568) - (143,054)
Net realized loss from investments (2,718) (105) (268,952) - (271,775)
Net change in unrealized
appreciation of investments - - - 3,424,316 3,424,316
---------- -------- ------------- ------------- --------------
Balance as of December 31, 1994 74,464 2,878 7,369,113(A) 3,923,964 11,370,419
Cash distribution, paid
April 17, 1995 - - (2,049,600) - (2,049,600)
Cash distribution, paid
October 19, 1995 (25,889) (1,000) (512,400) - (539,289)
Net investment loss (2,888) (111) (285,831) - (288,830)
Net realized gain from investments 16,507 638 1,633,593 - 1,650,738
Net change in unrealized
appreciation of investments - - - (949,912) (949,912)
---------- -------- ------------- ------------- --------------
Balance as of December 31, 1995 62,194 2,405 6,154,875(A) 2,974,052 9,193,526
Accrued cash distribution, paid
January 21, 1997 (4,984) (192) (512,400) - (517,576)
Net investment loss (3,726) (143) (368,681) - (372,550)
Net realized gain 3,702 143 366,316 - 370,161
Net change in unrealized
appreciation of investments - - - 2,045,632 2,045,632
---------- -------- ------------- ------------- --------------
Balance as of December 31, 1996 $ 57,186 $ 2,213 $ 5,640,110(A) $ 5,019,684 $ 10,719,193
========== ======== ============= ============= ==============
</TABLE>
(A) The net asset value per unit of limited partnership interest, including an
assumed allocation of net appreciation of investments, was $1,035, $888 and
$1,098 as of December 31, 1996, 1995 and 1994, respectively. Cumulative
cash distributions paid to Limited Partners, including the accrued cash
distribution paid in January 1997, totaled $300 per Unit as of December 31,
1996.
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. Organization and Purpose
ML Oklahoma Venture Partners, Limited Partnership (the "Partnership") was formed
on July 15, 1988 under the Revised Uniform Limited Partnership Act of the State
of Oklahoma. The Partnership's operations commenced on August 14, 1989. MLOK
Co., Limited Partnership, the managing general partner of the Partnership (the
"Managing General Partner"), is an Oklahoma limited partnership formed on July
15, 1988, the general partner of which is Merrill Lynch Venture Capital Inc.
(the "Management Company"), an indirect subsidiary of Merrill Lynch & Co., Inc.
The Partnership's objective is to achieve long-term capital appreciation by
making venture capital investments in new or developing companies, primarily
Oklahoma companies, and other special investment situations. The Partnership
does not engage in any other business or activity. The Partnership will
terminate on December 31, 1998, subject to the right of the Individual General
Partners to extend the term for up to two additional two-year periods.
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 Managing General Partner under the supervision of
the Individual General Partners. The Managing General Partner determines the
fair value of its portfolio investments by applying consistent guidelines. The
fair value of public securities is adjusted to the closing public market price
for the last trading day of the accounting period less an appropriate discount
for sales restrictions, the size of the Partnership's holdings and the public
market trading volume. Private securities are carried at cost until significant
developments affecting a portfolio investment 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
Managing General Partner considers such risks in determining the fair value of
the Partnership's portfolio investments.
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.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
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 $5.0
million as of December 31, 1996, which was recorded for financial statement
purposes, was not recognized for tax purposes. Additionally, from inception to
December 31, 1996, other timing differences totaling $1.0 million relating to
the original sales commissions paid and other costs of selling the Units have
been recorded on the Partnership's financial statements but have not yet been
deducted for tax purposes.
Statements of Cash Flows - The Partnership considers its interest-bearing cash
account to be cash equivalents.
Organizational Costs - Organizational costs of $47,718 were amortized over a
sixty-month period which commenced August 14, 1989.
3. Allocation of Partnership Profits and Losses
Pursuant to the Partnership Agreement, profits from venture capital investments
are allocated to all Partners in proportion to their capital contributions until
all Partners have been allocated a 10% Priority Return from liquidated
investments. Profits in excess of this amount are allocated 30% to the Managing
General Partner and 70% to all Partners in proportion to their capital
contributions until the Managing General Partner has been allocated 20% of the
total profits from venture capital investments. Thereafter, profits from venture
capital investments are allocated 20% to the Managing General Partner and 80% to
all Partners in proportion to their capital contributions. Profits from other
sources are allocated to all Partners in proportion to their capital
contributions.
Losses are allocated to all Partners in proportion to their capital
contributions. However, if profits had been previously allocated in the 70-30 or
80-20 ratios as discussed above, then losses will be allocated in the reverse
order in which profits were allocated.
4. Related Party Transactions
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 and
organizational and offering expenses paid by the Partnership, capital
distributed and realized losses, with a minimum annual fee of $200,000. Such fee
is determined and paid quarterly.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
5. Limitation on Operating Expenses
The Management Company has undertaken to the Partnership that it will reduce its
management fee or otherwise reimburse the Partnership in order to limit the
annual operating expenses of the Partnership, exclusive of the management fee,
to an amount equal to $203,720.
6. Independent General Partners' Fees
As compensation for services rendered to the Partnership, each of the three
Independent General Partners receives $16,000 annually in quarterly
installments, $1,000 for each meeting of the General Partners attended, $1,000
for each committee meeting attended ($500 if a committee meeting is held on the
same day as a meeting of the General Partners) and $500 for meetings held by
telephone conference.
7. Cash Distributions
On November 7, 1996, the General Partners approved a cash distribution to
Partners totaling $517,576. The cash distribution was paid on January 21, 1997.
Limited Partners of record on December 31, 1996 received $512,400, or $50 per
Unit, and the General Partners received $5,176. Cash distributions paid or
accrued during the periods presented 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>
April 17, 1995 $ 0 $ 2,049,600 $ 200
October 19, 1995 26,889 512,400 50
January 21, 1997 (accrued as of 12/31/96) 5,176 512,400 50
----------- -------------- ------
Cumulative totals as of December 31, 1996 $ 32,065 $ 3,074,400 $ 300
=========== ============== ========
</TABLE>
8. Short-Term Investments
As of December 31, 1996 and 1995, the Partnership's short-term securities
consisted of the following investments in commercial paper:
<TABLE>
Maturity Purchase Amortized
Issuer Yield Date Price Cost Face Value
December 31, 1996:
<S> <C> <C> <C> <C> <C> <C>
Korean Development Bank 5.35% 1/17/97 $ 493,461 $ 498,737 $ 500,000
------------ ------------ ---------------
December 31, 1995:
Golden Managers Acceptance Corp. 5.70% 1/17/96 $ 248,931 $ 249,327 $ 250,000
------------ ------------ ---------------
</TABLE>
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
9. Portfolio Investments
As of December 31, 1996, the Partnership's investments were categorized as
follows:
<TABLE>
% of
Type of Investments Cost Fair Value Net Assets*
- ------------------- ---------------- --------------- -----------
<S> <C> <C> <C>
Common Stock $ 2,529,138 $ 8,309,437 78%
Preferred Stock 2,584,022 2,187,407 20%
Debt Securities 364,000 0 0%
---------------- --------------- -------
$ 5,477,160 $ 10,496,844 98%
================ =============== =======
Country/Geographic Region
Oklahoma $ 3,632,633 $ 8,337,268 78%
Non-Oklahoma 1,844,527 2,159,576 20%
---------------- --------------- -------
$ 5,477,160 $ 10,496,844 98%
================ =============== =======
Industry
Publishing $ 364,000 $ 0 0%
Retail - Apparel 600,191 1,293,990 12%
Food Manufacturing + Distribution 529,900 1,455,467 14%
Energy/Natural Gas 1,133,743 633,938 6%
Data Communications 700,000 1,500,000 14%
Environmental Technology 413,000 398,250 4%
Healthcare/Biotechnology 922,716 4,808,394 44%
Measurement Instrumentation 813,610 406,805 4%
---------------- --------------- -------
$ 5,477,160 $ 10,496,844 98%
================ =============== =======
</TABLE>
* Percentage of net assets is based on fair value.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership
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 1989, the Securities and Exchange
Commission issued an order declaring that the 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 Managing General Partner and the
four Individual General Partners will serve as the General Partners of the
Partnership until successors have been elected or until their earlier
resignation or removal.
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 under the 1940 Act. In addition to
general fiduciary duties, the Individual General Partners, among other things,
supervise the management arrangements of the Partnership and the activities of
the Managing General Partner.
The Managing General Partner has exclusive power and authority to manage and
control the Partnership's venture capital investments, subject to the
supervision of the Individual General Partners. Additionally, subject to the
supervision of the Individual General Partners, the Managing General Partner is
authorized to make all decisions regarding the Partnership's venture capital
investment portfolio including, among other things, find, evaluate, structure,
monitor and liquidate such investments and to provide, or arrange for the
provision of, managerial assistance to the portfolio companies in which the
Partnership invests.
<PAGE>
Individual General Partners
William C. Liedtke, III (1)
P.O. Box 54369
Oklahoma City, OK 73154
Age 45
Individual General Partner since 1988
0 Units of the Partnership beneficially owned as of February 25, 1997 (3)
Energy consultant since 1991; Assistant to the Governor of the State of
Oklahoma from 1989 to 1991; an independent natural gas marketing consultant
since 1984; an oil and gas marketing manager for Trigg Drilling Company, Inc.,
a member of the State Bar of Texas; a trustee of the Casady School.
Richard P. Miller (1)
7500 N. Mockingbird Lane
Paradise Valley, AZ 85253
Age 69
Individual General Partner since 1988
0 Units of the Partnership beneficially owned as of February 25, 1997 (3)
Since1988 Director of Techlaw, Inc.; since 1995, President of Paice Corp.; from
1983 to 1990, Executive Vice President of Private Sector Counsel; in 1983
and 1984, Vice President, Corporate Finance, Union Bank of California; from
1968 to 1983, founder and Chief Executive Officer of Systems Control Inc.
George A. Singer (1)
2222 E. 25th Place
Tulsa, OK 74114
Age 49
Individual General Partner since 1995
0 Units of the Partnership beneficially owned as of February 25, 1997 (3)
Since 1978, Manager and Principal of Singer Bros. and General Partner of several
related family entities; since 1978, Executive Vice President, Pedestal Oil
Company, Inc.; since 1981, Director of Manchester Pipeline Corporation;
a member of the Independent Petroleum Association of America.
Bruce W. Shewmaker (2)
12 Briarwood Drive
Short Hills, NJ 07078
Age 51
Individual General Partner since 1988
0 Units of the Partnership beneficially owned as of February 25, 1997 (3)
Since1992 President of New Century Management Inc., a venture capital
management and advisory firm; since 1991, a self-employed business
consultant; from 1990 to 1991, venture investment advisor with Vector
Securities International Inc., an investment banking firm specializing in
health care companies; from 1984 to 1990, President of Merrill Lynch R&D
Management Inc.; from 1982 to 1983 and from 1988 to 1990, Vice President of
Merrill Lynch Venture Capital Inc.
(1) Independent General Partner and Member of Audit Committee.
(2) Interested person, as defined in the Investment Company Act, of the
Partnership.
(3) Each Individual General Partner has contributed $1,000 to the capital
of the Partnership. Mr. Shewmaker is a limited partner of the Managing
General Partner of the Partnership. The Managing General Partner
contributed $103,556 to the capital of the Partnership. George A.
Singer succeeded to the interest of a prior Independent General
Partner who contributed $1,000 to the capital of the Partnership.
The Managing General Partner
MLOK Co., Limited Partnership (the "Managing General Partner") is a limited
partnership organized on July 15, 1988 under the laws of the State of Oklahoma.
The Managing General Partner maintains its legal address at Meridian Tower, 5100
East Skelly Drive, Suite 1060, Tulsa, OK 74135. The Managing General Partner has
acted as the managing general partner of the Partnership since the Partnership
commenced operations on August 14, 1989. The Managing General Partner is engaged
in no other activity. The Managing General Partner has contributed $103,556 to
the capital of the Partnership, equal to 1% of the aggregate capital
contributions of all Partners of the Partnership.
The general partner of the Managing General Partner is Merrill Lynch Venture
Capital Inc. (the "Management Company") and the limited partners of the Managing
General Partner include Joe D. Tippens, C. James Bode and John Frick,
independent contractors to the Management Company. Information concerning the
Management Company is set forth below.
The Management Company
Merrill Lynch Venture Capital Inc. (the "Management Company") has served as the
management company for the Partnership since the Partnership commenced
operations. The Management Company performs, or arranges for others to perform,
the management and administrative services necessary for the operation of the
Partnership pursuant to a Management Agreement between the Partnership and the
Management Company.
The Management Company 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. Listed below is information concerning the directors
and officers of the Management Company, who are principally involved with the
Partnership's operations. Unless otherwise noted, the address of each such
person is World Financial Center, North Tower, New York, New York 10281.
Kevin K. Albert, Age 44, Director, President
Officer or Director since 1990
Managing Director of Merrill Lynch & Co. Investment Banking Division ("MLIBK")
since 1988; Vice President of MLIBK from 1983 to 1988.
<PAGE>
Robert F. Aufenanger, Age 43, Director and Executive Vice President
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.
Steven N. Baumgarten, Age 41, Vice President Officer or Director since 1993 Vice
President of MLPF&S since 1986.
Michael E. Lurie, Age 53, Director, Vice President
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.
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 1992, 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.
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.
Item 11. Executive Compensation.
Compensation - The Partnership pays each Independent General Partner an annual
fee of $16,000 in quarterly installments, $1,000 per meeting of the Individual
General Partners attended and $500 for participating in each special meeting of
the Individual General Partners conducted by telephone conference call and pays
all non-interested Individual General Partners' actual out-of-pocket expenses
relating to attendance at meetings. Additionally, the Independent General
Partners receive $1,000 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. The aggregate fees and
expenses paid by the Partnership to the Independent General Partners for the
years ended December 31, 1996, 1995, and 1994, totaled $60,183, $72,245 and
$52,826, respectively.
Allocations and Distributions - The information with respect to the allocation
and distribution of the Partnership's profits and losses to the Managing General
Partner set forth under the caption "Partnership Distributions and Allocations"
on pages 35 - 37 of the Prospectus is incorporated herein by reference.
For the year ended December 31, 1996 the Partnership had a net realized loss
from operations of $2,389. For the years ended December 31, 1995 and 1994, the
Partnership had a net realized gain from operations of $1,361,908 and a net
realized loss from operations of $414,829, respectively. In accordance with the
Partnership's allocation procedure, the Managing General Partner was allocated
$24, $13,619 and $4,149 of such gains and losses for the years ended December
31, 1996, 1995 and 1994, respectively.
In November 1996, the General Partners approved a cash distribution to Partners
totaling $517,576. Such distribution was paid in January 1997. Limited Partners
received $512,400, or $50 per Unit. The Individual General Partners received
$192 and the Managing General Partner received $4,984. During 1995, the
Partnership made cash distributions to Partners totaling $2,588,889. Limited
Partners received $2,562,000, or $250 per Unit. The Individual General Partners
received $1,000 and the Managing General Partner received $25,889. There were no
distributions to Partners prior to 1995.
Management Fee - Pursuant to the Management Agreement, the Management Company
receives a management fee at the annual rate of 2.5% of the amount of the
Partners' gross capital contributions (net of selling commissions and
organizational and offering expenses paid by the Partnership), reduced by
capital distributed and realized capital losses, with a minimum annual fee of
$200,000. Such fee is determined and payable quarterly in arrears. The
management fee was $200,000 for each of the years ended December 31, 1996, 1995
and 1994.
The Management Company has agreed to reduce its management fee, or otherwise
reimburse the Partnership in order to limit the annual operating expenses of the
Partnership, exclusive of the management fee, to an amount equal to $203,720.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information concerning the security ownership of the Individual General
Partners set forth in Item 10 under the subcaption "Individual General Partners"
is incorporated herein by reference. 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.
The Partnership is not aware of any arrangement which may, at a subsequent date,
result in a change of control of the Partnership.
<PAGE>
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. Steven N. Baumgarten, a Vice President
of the Management Company and MLPF&S, joined Merrill Lynch in 1986. 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 Baumgarten and Ms. Herte are involved with
certain other entities affiliated with Merrill Lynch or its affiliates.
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) 1. Financial Statements
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
2. (a) Exhibits
(3) (a) Amended and Restated Certificate of
Limited Partnership of the Partnership
dated as of November 29, 1988.*
(b) Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of
November 29, 1988.*
(c) Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of
August 14, 1989.**
(10) Management Agreement dated as of November 29,
1988 between the Partnership and the
Management Company.*
(27) Financial Data Schedule.
(28) (a) Prospectus of the Partnership dated
December 1, 1988 filed with the Securities and
Exchange Commission pursuant to Rule 497 (b)
under the Securities Act of 1933, as
supplemented by a supplement dated April 25,
1989 filed pursuant to Rule 497 (d) under the
Securities Act of 1933.***
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
* Incorporated by reference to the Partnership's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988 filed with the Securities and
Exchange Commission on April 3, 1989.
** Incorporated by reference to the Partnership's Quarterly Report on Form
10-Q for the quarter ended September 30, 1989 filed with the Securities
and Exchange Commission on November 14, 1989.
*** 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 27th day of March, 1997.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
By: MLOK Co. Limited Partnership
its Managing General Partner
By: Merrill Lynch Venture Capital Inc.
its General Partner
By: /s/ Kevin K. Albert
Kevin K. Albert
President
(Principal Executive Officer)
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 27th day of March 1997.
By: MLOK Co., Limited Partnership
its Managing General Partner
By: Merrill Lynch Venture Capital Inc.
its General Partner
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
By: /s/ Kevin K. Albert By: /s/ Richard P. Miller
----------------------------------------------------- -----------------------
Kevin K. Albert Richard P. Miller
President of Merrill Lynch Venture Capital, Inc. General Partner
(Principal Executive Officer) ML Oklahoma Venture Partners, Limited Partnership
By: /s/ Diane T. Herte By: /s/ George A. Singer
Diane T. Herte George A. Singer
V. P. & Treasurer of Merrill Lynch Venture Capital, Inc. General Partner
(Principal Financial and Accounting Officer) ML Oklahoma Venture Partners, Limited Partnership
By: /s/ William C. Liedtke, III By: /s/ Bruce W. Shewmaker
William C. Liedtke, III Bruce W. Shewmaker
General Partner General Partner
ML Oklahoma Venture Partners, Limited Partnership ML Oklahoma Venture Partners, Limited Partnership
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ML
OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP'S ANNUAL REPORT ON FORM
10-K FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5,477,160
<INVESTMENTS-AT-VALUE> 10,496,844
<RECEIVABLES> 50,528
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 380,685
<TOTAL-ASSETS> 11,426,794
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 707,601
<TOTAL-LIABILITIES> 707,601
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 10,248
<SHARES-COMMON-PRIOR> 10,248
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<ACCUM-APPREC-OR-DEPREC> 5,019,684
<NET-ASSETS> 10,719,193
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> (5,274)
<OTHER-INCOME> 0
<EXPENSES-NET> 367,276
<NET-INVESTMENT-INCOME> (372,550)
<REALIZED-GAINS-CURRENT> 370,161
<APPREC-INCREASE-CURRENT> 2,045,632
<NET-CHANGE-FROM-OPS> 2,043,243
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 517,576
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<NET-CHANGE-IN-ASSETS> 1,525,667
<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 888
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<PER-SHARE-GAIN-APPREC> 234
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