UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                    For the Three Months Ended March 31, 1999

                         Commission File Number 0-15669

                          ML-LEE ACQUISITION FUND, L.P.
      (Exact name of registrant as specified in its Governing Instruments)

              Delaware                            13-3426817
   (State or other jurisdiction        (IRS Employer Identification No.)
  of incorporation or organization)

                             World Financial Center
                            South Tower - 14th Floor
                          New York, New York 10080-6114
              (Address of principal executive offices and zip code)


Registrant's telephone number, including area code:  (212) 236-6562


Securities  registered  pursuant to Section  12(b) of the Act: None Name of each
exchange on which registered:  Not Applicable  Securities registered pursuant to
Section 12(g) of the Act:

                      Units of Limited Partnership Interest
                                (Title of class)

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

Aggregate market value of voting securities held by non-
affiliates:  Not Applicable.
    
<PAGE>
                          ML-LEE ACQUISITION FUND, L.P.

                                TABLE OF CONTENTS


                         PART I - FINANCIAL INFORMATION

                                                                     
Item 1.  Financial Statements

Statements of Assets, Liabilities and Partners' Capital
  as of March 31, 1999 and December 31, 1998                          

Statements of Operations - For the Three Months Ended
  March 31, 1999 and 1998                                           

Statements of Changes in Net Assets - For the Three Months Ended
  March 31, 1999 and 1998                                             

Statements of Cash Flows - For the Three Months Ended
  March 31, 1999 and 1998                                            

Statement of Changes in Partners' Capital - March 31, 1999         

Schedule of Portfolio Investments - March 31, 1999                   

Notes to Financial Statements                                        

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                               


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

Item 6.  Exhibits and Reports on Form 8-K                           

<PAGE>
                                   ML-LEE ACQUISITION FUND, L.P.
                    Statements of Assets, Liabilities and Partners' Capital
                                       (Dollars in Thousands)
 
<TABLE>
<S>                                                                        <C>                 <C>                     
                                                                              March 31, 1999    December 31, 1998
                                                                              ---------------   ---------------

Assets:
Investments - Notes 2, 9
    Temporary Investments, at amortized cost (cost $3,552 at
         March 31, 1999 and $3,760 at December 31, 1998)                      $         3,560   $         3,760
Cash                                                                                       10                 3
Note Receivable (Net of reserve of $1,000)                                                 --                --
                                                                              ---------------   ---------------
Total Assets                                                                  $         3,570   $         3,763
                                                                              ===============   ===============

Liabilities and Partners' Capital:

Liabilities
    Legal and Professional Fees Payable                                       $            --   $             1
    Reimbursable Administrative Expenses Payable                                           68               125
    Independent General Partner Expenses Payable                                           22                23
                                                                              ---------------   ---------------
Total Liabilities                                                                          90               149
                                                                              ===============   ===============
Partners' Capital - Note 2
    Managing General Partner                                                              378               379
    Limited Partners (487,489 Units)                                                    3,102             3,235
                                                                              ---------------   ---------------
Total Partners' Capital                                                                 3,480             3,614
Total Liabilities and Partners' Capital                                       $         3,570   $         3,763
                                                                              ===============   ===============
</TABLE>

See the Accompanying Notes to Financial Statements (Unaudited).                 
<PAGE>                 
                          ML-LEE ACQUISITION FUND, L.P.
                            Statements of Operations
                             (Dollars in Thousands)
                                  (Unaudited)

<TABLE>
<S>                                                                                  <C>               <C> 
                                                                                         For the Three Months Ended
                                                                                     --------------    ----------------
                                                                                     March 31, 1999      March 31, 1998
                                                                                     --------------    ----------------
Investment Income - Notes 2, 10:
Interest                                                                             $           --    $              6
Discount                                                                                         41                 196
Dividend & Other Income                                                                          --                   1
                                                                                     --------------    ----------------
    Total Income                                                                                 41                 203
                                                                                     --------------    ----------------
Expenses:
Investment Advisory Fee - Note 5                                                                 --                 300
Fund Administration Fee - Note 6                                                                 75                  75
Loan Fees - Notes 2, 4                                                                           --                 173
Independent General Partners' Fees and Expenses - Note 7                                         33                  40
Reimbursable Administrative Expenses - Note 6                                                    67                 133
Insurance Expense                                                                                --                   2
                                                                                     --------------    ----------------
    Total Expenses                                                                              175                 723
                                                                                     --------------    ----------------
Net Investment Loss                                                                            (134)               (520)
Net Realized (Loss) on Investments                                                               --             (17,202)            
        Publicly Traded Securities                                                               --               6,392
        Nonpublic Securities                                                                     --              21,000
                                                                                     --------------    ----------------
             Subtotal                                                                            --              27,392
                                                                                     --------------    ----------------
Net Increase (Decrease) in Net Assets
   Resulting From Operations                                                         $         (134)   $          9,670
                                                                                     ==============    ================

</TABLE>

See the Accompanying Notes to Financial Statements (Unaudited). 
<PAGE>
<TABLE>
                          ML-LEE ACQUISITION FUND, L.P.
                       Statements of Changes in Net Assets
                             (Dollars in Thousands)
                                                                                                                         

<S>                                                                  <C>               <C>
                                                                        For the Three Months Ended
                                                                      --------------   ---------------
                                                                      March 31, 1999    March 31, 1998
                                                                      --------------   ---------------
From Operations:

Net Investment Loss                                                   $        (134)   $          (520)

Net Realized Loss on Investments                                               --              (17,202)

Net Change in Unrealized Depreciation on Investments                           --               27,392
                                                                      --------------   ---------------

Net Increase in Net Assets Resulting from Operations                           (134)             9,670

Cash Distributions to Partners                                                 --              (18,776)
                                                                      --------------   ---------------

Total Decrease                                                                 (134)            (9,106)

Net Assets:

Beginning of Period                                                           3,614             57,446
                                                                      --------------   ---------------

End of Period                                                         $       3,480    $        48,340
                                                                      =============    ===============

</TABLE>


See the Accompanying Notes to Financial Statements (Unaudited).
<PAGE>
<TABLE>
                          ML-LEE ACQUISITION FUND, L.P.
                            Statements of Cash Flows
                             (Dollars in Thousands)
                                  (Unaudited)

<S>                                                                        <C>               <C> 
                                                                               For the Three Months Ended
                                                                          --------------     --------------
                                                                          March 31, 1999     March 31, 1998
                                                                          --------------     --------------
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows From Operating Activities:
  Interest, Dividends and Discount Income                                 $           34    $           238
  Investment Advisory Fee                                                             --               (300)
  Fund Administration Fee                                                            (75)               (75)
  Legal and Professional Fees                                                         (1)               (28)
  Loan Fees and Expenses                                                               --               (10)
  Independent General Partners' Fees and Expenses                                    (34)               (33)
  (Purchase) Sale of Temporary Investments, Net                                      208              4,435
  Reimbursable Administrative Expenses                                              (125)              (117)
  Proceeds from Sale of Portfolio Company Investments                                 --             14,670
                                                                          --------------     --------------
Net Cash Provided by Operating Activities                                              7             18,780
                                                                          --------------     --------------
Cash Flows From Financing Activities:
  Cash Distributions to Partners                                                      --            (18,776)
                                                                          --------------     --------------
Net Cash Applied to Financing Activities                                              --            (18,776)
                                                                          --------------     --------------
  Net Increase in Cash                                                                 7                  4
  Cash at Beginning of Period                                                          3                  1
                                                                          --------------     --------------
Cash at End of Period                                                     $           10    $             5
                                                                          ==============    ===============

Reconciliation of Net Investment Loss to
   Net Cash Provided by Operating Activities

Net Investment Loss                                                       $         (134)   $          (520)
                                                                          --------------     --------------
Adustments to Reconcile Net Investment Loss
    to Net Cash Provided by Operating Activities
   Decrease in Investments                                                           208             33,456
   Decrease in Receivable for Investments Sold
     (Net of Allowance)                                                               --              2,851
  (Increase) Decrease in Accrued Interest,
     Dividend and Discount Receivables                                                (8)                36
   Decrease in Prepaid Expenses                                                       --                165
   Increase in Independent General Partner Fees Payable                               (1)                 6
   Increase in Reimbursable Administrative Expenses Payable                          (57)                17
   Increase (Decrease) in Legal and Professional Fees Payable                         (1)               (29)
   Net Realized Gain (Loss) on Investments                                            --            (17,202)
                                                                          --------------     --------------
Total Adjustments                                                                    141             19,300
                                                                          --------------     --------------
Net Cash Provided by Operating Activities                                 $            7    $        18,780
                                                                          ==============    ===============
</TABLE>

See the Accompanying Notes to Financial Statements (Unaudited).
<PAGE>
<TABLE>
                          ML-LEE ACQUISITION FUND, L.P.
                   Statements of Changes in Partners' Captial
                             (Dollars in Thousands)
                                  (Unaudited)
 

<S>                                                                           <C>                   <C>            <C>
                                                                               Managing
                                                                                General              Limited
                                                                                Partner              Partners             Total
                                                                              ---------------    ---------------    ---------------

For the Three Months Ended March 31, 1999
Partners' Capital at January 1, 1999                                          $           379    $         3,235    $         3,614
Allocation of Net Investment Loss                                                          (1)              (133)              (134)
                                                                              ---------------    ---------------    ---------------
Partners' Capital at March 31, 1999                                           $           378    $         3,102    $         3,480
                                                                              ===============    ===============    ===============
</TABLE>

See the Accompanying Notes to Financial Statements (Unaudited).

<PAGE>
<TABLE>
<CAPTION>
                                                ML-LEE ACQUISITION FUND, L.P.
                                             SCHEDULE OF PORTFOLIO INVESTMENTS
                                                       MARCH 31, 1999
                                                    (DOLLARS IN THOUSANDS)
                                                          (Unaudited)
<S>                 <C>                                                                   <C>              <C>      <C>        <C>
                                                                                                                  Fair      % Of
                                                                                    Investment      Investment    Value    Total
Shares/Warrants     Investment                                                         Date           Cost      (Note 2) Investments
                 
                    TEMPORARY INVESTMENTS

                    COMMERCIAL PAPER

$3,560              General Electric Capital Services, 4.78% due 4/1/99              3/15/99             3,552     3,560      100.00
                    ------------------------------
                    TOTAL INVESTMENT IN COMMERCIAL PAPER                                                 3,552     3,560      100.00
                                                                                                      ------------------------------
                    TOTAL TEMPORARY INVESTMENTS                                                          3,552     3,560      100.00
                                                                                                      ------------------------------
                    TOTAL INVESTMENT PORTFOLIO                                                        $  3,552  $  3,560      100.00
                                                                                                      ==============================




</TABLE>
See the Accompanying Notes to Financial Statements (Unaudited).

<PAGE>
                          ML-LEE ACQUISITION FUND, L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                March 31, 1999


1.  Organization and Purpose

     ML-Lee  Acquisition  Fund, L.P. (the "Fund") was formed and the Certificate
of Limited  Partnership  was filed under the Delaware  Revised  Uniform  Limited
Partnership Act on April 1, 1987. The Fund's operations commenced on October 19,
1987.

     The Managing General Partner,  subject to the supervision of the Individual
General  Partners,  is  responsible  for  overseeing  and  monitoring the Fund's
investments.  Mezzanine Investments, L.P. (the "Managing General Partner"), is a
limited  partnership  in which  ML  Mezzanine  Inc.,  an  indirect  wholly-owned
subsidiary of Merrill Lynch & Co., Inc., is the general  partner,  and Thomas H.
Lee Advisers I (the "Investment Adviser"), an affiliate of Thomas H. Lee, is the
limited partner.  The Individual General Partners are Vernon R. Alden, Joseph L.
Bower and Stanley H. Feldberg (the "Independent General Partners") and Thomas H.
Lee.

     The Fund  elected to operate as a business  development  company  under the
Investment Company Act of 1940. Its primary investment  objective was to provide
current income and long-term  capital  appreciation  by investing in "Mezzanine"
securities  consisting  primarily  of  Subordinated  Debt  and  Preferred  Stock
combined  with an equity  participation  issued  in  connection  with  leveraged
acquisitions  or  other  leveraged  transactions.

     The term of the Fund expired on June 15, 1998 resulting in the  dissolution
of the Fund.  The Fund has an  additional  five years to liquidate its remaining
assets. As of March 31, 1999, the Fund has sold all of its remaining investments
in Portfolio Companies.  The last portfolio-related  asset held by the Fund is a
$1 million  (principal amount) Promissory Note related to the sale of the Fund's
interest in BeefAmerica Inc. The Promissory Note was written-down to zero during
1998. The Fund no longer generates  sufficient cash to pay current  obligations;
however the Fund has available  approximately $3.5 million as of March 31, 1999,
of cash reserves to cover future expenses  including all expenses related to the
winding up of the Fund's affairs such as administrative and custodial  expenses,
and audit,  tax and legal fees. Any remaining cash reserves in excess of amounts
required to pay the Fund's obligations prior to its termination (as discussed in
Note 11)  will be  distributed  as soon as  practicable  as a final  liquidating
distribution to Limited Partners.

2.  Significant Accounting Policies

Basis of Accounting

     For financial  reporting  purposes,  the records of the Fund are maintained
using the  accrual  method of  accounting.  For  Federal  income  tax  reporting
purposes,   the  results  of  operations  are  adjusted  to  reflect   statutory
requirements arising from book to tax differences.

Valuation of Investments

     Temporary  Investments  with  maturities of less than 60 days are stated at
amortized cost, which approximates market.

<PAGE>
Interest Receivable on Investments

     Since  the  Fund has hold all of its  remaining  investments  in  Portfolio
Companies,  the only  interest  the Fund  will  receive  will be the  result  of
temporary investments.

Investment Transactions

     The Fund records investment transactions on the date on which it obtains an
enforceable right to demand the securities or payment therefor. The Fund records
Temporary Investment transactions on the trade date.

     Realized  gains and losses on  investments  are  determined on the basis of
specific identification for accounting and tax purposes.

Loan Facility and Advisory Fees

     Loan  Facility and Advisory  Fees have been fully  amortized as of June 30,
1998.

Partners' Capital

     Partners' Capital represents the Fund's equity divided in proportion to the
Partners'  Capital  Contributions.   Profits  and  losses,  when  realized,  are
allocated  in  accordance  with  the  provisions  of the  Partnership  Agreement
summarized in Note 3.

3. Allocation of Profits and Losses

     Pursuant  to  the  Partnership   Agreement,   all  profits  from  Temporary
Investments  generally are  allocated 99% to the Limited  Partners and 1% to the
Managing  General Partner.  Profits from Mezzanine  Investments are, in general,
allocated as follows:

    first, if the capital  accounts of any partners have negative  balances,  to
    such  partners in  proportion  to the  negative  balances  in their  capital
    accounts until the balances of all such capital accounts equal zero,

    second,  99% to the Limited  Partners and 1% to the Managing General Partner
    until the sum allocated to the Limited  Partners  equals any previous losses
    allocated  together with a cumulative  Priority Return of 10% on the average
    daily  balance of Mezzanine  securities,  and any  outstanding  Compensatory
    Payments,

    third,  69% to the Limited  Partners and 31% to the Managing General Partner
    until the Managing  General  Partner has  received 21% of the total  profits
    allocated,

    thereafter,  79% to the Limited  Partners and 21% to the  Managing  General
    Partner.

    Losses will be allocated in reverse  order of profits  previously  allocated
and  thereafter  99% to the  Limited  Partners  and 1% to the  Managing  General
Partner.
<PAGE>
4.  Leverage

     The Fund entered into an amended credit  agreement,  dated as of August 13,
1991 (the "Credit  Facilities"),  with a lending group led by the First National
Bank of Chicago ("First Chicago"), which provided the Fund with a maximum credit
facility of $140 million. The Credit Facilities consisted of a $100 million term
loan and a $40 million  secured  revolving  credit line. In October of 1993, the
Fund amended the Credit  Facilities  enabling it to make prepayments of the term
loan at any time and without any  corresponding  reduction to the revolving line
of  credit.  As a result of  paydowns  of the term loan the  Fund's  outstanding
balance was paid in full as of March 29, 1994. The Credit Facilities were due to
expire on July 31, 1998,  however due to the  expiration of the term of the Fund
on June 15, 1998, and in order to stop  incurring  Unused  Commitment  Fees, the
Credit Facilities were amended to expire as of June 30, 1998.

     In connection with the Credit  Facilities,  the Fund incurred the following
loan fees:

     Nonrecurring  loan advisory and loan facility fees of  $4,441,580,  paid to
     First  Chicago  in 1991 in  connection  with  the  creation  of the  credit
     facility,  which were amortized over the life of the credit  facility.  The
     Credit Facility expired on June 30, 1998.

     For the three months ended  March 31, 1999 and 1998,   the Fund  incurred
     $0 and $172,733, respectively, in total loan fees.

5.   Investment Advisory Fee

     The  expiration  of the  Fund's  term on June  15,  1998,  has  caused  the
Management Agreement between the Investment Adviser and the Fund to expire. As a
result, the Investment Adviser is no longer receiving  compensation for services
rendered  effective July 1, 1998,  however the Investment  Adviser has agreed to
provide  investment  advisory  services  to  the  Fund  as  needed  until  final
liquidation.

     The  Investment  Adviser  provides for the  identification,  management and
liquidation of investments for the Fund. As compensation  for services  rendered
to the Fund, the Investment  Adviser received a quarterly fee at the annual rate
of 1% of assets under management (net offering  proceeds,  reduced by cumulative
capital  reductions,  plus outstanding bank borrowing as specified in the Fund's
Partnership  Agreement),  with  a  minimum  annual  fee  of  $1.2  million.  The
Investment Advisory Fee was calculated and paid quarterly,  in advance.  For the
three months ended March 31, 1998, the Fund paid $300,000 in Investment Advisory
Fees to Thomas H. Lee  Advisors  I. As of July 1, 1998,  the Fund no longer pays
Investment Advisory Fees to Thomas H. Lee Advisors I.

6.  Fund Administration Fee and Expenses

     ML Fund Administrators Inc. (the "Fund Administrator") (an affiliate of the
Managing General Partner) performs the operational and  administrative  services
necessary for the management of the Fund.  Beginning  October 19, 1995, the Fund
Administration Fee is calculated at an annual fee of $300,000 plus out-of-pocket
expenses  incurred  by the Fund  Administrator,  as  described  below.  The Fund
Administration  Fee is paid  quarterly,  in advance.  For the three months ended
March 31, 1999 and 1998, the Fund paid $75,000 in Fund Administration Fees.

     Beginning  October 19, 1995, in accordance with the Partnership  Agreement,
the  Fund   Administrator   is  being   reimbursed  by  the  Fund  for  100%  of
administrative  expenses incurred.  Actual out-of-pocket expenses ("reimbursable
expenses")  primarily consist of printing,  audits, tax preparation,  legal fees
and expenses,  and custodian fees. Total out-of-pocket  expenses incurred by the
Fund for the three  months  ended  March  31,  1999 and 1998  were  $67,972  and
$133,055, respectively.

<PAGE>
7.   Independent General Partners' Fees and Expenses

     As  compensation  for  services  rendered  to the  Fund,  each of the three
Independent   General   Partners   receives   $40,000   annually  in   quarterly
installments,  $1,000 for each  meeting of the  General  Partners  attended  and
$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) plus reimbursement for any
legal and  out-of-pocket  expenses.  Compensation  for the  Independent  General
Partners is reviewed annually by the Individual General Partners.

     For the three  months  ended  March 31,  1999 and 1998,  the Fund  incurred
$33,121 and $39,532, respectively, in Independent General Partners' Fees and
Expenses.

8. Litigation

     On August 2,  1996,  an action  was  commenced  against  General  Nutrition
Companies,  Inc.  ("GNC"),  its  officers,  directors  and certain of its former
shareholders,  including the Fund, in the United States  District  Court for the
Western District of Pennsylvania  (the "Court").  Plaintiffs  assert that GNC is
liable for  violations of Sections 11 and 12(a)(2) of the Securities Act of 1933
and  Section  1-501(a)  of  the  Pennsylvania  Securities  Act,  arising  out of
allegedly  false and misleading  statements in the  prospectus and  registration
statement for the February 7, 1996 public offering of GNC common stock,  and for
violations of Section 10(b) of the Securities Exchange Act of 1934 and negligent
misrepresentation   arising  out  of  allegedly  false  and  misleading   public
statements  during the period from the public  offering  through  May 28,  1996.
Plaintiffs also allege that certain officers, directors and shareholders of GNC,
including the Fund, as well as the  underwriters  for the public  offering,  are
liable for certain of such  violations of the federal and state  securities laws
and/or  control  person  liability  in  connection   therewith,   and  negligent
misrepresentation. Plaintiffs seek certification of the action as a class action
purportedly  on behalf of all  persons,  other than  defendants,  who  purchased
shares of GNC common stock during the proposed class action period from February
7, 1996 through May 28, 1996. After the defendants filed a motion to dismiss the
action  in  its  entirety,  the  plaintiffs  filed  an  amended  complaint.  The
defendants  thereafter  filed a motion to dismiss the amended  complaint  in its
entirety,  which motion has been fully  briefed.  The  defendants in this action
believe that the claims against them are without merit.  In the opinion of legal
counsel, the outcome of this case is not determinable at this time. On March 30,
1998, the Court entered an order adopting the Report and  Recommendation  of the
Magistrate Judge granting defendants' motion to dismiss the amended complaint in
its entirety with prejudice.  Plaintiffs  thereafter filed an appeal,  which has
been  briefed  and argued by both  plaintiffs  and  defendants.  The parties are
awaiting the Court's decision on the appeal.

<PAGE>
9.  Related  Party Transactions

     Certain of the Mezzanine Investments and Bridge Investments which were made
by the Fund involve  co-investments with entities affiliated with the Investment
Adviser.  Such  co-investments are generally  prohibited absent exemptive relief
from the Securities and Exchange Commission (the  "Commission").  As a result of
these   affiliations   and  the  Fund's   expectation   of   engaging   in  such
co-investments,  the Fund sought an exemptive order from the Commission allowing
such  co-investment,  which was received on September  23, 1987.  An  additional
exemptive order allowing  co-investment  with ML-Lee  Acquisition  Fund II, L.P.
("Fund  II")  and  ML-Lee  Acquisition  Fund  (Retirement   Accounts)  II,  L.P.
("Retirement  Fund") was received from the  Commission on September 1, 1989. The
Fund's investments in Managed Companies, and in certain cases its investments in
Non-Managed Companies,  typically involve the entry by the Fund and other equity
security  holders into  stockholders'  agreements.  While the provisions of such
stockholders'  agreements  vary,  such  agreements may include  provisions as to
corporate  governance,  registration  rights,  rights  of  first  offer or first
refusal,  rights to participate in sales of securities to third parties,  rights
of majority stockholders to compel minority stockholders to participate in sales
of securities to third parties, transfer restrictions and preemptive rights.

     Thomas H. Lee  Company,  a sole  proprietorship  owned by Thomas H. Lee, an
Individual  General  Partner  of the Fund  and an  affiliate  of the  Investment
Adviser,  typically performs certain  management  services for Managed Companies
and  receives  management  fees in  connection  therewith,  usually  pursuant to
written  agreements with such companies.  In addition,  certain of the Portfolio
Companies  have  contractual  or other  relationships  pursuant to which they do
business with one another.

     Merrill  Lynch,  Pierce,  Fenner  &  Smith  Incorporated  ("MLPF&S")  is an
affiliate of the Managing General Partner. MLPF&S and certain of its affiliates,
in the ordinary course of their business, perform various financial services for
various portfolio  companies of the Fund, which may include  investment  banking
services,  broker/dealer  services  and  economic  forecasting,  and  receive in
consideration   therewith   various  fees,   commissions   and   reimbursements.
Furthermore,  MLPF&S  and its  affiliates  or  investment  companies  advised by
affiliates of MLPF&S may, from time to time,  purchase or sell securities issued
by portfolio  companies of the Fund in connection with their ordinary investment
operations.

     During the first quarter of 1999, the Managing  General Partner received no
cash distributions.

10.  Reserves

     In February  1993,  the Fund  established a $15 million  reserve to provide
funds for follow-on  investments and to pay expenses.  On February 12, 1998, the
Independant  General Partners approved an additional reserve of $1.65 million to
fund anticipated cash shortfalls. This reserve was established from the proceeds
received from the sale of Stanley  Furniture Common Stock in January 1998. 

     Because  the  Fund no  longer  generates  sufficient  cash  to pay  current
obligations,  the Fund has  approximately  $3.5  million  as of March 31,  1999,
available of these  remaining cash reserves to cover future  expenses  including
all  expenses  related  to  the  winding  up  of  the  Fund's  affairs  such  as
administrative and custodial  expenses,  and audit and tax preparation fees. Any
remaining  cash  reserves  in  excess  of  amounts  required  to pay the  Fund's
obligations  prior to its termination will be distributed as soon as practicable
as a final liquidating distribution to Limited Partners.

11. Income Taxes 

     No  provision  for income taxes has been made because all income and losses
are  allocated to the Fund's  partners for  inclusion  in their  respective  tax
returns.

     Pursuant  to the  Statement  of  Financial  Accounting  Standards  No.  109
Accounting for Income Taxes,  the Fund is required to disclose any difference in
the tax basis of the Fund's assets and liabilities  versus the amounts  reported
in the financial  statements.  As of March 31, 1999, the tax basis of the Fund's
assets are greater than the amounts  reported in the financial  statements by $1
million.  This  difference  is  primarily  attributable  to the  write-off  of a
receivable which has not been recognized for tax purposes.

<PAGE>


Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations

Liquidity & Capital Resources

     The term of the Fund expired on June 15, 1998 resulting in the  dissolution
of the Fund.  The Fund has five  additional  years to  liquidate  its  remaining
assets.  As of July 1, 1998, the Fund no longer pays the Investment Adviser
an Investment Advisory Fee. 

     The Fund no longer  generates  sufficient cash to pay current  obligations;
however the Fund has  available  approximately  $3.5 million of cash reserves to
cover future  expenses  including all expenses  related to the winding up of the
Fund's affairs such as administrative and custodial expenses,  and audit and tax
preparation  fees. Any proceeds received from the Promissory Note related to the
Fund's  investment in BeefAmerica Inc. as well as any remaining cash reserves in
excess  of  amounts  required  to  pay  the  Fund's  obligations  prior  to  its
termination  will be distributed  as soon as practicable as a final  liquidating
distribution to Limited Partners.

     On  August  13,  1991,  the Fund  completed  a  refinancing  of its  credit
agreement  with a lending group led by The First  National Bank of Chicago.  The
agreement provided the Fund with a maximum of $140 million, consisting of a $100
million term loan and a $40 million  revolving  credit line. The Credit Facility
was due to expire on July 31, 1998,  however,  due to the expiration of the term
of the Fund on June 15, 1998, and in order to stop incurring Unused  Committment
Fees the Credit agreement was amended to instead expire as of June 30, 1998.

     Because  all of  the  Fund's  debt  investments  were  previously  sold  or
redeemed, interest and other income expected to be received by the Fund will not
be sufficient to cover the Fund's  expenses.  To fund the anticipated  cash flow
shortfall  in the near future and to maintain  adequate  reserves  for  possible
follow-on  investments  and  expenses,  the Fund  reserved  $15  million  of the
proceeds  received from the Playtex  notes sale in February,  1993. A portion of
the reserve was used to make follow-on investments in American Health Companies,
Duro-Test Corp.,  Chadwick-Miller,  Signature  Brands USA and Petco,  along with
distributions to partners totalling $1.4 million. In addition,  $2.9 million was
utilized  from the  reserve to pay down a portion of the First  Chicago  loan on
January 6, 1994. In February 1998, the Independent  General Partners approved an
additional  reserve of $1.65  million  which has been reserved from the proceeds
received from the sale of Stanley  Furniture in January  1998.  This reserve was
established  to fund  anticipated  cash  shortfalls  in the  future.  The Fund's
reserve balance as of May 14, 1999 was approximately $3.4 million, which is made
up of cash and temporary investments.

Results of Operations

Investment Income and Expenses

     For the three months ended March 31,  1999,  the Fund had a net  investment
loss of $134,730 as compared to a net  investment  loss of $520,021 for the same
period in 1998. The total investment  income earned on investments for the three
months ended March 31, 1999 and 1998 was $41,425 and $203,398, respectively, all
of which was earned from Temporary Investments.

     The major expense for the period consisted of Fund  Administration Fees and
Reimbursable Administrative Expenses.

     As a result of the expiration of the Fund's term, the Investment Adviser is
no longer receiving compensation for services rendered,  however, the Investment
Adviser has agreed to provide investment advisory services to the Fund as needed
until final liquidation.  Total Investment  Advisory Fees paid to the Investment
Adviser for the three  months  ended March 31,  1998 was  $300,000.  The fee was
calculated  at an  annual  rate of 1% of assets  under  management,  subject  to
certain  reductions  as specified  in the Fund's  Partnership  Agreement  with a
minimum annual payment of $1,200,000.

     Beginning October 19, 1995, in accordance with Partnership  Agreement,  the
Fund  Administration  Fee  changed  to an annual  fee of  $300,000  plus 100% of
Reimbursable  Administrative  Expenses (accounting,  printing,  tax preparation,
legal fees and expenses, and other administrative services) incurred by the Fund
Administrator.  For the three  months  ended March 31,  1999 and 1998,  the Fund
Administration Fee was $75,000. For the same period, Reimbursable Administration
Expenses totalled $67,972 and $133,055, respectively.

     Loan fees  consist  of fees on the unused  portion of the Fund's  facility,
loan  administration  fees,  amortization of the loan advisory and facility fees
and various  miscellaneous fees attributable to the facility.  Loan fees for the
three months ended March 31, 1998 totalled $172,733.
<PAGE>
Net Assets
  
     The Fund's net assets  decreased by $134,730  during the three months ended
March 31, 1999, due to a net investment loss of $134.730.
     
Unrealized Appreciation and Depreciation on Investments

     For the three months ended March 31, 1999,  the Fund recorded no unrealized
appreciation.  This compares to a net unrealized  appreciation  of $27.4 million
during the 1998 period.
       
Realized Gains and Losses

     For the  three  months  ended  March 31,  1999,  the Fund  recorded  no net
realized losses on investments as compared to a net realized loss of $17,201,622
for the same period in 1998.

 Cash Distributions

     Because all of the Fund's debt holdings were  previously  sold or redeemed,
remaining  portfolio  interest income expected to be received by the Fund is not
sufficient to cover the Fund's expenses.  As a result,  any income received will
be used to pay Fund expenses and will not be available for distribution.

     Should a Limited  Partner  decide to sell his Units,  any such sale will be
recorded  on the  books  and  records  of the  Fund  quarterly,  only  upon  the
satisfactory  completion and acceptance of the Fund's transfer documents.  There
can be no assurances  that such  transfer will be effected  before any specified
date. Additionally,  pursuant to the Partnership Agreement,  until a transfer is
recognized,  the Limited  Partner of record (i.e. the transferor) is entitled to
receive all the benefits and burdens of ownership of Units,  and any  transferee
has no rights to distributions  of sale proceeds  generated at any time prior to
the recognition of the transfer and assignment. Accordingly,  Distributable Cash
from  Investments for a quarter and  Distributable  Capital  Proceeds from sales
after  transfer or assignment  have been entered into,  but before such transfer
and  assignment is  recognized,  would be payable to the  transferor and not the
transferee.

Year 2000 Compliance Initiative

     The year 2000  ("Y2K")  problem is the result of a  widespread  programming
technique that causes computer  systems to identify a date based on the last two
numbers of a year,  with the  assumption  that the first two numbers of the year
are "19". As a result,  the year 2000 would be stored as "00", causing computers
to incorrectly interpret the year as 1900. Left uncorrected, the Y2K problem may
cause   information   technology   systems   (e.g.,   computer   databases)  and
non-information  technology systems (e.g.,  elevators) to produce incorrect data
or cease operating completely.

     Overall,  the  Fund  believes  that it has  identified  and  evaluated  its
internal Y2K problem and that it is devoting sufficient  resources to renovating
technology systems that are not already Y2K compliant. The Fund has been working
with third-party  software vendors to ensure that computer  programs utilized by
the Fund are Y2K compliant. In addition, the Fund has contacted third parties to
ascertain  whether these  entities are addressing the Y2K issue within their own
operation.

     ML Fund Administrators, Inc. an indirect wholly owned subsidiary of Merrill
Lynch  and  Co.,  Inc.   ("Merrill   Lynch"),   is  responsible   for  providing
administrative   and  accounting   services   necessary  to  support  Fund  II's
operations,  including maintenance of the books and records,  maintenance of the
partner database,  issuance of financial reports and tax information to partners
and  processing  distribution  payments  to  partners.  In 1995,  Merrill  Lynch
established  the Year 2000  Compliance  Initiative,  which is an  enterprisewide
effort (of which ML Fund  Administrators  Inc.,  is a part) to address the risks
associated  with the Y2K problem,  both internal and external.  The  integration
testing phase,  which will occur  throughout  1999,  validates that a system can
successfully  interface with both internal and external  systems.  Merrill Lynch
continues to survey and communicate with third parties whose Year 2000 readiness
is  important  to the  company.  Based on the  nature  of the  response  and the
importance  of the product or service  involved,  Merrill  Lynch  determines  if
additional testing is needed.
<PAGE>

     Merrill Lynch  participated  in further  industrywide  testing in March and
April  1999  sponsored  by the  Securities  Industry  Association.  These  tests
involved an expanded number of firms, transactions, and conditions compared with
those previously conducted.

     Although the Fund has not finally  determined the cost  associated with its
Year 2000  readiness  efforts,  the Fund does not anticipate the cost of the Y2K
problem  to be  material  to its  business,  financial  condition  or results of
operations  in any  given  year.  However,  there can be no  guarantee  that the
systems  of other  companies  on which the  Fund's  systems  rely will be timely
converted,  or that a failure to convert by another company or a conversion that
is incompatible with the Fund's systems would not have a material adverse effect
on the Fund's business, financial condition or results of operations.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

     As of  March  31,  1999,  the  Fund  maintains  a  portion  of its  cash
equivalents in financial instruments with original maturities of three months or
less.  These  financial  instruments are subject to interest rate risk, and will
decline in value if interest rates increase.  A significant increase or decrease
in  interest  rates  would not have a material  effect on the  Fund's  financial
position.
<PAGE>

Part II - Other Information

Item 1.   Legal Proceedings

    On August 2,  1996,  an action  was  commenced  against  General  Nutrition
Companies,  Inc.  ("GNC"),  its  officers,  directors  and certain of its former
shareholders,  including the Fund, in the United States  District  Court for the
Western District of Pennsylvania  (the "Court").  Plaintiffs  assert that GNC is
liable for  violations of Sections 11 and 12(a)(2) of the Securities Act of 1933
and  Section  1-501(a)  of  the  Pennsylvania  Securities  Act,  arising  out of
allegedly  false and misleading  statements in the  prospectus and  registration
statement for the February 7, 1996 public offering of GNC common stock,  and for
violations  of  Section  10 (b) of  the  Securities  Exchange  Act of  1934  and
negligent misrepresentation arising out of allegedly false and misleading public
statements  during the period from the public  offering  through  May 28,  1996.
Plaintiffs also allege that certain officers, directors and shareholders of GNC,
including the Fund, as well as the  underwriters  for the public  offering,  are
liable for certain of such  violations of the federal and state  securities laws
and/or  control  person  liability  in  connection   therewith,   and  negligent
misrepresentation. Plaintiffs seek certification of the action as a class action
purportedly  on behalf of all  persons,  other than  defendants,  who  purchased
shares of GNC common stock during the proposed class action period from February
7, 1996 through May 28, 1996. After the defendants filed a motion to dismiss the
action  in  its  entirety,  the  plaintiffs  filed  an  amended  complaint.  The
defendants  thereafter  filed a motion to dismiss the amended  complaint  in its
entirety,  which motion has been fully  briefed.  The  defendants in this action
believe that the claims against them are without merit.  In the opinion of legal
counsel, the outcome of this case is not determinable at this time. On March 30,
1998, the Court entered an order adopting the Report and  Recommendation  of the
Magistrate Judge granting defendants' motion to dismiss the amended complaint in
its entirety with prejudice.  Plaintiffs  thereafter filed an appeal,  which has
been  briefed  and argued by both  plaintiffs  and  defendants.  The parties are
awaiting the Court's decision on the appeal.
    
     Items 2 - 4 are  herewith  omitted as the  response  to all items is either
none or not applicable.

Item 5. Other Information

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits:                      NONE
    
(b) Reports on form 8-K:           NONE

<PAGE>

                                   SIGNATURES



Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  Registrant  has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on this 14th day of May 1999.


                                      ML-LEE ACQUISITION FUND, L.P.

                                      By:      Mezzanine Investments, L.P.
                                               Managing General Partner

                                      By:      ML Mezzanine Inc.
                                               its General Partner




                                      /s/ Robert J. Remick
                                      --------------------------------
Dated:  May 14, 1999                  Robert J. Remick
                                      ML Mezzanine Inc.
                                      Vice President and Treasurer
                                     (Principal Financial Officer of Registrant)