UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

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

                For the Quarterly Period Ended September 30, 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) 236-6577

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 ___.




<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 September 30, 1999 and December 31, 1998

Statements of Operations - For the Three and Nine Months Ended
  September 30, 1999 and 1998

Statements of Changes in Net Assets - For the Nine Months Ended
  September 30, 1999 and 1998

Statements of Cash Flows - For the Nine Months Ended
  September 30, 1999 and 1998

Statement  of  Changes in  Partners'  Capital - For the Nine  Months  Ended
  September 30, 1999

Schedule of Portfolio Investments - September 30, 1999

Notes to Financial Statements


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

Item 3.  Quantitative and Qualitative Disclosure About Market Risk


PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

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

Item 6.  Exhibits and Reports on Form 8-K

<PAGE>
<TABLE>
<CAPTION>

                                                 ML-LEE ACQUISITION FUND, L.P.
                                    Statements of Assets, Liabilities and Partners' Capital
                                                   (Dollars in Thousands)
                                                       (Unaudited)

                                                                                   September 30, 1999          December 31, 1998
                                                                                   ------------------          -----------------
<S>                                                                                <C>                         <C>
Assets:
Investments - Notes 2, 11
    Temporary Investments, at amortized cost (cost $3,120 at
         September 30, 1999 and $3,760 at December 31, 1998)                       $            3,140          $           3,760
Cash                                                                                              152                          3
Note Receivable (Net of reserve of $1,000) - Note 1, 8                                              -                          -
                                                                                   ------------------          -----------------
Total Assets                                                                       $            3,292          $           3,763
                                                                                   ==================          =================

Liabilities and Partners' Capital:

Liabilities
    Legal and Professional Fees Payable                                            $                4          $               1
    Reimbursable Administrative Expenses Payable - Note 6                                         102                        125
    Independent General Partner Expenses Payable - Note 7                                          24                         23
                                                                                   ------------------          -----------------
Total Liabilities                                                                                 130                        149
                                                                                   ------------------          -----------------
Partners' Capital - Note 2
    Managing General Partner                                                                      374                        379
    Limited Partners (487,489 Units)                                                            2,788                      3,235
                                                                                   ------------------          -----------------
Total Partners' Capital                                                                         3,162                      3,614
                                                                                   ------------------          -----------------
Total Liabilities and Partners' Capital                                            $            3,292          $           3,763
                                                                                   ==================          =================
</TABLE>
See the Accompanying Notes to Financial Statements (Unaudited).

<PAGE>
<TABLE>
<CAPTION>

                                                    ML-LEE ACQUISITION FUND, L.P.
                                                       Statements of Operations
                                                        (Dollars in Thousands)
                                                              (Unaudited)

                                                                       For the Three Months Ended        For the Nine Months Ended
                                                                      -----------------------------    -----------------------------
                                                                      September 30,   September 30,    September 30,   September 30,
                                                                          1999            1998              1999            1998
                                                                      -------------   -------------    -------------   -------------
<S>                                                                   <C>             <C>              <C>             <C>
Investment Income - Notes 2, 11
Interest                                                              $           1   $           1    $           1   $         16
Discount                                                                         40             103              123            527
Other                                                                             -               -                -              1
                                                                      -------------   -------------    -------------   ------------
    Total Investment Income                                                      41             104              124            544
                                                                      -------------   -------------    -------------   ------------
Expenses:
Investment Advisory Fee - Note 5                                                  -               -                -            600
Fund Administration Fee - Note 6                                                 75              75              225            225
Provision for Uncollectable Receivable - Note 1,8                                 -               -                -          1,000
Loan Fees - Notes 2, 4                                                            -               -                -            403
Independent General Partners' Fees and Expenses - Note 7                         34              33               97            112
Legal and Professional Fees                                                      29              29               29             29
Reimbursable Administrative Expenses - Note 6                                   102             137              225            428
Insurance Expense                                                                 -               -                -              7
                                                                      -------------   -------------    -------------   ------------
    Total Expenses                                                              240             274              576          2,804
                                                                      -------------   -------------    -------------   ------------

Net Investment Loss                                                            (199)           (170)            (452)        (2,260)

Net Realized Loss on Investments                                                  -         (16,652)               -         (9,557)

Net Change in Unrealized Appreciation (Depreciation)
     on Investments
        Publicly Traded Securities                                                -               -                -        (18,959)
        Nonpublic Securities                                                      -          16,652                -         37,906
                                                                      -------------   -------------    -------------   ------------
             Subtotal                                                             -          16,652                -         18,947
                                                                      -------------   -------------    -------------   ------------
Net Increase (Decrease) in Net Assets
   Resulting From Operations                                          $        (199)   $       (170)   $        (452)  $      7,130
                                                                      =============    ============    =============   ============
</TABLE>


See the Accompanying Notes to Financial Statements (Unaudited).

<PAGE>
<TABLE>
<CAPTION>

                                              ML-LEE ACQUISITION FUND, L.P.
                                           Statements of Changes in Net Assets
                                                (Dollars in Thousands)
                                                     (Unaudited)

                                                                                         For the Nine Months Ended
                                                                                ----------------------------------------------
                                                                                September 30, 1999          September 30, 1998
                                                                                ------------------          ------------------
<S>                                                                             <C>                         <C>
From Operations:

  Net Investment Loss                                                           $             (452)         $           (2,260)
  Net Realized Loss on Investments                                                               -                      (9,557)
  Net Change in Unrealized Depreciation on Investments                                           -                      18,947
                                                                                ------------------          ------------------

  Net Increase (Decrease) in Net Assets Resulting from Operations                             (452)                      7,130
  Cash Distributions to Partners                                                                 -                     (60,813)
                                                                                ------------------          ------------------

  Total Decrease                                                                              (452)                    (53,683)

Net Assets:
  Beginning of Period                                                                        3,614                      57,446
                                                                                ------------------          ------------------

  End of Period                                                                 $            3,162          $            3,763
                                                                                ==================          ==================
</TABLE>


See the Accompanying Notes to Financial Statements (Unaudited).


<PAGE>
<TABLE>
<CAPTION>
                                                ML-LEE ACQUISITION FUND, L.P.
                                                  Statements of Cash Flows
                                                   (Dollars in Thousands)
                                                        (Unaudited)


                                                                                          For the Nine Months Ended
                                                                                ----------------------------------------------
                                                                                September 30, 1999          September 30, 1998
                                                                                ------------------          ------------------
<S>                                                                             <C>                         <C>
Increase in Cash

Cash Flows From Operating Activities:
  Interest, Discount and Other Income                                           $              104          $              606
  Investment Advisory Fee                                                                        -                        (600)
  Fund Administration Fee                                                                     (225)                       (225)
  Legal and Professional Fees                                                                  (26)                        (94)
  Loan Fees and Expenses                                                                         -                         (17)
  Independent General Partners' Fees and Expenses                                              (96)                       (112)
  (Purchase) Sale of Temporary Investments, Net                                                640                      14,116
  Reimbursable Administrative Expenses                                                        (248)                       (408)
  Proceeds from Sale of Portfolio Company Investments                                            -                      47,556
                                                                                ------------------          ------------------
Net Cash Provided by Operating Activities                                                      149                      60,822
                                                                                ------------------          ------------------
Cash Flows From Financing Activities:
  Cash Distributions to Partners                                                                 -                     (60,813)
                                                                                ------------------          ------------------
Net Cash Used in Financing Activities                                                            -                     (60,813)
                                                                                ------------------          ------------------
Net Increase in Cash                                                                           149                           9
Cash at Beginning of Period                                                                      3                           1
                                                                                ------------------          ------------------
Cash at End of Period                                                           $              152          $               10
                                                                                ==================          ==================

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

Net Investment Loss                                                             $             (452)         $           (2,260)

Adjustments to Reconcile Net Investment Loss
   to Net Cash Provided by Operating Activities

   Decrease in Investments                                                                     640                      68,340
   Decrease in Receivable for Investments Sold
     (Net of Allowance)                                                                          -                       3,888
  (Increase) Decrease in Accrued Interest,
     Dividend and Discount Receivables                                                         (20)                         62
   Decrease in Prepaid Expenses                                                                  -                         391
   Increase in Independent General Partners' Fees Payable                                        1                           -
   Increase (Decrease) in Reimbursable Administrative Expenses Payable                         (23)                         21
   Increase (Decrease) in Legal and Professional Fees Payable                                    3                         (63)
   Net Realized Loss on Investments                                                              -                      (9,557)
                                                                                ------------------          ------------------
Total Adjustments                                                                              601                      63,082
                                                                                ------------------          ------------------
Net Cash Provided by Operating Activities                                       $              149          $           60,822
                                                                                ==================          ==================

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


<PAGE>
<TABLE>
<CAPTION>

                                                ML-LEE ACQUISITION FUND, L.P.
                                         Statements of Changes in Partners' Capital
                                                   (Dollars in Thousands)
                                                        (Unaudited)

                                                                               Managing
                                                                                General                Limited
                                                                                Partner                Partners             Total
                                                                             ------------            ------------        ----------
<S>                                                                          <C>                     <C>                 <C>
For the The Nine Months Ended September 30, 1999

Partners' Capital at January 1, 1999                                         $        379            $      3,235        $    3,614
Allocation of Net Investment Loss                                                      (5)                   (447)             (452)
                                                                             ------------            ------------        ----------
Partners' Capital at September 30, 1999                                      $        374            $      2,788        $    3,162
                                                                             ============            ============        ==========
</TABLE>
See the Accompanying Notes to Financial Statements (Unaudited).

<PAGE>
<TABLE>
<CAPTION>
                                                  ML-LEE ACQUISITION FUND, L.P.
                                               Schedule of Portfolio Investments
                                                      September 30, 1999
                                                    (Dollars in Thousands)
                                                        (Unaudited)

                                                                                                               Fair        % Of
 Principal                                                                   Investment      Investment       Value        Total
 Amount/Shares   Investment                                                    Date             Cost         (Note 2)    Investments

<S>              <C>                                                         <C>              <C>            <C>         <C>

                 TEMPORARY INVESTMENTS

                 COMMERCIAL PAPER

$  3,140         General Electric Capital Services, 5.20% due 10/1/99         8/17/99        $   3,120      $   3,140       100.00%
                                                                                             --------------------------------------
                 TOTAL INVESTMENT IN COMMERCIAL PAPER                                        $   3,120      $   3,140       100.00%
                                                                                             --------------------------------------
                 TOTAL TEMPORARY INVESTMENTS                                                 $   3,120      $   3,140       100.00%
                                                                                             --------------------------------------
                 TOTAL INVESTMENT PORTFOLIO                                                  $   3,120      $   3,140       100.00%
                                                                                             ======================================






</TABLE>

See the Accompanying Notes to Financial Statements (Unaudited).
<PAGE>
                          ML-LEE ACQUISITION FUND, L.P.
                          Notes to Financial Statements
                               September 30, 1999
                                   (Unaudited)

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 September 30, 1999, 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., which was written-down to zero during
1998 (refer to Note 8 titled "Investment Transactions" for further information).

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.  The preparation of financial
statements in accordance with generally accepted accounting  principles requires
management  to make  estimates  and  assumptions  that  affect the  amounts  and
disclosures in the financial statements. Actual reported results could vary from
these estimates.

Valuation of Investments

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


Interest Receivable on Investments

     Since  the  Fund has sold 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 recorded investment  transactions on the date on which it obtained
an  enforceable  right to demand the securities or payment  therefore.  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  and does not represent the Partners'  Capital
Accounts.  Profits and losses,  when realized,  are allocated in accordance with
the provisions of the Partnership Agreement summarized in Note 3.

Interim Financial Statements

     The financial  information included in this report as of September 30, 1999
and for the period then ended has been prepared by  management  without an audit
by independent  certified public  accountants.  The results for the period ended
September  30,  1999  are  not  necessarily  indicative  of the  results  of the
operations  expected for the year and reflect  adjustments,  all of a normal and
recurring  nature,  necessary  for the fair  presentation  of the results of the
interim  period.  In the opinion of the Managing  General  Partner all necessary
adjustments  have been made to the  aforementioned  financial  information for a
fair presentation in accordance with generally accepted accounting principles.

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; and

     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.

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  $4,442,000,  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.

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 $1,200,000. The Investment
Advisory Fee was calculated and paid quarterly,  in advance. 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.

     In an attempt to mitigate  certain  administrative  costs of the Fund,  the
Fund  Administrator has agreed to waive its  administration  fee; such waiver to
take  effect  for the  quarterly  period  commencing  October  1,  1999 and each
quarterly period thereafter, unless and until such waiver is rescinded. However,
no such waiver shall apply to any reimbursable expenses of the Fund.

     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
Administrative   Expenses")   primarily   consist  of  printing,   audits,   tax
preparation,  legal fees and expenses,  and custodian fees.

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.

     In an attempt to mitigate  certain  administrative  costs to the Fund,  the
three Independent  General Partners have agreed to waive their  compensation for
services  rendered to the Fund;  such  waiver to take  effect for the  quarterly
period commencing October 1, 1999 and each quarterly period  thereafter,  unless
and until such waiver is rescinded.  However,  no such waiver shall apply to any
reimbursable expenses of the Fund.

8. Investment Transactions

     In 1996, BeefAmerica, Inc. sold all of the capital stock of its subsidiary,
BeefAmerica  Operating Company,  Inc., in return for cash and preferred stock in
the acquiror.  The Fund, as  BeefAmerica  Inc.'s  primary  creditor,  was paid a
portion of the cash and preferred stock received by BeefAmerica Inc., in partial
satisfaction of its secured claim against BeefAmerica, Inc.

     On March 3,  1998,  the Fund sold the  preferred  stock to Lajara II LLC, a
limited  liability  company  owned by the  management of  BeefAmerica  Operating
Company,  Inc., in return for a promissory note in the amount of $1,000,000 (the
"Promissory Note"). On October 8, 1998,  BeefAmerica,  Inc. filed for bankruptcy
protection  under Chapter 11 of the United States  Bankruptcy  Code. As a result
the Fund, at that time,  determined the value of the Promissory  Note to be zero
and fully reserved against it.

     In May  1999,  BeefAmerica,  Inc.  was sued in  federal  district  court in
Nebraska  by  a  purported  class  of  individuals  and  a  related  union  (the
"Lawsuit").  The Lawsuit alleges,  among other things,  that  BeefAmerica,  Inc.
guaranteed  certain  retiree  medical  benefits  due  to  these  individuals  by
BeefAmerica   Operating  Company,   Inc.  and  that  certain  payments  made  by
BeefAmerica,  Inc.  in 1996 to its  "insiders"  were  fraudulent  transfers.  In
response to the Lawsuit, on September 10, 1999, BeefAmerica,  Inc. (now known as
BAI Liquidating Corp. ("BAI")) filed a voluntary petition under Chapter 7 of the
United States Bankruptcy Court for the District of Delaware (the  "Bankruptcy").
As BAI's primary  creditor,  the Fund has incurred and anticipates  that it will
continue to incur,  expenses  related to the Bankruptcy case. It is uncertain at
this time what the effect of the Lawsuit or the Bankruptcy will have on the Fund
or the final  liquidation of the Fund's  remaining  assets,  the timing of which
cannot be determined at the present date.

9. 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 of this action
believe that the claims against them are without  merit.  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.  The judgment of dismissal  was affirmed by the Third
Circuit of Appeals on August 10, 1999.

10.  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 involved the entry by the Fund and other equity
security  holders into  stockholders'  agreements.  While the provisions of such
stockholders' agreements varied, some of these agreements included 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  performed 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  had  contractual  or other  relationships  pursuant to which they did
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,  performed various financial  services
for  various  portfolio  companies  of the Fund,  which may  include  investment
banking services,  broker/dealer services and economic forecasting, and received
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 year  1999,  the  Managing  General  Partner  received  no cash
distributions.

11.  Reserves

     In February  1993,  the Fund  established a $15,000,000  reserve to provide
funds for follow-on  investments and to pay expenses.  $8,600,000 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 $1,400,000. In addition,  $2,900,000 was utilized from the
reserve to pay down a portion of the First  Chicago loan on January 6, 1994.  On
February 12, 1998,  the  Independent  General  Partners  approved an  additional
reserve of  $1,650,000 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  $3,300,000  as of September 30, 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,  audit,  tax and legal fees, and to pay
contingent costs and obligations of the Fund,  including those related to former
investments.  Any remaining  cash reserves in excess of amounts  required to pay
the Fund's  obligations prior to its termination,  including expenses related to
the BAI Bankruptcy case (as discussed in Note 8), will be distributed as soon as
practicable as a final liquidating distribution to Limited Partners.

12. 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 December  31,  1998,  the tax basis of the
Fund's assets are greater than the amounts reported in the financial  statements
by approximately  $1,000,000.  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.  Additionally,  the Fund  Administrator  has agreed to
waive its  administration  fee and the three  Independent  General Partners have
agreed to waive their  compensation  for  services  rendered  to the Fund;  such
waivers to take effect for the quarterly period  commencing  October 1, 1999 and
each quarterly period  thereafter,  unless and until such waivers are rescinded.
However,  no such waivers shall apply to any reimbursable  expenses of the Fund.
Accordingly,  the Fund Administration Fee of $75,000 and the Independent General
Partner's  compensation of $30,000 relating to the quarter commencing October 1,
1999 have been waived.

     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  $15,000,000  of the
proceeds  received from the Playtex notes sale in February  1993.  $8,600,000 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  $1,400,000.  In addition,  $2,900,000 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  $1,650,000  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.

     As of September 30, 1999 the Fund has available approximately $3,300,000 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,
audit,  tax and legal fees, and to pay contingent  costs and  obligations of the
Fund. The Fund is proceeding,  in accordance  with  applicable  Delaware law, to
assess  and  resolve  its  liabilities  and  contingent  costs and  obligations,
including  those  related to its former  investments,  prior to  completing  the
liquidation and  distribution of the Fund's assets.  Any remaining cash reserves
in  excess  of  amounts  required  to pay the  Fund's  obligations  prior to its
termination, including expenses related to the BAI Bankruptcy case (as discussed
below),  will  be  distributed  as soon as  practicable  as a final  liquidating
distribution to Limited Partners.

     In 1996, BeefAmerica, Inc. sold all of the capital stock of its subsidiary,
BeefAmerica  Operating Company,  Inc., in return for cash and preferred stock in
the acquiror.  The Fund, as  BeefAmerica  Inc.'s  primary  creditor,  was paid a
portion of the cash and preferred stock received by BeefAmerica Inc., in partial
satisfaction of its secured claim against BeefAmerica, Inc.

     On March 3,  1998,  the Fund sold the  preferred  stock to Lajara II LLC, a
limited  liability  company  owned by the  management of  BeefAmerica  Operating
Company,  Inc., in return for a promissory note in the amount of $1,000,000 (the
"Promissory Note"). On October 8, 1998,  BeefAmerica,  Inc. filed for bankruptcy
protection  under Chapter 11 of the United States  Bankruptcy  Code. As a result
the Fund, at that time,  determined the value of the Promissory  Note to be zero
and fully reserved against it.

     In May  1999,  BeefAmerica,  Inc.  was sued in  federal  district  court in
Nebraska  by  a  purported  class  of  individuals  and  a  related  union  (the
"Lawsuit").  The Lawsuit alleges,  among other things,  that  BeefAmerica,  Inc.
guaranteed  certain  retiree  medical  benefits  due  to  these  individuals  by
BeefAmerica   Operating  Company,   Inc.  and  that  certain  payments  made  by
BeefAmerica,  Inc.  in 1996 to its  "insiders"  were  fraudulent  transfers.  In
response to the Lawsuit, on September 10, 1999, BeefAmerica,  Inc. (now known as
BAI Liquidating Corp. ("BAI")) filed a voluntary petition under Chapter 7 of the
United States Bankruptcy Court for the District of Delaware (the  "Bankruptcy").
As BAI's primary  creditor,  the Fund has incurred and anticipates  that it will
continue to incur, expenses related to the Bankruptcy case. Through November 15,
1999,  the Fund has  incurred  approximately  $140,000 in  connection  with such
Bankruptcy.  It is  uncertain at this time what the effect of the Lawsuit or the
Bankruptcy  will  have  on the  Fund  or the  final  liquidation  of the  Fund's
remaining assets, the timing of which cannot be determined at the present date.

Results of Operations

Investment Income and Expenses

     For the nine months  ended  September  30,  1999,  the Fund  reported a net
investment  loss of $452,000 as compared to a net investment  loss of $2,260,000
for the same period in 1998.  The decrease in net  investment  loss for the nine
months ended  September 15, 1999 as compared to the nine months ended  September
30, 1998 resulted primarily because the Fund did not pay any Investment Advisory
and Loan Fees in 1999 as a result of the  expiration  of the Fund's term on June
30,  1998.  In  addition,  the Fund had an increase in expenses in 1998 due to a
reserve  established  for  uncollectible   proceeds  relating  to  the  sale  of
BeefAmerica, Inc.

     For the three  months  ended  September  30,  1999 the Fund  reported a net
investment loss of $199,000 as compared to a net investment loss of $170,000 for
the same  period in 1998.  The  increase  in net  investment  loss for the three
months  ended  September  30,  1999 as  compared  to the same  period in 1998 is
attributable to a decrease in discount income from Temporary  Investments due to
a reduction in Funds available for investment in such securities during the 1999
period  compared to the same period in 1998  partially  offset by a reduction of
Reimbursable Administrative Expenses in 1999 as further discussed below.

     The major  expenses for the three and nine months ended  September 30, 1999
and 1998, consisted of Fund Administration Fees and Reimbursable  Administrative
Expenses.

     As a result of the expiration of the Fund's term, the Investment Adviser as
of June 15, 1998 no longer receives 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 nine  months  ended  September  30,  1998 were
$600,000.  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 and nine months ended September 30, 1999 and 1998,
the  Fund  Administration  Fee  was  $75,000,  $225,000,  $75,000  and  $225,000
respectively.  For the three and nine months ended  September 30, 1999 and 1998,
Reimbursable  Administrative Expenses totalled $102,000,  $225,000, $137,000 and
$428,000 respectively.  The decrease in Reimbursable Administrative Expenses for
the three and nine  months  ended  September  30,  1999 as  compared to the same
periods in 1998 is due to an overall reduction in auditing,  custodian, printing
and legal  administration fees during 1999 resulting from fewer investments held
by the Fund during 1999.

     In an attempt to mitigate  certain  administrative  costs of the Fund,  the
Fund  Administrator has agreed to waive its  administration  fee; such waiver to
take  effect  for the  quarterly  period  commencing  October  1,  1999 and each
quarterly period thereafter, unless and until such waiver is rescinded. However,
no such waiver shall apply to any reimbursable expenses of the Fund.

     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. As of June 30, 1998
the Fund stopped incurring loan fees and for the nine months ended September 30,
1998 the Fund incurred $403,000 in loan fees.

     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.  For the three and nine month  periods ended
September 30, 1999 and 1998,  the Fund incurred  $34,000,  $97,000,  $33,000 and
$112,000, respectively, in Independent General Partners' Fees and Expenses.

     In an attempt to mitigate  certain  administrative  costs to the Fund,  the
three Independent  General Partners have agreed to waive their  compensation for
services  rendered to the Fund;  such  waiver to take  effect for the  quarterly
period commencing October 1, 1999 and each quarterly period  thereafter,  unless
and until such waiver is rescinded.  However,  no such waiver shall apply to any
reimbursable expenses of the Fund.

Net Assets

     The Fund's net assets  decreased  by $452,000  during the nine months ended
September 30, 1999,  due to a net investment  loss of $452,000.  During the nine
months ended  September 30, 1998 the Fund's net assets  decreased by $53,683,000
due to a net investment  loss of $2,260,000,  realized  losses on investments of
$9,557,000 and cash distributions of $60,813,000, which were partially offset by
net unrealized appreciation on investments of $18,947,000.

Unrealized Appreciation and Depreciation on Investments

     For the nine months  ended  September  30, 1999,  the Fund  recorded no net
change in  unrealized  appreciation  (depreciation).  For the nine months  ended
September  30,  1998,   the  Fund  recorded  net  unrealized   appreciation   of
$18,947,000,  all of which was a reversal  of net  unrealized  depreciation  for
investments sold.
<PAGE>

Realized Gains and Losses

     For the nine months  ended  September  30, 1999,  the Fund  recorded no net
realized  gains  (losses) on  investments  as compared to a net realized loss of
$9,557,000 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  the  Fund'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.

     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.  Merrill Lynch has participated in and continues to
participate in numerous industy tests throughout the world.

     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  September  30,  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  judgment of
dismissal was affirmed by the Third Circuit of Appeals on August 10, 1999.

Item 2.  Changes in Securities and Use of Proceeds.
         -----------------------------------------

         None

Item 3.  Defaults Upon Senior Securities.
         -------------------------------

         None

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

         The 1999 Annual  Meeting of the Limited  Partners was held on  July 13,
         1999. The result of the proposals were as follows:

               Proposal 1.  Election of the Individual General Partners
               -------- -

               Vernon R. Alden, Joseph L. Bower,  Stanley H. Feldberg and Thomas
               H. Lee  were  all  re-elected  to  serve  as  Individual  General
               Partners.

               Proposal 2.  Election of the Managing General Partner
               -------- -

               Mezzanine  Investments,  L.P. was re-elected to serve as Managing
               General Partner.

               Proposal    3.     Ratification     of    the     selection    of
               --------    -

               PricewaterhouseCoopers LLP as independent accountants

               PricewaterhouseCoopers  was  approved  to  serve  as  independent
               accountants  of the Fund for its fiscal year ending  December 31,
               1999.

               Proposal  4.  Amend  the  Fund's  Amended  and  Restated  Limited
               --------  -

               Partnership  Agreement  to  remove  the  requirement  (a) to hold
               future annual meetings,  thereby eliminating any required actions
               of Limited  Partners  taken at such  meetings  and (b) to provide
               Limited Partners with quarterly reports.

                  Number of                  Number of               Number of
               Affirmative Votes           Opposed Votes          Withheld Votes
               -----------------           -------------          --------------
                   237,059                     19,138                 231,292

               Accordingly, since the majority of all votes received were not in
               favor of Proposal 4, it was not approved.
<PAGE>

Item 5.  Other Information.
         -----------------
         None

Item 6.  Exhibits and Reports on Form 8-K.
         --------------------------------
         (a) Exhibits:

         Exhibit 27- Financial Data Schedule for the Quarter Ended September 30,
           1999

         (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 15th day of November 1999.


                                      ML-LEE ACQUISITION FUND, L.P.

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

                                      By:      ML Mezzanine Inc.
                                               its General Partner




                                      /s/ Kevin T. Seltzer
                                      --------------------------------
Dated:  November 15, 1999             Kevin T. Seltzer
                                      ML Mezzanine Inc.
                                      Vice President and Treasurer
                                     (Principal Financial Officer of Registrant)