UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 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 June 30, 2001

                         Commission File Number 0-17383

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

           Delaware                                 04-3028398
(State or other jurisdiction            (IRS Employer Identification No.)
of incorporation or organization)

                      4 World Financial Center - 26th Floor
                               New York, NY 10080

              (Address of principal executive offices and zip code)

Registrant's telephone number, including area code:  (800) 288-3694

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

        Title of each Class        Name of each exchange on which registered
               None                               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 II, L.P.

                               TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Statements of Assets,  Liabilities and Partners' Capital
    As of June 30, 2001 (Unaudited) and December 31, 2000 (Unaudited)

Statements of Operations
    For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited)

Statements of Changes in Net Assets
    For the Six Months Ended June 30, 2001 and 2000 (Unaudited)

Statements of Cash Flows
    For the Six Months Ended June 30, 2001 and 2000 (Unaudited)

Statements of Changes in  Partners'  Capital
    For the Six Months Ended June 30, 2001 (Unaudited)

Schedule of Portfolio Investments
    As of June 30, 2001 (Unaudited)

Notes to Financial Statements (Unaudited)

Supplemental Schedule of Unrealized Appreciation (Depreciation)
    - Schedule 1 (Unaudited)


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


Item 3.  Quantative and Qualitative Disclosure About Market Risk
<PAGE>
<TABLE>
<CAPTION>
                              ML-LEE ACQUISITION FUND II, L.P.
                  STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
                                  (DOLLARS IN THOUSANDS)
                                       (UNAUDITED)

                                                                June 30,     December 31,
                                                                  2001           2000
                                                              -----------    ------------
<S>                                                           <C>            <C>
Assets:

Investments - Notes 3, 4, 5, 7
  Portfolio Investments at fair value
    Managed Companies (amortized cost $14,537
      at June 30, 2001 and December 31, 2000)                 $   10,437       $   14,537
    Non-Managed Companies (amortized cost $2,371
      at June 30, 2001 and $2,183 at December 31, 2000)              838              334
    Temporary Investments, at amortized cost (cost $19,255
      at June 30, 2001 and $19,271 at December 31, 2000)          19,346           19,393
Cash                                                                  28              162
Accrued Interest and Other Receivable                                607              591
Prepaid Expenses                                                      19               23
                                                              ----------       ----------
Total Assets                                                  $   31,275       $   35,040
                                                              ==========       ==========


Liabilities and Partners' Capital:

Liabilities
  Reimbursable Administrative Expenses Payable - Note 6       $      118       $      104
  Independent General Partners' Fees Payable                           2               16
  Legal and Professional Fees Payable                                 46               42
  Deferred Interest Income                                             4                4
                                                              ----------       ----------
Total Liabilities                                                    170              166
                                                              ----------       ----------

Partners' Capital
  Individual General Partner                                          12               13
  Managing General Partner                                           603              612
  Limited Partners (221,745 Units)                                30,490           34,249
                                                              ----------       ----------
Total Partners' Capital                                           31,105           34,874
                                                              ----------       ----------
Total Liabilities and Partners' Capital                       $   31,275       $   35,040
                                                              ==========       ==========

See the Accompanying Notes to Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                        ML-LEE ACQUISITION FUND II, L.P.
                            STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
                                  (UNAUDITED)


                                                             For the Three Months   For the Six Months
                                                                Ended June 30,        Ended June 30,
                                                             --------------------   ------------------
                                                               2001       2000        2001      2000
                                                             --------   --------    -------   --------
<S>                                                          <C>        <C>         <C>       <C>
Investment Income:
  Interest                                                   $    210   $    485    $   233   $  1,265
  Discount                                                        210        257        493        403
                                                             --------   --------    -------   --------
    Total Investment Income                                       420        742        726      1,668
                                                             --------   --------    -------   --------
Expenses:
  Investment Advisory Fee - Notes 6, 7                            167        167        333        333
  Fund Administration Fee - Note 6                                 55         55        111        111
  Reimbursable Administrative Expenses - Note 6                    61         43        117        103
  Independent General Partners' Fees and Expenses                  18         19         46         40
  Legal and Professional Fees                                      54          -        100         11
  Insurance Expense                                                 2          2          4          4
                                                             --------   --------    -------   --------
    Total Expenses                                                357        286        711        602
                                                             --------   --------    -------   --------

Net Investment Income                                              63        456         15      1,066

Realized Loss on Sales of Investments                               -         (7)         -         (7)

Net Change in Unrealized Appreciation (Depreciation)
  on Investments - Notes 6, 7 and Schedule 1
  Nonpublic Securities                                         (3,784)        47     (3,784)        47
                                                             --------   --------    -------   --------
Net Increase (Decrease)in Net Assets
  Resulting from Operations                                    (3,721)       496     (3,769)     1,106

Less: Earned MGP Distributions to Managing General Partner          -        (98)         -       (205)
                                                             --------   --------    -------   --------
Net Increase (Decrease) Available for Pro-Rata
  Distribution to All Partners                               $ (3,721)  $    398    $(3,769)  $    901
                                                             ========   ========    =======   ========

See the Accompanying Notes to Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       ML-LEE ACQUISITION FUND II, L.P.
                     STATEMENTS OF CHANGES IN NET ASSETS
                            (DOLLARS IN THOUSANDS)
                                 (UNAUDITED)


                                                 For the Six Months Ended
                                                          June 30,
                                                -------------------------
                                                   2001            2000
                                                ---------       ---------
<S>                                             <C>             <C>
From Operations:
  Net Investment Income                         $      15       $   1,066
  Realized Loss on Sales of Investments                 -              (7)
  Net Change in Unrealized Appreciation
    (Depreciation) on Investments                  (3,784)             47
                                                ---------       ---------
  Net Increase (Decrease) in Net Assets
    Resulting  from Operations                     (3,769)          1,106
Net Assets:
  Beginning of Year                                34,874          32,875
                                                ---------       ---------
  End of Period                                 $  31,105       $  33,981
                                                =========       =========

See the Accompanying Notes to Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                        ML-LEE ACQUISITION FUND II, L.P.
                            STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)



                                                       For the Six Months Ended
                                                                June 30,
                                                       ------------------------
                                                         2001            2000
                                                       --------        --------
<S>                                                    <C>             <C>
Decrease in Cash

Cash Flows From Operating Activities:
  Interest and Discount Income                         $    565        $  1,459
  Investment Advisory Fee                                  (333)           (333)
  Fund Administration Fee                                  (111)           (111)
  Reimbursable Administrative Expenses                     (103)            (95)
  Independent General Partners' Fees and Expenses           (60)            (44)
  Legal and Professional Fees                               (97)            (16)
 (Purchase) Sale of Temporary Investments, Net               16          (3,610)
  Proceeds from Maturity and Paydown
    of Portfolio Company Investments                          -           2,723
  Purchase of Portfolio Company Investment                  (11)              -
                                                       --------        --------
Net Cash Used in Operating Activities                      (134)            (27)

Cash at Beginning of Year                                   162              36
                                                       --------        --------
Cash at End of Period                                  $     28        $      9
                                                       ========        ========


Reconciliation of Net Investment Income
  to Net Cash Used in Operating Activities

Net Investment Income                                  $     15        $  1,066
                                                       --------        --------
Adjustments to Reconcile Net Investment Income
 to Net Cash Used in Operating Activities:
  Increase in Investments at Cost                          (172)           (898)
 (Increase) Decrease in Accrued Interest
    and Discount Receivable                                  27            (209)
  Increase in Other Receivable                              (12)              -
  Decrease in Prepaid Expenses                                4               4
  Increase in Reimbursable Administrative
    Expenses Payable                                         14               8
  Decrease in Independent General Partners'
    Fees Payable                                            (14)             (4)
  Increase in Legal and Professional
    Fees Payable                                              4              13
  Realized Loss on Sales of Investments                       -              (7)
                                                       --------        --------
Total Adjustments                                          (149)         (1,093)
                                                       --------        --------
Net Cash Used in Operating Activities                  $   (134)       $    (27)
                                                       ========        ========

See the Accompanying Notes to Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                    ML-LEE ACQUISITION FUND II, L.P.
                               STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                                         (DOLLARS IN THOUSANDS)
                                               (UNAUDITED)




                                                 Individual   Managing
                                                  General      General    Limited
                                                  Partner      Partner   Partners     Total
                                                 ----------   --------   --------   --------
<S>                                              <C>          <C>        <C>        <C>
For the Six Months Ended June 30, 2001
  Partners' Capital as of January 1, 2001          $    13    $   612    $ 34,249   $ 34,874
  Allocation of Net Investment Income                    -          -          15         15
  Allocation of Net Change in Unrealized
    Appreciation (Depreciation) on Investments          (1)        (9)     (3,774)    (3,784)
                                                   -------    -------    --------   --------
Partners' Capital as of June 30, 2001              $    12    $   603    $ 30,490   $ 31,105
                                                   =======    =======    ========   ========

See the Accompanying Notes to Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                ML-LEE ACQUISITION FUND II, L.P.
                                                SCHEDULE OF PORTFOLIO INVESTMENTS
                                                         JUNE 30, 2001
                                                     (DOLLARS IN THOUSANDS)
                                                           (UNAUDITED)

                                                                                                                          % Of
  Principal                                                                          Investment  Investment    Fair       Total
Amount/Shares      Investment                                                           Date       Cost(g)     Value   Investments
-------------      ----------                                                        ----------  ----------  --------  -----------
<S>                <C>                                                               <C>         <C>         <C>       <C>
                   MEZZANINE INVESTMENTS
                   MANAGED COMPANIES

                   BIG V SUPERMARKETS, INC. (a) - Note 3 and Schedule 1
$10,430            Big V Supermarkets, Inc., Sr. Sub. Nt. 14.14% due 03/15/01(b)(d)(h) 12/27/90   $ 10,430   $ 10,430
117,333 Shares     Big V Holding Corp., Common Stock (c)                               12/27/90      4,107          7
                   (16.6% of fully diluted common equity) (f)
                                                                                                  -------------------------------
                   TOTAL INVESTMENT IN MANAGED COMPANIES                                          $ 14,537   $ 10,437       34.08%
                                                                                                  ===============================

                   NON-MANAGED COMPANIES

                   BIOLEASE, INC.- Note 7 and Schedule 1
$668               BioLease, Inc., 13% Sub. Nt. due 06/06/04 (b)                       06/08/94   $    576   $    650
96.56 Shares       BioLease, Inc., Common Stock (c)                                    06/08/94         94          -
9,362 Options      BioTransplant, Inc., Common Stock Purchase Options(c)               02/02/96          -          -
$188               BioLease, Inc. 15% Deferred Interest Promissory Note (b)(e)         06/08/94        188        188
                                                                                                  -------------------------------
                                                                                                       858        838        2.74%
                                                                                                  -------------------------------
                   FLA. ORTHOPEDICS, INC. - Schedule 1
19,366 Shares      FLA. Holdings, Inc. Series B Preferred Stock (a)(c)(d)              08/02/93      1,513          -
3,822 Warrants     FLA. Holdings, Inc. Common Stock Purchase Warrants (a)(c)           08/02/93          -          -
                       $4,842 12.5% Subordinated Note
                       Purchased 08/02/93                     $ 4,842
                       Surrendered 08/16/96                   $     0
                       Realized Loss                          $(4,842)
                       121,040 Common Stock
                       Purchased 08/02/93                     $ 1,513
                       Exchanged 08/02/96
                       19,366 Series B Preferred Stock        $ 1,513
                       Realized Gain                          $     0
                       Total Realized Loss                    $(4,842)
                                                                                                  -------------------------------
                                                                                                     1,513          -        0.00%
                                                                                                  -------------------------------
                   TOTAL INVESTMENT IN NON-MANAGED COMPANIES                                      $  2,371    $    838       2.74%
                                                                                                  ===============================

                   SUMMARY OF MEZZANINE INVESTMENTS

                   Subordinated Notes                                                  Various    $ 11,194    $ 11,268      36.80%
                   Preferred Stock, Common Stock, Options, Warrants and Stock Rights   Various       5,714           7       0.02%
                                                                                                  -------------------------------
                   TOTAL MEZZANINE INVESTMENTS                                                    $ 16,908    $ 11,275      36.82%
                                                                                                  ===============================

                   TEMPORARY INVESTMENTS

                   COMMERCIAL PAPER
$10,000            American General Corp., 3.94% due 7/2/01                            05/18/01   $  9,951    $  9,998
$ 9,350            Ford Motor Credit Corp., 3.90% due 7/2/01                           05/18/01      9,304       9,348
                                                                                                  -------------------------------
                   TOTAL INVESTMENT IN COMMERCIAL PAPER                                           $ 19,255    $ 19,346      63.18%
                                                                                                  -------------------------------
                   TOTAL TEMPORARY INVESTMENTS                                                    $ 19,255    $ 19,346      63.18%
                                                                                                  ===============================

                   TOTAL INVESTMENT PORTFOLIO                                                     $ 36,163    $ 30,621     100.00%
                                                                                                  ===============================
(a) Represents investment in affiliates as defined in the Investment Company Act of 1940.
(b) Restricted security.
(c) Restricted non-income producing equity security.
(d) Non-accrual investment status.
(e) Inclusive of payment-in-kind security.
(f) Percentages of Common Equity have not been audited by PricewaterhouseCoopers LLP.
(g) Represents original cost and excludes accretion of discount of $28 for
    Mezzanine Investments and $91 for Temporary Investments.
(h) Big V failed to make the November 15, 2000 interest payment due under the note.
    Principal payments were scheduled to be made on December 15, 2000 for $3,911,000 and on
    March 15, 2001 for the remaining $6,519,000. However, since the November 22, 2000 Big V
    Supermarkets, Inc. bankruptcy filing, these two principal payments and the
    February 15, 2001 and March 15, 2001 interest payments due under the note have been stayed.
    See also Note 3 of Notes to Financial Statements.

See the Accompanying Notes to Financial Statements (Unaudited).
</TABLE>
<PAGE>
                         ML-LEE ACQUISITION FUND II, L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

1.   Organization

     ML-Lee  Acquisition  Fund II, L.P. ("Fund II") was formed along with ML-Lee
Acquisition  Fund  (Retirement   Accounts)  II,  L.P.  (the  "Retirement  Fund";
collectively  referred  to as the  "Funds")  and  the  Certificates  of  Limited
Partnership  were filed under the Delaware  Revised Uniform Limited  Partnership
Act on September 23, 1988. The Funds' operations commenced on November 10, 1989.
Capital  contributions  from the Limited  Partners and the General  Partners (as
defined below) totaled $222,295,000 in the public offering of Fund II, the final
closing for which was held on January 5, 1990.

     Mezzanine Investments II, L.P. (the "Managing General Partner"), subject to
the  supervision  of the  Individual  General  Partners  (as  defined  below and
hereinafter  with the Managing  General Partner as the "General  Partners"),  is
responsible for overseeing and monitoring of Fund II's investments. The Managing
General Partner is a Delaware limited  partnership in which ML Mezzanine II Inc.
is the general  partner and Thomas H. Lee  Advisors  II,  L.P.,  the  Investment
Adviser to the Funds, 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. ML Fund  Administrators  Inc. (the "Fund
Administrator") is an indirect  wholly-owned  subsidiary of Merrill Lynch & Co.,
Inc. and is responsible for the day to day administrative services necessary for
the operations of Fund II.

2.   Basis of Accounting

     For financial  reporting  purposes,  the records of Fund II are  maintained
using the accrual method of accounting.  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.

     The financial  statements reflect all adjustments which are, in the opinion
of management,  necessary for a fair  presentation  of the financial  condition,
results of operations and cash flows for the periods presented. Such adjustments
consisted of those of a normal recurring  nature.  The results of operations for
the three and six months ended June 30, 2001 are not necessarily  indicative of
the results that may be achieved for the entire year.  Footnote disclosure which
substantially  duplicates the disclosure contained in Fund II's Annual Report on
Form 10-K for the year ended December 31, 2000, which is hereby  incorporated by
reference, has been omitted.

3.   Investment Transactions

     Before consenting to the distribution of all or part of Fund II's reserves,
at the quarterly  meetings held since  September 19, 2000, the General  Partners
reviewed certain contractual covenants,  commitments and contingencies which may
affect Fund II by virtue of its  investments  in Big V and Big V Holdings  Corp.
("BVH",  Big V's parent  company and defined herein with Big V and certain other
related entities as the "Big V Entities"). Such potential obligations arise from
letter agreements (the  "Agreements")  entered into by Wakefern Food Corporation
("Wakefern",  Big V's current  supplier),  Big V (together  with  certain of its
related  companies),  and Fund II (together with other investor groups in Big V)
in  December  1990 and  November  1993.  Since the  covenants,  commitments  and
contingencies  associated  with the  Agreements  may have the effect of delaying
and/or  decreasing  the amount of future  distributions,  the  General  Partners
determined   that   further   distributions   should   not  be  made  until  any
responsibilities  of Fund II with  respect to such  covenants,  commitments  and
contingencies have been determined.

     On  November  22,  2000,   following   careful  analysis  of  its  business
operations,  finances,  and the outlook for the operating  region in which Big V
competes with other  supermarket  retailers,  the Big V Entities filed voluntary
petitions  under  Chapter 11 of the United  States  Bankruptcy  Code (the "Big V
Bankruptcy") in the United States  Bankruptcy Court for the District of Delaware
(the  "Bankruptcy   Court"),  in  order  to  implement  a  major  financial  and
operational restructuring of its business.

     At  issue in the Big V  Bankruptcy  and  related  litigation,  among  other
things, are the terms under which change in the Wakefern distribution  agreement
can be effectuated and the cost of such change, if any, to Big V.  Particularly,
Big V, together with other related entities,  initiated litigation with Wakefern
seeking a  declaration  that Big V could exit the Wakefern food  cooperative  by
tendering the shares of Wakefern owned by Big V back to Wakefern, and transition
to a new supplier and continue to operate as an independent grocery store chain,
without  incurring a payment  obligation  to Wakefern (a  so-called  "Withdrawal
Penalty")  under the various  agreements by and among Big V and its  affiliates,
Wakefern and other members of Wakefern  (the  "Wakefern  Litigation").  Wakefern
took the  position  that  such an effort  by Big V would  trigger  a  Withdrawal
Penalty.

     On August 9, 2001,  after  conducting a trial in July 2001,  the Bankruptcy
Court  indicated  that it would  enter  judgment  in favor  of  Wakefern  in the
Wakefern  Litigation,  thereby  denying the request by the Big V Entities  for a
declaration that Big V could exit the Wakefern food cooperative by tendering the
shares of Wakefern  owned by Big V back to  Wakefern,  and  transition  to a new
supplier and continue to operate as an independent grocery store chain,  without
incurring a Withdrawal Penalty. The Bankruptcy Court also indicated that at some
date in the future it would  issue a written  decision  supporting  the entry of
such judgment in favor of Wakefern.  However,  the Bankruptcy Court did not rule
on, among other things,  the amount of the payment that would be due to Wakefern
if Big V  were  to  pursue  the  course  of  action  described  in the  Wakefern
Litigation or whether the payment obligation might otherwise be unenforceable.

     On August 9, 2001, the Bankruptcy  Court also deferred  ruling until August
23,  2001 on the  request  by the  Big V  Entities  for an  extension  of  their
exclusive period of time to propose a plan of  reorganization  in the Chapter 11
cases. The exclusive period thus has automatically been extended to that date.

     Currently,  Fund II holds a Senior  Subordinated  Note issued by Big V with
outstanding  principal of approximately $10.4 million (the "Senior  Subordinated
Note"),  as well as 117,333 shares of BVH common stock. At the time of the Big V
Bankruptcy  filing,  Big V had failed to make the  November  15,  2000  interest
payment due Fund II under the Senior  Subordinated  Note held by Fund II.  Since
the Big V Bankruptcy  filing, the December 15, 2000 and March 15, 2001 principal
payments and the February 15, 2001 and March 15, 2001 interest payments due Fund
II  under  such  note  have  been  stayed.  As a  result  of  the  uncertainties
surrounding  the Big V  Bankruptcy,  Fund II stopped  accruing  interest  on the
Senior Subordinated Note as of January 1, 2001.

     Based on the Bankruptcy  Court's  indication that it will enter judgment in
favor of Wakefern in the Wakefern  Litigation and the potential impact that this
decision has on the ability of Big V to  transition  to a new  supplier  without
incurring a Withdrawal  Penalty (subject to potential  further  litigation about
the amount or enforceability of that Withdrawal Penalty), Fund II, in accordance
with its valuation procedures,  has determined, as of June 30, 2001, to retain a
carrying value of approximately  $10.4 million for the Senior  Subordinated Note
and to write down the carrying  value for the 117,333 shares of BVH common stock
to a nominal valuation of approximately  $7,000. The actual value, however, that
might be realized by Fund II with respect to its debt and equity  investments in
the Big V Entities  remains  dependent in large part on the ultimate  outcome of
the Big V Bankruptcy  and related  litigation,  including  the  litigation  with
Wakefern.   Specifically,   if  the  Big  V  Bankruptcy  or  related  litigation
proceedings are not ultimately resolved in Big V's favor and/or the costs to Big
V of transferring the Wakefern distribution agreement are substantial, the value
of Fund II's debt and  equity  investments  in the Big V  Entities  as set forth
herein may be impaired,  and Fund II could  conceivably  be exposed to losses in
excess of its original debt and equity investments in the Big V Entities.

     Neither  the  Investment  Adviser nor the General  Partners,  however,  can
predict the ultimate outcome of the Big V Bankruptcy proceedings, including such
proceedings'  ultimate impact on the value of the Big V Senior Subordinated Note
or the BVH equity held by Fund II, or the timing or amount of payments,  if any,
that might be made to Fund II  pursuant  to Big V's plan of  reorganization.  In
addition, the General Partners cannot currently predict how the Big V Bankruptcy
may affect the timing of the ultimate  liquidation  of Fund II, or the amount of
proceeds that Limited Partners will ultimately receive.

     Fund II's Investment  Adviser will continue to monitor  developments in the
Big V Bankruptcy and update Fund II's General Partners as needed. It is possible
that the carrying value of such investments,  particularly the carrying value of
the Senior  Subordinated  Note at its outstanding  principal  balance,  could be
further negatively impacted by developments in the Big V Bankruptcy.

     In  addition,  the  General  Partners  will  continue  to review  Fund II's
reserves each quarter in light of the foregoing matter,  and distributions  will
be made in accordance with Fund II's Partnership Agreement.  Currently,  Fund II
has reserved  all  Mezzanine  Investment  sale,  paydown and  maturity  proceeds
received  since August 1999, as well as income from  operations  since the third
quarter 1999.

4.   Non-Accrual of Investments

     In accordance with Fund II's Accounting  Policy,  the following  securities
have been on non-accrual status since the dates indicated:

     - Florida Orthopedics, Inc.    January 1, 1995
     - Big V Supermarkets, Inc.     January 1, 2001

5.   Payment-In-Kind Securities

     All  payment-in-kind  securities received in lieu of cash interest payments
by Fund II's portfolio  companies are recorded at face value (which approximates
accrued  interest),  unless the  Investment  Adviser  and the  Managing  General
Partner  determine that there is no reasonable  assurance of collecting the full
principal  amounts of such  securities.  In accordance  with this policy,  as of
December 31, 2000,  Fund II's  portfolio of investments  excluded  approximately
$168,000  of  such   payment-in-kind   notes   received  from   BioLease,   Inc.
("BioLease").  As a result of the July 2001  sale of Fund  II's  investments  in
BioLease and BioTransplant,  Inc.  ("BioTransplant")(see Note 7), the collection
of the payment-in-kind notes was reasonably assured.  Therefore,  as of June 30,
2001,  Fund II recognized the December 31, 2000 note balance of $168,000 plus an
additional $20,000 related to the six month period ended June 30, 2001.

6.   Related Party Transactions

     The  Investment  Adviser,  pursuant to an investment  management  agreement
among  the  Investment  Adviser,  the  Thomas H. Lee  Company  and Fund II dated
November  10,  1989,  is  responsible  for the  identification,  management  and
liquidation of Mezzanine  Investments  and Bridge  Investments  for Fund II. The
Investment  Adviser  is  entitled  to  receive  an  Investment  Advisory  Fee as
compensation for these services (see Note 7).

     As compensation for its services,  the Fund Administrator,  an affiliate of
the Managing General Partner,  is entitled to receive a Fund Administration Fee.
In addition,  the Fund  Administrator  is entitled to  reimbursement  of 100% of
out-of-pocket expenses incurred by the Fund Administrator on behalf of the Funds
("Reimbursable  Administrative Expenses").  Reimbursable Administrative Expenses
primarily  consist  of  printing,  audit  and tax  preparation,  legal  fees and
expenses, and custodian fees.

     As provided by the Partnership  Agreement,  the Managing General Partner of
Fund II is entitled to receive an incentive  distribution after Limited Partners
have received their Priority Return of 10% per annum ("MGP  Distributions").  Of
the MGP Distributions,  the Investment Adviser is entitled to receive 95% and ML
Mezzanine II Inc. is entitled to receive 5%. During 2001,  the Managing  General
Partner received no cash distributions.

7.   Subsequent Events

     On July 10, 2001,  Fund II sold all of its debt and equity  investments  in
BioLease and BioTransplant for net proceeds of approximately $838,000 (including
$188,000  received  for the  payment-in-kind  notes  discussed  in Note  5).  In
connection with this sale, Fund II reversed $270,000 of unrealized  depreciation
and recorded $46,000 of unrealized  appreciation at June 30, 2001 related to the
BioLease  subordinated notes and recognized a net realized loss of approximately
$50,000  during the third  quarter of 2001 related to the BioLease  subordinated
notes and the BioLease common stock.

     On July 17, 2001, the Independent  General Partners,  on behalf of Fund II,
accepted  a  proposal  made by the  Investment  Adviser  to  reduce  the  annual
Investment  Advisory  Fee  payable to the  Investment  Adviser by 50%. A similar
reduction was approved for ML-Lee  Acquisition  Fund  (Retirement  Accounts) II,
L.P.  (the  "Retirement  Fund").  Accordingly,  the combined  annual  Investment
Advisory Fee payable by Fund II and the Retirement  Fund will be $600,000.  Such
reductions will be made effective retroactive to July 1, 2001.
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE 1
                        ML-LEE ACQUISITION FUND II, L.P.
         SUPPLEMENTAL SCHEDULE OF UNREALIZED APPRECIATION (DEPRECIATION)
                     FOR THE SIX MONTHS ENDED JUNE 30, 2001
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)


                                                    Unrealized       Unrealized
                                                   Appreciation     Appreciation        Total Unrealized
                                                  (Depreciation)   (Depreciation)   Appreciation (Depreciation)
                                                        for              for                  as of
                                                 the Three Months  the Six Months   ---------------------------
                            Investment    Fair         Ended            Ended       December 31,      June 30,
Security                       Cost       Value    June 30, 2001    June 30, 2001       2000            2001
--------------------------  ----------  -------- ---------------- ----------------  ------------    -----------
<S>                         <C>         <C>       <C>             <C>               <C>             <C>
Non Public Securities:
Big V Holding Corp.
  Common Stock*             $  4,107    $     7      $ (4,100)        $ (4,100)       $      -        $ (4,100)
Biolease, Inc.
  Common Stock*                   94          -             -                -             (94)            (94)
  Subordinated Notes* (a)        576        650           316              316            (270)             46
FLA. Orthopedics, Inc.
  Preferred  Stock*            1,513          -             -                -          (1,513)         (1,513)
  Subordinated Note*               -          -             -                -               -               -
                                                     --------         --------        --------        --------
Total Unrealized Depreciation from
  Non-Public Securities                              $ (3,784)        $ (3,784)       $ (1,877)       $ (5,661)
                                                     ========         ========        ========        ========

* Restricted Security
(a) Investment cost excludes accretion of remaining discount of $28.

See the Accompanying Notes to Financial Statements (Unaudited).
</TABLE>
<PAGE>
Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
         Results of Operations

Liquidity & Capital Resources

     At  the  regular  quarterly  meeting  of the  General  Partners  of  ML-Lee
Acquisition  Fund II, L.P.  ("Fund II"),  held on December  14, 1999,  Vernon R.
Alden,  Joseph L. Bower,  Stanley H. Feldberg and Thomas H. Lee (the "Individual
General  Partners")  determined  to extend the initial ten year term of Fund II,
which was due to terminate  January 5, 2000,  for an additional two year period,
pursuant to Section 2.4 of the Partnership Agreement.  Such extension will allow
Fund II to more effectively deal with its assets pending their liquidation.  The
term of Fund II will now expire on January 5, 2002. In addition,  the Individual
General  Partners  have the right,  pursuant to the  Partnership  Agreement,  to
extend the term of Fund II for an additional  one year period if they  determine
that such  extension is in the best  interest of Fund II. Fund II will then have
an additional five year period to liquidate its remaining assets.

     On July 17, 2001, the Independent  General Partners,  on behalf of Fund II,
accepted  a  proposal  made by the  Investment  Adviser  to  reduce  the  annual
Investment  Advisory  Fee  payable to the  Investment  Adviser by 50%. A similar
reduction was approved for ML-Lee  Acquisition  Fund  (Retirement  Accounts) II,
L.P.  (the  "Retirement  Fund",  and  together  with Fund II  referred to as the
"Funds").  Accordingly,  the combined annual Investment  Advisory Fee payable by
the Funds will be $600,000.  Such reductions will be made effective  retroactive
to July 1, 2001.

     On August 6, 1991, the Independent  General Partners approved a reserve for
follow-on investments of approximately $24,900,000 for Fund II. As of August 14,
2001,  this  remaining  reserve  balance  was  approximately  $3,100,000  due to
follow-on  investments  in Petco Animal  Supplies,  Fitz and Floyd,  Inc.,  Fine
Clothing,  Inc., Hills Stores,  Ghirardelli Holdings,  Anchor Advanced Products,
and BioTransplant Inc. Additionally, approximately $8,300,000 of the reserve has
been  returned  to the  partners.  The level of the  reserve  was based  upon an
analysis of potential follow-on investments in specific portfolio companies that
may become necessary to protect or enhance Fund II's existing investment.

     On July 10, 2001,  Fund II sold all of its debt and equity  investments  in
BioLease,  Inc. ("BioLease") and BioTransplant,  Inc.  ("BioTransplant") for net
proceeds  of  approximately   $838,000  (including  $188,000  received  for  the
payment-in-kind notes discussed in Note 5 of Notes to Financial Statements).  In
connection   with  this  sale,  Fund  II  recognized  a  net  realized  loss  of
approximatley $50,000 during the third quarter of 2001.

     Before consenting to the distribution of all or part of Fund II's reserves,
at the quarterly  meetings held since  September 19, 2000, the General  Partners
reviewed certain contractual covenants,  commitments and contingencies which may
affect Fund II by virtue of its  investments  in Big V and Big V Holdings  Corp.
("BVH",  Big V's parent  company and defined herein with Big V and certain other
related entities as the "Big V Entities"). Such potential obligations arise from
letter agreements (the  "Agreements")  entered into by Wakefern Food Corporation
("Wakefern",  Big V's current  supplier),  Big V (together  with  certain of its
related  companies),  and Fund II (together with other investor groups in Big V)
in  December  1990 and  November  1993.  Since the  covenants,  commitments  and
contingencies  associated  with the  Agreements  may have the effect of delaying
and/or  decreasing  the amount of future  distributions,  the  General  Partners
determined   that   further   distributions   should   not  be  made  until  any
responsibilities  of Fund II with  respect to such  covenants,  commitments  and
contingencies have been determined.

     On  November  22,  2000,   following   careful  analysis  of  its  business
operations,  finances,  and the outlook for the operating  region in which Big V
competes with other  supermarket  retailers,  the Big V Entities filed voluntary
petitions  under  Chapter 11 of the United  States  Bankruptcy  Code (the "Big V
Bankruptcy") in the United States  Bankruptcy Court for the District of Delaware
(the  "Bankruptcy   Court"),  in  order  to  implement  a  major  financial  and
operational restructuring of its business.

     At  issue in the Big V  Bankruptcy  and  related  litigation,  among  other
things, are the terms under which change in the Wakefern distribution  agreement
can be effectuated and the cost of such change, if any, to Big V.  Particularly,
Big V, together with other related entities,  initiated litigation with Wakefern
seeking a  declaration  that Big V could exit the Wakefern food  cooperative  by
tendering the shares of Wakefern owned by Big V back to Wakefern, and transition
to a new supplier and continue to operate as an independent grocery store chain,
without  incurring a payment  obligation  to Wakefern (a  so-called  "Withdrawal
Penalty")  under the various  agreements by and among Big V and its  affiliates,
Wakefern and other members of Wakefern  (the  "Wakefern  Litigation").  Wakefern
took the  position  that  such an effort  by Big V would  trigger  a  Withdrawal
Penalty.

     On August 9, 2001,  after  conducting a trial in July 2001,  the Bankruptcy
Court  indicated  that it would  enter  judgment  in favor  of  Wakefern  in the
Wakefern  Litigation,  thereby  denying the request by the Big V Entities  for a
declaration that Big V could exit the Wakefern food cooperative by tendering the
shares of Wakefern  owned by Big V back to  Wakefern,  and  transition  to a new
supplier and continue to operate as an independent grocery store chain,  without
incurring a Withdrawal Penalty. The Bankruptcy Court also indicated that at some
date in the future it would  issue a written  decision  supporting  the entry of
such judgment in favor of Wakefern.  However,  the Bankruptcy Court did not rule
on, among other things,  the amount of the payment that would be due to Wakefern
if Big V  were  to  pursue  the  course  of  action  described  in the  Wakefern
Litigation or whether the payment obligation might otherwise be unenforceable

     On August 9, 2001, the Bankruptcy  Court also deferred  ruling until August
23,  2001 on the  request  by the  Big V  Entities  for an  extension  of  their
exclusive period of time to propose a plan of  reorganization  in the Chapter 11
cases. The exclusive period thus has automatically been extended to that date.

     Currently,  Fund II holds a Senior  Subordinated  Note issued by Big V with
outstanding  principal of approximately $10.4 million (the "Senior  Subordinated
Note"),  as well as 117,333 shares of BVH common stock. At the time of the Big V
Bankruptcy  filing,  Big V had failed to make the  November  15,  2000  interest
payment due Fund II under the Senior  Subordinated  Note held by Fund II.  Since
the Big V Bankruptcy  filing, the December 15, 2000 and March 15, 2001 principal
payments and the February 15, 2001 and March 15, 2001 interest payments due Fund
II  under  such  note  have  been  stayed.  As a  result  of  the  uncertainties
surrounding  the Big V  Bankruptcy,  Fund II stopped  accruing  interest  on the
Senior Subordinated Note as of January 1, 2001.

     Based on the Bankruptcy  Court's  indication that it will enter judgment in
favor of Wakefern in the Wakefern  Litigation and the potential impact that this
decision has on the ability of Big V to  transition  to a new  supplier  without
incurring a Withdrawal  Penalty (subject to potential  further  litigation about
the amount or enforceability of that Withdrawal Penalty), Fund II, in accordance
with its valuation procedures,  has determined, as of June 30, 2001, to retain a
carrying value of approximately  $10.4 million for the Senior  Subordinated Note
and to write down the carrying  value for the 117,333 shares of BVH common stock
to a nominal valuation of approximately  $7,000. The actual value, however, that
might be realized by Fund II with respect to its debt and equity  investments in
the Big V Entities  remains  dependent in large part on the ultimate  outcome of
the Big V Bankruptcy  and related  litigation,  including  the  litigation  with
Wakefern.   Specifically,   if  the  Big  V  Bankruptcy  or  related  litigation
proceedings are not ultimately resolved in Big V's favor and/or the costs to Big
V of transferring the Wakefern distribution agreement are substantial, the value
of Fund II's debt and  equity  investments  in the Big V  Entities  as set forth
herein may be impaired,  and Fund II could  conceivably  be exposed to losses in
excess of its original debt and equity investments in the Big V Entities.

     Neither  the  Investment  Adviser nor the General  Partners,  however,  can
predict the ultimate outcome of the Big V Bankruptcy proceedings, including such
proceedings'  ultimate impact on the value of the Big V Senior Subordinated Note
or the BVH equity held by Fund II, or the timing or amount of payments,  if any,
that might be made to Fund II  pursuant  to Big V's plan of  reorganization.  In
addition, the General Partners cannot currently predict how the Big V Bankruptcy
may affect the timing of the ultimate  liquidation  of Fund II, or the amount of
proceeds that Limited Partners will ultimately receive.

     Fund II's Investment  Adviser will continue to monitor  developments in the
Big V Bankruptcy and update Fund II's General Partners as needed. It is possible
that the carrying value of such investments,  particularly the carrying value of
the Senior  Subordinated  Note at its outstanding  principal  balance,  could be
further negatively impacted by developments in the Big V Bankruptcy.

     In  addition,  the  General  Partners  will  continue  to review  Fund II's
reserves each quarter in light of the foregoing matter,  and distributions  will
be made in accordance with Fund II's Partnership Agreement.  Currently,  Fund II
has reserved  all  Mezzanine  Investment  sale,  paydown and  maturity  proceeds
received  since August 1999, as well as income from  operations  since the third
quarter 1999.

     As of  June  30,  2001,  Fund  II had  outstanding  a total  (at  cost)  of
$16,908,000 invested in Mezzanine Investments  representing  $14,537,000 Managed
and $2,371,000 Non-Managed portfolio  investments,  and Temporary Investments of
$19,255,000 comprised of commercial paper with maturities of less than 60 days.

     As provided by the Partnership  Agreement,  the Managing General Partner of
Fund II is entitled to receive an incentive  distribution after Limited Partners
have received their Priority Return of 10% per annum ("MGP Distributions").  The
Managing  General Partner is required to defer a portion of any MGP Distribution
earned  from the sale of  portfolio  investments  in excess  of 20% of  realized
capital  gains,  net realized  capital losses and  unrealized  depreciation,  in
accordance with the Partnership Agreement (the "Deferred  Distribution Amount").
Any Deferred  Distribution  Amount is distributable to the Partners  pro-rata in
accordance with their capital contributions, and certain amounts otherwise later
payable to Limited Partners from  distributable cash from operations are instead
payable to the Managing General Partner until the Deferred  Distribution  Amount
is paid. As of June 30, 2001,  there is no  outstanding  Deferred  Distribution
Amount.

     As recovered capital from portfolio company sales is distributed to Limited
Partners,  the Limited  Partners'  net asset  value  ("NAV") per Unit is reduced
accordingly,  and the corresponding interest income previously generated by such
holdings  will no longer be received by Fund II. After the July 10, 2001 sale of
Fund  II's  investment  in  BioLease  and  BioTransplant,  Fund II has  only two
portfolio  companies  remaining,  neither  of which is  income  producing.  As a
result,  it is expected that any future cash available to pay  distributions  to
Partners (to the extent such cash is not reserved for expenses and contingencies
- see  discussion of the Big V Bankruptcy  above) will be derived  entirely from
recovered  capital  and gains  from  asset  sales,  which are  subject to market
conditions and are inherently unpredictable as to timing.
<PAGE>
Investment in High-Yield Securities

     Fund II  invested  primarily  in  subordinated  debt  and  preferred  stock
securities   ("High-Yield   Securities"),   generally   linked  with  an  equity
participation,  issued in conjunction with the mezzanine  financing of privately
structured,   friendly  leveraged  acquisitions,   recapitalizations  and  other
leveraged  financings.  High-Yield  Securities  are  debt and  preferred  equity
securities that are unrated or are rated by Standard & Poor's  Corporation as BB
or lower and by Moody's  Investor  Services,  Inc. as Ba or lower.  Risk of loss
upon default by the issuer is significantly  greater with High-Yield  Securities
than  with  investment  grade  securities  because  High-Yield   Securities  are
generally unsecured and are often subordinated to other creditors of the issuer.
Also,  these  issuers  usually  have high  levels of  indebtedness  and are more
sensitive  to adverse  economic  conditions,  such as  recession  or  increasing
interest rates,  than  investment  grade issuers.  Most of these  securities are
subject to resale  restrictions and generally there is no quoted market for such
securities.

     Although Fund II cannot eliminate the risks associated with its investments
in High-Yield Securities,  it has established risk management policies.  Fund II
subjected each prospective  investment to rigorous  analysis and made only those
investments  that were  recommended by the Investment  Adviser and that met Fund
II's  investment  guidelines or that had otherwise been approved by the Managing
General Partner and the Independent General Partners. Fund II's investments were
measured  against  specified Fund II investment and performance  guidelines.  To
limit the  exposure of Fund II's capital in any single  issuer,  Fund II limited
the  amount of its  investment  in a  particular  issuer.  Fund II's  Investment
Adviser also continually  monitors portfolio  companies in order to minimize the
risks associated with its investments in High-Yield Securities.

     The  Investment   Adviser  reviews  each  portfolio   company's   financial
statements quarterly.  In addition, the Investment Adviser routinely reviews and
discusses  financial and operating  results with the  company's  management  and
where  appropriate,   attends  board  of  director  meetings.   In  some  cases,
representatives  of the Investment  Adviser,  acting on behalf of the Funds (and
affiliated investors where applicable), serve as one or more of the directors on
the  boards  of  portfolio  companies.  Fund II may,  from  time to  time,  make
follow-on investments to the extent necessary to protect or enhance its existing
investments.

Forward Looking Information

     In  addition  to  historical   information  contained  or  incorporated  by
reference   in  this  report  on  Form  10-Q,   Fund  II  may  make  or  publish
forward-looking statements about management expectations,  strategic objectives,
business  prospects,   anticipated  financial  performance,  and  other  similar
matters.  In  order  to  comply  with the  terms  of the  safe  harbor  for such
statements  provided by the Private  Securities  Litigation  Reform Act of 1995,
Fund II notes that a variety of factors,  many of which are beyond its  control,
affect its operations,  performance,  business  strategy,  and results and could
cause actual results and experience to differ  materially from the  expectations
expressed in these  statements.  These factors include,  but are not limited to,
the effect of changing  economic and market  conditions,  trends in business and
finance and in investor  sentiment,  the level of volatility of interest  rates,
the actions undertaken by both current and potential new competitors, the impact
of current,  pending,  and future  legislation and regulation both in the United
States and throughout the world, the impact of current ongoing  litigation as it
relates to Fund II, and the other risks and uncertainties  detailed in this Form
10-Q.  Fund II undertakes  no  responsibility  to update  publicly or revise any
forward-looking statements.

Results of Operations

Net Investment Income

     For  the  three  and  six  months  ended  June  30,  2001,  Fund II had net
investment  income of $63,000  and  $15,000,  respectively,  as  compared to net
investment  income for the three and six months  ended June 30, 2000 of $456,000
and $1,066,000, respectively. The decrease in net investment income during 2001,
as compared to 2000, is primarily  attributable to a decrease in interest income
from  Mezzanine  Investments  and an  increase in legal and  professional  fees,
partially  offset by an increase in interest and discount  income from Temporary
Investments and from the recognition of BioLease  deferred  interest income,  as
discussed below.

Investment Income and Expenses

     The total  investment  income from  operations for the three and six months
ended June 30, 2001 and 2000 consists  primarily of interest and discount income
earned on the investment of proceeds from Partner's  contributions  in Mezzanine
Investments  and  short-term  money  market  instruments.  For the three and six
months ended June 30, 2001 and 2000, Fund II had investment  income of $420,000,
$726,000, $742,000 and $1,668,000, respectively.
<PAGE>
     The decrease in  investment  income  during 2001,  as compared to 2000,  is
primarily  attributable to a decrease in income earned on Mezzanine  Investments
as  result  of the  non-accrual  status  of Big V in  2001  and a  non-recurring
$205,000  adjustment  in  the  first  quarter  of  2000  to  correct  for a 1999
understatement  of Mezzanine  Investment  income.  This  decrease was  partially
offset by an increase in income earned on Temporary  Investments  as a result of
investing  Mezzanine  Investment sale,  paydown and maturity  proceeds  received
since August 1999, as well as on income from  operations  from the third quarter
1999 and subsequent quarters,  all of which have been reserved;  and by the 2001
recognition of the BioLease  payment-in-kind note representing deferred interest
income on the BioLease subordinated note.

     Major  expenses  for the three and six months  ended June 30, 2001 and 2000
consisted of Investment Advisory Fees,  Administrative  Expenses,  and Legal and
Professional Fees.

     The  Investment   Adviser  and  Fund   Administrator   both  receive  their
compensation on a quarterly basis.  The total Investment  Advisory Fees incurred
by Fund II to the Investment Adviser for the three and six months ended June 30,
2001 and 2000 were $167,000, $333,000, $167,000 and $333,000,  respectively, and
were  calculated  at an annual  rate of 1.0% of  assets  under  management  (net
offering proceeds reduced by cumulative capital reductions and realized losses),
with a minimum annual amount of $1,200,000 for the Funds on a combined basis. On
July 17, 2001, the Independent General Partners,  on behalf of Fund II, accepted
a proposal  made by the  Investment  Adviser  to reduce  the  annual  Investment
Advisory Fee payable to the Investment  Adviser by 50%. A similar  reduction was
approved for the Retirement Fund.  Accordingly,  the combined annual  Investment
Advisory Fee payable by the Funds will be $600,000. Such reductions will be made
effective retroactive to July 1, 2001.

     As compensation  for its services,  the Fund  Administrator  is entitled to
receive an annual  amount of $400,000  for the Funds on a combined  basis,  plus
reimbursement   of  100%  of  out-of-pocket   expenses   incurred  by  the  Fund
Administrator  on behalf of Fund II  ("Reimbursable  Administrative  Expenses").
Reimbursable  Administrative Expenses primarily consist of printing,  audit, tax
preparation,  legal fees and expenses, and custodian fees. For the three and six
months ended June 30, 2001 and 2000, Fund II incurred Fund  Administration  Fees
of $55,000, $111,000, $55,000 and $111,000,  respectively. For the three and six
months ended June 30, 2001 and 2000, Fund II incurred $61,000, $117,000, $43,000
and $103,000, respectively, in Reimbursable Administrative Expenses.

     Legal and  professional  fees for the three and six  months  ended June 30,
2001 and 2000 were $54,000, $100,000, $0 and $11,000, respectively. The increase
in legal and  professional  fees for 2001,  as  compared to 2000,  is  primarily
attributable  to the legal fees incurred by Fund II in connection with the Big V
Bankruptcy.

Net Assets

     Fund II's net assets  decreased by  $3,769,000  during the six months ended
June 30, 2001,  due to net  unrealized  depreciation  of  $4,054,000,  partially
offset  by net  investment  income  of  $15,000  and a  reversal  of  unrealized
depreciation  of $270,000.  During the six months ended June 30, 2000, Fund II's
net assets increased by $1,106,000,  due to net investment  income of $1,106,000
and a reversal of unrealized  depreciation of $47,000  partially offset by a net
realized loss of $7,000.

Unrealized Appreciation and Depreciation on Investments

     Fund II recorded net unrealized  depreciation of $4,054,000  during the six
months  ended  June 30,  2001.  In  addition,  as a result  of  dispositions  of
Mezzanine Investments, Fund II recorded a reversal of unrealized depreciation of
$270,000  during the six months  ended June 30,  2001,  as compared to a $47,000
reversal of unrealized  depreciation  during the six months ended June 30, 2000.
Fund II's  cumulative net unrealized  depreciation on investments as of June 30,
2001 totaled $5,661,000.

     Securities for which market  quotations are readily available are valued by
reference to such market  quotation  using the last trade price (if reported) or
the  last  bid  price  for  the  period.   For  securities   without  a  readily
ascertainable  market value  (including  securities  restricted as to resale for
which a corresponding  publicly traded class exists),  fair value is determined,
on a quarterly basis, in good faith by the Investment Adviser and is approved by
the Managing  General  Partner with final approval from the  Individual  General
Partners of Fund II. For privately issued  securities in which Fund II typically
invests,  the fair value of an  investment  is generally  its original cost plus
accrued value in the case of original issue discount or deferred pay securities.
Such  investments  generally will be revalued if there is an objective basis for
doing so at a different price.  Investments will be written down in value if the
Investment Adviser and the General Partners believe adverse credit  developments
of a significant  nature  require a write-down of such  securities.  Investments
will be written up in value only if there has been an  arms'-length  third party
transaction to justify the increased valuation.  Although the Investment Adviser
and the General Partners use their best judgment in estimating the fair value of
these investments,  there are inherent limitations in any estimation  technique.
Therefore,  the  fair  value  estimates  presented  herein  are not  necessarily
indicative of the amount which Fund II could  realize in a current  transaction.
Future  confirming  events will also affect the  estimates of fair value and the
effect of such events on the estimates of fair value could be material.
<PAGE>
     As  a  result  of  total  net  realized  and  unrealized  appreciation  and
depreciation  recorded by Fund II through June 30, 2001,  Limited  Partners' net
asset value  ("NAV") was $137.49 per Unit.  Fund II's net assets as of that date
included its holdings in Big V and BVH  (approximately  33.6% of net assets) and
other private placement securities (approximately 2.7% of net assets), for which
there are no ascertainable  market values,  and commercial paper  (approximately
62.2% of net assets),  which is stated at amortized  cost. The June 30, 2001 NAV
figure does not reflect any change that may  subsequently  have  occurred in the
value of Fund II's holdings.  Moreover, in light of the Big V Bankruptcy filing,
there is a high degree of uncertainty  associated with Fund II's estimate of the
value  of its  investments  in Big V and BVH (see  also  Liquidity  and  Capital
Resources  above).  Finally,  the Big V Bankruptcy  and related  litigation  may
potentially  have an effect on other assets of Fund II. The previously  computed
NAV does not represent the Units' current market value, and Limited Partners may
not be able to  realize  this  value  upon a sale of  their  Units  or  ultimate
liquidation of Fund II's assets.

     The  information   presented  herein  is  based  on  pertinent  information
available to the Investment Adviser and Managing General Partner. The Investment
Adviser and Managing  General Partner are not aware of any factors not disclosed
herein that would significantly affect the estimated fair value amounts.

     For  additional  information  please  refer  to  Supplemental  Schedule  of
Unrealized Appreciation (Depreciation) - Schedule 1.

     Should a Limited  Partner  decide to sell his Units,  any such sale will be
recorded  on the  books  and  records  of  Fund  II  quarterly,  only  upon  the
satisfactory  completion and acceptance of Fund II'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.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

     As of June 30, 2001, Fund II 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 is not expected to have a material effect on Fund II's financial position.
<PAGE>
                          PART II - OTHER INFORMATION

     Item 1. Legal Proceedings.
             -----------------
             None

     Item 2. Changes in Securities and Use of Proceeds.
             -----------------------------------------
             None

     Item 3. Defaults Upon Senior Securites.
             ------------------------------
             None

     Item 4. Submission of Matters to a Vote of Security holders.
             ---------------------------------------------------
             None

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

     Item 6. Exhibits and 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, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto  duly  authorized  on the 20th day of
August, 2001.

                                   ML-LEE ACQUISITION FUND II, L.P.

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

                             By:   ML Mezzanine II Inc.,
                                   its General Partner


Dated:  August 20, 2001      By:   /s/ Kevin T. Seltzer
                                   ----------------------------------
                                   Kevin T. Seltzer
                                   ML Mezzanine II, Inc.
                                   Vice President and Treasurer
                                   (Principal Financial Officer of Registrant)