ML LEE ACQUISITION FUND RETIREMENT ACCOUNTS II L P - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the Fiscal Year Ended December 31, 2002

Or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from to
Commission file number 0-17382

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

Delaware 04-3028397
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

4 World Financial Center, 23rd Floor
New York, New York 10080
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(Address of principal executive offices) (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
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None None

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

Units of Limited Partnership Interest
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(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 ------ -------

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

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Prospectus of the Registrant dated September 6, 1989 are
incorporated by reference in Part I, Part II, and Part III hereof.

PART I

Item 1. Business

Formation and Current Status

ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. (the "Retirement Fund"),
a Delaware limited partnership, was formed on September 23, 1988 along with
ML-Lee Acquisition Fund II, L.P. ("Fund II" and together with the Retirement
Fund; the "Funds"). The Funds commenced operations on November 10, 1989.

Mezzanine Investments II, L.P. (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
(the "Investment Adviser"), is the limited partner. The Managing General Partner
is responsible for overseeing and monitoring the investments of the Funds,
subject to the overall supervision of four individual general partners (the
"Individual General Partners"; and together with the Managing General Partner,
the "General Partners"). The Individual General Partners of the Funds include
Thomas H. Lee and three independent general partners: Vernon R. Alden, Joseph L.
Bower and Stanley H. Feldberg (the "Independent General Partners"), who are
non-interested persons as defined in the Investment Company Act of 1940. ML Fund
Administrators Inc. (the "Fund Administrator"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc., is responsible for the administrative
services necessary for the operations of the Funds.

The final extension of the term of the Retirement Fund expired on December 20,
2002. Pursuant to the Retirement Fund's amended and restated agreement of
limited partnership, as amended (the "Partnership Agreement"), the Retirement
Fund will use a period of no more than five years to liquidate its remaining
assets. As previously disclosed, the Retirement Fund expects to complete its
liquidation at such time as all potential unresolved claims relating to the
settlement agreement involving Big V Supermarkets, Inc. ("Big V"), a former
portfolio company of the Retirement Fund, and any other claims, are resolved.
See Note 5 of notes to financial statements, included in Part I, Item 8 of this
Form 10-K. The General Partners currently cannot predict how the contingencies
relating to such potential claims may affect the timing of the termination of
the Retirement Fund or the final amount of liquidating distributions to be paid
to Limited Partners (as defined below).

Each of the Funds elected to operate as a business development company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). The
primary investment objective of the Funds was to provide current income and
capital appreciation to its partners by investing in privately structured,
friendly leveraged buyouts and other leveraged transactions. The Funds pursued
this objective by investing primarily in subordinated debt and related equity
securities issued in conjunction with the mezzanine financings of friendly
leveraged buyout transactions, leveraged acquisitions and recapitalizations
("Mezzanine Investments"). The Funds also invested in bridge investments, as
such investments facilitated the consummation of mezzanine financings. The
activity of the Funds is considered to constitute the single industry segment of
mezzanine financing investing.

The Funds invested substantially all of their respective net proceeds in
Mezzanine Investments consisting of high-yield subordinated debt and/or
preferred stock with equity participation, of middle market companies in
connection with friendly leveraged acquisitions, recapitalizations and other
leveraged financings. The Funds will not make any additional Mezzanine
Investments.

The Funds offered an aggregate of 1 million units of limited partnership
interest ("Units") at $1,000 per Unit. The Units were registered under the
Securities and Exchange Commission pursuant to a Registration Statement on Form
N-2 (File No. 33-25816), effective September 6, 1989. The information set forth
under the heading "Risk and Other Important Factors", "Estimated Use of
Proceeds", "Mezzanine Financing", "Investment Objectives and Policies" and
"Conflicts of Interest" in the Prospectus of the Funds dated September 6, 1989,
filed with the Securities and Exchange Commission pursuant to Rule 497(b) under
the Securities Act of 1933 (the "Prospectus"), is incorporated herein by
reference.

The offering of Units commenced on September 6, 1989. On November 10, 1989 and
December 20, 1989, the Retirement Fund held its first and second closings,
respectively, at which time the Managing General Partner admitted the additional
limited partners (the "Limited Partners") to the Retirement Fund, representing
177,515 Units. Capital contributions of the additional Limited Partners totaled
$164,201,375, which excludes discounts allowed of $1,447,740 and net of sales
commissions and financial advisory fees of $11,865,885. Additionally, the
Managing General Partner contributed $500,000 and Thomas H. Lee, an Individual
General Partner of the Funds, contributed $50,000 to the Retirement Fund. In
connection with the offering of Units, the Retirement Fund paid sales
commissions to Merrill Lynch, Pierce, Fenner and Smith Incorporated ("MLPF&S")
totaling $9,492,708, exclusive of discounts of $1,158,192. In addition, the
Retirement Fund paid a financial advisory fee to MLPF&S of $2,373,177, exclusive
of discounts of $289,548.

As described above, the final extension of the term of the Retirement Fund has
expired. In addition, the final extension of Fund II has also expired.
Accordingly, the only remaining activities of the Funds include settling their
affairs in the normal course of liquidation and the only remaining assets of the
Funds consist of temporary investments in short-term securities. Therefore, in
order to reduce costs during the liquidation period, the Funds applied for, and
on March 4, 2003 received, a no-action letter (the "Letter") from the Division
of Investment Management (the "Division") of the Commission relieving the Funds
from filing annual and quarterly reports on Forms 10-K and 10-Q under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Letter
indicated that the Division would not recommend enforcement action to the
Commission against the Funds for not filing such reports, subject to the terms
of the Letter. Pursuant to the Letter, the Funds will file their annual report
on Form 10-K for the year ended December 31, 2002, including audited financial
statements, but will discontinue filing Forms 10-K or 10-Q with the Commission
for periods ending after December 31, 2002. However, if the Funds are not
terminated within three years from the date of the Letter, the Funds will either
resume filing such reports with the Commission or request additional no-action
relief from the Division. In addition, pursuant to the Letter, the Funds have
withdrawn their elections to be operated as business development companies
pursuant to the Investment Company Act of 1940, as amended.

The Funds will continue to file current reports with the Commission on Form 8-K
in the event that material developments occur during the liquidation period,
including termination. In addition, the Funds will continue to deliver annual
and quarterly reports to Limited Partners as required by the terms of each
Fund's respective partnership agreement.

The Portfolio Investments

The Retirement Fund's portfolio investments were made on a coinvestment basis
with Fund II in proportion to the total capital available for investment by the
Funds. As of December 31, 2002, all portfolio investments of the Funds had been
liquidated. In June, 2002, the Retirement Fund had an $8,750,000 realized loss
from its portfolio investments resulting from the write-off of the $7,763,000
remaining cost of its investment 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"), and the $987,000 write-off of its investment
in FLA. Holdings, Inc. Both investments were carried at a value of zero as of
December 31, 2001, and accordingly, the realized loss was offset by the reversal
of unrealized depreciation, resulting in no change to the net asset value of the
Retirement Fund for 2002.

Competition
The Funds have completed their investment period and reinvestment program and,
therefore, will no longer be competing for new investment opportunities.

Employees
The Funds have no employees. The Investment Adviser, subject to the supervision
of the Managing General Partner and the Individual General Partners, is
responsible for overseeing and monitoring the Funds portfolio investments. The
Managing General Partner is responsible for managing the temporary investments
of the Funds. The Fund Administrator is responsible for the administrative
services of the Funds. The Fund Administrator is a subsidiary of Merrill Lynch &
Co., the parent of MLPF&S.

Item 2. Properties.
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The Funds do not own or lease any physical properties.

Item 3. Legal Proceedings.
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The Funds were not a party to any material pending legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.
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No matter was submitted to a vote of security holders of the Funds during the
fourth quarter of the fiscal year covered by this report.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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There is no established trading market for the Units. The Partnership Agreement
contains restrictions that are intended to prevent the development of a public
market. Accordingly, accurate information as to the market value of the Units at
any given date is not available. The approximate number of Unit holders as of
March 17, 2003 was approximately 8,565. The Managing General Partner and Thomas
H. Lee, an Individual General Partner, also hold interests in the Retirement
Fund.

In connection with the relief granted by the Letter (as defined in Part I
above), the Funds have agreed to permit transfers of Units only until April 1,
2003, subject to receipt of fully executed transfer documents on or prior to
March 31, 2003 and subject to the terms of each Fund's respective partnership
agreement (including, with respect to the Retirement Fund, the overall annual
5.0% limit on transfers in any tax year), except for transfers for no
consideration, pursuant to the laws of descent and distribution or as otherwise
required by law.

MLPF&S reports estimated values of limited partnerships and other direct
investments on client account statements and no longer reports the general
partner's estimate of limited partnership net asset value to Unit holders.
Pursuant to MLPF&S guidelines, estimated values for limited partnership
interests originally sold by MLPF&S, including Units of the Funds, are provided
by independent valuation services. Such estimated values are provided two times
per year, based on financial and other information available to the independent
services on the prior August 15 for reporting on December year-end client
account statements, and on information available to the independent services on
the prior March 31 for reporting on June month-end client account statements.
MLPF&S clients may contact their Financial Advisor to obtain a general
description of the methodology used by the independent valuation services in
determining the estimated values. The estimated values provided by the
independent services and the Retirement Fund's current net asset value as
estimated by the general partner are not market values and Unit holders may not
be able to sell their Units or realize either amount upon a sale of their Units.
In addition, Unit holders may not realize the independent estimated value or the
Retirement Fund's current net asset value upon the liquidation of assets over
its remaining life.

The Retirement Fund distributes Distributable Cash from Investments and
Distributable Capital Proceeds in accordance with the terms of the Partnership
Agreement. Pursuant to the Partnership Agreement, transfers of Units are
recognized on the first day of the fiscal quarter after which the Managing
General Partner has been duly notified of a transfer pursuant to the Partnership
Agreement. Until a transfer is recognized, the limited partner of record (i.e.
the transferor) will continue to receive all of the benefits and burdens of
ownership of Units, including allocations of profit and loss and distributions,
and any transferee will have 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 by the Managing General
Partner, will be payable to the transferor and not the transferee.

Cash Distributions - No distributions were made to the partners of the
Retirement Fund during the three year period ended December 31, 2002.

On February 5, 2003, the General Partners approved a cash distribution of
$10,759,809. Limited Partners received $10,544,391, or $59.40 per unit of
limited partnership interest ("Unit"), an Individual General Partner received
$6,694 and the Managing General Partner received $208,724. The distribution was
paid on March 12, 2003 to Limited Partners of record on February 5, 2003.

Item 6. Selected Financial Data.
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Years Ended December 31,
2002 2001 2000 1999 1998
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Net Investment Income (loss) $ (1,500,262) $ (596,858) $ 885,393 $ 337,251 $1,922,189

Net Realized Gain (Loss) on Sales of
Investments (8,750,745) (25,874) 19,054 (3,468,662) (9,869,500)

Net Change in Unrealized Appreciation
of Investments 8,750,745 (7,525,114) 30,703 10,881,662 17,438,728

Cash Distributions to Partners - - - 8,325,079 20,876,516

Net Assets 12,405,668 13,905,930 22,053,778 21,118,625 21,693,451

Cost of Mezzanine Investments - 8,750,745 9,189,522 10,656,462 28,049,200

Total Assets 12,499,244 14,104,736 22,213,889 21,277,376 21,798,979

PER UNIT OF LIMITED PARTNERSHIP INTEREST:

Investment Income $ 1.31 $ 2.26 $ 9.71 $ 6.40 $ 16.66

Expenses 9.73 5.61 5.21 4.94 7.58

Net Investment (Loss) Income (8.42) (3.35) 4.50 1.46 9.08

Net Realized Gain (Loss) from Investments (49.14) (0.15) 0.11 (19.65) (63.45)

Net Change in Unrealized Appreciation
of Investments 49.14 (42.26) 0.17 61.11 98.00

Cash Distributions - - - 43.98 107.11

Cumulative Cash Distributions 1,476.31 1,476.31 1,476.31 1,476.31 1,432.33

Net Asset Value 68.49 76.91 122.67 117.89 118.96

See cash distributions schedule for additional information.

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

As of December 31, 2002, ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.
(the "Retirement Fund") held $143,000 in an interest-bearing cash account and
$12,347,000 in temporary investments consisting of short-term discounted
commercial paper and U.S. Treasury Bills with maturities of less than 90 days.
For the years ended December 31, 2002, 2001 and 2000, the Retirement Fund earned
interest from such investments totaling $234,000, $549,000 and $757,000,
respectively. Interest earned in future periods is subject to fluctuations in
short-term interest rates and changes in amounts available for investment in
such securities. Funds needed to cover future operating expenses of the
Retirement Fund and contingent obligations, if any, as discussed below, will be
obtained from these existing cash reserves and interest on such reserves. The
Retirement Fund, together with ML-Lee Acquisition Fund II, L.P., are referred to
herein as the "Funds".

The final extension of the term of the Retirement Fund expired on December 20,
2002. Pursuant to the Retirement Fund's amended and restated agreement of
limited partnership, as amended (the "Partnership Agreement"), the Retirement
Fund will use a period of no more than five years to liquidate its remaining
assets.

As more fully described in Note 5 of notes to financial statements, included in
Part I, Item 8 of this Form 10-K, the bankruptcy court has confirmed a plan of
reorganization for Big V Supermarkets, Inc. ("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"). In connection therewith, in July
2002, the Retirement Fund contributed $731,000 to fund its portion of certain
payments due under the plan in exchange for broad releases of certain claims,
and to provide funds for use by or on behalf of the Settling Parties (as
described in Note 5 of notes to financial statements) jointly to address claims
not resolved by the plan. Additionally, as part of the settlement, the
subordinated debt and the equity of Big V held by the Retirement Fund was
cancelled.

With all of its portfolio investments now liquidated, it is expected that the
Retirement Fund will complete its liquidation at such time as all potential
unresolved claims relating to Big V are resolved to the satisfaction of the
Retirement Fund and the other Settling Parties to the plan. At this time (and
subject to the description contained in Note 5 of notes to financial
statements), the Retirement Fund cannot estimate the likelihood of any claims
being asserted, or the magnitude or merits of any such claims. The Retirement
Fund and the other Settling Parties will continue to monitor in good faith the
appropriate amount of assets that each holds to provide for any such unresolved
claims. In addition, the General Partners currently cannot predict how these
contingencies may affect the timing of the termination of the Retirement Fund,
or the final amount of liquidating distributions to be paid to Limited Partners.

At a meeting of the General Partners of the Retirement Fund held on February 5,
2003, the General Partners approved a cash distribution of $10,759,809. Limited
Partners received $10,544,391, or $59.40 per unit of limited partnership
interest ("Unit"), an Individual General Partner received $6,694 and the
Managing General Partner received $208,724. The distribution was paid on March
12, 2003 to Limited Partners of record on February 5, 2003.

By further action taken at the meeting held on February 5, 2003, the General
Partners of the Funds, the Investment Adviser and the Fund Administrator
authorized certain measures to reduce costs while the Funds are liquidating
their remaining assets. In this regard, the Investment Adviser, the Fund
Administrator and the Independent General Partners have agreed, as of January 1,
2003, to reduce by 50% the respective fees paid to them by the Funds.
Accordingly, beginning on January 1, 2003, the aggregate annual Investment
Advisory Fee to be paid by the Funds will be reduced to $300,000, the aggregate
annual Fund Administration Fee to be paid by the Funds will be reduced to
$200,000, and the aggregate annual Independent General Partner fees to be paid
by the Funds will be reduced to $20,000 for each Independent General Partner.
The Retirement Fund's proportionate share of such aggregate annual fees will be
$133,500 for the Investment Advisory Fee, $89,000 for the Fund Administration
Fee and $8,900 for fees paid to each of the Independent General Partners.

Results of Operations

Net Investment Income or Loss - For the year ended December 31, 2002, the
Retirement Fund had a net investment loss of $1,500,000 as compared to net
investment loss of $597,000 and net investment income of $885,000 for the years
ended December 31, 2001 and 2000, respectively.

The unfavorable change in net investment loss for the year ended 2002 compared
to 2001 resulted from the $731,000 litigation settlement relating to the
Retirement Fund's investment in Big V, as discussed above, a $168,000 decrease
in investment income and a $4,000 increase in operating expenses. The
unfavorable change in investment income includes a $315,000 decrease in interest
from temporary investments, which primarily resulted from a decline in
short-term interest rates for the year ended 2002 compared to 2001. The decline
in investment income also includes a $157,000 decrease in interest from
portfolio investments, due to interest earned on notes due from BioLease, Inc.
during 2001, as discussed below. These amounts were offset by the reversal in
2001 of accrued interest of $304,000 due on the Big V subordinated notes. The
slight increase in operating expenses for the year ended 2002 compared to 2001
primarily resulted from the lower Investment Advisory Fee for the year ended
2002, as discussed below, which was offset by an increase in legal fees relating
to the Retirement Fund's investment in the Big V Entities and increases to
mailing and printing fees.

The unfavorable change in net investment income for the year ended 2001 as
compared to 2000 resulted from a $1,509,000 decrease in investment income
partially offset by a $27,000 decrease in operating expenses. The decline in
investment income includes a $1,301,000 decrease in interest from portfolio
investments and a $208,000 decrease in interest from temporary investments. The
decrease in interest from temporary investments primarily resulted from a
reduction in short-term interest rates during 2001 compared to 2000. The
decrease in interest income from portfolio investments primarily resulted from
the suspension of interest accruals on the $5,570,000 subordinated note due from
Big V as of January 1, 2001, and the reversal in 2001 of $304,000 of accrued
interest due on the Big V subordinated note, as discussed above. Also, a
one-time adjustment of $120,000 to correct a prior period understatement of
interest from portfolio investments was included in the 2000 period. These
declines in interest from portfolio investments were partially offset by
$124,000 of deferred interest on the subordinated note due from BioLease, Inc.,
which was recorded during the second quarter of 2001 as a payment in-kind note.
The note was paid in full in July 2001 as part of the sale of the Retirement
Fund's holdings of BioLease, Inc. and BioTransplant, Inc., as discussed below.
The decrease in operating expenses for the year ended 2001 compared to 2000
primarily resulted from the 50% reduction in the Investment Advisory Fee, as
discussed below partially offset by increases in legal fees relating to the
Retirement Fund's investments in the Big V Entities.

The Investment Adviser is responsible for the identification, management and
liquidation of the portfolio investments of the Funds. As compensation for
services rendered to the Funds, the Investment Adviser had received an
Investment Advisory Fee at an annual rate of 1% of the combined assets under
management of the Funds (net offering proceeds reduced by cumulative capital
reductions and realized losses), with a minimum fee of $1,200,000. The
Retirement Fund's proportionate share of such fee was $534,000. In July 2001,
the Investment Adviser voluntarily agreed to reduce the annual Investment
Advisory Fee payable by the Funds by 50%. Accordingly, the combined annual
Investment Advisory Fee payable by the Funds was reduced to $600,000, effective
as of July 1, 2001. The Retirement Fund's proportionate share of such annual fee
was $267,000. As a result, the Investment Advisory Fee for the years ended
December 31, 2002, 2001 and 2000 was $267,000, $401,000, and $534,000,
respectively.

As compensation for its services to the Funds, the Fund Administrator received
an annual fee of $400,000 through December 31, 2002. The Retirement Fund's
proportionate share of such annual fee was $178,000. As a result, the Fund
Administration Fee for each of the years ended December 31, 2002, 2001 and 2000
was $178,000.

The Fund Administrator also is entitled to reimbursement of 100% of the
operating expenses paid by the Fund Administrator on behalf of the Funds
("Reimbursable Administrative Expenses"). Reimbursable Administrative Expenses
primarily consist of printing and mailing, audit, tax preparation, general
non-investment related legal fees and custody fees. Reimbursable Administrative
Expenses for the years ended December 31, 2002, 2001 and 2000 were $281,000,
$200,000 and $210,000, respectively.

As discussed above, the Investment Adviser and the Fund Administrator have
agreed, as of January 1, 2003, to reduce by 50% the respective fees paid to them
by the Funds. Accordingly, beginning on January 1, 2003, the aggregate annual
Investment Advisory Fee and Fund Administration Fee to be paid by the Funds will
be reduced to $300,000 and $200,000, respectively. The Retirement Fund's
proportionate share of such aggregate annual fees will be $133,500 for the
Investment Advisory Fee and $89,000 for the Fund Administration Fee.

Realized Gains and Losses from Portfolio Investments - For the year ended
December 31, 2002, the Retirement Fund had a $8,750,000 realized loss from its
portfolio investments resulting from the write-off of the remaining cost of its
$7,763,000 investment in the Big V Entities and its $987,000 investment in FLA.
Holdings, Inc. Both investments were previously carried at a value of zero, and
the realized loss was accordingly offset by the reversal of unrealized
depreciation, as discussed below.

For the year ended December 31, 2001, the Retirement Fund had a net realized
loss from its portfolio investments of $26,000. In July 2001, the Retirement
Fund received net proceeds of $555,000 from the sale of its holdings of
BioLease, Inc. and BioTransplant, Inc., comprised of $124,000 full repayment of
deferred interest promissory notes and $431,000 repayment of subordinated notes.
Additionally, the Retirement Fund received accrued interest payments of $16,000.

For the year ended December 31, 2000, the Retirement Fund had a net realized
gain from its portfolio investments of $19,000. During 2000, a $76,000 partial
repayment of the subordinated note due from BioLease, Inc. resulted in a
realized loss of $5,000. Additionally, the Retirement Fund sold 6,554 common
shares of BioTransplant, Inc. for $60,000, resulting in a realized gain of
$24,000.

Change in Unrealized Depreciation of Portfolio Investments - For the year ended
December 31, 2002, the Retirement Fund had a $8,750,000 favorable change in
unrealized depreciation of investments resulting from the reversal of unrealized
depreciation in connection with the write-off of its investments in the Big V
Entities and FLA. Holdings, Inc.

For the year ended December 31, 2001, the Retirement Fund had a $7,525,000
unfavorable change in unrealized depreciation of portfolio investments,
primarily resulting from a $7,763,000 downward revaluation of the Retirement
Fund's investments in the Big V Entities, which reduced the carrying value of
this investment to zero. This decline was partially offset by a $206,000 upward
revaluation of the $437,000 subordinated note due from BioLease, Inc., which was
repaid in July 2001. Additionally, during 2001, $32,000 of unrealized
depreciation was reversed due to the sale of the Retirement Fund's investment in
BioLease, Inc. and BioTransplant, Inc.

For the year ended December 31, 2000, the Retirement Fund had a $31,000
favorable change in unrealized depreciation of portfolio investments, resulting
from the reversal of unrealized depreciation relating to the $76,000 partial
repayment of the subordinated note due from BioLease, Inc.

Net Assets - As of December 31, 2002, the Retirement Fund's net assets were
$12,405,000 compared to $13,905,000 as of December 31, 2001. The reduced net
asset value reflects the net investment loss of $1,500,000 for the year ended
December 31, 2002. Since the Retirement Fund's remaining investments in the Big
V Entities and FLA. Holdings, Inc. had been fully reserved in prior periods, the
write-off of the remaining cost of these investments resulted in no change to
the Retirement Fund's net asset value for 2002.

As of December 31, 2001, the Retirement Fund's net assets were $13,905,000
compared to $22,053,000 as of December 31, 2000. The $8,148,000 decrease
reflects the net decrease in net assets from operations for 2001, which is
comprised of the unfavorable change in unrealized depreciation of $7,525,000,
the net realized loss from investments of $26,000 and the net investment loss of
$597,000.

As of December 31, 2000, the Retirement Fund's net assets were $22,053,000
compared to $21,118,000 as of December 31, 1999. The $935,000 increase reflects
the net increase in net assets from operations for 2000, which is comprised of
the net investment income of $885,000, the net realized gain from investments of
$19,000 and the favorable change in unrealized depreciation of $31,000.

The net asset value per $1,000 unit of limited partnership interest ("Unit") of
the Retirement Fund as of December 31, 2002, 2001 and 2000, was $68, $77 and
$123, respectively. The computed net asset value does not represent the current
market value of a Unit, and limited partners may not be able to realize this
value upon a sale of their Units or ultimate liquidation of the Retirement
Fund's assets.

Cash Distributions - No cash distributions were paid to partners during 2002,
2001 or 2000. Cumulative cash distributions paid to partners from inception of
the Retirement Fund through December 31, 2002 are shown below:

Managing Individual Per
General General Limited $1,000
Partner Partner Partners Unit
--------------- ------------- --------------- --------------

Cumulative totals as of December 31, 2002 $ 31,509,830 $ 80,958 $ 261,910,126 $ 1,476.31
=============== ========== =============== ============

On February 5, 2003, the General Partners approved a cash distribution to
partners of $10,759,809. Limited Partners received $10,544,391, or $59.40 per
unit of limited partnership interest ("Unit"), an Individual General Partner
received $6,694 and the Managing General Partner received $208,724. The
distribution was paid on March 12, 2003 to Limited Partners of record on
February 5, 2003.

Forward Looking Information

In addition to historical information contained or incorporated by reference in
this report on Form 10-K, the Retirement Fund 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, the
Retirement Fund 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 impact of current ongoing litigation as it relates to the
Retirement Fund, and the other risks and uncertainties detailed in this Form
10-K. The Retirement Fund undertakes no responsibility to update publicly or
revise any forward looking statements.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

As of December 31, 2002, the Retirement 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. However, a significant increase or
decrease in interest rates is not expected to have a material effect on the
Retirement Fund's financial position.

Item 8. Financial Statements and Supplemental Data

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
INDEX

Report of Independent Accountants

Statements of Assets, Liabilities and Partners' Capital as of December 31, 2002
and December 31, 2001

Statements of Operations for the Years Ended December 31, 2002, 2001 and 2000

Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000

Statements of Changes in Partners' Capital for the Years Ended December 31,
2002, 2001 and 2000

Schedule of Investments as of December 31, 2002 and 2001

Notes to Financial Statements

REPORT OF INDEPENDENT ACCOUNTANTS

To the General and Limited Partners of ML-Lee Acquisition Fund (Retirement
Accounts) II, L.P.

In our opinion, the accompanying statements of assets, liabilities and partners'
capital, including the schedules of investments, and the related statements of
operations, of cash flows and of changes in partners' capital present fairly, in
all material respects, the financial position of ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P. (the "Fund") at December 31, 2002 and December
31, 2001, and the results of its operations, its cash flows and the changes in
its partners' capital for each of the three years in the period ended December
31, 2002, in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2002 and
December 31, 2001 by correspondence with the custodian, provide a reasonable
basis for our opinion.

As discussed in Note 1, the final extension of the term of the Fund expired on
December 20, 2002. Pursuant to the amended and restated agreement of Limited
Partnership, the Fund will use a period of no more than five years to liquidate
its remaining assets.

PricewaterhouseCoopers LLP

New York, New York
March 27, 2003

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
As of December 31, 2002 and 2001
(dollars in thousands)

2002 2001
------------------ ------------------
Assets

Investments:
Portfolio investments at fair value (cost $0 as of
December 31, 2002 and $8,750 as of December 31, 2001) $ - $ -
Temporary investments at amortized cost 12,347 13,849
Cash - interest bearing 143 246
Accrued interest receivable 4 -
Prepaid expenses 5 10
------------ -------------

Total Assets $ 12,499 $ 14,105
============ =============

Liabilities and Partners' Capital

Liabilities:

Reimbursable administrative expenses payable $ 91 $ 130
Accounts payable and accrued expenses - 56
Accrued Independent General Partners' fees and expenses 3 14
------------ -------------
Total Liabilities 94 200
------------ -------------

Partners' Capital:
Individual General Partner 8 8
Managing General Partner 240 245
Limited Partners (177,515 Units) 12,157 13,652
------------ -------------
Total Partners' Capital 12,405 13,905
------------ -------------

Total Liabilities and Partners' Capital $ 12,499 $ 14,105
============ =============

See notes to financial statements.

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2002, 2001 and 2000
(dollars in thousands)

2002 2001 2000
----------- ----------- -----------
Investment Income and Expenses

Investment Income:
Interest from portfolio investments $ - $ 157 $ 1,154
Reversal of accrued interest from portfolio investment - (304) -
Interest from temporary investments 234 549 757
----------- ----------- -----------
Total investment income 234 402 1,911
----------- ----------- -----------

Expenses:
Investment advisory fee 267 401 534
Fund administration fee 178 178 178
Reimbursable administrative expenses 281 200 210
Independent General Partners' fees and expenses 131 80 74
Legal fees 139 135 25
Insurance expense 7 5 5
Litigation settlement 731 - -
----------- ----------- -----------
Total expenses 1,734 999 1,026
----------- ----------- -----------

Net Investment (Loss) Income (1,500) (597) 885
----------- ----------- -----------

Net Realized and Unrealized (Loss) Gain
From Investments

Net realized (loss) gain from investments (8,750) (26) 19
Change in unrealized depreciation of investments 8,750 (7,525) 31
----------- ----------- -----------

Net realized and unrealized (loss) gain from investments - (7,551) 50
----------- ----------- -----------

Net (Decrease) Increase in Net Assets Resulting
From Operations (1,500) (8,148) 935

Less: Earned MGP Distributions - - (91)
----------- ----------- -----------

Net (Decrease) Increase in Net Assets
Available for Pro-Rata Distribution to Partners $ (1,500) $ (8,148) $ 844
=========== =========== ===========

See notes to financial statements.

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2002, 2001 and 2000
(dollars in thousands)

2002 2001 2000
----------- ----------- -----------
Cash Flows From Operating Activities:
Interest income $ 234 $ 647 $ 1,605
Litigation settlement (731) - -
Investment advisory fee (267) (401) (534)
Fund administration fee (178) (178) (178)
Independent General Partners' fees and expenses (142) (80) (66)
Reimbursable administrative expenses (320) (191) (213)
Legal fees (195) (103) (49)
Insurance expense (2) - -
Net redemption (purchase) of temporary investments 1,498 (156) (1,961)
Proceeds from dispositions and repayments of
portfolio investments - 555 1,517
----------- --------- -----------

Net cash (used in) provided by operating activities (103) 93 121

Cash at Beginning of Year 246 153 32
----------- --------- -----------

Cash at End of Year $ 143 $ 246 $ 153
=========== ========= ============
Reconciliation of net investment (loss) income to net cash (used in) provided by
operating activities:

Net investment (loss) income $ (1,500) $ (597) $ 885
----------- --------- -------------
Adjustments to reconcile net investment (loss) income to net cash (used in)
provided by operating activities:

Reversal of accrued interest from portfolio investments $ - $ 304 $ -

Amortization of commitment fee income - (2) -
Decrease (increase) in investments at cost 10,252 301 (490)
(Increase) decrease in accrued interest receivable (4) 67 (306)
Decrease (increase) in prepaid expenses 5 5 (11)
(Decrease) increase in accounts payable and accrued expenses (56) 32 19
(Decrease) increase in reimbursable administrative
expenses payable (39) 9 (3)
(Decrease) increase in accrued Independent General Partners'
fees and expenses (11) - 8
Net realized (loss) gain from portfolio investments (8,750) (26) 19
----------- --------- -----------
Total adjustments 1,397 690 (764)
----------- --------- -----------

Net cash (used in) provided by operating activities $ (103) $ 93 $ 121
=========== ========= ===========

See notes to financial statements.

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 2002, 2001 and 2000
(dollars in thousands)

Individual Managing
General General Limited
Partner Partner Partners Total
------------- ------------- ------------- --------------

Balance as of December 31, 1999 $ 11 $ 181 $ 20,926 $ 21,118

Net investment income - (a) 87 798 885

Net realized gain from investments - (a) - (a) 19 19

Change in unrealized depreciation of investments - (a) - (a) 31 31

-------- -------------- ---------- -------------

Balance as of December 31, 2000 11 268 21,774 22,053

Net investment loss - (a) (2) (595) (597)

Net realized loss from investments - (a) - (a) (26) (26)

Change in unrealized depreciation of investments (3) (21) (7,501) (7,525)
-------- ---------- ------------ ------------

Balance as of December 31, 2001 8 245 13,652 13,905

Net investment loss - (a) (5) (1,495) (1,500)

Net realized loss from investments (2) (25) (8,723) (8,750)

Change in unrealized depreciation of investments 2 25 8,723 8,750
-------- ---------- ------------ ------------

Balance as of December 31, 2002 $ 8 $ 240 $ 12,157(b) $ 12,405
======== ========== ============ ============

(a) Allocated amounts are less than $1,000.
(b) The net asset value per $1,000 unit of limited partnership interest
("Unit") was $68, $77 and $123 as of December 31, 2002, 2001 and 2000,
respectively. As of December 31, 2002, 2001 and 2000 cumulative cash
distributions paid to limited partners from inception totaled $1,476 per
unit.

See notes to financial statements.

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
SCHEDULE OF INVESTMENTS
As of December 31, 2002
(dollars in thousands)

PORTFOLIO INVESTMENTS:
Initial
Investment
Date Cost Fair Value

Total Portfolio Investments (a) $ - $ -
========== ===========

TEMPORARY INVESTMENTS:

Maturity Original Amortized Amortized
Issuer Yield Date Cost Discount Cost
- -----------------------------------------------------------------------------------------------------------------------------

American General Corp. 1.52% 1/06/03 $ 11,968 $ 29 $ 11,997
U.S. Treasury Bill 1.12% 1/16/03 350 - (b) 350
----------- --------- -----------

Total Temporary Investments $ 12,318 $ 29 $ 12,347
=========== ========= =============

(a) In June 2002, the Retirement Fund wrote-off its remaining investment in Big V Supermarkets, Inc. and FLA.
Orthopedics, Inc., realizing a loss of $7,763 and $987, respectively. See Note 5 of notes to financial
statements.

(b) Amortized discount of such security is less than $1,000.

See notes to financial statements.

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
SCHEDULE OF INVESTMENTS
As of December 31, 2001
(dollars in thousands)

PORTFOLIO INVESTMENTS:
Initial
Investment
Date Cost Fair Value
Managed Companies:

Big V Supermarkets, Inc. Dec. 1990
Senior Subordinated Note 14.14% due 3/15/01 $ 5,570 $ -
62,667 shares of common stock of Big V Holding Corp. 2,193 -
---------- -----------
Total investment in Managed Companies 7,763 -
---------- -----------

Non-Managed Companies:

FLA. Orthopedics, Inc. Aug. 1993
12,634 shares of Series B preferred stock of FLA. Holdings, Inc. 987 -
Warrants to purchase 2,493 common shares of FLA. Holdings, Inc. - -
---------- -----------

Total investment in Non-Managed Companies 987 -
---------- -----------

Total Portfolio Investments $ 8,750 $ -
========== ===========

TEMPORARY INVESTMENTS:

Maturity Original Amortized Amortized
Issuer Yield Date Cost Discount Cost
- -----------------------------------------------------------------------------------------------------------------------------

GE Capital Corp. 1.87% 1/02/02 $ 9,975 $ 24 $ 9,999

Prudential Funding Corp. 1.85% 1/02/02 3,840 10 3,850
----------- --------- -----------

Total Temporary Investments $ 13,815 $ 34 $ 13,849
=========== ========= ===========

See notes to financial statements.

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
NOTES TO FINANCIAL STATEMENTS

1. Organization and Purpose

ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. (the "Retirement Fund"),
a Delaware limited partnership, was formed on September 23, 1988 along with
ML-Lee Acquisition Fund II, L.P. ("Fund II", and collectively, with the
Retirement Fund referred to herein as the "Funds"). The Funds commenced
operations on November 10, 1989.

Mezzanine Investments II, L.P. (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
(the "Investment Adviser"), is the limited partner. The Managing General Partner
is responsible for overseeing and monitoring the investments of the Retirement
Fund, subject to the overall supervision of four individual general partners
(the "Individual General Partners"; and together with the Managing General
Partner, the "General Partners"). The Individual General Partners of the
Retirement Fund include Thomas H. Lee and three independent general partners:
Vernon R. Alden, Joseph L. Bower and Stanley H. Feldberg (the "Independent
General Partners"), who are non-interested persons as defined in the Investment
Company Act of 1940. ML Fund Administrators Inc. (the "Fund Administrator"), an
indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc., is responsible
for the administrative services necessary for the operations of the Retirement
Fund.

The primary objective of the Retirement Fund is to provide current income and
capital appreciation by investing in privately structured, friendly leveraged
buyouts and other leveraged transactions. The Retirement Fund has pursued this
objective by investing primarily in subordinated debt and related equity
securities issued in conjunction with the mezzanine financings of friendly
leveraged buyout transactions, leveraged acquisitions and recapitalizations.

The final extension of the term of the Retirement Fund expired on December 20,
2002. Pursuant to the Retirement Fund's amended and restated agreement of
limited partnership, as amended (the "Partnership Agreement"), the Retirement
Fund will use a period of no more than five years to liquidate its remaining
assets. As previously disclosed, the Retirement Fund expects to complete its
liquidation at such time as all potential unresolved claims relating to the
settlement agreement involving Big V Supermarkets, Inc. ("Big V"), a former
portfolio company of the Retirement Fund, and any other claims, are resolved.
See Note 5. The General Partners currently cannot predict how the contingencies
relating to such potential claims may affect the timing of the termination of
the Retirement Fund or the final amount of liquidating distributions to be paid
to Limited Partners.

2. Significant Accounting Policies

Valuation of Investments - As of December 31, 2002, the Retirement Fund had no
investments other than temporary investments with short-term maturities of less
than 90 days. Such temporary investments are carried at amortized cost, which
approximates market value.

The fair value of publicly listed portfolio securities for which market
quotations were readily available, were valued using the public market price as
of the last day of the valuation period. The fair value of publicly listed
portfolio securities for which market quotations were not readily available,
including securities restricted as to resale for which a corresponding publicly
traded class exists, were valued in good faith by the Investment Adviser after
approval by the Managing General Partner and approval of the Individual General
Partners. Privately held portfolio securities generally were valued at original
cost plus accrued value in the case of original issue discount or deferred pay
securities. Such privately held investments generally were revalued if there was
an objective basis for doing so at a different price. Portfolio investments were
written down in value if the Investment Adviser and the General Partners
believed adverse credit developments of a significant nature required a
write-down of such securities.

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
NOTES TO FINANCIAL STATEMENTS, continued

Portfolio investments were written up in value only if there had been an arms
length third party transaction to support the increased valuation.

Investment Transactions - Investment transactions are recorded on the accrual
method. Investments are recorded on the trade date, or the date the Retirement
Fund obtains an enforceable right to demand the securities or payment therefore.
Realized gains and losses on investments sold are computed on a specific
identification basis.

Income Taxes - No provision for income taxes has been made since all income and
losses are allocable to the partners for inclusion in their respective tax
returns. The Retirement Fund's net assets for financial reporting purposes
differ from its net assets for tax purposes. Syndication costs relating to the
offering of limited partnership interests totaling $15.7 million were charged to
partners' capital on the financial statements. These amounts have not been
deducted or charged against partners' capital for tax purposes.

Reclassification - Certain reclassifications have been made to the prior period
financial statements to conform with the current period presentation.

3. Allocations of Profits and Losses

Pursuant to the Partnership Agreement, all profits from Temporary Investments
generally are allocated 99.69% to the Limited Partners, 0.28% to the Managing
General Partner and 0.03% to the Individual General Partner. Profits from
Mezzanine Investments generally are allocated as follows:

o 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;

o second, 99.69% to the Limited Partners, 0.28% to the Managing General
Partner and 0.03% to the Individual 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
amount in Mezzanine Investments, and any outstanding Compensatory
Payments;

o third, 69.69% to the Limited Partners, 30.281% to the Managing General
Partner and 0.029% to the Individual General Partner until the Managing
General Partner has received 20.281% of the total profits allocated;
and

o thereafter, 79.69% to the Limited Partners, 20.281% to the Managing
General Partner and 0.029% to the Individual General Partner.

4. Related Party Transactions

The Investment Adviser is responsible for the identification, management and
liquidation of the portfolio investments of the Funds. As compensation for
services rendered to the Funds, the Investment Adviser had received an
Investment Advisory Fee at an annual rate of 1% of the combined assets under
management of the Funds (net offering proceeds reduced by cumulative capital
reductions and realized losses), with a minimum fee of $1,200,000. The
Retirement Fund's proportionate share of such annual fee was $534,000. In July
2001, the Investment Adviser voluntarily agreed to reduce the annual Investment
Advisory Fee payable by the Funds by 50%. Accordingly, the combined annual
Investment Advisory Fee payable by the Funds was reduced to $600,000, effective
as of July 1, 2001. The Retirement Fund's proportionate share of such annual fee
is $267,000. The Investment Advisor has agreed to further reduce

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
NOTES TO FINANCIAL STATEMENTS, continued

the Investment Advisory Fee by an additional 50% beginning on January 1,
2003. See Note 6. The Investment Advisory Fee is paid quarterly in advance.

As compensation for its services to the Funds, the Fund Administrator receives
an annual fee of $400,000, payable quarterly in advance. The Retirement Fund's
proportionate share of such annual fee is $178,000. The Fund Administrator has
agreed to reduce the Fund Administration Fee by 50% beginning on January 1,
2003. See Note 6.

Additionally, the Fund Administrator is entitled to reimbursement of 100% of the
operating expenses paid by the Fund Administrator on behalf of the Funds
("Reimbursable Administrative Expenses"). Reimbursable Administrative Expenses
primarily consist of printing and mailing, audit, tax preparation, general
non-investment related legal fees and custody fees.

As provided by the Retirement Fund's Partnership Agreement, the Managing General
Partner of the Retirement Fund is entitled to receive an incentive distribution
after Limited Partners have received a Priority Return (as defined in the
Partnership Agreement) 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%. The Managing General Partner
received no MGP distributions during the years ended December 31, 2002, 2001 and
2000.

As compensation for their services to the Funds, each of the Independent General
Partners received through December 31, 2002, a combined annual fee of $40,000
and $1,000 for each meeting attended ($500 if a meeting is held on the same day
as a committee meeting of the General Partners) plus reimbursement for
out-of-pocket costs incurred in connections with such meetings. The Retirement
Fund's proportionate share of the annual fee and meeting fee paid to each of the
Independent General Partners through December 31, 2002 was $17,800 and $445,
respectively. The Independent General Partners agreed to reduce the annual fee
paid by the Funds to each Independent General Partner to $20,000 beginning on
January 1, 2003. See Note 6.

5. Big V Supermarkets, Inc.

On June 28, 2002, the United States Bankruptcy Court for the District of
Delaware (the "Court") entered an order confirming the First Amended Joint
Consolidated Liquidating Plan of Reorganization (the "Plan") for Big V
Supermarkets, Inc. ("Big V" and together with Big V Holdings Corp. "BVH", Big
V's parent company, and certain other related entities, the "Big V Entities").
The Plan, among other things, provided for the sale of substantially all of Big
V's assets to a wholly owned subsidiary of Wakefern Food Corporation
("Wakefern"). Big V had been a member of Wakefern's food purchasing cooperative.
On or about July 15, 2002, the sale to Wakefern's subsidiary was accomplished
(subject to post-closing adjustments), and Big V currently is engaged in the
process of resolving claims and distributing the proceeds of its estate.

The Plan also provided for the resolution of various potential claims against
the Retirement Fund, Fund II, Thomas H. Lee Equity Partners, L.P. and others
(collectively, the "Settling Parties").

Specifically, under the Plan, (i) the Retirement Fund and Fund II received
nothing on account of the subordinated debt and equity held in Big V; (ii) the
equity in Big V held by the Retirement Fund, Fund II and Thomas H. Lee Equity
Partners, L.P. was cancelled; (iii) certain payments were made jointly by and on
behalf of the Retirement Fund, Fund II and Thomas H. Lee Equity Partners, L.P.
and (iv) in exchange for these payments, the Retirement Fund and the other
Settling Parties received broad releases of claims relating to or arising from
their investment in Big V. Specifically, the releases cover all claims

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
NOTES TO FINANCIAL STATEMENTS, continued

that could be asserted by or on behalf of Big V, all claims that could be
asserted by or on behalf of Wakefern (including claims related to the Side
Letters, as defined and discussed in previous filings), and also all claims that
could be asserted by any creditor or party in interest that either voted in
favor of the Plan or signed a lock-up letter supporting the Plan.

The Retirement Fund believes that the claims resolved by the above-described
payments were without merit, that the Retirement Fund had meritorious defenses
to such claims, and in any event that the Retirement Fund would likely have had
insurance coverage for certain of the claims under insurance that previously had
been procured by Thomas H. Lee Partners, L.P. or Thomas H. Lee Company ("THL").
Nevertheless, the complexity of the claims, the rights to insurance coverage on
some but not all of the claims, and insurance coverage disputes raised by the
insurer, made it likely that the cost of defending such claims and resolving
issues with respect to insurance would be significant and for the Retirement
Fund, would exceed the amount it would have to pay to obtain the releases.
Accordingly, in July 2002, the Retirement Fund contributed $731,000 to fund its
portion of the above-described payments, and to provide funds for use by or on
behalf of the Settling Parties jointly to address claims not resolved by the
Plan, as described below. The Retirement Fund will be entitled to receive its
share of any available funds not needed under the Plan or to resolve other
claims.

Notwithstanding disputes with respect to insurance coverage, a significant
portion of the rest of the settlement payment described above was funded through
monies received from the insurance procured by THL. To obtain these insurance
monies, however, THL was required to indemnify the insurance company from future
claims related to the Big V Entities, to the extent that insurance would
otherwise have been available, and the Settling Parties and others were required
to indemnify THL to the same extent that THL indemnified the insurance company.

Although the Retirement Fund believes that the Plan has resolved the vast
majority of potential claims related to or arising from Big V, there are some
creditors who did not vote in favor of the Plan or sign a lock-up letter
supporting the Plan and may retain claims against the Retirement Fund. In
addition, creditors who did vote in favor of the Plan and/or sign a lock-up
letter supporting the Plan may attempt to assert claims despite such vote or
support. In connection with the joint payment described above, the Retirement
Fund has agreed to cooperate with the other Settling Parties to address any
remaining claims relating to or arising from Big V. At this time the Retirement
Fund cannot estimate the extent of claims relating to Big V that may be
asserted, or the magnitude or merits of any such claims. The Retirement Fund
notes, however, that a limited number of members of Big V's former bank
syndicate (which limited number of members have been paid in the aggregate,
pursuant to the Plan, all but approximately $1.7 million of the approximately
$12 million that had been owed to them by Big V) have initiated an action
against THL relating to Big V. The Retirement Fund believes that the claims
asserted by these banks in fact were released in connection with the Plan, and
that otherwise there are defenses to these claims.

As indicated in Note 6, the Retirement Fund made a cash distribution to its
partners totaling $10,759,809 on March 12, 2003. However, until such time as
such potential claims are resolved, or the Retirement Fund, in consultation with
the other Settling Parties, determines that it has sufficient assets remaining
to satisfy its actual or potential obligations relating to such unresolved
claims, the Retirement Fund does not anticipate making any further distributions
to its partners. The Retirement Fund and the other Settling Parties will
continue to monitor in good faith the appropriate amount of assets that each
holds to provide for any such unresolved claims.

As with the claims that are released under the Plan, the Retirement Fund
believes that any potential unresolved claims are without merit and that the
Retirement Fund has defenses to any liability from such

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
NOTES TO FINANCIAL STATEMENTS, continued

claims. As discussed above, the Retirement Fund wrote-off the remaining cost of
its investment in the Big V Entities as of June 30, 2002, realizing a loss of
$7,764,000.

6. Subsequent Events

Cash Distribution - At a meeting of the General Partners of the Retirement Fund
held on February 5, 2003, the General Partners approved a cash distribution of
$10,759,809. Limited Partners received $10,544,391, or $59.40 per unit of
limited partnership interest ("Unit"), an Individual General Partner received
$6,694 and the Managing General Partner received $208,724. The distribution was
paid on March 12, 2003 to Limited Partners of record on February 5, 2003.
Because the Retirement Fund is in dissolution, pursuant to the Partnership
Agreement, such distribution was made, and all future distributions will be
made, to partners in proportion to their respective positive capital account
balances.

Reduction of Fees - By further action taken at the meeting held on February 5,
2003, the General Partners of the Funds, the Investment Adviser and the Fund
Administrator authorized certain measures to reduce costs while the Funds are
liquidating their remaining assets (Fund II's term ended on January 5, 2003). In
this regard, the Investment Adviser, the Fund Administrator and the Independent
General Partners have agreed, as of January 1, 2003, to reduce by 50% the
respective fees paid to them by the Funds. Accordingly, beginning on January 1,
2003, the aggregate annual Investment Advisory Fee to be paid by the Funds will
be reduced to $300,000, the aggregate annual Fund Administration Fee to be paid
by the Funds will be reduced to $200,000, and the aggregate annual Independent
General Partner fees to be paid by the Funds will be reduced to $20,000 for each
Independent General Partner. The Retirement Fund's proportionate share of such
aggregate annual fees will be $133,500 for the Investment Advisory Fee, $89,000
for the Fund Administration Fee and $8,900 for fees paid to each of the
Independent General Partners.

7. Financial Highlights

The following performance ratios for the years ended December 31, 2002 and 2001
are presented for the Limited Partners as a single class, taken as a whole. The
actual ratios of each individual investor may vary and are dependent upon the
specific allocations of income and expense to such investor and the timing of
capital transactions for such investor.

The net investment loss ratio and the expense ratio are computed using the
weighted average net assets of the Limited Partners during the period. The
weighted average net assets calculation reflects a measure of net assets after
each capital contribution, distribution or other significant change in net
assets and at the end of each quarterly accounting period.

2002 2001
----------- -----------

Net investment loss ratio (11.54%) (3.12%)
========= ========

Expense ratio 13.34% 5.23%
========= ========

Total return ratio (10.96%) (37.30%)
========= ========

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.
NOTES TO FINANCIAL STATEMENTS, continued

7. Financial Highlights, continued

The allocation of profit and loss and net asset value per unit of limited
partnership interest for the years ended December 31, 2002 and 2001 is
summarized below:

Net asset value as of December 31, 2000 $ 122.67

Net investment loss (3.35)

Net realized loss from investments (0.15)

Net change in unrealized appreciation (47.26)
------------

Net asset value as of December 31, 2001 76.91

Net investment loss (8.42)

Net realized loss from investments (49.14)

Net change in unrealized appreciation 49.14
------------

Net asset value as of December 31, 2002 $ 68.49
============

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

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The General Partners of ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.
(the "Retirement Fund") consist of the four Individual General Partners and the
Managing General Partner. The five General Partners are responsible for the
management and administration of the Retirement Fund and ML-Lee Acquisition Fund
II, L.P. (the "Fund II" and together with the Retirement Fund referred to herein
as the "Funds"). As required by the Investment Company Act of 1940 (the "1940
Act"), a majority of the General Partners are individuals who are not
"interested persons" of the Funds as defined in the 1940 Act.

Individual General Partners

The Individual General Partners provide overall guidance and supervision with
respect to the operations of the Funds and perform the various duties imposed on
the directors of business development companies by the 1940 Act. The Individual
General Partners supervise the Managing General Partner and must, with respect
to any Mezzanine Investment transactions, either certify that the transaction
meets the investment guidelines of the Funds or specifically approve the
transaction as a non-Guideline Investment or Bridge Investment. The Funds
investment and reinvestment period expired in December 1993 and the only
investments now permitted are follow-on investments in existing portfolio
companies. In addition, if a portfolio company's performance is in default of a
material provision of a lending agreement or has a ratio of operating cash flow
to current cash fixed charges for its four most recent fiscal quarters of less
than or equal to 1.1 to 1, the Independent General Partners are required to
approve any changes in the terms of or sale of such portfolio company. The
Independent General Partners receive an annual fee and meeting fees as described
in Note 4 of notes to financial statements.

Vernon R. Alden, Joseph L. Bower and Stanley H. Feldberg (the "Independent
General Partners") and Thomas H. Lee have served as the individual general
partners (the "Individual General Partners") of the Funds since 1989. Each
Individual General Partner shall hold office until his removal or withdrawal.

Mr. Alden, 79, Independent General Partner of the Funds, Director of
Sonesta International Hotels Corporation, Chairman of the Japan Society of
Boston, Trustee Emeritus of the Boston Symphony Orchestra and the Boston Museum
of Science.

Mr. Bower, 64, Independent General Partner of the Funds, Donald Kirk David
Professor of Business Administration, Harvard Business School faculty member
since 1963, Director of Anika Therapeutics, Inc., Brown Shoe Co., Loews
Corporation, New America High Income Fund, Sonesta International Hotels
Corporation and, The TH Lee Putnam EOP. Also, Trustee of the DeCordova & Dana
Museum and Sculpture Park and the New England Conservatory of Music.

Mr. Feldberg, 78, Independent General Partner of the Funds, Chairman of the
Board of Storm Eye Institute at Medical University of South Carolina, former
Director of TJX Companies, Inc. and Waban Inc., Trustee - Emeritus of Brandeis
University and Honorary Trustee of Beth Israel Deaconess Medical Center.

Mr. Lee, 59, Individual General Partner of the Funds, Chairman of the
Administrative General Partner of the Investment Adviser to the Funds since
1989, Chairman of the Administrative General Partner of Thomas H. Lee Equity
Partners L.P. since 1989, Chairman of the Administrative General Partner of
Thomas H. Lee Equity Fund III, L.P. since 1996, Chairman of the General Partner
of Thomas H. Lee Equity Fund IV, L.P. since 1998 and Chairman of the General
Partner of Thomas H. Lee Equity Fund V, L.P. since 2000. Founder of the Thomas
H. Lee Company (the "Lee Company") and its President from 1974 to 1999; Chairman
of the General Partner of Thomas H. Lee Partners, L.P. since 1999. Director of
Finlay Enterprises Inc., Metris Companies, Inc., Vertis Holdings, Inc., Miller
Import Corporation, Wyndham International, Inc., The Smith and Wollensky
Restaurant Group, Inc., and Vail Resorts, Inc. Mr. Lee also serves in a trustee
or other capacity for numerous civic and charitable organizations.

The Investment Adviser

The Investment Adviser, pursuant to an investment advisory agreement among the
Investment Adviser, the Lee Company and the Retirement Fund dated November 10,
1989, is responsible for the identification, management and liquidation of the
portfolio investments of the Funds. The Investment Adviser has received an
Investment Advisory Fee for such services as discussed in Note 4 to the notes to
Financial Statements.

Certain officers of the General Partner of Thomas H. Lee Partners, L.P.
have been designated as trustees and executive officers of TH Lee Mezzanine II,
the administrative general partner of the Investment Adviser.

Served in
Present
Name Capacity Since Title
- ---------------------------------------------------------------------------
Thomas H. Lee 11/10/89 Chairman, Trustee

Thomas R. Shepherd 11/10/89 Executive Vice President

David V. Harkins 11/10/89 Senior Vice President, Trustee

C. Hunter Boll 11/10/89 Vice President, Trustee

Scott A. Schoen 11/10/89 Vice President

Joseph Pesce 07/01/01 Treasurer

Information concerning Mr. Lee is set forth above.

Mr. Shepherd, 73, is Chairman of TSG Equity Partners, LLC. Mr. Shepherd is
also currently a director of CCI, Inc., Community Resource Systems, Inc., 4R
Systems, Inc., First Point Energy Corp., Rayovac Corporation and Vermont Teddy
Bear Co.

Mr. Harkins, 62, has been affiliated with Thomas H. Lee Partners, L.P. and
its predecessor, Thomas H. Lee Company since it's founding in 1974 and currently
serves as President of Thomas H. Lee Partners, L.P. In addition, he has over 30
years experience in the investment and venture capital industry with the John
Hancock Mutual Life Insurance Company, where he began his career, as well as
with TA Associates and Massachusetts Capital Corporation. Mr. Harkins also
serves as President and Trustee of T.H. Lee Mezzanine II, the Administrative
General Partner of Thomas H. Lee Advisors II, L.P., which is the sole limited
partner of the Managing General Partner of ML-Lee Acquisition Fund II, L.P. and
ML-Lee Acquisition Fund (Retirement Accounts) II, L.P., Managing Director of
Thomas H. Lee Advisors, LLC, TH Lee, Putnam Capital Advisors, LLC and Thomas H.
Lee Management Company, LLC, President of THL Fund IV Bridge Corp. and THL
Investment Management Corp., and Vice President of THL Equity Holdings III, Inc.
Mr. Harkins also founded National Dentex Corporation and currently serves as
Chairman of the Board. He is also currently a director of Conseco Inc., Cott
Corporation, Fisher Scientific International, Inc., Metris Companies Inc.,
Stanley Furniture Company, Inc. and Syratech Corporation. Mr. Harkins received a
B.S. from the United States Military Academy.

Mr. Boll, 47, has been employed by Thomas H. Lee Partners, L.P. and its
predecessor, Thomas H. Lee Company, since 1986 and currently serves as a
Managing Director. From 1984 through 1986, Mr. Boll was with The Boston
Consulting Group. From 1977 through 1982, he served as an Assistant Vice
President of the Energy and Minerals Division of Chemical Bank. Mr. Boll is also
Vice President and Trustee of THL Equity Trust III, the General Partner of THL
Equity Advisors III, L.P., which is the General Partner of Thomas H. Lee Equity
Fund III, L.P. and Vice President and Trustee of T.H. Lee Mezzanine II, the
Administrative General Partner of Thomas H. Lee Advisors II, L.P., which is the
sole limited partner of the Managing General Partner of ML-Lee Acquisition Fund
II, L.P. and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. Mr. Boll is
a director of Cott Corporation, TransWestern Holdings, L.P., Metris Companies
Inc. and United Industries Corporation. Mr. Boll received a B.A. in Economics
from Middlebury College and an M.B.A. from the Stanford Graduate School of
Business.

Mr. Schoen, 44, has been employed by Thomas H. Lee Partners, L.P. and its
predecessor, Thomas H. Lee Company, since 1986 and currently serves as a
Managing Director. In addition, Mr. Schoen is a Vice President of Thomas H. Lee
Advisors, LLC and Thomas H. Lee Advisors II, L.P. Mr. Schoen is also a Trustee
of THL Equity Trust III, the general partner of THL Equity Advisors III, L.P.,
which is the general partner of Thomas H. Lee Equity Fund III, L.P. and Vice
President of T.H. Lee Mezzanine II, the Administrative General Partner of Thomas
H. Lee Advisors II, L.P., which is the sole limited partner of the Managing
General Partner of ML-Lee Acquisition Fund II, L.P. and ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P. Mr. Schoen is also Managing Director of the
Thomas H. Lee Management Co. and, through his position as Managing Director of
Thomas H. Lee Partners, L.P., of the Thomas H. Lee Equity Fund V and Thomas H.
Lee Equity Fund IV. Mr. Schoen is also a director of ARC Holdings, LLC, Axis
Capital Holdings Limited, Syratech Corporation, TransWestern Holdings, L.P.,
United Industries Corporation and Wyndham International Inc. Prior to joining
Thomas H. Lee Partners, L.P., Mr. Schoen was in the Private Finance Department
of Goldman, Sachs & Co. Mr. Schoen received a B.A. in History from Yale
University, a J.D. from Harvard Law School and an M.B.A. from the Harvard
Graduate School of Business Administration. He is a member of the New York Bar.

Mr. Pesce, 54, has been Senior Vice President of Finance, Chief Financial
Officer and Treasurer of Thomas H. Lee Partners, L.P. since July 2001. Prior to
joining Thomas H. Lee Partners, L.P., from July 1999 to July 2001, Mr. Pesce was
the Executive Vice-President of Finance and Administration and CFO of
Renaissance Worldwide Inc., and from October 1994 through June 1999, Mr. Pesce
was the Executive Vice-President of Finance and Administration and CFO of
Concentra Managed Care, Inc.

The Managing General Partner

The Managing General Partner is a limited partnership in which ML Mezzanine II
Inc. is the sole general partner and the Investment Adviser is the limited
partner. The Managing General Partner is responsible for the supervision of the
Retirement Fund's investments.

The executive officers of ML Mezzanine II Inc. are as follows:

Served in
Present
Name Capacity Since (1) Title
- ---------------------------------------------------------------------
Kevin K. Albert 7/31/89 Chairman, President and Director

James V. Caruso 1/28/93 Executive Vice President
1/27/93 Director

Curtis W. Cariddi 2/08/02 Treasurer

James V. Bruno 11/05/99 Vice President, Assistant Treasurer

(1) Directors hold office until their successors are elected and qualified. All
executive officers serve at the pleasure of the Board of Directors.

Kevin K. Albert, 50, a Managing Director of Merrill Lynch Investment Banking
Group ("MLIBK"), is responsible for the Private Equity Placement Group. He
joined Merrill Lynch in 1981. Mr. Albert's work in the Private Equity Placement
Group is involved in structuring and placing a diversified array of private
equity financings, including common stock, preferred stock, limited partnership
interests and other equity-related securities. Mr. Albert also is a director of
ML Media Management Inc. ("ML Media"), an affiliate of ML Mezzanine II Inc. and
a joint venturer of Media Management Partners, the general partner of ML Media
Partners, L.P.

James V. Caruso, 51, Director of MLIBK joined Merrill Lynch in January 1975. Mr.
Caruso is the director of Technology for the Global Investment Banking Group. He
is responsible for ensuring that the business requirements of MLIBK are
supported by managing the development of new technologies and enhancing existing
systems.

Curtis W. Cariddi, 47, a Director and Chief Financial Officer for the Merrill
Lynch Private Equity Division, joined Merrill Lynch in February 1986. His
responsibilities include controllership, financial management, and financial
reporting and administrative functions for Merrill Lynch private equity
initiatives including, direct investments, investments in third-party private
equity funds and Merrill Lynch-sponsored funds. He has held a number of finance
positions at both the corporate level as well as in the Firm's operating
divisions including, International Private Client Group, U.S. Private Client
Group and Global Markets & Investment Banking.

James V. Bruno, 36, a Vice President for the Merrill Lynch Private Equity
Division, joined Merrill Lynch in 1997. Mr. Bruno's responsibilities include
controllership and financial management functions for certain partnerships and
other entities for which subsidiaries of Merrill Lynch are the general partner
or manager.

The Fund Administrator

ML Fund Administrators Inc., a Delaware corporation and a subsidiary of Merrill
Lynch & Co., Inc., is responsible for the provision of certain administrative
services necessary for the operation of the Funds. The Fund Administrator
receives a Fund Administration Fee for such services as discussed in Note 4 to
the notes to Financial Statements. The Fund Administrator is responsible for the
day-to-day administrative affairs of the Funds and for the management of the
accounts of Limited Partners. The Fund Administrator also provides the Funds, at
the Fund Administrator's expense, with office space, facilities, equipment and
personnel necessary to carry out its obligations under the Administrative
Services Agreement.

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

Item 11. Executive Compensation

The information with respect to compensation of the Individual General Partners
set forth under the caption "Management Arrangements - the Individual General
Partners" in the Prospectus on pages 73 and 74 is incorporated herein by
reference. As compensation for services to the Funds, each of the Independent
General Partners received through December 31, 2002 a combined annual fee of
$40,000 and $1,000 for each meeting attended ($500 if a meeting is held on the
same day as a committee meeting of the General Partners) plus reimbursement for
out-of-pocket costs incurred in connections with such meetings.

The Retirement Fund's proportionate share of the annual fee and meeting fee
paid to the each of the Independent General Partners through December 31, 2002
was $17,800 and $445, respectively. During 2002, the Independent General
Partners received annual fees and meeting fees from the Funds totaling $140,000,
of which the Retirement Fund's share was $62,300. The Independent General
Partners agreed to reduce the annual fee paid by the Funds to each Independent
General Partner to $20,000 beginning on January 1, 2003. See Note 6 of notes to
financial statements.

The information with respect to the allocation and distribution of profits and
losses of the Retirement Fund to the Managing General Partner set forth under
the caption "Distributions and Allocations - Allocations of Profits and Losses"
in the Prospectus on pages 86 and 87 is incorporated herein by reference. The
Managing General Partner received no distributions during 2002.

The information with respect to the Investment Advisory Fee payable to the
Investment Adviser (and distributions from the Managing General Partner) set
forth under the caption "Management Arrangements - Description of the Advisory
Agreement" in the Prospectus on pages 73 and 74 is incorporated herein by
reference. The Investment Adviser had received an Investment Advisory Fee at an
annual rate of 1% of the combined assets under management of the Funds (net
offering proceeds reduced by cumulative capital reductions and realized losses),
with a minimum fee of $1,200,000. The Retirement Fund's proportionate share of
such annual fee was $534,000. In July 2001, the Investment Adviser voluntarily
agreed to reduce the annual Investment Advisory Fee payable by the Funds by 50%.
Accordingly, the combined annual Investment Advisory Fee payable by the Funds
was reduced to $600,000, effective as of July 1, 2001. The Retirement Fund's
proportionate share of such annual fee is $267,000. The Investment Adviser has
agreed to further reduce the Investment Advisory Fee by an additional 50%
beginning on January 1, 2003. See Note 6 of notes to financial statements.

The information with respect to the Fund Administration Fees and Expenses
payable to the Fund Administrator set forth under the caption "Management
Arrangements - The Fund Administrator" in the Prospectus on pages 72 and 73 is
incorporated herein by reference. The Fund Administration fee incurred by the
Retirement Fund was $178,000 for 2002. The Fund Administrator has agreed to
reduce the Fund Administration Fee by 50% beginning on January 1, 2003. See Note
6 of notes to financial statements.

Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
---------------------------------------------------------------

As of March 17, 2003, the Managing General Partner is aware of the following
persons who are beneficial owners of more than five percent of the units of
limited partnership interest in the Retirement Fund ("Units").

Amount of
Beneficial % of Units
Name and Address Ownership Beneficially
of Beneficial Owner (In Units) Owned
- ----------------------------------------------------------------------------------------

Common Fund 21,448 12.08 %
363 Reef Road
P.O. Box 940
Fairfield, CT 06430

Units held by the General Partners and officers of the Investment Adviser and
Mezzanine II as of March 17, 2003 are as follows:
Units
Name Held Percentage

Vernon R. Alden None N/A
Joseph L. Bower 11 *
Stanley H. Feldberg None N/A
Thomas H. Lee 6,975 3.93%

All General Partners and
Officers as a Group 8,537 4.81%

* Less than one percent.

The Managing General Partner is not aware of any arrangement that may, at a
subsequent date, result in a change of control of the Retirement Fund.

Registrant has no employee stock option plans.

Item 13. Certain Relationships and Related Transactions

The Retirement Fund's investments generally were made as co-investments with
Fund II. In addition, certain of the portfolio investments may involve
co-investments with other entities affiliated with the Investment Adviser. Such
co-investments with affiliates generally are prohibited unless exemptive relief
is received from the Securities and Exchange Commission (the "Commission"). As a
result of these affiliations and the Retirement Fund's expectation of engaging
in such co-investments, the Funds and ML-Lee Acquisition Fund, L.P., sought an
exemptive order from the Commission allowing such co-investments, which was
received on September 1, 1989. The Retirement Fund's co-investments in Managed
Companies and in certain cases its co-investments in Non-Managed Companies,
typically involved the entry by the Funds and other equity security holders into
stockholders' agreements. While the provisions of such stockholders' agreements
vary, such agreements may have 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 Partners, L.P., an affiliate of the Investment Adviser, in the
past has performed certain management services for Managed Companies and
received management fees in connection therewith usually pursuant to written
agreements with such companies. The Funds had no Managed Companies in their
portfolios as of December 31, 2002, that paid management fees to Thomas H. Lee
Partners, L.P. during the fiscal year ended December 31, 2002.

Item 14. Controls and Procedures.
-----------------------

The Funds maintain disclosure controls and procedures and internal controls
designed to ensure that information required to be disclosed in filings pursuant
to the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. The chief executive officer and chief financial
officer of the Funds have evaluated the effectiveness of the controls and
procedures of the Funds within 90 days of the filing of this annual report on
Form 10-K. Based on their evaluation of such controls and procedures, the chief
executive officer and chief financial officer of the Funds believe such controls
and procedures to be effective.

Additionally, there have been no significant changes in internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
----------------------------------------------------------------

(a) Financial Statements, Financial Statement Schedules and Exhibits.

(1) Financial Statements.

See Item 8. Financial Statements and Supplemental Data.

(2) Financial Statement Schedules.

No Financial Statement Schedules are included because of the absence of
conditions that require such inclusion or because the required information is
included in the financial statements or set forth in the Notes thereto.

(3) Exhibits.

3.1 Amended and Restated Certificate Incorporated by reference
of Limited Partnership, dated as to Exhibit 3.1 to registrant's
of August 25, 1989 Registration Statement on
Form N-2, # 33-25816.

3.2 Amended and Restated Agreement of Incorporated by reference
Limited Partnership, dated to Exhibit 3.2. to
November 10, 1989 Amendment No. 1, registrant's Annual Report
dated January 30, 1990. of Form 10-K for the year
ended December 31, 1989.

10.1 Investment Advisory Agreement, Incorporated by reference
dated November 10, 1989 by and to Exhibit 10.1 to
between Registrant, Thomas H. Lee registrant's Annual Report
Advisors II, L.P. and Thomas H. of Form 10-K for the year
Lee Company. ended December 31, 1991.

10.2 Custodian Agreement, dated Incorporated by reference
November 10, 1989, by and between to Exhibit 10.2 to
Registrant and State Street Bank registrant's Annual Report
and Trust Company. of Form 10-K for the year
ended December 31, 1991.

10.3 Administrative Services Agreement, Incorporated by reference
dated November 10, 1989 by and to Exhibit 10.3 to
between Registrant and ML Fund registrant's Annual Report
Administrators Inc. of Form 10-K for the year
ended December 31, 1991.

10.4 Amendment No. 1 to Investment Filed herewith
Advisory Agreement dated February
5, 2003 by and between Registrant,
Thomas H. Lee Advisors II, L.P., and
Thomas H. Lee Company.

10.5 Amendment No. 1 to Administrative Filed herewith
Services Agreement dated February
5, 2003 by and between Registrant
and ML Fund Administrators Inc.

28 Pages 21-91 of the Prospectus Incorporated by reference
dated September 6,1989, filed to Exhibit 28 to
pursuant to Rule 497(b) under the registrant's Annual Report
Securities Act of 1933. of Form 10-K for the year
ended December 31, 1991.

99.1 Certification of chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002

99.2 Certification of chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K.

No Reports on Form 8-K were filed during the last quarter of the period
covered by this report. However, a report on Form 8-K was filed on
March 6, 2003 to provide information regarding the
following matters:
1. dissolution of the Retirement Fund,
2. cash distribution to partners paid on March 12, 2003,
3. reduction of fees paid to the Investment Advisor, the Fund Administrator and the Independent General
Partners, and
4. receipt of no-action letter.

(c) Exhibits.

See (a) (3) above.

(d) Financial Statement Schedules.

See (a) (2) above.

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 31st day of March
2003.

ML-LEE ACQUISITION FUND (RETIREMENT ACCOUNTS) II, L.P.

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

By: ML Mezzanine II Inc.,
it's General Partner

/s/ Kevin K. Albert
-------------------------------------------------
By: Kevin K. Albert
President, ML Mezzanine II Inc. and
General Partner of Mezzanine Investments II, L.P.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated on the 31st day of March 2003.

By: /s/ Kevin K. Albert By: /s/ Vernon R. Alden
------------------------------------------------- -------------------------------------------------
Kevin K. Albert Vernon R. Alden
President, ML Mezzanine II Inc. Individual General Partner
(Principal Executive Officer) ML-Lee Acquisition Fund (Retirement
Accounts) II, L.P.

By: /s/ Curtis W. Cariddi By: /s/ Joseph L. Bower
------------------------------------------------- -------------------------------------------------
Curtis W. Cariddi Joseph L. Bower
Treasurer Individual General Partner
ML Mezzanine II Inc. ML-Lee Acquisition Fund (Retirement
(Principal Financial Officer) Accounts) II, L.P.

By: /s/ Stanley H. Feldberg
-------------------------------------------------
Stanley H. Feldberg
Individual General Partner
ML-Lee Acquisition Fund (Retirement
Accounts) II, L.P.

By: /s/ Thomas H. Lee
-------------------------------------------------
Thomas H. Lee
Individual General Partner
ML-Lee Acquisition Fund (Retirement
Accounts) II, L.P.

Certification

I, Kevin K. Albert, certify that:

1. I have reviewed this annual report on Form 10-K of ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P. (the "Registrant");

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly presents in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this annual report;

4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and

c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's general partners:

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the Registrant's internal controls; and

6. The Registrant's other certifying officer and I have indicated in this
report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: March 31, 2003

/s/ Kevin K. Albert
---------------------------
Kevin K. Albert
President
ML Mezzanine II Inc.

Certification

I, Curtis W. Cariddi, certify that:

1. I have reviewed this annual report on Form 10-K of ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P. (the "Registrant");

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly presents in all
material respects the financial condition, results of operations and
cash flows of the Registrant, as of, and for, the periods presented in
this annual report;

4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and

c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's general partners:

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a
significant role in the Registrant's internal controls; and

6. The Registrant's other certifying officer and I have indicated in this
report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: March 31, 2003

/s/ Curtis W. Cariddi
---------------------------
Curtis W. Cariddi
Treasurer
ML Mezzanine II Inc.