ML LEE ACQUISITION FUND L P, DEF 14A, 1998-04-23

ML LEE ACQUISITION FUND L P
DEF 14A, 1998-04-23

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<PAGE>

PROXY
ML-LEE ACQUISITION FUND, L.P.
World Financial Center - South Tower
New York, New York 10080

This Proxy is solicited on behalf of the Individual General Partners

The undersigned hereby appoints THOMAS H. LEE and JOSEPH L. BOWER and each of
them as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated herein, all
units of limited partnership interest ("Units") of the ML-Lee Acquisition Fund,
L.P. (the "Fund") held of record by the undersigned on April 10, 1998 at the
Annual Meeting of the Limited Partners of the Fund to be held on June 5, 1998 or
any adjournment thereof.

This proxy when properly executed will be voted in the manner directed herein by
the undersigned Limited Partner. If this Proxy is signed and returned without
specific direction, this Proxy will be voted for Proposals 1, 2, 3, and 4.

(Continued and to be signed on the reverse side)

<PAGE>
PROXY FORM

The Board of Directors Recommends a vote FOR the proposals regarding:

ELECTION OF INDIVIDUAL GENERAL PARTNERS
(1) NOMINEES: Vernon R. Alden, Joseph L. Bower, Stanley H. Feldberg,
Thomas H. Lee

FOR / / WITHHOLD / /
all nominees listed on the reverse side (except Authority to vote for all
as marked to the contrary to the right) nominees on the reverse
side

(2) ELECTION OF MANAGING FOR AGAINST
GENERAL PARTNER NOMINEE: Mezzanine Investments L.P. / / / /

(3) Proposal to ratify the selection of Price Waterhouse LLP as FOR AGAINST ABSTAIN
independent accountants of the Fund for its fiscal year ending / / / / / /
December 31, 1998.

(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write that nominee's name in the
space provided below.)
_______________________________________________________

(4) Proposal to ratify the amendment to the Management Agreement FOR AGAINST ABSTAIN
by and among Thomas H. Lee Advisors I, Thomas H. Lee Company and / / / / / /
the Fund.

In the discretion of such proxies, upon such other business as
may properly come before the meeting or any adjournment hereof.

PLEASE CHECK HERE if you plan to attend the Annual Meeting. / /

</TABLE>

_____________________ __________ PLEASE MARK ALL /X/
ACCOUNT NUMBER SHARES CHOICES LIKE THIS

SIGNATURE ______________________________ DATE ____________

</TABLE>

<PAGE>
ML-LEE ACQUISITION FUND, L.P.

NOTICE OF 1998 ANNUAL MEETING
OF LIMITED PARTNERS
JUNE 5, 1998

To the Limited Partners of

ML-LEE ACQUISITION FUND, L.P.

Notice is hereby given that the 1998 Annual Meeting of Limited Partners (the
"Meeting") of ML-Lee Acquisition Fund, L.P. (the "Fund") will be held at the
offices of Hutchins, Wheeler & Dittmar, 101 Federal Street, 31st Floor, Boston,
Massachusetts 02110, on June 5, 1998, at 10:00 A.M. for the following purposes:

1. To elect four Individual General Partners to serve for the ensuing year;

2. To elect one Managing General Partner to serve for the ensuing year;

3. To consider and act upon the proposal to ratify the selection of Price
Waterhouse LLP as independent accountants of the Fund for its fiscal year ending
December 31, 1998;

4. To consider and act upon the proposal to ratify the amendment to the
Management Agreement by and among Thomas H. Lee Advisors I, Thomas H. Lee
Company and the Fund; and

5. To transact such other business as may properly come before the meeting or
any adjournment thereof.

The Individual General Partners of the Fund have fixed the close of business
on April 10, 1998 as the record date for the determination of Limited Partners
entitled to notice of and to vote at the Meeting or any adjournment thereof.

A complete list of the Limited Partners of the Fund entitled to vote at the
Meeting will be available and open to the examination of any Limited Partner of
the Fund for any purpose germane to the Meeting during ordinary business hours
from and after April 10, 1998, at the office of the Fund, World Financial
Center, South Tower, New York, New York 10080.

<PAGE>
You are cordially invited to attend the Meeting. All Limited Partners, even
those planning to attend the Meeting, are urged to complete, date and sign the
enclosed form of proxy and return it promptly in the envelope provided for that
purpose. Since mail delays may occur, it is important that the proxy be returned
well in advance of the meeting. If you decide to attend the Meeting and wish to
vote personally, you may revoke your proxy at any time before it is exercised.
The enclosed proxy is being solicited by the Individual General Partners of the
Fund.

<S> <C>

By Order of the Individual
General Partners

</TABLE>

<S> <C>

THOMAS H. LEE
Individual General Partner

</TABLE>

Boston, Massachusetts
Dated: April 28, 1998

LIMITED PARTNERS ARE URGED TO VOTE, SIGN AND DATE
THE ENCLOSED FORM OF PROXY AND TO RETURN IT IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.

<PAGE>
PROXY STATEMENT
ML-LEE ACQUISITION FUND, L.P.

WORLD FINANCIAL CENTER
SOUTH TOWER
NEW YORK, NEW YORK 10080

1998 ANNUAL MEETING OF LIMITED PARTNERS
JUNE 5, 1998

INTRODUCTION

ML-Lee Acquisition Fund, L.P. (the "Fund") is a limited partnership organized
under the Delaware Revised Uniform Limited Partnership Act. The Fund, a business
development company under the Investment Company Act of 1940, commenced
operations on October 19, 1987, following the initial closing of its public
offering. As of April 10, 1998, the Fund had outstanding 487,489 units of
limited partnership interest (the "Units"). The Fund is managed by five General
Partners, consisting of four Individual General Partners and the Managing
General Partner, described below. In accordance with the terms of its Amended
and Restated Agreement of Limited Partnership, as amended (the "Partnership
Agreement"), the Fund is required to hold annual meetings of the Limited
Partners of the Fund to approve certain Fund matters, including the election of
Individual General Partners, the election of the Managing General Partner and
the ratification of the selection of the independent public accountants for the
Fund.

This Proxy Statement is furnished in connection with the solicitation of
proxies to be voted at the 1998 Annual Meeting of Limited Partners of the Fund
(the "Meeting"), to be held at the offices of Hutchins, Wheeler & Dittmar, 101
Federal Street, 31st Floor, Boston, Massachusetts 02110, on June 5, 1998, at
10:00 A.M. The enclosed proxy is being solicited on behalf of the Individual
General Partners of the Fund. The approximate mailing date of this Proxy
Statement is April 28, 1998.

All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon or otherwise as
provided therein. Unless instructions to the contrary are marked, proxies will
be voted for the election of four Individual General Partners, for the election
of one Managing General Partner and for the ratification of the selection of
independent accountants. Any proxy may be revoked at any time prior to the
exercise thereof by giving notice to the Fund at its principal office.

The Fund has retained Automatic Data Processing Investor Communications
Services to tabulate the votes in connection with the matters to be acted upon
at the
1

<PAGE>
Meeting. Abstentions and broker "no votes" will be counted as present in
determining whether the Meeting's quorum requirement is satisfied. When any
matter to be acted upon at the Meeting requires a favorable vote by the Limited
Partners entitled to vote at the Meeting who hold at least a majority of the
Units outstanding, abstentions and broker "no votes" will be considered a vote
"Against" the matter; otherwise, abstentions and broker "no votes" will have no
effect on the outcome, that is, they will not be considered.

The Individual General Partners have fixed the close of business on April 10,
1998 as the record date for the determination of Limited Partners entitled to
notice of and to vote at the Meeting and at any adjournment thereof. Limited
Partners on the record date will be entitled to one vote for each interest held
in the Fund represented by a $1,000 capital contribution to the Fund (a "Unit").

The following table sets forth as of April 10, 1998 the only persons known to
the management of the Fund who may be deemed to be beneficial owners of more
than five percent of the outstanding Units of limited partnership interest of
the Fund.

PERCENT OF UNITS
OF THE FUND
AMOUNT OF BENEFICIALLY
NAME AND ADDRESS BENEFICIAL OWNED AT
OF BENEFICIAL OWNER OWNERSHIP APRIL 10, 1998

Yale University 31,537(1) 6.47%
Investment Office
230 Prospect Street
New Haven, CT 06511

Farallon Capital Partners, L.P. 23,977(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1325
San Francisco, CA 94111

Tinicum Partners, L.P. 6,510(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1325
San Francisco, CA 94111

Thomas F. Steyer 30,487(2) 6.25%
Farallon Capital Management, LLC One Maritime
Plaza, Suite 1325
San Francisco, CA 94111

Fleur E. Fairman 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1325
San Francisco, CA 94111

David I. Cohen 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1325
San Francisco, CA 94111

</TABLE>

PERCENT OF UNITS
OF THE FUND
AMOUNT OF BENEFICIALLY
NAME AND ADDRESS BENEFICIAL OWNED AT
OF BENEFICIAL OWNER OWNERSHIP APRIL 10, 1998

Enrique Boilini 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1250
San Francisco, CA 94111

Andrew B. Freinder 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1250
San Francisco, CA 94111

Stephen L. Millham 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1250
San Francisco, CA 94111

Joseph F. Downes 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1250
San Francisco, CA 94111

Jason M. Fish 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1250
San Francisco, CA 94111

William F. Mellin 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1250
San Francisco, CA 94111

Meridee A. Moore 30,487(2) 6.25%
Farallon Capital Management, LLC
One Maritime Plaza, Suite 1250
San Francisco, CA 94111

</TABLE>

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(1) Based upon a statement on Schedule 13G dated February 8, 1995.

(2) By reason of Rule 13d-5 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), Farallon Partners, L.L.C., a Delaware limited
liability company ("FPLLC"), the general partner of Farallon Capital Partners,
L.P., a California limited partnership ("FCP"), and Tinicum Partners, L.P., a
New York limited partnership ("Tinicum"), may be deemed to be the beneficial
owner of 30,487 Units of limited partnership interest constituting
approximately 6.25% of the Units of limited partnership interest, as a result
of the direct ownership by FCP of 23,977 of such Units and as a result of the
direct ownership by Tinicum of 6,510 of such Units. In addition, by reason of
Rule 13d-3 under the Exchange Act, each of the managing members of FPLLC,
Thomas F. Steyer, Fleur E. Fairman, David I. Cohen, Joseph F. Downes, Jason M.
Fish, William F. Mellin, Meridee A. Moore, Enrique Boilini, Andrew B. Freinder,
and Stephen L. Millham, may be deemed to own beneficially the Units of limited
partnership interest owned by FCP and Tinicum.
3

<PAGE>
The Individual General Partners of the Fund know of no business other than
that mentioned in Items 1 through 4 of the Notice of Meeting which will be
presented for consideration at the Meeting. If any other matter is properly
presented, it is the intention of the persons named in the enclosed proxy to
vote in accordance with their best judgment.

The term of the Fund will expire June 15, 1998, subject to the right of the
Individual General Partners to extend the term for up to one additional two-year
period and one additional one-year period if such extension is in the best
interest of the Fund. Following expiration of the term, the Fund will have five
additional years to liquidate its remaining investments. At the meeting held on
February 12, 1998, the Individual General Partners indicated that it was likely
they would elect to extend the term of the Fund for an additional two-year
period. At that meeting, the Individual General Partners expressed their
intention to vote on the matter at their meeting scheduled for June 5, 1998.

On April 15, 1998, Playtex Products Inc., a Portfolio Company of the Fund,
filed a registration statement pursuant to which the Fund intends to sell all of
its remaining interest in the Company (as further discussed on page 22 hereof).
The Fund owns 1,406,204 shares of Playtex Products, Inc. Common Stock, which as
of April 10, 1998, represented approximately 76% of the Fund's net asset value.
If the Playtex Products, Inc. transaction is consummated prior to June 15, 1998,
and/or the Individual General Partners are otherwise satisfied with the
arrangements for disposition of the Fund's remaining assets, the Individual
General Partners may elect not to extend the term of the Fund.

Between the date hereof and the expiration date of the term of the Fund, the
Investment Adviser will continue to manage the Fund's remaining investments with
a view towards maximizing value, whenever possible. In the event that the term
of the Fund is not extended because the Playtex Products, Inc. transaction has
been consummated and the Individual General Partners are otherwise satisfied as
to the arrangements for disposition of the Fund's remaining assets, the
Management Agreement will not be amended as discussed on page 17 hereof and will
expire according to its original terms.

ELECTION OF GENERAL PARTNERS

The five General Partners of the Fund, who are elected annually by the Limited
Partners, are responsible for the management and administration of the Fund. The
General Partners consist of four Individual General Partners and the Managing
General Partner. As required by the Investment Company Act of 1940, a majority
of the General Partners must be individuals who are not "interested persons" of
the Fund as defined in the Investment Company Act of 1940. In 1987, the
Securities and Exchange Commission issued an order declaring that three
Individual General Partners of the Fund (the "Independent General Partners"),
excluding Thomas H. Lee, are not "interested persons" of the Fund as defined in
the Investment Company Act of 1940 solely by reason of their being general
partners of the Fund. Mr. Lee and the Managing General Partner are considered
interested persons, as described below.
4

<PAGE>
The Individual General Partners provide overall guidance and supervision with
respect to the operations of the Fund and perform the various duties imposed on
the directors of business development companies by the Investment Company Act of
1940. The Individual General Partners supervise the Managing General Partner and
must verify that all transactions made in accordance with the Fund's Guidelines
for investments fully comply with the Guidelines and specifically approve each
Qualified Investment that is a non-Guideline investment or a Bridge Investment.
The Fund's investment and reinvestment period expired in 1992 and the only
investments now permitted are Follow-On Investments in existing Portfolio
Companies. In addition, if a Portfolio Company is in default under a material
provision of a lending agreement or has a ratio of operating income to current
fixed charges that is less than or equal to 1.1 to 1, the Individual General
Partners are required to approve any changes in the terms of or dispositions of
the Fund's investment in such Portfolio Company.

The Managing General Partner is responsible for purchasing investments for the
Fund which have been determined by the Independent General Partners to meet the
Fund's investment Guidelines or approved by them notwithstanding the failure to
meet all the Guidelines, for recommending the approval of non-Guideline and
Bridge Investments and modifications of the terms of or dispositions of Fund
investments in a troubled company, for investing and managing Temporary
Investments, for the admission of assignee Limited Partners to the Fund and,
subject to the supervision of the Individual General Partners, for supervising
the Investment Adviser.

INDIVIDUAL GENERAL PARTNERS

At the Meeting, four Individual General Partners will be elected to serve
until the next Annual Meeting of Limited Partners and until their successors are
elected and qualified. In the election of Individual General Partners, the four
candidates receiving the highest number of votes cast shall be so elected. It is
the intention of the persons named in the enclosed proxy to nominate and vote in
favor of the election of the persons listed below.

Each nominee listed below has consented to continue to serve as an Individual
General Partner. The Individual General Partners of the Fund know of no reason
why any of these nominees will be unable to serve, but in the event of any such
unavailability, the proxies received will be voted for such substitute nominees
as the Individual General Partners may recommend.
5

<PAGE>
Certain information concerning the nominees, as of April 10, 1998, is set
forth below.

<TABLE>
<CAPTION>
UNITS OF
INDIVIDUAL THE FUND PRINCIPAL OCCUPATION
GENERAL BENEFICIALLY DURING THE PAST
NAME AND ADDRESS PARTNER OWNED AS OF FIVE YEARS AND
OF NOMINEES AGE SINCE APRIL 10, 1998(1) DIRECTORSHIPS

<S> <C> <C> <C> <C>
Vernon R. Alden(2) 75 1987 -50- Individual General Partner of
20 Park Plaza the Fund, ML-Lee Acquisition
Suite 1010 Fund II, L.P. ("Fund II") and
Boston, MA 02116 ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P.
(the "Retirement Fund"; and
together with Fund II, the "New
Funds"; and together with the
Fund and Fund II the "Funds").
Director of Digital Equipment
Corporation, Intermet
Corporation and Sonesta
International Hotels
Corporation. Chairman of the
Japan Society of Boston, Trustee
Emeritus of the Boston Symphony
Orchestra and the Boston Museum
of Science and Honorary Consul
General of the Royal Kingdom of
Thailand.

Joseph L. Bower(2) 59 1987 -25- Individual General Partner of
Harvard University the Funds. Donald Kirk David
Graduate School of Professor of Business
Cambridge, MA 02163 Administration. Harvard
University Graduate School of
Business Administration. Faculty
member since 1963. Director of
Anika Research, Inc., Brown
Group, Inc., New America High
Income Fund, Sonesta
International Hotels Corporation
and The Lincoln Foundation.
Trustee of the DeCordova & Dana
Museum and Park and
Vice-Chairman of the New England
Conservatory of Music.

</TABLE>

<S> <C> <C> <C> <C>
UNITS OF
INDIVIDUAL THE FUND PRINCIPAL OCCUPATION
GENERAL BENEFICIALLY DURING THE PAST
NAME AND ADDRESS PARTNER OWNED AS OF FIVE YEARS AND
OF NOMINEES AGE SINCE APRIL 10, 1998(1) DIRECTORSHIPS

Stanley H. Feldberg(2) 73 1987 -25- Individual General Partner of
One Sanderling Court the Funds. Trustee Emeritus of
Hilton Head, SC 29926 Brandeis University.

Thomas H. Lee(3) 54 1987 -20- Individual General Partner of
75 State Street the Funds. Chairman of the
Boston, MA 02109 Investment Adviser of the Fund
since 1987; Chairman of the
Administrative General Partner
of the Investment Adviser to
the New 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. General
Director of the General Partner
of Thomas H. Lee Equity Fund
IV, LP since 1997. Founder of
the Thomas H. Lee Company (the
"Lee Company") and its
President since 1974. Director
of Autotote Corporation, Finlay
Enterprises Inc., First
Security Services Corporation,
Livent, Inc., Miller Import
Corporation, Playtex Products,
Inc., Sondik Supply Corporation
and Vail Resorts, Inc.

General Partners and -185-(4)
Officers as a Group
(10 persons)

</TABLE>

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(1) In each case, represents less than 1% of Units outstanding.

(2) Member of Audit Committee of the Individual General Partners.

(3) Mr. Lee is the Chairman, a Trustee and a majority shareholder of the
Investment Adviser; therefore, he is deemed to be an interested person, as
defined in the Investment Company Act of 1940, of the Fund.

(4) Does not include Capital Contributions made by the Managing General Partner,
which are described in "Managing General Partner".
7

<PAGE>
COMMITTEE AND INDIVIDUAL GENERAL PARTNERS' MEETINGS

The Individual General Partners have a standing Audit Committee which consists
of the Independent General Partners. The purposes of the Audit Committee are (i)
to recommend to the Independent General Partners the firm of independent public
accountants that conducts the Fund's annual audit and (ii) to review the scope
of the annual audit conducted by the Fund's independent public accountants and
the evaluation by such accountants of the accounting procedures followed by the
Fund. The Audit Committee held two meetings in 1997. The Individual General
Partners do not have a nominating or compensation committee.

During the fiscal year ended December 31, 1997, the Individual General
Partners held eight meetings. Each Individual General Partner nominated for
election attended at least 75% of (i) the meetings of the Individual General
Partners and (ii) if a member of the Audit Committee, the meetings of the Audit
Committee held during such fiscal year except for Mr. Lee, who did attend at
least 75% of the meetings of the Individual General Partners at which he was
entitled to vote on the action taken.

Compensation. The Fund paid each Independent General Partner an annual fee of
$40,000 in quarterly installments plus $1,000 per meeting of the Individual
General Partners attended, together with all actual out-of-pocket expenses
relating to attendance at meetings. The Independent General Partners receive
$1,000 for each committee meeting attended unless such committee meeting is held
on the same day as a meeting of the Individual General Partners. In such case,
the Independent General Partners receive $500 for each committee meeting
attended. The aggregate fees and expenses incurred by the Fund to the
Independent General Partners totaled $142,080 for the fiscal year ended December
31, 1997. Thomas H. Lee, as an interested Individual General Partner, does not
receive any additional compensation therefor.

Set forth below is a chart showing the aggregate fees and expenses paid by the
Fund to each of the Individual General Partners during the fiscal year ended
December 31, 1997, as well as the aggregate fees and expenses paid to each
Individual General Partner by the Fund, Fund II and the Retirement Fund
(collectively, the "Fund Complex") for their services as Individual General
Partners to the Funds during the fiscal year ended December 31, 1997:

Pension or Total Compensation
Retirement from Fund and
Aggregate Benefits Accrued Fund Complex
Compensation as Part of Fund Paid to Individual
Name From Fund Expenses General Partners
------------------- ------------ ---------------- ------------------

Vernon R. Alden $46,000 $ 0 $93,000

Joseph L. Bower 46,000 0 93,000

Stanley H. Feldberg 46,000 0 93,000

Thomas H. Lee 0 0 0

</TABLE>

<PAGE>
MANAGING GENERAL PARTNER

At the Meeting, a Managing General Partner will be elected to serve until the
next Annual Meeting of Limited Partners and until its successor is elected and
qualified. In the election of Managing General Partner, the one candidate
receiving the highest number of votes cast shall be so elected. The Managing
General Partner will receive reimbursement of certain expenses and the
distributions and allocations described below. The Fund considers its
relationship with the Managing General Partner to be an investment advisory
relationship. It is the intention of the persons named in the enclosed proxy to
nominate and vote in favor of the election of the Managing General Partner
discussed below, which will receive the compensation, distributions and
allocations described below. The nominee discussed below has consented to
continue to serve as Managing General Partner.

Information Concerning the Managing General Partner. Mezzanine Investments,
L.P. (the "Managing General Partner") is a limited partnership organized under
the Delaware Revised Uniform Limited Partnership Act. The Managing General
Partner maintains its principal office at World Financial Center, South Tower,
New York, New York 10080. The Managing General Partner has acted as the managing
general partner of the Fund since the Fund commenced operations on October 19,
1987. The Managing General Partner is engaged in no other activities at the date
of this proxy statement.

The sole general partner of the Managing General Partner is ML Mezzanine Inc.
("ML Mezzanine"), an indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("ML"). ML Mezzanine maintains its principal office at World Financial
Center, South Tower, New York, New York 10080 and ML maintains its principal
office at World Financial Center, North Tower, New York, New York 10281. ML Fund
Administrators Inc. (the "Fund Administrator"), a Delaware corporation and an
indirect wholly-owned subsidiary of ML, provides administrative services for the
Fund pursuant to an Administrative Services Agreement between the Fund and the
Fund Administrator, dated June 30, 1989 (the "Administrative Services
Agreement"). Information concerning the Fund Administrator is set forth below
under "Information Concerning the Fund Administrator." The sole limited partner
of the Managing General Partner is Thomas H. Lee Advisors I (the "Investment
Adviser"). Information concerning the Investment Adviser is set forth below
under "The Management Agreement." The Managing General Partner's unaudited
balance sheet at December 31, 1997 is appended to this proxy statement as
Exhibit A.

The Partnership Agreement obligates the Managing General Partner to contribute
cash to the capital of the Fund so that the Managing General Partner's Capital
Contribution at all times will be equal to one percent (1%) of the aggregate
Capital Contributions of all Partners of the Fund. The Managing General Partner
has contributed $4,924,136 to the capital of the Fund.

The following table sets forth information concerning the directors and
executive officers of ML Mezzanine Inc. Unless otherwise noted, the address of
each such person is World Financial Center, South Tower, New York, New York
10080.
9

<S> <C> <C> <C> <C>
OFFICER PRINCIPAL OCCUPATION
OR DURING THE PAST
DIRECTOR FIVE YEARS AND
NAME AGE TITLE SINCE* DIRECTORSHIPS

Kevin K. Albert (1) 45 Chairman, 1990 Vice President and a Managing Director
World Financial President, 1987 of the Investment Banking Group ("ML
Center Director Investment Banking") of Merrill Lynch,
North Tower Pierce, Fenner & Smith Incorporated
New York, NY 10281 ("Merrill Lynch"). Mr. Albert is the
manager of the Equity Private
Placement Group of ML Investment
Banking and is involved in
structuring, marketing and closing a
diversified array of private equity
financings including common stock,
preferred stock, limited partnership
interests and other equity-related
securities. Mr. Albert is also a
director of ML Media Management Inc.
("ML Media"), an affiliate of the
Managing General Partner and a joint
venturer of Media Management Partners,
the general partner of ML Media
Partners, L.P.; a director of ML Film
Entertainment Inc. ("ML Film"), an
affiliate of the Managing General
Partner and the managing general
partner of the general partner of ML
Delphi Premier Partners, L.P.; a
director of ML Opportunity Management
Inc. ("ML Opportunity"), an affiliate
of the Managing General Partner and a
joint venturer in Media Opportunity
Management Partners, the general
partner of ML Media Opportunity
Partners, L.P.; a director of ML
Mezzanine II Inc. ("ML Mezzanine II"),
an affiliate of the Managing General
Partner and the sole general partner
of the managing general partner of the
New Funds; a director of Merrill Lynch
Venture Capital Inc. ("ML Venture"),
an affiliate of the Managing General
Partner and the general partner of the
managing general partner of ML Venture
Partners II, L.P. ("Venture II"), and
ML Oklahoma Venture Partners Limited

</TABLE>

<S> <C> <C> <C> <C>
OFFICER PRINCIPAL OCCUPATION
OR DURING THE PAST
DIRECTOR FIVE YEARS AND
NAME AGE TITLE SINCE* DIRECTORSHIPS

Partnership ("Oklahoma"); a director
of Merrill Lynch R&D Management Inc.
("ML R&D"), an affiliate of the
Managing General Partner and the
general partner of the general
partner of ML Technology Ventures,
L.P.; Mr. Albert also serves as an
independent general partner of
Venture II. Mr. Albert joined Merrill
Lynch in 1981.

Robert F. Aufenanger 44 Executive 1993 Vice President of Merrill Lynch & Co.
Vice Corporate Credit and a Director of
President, the Partnership Department. Mr.
Director Aufenanger is responsible for the
ongoing management of the operations
of the equipment and project- related
limited partnerships for which
subsidiaries of ML Leasing Equipment
Corp., an affiliate of the Managing
General Partner, are general
partners. Mr. Aufenanger serves as a
director of ML Media, ML Film, ML
Opportunity, MLH Real Estate II,
Inc., ML Mezzanine II Inc., ML
Venture and ML R&D, MLH Property
Managers Inc., MLHRE Inc., MLH Real
Estate Inc., and MLH Real Estate
Assignor Inc. Mr. Aufenanger joined
Merrill Lynch in 1980.

</TABLE>

<S> <C> <C> <C> <C>
OFFICER PRINCIPAL OCCUPATION
OR DURING THE PAST
DIRECTOR FIVE YEARS AND
NAME AGE TITLE SINCE* DIRECTORSHIPS

Director of ML Investment Banking.
James V. Caruso 46 Executive 1993 Since June 1992, Mr. Caruso has
Vice served as Manager of Merrill
President, Lynch's Partnership Analysis and
Director Finance Group (the "Partnership
Department"), which is responsible
for accounting and the ongoing
administration and operations of
more than 150 investment limited
partnerships as well as the Merrill
Lynch affiliated entities that
manage or administer such
partnerships. Mr. Caruso serves as
a director of ML Mezzanine II
KECALP Inc., ML Film Entertainment
International Inc., ML Leasing
Management, Inc., ML Fund
Administrators Inc. ("ML Fund
Administrators"), ML Employees LBO
Managers, Inc., ML IBK Positions,
Inc., ML Real Estate II Inc., MLH
Property Managers Inc. and ML RE II
Inc. Mr. Caruso joined Merrill
Lynch in 1975.

Rosalie Y. Goldberg 60 Vice 1987 First Vice President and Senior
President, Director of Merrill Lynch Private
Director Client Group. Ms. Goldberg also is
Manager of the Merrill Lynch
Special Investments Group, a vice
president and a director of ML
Mezzanine II, MLH Real Estate Inc.,
MLH Real Estate Assignor Inc.,
MLHRE Inc., ML Real Estate II Inc.
and a vice president and director
of ML Private Equity Inc. Ms.
Goldberg joined Merrill Lynch in
1975.

</TABLE>

<S> <C> <C> <C> <C>
OFFICER PRINCIPAL OCCUPATION
OR DURING THE PAST
DIRECTOR FIVE YEARS AND
NAME AGE TITLE SINCE* DIRECTORSHIPS

Audrey L. Bommer 31 Vice 1994 Vice President of ML Investment
President, Banking. Joined ML Investment
Treasurer Banking in April 1994 and serves
as Treasurer and chief financial
officer to the Funds. Ms. Bommer
manages all financial reporting,
accounting, ministerial and
administrative services in the
Partnership Management
Department. Ms. Bommer also
serves as Vice President and
Treasurer of ML Mezzanine II and
ML Fund Administrators. From 1989
to 1993, Ms. Bommer was a Senior
Auditor with Grant Thornton, LLP.

Roger F. Castoral, Jr. 30 Vice 1995 Assistant Vice-President of ML
President, Investment Banking. Joined ML
Assistant Investment Banking in 1995 and
Treasurer serves as Vice President and
Assistant Treasurer to the Funds.
Mr. Castoral is responsible for
fund accounting and financial
reporting functions in the
Partnership Management
Department. Mr. Castoral also
serves as Vice President and
Assistant Treasurer of ML
Mezzanine II and ML Fund
Administrators. From 1993 to
1995, Mr. Castoral was an
Assistant Controller with
Midlantic Corporation. From 1991
to 1993, Mr. Castoral was a
senior auditor with Midlantic
Corporation. Prior to joining
Midlantic, Mr. Castoral was a
staff accountant at KPMG Peat
Marwick.

</TABLE>

--------
(1)As of April 10, 1998, Mr. Albert beneficially owned 25 Units, which
represents less than 1% of Units outstanding.

*Officers of ML Mezzanine serve at the pleasure of its Board of Directors.
13

<PAGE>
Distributions. The Fund made cash distributions to the Managing General
Partner of $520,156 during the Fund's fiscal year ended December 31, 1997, all
of which related to the MGP's Capital Contribution. There were no MGP
Distributions, as defined below, by the Fund with respect to the Fund's fiscal
year ended December 31, 1997. All distributions to Partners are made according
to the following formula:

1. Current Returns. All cash dividends, interest and other income received by
the Fund in excess of the Fund's expenses and reserves for expenses and
Follow-On investments are distributed to the Limited Partners and to the
Managing General Partner quarterly, within 45 days after the end of each
calendar quarter, as follows:

a. From Mezzanine Investments,

first, 99% to the Limited Partners and 1% to the Managing General Partner,
until the Limited Partners, as a class, have received from cumulative
distributions from Mezzanine Investments, an amount equal to an aggregate
return (cumulative but not compounded) of 10% per annum on the average daily
amount of Gross Capital Contributions represented by Mezzanine Investments
(the "Priority Return"), and any outstanding unpaid Compensatory Payment
balance (defined below),

second, 100% to the Managing General Partner until the Managing General
Partner shall have received an amount equal to any outstanding Deferred
Distribution Amount (defined below),

third, 69% to the Limited Partners and 31% to the Managing General Partner
(30% being an incentive distribution, an "MGP Distribution") until the
Managing General Partner has received from all distributions with respect to
Mezzanine Investments then or theretofore made (other than as a return of
capital), an amount equal to 21% of all such distributions, and

fourth, thereafter, 79% to the Limited Partners and 21% to the Managing
General Partner (20% being an MGP Distribution).

b. From all Other Sources,

99% to the Limited Partners and 1% to the Managing General Partner.

2. Capital Transactions. The net proceeds from the disposition of Qualified
Investments and Temporary Investments, including distributions of returns of
capital from investments, and proceeds of any refinancing ("Capital
Transactions"), that are not applied against outstanding debts of the Fund or
reserved for following investments or Fund expenses, will be distributed as
soon as practicable after such Capital Transaction as follows:

a. From Mezzanine Investments,

first, 99% to the Limited Partners and 1% to the Managing General Partner,
until the Limited Partners, as a class, have received from cumulative
14

<PAGE>
distributions from Mezzanine Investments, an amount equal to the Priority
Return and any outstanding unpaid Compensatory Payment balance,

second, 100% to the Managing General Partner until the Managing General
Partner shall have received an amount equal to any outstanding Deferred
Distribution Amount,

third, 99% to the Limited Partners and 1% to the Managing General Partner
until the Limited Partners, as a class, have received an amount equal to the
amount of their Net Capital Contributions represented by Mezzanine
Investments then or theretofore liquidated together with the Priority Return
and any outstanding Compensatory Payment,

fourth, 69% to the Limited Partners and 31% to the Managing General Partner
(30% being an MGP Distribution), until the Managing General Partner has
received from all distributions with respect to Mezzanine Investments then
or theretofore made, 21% of all distributions, and

fifth, thereafter, 79% to the Limited Partners and 21% to the Managing
General Partner (20% being an MGP Distribution).

b. From all Other Sources,

99% to the Limited Partners and 1% to the Managing General Partner.

For purposes of the distributions described above, Gross Capital Contributions
represented by Mezzanine Investments is the proportionate amount of the Fund's
equity that is invested in Mezzanine Investments (the "Net Capital Contributions
represented by Mezzanine Investments"), grossed up for the related selling
commissions (assuming no discounts), marketing and sales expenses and
organization and offering expenses of the Fund.

Compensatory Payment means an amount equal to the aggregate of: (i) the
cumulative amount by which the Distributable Capital Proceeds related to the
Sales of Qualified Investments are less than the Fund's cost of such Qualified
Investments, but only to the extent of the excess of cumulative MGP
Distributions then or theretofore made over the cumulative amounts of payments
then or theretofore made as Compensatory Payments pursuant to the distribution
process summarized above and (ii) the cumulative amount of MGP Distributions
with respect to those portions of Bridge Investments which were expected to
become Mezzanine Investments at liquidation within nine months, but which did
not actually become Mezzanine Investments within nine months, or with the
approval of the Individual General Partners twelve months.

In addition, to the extent that making any MGP Distribution from sales would
result in the Managing General Partner receiving cumulative MGP Distributions
from dispositions of Qualified Investments in excess of 20% of the cumulative
capital gains realized by the Fund (net of realized capital losses and
unrealized net capital depreciation), such distribution will instead be deferred
(the "Deferred Distribution Amount").
15

<PAGE>
Allocations of Profits and Losses. Profits and Losses for tax and accounting
purposes are determined and allocated as of, and within sixty days after, the
end of each calendar year. Profits and Losses are allocated consistently with,
and generally in the same proportions as, cash distributions (other than as to
distributions of capital). All unrealized gains and losses at the termination of
the Fund will be deemed realized at that time. Unrealized gains and losses
attributable to any securities distributed in kind to Partners will be deemed
realized upon such distribution.

Removal of the Managing General Partner. The Managing General Partner may be
removed from the Fund either (i) by a majority of the Independent General
Partners of the Fund, (ii) by failure to be reelected by the Limited Partners or
(iii) with the consent of a majority in interest of the Limited Partners.

Information Concerning the Fund Administrator. Pursuant to the Administrative
Services Agreement, the Fund Administrator is responsible for the day-to-day
administrative affairs of the Fund and for the management of the accounts of
Limited Partners. The Fund Administrator also provides the Fund, at the Fund
Administrator's expense (except as provided below), with office space,
facilities, equipment and personnel necessary to carry out its obligations under
such agreement and such other services as the Fund Administrator, subject to
supervision by the Individual General Partners, from time to time determines to
be necessary and appropriate.

The Fund Administration Fee. As of October 19, 1995, the Fund pays the Fund
Administrator a quarterly fee payable in advance (the "Fund Administration Fee")
at the annual rate of $300,000 plus all actual out-of-pocket expenses incurred
on behalf of the Fund (other than extraordinary legal and related expenses and
certain expenses of insurance and bonding which have been and will continue to
be borne by the Fund), but in no event exceeding in aggregate the annual amount
of $2.0 million. The officers and directors of the Fund Administrator do not
receive any compensation for their services from the Fund. The Fund
Administration Fees and expenses paid by the Fund to the Fund Administrator for
the fiscal year ended December 31, 1997 totaled $300,000.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Fund's
officers and Individual General Partners and persons owning more than 10% of the
outstanding Units of the Fund to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, General
Partners and greater than 10% holders of Units are required by SEC regulation to
furnish the Fund, through its Managing General Partner, with copies of all
Section 16(a) Forms they file.

Based solely on copies of such Forms furnished as provided above, or written
representations that no Forms 5 were required, the Fund believes that during
1997 through the date hereof all Section 16(a) filing requirements applicable to
its officers, General Partners and owners of greater than 10% of its Units were
complied with.
16

<PAGE>
SELECTION OF INDEPENDENT ACCOUNTANTS

At their meeting held in person on December 2, 1997, the Independent General
Partners of the Fund unanimously selected the firm of Price Waterhouse LLP,
independent accountants, to audit the financial statements of the Fund for the
fiscal year ending December 31, 1998. The Fund knows of no direct or indirect
financial interest of such firm in the Fund. Such appointment is subject to
ratification or rejection by the Limited Partners of the Fund. Unless a contrary
specification is made, the accompanying proxy will be voted in favor of
ratifying the selection of such accountants.

Representatives of Price Waterhouse LLP are expected to be present at the
Meeting and will have the opportunity to respond to questions from Limited
Partners and to make a statement if they so desire.

THE MANAGEMENT AGREEMENT

Thomas H. Lee Advisors I, the Investment Adviser, pursuant to an investment
management agreement among the predecessor to the Investment Adviser, the Lee
Company and the Fund, dated September 14, 1987, as amended March 18, 1988 and as
assumed by the Investment Adviser December 29, 1988 (the "Management
Agreement"), is responsible for the identification of all Qualified Investments
made by the Funds and performs the managerial functions usually carried out by
an investment adviser to a business development company. The Investment Adviser
and its predecessor entity, Thomas H. Lee Advisors, Inc., have served as the
investment adviser for the Fund since the Fund commenced operations on October
19, 1987, and the Limited Partners ratified and approved the Management
Agreement at their first two annual meetings held on May 12, 1988 and May 5,
1989.

Amendment To Management Agreement. The Fund's investment and reinvestment
periods have expired and the Fund is currently being managed with a view towards
realizing value, including gains when possible, from the Fund's remaining
investments. The term of the Fund will expire on June 15, 1998 unless extended
in accordance with the terms of the Partnership Agreement. The Investment
Adviser has discussed with the Managing General Partner and with the Independent
General Partners the need for continued investment service during the
liquidation of the Fund's investments and during any extension period currently
being considered, and the level of appropriate management fee during any such
extension. Following those discussions, the Investment Adviser and the Fund have
agreed to amend the Management Agreement, reducing the management fee payable
thereunder commencing July 1, 1998 to $250,000 per annum, payable quarterly in
advance, plus all actual out-of-pocket expenses incurred by the Investment
Adviser in connection with the Fund (other than compensation of employees of the
Investment Adviser). Such out-of-pocket expenses would be for any third-party
fees for consultation with counsel, accountants or other experts in connection
with the Investment Adviser's duties to the Fund. All other terms of the
Management Agreement will remain the same as discussed below under "Terms of the
Management Agreement." The Independent General Partners of the Fund have
approved this amendment to the Management Agreement and recommend its
17

<PAGE>
ratification and approval by the Limited Partners. If this amendment is ratified
and approved, it will be effective July 1, 1998.

Unless earlier terminated, the Management Agreement will continue from year to
year if approved by a majority of the Independent General Partners. The
Management Agreement is not assignable (within the meaning of the Investment
Company Act of 1940) and may be terminated without penalty on 60 days' written
notice at the option of the Fund or the Investment Adviser or by vote of the
Limited Partners. In the event that the term of the Fund is not extended because
the Playtex Products, Inc. transaction has been consummated and the Individual
General Partners are otherwise satisfied as to the arrangements for disposition
of the Fund's remaining assets, the Management Agreement will not be amended and
will expire according to its original terms.

Information Concerning the Investment Adviser. The Investment Adviser is a
Massachusetts business trust with transferable shares, the majority of whose
shares are owned by Thomas H. Lee. The Investment Adviser maintains its
principal office at the offices of the Thomas H. Lee Company at 75 State Street,
Boston, Massachusetts 02109. The Investment Advisor's unaudited balance sheet at
December 31, 1997 is appended to this proxy statement as Exhibit B.

The following table sets forth information concerning the Trustees and
officers of the Investment Adviser. Information concerning Thomas H. Lee, the
Chairman and a Trustee of the Investment Adviser, is set forth under "Election
of General Partners -- Individual General Partners." Unless otherwise noted, the
address of each such person is 75 State Street, Boston, Massachusetts 02109.
18

<S> <C> <C> <C> <C>
OFFICER OR PRINCIPAL OCCUPATION
TRUSTEE DURING PAST
(DIRECTOR) FIVE YEARS AND
NAME AGE TITLE SINCE* DIRECTORSHIPS

David V. Harkins 57 President, 1998 Managing Director of the Lee
Trustee Company since 1986. Senior Vice
President and Trustee of T.H.
Lee Mezzanine II. Chairman of
National Dentex Corporation
since 1983. Director of Stanley
Furniture Company, Inc. and
National Dentex Corporation.

Thomas R. Shepherd 68 Executive 1987 Managing Director of the Lee
Vice President Company since 1986. Executive
Vice President of T.H. Lee
Mezzanine II. The
Administrative General Partner
of the Investment Adviser to
the New Funds ("T.H. Lee
Mezzanine II"). Director of
General Nutrition Companies,
Inc., and Rayovac Corporation.

C. Hunter Boll 42 Vice President, 1987 Managing Director of the Lee
Trustee 1998 Company since 1991; Vice
President of the Lee Company
from 1986 to 1991. Vice
President and Trustee of T.H.
Lee Mezzanine II.

Scott A. Schoen 39 Vice President 1987 Managing Director of the Lee
Company since 1991; Vice
President of the Lee Company
from 1986 to 1990. Vice
President of T.H. Lee Mezzanine
II. Director of Rayovac
Corporation, Syratech
Corporation and Transwestern
Publishing Company.

Wendy L. Masler 44 Treasurer, Clerk 1987 Senior Vice President and
Treasurer of the Lee Company
since 1984. Treasurer and Clerk
of T.H. Lee Mezzanine II.

</TABLE>

<PAGE>
*Officers of the Investment Adviser serve at the pleasure of its Board of
Directors. Dates include service with the Investment Adviser's predecessor
entity.

As of April 10, 1998, John W. Childs resigned as the President and Trustee of
the Investment Adviser to the Fund. In addition, Mr. Childs transferred his
Shares in the Investment Adviser to a limited liability company of which he is
the sole member. At such time, David V. Harkins, formerly the Investment
Adviser's Senior Vice President, was appointment as President. Mr. Harkins will
remain a Trustee of the Investment Adviser. In addition, C. Hunter Boll, a Vice
President of the Investment Adviser, was appointed as a trustee. At the same
time, Mr. Childs also resigned his position of President of The Investment
Adviser to the New Funds.

TERMS OF THE MANAGEMENT AGREEMENT

The Management Agreement requires the Investment Adviser to perform, subject
to the supervision of the General Partners, managerial and investment advisory
services necessary for the operation of the Fund in carrying out its investment
objective and policies, including providing managerial assistance to Managed
Companies of the Fund and other services related to Mezzanine and Bridge
Investments. Management services consist of providing the Fund with office space
and equipment and dealing with service agents, accountants, attorneys, brokers
and others.

The Investment Adviser is responsible for locating, structuring, acquiring,
monitoring and disposing of Qualified Investments for the Fund and structuring
the Fund's financing. The Fund will make only the Qualified Investments
recommended to it by the Investment Adviser, and the Investment Adviser (subject
to the supervision of the General Partners) has the exclusive power and
authority to make, monitor, manage and control the Fund's Qualified Investments.
The Investment Adviser will determine the manner in which voting rights, rights
to consent to corporate action, and any other rights pertaining to the Fund's
Qualified Investments will be exercised.

Management Fee. Prior to the effectiveness of the amendment described on page
17, the Management Agreement would provide that the Fund pay the Investment
Adviser a quarterly fee, payable in advance, at an annual rate, subject to
reduction by a portion of any deductible fees, equal to $1.2 million. Deductible
fees consist of (i) as to break-up fees paid to the Investment Adviser or any
affiliate thereof relating to a company in which a Qualified Investment is
structured but not consummated, the amount of such fee (net of expenses), which
is proportionate to the percentage (and if not ascertainable then 35%) of common
equity the Fund had or would have had in such company (the "equity percentage")
and (ii) as to any investment banking fee paid the Investment Adviser or an
affiliate thereof by persons unaffiliated with the Investment Adviser or the
Fund, the amount of such fee in excess of one percent of the funding on which it
was paid, which is proportionate to the equity percentage. Upon effectiveness of
such amendment to the Management Agreement, the fee to the Investment Advisor
would be $250,000 per annum plus all actual out-of-pocket expenses (as defined
on page 17) incurred
20

<PAGE>
by the Investment Adviser in connection with the Fund, commencing July 1, 1998.
The Investment Adviser may retain without reduction in its fees the amount of
any investment banking fees to the extent not in excess of one percent of the
funding on which the fee was paid, and the full amount of any management fees
paid with respect to Portfolio Companies. See "Certain Transactions."

In addition, pursuant to the Amended and Restated Agreement of Limited
Partnership of the Managing General Partner, as amended, the Investment Adviser
receives those MGP Distributions which are related to investments made by the
Fund for which the Investment Adviser acted in the capacity of investment
adviser to the Fund. See "Election Of General Partners -- Managing General
Partner Distributions."

Payment of Expenses. The Investment Adviser bears the expense of maintaining
the staff necessary for performing its obligations under the Management
Agreement. Pursuant to the amended Management Agreement, the Fund will reimburse
the Investment Adviser for all other out-of-pocket expenses associated with its
duties. The Investment Adviser generally recovers its fees and expenses from the
Portfolio Companies in completed transactions. However, after an investment has
been certified by the Investment Adviser as meeting the Guidelines, or approved
by the Independent General Partners and the Managing General Partner, all legal
fees and expenses associated with negotiating and structuring the Fund's
investment, if not borne by the Portfolio Company or a third party, will be
borne by the Fund. Furthermore, in connection with the disposition of a
Qualified Investment, all fees, commissions and legal fees and expenses, if not
borne by the Portfolio Company or a third party, will be borne by the Fund on a
pro rata basis in proportion to its share of the total amount of securities
being sold or otherwise disposed of. The Fund's obligation in each case is
without regard to whether or not the transaction is consummated; provided,
however, any unconsummated sale must have been pursued on the basis of the
reasonable business judgment of the Investment Adviser.

During the Fund's fiscal year ended December 31, 1997, the Investment Advisory
Fees paid by the Fund to the Investment Adviser totaled $1,193,717.

CERTAIN TRANSACTIONS

Subject to any policies established by the Individual General Partners, the
Investment Adviser is responsible for the management of the Fund's Mezzanine
Investments and Bridge Investments and is responsible for conducting the
negotiations with respect to the acquisition of such investments on behalf of
the Fund.

Certain of the Mezzanine Investments and Bridge Investments which may be made
by the Fund may involve coinvestments with entities affiliated with the
Investment Adviser. Such coinvestments are generally prohibited absent exemptive
relief from the Securities and Exchange Commission (the "Commission"). As a
result of these affiliations and the Fund's expectation of engaging in such
coinvestments, the Fund sought an exemptive order from the Commission allowing
such coinvestment, which was received on September 23, 1987. An additional
21

<PAGE>
exemptive order, allowing coinvestment with the New Funds was received from the
Commission on September 1, 1989. The Funds' coinvestments in Managed Companies,
and in certain cases their coinvestments in NonManaged Companies, typically
involved the entry by the Fund and other equity security holders into
stockholders' agreements. While the provisions of such stockholders' agreements
vary, such agreements may include provisions as to corporate governance,
registration rights, rights of first offer or first refusal, rights to
participate in sales of securities to third parties, rights of majority
stockholders to compel minority stockholders to participate in sales of
securities to third parties, transfer restrictions, and preemptive rights.

Set forth below is a description of the transactions involving the Fund and
affiliates of the Investment Adviser (the "Lee Affiliates"), including
coinvestments pursuant to the above exemptive orders, which were consummated, or
which were approved but had not yet been consummated, during the period from
January 1, 1997 through April 10, 1998. For descriptions of acquisitions and
dispositions of securities of Portfolio Companies in which the Fund participated
but the Lee Affiliates did not participate, see the Fund's Annual Report for
fiscal year 1997.

Alliance International Group, Inc. As of December 31, 1996, the Fund held
250,800 shares of the Company's common stock, 110,000 shares of the Company's
Class A Cumulative Preferred Stock and 5,016 shares of the Company's Cumulative
Redeemable Preferred Stock, representing approximately 25.1% of the Company's
common stock, 100% of the Company's Class A Cumulative Preferred Stock and 25.1%
of the Company's Cumulative Redeemable Preferred Stock. As of December 31, 1996,
the Lee Affiliates held an aggregate of 271,700 shares of the Company's common
stock and 5,434 shares of the Company's Cumulative Redeemable Preferred Stock,
representing approximately 27.2% of the Company's common stock and 27.2% of the
Company's Cumulative Redeemable Preferred Stock.

On October 3, 1997, the Fund and the Lee Affiliates sold all of their holdings
of Alliance Common Stock in an unrelated third party for $7.78 per share,
generating proceeds of $1.95 million and $2.1 million, respectively. In
addition, immediately prior to the consummation of the transaction, Alliance
redeemed all of the outstanding shares of Company's Preferred Stock, repaid all
of the Company's outstanding indebtedness, including all accrued and unpaid
dividends and interest thereon, which resulted in proceeds of $23.1 million and
$826,228 to the Fund and the Lee Affiliates, respectively.

Playtex Products, Inc. As of December 31, 1996 and 1997, the Fund, Fund II,
the Retirement Fund and the Lee Affiliates, respectively, held 1,406,204,
343,726, 183,560 and 2,093,211 shares of Playtex Products, Inc. common stock,
representing approximately 2.6%, 0.6%, 0.3% and 4.2% of Playtex's outstanding
common stock.

On April 15, 1998 Playtex filed a registration statement covering all shares
of the common stock owned by the Fund, Fund II, the Retirement Fund and the Lee
Affiliates pursuant to an underwritten public offering. Such offering is
expected to
22

<PAGE>
be consummated during the second quarter of 1998; however, there can be no
assurance that such offering will be consummated or that the selling
stockholders, including the Fund, will be able to sell all of their remaining
shares of Playtex common stock in such offering.

Signature Brands USA, Inc. (formerly known as Health o meter Products, Inc.).
As of December 31, 1996 and December 31, 1997, the Fund and the Lee Affiliates,
respectively, held 1,563,053 and 3,212,747 shares of the common stock of
Signature Brands USA, Inc. representing approximately 14.7% and 29.6% of
Signature Brands' outstanding Common Stock.

On February 28, 1998, Signature Brands entered into a definitive merger
agreement with Sunbeam Corporation, pursuant to which Sunbeam agreed, among
other things, to commence a tender offer for all of the outstanding shares of
Signature Brands at a price per share of $8.25. The tender offer commenced on
March 6, 1998. The Fund and the Lee Affiliates tendered all of their shares of
Signature Brands common stock, receiving proceeds of $12.9 million and $26.5
million, respectively.

Stanley Furniture Company, Inc. As of December 31, 1996, the Fund, Fund II,
the Retirement Fund and the Lee Affiliates, respectively, held 1,560,296,
13,474, 10,795 and 23,584 shares of Stanley Common Stock, representing
approximately 34.1%, 0.3%, 0.2% and 0.5% of Stanley's outstanding Common Stock.

During February 1997, the Fund, Fund II, the Retirement Fund and the Lee
Affiliates respectively, sold 31,515, 272, 218, and 480 shares of Stanley Common
Stock pursuant to the provisions of Rule 144 under the Securities Act of 1933,
as amended, generating proceeds of $756,335, $6,528, $5,232 and $11,520,
respectively.

On June 27, 1997, the Fund, Fund II, the Retirement Fund and the Lee
Affiliates, respectively, sold 727,344, 6,281, 5,032 and 10,992 shares of
Stanley Common Stock pursuant to the terms of a Stock Purchase Agreement with
Stanley for $20 per share, generating proceeds of $14,546,880, $125,620,
$100,640 and $219,840, respectively.

On November 11, 1997, Stanley repurchased a total of 413,201 shares of its
Common Stock from the Fund, Fund II, the Retirement Fund and the Lee Affiliates
for $25 per share. In connection with such repurchase, the Fund, Fund II, the
Retirement Fund and the Lee Affiliates, respectively, sold 400,718, 3,460, 2,772
and 6,056 shares, generating proceeds of $10,017,950, $86,500, $69,300 and
$151,400, respectively.

In January 1998, the Fund, Fund II, the Retirement Fund and the Lee
Affiliates, respectively, sold 400,719, 3,461, 2,773 and 6,056 shares
(representing all of their remaining holdings of Stanley Common Stock) pursuant
to a registration statement which had been declared effective by the Securities
and Exchange Commission for $27 per share (net of underwriting discounts and
commissions). This sale generated proceeds of $10,819,413, $93,447, $74,871 and
$163,512, respectively.
23

<PAGE>
GENERAL INFORMATION

MLPF&S, and certain of its affiliates perform various financial services for
various portfolio companies of the Fund in the ordinary course of business,
including investment banking services, broker/dealer services, economic
forecasting and pension plan services. In connection therewith, such persons
receive various fees, commissions and reimbursements. The aggregate revenue
received by such persons during 1997 for providing such services to Managed
Companies in which the Fund has a material interest (other than those
specifically set forth above or below) was not in excess of $100,000.
Furthermore, MLPF&S and its affiliates or investment companies advised by
affiliates of MLPF&S may, from time to time, purchase or sell securities issued
by portfolio companies of the Fund in connection with their ordinary investment
operations.

The Lee Company typically performs certain management services for managed
portfolio companies of the Fund and receives management fees in connection
therewith, usually pursuant to written agreements with such companies. Of the
total of five managed portfolio companies of the Fund, one paid management fees
to the Lee Company (exclusive of reimbursement of expenses) of $220,000 with
respect to the year ended December 31, 1997. In addition, certain managed
portfolio companies of the Funds have contractual or other relationships
pursuant to which they do business with one another.

Additional coinvestments, investment modifications and follow-on investments
are expected to be made by the Lee Affiliates in various investments with the
Fund from time to time.

The Managing General Partner is responsible for the management of the Fund's
short-term investments. In placing orders for money market securities, it is the
policy of the Managing General Partner to obtain the best net results taking
into account such factors as price (including the applicable dealer spread), the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities, and the firm's risk in positioning the
securities involved. While the Managing General Partner generally seeks
reasonably competitive spreads or commissions, the Fund will not necessarily be
paying the lowest spread or commission available. Affiliates of the Fund may not
serve as the Fund's dealer in connection with such transactions.

ADDITIONAL INFORMATION

The expense of preparation, printing and mailing of the enclosed form of proxy
and accompanying Notice and Proxy Statement will be borne by the Fund. The Fund
will pay all reasonable expenses in forwarding proxy solicitation material to
the beneficial owners of the Units.

Approval of the selection of accountants requires the vote (a) of 67% or more
of the Units in the Fund present at the Meeting if the holders of more than 50%
of the outstanding Units are present or represented by proxy, or (b) of more
than 50% of the outstanding Units, whichever is less. The Individual General
Partners and Managing General Partner will be elected if they receive more votes
than any other
24

<PAGE>
candidate at a meeting at which a majority of the Limited Partners who hold a
majority of the outstanding Units are present in person or by proxy. In order to
obtain the necessary quorum at the Meeting, supplementary solicitation may be
made by mail, telephone, telegraph, or personal interview by officers of the
Investment Adviser or the Fund Administrator. It is anticipated that the cost of
such supplementary solicitation, if any, will be nominal and will be borne by
the Fund.

The Partnership Agreement provides that the Limited Partners of the Fund are
prohibited from exercising certain rights of Limited Partners, including the
right to elect General Partners and to approve certain fund matters, unless
prior to the exercise of such rights, counsel for the Fund has delivered to the
Fund an opinion to the effect that neither the existence of such rights nor the
exercise thereof will violate the provisions of the Revised Uniform Limited
Partnership Act of the State of Delaware, as amended, or the applicable laws of
the jurisdictions in which the Fund is then formed or qualified, will adversely
affect the limited liability of the Limited Partners or will adversely affect
the classification of the Fund as a partnership for federal income tax purposes.
Counsel to the Fund will deliver an opinion to the Fund with respect to the
foregoing. In rendering such opinion, counsel for the Fund may rely as to
matters of Delaware law upon the opinion of special Delaware counsel to the
Fund.

PROPOSALS OF LIMITED PARTNERS

Proposals of Limited Partners intended to be presented at the next Annual
Meeting of Limited Partners of the Fund must be received by the Fund for
inclusion in its proxy statement and form of proxy relating to that meeting by
December 31, 1998.

By Order of the
Individual General Partners

THOMAS H. LEE
Individual General
Partner

Dated: April 28, 1998
25

<PAGE>
EXHIBIT A

MEZZANINE INVESTMENTS, L.P.

BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)

<S> <C> <C> <C> <C>
ASSETS NOTES

Investments in ML-Lee Acquisition Fund, L.P. $ 917,586
---------- ---

Total Assets................................ $ 917,586
---------------
---------------

PARTNERS' CAPITAL

Partners' Capital...........................

General Partner............................. 1,3 $ 2,954,288

Limited Partner............................. (2,036,702 )
---------- ---

Total Partners' Capital..................... $ 917,586
---------------
---------------

</TABLE>

See Accompanying Notes to Balance Sheet.
A-1

<PAGE>
MEZZANINE INVESTMENTS, L.P.

NOTES TO BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)

1. ORGANIZATION

Mezzanine Investments, L.P. (the "Managing General Partner") was formed and
the Certificate of Limited Partnership was filed under the Delaware Revised
Uniform Limited Partnership Act on February 1, 1985. The Managing General
Partner is a registered investment adviser and the Managing General Partner of
MLLee Acquisition Fund, L.P. (the "Fund") and is responsible for supervising the
Fund's investments. The Managing General Partner is a limited partnership in
which ML Mezzanine Inc. ("ML Mezzanine"), an indirect subsidiary of Merrill
Lynch & Co., Inc., acts as the general partner. ML Mezzanine performs the
responsibilities of the Managing General Partner with respect to the Fund. The
Limited Partner of the Managing General Partner is Thomas H. Lee Advisors I (the
"Investment Adviser"), which is an affiliate of the Thomas H. Lee Company, a
sole proprietorship owned by Thomas H. Lee.

The Fund has elected to operate as a business development company under the
Investment Company Act of 1940. Its primary investment objective is to provide
current income and longterm capital appreciation by investing in mezzanine
securities usually issued in connection with leveraged acquisitions and
recapitalizations of businesses.

2. INVESTMENT IN FUND

Under the terms of the Amended and Restated Agreement of Limited Partnership
of the Fund, as amended (the "Partnership Agreement"), the Managing General
Partner on October 19, 1987, admitted additional limited partners to the Fund at
the Fund's first closing. The total capital contributions of all such limited
partners were $403,383,350, reflecting $132,650 of volume discounts. On November
20, 1987, the Managing General Partner admitted additional limited partners to
the Fund at the Fund's second closing. The total capital contributions of all
such limited partners were $19,862,000, reflecting $15,000 of volume discounts.
On May 20, 1988 the Managing General Partner admitted an additional limited
partner to the Fund at the Fund's third closing. The total capital contribution
of such limited partner was $49,999,688, reflecting $3,333,312 of volume
discounts. On June 15, 1988 the Managing General Partner admitted additional
limited partners to the Fund at the Fund's fourth closing. The total capital
contributions of all such limited partners were $10,124,720, reflecting $638,280
of volume discounts. As of December 31, 1997, the aggregate capital
contributions of all limited partners were $483,369,758, reflecting $4,119,242
of volume discounts. The Managing General Partner has acquired an interest in
the Fund in exchange for its cash contributions. The Managing General Partner
contributed $4,924,136 to the Fund and will contribute or withdraw cash, if
necessary, so that it will maintain a one percent interest in the total capital
contributions to the Fund.
A-2

<PAGE>
3. CAPITAL REQUIREMENTS

The General Partner shall remain at all times a net worth at a level that is
sufficient to meet all requirements of currently applicable U.S. income tax
regulations.

4. CASH DISTRIBUTIONS

For the year ended December 31, 1997, the Managing General Partner received
$701,411 in cash distributions from the Fund. This amount was approved by the
Individual General Partners of the Fund throughout the fiscal year and
represents 1% of the total cash distributions that were distributed.
A-3

<PAGE>
EXHIBIT B

THOMAS H. LEE ADVISORS I

BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)

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

Cash................................. $ 1,662
---------- ---

Total Assets......................... $ 1,662
---------------
---------------

BENEFICIARIES' EQUITY

Beneficial Interest.................. $ 8,025,000

Retained Deficit..................... (8,023,338 )
---------- ---

Total Beneficiaries' Equity.......... $ 1,662
---------------
---------------

</TABLE>

See Accompanying Notes to Balance Sheet.
B-1

<PAGE>
THOMAS H. LEE ADVISORS I

NOTES TO BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)

1. ORGANIZATION AND PURPOSE

Thomas H. Lee Advisors I ("Advisors") is a Massachusetts business trust,
previously a Massachusetts corporation formed on March 31, 1987. Advisors serves
as the Investment Adviser to ML-Lee Acquisition Fund, L.P. (the "Fund"), and is
responsible for the identification, management and liquidation of investments
for the Fund. Advisors is a limited partner of Mezzanine Investments, L.P., the
Managing General Partner of the Fund. Thomas H. Lee, the majority shareholder of
Advisors, is also a General Partner of the Fund. Advisors is a registered
investment adviser.

2. SIGNIFICANT ACCOUNTING POLICIES

No provision for federal income taxes has been made since the liability for
such taxes is that of the stockholders rather than the business trust.

3. RELATED PARTY TRANSACTIONS

As compensation for its investment advisory services, Advisors receives a
quarterly fee from the Fund at the annual rate of 1.0% of assets under
management with a minimum annual payment of $1,200,000, subject to adjustment.

Advisors also receives, from the Managing General Partner, an Incentive
Return, after the Limited Partners have received the 10% Priority Return. The
Incentive Return will aggregate not more than 20% of the Fundis current income
and capital gains.

Advisors has an agreement with Thomas H. Lee Company, a sole proprietorship
owned by Thomas H. Lee, that Thomas H. Lee Company will pay the expenses of
identifying, managing and liquidating Fund investments to the extent that these
expenses are not paid by the Fund or the portfolio companies.
B-2