ITEM 1. BUSINESS.
GENERAL
MACC Private Equities Inc. (the "Corporation") was formed as a Delaware corporation on March 3, 1994. It is qualified as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act").
The Corporation has one direct wholly-owned subsidiary, MorAmerica Capital Corporation ("MorAmerica Capital"). As of September 30, 2000, MorAmerica Capital comprised approximately 99% of the Corporation's assets. MorAmerica Capital is an Iowa corporation incorporated in 1959 and which has been licensed as a small business investment company since that year. It has also elected treatment as a BDC under the 1940 Act.
THE CORPORATION'S OPERATION AS A BDC
As noted above, both the Corporation and its wholly-owned subsidiary, MorAmerica Capital, have elected treatment as BDCs under the 1940 Act. Under the 1940 Act, a BDC may not acquire any asset other than Qualifying Assets as defined under the 1940 Act, unless, at the time the acquisition is made, Qualifying Assets represent at least 70 percent of the value of the BDC's total assets. The principal categories of Qualifying Assets relevant to the business of the Corporation are the following:
(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer is an eligible portfolio company. An eligible portfolio company is defined in the 1940 Act as any issuer that:
(a) is organized under the laws of, and has its principal place of business in, the United States;
(b) is not an investment company; and
(c) does not have any class of securities with respect to which a broker may extend margin credit.
The Corporation's investment in all of the issued and outstanding common stock of MorAmerica Capital is also a Qualifying Asset under the 1940 Act.
(2) Cash, cash items, government securities, or high quality debt securities maturing in one year or less from the time of investment.
In addition, a BDC must have been organized (and have its principal place of business) in the United States for the purpose of making investments in the types of securities described in (1)
above and, in order to count the securities as Qualifying Assets for the purpose of the 70 percent test, the BDC must make available to the issuers of the securities significant managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.
Under the 1940 Act, once a company has elected to be regulated as a BDC, it may not change the nature of its business so as to cease to be, or withdraw its election as, a BDC unless authorized by vote of a majority, as defined in the 1940 Act, of the company's shares. In order to maintain their status as BDCs, the Corporation and MorAmerica Capital each must have at least 50% of their total assets invested in the types of portfolio companies described by Sections 55(a)(1) though 55(a)(3) of the 1940 Act. Accordingly, the Corporation and MorAmerica Capital may not withdraw their BDC elections or otherwise change their business so as to cease to qualify as BDCs without shareholder approval.
INVESTMENTS AND DIVESTITURES
For the fiscal year ended September 30, 2000, the Corporation made total investments of $13,807,165 in 13 new portfolio companies and in follow-on investments in 13 existing portfolio companies. The Corporation's investment-level objectives on a consolidated basis call for new and follow-on investments of approximately $13,000,000 during fiscal year 2001.
During fiscal year 2000, the Corporation recorded $2,266,652 in net realized losses.
ITEM 2.
ITEM 2. PROPERTIES.
The Corporation does not own or lease any properties or other tangible assets. Its business premises and equipment are furnished by InvestAmerica Investment Advisors, Inc. (the "Investment Advisor"), the investment advisor to the Corporation.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
There are no items to report.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There are no items to report.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the names, ages and positions of the Corporation's Executive Officers as of December 15, 2000, as well as certain other information with respect to such persons:
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information in response to this Item is incorporated by reference to the "Shareholder Information" section of the Corporation's Annual Report to Shareholders for the fiscal year ended September 30, 2000 (the "2000 Annual Report").
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Information in response to this Item is incorporated by reference to the "Selected Financial Data" section of the 2000 Annual Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Information in response to this Item is incorporated by reference to the "Management's Discussion and Analysis" section of the 2000 Annual Report.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information in response to this Item is incorporated by reference to the "Quantitative and Qualitative Disclosures About Market Risk" section of the 2000 Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information in response to this Item is incorporated by reference to the Consolidated Financial Statements, notes thereto and report therein contained in the 2000 Annual Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There are no items to report.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information in response to this Item is incorporated by reference to the identification of directors and nominees contained in the "Election of Directors" section and the subsection captioned "Section 16(a) Reporting Compliance" of the Corporation's definitive proxy statement in connection with its 2001 Annual Meeting of Stockholders, scheduled to be held on February 27, 2001 (the "2001 Proxy Statement"). Information in response to this Item also is included under the caption "Executive Officers of the Registrant" of this Report.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Information in response to this Item is incorporated by reference to the subsection captioned "Compensation of Directors and Executive Officers" of the 2001 Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information in response to this Item is incorporated by reference to the subsection captioned "Stock Ownership of Certain Beneficial Owners" of the 2001 Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Corporation and MorAmerica Capital each have executed an Investment Advisory Agreement with the Investment Advisor. With respect to the Corporation, the Investment Advisory Agreement provides for a management fee payable to the Investment Advisor equal to 2.5% of Assets Under Management (as that term is defined in the Investment Advisory Agreement). With respect to MorAmerica Capital, the management fee is equal to 2.5% of Capital Under Management (as that term is defined in the Investment Advisory Agreement), not to exceed 2.5% of Assets Under Management or 7.5% of Regulatory Capital. In addition, the Investment Advisor is entitled to an incentive fee under both of the Investment Advisory Agreements equal to 13.4% of the net capital gains, before taxes, on portfolio investments and from the disposition of other assets or property managed by the Investment Advisor.
Management fees under the Investment Advisory Agreements on a consolidated basis amounted to $940,880 for fiscal year 2000. Incentive fees under the Investment Advisory Agreements on a consolidated basis amounted to $24,771 for fiscal 2000.
The Investment Advisor is owned by its three principal officers and directors, all of whom are also officers and/or directors of the Corporation. These individuals and their positions held with the Investment Advisor are:
Name Offices ---- -------
David R. Schroder Director, President and Secretary
Robert A. Comey Director, Executive Vice President, and Treasurer
Kevin F. Mullane Director and Senior Vice President
Under the Agreement dated May 13, 1996 (the "Agreement"), between the Corporation, Zions Bancorporation ("Zions") and Zions First National Bank (the "Bank"), as amended, Zions and the Bank are permitted to increase their collective ownership of the Corporation's common stock to up to 35% of the issued and outstanding shares. As of October 31, 2000, Zions and the Bank were the beneficial owners of approximately 644,678 shares of the Corporation's Common Stock, representing approximately 33.20% of the outstanding shares.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report:
1. A. The following financial statements are incorporated by reference to the 2000 Annual Report. Consolidated Balance Sheet at September 30, 2000 Consolidated Statement of Operations for the year ended September 30, 2000 Consolidated Statements of Changes in Net Assets for the years ended September 30, 2000, and September 30, 1999 Consolidated Statement of Cash Flows for the year ended September 30, 2000 Notes to Consolidated Financial Statements Consolidated Schedule of Investments as of September 30, 2000 Notes to the Consolidated Schedule of Investments
B. The Report of Independent Accountants with respect to the financial statements listed in A. above is incorporated by reference to the 2000 Annual Report.
2. No financial statement schedules of the Corporation are filed herewith because (i) such schedules are not required or (ii) the information required has been presented in the aforementioned financial statements and schedule of investments.
3. The following exhibits are filed herewith or incorporated by reference as set forth below:
3.1* Certificate of Incorporation of the Corporation.
3.2** By-Laws of the Corporation.
4. See Exhibits 3.1 and 3.2.
10.1** Investment Advisory Agreement between the Corporation and InvestAmerica Investment Advisors, Inc., dated March 1, 1998.
10.2*** Investment Advisory Agreement between MorAmerica Capital Corporation and InvestAmerica Investment Advisors, Inc., dated March 1, 1999.
10.3.a.**** Agreement between the Corporation and Zions Bancorporation, dated May 13, 1996.
10.3.b.** First Amendment to Agreement between the Corporation, Zions Bancorporation and Zions First National Bank, dated April 29, 1998
13 2000 Annual Report to Stockholders.
21 Subsidiary of the Corporation and jurisdiction of incorporation.
27 Financial Data Schedule
* Incorporated by reference to the Corporation's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997, as filed with the Commission on May 14, 1997.
** Incorporated by reference to the Corporation's Annual Report on Form 10-K for the year ended September 30, 1998, as filed with the Commission on December 29, 1998.
*** Incorporated by reference to the Corporation's Quarterly Report on Form 10-Q for the three months ended March 31, 1999, as filed with the Commission on May 12, 1999.
**** Incorporated by reference to the Corporation's Current Report on Form 8-K, dated May 13, 1996, filed with the Commission on May 13, 1996.
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the three months ended September 30, 2000.
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 December 12, 2000.
/s/ David Schroder ---------------------------------- David R. Schroder President and Secretary
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 and on the dates indicated.