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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OR 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
or
/X/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-24412
MACC PRIVATE EQUITIES INC.
(Exact Name of Registrant as specified in Charter)
Delaware 42-1421406
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.
101 Second Street, S.E., Ste. 800 52401
Cedar Rapids, Iowa (Zip Code)
Registrant's Telephone Number
Including Area Code: (319) 363-8249
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
------------------- ----------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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 [ ]
The agrregate market value of the registrant's common stock held by
non-affiliates of the registrant as of November 30, 1995, was approximately
$6,841,840 based upon the average bid and asked price for the registrant's
common stock on that date. As of November 30, 1995 there were 996,539 shares
of the registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the year ended
September 30, 1995 are incorporated by reference into Parts II and IV of this
Report. Portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on February 27, 1996, are incorporated by
reference into Part III of this Report.
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Page 1 of . Exhibit Index appears on pages 13.
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Part I
Item 1. Business.
General
MACC Private Equities Inc. (the "Company") 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 Company has two direct wholly-owned subsidiaries,
MorAmerica Capital Corporation ("MorAmerica Capital") and
MorAmerica Realty Services, Inc. ("MorAmerica Realty"), and one
indirect wholly-owned subsidiary, Motel Services, Inc. ("Motel
Services"), which is a wholly-owned subsidiary of MorAmerica
Realty. As of September 30, 1995, MorAmerica Capital and
MorAmerica Realty comprised approximately 82% and 0% of the
Company's assets respectively. MorAmerica Capital is an Iowa
corporation incorporated in 1959 and which has been licensed as
a small business investment corporation since that year. It
has also elected treatment as a BDC under the 1940 Act.
MorAmerica Realty, an Iowa corporation incorporated in 1972,
previously owned a motel which had been held for liquidation.
Following the sale of the motel during fiscal year 1994, the
activities of MorAmerica Realty and Motel Services have been
limited to an orderly wind-up of affairs.
The Company is the successor in interest to MorAmerica
Financial Corporation ("MorAmerica Financial"). On
February 19, 1993, MorAmerica Financial and its principal
subsidiary, Morris Plan Liquidation Company ("Morris Plan"),
filed for protection under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Iowa, Cedar Rapids Division (the
"Bankruptcy Court") (Case Nos. 93-10268LC and 93-10269LC,
jointly administered). On December 28, 1993, the Bankruptcy
Court confirmed the MorAmerica Financial and Morris Plan
Amended Debtors' Joint Plan of Reorganization (the "Plan").
Pursuant to the terms of the Plan, MorAmerica Financial was
merged with and into the Company on February 15, 1995. The
effective date of the Plan was set by the Company's Board of
Directors as February 15, 1995, the date upon which all issued
and outstanding shares of the Company's common stock were
issued to creditors of the predecessor companies. The
Company's common stock began trading on the NASDAQ SmallCap
Market thereafter on March 2, 1995.
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The Company's Operation as a BDC
As noted above, both the Company 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 Company 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 Company'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
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1940 Act, of the Company's shares. In order to maintain their
status as BDCs, the Company 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 Company 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 twelve months ended September 30, 1995, the
Corporation made total investments of $4,082,089 in eight new
portfolio companies and in follow-on investments in three
existing portfolio companies. The Corporation's investment-
level objectives on a consolidated basis call for new and
follow-on investments of approximately $7,000,000 during fiscal
year 1996.
During the seven and one-half month period ended
September 30, 1995, the Corporation received publicly traded
common stock of Physicians Sales and Service, Inc. (NYSE: PSSI)
in a pooling of interests with Taylor Medical, Inc. Also during
the period, the Corporation received publicly traded common stock
of the Arcadian Corporation (NYSE: ACA). The Arcadian Corporation
stock is restricted through January, 1996. The Corporation
recorded net gains of $4,048,500 from the sale of NorthWord Press,
Inc. in December, 1994, and $2,644,958 from the sale of Diversified
CPC International, Inc. in the first half of February, 1995.
Item 2. Properties.
The Company 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 Company.
Item 3. Legal Proceedings.
The Company's wholly-owned subsidiary, Realty Services, is
the defendant in a lawsuit filed in the Circuit Court of
Tippecanoe County, Indiana, Seabolt v. MorAmerica Realty
Services, Inc. d/b/a/ University Inn and University Inn. Until
its sale in May, 1994, Realty Services owned and operated
University Inn, a motel in West Lafayette, Indiana. This
property had been acquired through a deed in lieu of
foreclosure of a loan originally made by Morris Plan. The
lawsuit alleges that a third party was served alcoholic
beverages at a private reception at University Inn and was not
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refused service even though in an intoxicated state. The third
party injured the plaintiff while driving in an alleged
intoxicated condition. The plaintiff's petition does not
contain a dollar amount of damages being sought.
From inception until July 5, 1995, the lawsuit was defended
on behalf of Realty Services by its Insurer, Beverage Retailers
Insurance Company (the "Insurer"), under a Liquor Liability
Insurance Policy. The policy provides a limit of liability of
$1,000,000 for any one incident. On July 5, 1995, the Superior
Court of Washington County, Vermont, entered an Order of
Liquidation of the Insurer. Pursuant to this Order, the
Insurer's liquidator is discontinuing defense of claims against
policyholders. Any claim payable under the policy, including
defense costs of Realty Services, will be a claim against the
Insurer's liquidation estate.
Realty Services has retained the counsel previously
retained by the Insurer to continue representation of Realty
Services in the litigation. Realty Services has also filed
proofs of claim with the Insurer's liquidation estate for
expenses of ongoing litigation and to cover a judgment or
settlement, if any, in the litigation.
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 Company's Executive Officers as of
December 15, 1995, as well certain other information with
respect to such persons:
Positions Principal
Currently Held Occupations During
Name Age With the Company Past 5 Years
David R. Schroder 52 President President
Director Secretary and a
Secretary Director of the
Investment
Advisor;
MorAmerica
Capital;
InvestAmerica
Venture Group,
Inc.;
InvestAmerica
N.D. Management,
Inc.; and
InvestAmerica
N.D., L.L.C.
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Robert A. Comey 49 Executive Vice Director,
President Executive
Director Vice President,
Treasurer and
Assistant
Secretary of the
Investment
Advisor;
InvestAmerica
Venture Group,
Inc.;
InvestAmerica
N.D. Management,
Inc.; and
InvestAmerica
N.D., L.L.C.
Mr. Comey is also
a Director,
Executive Vice
President and
Treasurer of
MorAmerica
Capital.
Kevin F. Mullane 40 Vice President Vice President
and Director of
the Investment
Advisor; InvestAmerica
N.D. Management,
Inc. and InvestAmerica
N.D., L.L.C. Mr.
Mullane is also Vice
President of MorAmerica
Capital.
Steven J. Massey 36 Vice President Vice President
and Director of
the Investment
Advisor;
InvestAmerica
N.D. Management,
Inc.; and
InvestAmerica
N.D., L.L.C.
Mr. Massey is
also Vice
President of
MorAmerica
Capital.
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PART II
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
Company's Annual Report to Shareholders for the fiscal year
ended September 30, 1995 (the "1995 Annual Report").
Item 6. Selected Financial Data.
Information in response to this Item is incorporated by
reference to the "Selected Financial Data" section of the 1995
Annual Report.
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 1995 Annual Report.
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 thereon contained in the 1995 Annual Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
There are no items to report.
PART III
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 Company's definitive proxy statement in connection with its
1996 Annual Meeting of Stockholders, scheduled to be held on
February 27, 1996 (the "1996 Proxy Statement"). Information in
response to this Item also is included under the caption
"Executive Officers of the Registrant" of this Report.
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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 1996 Proxy Statement.
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 1996 Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
The Company and MorAmerica Capital each have executed an
Investment Advisory Agreement with the Investment Advisor.
With respect to the Company, the Investment Advisory Agreement
provides for a management fee payable to the Investment Advisor
equal to 2.5% of assets under management. With respect to
MorAmerica Capital, the management fee is equal to 2.5% of
capital under management, not to exceed 2.5% of assets under
management, plus $6,000 per month through January 31, 1995,
which then decreases to $5,000 per month through September 30,
1998. 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 $380,982 for the seven and
one-half months ended September 30, 1995, and $217,844 for the
four and one-half months ended February 15, 1995. Incentive
fees under the Investment Advisory Agreements on a consolidated
basis amounted to zero for the seven and one-half months ended
September 30, 1995, and $1,032,800 for the four and one-half
months ended February 15, 1995. Total fees under the
Investment Advisory Agreements on a consolidated basis for the
seven and one-half month and four and one-half month periods
amounted to $1,631,626.
The Investment Advisor is owned by its four principal
officers and directors, all of whom are also officers and/or
directors of the Company. These individuals and their
positions held with the Investment Advisor are:
Name Offices
---- -------
David R. Schroder Director, President and
Assistant Secretary
Robert A. Comey Director, Executive Vice
President, and Treasurer
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Kevin F. Mullane Director, Vice President
and Assistant Secretary
Steven J. Massey Director, Vice President
and Assistant Treasurer
PART IV
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 1995 Annual
Report.
Consolidated Balance Sheet at September 30, 1995
Consolidated Statements of Operations for the seven
and one-half months ended September 30, 1995, and
the four and one-half months ended February 15, 1995
Consolidated Statements of Changes in Net Assets
(Deficit) for the seven and one-half months ended
September 30, 1995, the four and one-half months
ended February 15, 1995, and the year ended
September 30, 1994
Consolidated Statements of Cash Flows for the seven
and one-half months ended September 30, 1995, and
the four and one-half months ended February 15, 1995
Notes to Consolidated Financial Statements
Consolidated Schedule of Investments as of
September 30, 1995
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 1995
Annual Report.
2. No financial statement schedules of the Company 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 Company.
3.2** By-Laws of the Company.
4 See Exhibits 3.1 and 3.2.
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10.1** Investment Advisory Agreement between the
Company and InvestAmerica Investment
Advisors, Inc., dated October 1, 1994.
10.2** Investment Advisory Agreement between
MorAmerica Capital Corporation and
InvestAmerica Investment Advisors, Inc.,
dated October 1, 1994.
13 1995 Annual Report to Stockholders.
21 Subsidiaries of the Company and jurisdiction
of incorporation.
27 Financial Data Schedule
*Incorporated by reference to the Company's Registration
Statement on Form N-2, filed with the Commission on May 24,
1994 (File No. 33-79276).
**Incorporated by reference to Amendment No. 3 to the
Company's Registration Statement on Form N-2, filed with the
Commission on January 24, 1995 (File No. 33-79276).
(b) Reports on Form 8-K.
1. On August 28, 1995, the Company filed a Report on Form
8-K with regard to its Management Letter, dated June
30, 1995, and mailed to shareholders on or about
August 30, 1995. The Management Letter summarizes the
Company's operations and financial position for the
three months ended June 30, 1995.
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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 18, 1995.
/s/ David R. Schroder
-------------------------------
David R. Schroder
President and Secretary
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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.
Signature Date
/s/ Paul M. Bass, Jr. December 18, 1995
----------------------------------
Paul M. Bass, Jr.
Chairman of the Board of Directors
/s/ David R. Schroder December 18, 1995
----------------------------------
David R. Schroder
Director, President and Secretary
/s/ Robert A. Comey December 18, 1995
----------------------------------
Robert A. Comey
Director, Executive Vice President
and Treasurer
/s/ Henry T. Madden December 18, 1995
----------------------------------
Henry T. Madden
Director
/s/ John D. Wolfe December 18, 1995
----------------------------------
John D. Wolfe
Director
/s/ Michael W. Dunn December 18, 1995
----------------------------------
Michael W. Dunn
Director
/s/ James L. Miller December 18, 1995
----------------------------------
James L. Miller
Director
5395A
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EXHIBIT INDEX
Exhibit
Number Description Sequential Page
3.1* Articles of Incorporation
of the Company
3.2** By-Laws of the Company
4 See Exhibits 3.1 and 3.2
10.1** Investment Advisory Agreement
between the Company and
InvestAmerica Investment Advisors,
Inc., dated October 1, 1994
10.2** Investment Advisory Agreement
Between MorAmerica Capital
Corporation and InvestAmerica
Investment Advisors, Inc.,
dated October 1, 1994
13 1995 Annual Report to Stockholders
21 Subsidiaries of the Company and
jurisdiction of incorporation
27 Financial Data Schedule
*Incorporated by reference to the Company's Registration
Statement on Form N-2, filed with the Commission on May 24,
1994 (File No. 33-79276).
**Incorporated by reference to Amendment No. 3 to the
Company's Registration Statement on Form N-2, filed with the
Commission on January 24, 1995 (File No. 33-79276).
5395A