<PAGE>   1
                                   EXHIBIT 13

                               2000 ANNUAL REPORT




<PAGE>   2
   FINANCIAL HIGHLIGHTS


FISCAL 2000 SAW TOTAL ASSETS AND NET ASSET VALUE PER SHARE INCREASE FOR THE
THIRD CONSECUTIVE YEAR.

$ IN THOUSANDS, EXCEPT PER SHARE DATA


   AT YEAR END SEPTEMBER 30                          2000          1999
   Total Assets                                   $46,607        38,535
   Total Stockholder Equity                        25,646        23,394
   Net Assets Per Share                             13.21         12.05(1)


                              [PERFORMANCE GRAPH]

                                  Total Assets

            2000           1999
          -------        -------
          $46,607        $38,535


                              [PERFORMANCE GRAPH]

                              Net Assets Per Share


            2000          1999
           ------       ---------
           $13.21       $12.05(1)






FOR THE YEAR

   Total Income                                    $2,794         2,255
   Net Investment Income (Expense)                     51           (7)
   Net Realized (Loss) Gain on Investments        (2,267)         5,142
   Net Change in Unrealized Appreciation            4,478         (608)
    (Depreciation) on Investments
   Net Increase in Net Assets                       2,251         3,866



QUARTERLY STOCK PRICES(1,2)

$ Per Share


                           2000                   1999
QUARTER             HIGH        LOW          HIGH        LOW
-------            ------      -----        ------      -----
First               11.51      10.21          6.89       5.85

Second              11.15       8.75          6.73       6.33

Third               10.81       9.13          7.82       6.28

Fourth               9.56       8.94         10.37       7.71


ANNUAL STOCK PRICES(1,2)

                              [PERFORMANCE GRAPH]


           2000                      1999
      HIGH        LOW          HIGH        LOW
     ------      -----        ------      -----
     $11.51      $8.75        $10.37      $5.85



(1) Restated to reflect a 20% stock split effected in the form of a stock
    dividend on March 31, 2000.
(2) Closing bid price per share.

                                                   MACC PRIVATE EQUITIES INC.  1





<PAGE>   3

   TO OUR SHAREHOLDERS

AN ALL-TIME RECORD HIGH INVESTMENT LEVEL was achieved in fiscal 2000. MACC
invested $13,807,165, a 142% increase over fiscal 1999 investments of
$5,697,574. MACC invested in thirteen new portfolio companies in fiscal 2000
bringing its total portfolio to forty-two active companies, which is a record
high portfolio size.

MACC SHAREHOLDERS WERE AGAIN REWARDED during a period which included
surprisingly negative public market results. Management rewarded shareholders
with a third consecutive annual increase in net asset value per share. The
increase over fiscal 1999 was 9.6% after giving effect to a 20% stock split
effected in the form of a stock dividend paid to shareholders in March 2000.

MANAGEMENT CONTINUED TO STRENGTHEN MACC'S ABILITY TO COMPETE in an
ever-expanding SBIC and venture fund industry. By increasing MorAmerica's
capital stock and paid-in-capital from $18,000,000 to $19,000,000 on September
30, 2000, MorAmerica increased its maximum regulatory investment size to
$3,800,000. In addition at year-end, MACC requested an additional $10,000,000
SBA leverage commitment to support future liquidity needs.

LIQUIDITY WAS SUPPORTED when MACC reinvested $1,378,135 in cash proceeds from
the disposition of portfolio investments in fiscal 2000. MACC has cash and
leverage available to meet its targeted fiscal 2001 investment goal.

AT YEAR-END, THE INVESTAMERICA MANAGEMENT TEAM WAS STRENGTHENED with the
addition of a talented associate with SBIC management experience. This move will
support MACC's ability to grow in size and to expand geographically.

THE FUTURE CONTINUES TO APPEAR PROMISING. Capped with a record investment level
in fiscal 2000, MACC has now invested a total of $41,962,139 in the last five
fiscal years. These investments should produce significant future gains and cash
flow that will in turn be cycled into future investments to support continued
portfolio growth.

Your management and board are indebted for the support of our shareholders and
portfolio companies.


/s/ PAUL M. BASS, JR.                           /s/ DAVID SCHRODER
Paul M. Bass, Jr.,                              David Schroder,
Chairman                                        President


2  MACC PRIVATE EQUITIES INC.


<PAGE>   4



   CORPORATE PROFILE


[   PHOTO OF
 David R. Schroder
 Robert A. Comey
 Kevin F. Mullane]

MACC'S MISSION IS TO BUILD SUBSTANTIAL SHAREHOLDER VALUE BY ACHIEVING...
CONSISTENT LATER STAGE VENTURE CAPITAL RETURNS with REDUCED RISK BASED UPON BOTH
THE GEOGRAPHIC AND INDUSTRY DIVERSITY OF THE PORTFOLIO AND OUR EXPERIENCED
MANAGEMENT TEAM and LONG TERM CORPORATE GROWTH CAPITALIZED BY RETAINED EARNINGS
AND SBIC LEVERAGE IN ORDER TO CONTINUE TO MAINTAIN A STRONG POSITION IN MACC'S
TRADITIONAL NATIONAL MID-MARKET NICHE.


MACC PRIVATE EQUITIES INC.

MACC Private Equities Inc. (Nasdaq NMS: MACC) is a Delaware corporation and the
parent of MorAmerica Capital Corporation. Additionally, MACC is a business
development company (BDC). MACC's wholly owned subsidiary, MorAmerica Capital
Corporation, conducts all of its venture investing. MACC's primary goal is to
create long term appreciation of shareholder value based upon the successful
management of venture capital activities.

MORAMERICA CAPITAL CORPORATION

Founded in 1959, MorAmerica Capital is one of the nation's oldest and most
well-known small business investment companies (SBIC), federally licensed under
the Small Business Investment Act of 1958. MorAmerica Capital generally invests
from $1,000,000 up to $3,800,000 in growth and later stage manufacturing,
service, technology and communications businesses with annual sales typically
from $5,000,000 to $100,000,000. These growth and buyout investments are made in
the form of subordinated debt or preferred stock with warrants or common stock.
Since 1980, MorAmerica Capital has provided equity financing of over $75,000,000
to more than one hundred and eight companies and plays a significant role in the
syndication of equity fundings for later stage middle market growth and buyout
financings.


INVESTAMERICA INVESTMENT ADVISORS, INC.

MACC and MorAmerica Capital are managed by InvestAmerica, an investment advisor
affiliated with the InvestAmerica group of venture capital management companies,
the first of which was organized in 1985. The InvestAmerica group manages more
than $60,000,000 in assets and the three InvestAmerica principals have over
sixty-five years of venture capital fund management experience.




                                           [MORAMERICA CAPITAL CORPORATION LOGO]



                                                   MACC PRIVATE EQUITIES INC.  3



<PAGE>   5

   THE PROMISE OF INCREASED SHAREHOLDER VALUE WAS ACHIEVED

IN FISCAL 2000, MACC PRIVATE EQUITIES INC. ACHIEVED CONTINUED GROWTH IN TOTAL
ASSETS AND NET ASSET VALUE PER SHARE AND RECORD CAPITAL INVESTED.

                                  TOTAL ASSETS

                              [PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
    1995           1996           1997           1998          1999           2000
 ----------    -----------    -----------    -----------    -----------   -----------
<S>            <C>            <C>            <C>            <C>           <C>
$28,006,385    $27,906,798    $25,995,422    $31,294,524    $38,535,445   $46,607,466
</TABLE>


Total Assets grew by $8,072,021 for an increase of 21%.



                          NET ASSET VALUE PER SHARE(1)

                              [PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
  9/30/95        9/30/96       9/30/97         9/30/98        9/30/99       9/30/00
 ----------    -----------    -----------    -----------    -----------   -----------
<S>            <C>            <C>            <C>            <C>           <C>
    $8.85        $8.79           $7.92         $10.06         $12.05        $13.21
</TABLE>

MACC's 2000 year end net asset growth continued its third consecutive annual
rise with a fiscal 2000 increase of 9.6% in Net Asset Value Per Share.



                          MARKET BID PRICE PER SHARE(1)

                              [PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
  9/30/95        9/30/96       9/30/97         9/30/98        9/30/99       9/30/00
 ----------    -----------    -----------    -----------    -----------   -----------
<S>            <C>            <C>            <C>            <C>           <C>
   $3.58         $4.62          $5.14           $6.89          $10.21        $9.19
</TABLE>


MACC's Market Bid Price Per Share has increased by an average of 20.7% per year
over the last five years.


          STOCK PRICE AS A PERCENTAGE OF NET ASSET VALUE PER SHARE(1)

                              [PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
  9/30/95        9/30/96       9/30/97         9/30/98        9/30/99       9/30/00
 ----------    -----------    -----------    -----------    -----------   -----------
<S>            <C>            <C>            <C>            <C>           <C>
   40.5%          52.6%         64.9%          68.5%           84.7%         69.6%
</TABLE>

At fiscal year end 2000, Stock Price as a Percentage of Net Asset Value Per
Share decreased by 15.1%.


                            ANNUAL CAPITAL INVESTED

                              [PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
    1995           1996           1997           1998          1999           2000
 ----------    -----------    -----------    -----------    -----------   -----------
<S>            <C>            <C>            <C>            <C>           <C>
$4,082,089     $5,135,249     $9,800,370     $7,521,781     $5,697,574    $13,807,165
</TABLE>

Fiscal year 2000 capital invested of $13,807,165 was a 142% increase over fiscal
1999.


                        INVESTMENT INCOME (EXPENSE), NET

                              [PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
    1995           1996           1997           1998          1999           2000
 ----------    -----------    -----------    -----------    -----------   -----------
<S>            <C>            <C>            <C>            <C>           <C>
$(168,031)     $(89,576)       $(253,367)     $621,928       $(7,459)       $50,810
</TABLE>

Net Investment Income improved from an expense of ($7,459) in fiscal 1999 to an
income of $50,810 in fiscal 2000.


(1) Restated to reflect stock splits effected in the form of stock dividends
    paid in March 2000, 1999, 1998 and 1997.


4  MACC PRIVATE EQUITIES INC.
<PAGE>   6

THE FOLLOWING GRAPH COMPARES THE ANNUAL PERCENTAGE change in cumulative
stockholder return on MACC's Common Stock for the five year period beginning
September 30, 1995, with the cumulative total return over the same period of (i)
the Nasdaq Stock Market Total Return Index (U.S. Companies), and (ii) a peer
group selected in good faith by MACC composed of the following eight business
development companies or other funds known by MACC to have similar investment
objectives to MACC: Allied Capital Corporation (ALLC), American Capital
Strategies (ACAS), Brantley Capital Corporation (BBDC), Capital Southwest
Corporation (CSWC), Harris & Harris Group, Inc. (HHGP), Rand Capital Corporation
(RAND), Waterside Capital Corporation (WSCC) and Winfield Capital Corporation
(WCAP) (the "Peer Group").

In the graph, the comparison assumes $100 was invested on September 30, 1995, in
shares of MACC's Common Stock and in both of the indices. The comparison is
based upon the closing market bid price for shares of MACC's Common Stock, and
assumes the reinvestment of all dividends, if any. The returns of each of the
companies in the Peer Group are weighted according to the respective company's
stock market capitalization at the beginning of each period for which a return
is indicated.


                 COMPARISON OF CUMULATIVE TOTAL RETURN OF MACC,
                           PEER GROUP AND BROAD MARKET


                              [PERFORMANCE GRAPH]
$ dollars

<TABLE>
<CAPTION>
  9/29/95        9/30/96       9/30/97         9/30/98        9/30/99       9/29/00
 ----------    -----------    -----------    -----------    -----------   -----------
<S>            <C>            <C>            <C>            <C>           <C>
</TABLE>



                                                   MACC PRIVATE EQUITIES INC.  5
<PAGE>   7

   INVESTING IN AMERICA'S FUTURE

FISCAL 2000 WAS A BANNER INVESTMENT YEAR IN WHICH MACC INVESTED $13,807,165 IN
THIRTEEN DIVERSE NEW PORTFOLIO COMPANIES.

A-PLUS GALVANIZING, INC. - MorAmerica backed a proven entrepreneur in a start-up
zinc galvanizing facility which includes the world's largest zinc galvanizing
kettle. MorAmerica co-led this investment which includes the elements essential
for early stage investment success including an experienced lead entrepreneur
with a significant personal investment at risk, a service and market that are
natural extensions of the entrepreneur's current operations, long standing
relationships with potential customers in growth industries and unique
capabilities unavailable to competitors.

ALANIZ HOLDING, LLC - MorAmerica and two SBIC co-investors supported an equity
sponsor led management buyout of a highly specialized direct mail company.
Alaniz is a true specialist focusing on producing millions of intricate,
effective and timely mailings to support fundraising. Alaniz enjoys an
outstanding reputation among its world-class charitable and not-for-profit
customers. MorAmerica's investment will support continued growth and will help
the company to take advantage of its strong market position.

ARCHITECTURAL ART MANUFACTURING, INC. - This growth investment co-led by
MorAmerica with four SBIC partners is an excellent example of the diverse
elements that investors and management assemble to create value. Architectural
Art is an eighteen-year-old manufacturer of engineered products for the
commercial and residential construction industry. Architectural's acquisition of
a seventy-five year old boiler manufacturer and the subsequent recapitalization
with investment capital, new management and renewed marketing efforts were
structured to produce a combined business with revenues balanced between
commercial and residential construction, higher sales per customer and total
revenue and margin increases.

DELUXE ICE CREAM COMPANY - United States demographic and competitive business
conditions have converged to support the sale of many family businesses to
create founder's liquidity, revived growth and new direction for the companies
and their employees. Deluxe was established in 1913 and evolved to be a
significant Northwestern ice cream and ice cream novelty manufacturer.
MorAmerica was asked by a local investment-banking group to support the
transaction and co-led the financing with a well-established West Coast SBIC.
The cornerstone recapitalization elements included the addition of new
management, ownership sharing with core management and new growth ideas.

DIGITAL ARCHAEOLOGY CORPORATION - To strategically supplement MorAmerica's later
stage portfolio with carefully chosen high technology, potentially high return
ventures, MorAmerica joined seven venture funds led by one of the nation's
largest venture groups to complete this early stage financing. Digital
Archeology created a revolutionary new database analysis system which is an
ideal tool for applications that require data exploration and analytics such as
the rapidly growing CRM market. The technology behind this software is the first
commercial implementation of extended set theory called X-Set. MorAmerica's
insight was affirmed when in October 2000, less than nine months from
investment, Digital was purchased by an exciting publicly traded industry leader
yielding MorAmerica a gain in the form of cash and stock in Delano Technology
Corporation.

EMERGEN, INC. - With an experienced early stage venture fund, MorAmerica co-led
a bridge loan, to a seed stage, genomics research company. EmerGen is a genomics
research and discovery company engaged in genetic research to identify human
disease genes and their relationships to medical disorders affecting women and
children. EmerGen will focus on discovery and then licensing and partnering with
other medical firms to bring products to market. EmerGen's competitive edge is
based upon the leadership and scientific expertise of Dr. Kenneth Ward and the
extraordinary advantage that should accrue from EmerGen's exclusive rights to
commercialize certain University of Utah databases and samples. Three months
subsequent to MorAmerica's investment, EmerGen received $15,000,000 in venture
funding including this bridge financing.



6  MACC PRIVATE EQUITIES INC.
<PAGE>   8

HOOK-UP, INC. - MorAmerica and three SBIC co-investors funded $5,000,000 to
expand and complete Hook-Up's B2B Internet Services division and to further grow
its core business. Hook-Up, Inc. is the second largest new truck driveaway
services company delivering new trucks from manufacturers to dealers throughout
the United States and Canada, also is one of the largest used and specialty
driveaway companies in North America and has grown at an average annual rate of
66% since 1992. This growth financing supported the July 2000 start-up of
Hook-Up's on-line new and used Internet truck auction site, www.hookup.com.
Hook-Up's dealer relationships should allow it to be a dominant provider in this
very large internet market.

LEE MATHEWS EQUIPMENT, INC. - MorAmerica co-led this later stage growth
financing with three Midwestern SBICs. The investment was structured to provide
a deserving company with timely capital to fund growth with a complimentary
acquisition and at the same time to earn investors an appropriate return using a
current yielding instrument. Lee Mathews is a first tier, value added
distributor of industrial and construction pumps, mixers and controls. Led by an
experienced management team, the company's primary points of competitive
differentiation are its full line, value added proficiencies including pump
systems design, custom fabrication, in field service and training, rebuilding,
preventative maintenance and 24 hour rental service.

MORGAN OHARE, INC. - MorAmerica was the lead investor in the entrepreneurially
led buyout of a small, eighteen year old metal fastener plating and
heat-treating company. Its relatively small size was mitigated by positive later
stage business characteristics such as consistent historical profitability and
cash flow, a diversified customer base and a revenue stream characterized by
many repetitive transactions. Important to the Morgan recapitalization was the
addition of enhanced plating, heat-treating and financial management experience
brought by the two new owners.

PENN WHEELING ACQUISITION COMPANY, LLC - As an established but relatively small
metal closure manufacturer, Penn was being sold by its large parent. An industry
buyer may have merged the operations and closed this West Virginia plant.
MorAmerica and two other SBICs supported a lead SBIC in this buyout preserving
this independent business and opportunistically positioning Penn as an
entrepreneurially driven company with the addition of a new, industry
experienced owner. The investor team further recapitalized Penn with management
ability and a strategic focus to revitalize its growth.

PRATT-READ CORPORATION - Pratt-Read is an excellent example of MorAmerica's
focus on value added, later stage growth investing. MorAmerica was asked by one
of its long term co-investors to share the funding of a growth financing to
allow Pratt-Read, an established screwdriver blade specialty manufacturer, to
combine with a compatible, profitable screwdriver handle manufacturer. The
synergies include reduced expenses, manufacturing efficiencies, increased
customer satisfaction and higher profitability. The value added allowed two
small, old-line basic manufacturers to remain capable competitors in a market
increasingly dominated by large customers and efficient manufacturers.

STASIS CORPORATION - In another example of value added investing, an experienced
East Coast equity sponsor, MorAmerica and three venture funds led the
recapitalization of a thirty-year-old fabricated steel counter weight
manufacturer. Within six months, the company doubled its size by merging with a
like sized competitor. The value added included risk capital, new management,
the insight to opportunistically increase market share and a consolidation to
generate cost savings demand by customers intent upon cost reduction. In short,
management and investors came together to insure that two bricks and mortar
companies could remain viable in an increasingly competitive environment.

WARREN FAMILY FUNERAL HOMES, INC. - The Warren investment is an example of a
pure growth financing of a promising new service concept based upon experienced
management and confirming market research. The company is an expanding seven
home chain of value-priced funeral homes. The five SBIC investors committed
$5,000,000 to triple the number of homes in three years. The entrepreneur in
this case has twenty-five years of direct experience and his family has been in
the industry since 1893. The new value-priced service model has been Beta tested
with seven homes since 1995 and demographic market conditions are very
favorable. Rapid growth carries with it the possibility of high returns.



                                                   MACC PRIVATE EQUITIES INC.  7


<PAGE>   9

   Q & A

Q: Could you explain the interactions between MACC Private Equities Inc.,
   MorAmerica Capital Corporation and InvestAmerica Investment Advisors, Inc.?

A: MACC Private Equities Inc. owns MorAmerica Capital Corporation. InvestAmerica
   Investment Advisors, Inc. manages MACC Private Equities Inc. and its
   subsidiary MorAmerica Capital.


Q: How would you describe MACC's management team and Board of Directors?

A: InvestAmerica principals have over sixty-five years of SBIC management
   experience, which brings a level of deal flow, co-investor relationships, and
   portfolio management capabilities usually only found in larger funds.
   InvestAmerica was founded in 1985 and commenced managing MorAmerica Capital
   and MACC in 1985 and 1994, respectively. MACC has been fortunate to attract
   Board persons experienced in investment banking, manufacturing, retailing,
   early stage venture capital and commercial banking. This breadth and depth of
   operating and strategic experience helps to keep MACC competitive in such key
   areas as access to capital, deal flow and exit execution. Board members and
   management own approximately 9.2% of the company. Of the board members, the
   two InvestAmerica principals are the two largest shareholders. It is
   important to note that all management and Board shares were purchased on the
   open market.


Q: What is your industry and where does MACC fit in it?

A: MACC is a venture capital investor. The venture capital industry is broadly
   described nationally as including approximately 1000 private venture capital
   partnerships and about 350 Small Business Investment Companies (SBICs). MACC
   invests through its wholly owned subsidiary, MorAmerica Capital which is an
   SBIC. Chronologically, MorAmerica Capital is the fifth oldest active SBIC.


Q: What differentiates you from your competition?

A: MorAmerica Capital has been investing since 1959. We have a 42-year history
   as a licensed SBIC and are well known and respected within the industry.
   Longevity is a real strength. MorAmerica Capital is a corporation not a
   limited partnership and has the staying power of being a corporation.
   Finally, MACC is one of a select group of publicly traded venture funds.


Q: How do you select your portfolio investments?

A: MorAmerica Capital is diversified by industry and by geography. We focus on
   manufacturing, service, technology and communications companies. MorAmerica
   Capital generally invests in companies with $5,000,000 to $100,000,000 in
   sales. We look for companies with strong management and proven track records.
   However, we will look at turnaround situations if strong management is in
   place. We invest nationally through our extensive network of co-investors,
   staying in deals for about five years. Our five-year plan calls for investing
   approximately 25% of our total available assets every year.


Q: What is MACC's investment appeal?

A: MACC is a publicly traded venture capital fund. It represents one of the few
   opportunities available to investors who, while they would like to add
   venture capital opportunities to their investment portfolios, are unwilling
   or unable to make the substantial investment generally required by private
   venture capital funds. Also, because MorAmerica Capital is an SBIC, banks and
   other depository institutions may receive certain regulatory benefits from
   investing in MACC shares. Keep in mind, that while venture capital investing
   may offer the potential for higher returns, it may also involve higher risks
   based upon both the nature of MACC's investments and the use of leverage. As
   with all of your investment decisions, consult with your investment
   professional or other financial advisor to determine whether investing in
   MACC is appropriate for your investment needs.


8  MACC PRIVATE EQUITIES INC.

<PAGE>   10
                                FINANCIAL REPORT



CONTENTS

10   SELECTED FINANCIAL DATA

11   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
     OPERATIONS

18   AUDITORS' REPORT

35   SHAREHOLDER INFORMATION

36   OFFICERS & DIRECTORS




                                                   MACC PRIVATE EQUITIES INC.  9



<PAGE>   11

     SELECTED FINANCIAL DATA
     FOR THE FISCAL YEARS ENDING SEPTEMBER 30

                                                   MACC Private Equities Inc.(1)


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                         2000             1999           1998            1997            1996
-------------------------------------------------------------------------------------------------------------
<S>                              <C>                   <C>            <C>           <C>              <C>
Investment income (expense),     $     50,810          (7,459)        621,928       (253,367)        (89,576)
net of tax

Net realized (loss) gain on        (2,266,652)      3,293,177         981,091        952,102         514,172
investments, net of tax

Net change in unrealized
appreciation/depreciation
on investments                      4,478,415        (607,771)      2,554,471     (2,200,033)       (641,851)
                                 ------------       ---------       ---------     ----------        --------

Net increase (decrease)
in net assets from operations    $  2,262,573       2,677,947       4,157,490     (1,501,298)       (217,255)
                                 ============       =========       =========     ==========        ========


Net increase (decrease) in net
assets from operations
per common share                         1.17(5)         1.38(4)         2.14(3)       (0.78)(2)       (0.11(1)
                                 ============      ==========      ==========     ==========      ==========

Total assets                     $ 46,607,466      38,535,445      31,294,524     25,995,422      27,906,798
                                 ============      ==========      ==========     ==========      ==========
Total long term debt             $ 20,320,922      13,763,123      11,253,421     10,244,478      10,236,250
                                 ============      ==========      ==========     ==========      ==========
</TABLE>




(1) Per share data have been restated to reflect a 10% stock split effected in
    the form of a stock dividend on March 31, 1997, a 20% stock split effected
    in the form of a stock dividend on March 31, 1998, a 30% stock split
    effected in the form of a stock dividend on March 31, 1999 and a 20% stock
    split effected in the form of a stock dividend on March 31, 2000.

(2) Per share data have been restated to reflect a 20% stock split effected in
    the form of a stock dividend on March 31, 1998, a 30% stock split effected
    in the form of a stock dividend on March 31, 1999 and a 20% stock split
    effected in the form of a stock dividend on March 31, 2000.

(3) Per share data have been restated to reflect a 30% stock split effected in
    the form of a stock dividend on March 31, 1999 and a 20% stock split
    effected in the form of a stock dividend on March 31, 2000.

(4) Per share data have been restated to reflect a 20% stock split effected in
    the form of a stock dividend on March 31, 2000.

(5) Computed using 1,941,879 shares outstanding at September 30, 2000.



10  MACC PRIVATE EQUITIES INC.
<PAGE>   12

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

This Annual Report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "1995
Act"). Such statements are made in good faith by MACC pursuant to the
safe-harbor provisions of the 1995 Act, and are identified as including terms
such as "may," "will," "should," "expects," "anticipates," "estimates," "plans,"
or similar language. In connection with these safe-harbor provisions, MACC has
identified herein important factors that could cause actual results to differ
materially from those contained in any forward-looking statement made by or on
behalf of MACC, including, without limitation, the high risk nature of MACC's
portfolio investments, any failure to achieve annual investment level
objectives, changes in prevailing market interest rates, and contractions in the
markets for corporate acquisitions and initial public offerings. MACC further
cautions that such factors are not exhaustive or exclusive. MACC does not
undertake to update any forward-looking statement which may be made from time to
time by or on behalf of MACC.



RESULTS OF OPERATIONS
Fiscal 2000 Compared to Fiscal 1999

MACC's investment income includes income from interest, dividends and fees. Net
investment income represents total investment income minus operating and
interest expenses, net of applicable income taxes. The main objective of
portfolio company investments is to achieve capital appreciation and realized
gains in the portfolio. These are not included in net investment income.
However, another one of MACC's on-going goals is to achieve net investment
income and increased earnings stability. In this regard, a significant
proportion of new portfolio investments are structured so as to provide a
current yield through interest or dividends. MACC also earns interest on short
term investments of cash.

    For fiscal year ended September 30, 2000, total investment income was
$2,794,487, total operating expenses were $2,733,677, tax expense equaled
$10,000 and net investment income was $50,810.

    During the fiscal year ended September 30, 2000, investment income increased
to $2,794,487, a 24% increase over fiscal 1999 investment income of $2,255,120.
The increase during the current year was the result of increases in interest
income, dividend income and processing fees of 11%, 112%, and 73% respectively.
MACC attributes the increase in interest income primarily to the significant
number of new investments made during the current fiscal year ended September
30, 2000 that were structured as subordinated debentures. Of the $13,807,165
invested during fiscal 2000, $8,018,961 represents investments in the form of
subordinated debentures. The increase in dividend income represents dividends
received on five existing portfolio companies, four of which are distributions
from limited liability companies, as compared to dividends received on seven
portfolio companies during fiscal 1999. Although MACC received dividends on
fewer portfolio companies, the distributions from the limited liability
companies were greater in fiscal 2000 than in fiscal 1999. The increase in
processing fees is due to processing fees received on the significantly higher
volume of new investments made during the current fiscal year ended September
30, 2000. Although MACC's total investments made during fiscal 2000 represent an
increase of approximately 142% over total investments made during fiscal 1999,
MACC does not receive processing fees on every new and follow-on investment. The
timing and amount of some sources of investment income, such as interest income
from prepayment penalties, certain dividend income, income from the collection
of processing fees on new investments and other income are difficult to predict.
There can be no assurance that MACC will be able to achieve similar levels of
investment income in fiscal 2001 or in future years.



                                                         [CONTINUED ON PAGE 12.]

                                                  MACC PRIVATE EQUITIES INC.  11
<PAGE>   13
M D & A

[CONTINUED FROM PAGE 11.]

    Operating expenses of MACC increased by 13% in fiscal year 2000 to
$2,733,677 from $2,412,579 in fiscal year 1999. The relative increase in
operating expenses is primarily due to increases in financial expense and
management fees. These increases were generated from additional borrowings from
the Small Business Administration and increased assets under management.

    MACC's net investment income in fiscal year 2000 increased to $50,810 from a
net investment expense of $7,459 in 1999. The increase in net investment income
is the net result of the 24% increase in investment income which was partially
offset by the 13% increase in operating expenses and a $160,000 change in income
taxes. This is a positive step toward achieving MACC's goal of positive net
investment income and earnings stability.

    MACC had a net realized loss on investments in fiscal year 2000 of
$2,266,652 down from a net realized gain of $5,142,177 achieved in fiscal year
1999. The loss is mainly due to the write off of $3,217,598 from two portfolio
companies in fiscal 2000. MACC had unrealized appreciation of $4,169,689 at
September 30, 2000, a change of $4,478,415 from the $308,726 of unrealized
depreciation at September 30, 1999. This resulted in a net gain on investments
before income tax expense for fiscal year 2000 of $2,211,763 as compared to
$4,534,406 for fiscal year 1999. The change in unrealized
appreciation/depreciation is the net effect of increases in fair value of eleven
portfolio companies, decreases in fair value of three portfolio companies and
the write off of the two portfolio companies referenced above.

    Net change in unrealized appreciation/depreciation on investments represents
the change for the period in the unrealized appreciation net of unrealized
depreciation on MACC's total portfolio investment. When MACC increases the fair
value of a portfolio investment above its cost, unrealized appreciation for the
portfolio as a whole increases, and when MACC decreases the fair value of a
portfolio investment below its cost, the unrealized depreciation for the
portfolio as a whole increases. When MACC sells an appreciated portfolio
investment for a gain, unrealized appreciation for the portfolio as a whole
decreases as the gain is realized. Similarly, when MACC sells or writes off a
depreciated portfolio investment for a loss, unrealized depreciation for the
portfolio as a whole decreases as the loss is realized.

    Most of MACC's portfolio investments are structured to mature in five to
seven years. Management does not attempt to maintain a comparable level of
realized gains from year to year, but instead attempts to maximize total
investment portfolio appreciation by realizing gains in the disposition of
securities and by investing in new portfolio investments. During fiscal years
1995 through 2000, MorAmerica Capital recorded significantly higher levels of
new and follow-on portfolio investments as compared to fiscal years 1988-1994.
MACC anticipates that MorAmerica Capital will continue these higher portfolio
investment levels over the foreseeable future. As an ordinary element of its
investment cycle, MACC typically experiences unrealized depreciation and/or
realized losses on portfolio investments before it experiences unrealized
appreciation and/or realized gains, if any.

    The majority of MACC's consolidated investment portfolio is in the earlier
stages of the five to seven year investment cycle. MACC anticipates that its
growth in Net Asset Value Per Share will continue to increase over the next
three to ten years as MACC's portfolio investments reach maturity and investment
gains, if any, are taken. However, it is difficult to predict the timing or the
amount of gains in the investment portfolio.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

To date, MACC has relied upon several sources to fund its investment activities,
including MACC's cash equivalents and cash, and the Small Business Investment
Company (SBIC) leverage program operated by the Small Business Administration
(the SBA).

    MACC, through its wholly-owned subsidiary, MorAmerica Capital, from time to
time may seek to procure additional capital through the SBIC leverage program to
provide a portion of its investment capital requirements. At present, capital
with a commitment



12  MACC PRIVATE EQUITIES INC.

<PAGE>   14



M D & A

period of up to five years is available through the SBIC leverage program and
MACC anticipates that capital will be available in future periods.

    As of September 30, 2000, MACC's certificates of deposit and cash totaled
$4,167,187. MACC borrowed $9,000,000 in new SBA Guaranteed Debentures during
fiscal 2000. Of this $9,000,000, $2,500,000 represents the refinancing of an
SBA-guaranteed debenture that matured during fiscal 2000, and $6,550,000
represents addition capital obtained to finance MorAmerica Capital's operations.
MACC has a commitment for an additional $6,790,000 in SBA guaranteed debentures,
which expires on September 30, 2002. During December 2000, MACC obtained an
additional commitment for $10,000,000 in SBA guaranteed debentures, which
expires on September 30, 2005. MACC believes that its existing certificates of
deposit and cash, together with the $6,790,000 SBA commitment, the additional
$10,000,000 SBA commitment and other anticipated cash flows, will provide
adequate funds for MACC's fiscal year 2001 anticipated cash requirements,
including portfolio investment activities, principal and interest payments on
outstanding debentures payable and administrative expenses. MACC's investment
objective is to invest $13,000,000 in new and follow-on investments during
fiscal year 2001.

    Liquidity for the next several years will be impacted by principal payments
on MACC's debentures payable. Debentures payable are composed of $20,340,000 in
principal amount of SBA-guaranteed debentures issued by MACC's subsidiary,
MorAmerica Capital, which mature as follows: $5,690,000 in 2001, $2,150,000 in
2003, $1,000,000 in 2007, $2,500,000 in 2009, and $9,000,000 in 2010. It is
anticipated MorAmerica Capital would be able to roll over these debentures with
new ten year debentures when they mature. MorAmerica Capital has obtained a
commitment for leverage from SBA which may be used to refinance the debentures
through 2001 for another 10 year term. As indicated above, the total amount of
MorAmerica Capital's commitment from the SBA is $16,790,000.

PORTFOLIO ACTIVITY

MACC's original investment objective for fiscal year 2000 called for total new
and follow-on investments of $11,000,000. In June, MACC reached its investment
goal and as a result revised its investment objective to $17,000,000. During
fiscal 2000, MACC invested $13,807,165 in 26 portfolio companies. Of this
amount, $9,937,083 was invested in 13 new portfolio companies and $3,870,082 was
invested in follow-on investments in 13 existing portfolio companies. While
MACC's investments for fiscal year 2000 fell short of MACC's $17,000,000 revised
investment objective, MACC exceeded its $11,000,000 original investment
objective. The amount invested by MACC during fiscal 2000 represents an increase
of 142% over total investments made during fiscal 1999, and an increase of 114%
over the average total investments made during fiscal years 1995 through 1999.
Management views investment objectives for any given year as secondary in
importance to MACC's overriding concern of investing only in those portfolio
companies which satisfy MACC's investment criteria.

    MACC has strong co-investment ties with investment partners, anticipates a
moderately active venture financing market and has a continuing commitment to
increase its average new investment size. In fiscal 2001, MACC anticipates
investing $13,000,000 in new and follow-on investments.

VALUATION CHANGES

The following table presents investments held at September 30, 2000 which the
valuation changed from September 30, 1999:


                            - See table on page 14 -


                                                         [CONTINUED ON PAGE 14.]

                                                  MACC PRIVATE EQUITIES INC.  13

<PAGE>   15

M D & A

[CONTINUED FROM PAGE 13.]


<TABLE>
<CAPTION>
                                   FAIR VALUE
--------------------------------------------------------------------------------
PORTFOLIO COMPANY                     SEPTEMBER 30, 2000     SEPTEMBER 30, 1999
<S>                                   <C>                    <C>
Central Fiber Corporation                  $     866,665         $     733,333
Centrum Industries, Inc.                         878,432             1,254,903
Concentrix Corporation                         3,007,000             2,255,250
Digital Archaeology Corporation                2,407,189               962,500*
Encompass Services Corporation                   265,522               316,690
Heritage Consumer Products                             1             1,263,736**
Linton Truss Corporation                         487,746               437,746**
Monitronics International, Inc.                  839,165               838,353
Organized Living, Inc.                         1,769,327             1,274,202**
PPC Acquisition Company                          928,365               350,040
Portrait Displays, Inc.                          600,000               500,000
RSI Holdings, Inc.                             1,863,191             1,474,527
Talaria Holdings, LLC                          2,000,000               912,500
Tri-Circle Corporation                           616,299               513,583**
--------------------------------------------------------------------------------
</TABLE>

*   Represents an amount invested in fiscal 2000.

**  September 30, 1999 valuations have been adjusted for additional amounts
    invested or partial disposition of the portfolio investment for purpose of
    comparison.

*** Relates to an escrow held in other investments.
--------------------------------------------------------------------------------


DETERMINATION OF NET ASSET VALUE

The net asset value per share of MACC's outstanding common stock is determined
quarterly, as soon as practicable after and as of the end of each calendar
quarter, by dividing the value of total assets minus total liabilities by the
total number of shares outstanding at the date as of which the determination is
made.

    In calculating the value of total assets, securities that are traded in the
over-the-counter market or on a stock exchange are valued in accordance with the
current valuation policies of the Small Business Administration ("SBA"). Under
SBA regulations, publicly traded equity securities are valued by taking the
average of the close (or bid price in the case of over-the-counter equity
securities) for the valuation date and the preceding two days. This policy
differs from the Securities and Exchange Commission's guidelines which utilize
only a one day price measurement. MACC's use of SBA valuation procedures did not
result in a material variance as of September 30, 2000, from valuations using
the Securities and Exchange Commission's guidelines.

    All other investments are valued at fair value as determined in good faith
by the Board of Directors. The Board of Directors has determined that all other
investments will be valued initially at cost, but such valuation will be subject
to semi-annual adjustments and on such other interim periods as are justified by
material portfolio company events if the Board of Directors determines in good
faith that cost no longer represents fair value.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The majority of the MACC consolidated investment portfolio consists of debt and
equity securities which are not publicly traded and are recorded at fair value
in accordance with SBA valuation policies. These


14  MACC PRIVATE EQUITIES INC.


<PAGE>   16
M D & A


policies generally do not result in increases or decreases in the fair value of
debt portfolio investments based upon changes in market interest rates.
Moreover, equity securities that are not publicly traded are not subject to
market price risk. Nevertheless, MACC is exposed to market risk from changes in
market prices of publicly traded equity securities held in the MACC consolidated
investment portfolio.

    At September 30, 2000, publicly traded equity securities in the MACC
consolidated investment portfolio were recorded at a fair value of $265,522. In
accordance with MACC's valuation policies and SBA regulations, the fair value of
publicly traded equity securities is determined based upon the average of the
closing prices (or bid price in the case of over-the-counter equity securities)
for the valuation date and the preceding two days. The publicly traded equity
securities in the MACC consolidated investment portfolio thus have exposure to
price risk, which is estimated as the potential loss in fair value due to a
hypothetical 10% adverse change in quoted market prices, and would amount to a
decrease in the recorded value of such publicly traded equity securities of
approximately $26,552. Actual results may differ.

    MACC is also exposed to market risk from changes in market interest rates
that affect the fair value of MorAmerica Capital's debentures payable determined
in accordance with Statement of Financial Accounting Standards No. 107,
Disclosures About Fair Value of Financial Instruments. The estimated fair value
of MorAmerica Capital's outstanding debentures payable at September 30, 2000,
was $20,113,000, with a cost of $20,340,000. Fair value of MorAmerica Capital's
outstanding debentures payable is calculated by discounting cash flows through
estimated maturity using the borrowing rate currently available to MorAmerica
Capital for debt of similar original maturity. None of MorAmerica Capital's
outstanding debentures payable are publicly traded. Market risk is estimated as
the potential increase in fair value resulting from a hypothetical 0.5% decrease
in interest rates. Actual results may differ.

                          - See chart in next column -


          -----------------------------------------------
                                                     2000
          -----------------------------------------------

          Fair Value of Debentures Payable    $20,113,000
          Amount Below Cost                      $227,000
          Additional Market Risk                 $450,000
          -----------------------------------------------


RISKS

- Portfolio Risks

Pursuant to Section 64(b)(1) of the Investment Company Act of 1940, a business
development company is required to describe the risk factors involved in an
investment in the securities of such company due to the nature of MACC's
investment portfolio. Accordingly, MACC states that:

    The portfolio securities of MACC consist primarily of securities issued by
small, privately held companies. Generally, little or no public information is
available concerning the companies in which MACC invests, and MACC must rely on
the diligence of the Investment Advisor to obtain the information necessary for
MACC's investment decisions. In order to maintain their status as business
development companies, MACC and MorAmerica Capital both must invest at least 50%
of their total assets in the types of portfolio investments described by
Sections 55(a)(1) though 55(a)(3) of the Investment Company Act of 1940, as
amended. These investments generally are securities purchase in private
placement transactions from small privately held companies. Typically, the
success or failure of such companies depends on the management talents and
efforts of one person or a small group of persons, so that the death, disability
or resignation of such person or persons could have a materially adverse impact
on such companies. Moreover, smaller companies frequently have smaller product
lines and smaller market shares than larger companies and may be more vulnerable
to economic downturns. Because these companies will generally have highly
leveraged capital structures, reduced cash flows resulting from an


                                                         [CONTINUED ON PAGE 16.]


                                                  MACC PRIVATE EQUITIES INC.  15
<PAGE>   17
M D & A

[CONTINUED FROM PAGE 15.]


economic downturn may adversely affect the return on, or the recovery of, MACC's
investments. Investment in these companies therefore involves a high degree of
business and financial risk, which can result in substantial losses and should
be considered speculative.

    MACC's investments primarily consist of securities acquired from the issuers
in private transactions, which are usually subject to restrictions on resale and
are generally illiquid. No established trading market generally exists with
regard to such securities, and most of such securities are not available for
sale to the public without registration under the Securities Act of 1933, as
amended, which involves significant delay and expense.

    The investments of MACC are generally long-term in nature. Some existing
investments do not bear a current yield and a return on such investments will be
earned only after the investment matures or is sold. Most investments are
structured so as to return a current yield throughout most of their term.
However, these investments will typically produce capital gains only when sold
in five to seven years. There can be no assurance, however, that any of MACC's
investments will produce current yields or capital gains.

- Operations Risks

MACC generally relies on portfolio investment divestitures and liquidity events,
as well as increases in fair value of portfolio investments, to provide for
increases in net asset value in any period. MACC typically relies on the sale of
portfolio companies in negotiated transactions and on the initial public
offering of portfolio company securities to provide for portfolio investment
divestitures and liquidity events. Accordingly, a general contraction in the
markets for corporate acquisitions and/or initial public offerings could
adversely affect MACC's ability to realize capital gains, if any, from the sale
of its portfolio company securities. The SBIC guidelines under which MorAmerica
Capital operates permit the MorAmerica Capital Board of Directors to determine
increases in fair value of unliquidated portfolio investments based upon a
number of factors, including subsequent financings provided to portfolio
companies. Accordingly, decreases in the supply of additional capital to MACC's
portfolio companies could adversely affect MorAmerica Capital's ability to
achieve increases, if any, in fair value of its portfolio investments. MACC's
failure to achieve its investment level objectives for any particular year or
years could also adversely affect the rate of increase, if any, in net asset
value.

- Interest Rate Risks

MACC faces several risks in relation to changes in prevailing market interest
rates. First, at September 30, 2000, MACC had outstanding $20,340,000 in
principal amount of SBA-guaranteed debentures issued by MACC's subsidiary,
MorAmerica Capital, which mature as follows: $5,690,000 in 2001, $2,150,000 in
2003, $1,000,000 in 2007, $2,500,000 in 2009, and $9,000,000 in 2010. These
debentures provide for a fixed rate of interest, and accordingly, changes in
market interest rates will have no effect on the amount of interest paid by MACC
with respect to the SBA-guaranteed debentures which are presently outstanding.
However, if MorAmerica Capital were to re-finance any of the maturing
SBA-guaranteed debentures by issuing additional SBA-guaranteed debentures at a
time when market interest rates have increased relative to the rates paid on the
maturing debentures, then MACC may incur higher interest expenses during
subsequent periods, and MACC's ability during such periods to achieve a net
operating profit, if any, could be adversely affected.

    Second, MACC has stated that one of its goals is to structure portfolio
investments to provide a current yield in order to provide MACC with earnings
stability. These investments typically provide for a fixed preferred dividend or
interest rate. Accordingly, MACC's ability to earn a net operating profit under
its current strategy could be adversely affected by a decrease in market
interest rates over the next several years because the increased level of
portfolio investments anticipated to be made during this period would reflect
these lower

16 MACC PRIVATE EQUITIES INC.
<PAGE>   18

M D & A

interest rates, which would adversely affect MACC's projected total income over
the foreseeable future.

    Third, many of MACC's portfolio companies have or may issue debt senior to
MACC's investment. The payment of principal and interest due on MACC's
investment, therefore, will generally be subordinate to payments due on any such
senior debt. Moreover, senior debt typically bears interest at a floating rate,
whereas MACC's investments generally do not. Any increase in market interest
rates may put significant economic pressure on those portfolio companies that
have issued senior debt which bears interest at a floating rate. Accordingly,
MACC's ability to achieve net operating income and generally to realize gains
from its portfolio investments may be adversely affected by an increase in
market interest rates.

- Effect of New Accounting Standards

SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as
amended by SFAS 137 and 138, will be effective for MACC for years beginning
after October 1, 2000. MACC has no derivative or hedging activities, therefore,
it is not anticipated this statement will have a material effect on its results
of operations or financial position.



                                                  MACC PRIVATE EQUITIES INC.  17

<PAGE>   19
INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
MACC PRIVATE EQUITIES INC.:



    We have audited the accompanying consolidated balance sheet of MACC Private
Equities Inc. and subsidiary, including the consolidated schedule of
investments, as of September 30, 2000, and the related consolidated statements
of operations and cash flows for the year ended September 30, 2000 and the
consolidated statements of changes in net assets for the years ended September
30, 2000 and 1999. These consolidated financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation or examination of securities
owned as of September 30, 2000. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

    In our opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of MACC Private
Equities Inc. and subsidiary as of September 30, 2000, and the results of their
operations and their cash flows for the year then ended and changes in net
assets for the years ended September 30, 2000 and 1999, in conformity with
accounting principles generally accepted in the United States of America.


/s/ KPMG LLP

Des Moines, Iowa
November 9, 2000



18  MACC PRIVATE EQUITIES INC.


<PAGE>   20

CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2000


                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S>                                                                     <C>
Loans and investments in portfolio securities at
    market or fair value, cost of $36,965,143 (note 2)                   $41,032,116

Cash and money market accounts                                             3,767,188
Certificates of deposit                                                      399,999
Other assets, net (note 1)                                                 1,408,163
                                                                         -----------

            Total assets                                                 $46,607,466
                                                                         ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

  Debentures payable, net of discount (note 3)                           $20,320,922
  Incentive fees payable (note 6)                                            118,164
  Accrued interest                                                           242,424
  Accounts payable and other liabilities                                     280,387
                                                                         -----------

           Total liabilities                                              20,961,897
                                                                         -----------

Net assets (notes 3 and 4):

  Common stock, $.01 par value per share; authorized
    4,000,000 shares; issued and outstanding 1,941,879 shares                 19,419
  Additional paid-in-capital (notes 4 and 5)                              16,510,381
  Net investment income                                                      415,889
  Net realized gain on investments                                         4,530,191
  Unrealized appreciation on investments (note 1)                          4,169,689
                                                                         -----------

            Total net assets                                              25,645,569
                                                                         -----------

Commitments (note 6)

            Total liabilities and net assets                             $46,607,466
                                                                         ===========

Net assets per share                                                     $     13.21
                                                                         ===========

</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------


                                                  MACC PRIVATE EQUITIES INC.  19


<PAGE>   21

CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2000


                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
INVESTMENT INCOME:
  Interest                                                     $ 1,964,948
  Dividends                                                        641,297
  Processing fees                                                  169,396
  Other                                                             18,846
                                                               -----------

           Total income                                          2,794,487
                                                               -----------

OPERATING EXPENSES:
  Interest expenses (note 3)                                     1,352,807
  Management fees (note 6)                                         940,880
  Professional fees                                                128,265
  Other                                                            311,725
                                                               -----------

            Total operating expenses                             2,733,677
                                                               -----------

            Investment income, net before tax expense               60,810

Income tax expense (note 5)                                         10,000
                                                               -----------

            Investment income, net                                  50,810
                                                               -----------

Realized and unrealized (loss) gain on investments (note 2):
  Net realized loss on investments                              (2,266,652)
  Net change in unrealized appreciation on investments           4,478,415
                                                               -----------

            Net gain on investments                              2,211,763
                                                               -----------

            Net change in net assets from operations           $ 2,262,573
                                                               ===========

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------


20  MACC PRIVATE EQUITIES INC.

<PAGE>   22

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 2000 AND 1999


                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                               2000             1999
--------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                <C>
OPERATIONS:
    Net investment income (expense)                                        $     50,810          (7,459)
    Net realized (loss) gain on investments, net of tax                      (2,266,652)      3,293,177
    Net change in unrealized appreciation (depreciation)  on investments      4,478,415        (607,771)
                                                                           ------------      ----------

        Net increase in net assets from operations                            2,262,573       2,677,947

    Payments for fractional shares in connection with
      stock split (note 4)                                                      (11,152)         (9,677)
    Allocation of income tax benefit to additional paid-in
      capital (note 5)                                                             --         1,198,000
                                                                           ------------      ----------

        Net increase in net assets                                            2,251,421       3,866,270

NET ASSETS:

    Beginning of period                                                      23,394,148      19,527,878
                                                                           ------------      ----------
    End of period                                                          $ 25,645,569      23,394,148
                                                                           ============      ==========
</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------


                                                  MACC PRIVATE EQUITIES INC.  21




<PAGE>   23

CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 2000

                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
<TABLE>
<S>                                                                                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Increase in net assets from operations                                                $  2,262,573
                                                                                      ------------

     Adjustments to reconcile increase in net assets from operations to net cash
   used in operating activities:
Net realized and unrealized gain on investments                                         (2,211,763)
              Change in accrued interest, incentive fees payable, accounts payable,       (908,831)
                    and other liabilities
              Other                                                                        196,943
                                                                                      ------------
                    Total adjustments                                                   (2,923,651)
                                                                                      ------------
                         Net cash used in operating activities                            (661,078)
                                                                                      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of and payments on loans and
   investments in portfolio securities                                                   1,378,135
     Purchases of loans and investments in portfolio securities                        (13,612,160)
     Proceeds from disposition of short-term investments                                 5,782,133
     Purchases of short-term investments                                                   (99,000)
                                                                                      ------------
                         Net cash used in investing activities                          (6,550,892)
                                                                                      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance                                                              8,775,000
     Principal payment on debentures payable                                            (2,450,000)
     Payments for fractional shares in connection with stock split                         (11,152)
                                                                                      ------------

                         Net cash provided by financing activities                       6,313,848
                                                                                      ------------

                         Net decrease in cash and cash equivalents                        (898,122)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                           5,065,309
                                                                                      ------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                              $  4,167,187
                                                                                      ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION--

     CASH PAID DURING THE YEAR FOR INTEREST:                                          $  1,321,455
                                                                                      ============

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING INFORMATION--
     ASSETS RECEIVED IN EXCHANGE OF SECURITIES                                        $    664,084
     INVESTMENT PURCHASES INCLUDED IN OTHER LIABILITIES                                    195,005
DEBT ISSUANCE COSTS FINANCED WITH DEBENTURES PAYABLE                                       225,000
                                                                                      ============
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------


22  MACC PRIVATE EQUITIES INC.
<PAGE>   24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MACC Private Equities Inc. and Subsidiary

1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS


- Basis of Presentation

The consolidated financial statements include the accounts of MACC Private
Equities Inc. (Equities) and its wholly owned subsidiary, MorAmerica Capital
Corporation (MACC). Equities and MACC (the Company) are qualified as business
development companies under the Investment Company Act of 1940. All material
intercompany accounts and transactions have been eliminated. The consolidated
financial statements have been prepared in accordance with accounting principles
generally accepted by the United States of America for investment companies.

    On February 15, 1995, the Company consummated a plan of reorganization as
confirmed by the United States Bankruptcy Court for the Northern District of
Iowa on December 28, 1993. As of February 15, 1995, the Company adopted
fresh-start reporting in accordance with American Institute of Certified Public
Accountants (AICPA) Statement of Position (SOP) 90-7, Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code, resulting in the Company's
assets and liabilities being adjusted to fair values.

- Use of Estimates

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

-  Cash Equivalents

For purposes of reporting cash flows, the Company considers certificates of
deposit and U. S. treasury bills with maturities of three months or less from
the date of purchase and money market deposit accounts to be cash equivalents.
At September 30, 2000, cash and cash equivalents for purposes of reporting cash
flows consisted of $3,767,188 of cash and money market funds and $399,999 of
certificates of deposit.

- Loans and Investments in Portfolio Securities

Investments in securities traded on a national securities exchange (or reported
on the NASDAQ national market) are stated at the average of the bid price on the
three final trading days of the valuation period. Restricted and other
securities for which quotations are not readily available are valued at fair
value as determined by the Board of Directors. Realization of the carrying value
of investments is subject to future developments (see note 2). Investment
transactions are recorded on the trade date. Identified cost is used to
determine realized gains and losses. Under the provisions of SOP 90-7, the fair
value of loans and investments in portfolio securities on February 15, 1995, the
fresh-start date, is considered the cost basis for financial statement purposes.

- Other Assets

Other assets includes accrued interest receivable on portfolio loans of $923,585
at September 30, 2000, which is presented net of a reserve of $619,434.

    Other assets include a receivable from the sale of an investment with a fair
value of $205,433 which includes unrealized appreciation of $102,716.

- Revenue Recognition

Dividend income is recognized on the ex-dividend date and interest income is
    accrued on a daily basis.

    In conjunction with the investment process, the Company negotiates
non-refundable processing fees with many companies it evaluates for investment.
These fees are compensation for time and effort of the investment advisory
personnel and for reimbursement of expenses related to the due diligence, and
are recognized as income when received.


                                                         [CONTINUED ON PAGE 24.]

                                                  MACC PRIVATE EQUITIES INC.  23


<PAGE>   25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MACC Private Equities Inc. and Subsidiary

- Income Taxes

Equities and MACC are members of a consolidated group for income tax purposes.

    Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the consolidated financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in the period that includes the enactment date.

-  Disclosures About Fair Value of Financial Instruments

Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures About
Fair Value of Financial Instruments, requires that disclosures be made regarding
the estimated fair value of financial instruments, which are generally described
as cash, contractual obligations, or rights to pay or receive cash. The carrying
amount approximates fair value for certain financial instruments because of the
short-term maturity of these instruments, including cash, U. S. treasury bills,
certificates of deposit, accrued interest, and accounts payable.

    Portfolio investments are recorded at fair value. The consolidated schedule
of investments discloses the applicable fair value and cost for each security
investment, which aggregated to $41,032,116 and $36,965,143, respectively, at
September 30, 2000.

    The estimated fair value of long-term debt is $20,113,000, with a cost of
$20,340,000. This amount was calculated by discounting future cash flows through
estimated maturity using the borrowing rate currently available to the Company
for debt of similar original maturity.

-  Effect of New Financial Accounting Standards

No issued, but not-yet-adopted financial accounting standards are expected to
have a material effect on the Company.

2  LOANS AND INVESTMENTS IN PORTFOLIO SECURITIES

Loans and investments in portfolio securities include debt and equity securities
in small business concerns located throughout the continental United States,
with current concentrations in the Midwest and New England. The Company
determined that the fair value of its portfolio securities was $41,032,116 at
September 30, 2000. Among the factors considered by the Company in determining
the fair value of investments were the cost of the investment; developments,
including recent financing transactions, since the acquisition of the
investment; the financial condition and operating results of the investee; the
long-term potential of the business of the investee; and other factors generally
pertinent to the valuation of investments. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the securities
existed, and the differences could be material.

    The Company acquired its portfolio securities by direct purchase from the
issuers under investment representation and values the securities on the premise
that, in most instances, they may not be sold without registration under the
Securities Act of 1933. The price of securities purchased was determined by
direct negotiation between the Company and the seller. All portfolio securities
other than Encompass Services Corporation (acquired on April 27, 1998) are
considered to be restricted in their disposition and illiquid at September 30,
2000.

3   DEBENTURES PAYABLE

Debentures of MACC guaranteed by the Small Business Administration (SBA) of
$20,340,000 at September 30, 2000 are unsecured. In accordance with SOP 90-7,
the debentures then outstanding were revalued to fair value on February 15,
1995. Debentures payable at September 30, 2000 are recorded net of discount of
$19,078. Maturities of the debentures are as follows:


                            - See table on page 25 -


24  MACC PRIVATE EQUITIES INC.


<PAGE>   26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MACC Private Equities Inc. and Subsidiary

--------------------------------------------------------------------------------
 YEAR ENDING                                                 FIXED
SEPTEMBER 30,                 DEBENTURES                     INTEREST RATE
--------------------------------------------------------------------------------

2001                          $5,690,000                      9.08%

2003                           2,150,000                      6.12

2007                           1,000,000                      7.55

2009                           2,500,000                      7.83

2010                           9,000,000                      8.48
                             -----------                      ====
                             $20,340,000
                             ===========
--------------------------------------------------------------------------------

The debentures contain restrictions on the acquisition or repurchase of MACC's
capital stock, distributions to MACC's shareholder other than out of
undistributed net realized earnings, officers' salaries, and certain other
matters. At September 30, 2000, MACC does not have accumulated undistributed net
realized earnings (computed under SBA guidelines) available for distribution to
Equities.

    MACC has a commitment letter with the SBA to issue debentures, which expires
on September 30, 2002. At September 30, 2000, $6,790,000 of this commitment
remained unused.


4   STOCKHOLDER'S EQUITY

On February 22, 2000, the Company declared a stock split effected in the form of
a dividend equal to twelve common shares for every ten common shares outstanding
to shareholders of record on March 13, 2000. As part of this transaction, the
Company made payments to shareholders totaling $11,152, representing the amount
due for fractional shares, and issued 322,782 shares of common stock.

    On February 23, 1999, the Company declared a stock split effected in the
form of a dividend equal to thirteen common shares for every ten common shares
outstanding to shareholders of record on March 15, 1999. As part of this
transaction, the Company made payments to shareholders totaling $9,677,
representing the amount due for fractional shares, and issued 372,705 shares of
common stock.

5   INCOME TAXES

Income tax expense differed from the amounts computed by applying the United
States federal income tax rate of 34% to pretax income due to the following:


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

Computed "expected" tax expense                                    $  773,000

Increase (reduction) in income taxes resulting from:

    State income tax benefit, net of federal tax effect               136,000

    Nontaxable dividend income                                       (218,000)

    Change in the beginning of the period
     valuation allowance for deferred tax assets                     (605,000)

    Other                                                             (76,000)
                                                                   ----------
          Income tax expense                                       $   10,000
                                                                   ==========

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

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at September 30, 2000 are as follows:

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


Deferred tax assets:

    Net operating loss carryforwards                              $ 4,952,000

    Other                                                             352,000
                                                                  -----------
          Total gross deferred tax assets                           5,304,400

Less valuation allowance                                           (3,160,000)
                                                                  -----------
          Net deferred tax assets                                   2,144,000

Deferred tax liabilities:

    Unrealized appreciation on investments                         (1,256,000)

    Equity investments                                               (794,000)

    Other assets received in lieu of cash                             (94,000)
                                                                  -----------

          Net deferred tax assets                                       --
                                                                  ===========



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

The net change in the total valuation allowance for the year ended September 30,
2000 was a decrease of $605,000. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those



                                                         [CONTINUED ON PAGE 26.]


                                                  MACC PRIVATE EQUITIES INC.  25
<PAGE>   27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MACC Private Equities Inc. and Subsidiary

[CONTINUED FROM PAGE 25.]


temporary differences become deductible. Management considers projected future
taxable income and tax planning strategies in making this assessment. In order
to fully realize the gross deferred tax assets, the Company will need to
generate future taxable income of approximately $13.3 million prior to the
expiration of the net operating loss carryforwards in 2008-2020. The Company had
a taxable loss of approximately $3,175,000 for the year ended September 30,
2000. Based upon the level of historical taxable income of MACC and projections
for future taxable income over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowance at September 30, 2000.

    At September 30, 2000, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $12,380,000, which are available to
offset future federal taxable income, if any, through 2020. Approximately
$5,350,000 of the carryforwards are available for the year ending September 30,
2001, with approximately $1,004,000 additionally available annually thereafter.

    During 1999, a $1,198,000 tax benefit from utilization of pre-confirmation
net operating losses was allocated to additional paid-in capital under the
provisions of SOP 90-7. This allocation does not require any cash payments of
taxes.


6   COMMITMENTS

-  Management Agreements

Equities has an investment advisory agreement (the Agreement) with InvestAmerica
Investment Advisors, Inc. (IAIA). Three of Equities' officers are officers and
stockholders of IAIA. The management fee is equal to 2.5% of the assets under
management, on an annual basis. The management fee is calculated excluding MACC.
In addition, Equities contracted to pay an incentive fee of 13.4% of the net
capital gains (as defined in the Agreement) before taxes on the disposition of
investments. The Agreement may be terminated by either party upon sixty days'
written notice. Total management fees under the Agreement amounted to $27,386
for the year ended September 30, 2000. There were no incentive fees accrued or
paid under the Agreement in 2000.

    MACC has a separate investment advisory agreement with IAIA. This agreement
may be terminated by either party upon sixty days written notice. The fee is
equal to 2.5% of the Capital Under Management (as defined in the Agreement) on
an annual basis, but in no event more than 2.5% per annum of the Assets Under
Management, or 7.5% of Regulatory Capital (as defined in the Agreement). In
addition, MACC contracted to pay IAIA 13.4% of the net capital gains, before
taxes, on investments in the form of an incentive fee. Net capital gains, as
defined in the agreement, are calculated as gross realized gains, minus the sum
of capital losses, less any unrealized depreciation, including reversals of
previously recorded unrealized depreciation, recorded during the year, and net
investment losses, if any, as reported on page 4c, line 33 of the SBA Form
468.1. Capital losses and realized capital gains are not cumulative under the
incentive fee computation. Payments for incentive fees resulting from noncash
gains are deferred until the assets are sold.

    Total management fees under this agreement amounted to $913,494 for the year
ended September 30, 2000. Incentive fees are an expense in determining net
realized gain (loss) on investments in the consolidated statement of operations.
No incentive fees were earned for the year ended September 30, 2000. Total
incentive fees paid under this agreement amounted to $24,771 in 2000.
Approximately $118,164 of incentive fees related to noncash gains from prior
years is being deferred as described above.


26  MACC PRIVATE EQUITIES INC.
<PAGE>   28
CONSOLIDATED SCHEDULE OF INVESTMENTS
SCHEDULE 10 SEPTEMBER 30, 2000


                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
MANUFACTURING:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
COMPANY                                 SECURITY                                               NET ASSETS       VALUE         COST
-------                                 --------                                               ----------    -----------     -------
<S>                                       <C>                                                  <C>           <C>             <C>
ARCHITECTURAL ART                         12% debt security, due June 15, 2005                               $  780,000      780,000
MANUFACTURING, INC.                     *Warrant to purchase 11,143 common shares                                     1            1
                                                                                                             ----------   ----------
Wichita, Kansas
Manufacturer of industrial and
commercial boilers and shower doors,
frames and enclosures                                                                                           780,001      780,001
                                                                                                             ----------   ----------
B & B MOLDERS, LLC                        11% debt security, due June 1, 2003                                   937,500      937,500
Mishawaka, Indiana
Manufacturer of custom plastic
injection molded products for
the RV and other industries                                                                                     937,500      937,500
                                                                                                             ----------   ----------

CENTRAL FIBER CORPORATION                 12% debt security, due December 31, 2005                              400,000      400,000
Wellsville, Kansas                      *Warrant to purchase 1,226.66 common shares                             466,665           --
                                                                                                             ----------   ----------
Recycles and manufactures
cellulose fiber products                                                                                        866,665      400,000
                                                                                                             ----------   ----------

CENTRUM INDUSTRIES, INC.                *11% debt security, due March 31, 2001                                  878,419    1,254,890
Corry, Pennsylvania                     *Warrant to purchase 627,445 common shares                                   13           13
Open die and seamless rolled            *Warrant to purchase 3,732 common shares                                     --           --
ring steel forging                      *Warrant to purchase 4,547 common shares                                     --           --
                                        *Stock option to purchase 10,756 common shares                               --           --
                                        *Warrant to purchase 19,679 common shares                                    --           --
                                        *Stock option to purchase 7,171 common shares                                --           --
                                                                                                             ----------   ----------
                                                                                                                878,432    1,254,903
                                                                                                             ----------   ----------


DELUXE ICE CREAM COMPANY                  14% debt security, due September 1, 2005                              610,000      610,000
Salem, Oregon                           *14,600 shares Series A preferred                                       146,000      146,000
Ice cream and novelty                   *Warrant to purchase common shares                                           24           24
dessert manufacturer                    *Warrant to purchase common shares                                           --           --
                                        *Warrant to purchase common shares                                           --           --
                                        *Warrant to purchase common shares                                           --           --
                                                                                                             ----------   ----------
                                                                                                                756,024      756,024
                                                                                                             ----------   ----------

GREGG MANUFACTURING, INC.                 12% debt security, due March 1, 2004                                  897,250      897,250
Irvine, California                      * 545,750 units of 8% preferred                                         166,500      166,500
Manufacturer of Bible covers and        *136,438 units of common                                                 37,000       37,000
Christian themed apparel and gifts      *Warrant to purchase 74,000 units of common--                                --
                                                                                                             ----------   ----------
                                                                                                              1,100,750    1,100,750
                                                                                                             ----------   ----------

HANDY INDUSTRIES, LLC                     12% debt security, due April 1, 2006                                  830,280      830,280
Marshalltown, Iowa                        Membership interest                                                   262,515      262,515
Manufacturer of lifts for motorcycles,                                                                       ----------   ----------
trucks and industrial metal products                                                                          1,092,795    1,092,795
                                                                                                             ----------   ----------
</TABLE>

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


                                                  MACC PRIVATE EQUITIES INC.  27


<PAGE>   29
CONSOLIDATED SCHEDULE OF INVESTMENTS
SCHEDULE 1 CONTINUED...

                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
MANUFACTURING CONTINUED...
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                              PERCENT OF
COMPANY                                 SECURITY                                              NET ASSETS      VALUE          COST
-------                                 --------                                              ----------   -----------    ----------
<S>                                     <C>                                                   <C>          <C>            <C>
HERITAGE CONSUMER PRODUCTS, LLC         *12% debt security, due November 1, 2005                           $        --       983,913
Brookfield, Connecticut                 *Membership interest                                                         1       147,587
Distributor of consumer                 *Stock assignment                                                           --            --
over-the-counter pharmaceuticals        *Membership interest                                                        --        80,609
                                        *12% debt security, due September 1, 2004                                   --        51,627
                                        *Warrant to purchase additional membership interest                         --            --
                                                                                                            ----------     ---------
                                                                                                                     1     1,263,736
                                                                                                            ----------     ---------
HICKLIN ENGINEERING, L.C.                 10% debt security, due June 30, 2003                                 740,000       740,000
Des Moines, Iowa                          Membership interest                                                      127           127
Manufacturer of auto and truck            12% promissory note, due December 31, 2004                            25,050        25,050
transmission and brake dynamometers                                                                         ----------     ---------
                                                                                                               765,177       765,177
                                                                                                            ----------     ---------

HUMANE MANUFACTURING, LLC                 12% debt security, due April 3, 2002                                 784,300       784,300
Baraboo, Wisconsin                      *Membership interest                                                   101,200       101,200
Manufacturer of rubber mats for                                                                             ----------     ---------
agricultural, exercise and roofing
markets                                                                                                        885,500       885,500
                                                                                                            ----------     ---------

KW PRODUCTS, INC.                         Variable rate debt security, due September 30, 2003                  275,035       275,035
Marion, Iowa                              (12.875% at September 30, 2000)
Manufacturer of automobile aftermarket  *29,340 common shares                                                   92,910        92,910
engine and brake repair machinery                                                                           ----------     ---------
                                                                                                               367,945       367,945
                                                                                                            ----------     ---------

LINTON TRUSS CORPORATION                *11% debt security, due March 1, 2001                                  367,731       367,731
Delray Beach, Florida                   *542.8 common shares                                                        --            --
Manufacturer of residential roof        *400 shares Series 1 preferred                                          40,000        40,000
and floor truss systems                 *11% debt security, due October 31, 2001                                80,000        80,000
                                        *Warrant to purchase common shares                                          15            15
                                        *Warrant to purchase common shares                                          --            --
                                        *Warrant to purchase common shares                                          --            --
                                                                                                            ----------     ---------
                                                                                                               487,746       487,746
                                                                                                            ----------     ---------
MERCURY EMS                               12% debt security, due July 31, 2003                                 838,666       838,666
Olathe, Kansas                          *Warrant to purchase 262,857 common shares--                                --
Manufacturer of outsourced                12% debt security, due December 23, 2004                             641,332       641,332
electronic assemblies                   *Warrant to purchase 339,902 common shares                                  18            18
                                                                                                            ----------     ---------
                                                                                                             1,480,016     1,480,016
                                                                                                            ----------     ---------

PPC ACQUISITION COMPANY                   12% debt security, due January 3, 2003                               350,000       350,000
Kansas City, Kansas                     *Warrant to purchase common shares                                     578,365            40
Manufacturer and printer of                                                                                 ----------     ---------
plastic packaging                                                                                              928,365       350,040
                                                                                                            ----------     ---------
</TABLE>
--------------------------------------------------------------------------------

28  MACC PRIVATE EQUITIES INC.

<PAGE>   30
CONSOLIDATED SCHEDULE OF INVESTMENTS
SCHEDULE 1 CONTINUED...

                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
MANUFACTURING CONTINUED...
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                      PERCENT OF
COMPANY                                 SECURITY                                      NET ASSETS             VALUE           COST
-------                                 --------                                      ----------        -------------     ----------
<S>                                     <C>                                           <C>               <C>               <C>
PENN WHEELING ACQUISITION                 13% debt security, due March 10, 2007                         $     694,000        694,000
COMPANY, LLC                            *62 units Class B membership interest                                  62,000         62,000
Glen Dale, West Virginia                *24 units Class C membership interest                                  24,000         24,000
Metal closure manufacturer                                                                              -------------      ---------
                                                                                                              780,000        780,000
                                                                                                        -------------      ---------

PRATT-READ CORPORATION                    13,889 shares Series A preferred                                    750,000        750,000
Bridgeport, Connecticut                 *Warrant to purchase common shares                                         --             --
Manufacturer of screwdriver shafts                                                                      -------------      ---------
and handles and other hand tools                                                                              750,000        750,000
                                                                                                        -------------      ---------
SIMONIZ USA, INC.                         12% debt security, due January 2, 2002                              750,000        750,000
Bolton, Connecticut                     *Warrant to purchase common shares                                         --             --
Producer of cleaning and wax                                                                            -------------      ---------
products under both the Simoniz                                                                               750,000        750,000
brand and private label brand names                                                                     -------------      ---------

STASIS CORPORATION                        14% debt security, due June 1, 2005                               1,125,000      1,125,000
Providence, Rhode Island                *1,500 shares Series A preferred                                    1,125,000      1,125,000
Counter weight manufacturer             *Warrant to purchase 315.42 common shares                                  --             --
and secondary steel processor                                                                           -------------      ---------
                                                                                                            2,250,000      2,250,000

TALARIA HOLDINGS, LLC                     12% debt security, due November 15, 2004                            730,000        730,000
Boston, Massachusetts                     Membership interest                                               1,270,000        182,517
Custom and semi-custom                                                                                  -------------      ---------
sail and power boat builder                                                                                 2,000,000        912,517
                                                                                                        -------------      ---------

TAYLOR HOLDINGS, INC.                     12% debt security, due May 31, 2003                                 574,163        574,163
Parsons, Kansas                         *48,038 common shares                                                  48,038         48,038
Manufacturer of industrial              *292,800 shares preferred                                             304,512        304,512
bagging equipment                       *Warrant to purchase 56,529 common shares                             210,565            565
                                                                                                        -------------      ---------
                                                                                                            1,137,278        927,278
                                                                                                        -------------      ---------
                  Total manufacturing                                                     74.06%        $  18,994,195     18,291,928
                                                                                          =====         -------------      ---------
</TABLE>

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

                                                  MACC PRIVATE EQUITIES INC.  29
<PAGE>   31
CONSOLIDATED SCHEDULE OF INVESTMENTS
SCHEDULE 1 CONTINUED...

                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
SERVICE:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      PERCENT OF
COMPANY                                 SECURITY                                      NET ASSETS             VALUE           COST
-------                                 --------                                      ----------        -------------     ----------
<S>                                     <C>                                           <C>               <C>               <C>
A-PLUS GALVANIZING, INC.                  10% debt security, due February 11, 2005                      $     712,250        712,250
Salina, Kansas                          *Warrant to purchase 12,950 common shares                                   1              1
Specialty metal galvanizing                                                                             -------------     ----------

                                                                                                              712,251        712,251
                                                                                                        -------------     ----------

ALANIZ HOLDING, LLC                     *537.634 units of preferred                                           537,634        537,634
Mt. Pleasant, Iowa                        Membership interest                                                  47,366         47,366
Provider of turnkey services                                                                            -------------     ----------
for non-profit fund raising
                                                                                                              585,000        585,000
                                                                                                        -------------     ----------


BIG J ENTERPRISES, LLC                    12% debt security, due August 20, 2004                              562,500        562,500
Albuquerque, New Mexico                   Membership interest                                                 263,250        263,250
High-end electrical-mechanical                                                                          -------------     ----------
specialty contractor and in-plant
construction and maintenance provider                                                                         825,750        825,750
                                                                                                        -------------     ----------


CONCENTRIX CORPORATION                    3,758,750 shares Series A preferred                               3,007,000      2,255,250
Pittsford, New York                                                                                     -------------     ----------
Provides marketing outsourcing solutions
including telemarketing, fulfillment
and web communications

ENCOMPASS SERVICES CORPORATION          *36,290 common shares                                                 265,522        530,502
Houston, Texas                                                                                          -------------     ----------
Commercial facilities management
services provider

HOOK-UP, INC.                             780,000 shares Series A preferred                                   780,000        780,000
Joplin, Missouri                        *Warrant to purchase 421.335 common shares                                 19             19
Provider of truck driveaway, internet     195,000 shares Series A preferred                                   195,000        195,000
based auction and related services      *Warrant to purchase 109.172 common shares                                  5              5
to the commercial truck industry                                                                        -------------     ----------

                                                                                                              975,024        975,024
                                                                                                        -------------     ----------

LEE MATHEWS EQUIPMENT, INC.               12% debt security, due March 10, 2005                               500,000        500,000
Kansas City, Missouri                   *Warrant to purchase 153,654 common shares                                 30             30
Distributor of industrial pump systems                                                                  -------------     ----------

                                                                                                              500,030        500,030
                                                                                                        -------------     ----------

MONITRONICS INTERNATIONAL, INC.         *73,214 common shares                                                 839,165         54,703
Dallas, Texas                                                                                           -------------     ----------
Provides home security systems
monitoring services
</TABLE>

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

30  MACC PRIVATE EQUITIES INC.
<PAGE>   32
CONSOLIDATED SCHEDULE OF INVESTMENTS
SCHEDULE 1 CONTINUED...

                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
SERVICE CONTINUED...
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           PERCENT OF
COMPANY                                 SECURITY                                           NET ASSETS        VALUE           COST
-------                                 --------                                           ----------     -----------     ----------
<S>                                     <C>                                                <C>            <C>             <C>
MORGAN OHARE, INC.                        11.25% debt security, due November 1, 2004                      $ 1,125,000      1,125,000
Addison, Illinois                       *Warrant to purchase 85.875 common shares                                  --             --
Fastener plating and heat treating                                                                         ----------      ---------
                                                                                                            1,125,000      1,125,000
                                                                                                           ----------      ---------

ORGANIZED LIVING, INC.                    400,000 shares Series A preferred                                   640,000        400,000
Lenexa, Kansas                            145,204 shares Series A preferred                                   231,832        143,227
Retail specialty stores for storage       130,435 shares Series B preferred                                   213,587        150,000
and organizational products               43,478 shares Series B preferred                                     71,195         50,001
                                          41,680 shares Series B preferred                                     68,251         47,932
                                          94,241 shares Series C preferred                                    157,233        120,029
                                          71,428.5714 shares Series C preferred                               121,428        100,000
                                          9,295 shares Series C preferred                                      15,800         13,012
                                          104,167 shares Series D preferred                                   250,001        250,001

                                                                                                            1,769,327      1,274,202

TRANSCORE HOLDINGS, INC.                  7% debt security, due August  30, 2006                              245,159        245,159
Hummelstown, Pennsylvania                 13% debt security, due August  30, 2006                             263,602        263,602
Legal, audit, logistical and internet   *Warrant to purchase 1,296.48 common shares                            24,000         24,000
e-business services for the trucking                                                                      -----------     ----------
industry                                                                                                      532,761        532,761
                                                                                                          -----------     ----------
WARREN FAMILY FUNERAL HOMES, INC.         12% debt security, due June 29, 2006                                385,000        385,000
Topeka, Kansas                          *Warrant to purchase 231 common shares                                      8              8
Provider of value priced funeral                                                                          -----------     ----------
services                                                                                                      385,008        385,008
                                                                                                          -----------     ----------

WATER CREATIONS, INC.                   *225,000 common shares                                              1,125,000      1,125,000
Des Moines, Iowa                         9% debt security, due June 30, 2004                                  202,500        202,500
Distributor of pond and water                                                                             -----------     ----------
garden products                                                                                             1,327,500      1,327,500
                                                                                                          -----------     ----------


                  Total service                                                         50.10%            $12,849,338     11,082,981
                                                                                        =====             -----------     ----------
</TABLE>

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


                                                  MACC PRIVATE EQUITIES INC.  31
<PAGE>   33
CONSOLIDATED SCHEDULE OF INVESTMENTS
SCHEDULE 1 CONTINUED...


                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
TECHNOLOGY AND COMMUNICATIONS:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                          PERCENT OF
COMPANY                                 SECURITY                                          NET ASSETS         VALUE            COST
-------                                 --------                                          ----------     -------------   -----------
<S>                                     <C>                                               <C>            <C>             <C>
CIRQUE CORPORATION                      *100,000 shares Series A preferred                               $    167,499        335,000
Salt Lake City, Utah                    *55,834 shares Series A preferred                                     167,503        335,004
Develops and markets input                                                                               ------------     ----------
solutions for the electronics industry
                                                                                                              335,002        670,004
                                                                                                         ------------     ----------

DIGITAL ARCHAEOLOGY CORPORATION         *962.50 shares Series D preferred                                   2,407,189        962,500
Lenexa, Kansas                                                                                           ------------     ----------
Database mining and analysis

EAGLE WEST, L.L.C.                        12% debt security, due October 31, 2004                             665,812        665,812
Mesa, Arizona                           *Membership interest                                                  197,779        197,779
Consolidator of cable TV systems        *Membership interest                                                      186            186
                                          10% debt security, due January 1, 2001                               47,285         47,285
                                                                                                         ------------     ----------
                                                                                                              911,062        911,062
                                                                                                         ------------     ----------

EASY SYSTEMS, INC.                      *11% debt security, due March 1, 2004                                 780,754        780,754
Welcome, Minnesota                      *95,238 shares Series B preferred                                     200,000        200,000
Batch feed software and systems         *Warrant to purchase 292,643 common shares                                 --             --
and B2B internet services               *Warrant to purchase 160,000 common shares--                               --
                                        *59,182 shares Series B preferred                                     124,283        124,283
                                        *Warrant to purchase 99,426 common shares                                  --             --
                                        *36,056 shares Series B preferred                                      75,717         75,717
                                        *Warrant to purchase 60,574 common shares                                  --             --
                                        *16,473.81 shares Series B preferred                                   34,595         34,595
                                        *Warrant to purchase 27,676 common shares                                  --             --
                                        *5,891.37 shares Series B preferred                                    12,372         12,372
                                        *Warrant to purchase 9,897.50 common shares                                --             --
                                        *44,047.62 shares Series B preferred                                   92,500         92,500
                                        *Warrant to purchase 74,000 common shares                                  --             --
                                        *4,063.39 shares Series B preferred                                     8,533          8,533
                                        *Warrant to purchase 6,826.50 common shares                                --             --
                                                                                                         ------------     ----------

                                                                                                            1,328,754      1,328,754
                                                                                                         ------------     ----------

EMERGEN, INC.                             8% debt security, due December 31, 2002                             456,000        456,000
Salt Lake City, Utah                                                                                     ------------     ----------
Gene research and discovery company

MILES MEDIA GROUP, INC.
Sarasota, Florida                       *1,000 common shares                                                  440,000        440,000
Tourist magazine publisher                                                                               ------------     ----------

</TABLE>

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


32  MACC PRIVATE EQUITIES INC.
<PAGE>   34
CONSOLIDATED SCHEDULE OF INVESTMENTS
SCHEDULE 1 CONTINUED...


                                       MACC Private Equities Inc. and Subsidiary
--------------------------------------------------------------------------------
TECHNOLOGY AND COMMUNICATIONS CONTINUED...
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               PERCENT OF
COMPANY                                 SECURITY                                               NET ASSETS        VALUE         COST
-------                                 --------                                               ----------    -----------    --------
<S>                                     <C>                                                    <C>           <C>            <C>
NEWPATH COMMUNICATIONS, LC              *10% debt security, due April 16, 2002                               $   847,000     847,000
Des Moines, Iowa                        *Membership interest                                                         385         385
Rural cable TV network provider                                                                              -----------  ----------
                                                                                                                 847,385     847,385
                                                                                                             -----------  ----------

PORTRAIT DISPLAYS, INC.                 *535,715 shares Series B preferred                                       349,999     750,001
Pleasanton, California                  *Warrant to purchase 16,071 common shares                                     --          --
Designs and markets pivot enabling      *71,429 Shares Series C preferred                                        100,001     100,001
software for LCD computer monitors      *Warrant to purchase 13,570 Series C preferred                                --          --
                                        *Warrant to purchase 12,240 Series C preferred                                --          --
                                        *Warrant to purchase 27,160 Series C preferred                                --          --
                                        *911,300 shares Series D preferred                                       150,000     150,000
                                                                                                             -----------  ----------
                                                                                                                 600,000   1,000,002
                                                                                                             -----------  ----------

RSI HOLDINGS, INC.                        11% debt security, due August 22, 2002                                 654,970     654,970
Fargo, North Dakota                     *Warrant to purchase 1,188 common shares                                 604,292          --
Satellite simulcast communications        11% debt security, due August 22, 2002                                 319,557     319,557
and services to the gaming industry     *Warrant to purchase 562 common shares                                   284,372          --
                                                                                                             -----------  ----------
                                                                                                               1,863,191     974,527
                                                                                                             -----------  ----------


                  Total technology and communications                                            35.83%      $ 9,188,583   7,590,234
                                                                                                 =====       -----------  ----------

                                                                                                             $41,032,116  36,965,143
                                                                                                             ===========  ==========

</TABLE>


*Presently non-income producing

        SEE ACCOMPANYING NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS

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


                                                  MACC PRIVATE EQUITIES INC.  33
<PAGE>   35

NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS
MACC Private Equities Inc. and Subsidiary

A  For investments held at the February 15, 1995 fresh-start date, the stated
   cost represents the fair value at the fresh-start date.

B  At September 30, 2000, all securities except for Encompass Services
   Corporation are considered to be restricted in their disposition and are
   stated at what the Board of Directors considers to be fair market value.

C  At September 30, 2000, the cost of securities for federal income tax purposes
   was $36,011,807, and the aggregate unrealized appreciation/depreciation
   (including other basis differences) based on that cost was:

  Unrealized appreciation                     $ 7,634,010
  Unrealized depreciation                      (2,613,701)
                                              -----------
              Net unrealized appreciation     $ 5,020,309
                                              ===========

D  The Company owns a portfolio which includes investments in restricted
   securities of small businesses. Within this portfolio, thirty of these
   restricted securities include registration rights and twelve of these
   restricted securities do not include registration rights. Within the thirty
   securities that include registration rights, the actual rights include the
   following general characteristics:

(1) The securities generally provide for demand rights as follows:

a  The demand rights may only be required from a low of 25% of the security
   holders to a high of a majority of the security holders.

b  The security holders may require from one to two demand registrations.

c  The small businesses are generally only required to use "best efforts" to
   comply with the demands.

(2) The securities generally allow the security holders to register securities
if the small business registers its securities, i.e. "piggyback rights."

a  Piggyback rights generally may be accessed by individual security holders.

b  Under piggyback rights, the small business and its investment bankers are
only required to use best efforts to comply with the right.

(3) The Company expects that, in general, the securities that they will acquire
in the future will include demand and piggyback rights.

PORTFOLIO CHANGES DURING THE YEAR

NEW INVESTMENTS AND ADDITIONS TO PREVIOUS INVESTMENTS

<TABLE>
<CAPTION>
                                                   Amount Invested
                                                   ---------------
<S>                                                <C>
Alaniz Holding, LLC                                 $   585,000
A-Plus Galvanizing, Inc.                                712,251
Architectural Art Manufacturing, Inc.                   780,001
Stasis Corporation                                    2,250,000
Deluxe Ice Cream Company                                756,024
Digital Archaeology Corporation                         962,500
Eagle West, L.L.C.                                      348,008
Easy Systems,Inc.                                       548,000
EmerGen, Inc.                                           456,000
Gregg Manufacturing, Inc.                                64,750
Heritage Consumer Products, LLC                          51,627
Hicklin Engineering, L.C.                                41,750
Hook-Up, Inc.                                           975,024
Lee Mathews Equipment, Inc.                             500,030
Mercury EMS                                             641,350
Morgan Ohare, Inc.                                    1,125,000
Organized Living, Inc.                                  250,001
Penn Wheeling Acquisition Company, LLC                  780,000
Pratt-Read Corporation                                  750,000
Progressive Solutions, Inc.                             200,000
Talaria Holdings, LLC                                        17
Viastar Services Corporation                            442,324
Warren Family Funeral Homes, Inc.                       385,008
Water Creations, Inc.                                   202,500
                                                    -----------
                                                    $13,807,165
                                                    ===========

<CAPTION>

DISPOSITIONS
                                                       Amount
                                           Cost       Received
                                        ----------   ----------
<S>                                     <C>          <C>
Building One Services Corporation       $     -      $      821
Houghton Acquisition Corporation              -           6,585
Murphey Acquisition, LLC                      -         937,498
Progressive Solutions, Inc.              1,884,265         -
Sight & Sound Distributors, Inc.         1,333,333         -
Viastar Services Corporation             1,182,324      939,095
                                        ----------   ----------
                                        $4,399,922   $1,883,999
                                        ==========   ==========
REPAYMENTS RECEIVED                                  $   80,465
                                                     ==========
</TABLE>


34  MACC PRIVATE EQUITIES INC.
<PAGE>   36

SHAREHOLDER INFORMATION

- Stock Transfer Agent

ChaseMellon Shareholder Services, L.L.C., P.O. Box 3315, South Hackensack, New
Jersey 07606-1915 (telephone (800) 288-9541, (800) 231-5469 (TDD), and
www.chasemellon.com) serves as transfer agent and registrar for MACC's common
stock. Certificates to be transferred should be mailed directly to the transfer
agent, preferably by registered mail.

- Shareholders

MACC had approximately 2,527 record holders of its common stock at October 31,
2000.

- Annual Meeting

The Annual Meeting of Shareholders of MACC will be held on Tuesday, February 27,
2001, at 10:00 a.m. at the Crowne Plaza Five Seasons Hotel, 350 First
Avenue N.E., Cedar Rapids, Iowa.

- Dividends

MACC has no history of paying cash dividends and does not anticipate declaring
any cash dividends in the foreseeable future, but intends to retain all
earnings, if any, for use in MACC's business. During fiscal year 2000, however,
MACC declared and paid a 20% stock split effected in the form of a stock
dividend. The payment of dividends, if any, in the future is within the
discretion of the Board of Directors and will depend upon MACC's earnings,
capital requirements, financial condition and other relevant factors. MACC does
not presently have any type of dividend reinvestment plan.

- Market Prices

The common stock of MACC is traded on the over-the-counter market through the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market under the symbol "MACC". At the close of business on October 31,
2000, the bid price for shares of MACC's common stock was $9.50. The following
high and low bid quotations for the shares during each quarterly period ended on
the date shown below of MACC's fiscal years 2000 and 1999 were taken from
quotations provided to MACC by the National Association of Securities Dealers,
Inc:


                                        HIGH        LOW
                                       -----       -----
December 31, 1998                      $6.89        5.85
March 31, 1999                          6.73        6.33
June 30, 1999                           7.82        6.28
September 30, 1999                     10.37        7.71
December 31, 1999                      11.51       10.21
March 31, 2000                         11.15        8.75
June 30, 2000                          10.81        9.13
September 30, 2000                      9.56        8.94

High and low bid quotations have been adjusted to reflect the payment of a 20%
stock split effected in the form of a stock dividend on March 31, 2000 and a
30% stock split effected in the form of a stock dividend on March 31, 1999.

Such over-the-counter market quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission and may not represent actual
transactions.


                                                  MACC PRIVATE EQUITIES INC.  35
<PAGE>   37

OFFICERS AND DIRECTORS

FUND MANAGER
InvestAmerica Investment Advisors, Inc.

OFFICERS

DAVID R. SCHRODER
President and Secretary

ROBERT A. COMEY
Executive Vice President and Treasurer

KEVIN F. MULLANE
Senior Vice President

BOARD OF DIRECTORS

PAUL M. BASS, JR.  -   DALLAS, TEXAS
Chairman of the Company, Vice Chairman of First
Southwest Company, a regional investment banking firm

ROBERT A. COMEY  -   CEDAR RAPIDS, IOWA
Executive Vice President of the Company, Executive Vice
President of InvestAmerica Investment Advisors, Inc.

MICHAEL W. DUNN  -   MANCHESTER, IOWA
President, Farmers and Merchants Savings Bank

JERI J. HARMAN  -   WOODLAND HILLS, CALIFORNIA
Principal, American Capital Strategies

HENRY T. MADDEN  -   IOWA CITY, IOWA
Adjunct Professor, School of Management,
University of Iowa and Management Consultant

JAMES L. MILLER  -   CEDAR RAPIDS, IOWA
Self-employed, with background in retail management

DAVID R. SCHRODER  -   CEDAR RAPIDS, IOWA
President of the Company, President of
InvestAmerica Investment Advisors, Inc.

TODD J. STEVENS  -   SALT LAKE CITY, UTAH
Managing Director, Wasatch Venture Fund, Manager of
the Venture Capital Department of Zions First National Bank

JOHN D. WOLFE  -   MOUNT VERNON, IOWA
Retired from career in retail banking and mortgage lending


36  MACC PRIVATE EQUITIES INC.