<PAGE>
Rule 424(b)(1)
File No. 333-94119
PROSPECTUS
[LOGO OF METROPOLITAN MORTGAGE]
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
100,000 Shares of Preferred Stock, Series E-7
We are offering variable rate cumulative preferred stock with the following
terms:
. The preferred stock is subordinate to all of our debt, including our notes
and debentures.
. Preferred stock distributions are cumulative and will be declared monthly
according to a variable rate formula described in this prospectus.
. The preferred stock has a liquidation preference of $100 per share.
. We may redeem the preferred stock at any time at a price of $100 per share
plus the amount of any declared but unpaid distributions.
You should consider carefully the risk factors beginning on page 9 in this
prospectus.
<TABLE>
<CAPTION>
Per Preferred Share Total
------------------- -----------
<S> <C> <C>
Public offering price...................... $100 $10,000,000
Maximum underwriting discounts and
commissions*.............................. 6% $ 600,000
Maximum proceeds to Metropolitan (before
expenses)................................. $ 94 $ 9,400,000
</TABLE>
* You will not incur a direct sales charge. Preferred stock distributions
will be based on their full offering price, without deduction for underwriting
discounts or commissions. We will reimburse our underwriters for commissions
paid to licensed securities sales representatives. Sales commission rates on
the sale of preferred stock depend upon the terms of the sale. See "PLAN OF
DISTRIBUTION."
. Currently there is no trading market for the preferred stock and you should
not expect one to be established in the future.
. The preferred stock is being issued only in book-entry form.
. The underwriter maintains a list of persons willing to sell or purchase our
issued and outstanding shares of preferred stock.
. We are offering the preferred stock on a continuous, best efforts basis, and
there is no minimum amount of preferred stock that must be sold.
. You may not purchase the preferred stock pursuant to this prospectus after
January 31, 2001.
The shares of preferred stock are securities of our company and they are not
insured or guaranteed by any governmental agency, any insurance company, any
affiliate of our company or any other person or entity.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
METROPOLITAN INVESTMENT SECURITIES, INC.
The date of this prospectus is February 11, 2000.
<PAGE>
<TABLE>
<S> <C>
FORWARD-LOOKING STATEMENTS.................................................. 2
PROSPECTUS SUMMARY.......................................................... 3
RISK FACTORS................................................................ 9
USE OF PROCEEDS............................................................. 11
DESCRIPTION OF SECURITIES................................................... 11
PLAN OF DISTRIBUTION........................................................ 17
LEGAL MATTERS............................................................... 18
EXPERTS..................................................................... 18
AVAILABLE INFORMATION....................................................... 18
INCORPORATION OF DOCUMENTS BY REFERENCE..................................... 19
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We based these forward-
looking statements on our current expectations and projections about future
events. These forward-looking statements are subject to risks, uncertainties,
and assumptions about Metropolitan, including:
. Our anticipated growth strategies,
. Anticipated trends in our businesses, including trends in the markets
for insurance, mortgages, annuities and real estate,
. Future interest rate trends, movements and fluctuations,
. Future expenditures for purchasing receivables, and
. Our ability to continue to control costs and accurately price the risk
of default on the payment of receivables.
----------------
You should only rely on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider before investing in the preferred stock. You should read
both this prospectus and the attached Annual Report on Form 10-K of
Metropolitan for the fiscal year ended September 30, 1999, carefully before you
make your investment decision.
The Metropolitan Consolidated Group Of Companies
General
Metropolitan was incorporated in the State of Washington in January 1953.
Its principal executive offices are located at 601 West First Avenue, Spokane,
Washington 99201-5015. Its mailing address is P.O. Box 2162, Spokane,
Washington 99210-2162 and its telephone number is (509) 838-3111. Metropolitan
and its subsidiaries are collectively referred to in this prospectus as the
"consolidated group," while the terms "Metropolitan," "we" and "our" refer
solely to the parent company, Metropolitan Mortgage & Securities Co., Inc.
History
Metropolitan's controlling shareholder is C. Paul Sandifur, Jr. Mr. Sandifur
has control through his voting power over a family trust and through his direct
ownership of common stock. See "Item 12" in Metropolitan's Annual Report on
Form 10-K for the year ended September 30, 1999, which is attached to this
prospectus. As a result of Mr. Sandifur's common control, we have several other
affiliates, including Summit Securities, Inc., Old Standard Life Insurance
Company and Old West Annuity & Life Insurance Company. Collectively, these
affiliated companies are referred to as "affiliated companies." The chart on
the next page depicts the relationship of some of the significant companies in
the Metropolitan consolidated group, which excludes affiliated companies that
are not subsidiaries of Metropolitan.
Business
The consolidated group is engaged in a nationwide business of acquiring,
holding, selling and securitizing receivables. These receivables include real
estate contracts and promissory notes that are secured by first position liens
on real estate. The consolidated group also invests in receivables consisting
of real estate contracts and promissory notes secured by second and lower
position liens, structured settlements, annuities, lottery prizes, equipment
leases and other investments. The receivables secured by real estate are
typically non-conventional because they were either financed by the sellers of
the properties involved or they were originated by institutional lenders who
originate loans for borrowers with impaired credit or for non-conventional
properties. In addition to receivables, the consolidated group invests in other
assets, including U.S. Treasury obligations, corporate bonds and other
securities.
The consolidated group's capital to invest in these receivables comes from
several sources. The consolidated group uses funds generated from the sale and
securitization of receivables, collateralized borrowings, receivable cash
flows, the sale of annuities, the sale of debt and equity securities, the sale
of real estate and securities portfolio earnings.
The consolidated group provides services to the affiliated companies for a
fee and engages in various business transactions with the affiliated companies.
Metropolitan provides receivable acquisition services to the affiliated
companies and to our insurance subsidiary, Western United Life Assurance
Company. Metropolitan's wholly owned subsidiary, Metwest Mortgage Services,
Inc., conducts receivable collection and servicing activities for the
affiliated companies, Metropolitan and Western United.
3
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The consolidated group owns various properties acquired through repossession
and other sources. These properties are held for sale and/or development. For a
more detailed discussion of the business of the consolidated group, see "Item
1" in Metropolitan's Annual Report filed on Form 10-K for the year ended
September 30, 1999, which is attached to this prospectus.
Organizational Chart
(as of September 30, 1999)
The chart below lists the consolidated group's principal operating
subsidiaries and their ownership.
[CHART]
- --------
* The remaining 3.5% of Consumers Group Holding Co., Inc. is owned by Summit
Securities, Inc.
Metropolitan Mortgage & Securities Co., Inc.: Parent organization; invests
in receivables and other investments, including real estate development, which
are principally funded by proceeds from receivable investments, other
investments, and securities offerings.
Consumers Group Holding Co., Inc.: A holding company; its sole business
activity is being a shareholder of Consumers Insurance Co., Inc.
Consumers Insurance Company: Inactive property and casualty insurer; its
principal business activity is being a shareholder of Western United Life
Assurance Company.
Western United Life Assurance Company: Metropolitan's largest subsidiary and
largest company within the consolidated group; is engaged in investing in
receivables and other investments principally funded by annuity contract sales
and premiums from the sale of life insurance policies.
Metwest Mortgage Services, Inc.: Performs loan origination, collection and
servicing functions. It is an FHA/HUD licensed servicer and lender and is
licensed as a Fannie Mae seller/servicer.
4
<PAGE>
Summary of the Preferred Stock Offering
Preferred stock offering........ We are offering 100,000 shares of
variable rate cumulative preferred stock,
series E-7 at $100 per share. The
preferred stock will be sold in whole and
fractional shares. There is no minimum
amount of preferred stock that must be
sold. The preferred stock will be issued
only in book-entry form.
Distributions................... We will pay distributions on the
preferred stock on a cumulative basis
from the date the shares are issued. When
we make distributions, they will be paid
monthly at the applicable annual rates
described in "DESCRIPTION OF SECURITIES--
Distributions."
Liquidation rights.............. If we liquidate Metropolitan, you will
have a right to receive a liquidation
preference of $100 per share, plus
declared and unpaid distributions. Your
liquidation rights will be paid only
after all of our debts, including our
outstanding notes and debentures, are
paid. Your liquidation rights will be
paid before any liquidating distributions
to the common stockholders.
Redemption upon request of
holder.......................... We may consider a written shareholder
request you make to have your shares
redeemed. We will generally not consider
a request to redeem shares unless they
have been listed for sale on Metropolitan
Investment Securities, Inc.'s trading
list for at least 60 days. We are under
no obligation to redeem your shares of
preferred stock. Our decision whether or
not to redeem your shares will depend, in
part, on our financial condition and our
liquidity position at the time. Any
shares that we do redeem will be redeemed
at a price per share that is determined
by our board of directors in its
discretion, and will include any declared
but unpaid distributions. This price may
be less than your original $100 per share
purchase price. See "DESCRIPTION OF
SECURITIES--Redemption of Shares" and
"RISK FACTORS."
Redemption upon call by
Metropolitan.................... We can redeem any or all shares of the
preferred stock if we provide you with
notice at least 30 but not more than 60
days prior to redemption by mail. If we
decide to redeem your shares, you will be
paid $100 per share plus the amount of
any declared but unpaid distributions as
of the date fixed for redemption. See
"DESCRIPTION OF SECURITIES--Redemption of
Shares."
Voting rights .................. Your voting rights will be limited to two
situations. First, you will have those
voting rights expressly granted by the
laws of the State of Washington. Second,
you will have voting rights if the
distributions payable to you on your
preferred stock remain unpaid for a
period of time that equals twenty-four
monthly distributions. See "DESCRIPTION
OF SECURITIES--Voting Rights."
5
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Federal income tax
considerations.................. If we earn a profit on a tax accounting
basis during any future year, any
earnings or profits that we distribute to
you will be taxable. If we incur a loss
on a tax accounting basis, the
distributions will be a return of capital
and not taxed, but will reduce your
basis. We cannot predict whether we will
have future distributions, or whether
those distributions will be taxable to
you. You are encouraged to consult your
own tax advisors about whether the
distributions you will receive will be
taxable income. See "DESCRIPTION OF
SECURITIES--Federal Income Tax
Consequences of Distributions."
Use of proceeds................. We will use the proceeds of this
preferred stock offering to invest in
receivables and to make other investments
which may include investments in existing
subsidiaries, new business ventures, to
acquire other companies or for other
investment purposes. The proceeds may
also be used to retire maturing
debentures, for property development, to
pay preferred stock distributions and for
general corporate purposes. See "USE OF
PROCEEDS."
Risk factors.................... Your investment in the preferred stock
involves risk. You should review the
risks described in this prospectus and
those described in the attached Annual
Report on Form 10-K of Metropolitan
before investing in the preferred stock.
See "RISK FACTORS" for a discussion of
the risks associated with investing in
the preferred stock.
6
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Capitalization
The following table shows the capitalization of the consolidated group at
September 30, 1999.
<TABLE>
<CAPTION>
Amount
Class Outstanding
----- ------------
<S> <C>
Debt Payable:
Advances under funding facility with Bank of America, interest
at 6.383% per annum; due on March 24, 2000; collateralized by
$65,505,000 in real estate contracts and mortgage notes....... $ 62,908,030
Reverse repurchase agreements with Seattle Northwest; interest
at 5.35% per annum; due on October 13, 1999; collateralized by
$5,000,000 in U.S. Treasury Bonds............................. 4,962,500
Reverse repurchase agreements with Bear Stearns; interest at
5.33% per annum; due October 13, 1999; collateralized by
$10,000,000 in collateralized mortgage obligation ("CMO")
bonds......................................................... 10,000,000
Note payable to Old Standard Life Insurance Company; interest
at 10.50% per annum; due May 3, 2004; collateralized by Beach
House Restaurant.............................................. 2,507,289
Note payable to Summit Securities, Inc., interest at 11.0% per
annum; due on June 30, 2000; collateralized by $12,500,000 in
structured settlement agreements.............................. 10,000,000
Notes payable to Federal Home Loan Bank of Seattle, interest
rates ranging from 5.39% to 5.42% per annum; due October 25,
1999; collateralized by $41,250,000 in CMO bonds.............. 33,000,000
Note payable to IDS Life Insurance Company, interest at 7.04%
per annum; due August 1, 2009; collateralized by Metropolitan
Financial Center located in Spokane, Washington............... 11,970,474
Real estate contracts and mortgage notes payable, interest
rates ranging from 3% to 11.6% per annum, due through 2026;
collateralized by senior liens on certain of the Company's
real estate contracts, mortgage notes and real estate held for
sale.......................................................... 1,877,056
Accrued interest payable....................................... 119,281
------------
Total Debt Payable........................................... 137,344,630
------------
Debenture Bonds:
Investment Debentures, Series III maturing in 1999 to 2009, at
5.5% to 11%................................................... 71,406,000
Investment Debentures, Series II maturing in 1999 to 2002, at
5.5% to 11%................................................... 104,676,000
Installment Debentures Series I, maturing in 1999 to 2007 at
7.5% to 10.25%................................................ 157,000
Compound and accrued interest.................................. 22,649,779
------------
Total Debenture Bonds........................................ 198,888,779
------------
Stockholders' Equity:
Preferred Stock................................................ 19,099,294
Common Stock................................................... 291,167
Additional paid-in capital..................................... 22,522,036
Accumulated comprehensive loss................................. (3,638,723)
Retained earnings.............................................. 33,430,689
------------
Total Stockholders' Equity................................... 71,704,463
------------
Total Capitalization......................................... $407,937,872
============
</TABLE>
7
<PAGE>
Summary Consolidated Financial Data
The summary consolidated financial data shown below as of September 30, 1999
and 1998 and for the years ended September 30, 1999, 1998 and 1997, other than
the ratios of earnings to fixed charges and preferred stock dividends, have
been derived from, and should be read in conjunction with, the consolidated
financial statements, related notes, and Management's Discussion and Analysis
of Financial Condition and Results of Operations appearing in Metropolitan's
Form 10-K for the year ended September 30, 1999, which is incorporated in this
prospectus by reference and attached to this prospectus. The summary
consolidated financial data shown below as of September 30, 1997, 1996 and 1995
and for the years ended September 30, 1996 and 1995, other than the ratios of
earning, to fixed charges and preferred stock dividends, have been derived from
consolidated financial statement not included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF INCOME DATA:
Revenues................ $ 165,221 $ 155,955 $ 155,135 $ 156,672 $ 138,107
========== ========== ========== ========== ==========
Income before minority
interest............... $ 16,593 $ 10,453 $ 9,791 $ 8,146 $ 6,376
Income allocated to
minority interests..... (318) (126) (123) (108) (73)
---------- ---------- ---------- ---------- ----------
Net income.............. 16,275 10,327 9,668 8,038 6,303
Preferred stock
dividends.............. (3,642) (3,732) (4,113) (3,868) (4,038)
---------- ---------- ---------- ---------- ----------
Income applicable to
common stockholders.... $ 12,633 $ 6,595 $ 5,555 $ 4,170 $ 2,265
========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges.......... 1.12 1.75 1.77 1.46 1.35
Ratio of earnings to
fixed charges and
preferred stock
dividends.............. (1) 1.37 1.31 1.14 1.03
PER COMMON SHARE DATA:
Basic and diluted income
per share applicable to
common
stockholders(2)........ $ 97,933 $ 50,728 $ 42,733 $ 32,073 $ 17,288
========== ========== ========== ========== ==========
Weighted average number
of common shares
outstanding............ 129 130 130 130 131
========== ========== ========== ========== ==========
Cash dividends per
common share........... $ 2,400 $ 1,200 $ -- $ -- $ 3,800
========== ========== ========== ========== ==========
CONSOLIDATED BALANCE
SHEET DATA:
Total assets............ $1,230,957 $1,226,665 $1,112,389 $1,282,659 $1,078,468
Debentures, line of
credit advances, other
debt payable and
securities sold, not
owned.................. $ 336,233 $ 323,908 $ 190,131 $ 363,427 $ 226,864
Stockholders' equity.... $ 71,704 $ 58,757 $ 54,113 $ 46,343 $ 40,570
</TABLE>
- --------
(1) Earnings were insufficient to meet fixed charges and preferred stock
dividends by approximately $808,000 for the year ended September 30, 1999.
The consolidated ratio of earnings to fixed charges and preferred stock
dividends was 1.37, 1.31, 1.14 and 1.03 for the years ended September 30,
1998, 1997, 1996 and 1995, respectively. Assuming no benefit from the
earnings of its subsidiaries with the exception of direct dividend
payments, earnings were insufficient to meet fixed charges and preferred
stock dividends by approximately $390,000 for the year ended September 30,
1999. The ratio of earnings to fixed charges and preferred dividends for
Metropolitan alone was 1.10, 1.01, 1.11, and 1.05 for the years ended
September 30, 1998, 1997, 1996 and 1995, respectively. The consolidated
ratio of earnings to fixed charges excluding preferred stock dividends was
1.12, 1.75, 1.77, 1.46 and 1.35 for the years ended September 30, 1999,
1998, 1997, 1996 and 1995, respectively. The ratio of earnings to fixed
charges excluding preferred stock dividends for Metropolitan, assuming no
benefit from the earnings of its subsidiaries with the exception of direct
dividend payments was 1.13, 1.40, 1.36, 1.48 and 1.40 for the years ended
September 30, 1999, 1998, 1997, 1996 and 1995, respectively.
(2) Earnings per common share, basic and diluted, are computed by deducting
preferred stock dividends from net income and dividing the result by the
weighted average number of shares of common stock outstanding. There were
no common stock equivalents or potentially dilutive securities outstanding
during any period presented.
8
<PAGE>
RISK FACTORS
When deciding whether or not to purchase the preferred stock, you should
carefully consider the risks contained in the section entitled "BUSINESS
OVERVIEW--Factors Affecting Future Operating Results" of Metropolitan's Annual
Report on Form 10-K for the year ended September 30, 1999, incorporated into
and attached to this prospectus. You should also consider the following risks
associated with an investment in the preferred stock:
We can issue more
company securities....... Metropolitan's and your rights and obligations in
the preferred stock are defined in the Statement
of Rights, Designations and Preferences of
Variable Rate Cumulative Preferred Stock Series
E-7. This statement does not restrict our ability
to issue additional debt, preferred stock or
other equity securities in our company.
Preferred stock is not
insured against the risk
of loss.................. The preferred stock is not insured or guaranteed
by any bank, any governmental agency, any
insurance company, any affiliate of our company
or any other person or entity. Thus, the
preferred stock has greater risk than investments
that are insured against the risk of loss.
Preferred stock is not a
liquid investment due to
the absence of an
established trading
market................... The preferred stock is not listed for trading on
a stock exchange. We do not anticipate listing
the preferred stock on any stock exchange or that
an independent public market for the preferred
stock will develop.
Trading list does not
guarantee a market for
the preferred stock...... The broker/dealer for this offering maintains a
trading list of persons willing to sell or
purchase outstanding shares of our preferred
stock. We can not assure you that this list will
continue to operate or that it will provide you a
means to sell your shares.
Our discretionary
redemption option does
not guarantee you the
ability to sell
securities to
Metropolitan............. Under our discretionary redemption option, we are
under no obligation to redeem your shares. You
should not rely on this option as a guarantee
that you will be able to have us reacquire your
shares. See "DESCRIPTION OF SECURITIES--
Redemption of Shares."
The preferred stock has
limitations on
redemption and
restrictions on
distributions............ If we have not paid cumulative distributions to
all preferred shareholders, we cannot purchase or
offer to exchange your shares unless we make the
same offer to all preferred shareholders. See
"DESCRIPTION OF SECURITIES--Redemption of
Shares." We will not make distributions to you
unless distributions can be made to all other
holders of preferred stock. See "DESCRIPTION OF
SECURITIES--Distributions."
9
<PAGE>
Liquidation rights are
junior to Metropolitan's
outstanding debt......... If we liquidate, we must pay all of our
outstanding debt before we can make any
distributions to you. If there is not enough
money to distribute to all preferred shareholders
for their entire respective liquidation rights,
you will share the shortfall with the other
preferred shareholders in proportion to your
respective liquidation rights.
Extraordinary corporate
events could eliminate
the liquidation rights
of the holders of
preferred stock.......... Your preferences in liquidation could be
adversely effected if we have an asset sale, a
capital restructuring, a merger, a reorganization
or a bankruptcy. If one of these events occurs,
your rights may be compromised by a negotiation
between all interested parties or by a court
determination.
Lack of voting control
of the company........... You will have very few voting rights as an owner
of preferred stock. The only class of stock
carrying full voting rights is the common stock.
See "DESCRIPTION OF SECURITIES--Voting Rights."
Metropolitan can redeem
or call the preferred
stock at its own
discretion............... We have the option of calling or redeeming your
shares at any time for $100 per share plus any
declared and unpaid distributions. See
"DESCRIPTION OF SECURITIES---Redemption of
Shares."
Risk of holding book-
entry shares of
preferred stock because
there are no physical
shares to transfer....... Our use of book-entry shares of preferred stock
rather than actual physical shares in this
offering could limit the markets for these
securities, prevent a secondary market from
forming and could delay payments to you. The
absence of physical shares may prevent a
secondary market from developing because
investors may be unwilling to invest in
securities if they cannot obtain delivery of
physical shares. The use of book-entry shares may
delay payments to you because distributions on
the shares would be made first to the person in
whose name the shares are registered.
10
<PAGE>
USE OF PROCEEDS
If all of the preferred stock we are offering is sold, we expect proceeds to
total $10,000,000 before deducting sales commissions and other expenses.
Offering expenses are estimated at $112,000 and sales commissions will be a
maximum of six percent (6%) of the offering proceeds. There can be no
assurance, however, that any of the preferred stock can or will be sold.
In conjunction with the other funds available to us through operations
and/or borrowings, we currently plan to utilize the proceeds of the preferred
stock offering for the following purposes: priority will be given first to (1)
funding investments in receivables and other investments, which may include
investments in existing subsidiaries, the commencement of new business ventures
or the acquisition of other companies, and then to (2) the development of real
estate we currently hold or acquire in the future. We do not have any
commitments or agreements for material acquisitions. However, the consolidated
group continues to evaluate possible acquisition candidates. To the extent
internally generated funds are insufficient or unavailable for the retirement
of maturing debentures, proceeds of this offering may be used for retiring
maturing debentures, preferred stock distributions and for general corporate
purposes, including debt service and other general operating expenses.
Approximately $26.5 million in principal amount of debt securities will mature
between February 1, 2000 and January 31, 2001 with interest rates ranging from
5.57% to 9.75% and averaging approximately 7.7% per annum. See "BUSINESS
OVERVIEW--Factors Affecting Future Operating Results" under Item 1 in our
Annual Report on Form 10-K for the year ended September 30, 1999.
We anticipate that some of the proceeds from this offering will be invested
in money market funds, bank repurchase agreements, commercial paper, U.S.
Treasury Bills and similar securities investments while awaiting use as
described above. Since we do not know how many shares of preferred stock will
be sold, we are unable to accurately forecast the total net proceeds generated
by this offering. Therefore, we have not allocated specific amounts for any of
the foregoing purposes.
In the event substantially less than the maximum proceeds are obtained, we
do not anticipate any material changes to our planned use of proceeds from
those described above.
DESCRIPTION OF SECURITIES
Description of Capital Stock
The authorized capital stock of Metropolitan consists of:
. 222 shares of Class A Common Stock, $2,250 par value,
. 222 shares of Class B Common Stock, $2,250 par value,
. 750,000 shares of Preferred Stock, Series A, $1 par value,
. 200,000 shares of Preferred Stock, Series B, $10 par value,
. 1,000,000 shares of Preferred Stock, Series C, $10 par value,
. 1,375,000 of Preferred Stock, Series D, $10 par value,
. 5,000,000 shares of Preferred Stock, Series E, $10 par value, and
. 1,000,000 shares of Subordinate Preferred Stock, no par value.
Of the shares authorized, 129 shares of Common A, 373,052 shares of
Preferred C, 539,058 shares of Preferred D and 997,820 shares of Preferred E
were issued and outstanding as of September 30, 1999.
11
<PAGE>
Description of Preferred Stock
This offering consists of 100,000 shares of variable rate cumulative
preferred stock, Series E-7. All of the outstanding shares of preferred stock
and the shares of preferred stock we are offering in this prospectus, when
issued and sold, will be validly issued, fully paid and nonassessable. The
relative rights and preferences of preferred stock have been fixed and
determined by our board of directors and are set forth in the statement of
rights, designations and preferences of preferred stock, duly approved by the
board of directors. The preferred stock is issued in book-entry form only.
The following statements relating to the preferred stock are summaries, do
not purport to be complete and are qualified in their entirety by reference to
the statement of rights which is filed as an exhibit to the registration
statement that includes this prospectus. The statement of rights is also
available for inspection at the principal office of Metropolitan.
Distributions
Distributions on the preferred stock are cumulative and will be declared
monthly on the first business day of the month, payable to the shareholders of
record as of the fifth calendar day of each month. Distributions will be paid
in cash on the twentieth calendar day of each month in an amount equal to the
offering price of $100 per share multiplied by the distribution rate divided by
twelve. The distribution rate will be the "applicable rate," as defined below,
subject to the authority of Metropolitan's board of directors to authorize, by
resolution, a higher rate.
The applicable rate for any monthly distribution period cannot be less than
6% or greater than 14% per annum. The applicable rate for any monthly
distribution period shall be (1) the highest of the three-month U.S. Treasury
Bill rate, the ten-year constant maturity rate or the twenty-year constant
maturity rate, each as described below, plus (2) one-half of one percentage
point (0.5%).
The three-month Treasury Bill rate for each distribution period is based on
the weekly per annum market discount rate for three-month U.S. Treasury bills.
The ten-year constant maturity rate for each distribution period is based on
the weekly per annum average yield to maturity for actively traded marketable
U.S. Treasury fixed interest rate securities adjusted to constant maturities of
ten years. The twenty-year constant maturity rate for each distribution period
is based on the weekly per annum average yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities adjusted to constant
maturities of twenty years.
Each of the above three rates shall be calculated as the arithmetic average
of the two most recent weekly per annum yields as published weekly by the
Federal Reserve Board, the Federal Reserve Bank or any U.S. Government
department or agency selected by Metropolitan, during the period of 14 calendar
days immediately prior to the 10 calendar days immediately preceding the first
day of the distribution period for which the distribution rate on preferred
stock is being determined.
If any or all of these methods are unavailable, the statement of rights
includes other methods to determine the distribution rate. If we determine in
good faith that one or more of these rates cannot be determined for any
distribution period, then the applicable rate for that period will be the
higher of whichever of the rates that can be determined, plus one-half of one
percentage point. If we determine in good faith that none of the rates can be
determined for any distribution period, then the applicable rate in effect for
the preceding distribution period will be continued for that distribution
period. The distribution rate for each monthly distribution period will be
calculated as promptly as practicable by Metropolitan. Metropolitan will
enclose notice of the distribution rate with the next mailed distribution
payment check. In making the calculation, the three-month U.S. Treasury Bill
rate, ten-year constant maturity rate and twenty-year constant maturity rate
will each be rounded to the nearest five one-hundredths of a percentage point.
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<PAGE>
Prior to the effective date of this prospectus, Metropolitan's board of
directors adopted a resolution authorizing a distribution rate on the preferred
stock at one percentage point higher than the applicable rate. This higher
distribution rate will continue from month to month until the board elects to
terminate it. The board may increase, decrease or eliminate the additional
percentage rate at any time in its sole discretion.
Restrictions on Distributions
Metropolitan may not declare or pay a distribution on any share of preferred
stock offered in this prospectus for any distribution period unless, at the
same time, a like distribution is declared and paid on all shares of preferred
stock previously issued and outstanding and entitled to receive distributions.
Distributions may only be paid from legally available funds.
If any shares of preferred stock are outstanding and the full cumulative
distributions on all previously outstanding preferred stock, including the
preferred stock offered by this prospectus, have not been paid or declared and
set apart for all past distribution periods, Metropolitan may not:
. declare, pay or set aside for payment any distribution, except as
provided below;
. declare or pay any other distribution upon common stock or upon any
other stock ranking junior to or on a parity with preferred stock as to
distributions or upon liquidation; or
. redeem, purchase or otherwise acquire common stock or any other stock of
Metropolitan ranking junior to or on a parity with preferred stock as to
distributions or upon liquidation for any consideration, or pay or make
available any funds for a sinking fund for the redemption of any shares
of that stock, except by conversion into or exchange for stock of
Metropolitan ranking junior to preferred stock as to distributions and
upon liquidation.
Notwithstanding the above, Metropolitan may declare, pay or set aside
payment for:
. distributions in common stock;
. distributions in any other stock ranking junior to preferred stock as to
distributions;
. liquidation rights; and
. distributions where a like distribution is declared or paid on all
shares of preferred stock then issued and outstanding and entitled to
receive distributions.
Metropolitan may make distributions ratably on the shares of preferred stock
and shares of any stock of Metropolitan ranking on a parity with the preferred
stock with regard to the payment of distributions, in accordance with the sums
which would be payable on those shares if all distributions, including
accumulations, if any, were declared and paid in full. As of the date of this
prospectus, no distributions on Metropolitan's preferred stock were in arrears.
No interest will be paid for or on account of any unpaid distributions.
Liquidation Rights
If any voluntary or involuntary liquidation, dissolution or winding up of
Metropolitan occurs, the preferred stock shareholders will be entitled to
receive liquidating distributions, in the amount of $100 per share plus
declared and unpaid regular monthly distributions, out of the assets of
Metropolitan available for distribution to shareholders, before any
distribution of assets is made to holders of common stock or any stock of
Metropolitan ranking, upon liquidation, junior to preferred stock. The
preferred stock is junior in liquidation to outstanding debt of Metropolitan
and on parity with all other issued and outstanding preferred stock to the
extent of its liquidation preference of $100 per share. As of September 30,
1999, the total consolidated liabilities of Metropolitan ranking senior in
liquidation preference to preferred stock were approximately
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<PAGE>
$1,159,252,000. Obligations ranking on a parity with preferred stock upon
liquidation, the total liquidation preference of the outstanding shares of all
previous series of preferred stock, as of September 30, 1999, were
approximately $53,095,000. There are no limitations on Metropolitan's ability
to incur additional secured indebtedness. See "RISK FACTORS."
The statement of rights provides that, without limitation, the voluntary
sale, lease or conveyance of all or substantially all of Metropolitan's
property or assets to, or its consolidation or merger with, any other
corporation will not be deemed to be a liquidation, dissolution or winding up
of Metropolitan. If the aggregate liquidation preference payable with respect
to preferred stock and any other shares of stock of Metropolitan ranking on a
parity with preferred stock with respect to the distribution are not paid in
full upon any voluntary or involuntary liquidation, dissolution or winding up
of Metropolitan, then the holders of preferred stock and of these other shares
will share ratably in any distribution of assets of Metropolitan in proportion
to the full respective preferential amounts they are entitled to receive. After
payment of the full amount of the liquidating distribution they are entitled to
receive, the preferred stock shareholders will not be entitled to any further
participation in any distribution of assets by Metropolitan.
Redemption of Shares
Upon call by Metropolitan. Subject to regulatory restrictions affecting
redemptions during an offering, the shares of preferred stock are redeemable,
in whole or in part, only at the option of Metropolitan at a redemption price
of $100 per share plus declared and unpaid distributions to the date fixed for
redemption. If fewer than all of the outstanding shares of preferred stock are
redeemed, the number of shares redeemed will be determined by Metropolitan and
the shares to be redeemed will be determined by any method Metropolitan in its
sole discretion deems to be equitable.
Discretionary Redemption Upon Request of the Holder. Preferred Stock is not
redeemable at the option of the holder. If, however, Metropolitan receives an
unsolicited written request for redemption of shares from any holder,
Metropolitan may, in its sole discretion, subject to regulatory restrictions
affecting redemptions during an offering, and subject to the limitations
described below, consider redemption of these shares. Redemption requests, when
received, are reviewed in the order received. Any shares so tendered, which
Metropolitan in its discretion allows for redemption, will be redeemed by
Metropolitan directly, and not from or through a broker/dealer, at a price
established by the board of directors, from time to time, in its sole
discretion.
There can be no assurance that Metropolitan's financial condition will allow
it to exercise its discretion to accept any request for redemption of preferred
stock. Metropolitan will not redeem any shares tendered for redemption:
. if to do so would, in the opinion of Metropolitan's management, be
unsafe or unsound in light of Metropolitan's financial condition,
including its liquidity position;
. if payment of interest or principal on any outstanding instrument of
indebtedness is in arrears or in default; or
. if payment of any distribution on preferred stock or on shares of any
stock of Metropolitan ranking at least on a parity with the preferred
stock is in arrears as to distributions.
If cumulative distributions on preferred stock have not been paid in full,
Metropolitan may not purchase or acquire any shares of preferred stock other
than by a purchase or exchange offer made on the same terms to all holders of
preferred stock.
As provided in the statement of rights, for a period of three years from the
date of initial sale of each share of preferred stock, any redemption of that
share, at the sole discretion of Metropolitan, will occur only upon the death
or major medical emergency, as demonstrated to the satisfaction of
Metropolitan's management, of the
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<PAGE>
holder or any joint holder of the share requested to be redeemed. As further
provided in the statement of rights, any optional redemption of a share in any
calendar year after the third year from the date of sale of the share, not
arising from the death or medical emergency of the holder or any joint holder
shall occur only when the sum of all optional redemptions, including those
arising out of the death or medical emergency of the holder or any joint
holder, of shares of preferred stock during that calendar year will not exceed
ten percent of the number of shares of preferred stock outstanding at the end
of the preceding calendar year. In the event the ten percent limit is reached
in any calendar year, the only redemptions which may be considered during that
calendar year will be those arising from the death or medical emergency of the
holder or any joint holder; provided, however, that to the extent that total
optional redemptions in any calendar year do not reach the ten percent limit,
the amount by which the optional redemptions shall fall short of the ten
percent limit may be carried over into ensuing years; and, provided further,
that to the extent that all redemptions, including those involving the death or
medical emergency of the holder or any joint holder, exceed the ten percent
limit in any year, the amount by which the redemptions exceed the ten percent
limit shall reduce the limit in the succeeding year for limiting redemptions
not involving the death or medical emergency of a holder or any joint holder.
In no event shall the optional redemptions of all types in any single calendar
year exceed 20% of the number of shares of preferred stock outstanding at the
end of the preceding calendar year.
Absence of Trading Market
We do not anticipate listing the preferred stock for trading on any national
or regional stock exchange nor do we anticipate an independent public market
for the preferred stock to develop. The broker-dealer for this offering,
Metropolitan Investment Securities, Inc. maintains a trading list to match
buyers and sellers of preferred stock. With limited exceptions, Metropolitan
has established a policy that all preferred shareholders, including holders of
the preferred stock offered in this prospectus, must place their shares for
sale on the trading list for 60 consecutive days before Metropolitan will
entertain a request for redemption. See "RISK FACTORS."
Voting Rights
The preferred stock has no voting rights except as provided in the statement
of rights and except as required by Washington State law regarding amendments
to Metropolitan's Articles of Incorporation that adversely affect holders of
these shares as a class and requires approval of 66 2/3% of the outstanding
shares entitled to vote.
The statement of rights provides that holders of the preferred stock,
together with the holders of Metropolitan's other outstanding preferred stock
and any other preferred stock previously authorized, voting separately and as a
single class, shall be entitled to elect a majority of the board of directors
of Metropolitan in the event that distributions payable on any shares of
preferred stock are in arrears in an amount equal to twenty-four or more full
monthly distributions per share. This right will continue until all
distributions in arrears have been paid in full.
Federal Income Tax Consequences of Distributions
The following discussion of the federal income tax consequences of
distributions paid on the preferred stock is based upon the Internal Revenue
Code of 1986 (the "tax code"), existing Treasury Department regulations,
current published administrative positions of the Internal Revenue Service
contained in revenue rulings, revenue procedures and notes and existing
judicial decisions. No assurance can be given that legislative or
administrative changes or court decisions may not be forthcoming that could
significantly modify the statements in this discussion. Any of these changes
may or may not be retroactive with respect to transactions effected prior to
the date of the changes.
Distributions paid to the holders of preferred stock may or may not be
taxable depending, in part, on the extent to which they are made out of current
or accumulated earnings and profits of Metropolitan as calculated
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<PAGE>
for federal income tax purposes. To the extent, if any, that distributions paid
by Metropolitan to the holders of preferred stock exceed current and
accumulated earnings and profits of Metropolitan, these distributions will be
treated first as a tax-free return of capital, reducing the holder's basis in
preferred stock, but not below zero, and thereafter, as capital gains, or
ordinary gains if the preferred stock is not held by the holder as a capital
asset.
Metropolitan believes that distributions with respect to Metropolitan's
preferred stock paid during the calendar years 1984 through 1992 and in 1994
were a return of capital under Section 301 of the tax code. Metropolitan has
filed a Report of Nontaxable Distributions for the years 1984 through 1992 and
in 1994 with the IRS. Metropolitan believes that distributions paid during 1993
and 1995 through 1999 were taxable. Metropolitan is currently unable to predict
the character of its distributions for future years, but as required by the tax
code, will report annually to shareholders regarding the tax character of the
prior year's distributions.
Each preferred shareholder's individual tax circumstances is unique;
accordingly, preferred shareholders are advised to consult their own tax
advisor with respect to the income tax treatment or any distribution made with
respect to the preferred stock.
Distributions paid with respect to the preferred stock, whether deemed to be
dividends, return of capital, or capital gains for federal income tax purposes,
will result in the same federal income tax consequences to Metropolitan as
other payments of distributions. These distributions are not deductible by
Metropolitan under current tax law. Additionally, distributions to foreign
taxpayers are subject to special rules not discussed in this prospectus.
Transfer Agent and Registrar
Metropolitan acts as its own transfer agent and registrar of its common and
preferred stock.
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Summary of Preferred Stock Attributes
The following table shows several of the primary differences and relative
rights of the various series of outstanding preferred stock of Metropolitan as
of the date of this prospectus, including the preferred stock, Series E-7
offered in this prospectus:
<TABLE>
<CAPTION>
Offering Liquidation Redemption
Series Price Preference Price(l) Distribution Rate(4)
- ------ -------- ----------- ---------- -------------------
<S> <C> <C> <C> <C>
C $ 10 $ 10 $ 9.90 Applicable Rate
D $ 10 $ 10 $ 9.90 Applicable Rate
E-1 $ 10 $ 10 $ 9.90 Applicable Rate
E-2 $100 $ 10(2) $99.00 Applicable Rate plus
.5%
E-3 $100 $ 10(2) $99.00 Applicable Rate plus
.5%
E-4 $100 $100 $99.00(3) Applicable Rate plus
.5%
E-5 $100 $100 $99.00(3) Applicable Rate plus
.5%
E-6 $100 $100 (3) Applicable Rate plus
.5%
E-7 $100 $100 (3) Applicable Rate plus
.5%
</TABLE>
- --------
(1) The redemption price shown is for redemptions at the request of the
shareholder. For Series E-7, the redemption price for redemptions at the
request of the holder is at the discretion of Metropolitan. The decision to
redeem shares is also at the sole discretion of Metropolitan. In the event
of a redemption at the request of Metropolitan, the redemption price per
share for authorized shares of Series C, D, and E-1 preferred stock is $10
and for Series E-2 through E-7 preferred stock is $100.
(2) The liquidation preference for classes E-2 and E-3 is $10. In addition,
Metropolitan's amended Articles of Incorporation provide that the E-2 and
E-3 shareholders will receive liquidation distributions of up to $90 per
share prior to any distribution to the common shareholders.
(3) Series E-4, E-5, E-6 and E-7 preferred stock are not redeemable during the
first three years after their respective issuance except for instances of
death or medical emergency. See "DESCRIPTION OF SECURITIES--Redemption of
Shares."
(4) The board of directors has authorized, for an indefinite period, a
distribution payment on all series of preferred stock of an additional one
percentage point above the Distribution Rate listed. The board of directors
may at its sole discretion eliminate the additional percentage point above
the listed Distribution Rate.
PLAN OF DISTRIBUTION
The preferred stock is being offered to the public on a continuing best
efforts basis through Metropolitan Investment Securities, Inc. ("MIS"), which
is affiliated with Metropolitan through the common control of C. Paul Sandifur,
Jr. Accordingly, the offering has not received the independent selling agent
review customarily made when an unaffiliated selling agent offers securities.
No commission or other expense of the offering will be paid by the purchasers
of the preferred stock. A commission in the maximum amount of 6% of the
offering price will be paid by Metropolitan on most preferred stock sales.
Preferred stock is offered for cash or other consideration, tangible or
intangible property, which is acceptable to Metropolitan as determined in good
faith by the board of directors. MIS will transmit the funds or other
consideration it receives directly to Metropolitan by noon of the next business
day after receipt. During the three fiscal years ended September 30, 1999, MIS
received commissions of $426,603 from Metropolitan on sales of approximately
$7,110,000 of Metropolitan's preferred stock through an in-house trading list.
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MIS is a member of the National Association of Securities Dealers, Inc. Due
to the affiliation of Metropolitan and MIS, NASD Rule 2720 of the NASD Conduct
Rules requires, in part, that a qualified independent underwriter be engaged to
render a recommendation regarding the pricing of the preferred stock offered
through this prospectus. Accordingly, MIS has obtained a letter from Cruttenden
Roth Incorporated, a NASD member, stating that the offering price of the
preferred stock is consistent with Cruttenden's recommendations which were
based on conditions and circumstances existing as of the date of the
prospectus. Therefore, the price offered for the preferred stock will be no
higher than Cruttenden would have independently recommended. Cruttenden has
assumed the responsibilities of acting as the qualified independent underwriter
in pricing the offering and conducting due diligence. For performing its
functions as a qualified independent underwriter with respect to the preferred
stock offered in this prospectus, Cruttenden will receive $6,666 in fees.
We have agreed to indemnify Cruttenden against, or make contributions with
respect to some liabilities under the Securities Act of 1933 and the Securities
Exchange Act of 1934.
There is not now and we do not expect that there will be a public trading
market for the preferred stock in the future. MIS does not intend to make a
market for the preferred stock. Metropolitan, through MIS, undertakes to
maintain a list of persons willing to sell or purchase outstanding shares of
preferred stock. See "RISK FACTORS" and "DESCRIPTION OF SECURITIES--Redemption
of Shares."
MIS may enter into selected dealer agreements with and reallow to some
dealers, who are members of the NASD, and some foreign dealers who are not
eligible for membership in the NASD, a commission of up to 6% of the principal
amount of preferred stock sold by those dealers.
Sales of preferred stock will not be made in discretionary accounts without
the prior specific written approval of the customer. In addition, sales will
only be made in compliance with the suitability standards listed in Rule 2720
of the NASD Conduct Rules.
LEGAL MATTERS
The legality of the preferred stock being issued in this prospectus is being
passed upon for Metropolitan by the law firm of Kutak Rock LLP, Denver,
Colorado.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Metropolitan for the year ended
September 30, 1999 have been incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act and, in compliance with this act, file periodic reports and other
information with the SEC. These reports and the other information we file with
the SEC can be inspected and copied at the public reference facilities
maintained by the SEC in Washington, D.C. at 450 Fifth Street, N.W.,
Washington, DC 20549 and at some of its regional offices which are located in
the New York Regional Office, Seven World Trade Center, Suite 1300, New York,
NY 10048, and the Chicago Regional Office, CitiCorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511. In addition, the SEC maintains a
World Wide Web site that contains reports, proxy statements and other
information regarding registrants like Metropolitan that file electronically
with the SEC at the following Internet address: (http://www.sec.gov).
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<PAGE>
We have filed with the SEC in Washington, D.C. a registration statement on
Form S-2 under the Securities Act with respect to the preferred stock offered
by this prospectus. This prospectus does not contain all of the information
contained in the registration statement, as permitted by the rules and
regulations of the SEC.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following document filed with the SEC is incorporated in this prospectus
by reference:
Annual Report on Form 10-K of Metropolitan for the fiscal year ended
September 30, 1999.
Current Report on Form 8-K of Metropolitan dated December 31, 1999.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus modifies or supersedes that statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
Metropolitan will provide without charge to each person, including to whom a
prospectus is delivered, upon written or oral request of that person, a copy of
any and all of the information that has been referenced in this prospectus
other than exhibits to these documents. Requests for these copies should be
directed to Corporate Secretary, Metropolitan Mortgage & Securities Co., Inc.,
P.O. Box 2162, Spokane, Washington 99210-2162, telephone number (509) 838-3111.
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Metropolitan Mortgage & Securities Co., Inc.
[LOGO OF METROPOLITAN MORTGAGE & SECURITIES CO., INC.]
100,000 Shares of Preferred Stock, Series E-7
----------------
PROSPECTUS
----------------
February 11, 2000
Metropolitan Investment Securities, Inc.
