<PAGE>
IMPACT MANAGEMENT INVESTMENT TRUST
1998
ANNUAL
REPORT
THE GROWTH PORTFOLIO
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TABLE OF CONTENTS
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SECTION PAGE
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<S> <C>
A Message from Your Chairman 1
A Letter from the Portfolio Manager 2
Fund Performance 4
Financial Highlights 5
Statement of Assets and Liabilities 6
Schedule of Invsestments in Securities 7
Statement of Operations 8
Statements of Changes in Net Assets 9
Notes to Financial Statements 10
Independent Auditor's Report 12
</TABLE>
<PAGE>
A MESSAGE FROM YOU CHAIRMAN...
- ------------------------------
Dear Shareholders,
The Impact Management Growth Portfolio of the Impact Management Investment
Trust ended its first full year of operation on September 30, 1998. As
mentioned in the Semi-Annual Report, dated March 31, 1998, Senior Portfolio
Manager, Neal Jordan of Jordan American Holdings, Inc., the advisor to the Fund,
was operating with a strong eye on the stock market's exit. Therefore,
throughout the year the Fund was positioned with a more defensive posture in
mind. As expected, the stock market began to show signs of internal weakness
as early as mid-April and by late July the sell-off had begun. The significant
thing about this market decline was that it was the first decline in sixty
years to reach bear market proportions without restrictive action on the part
of the Federal Reserve Board being its cause. That may very well show a degree
of fragility in today's market that is not widely recognized. The fact that
so much money is already in the stock market is a potentially huge negative
factor. If only a small percentage of the money that is in the market wanted
to exit in a short period of time the negative price pressure on stocks could
be significant. Your Fund's advisor believes that this is a time to be
somewhat defensive and patient with a recognition of the realities that exist
in the market and today's world.
Stock market volatility can be the ally of an investor when it occurs in
an understandable context. A return to a normal, understandable context by
the stock market may take some time. However, once reached, the potentials for
profit combined with understandable and manageable risk should make that time
well worth the wait.
Sincerely,
Charles R. Clark
Chairman
Impact Management Investment Trust
1
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A LETTER FROM YOUR ADVISOR...
- -----------------------------
Dear Shareholders,
It's important to understand the difference between the stock market hype
which flows from Wall Street, and what it takes for the achievement of real
success. "True success" in my definition equals the multiplication of assets
over time, using the medium of the competitive marketplace as our conduit. Two
key phrases: "multiplication of assets," and "over time." See "Warren Buffett"
multi-billionaire.
In my opinion, assuming proper management, there is little difference
between seeking profit in a mutual fund portfolio, and seeking success with any
other type of portfolio. We don't want to be over-diversified to the extent
that our potentials are reduced to "whatever the market might give," a general
market result. While such a result may be either postive or negative, and
while a consistently rising trend would be positive, mutual fund shareholders
who have experienced the impact of an authentic bear market trend on such a
fund would be good witnesses to the negative. Experienced investors, those who
have observed both positive and negative market trends, might find it difficult
to accept an investment philosophy of merely "throwing money at the stock
market and hopeing for the best." Such an approach would reflect a disregard
for what I believe are the two keys to investment success. "Respect" and
"Control" are, in my opinion, the two essential qualities which are found in
most successful long-term investment programs. "Respect" for the
enormity of the profit potentials as well as the degree of difficulty in
attaining them, and "Control" over both human emotions and the investment
capital which affords the potentials. In the management of the IMPACT
Management Growth Portfolio, we seek to apply both qualities. The structure of
the fund is a reflection of our philosophy.
Growth is our objective. Seventy-five percent of fund assets may be
invested in such a way that a maximum of five percent goes into any one
company. This assures what I would consider a fair degree of diversification.
With the other twenty-five percent of fund assets we have a degree of
flexibility which I believe provides an important potential to us. Twenty-
five percent of assets can be invested in one industry, even into one company
within the industry. We can therefore seek maximum profitability by "focusing
on the search for the exceptional" with twenty-five percent of the assets.
This ability to be more focused on a smaller number of companies may be of
great importance when we are fortunate enough to identify potentially
exceptional opportunities.
2
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The other equally important potential which our fund has is that which
allows us to protect assets during periods of market decline. Common sense
dictates that when the stock market affords to everyone a special kind of
reduced risk buying opportunity, that investors should endeavor to take
advantage of it. In my opinion, it is insanity to approach stock market
investing with the attitude of wanting to be fully at risk by being fully
invested at all times regardless of the influences which impact price trends.
The market decline of 1998, while substantial, was a little "tinkling of a
bell" wake up call, yet many mutual funds suffered severe declines between
April and October of this year. Our fund has the flexibility to remain on the
sidelines during turbulent time with up to 100% of fund assets if we believe
that market risks are greater than the positive potentials. As we move into
the decade ahead, my expectation is that the protection of you funds' assets
during negative trends shall be of greater importance than at any time since
1982. "Tinkling bells" are sometimes replaced by gongs. And--- paradoxically,
being protective of investment capital during perceived lower potential/higher
risk times, affords maximum growth potential when market conditions reverse
from negative to authentically bullish. Remember the two key words: "Respect,"
and "Control."
The "reality of the actual requirements for the achievement of true
success," referred to above, in my opinion goes far beyond the quasi-
professional management of many mutual funds. "Professional management" in an
investment medium which is volatile and in flux should not mean simply
investing every dollar when it comes in, because the tendency is for more money
to pour in when the news is comforting and prices are higher prior to declines.
"Professional management" also should not mean having no money to invest near
the bottom because emotional shareholders send in panic liquidation requests
when they "can't take any more" after their fund has declined substantially
because they were fully at risk, fully invested all of the way down.
A primary goal in the management of your fund is to attempt to prove that
your mutual fund, properly managed, obviates the need for timing decisions by
our shareholders.
Sincerely,
W. Neal Jordan
Senior Portfolio Manager
Jordan American Holdings, Inc.
3
<PAGE>
Impact Management Growth Portfolio
Fund Performance
For fiscal year from October 1, 1997
through September 30, 1998
MANAGEMENT'S REPORT ON FUND PERFORMANCE
Stock market conditions relative to the timing of both the start-up as well as
the fiscal year end reporting materially affected the fund's performance for
the reporting period. The fund was formed in July 1997, began trading in
September 1997, and in late October 1997, we saw the Dow Jones Industrials
sell-off 554 points in one day. In addition, the end of the fiscal year was
less than 30 days after the summer sell-off bottom set in early September 1998.
Though the fund was in a relatively highly defensive postion, smaller
capitalization portfolio holdings came under more severe price pressure than
the market averages overall. While the fund was down 15.9%, the Russell 2000
Index was down 19.0% and the S&P 500 Index was up 9.0%. Those numbers point to
the fact that the overall market strength has been concentrated in an ever
decreasing number of larger, more liquid stocks.
[Insert: Line graph indicating growth [Insert: Table providing the average
of a $10,000 investment compared to annual total return for the fiscal
the growth of the Russell 2000 Index year of the Fund and since inception
and the S&P 500 Index.] compared to the Russell 2000 Index
and the S&P 500 Index.]
The graph above compares the initial and The table above provides the average
subsequent account values at the end of annual total return for the fiscal
the fiscal year of the Fund, in relation year of the Fund and since inception
to the S&P 500 Index and the Russell in relation to the S&P 500 Index and
2000 Index. Assumes a $10,000 initial the Russell 2000 Index.
investment at the beginning of the *Inception - July 1, 1997
fiscal year. Past performance is not Past performance does not predict
indicative of future results. future results. Investment return
and principal value will flucuate so
that an investor's shares when
redeemed may be worth more or less
than the original cost.
4
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IMPACT MANAGEMENT INVESTMENT TRUST
IMPACT MANAGEMENT GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
--------------------
<TABLE>
<CAPTION>
Year Ended June 17, 1997+ to
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Per Share Data*
Investment income $ .29 $ .01
Expenses (.21) (.01)
------------ ------------
Net investment income .08 .00
Distributions from net investment income (.01) .00
Net realized and unrealized (loss) on investments (1.66) (.08)
Distributions from realized gains on investments .00 .00
------------ ------------
Net (decrease) in net asset value (1.59) (.08)
Net asset value:
Beginning of period 9.92 10.00
------------ ------------
End of period $ 8.33 $ 9.92
============ ============
Ratios and Supplemental Data
Total return# (15.93)% (.80)%^
Ratio of expenses to average net assets# 2.25% 2.25%**
Ratio of net investment income to average net assets# 0.88% 0.00%**
Portfolio turnover rate 221.45% 0.00%
Average commission rate paid $ .1296 $ .1437
Net assets, end of period $ 3,925,928 $ 501,758
Shares of beneficial interest outstanding, end of period 471,512 50,567
Number of shareholder accounts, end of period 136 17
</TABLE>
_____________________
+ Commencement of operations.
* Selected data for a share of beneficial interest outstanding throughout each
period.
^ Not annualized.
** Annualized.
# Excludes administrative fee and account closing fee charged directly to
shareholder accounts (see Note 4 to financial statements).
See accompanying notes to financial statements.
5
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IMPACT MANAGEMENT INVESTMENT TRUST
IMPACT MANAGEMENT GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
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<S> <C>
ASSETS
Investments in securities, at value - identified cost $1,502,754 $1,187,108
Cash 2,343,884
Receivable for investment securities sold 383,654
Receivable for shares of beneficial interest sold 129,306
-----------
Total assets 4,043,952
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LIABILITIES
Payable for investment securities purchased 74,717
Investment advisory fee payable 3,856
Distribution expenses payable 3,085
Administrative fee payable 1,793
Payable for shares of beneficial interest redeemed 34,573
-----------
Total liabilities 118,024
-----------
NET ASSETS $3,925,928
===========
NET ASSETS CONSIST OF:
Accumulated net investment income - net of distributions $ 24,762
Accumulated net realized (loss) (220,761)
Net unrealized (depreciation) (315,646)
Paid-in capital applicable to 471,512 no par value
shares of beneficial interest outstanding;
unlimited number of shares authorized 4,437,573
-----------
NET ASSETS $3,925,928
===========
NET ASSET VALUE PER SHARE $ 8.33
===========
</TABLE>
See accompanying notes to financial statements.
6
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IMPACT MANAGEMENT INVESTMENT TRUST
IMPACT MANAGEMENT GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS IN SECURITIES
September 30, 1998
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<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Common Stocks - 29.6%
Communications - 13.6%
Associated Group Inc. - Class A * 5,440 $ 179,520
Scientific Atlanta Inc. 9,000 190,125
Teligent Inc. - Class A * 6,000 165,000
Computers and Technology - 6.4%
Cisco Systems Inc. * 2,250 139,078
Micron Technology Inc. 3,700 112,618
Medical - 3.9%
Atlantic Pharmaceuticals Inc. * 6,000 10,500
Interneuron Pharmaceuticals * 7,200 21,600
LCA-Vision Inc. * 1,725 2,588
Sunrise Technologies International Inc. * 22,000 116,875
Restaurants - 2.6%
Nathan's Famous Inc. * 29,500 103,250
Transportation - 1.9%
Noble International Ltd. * 10,000 72,500
Other - 1.2%
Harris & Harris Group Inc. 33,250 47,797
-----------
Total common stocks (cost $1,477,097) 1,161,451
-----------
Short-Term Investments - 0.6%
Rydex Series Trust - U.S. Government Money
Market Fund (4.34% seven day yield,
cost $25,657) 25,657 25,657
-----------
Total investments in securities -
30.2% of net assets (cost $1,502,754) $1,187,108
===========
</TABLE>
_____________________
* Non-income producing security
See accompanying notes to financial statements.
7
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IMPACT MANAGEMENT INVESTMENT TRUST
IMPACT MANAGEMENT GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1998
-------------------------------------
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Investment income
Interest income $ 73,970
Dividend income 25,401
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Total income 99,371
----------
Expenses
Investment advisory fee 54,723
Distribution expenses 16,699
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Total expenses 71,422
----------
Net investment income 27,949
----------
Realized and unrealized (loss)
Net realized (loss) on securities (220,761)
Change in net unrealized appreciation or
depreciation on securities (312,975)
----------
Net realized and unrealized (loss) (533,736)
----------
Net (decrease) in net assets resulting from operations $(505,787)
==========
</TABLE>
See accompanying notes to financial statements.
8
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IMPACT MANAGEMENT INVESTMENT TRUST
IMPACT MANAGEMENT GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended September 30, 1998 and
For the Period June 17, 1997 (commencement of operations)
to September 30, 1997
---------------------
<TABLE>
<CAPTION>
Year Ended June 17, 1997 to
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 27,949 $ (17)
Net realized (loss) on securities (220,761) 0
Change in net unrealized appreciation or
depreciation on securities (312,975) (2,671)
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(Decrease) in net assets resulting
from operations (505,787) (2,688)
----------- -----------
Distributions to shareholders from net
investment income (3,170) 0
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Beneficial interest share transactions *
Shares sold 4,615,307 504,560
Shares redeemed (685,350) (114)
Shares issued for reinvestment of
distributions 3,170 0
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Increase in net assets from share
transactions 3,933,127 504,446
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Total increase in net assets 3,424,170 501,758
Net assets
Beginning of period 501,758 0
----------- -----------
End of period (including undistributed net
investment income (loss) of $24,762 and
$(17), respectively) $3,925,928 $ 501,758
=========== ===========
* Share information
Shares sold 495,928 50,579
Shares redeemed (75,342) (12)
Shares issued for reinvestment of
distributions 359 0
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Increase in shares outstanding 420,945 50,567
=========== ===========
</TABLE>
See accompanying notes to financial statements.
9
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IMPACT MANAGEMENT INVESTMENT TRUST
IMPACT MANAGEMENT GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
A. General Description
IMPACT Management Investment Trust (the "Trust") was organized as a
Massachusetts business trust on December 18, 1996. The Trust is registered
under the Investment Company Act of 1940 (the "1940 Act") as a diversified,
open-end management investment company. IMPACT Management Growth Portfolio
(the "Fund") is the initial Series of the Trust. The Trust commenced
operations on June 17, 1997, with the sale of 10,000 shares of beneficial
interest of the Fund to Jordan American Holdings, Inc., d/b/a Equity Assets
Management (the "Investment Advisor"), for cash in the amount of $100,000.
The Trust commenced investing in securities on September 16, 1997.
B. Security Valuation
Investments in securities listed or traded on a securities exchange are valued
at the last quoted sales price on the security's principal exchange on that
day. Listed securities not traded on an exchange that day, and other
securities which are traded in the over-the-counter market are valued at the
mean between the last closing bid and asked prices in the market on that day.
C. Method of Reporting
The financial statements are presented in accordance with generally accepted
accounting principles, which require the use of certain estimates made by the
Fund's management. The Fund follows industry practice and records security
transactions on the trade date. Realized gains and losses are reported on the
identified cost basis. Dividend income is recognized on the ex-dividend date,
and interest income is recorded on the accrual basis.
D. Federal Income Taxes
No provision for federal income taxes is required since the Fund intends to
continue to qualify as a regulated investment company and distribute all its
taxable income to its shareholders.
Note 2. INVESTMENT TRANSACTIONS
-----------------------
Purchases and sales of investment securities, other than short-term investments,
during the year ended September 30, 1998 were $4,967,140 and $3,434,706,
respectively. At September 30, 1998, the aggregate cost of investments for
federal income tax and financial reporting purposes was $1,502,754 and net
unrealized depreciation aggregated $315,646, of which $38,389 related to
appreciated investments and $354,035 to depreciated investments.
10
<PAGE>
IMPACT MANAGEMENT INVESTMENT TRUST
IMPACT MANAGEMENT GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
Note 3. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
---------------------------------------------------------------
The Trust has entered into an investment advisory agreement with the Investment
Advisor. The Investment Advisor makes investment decisions with respect to
the assets of the Fund and reviews, supervises and administers the investment
program of the Fund. As compensation for services rendered, the Investment
Advisor receives an annual investment advisory fee equal to a fixed percentage
of the Fund's average daily net assets. Prior to May 5, 1998, the investment
advisory fee was 2.25% of the Fund's average daily net assets and effective
May 5, 1998, the investment advisory fee was reduced to an annual fee of 1.25%
of the Fund's average daily net assets. The investment advisory fee is
calculated daily and paid monthly.
Effective May 5, 1998, a Distribution Plan was adopted by the Trust pursuant
to Rule 12b-1 of the 1940 Act. Under the provisions of the Distribution Plan,
the Fund pays or reimburses the Investment Advisor, affiliates or other third
parties for expenses incurred in connection with the promotion and
distribution of the Fund's shares in an amount up to 1% per annum of the
average daily net assets of the Fund.
A wholly-owned subsidiary of the Investment Advisor, IMPACT Financial Network,
Inc., a broker and dealer in securities registered with the Securities and
Exchange Commission and a member of the National Association of Securities
Dealers, Inc., earned brokerage fees on the Fund's purchases and sales of
investment securities aggregating approximately $41,000 and was reimbursed
$16,699 pursuant to the provisions of the Distribution Plan for the year ended
September 30, 1998.
Certain officers of the Trust and members of the Board of Trustees are also
officers and directors of the Investment Advisor.
Note 4. ADMINISTRATIVE SERVICES
-----------------------
Effective May 5, 1998, the Trust entered into an administrative services
agreement with Impact Administrative Services, Inc. ("IASI"), a wholly-owned
subsidiary of the Investment Advisor. Under the agreement, IASI provides
administrative personnel and services necessary to operate the Fund including
transfer agent and dividend disbursing agent services. IASI bears substantially
all operating expenses of the Fund, excluding brokerage fees, interest charges
and taxes. For these services, IASI is paid a fee of $165.00 per account, per
year. One twelfth of the annual fee paid to IASI is charged to shareholder
accounts at each month end as a redemption of shares of beneficial interest.
In addition, when a shareholder closes an account, IASI is paid a fee of $2.00
which is charged to the shareholder as a redemption of shares of beneficial
interest. Prior to May 5, 1998, the Trust had an administrative services
agreement with Impact Management Services, Inc. ("IMSI") with substantially
the same terms and an identical fee structure. Total fees charged to
shareholder accounts under these agreements amounted to $16,498 for the year
ended September 30, 1998, of which $1,793 is payable to IASI at September 30,
1998.
11
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INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Trustees
IMPACT Management Investment Trust
IMPACT Management Growth Portfolio
We have audited the accompanying statement of assets and liabilities of IMPACT
Management Growth Portfolio (the "Fund"), a Series of IMPACT Management
Investment Trust, including the schedule of investments in securities, as of
September 30, 1998, and the related statement of operations for the year then
ended, and the statements of changes in net assets and the financial highlights
for the year then ended and for the period June 17, 1997 (commencement of
operations) to September 30, 1997. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 1998, by correspondence
with the custodian. 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 audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of IMPACT
Management Growth Portfolio, a Series of IMPACT Management Investment Trust, as
of September 30, 1998, the results of its operations for the year then ended,
and the changes in its net assets and the financial highlights for the year
then ended and for the period June 17, 1997 (commencement of operations) to
September 30, 1997, in conformity with generally accepted accounting principles.
/s/ Arthur F. Bell, Jr. & Associates, L.L.C.
ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Lutherville, Maryland
October 22, 1998
12
