January 16, 2001
IMPACT MANAGEMENT INVESTMENT TRUST
Jordan 25 Fund
Retail Class Shares
Traditional Class Shares
Wholesale Class Shares
Institutional Class Shares
1-800-556-5856
(Toll Free)
The U.S. Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
TABLE OF CONTENTS
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Page
PORTFOLIO SUMMARIES.........................................................
Investment Objective and Principal Strategies......................
Principal Risks....................................................
Portfolio Expenses.................................................
FINANCIAL HIGHLIGHTS........................................................
INVESTMENT POLICIES AND RISKS...............................................
Risk Factors.......................................................
MANAGEMENT OF THE PORTFOLIO.................................................
Investment Adviser.................................................
Advisory Fees......................................................
Portfolio Manager..................................................
PRICING PORTFOLIO SHARES....................................................
HOW TO PURCHASE SHARES......................................................
General............................................................
Purchasing By Mail.................................................
Purchasing by Wire.................................................
HOW TO REDEEM SHARES........................................................
Written Requests...................................................
Signatures.........................................................
Telephone Redemptions..............................................
Redemption in Kind.................................................
Receiving Payment..................................................
Accounts with Low Balances.........................................
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DISTRIBUTION ARRANGEMENTS...................................................
General ..........................................................
Plans Of Distribution..............................................
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................................
Dividends and Distributions........................................
Tax Consequences...................................................
PORTFOLIO SUMMARIES
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
The investment objective of the Jordan 25 Fund (the "Portfolio") is to
provide long-term capital growth.
The Portfolio seeks to achieve its objective by investing primarily in
equity securities selected because of their potential for strong earnings
growth. The Portfolio will normally hold a core group of 12 to 25 common stocks
of U.S. companies. The Portfolio is non-diversified and may concentrate its
investments in a particular industry or industries. There are no limitations on
the size of companies in which the Portfolio may invest, and during periods when
the stock market is rising, the Portfolio may invest primarily in small and
mid-size U.S. companies. In addition to common stocks, the Portfolio may invest
in preferred stocks and put and call options on common stocks.
The portfolio manager will purchase stocks that exhibit the following
characteristics:
o consistent above-average earnings growth
o risk/reward characteristics which are attractive because the stock's
value and potential have not been fully recognized in its marketplace
o higher forecasted growth rates than the universe of U.S. companies
The portfolio manager may choose to sell a stock when:
o it becomes overvalued relative to what the portfolio manager considers
to be its future earnings potential.
o the company's earnings decelerate as a result of its growth rate
declining or its industry leadership deteriorating.
o The portfolio manager identifies a stronger holding (which could
include cash).
o The portfolio manager discovers something negative about the company
that invalidates the original reason for the purchase or detracts from
the growth estimates.
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Although providing current income is not an objective of the Portfolio, the
Portfolio may earn dividend income generated by its equity holdings and/or
interest income generated by its invested cash positions. During periods of
adverse market conditions, the Portfolio temporarily may hold a substantial
percentage of its assets in cash or money market securities, at which time it is
not likely to achieve growth of capital.
PRINCIPAL RISKS
o The Portfolio's share price will fluctuate in response to market
conditions, economic conditions and financial conditions of issuers of
the Portfolio's investments.
o A relatively high percentage of the Portfolio's assets may be invested
in securities of a limited number of issuers. Consequently, the
Portfolio may be more sensitive to changes in the market price of its
portfolio securities than a diversified fund.
o The stocks of small and mid-size companies historically have been more
volatile in price than stocks of larger companies.
o Growth-oriented investments may be more volatile than the rest of the
U.S. stock market.
o The Portfolio may invest in put and call options on stocks which can
increase the volatility of the Portfolio's share price and decrease
the liquidity of the Portfolio's investments.
o As with an investment in any fund, there is risk of loss of all or
part of your investment.
PORTFOLIO EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold Portfolio shares.
SHAREHOLDER FEES (1)
--------------------
(paid directly from your investment)
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RETAIL TRADITIONAL WHOLESALE INSTITUTIONAL
CLASS CLASS CLASS CLASS
------ ----------- --------- -------------
Maximum Sales Charge (Load) None 5.75%(2) None None
Imposed on Purchases (as a
percentage of offering price)
ANNUAL FUND OPERATING EXPENSES
------------------------------
(expenses that are deducted from Fund assets)
RETAIL TRADITIONAL WHOLESALE INSTITUTIONAL
CLASS CLASS CLASS CLASS
------ ----------- --------- -------------
Management Fees (3) 1.20% 1.20% 1.20% 1.20%
Distribution (12b-1)Fees (4) 1.00% 0.25% 0.25% None
Other Expenses (5) 0.35% 0.35% 0.35% 0.35%
----- ----- ----- -----
Total Annual Fund 2.55% 1.80% 1.80% 1.55%
Operating Expenses
--------------------
(1) Brokers which have not entered into a selling dealer's agreement with the
Portfolio's principal distributor may impose a charge on the purchase of
shares. If such a fee is charged, it will be charged directly by the
broker, and not by the Portfolio.
(2) Reduced for purchases of $50,000 or more, decreasing to zero for purchases
over $1 million. See "DISTRIBUTION ARRANGEMENTS."
(3) Management fees may either increase or decrease from the base rate of 1.20%
depending upon the effect of the performance adjustment fee. See "ADVISORY
FEES" on p. 7.
(4) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc. See "DISTRIBUTION ARRANGEMENTS."
(5) "Other Expenses" are based on estimated amounts for the current fiscal
year.
EXAMPLE
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This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds.
You would pay the following expenses on a $10,000 investment, assuming (1)
a 5% annual return, (2) redemption at the end of each time period,
(3)reinvestment of all dividends and capital distribution, and (4) operating
expenses remain the same. Actual expenses in the future may be greater or lesser
than those shown.
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1 Year 3 Years
Retail Class $261 $824
Traditional Class $749 $1,123
Wholesale Class $185 $582
Institutional Class $159 $501
This example should not be considered a representation of past or future
expenses or performance.
INVESTMENT POLICIES AND RISKS
The Portfolio will invest at least 65% of its assets in a core group of at
least 12, and no more than 25, common stocks of U.S. issuers. The Portfolio
is permitted to invest in companies of any size, from larger well-established
companies to smaller emerging growth companies. It is anticipated that the
Portfolio will be more fully invested in small and mid-size companies during
favorable market periods. The Portfolio is classified as "non-diversified"
because the proportion of its assets that may be invested in the securities of
a single issuer is not limited by the Investment Company Act of 1940. The
Portfolio may concentrate its investment in a particular industry or industries.
The portfolio manager seeks to identify individual companies whose value
and earnings potential have not been fully recognized by the market at large as
reflected in its market price. Utilizing outside research, the portfolio
manager's selection process includes analyzing historical and projected
earnings, price/earnings relationships, industry potential, current and expected
market share, competition and the quality of management. The portfolio manager
then monitors these stocks in the marketplace utilizing proprietary technical
analysis to verify that the stock is consistent with the fundamental
understanding of the company.
PUT AND CALL OPTIONS. The Portfolio may purchase call options on securities in
which it is authorized to invest in order to fix the cost of a future purchase
or attempt to enhance return by, for example, participating in an anticipated
increase in the value of a security. The Portfolio may purchase put options to
hedge against a decline in the market value of securities held in the Portfolio
or in an attempt to enhance return. The Portfolio may sell covered call options
on the securities which it owns and covered put options which give the holder of
the option the right to sell the underlying security to the Portfolio at the
stated exercise price. The Portfolio may sell covered call and put options
contracts on common stocks to the extent of 25% of the value of its net assets
at the time such option contracts are sold.
PORTFOLIO TURNOVER. Although the Portfolio does not intend to invest for the
purpose of seeking short-term profits, securities held by it will be sold
whenever the adviser believes it is appropriate to do so in light of the
Portfolio's investment objective, without regard to the length of time a
particular security may have been held.
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The Portfolio does not attempt to set or meet any specific portfolio
turnover rate, since turnover is incidental to transactions undertaken in an
attempt to achieve the Portfolio's investment objective. A higher turnover rate
(100% or more) increases transaction costs (i.e., brokerage commissions) and
adverse tax consequences for Portfolio shareholders. With frequent trading
activity, a greater proportion of any dividends that you receive from the
Portfolio will be characterized as ordinary income, which is taxed at higher
rates than long-term capital gains. It is expected that under normal market
conditions, the annual turnover rate for the Portfolio will not exceed 100%.
TEMPORARY INVESTMENTS. For temporary defensive purposes, when the adviser
determines that market conditions so warrant, the Portfolio may invest up to
100% of its assets in cash, cash items, and money market instruments. When
following such a defensive strategy (which may be as long as 24 months during a
major bear market period), the Portfolio will be less likely to achieve its
investment objective of capital growth.
The foregoing investment policies of the Portfolio are non-fundamental and may
be changed by the Board of Trustees without the approval of shareholders.
RISK FACTORS
The Portfolio is managed with a view to long-term growth with a minimum
ten-year investment horizon. The Portfolio's net asset value will fluctuate to
reflect the investment performance of the securities held by the Portfolio, so
that the value that a shareholder receives upon redemption may be greater or
lesser than the value of such shares when purchased. Investments in common
stocks in general are subject to market risks that may cause their prices to
fluctuate over time. In addition, investment in the securities of small and
mid-sized companies in which the Portfolio may invest a majority of its assets
presents risks. Such companies may be more volatile than larger companies, so
there may be greater risk of a decline in the stock prices of small or mid-size
companies than stocks of larger companies.
As a non-diversified fund, the Portfolio may invest a greater percentage of
its assets in a single issuer and invest in fewer companies than a diversified
fund. Consequently, a decline in the value of a single stock held by the
Portfolio may have a greater impact on the Portfolio's share price than on the
share price of a diversified fund.
The prices of the growth stocks owned by the Portfolio are based on future
expectations, and growth stocks often are more sensitive than value stocks to
bad economic news or negative earnings reports. Growth stocks may underperform
during periods when the market favors value stocks. Also, to the extent that the
portfolio manager sells growth stocks before they reach their market peak, the
Portfolio may miss out on opportunities for higher performance.
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While options transactions can be used effectively to further the
Portfolio's investment objective, under certain market conditions, they can
increase the volatility of the Portfolio's share price, decrease the liquidity
of the Portfolio and make the accurate pricing of the Portfolio's investments
more difficult. If the portfolio manager invests in options at inappropriate
times or judges market conditions incorrectly, such investments may lower the
Portfolio's return or result in a loss. The Portfolio also could experience
losses if it is unable to liquidate its options positions because of an illiquid
secondary market. The Portfolio must set aside liquid assets in a segregated
account to cover its obligations relating to options transactions. To maintain
this required cover, the Portfolio may have to sell portfolio securities at
disadvantageous prices.
MANAGEMENT OF THE PORTFOLIO
INVESTMENT ADVISER
Equity Assets Management, Inc. ("EAM") is the Portfolio's investment
adviser. Subject to the authority of the Board of Trustees, EAM manages the
Portfolio's assets in accordance with the Portfolio's investment objectives and
policies described above. The adviser provides the Portfolio with on-going
research, analysis, advice and judgments regarding the Portfolio's investments.
The adviser also purchases and sells securities on behalf of the Portfolio.
EAM is a professional investment manager and a registered investment
adviser. EAM's principal place of business is located at 2155 Resort Drive,
Suite 108, Steamboat Springs, Colorado 80487. In addition to advising the
Portfolio, the adviser and its parent company provide investment advisory
services to individuals, corporations, foundations, limited partnerships, and
individual retirement, corporate, and group pension and profit-sharing plans.
The adviser and its parent company currently have discretionary management
authority with respect to approximately $75 million in assets.
ADVISORY FEES
Under the Portfolio's investment advisory contract, the Portfolio pays EAM
a base fee which on an annual basis equals 1.20% of the Portfolio's average
daily net assets, which shall be adjusted monthly depending on the Portfolio's
investment performance compared to Lipper Growth Index. As a result of the
performance fee adjustment, the annual advisory fee rate could be as high as
1.90%, but will not be less than 0.50%, of the Portfolio's average daily net
assets. Pursuant to the investment advisory contract, the adviser may
voluntarily waive some or all of its fees.
PORTFOLIO MANAGER
The portfolio manager of the Portfolio is:
W. Neal Jordan, President of EAM and founder and Senior Portfolio Manager
of EAM's parent company, Jordan American Holdings Inc., since 1972
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PRICING PORTFOLIO SHARES
Retail Class, Wholesale Class and Institutional Class shares are sold at
net asset value per share, while Traditional Class shares are sold at the
offering price per share. The offering price per share consists of the net asset
value per share next computed after an order is received, plus any applicable
front-end sales charges. The methodology and procedures for determining net
asset value are identical for each class of shares of the Portfolio, but because
the distribution expenses and other costs allocable to each class varies, the
net asset value for each class likewise will vary.
Net asset value fluctuates. The net asset value for shares of the Portfolio
is determined by calculating the value of all securities and other assets of the
Portfolio, subtracting the liabilities of the Portfolio, and dividing the
remainder by the total number of shares outstanding. Expenses and fees of each
class of the Portfolio, including the advisory, distribution and administrative
fees, are accrued daily and taken into account for the purpose of determining
the net asset value.
Portfolio securities listed or traded on a securities exchange for which
representative market quotations are available will be 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, will be valued at the mean between the last closing bid
and asked prices in the market on that day, if any. Securities for which market
quotations are not readily available and all other assets will be valued at
their respective fair market value as determined in good faith by, or under
procedures established by, the Board of Trustees. In determining fair value, the
Trustees may employ an independent pricing service.
Money market securities with less than sixty days remaining to maturity
when acquired by the Portfolio will be valued on an amortized cost basis by the
Portfolio, excluding unrealized gains or losses thereon from the valuation. This
is accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If the Portfolio acquires a
money market security with more than sixty days remaining to its maturity, it
will be valued at current market until the 60th day prior to maturity, and will
then be valued on an amortized cost basis based upon the value on such date
unless the Trustees determine during such 60-day period that this amortized cost
value does not represent fair market value.
The offering price and net asset value of shares of each class of the
Portfolio is determined as of the close of trading (normally 4:00 p.m., Eastern
time) on the New York Stock Exchange (the "Exchange"), Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Portfolio's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays when the Exchange is closed: New Year's Day, Martin Luther King Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
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HOW TO PURCHASE SHARES
GENERAL
Shares of the Portfolio are distributed through IMPACT Financial Network,
Inc. ("IFNI"), the Portfolio's distributor. Shares are sold on days on which the
Exchange is open. Retail Class, Wholesale Class and Institutional Class shares
are sold without a sales charge at the net asset value next determined after
receipt of a purchase order in proper form by the Portfolio's sub-transfer
agent. Traditional Class shares are sold at the net asset value next determined,
plus an initial maximum sales charge of up to 5.75% of the offering price (6.10%
of the net amount invested), reduced for investments of $50,000 or more. See
"Distribution Arrangements" below. Purchases of Traditional Class Shares may be
made at net asset value without a sales charge by current officers, directors
and employees (and members of their immediate families) of EAM and its
affiliates.
The minimum initial investment for both the Retail Class and Traditional
Class of the Portfolio is $1,000. The minimum initial investment in Wholesale
Class shares is $10,000 and the minimum initial investment in Institutional
Class shares is $250,000. Brokers that have not entered into a selling dealer's
agreement with IFNI may impose their own charge on the purchase of shares. An
institutional investor's minimum investment will be calculated by combining all
of the accounts it maintains with the Portfolio. Accounts established through a
non-affiliated bank or broker may, therefore, be subject to a smaller minimum
investment. Accounts established through a qualified retirement plan and
Individual Retirement Accounts ("IRAs") are not subject to the minimum
investment requirement. The Portfolio reserves the right to vary the initial
investment minimum and the minimum for subsequent investments at any time.
Additional investments can be made in amounts of at least $100. No minimum
applies to subsequent purchases effected through reinvestment of dividends and
capital gains or for subsequent purchases through qualified retirement plans or
IRAs.
Purchases will be made in full and fractional shares of the Portfolio
calculated to three decimal places. The Portfolio will not issue certificates
representing shares of the Portfolio. Quarterly account statements will be sent
to each shareholder. In addition, detailed confirmations of each purchase or
redemption are sent to each shareholder. Annual confirmations are sent to each
shareholder to report dividends paid during that period. The Portfolio reserves
the right to reject any purchase request.
PURCHASING BY MAIL
To purchase shares by mail, complete and sign the attached Application and
mail it together with a check (in the amount of at least $1,000 for an initial
investment or $100 for a subsequent investment) made payable to Jordan 25 Fund:
[SPECIFY SHARE CLASS] to: IMPACT MANAGEMENT INVESTMENT TRUST c/o Fifth Third
Bank, P.O. Box 632164, Cincinnati, OH 45263-2164.
Payment for purchases of shares received by mail will be credited to an
account at the next share price calculated for the Portfolio after receipt.
Payment does not have to be converted into Federal Funds (monies credited to the
Portfolio's custodian bank by a Federal Reserve Bank) before the Portfolio will
accept it for investment.
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PURCHASING BY WIRE
To purchase shares by wire, contact Impact Administrative Services, Inc.
("IASI"), the Portfolio's transfer agent, at 1-800-556-5856 to obtain a
shareholder account number and then wire the amount to be invested to Jordan 25
Fund: [SPECIFY SHARE CLASS] c/o Fifth Third Bank, the Portfolio's Custodian
Bank, at the following address:
The Fifth Third Bank
ABA # 042000314
Jordan 25 Fund:
Credit Account #728-62611
Account Name (your name)
Account Number (your personal account number)
Forward a completed Application to the Portfolio at the address shown on
the form. Federal Funds purchases will be accepted only on a day on which both
the Exchange and the Portfolio's custodian bank are open for business.
HOW TO REDEEM SHARES
The Portfolio redeems shares at net asset value as determined at the close
of the day on which the Portfolio receives the redemption request. Redemption
requests must be received in proper form and can be made by written request.
WRITTEN REQUESTS
Shares may be redeemed by sending a written request to IASI. Call toll-free
at 1-800-556-5856 for specific instructions before redeeming by letter. The
shareholder will be asked to provide in the request his or her name, the
Portfolio name, his or her account number, and the share or dollar amount
requested.
SIGNATURES
Shareholders requesting a redemption of $50,000 or more, a redemption of
any amount to be sent to an address other than that on record with IASI, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
o a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
o a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
o a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC; or
o any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
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The Portfolio does not accept signatures guaranteed by a notary public.
TELEPHONE REDEMPTIONS
Shareholders who have so indicated on the Application, or have subsequently
arranged in writing to do so, may redeem shares by instructing IASI by
telephone. To arrange for redemption by wire or telephone after an account has
been opened, or to change the bank or account designated to receive redemption
proceeds, a written request, accompanied by a signature guarantee, must be sent
to IASI at the address on the back of this prospectus.
Neither the Portfolio nor any of its service contractors will be liable for
any loss or expense in acting upon any telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Portfolio will use such procedures as are
considered reasonable, including requesting a shareholder to correctly state his
or her Portfolio account number, the name in which his or her bank account is
registered, his or her banking institution, bank account number and the name in
which his or her bank account is registered. To the extent that the Portfolio
fails to use reasonable procedures to verify the genuineness of telephone
instructions, it and/or its service contractors may be liable for any such
instructions that prove to be fraudulent or unauthorized.
The Portfolio reserves the right to refuse a wire or telephone redemption
if it is believed advisable to do so. Procedures for redeeming Portfolio shares
by wire or telephone may be modified or terminated at any time by the Portfolio.
The Portfolio and IASI have adopted standards for accepting signature
guarantees from the above institutions. The Portfolio may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Portfolio and IASI reserve the right to amend
these standards at any time without notice.
REDEMPTION IN KIND
Impact Management Investment Trust has elected to be governed by Rule 18f-1
of the Investment Company Act of 1940, under which the Trust is obligated to
redeem Shares for any one shareholder in cash only up to the lesser of $250,000
or 1% of the respective class's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless Trustees
determine that payments should be in kind. In such a case, the Portfolio will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way as the Portfolio determines net asset value.
The portfolio instruments will be selected in a manner that Trustees deem fair
and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their securities
and could incur certain transactions costs.
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RECEIVING PAYMENT
Normally, a check for the redemption proceeds is mailed within one business
day, but in no event more than seven calendar days after the receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the
Portfolio may redeem shares in any account and pay the proceeds to the
shareholder if the balance falls below the required minimum of $1,000 due to
shareholder redemptions. This procedure would not apply, however, if the balance
falls below $1,000 solely because of a decline in the Portfolio's net asset
value. A shareholder would receive at least 30 days' prior notice before such a
mandatory redemption occurs.
DISTRIBUTION ARRANGEMENTS
GENERAL
The Portfolio offers four classes of shares: Retail Class, Traditional
Class, Wholesale Class and Institutional Class. The four classes represent
interests in the same portfolio of investments of the Portfolio, generally have
the same rights and are identical in all respects, except for differing 12b-1
fees (none for Institutional Class), minimum investment requirements, and sales
charges (imposed on Traditional Class only). Each class has exclusive voting
rights with respect to its 12b-1 plan.
Traditional Class
-----------------
Total Sales Charge as a Percentage of
-------------------------------------
Investment Amount Offering Price Net Amount Invested
----------------- -------------- -------------------
Under $50,000 5.75% 6.10%
$50,000, but less than $100,000 4.50% 4.71%
$100,000, but less than $250,000 3.50% 3.63%
$250,000, but less than $500,000 2.50% 2.56%
$500,000, but less than $1,000,000 2.00% 2.04%
$1,000,000 or more 0% 0%
See "Distribution of Shares" in the Portfolio's Statement of Additional
Information for more information about the purchase of Traditional Class shares.
PLANS OF DISTRIBUTION
The Portfolio has adopted separate plans of distribution ("Plans") pursuant
to Rule 12b-1 for the Retail Class shares, Traditional Class shares and
Wholesale Class shares of the Portfolio under the Investment Company Act of
1940, as amended. Pursuant to each Plan, the Portfolio may reimburse IFNI or
others for expenses actually incurred by IFNI or others in the promotion and
distribution of the shares of the Retail, Traditional and Wholesale Classes of
the Portfolio ("distribution expense") and servicing their shareholders by
providing personal services and/or maintaining shareholder accounts ("service
fees"). With respect to Retail Class shares, the Portfolio reimburses IFNI and
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others for distribution expenses and service fees at an annual rate of up to
1.00% (0.25% of which is a service fee) payable on a monthly basis, of the
Portfolio's aggregate average daily net assets attributable to the Retail Class
shares. With respect to Traditional Class shares, the Portfolio reimburses IFNI
and others for distribution expenses at an annual rate of up to 0.25%, payable
on a monthly basis, of the Portfolio's aggregate average daily net assets
attributable to Traditional Class shares. With respect to Wholesale Class
shares, the Portfolio reimburses IFNI and others for distribution expenses at an
annual rate of up to 0.25%, payable on a monthly basis, of the Portfolio's
aggregate average net assets attributable to Wholesale Class shares. Since 12b-1
fees are paid out of the Portfolio's assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Substantially all of the net investment income and capital gains of the
Portfolio is distributed at least annually.
Shareholders automatically receive all dividends and capital gain
distributions in additional shares at the net asset value determined on the next
business day after the record date, unless the shareholder has elected to take
such payment in cash. Shareholders may receive payments for cash distributions
in the form of a check.
Dividends and distributions of the Portfolio are paid on a per share basis.
The value of each share will be reduced by the amount of the payment. If shares
are purchased shortly before the record date for a dividend or distribution of
capital gains, a shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
TAX CONSEQUENCES
The Portfolio will distribute all of its net investment income (including,
for this purpose, net short-term capital gain) to shareholders. Dividends from
net investment income will be taxable to shareholders as ordinary income whether
received in cash or in additional shares. Distributions from net investment
income will qualify for the dividends-received deduction for corporate
shareholders only to the extent such distributions are derived from dividends
paid by domestic corporations. It can be expected that only certain dividends of
the Portfolio will qualify for that deduction. Any net capital gains will be
distributed annually and will be taxed to shareholders as long-term capital
gains, subject to certain limitations regardless of how long the shareholder has
held shares and regardless of whether the distributions are received in cash or
in additional shares. The Portfolio will make annual reports to shareholders of
the federal income tax status of all distributions, including the amount of
dividends eligible for the dividends-received deduction.
The Portfolio intends to qualify for treatment as a regulated investment
company so that it will not be subject to federal income tax. If it fails to
qualify for such treatment, it is required to pay such taxes.
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Certain securities purchased by the Portfolio may be sold with original
issue discount and thus would not make periodic cash interest payments. If the
Portfolio acquired such securities, it would be required to include as part of
its current net investment income the accrued discount on such obligations for
purposes of the distribution requirement even though the portfolio has not
received any interest payments on such obligations during that period. Because
the Portfolio distributes all of its net investment income to its shareholders,
the Portfolio may have to sell portfolio securities to distribute such accrued
income, which may occur at a time when the Adviser would not have chosen to sell
such securities and which may result in taxable gain or loss.
Income received on direct U.S. obligations is exempt from income tax at the
state level when received directly by the Portfolio and may be exempt, depending
on the state, when received by a shareholder as income dividends from the
Portfolio provided certain state-specific conditions are satisfied. Not all
states permit such income dividends to be as exempt and some require that a
certain minimum percentage of an investment company's income be derived from
state tax-exempt interest. The Portfolio will inform shareholders annually of
the percentage of income and distributions derived from direct U.S. obligations.
You should consult your tax adviser to determine whether any portion of the
income dividends received from the Portfolio is considered tax exempt in your
particular state.
Each sale or redemption of the Portfolio's shares is a taxable event to the
shareholder. Shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.
-14-
<PAGE>
IMPACT MANAGEMENT INVESTMENT TRUST
Jordan 25 Fund
333 West Vine Street, Suite 206
Lexington, KY 40507
Investment Adviser
Equity Assets Management, Inc.
2155 Resort Drive, Suite 108
Steamboat Springs, CO 80487
Distributor
IMPACT Financial Network, Inc.
2155 Resort Drive, Suite 108
Steamboat Springs, CO 80487
Administrator, Transfer Agent and Dividend Disbursing Agent
IMPACT Administrative Services, Inc.
333 West Vine Street, Suite 206
Lexington, KY 40507
Custodian
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, OH 45263
Legal Counsel
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103-7098
This prospectus contains the information you should read and know before
you invest in shares of the Portfolio. Please read this prospectus carefully and
keep it for future reference. The Portfolio has filed a Statement of Additional
Information with the Securities and Exchange Commission which contains
additional information about the Portfolio. The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information,
free of charge, or make inquiries about the Portfolio by contacting Impact
Administrative Services, Inc., the Portfolio's administrator, by calling toll-
free 1-800-556-5856.
Information about the Portfolio (including the Statement of Additional
Information) can be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. The Public Reference Room's hours of operation may be obtained
by calling 1-800-SEC-0330. Reports and other information about the Portfolio are
available on the SEC's Internet site at http://www.sec.gov. Copies of this
information may be obtained, upon payment of a duplicating fee, by electronic
request at the following E-mail address: [email protected] or by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-6009.
SEC File No. 811-8065
-15-
<PAGE>
PROSPECTUS
January 16, 2001
IMPACT MANAGEMENT INVESTMENT TRUST
JORDAN 25 VARIABLE FUND
SCHNEIDER LARGE CAP VARIABLE FUND
Shares of the portfolios are offered only to insurance company separate accounts
funding variable life insurance policies and variable annuity contracts. The
U.S. Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
-----------------
PORTFOLIO SUMMARIES
Investment Objectives and Strategies
Principal Risks
Portfolio Expenses
INVESTMENT POLICIES AND RISKS
Risk Factors
MANAGEMENT OF THE PORTFOLIO
Investment Advisers
Portfolio Managers
Advisory Fees
Advisers' Performance Records
PRICING PORTFOLIO SHARES
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTION PLANS
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
Tax Consequences
<PAGE>
PORTFOLIO SUMMARIES
INVESTMENT OBJECTIVES AND STRATEGIES
JORDAN 25 VARIABLE FUND. The investment objective of the Jordan 25 Variable Fund
(the "Jordan Portfolio") is to provide long-term capital growth.
The portfolio seeks to achieve its objective by investing primarily in
equity securities selected because of their potential for strong earnings
growth. The portfolio will normally hold a core group of 12 to 25 common stocks
of U.S. companies. The portfolio is non-diversified and may concentrate its
investments in a particular industry or industries. There are no limitations on
the size of companies in which the portfolio may invest, and during periods when
the stock market is rising, the portfolio may invest primarily in small and
mid-size U.S. companies. In addition to common stocks, the portfolio may invest
in preferred stocks and put and call options on common stocks.
The portfolio manager will purchase stocks that exhibit the following
characteristics:
o consistent above-average earnings growth
o risk/reward characteristics which are attractive because the stock's
value and potential have not been fully recognized in its market place
o higher forecasted growth rates than the universe of U.S. companies
The portfolio manager may choose to sell a stock when:
o it becomes overvalued relative to what the portfolio manager considers
to be its future earnings potential
o the company's earnings decelerate as a result of its growth rate
declining or its industry leadership deteriorating
o the portfolio manager identifies a stronger holding (which could
include cash)
o the portfolio manager discovers something negative about the company
that invalidates the original reason for the purchase or detracts from
the growth estimates
Although providing current income is not an objective of the portfolio, the
portfolio may earn dividend income generated by its equity holdings and/or
interest income generated by its invested cash positions. During periods of
adverse market conditions, the Portfolio temporarily may hold a substantial
percentage of its assets in cash or money market securities, at which time it is
not likely to achieve growth of capital.
SCHNEIDER LARGE CAP VARIABLE FUND. The investment objective of the Schneider
Large Cap Variable Fund (the "Schneider Portfolio") is to provide maximum
long-term total return consistent with reasonable risk to capital. The total
return on the portfolio is expected to consist of capital appreciation and
income.
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<PAGE>
The portfolio seeks to achieve its objective by investing on average 65% of
its total assets in the equity securities of companies listed in the Russell
1000(R) Index. The Russell 1000 Index companies generally are the companies from
which the Portfolio selects its portfolio securities; however, equity securities
may also be selected from companies outside the Russell 1000 Index if such
companies have characteristics similar to those of the Russell 1000 Index
companies. The Russell 1000 Index consists of the 1000 largest U.S. companies
with lower price-to-book ratios and lower forecasted growth than all companies
included in the Russell 3000 Index. The Russell 3000 Index measures the
performance of the 3000 largest U.S. companies based on total market
capitalization. The smallest company in the Russell 1000 Index has an
approximate market capitalization of $1.4 billion.
The portfolio will invest in securities that exhibit the following
characteristics:
o have low price-to-earnings and low price-to-book value ratios
o have higher dividend yields than the universe of growth stocks
o have lower forecasted growth rates than the universe of growth stocks
o are typically considered out of favor by the market
The portfolio will sell securities when
o a security becomes widely recognized by the professional investment
community
o a security appreciates in value to the point that it is considered to
be overvalued
o the portfolio's holdings should be rebalanced to include a more
attractive stock or stocks
o a security's earnings potential is believed to be jeopardized
The portfolio seeks capital appreciation through investment in
value-oriented growth securities. Income may come from dividend income generated
by the portfolio's equity holdings, and/or interest income generated by the
portfolio's invested cash positions. During periods of adverse market
conditions, the portfolio may hold a substantial percentage of its assets in
cash or money market securities, thereby seeking total return through income,
without regard to capital appreciation.
PRINCIPAL RISKS
A portfolio's share price will fluctuate in response to market conditions,
economic conditions and the financial conditions of the companies in which the
portfolio invests. As with an investment in any fund, there is a risk of loss of
all or part of your investment. In addition to these risks, the portfolios are
subject to the following specific risks which are associated with their
respective investment policies and strategies.
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<PAGE>
Jordan Portfolio
----------------
o A relatively high percentage of the portfolio's assets may be invested
in securities of a limited number of issuers. Consequently, the
portfolio may be more sensitive to changes in the market price of its
portfolio securities than a diversified fund.
o The stocks of small and mid-size companies historically have been more
volatile in price than stocks of larger companies.
o Growth-oriented investments may be more volatile than the rest of the
U.S. stock market.
o The portfolio may invest in put and call options on stocks which can
increase the volatility of the portfolio's share price and decrease
the liquidity of the portfolio's investments.
Schneider Portfolio
-------------------
o Value investing involves risks because investments are made in
securities that are sold at a discount to their intrinsic value. These
securities are considered out-of-favor by the investment community
because of their indeterminate growth potential.
PORTFOLIO EXPENSES
Investors using the Jordan Portfolio or the Schneider Portfolio to fund a
variable annuity contract or a variable life insurance policy will pay certain
fees and expenses in connection with such portfolios, which are described in the
tables below. These fees and expenses are paid out of a portfolio's assets, so
their effect is included in the portfolio's share price. The tables below do not
reflect any fees or charges imposed by participating insurance companies under
their variable annuity contracts or variable life insurance policies. Owners of
variable annuity contracts or variable life insurance policies should refer to
their applicable insurance company prospectus for information on those fees and
charges.
Fee Table for Jordan Portfolio
Percentage of Average Daily Net Assets
Management fees 0.60%
Distribution (12b-1) fees 0.15%
Other expenses(1) 0.15%
-----------------------------------------
TOTAL 0.90%
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<PAGE>
Fee Table for Schneider Portfolio
Percentage of Average Daily Net Assets
Management fees 0.60%
Distribution (12b-1) fees 0.15%
Other expenses(1) 0.15%
-----------------------------------------
TOTAL 0.90%
(1) These expenses are based on estimated amounts for the current fiscal year.
Expense Example
The following examples are intended to help you compare the cost of
investing in the Jordan Portfolio or the Schneider Portfolio with the cost of
investing in other mutual funds.
You would pay the following expenses on a $10,000 investment, assuming (1)
5% annual return, (2) redemption at the end of each time period, (3)
reinvestment of all dividends and capital distribution, and (4) operating
expenses remain the same. Actual expenses in the future may be greater or lesser
than those shown.
1 Year 3 Years
Jordan Portfolio $92 $291
Schneider Portfolio $92 $291
These examples should not be considered a representation of past or future
expenses or performance.
INVESTMENT POLICIES AND RISKS
Jordan Portfolio
----------------
The Jordan Portfolio's investment objective is to provide long-term capital
growth, which it seeks to achieve by investing primarily in equity securities of
companies with the potential for strong earnings growth. The Jordan Portfolio
will invest at least 65% of its assets in a core group of at least 12, and no
more than 25, common stocks of U.S. issuers. The portfolio is permitted to
invest in companies of any size, from larger well-established companies to
smaller emerging growth companies. It is anticipated that the portfolio will be
more fully invested in small and mid-size companies during favorable market
periods. The portfolio is classified as "non-diversified" because the proportion
of its assets that may be invested in the securities of a single issuer is not
limited by the Investment Company Act of 1940. The portfolio may concentrate its
investment in a particular industry or industries.
The portfolio manager seeks to identify individual companies whose value
and earnings potential have not been fully recognized by the market at large as
reflected in its market price. Utilizing outside research, the portfolio
manager's selection process includes analyzing historical and projected
earnings, price/earnings relationships, industry potential, current and expected
market share, competition and the quality of management. The portfolio manager
then monitors these stocks in the marketplace utilizing proprietary technical
analysis to verify that the stock is consistent with the fundamental
understanding of the company.
-4-
<PAGE>
The portfolio may purchase call options on securities in which it is
authorized to invest in order to fix the cost of a future purchase or attempt to
enhance return by, for example, participating in an anticipated increase in the
value of a security. The portfolio may purchase put options to hedge against a
decline in the market value of securities held in the portfolio or in an attempt
to enhance return. The portfolio may sell covered call options on the securities
which it owns and covered put options which give the holder of the option the
right to sell the underlying security to the portfolio at the stated exercise
price. The portfolio may sell covered call and put options contracts on common
stocks to the extent of 25% of the value of its net assets at the time such
option contracts are sold.
Schneider Portfolio
-------------------
The Schneider Portfolio's investment objective is to provide maximum
long-term total return consistent with reasonable risk to capital. The Portfolio
seeks to achieve its objective by investing on average 65% of its total assets
in the equity securities of companies listed in the Russell 1000(R) Index (the
"Index"). The Index is composed of the 1,000 largest stocks with a
less-than-average growth orientation in the Russell 3000 Index, a market value
weighted index of the 3,000 largest U.S. publicly traded companies.
Securities in the Index tend to exhibit low price-to-book and
price-to-earnings ratios, higher dividend yields and lower forecasted growth
rates than the universe of growth stocks. It is anticipated that the portfolio
will be more fully invested during favorable market periods and may reduce its
investment in equity securities during unfavorable market periods.
In pursuing a "value" investment strategy, the portfolio primarily invests
in stocks with low prices in relation to their attractive earnings prospects.
The adviser selects securities for the Portfolio using a fundamental method of
analysis. Sources of information used in researching and selecting stocks
include annual reports, prospectuses, filings with the Securities and Exchange
Commission, company press releases, financial newspapers and magazines, research
materials prepared by others and inspections of corporate activities. The
adviser seeks to identify companies in which positive change is taking place
that has not yet been fully recognized by the investing public and/or the
professional investment community. Positive change can include change in
management, change in the supply and demand relationships in a company's
industry, forthcoming changes in response to capital expenditures necessary to
expand or improve the company's business, and other changes that the adviser
considers positive.
The adviser sells securities when such securities become more widely
recognized by the professional investment community, and have appreciated to the
point that such securities are considered to be overvalued. A security may be
sold and replaced by another security that presents greater potential for
capital appreciation, and/or may be sold when upside earning potential is
believed to be jeopardized.
TEMPORARY INVESTMENTS
The Jordan Portfolio and the Schneider Portfolio are each subject to the
following policy relating to temporary defensive investments.
-5-
<PAGE>
For temporary defensive purposes, when the adviser determines that market
conditions so warrant, a portfolio may invest up to 100% of its assets in cash,
cash items, and money market instruments. When following such a defensive
strategy (which for the Jordan Portfolio may be as long as 24 months during a
major bear market period), a portfolio will be less likely to achieve its
investment objective.
PORTFOLIO TURNOVER
Although neither portfolio intends to invest for the purpose of seeking
short-term profits, securities held will be sold whenever the adviser believes
it is appropriate to do so in light of a portfolio's investment objectives,
without regard to the length of time a particular security may have been held.
The portfolios do not attempt to set or meet any specific portfolio
turnover rate, since turnover is incidental to transactions undertaken in an
attempt to achieve a portfolio's investment objective. A higher turnover rate
(100% or more) increases transaction costs (i.e., brokerage commissions) and
adverse tax consequences for portfolio shareholders. With frequent trading
activity, a greater proportion of any dividends that you receive from a
portfolio will be characterized as ordinary income, which is taxed at higher
rates than long-term capital gains. It is expected that under normal market
conditions, the annual turnover rate for a portfolio will not exceed 100%.
The foregoing investment policies of the portfolios are non-fundamental and
may be changed by the Board of Trustees without the approval of shareholders.
RISK FACTORS
Jordan Portfolio
----------------
The Jordan Portfolio is managed with a view to long-term growth with a
minimum ten-year investment horizon. The portfolio's net asset value will
fluctuate to reflect the investment performance of the securities held by the
portfolio, so that the value that a shareholder receives upon redemption may be
greater or lesser than the value of such shares when purchased.
Investments in common stocks in general are subject to market risks that may
cause their prices to fluctuate over time. In addition, investment in the
securities of small and mid-sized companies in which the portfolio may invest a
majority of its assets presents risks. Such companies may be more volatile than
larger companies, so there may be greater risk of a decline in the stock prices
of small or mid-size companies than stocks of larger companies.
As a non-diversified fund, the portfolio may invest a greater percentage of
its assets in a single issuer and invest in fewer companies than a diversified
fund. Consequently, a decline in the value of a single stock held by the
portfolio may have a greater impact on the portfolio's share price than on the
share price of a diversified fund.
-6-
<PAGE>
The prices of the growth stocks owned by the portfolio are based on future
expectations, and growth stocks often are more sensitive than value stocks to
bad economic news or negative earnings reports. Growth stocks may underperform
during periods when the market favors value stocks. Also, to the extent that the
portfolio manager sells growth stocks before they reach their market peak, the
portfolio may miss out on opportunities for higher performance.
While options transactions can be used effectively to further the
portfolio's investment objective, under certain market conditions, they can
increase the volatility of the portfolio's share price, decrease the liquidity
of the portfolio and make the accurate pricing of the portfolio's investments
more difficult. If the portfolio manager invests in options at inappropriate
times or judges market conditions incorrectly, such investments may lower the
portfolio's return or result in a loss. The portfolio also could experience
losses if it is unable to liquidate its options positions because of an illiquid
secondary market. The portfolio must set aside liquid assets in a segregated
account to cover its obligations relating to options transactions. To maintain
this required cover, the portfolio may have to sell portfolio securities at
disadvantageous prices.
Schneider Portfolio
-------------------
The Schneider Portfolio is managed with a view to total return with a
minimum ten-year investment horizon. The portfolio's net asset value will
fluctuate to reflect the investment performance of the securities held by the
portfolio, so that the value that a shareholder receives upon redemption may be
greater or lesser than the value of such shares when purchased. Investments in
common stocks in general are subject to market risks that may cause their prices
to fluctuate over time.
Value investing involves substantial risk because investments are made in
securities that are sold at a discount to their intrinsic value. These
securities are considered to be out-of-favor by the investment community because
of their indeterminate growth potential. There is a risk that these securities
may decline in value.
MANAGEMENT OF THE PORTFOLIO
INVESTMENT ADVISERS
Schneider Capital Management ("Schneider Capital") is the investment
adviser of the Schneider Portfolio, and Equity Assets Management, Inc. ("EAM")
is the investment adviser of the Jordan Portfolio. Subject to the authority of
the Board of Trustees, each adviser manages a portfolio's assets in accordance
with the investment objectives and policies described above. Each adviser
provides on-going research, analysis, advice and judgments regarding a
portfolio's investments. The advisers also purchase and sell securities on
behalf of the portfolio they manage.
EAM is a registered investment adviser located at 2155 Resort Drive, Suite
108, Steamboat Springs, Colorado 80487 and a wholly-owned subsidiary of Jordan
American Holdings, Inc. ("JAHI"). In addition to advising the portfolios, EAM
and its affiliates provide investment advisory services to individuals,
corporations, foundations, limited partnerships, and individual retirement,
corporate, and group pension and profit-sharing plans. EAM and its affiliates
together have discretionary management authority with respect to approximately
$75 million in assets.
-7-
<PAGE>
Schneider Capital, 460 East Swedesford Road, Suite 1080, Wayne, PA 19087,
is a registered investment adviser founded in 1996. Schneider Capital provides
discretionary investment management services primarily to institutional clients.
Arnold C. Schneider, III, founder, President and Chief Investment Officer of
Schneider Capital has over 17 years of investment management experience (see
"Portfolio Manager" below). Mr. Schneider directs day-to-day investment
activities for a number of Schneider Capital financial products, including SCM
Small Cap Value Fund, approximating $1 billion in assets.
PORTFOLIO MANAGERS
The portfolio manager of the Jordan Portfolio is:
W. Neal Jordan, President of EAM and founder and Senior Portfolio Manager
of JAHI since its inception in 1972. Mr. Jordan continues to serve as Senior
Portfolio Manager of JAHI and also serves as Chief Investment Officer.
The portfolio manager of the Schneider Portfolio is:
Arnold C. Schneider, III, CFA, founder, President and CIO of Schneider
Capital Management since its inception in 1996. Mr. Schneider is also a
Portfolio Manager with Schneider Capital. From 1982 through 1996, Mr. Schneider
was employed with Wellington Management Company (1983-1991 as a securities
analyst; 1991 to 1996 as Senior Vice President and portfolio manager). Mr.
Schneider was made a partner at Wellington in 1991. Mr. Schneider managed the
Compass Equity Income Fund from 1993-1995 and the Mentor Income Growth Fund from
1993-1996.
ADVISORY FEES
Under an investment advisory contract between Schneider Capital and the
Trust, the Schneider Portfolio pays Schneider Capital an advisory fee which on
an annual basis equals 0.60% of the portfolio's average daily net assets.
Pursuant to a separate investment advisory contract between EAM and the Trust,
the Jordan Portfolio pays EAM an advisory fee which on an annual basis equals
0.60% of the portfolio's average daily net assets.
-8-
PRICING PORTFOLIO SHARES
Each portfolio ordinarily effects orders to purchase and redeem shares at
the portfolio's next computed net asset value after it receives an order. Net
asset value fluctuates. The net asset value for shares of each portfolio is
determined by calculating the value of all securities and other assets of the
portfolio, subtracting the liabilities of the portfolio, and dividing the
remainder by the total number of shares outstanding. Expenses and fees of each
class of the portfolio, including the advisory fees, are accrued daily and taken
into account for the purpose of determining the net asset value.
Portfolio securities listed or traded on a securities exchange for which
representative market quotations are available will be 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, will be valued at the mean between the last closing bid
and asked prices in the market on that day, if any. Securities for which market
quotations are not readily available and all other assets will be valued at
their respective fair market value as determined in good faith by, or under
procedures established by, the Board of Trustees. In determining fair value, the
Trustees may employ an independent pricing service.
Money market securities with less than sixty days remaining to maturity
when acquired by a portfolio will be valued on an amortized cost basis by such
portfolio, excluding unrealized gains or losses thereon from the valuation. This
is accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If a portfolio acquires a
money market security with more than sixty days remaining to its maturity, it
will be valued at current market until the 60th day prior to maturity, and will
then be valued on an amortized cost basis based upon the value on such date
unless the Trustees determine during such 60-day period that this amortized cost
value does not represent fair market value.
The net asset value of shares of each portfolio is determined as of the
close of trading (normally 4:00 p.m., Eastern time) on the New York Stock
Exchange (the "Exchange"), Monday through Friday, except on: (i) days on which
there are not sufficient changes in the value of a portfolio's portfolio
securities that its net asset value might be materially affected; (ii) days
during which no shares are tendered for redemption and no orders to purchase
shares are received; or (iii) the following holidays when the Exchange is
closed: New Year's Day, Martin Luther King Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
HOW TO PURCHASE AND REDEEM SHARES
To invest in a portfolio, please see the prospectus of the insurance
company's separate account which offers variable life insurance policies and
-9-
<PAGE>
variable annuity contracts to investors. Insurance companies participating in
each portfolio serve as the portfolio's designee for receiving orders of
separate accounts that invest in the portfolio. Each portfolio currently offers
shares only to insurance company separate accounts. The portfolios reserve the
right to offer shares to pension and retirement plans that qualify for special
federal income tax treatment.
The Board of Trustees monitors for possible conflicts among separate
accounts (and will do so for plans) buying shares of the portfolios. A
portfolio's net asset value could decrease if it had to sell investment
securities to pay redemption proceeds to a separate account (or plan)
withdrawing because of a conflict.
DISTRIBUTION PLANS
The portfolios each have adopted separate plans of distribution ("Plans")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Plans, a portfolio may reimburse IMPACT Financial Network, Inc.
("IFNI"), the portfolio's distributor, or others for expenses actually incurred
by IFNI or others in the promotion and distribution of the shares of the
portfolio ("distribution expense"). A portfolio may reimburse IFNI and others
for distribution expenses and service fees at an annual rate of up to 0.25% of
the portfolio's aggregate average daily net assets. Since 12b-1 fees are paid
out of a portfolio's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Substantially all of the net investment income and capital gains of each
portfolio is distributed at least annually. At the election of participating
life insurance companies, all dividends and capital gain distributions are
reinvested at the net asset value determined on the next business day after the
record date.
Dividends and distributions of a portfolio are paid on a per share basis.
The value of each share will be reduced by the amount of the payment. If shares
are purchased shortly before the record date for a dividend or distribution of
capital gains, a shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
TAX CONSEQUENCES
The tax status of your investment depends upon the features of your
variable life insurance policy or variably annuity contract. For information
concerning federal income tax consequences of your investments, please consult
the applicable prospectus of the insurance company separate account or your tax
adviser.
Participating insurance companies should consult their tax advisers about
federal, state and local tax consequences.
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<PAGE>
IMPACT MANAGEMENT INVESTMENT TRUST
Jordan 25 Variable Fund
Schneider Large Cap Variable Fund
333 West Vine Street, Suite 206
Lexington, KY 40507
Investment Advisers
Equity Assets Management, Inc.
2155 Resort Drive, Suite 108
Steamboat Springs, CO 80487
Schneider Capital Management
460 East Swedesford Road
Suite 1080
Wayne, PA 19087
Administrator, Transfer Agent and Dividend Disbursing Agent
IMPACT Administrative Services, Inc.
333 West Vine Street, Suite 206
Lexington, KY 40507
Custodian
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, OH 45263
Legal Counsel
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-7098
This prospectus is intended for use in connection with a variable life
insurance policy or variable annuity contract. Please read this prospectus
carefully and keep it for future reference. The portfolios have filed a
Statement of Additional Information with the Securities and Exchange Commission
which contains additional information about the portfolios. The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information, free of charge, or make inquiries about the portfolios
by contacting IMPACT Administrative Services, Inc., the portfolios'
administrator, or by calling toll-free 1-800-556-5856.
Information about the portfolios (including the Statement of Additional
Information) can be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. The Public Reference Room's hours of operation may be obtained
by calling 1-202-942-8090. Reports and other information about the portfolios
are available on the SEC's Internet site at http://www.sec.gov. Copies of this
information may be obtained, upon payment of a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-0102.
SEC File No. 811-8065
-11-
<PAGE>
IMPACT MANAGEMENT INVESTMENT TRUST
Jordan 25 Fund
Retail Class Shares
Traditional Class Shares
Wholesale Class Shares
Institutional Class Shares
STATEMENT OF ADDITIONAL INFORMATION
January 16, 2001
This Statement of Additional Information is not a prospectus, but
supplements and should be read in conjunction with the prospectus for Jordan 25
Fund dated January 16, 2001. To receive a copy of the prospectus, call
toll-free, at 1-800-556-5856. Retain this Statement of Additional Information
for future reference.
TABLE OF CONTENTS
-----------------
Page
----
INFORMATION ABOUT THE TRUST.................................................
INVESTMENT STRATEGIES, POLICIES AND RISKS...................................
Restricted and Illiquid Securities.................................
Temporary Investments..............................................
Money Market Instruments...........................................
U.S. Government Obligations........................................
When-issued and Delayed Delivery Transactions......................
Repurchase Agreements..............................................
Options Transactions...............................................
Securities of Other Investment Companies...........................
Portfolio Turnover.................................................
INVESTMENT LIMITATIONS......................................................
Investing In Real Estate...........................................
Buying On Margin...................................................
Selling Short......................................................
Issuing Senior Securities And Borrowing Money......................
Lending Cash Or Securities.........................................
Underwriting.......................................................
Commodities or Commodity Contracts.................................
MANAGEMENT OF THE PORTFOLIO.................................................
TRUST OWNERSHIP.............................................................
INVESTMENT ADVISORY SERVICES................................................
DISTRIBUTION OF SHARES......................................................
CODE OF ETHICS..............................................................
ADMINISTRATIVE SERVICES, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT...................................................
Custodian..........................................................
Independent Auditors...............................................
BROKERAGE TRANSACTIONS......................................................
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SHARES OF BENEFICIAL INTEREST...............................................
General Information................................................
Voting Rights......................................................
Massachusetts Partnership Law......................................
PURCHASING SHARES...........................................................
REDEEMING SHARES............................................................
TAX STATUS..................................................................
PERFORMANCE INFORMATION.....................................................
Performance Comparisons............................................
INFORMATION ABOUT THE TRUST
Jordan 25 Fund (the "Portfolio") is a non-diversified portfolio of Impact
Management Investment Trust ("IMIT"). IMIT was established as a Massachusetts
business trust under a Declaration of Trust dated December 18, 1996. IMIT is an
open-end management investment company. As of the date of this Statement of
Additional Information, IMIT consists of four series, the Impact Total Return
Portfolio, Schneider Large Cap Variable Fund, Jordan 25 Fund and Jordan 25
Variable Fund.
INVESTMENT STRATEGIES, POLICIES AND RISKS
RESTRICTED AND ILLIQUID SECURITIES. The Portfolio expects that any
restricted securities acquired would be either from institutional investors who
originally acquired the securities in private placements or directly from the
issuers of the securities in private placements. Restricted securities and other
securities that are not readily marketable may sell at a discount from the price
they would bring if freely marketable. The Portfolio will not invest more than
15% of the value of its net assets in illiquid securities, including repurchase
agreements providing for settlement in more than seven days after notice, and
certain restricted securities not determined by Trustees to be liquid.
TEMPORARY INVESTMENTS. The Portfolio may invest in the following temporary
investments for defensive purposes:
Money Market Instruments
------------------------
The Portfolio may invest in the following money market instruments:
o instruments of domestic and foreign banks and savings and loans if
they have capital, surplus, and undivided profits of over
$100,000,000, or if the principal amount of the instrument is insured
in full by the Bank Insurance Fund, which is administered by the
Federal Deposit Insurance Corporation ("FDIC"), or the Savings
Association Insurance Fund, which is administered by the FDIC; and
o prime commercial paper (rated A-1 by Standard and Poor's Ratings
Group, Prime-1 by Moody's Investors Service, Inc., or F-1 by Fitch
Investors Service, Inc.).
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U.S. Government Obligations
---------------------------
The types of U.S. government obligations in which the Portfolio may invest
generally include direct obligations of the U.S. Treasury (such as U.S. Treasury
bills, notes, and bonds) and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Federal Farm Credit Banks;
o Federal Home Loan Banks;
o Federal National Mortgage Association;
o Student Loan Marketing Association; and
o Federal Home Loan Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Portfolio may purchase
and sell securities on a "when issued" or "delayed delivery" basis.
"When-issued" refers to securities whose terms and indenture are available, and
for which a market exists, but which are not available for immediate delivery.
When-issued transactions may be expected to occur a month or more before
delivery is due. Delayed delivery is a term used to describe settlement of a
securities transaction in the secondary market which will occur sometime in the
future. No payment or delivery is made by the Portfolio until it receives
payment or delivery from the other party to any of the above transactions. It is
possible that the market price of the securities at the time of delivery may be
higher or lower than the purchase price. The Portfolio will maintain a separate
account of cash or liquid securities at least equal to the value of purchase
commitments until payment is made. Typically, no income accrues on securities
purchased on a delayed delivery basis prior to the time delivery is made
although the Portfolio may earn income on securities it has deposited in a
segregated account.
The Portfolio may engage in these types of purchases in order to buy
securities that fit with its investment objectives at attractive prices - not to
increase its investment leverage. The Portfolio does not intend to engage in
when-issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of its assets.
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REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase agreements
collateralized by U.S. Government securities, certificates of deposit, and
certain bankers' acceptances and other securities outlined above under
"Temporary Investments." In a repurchase agreement, the Portfolio buys a
security and simultaneously commits to sell that security back at an agreed upon
price plus an agreed upon market rate of interest. Under a repurchase agreement,
the seller is required to maintain the value of securities subject to the
agreement at not less than 100% of the repurchase price. The value of the
securities purchased will be evaluated daily, and the adviser will, if
necessary, require the seller to maintain additional securities to ensure that
the value is in compliance with the previous sentence. The use of repurchase
agreements involves certain risks. For example, a default by the seller of the
agreement may cause the Portfolio to experience a loss or delay in the
liquidation of the collateral securing the repurchase agreement. The Portfolio
might also incur disposition costs in liquidating the collateral. While the
Portfolio's management acknowledges these risks, it is expected that they can be
controlled through stringent security selection criteria and careful monitoring
procedures. The Portfolio will only enter into repurchase agreements with banks
and other recognized financial institutions, such as broker/dealers, which are
found by the Portfolio's investment adviser to be creditworthy pursuant to
guidelines established by the Board of Trustees (the "Trustees").
OPTIONS TRANSACTIONS. The Portfolio may purchase call options on securities
that the adviser intends to include in the Portfolio in order to fix the cost of
a future purchase or attempt to enhance return by, for example, participating in
an anticipated increase in the value of a security. The Portfolio may purchase
put options to hedge against a decline in the market value of securities held in
the Portfolio or in an attempt to enhance return. The Portfolio may write (sell)
put and covered call options on securities in which it is authorized to invest.
Certain special characteristics of and risks associated with using these
strategies are discussed below. Use of options contracts is subject to
applicable regulations and/or interpretations of the SEC and the several options
and futures exchanges upon which these instruments may be traded.
COVER REQUIREMENTS The Portfolio will not use leverage in its options
strategies. Accordingly, the Portfolio will comply with guidelines established
by the SEC with respect to coverage of these strategies by either (1) setting
aside cash or liquid, unencumbered, daily marked-to-market securities in one or
more segregated accounts with the custodian in the prescribed amount; or (2)
holding securities or other options contracts whose values are expected to
offset ("cover") their obligations thereunder. Securities, currencies, or other
options contracts used for cover cannot be sold or closed out while these
strategies are outstanding, unless they are replaced with similar assets. As a
result, there is a possibility that the use of cover involving a large
percentage of the Portfolio's assets could impede portfolio management, or the
Portfolio's ability to meet redemption requests or other current obligations.
OPTIONS STRATEGIES. The Portfolio may purchase and write (sell) only those
options on securities and securities indices that are traded on U.S. exchanges.
Exchange-traded options in the U.S. are issued by a clearing organization
affiliated with the exchange, on which the option is listed, which, in effect,
guarantees completion of every exchange-traded option transaction.
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The Portfolio may purchase call options on securities in which it is
authorized to invest in order to fix the cost of a future purchase. Call options
also may be used as a means of enhancing returns by, for example, participating
in an anticipated price increase of a security. In the event of a decline in the
price of the underlying security, use of this strategy would serve to limit the
potential loss to the Portfolio to the option premium paid; conversely, if the
market price of the underlying security increases above the exercise price and
the Portfolio either sells or exercises the option, any profit eventually
realized would be reduced by the premium paid.
The Portfolio may purchase put options on securities that it holds in order
to hedge against a decline in the market value of the securities held or to
enhance return. The put option enables the Portfolio to sell the underlying
security at the predetermined exercise price; thus, the potential for loss to
the Portfolio below the exercise price is limited to the option premium paid. If
the market price of the underlying security is higher than the exercise price of
the put option, any profit the Portfolio realizes on the sale of the security is
reduced by the premium paid for the put option less any amount for which the put
option may be sold.
The Portfolio may on certain occasions wish to hedge against a decline in
the market value of securities that it holds at a time when put options on those
particular securities are not available for purchase. At those times, the
Portfolio may purchase a put option on other carefully selected securities in
which it is authorized to invest, the values of which historically have a high
degree of positive correlation to the value of the securities actually held. If
the adviser's judgment is correct, changes in the value of the put options
should generally offset changes in the value of the securities being hedged.
However, the correlation between the two values may not be as close in these
transactions as in transactions in which a the Portfolio purchases a put option
on a security that it holds. If the value of the securities underlying the put
option falls below the value of the portfolio securities, the put option may not
provide complete protection against a decline in the value of the portfolio
securities.
The Portfolio may write covered call options on securities in which it is
authorized to invest for hedging purposes or to increase return in the form of
premiums received from the purchasers of the options. A call option gives the
purchaser of the option the right to buy, and the writer (seller) the obligation
to sell, the underlying security at the exercise price during the option period.
The strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the Portfolio declines, the amount of the
decline will be offset wholly or in part by the amount of the premium received
by the Portfolio. If, however, there is an increase in the market price of the
underlying security and the option is exercised, the Portfolio will be obligated
to sell the security at less than its market value.
The Portfolio may also write covered put options on securities in which it
is authorized to invest. A put option gives the purchaser of the option the
right to sell, and the writer (seller) the obligation to buy, the underlying
security at the exercise price during the option period. So long as the
obligation of the writer continues, the writer may be assigned an exercise
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notice by the broker-dealer through whom such option was sold, requiring it to
make payment of the exercise price against delivery of the underlying security.
The operation of put options in other respects, including their related risks
and rewards, is substantially identical to that of call options. If the put
option is not exercised, the Portfolio will realize income in the amount of the
premium received. This technique could be used to enhance current return during
periods of market uncertainty. The risk in such a transaction would be that the
market price of the underlying securities would decline below the exercise price
less the premiums received, in which case the Portfolio would expect to suffer a
loss.
OPTIONS GUIDELINES. In view of the risks involved in using the options
strategies described above, the Portfolio has adopted the following investment
guidelines to govern its use of such strategies; these guidelines may be
modified by the Board of Trustees without shareholder approval:
(1) the Portfolio will write only covered options, and each such option
will remain covered so long as the Series is obligated thereby; and
(2) the Portfolio will not write options if aggregate exercise prices of
previous written outstanding options, together with the value of
assets used to cover all outstanding positions, would exceed 25% of
its total net assets.
RISKS OF OPTIONS TRADING. The Portfolio may effectively terminate its right
or obligation under an option by entering into a closing transaction. If the
Portfolio wishes to terminate its obligation to purchase or sell securities
under a put or a call option it has written, the Portfolio may purchase a put or
a call option of the same Portfolio (that is, an option identical in its terms
to the option previously written). This is known as a closing purchase
transaction. Conversely, in order to terminate its right to purchase or sell
specified securities under a call or put option it has purchased, the Portfolio
may sell an option of the same series as the option held. This is known as a
closing sale transaction. Closing transactions essentially permit the Portfolio
to realize profits or limit losses on its options positions prior to the
exercise or expiration of the option. If a Portfolio is unable to effect a
closing purchase transaction with respect to options it has acquired, the
Portfolio will have to allow the options to expire without recovering all or a
portion of the option premiums paid. If a Portfolio is unable to effect a
closing purchase transaction with respect to covered options it has written, the
Portfolio will not be able to sell the underlying securities or dispose of
assets used as cover until the options expire or are exercised, and the
Portfolio may experience material losses due to losses on the option transaction
itself and in the covering securities.
In considering the use of options to enhance returns or for hedging
purposes, particular note should be taken of the following:
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(1) The value of an option position will reflect, among other things, the
current market price of the underlying security, the time remaining
until expiration, the relationship of the exercise price to the market
price, the historical price volatility of the underlying security, and
general market conditions. For this reason, the successful use of
options depends upon the adviser's ability to forecast the direction
of price fluctuations in the underlying securities markets.
(2) Options normally have expiration dates of up to three years. An
American style put or call option may be exercised at any time during
the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior to
expiration. The exercise price of the options may be below, equal to
or above the current market value of the underlying security or index.
Purchased options that expire unexercised have no value. Unless an
option purchased by the Portfolio is exercised or unless a closing
transaction is effected with respect to that position, the Portfolio
will realize a loss in the amount of the premium paid and any
transaction costs.
(3) A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options.
Although the Portfolio intends to purchase or write only those
exchange-traded options for which there appears to be a liquid
secondary market, there is no assurance that a liquid secondary market
will exist for any particular option at any particular time. A liquid
market may be absent if: (i) there is insufficient trading interest in
the option; (ii) the exchange has imposed restrictions on trading,
such as trading halts, trading suspensions or daily price limits;
(iii) normal exchange operations have been disrupted; or (iv) the
exchange has inadequate facilities to handle current trading volume.
(4) The Portfolio's activities in the options markets may result in a
higher Portfolio turnover rate and additional brokerage costs;
however, the Portfolio also may save on commissions by using options
as a hedge rather than buying or selling individual securities in
anticipation of, or as a result of, market movements.
SECURITIES OF OTHER INVESTMENT COMPANIES. The Portfolio may invest up to
10% of its assets in securities of other investment companies. Since all
investment companies incur certain operating expenses, such as management fees
and accounting fees, similar to the expenses of the Portfolio, any investment by
the Portfolio in shares of another investment company would involve duplication
of such expenses.
PORTFOLIO TURNOVER. Although the Portfolio does not intend to invest for
the purpose of seeking short-term profits, securities in its portfolio will be
sold whenever the adviser believe it is appropriate to do so in light of the
Portfolio's investment objective, without regard to the length of time a
particular security may have been held. The Portfolio will not attempt to set or
meet a portfolio turnover rate since any turnover would be incidental to
transactions undertaken in an attempt to achieve the Portfolio's investment
objective.
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INVESTMENT LIMITATIONS
The investment objectives of the Portfolio and certain investment
limitations set forth herein are fundamental policies of the Portfolio. The
Portfolio's fundamental limitations cannot be changed without the consent of the
holders of a majority of the Portfolio's outstanding shares.
The following limitations are fundamental policies of the Portfolio.
CONCENTRATION OF INVESTMENTS
---------------------------
The Portfolio will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets at the time of purchase
would be invested in any one industry. However, the Portfolio may at times
invest 25% or more of the value of its total net assets in cash or cash items
(not including certificates of deposit), securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, or repurchase agreements
secured by such instruments.
INVESTING IN REAL ESTATE
------------------------
The Portfolio will not purchase or sell real estate, although it may invest
in the securities of companies whose business involves the purchase or sale of
real estate, or in securities which are secured by real estate or interests in
real estate.
BUYING ON MARGIN
----------------
The Portfolio will not purchase any securities on margin but may obtain
such short-term credits as may be necessary for the clearance of transactions.
SELLING SHORT
-------------
The Portfolio will not sell securities short.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
---------------------------------------------
The Portfolio will not issue senior securities, except as permitted by its
investment objective and policies, and except that the Portfolio may borrow
money only in amounts up to one-third of the value of its net assets, including
the amounts borrowed. Any such borrowings shall be from banks. The Portfolio
will borrow money only as a temporary, extraordinary, or emergency measure, to
facilitate management of the portfolio by enabling the Portfolio to meet
redemption requests where the liquidation of portfolio securities is deemed to
be inconvenient or disadvantageous. The Portfolio will not purchase any
securities while any such borrowings are outstanding.
LENDING CASH OR SECURITIES
--------------------------
The Portfolio may not lend any of its assets except portfolio securities;
however, it is not anticipated that the Portfolio will lend its portfolio
securities.
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UNDERWRITING
------------
The Portfolio will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
COMMODITIES OR COMMODITY CONTRACTS
----------------------------------
The Portfolio will not purchase or sell any commodities, or commodities
contracts, including futures.
For purposes of its policies and limitations, the Portfolio considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction. The Portfolio has no present intent to borrow money in
excess of 5% of the value of its total assets.
MANAGEMENT OF THE PORTFOLIO
IMIT and the Portfolio are managed by a Board of Trustees. The Trustees
appoint officers to the Portfolio, and oversee the management and operations of
the Portfolio. Officers and Trustees are listed with their addresses, birth
dates, present positions with IMIT, and principal occupations.
Name: Charles R. Clark*
Birthdate: November 16, 1959
Address: 333 West Vine Street, Suite 206
Lexington, KY 40507
Position with
Portfolio Chairman of the Board of Trustees
Occupation: Chief Market Analyst of Jordan American Holdings, Inc.
since 1993 and Vice President of Equity Assets
Management, Inc. since 2000. Vice-President of IMPACT
Financial Network,Inc. since 1993.
Name: A.J. Elko*
Birthdate: September 4, 1963
Address: 333 West Vine Street, Suite 206
Lexington, KY 40507
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Position with
Portfolio: President, Treasurer and Secretary
Occupation: Chief Operating Officer and Chief Financial Officer of
Jordan American Holdings, Inc. since 1999. Vice
President of Equity Asset Management, Inc., IMPACT
Financial Network, Inc. and Impact Administrative
Services, Inc. since 1999. Chief Operating Manager and
founder of A.J. Elko & Associates, LLC, (a tax planning
and tax preparation services company) since 1995.
President and co-founder of Tummino Construction, Inc.
(a general contractor) since 1996.
Name: Oleen Eagle
Birthdate: September 28, 1930
Address: 3215 Chestnut Street
Murrysville, PA 15668
Position with
Portfolio: Trustee
Occupation: President of Cornerstone TeleVision since 1987, Vice
President and General Manager of Cornerstone
TeleVision, 1976-1987, President and Director of Group
C (a for profit subsidiary of Cornerstone TeleVision)
since 1991, Vice President and Director of Christian
Advance International (a nonprofit Christian missionary
organization) since 1985.
Name: Gerald L. Bowyer
Birthdate: August 31, 1962
Address: 820 Pine Hollow Road
McKees Rocks, PA 15136
Position with
Portfolio: Trustee
Occupation: President, Allegheny Institute (a non-partisan research
and educational institute) since 1994; host of "Focus
on the Issues," a syndicated public affairs television
program originating on WPCB, Cornerstone TeleVision.
Name: Steven J. Fellin*
Birth date: April 1, 1965
Address: 460 E. Swedesford Rd, Suite 1080
Wayne, PA 19087
Position with
Portfolio: Trustee
Occupation: Vice President and Chief Financial Officer of Schneider
Capital Management since 1998. Assistant Vice President
of Schneider Capital Management since 1997. From July
1995 through October of 1997, he was a Senior Manager
of Fund Accounting and Administration at SEI
Investments.
* An "interested person" of IMIT, as defined in the Investment Company Act of
1940, as amended.
Trustees who are not interested persons of IMIT or the adviser receive
compensation of $500 per meeting attended. For the fiscal year ended September
30, 2000, the non-interested trustees of IMIT received the following
compensation:
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Independent Compensation Total Compensation
Trustee from IMIT from IMIT
------- --------- ---------
Oleen Eagle $2,000 $2,000
Gerald L. Bowyer $2,000 $2,000
TRUST OWNERSHIP
As of December 31, 2000, officers and Trustees of IMIT owned individually
and together less than 1% of IMIT's outstanding Shares.
INVESTMENT ADVISORY SERVICES
The Portfolio's adviser is Equity Assets Management, Inc. ("EAM"), a
wholly-owned subsidiary of Jordan American Holdings, Inc. W. Neal Jordan is
considered to be a control person of the adviser because he owns more than 25%
of the voting stock of Jordan American Holdings, Inc. Mr. Jordan is the
President, Senior Portfolio Manager and Chief Investment Officer of EAM, Inc.
The Portfolio's principal distributor, IMPACT Financial Network, Inc., is an
affiliate of EAM.
Advisory Fee
------------
Each class of shares of the Portfolio pays its respective pro rata portion
of the advisory fee which is paid monthly by the Portfolio.
For its services, EAM is paid an annual base fee equal to 1.20% of the
Portfolio's average daily net assets. Before the fee based on the asset charge
is paid, it is adjusted monthly for investment performance. The adjustment will
be calculated using the percentage point difference between the change in the
net asset value of one Traditional Class share of the Portfolio and the change
in the Lipper Growth Index ("Index"). The performance of one Traditional Class
share of the Portfolio is measured by computing the percentage difference
between the opening and closing net asset value of one share of the Portfolio,
as of the last business day of the period selected for comparison, adjusted for
dividend or capital gain distributions, which are treated as reinvested at the
end of the month during which the distribution was made. The performance of the
Index for the same period is established by measuring the percentage difference
between the beginning and ending Index for the comparison period. The Index
performance is adjusted for dividend or capital gain distributions (on the
securities which comprise the Index), which are treated as reinvested at the end
of the month during which the distribution was made. One percentage point will
be subtracted from the percentage point difference in performance to help assure
that the performance adjustment is attributable to EAM's management abilities
rather than random fluctuations. The result is multiplied by 0.01, then
multiplied by the Portfolio's average net assets for the comparison period. This
product next shall be divided by the number of months in the comparison period
to determine the monthly performance adjustment.
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Where the Portfolio's share performance exceeds that of the Index, the base
fee will be increased by the adjustment amount determined in the preceding
paragraph. Where the performance of the Index exceeds the performance of the
Portfolio's Traditional Class shares, the base fee will be decreased by the
amount of the performance adjustment. The maximum annual advisory fee that the
Portfolio will pay will be 1.90% of average daily net assets and the minimum
annual advisory fee will be 0.50% (unless the adviser voluntarily agrees to
waive its fee).
The 12-month comparison period rolls over with each succeeding month, so
that it always equals 12 months, ending with the month for which the performance
adjustment is being computed.
DISTRIBUTION OF SHARES
IMPACT Financial Network, Inc. ("IFNI") is the principal distributor of
shares of IMIT. IFNI is located at 2155 Resort Drive, Suite 108 Steamboat
Springs, CO 80487. IFNI is a Florida corporation, and is an affiliate of EAM.
IFNI does not receive any fee or other compensation except as described under
"Distribution Plan" below, and "Brokerage Transactions" herein.
DISTRIBUTION OF TRADITIONAL CLASS SHARES
----------------------------------------
Traditional Class shares of the Portfolio are sold with a front-end sales
charge. This sales charge is discussed in the Portfolio's prospectus.
The amount of sales charge reallowed to dealers, as a percentage of the
offering price of Traditional Class shares, is as follows:
Amount of Purchase Amount Paid to Dealers
-------------------- ----------------------
Under $50,000 5.00%
$50,000, but less than $100,000 3.75%
$100,000, but less than $250,000 2.75%
$250,000, but less than $500,000 2.00%
$500,000, but less than $1,000,000 1.60%
A commission will be paid to authorized dealers who initiate and are
responsible for purchases of $1 million or more of Traditional Class shares
during the first 12 months of operation of the Traditional Class.
IFNI will pay the dealer concession to those selected dealers who have
entered into an agreement with IFNI. The dealer's concession may be changed from
time to time. Further, IFNI may from time to time offer incentive compensation
to dealers who sell Portfolio shares subject to sales charges, allowing such
dealers to retain an additional portion of the sales charge. On some occasions,
such cash or incentives will be conditioned upon the sale of a specified minimum
dollar amount of the Portfolio shares during a specified period of time. A
dealer who receives all or substantially all of the sales charge may be
considered an "underwriter" under federal securities laws. All such sales
charges are paid to the securities dealer involved in the trade, if any. No
sales charge will be assessed on the reinvestment of dividends or distributions.
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DISTRIBUTION PLANS
-------------------
The Portfolio has adopted Rule 12b-1 Plans (the "Plans"), for the Retail,
Traditional and Wholesale Classes of its shares. The Plans provide that IFNI, as
distributor, is entitled to a reimbursement each month for the actual expenses
incurred in the distribution and promotion of the Portfolio's shares, including
but not limited to, printing of prospectuses and reports used for sales
purposes, preparation and printing of sales literature and related expenses,
advertisements, and other distribution-related expenses as well as any
distribution or service fees paid to securities dealers or others who have
executed a dealer agreement with IFNI. Any expense of distribution in excess of
the 12b-1 fees under the Plans will be borne by the adviser without any
reimbursement or payment by the Portfolio.
The Plans also provides that to the extent that the Portfolio, the adviser,
IFNI or other parties on behalf of the Portfolio, the adviser or IFNI makes
payments that are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares issued by the Portfolio
within the context of Rule 12b-1, such payments shall be deemed to be made
pursuant to the applicable Plan. In no event shall the payments made under the
Plans, plus any other payments deemed to be made pursuant to the Plan, exceed
the amount permitted to be paid pursuant to the Conduct Rule 2830 of the
National Association of Securities Dealers, Inc.
Other expenses of distribution and marketing in excess of the maximum
amounts permitted by the Plans per annum will be borne by IFNI, and any amounts
paid for the above services will be paid pursuant to a servicing or other
agreement.
The Plans were approved by the Board, including a majority of the Trustees
who are not "interested persons" of IMIT as defined in the 1940 Act (and each of
whom has no direct or indirect financial interest in the Plans or any agreement
related thereto, referred to herein as the ("12b-1 Trustees"). The Board
determined that a Plan may be of benefit to the relevant class of the Portfolio,
to the shareholders of such class, and to the Trust by helping the Portfolio and
its classes facilitate sales of shares to increase the assets in the Portfolio,
and, therefore, to achieve economies of scale. The Plans may be terminated at
any time by the vote of the Board or the 12b-1 Trustees, or by the vote of a
majority of the outstanding applicable class of shares of the Portfolio.
IFNI, the Portfolio's distributor has a financial interest in the operation
of the Plans. Charles R. Clark, Trustee of IMIT, and Vice President of IFNI, has
a direct financial interest in the operation of the Plans.
CODES OF ETHICS
IMIT, the investment adviser and distributor each have adopted a code of
ethics under Rule 17j-1 of the Investment Company Act. These codes permit
personnel to invest in securities, including securities that may be purchased or
sold by the Portfolio, subject to preclearance by IMIT's Compliance Officer and
certain other conditions.
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ADMINISTRATIVE SERVICES, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
IMPACT Administrative Services, Inc., ("IASI"), 333 West Vine Street, Suite
206, Lexington, Kentucky, 40507, is responsible for performing and overseeing
administrative, transfer agent, dividend disbursing and fund accounting services
on behalf of the Portfolio. IASI is an affiliate of EAM, the Portfolio's
adviser. The annual fee paid to IASI for services is 0.35% of the Portfolio's
average net assets.
CUSTODIAN
---------
The custodian for the securities and cash of IMIT and the Portfolio is
Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, OH 45263. The
custodian's fee is paid by IASI from its administrative services fee.
INDEPENDENT AUDITORS
--------------------
Spicer, Jeffries & Co., 4155 E. Jewell Aenue, Suite 307, Denver, Colorado
80222, serves as the independent auditor for the Portfolio. The auditor's fees
are paid by IASI from the administrative services fee.
BROKERAGE TRANSACTIONS
The adviser, when effecting the purchases and sales of portfolio securities
for the account of the Portfolio, will seek execution of trades either (i) at
the most favorable and competitive rate of commission charged by any broker,
dealer or member of an exchange, or (ii) at a higher rate of commission charges
if reasonable in relation to brokerage and research services provided to the
Portfolio or the adviser by such member, broker, or dealer. Such services may
include, but are not limited to, any one or more of the following: information
on the availability of securities for purchase or sale, statistical or factual
information, or opinions pertaining to investments. The adviser may use research
and services provided to it by brokers and dealers in servicing all its clients;
however, not all such services will be used by the adviser in connection with
the Portfolio. Brokerage may also be allocated to dealers in consideration of
the Portfolio's share distribution but only when execution and price are
comparable to that offered by other brokers.
Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by the adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the adviser. Although
there is no specified formula for allocating such transactions, the various
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allocation methods used by the adviser, and the results of such allocations, are
subject to periodic review by the Portfolio's Board of Trustees.
It is anticipated that the majority of the Portfolio's brokerage
transactions will be executed by IFNI, an affiliate of the adviser.
SHARES OF BENEFICIAL INTEREST
GENERAL INFORMATION
IMIT is a Massachusetts business trust. IMIT's Declaration of Trust
authorizes the Board of Trustees to issue an unlimited number of shares, which
are shares of beneficial interest, without par value. The Trust presently has
four series of shares. The Declaration of Trust authorizes the Board of Trustees
to divide or redivide any unissued shares of the Trust into one or more
additional series by setting or changing in any one or more respects their
respective preferences, conversion or other rights, voting power, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption.
Shares have no subscription or preemptive rights and only such conversion
or exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus and this Statement of
Additional Information, the Portfolio's shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
shareholders of the Portfolio are entitled to receive the assets available for
distribution belonging to the Portfolio. As used in the Prospectus and in this
Statement of Additional Information, "assets belonging to the Portfolio" means
the consideration received by the Portfolio upon the issuance or sale of shares
in the Portfolio together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds from the sale,
exchange or liquidation of such investments, and any funds or amounts derived
from any reinvestment of such proceeds.
VOTING RIGHTS
Each share of the Portfolio gives the shareholder one vote in Trustee
elections and all other matters submitted to shareholders for a vote. All shares
in IMIT have equal voting rights. Shares of all the portfolios of IMIT would be
able to vote on the election of Trustees and in certain trust matters. Only
holders of shares of a particular portfolio or share class will be able to vote
on matters relating solely to that portfolio or share class.
As a Massachusetts business trust, IMIT is not required to hold annual
shareholder meetings, and does not intend to hold annual meetings.
Trustees may be removed by the Board of Trustees or by shareholders at a
special meeting. A special meeting of shareholders may be called by the Board of
Trustees at any time and will be called by Trustees upon the written request of
shareholders owning at least 10% of IMIT's outstanding shares of all series
entitled to vote.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
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each series affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a series will be required in
connection with a matter, a series will be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical, or that the matter does not affect any interest of the series. Under
Rule 18f-2, the approval of any amendment to the investment advisory agreement
or any change in investment policy submitted to shareholders would be
effectively acted upon with respect to a series only if approved by a majority
of the outstanding shares of such series. However, Rule 18f-2 also provides that
the ratification of independent public accountants, the approval of principal
underwriting contracts, and the election of Trustees may be effectively acted
upon by shareholders of the Trust voting without regard to series.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of IMIT. To protect its
shareholders, IMIT has filed legal documents with Massachusetts that expressly
disclaim the liability of its shareholders for acts or obligations of IMIT.
These documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument IMIT or its Trustees enter into or sign.
In the unlikely event that a shareholder is held personally liable for
IMIT's obligations, IMIT is required by its Declaration of Trust to use its
property to protect or compensate the shareholder. On request, IMIT will defend
any claim made and pay any judgment against a shareholder for any act or
obligation of IMIT. Therefore, financial loss resulting from liability as a
shareholder will occur only if IMIT itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
PURCHASING SHARES
Except under certain circumstances described in the prospectus, shares are
sold at their net asset value on days the New York Stock Exchange is open for
business. The procedure for purchasing shares is explained in the Prospectus
under "How To Purchase Shares."
REDEEMING SHARES
The Portfolio redeems shares at the next computed net asset value after the
Portfolio receives the redemption request. Redemption procedures are explained
in the prospectus under "How To Redeem Shares."
REDEMPTION IN KIND. IMIT has elected to be governed by Rule 18f-1 of the
Investment Company Act of 1940, under which IMIT is obligated to redeem Shares
for any one shareholder in cash only up to the lesser of $250,000 or 1% of the
respective class's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless Trustees
determine that payments should be in kind. In such a case, the Portfolio will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way as the Portfolio determines net asset value.
The portfolio instruments will be selected in a manner that Trustees deem fair
and equitable.
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Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their securities
and could incur certain transaction costs.
TAX STATUS
The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify for this treatment, the Portfolio must, among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
To the extent that a fund qualifies for treatment as a regulated investment
company, it will not be subject to federal income tax on income and net capital
gains paid to shareholders in the form of dividends or capital gains
distributions. If a fund fails to qualify for such treatment, it is required to
pay such taxes.
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional Shares. No portion of any income dividend
paid by the Portfolio is eligible for the dividends received deduction available
to corporations. These dividends, and any short-term capital gains, are taxable
as ordinary income.
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held the
Portfolio Shares.
PERFORMANCE INFORMATION
From time to time, the Portfolio may advertise its total return. These
figures will be based on historical earnings and are not intended to indicate
future performance. No representations can be made regarding actual future
returns.
Total return represents the change, over a specific period of time, in the
value of an investment in the Portfolio after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The average annual total return for shares of the Portfolio is the average
compounded rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at the
end of the period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of shares
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purchased at the beginning of the period with $1,000, less any applicable sales
load adjusted over the period by any additional shares, assuming the quarterly
reinvestment of all dividends and distributions.
Average annual total return quotations used in the Portfolio's advertising
and promotional materials are calculated according to the following formula:
n
P(1 + T) = ERV
Where P equals a hypothetical initial payment of $1000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication. Average annual
total return, or "T" in the above formula, is computed by finding the average
annual compounded rates of return over the period that would equate the initial
amount invested to the ending redeemable value. Average annual total return
assumes the reinvestment of all dividends and distributions.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of shares, the performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
--------------------------------------------------------------------------------
The performance of shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Portfolio's expenses; and
o various other factors.
The Portfolio's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of total return.
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To help investors evaluate how the Portfolio might satisfy their investment
objective, advertisements regarding the Portfolio may discuss total return for
the Portfolio as reported by various financial publications. Advertisements may
also compare total return to total return as reported by other investments,
indices and averages. The following publications, indices and averages may be
used:
o Standard & Poor's 500 Composite Stock Price Index
o Russell 1000 Growth Index
o Lipper Growth Index
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<PAGE>
IMPACT MANAGEMENT INVESTMENT TRUST
Jordan 25 Variable Fund
Schneider Large Cap Variable Fund
STATEMENT OF ADDITIONAL INFORMATION
January 16, 2001
This Statement of Additional Information is not a prospectus, but
supplements and should be read in conjunction with the prospectus for Jordan 25
Variable Fund and Schneider Large Cap Variable Fund, dated January 16, 2001.
To receive a copy of the prospectus, call toll-free, at 1-800-556-5856. Retain
this Statement of Additional Information for future reference.
Shares of the portfolios are offered only to insurance company separate
accounts funding variable life insurance policies and variable annuity
contracts.
<PAGE>
TABLE OF CONTENTS
-----------------
INFORMATION ABOUT THE TRUST
INVESTMENT STRATEGIES, POLICIES AND RISKS
Fixed-Income Securities
Restricted and Illiquid Securities
Temporary Investments
When-Issued and Delayed Delivery Transactions
Repurchase Agreements
Securities of Other Investment Companies
Options Transactions
Convertible Securities
Portfolio Turnover
INVESTMENT LIMITATIONS
Investing in Real Estate
Buying on Margin
Selling Short
Issuing Senior Securities and Borrowing Money
Lending Cash or Securities
Underwriting
Investing in Minerals
Commodities or Commodity Contracts
Concentration of Investments
Diversification Requirements
Investing In Issuers Whose Securities are Owned by Officers and Trustees of
IMIT
Pledging Assets
Acquiring Securities to Exercise Control
<PAGE>
MANAGEMENT OF THE PORTFOLIO
TRUST OWNERSHIP
INVESTMENT ADVISORY SERVICES
DISTRIBUTION OF SHARES
Distribution Plans
ADMINISTRATIVE SERVICES, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Custodian
Independent Auditors
BROKERAGE TRANSACTIONS
SHARES OF BENEFICIAL INTEREST
General Information
Voting Rights
Massachusetts Partnership Law
PURCHASING AND REDEEMING SHARES
TAX STATUS
PERFORMANCE INFORMATION
Performance Comparisons
<PAGE>
INFORMATION ABOUT THE TRUST
Jordan 25 Variable Fund ("Jordan Portfolio") is a non-diversified
portfolio, and Schneider Large Cap Variable Fund ("Schneider Portfolio") is a
diversified portfolio, of Impact Management Investment Trust ("IMIT"). IMIT was
established as a Massachusetts business trust under a Declaration of Trust dated
December 18, 1996. IMIT is an open-end management investment company. As of the
date of this Statement of Additional Information, IMIT consists of four series,
IMPACT Total Return Portfolio, Schneider Large Cap Variable Fund, Jordan 25
Fund, and Jordan 25 Variable Fund.
INVESTMENT STRATEGIES, POLICIES AND RISKS
Information concerning each portfolio's non-fundamental investment
objective, investment program and the primary risks associated with that
investment program are set for the prospectus under the heading "Investment
Policies and Risks." There can be no assurance that any portfolio will achieve
its objective. The following discussion of investment policies supplements the
discussion of the investment strategies and risks set forth in the prospectus.
JORDAN PORTFOLIO AND SCHNEIDER PORTFOLIO
Each portfolio may invest in the following investment vehicles:
RESTRICTED AND ILLIQUID SECURITIES. The portfolios expect that any
restricted securities acquired would be either from institutional investors who
originally acquired the securities in private placements or directly from the
issuers of the securities in private placements. Restricted securities and other
securities that are not readily marketable may sell at a discount from the price
they would bring if freely marketable. Each portfolio will not invest more than
15% of the value of its net assets in illiquid securities, including repurchase
agreements providing for settlement in more than seven days after notice, and
certain restricted securities not determined by Trustees to be liquid.
TEMPORARY INVESTMENTS. Each portfolio may invest in the following temporary
investments for defensive purposes:
Money Market Instruments
------------------------
A portfolio may invest in the following money market instruments:
o instruments of domestic and foreign banks and savings and loans if
they have capital, surplus, and undivided profits of over
$100,000,000, or if the principal amount of the instrument is insured
in full by the Bank Insurance Fund, which is administered by the
Federal Deposit Insurance Corporation ("FDIC"), or the Savings
Association Insurance Fund, which is administered by the FDIC; and
o prime commercial paper (rated A-1 by Standard and Poor's Ratings
Group, Prime-1 by Moody's Investors Service, Inc., or F-1 by Fitch
Investors Service, Inc.).
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U.S. Government Obligations
---------------------------
The types of U.S. government obligations in which a portfolio may invest
generally include direct obligations of the U.S. Treasury (such as U.S. Treasury
bills, notes, and bonds) and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Federal Farm Credit Banks;
o Federal Home Loan Banks;
o Federal National Mortgage Association;
o Student Loan Marketing Association; and
o Federal Home Loan Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each portfolio may purchase
and sell securities on a "when issued" or "delayed delivery" basis.
"When-issued" refers to securities whose terms and indenture are available, and
for which a market exists, but which are not available for immediate delivery.
When-issued transactions may be expected to occur a month or more before
delivery is due. Delayed delivery is a term used to describe settlement of a
securities transaction in the secondary market which will occur sometime in the
future. No payment or delivery is made by a portfolio until it receives payment
or delivery from the other party to any of the above transactions. It is
possible that the market price of the securities at the time of delivery may be
higher or lower than the purchase price. A portfolio will maintain a separate
account of cash or liquid securities at least equal to the value of purchase
commitments until payment is made. Typically, no income accrues on securities
purchased on a delayed delivery basis prior to the time delivery is made
although the portfolio may earn income on securities it has deposited in a
segregated account.
Each portfolio may engage in these types of purchases in order to buy
securities that fit with its investment objectives at attractive prices - not to
increase its investment leverage. Each Portfolio does not intend to engage in
when-issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of its assets.
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REPURCHASE AGREEMENTS. Each portfolio may invest in repurchase agreements
collateralized by U.S. Government securities, certificates of deposit, and
certain bankers' acceptances and other securities outlined above under
"Temporary Investments." In a repurchase agreement, a portfolio buys a security
and simultaneously commits to sell that security back at an agreed upon price
plus an agreed upon market rate of interest. Under a repurchase agreement, the
seller is required to maintain the value of securities subject to the agreement
at not less than 100% of the repurchase price. The value of the securities
purchased will be evaluated daily, and the adviser will, if necessary, require
the seller to maintain additional securities to ensure that the value is in
compliance with the previous sentence. The use of repurchase agreements involves
certain risks. For example, a default by the seller of the agreement may cause a
portfolio to experience a loss or delay in the liquidation of the collateral
securing the repurchase agreement. A portfolio might also incur disposition
costs in liquidating the collateral. While the portfolios' management
acknowledges these risks, it is expected that they can be controlled through
stringent security selection criteria and careful monitoring procedures. The
portfolios will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are found by
the portfolios' investment adviser to be creditworthy pursuant to guidelines
established by the Board of Trustees (the "Trustees").
SECURITIES OF OTHER INVESTMENT COMPANIES. Each portfolio may invest up to
10% of its assets in securities of other investment companies. Since all
investment companies incur certain operating expenses, such as management fees
and accounting fees, similar to the expenses of the portfolios, any investment
by a portfolio in shares of another investment company would involve duplication
of such expenses.
PORTFOLIO TURNOVER.
Although the portfolios do not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the
adviser believe it is appropriate to do so in light of a portfolio's investment
objective, without regard to the length of time a particular security may have
been held. The portfolios will not attempt to set or meet a portfolio turnover
rate since any turnover would be incidental to transactions undertaken in an
attempt to achieve each portfolio's investment objective.
In addition to the foregoing investment policies, the Jordan Portfolio is
subject to the following specific investment polices:
JORDAN PORTFOLIO
OPTIONS TRANSACTIONS. The Jordan Portfolio may purchase call options on
securities that the adviser intends to include in the Portfolio in order to fix
the cost of a future purchase or attempt to enhance return by, for example,
participating in an anticipated increase in the value of a security. The
portfolio may purchase put options to hedge against a decline in the market
value of securities held in the portfolio or in an attempt to enhance return.
The portfolio may write (sell) put and covered call options on securities in
which it is authorized to invest.
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Certain special characteristics of and risks associated with using these
strategies are discussed below. Use of options contracts is subject to
applicable regulations and/or interpretations of the SEC and the several options
and futures exchanges upon which these instruments may be traded.
COVER REQUIREMENTS. The portfolio will not use leverage in its options
strategies. Accordingly, the portfolio will comply with guidelines established
by the SEC with respect to coverage of these strategies by either (1) setting
aside cash or liquid, unencumbered, daily marked-to-market securities in one or
more segregated accounts with the custodian in the prescribed amount; or (2)
holding securities or other options contracts whose values are expected to
offset ("cover") their obligations thereunder. Securities, currencies, or other
options contracts used for cover cannot be sold or closed out while these
strategies are outstanding, unless they are replaced with similar assets. As a
result, there is a possibility that the use of cover involving a large
percentage of the portfolio's assets could impede portfolio management, or the
portfolio's ability to meet redemption requests or other current obligations.
OPTIONS STRATEGIES. The portfolio may purchase and write (sell) only those
options on securities and securities indices that are traded on U.S. exchanges.
Exchange-traded options in the U.S. are issued by a clearing organization
affiliated with the exchange, on which the option is listed, which, in effect,
guarantees completion of every exchange-traded option transaction.
The portfolio may purchase call options on securities in which it is
authorized to invest in order to fix the cost of a future purchase. Call options
also may be used as a means of enhancing returns by, for example, participating
in an anticipated price increase of a security. In the event of a decline in the
price of the underlying security, use of this strategy would serve to limit the
potential loss to the portfolio to the option premium paid; conversely, if the
market price of the underlying security increases above the exercise price and
the portfolio either sells or exercises the option, any profit eventually
realized would be reduced by the premium paid.
The portfolio may purchase put options on securities that it holds in order
to hedge against a decline in the market value of the securities held or to
enhance return. The put option enables the portfolio to sell the underlying
security at the predetermined exercise price; thus, the potential for loss to
the Portfolio below the exercise price is limited to the option premium paid. If
the market price of the underlying security is higher than the exercise price of
the put option, any profit the portfolio realizes on the sale of the security is
reduced by the premium paid for the put option less any amount for which the put
option may be sold.
The portfolio may on certain occasions wish to hedge against a decline in
the market value of securities that it holds at a time when put options on those
particular securities are not available for purchase. At those times, the
portfolio may purchase a put option on other carefully selected securities in
which it is authorized to invest, the values of which historically have a high
degree of positive correlation to the value of the securities actually held. If
the adviser's judgment is correct, changes in the value of the put options
should generally offset changes in the value of the securities being hedged.
However, the correlation between the two values
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<PAGE>
may not be as close in these transactions as in transactions in which a the
Portfolio purchases a put option on a security that it holds. If the value of
the securities underlying the put option falls below the value of the portfolio
securities, the put option may not provide complete protection against a decline
in the value of the portfolio securities.
The portfolio may write covered call options on securities in which it is
authorized to invest for hedging purposes or to increase return in the form of
premiums received from the purchasers of the options. A call option gives the
purchaser of the option the right to buy, and the writer (seller) the obligation
to sell, the underlying security at the exercise price during the option period.
The strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the portfolio declines, the amount of the
decline will be offset wholly or in part by the amount of the premium received
by the portfolio. If, however, there is an increase in the market price of the
underlying security and the option is exercised, the portfolio will be obligated
to sell the security at less than its market value.
The portfolio may also write covered put options on securities in which it
is authorized to invest. A put option gives the purchaser of the option the
right to sell, and the writer (seller) the obligation to buy, the underlying
security at the exercise price during the option period. So long as the
obligation of the writer continues, the writer may be assigned an exercise
notice by the broker-dealer through whom such option was sold, requiring it to
make payment of the exercise price against delivery of the underlying security.
The operation of put options in other respects, including their related risks
and rewards, is substantially identical to that of call options. If the put
option is not exercised, the portfolio will realize income in the amount of the
premium received. This technique could be used to enhance current return during
periods of market uncertainty. The risk in such a transaction would be that the
market price of the underlying securities would decline below the exercise price
less the premiums received, in which case the portfolio would expect to suffer a
loss.
OPTIONS GUIDELINES. In view of the risks involved in using the options
strategies described above, the portfolio has adopted the following investment
guidelines to govern its use of such strategies; these guidelines may be
modified by the Board of Trustees without shareholder approval:
(1) the portfolio will write only covered options, and each such option
will remain covered so long as the Series is obligated thereby; and
(2) the portfolio will not write options if aggregate exercise prices of
previous written outstanding options, together with the value of assets used to
cover all outstanding positions, would exceed 25% of its total net assets.
RISKS OF OPTIONS TRADING. The portfolio may effectively terminate its right
or obligation under an option by entering into a closing transaction. If the
portfolio wishes to terminate its obligation to purchase or sell securities
under a put or a call option it has written, the portfolio may purchase a put or
a call option of the same portfolio (that is, an option identical in its terms
to the option previously written). This is known as a
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closing purchase transaction. Conversely, in order to terminate its right to
purchase or sell specified securities under a call or put option it has
purchased, the portfolio may sell an option of the same series as the option
held. This is known as a closing sale transaction. Closing transactions
essentially permit the portfolio to realize profits or limit losses on its
options positions prior to the exercise or expiration of the option. If a
portfolio is unable to effect a closing purchase transaction with respect to
options it has acquired, the portfolio will have to allow the options to expire
without recovering all or a portion of the option premiums paid. If a portfolio
is unable to effect a closing purchase transaction with respect to covered
options it has written, the portfolio will not be able to sell the underlying
securities or dispose of assets used as cover until the options expire or are
exercised, and the portfolio may experience material losses due to losses on the
option transaction itself and in the covering securities.
In considering the use of options to enhance returns or for hedging
purposes, particular note should be taken of the following:
(1) The value of an option position will reflect, among other things, the
current market price of the underlying security, the time remaining until
expiration, the relationship of the exercise price to the market price, the
historical price volatility of the underlying security, and general market
conditions. For this reason, the successful use of options depends upon the
adviser's ability to forecast the direction of price fluctuations in the
underlying securities markets.
(2) Options normally have expiration dates of up to three years. An
American style put or call option may be exercised at any time during the option
period while a European style put or call option may be exercised only upon
expiration or during a fixed period prior to expiration. The exercise price of
the options may be below, equal to or above the current market value of the
underlying security or index. Purchased options that expire unexercised have no
value. Unless an option purchased by the portfolio is exercised or unless a
closing transaction is effected with respect to that position, the portfolio
will realize a loss in the amount of the premium paid and any transaction costs.
(3) A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. Although the
portfolio intends to purchase or write only those exchange-traded options for
which there appears to be a liquid secondary market, there is no assurance that
a liquid secondary market will exist for any particular option at any particular
time. A liquid market may be absent if: (i) there is insufficient trading
interest in the option; (ii) the exchange has imposed restrictions on trading,
such as trading halts, trading suspensions or daily price limits; (iii) normal
exchange operations have been disrupted; or (iv) the exchange has inadequate
facilities to handle current trading volume.
(4) The portfolio's activities in the options markets may result in a
higher portfolio turnover rate and additional brokerage costs; however, the
portfolio also may save on commissions by using options as a hedge rather than
buying or selling individual securities in anticipation of, or as a result of,
market movements.
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INVESTMENT LIMITATIONS
The investment objectives of the portfolios and certain investment
limitations set forth herein are fundamental policies of the portfolios. A
portfolio's fundamental limitations cannot be changed without the consent of the
holders of a majority of its outstanding shares.
Unless otherwise stated, each Portfolio is subject to the following
limitations which are fundamental policies of the portfolios.
CONCENTRATION OF INVESTMENTS
---------------------------
No portfolio will purchase securities if, as a result of such purchase, 25%
or more of the value of its total assets at the time of purchase would be
invested in any one industry. However, a portfolio may at times invest 25% or
more of the value of its total net assets in cash or cash items (not including
certificates of deposit), securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or repurchase agreements secured
by such instruments.
INVESTING IN REAL ESTATE
------------------------
No portfolio will purchase or sell real estate, although it may invest in
the securities of companies whose business involves the purchase or sale of real
estate, or in securities which are secured by real estate or interests in real
estate.
BUYING ON MARGIN
----------------
No portfolio will purchase any securities on margin but may obtain such
short-term credits as may be necessary for the clearance of transactions.
SELLING SHORT
-------------
No portfolio will sell securities short.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
---------------------------------------------
No portfolio will issue senior securities, except as permitted by its
investment objective and policies, and except that a portfolio may borrow money
only in amounts up to one-third of the value of its net assets, including the
amounts borrowed. Any such borrowings shall be from banks. A portfolio will
borrow money only as a temporary, extraordinary, or emergency measure, to
facilitate management of the portfolio by enabling the portfolio to meet
redemption requests where the liquidation of portfolio securities is deemed to
be inconvenient or disadvantageous. A portfolio will not purchase any securities
while any such borrowings are outstanding.
LENDING CASH OR SECURITIES
--------------------------
No portfolio may lend any of its assets except portfolio securities;
however, it is not anticipated that any of the portfolios will lend its
portfolio securities.
UNDERWRITING
------------
No portfolio will underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities in accordance with its investment objective, policies,
and limitations.
COMMODITIES OR COMMODITY CONTRACTS
----------------------------------
No Portfolio will purchase or sell any commodities, or commodities
contracts, including futures.
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DIVERSIFICATION OF INVESTMENTS
------------------------------
With respect to 75% of its assets, the Schneider Portfolio will not
purchase the securities of any issuer (other than securities of the U.S.
government, its agencies, or instrumentalities, or instruments secured by
securities of such issuers, such as repurchase agreements) if, as a result, more
than 5% of the value of its total assets would be invested in the securities of
such issuer, nor will the Schneider Portfolio acquire more than 10% of any class
of voting securities of any issuer. For these purposes, the Schneider Portfolio
takes all common stock and all preferred stock of an issuer each as a single
class, regardless of priorities, series, designations, or other differences.
The following limitations are non-fundamental policies, which means that
they may be changed by the Trustees without shareholder approval. Shareholders
will be notified before any material changes in these limitations become
effective.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction. Each portfolio has no present intent to borrow money in
excess of 5% of the value of its total assets.
MANAGEMENT OF THE PORTFOLIO
IMIT and the portfolios are managed by a Board of Trustees. The Trustees
appoint officers to the portfolios, and oversee the management and operations of
the portfolios. Officers and Trustees are listed with their addresses, birth
dates, present positions with IMIT, and principal occupations.
Name: Charles R. Clark*
Birthdate: November 16, 1959
Address: 333 West Vine Street, Suite 206
Lexington, KY 40507Position with
Position with
Portfolio: Chairman of the Board of Trustees
Occupation: Chief Market Analyst and Senior Assistant Portfolio
Manager of Jordan American Holdings, Inc. since 1993.
Vice President of Equity Assets Management, Inc. since
2000. Vice-President of IMPACT Financial Network, Inc.
since 1993.
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Name: A.J. Elko*
Birthdate: September 4, 1963
Address: 333 West Vine Street, Suite 206
Lexington, KY 40507
Position with
Portfolio: President, Treasurer and Secretary
Occupation: Chief Operating Officer and Chief Financial Officer of
Jordan American Holdings, Inc. since 1999. Vice
President of Equity Assets Management, Inc. since 2000.
Vice President of IMPACT Financial Network, Inc. and
Impact Administrative Services, Inc. since 1999. Chief
Operating Manager and founder of A.J. Elko &
Associates, LLC, (a tax planning and tax preparation
services company) since 1995. President and co-founder
of Tummino Construction, Inc. (a general contractor)
since 1996.
Name: Oleen Eagle
Birthdate: September 28, 1930
Address: 3215 Chestnut Street
Murrysville, PA 15668
Position with
Portfolio: Trustee
Occupation: President of Cornerstone TeleVision since 1987, Vice
President and General Manager of Cornerstone
TeleVision, 1976-1987, President and Director of Group
C (a for profit subsidiary of Cornerstone TeleVision)
since 1991, Vice President and Director of Christian
Advance International (a nonprofit Christian missionary
organization) since 1985.
Name: Gerald L. Bowyer
Birthdate: August 31, 1962
Address: 820 Pine Hollow Road
McKees Rocks, PA 15136
Position with
Portfolio: Trustee
Occupation: President, Allegheny Institute (a non-partisan research
and educational institute) since 1994; host of "Focus
on the Issues," a syndicated public affairs television
program originating on WPCB, Cornerstone TeleVision.
Name: Steven J. Fellin*
Birth date: April 1, 1965
Address: 460 E. Swedesford Rd, Suite 1080
Wayne, PA 19087
Position with
Portfolio: Trustee
Occupation: Vice President and Chief Financial Officer of Schneider
Capital Management since 1998. Assistant Vice President
of Schneider Capital Management since 1997. From July
1995 through October of 1997, he was a Senior Manager
of Fund Accounting and Administration at SEI
Investments.
* An "interested person" of IMIT, as defined in the Investment Company Act
of 1940, as amended.
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Trustees who are not interested persons of IMIT or the adviser receive
compensation of $500 per meeting attended. For the fiscal year ended September
30, 2000, the non-interested trustees of IMIT received the following
compensation:
Independent Compensation Total Compensation
Trustee from IMIT from IMIT
------- --------- ---------
Oleen Eagle $2,000 $2,000
Gerald L. Bowyer $2,000 $2,000
TRUST OWNERSHIP
As of December 31 , 2000, officers and Trustees of IMIT owned individually
and together less than 1% of IMIT's outstanding Shares.
INVESTMENT ADVISORY SERVICES
Schneider Capital Management ("Schneider Capital") is the investment
adviser of the Schneider Portfolio, and Equity Assets Management, Inc. ("EAM"),
a wholly owned subsidiary of Jordan American Holdings Inc, is the investment
adviser of the Jordan Portfolio. W. Neal Jordan is considered to be a control
person of EAM because he owns more than 25% of Jordan American Holdings, Inc.'s
voting stock. Mr. Jordan is the founder, Senior Portfolio Manager and Chief
Investment Officer of EAM.
Schneider Capital is a Pennsylvania corporation and is employee owned.
Arnold C. Schneider III is considered to be a control person of Schneider
Capital because he owns more than 25% of Schneider Capital's voting stock.
Pursuant to an investment advisory agreement between Schneider Capital and
the Trust, the Schneider Portfolio pays Schneider Capital an advisory fee which
on an annual basis equals 0.60% of the portfolio's average daily net assets for
services to the portfolio
Pursuant to a separate investment advisory agreement, the Jordan Portfolio
pays EAM an advisory fee which on an annual basis equals 0.60% of the
portfolio's average daily net assets for its services to the Jordan Portfolio.
DISTRIBUTION OF SHARES
IMIT has entered into a distribution agreement with IMPACT Financial
Network, Inc. ("IFNI") in which IFNI is the principal distributor of shares of
IMIT. IFNI is located at 2155 Resort Drive, Suite 108, Steamboat Springs, CO
80487. IFNI is a Florida corporation, and is a wholly-owned subsidiary of Jordan
American Holdings, an affiliate of EAM. IFNI does not receive any fee or other
compensation except as described under "Distribution Plans" and "Brokerage
Transactions" herein.
Distribution Plans
------------------
The portfolios have adopted Rule 12b-1 Plans (the "Plans"), which provide
that IFNI, as distributor, is entitled to a reimbursement each month for the
actual expenses incurred in the distribution and promotion of a portfolio's
shares, including but not limited to, printing of prospectuses
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and reports used for sales purposes, preparation and printing of sales
literature and related expenses, advertisements, and other distribution-related
expenses as well as any distribution or service fees paid to securities dealers
or others who have executed a dealer agreement with IFNI. Any expense of
distribution in excess of the 12b-1 fees under the Plans will be borne by the
adviser without any reimbursement or payment by the portfolio.
The Plans also provides that to the extent that a portfolio, its adviser,
IFNI or other parties on behalf of the portfolio, the adviser or IFNI makes
payments that are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares issued by the portfolio
within the context of Rule 12b-1, such payments shall be deemed to be made
pursuant to the applicable Plan. In no event shall the payments made under the
Plans, plus any other payments deemed to be made pursuant to the Plan, exceed
the amount permitted to be paid pursuant to the Conduct Rule 2830 of the
National Association of Securities Dealers, Inc.
Other expenses of distribution and marketing in excess of the maximum
amounts permitted by the plans per annum will be borne by IFNI, and any amounts
paid for the above services will be paid pursuant to a servicing or other
agreement.
The Plans were approved by the Board, including a majority of the Trustees
who are not "interested persons" of IMIT as defined in the 1940 Act (and each of
whom has no direct or indirect financial interest in the Plans or any agreement
related thereto, referred to herein as the ("12-b-1 Trustees"). The Board
determined that a Plan may be of benefit to the portfolios, the shareholders and
the Trust by helping a portfolio facilitate sales of shares to increase the
assets in the portfolio, and, therefore, to achieve economies of scale. The
Plans may be terminated at any time by the vote of the Board or the 12b-1
Trustees, or by the vote of a majority of the outstanding shares of a portfolio.
IFNI, the Portfolio's distributor has a financial interest in the operation
of the Plans. Charles R. Clark, Trustee of IMIT, and Vice President of IFNI, has
a direct financial interest in the operation of the Plans.
CODE OF ETHICS
IMIT, the investment advisers and IFNI each have adopted a code of ethics
under Rule 17j-1 of the Investment Company Act. These codes permit personnel to
invest in securities, including securities that may be purchased or sold by the
portfolios, subject to preclearance by IMIT's Compliance Officer and certain
other conditions.
ADMINISTRATIVE SERVICES, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
IMPACT Administrative Services, Inc., ("IASI"), 333 West Vine Street, Suite
206, Lexington, KY, 40507, is responsible for performing and overseeing
administrative, transfer agent, dividend disbursing and fund accounting services
on behalf of the portfolios. IASI is an affiliate of EAM., the adviser of the
Jordan Portfolio. The annual fee paid to IASI for services is 0.15% of each
portfolio's average net assets. IASI provides all administrative
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<PAGE>
services to the portfolios other then those relating to the investment portfolio
of the portfolios. IASI also provides the portfolios' transfer agency services
and provides fund accounting services to the portfolios.
CUSTODIAN
---------
The custodian for the securities and cash of IMIT and the portfolios is
Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, OH 45263. The
custodian's fee is paid by IASI from its administrative services fee.
INDEPENDENT AUDITORS
--------------------
Spicer, Jeffries & Co., 4155 E. Jewell Avenue, Suite 307, Denver, Colorado
80222, serves as the independent auditor for the portfolios. The auditor's fees
are paid by IASI from the administrative services fee.
BROKERAGE TRANSACTIONS
The adviser, when effecting the purchases and sales of portfolio securities
for the account of a portfolio, will seek execution of trades either (i) at the
most favorable and competitive rate of commission charged by any broker, dealer
or member of an exchange, or (ii) at a higher rate of commission charges if
reasonable in relation to brokerage and research services provided to the
Portfolios or the adviser by such member, broker, or dealer. Such services may
include, but are not limited to, any one or more of the following: information
on the availability of securities for purchase or sale, statistical or factual
information, or opinions pertaining to investments. The adviser may use research
and services provided to it by brokers and dealers in servicing all its clients;
however, not all such services will be used by the adviser in connection with
the Portfolios. Brokerage may also be allocated to dealers in consideration of a
portfolio's share distribution but only when execution and price are comparable
to that offered by other brokers.
Some securities considered for investment by a portfolio may also be
appropriate for other clients served by the adviser. If purchases or sales of
securities consistent with the investment policies of a portfolio and one or
more of these other clients served by the adviser is considered at or about the
same time, transactions in such securities will be allocated among the portfolio
and clients in a manner deemed fair and reasonable by the adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the adviser, and the results of such allocations, are
subject to periodic review by the Portfolios' Board of Trustees.
It is anticipated that the majority of the Jordan Portfolio's brokerage
transactions will be executed by IFNI, an affiliate of the portfolio's adviser.
SHARES OF BENEFICIAL INTEREST
GENERAL INFORMATION
IMIT is a Massachusetts business trust. IMIT's Declaration of Trust
authorizes the Board of Trustees to issue an unlimited number of shares,
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<PAGE>
which are shares of beneficial interest, without par value. The Trust presently
has four series of shares. The Declaration of Trust authorizes the Board of
Trustees to divide or redivide any unissued shares of the Trust into one or more
additional series by setting or changing in any one or more respects their
respective preferences, conversion or other rights, voting power, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption.
Shares have no subscription or preemptive rights and only such conversion
or exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus and this Statement of
Additional Information, a portfolio's shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
shareholders of a portfolio are entitled to receive the assets available for
distribution belonging to a portfolio. As used in the Prospectus and in this
Statement of Additional Information, "assets belonging to the portfolio" means
the consideration received by a portfolio upon the issuance or sale of shares in
the portfolio together with all income, earnings, profits, and proceeds derived
from the investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, and any funds or amounts derived from any
reinvestment of such proceeds.
VOTING RIGHTS
The participating insurance companies and their respective separate
accounts are the shareholders of the portfolios. As shareholders of the
portfolios, they have certain voting rights. Each share of a portfolio gives the
shareholder one vote in Trustee elections and all other matters submitted to
shareholders for a vote. All shares in IMIT have equal voting rights. Shares of
all the portfolios of IMIT will be able to vote on the election of Trustees and
in certain trust matters. Only holders of shares of a particular portfolio or
share class will be able to vote on matters relating solely to that portfolio or
share class.
As a Massachusetts business trust, IMIT is not required to hold annual
shareholder meetings, and does not intend to hold annual meetings.
Trustees may be removed by the Board of Trustees or by shareholders at a
special meeting. A special meeting of shareholders may be called by the Board of
Trustees at any time and will be called by Trustees upon the written request of
shareholders owning at least 10% of IMIT's outstanding shares of all series
entitled to vote.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a series will be required in
connection with a matter, a series will be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical, or that the matter does not affect any interest of the series. Under
Rule 18f-2, the approval of any amendment to the investment advisory agreement
or any change in investment policy submitted to shareholders would be
effectively acted upon with respect to a
13
<PAGE>
series only if approved by a majority of the outstanding shares of such series.
However, Rule 18f-2 also provides that the ratification of independent public
accountants, the approval of principal underwriting contracts, and the election
of Trustees may be effectively acted upon by shareholders of the Trust voting
without regard to series.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of IMIT. To protect its
shareholders, IMIT has filed legal documents with Massachusetts that expressly
disclaim the liability of its shareholders for acts or obligations of IMIT.
These documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument IMIT or its Trustees enter into or sign.
In the unlikely event that a shareholder is held personally liable for
IMIT's obligations, IMIT is required by its Declaration of Trust to use its
property to protect or compensate the shareholder. On request, IMIT will defend
any claim made and pay any judgment against a shareholder for any act or
obligation of IMIT. Therefore, financial loss resulting from liability as a
shareholder will occur only if IMIT itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
PURCHASING AND REDEEMING SHARES
Each portfolio ordinarily effects orders to purchase and redeem shares at
the portfolio's next computed net asset value after it receives an order.
Insurance companies participating in each portfolio serves as the portfolio's
designee for receiving orders of separate accounts that invest in the portfolio.
Each portfolio currently offers shares only to insurance company separate
accounts. In the future, the portfolios may offer their shares to pension and
retirement plans that qualify for special federal income tax treatment.
The Board of Trustees monitors for possible conflicts among separate
accounts (and will do so for plans) buying shares of the portfolios. A
portfolio's net asset value could decrease if it had to sell investment
securities to pay redemption proceeds to a separate account (or plan)
withdrawing because of a conflict.
TAX STATUS
Each Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify for this treatment, a portfolio must, among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
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<PAGE>
To the extent that a fund qualifies for treatment as a regulated investment
company, it will not be subject to federal income tax on income and net capital
gains paid to shareholders in the form of dividends or capital gains
distributions. If a fund fails to qualify for such treatment, it is required to
pay such taxes.
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional Shares. No portion of any income dividend
paid by a portfolio is eligible for the dividends received deduction available
to corporations. These dividends, and any short-term capital gains, are taxable
as ordinary income.
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held the
portfolio Shares.
Since each portfolio's shareholders are the participating insurance
companies and their separate accounts, the tax treatment of dividends and
distributions will depend on the tax status of the participating insurance
company. Accordingly, no discussion is included as to the federal income tax
consequences to variable annuity contract holders and variable life insurance
policy holders. For this information, variable annuity contract holders and
variable life insurance policy holders should consult the applicable prospectus
of the separate account of the participating insurance company or their tax
advisers.
PERFORMANCE INFORMATION
From time to time, the portfolios may advertise their respective total
return. These figures will be based on historical earnings and are not intended
to indicate future performance. No representations can be made regarding actual
future returns.
Total return represents the change, over a specific period of time, in the
value of an investment in a portfolio after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The average annual total return for shares of a portfolio is the average
compounded rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at the
end of the period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, less any applicable sales
load adjusted over the period by any additional shares, assuming the quarterly
reinvestment of all dividends and distributions.
Average annual total return quotations used in a portfolio's advertising
and promotional materials are calculated according to the following formula:
n
P(1 + T) = ERV
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<PAGE>
Where P equals a hypothetical initial payment of $1000; T equals average
annual total return; n equals the number of years; and ERV equals the ending
redeemable value at the end of the period of a hypothetical $1000 payment made
at the beginning of the period.
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication. Average annual
total return, or "T" in the above formula, is computed by finding the average
annual compounded rates of return over the period that would equate the initial
amount invested to the ending redeemable value. Average annual total return
assumes the reinvestment of all dividends and distributions.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of shares, the performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
-----------------------
The performance of shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Portfolio's expenses; and
o various other factors.
A portfolio's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of total return.
To help investors evaluate how a portfolio might satisfy their investment
objective, advertisements regarding a portfolio may discuss total return for a
portfolio as reported by various financial publications. Advertisements may also
compare total return to total return as reported by other investments, indices
and averages. The following publications, indices and averages may be used:
o Standard & Poor's 500 Composite Stock Price Index
o Russell 1000 Index
o Russell 1000 Value Index
16
