## TO OUR SHAREHOLDERS 

In 2000, we set out to show you and ourselves How to Build a Better Company. That meant undertaking a thorough evaluation of our business strategy, followed by refocusing on our core operations. 

It meant making some tough decisions and imple- menting three strategic initiatives. During the year, we believe that we successfully set the foundation for our long-term growth and stability. In that regard, we view 2000 as one of the most dynamic and important years in our history. The one that sets the stage for our future success. 

## Our Plan 

The most important issues facing the mortgage in- dustry in general, and Impac Mortgage Holdings, Inc. (“Impac”) in particular, have been volatility and liquidity. Over the past year, we implemented three strategic initiatives designed to increase the Company’s stability and position it for improved overall future performance. 

The first step was to restructure and rebuild our balance sheet, an initiative that required some tough decisions and aggressive actions. Among these were writing off $52.6 million in non- performing investment securities. In addition, to protect ourselves from similar charges and losses in the future, we added loan loss provisions of $14.5 million. These one-time, extraordinary charges resulted in a net loss of $54.2 million for the year ended December 31, 2000. 

Since 1998, we have limited our investments to non-conforming investment grade loans purchased or originated by our Mortgage Operations, a move taken to better ensure the quality of the invest- ments in our portfolio. 

We also issued two Collateralized Mortgage Obligations (CMOs) for $943.6 million. These securities act as financing vehicles that are secured by Impac’s mortgage loans. CMOs enable us to more closely lock in our interest rate spreads, eliminate margin calls and significantly reduce our invested capital. 

