-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q8r00gADPQ4zIG+fZabld29EJJknhyx1gWX1Nm4h9g4g8eW9mkJdl6FCHxcSGr1/ hwgMXlC6NVaZB6gkqYJR3w== 0000950109-97-001702.txt : 19970228 0000950109-97-001702.hdr.sgml : 19970228 ACCESSION NUMBER: 0000950109-97-001702 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19970227 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMOTHY PLAN CENTRAL INDEX KEY: 0000916490 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 597016828 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-73248 FILM NUMBER: 97546013 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08228 FILM NUMBER: 97546014 BUSINESS ADDRESS: STREET 1: 1304 W FAIRBANKS AVE CITY: WINTER PARK STATE: FL ZIP: 32789 BUSINESS PHONE: 4076441986 MAIL ADDRESS: STREET 1: 1304 W FAIRBANKS AVE CITY: WINTER PARK STATE: FL ZIP: 32789 485APOS 1 RULE 485(A) POST-EFFECTIVE AMENDMENT NO. 5 UNITED STATES FILE NO. 33-73248 ------------------ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FILE NO. 811-8228 ------------------ FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_] Pre-Effective Amendment No. _______ [_] Post Effective Amendment No. 5 [X] ------ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_] Amendment No. 6 [X] ------- THE TIMOTHY PLAN (Exact name of Registrant as Specified in Charter) 1304 West Fairbanks Avenue Winter Park, Florida 32789 - -------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code 407-644-1986 ------------ Arthur D. Ally, President The Timothy Plan 1304 West Fairbanks Avenue Winter Park, FL 32789 ------------------------------ (Name and Address of Agent for Service) COPIES TO: Joseph V. Del Raso, Esq. Stradley, Ronon, Stevens & Young 2600 One Commerce Square Philadelphia, PA 19103-7098 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICAL AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE: [_] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485. [_] ON (DATE), PURSUANT TO PARAGRAPH (B). ----- [X] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1). [_] ON (DATE) PURSUANT TO PARAGRAPH (A) OF RULE 485. ------ [_] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(II). [_] ON (DATE) PURSUANT TO PARAGRAPH (A)(II) OF RULE 485. ------ IF APPROPRIATE, CHECK THE FOLLOWING BOX: [_] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT. Registrant has previously registered an indefinite number of shares of common stock of The Timothy Plan under the Securities Act of 1933 pursuant to Rule 24f-2 of the Investment Company Act of 1940, as amended. Registrant filed a Notice pursuant to Rule 24f-2 for the fiscal year ended December 31, 1996 on February 24, 1997. As filed with the U.S. Securities and Exchange Commission on February 28, 1997 CROSS REFERENCE SHEET Pursuant to Rule 481(a)
Part A Item No. Prospectus Caption - --------------------------------------------------------------------- 1. Cover Page................................... Cover Page 2. Synopsis..................................... Expenses of the Fund 3. Financial Highlights......................... Financial Highlights 4. General Description of Registrant............ Prospectus Cover, Investment Objective and Policies, Risk Factors and Investment Restrictions 5. Management of the Fund....................... Board of Trustees, Investment Adviser, Investment Manager, Historical Performance of the Investment Manager, Underwriter, Administrator, Custodian, Transfer Agent, Fund Accounting/Pricing Agent, Distribution of Shares, and Expenses 6. Capital Stock and Other Securities........... Shares of Beneficial Interest, Dividends, Distributions and Taxes 7. Purchase of Shares Being Offered............. Determination of Net Asset Value, How to Purchase Shares, Retirement Plans 8. Redemption or Repurchase..................... How to Redeem Fund Shares 9. Pending Legal Proceedings.................... Inapplicable PART B STATEMENT OF ADDITIONAL ITEM NO. INFORMATION CAPTION - -------- --------------------- 10. Cover Page................................... Cover Page 11. Table of Contents............................ Table of Contents 12. General Information and History.............. N/A 13. Investment Objective and Policies............ Cover, The Timothy Plan- Investments, Investment Restrictions 14. Management of the Fund....................... Officers an Trustees of the Fund 15. Control Persons and Principal Holders of Securities........................ Miscellaneous 16. Investment Advisory and Other Services..................................... Investment Advisor, Investment Manager, Underwriter and Administrator 17. Brokerage Allocation......................... Allocation of Portfolio Brokerage 18. Capital Stock and Other Securities........... N/A 19. Purchase, Redemption and Pricing of Securities Being Offered.................. Purchase of Shares 20. Tax Status................................... N/A 21. Underwriters................................. Underwriters, Purchase of Shares, Distribution Plan 22. Calculation of Performance Data.............. Performance Calculations 23. Financial Statements......................... Audited Financial Statements
PART C - ------ Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of this Post-Effective Amendment No.5 to the Registration Statement. CROSS REFERENCE SHEET Pursuant to Rule 481(a)
Part A Item No. Prospectus Caption - --------------------------------------------------------------------- 1. Cover Page................................... Cover Page 2. Synopsis..................................... Expenses of the Fund 3. Financial Highlights......................... Financial Highlights 4. General Description of Registrant............ Prospectus Cover, Investment Objective and Policies, Risk Factors and Investment Restrictions 5. Management of the Fund....................... Board of Trustees, Investment Adviser, Investment Manager, Historical Performance of the Investment Manager, Underwriter, Administrator, Custodian, Transfer Agent, Fund Accounting/Pricing Agent, Distribution of Shares, and Expenses 6. Capital Stock and Other Securities........... Shares of Beneficial Interest, Dividends, Distributions and Taxes 7. Purchase of Shares Being Offered............. Determination of Net Asset Value, How to Purchase Shares, Retirement Plans 8. Redemption or Repurchase..................... How to Redeem Fund Shares 9. Pending Legal Proceedings.................... Inapplicable PART B STATEMENT OF ADDITIONAL ITEM NO. INFORMATION CAPTION - -------- --------------------- 10. Cover Page................................... Cover Page 11. Table of Contents............................ Table of Contents 12. General Information and History.............. N/A 13. Investment Objective and Policies............ Cover, The Timothy Plan- Investments, Investment Restrictions 14. Management of the Fund....................... Officers an Trustees of the Fund 15. Control Persons and Principal Holders of Securities........................ Miscellaneous 16. Investment Advisory and Other Services..................................... Investment Advisor, Investment Manager, Underwriter and Administrator 17. Brokerage Allocation......................... Allocation of Portfolio Brokerage 18. Capital Stock and Other Securities........... N/A 19. Purchase, Redemption and Pricing of Securities Being Offered.................. Purchase of Shares 20. Tax Status................................... N/A 21. Underwriters................................. Underwriters, Purchase of Shares, Distribution Plan 22. Calculation of Performance Data.............. Performance Calculations 23. Financial Statements......................... Audited Financial Statements
PART C - ------ Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of this Post-Effective Amendment No.5 to the Registration Statement. PROSPECTUS FOR THE TIMOTHY PLAN INSTITUTIONAL CLASS APRIL 29, 1997 ________________________________________________________________________________ Distributed By: FPS Broker Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406-0903 (800) 441-6580 ________________________________________________________________________________ The Timothy Plan (the "Fund") is an open-end diversified management investment company. It was organized as a series Delaware business trust and currently offers shares of one series, which has a specific investment objectives. There is no assurance that the Fund's objectives will be achieved. The objective of the Fund is long-term capital growth and its secondary objective is current income. The Fund seeks to achieve its objectives by investing in securities issued by companies which, in the opinion of the Fund's advisor, conduct business in accordance with the stated philosophy and principles of the Fund (See "Investment Objectives and Policies"). The Fund currently offers two classes of shares: Institutional Class and Retail Class. This Prospectus pertains only to the Fund's Institutional Class shares. The Institutional Class shares have no sales charge but are subject to annual 12b-1 Plan expenses. Retail Class shares have a front-end sales charge and are also subject to annual 12b-1 Plan expenses. The Retail Class is offered in a separate prospectus which can be obtained by calling (800) TIM-PLAN. The shares of the Fund may be purchased or redeemed at any time. Purchases and redemptions will be effected at the net asset value next determined following receipt of the investor's request. (See "Determination of Net Asset Value," "How to Purchase Shares," and "How to Redeem Shares"). This Prospectus sets forth concisely the information about the Fund that a prospective investor should know before investing. Investors should read and retain this Prospectus for future reference. More information about the Fund and classes of shares of the Fund has been filed with the U.S. Securities and Exchange Commission, and is contained in the "Statement of Additional Information," dated April 29, 1997 which is available at no charge upon request to the Fund. The Fund's Statement of Additional Information is incorporated herein by reference. The Statement of Additional Information, material incorporated by reference into this Prospectus, and other information regarding the Fund are maintained electronically with the U.S. Securities and Exchange Commission at its Internet Web site (http://www.sec.gov). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS
PAGE Expenses of the Fund ............................................ Financial Highlights ............................................ The Fund ........................................................ Investment Objectives and Policies .............................. Risk Factors .................................................... Investment Restrictions ......................................... Shares of Beneficial Interest ................................... Management of the Fund .......................................... Board of Trustees .............................................. Investment Advisor ............................................. Investment Manager ............................................. Historical Performance of the Investment Manager ............... Underwriter .................................................... Plan of Distribution ........................................... Administrator .................................................. Custodian, Transfer Agent and Fund Accounting/Pricing Agent .... Expenses ....................................................... Dividends, Distributions and Taxes .............................. Determination of Net Asset Value ................................ How to Purchase Shares .......................................... How to Redeem Shares ............................................ Retirement Plans ................................................ Performance ..................................................... Investment Application .......................................... Automatic Investment Plan Application ........................... Application to Request to Transfer to The Timothy Plan ..........
This Prospectus is not an offering of the securities herein described in any jurisdiction or to any person to whom it is unlawful for the Fund to make such an offer or solicitation. No sales representative, dealer, or other person is authorized to give any information or make any representation other than those contained in this Prospectus. EXPENSES OF THE FUND The following table illustrates all expenses and fees that a shareholder of the Fund's Institutional Class will incur. SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Load Imposed on Purchases............................ none Maximum Sales Load Imposed on Reinvested Dividends................. none Redemption Fees.................................................... none /1/
ANNUAL OPERATING EXPENSES OF THE INSTITUTIONAL CLASS * (as a percentage of average net assets) Management and Advisory Expenses After Expense Reimbursements...... 0.00% 12b-1 Fees......................................................... 0.25% /2/ Other Expenses After Expense Reimbursements........................ 1.35% ---- Total Operating Costs After Expense Reimbursements................. 1.60% ====
The purpose of this table is to assist the investor in understanding the various expenses that an investor in the Institutional Class will bear directly or indirectly. The Advisor has voluntarily agreed to waive its fees, so that the Institutional Class' total annual operating expenses will never exceed 1.60% of the daily average net assets. Further, the Advisor has agreed to reimburse the Institutional Class for its other expenses so that the Institutional Class' total annual expenses will never exceed 1.60%. Absent the fee waiver and expense reimbursements, "Management and Advisory Expenses" and "Other Expenses" would have been 0.85% and 2.85%, respectively. The following example illustrates the expenses that you would pay on a $1,000 investment over various time periods assuming (1) a 5% annual rate of return and (2) redemption at the end of each time period. As noted in the table above, the Fund charges no redemption fees of any kind.
1 year 3 years 5 years 10 years ------ ------- ------- -------- $16 $50 $87 $190
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The Fund issues two classes of shares that invest in the same portfolio of securities. Shareholders of Retail Class shares are subject to a sales charge and each class is subject to a different 12b-1 Plan, therefore, expenses and performance figures will vary between the classes. Further information about Retail Class shares may be obtained by calling (800) TIM-PLAN. - -------------------------------------------------------------------------------- /1/ United Missouri Bank KC NA charges $9.00 per redemption for redemptions payable by wire. /2/ The Board of Trustees has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended for the Fund's Institutional Class. With the Plan of Distribution in place, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charge consistent with rules of the National Association of Securities Dealers, Inc. Given the maximum rate permitted under the Fund's Plan of Distribution, it is anticipated that it would take a substantial number of years to reach such maximum. * The table reflects the expenses the Fund's Institutional Class incurred during the fiscal year ended December 31, 1996. Page 3 FINANCIAL HIGHLIGHTS The following financial highlights were derived from the Fund's financial statements related to the Institutional Class which were audited by Tait, Weller & Baker, independent auditors, whose unqualified report thereon is incorporated by reference into the Statement of Additional Information. The Fund's Statement of Additional Information may be obtained by shareholders without charge and is incorporated by reference into this Prospectus. The table sets forth financial data for a share of capital stock outstanding throughout the periods presented.
INSTITUTIONAL SHARES ----------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1995 1994 * ------------ ------------ -------------- NET ASSET VALUE, BEGINNING OF PERIOD................. $ 10.07 $ 9.66 $ 10.00 ------- ------ ------- Income From Investment Operations: Net investment income.............................. 0.10 0.11 0.06 Net gains (losses) on securities (both realized and unrealized).................................. 1.17 0.66 (0.34) ------- ------ ------- Total from investment operations..................................... 1.27 0.77 (0.28) ------- ------ ------- Less Distributions Distributions from net investment income: Institutional Shares............................. (0.10) (0.11) (0.06) Retail Shares.................................... 0.00 0.00 0.00 Distributions from net capital gains: Institutional Shares............................. 0.00 (0.25) 0.00 Retail Shares.................................... 0.00 0.00 0.00 ------- ------ ------- Total distributions.............................. (0.10) (0.36) (0.06) ------- ------ ------- NET ASSET VALUE, END OF PERIOD........................ $ 11.24 $10.07 $ 9.66 ======= ====== ======= TOTAL RETURN.......................................... 12.59% 7.93% (2.84%) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in 000s).................. $ 7,760 $6,133 $ 2,217 Ratio of expenses to average net assets: Before expense reimbursement....................... 3.70% 5.84% 18.62% /1/ After expense reimbursement........................ 1.60% 1.60% 1.60% /1/ Ratio of net investment income to average net assets: Before expense reimbursement....................... (1.05%) (2.96%) (15.49%)/1/ After expense reimbursement........................ 1.05% 1.28% 1.53% /1/ Portfolio turnover rate.............................. 93.08% 34.12% 8.31% Average commission rate paid......................... $0.0593 N/R /2/ N/R /2/
* The Institutional Shares commenced investment operations on March 21, 1994. /1/ Annualized. /2/ Not Required. Page 4 THE FUND The Timothy Plan (the "Fund") is an open-end diversified management investment company commonly known as a mutual fund. The Fund was established as a series Delaware business trust on December 16, 1993. The Fund currently offers one series with two classes of shares: Institutional Class and Retail Class. This Prospectus pertains only to Institutional Class shares. INVESTMENT OBJECTIVES AND POLICIES Set forth below are the investment objectives and policies of the Fund. The investment objectives of the Fund are a fundamental policy and may not be changed without the approval of the holders of a majority of the Fund's outstanding voting securities. There can be no assurance that the Fund will achieve its objectives. The Fund's objective is long-term capital growth, with a secondary objective of current income. The Fund shall seek to achieve its objectives while abiding by ethical standards established for investments by the Fund. Those standards preclude the investment in securities of companies involved in the businesses of alcohol production, tobacco production, or casino gambling, or which are directly or indirectly involved in pornography or abortion. The securities in which the Fund shall be precluded from investing, by virtue of the Fund's ethical standards, are referred to as the "Excluded Securities." The Fund will invest most of its assets in common stocks and American Depository Receipts ("ADRs"), although it may also invest in other types of securities including securities convertible into common stocks and common stock equivalents (including rights and warrants), preferred stocks, short-term U.S. Government securities, and/or other high-quality, short-term debt securities (commercial paper, repurchase agreements, bankers' acceptances, certificates of deposit and other fixed income securities (non-convertible and convertible bonds, debentures and notes issued by U.S. corporations and certain bank obligations and participations). High-quality debt securities are those that are rated Aa or better by Moody's, or AA or better by Standard & Poor's, or that are of comparable quality. See "Risk Factors" herein, and the Statement of Additional Information for information relating to these securities. While it is the Fund's policy to seek long-term investments, changes will be made whenever management believes that such changes will strengthen the Fund's investments and realization of its objectives. The Fund will pursue its objectives by investing a major portion of its assets in securities of companies which offer prospects for growth of capital in accordance with the portfolio investment techniques described below. The Fund seeks to achieve its investment objectives by investing primarily in common stocks and ADRs, while foregoing investments in the Excluded Securities. Awad & Associates (the "Investment Manager"), a division of Raymond James & Associates, Inc., as sub-investment advisor to Timothy Partners, Ltd. (the "Advisor"), will select the investments for the Fund, but will not invest in securities which the Advisor will determine are Excluded Securities. The Advisor has instructed the Investment Manager to avoid investment in any company directly involved in the business of alcohol production, tobacco production, or casino gambling. In addition, the Advisor will compile and maintain a list of companies that it determines, by using information collected by and published by three Christian ministries, participate directly or indirectly in either pornography or abortion. The Advisor will use its best judgement in determining which companies, through their corporate practices in either of these two areas, need to be placed on the Excluded Securities list. The Advisor also reserves the right to exercise its best judgement to exclude investment in other companies whose corporate practices may not fall within the exclusions described above, but nevertheless could be found offensive to basic traditional Judeo Christian values. The three Christian ministries that publish information that the Advisor will utilize in identifying companies directly or indirectly involved in pornography or abortion are as follows: (1) The American Family Association (to identify companies engaged in pornography); (2) Pro Vita Advisors (to identify companies that directly and indirectly participate in abortion); and (3) Life Decisions International (to identify companies that indirectly support abortion causes through corporate funding programs). The Advisor retains the right to change the ministries whose information it reviews, at its discretion. Page 5 After eliminating the Excluded Securities, the Investment Manager will construct a portfolio of investments to produce the highest possible risk-adjusted return on investment as is consistent with the Fund's objectives and policies. The Fund will invest primarily in a diversified portfolio of equity securities of companies whose market capitalizations exceed $200 million, and whose securities trade on the New York Stock Exchange, the American Stock Exchange and the NASDAQ National Market System. Since the Fund is an equity fund, the Investment Manager seeks investments that show the greatest potential for growth, with income as a secondary factor. Therefore, these companies may or may not pay dividends. Potential equity investment candidates will be analyzed to determine their ability to repay all fixed debt obligations (including certain "off balance sheet debts" such as operating lease obligations and unfunded pension liabilities) from their historical level of net investment income within a reasonable time period, generally less than five years. Securities are typically sold when an appreciation objective is met. The Fund may invest up to 30% of its assets in cash or debt securities. Although the Investment Manager does not utilize a market timing strategy, if market conditions are viewed to require that the Fund take a temporary defensive position, the Fund may invest up to 100% of its assets in (i) debt securities issued by the U.S. Government, its agencies or instrumentalities, (ii) commercial paper, or (iii) certificates of deposit and bankers' acceptances with respect to any of the foregoing investments. The Fund may also invest in such securities pending the investment of the proceeds of certain sales of portfolio securities and at such other times when suitable equity securities are not available. It is impossible to predict whether, or for how long, the Fund will use any of such temporary defensive strategies. The Advisor will attempt to monitor and respond to changes in business policies within the companies selected for investment. It is possible that securities in which the Fund has invested may become Excluded Securities. In such event, the Fund will sell its position in those securities subject to general market considerations. RISK FACTORS INVESTMENT RESTRICTIONS OF THE FUND. The ethical standards established for investments by the Fund limit the pool of securities from which investment securities may be selected by the Investment Manager. Although the Advisor believes the Fund's investment objective of long-term capital growth can be achieved notwithstanding the effect of the Fund's ethical standards, this objective may be affected by the limitations imposed by the Advisor, in eliminating the Excluded Securities as potential investments. ADVISOR AND INVESTMENT MANAGER. The principals of the managing general partner of the Advisor have been engaged in various aspects of the retail brokerage and financial advisory business. The Investment Manager has advised individuals, pension funds, trusts and institutions. Awad & Associates, a division of Raymond James & Associates, Inc., currently manages approximately $575 million in these accounts. The Investment Manager currently serves as co-investment advisor to one other investment company: Heritage Small Cap Fund. The Advisor has served as investment advisor exclusively to the Fund since the Fund's commencement of operations (March 21, 1994) but has not previously served as investment advisor to any other investment company. PORTFOLIO TURNOVER. It is anticipated that the annualized portfolio turnover rate for the Fund generally will not exceed a range of 50% to 75%, and may be lower than 50%, during most periods. High portfolio turnover involves additional Page 6 transaction costs (such as brokerage commissions) which are borne by the Fund, and might involve adverse tax effects. (See "Dividends, Distributions and Taxes"). RISKS OF CERTAIN FIXED INCOME SECURITIES INTEREST BEARING DEBT INSTRUMENTS. The market value of interest-bearing debt securities, if and when held by the Fund, is affected by changes in interest rates. There is normally an inverse relationship between the market value of securities sensitive to prevailing interest rates and actual changes in interest rates; i.e., a decline in interest rates produces an increase in market value, while an increase in rates produces a decrease in market value. Moreover, the longer the remaining maturity of a security, the greater the effect of interest rate changes on the market value of such a security. In addition, changes in an issuer's ability to make payments of interest and principal and in the market's perception of an issuer's creditworthiness also affect the market value of the debt securities of that issuer. MONEY MARKET SECURITIES. The Fund will select money market securities for investment when such securities offer a current market rate of return which the Fund considers reasonable in relation to the risk of the investment, and the issuer can satisfy suitable standards of credit-worthiness set by the Fund. The money market securities in which the Fund may invest are repurchase agreements, certificates of deposit, U.S. Government securities, commercial paper and securities of money market mutual funds. Although the Fund intends to invest primarily in common stocks, common stock equivalents, and ADRs, the Fund may invest up to 30% of its assets directly in money market securities whenever deemed appropriate to achieve the Fund's investment objectives. It may invest without limitation in such securities on a temporary basis for defensive purposes. Securities issued or guaranteed as to principal and interest by the U.S. Government ("Government Securities") include a variety of Treasury securities, which differ in their interest rates, maturities and date of issue. Treasury bills have a maturity of one year or less; Treasury notes have maturities of one to ten years; Treasury bonds generally have a maturity of greater than five years. The Fund will only acquire Government Securities which are supported by the "full faith and credit" of the United States. Securities which are backed by the full faith and credit of the United States include Treasury bills, Treasury notes, Treasury bonds and obligations of: the Government National Mortgage Association, the Farmers Home Administration and the Export-Import Bank. The Fund's direct investments in money market securities will generally favor securities with shorter maturities (maturities of less than 60 days) which are less affected by price fluctuations than are those with longer maturities. Certificates of deposit are certificates issued against funds deposited in a commercial bank or a savings and loan association for a definite period of time and earning a specified return. Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn by an importer or exporter to pay for specific merchandise, which are "accepted" by a bank, meaning, in effect, that the bank unconditionally agrees to pay the face value of the instrument on maturity. Investments in bank certificates of deposit and bankers' acceptances are generally limited to domestic banks and savings and loan associations that are members of the Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance Corporation having a net worth of at least $100 million dollars ("Domestic Banks") and domestic branches of foreign banks (limited to institutions having total assets not less than $1 billion or its equivalent). Investments in prime commercial paper may be made in notes, drafts, or similar instruments payable on demand or having a maturity at the time of issuance not exceeding nine months, exclusive of days of grace, or any renewal thereof payable on demand or having a maturity likewise limited. REPURCHASE AGREEMENTS Under a repurchase agreement the Fund acquires a debt instrument for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the Fund to resell such debt instrument at a fixed price. The Fund will enter into repurchase agreements only with banks which are members of the Federal Reserve System, or securities dealers who are members of a national securities exchange or are market makers in government securities and report to the Market Reports Division of the Federal Reserve Bank of New York and, in either case, only where the debt instrument collateralizing the repurchase agreement is a U.S. Treasury or agency obligation supported by the full faith and credit of the United States. A repurchase agreement may also be viewed as Page 7 the loan of money by the Fund to the seller. The resale price specified is normally in excess of the purchase price, reflecting an agreed upon interest rate. The rate is effective for the period of time the Fund is invested in the agreement and may not be related to the coupon rate on the underlying security. The term of these repurchase agreements will usually be short (from overnight to one week). At no time will the Fund invest in repurchase agreements of more than sixty days. The securities which are collateral for the repurchase agreements, however, may have maturity dates in excess of sixty days from the effective date of the repurchase agreement. The Fund will always receive, as collateral, securities whose market value, including accrued interest, will at least equal 102% of the dollar amount to be paid to the Fund under each agreement at its maturity, and the Fund will make payment for such securities only upon physical delivery or evidence of book entry transfer to the account of the Custodian. If the seller defaults, the Fund might incur a loss if the value of the collateral securing the repurchase agreement declines, and might incur disposition costs in connection with liquidation of the collateral. In addition, if bankruptcy proceedings are commenced with respect to the seller of the security, collection of the collateral by the Fund may be delayed or limited. The Fund also may not be able to substantiate its interests in the underlying securities. While management of the Fund acknowledges these risks, it is expected that such risks can be controlled through stringent security selection and careful monitoring procedures. The Fund may not enter into a repurchase agreement with more than seven days to maturity if, as a result, more than 10% of the market value of the Fund's net assets would be invested in such repurchase agreements and any other illiquid assets. For purposes of the diversification test for qualification as a regulated investment company under the Internal Revenue Code, Repurchase Agreements are not counted as cash, cash items or receivables, but rather as securities issued by the counter-party to the Repurchase Agreements. INVESTMENT RESTRICTIONS The investment restrictions set forth below have been adopted by the Fund as fundamental policies, to limit certain risks that may result from investment in specific types of securities or from engaging in certain kinds of transactions addressed by such restrictions. They may not be changed without the affirmative vote of the holders of a majority of the outstanding voting securities of the Fund. Certain of these policies are detailed below, while other policies are set forth in the Statement of Additional Information. Changes in values of particular Fund assets or the assets of the Fund as a whole will not cause a violation of the investment restrictions so long as percentage restrictions are observed by the Fund at the time it purchases any security. The investment restrictions specifically provide that the Fund will not: (a) as to 75% of the Fund's total assets, invest more than 5% of its total assets in the securities of any one issuer. (This limitation does not apply to cash and cash items, or obligations issued or guaranteed by the United States Government, its agencies or instrumentalities); (b) purchase more than 10% of the voting securities, or more than 10% of any class of securities, of another investment company. For purposes of this restriction, all outstanding fixed income securities of an issuer are considered as one class; (c) purchase or sell commodities or commodity futures contracts, other than those related to stock indexes as previously outlined in "Investment Objectives and Policies;" (d) purchase or sell real estate or interests therein, although it may purchase securities of issuers which engage in real estate operations; (e) make loans of money or securities, except (i) by the purchase of fixed income obligations in which the Fund may invest consistent with its investment objectives and policies; or (ii) by investment in repurchase agreements (see "Investment Objectives and Policies"); (f) invest in securities of any company if, any officer or trustee of the Fund or the Advisor owns more than 0.5% of the outstanding securities of such company and such officers and trustees (who own more than 0.5%) in the aggregate own more than 5% of the outstanding securities of such company; Page 8 (g) borrow money, except the Fund may borrow from banks (i) for temporary or emergency purposes in an amount not exceeding 5% of the Fund's assets or (ii) to meet redemption requests that might otherwise require the untimely disposition of portfolio securities, in an amount up to 33 1/3% of the value of the Fund's total assets (including the amount borrowed) valued at market less liabilities (not including the amount borrowed) at the time the borrowing was made. While borrowing exceeds 5% of the value of the Fund's total assets, the Fund will not purchase securities. Interest paid on borrowing will reduce net income; (h) pledge, hypothecate, mortgage or otherwise encumber its assets, except in an amount up to 33 1/3% of the value of its net assets but only to secure borrowing for temporary or emergency purposes, such as to effect redemptions; or (i) purchase the securities of any issuer, if, as a result, more than 10% of the value of a Fund's net assets would be invested in securities that are subject to legal or contractual restrictions on resale ("restricted securities"), in securities for which there are no readily available market quotations, or in repurchase agreements maturing in more than seven days, if all such securities would constitute more than 10% of the Fund's net assets. SHARES OF BENEFICIAL INTEREST The beneficial interest of the Fund is divided into an unlimited number of shares ("Shares") with a par value of $0.001 each. Each Share has equal dividend, voting, liquidation and redemption rights. If a matter to be voted on does not affect the interests of all classes, then only the shareholders of the affected class shall be entitled to vote on the matter. There are no conversion or preemptive rights. Shares, when issued, will be fully paid and nonassessable. Fractional shares have proportional voting rights. Shares of the Fund do not have cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any person to the Board of Trustees. MANAGEMENT OF THE FUND BOARD OF TRUSTEES - ----------------- The members of the Fund's Board of Trustees are fiduciaries for the Fund's shareholders and are governed by the laws of the State of Delaware in this regard. They establish policy for the operation of the Fund and appoint the officers who conduct the daily business of the Fund. The Statement of Additional Information contains more information regarding Officers and Trustees. INVESTMENT ADVISOR - ------------------ Timothy Partners, Ltd. (the "Advisor") is a Florida limited partnership organized on December 6, 1993. The Advisor supervises the investment of the assets of the Fund in accordance with the objectives, policies and restrictions of the Fund. The Advisor approves the portfolio of securities selected by the Investment Manager (See "Investment Manager" below). To determine which securities are Excluded Securities with respect to abortion and pornography, the Advisor consults with three Christian ministries on these issues: The American Family Association (pornography), Pro Vita Advisors (direct and indirect participation and involvement in abortion) and Life Decisions International (indirect participation in abortion through corporate funding programs). The Advisor retains the right to change the ministries whose information it reviews, at its discretion. For its services, the Advisor is paid an annual fee equal to 0.85% of the Fund's average daily net assets. This fee is subject to certain voluntary reductions in fees paid by the Fund. A portion of the advisory fee is paid by the Advisor to: (i) the Investment Manager for assisting in the selection of portfolio securities for the Fund and (ii) Covenant Page 9 Financial Management ("CFM") as reimbursement for certain expenses related to the daily operations of the Fund performed by CFM. In addition, this fee also covers the cost of postage, materials and handling of the fulfillment function of processing Prospectus requests as well as other sundry marketing and general administration expenses. The fee payable to and services provided by the Investment Manager are described under the heading "Investment Manager" below. The fee payable to and services provided by CFM are described at the end of this section. The Advisor's fee is higher than that charged by other funds, but is comparable to fees charged by funds with similar investment objectives. The Advisor has offices located at 1304 West Fairbanks Avenue, Winter Park, FL 32789. Arthur D. Ally, the President, Chairman and Trustee of the Fund, is President and a 70% shareholder of Covenant Funds, Inc. ("Covenant"), located at 1304 West Fairbanks Avenue, Winter Park, FL 32789, which is the managing general partner of the Advisor. Mr. Ally is also an individual general partner of the Advisor. Neither the Advisor nor its managing general partners previously has served as an advisor to any other registered investment company but the Advisor has served as investment advisor exclusively to the Fund since the Fund's commencement of operations (March 21, 1994). Prior thereto, Mr. Ally, had extensive securities industry experience having served as either financial consultant or branch manager for three securities firms over the previous seventeen years: Prudential Bache, Shearson Lehman Brothers and Investment Management & Research. Some or all of these firms may be used by the Investment Manager to execute portfolio trades for the Fund. Neither Mr. Ally nor any affiliated person to the Fund will receive any benefit from any of these transactions. The Advisor and CFM have entered into an agreement dated February 23, 1994, as amended April 23, 1996, whereby the Advisor pays CFM for certain overhead expenses related to the daily operations of the Fund that CFM carries out. These expenses include: salary of administrative personnel, cost of preparation of shareholder fulfillment kits, cost of phone lines and office space, and cost of postage and supplies. The annual fee is an amount to cover CFM's costs in providing services to the Advisor, payable by the Advisor on a monthly basis. Both parties have agreed that no profits will accrue to CFM as a result of this agreement. Arthur D. Ally is President and 100% shareholder of CFM. INVESTMENT MANAGER Effective January 1, 1997 the Fund engaged a new investment manager Awad & Associates (the "Investment Manager"), a division of Raymond James & Associates, Inc., pursuant to a new sub-investment advisory agreement among the Fund, Timothy Partners, Ltd. and Awad & Associates, which was approved by the Board of Trustees at a meeting held on November 29, 1996 and by shareholders of record on November 14, 1996 at a Special Meeting of Shareholders held on January 31, 1997. The Investment Manager has offices at 477 Madison Avenue, New York, New York 10022. The Investment Manager is a joint venture between James Awad, a twenty- six year veteran of the investment management business, and Raymond James Financial, a New York Stock Exchange member firm. The Investment Manager has been retained by the Advisor pursuant to a sub-advisory agreement to assist in the selection and management of the Fund's investment securities and prepare the portfolio of securities of selected issuers with business practices that meet the objectives and policies of the Fund. The Advisor reviews the portfolio to insure compliance with the Fund's ethical standards. The Investment Manager's investment policy committee, comprised of James Awad, Dan Veru and Carol Egan, is responsible for the day-to-day management of the Fund's portfolio. James Awad is the senior investment officer of the Investment Manager. Mr. Awad has been in the investment business since 1965, focusing on research and portfolio management. Prior to forming Awad & Associates, he was President of BMI Capital, a successful money management firm he founded. In addition, Mr. Awad managed assets at Neuberger & Berman, Channing Management and First Investment Corp. The Investment Manager managed approximately $575 million in assets at December 31, 1996 for clients on a separate account basis utilizing the same investment methodology that it will employ for the Fund. Page 10 The Investment Manager places portfolio transactions for the Fund. In this regard, the Investment Manager will be governed by the policies set forth under "Investment Objectives and Policies". For its services, the Investment Manager is paid an annual fee by the Advisor equal to 0.42% of the average daily net assets of the Fund with respect to the first $10 million in assets; 0.40% of the next $5 million in assets; 0.35% of the next $10 million in assets; and 0.25% of assets over $25 million. Awad & Associates currently serves as co-investment advisor to one other investment company: Heritage Small Cap Fund. At January 1, 1996, Awad & Associates managed $70 million in net assets of Heritage Small Cap Fund and received an advisory fee of 0.50% of its average daily net assets with respect to the first $50 million in assets and 37.5% thereafter. INVESTMENT MANAGER'S HISTORICAL PERFORMANCE - ------------------------------------------- Set forth below are certain performance data provided by the Investment Manager relating to the composite of separately managed equity accounts of clients of the Investment Manager. These accounts have substantially similar investment objectives and policies as the Fund's and they are managed using substantially similar investment strategies and techniques as those contemplated by the Fund. It is important to note that these returns do not take into account the effects of the Fund's moral screening restrictions, which the Advisor estimates would eliminate about 2.85% of the Investment Manager's current core portfolio. These figures are net of assumed management fees and commissions, and are a time-weighted average for the entire period, all of which would not be duplicated in any individual account, and would not result in the same return for an investor. Further, the separately managed accounts are not subject to investment limitations, diversification requirements, and other restrictions imposed by the Investment Company Act of 1940, as amended and Internal Revenue Code; such conditions, if applicable, may have lowered the returns for the separately managed accounts. The composites shown include accounts carried over from a previous firm, BMI Capital. The performance presented does not represent the historical performance of the Fund and is not indicative of the Fund's future performance.
YEAR COMPOSITE PAST PERFORMANCE OF PAST PERFORMANCE OF AWAD & ASSOCIATES AND BMI CAPITAL S&P 500 1996 20.0% 23.0% 1995 48.5% 37.6% 1994 4.8% 1.3% 1993 12.3% 10.1% 1992 14.5% 7.6% 1991 39.7% 30.6% 1990 (13.2%) (3.2%) 1989 9.6% 31.6% 1988 26.1% 16.8% 1987 (5.4%) 5.2% 1986 17.5% 18.4% 1985 17.3% 32.0% 1984 (2.3%) 6.3% 1983 20.9% 22.6% 1982 54.2% 21.5% One Year * 20.0% 23.0% Three Year 20.3% 19.7% Five Year 17.1% 15.2% Ten Year 13.3% 15.3%
Page 11 * One year ended December 31, 1996 NOTE 1: The results presented from October 1, 1992 forward represent only those accounts managed by Awad & Associates through Raymond James Financial. UNDERWRITER - ----------- FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, King of Prussia, PA 19406-0903 was engaged pursuant to an agreement dated January 19, 1994, as amended February 23, 1996. The purpose of acting as underwriter is to facilitate the registration of shares of the Fund under state securities laws and to assist in the sale of shares. The fee for such services is borne by the Advisor. PLAN OF DISTRIBUTION - -------------------- The Fund has adopted a plan pursuant to Rule 12b-1 (the "12b-1 Plan") under the Investment Company Act of 1940, as amended, whereby it may reimburse FPSB or others for expenses actually incurred by FPSB or others in the promotion and distribution of the Fund's Institutional Class shares. These expenses include, but are not limited to, the printing of prospectuses and reports used for sales purposes, the preparation of sales literature and related expenses, advertisements, and other distribution-related expenses, including payments to securities dealers and others participating in the sale and servicing of Institutional Class shares, including payment for providing personal services and/or maintaining shareholder accounts. The maximum amount which the Fund may pay to FPSB and others (and which FPSB may re-allow to securities dealers and others participating in the sale of shares) for such distribution expenses is 0.25% per annum of the Fund's average daily net assets payable on a monthly basis. All expenses of distribution and marketing in excess of 0.25% per annum will be borne by the Advisor. The 12b-1 Plan also covers any payments made by the Fund, the Advisor, the Investment Manager, FPSB, or other parties on behalf of the Fund, the Advisor, the Investment Manager, or FPSB, to the extent such payments are deemed to be for the financing of any activity primarily intended to result in the sale of shares issued by the Fund within the context of Rule 12b-1. ADMINISTRATOR - ------------- FPS Services, Inc. ("FPS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903 is the Fund's administrator pursuant to an Administration Services Agreement (the "Agreement") with the Fund dated January 19, 1994, as amended February 23, 1996. Under the Agreement, FPS receives a fee at the annual rate of 0.15% of the first $50 million in average net assets of the Fund, 0.10% of the next $50 million in average net assets and 0.05% of average net assets over $100 million. There is a minimum fee of $50,000 per year for the initial series/class issued by the Fund and $12, 000 per year for each additional series or class of shares. The services FPS provides to the Fund include: considering and monitoring of any third parties furnishing services to the Fund; providing the necessary office space, equipment and personnel to perform administrative and clerical functions for the Fund; preparing, filing and distributing proxy materials, periodic reports to shareholders, registration statements, and other documents; and responding to shareholder inquiries. CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING/PRICING AGENT - ----------------------------------------------------------- The Bank of New York, 48 Wall Street, New York, New York 10286, is custodian for the securities and cash of the Fund. FPS serves as the Fund's transfer agent. As transfer agent, it maintains the records of each shareholder's account, answers shareholder inquiries concerning accounts, processes purchases and redemptions of the Fund's shares, acts as dividend and distribution disbursing agent, and performs other shareholder service functions. Shareholder inquiries should be directed to the transfer agent at (800) 662-0201. Page 12 FPS also performs certain accounting and pricing services for the Fund. This includes the daily calculation of the Fund's net asset value. EXPENSES - -------- Except as indicated above, the Fund is responsible for the payment of its expenses, other than those borne by the Advisor. These expenses may include, but are not limited to: (a) management fees; (b) the charges and expenses of the Fund's legal counsel and independent accountants; (c) brokers' commissions, mark-ups and mark-downs and any issue or transfer taxes chargeable to the Fund in connection with its securities transactions; (d) all taxes and corporate fees payable by the Fund to governmental agencies; (e) the fees of any trade association of which the Fund is a member; (f) the cost of stock certificates, if any, representing shares of the Fund; (g) amortization and reimbursements of the organization expenses of the Fund and the fees and expenses involved in registering and maintaining registration of the Fund and its shares with the U.S. Securities and Exchange Commission, and the preparation and printing of the Fund's registration statements and prospectuses for such purposes; (h) allocable communications expenses with respect to investor services and all expenses of shareholders and trustee meetings and of preparing, printing and mailing prospectuses and reports to shareholders; (i) litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund's business; (j) state filing fees; and (k) compensation for employees of the Fund. DIVIDENDS, DISTRIBUTIONS AND TAXES The Fund will declare and pay annual dividends to its shareholders of substantially all of its net investment income, if any, earned during the year from its investments, and the Fund will distribute net realized capital gains, if any, once with respect to each year. Expenses of the Fund, including the advisory fee, are accrued each day. Reinvestments of dividends and distributions in additional shares of the Fund will be made at the net asset value determined on the ex date of the dividend or distribution unless the shareholder has elected in writing to receive dividends or distributions in cash. An election may be changed by notifying FPS in writing thirty days prior to record date. Dividends paid by the Fund with respect to its Institutional Class and Retail Class shares are calculated in the same manner and at the same time. Both Institutional Class and Retail Class shares of the Fund will share proportionately in the investment income and expenses of the Fund, except that the per share dividends of Retail Class shares will differ from the per share dividends of Institutional Class shares as a result of additional distribution expenses charged to Retail Class shares. As the sole series of The Timothy Plan, the Fund has qualified, and intends to continue to qualify, as a regulated investment company under Subchapter M of the Internal Revenue Code (the "Code"). As such, the Fund will not be subject to federal income tax, or to any excise tax, to the extent its earnings are distributed in accordance with the timing requirements imposed by the Code and by meeting certain other requirements relating to the sources of its income and diversification of its assets. The Fund intends to distribute substantially all of its net investment income and net capital gains. Dividends from net investment income or net short-term capital gains will be taxable to you as ordinary income, whether received in cash or in additional shares. Dividends from net investment income will generally qualify, in part, for the 70% corporate dividends received deduction, subject to certain holding period and debt financing restrictions imposed under the Code on the corporate investor claiming the deduction. The portion of the dividends so qualified depends on the aggregate qualifying dividend income received by the Fund from domestic (U.S.) sources. Distributions paid by the Fund from long-term capital gains, whether received in cash or in additional shares, are taxable to those investors who are subject to income tax as long-term capital gains, regardless of the length of time an investor has owned shares in the Fund. The Fund does not seek to realize any particular amount of capital gains during a year; rather, realized gains are a byproduct of Fund management activities. Consequently, capital gains distributions may be expected to vary considerably from year to year. Also, for those investors subject to tax, if purchases of shares in the Fund are made shortly before the record date for a dividend or capital gains distribution, a portion of the investment will Page 13 be returned as a taxable distribution. Dividends which are declared in October, November or December to shareholders of record in such a month but which, for operational reasons, may not be paid to the shareholder until the following January, will be treated for tax purposes as if paid by the Fund and received by the shareholder on December 31 of the calendar year in which they are declared. The sale of shares of the Fund is a taxable event and may result in a capital gain or loss to shareholders subject to tax. Capital gain or loss may be realized from an ordinary redemption of shares or an exchange of shares between two mutual funds (or two series of a mutual fund). Any loss incurred on sale or exchange of the Fund's shares, held for six months or less, will be treated as a long-term capital loss to the extent of capital gain dividends received with respect to such shares. In addition to federal taxes, shareholders may be subject to state and local taxes on distributions. Each year, the Fund will mail you information on the tax status of the Fund's dividends and distributions. Of course, shareholders who are not subject to tax on their income would not be required to pay tax on amounts distributed to them by the Fund. The Fund is required to withhold 31% of taxable dividends, capital gains distributions, and redemptions paid to shareholders who have not complied with IRS taxpayer identification regulations. You may avoid this withholding requirement by certifying on your Account Registration Form your proper Taxpayer Identification Number and by certifying that you are not subject to backup withholding. The tax discussion set forth above is included for general information only. Prospective investors should consult their own tax advisers concerning the federal, state, local or foreign tax consequences of an investment in the Fund. DETERMINATION OF NET ASSET VALUE The net asset value per Fund share is determined by the Fund as of the close of regular trading on each day that the New York Stock Exchange (the "NYSE") is open for unrestricted trading from Monday through Friday and on which there is a purchase or redemption of the Fund's share. The net asset value is determined by the Fund by dividing the value of the Fund's securities, plus any cash and other assets, less all liabilities, by the number of shares outstanding. Expenses and fees of the Fund, including the advisory and the distributor fees, are accrued daily and taken into account for the purpose of determining the net asset value. Fund 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 last reported bid price 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 Fund will be valued on an amortized cost basis by the Fund, 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 Fund acquires a money market security with more than sixty days remaining to its maturity, it will be valued at current market value 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. Net asset value is calculated separately for each class of the Fund based on expenses applicable to the particular class. Although the methodology and procedures for determining net asset value are identical for the Fund's classes, the net asset value of the classes may differ because of the different fees and expenses charged to each class. Page 14 HOW TO PURCHASE SHARES Shares of the Fund may be purchased directly from the Fund at the net asset value next determined after receipt of the order in proper form by the transfer agent. There is no sales load in connection with the purchase of shares. The Fund reserves the right to reject any purchase order and to suspend the offering of shares of the Fund. The Fund will not accept a check endorsed over by a third-party. The minimum initial investment is $25,000, with no minimum subsequent investment. The Fund reserves the right to vary the initial investment minimum and minimums for additional investments at any time. There is no minimum investment requirement for qualified retirement plans. At the discretion of the Fund, investors may be permitted to purchase Fund shares by transferring securities to the Fund that meet the Fund's investment objectives and policies. Securities transferred to the Fund will be valued in accordance with the same procedures used to determine the Fund's net asset value at the time of the next determination of net asset value after such acceptance. Shares issued by the Fund in exchange for securities will be issued at net asset value determined as of the same time. All dividends, interest, subscription, or other rights pertaining to such securities shall become the property of the Fund and must be delivered to the Fund by the investor upon receipt from the issuer. Investors who are permitted to transfer such securities will be required to recognize a gain or loss on such transfer, and pay tax thereon, if applicable, measured by the difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of the Fund unless: (l) such securities are, at the time of the exchange, eligible to be included in the Fund and current market quotations are readily available for such securities; (2) the investor represents and warrants that all securities offered to be exchanged are not subject to any restrictions upon their sale by the Fund under the Securities Act of 1933 or under the laws of the country in which the principal market for such securities exists, or otherwise and (3) the value of any such security (except U.S. Government securities) being exchanged together with other securities of the same issuer owned by the Fund, will not exceed 5% of the Fund's net assets immediately after the transaction. Purchase orders for shares of the Fund which are received by the transfer agent in proper form prior to the close of regular trading hours on the NYSE (currently 4:00 p.m. Eastern time) on any day that the Fund calculates its net asset value, are priced according to the net asset value determined on that day. Purchase orders for shares of the Fund received after the close of the NYSE on a particular day are priced as of the time the net asset value per share is next determined. Purchases may be made in one of the following ways: PURCHASES BY MAIL Shares may be purchased initially by completing the Investment Application on pages XX and XX of this Prospectus and mailing it to the transfer agent, together with a check payable to The Timothy Plan, c/o FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903. All checks for purchase of shares must be drawn on U.S. banks and payable in U.S. dollars. Subsequent investments in an existing account in the Fund may be made at any time by sending a check payable to The Timothy Plan, c/o United Missouri Bank KC, NA, P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of your account statement along with the amount of the investment and the name of the account for which the investment is to be made and the account number. Please note: A $20 fee will be charged to your account for any payment check returned to the custodian. The Fund may accept telephone orders from broker-dealers or service organizations which have been previously approved by the Fund. It is the responsibility of such broker-dealers or service organizations to promptly forward purchase orders and payments for the same to the Fund. Shares of the Fund may be purchased through broker-dealers, banks and bank trust departments who may charge the investor a transaction fee or other fee for their services at the time of purchase. Such fees would not otherwise be charged if the shares were purchased directly from the Fund. Page 15 PURCHASES BY WIRE To order shares for purchase by wiring federal funds, the transfer agent must first be notified by calling (800) 662-0201 to request an account number and furnish the Fund with your tax identification number. Following notification to the transfer agent, federal funds and registration instructions should be wired through the Federal Reserve System to: UNITED MISSOURI BANK KC NA ABA #10-10-00695 ----------- FOR: FPS SERVICES, INC. A/C 98-7037-071-9 ------------- FBO "THE TIMOTHY PLAN - INSTITUTIONAL CLASS" ACCOUNT OF (exact name(s) of account registration) --------------------------------------- SHAREHOLDER ACCOUNT # _______________ A completed application with signature(s) of registrant(s) must be filed with the transfer agent immediately subsequent to the initial wire. Investors should be aware that some banks may impose a wire service fee. Shareholders may be subject to 31% withholding if original application is not received. AUTOMATIC INVESTMENT PLAN Shares of the Fund may be purchased through an Automatic Investment Plan (the "Plan"). The Plan provides a convenient method by which investors may have monies deducted directly from their checking, savings or bank money market accounts for investment in the Fund. The minimum investment pursuant to this Plan is $100 per month. If you desire to take advantage of this Plan simply complete and remit the Automatic Investment Plan application on pages XX and XX. The account designated will be debited in the specified amount, on the date indicated, and Fund shares will be purchased. Only an account maintained at a domestic financial institution which is an ACH member may be so designated. The Fund may alter, modify or terminate this Plan at any time. For information about participating in the Automatic Investment Plan, call FPS at (800) 662-0201. HOW TO REDEEM SHARES Shareholders may redeem their shares of the Fund without charge on any business day that the NYSE is open (see "Determination of Net Asset Value"). Redemptions will be effective at the net asset value per share next determined after the receipt by the transfer agent of a redemption request meeting the requirements described below. The Fund normally sends redemption proceeds on the next business day, but in any event redemption proceeds are sent within seven calendar days of receipt of a redemption request in proper form. Payment may also be made by wire directly to any bank previously designated by the shareholder in a shareholder account application. There is a $9.00 charge for redemptions by wire. Please note that the shareholder's bank also may impose a fee for wire service. The Fund will honor redemption requests of shareholders who recently purchased shares by check, but will not mail the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to fifteen days from the purchase date, at which time the redemption proceeds will be mailed to the shareholder. To avoid delays of this kind, you may wish to purchase by wire if you are planning on redeeming your shares in the near future. Except as noted below, redemption requests received in proper form by the transfer agent prior to the close of regular trading hours on the NYSE on any business day that the Fund calculates its per share net asset value are effective that day. Redemption requests received after the close of the NYSE are effective as of the time the net asset value per share is next determined. The Fund will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of the Advisor or the Board of Trustees, result in the necessity of the Fund selling assets under disadvantageous conditions and to the detriment of the remaining shareholders of the Fund. Page 16 Pursuant to the Fund's Agreement and Declaration of Trust, payment for shares redeemed may be made either in cash or in-kind, or partly in cash and partly in- kind. However, the Fund has elected, pursuant to Rule 18f-1 under the Act, to redeem its shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund, during any 90 day period for any one shareholder. Payments in excess of this limit will also be made wholly in cash unless the Board of Trustees believes that economic conditions exist which would make such a practice detrimental to the best interests of the Fund. Any portfolio securities paid or distributed in-kind would be valued as described under "Determination of Net Asset Value." In the event that an in-kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from the Fund. In-kind payments need not constitute a cross-section of the Fund's portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment, and where the Fund completes such redemption in-kind, the Fund will not recognize gain or loss for federal tax purposes, on the securities used to complete the redemption but the shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. Shares may be redeemed in one of the following ways: REDEMPTION BY MAIL Shares may be redeemed by submitting a written request for redemption to the transfer agent at 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406- 0903. A written redemption request to the transfer agent must: (i) identify the shareholder's account number, (ii) state the number of shares or dollars to be redeemed and (iii) be signed by each registered owner exactly as the shares are registered. A redemption request for amounts above $25,000, or redemption requests for which proceeds are to be mailed somewhere other than the address of record, must be accompanied by signature guarantees. Signatures must be guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible guarantor institutions include banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations. Broker-dealers guaranteeing signatures must be members of a clearing corporation or maintain net capital of at least $100,000. Credit unions must be authorized to issue signature guarantees. Signature guarantees will be accepted from any eligible guarantor institution which participates in a signature guarantee program. The transfer agent may require additional supporting documents for redemptions made by corporations, executors, administrators, trustees and guardians. A redemption request will not be deemed to be properly received until the transfer agent receives all required documents in proper form. Questions with respect to the proper form for redemption requests should be directed to the transfer agent at (800) 662-0201. REDEMPTION BY TELEPHONE Shareholders who have so indicated on the application, or have subsequently arranged in writing to do so, may redeem shares by instructing the transfer agent by telephone. In order 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 must be sent to the transfer agent at the address listed above. Neither the Fund 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 Fund will use such procedures as are considered reasonable, including requesting a shareholder to correctly state his or her Fund account number, the name in which his or her 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 Fund 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 Fund reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming Fund shares by wire or telephone may be modified or terminated at any time by the Fund. Page 17 SYSTEMATIC CASH WITHDRAWAL PLAN The Fund offers a Systematic Cash Withdrawal Plan as another option which may be utilized by an investor who wishes to withdraw funds from his or her account on a regular basis. To participate in this option, an investor must either own or purchase shares having a value of $25,000 or more. Automatic payments by check will be mailed to the investor on either a monthly, quarterly, semi-annual or annual basis in amounts of $100 or more. All withdrawals are processed on the 25th of the month or, if such day is not a business day, on the next business day and paid promptly thereafter. Please complete the appropriate section on the Investment Application enclosed within this Prospectus, indicating the amount of the distribution and the desired frequency. ADDITIONAL INFORMATION The Fund also reserves the right to involuntarily redeem an investor's account where the account is worth less than the minimum initial investment required when the account is established, presently $25,000. (Any redemption of shares from an inactive account established with a minimum investment may reduce the account below the minimum initial investment, and could subject the account to redemption initiated by the Fund.) The Fund will advise the shareholder of such intention in writing at least sixty (60) days prior to effecting such redemption, during which time the shareholder may purchase additional shares in any amount necessary to bring the account back to $25,000. If the Trustees determine that it would be detrimental to the best interest of the remaining shareholders of the Fund to make payment in cash, the Fund may pay the redemption price in whole or in part by distribution in kind of readily marketable securities, from the Fund, within certain limits prescribed by the United States Securities and Exchange Commission. Such securities will be valued on the basis of the procedures used to determine the net asset value at the time of the redemption. If shares are redeemed in kind, the redeeming shareholder will incur brokerage costs in converting the assets into cash. RETIREMENT PLANS The Fund offers its shares for use in certain Tax Deferred (such as IRA, defined contribution, 401(k) and 403(b)(7) plans) Retirement Plans. The Fund sponsors IRA and 403(b)(7) plans. Information on these Plans is available from FPS or by reviewing the Statement of Additional Information. PERFORMANCE Total return data may from time to time be included in advertisements about the Fund. The Fund's total return may be calculated on an annualized and aggregate basis for various periods (which periods will be stated in the advertisement). Average annual return reflects the average percentage change per year in value of an investment in the Fund. Aggregate total return reflects the total percentage change over the stated period. The Fund may compare its investment performance with appropriate market indices such as the S&P Index and to appropriate mutual fund indices; and the Fund may advertise its ranking compared to other similar mutual funds as reported by industry analysts such as Lipper Analytical Services, Inc. All data will be based on the Fund's past investment results and does not predict future performance. Investment performance, which will vary, is based on many factors, including market conditions, the composition of the investments in the Fund, and the Fund's operating expenses. Investment performance also often reflects the risk associated with the Fund's investment objectives and policies. These factors should be considered when comparing the Fund to other mutual funds and other investment vehicles. The performance of the Institutional Class shares will normally be higher than the Retail Class shares because of the sales charge (when applicable) and additional distribution expenses charged to the Retail Class shares. Further information about the performance of the Fund is included in the Fund's Annual Report, dated December 31, Page 18 1996, which may be obtained without charge by contacting the Fund at (800) TIM- PLAN. Page 19 __________________________________ BROKER DEALER:____________________ THE TIMOTHY PLAN(R) REGISTERED REP:___________________ INSTITUTIONAL CLASS BRANCH #:_________ REP #:_______ INVESTMENT APPLICATION BRANCH NAME:______________________ BRANCH ADDRESS:___________________ MAIL TO: PHONE NUMBER:( ) - Ext: FPS Services, Inc., P.O. Box 61503, __________________________________ King of Prussia, PA 19406-0903 1. INITIAL INVESTMENT ($25,000 minimum) FORM OF PAYMENT [_] Check for $__________________ enclosed (make payable to "The Timothy Plan") [_] By Wire*1 An initial purchase of $_____________________ was wired on by Date _________________________________________________ to account # ______________________________ Name of your Bank or Broker Number assigned by F/P/S 2. REGISTRATION (Please Print) No certificate will be issued unless requested in writing. INDIVIDUAL Must complete items 1, 3, 4 and 8 (you may choose options 5, 6 or 7). ____________________________________________________________________________________________ ____________________________ First Name Middle Name Last Name Social Security Number ____________________________________________________________________________________________ ____________________________ Joint Owner First Name*2 Middle Name Last Name Social Security Number Citizen of: [ ] United States [ ] Other (Please Indicate) _______________________________ GIFT TO MINORS Must complete items 1, 3, 4 and 8 (you may choose options 5, 6, or 7). _______________________________________________________________________________ Name of Custodian (Name one only) As Custodian For (Name one only) Under the ____________________________ Uniform Gift to Minors Act _____________________________ State Security Number CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS Must complete items 1, 3, 4, 9 and 10 (you may choose options 5, 6, or 7). _____________________________________________________________ ______________________________________________________________ Name of Corporation, Partnership, Trust or Other ____ ____________________________ __________________________________________________ _______ _________ _______ Tax ID # Name of Trustee(s) Date of Trust 3. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S) ________________________________________________________________________________________________________________________________ Street Address and Apartment Number ____________________________________________ ________________________________ ________________ ______________________ City State Zip Code Zip Extend ___________ _____________________________ __________ _________________________________ (Area Code) Daytime Telephone Number (Area Code) Evening Telephone Number 4. DISTRIBUTION OPTIONS (Please indicate one) See page XX of the Prospectus for more detail. Income Dividends (check one box/line only) [_] reinvested [_] paid in cash Capital Gains Distributions (check one box/line only) [_] reinvested [_] paid in cash
. *1 Before making an initial investment by wire, you must be assigned an account number by calling (800) 662-0201. Then have your local bank wire your funds to: United Missouri Bank, N.A., ABA # 10-10-00695 for credit to FPS Services, Inc., AC # 98-7037-071-9 (The Timothy Plan). Be sure to include your name and account number on the wire. *2 (Joint ownership with rights of survivorship unless otherwise noted). Page 20 5. SYSTEMATIC WITHDRAWAL PLAN ($25,000 minimum necessary) See page XX of the Prospectus for more detail. A check in the amount of $______________________ (minimum $100.00) will be sent to you at your address of record unless otherwise noted. Please select desired frequency: [_] Monthly [_] Quarterly, in the months of _________, __________, __________, and __________. [_] Semi-Annual or Annual, in the month(s) of __________, __________, or __________. 6. TELEPHONE PRIVILEGES See page XX of the Prospectus for more detail. [_] REDEEM SHARES BY TELEPHONE I (we) authorize FPS Services, Inc., to honor telephone instructions for my (our) account which I (we) understand the proceeds of which will be mailed only to the address of record or wired to the bank specified below. Neither the Fund nor FPS Services, Inc., will be liable for properly acting upon telephone instructions believed to be genuine. Please attach a voided check on your account if the bank option is chosen. ____________________________________________________________________________________________________________ Name of Bank City State ____________________________________________________________________________________________________________ Bank Routing Number Account Number [_] Checking [_] Savings
7. AUTOMATIC INVESTMENT PLAN (For this option - please complete and send in form on pages XX and XX of the Prospectus). 8. SIGNATURE AND CERTIFICATION (This Section must be completed by INDIVIDUAL, ---- JOINT and CUSTODIAL accounts). THE FOLLOWING IS REQUIRED BY FEDERAL TAX LAW TO AVOID 31% BACKUP WITHHOLDING; "BY SIGNING BELOW, I CERTIFY UNDER PENALTIES OF PERJURY THAT THE SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER ENTERED ABOVE IS CORRECT (OR I AM WAITING FOR A NUMBER TO BE ISSUED TO ME), AND THAT I HAVE NOT BEEN NOTIFIED BY THE IRS THAT I AM SUBJECT TO BACKUP WITHHOLDING UNLESS I HAVE CHECKED THE BOX." IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING, CHECK BOX [ ]. THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING. RECEIPT OF CURRENT PROSPECTUS IS HEREBY ACKNOWLEDGED. _______________________________________________________________________________________ ____________________________________ Signature [_] Owner [_] Custodian [_] Trustee Date _______________________________________________________________________________________ _________ _________ _________ Signature of Joint Owner (if applicable) Date
9. RESOLUTIONS (This Section must be completed by CORPORATIONS, PARTNERSHIPS, ---- TRUSTS and OTHER ORGANIZATIONS). RESOLVED: That this corporation or organization become a shareholder of The Timothy Plan (the "Fund) and that__________________________________________ _____________________________________ is (are) authorized to complete and execute the Application on behalf of the corporation or organization and take any action for it as may be necessary or appropriate with respect to its shareholders account(s) with the Fund, and it is FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to appoint FPS Services, Inc. as redemption agent of the corporation for shares of the Fund, to establish or acknowledge terms and conditions governing the redemption of said shares or to otherwise implement the privileges elected on the application. 10. CERTIFICATE (This Section must be completed by CORPORATIONS, PARTNERSHIPS, ---- TRUSTS and OTHER ORGANIZATIONS). I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of the: __________________________________________ incorporated or formed under the (Name of Corporation) laws of _______________ and were adopted at a meeting of the Board of (State) Directors or Trustees of the organization or corporation duly called and held on ________________ at which a quorum was preset and acting throughout, and that the same are now in full force and effect. I further certify that the following is (are) the duly elected officer(s) of the corporation or organization, authorized to act in accordance with the foregoing resolutions. NAME TITLE ___________________________________ _______________________ ___________________________________ _______________________ ___________________________________ _______________________ Witness my hand and the seal of the corporation or organization this _________ day of _______________________, 19 ______. _______________________________ _________________________________________ *Secretary-Clerk Other Authorized Officer (if required) * If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be signed by another officer. Page 21 AUTOMATIC INVESTMENT PLAN APPLICATION - -------------------------------------------------------------------------------- HOW DOES IT WORK? 1. FPS Services, Inc., through our bank, United Missouri Bank KC NA, draws an automatic clearing house (ACH) debit electronically against your personal checking account each month, according to your instructions. 2. Choose any amount ($100 or more) that you would like to invest regularly and your debit for this amount will be processed by FPS Services, Inc. as if you had written a check yourself. 3. Shares will be purchased and a confirmation sent to you. HOW DO I SET IT UP? 1. Complete the forms and the Fund Application Form if you do not already have an existing account. 2. Mark one of your personal checks or deposit slips VOID, attach it to the forms below and mail to FPS Services, Inc., P.O. Box 61503, King of Prussia, PA 19406-0903. 3. As soon as your bank accepts your authorization, debits will be generated and your Automatic Investment Plan started. In order for you to have ACH debits from your account, your bank must be able to accept ACH transactions and/or be a member of an ACH association. Your branch manager should be able to tell you your bank's capabilities. We cannot guarantee acceptance by your bank. 4. Please allow one month for processing of your Automatic Investment Plan before the first debit occurs. - -------------------------------------------------------------------------------- AUTOMATIC INVESTMENT PLAN APPLICATION TO: FPS Services, Inc. P.O. Box 61503 King of Prussia, PA 19406-0903 Please start an Automatic Investment Plan for me and invest___________________. ($100 or more) on the [_] 10th [_] 15th [_] 20th of each month, in shares of THE TIMOTHY PLAN - INSTITUTIONAL CLASS. Check one: [_] I am in the process of establishing an account. or [_] My account number is: _____________________________________________________ ________________________________________________________________________________ Name as account is registered ________________________________________________________________________________ Street ________________________________________________________________________________ City State Zip + ext. I understand that my ACH debit will be dated on the day of each month as indicated above or as specified by written request. I agree that if such debit is not honored upon presentation, FPS Services, Inc. may discontinue this service and any share purchase made upon deposit of such debit may be canceled. I further agree that if the net asset value of the shares purchased with such debit is less when said purchase is canceled than when the purchase was made, FPS Services, Inc. shall be authorized to liquidate other shares or fractions thereof held in my account to make up the deficiency. This Automatic Investment Plan may be discontinued by FPS Services, Inc. upon 30-days written notice or at any time by the investor by written notice to FPS Services, Inc. which is received not later than 5 business days prior to the above designed investment date. Signature(s): _______________________________________________ _______________________________________________ Page 22 AUTOMATIC INVESTMENT PLAN APPLICATION - -------------------------------------------------------------------------------- BANK REQUEST AND AUTHORIZATION TO: _____________________________ ____________________________ Name of Your Bank Bank Checking Account Number ___________________________________________________________________________ Address of Bank or Branch Where Account is Maintained As a convenience to me, please honor ACH debits on my account drawn by FPS Services, Inc., United Missouri Bank KC NA and payable to "THE TIMOTHY PLAN". I agree that your rights with respect to such debit shall be the same as if it were a check drawn upon you and signed personally by me. This authority shall remain in effect until you receive written notice from me changing its terms or revoking it, and until you actually receive such notice, I agree that you shall be fully protected in honoring such debit. I further agree that if any debit is dishonored, whether with or without cause or whether intentionally or inadvertently, you shall be under no liability whatsoever. DEPOSITOR'S _______________________________________________________________ Signature of Bank Depositor(s) as shown on bank records. NOTE: Your bank must be able to accept ACH transactions and/or be a member of an ACH association in order for you to use this service. - -------------------------------------------------------------------------------- INDEMNIFICATION AGREEMENT TO: The bank named above So that you may comply with your Depositor's request and authorization, THE TIMOTHY PLAN agrees as follows: 1. To indemnify and hold you harmless from any loss you may suffer arising from or in connection with the payment by you of a debit drawn by FPS Services, Inc. to the order of THE TIMOTHY PLAN designated on the account of your depositor(s) executing the authorization including any costs or expenses reasonably incurred in connection with such loss. THE TIMOTHY PLAN will not, however, indemnify you against any loss due to your payment of any debit generated against insufficient funds. 2. To refund to you any amount erroneously paid by you to FPS Services, Inc., on any such debit if claim for the amount of such erroneous payment is made by you within 3 months of the date of such debit on which erroneous payment was made. Page 23 __________________________________ BROKER DEALER:____________________ THE TIMOTHY PLAN(R) REGISTERED REP:___________________ INSTITUTIONAL CLASS BRANCH #:_________ REP #:_______ INVESTMENT APPLICATION BRANCH NAME:______________________ BRANCH ADDRESS:___________________ MAIL TO: PHONE NUMBER:( ) - Ext: FPS Services, Inc., P.O. Box 61503, __________________________________ King of Prussia, PA 19406-0903 1. INVESTOR INFORMATION ____________________________________________________________________________ First Name Middle Initial Last Name ____________________________________________________________________________ Street Address _______________________________________________ ______ ________ __________ City State Zip Code Zip Extend _________________________ _________________ _____________ Social Security Number Date of Birth (Area Code) __________________________ ________________ __________________________ Residence Telephone Number (Area Code) Business Telephone Number 2. PREVIOUS INVESTMENT FIRM ____________________________________________________________________________ Name of Previous Firm ____________________________________________________________________________ Address ____________________________________________________________________________ Investor's Name Account Number Type of Account: [_] Individual [_] Joint [_] UGMA [_] Trust Type of Assets: [_] Mutual Fund [_] Money Market [_] CD (Immediately/At Maturity) [_] Securities 3. AMOUNT TO BE TRANSFERRED TO THE TIMOTHY PLAN [_] Liquidate all assets from the above account and transfer the proceeds. [_] Liquidate $_____________________________________ from the above account and transfer the proceeds 4. TRANSFER INSTRUCTIONS Make check payable to: The Timothy Plan Mail to: Post Office Box 61503, King of Prussia, PA 19406-0903 5. INVESTOR'S AUTHORIZATION ________________________________ ___________ _________________________ Signature of Participant Date Signature Guarantee Page 24 INVESTMENT ADVISOR Timothy Partners, Ltd. 1304 West Fairbanks Avenue Winter Park, FL 32789 INVESTMENT MANAGER Awad & Associates 477 Madison Avenue New York, New York 10022 UNDERWRITER FPS Broker Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406 SHAREHOLDER SERVICES FPS Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406 CUSTODIAN The Bank of New York 48 Wall Street New York, NY 10286 LEGAL COUNSEL Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 AUDITORS Tait, Weller & Baker Two Penn Center Suite 700 Philadelphia, PA 19102-1707 For Additional Information About The Timothy Plan, Please Call: (800) TIM-PLAN PROSPECTUS FOR THE TIMOTHY PLAN RETAIL CLASS APRIL 29, 1997 - -------------------------------------------------------------------------------- Distributed By: FPS Broker Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406-0903 (800) 441-6580 - -------------------------------------------------------------------------------- The Timothy Plan (the "Fund") is a low level load, open-end diversified management investment company. It was organized as a series Delaware business trust and currently offers shares of one series, which has a specific investment objectives. There is no assurance that the Fund's objectives will be achieved. The objective of the Fund is long-term capital growth and its secondary objective is current income. The Fund seeks to achieve its objectives by investing in securities issued by companies which, in the opinion of the Fund's advisor, conduct business in accordance with the stated philosophy and principles of the Fund (See "Investment Objectives and Policies"). The Fund currently offers two classes of shares: Institutional Class and Retail Class. This Prospectus pertains only to the Fund's Retail Class shares which have a front-end sales charge and are subject to annual 12b-1 Plan expenses. Shareholders, who purchase larger amounts than the initial investment requirement, may qualify for a reduced sales charge at the time of purchase. (See "How to Purchase Shares"). The Institutional Class is offered in a separate prospectus which can be obtained by calling (800) TIM-PLAN. The shares of the Fund may be purchased or redeemed at any time. Purchases will be effected at the net asset value, plus the applicable sales charge, next determined following receipt of the investor's request. (See "Determination of Net Asset Value," "How to Purchase Shares," and "How to Redeem Shares"). This Prospectus sets forth concisely the information about the Fund that a prospective investor should know before investing. Investors should read and retain this Prospectus for future reference. More information about the Fund and classes of shares of the Fund has been filed with the U.S. Securities and Exchange Commission, and is contained in the "Statement of Additional Information," dated April 29, 1997, which is available at no charge upon request to the Fund. The Fund's Statement of Additional Information is incorporated herein by reference. The Statement of Additional Information, material incorporated by reference into this Prospectus, and other information regarding the Fund are maintained electronically with the U.S. Securities and Exchange Commission at its Internet Web site (http: //www.sec.gov). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS
PAGE Expenses of the Fund....................................................... Financial Highlights....................................................... The Fund................................................................... Investment Objectives and Policies......................................... Risk Factors............................................................... Investment Restrictions.................................................... Shares of Beneficial Interest.............................................. Management of the Fund..................................................... Board of Trustees......................................................... Investment Advisor........................................................ Investment Manager........................................................ Historical Performance of the Investment Manager.......................... Underwriter............................................................... Plan of Distribution...................................................... Administrator............................................................. Custodian, Transfer Agent and Fund Accounting/Pricing Agent............... Expenses.................................................................. Dividends, Distributions and Taxes......................................... Determination of Net Asset Value........................................... How to Purchase Shares..................................................... How to Redeem Shares....................................................... Retirement Plans........................................................... Performance................................................................ Investment Application..................................................... Automatic Investment Plan Application...................................... Application to Request to Transfer to The Timothy Plan.....................
This Prospectus is not an offering of the securities herein described in any jurisdiction or to any person to whom it is unlawful for the Fund to make such an offer or solicitation. No sales representative, dealer, or other person is authorized to give any information or make any representation other than those contained in this Prospectus. Page 2 EXPENSES OF THE FUND The following table illustrates all estimated expenses and fees that a shareholder of the Fund's Retail Class will incur. SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................. 1.75% Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)....... none Redemption Fees.............................................................................. none /1/
ANNUAL OPERATING EXPENSES OF THE RETAIL CLASS* (as a percentage of average net assets) Management and Advisory Expenses After Expense Reimbursements................................ 0.00% 12b-1 Fees................................................................................... 0.85% /2/ Other Expenses After Expense Reimbursements.................................................. 1.35% ---- Total Operating Costs After Expense Reimbursements........................................... 2.20% ====
The purpose of this table is to assist the investor in understanding the various expenses that an investor in the Retail Class will bear directly or indirectly. The Advisor has voluntarily agreed to waive its fees, so that the Retail Class' total annual operating expenses will never exceed 2.20% of the daily average net assets. Further, the Advisor has agreed to reimburse the Retail Class for its other expenses so that the Retail Class' total annual expenses will never exceed 2.20%. Absent the fee waiver and expense reimbursements, "Management and Advisory Expenses After Expense Reimbursements" would have been 0.85% and "Other Expenses After Expense Reimbursements" would have been 3.45% for the fiscal year ended December 31, 1996. The following example illustrates the expenses that you would pay on a $1,000 investment over various time periods assuming (1) a 5% annual rate of return and (2) redemption at the end of each time period. As noted in the table above, the Fund charges no redemption fees of any kind. 1 year 3 years 5 years 10 years ------ ------- ------- -------- $39 $85 $133 $266 THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The Fund issues two classes of shares that invest in the same portfolio of securities. Shareholders of Retail Class shares are subject to a sales charge and each class is subject to a different 12b-1 Plan, therefore, expenses and performance figures will vary between the classes. The information set forth in the foregoing tables and example relates only to the Retail Class shares. The rules of the U.S. Securities and Exchange Commission require that the maximum sales charge be reflected in the above table. However, certain investors may qualify for a reduced sales charge. See "How to Purchase Shares." Further information about Institutional Class shares may be obtained by calling (800) TIM-PLAN. - -------------------------------------------------------------------------------- /1/ United Missouri Bank KC NA charges $9.00 per redemption for redemptions payable by wire. /2/ For purposes of this table, "12b-1 Fees" are comprised of an asset-based 12b-1 fee up to a maximum of 0.85% of average daily net assets, of which, up to 0.25% may be service fees to be paid to FPS Broker Services, Inc., dealers and others, for providing personal service and/or maintaining shareholder accounts. Long-term holders of Retail Class shares may eventually pay more than the economic equivalent of the maximum front-end sales charges otherwise permitted by the Rules of Fair Practice of the National Association of Securities Dealers, Inc. * The table reflects the expenses the Fund's Retail Class incurred during the fiscal year ended December 31, 1996. Page 3 FINANCIAL HIGHLIGHTS The following financial highlights were derived from the Fund's financial statements, which were audited by Tait, Weller & Baker, independent auditors, whose unqualified report thereon is incorporated by reference into the Statement of Additional Information. The Fund's Statement of Additional Information may be obtained by shareholders without charge and is incorporated by reference into this Prospectus. The table sets forth financial data for a share of capital stock outstanding throughout the periods presented.
RETAIL SHARES ----------------------------- FOR THE YEAR FOR THE PERIOD ENDED ENDED DECEMBER 31, DECEMBER 31, 1996 1995 * ------------ -------------- NET ASSET VALUE, BEGINNING OF PERIOD....... $ 10.08 $ 10.49 ------- ------- Income From Investment Operations: Net investment income.................... 0.07 0.11 Net gains (losses) on securities (both realized and unrealized)......... 1.14 (0.16) ------- ------- Total from investment operations........................... 1.21 (0.05) ------- ------- Less Distributions Distributions from net investment income: Institutional Shares.................... 0.00 0.00 Retail Shares........................... (0.07) (0.11) Distributions from net capital gains: Institutional Shares.................... 0.00 0.00 Retail Shares........................... 0.00 (0.25) ------- ------- Total distributions..................... (0.07) (0.36) ------- ------- NET ASSET VALUE, END OF PERIOD............. $ 11.22 $ 10.08 ======= ======= TOTAL RETURN............................... 11.98% /1/ (0.46%)/1/ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in 000s)....... $ 3,929 $ 620 Ratio of expenses to average net assets: Before expense reimbursement............. 4.30% 6.44% /2/ After expense reimbursement.............. 2.20% 2.20% /2/ Ratio of net investment income to average net assets: Before expense reimbursement............. (1.65%) (3.56%)/2/ After expense reimbursement.............. 0.45% 0.68% /2/ Portfolio turnover rate................... 93.08% 34.12% Average commission rate paid.............. $0.0593 N/R /3/
* The Retail Shares commenced investment operations on August 25, 1995. /1/ Total return calculation does not reflect sales load. /2/ Annualized. /3/ Not Required. Page 4 THE FUND The Timothy Plan (the "Fund") is a low level load, open-end, diversified management investment company commonly known as a mutual fund. The Fund was established as a series Delaware business trust on December 16, 1993. The Fund currently offers one series with two classes of shares: Institutional Class and Retail Class. This Prospectus pertains only to Retail Class shares. INVESTMENT OBJECTIVES AND POLICIES Set forth below are the investment objectives and policies of the Fund. The investment objectives of the Fund are a fundamental policy and may not be changed without the approval of the holders of a majority of the Fund's outstanding voting securities. There can be no assurance that the Fund will achieve its objectives. The Fund's objective is long-term capital growth, with a secondary objective of current income. The Fund shall seek to achieve its objectives while abiding by ethical standards established for investments by the Fund. Those standards preclude the investment in securities of companies involved in the businesses of alcohol production, tobacco production, or casino gambling, or which are directly or indirectly involved in pornography or abortion. The securities in which the Fund shall be precluded from investing, by virtue of the Fund's ethical standards, are referred to as the "Excluded Securities." The Fund will invest most of its assets in common stocks and American Depository Receipts ("ADRs"), although it may also invest in other types of securities including securities convertible into common stocks and common stock equivalents (including rights and warrants), preferred stocks, short-term U.S. Government securities, and/or other high-quality, short-term debt securities (commercial paper, repurchase agreements, bankers' acceptances, certificates of deposit and other fixed income securities (non-convertible and convertible bonds, debentures and notes issued by U.S. corporations and certain bank obligations and participations). High-quality debt securities are those that are rated Aa or better by Moody's, or AA or better by Standard & Poor's, or that are of comparable quality. See "Risk Factors" herein, and the Statement of Additional Information for information relating to these securities. While it is the Fund's policy to seek long-term investments, changes will be made whenever management believes that such changes will strengthen the Fund's investments and realization of its objectives. The Fund will pursue its objectives by investing a major portion of its assets in securities of companies which offer prospects for growth of capital in accordance with the portfolio investment techniques described below. The Fund seeks to achieve its investment objectives by investing primarily in common stocks and ADRs, while foregoing investments in the Excluded Securities. Awad & Associates (the "Investment Manager"), a division of Raymond James & Associates, Inc., as sub-investment advisor to Timothy Partners, Ltd. (the "Advisor"), will select the investments for the Fund, but will not invest in securities which the Advisor will determine are Excluded Securities. The Advisor has instructed the Investment Manager to avoid investment in any company directly involved in the business of alcohol production, tobacco production, or casino gambling. In addition, the Advisor will compile and maintain a list of companies that it determines, by using information collected by and published by three Christian ministries, participate directly or indirectly in either pornography or abortion. The Advisor will use its best judgement in determining which companies, through their corporate practices in either of these two areas, need to be placed on the Excluded Securities list. The Advisor also reserves the right to exercise its best judgement to exclude investment in other companies whose corporate practices may not fall within the exclusions described above, but nevertheless could be found offensive to basic traditional Judeo Christian values. The three Christian ministries that publish information that the Advisor will utilize in identifying companies directly or indirectly involved in pornography or abortion are as follows: (1) The American Family Association (to identify companies engaged in pornography); (2) Pro Vita Advisors (to identify companies that directly and indirectly participate in abortion); and (3) Life Decisions International (to identify companies that indirectly support abortion causes through corporate funding programs). The Advisor retains the right to change the ministries whose information it reviews, at its discretion. Page 5 After eliminating the Excluded Securities, the Investment Manager will construct a portfolio of investments to produce the highest possible risk-adjusted return on investment as is consistent with the Fund's objectives and policies. The Fund will invest primarily in a diversified portfolio of equity securities of companies whose market capitalizations exceed $200 million, and whose securities trade on the New York Stock Exchange, the American Stock Exchange and the NASDAQ National Market System. Since the Fund is an equity fund, the Investment Manager seeks investments that show the greatest potential for growth, with income as a secondary factor. Therefore, these companies may or may not pay dividends. Potential equity investment candidates will be analyzed to determine their ability to repay all fixed debt obligations (including certain "off balance sheet debts" such as operating lease obligations and unfunded pension liabilities) from their historical level of net investment income within a reasonable time period, generally less than five years. Securities are typically sold when an appreciation objective is met. The Fund may invest up to 30% of its assets in cash or debt securities. Although the Investment Manager does not utilize a market timing strategy, if market conditions are viewed to require that the Fund take a temporary defensive position, the Fund may invest up to 100% of its assets in (i) debt securities issued by the U.S. Government, its agencies or instrumentalities, (ii) commercial paper, or (iii) certificates of deposit and bankers' acceptances or with respect to any of the foregoing investments. The Fund may also invest in such securities pending the investment of the proceeds of certain sales of portfolio securities and at such other times when suitable equity securities are not available. It is impossible to predict whether, or for how long, the Fund will use any of such temporary defensive strategies. The Advisor will attempt to monitor and respond to changes in business policies within the companies selected for investment. It is possible that securities in which the Fund has invested may become Excluded Securities. In such event, the Fund will sell its position in those securities subject to general market considerations. RISK FACTORS INVESTMENT RESTRICTIONS OF THE FUND. The ethical standards established for investments by the Fund limit the pool of securities from which investment securities may be selected by the Investment Manager. Although the Advisor believes the Fund's investment objective of long-term capital growth can be achieved notwithstanding the effect of the Fund's ethical standards, this objective may be affected by the limitations imposed by the Advisor, in eliminating the Excluded Securities as potential investments. ADVISOR AND INVESTMENT MANAGER. The principals of the managing general partner of the Advisor have been engaged in various aspects of the retail brokerage and financial advisory business. The Investment Manager has advised individuals, pension funds, trusts and institutions. Awad & Associates, a division of Raymond James & Associates, Inc., currently manages approximately $575 million in these accounts. The Investment Manager currently serves as co-investment advisor to one other investment company: Heritage Small Cap Fund. The Advisor has served as investment advisor exclusively to the Fund since the Fund's commencement of operations (March 21, 1994) but has not previously served as investment advisor to any other investment company. PORTFOLIO TURNOVER. It is anticipated that the annualized portfolio turnover rate for the Fund generally will not exceed Page 6 a range of 50% to 75%, and may be lower than 50%, during most periods. High portfolio turnover involves additional transaction costs (such as brokerage commissions) which are borne by the Fund, and might involve adverse tax effects. (See "Dividends, Distributions and Taxes"). RISKS OF CERTAIN FIXED INCOME SECURITIES INTEREST BEARING DEBT INSTRUMENTS. The market value of interest-bearing debt securities, if and when held by the Fund, is affected by changes in interest rates. There is normally an inverse relationship between the market value of securities sensitive to prevailing interest rates and actual changes in interest rates; i.e., a decline in interest rates produces an increase in market value, while an increase in rates produces a decrease in market value. Moreover, the longer the remaining maturity of a security, the greater the effect of interest rate changes on the market value of such a security. In addition, changes in an issuer's ability to make payments of interest and principal and in the market's perception of an issuer's creditworthiness also affect the market value of the debt securities of that issuer. MONEY MARKET SECURITIES. The Fund will select money market securities for investment when such securities offer a current market rate of return which the Fund considers reasonable in relation to the risk of the investment, and the issuer can satisfy suitable standards of credit-worthiness set by the Fund. The money market securities in which the Fund may invest are repurchase agreements, certificates of deposit, U.S. Government securities, commercial paper and securities of money market mutual funds. Although the Fund intends to invest primarily in common stocks, common stock equivalents, and ADRs, the Fund may invest up to 30% of its assets directly in money market securities whenever deemed appropriate to achieve the Fund's investment objectives. It may invest without limitation in such securities on a temporary basis for defensive purposes. Securities issued or guaranteed as to principal and interest by the U.S. Government ("Government Securities") include a variety of Treasury securities, which differ in their interest rates, maturities and date of issue. Treasury bills have a maturity of one year or less; Treasury notes have maturities of one to ten years; Treasury bonds generally have a maturity of greater than five years. The Fund will only acquire Government Securities which are supported by the "full faith and credit" of the United States. Securities which are backed by the full faith and credit of the United States include Treasury bills, Treasury notes, Treasury bonds and obligations of: the Government National Mortgage Association, the Farmers Home Administration and the Export-Import Bank. The Fund's direct investments in money market securities will generally favor securities with shorter maturities (maturities of less than 60 days) which are less affected by price fluctuations than are those with longer maturities. Certificates of deposit are certificates issued against funds deposited in a commercial bank or a savings and loan association for a definite period of time and earning a specified return. Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn by an importer or exporter to pay for specific merchandise, which are "accepted" by a bank, meaning, in effect, that the bank unconditionally agrees to pay the face value of the instrument on maturity. Investments in bank certificates of deposit and bankers' acceptances are generally limited to domestic banks and savings and loan associations that are members of the Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance Corporation having a net worth of at least $100 million dollars ("Domestic Banks") and domestic branches of foreign banks (limited to institutions having total assets not less than $1 billion or its equivalent). Investments in prime commercial paper may be made in notes, drafts, or similar instruments payable on demand or having a maturity at the time of issuance not exceeding nine months, exclusive of days of grace, or any renewal thereof payable on demand or having a maturity likewise limited. REPURCHASE AGREEMENTS Under a repurchase agreement the Fund acquires a debt instrument for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the Fund to resell such debt instrument at a fixed price. The Fund will enter into repurchase agreements only with banks which are members of the Federal Reserve System, or securities dealers who are members of a national securities exchange or are market makers in government securities and report to the Market Reports Division of the Federal Reserve Bank of New York and, in either case, only where the debt instrument collateralizing the repurchase agreement is a U.S. Treasury or agency Page 7 obligation supported by the full faith and credit of the United States. A repurchase agreement may also be viewed as the loan of money by the Fund to the seller. The resale price specified is normally in excess of the purchase price, reflecting an agreed upon interest rate. The rate is effective for the period of time the Fund is invested in the agreement and may not be related to the coupon rate on the underlying security. The term of these repurchase agreements will usually be short (from overnight to one week). At no time will the Fund invest in repurchase agreements of more than sixty days. The securities which are collateral for the repurchase agreements, however, may have maturity dates in excess of sixty days from the effective date of the repurchase agreement. The Fund will always receive, as collateral, securities whose market value, including accrued interest, will at least equal 102% of the dollar amount to be paid to the Fund under each agreement at its maturity, and the Fund will make payment for such securities only upon physical delivery or evidence of book entry transfer to the account of the Custodian. If the seller defaults, the Fund might incur a loss if the value of the collateral securing the repurchase agreement declines, and might incur disposition costs in connection with liquidation of the collateral. In addition, if bankruptcy proceedings are commenced with respect to the seller of the security, collection of the collateral by the Fund may be delayed or limited. The Fund also may not be able to substantiate its interests in the underlying securities. While management of the Fund acknowledges these risks, it is expected that such risks can be controlled through stringent security selection and careful monitoring procedures. The Fund may not enter into a repurchase agreement with more than seven days to maturity if, as a result, more than 10% of the market value of the Fund's net assets would be invested in such repurchase agreements and any other illiquid assets. For purposes of the diversification test for qualification as a regulated investment company under the Internal Revenue Code, Repurchase Agreements are not counted as cash, cash items or receivables, but rather as securities issued by the counter-party to the Repurchase Agreements. INVESTMENT RESTRICTIONS The investment restrictions set forth below have been adopted by the Fund as fundamental policies, to limit certain risks that may result from investment in specific types of securities or from engaging in certain kinds of transactions addressed by such restrictions. They may not be changed without the affirmative vote of the holders of a majority of the outstanding voting securities of the Fund. Certain of these policies are detailed below, while other policies are set forth in the Statement of Additional Information. Changes in values of particular Fund assets or the assets of the Fund as a whole will not cause a violation of the investment restrictions so long as percentage restrictions are observed by the Fund at the time it purchases any security. The investment restrictions specifically provide that the Fund will not: (a) as to 75% of the Fund's total assets, invest more than 5% of its total assets in the securities of any one issuer. (This limitation does not apply to cash and cash items, or obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities); (b) purchase more than 10% of the voting securities, or more than 10% of any class of securities, of another investment company. For purposes of this restriction, all outstanding fixed income securities of an issuer are considered as one class; (c) purchase or sell commodities or commodity futures contracts, other than those related to stock indexes as previously outlined in "Investment Objectives and Policies;" (d) purchase or sell real estate or interests therein, although it may purchase securities of issuers which engage in real estate operations; (e) make loans of money or securities, except (i) by the purchase of fixed income obligations in which the Fund may invest consistent with its investment objectives and policies; or (ii) by investment in repurchase agreements (see "Investment Objectives and Policies"); (f) invest in securities of any company if, any officer or trustee of the Fund or the Advisor owns more than 0.5% of the outstanding securities of such company and such officers and trustees (who own Page 8 more than 0.5%) in the aggregate own more than 5% of the outstanding securities of such company; (g) borrow money, except the Fund may borrow from banks (i) for temporary or emergency purposes in an amount not exceeding 5% of the Fund's assets or (ii) to meet redemption requests that might otherwise require the untimely disposition of portfolio securities, in an amount up to 33 1/3% of the value of the Fund's total assets (including the amount borrowed) valued at market less liabilities (not including the amount borrowed) at the time the borrowing was made. While borrowing exceeds 5% of the value of the Fund's total assets, the Fund will not purchase securities. Interest paid on borrowing will reduce net income; (h) pledge, hypothecate, mortgage or otherwise encumber its assets, except in an amount up to 33 1/3% of the value of its net assets but only to secure borrowing for temporary or emergency purposes, such as to effect redemptions; or (i) purchase the securities of any issuer, if, as a result, more than 10% of the value of a Fund's net assets would be invested in securities that are subject to legal or contractual restrictions on resale ("restricted securities"), in securities for which there are no readily available market quotations, or in repurchase agreements maturing in more than seven days, if all such securities would constitute more than 10% of the Fund's net assets. SHARES OF BENEFICIAL INTEREST The beneficial interest of the Fund is divided into an unlimited number of shares ("Shares") with a par value of $0.001 each. Each Share has equal dividend, voting, liquidation and redemption rights. If a matter to be voted on does not affect the interests of all classes, then only the shareholders of the affected class shall be entitled to vote on the matter. There are no conversion or preemptive rights. Shares, when issued, will be fully paid and nonassessable. Fractional shares have proportional voting rights. Shares of the Fund do not have cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any person to the Board of Trustees. Currently, there are two classes of shares issued by the Fund. MANAGEMENT OF THE FUND BOARD OF TRUSTEES - ----------------- The members of the Fund's Board of Trustees are fiduciaries for the Fund's shareholders and are governed by the laws of the State of Delaware in this regard. They establish policy for the operation of the Fund and appoint the officers who conduct the daily business of the Fund. The Statement of Additional Information contains more information regarding Officers and Trustees. INVESTMENT ADVISOR - ------------------ Timothy Partners, Ltd. (the "Advisor") is a Florida limited partnership organized on December 6, 1993. The Advisor supervises the investment of the assets of the Fund in accordance with the objectives, policies and restrictions of the Fund. The Advisor approves the portfolio of securities selected by the Investment Manager (See "Investment Manager" below). To determine which securities are Excluded Securities with respect to abortion and pornography, the Advisor consults with three Christian ministries on these issues: The American Family Association (pornography), Pro Vita Advisors (direct and indirect participation and involvement in abortion) and Life Decisions International (indirect participation in abortion through corporate funding programs). The Advisor retains the right to change the ministries whose information it reviews, at its discretion. For its services, the Advisor is paid an annual fee equal to 0.85% of the Fund's average daily net assets. This fee is subject to certain voluntary reductions in fees paid by the Fund. A portion of the advisory fee is paid by the Advisor to: (i) the Investment Manager for assisting in the selection of portfolio securities for the Fund and (ii) Covenant Page 9 Financial Management ("CFM") as reimbursement for certain expenses related to the daily operations of the Fund performed by CFM. In addition, this fee also covers the cost of postage, materials and handling of the fulfillment function of processing Prospectus requests as well as other sundry marketing and general administration expenses. The fee payable to and services provided by the Investment Manager are described under the heading "Investment Manager" below. The fee payable to and services provided by CFM are described at the end of this section. The Advisor's fee is higher than that charged by other funds, but is comparable to fees charged by funds with similar investment objectives. The Advisor has offices located at 1304 West Fairbanks Avenue, Winter Park, FL 32789. Arthur D. Ally, the President, Chairman and Trustee of the Fund, is President and a 70% shareholder of Covenant Funds, Inc. ("Covenant"), located at 1304 West Fairbanks Avenue, Winter Park, FL 32789, which is the managing general partner of the Advisor. Mr. Ally is also an individual general partner of the Advisor. Neither the Advisor nor its managing general partners previously has served as an advisor to any other registered investment company but the Advisor has served as investment advisor exclusively to the Fund since the Fund's commencement of operations (March 21, 1994). Prior thereto, Mr. Ally, has had extensive securities industry experience having served as either financial consultant or branch manager for three securities firms over the previous seventeen years: Prudential Bache, Shearson Lehman Brothers and Investment Management & Research. Some or all of these firms may be used by the Investment Manager to execute portfolio trades for the Fund. Neither Mr. Ally nor any affiliated person to the Fund will receive any benefit from any of these transactions. The Advisor and CFM have entered into an agreement dated February 23, 1994, as amended April 23, 1996, whereby the Advisor pays CFM for certain overhead expenses related to the daily operations of the Fund that CFM carries out. These expenses include: salary of administrative personnel, cost of preparation of shareholder fulfillment kits, cost of phone lines and office space, and cost of postage and supplies. The annual fee is an amount to cover CFM's costs in providing services to the Advisor, payable by the Advisor on a monthly basis. Both parties have agreed that no profits will accrue to CFM as a result of this agreement. Arthur D. Ally is President and 100% shareholder of CFM. INVESTMENT MANAGER - ------------------ Effective January 1, 1997 the Fund engaged a new investment manager Awad & Associates (the "Investment Manager"), a division of Raymond James & Associates, Inc., pursuant to a new sub-investment advisory agreement among the Fund, Timothy Partners, Ltd. and Awad & Associates, which was approved by the Board of Trustees at a meeting held on November 29, 1996 and by shareholders of record on November 14, 1996 at a Special Meeting of Shareholders held on January 31, 1997. The Investment Manager has offices at 477 Madison Avenue, New York, New York 10022. The Investment Manager is a joint venture between James Awad, a twenty- six year veteran of the investment management business, and Raymond James Financial, a New York Stock Exchange member firm. The Investment Manager has been retained by the Advisor pursuant to a sub-advisory agreement to assist in the selection and management of the Fund's investment securities and prepare the portfolio of securities of selected issuers with business practices that meet the objectives and policies of the Fund. The Advisor reviews the portfolio to insure compliance with the Fund's ethical standards. The Investment Manager's investment policy committee, comprised of James Awad, Dan Veru and Carol Egan, is responsible for the day-to-day management of the Fund's portfolio. James Awad is the senior investment officer of the Investment Manager. Mr. Awad has been in the investment business since 1965, focusing on research and portfolio management. Prior to forming Awad & Associates, he was President of BMI Capital, a successful money management firm he founded. In addition, Mr. Awad managed assets at Neuberger & Berman, Channing Management and First Investment Corp. The Investment Manager managed approximately $575 million in assets at December 31, 1996 for clients on a separate account basis utilizing the same investment methodology that it will employ for the Fund. Page 10 The Investment Manager places portfolio transactions for the Fund. In this regard, the Investment Manager will be governed by the policies set forth under "Investment Objectives and Policies". For its services, the Investment Manager is paid an annual fee by the Advisor equal to 0.42% of the average daily net assets of the Fund with respect to the first $10 million in assets; 0.40% of the next $5 million in assets; 0.35% of the next $10 million in assets; and 0.25% of assets over $25 million. Awad & Associates currently serves as co-investment advisor to one other investment company: Heritage Small Cap Fund. At January 1, 1996, Awad & Associates managed $70 million in net assets of Heritage Small Cap Fund and received an advisory fee of 0.50% of its average daily net assets with respect to the first $50 million in assets and 37.5% thereafter. INVESTMENT MANAGER'S HISTORICAL PERFORMANCE - ------------------------------------------- Set forth below are certain performance data provided by the Investment Manager relating to the composite of separately managed equity accounts of clients of the Investment Manager. These accounts have substantially similar investment objectives and policies as the Fund's and they are managed using substantially similar investment strategies and techniques as those contemplated by the Fund. It is important to note that these returns do not take into account the effects of the Fund's moral screening restrictions, which the Advisor estimates would eliminate about 2.85% of the Investment Manager's current core portfolio. These figures are net of assumed management fees and commissions, and are a time-weighted average for the entire period, all of which would not be duplicated in any individual account, and would not result in the same return for an investor. Further, the separately managed accounts are not subject to investment limitations, diversification requirements, and other restrictions imposed by the Investment Company Act of 1940, as amended and Internal Revenue Code; such conditions, if applicable, may have lowered the returns for the separately managed accounts. The composites shown include accounts carried over from a previous firm, BMI Capital. The performance presented does not represent the historical performance of the Fund and is not indicative of the Fund's future performance.
YEAR COMPOSITE PAST PERFORMANCE OF PAST PERFORMANCE OF AWAD & ASSOCIATES AND BMI CAPITAL S&P 500 1996 20.0% 23.0% 1995 48.5% 37.6% 1994 4.8% 1.3% 1993 12.3% 10.1% 1992 14.5% 7.6% 1991 39.7% 30.6% 1990 (13.2%) (3.2%) 1989 9.6% 31.6% 1988 26.1% 16.8% 1987 (5.4%) 5.2% 1986 17.5% 18.4% 1985 17.3% 32.0% 1984 (2.3%) 6.3% 1983 20.9% 22.6% 1982 54.2% 21.5% One Year * 20.0% 23.0% Three Year 20.3% 19.7% Five Year 17.1% 15.2% Ten Year 13.3% 15.3%
Page 11 * One year ended December 31, 1996 NOTE 1: The results presented from October 1, 1992 forward represent only those accounts managed by Awad & Associates through Raymond James Financial. UNDERWRITER - ----------- FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, was engaged pursuant to an agreement dated January 19, 1994, as amended February 23, 1996. The purpose of acting as underwriter is to facilitate the registration of shares of the Fund under state securities laws and to assist in the sale of shares. The fee for such services is borne by the Advisor. PLAN OF DISTRIBUTION - -------------------- The Fund has adopted a plan pursuant to Rule 12b-1 (the "12b-1 Plan") under the Investment Company Act of 1940, as amended, whereby it may reimburse FPSB or others for expenses actually incurred by FPSB or others in the promotion and distribution of the Fund's Retail Class shares. These expenses include, but are not limited to, the printing of prospectuses and reports used for sales purposes, the preparation of sales literature and related expenses, advertisements, and other distribution-related expenses, including payments to securities dealers and others participating in the sale and servicing of Retail Class shares. The maximum amount which the Fund may pay to FPSB and others (and which FPSB may re-allow to securities dealers and others participating in the sale of shares) for such distribution expenses is 0.85% per annum of the Fund's average daily net assets, of which, up to 0.25% may be service fees to be paid to FPSB, dealers and others, for providing personal services and/or maintaining shareholder accounts, payable on a monthly basis. All expenses of distribution and marketing in excess of 0.85% per annum will be borne by the Advisor and any amounts paid for the above services will be paid pursuant to a servicing or other agreement. The 12b-1 Plan also covers any payments made by the Fund, the Advisor, the Investment Manager, FPSB, or other parties on behalf of the Fund, the Advisor, the Investment Manager, or FPSB, to the extent such payments are deemed to be for the financing of any activity primarily intended to result in the sale of shares issued by the Fund within the context of Rule 12b-1. ADMINISTRATOR - ------------- FPS Services, Inc. ("FPS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, is the Fund's administrator pursuant to an Administration Services Agreement (the "Agreement") with the Fund dated January 19, 1994, as amended February 23, 1996. Under the Agreement, FPS receives a fee at the annual rate of 0.15% of the first $50 million in average net assets of the Fund, 0.10% of the next $50 million in average net assets and 0.05% of average net assets over $100 million. There is a minimum fee of $50,000 per year for the initial series/class issued by the Fund and $12,000 per year for each additional series or class of shares. The services FPS provides to the Fund include: considering and monitoring of any third parties furnishing services to the Fund; providing the necessary office space, equipment and personnel to perform administrative and clerical functions for the Fund; preparing, filing and distributing proxy materials, periodic reports to shareholders, registration statements, and other documents; and responding to shareholder inquiries. CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING/PRICING AGENT - ----------------------------------------------------------- The Bank of New York, 48 Wall Street, New York, New York 10286, is custodian for the securities and cash of the Fund. FPS serves as the Fund's transfer agent. As transfer agent, it maintains the records of each shareholder's account, answers shareholder inquiries concerning accounts, processes purchases and redemptions of the Fund's shares, acts as dividend and distribution disbursing agent, and performs other shareholder service functions. Shareholder inquiries should be directed to the transfer agent at (800) 662-0201. FPS also performs certain accounting and pricing services for the Fund. This includes the daily calculation of the Fund's net asset value. Page 12 EXPENSES - -------- Except as indicated above, the Fund is responsible for the payment of its expenses, other than those borne by the Advisor. These expenses may include, but are not limited to: (a) management fees; (b) the charges and expenses of the Fund's legal counsel and independent accountants; (c) brokers' commissions, mark-ups and mark-downs and any issue or transfer taxes chargeable to the Fund in connection with its securities transactions; (d) all taxes and corporate fees payable by the Fund to governmental agencies; (e) the fees of any trade association of which the Fund is a member; (f) the cost of stock certificates, if any, representing shares of the Fund; (g) amortization and reimbursements of the organization expenses of the Fund and the fees and expenses involved in registering and maintaining registration of the Fund and its shares with the Securities and Exchange Commission, and the preparation and printing of the Fund's registration statements and prospectuses for such purposes; (h) allocable communications expenses with respect to investor services and all expenses of shareholders and trustee meetings and of preparing, printing and mailing prospectuses and reports to shareholders; (i) litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund's business; (j) state filing fees and (k) compensation for employees of the Fund. DIVIDENDS, DISTRIBUTIONS AND TAXES The Fund will declare and pay annual dividends to its shareholders of substantially all of its net investment income, if any, earned during the year from its investments, and the Fund will distribute net realized capital gains, if any, once with respect to each year. Expenses of the Fund, including the advisory fee, are accrued each day. Reinvestments of dividends and distributions in additional shares of the Fund will be made at the net asset value determined on the ex date of the dividend or distribution unless the shareholder has elected in writing to receive dividends or distributions in cash. An election may be changed by notifying FPS in writing thirty days prior to record date. Dividends paid by the Fund with respect to its Institutional Class and Retail Class shares are calculated in the same manner and at the same time. Both Institutional Class and Retail Class shares of the Fund will share proportionately in the investment income and expenses of the Fund, except that the per share dividends of Retail Class shares will differ from the per share dividends of Institutional Class shares as a result of additional distribution expenses charged to Retail Class shares. As the sole series of The Timothy Plan, the Fund has qualified, and intends to continue to qualify, as a regulated investment company under Subchapter M of the Internal Revenue Code (the "Code"). As such, the Fund will not be subject to federal income tax, or to any excise tax, to the extent its earnings are distributed in accordance with the timing requirements imposed by the Code and by meeting certain other requirements relating to the sources of its income and diversification of its assets. The Fund intends to distribute substantially all of its net investment income and net capital gains. Dividends from net investment income or net short-term capital gains will be taxable to you as ordinary income, whether received in cash or in additional shares. Dividends from net investment income will generally qualify, in part, for the 70% corporate dividends received deduction, subject to certain holding period and debt financing restrictions imposed under the Code on the corporate investor claiming the deduction. The portion of the dividends so qualified depends on the aggregate qualifying dividend income received by the Fund from domestic (U.S.) sources. Distributions paid by the Fund from long-term capital gains, whether received in cash or in additional shares, are taxable to those investors who are subject to income tax as long-term capital gains, regardless of the length of time an investor has owned shares in the Fund. The Fund does not seek to realize any particular amount of capital gains during a year; rather, realized gains are a byproduct of Fund management activities. Consequently, capital gains distributions may be expected to vary considerably from year to year. Also, for those investors subject to tax, if purchases of shares in the Fund are made shortly before the record date for a dividend or capital gains distribution, a portion of the investment will be returned as a taxable distribution. Dividends which are declared in October, November or December to shareholders of record in such a month but which, for operational reasons, may not be paid to the shareholder until the following January, will be treated for tax purposes Page 13 as if paid by the Fund and received by the shareholder on December 31 of the calendar year in which they are declared. The sale of shares of the Fund is a taxable event and may result in a capital gain or loss to shareholders subject to tax. Capital gain or loss may be realized from an ordinary redemption of shares or an exchange of shares between two mutual funds (or two series of a mutual fund). Any loss incurred on sale or exchange of the Fund's shares, held for six months or less, will be treated as a long-term capital loss to the extent of capital gain dividends received with respect to such shares. All or a portion of the sales charge incurred in purchasing the Fund's shares will not be included in the federal tax basis of any of such shares sold or exchanged within ninety (90) days of their purchase (for purposes of determining gain or loss upon sale of such shares) if the sale proceeds are reinvested in the Fund or in another fund and a sales charge that would otherwise apply to the reinvestment is reduced or eliminated. Any portion of such sales charge excluded from the tax basis of the shares sold will be added to the tax basis of the shares acquired in the reinvestment. In addition to federal taxes, shareholders may be subject to state and local taxes on distributions. Each year, the Fund will mail you information on the tax status of the Fund's dividends and distributions. Of course, shareholders who are not subject to tax on their income would not be required to pay tax on amounts distributed to them by the Fund. The Fund is required to withhold 31% of taxable dividends, capital gains distributions, and redemptions paid to shareholders who have not complied with IRS taxpayer identification regulations. You may avoid this withholding requirement by certifying on your Account Registration Form your proper Taxpayer Identification Number and by certifying that you are not subject to backup withholding. The tax discussion set forth above is included for general information only. Prospective investors should consult their own tax advisers concerning the federal, state, local or foreign tax consequences of an investment in the Fund. DETERMINATION OF NET ASSET VALUE The net asset value per Fund share is determined by the Fund as of the close of regular trading on each day that the New York Stock Exchange (NYSE) is open for unrestricted trading from Monday through Friday and on which there is a purchase or redemption of the Fund's share. The net asset value is determined by the Fund by dividing the value of the Fund's securities, plus any cash and other assets, less all liabilities, by the number of shares outstanding. Expenses and fees of the Fund, including the advisory and the distributor fees, are accrued daily and taken into account for the purpose of determining the net asset value. Fund 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 last reported bid price 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 Fund will be valued on an amortized cost basis by the Fund, 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 Fund acquires a money market security with more than sixty days remaining to its maturity, it will be valued at current market value 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. Net asset value is calculated separately for each class of the Fund based on expenses applicable to the particular class. Although the methodology and procedures for determining net asset value are identical for the Fund's classes, the net asset value of the classes may differ because of the different fees and expenses charged to each class. Page 14 HOW TO PURCHASE SHARES Shares of the Fund may be purchased directly from the Fund at the net asset value per share, plus the applicable sales load, next determined after receipt of the order in proper form by the transfer agent. There is a sales load in connection with the purchase of shares which is reduced on purchases involving large amounts and which may be eliminated in certain circumstances described under "Reduced Sales Charges". The Fund reserves the right to reject any purchase order and to suspend the offering of shares of the Fund. The Fund will not accept a check endorsed over by a third-party. The minimum initial investment is $1,000, with no minimum subsequent investment. The Fund reserves the right to vary the initial investment minimum and minimums for additional investments at any time. There is no minimum investment requirement for qualified retirement plans. At the discretion of the Fund, investors may be permitted to purchase Fund shares by transferring securities to the Fund that meet the Fund's investment objectives and policies. Securities transferred to the Fund will be valued in accordance with the same procedures used to determine the Fund's net asset value at the time of the next determination of net asset value after such acceptance. Shares issued by the Fund in exchange for securities will be issued at net asset value determined as of the same time. All dividends, interest, subscription, or other rights pertaining to such securities shall become the property of the Fund and must be delivered to the Fund by the investor upon receipt from the issuer. Investors who are permitted to transfer such securities will be required to recognize a gain or loss on such transfer, and pay tax thereon, if applicable, measured by the difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of the Fund unless: (l) such securities are, at the time of the exchange, eligible to be included in the Fund and current market quotations are readily available for such securities; (2) the investor represents and warrants that all securities offered to be exchanged are not subject to any restrictions upon their sale by the Fund under the Securities Act of 1933 or under the laws of the country in which the principal market for such securities exists, or otherwise and (3) the value of any such security (except U.S. Government securities) being exchanged together with other securities of the same issuer owned by the Fund, will not exceed 5% of the Fund's net assets immediately after the transaction. Purchase orders for shares of the Fund which are received by the transfer agent in proper form prior to the close of regular trading hours on the NYSE (currently 4:00 p.m. Eastern time) on any day that the Fund calculates its net asset value, are priced according to the net asset value determined on that day. Purchase orders for shares of the Fund received after the close of the NYSE on a particular day are priced as of the time the net asset value per share is next determined. Purchases may be made in one of the following ways: PURCHASES BY MAIL Shares may be purchased initially by completing the Investment Application on pages XX and XX of this Prospectus and mailing it to the transfer agent, together with a check payable to The Timothy Plan, c/o FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903. All checks for purchase of shares must be drawn on U.S. banks and payable in U.S. dollars. Subsequent investments in an existing account in the Fund may be made at any time by sending a check payable to The Timothy Plan, c/o United Missouri Bank KC, NA, P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of your account statement along with the amount of the investment and the name of the account for which the investment is to be made and the account number. Please note: A $20 fee will be charged to your account for any payment check returned to the custodian. PURCHASES THROUGH BROKER/DEALERS The Fund may accept telephone orders from broker-dealers or service organizations which have been previously approved by the Fund. It is the responsibility of such broker-dealers or service organizations to promptly forward purchase orders and payments for the same to the Fund. Shares of the Fund may be purchased through broker-dealers, banks and bank trust departments who may charge the investor a transaction fee or other fee for their services at the time Page 15 of purchase. Wire orders for shares of the Fund received by FPS prior to 4:00 p.m., Eastern time, are confirmed at that day's public offering price. Orders received by dealers after 4:00 p.m., Eastern time, are confirmed at the public offering price on the following business day. APPLICABLE SALES CHARGES Shares of the Fund are offered at the public offering price which is the net asset value per share, plus any applicable sales charge. The sales charge is a variable percentage of the offering price depending upon the amount of the sale. No sales charge will be assessed on the reinvestment of distributions. The sales charge will be assessed as follows: - ------------------------------------------------------------------------------- TOTAL SALES CHARGE AS A % OF AS A % OF DEALER CONCESSION OFFERING NET AMOUNT AS A PERCENTAGE OF AMOUNT OF YOUR INVESTMENT PRICE INVESTED OFFERING PRICE ------------------------- ---------- ----------- ------------------- $1,000 but under $10,000.... 1.75% 1.78% 1.50% $10,000 but under $25,000... 1.50% 1.52% 1.25% $25,000 but under $50,000... 1.25% 1.27% 1.00% $50,000 but under $100,000.. 1.00% 1.01% 0.75% $100,000 or over............ 0.00% 0.00% 0.00% - ------------------------------------------------------------------------------- Shares purchased through of the Fund may be purchased at the net asset value per share next determined after receipt of the order without a sales charge by 403(b)(7) participants. At the discretion of the Fund, investors may be permitted to purchase Fund shares without a sales charge by transferring securities to the Fund that meet the Fund's investment objectives and policies. The distributor will pay the appropriate dealer concession to those selected dealers who have entered into an agreement with the distributor. The dealer's concession may be changed from time to time. The distributor may from time to time offer incentive compensation to dealers (which sell shares of the Fund subject to sales charges) allowing such dealers to retain an additional portion of the sales load. A dealer who receives all of the sales load may be considered an "underwriter" under the Securities Act of 1933, as amended. All such sales charges are paid to the securities dealer involved in the trade, if any. The foregoing schedule of sales charges applies to single purchases and to purchases made under a Letter of Intent and pursuant to the Rights of Accumulation, both of which are described below. REDUCED SALES CHARGES The sales charge for purchases of shares of the Fund may be reduced through Rights of Accumulation or Letter of Intent. To qualify for a reduced sales charge, an investor must so notify his or her distributor at the time of each purchase of shares which qualifies for the reduction. RIGHTS OF ACCUMULATION A shareholder may qualify for a reduced sales charge by aggregating the net asset values of shares requiring the payment of an initial sales charge, previously purchased and currently owned with the dollar amount of shares to be purchased. LETTER OF INTENT An investor may qualify for a reduced sales charge immediately by signing a non- binding Letter of Intent stating the investor's intention to invest during the next 13 months a specified amount which, if made at one time, would qualify for a reduced sales charge. The first investment cannot be made more than 90 days prior to the date of the Letter of Intent. Any redemptions made during the 13 month period will be subtracted from the amount of purchases in determining whether the Letter of Intent has been completed. During the term of a Letter of Intent, the transfer agent will hold shares representing 1.75% of the indicated amount in escrow for payment of a higher sales load if the full Page 16 amount indicated in the Letter of Intent is not purchased. The escrowed shares will be released when the full amount indicated has been purchased. If the full amount indicated is not purchased within the 13 month period, an investor's escrowed shares will be redeemed in an amount equal to the difference in the dollar amount of sales charge actually paid and the amount of sales charge the investor would have had to pay on his or her aggregate purchases if the total of such purchases had been made at a single time. PURCHASES BY WIRE To order shares for purchase by wiring federal funds, the transfer agent must first be notified by calling (800) 662-0201 to request an account number and furnish the Fund with your tax identification number. Following notification to the transfer agent, federal funds and registration instructions should be wired through the Federal Reserve System to: UNITED MISSOURI BANK KC NA ABA #10-10-00695 ----------- FOR: FPS SERVICES, INC. A/C 98-7037-071-9 ------------- FBO "THE TIMOTHY PLAN - RETAIL CLASS" ACCOUNT OF (exact name(s) of account registration) --------------------------------------- SHAREHOLDER ACCOUNT # _______________ A completed application with signature(s) of registrant(s) must be filed with the transfer agent immediately subsequent to the initial wire. Investors should be aware that some banks may impose a wire service fee. Shareholders may be subject to 31% withholding if original application is not received. AUTOMATIC INVESTMENT PLAN Shares of the Fund may be purchased through an Automatic Investment Plan (the "Plan"). The Plan provides a convenient method by which investors may have monies deducted directly from their checking, savings or bank money market accounts for investment in the Fund. The minimum investment pursuant to this Plan is $100 per month. If you desire to take advantage of this Plan simply complete and remit the Automatic Investment Plan Application on pages XX and XX. The account designated will be debited in the specified amount, on the date indicated, and Fund shares will be purchased. Only an account maintained at a domestic financial institution which is an ACH member may be so designated. The Fund may alter, modify or terminate this Plan at any time. For information about participating in the Automatic Investment Plan, call FPS Services, Inc. at (800) 662-0201. HOW TO REDEEM SHARES Shareholders may redeem their shares of the Fund without charge on any business day that the NYSE is open (see "Determination of Net Asset Value"). Redemptions will be effective at the net asset value per share next determined after the receipt by the transfer agent of a redemption request meeting the requirements described below. The Fund normally sends redemption proceeds on the next business day, but in any event redemption proceeds are sent within seven calendar days of receipt of a redemption request in proper form. Payment may also be made by wire directly to any bank previously designated by the shareholder in a shareholder account application. There is a $9.00 charge for redemptions by wire. Please note that the shareholder's bank also may impose a fee for wire service. The Fund will honor redemption requests of shareholders who recently purchased shares by check, but will not mail the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to fifteen days from the purchase date, at which time the redemption proceeds will be mailed to the shareholder. To avoid delays of this kind, you may wish to purchase by wire if you are planning on redeeming your shares in the near future. Except as noted below, redemption requests received in proper form by the transfer agent prior to the close of regular trading hours on the NYSE on any business day that the Fund calculates its per share net asset value are effective that day. Redemption requests received after the close of the NYSE are effective as of the time the net asset value per share is next determined. Page 17 Retail Class shares of the Fund may be redeemed through certain brokers, financial institutions or service organizations, banks and bank trust departments who may charge the investor a transaction fee or other fee for their services at the time of redemption. Such fees would not otherwise be charged if the shares were directly redeemed from the Fund. The Fund will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of the Advisor or the Board of Trustees, result in the necessity of the Fund selling assets under disadvantageous conditions and to the detriment of the remaining shareholders of the Fund. Pursuant to the Fund's Agreement and Declaration of Trust, payment for shares redeemed may be made either in cash or in-kind, or partly in cash and partly in- kind. However, the Fund has elected, pursuant to Rule 18f-1 under the Act, to redeem its shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund, during any 90 day period for any one shareholder. Payments in excess of this limit will also be made wholly in cash unless the Board of Trustees believes that economic conditions exist which would make such a practice detrimental to the best interests of the Fund. Any portfolio securities paid or distributed in-kind would be valued as described under "Determination of Net Asset Value." In the event that an in-kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from the Fund. In-kind payments need not constitute a cross-section of the Fund's portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment, and where the Fund completes such redemption in-kind, the Fund will not recognize gain or loss for federal tax purposes, on the securities used to complete the redemption but the shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. Shares may be redeemed in one of the following ways: REDEMPTION BY MAIL Shares may be redeemed by submitting a written request for redemption to the transfer agent at 3200 Horizon Dirve, P.O. Box 61503, King of Prussia, PA 19406- 0903. A written redemption request to the transfer agent must: (i) identify the shareholder's account number, (ii) state the number of shares or dollars to be redeemed and (iii) be signed by each registered owner exactly as the shares are registered. A redemption request for amounts above $25,000, or redemption requests for which proceeds are to be mailed somewhere other than the address of record, must be accompanied by signature guarantees. Signatures must be guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible guarantor institutions include banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations. Broker-dealers guaranteeing signatures must be members of a clearing corporation or maintain net capital of at least $100,000. Credit unions must be authorized to issue signature guarantees. Signature guarantees will be accepted from any eligible guarantor institution which participates in a signature guarantee program. The transfer agent may require additional supporting documents for redemptions made by corporations, executors, administrators, trustees and guardians. A redemption request will not be deemed to be properly received until the transfer agent receives all required documents in proper form. Questions with respect to the proper form for redemption requests should be directed to the transfer agent at (800) 662-0201. REDEMPTION BY TELEPHONE Shareholders who have so indicated on the application, or have subsequently arranged in writing to do so, may redeem shares by instructing the transfer agent by telephone. In order 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 must be sent to the transfer agent at the address listed above. Neither the Fund 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 Fund will use such procedures as are considered reasonable, including requesting a shareholder to correctly state his or her Fund account number, the name in which his or her 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 Fund fails to use Page 18 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 Fund reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming Fund shares by wire or telephone may be modified or terminated at any time by the Fund. SYSTEMATIC CASH WITHDRAWAL PLAN The Fund offers a Systematic Cash Withdrawal Plan as another option which may be utilized by an investor who wishes to withdraw funds from his or her account on a regular basis. To participate in this option, an investor must either own or purchase shares having a value of $10,000 or more. Automatic payments by check will be mailed to the investor on either a monthly, quarterly, semi-annual or annual basis in amounts of $100 or more. All withdrawals are processed on the 25th of the month or, if such day is not a business day, on the next business day and paid promptly thereafter. Please complete the appropriate section on the Investment Application enclosed within this Prospectus, indicating the amount of the distribution and the desired frequency. ADDITIONAL INFORMATION The Fund also reserves the right to involuntarily redeem an investor's account where the account is worth less than the minimum initial investment required when the account is established, presently $1,000. (Any redemption of shares from an inactive account established with a minimum investment may reduce the account below the minimum initial investment, and could subject the account to redemption initiated by the Fund.) The Fund will advise the shareholder of such intention in writing at least sixty (60) days prior to effecting such redemption, during which time the shareholder may purchase additional shares in any amount necessary to bring the account back to $1,000. If the Trustees determine that it would be detrimental to the best interest of the remaining shareholders of the Fund to make payment in cash, the Fund may pay the redemption price in whole or in part by distribution in kind of readily marketable securities, from the Fund, within certain limits prescribed by the U.S. Securities and Exchange Commission. Such securities will be valued on the basis of the procedures used to determine the net asset value at the time of the redemption. If shares are redeemed in kind, the redeeming shareholder will incur brokerage costs in converting the assets into cash. RETIREMENT PLANS The Fund offers its shares for use in certain Tax Deferred (such as IRA, defined contribution, 401(k) and 403(b)(7) plans) Retirement Plans. The Fund sponsors IRA and 403(b)(7) plans. Information on these Plans is available from FPS or by reviewing the Statement of Additional Information. PERFORMANCE Total return data may from time to time be included in advertisements about the Fund. The Fund's total return may be calculated on an annualized and aggregate basis for various periods (which periods will be stated in the advertisement). Average annual return reflects the average percentage change per year in value of an investment in the Fund. Aggregate total return reflects the total percentage change over the stated period. Any fees charged by banks or their institutional investors directly to their customer accounts in connections with investments in the Retail Class shares of the Fund will not be included in the Fund's calculations of total returns. The Fund may compare its investment performance with appropriate market indices such as the S&P Index and to appropriate mutual fund indices; and the Fund may advertise its ranking compared to other similar mutual funds as reported by industry analysts such as Lipper Analytical Services, Inc. All data will be based on the Fund's past investment results and does not predict future performance. Investment performance, which will vary, is based on many factors, including market conditions, the composition of the investments in the Fund, and the Fund's operating expenses. Investment performance also often reflects the risk associated with the Fund's investment objectives and policies. These factors should be considered when comparing the Fund to other Page 19 mutual funds and other investment vehicles. The performance of the Institutional Class shares will normally be higher than the Retail Class shares because of the sales charge (when applicable) and additional distribution expenses charged to the Retail Class shares. Shareholders may obtain current performance information about the Fund by calling (800) TIM-PLAN. Further information about the performance of the Fund is included in the Fund's Annual Report, dated December 31, 1996, which may be obtained without charge by contacting the Fund at (800) TIM-PLAN. Page 20 -------------------------------------------- BROKER DEALER: ____________________________ REGISTERED REP: ___________________________ BRANCH #:__________________ REP #:_________ BRANCH NAME: ______________________________ BRANCH ADDRESS: ___________________________ PHONE NUMBER: ( ) - Ext: -------------------------------------------- THE TIMOTHY PLAN(R) RETAIL CLASS INVESTMENT APPLICATION MAIL TO: FPS Services, Inc., P.O. Box 61503, King of Prussia, PA 19406-4902 1. INITIAL INVESTMENT ($1,000 minimum) FORM OF PAYMENT [_] Check for $__________________ enclosed (make payable to "The Timothy Plan") [_] By Wire*1 An initial purchase of $_____________________ was wired on ______________ by ________________________________ to account # Date Name of your Bank or Broker ________________________________ Number assigned by F/P/S 2. REGISTRATION (Please Print) No certificate will be issued unless requested in writing. INDIVIDUAL Must complete items 1, 3, 4 and 8 (you may choose options 5, 6 or 7). __________________________________________________________________________ First Name Middle Name Last Name ____________________________ Social Security Number __________________________________________________________________________ Joint Owner First Name*2 Middle Name Last Name _____________________________ Social Security Number Citizen of: [_] United States [_] Other (Please Indicate) ____________ GIFT TO MINORS Must complete items 1, 3, 4 and 8 (you may choose options 5, 6, or 7). __________________________________________________________________________ Name of Custodian (Name one only) As Custodian For (Name one only) Under the _____________________________ Uniform Gift to Minors Act State ___________________________________ Security Number CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS Must complete items 1, 3, 4, 9 and 10 (you may choose options 5, 6, or 7). __________________________________________________________________________ Name of Corporation, Partnership, Trust or Other ______________ ________________________________ _____________ Tax ID # Name of Trustee(s) Date of Trust 3. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S) _______________________________________________________________________________ Street Address and Apartment Number ________________________________________________________________________________ City State Zip Code Zip Extend ______________ ________________________ ____________ ___________________________ (Area Code) Daytime Telephone Number (Area Code) Evening Telephone Number 4. DISTRIBUTION OPTIONS (Please indicate one) See page XX of the Prospectus for more detail. Income Dividends (check one box/line only) [_] reinvested [_] paid in cash Capital Gains Distributions (check one box/line only) [_] reinvested [_] paid in cash *1 Before making an initial investment by wire, you must be assigned an account number by calling (800) 662-0201. Then have your local bank wire your funds to: United Missouri Bank, N.A., ABA # 10-10-00695 for credit to FPS Services, Inc. AC # 98-7037-071-9 (The Timothy Plan). Be sure to include your name and account number on the wire. *2 (Joint ownership with rights of survivorship unless otherwise noted). Page 21 5. SYSTEMATIC WITHDRAWAL PLAN ($10,000 minimum necessary) See page XX of the Prospectus for more detail. A check in the amount of $______________________ (minimum $100.00) will be sent to you at your address of record unless otherwise noted. Please select desired frequency: [_] Monthly [_] Quarterly, in the months of _______, ________,__________, and __________. [_] Semi-Annual or Annual, in the month(s) of __________, __________, or __________. 6. TELEPHONE PRIVILEGES See page XX of the Prospectus for more detail. [_] REDEEM SHARES BY TELEPHONE I (we) authorize FPS Services to honor telephone instructions for my (our) account which I (we) understand the proceeds of which will be mailed only to the address of record or wired to the bank specified below. Neither the Fund nor FPS Services, Inc. will be liable for properly acting upon telephone instructions believed to be genuine. Please attach a voided check on your account if the bank option is chosen. ___________________________________________________________________________ Name of Bank City State ___________________________________________________________________________ Bank Routing Number Account Number [_]Checking [_]Savings 7. AUTOMATIC INVESTMENT PLAN (For this option - please complete and send in form on pages XX and XX of the Prospectus). 8. SIGNATURE AND CERTIFICATION (This Section must be completed by INDIVIDUAL, ---- JOINT and CUSTODIAL accounts). THE FOLLOWING IS REQUIRED BY FEDERAL TAX LAW TO AVOID 31% BACKUP WITHHOLDING; "BY SIGNING BELOW, I CERTIFY UNDER PENALTIES OF PERJURY THAT THE SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER ENTERED ABOVE IS CORRECT (OR I AM WAITING FOR A NUMBER TO BE ISSUED TO ME), AND THAT I HAVE NOT BEEN NOTIFIED BY THE IRS THAT I AM SUBJECT TO BACKUP WITHHOLDING UNLESS I HAVE CHECKED THE BOX." IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING, CHECK BOX [_]. THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING. RECEIPT OF CURRENT PROSPECTUS IS HEREBY ACKNOWLEDGED. ___________________________________________________________________________ Signature [_] Owner [_] Custodian [_] Trustee [_] Date ___________________________________________________________________________ Signature of Joint Owner (if applicable) Date 9. RESOLUTIONS (This Section must be completed by CORPORATIONS, PARTNERSHIPS, ---- TRUSTS and OTHER ORGANIZATIONS). RESOLVED: That this corporation or organization become a shareholder of the Timothy Plan (the "Fund") and that ______________________________________ _________________________________________ is (are) authorized to complete and execute the Application on behalf of the corporation or organization and take any action for it as may be necessary or appropriate with respect to its shareholders account(s) with the Fund, and it is FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to appoint FPS Services, Inc. as redemption agent of the corporation for shares of the Fund, to establish or acknowledge terms and conditions governing the redemption of said shares or to otherwise implement the privileges elected on the application. 10. CERTIFICATE (This Section must be completed by CORPORATIONS, PARTNERSHIPS, ---- TRUSTS and OTHER ORGANIZATIONS). I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of the: _________________________________________________________________________ (Name of Corporation) incorporated or formed under the laws of _______________ and were adopted (State) at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on ________________ at which a quorum was preset and acting throughout, and that the same are now in full force and effect. I further certify that the following is (are) the duly elected officer(s) of the corporation or organization, authorized to act in accordance with the foregoing resolutions. NAME TITLE _________________________________________ ____________________________ _________________________________________ ____________________________ _________________________________________ ____________________________ Witness my hand and the seal of the corporation or organization this ___________ day of _______________________, 19 ______. ____________________ _________________________________________________ *Secretary-Clerk Other Authorized Officer (if required) * If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be signed by another officer. Page 22 AUTOMATIC INVESTMENT PLAN APPLICATION - -------------------------------------------------------------------------------- HOW DOES IT WORK? 1. FPS Services, Inc., through our bank, United Missouri Bank KC NA, draws an automatic clearing house (ACH) debit electronically against your personal checking account each month, according to your instructions. 2. Choose any amount ($100 or more) that you would like to invest regularly and your debit for this amount will be processed by FPS Services, Inc. as if you had written a check yourself. 3. Shares will be purchased and a confirmation sent to you. HOW DO I SET IT UP? 1. Complete the forms and the Fund Application Form if you do not already have an existing account. 2. Mark one of your personal checks or deposit slips VOID, attach it to the forms below and mail to FPS Services, Inc., P.O. Box 61503, King of Prussia, PA 19406-0903 3. As soon as your bank accepts your authorization, debits will be generated and your Automatic Investment Plan started. In order for you to have ACH debits from your account, your bank must be able to accept ACH transactions and/or be a member of an ACH association. Your branch manager should be able to tell you your bank's capabilities. We cannot guarantee acceptance by your bank. 4. Please allow one month for processing of your Automatic Investment Plan before the first debit occurs. - -------------------------------------------------------------------------------- AUTOMATIC INVESTMENT PLAN APPLICATION TO: FPS Services, Inc. P.O. Box 61503 King of Prussia, PA 19406-0903 Please start an Automatic Investment Plan for me and invest __________________. ($100 or more) on the [_] 10th [_] 15th [_] 20th of each month, in shares of THE TIMOTHY PLAN - RETAIL CLASS. Check one: [_] I am in the process of establishing an account. or [_] My account number is: ________________________________________________ ____________________________________________________________________________ Name as account is registered ____________________________________________________________________________ Street ____________________________________________________________________________ City State Zip + ext. I understand that my ACH debit will be dated on the day of each month as indicated above or as specified by written request. I agree that if such debit is not honored upon presentation, FPS Services, Inc. may discontinue this service and any share purchase made upon deposit of such debit may be canceled. I further agree that if the net asset value of the shares purchased with such debit is less when said purchase is canceled than when the purchase was made, FPS Services, Inc. shall be authorized to liquidate other shares or fractions thereof held in my account to make up the deficiency. This Automatic Investment Plan may be discontinued by FPS Services, Inc. upon 30-days written notice or at any time by the investor by written notice to FPS Services, Inc. which is received not later than 5 business days prior to the above designed investment date. Signature(s): _________________________________________ _________________________________________ Page 23 AUTOMATIC INVESTMENT PLAN APPLICATION - ------------------------------------------------------------------------------- BANK REQUEST AND AUTHORIZATION TO: _____________________________________ _____________________________ Name of Your Bank Bank Checking Account Number _______________________________________________________________________ Address of Bank or Branch Where Account is Maintained As a convenience to me, please honor ACH debits on my account drawn by FPS Services, Inc., United Missouri Bank KC NA and payable to "THE TIMOTHY PLAN". I agree that your rights with respect to such debit shall be the same as if it were a check drawn upon you and signed personally by me. This authority shall remain in effect until you receive written notice from me changing its terms or revoking it, and until you actually receive such notice, I agree that you shall be fully protected in honoring such debit. I further agree that if any debit is dishonored, whether with or without cause or whether intentionally or inadvertently, you shall be under no liability whatsoever. DEPOSITOR'S __________________________________________________________________ Signature of Bank Depositor(s) as shown on bank records. NOTE: Your bank must be able to accept ACH transactions and/or be a member of an ACH association in order for you to use this service. - -------------------------------------------------------------------------------- INDEMNIFICATION AGREEMENT TO: The bank named above So that you may comply with your Depositor's request and authorization, THE TIMOTHY PLAN agrees as follows: 1. To indemnify and hold you harmless from any loss you may suffer arising from or in connection with the payment by you of a debit drawn by FPS Services, Inc. to the order of THE TIMOTHY PLAN designated on the account of your depositor(s) executing the authorization including any costs or expenses reasonably incurred in connection with such loss. THE TIMOTHY PLAN will not, however, indemnify you against any loss due to your payment of any debit generated against insufficient funds. 2. To refund to you any amount erroneously paid by you to FPS Services, Inc. on any such debit if claim for the amount of such erroneous payment is made by you within 3 months of the date of such debit on which erroneous payment was made. Page 24 -------------------------------------------- BROKER DEALER: ____________________________ REGISTERED REP: ___________________________ BRANCH #:__________________ REP #:_________ BRANCH NAME: ______________________________ BRANCH ADDRESS: ___________________________ PHONE NUMBER: ( ) - Ext: -------------------------------------------- THE TIMOTHY PLAN(R) RETAIL CLASS REQUEST FOR TRANSFER MAIL TO: FPS Services, Inc., P.O. Box 61503, King of Prussia, PA 19406-4902 1. INVESTOR INFORMATION ___________________________________________________________________________ First Name Middle Initial Last Name ___________________________________________________________________________ Street Address ___________________________ _______________ _____________ __________ City State Zip Code Zip Extend _______________________ ________________ _____________ Social Security Number Date of Birth (Area Code) _________________________ ___________ _________________________ Residence Telephone Number (Area Code) Business Telephone Number 2. PREVIOUS INVESTMENT FIRM ___________________________________________________________________________ Name of Previous Firm ___________________________________________________________________________ Address ___________________________________________________________________________ Investor's Name Account Number Type of Account: [_] Individual [_] Joint [_] UGMA [_] Trust Type of Assets: [_] Mutual Fund [_] Money Market [_] CD (Immediately/At Maturity) [_] Securities 3. AMOUNT TO BE TRANSFERRED TO THE TIMOTHY PLAN [_] Liquidate all assets from the above account and transfer the proceeds. [_] Liquidate $_____________________________________ from the above account and transfer the proceeds 4. TRANSFER INSTRUCTIONS Make check payable to: The Timothy Plan Mail to: Post Office Box 61503, King of Prussia, PA 19406-0903 5. INVESTOR'S AUTHORIZATION ___________________________________________________________________________ Signature of Participant Date Signature Guarantee Page 25 INVESTMENT ADVISOR Timothy Partners, Ltd. 1304 West Fairbanks Avenue Winter Park, FL 32789 INVESTMENT MANAGER Awad & Associates 477 Madison Avenue New York, NY 10022 UNDERWRITER FPS Broker Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406-0903 SHAREHOLDER SERVICES FPS Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406-0903 CUSTODIAN The Bank of New York 48 Wall Street New York, NY 10286 LEGAL COUNSEL Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 AUDITORS Tait, Weller & Baker Two Penn Center Suite 700 Philadelphia, PA 19102-1707 For Additional Information About The Timothy Plan, Please Call: (800) TIM-PLAN THE TIMOTHY PLAN STATEMENT OF ADDITIONAL INFORMATION April 29, 1997 - -------------------------------------------------------------------------------- FPS Broker Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406 (800) 441-6580 - -------------------------------------------------------------------------------- A copy of the Prospectus of The Timothy Plan (the "Fund") is available without charge upon request to the Fund. The Fund is an open-end diversified investment company, currently offering one series of shares. The series currently offers two classes of shares: Institutional Class and Retail Class. The shares of the Fund may be purchased or redeemed at any time. Purchases and redemptions will be effected at the net asset value next computed after receipt of the order in proper form by the transfer agent. The objective of the Fund is long-term capital growth and its secondary objective is current income. The Fund will use a variety of investment strategies in an effort to balance Fund risks. There can be no assurance that the objectives of the Fund will be achieved. - -------------------------------------------------------------------------------- THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ IN CONNECTION WITH THE FUND'S PROSPECTUS DATED APRIL 29, 1997 RETAIN THIS STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE. - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page THE TIMOTHY PLAN - INVESTMENTS............................................. INVESTMENT RESTRICTIONS.................................................... INVESTMENT ADVISOR......................................................... INVESTMENT MANAGER......................................................... UNDERWRITER................................................................ ADMINISTRATOR.............................................................. ALLOCATION OF PORTFOLIO BROKERAGE.......................................... PURCHASE OF SHARES......................................................... Tax-Deferred Retirement Plans......................................... REDEMPTIONS................................................................ OFFICERS AND TRUSTEES OF THE FUND.......................................... DISTRIBUTION PLAN.......................................................... TAXATION................................................................... GENERAL INFORMATION........................................................ Audits and Reports.................................................... Miscellaneous......................................................... PERFORMANCE................................................................ Comparisons and Advertisements........................................ FINANCIAL STATEMENTS.......................................................
Page 2 THE TIMOTHY PLAN - INVESTMENTS The Fund seeks to achieve its objective by making investments selected in accordance with the Fund's investment restrictions and policies. The Fund will vary its investment strategy as described in the Fund's prospectus to achieve its objective. This Statement of Additional Information contains further information concerning the techniques and operations of the Fund, the securities in which it will invest, and the policies it will follow. The Fund issues two classes of shares (Institutional Class and Retail Class) that invest in the same portfolio of securities. Shareholders of Retail Class shares are subject to a sales charge and each class is subject to different 12b-1 Plan expenses. COMMON STOCK Common stock is defined as shares of a corporation that entitle the holder to a pro rata share of the profits of the corporation, if any, without a preference over any other shareholder or class of shareholders, including holders of the corporation's preferred stock and other senior equity. Common stock usually carries with it the right to vote, and frequently, an exclusive right to do so. Holders of common stock also have the right to participate in the remaining assets of the corporation after all other claims, including those of debt securities and preferred stock, are paid. PREFERRED STOCK Generally, preferred stock receives dividends prior to distributions on common stock and usually has a priority of claim over common stockholders if the issuer of the stock is liquidated. Unlike common stock, preferred stock does not usually have voting rights; preferred stock, in some instances, is convertible into common stock. In order to be payable, dividends on preferred stock must be declared by the issuer's Board of Trustees. Dividends on the typical preferred stock are cumulative, causing dividends to accrue even if not declared by the Board of Trustees. There is, however, no assurance that dividends will be declared by the Board of Trustees of issuers of the preferred stocks in which the Fund invests. CONVERTIBLE SECURITIES Traditional convertible securities include corporate bonds, notes and preferred stocks that may be converted into or exchanged for common stock, and other securities that also provide an opportunity for equity participation. These securities are generally convertible either at a stated price or a stated rate (that is, for a specific number of shares of common stock or other security). As with other fixed income securities, the price of a convertible security to some extent varies inversely with interest rates. While providing a fixed-income stream (generally higher in yield than the income derivable from a common stock but lower than that afforded by a non-convertible debt security), a convertible security also affords the investor an opportunity, through its conversion feature, to participate in the capital appreciation of the common stock into which it is convertible. As the market price of the underlying common stock declines, convertible securities tend to trade increasingly on a yield basis and so may not experience market value declines to the same extent as the underlying common stock. When the market price of the underlying common stock increases, the price of a convertible security tends to rise as a reflection of the value of the underlying common stock. To obtain such a higher yield, the Fund may be required to pay for a convertible security an amount in excess of the value of the underlying common stock. Common stock acquired by the Fund upon conversion of a convertible security will generally be held for so long as the Advisor or Investment Manager anticipates such stock will provide the Fund with opportunities which are consistent with the Fund's investment objectives and policies. WARRANTS The Fund may invest in warrants, in addition to warrants acquired in units or attached to securities. A warrant is an instrument issued by a corporation which gives the holder the right to subscribe to a specified amount of the issuer's capital stock at a set price for a specified period of time. AMERICAN DEPOSITORY RECEIPTS The Fund may make foreign investments through the purchase and sale of sponsored or unsponsored American Depository Receipts ("ADRs"). ADRs are receipts typically issued by a U.S. bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. The Fund may purchase ADRs whether they are "sponsored" or "unsponsored". "Sponsored" ADRs are issued jointly by the issuer of the underlying security and a depository. "Unsponsored" ADRs are issued without participation of the issuer of the deposited security. The Fund does not consider any ADRs purchased to be foreign. Holders of unsponsored ADRs generally bear all Page 3 the costs of such facilities. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts in respect to the deposited securities. Therefore, there may not be a correlation between information concerning the issuer of the security and the market value of an unsponsored ADR. ADRs may result in a withholding tax by the foreign country of source which will have the effect of reducing the income distributable to shareholders. Because the Fund will not invest more than 50% of the value of its total assets in stock or securities issued by foreign corporations, it will be unable to pass through the foreign taxes the Fund pays (or is deemed to pay) to shareholders under the Internal Revenue Code of 1986, as amended (the "Code"). PORTFOLIO TURNOVER It is not the policy of the Fund to purchase or sell securities for short-term trading purposes, but the Fund may sell securities to recognize gains or avoid potential for loss. The Fund will, however, sell any portfolio security (without regard to the time it has been held) when the investment advisor believes that market conditions, credit-worthiness factors or general economic conditions warrant such a step. The Fund presently estimates that the annualized portfolio turnover rate generally will not exceed a range of 50% to 75%, and may be lower than 50%, during most periods. The annualized portfolio turnover rate for the period March 21, 1994 (commencement of operations) through December 31, 1994 and the portfolio turnover rate for the fiscal years ended December 31, 1995 and 1996, were 8.31%, 34.12% and 93.08%, respectively. High portfolio turnover would involve additional transaction costs (such as brokerage commissions) which are borne by the Fund, or adverse tax effects. (See "Dividends, Distributions and Taxes" in the Prospectus.) INVESTMENT RESTRICTIONS In addition to those set forth in the Fund's current Prospectus, the Fund has adopted the Investment Restrictions set forth below, which are fundamental policies of the Fund, and which cannot be changed without the approval of a majority of the outstanding voting securities. As provided in the Investment Company Act of 1940, as amended (the "1940 Act"), a "vote of a majority of the outstanding voting securities" means the affirmative vote of the lesser of (i) more than 50% of the outstanding shares, or (ii) 67% or more of the shares present at a meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. These investment restrictions provide that each Fund will not: (1) issue senior securities; (2) engage in the underwriting of securities except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933 in disposing of a portfolio security; (3) purchase or sell real estate or interests therein, although it may purchase securities of issuers which engage in real estate operations; (4) invest for the purpose of exercising control or management of another company; (5) purchase oil, gas or other mineral leases, rights or royalty contracts or exploration or development programs, except that the Fund may invest in the securities of companies which invest in or sponsor such programs; (6) invest more than 25% of the value of the Fund's total assets in one particular industry, except for temporary defensive purposes; (7) make purchases of securities on "margin", or make short sales of securities, provided that the Fund may enter into futures contracts and related options and make initial and variation margin deposits in connection therewith; and (8) invest in securities of any open-end investment company, except that the Fund may Page 4 purchase securities of money market mutual funds, but such investments in money market mutual funds may be made only in accordance with the limitations imposed by the 1940 Act and the rules thereunder, as amended. So long as percentage restrictions are observed by the Fund at the time it purchases any security, changes in values of particular Fund assets or the assets of the Fund as a whole will not cause a violation of any of the foregoing restrictions. INVESTMENT ADVISOR The Fund has entered into an advisory agreement with Timothy Partners, Ltd. (the "Advisor"), effective January 19, 1994 (the "Investment Advisory Agreement"), as amended August 28, 1995, for the provision of investment advisory services, subject to the supervision and direction of the Fund's Board of Trustees. Pursuant to the Investment Advisory Agreement, the Fund is obligated to pay the Advisor a monthly fee equal to an annual rate of 0.85% of the Fund's average daily net assets. This fee is higher than that charged by some funds, but is comparable to fees charged by funds with similar investment objectives. The Investment Advisory Agreement specifies that the advisory fee will be reduced to the extent necessary to comply with the most stringent limits prescribed by any state in which the Fund's shares are offered for sale. The most stringent current state restriction limits a fund's allowable aggregate operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses such as litigation costs) in any fiscal year to 2.5% of the first $30 million of net assets of the Fund, 2% of the next $70 million of net assets of the Fund, and 1.5% of average annual net assets of the Fund in excess of $100 million. For the period March 21, 1994 (commencement of operations) through December 31, 1994 and for the years ended December 31, 1995 and 1996, advisory fees of $7,938, $41,257 and $78,848 respectively, were paid to the Advisor and the Advisor reimbursed the Fund $135,114, and $189,534 and $194,967 respectively. The Investment Advisory Agreement is initially effective for two years. The Investment Advisory Agreement may be renewed after its initial term only so long as such renewal and continuance are specifically approved at least annually by the Board of Trustees or by vote of a majority of the outstanding voting securities of the Fund, and only if the terms of the renewal thereof have been approved by the vote of a majority of the Trustees of the Fund who are not parties thereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. The Investment Advisory Agreement will terminate automatically in the event of its assignment. INVESTMENT MANAGER Pursuant to an agreement between the Advisor and Awad & Associates (the "Investment Manager"), a division of Raymond James & Associates, Inc., effective January 1, 1997 (the "Sub-Investment Advisory Agreement"), the Investment Manager provides advice and assistance to the Advisor in the selection of appropriate investments for the Fund, subject to the supervision and direction of the Fund's Board of Trustees. As compensation for its services, the Investment Manager receives from the Advisor an annual fee at a rate equal to 0.42% of the first $10 million in assets of the Fund; 0.40% of the next $5 million in assets; 0.35% of the next $10 million in assets; and 0.25% of assets over $25 million. The Sub-Investment Advisory Agreement is initially effective for two years. The Agreement may be renewed by the parties after its initial term only so long as such renewal and continuance are specifically approved at least annually by the Board of Trustees or by vote of a majority of the outstanding voting Page 5 securities of the Fund, and only if the terms of renewal thereof have been approved by the vote of a majority of the Trustees of the Fund who are not parties thereto or interested persons of any such party, cast in person at the meeting called for the purpose of voting on such approval. The Sub-Investment Advisory Agreement will terminate automatically in the event of its assignment. Prior to January 1, 1997, the Advisor paid Systematic Financial Management, L.P. for advice and assistance in the selection of appropriate investments for the Fund. For the period March 21, 1994 (commencement of operations) through December 31, 1994 and for the fiscal years ended December 31, 1995 and 1996, the Advisor paid Systematic Financial Management, L.P. sub-advisory fees of $3,969, and $20,628 and $46,381, respectively. UNDERWRITER FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, King of Prussia, PA 19406, acts as an underwriter of the Fund shares for the purpose of facilitating the registration of shares of the Fund under state securities laws and to assist in sales of shares pursuant to an underwriting agreement (the "Underwriting Agreement") approved by the Fund's Trustees. In that regard, FPSB has agreed at its own expense to qualify as a broker-dealer under all applicable federal or state laws in those states which the Fund shall from time to time identify to FPSB as states in which it wishes to offer its shares for sale, in order that state registrations may be maintained by the Fund. FPSB is a broker-dealer registered with the U.S. Securities and Exchange Commission and is a member in good standing of the National Association of Securities Dealers, Inc. For the services to be provided under the Underwriting Agreement, FPSB is entitled to receive an annual fixed fee of $15,000, for one series, plus $2,500 for each additional operational series or class, payable in advance. This fee is fixed for a one (1) year period from the date of the agreement and may be increased or decreased in future years by an amendment signed by both the Fund and FPSB. The fees for such services are borne entirely by the Advisor. The Fund does not impose any sales loads or redemption fees. The Fund shall continue to bear the expense of all filing or registration fees incurred in connection with the registration of shares under state securities laws. The Underwriting Agreement may be terminated by either party upon 60 days prior written notice to the other party, and if so terminated, the pro-rata portion of the unearned fee will be returned to the Fund. ADMINISTRATOR FPS Services, Inc., 3200 Horizon Drive, King of Prussia, PA 19406, (the "Administrator"), provides certain administrative services to the Fund pursuant to an Administrative Services Agreement. Under the Administrative Services Agreement, the Administrator: (1) coordinates with the Custodian and Transfer Agent and monitors the services they provide to the Fund; (2) coordinates with, and monitors, any third parties furnishing services to the Fund; (3) provides the Fund with necessary office space, telephones and other communications facilities and personnel competent to perform administrative and clerical functions; (4) supervises the maintenance by third parties of such books and records of the Fund as may be required by applicable federal or state law; (5) prepares or supervises the preparation by third parties of all federal, state and local tax returns and reports of the Fund required by applicable law; (6) prepares and, after approval by the Fund, files and arranges for the distribution of proxy materials and periodic reports to shareholders of the Fund as required by applicable law; (7) prepares and, after approval by the Fund, arranges for the filing of such registration statements and other documents with the Securities and Exchange Commission and other federal and state regulatory authorities as may be required by applicable law; (8) reviews and submits to the officers of the Fund for their approval invoices Page 6 or other requests for payment of the Funds expenses and instructs the Custodian to issue checks in payment thereof; and (9) takes such other action with respect to the Fund as may be necessary in the opinion of the Administrator to perform its duties under the agreement. As compensation for services performed under the Administrative Services Agreement, the Administrator receives a fee payable monthly at an annual rate of 0.15% of the first $50 million in average net assets of the Fund; 0.10% of the next $50 million in average net assets; and 0.05% of average net assets over $100 million. There is a minimum fee of $50,000 per year for the initial series/class of shares issued by the Fund and $12,000 per year for each additional separate series/class of shares. For the period March 21, 1994 (commencement of operations) through December 31, 1994 and for the fiscal years ended December 31, 1995 and 1996, the Fund paid $39,583,and $54,297 and $62,581 respectively, for Administration fees. ALLOCATION OF PORTFOLIO BROKERAGE The Investment Manager, when effecting the purchases and sales of portfolio securities for the account of the Fund, 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 Fund or the Investment Manager 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 Fund's Investment Manager 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 Investment Manager in connection with the Fund. Brokerage may also be allocated to dealers in consideration of the Fund's share distribution but only when execution and price are comparable to that offered by other brokers. The Fund incurred brokerage commissions of $7,631 for the period March 21, 1994 (commencement of operations) through December 31, 1994 and for the fiscal years ended December 31, 1995 and 1996, the Fund incurred brokerage commissions of $13,704 and $32,684, respectively. The Advisor, through the Investment Manager, is responsible for making the Fund's portfolio decisions subject to instructions described in the prospectus. The Board of Trustees may however impose limitations on the allocation of portfolio brokerage. PURCHASE OF SHARES The shares of the Fund are continuously offered by the Distributor. Orders will not be considered complete until receipt by the Distributor of a completed account application form, and receipt by the Custodian of payment for the shares purchased. Once both are received, such orders will be confirmed at the next determined net asset value per share, plus the applicable sales load for Retail Class shares (based upon valuation procedures described in the Prospectus), as of the close of business of the business day on which the completed order is received, normally 4 o'clock p.m. Eastern Time. Completed orders received by the Fund after 4 o'clock p.m. will be confirmed at the next day's price. TAX-DEFERRED RETIREMENT PLANS - ----------------------------- Shares of the Fund are available to all types of tax-deferred retirement plans such as IRA's, employer-sponsored defined contribution plans (including 401(k) plans) and tax-sheltered custodial accounts described in Section 403(b)(7) of the Internal Revenue Code. Qualified investors benefit from the tax-free compounding of income dividends and capital gains distributions. The Fund sponsors an Individual Retirement Accounts (IRA). Individuals, who are not active participants (and, when a joint return is filed, who do not have a spouse who is an active participant) in an employer maintained retirement plan are eligible to contribute on a deductible basis to an IRA account. The IRA deduction is also retained for individual taxpayers and married couples with adjusted gross incomes not in excess of certain specified limits. All individuals who have earned income may make nondeductible IRA contributions to the extent Page 7 that they are not eligible for a deductible contribution. Income earned by an IRA account will continue to be tax deferred. A special IRA program is available for employers under which the employers may establish IRA accounts for their employees in lieu of establishing tax qualified retirement plans. Known as SEP-IRA's (Simplified Employee Pension-IRA), they free the employer of many of the record keeping requirements of establishing and maintaining a tax qualified retirement plan trust. If you are entitled to receive a distribution from a qualified retirement plan, you may rollover all or part of that distribution into the Fund's IRA. Your rollover contribution is not subject to the limits on annual IRA contributions. You can continue to defer Federal income taxes on your contribution and on any income that is earned on that contribution. The Fund also sponsors 403(b)(7) Retirement Plans. The Fund offers a plan for use by schools, hospitals, and certain other tax-exempt organizations or associations who wish to use shares of the Fund as a funding medium for a retirement plan for their employees (the "403(b)(7) Plan"). Contributions are made to the 403(b)(7) Plan as a reduction to the employee's regular compensation. Such contributions, to the extent they do not exceed applicable limitations (including a generally applicable limitation of $9,500 per year), are excludable from the gross income of the employee for Federal Income tax purposes. In all these Plans, distributions of net investment income and capital gains will be automatically reinvested. All the foregoing retirement plan options require special plan documents. Please call the Fund at (800) TIM-PLAN (or (800) 846-7526) to obtain information regarding the establishment of retirement plan accounts. In the case of IRAs and 403(b)(7) Plans, Semper Trust Company acts as the plan custodian and charges $12.00 per account in connection with plan establishment and maintenance. These fees are detailed in the plan documents. You should consult with your attorney or other tax advisor for specific advice prior to establishing a plan. REDEMPTIONS Under normal circumstances you may redeem your shares at any time without a fee. The redemption price will be based upon the net asset value per share next determined after receipt of the redemption request, provided it has been submitted in the manner described below. The redemption price may be more or less than your cost, depending upon the net asset value per share at the time of redemption. Retail Class shares of the Fund may be redeemed through certain brokers, financial institutions or service organizations, banks and bank trust departments who may charge the investor a transaction fee or other fee for their services at the time of redemption. Such fees would not otherwise be charged if the shares were purchased directly from the Fund. Payment for shares tendered for redemption is made by check within seven days after tender in proper form, except that the Fund reserves the right to suspend the right of redemption, or to postpone the date of payment upon redemption beyond seven days: (i) for any period during which the NYSE is restricted, (ii) for any period during which an emergency exists as determined by the U.S. Securities and Exchange Commission as a result of which disposal of securities owned by the Fund is not reasonably predictable or it is not reasonably practicable for the Fund fairly to determine the value of its net assets, or (iii) for such other periods as the U.S Securities and Exchange Commission may by order permit for the protection of shareholders of the Fund. Pursuant to the Fund's Agreement and Declaration of Trust, payment for shares redeemed may be made either in cash or in-kind, or partly in cash and partly in- kind. However, the Fund has elected, pursuant to Rule 18f-1 under the 1940 Act, to redeem its shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund, during any 90-day period for any one shareholder. Payments in excess of this limit will also be made wholly in cash unless the Board of Trustees believes that economic conditions exist which would make such a practice detrimental to the best interests of the Fund. Any portfolio Page 8 securities paid or distributed in-kind would be valued as described under "Determination of Net Asset Value" in the Fund's prospectus. In the event that an in-kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from the Fund. In-kind payments need not constitute a cross-section of the Fund's portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment, and where the Fund completes such redemption in-kind, the Fund will not recognize gain or loss for federal tax purposes, on the securities used to complete the redemption. The shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. OFFICERS AND TRUSTEES OF THE FUND The trustees and principal executive officers and their principal occupations for the past five years are listed below.
POSITION AND OFFICE HELD WITH PRINCIPAL OCCUPATION NAME AND ADDRESS AGE THE REGISTRANT DURING THE PAST FIVE YEARS - ---------------- --- -------------- -------------------------- Arthur D. Ally * 55 President and President, Covenant Financial 1304 West Fairbanks Ave Trustee Management, Inc. (1990-present) Winter Park, Florida Joseph E. Boatwright * 65 Secretary and Retired; prior thereto Senior Pastor; 1410 Hyde Park Drive Trustee Aloma Baptist Church, (1970-1996) Winter Park, Florida Wesley W. Pennington 66 Trustee Secretary/Treasurer, American Call to 442 Raymond Ave. Greatness (publishing); President & Sole Longwood, Florida Shareholder, Weston, Inc. (fabric treatment) (1979-present); President & Sole Shareholder, Designer Services Group, Inc. (furniture storage & delivery) (1981-1991) Mark Schweizer 64 Trustee Retired; prior thereto Architect/Engineer, 1000 Bent Tree Lane President of Schweizer, Inc. (1960-1996) Columbia, S.C. Jock M. Sneddon * 49 Trustee Physician, Florida Hospital 6001 Vineland Drive Center (present); prior thereto Orlando, Florida President and Director of Sneddon & Helmers M.D. P. A. (1976-1993) Philip B. Crosby * 70 Trustee Owner and Founder; Career IV P.O. Box 1927 (1991-current); prior thereto Winter Park, Florida Founder, Philip Crosby, Associates, Inc. (1979-retired 1991). Daniel D. Busby, CPA 55 Trustee CFO, International Center of Wesleyan P.O. Box 50188 Church (1986-present); and Partner, Indianapolis, IN Busby, Keller & Co.
* These trustees and officers are considered "interested persons" of the Funds within the meaning of Page 9 Section 2(a)(19) of the 1940 Act. The trustees and officers considered "interested persons" are so deemed by reason of their affiliation with the Fund's investment advisor and as a result of being a trustee and/or officer of the Fund. The officers conduct and supervise the daily business operations of the Fund, while the trustees, in addition to functions set forth under "Investment Advisor," "Investment Manager," and "Underwriter," review such actions and decide on general policy. Compensation to officers and trustees of the Fund who are affiliated with the Advisor is paid by the Advisor, and not by the Fund. For the fiscal year ended December 31, 1996, the Fund did not pay compensation to any of its trustees. In addition, no trustee served on the Board of Directors of another investment company managed by the Advisor for the calendar year ended December 31, 1996. DISTRIBUTION PLAN As noted in the Fund's Prospectuses, each Class of the Fund has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan") whereby the Fund may pay up to a maximum of 0.25% for Institutional Class shares and up to a maximum of 0.85% for Retail Class shares (of which, up to 0.25% may be service fees to be paid by each respective class of shares to FPBS, dealers and others, for providing personal service and/or maintaining shareholder accounts) per annum of its average daily net assets for expenses incurred by the Underwriter in the distribution of the Fund's shares. The fees are paid on a monthly basis, based on the Fund's average daily net assets. Pursuant to the Plan, the Underwriter is entitled to a reimbursement each month (up to the maximum of 0.25% for Institutional Class shares and 0.85% for Retail Class shares per annum of average net assets of the Fund) for the actual expenses incurred in the distribution and promotion of the Fund'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 the Underwriter. Any expense of distribution in excess of 0.25% for Institutional Class shares or 0.85% for Retail Class shares per annum will be borne by the Advisor without any reimbursement or payment by the Fund. For the period ended December 31, 1994 and fiscal year ended December 31, 1995, the Fund reimbursed the Underwriter $1,985 and $11,606, respectively, for distribution costs incurred by the Fund. For the fiscal year ended December 31, 1996, the Fund reimbursed the Underwriter $36,568 for distribution costs incurred as follows: $ 7,063 for printing; $18,465 compensation to underwriters and distribution services; $11,040 compensation to dealers for the Retail Class shares. The Plan also provides that to the extent that the Fund, the Advisor, the Investment Manager, the Underwriter, or other parties on behalf of the Fund, the Advisor, the Investment Manager, or the Underwriter make 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 Fund within the context of Rule 12b- 1, such payments shall be deemed to be made pursuant to the Plan. In no event shall the payments made under the Plan, plus any other payments deemed to be made pursuant to the Plan, exceed the amount permitted to be paid pursuant to the Rules of Fair Practice of the National Association of Securities Dealers, Inc., Article III, Section 26(d)(4). The Board of Trustees has determined that a consistent cash flow resulting from the sale of new shares is necessary and appropriate to meet redemptions and to take advantage of buying opportunities without having to make unwarranted liquidations of portfolio securities. The Board therefore believes that it will likely benefit the Fund to have monies available for the direct distribution activities of the Underwriter in promoting the sale of the Fund's shares, and to avoid any uncertainties as to whether other payments constitute distribution expenses on behalf of the Fund. The Board of Trustees, including the non-interested Page 10 trustees, has concluded that in the exercise of their reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit the Fund and its shareholders. The Plan has been approved by the Fund's Board of Trustees, including all of the trustees who are non-interested persons as defined in the 1940 Act. The Plan must be renewed annually by the Fund's Board of Trustees, including a majority of the trustees who are non-interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plan. The votes must be cast in person at a meeting called for that purpose. It is also required that the selection and nomination of such trustees be done by the non-interested trustees. The Plan and any related agreements may be terminated at any time, without any penalty: 1) by vote of a majority of the non-interested trustees on not more than 60 days' written notice, 2) by the Underwriter on not more than 60 days' written notice, 3) by vote of a majority of the Fund's outstanding shares, on 60 days' written notice, and 4) automatically by any act that terminates the Underwriting Agreement with the Underwriter. The Underwriter or any dealer or other firm may also terminate their respective agreements at any time upon written notice. The Plan and any related agreement may not be amended to increase materially the amounts to be spent for distribution expenses without approval by a majority of the Fund's outstanding shares, and all material amendments to the Plan or any related agreements shall be approved by a vote of the non-interested trustees, cast in person at a meeting called for the purpose of voting on any such amendment. The Underwriter is required to report in writing to the Board of Trustees of the Fund, at least quarterly, on the amounts and purpose of any payment made under the Plan, as well as to furnish the Board with such other information as may reasonably be requested in order to enable the Board to make an informed determination of whether the Plan should be continued. TAXATION The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In order to so qualify, a fund must, among other things (i) derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies; (ii) derive less than 30% of its gross income from the sale or other disposition of stock or securities or certain futures and options thereon held for less than three months ("short-short gains"); (iii) distribute at least 90% of its dividends, interest and certain other taxable income each year; and (iv) at the end of each fiscal quarter maintain at least 50% of the value of its total assets in cash, government securities, securities of other regulated investment companies, and other securities of issuers which represent, with respect to each issuer, no more than 5% of the value of a fund's total assets and 10% of the outstanding voting securities of such issuer, and with no more than 25% of its assets invested in the securities (other than those of the government or other regulated investment companies) of any one issuer or of two or more issuers which the Fund controls and which are engaged in the same, similar or related trades and businesses. To the extent the 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. An excise tax at the rate of 4% will be imposed on the excess, if any, of the Fund's "required distributions" over actual distributions in any calendar year. Generally, the "required distribution" is 98% of a fund's ordinary income for the calendar year plus 98% of its capital gain net income recognized during the one-year period ending on December 31 plus undistributed amounts from prior years. The Fund intends to make distributions sufficient to avoid imposition of the excise tax. Distributions declared by the Fund during October, November or December to shareholders of record during such month and paid by January 31 of the following year will be taxable to shareholders in the calendar year in which they are Page 11 declared, rather than the calendar year in which they are received. Shareholders will be subject to federal income taxes on distributions made by the Fund whether received in cash or additional shares of the Fund. Distributions of net investment income and net short-term capital gains, if any, will be taxable to shareholders as ordinary income. Distributions of net long- term capital gains, if any, will be taxable to shareholders as long-term capital gains, without regard to how long a shareholder has held shares of the Fund. A loss on the sale of shares held for six months or less will be treated as a long-term capital loss to the extent of any long-term capital gain dividend paid to the shareholder with respect to such shares. Dividends eligible for designation under the dividends received deduction and paid by the Fund may qualify in part for the 70% dividends received deduction for corporations provided, however, that those shares have been held for at least 45 days. The Fund will notify shareholders each year of the amount of dividends and distributions, including the amount of any distribution of long-term capital gains, and the portion of its dividends which may qualify for the 70% deduction. The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury regulations currently in effect. For the complete provisions, reference should be made to the pertinent Code sections and regulations. The Code and regulations are subject to change by legislative or administrative action at any time, and retroactively. Each Class of shares of a Fund will share proportionately in the investment income and expenses of that Fund, except that each Fund will incur different distributions expenses. Dividends and distributions also may be subject to state and local taxes. Shareholders are urged to consult their tax advisors regarding specific questions as to federal, state and local taxes. GENERAL INFORMATION AUDITS AND REPORTS - ------------------ The accounts of the Fund are audited each year by Tait, Weller & Baker of Philadelphia, PA, independent certified public accountants whose selection must be ratified annually by the Board of Trustees. Shareholders receive semi-annual and annual reports of the Fund including the annual audited financial statements and a list of securities owned. MISCELLANEOUS - ------------- As of February 10, 1997, Mr. Boatwright owned benefically more than 1% of the outstanding shares of the Institutional Class, however the Trustees and officers of the Fund individually and as a group owned beneficially less than 1.00% of the outstanding shares of the Fund. As of February 10, 1997, the following persons owned of record or exercised voting control over 5% of the outstanding shares of the Retail Class shares of the Fund: Name & Address of Beneficial Owners Percentage - ----------------------------------- ---------- Southwest Securities Inc. 7.28% Dallas, TX Page 12 PERFORMANCE Performance information for the Institutional Class and Retail Class shares of the Fund will vary due to the effect of expense ratios on the performance calculations. Current yield and total return may be quoted in advertisements, shareholder reports or other communications to shareholders. Yield is the ratio of income per share derived from the Fund's investments to a current maximum offering price expressed in terms of percent. The yield is quoted on the basis of earnings after expenses have been deducted. Total return is the total of all income and capital gains paid to shareholders, assuming reinvestment of all distributions, plus (or minus) the change in the value of the original investment, expressed as a percentage of the purchase price. Occasionally, the Fund may include its distribution rate in advertisements. The distribution rate is the amount of distributions per share made by the Fund over a 12-month period divided by the current maximum offering price. U.S. Securities and Exchange Commission rules require the use of standardized performance quotations or, alternatively, that every non-standardized performance quotation furnished by the Fund be accompanied by certain standardized performance information computed as required by the Commission. Current yield and total return quotations used by the Fund are based on the standardized methods of computing performance mandated by the Commission. An explanation of those and other methods used by the Fund to compute or express performance follows. As the following formula indicates, the average annual total return is determined by multiplying a hypothetical initial purchase order of $1,000 by the average annual compound rate of return (including capital appreciation/depreciation and dividends and distributions paid and reinvested) for the stated period less any fees charged to all shareholder accounts and annualizing the result. The calculation assumes the maximum sales load is deducted from the initial $1,000 purchase order and that all dividends and distributions are reinvested at the net asset value on the reinvestment dates during the period. The quotation assumes the account was completely redeemed at the end of each one, five and ten-year period and assumes the deduction of all applicable charges and fees. According to the SEC formula: P(1+T)/n /= ERV where: P = a hypothetical initial payment of $1,000. T = average annual total return. n = number of years. ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the one, five or ten-year periods, determined at the end of the one, five or ten-year periods (or fractional portion thereof). Based on the foregoing calculations, the average annual total return for Institutional Class shares, for the period March 21, 1994 (commencement of operations) through December 31, 1996, and for the one year period ended 1996, was 6.16% and 12.59%, respectively. The average annual total return for Retail Class Shares, for the period August 25, 1995 Page 13 (commencement of operations) through December 31, 1996 and for the one year period ended December 31, 1996 was 6.83% and 10.00%, respectively. Regardless of the method used, past performance is not necessarily indicative of future results, but is an indication of the return to shareholders only for the limited historical period used. COMPARISONS AND ADVERTISEMENTS - ------------------------------ To help investors better evaluate how an investment in the Fund might satisfy their investment objective, advertisements regarding the Fund may discuss yield or total return for the Fund as reported by various financial publications. Advertisements may also compare yield or total return to yield or total return as reported by other investments, indices, and averages. The following publications, indices, and averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Mutual Fund Indices; CDA Weisenberger; and Morningstar From time to time, the Fund may also include in sales literature and advertising (including press releases) the Advisors comments on current news items, organizations which violate the Fund's philosophy (and are screened out as unacceptable portfolio holdings), channels of distribution and organizations which endorse the Fund as consistent with their philosophy of investment. FINANCIAL STATEMENTS The Fund's Financial Statements, including the notes thereto, dated December 31, 1996, which have been audited by Tait, Weller & Baker, are incorporated by reference from the Fund's 1996 Annual Report to Shareholder's. Page 14 INVESTMENT ADVISOR Timothy Partners, Ltd. 1304 West Fairbanks Avenue Winter Park, FL 32789 INVESTMENT MANAGER Awad & Associates 477 Madison Avenue New York, New York 10022 UNDERWRITER FPS Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406 SHAREHOLDER SERVICES FPS Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406 CUSTODIAN The Bank of New York 48 Wall Street New York, New York 10286 LEGAL COUNSEL Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 AUDITORS Tait, Weller & Baker Two Penn Center Suite 700 Philadelphia, PA 19102-1707 FILE NAME PART C POST EFFECTIVE AMENDMENT NO. 5 4 = TO REGISTRATION STATEMENT NO. 33-73248 ON FORM N-1A PART C. OTHER INFORMATION. ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS. - -------------------------------------------- (A) Financial Statements: (1) The Financial Highlights are included in Part A of this Registration Statement on Form N-1A. The following audited Financial Statements are incorporated by reference in Part B of this Registration Statement on Form N1-A for the period ended December 31, 1996: (i) Schedule of Investments at December 31, 1996. (ii) Statement of Assets and Liabilities at December 31, 1996. (iii) Statement of Operations for the period ended December 31, 1996 (iv) Statement of Changes in Net Assets for the year ended December 31, 1996. (v) Notes to Financial Statements. (vi) Financial Highlights. (vii) Report of Independent Accountants (2) All required financial statements are included or incorporated by reference in Parts A and B hereof. All other financial statements and schedules are inapplicable. (B) Exhibits: (1) Agreement and Declaration of Trust is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (1) to Item 24 as electronically filed on April 26, 1996. (2) By-Laws of Registrant dated January 19, 1994 is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (2) to Item 24 as electronically filed on April 26, 1996. (3) None (4) Specimen Copy of each security to be issued by the registrant: Registrant proposes to maintain investments as non-certificated book entry shares. (5) Investment Advisory Agreements: (a)(i) Amendment dated August 28, 1995 to Investment Advisory Agreement dated January 19, 1994 between Registrant and Timothy Partners, Ltd. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (5)(a)(i) to Item 24 as electronically filed on April 26, 1996. (a)(ii) Investment Advisory Agreement dated January 19, 1994 between Registrant and Timothy Partners, Ltd. is incorporated herein by reference to Post-Effective Amendment No. 4 as Exhibit No. 99 (5)(a)(ii) to Item 24 as electronically filed on April 26, 1996. (b)(ii) Sub-Investment Advisory Agreement dated January 1, 1997 between Timothy Partners, Ltd., Awad & Associates and the Registrant is filed herewith electronically. (6) (a) DISTRIBUTION AGREEMENTS: (a)(i) Amendment dated February 23, 1996, to the Underwriting Agreement dated January 19, 1994 between Registrant and FPS Broker Services, Inc. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (6)(a)(i) to Item 24 as electronically filed on April 26, 1996. (a)(ii) Underwriting Agreement dated January 19, 1994 between Registrant and Fund/Plan FPS Broker Services, Inc. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (6)(a)(ii) to Item 24 as electronically filed on April 26, 1996. (b) None (7) None (8) CUSTODIAN AGREEMENT (a) Custodian Agreement between Registrant and The Bank of New York, dated November 11, 1994 is filed herewith electronically. (9) OTHER MATERIAL CONTRACTS: (a)(i) Amendment dated February 23, 1996, to Shareholder Services Agreement dated January 19, 1994 between Registrant and FPS Services, Inc. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (9)(a)(i) to Item 24 as electronically filed on April 26, 1996. (a)(ii) Shareholder Services Agreement dated January 19, 1994 between Registrant and FPS Services, Inc. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (9)(a)(ii) to Item 24 as electronically filed on April 26, 1997. (b)(i) Amendment dated February 23, 1996, to Administration Agreement dated January 19, 1994 between Registrant and FPS Services, Inc. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (9)(b)(i) to Item 24 as electronically filed on April 26, 1996. (b)(ii) Administration Agreement dated January 19, 1994 between Registrant and FPS Services, Inc. is filed incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (9)(b)(ii) to Item 24 as electronically filed on April 26, 1996. (c) Accounting Services Agreement dated February 23, 1996 between Registrant and FPS Services, Inc. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (9)(c) to Item 24 as electronically filed on April 26, 1996. (d)(i) Amendment dated May 1, 1996 to Administrative Agreement dated January 19, 1994 between Registrant and Covenant Financial Management, Inc. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (9)(d)(i) to Item 24 as electronically filed on April 26, 1996. (d)(ii) Administrative Agreement dated January 19, 1994 between Registrant and Covenant Financial Management, Inc. is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (9)(d)(ii) to Item 24 as electronically filed on April 26, 1996. (10) OPINION AND CONSENT OF COUNSEL AS TO THE LEGALITY OF THE SECURITIES TO BE ISSUED: (a) To be filed by the Registrant on a yearly basis along with its Rule 24f-2 Notice. (11) CONSENTS (a) Consent of Tait, Weller & Baker is filed herewith electronically. (12) None. (13) LETTERS OF UNDERSTANDING RELATING TO INITIAL CAPITAL: (a) Investment letters between the Registrant and Phillis B. Crosby, Michael J. Demaray, Thomas J. Snyder, William R. Cadle, Bernice I. Cradle, Mary A. Gibson, Delbert E. Rich, Gwynn M. Reel, Charles E. Davis, Gregory Tighe and Frank Salerno are incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (13) to Item 24 as electronically filed on April 26, 1996. (14) MODEL PLANS: (a) Form of 403(b)(7) Retirement Plan is filed herewith electronically, previously filed as exhibit (14)(a) of Post-Effective No. 1 of the Registrant's Registration Statement on Form N-1A, filed on September 21, 1994. (b) Form of Individual Retirement Account (I.R.A.) is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (14)(b) to Item 24 as electronically filed on April 26, 1996. (15) PLANS UNDER 12b-1: (a) Distribution Plan dated February 10, 1996, on behalf of Institutional Class shares is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (15)(a) to Item 24 as electronically filed on April 26, 1996. (b) Distribution Plan dated February 10, 1996, on behalf of the Retail shares is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (15)(b) to Item 24 as electronically filed on April 26, 1996. (c) Shareholder Services Agreement dated January 1, 1996 between Timothy Partners, Ltd. and FPS Broker Services, Inc. on behalf of the Institutional Class shares is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (15)(c) to Item 24 as electronically filed on April 26, 1996. (d) Shareholder Services Agreement dated January 1, 1996 between Timothy Partners, Ltd. and FPS Broker Services, Inc. on behalf of the Retail Class shares is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (15)(d) to Item 24 as electronically filed on April 26, 1996. (16) Schedule of Computations of Performance Quotations herewith electronically incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (16) to Item 24 as electronically filed on April 26, 1996.. (18) Multiple Class plan is incorporated herein by reference to Post Effective Amendment No. 4 as Exhibit No. 99 (18) to Item 24 as electronically filed on April 26, 1996. (19) Powers of Attorney are filed herewith electronically. (27) Financial Data Schedule is filed herewith electronically. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. - ----------------------------------------------------------------------- None. ITEM 26. NUMBER OF HOLDERS OF SECURITIES. - -----------------------------------------
Number of Record Holders TITLE OF CLASS as of February 10, 1997 -------------- Institutional Class Common Stock, 1151 par value $0.001 per share Retail Class Common Stock, 586 par value $0.001 per share
ITEM 27. INDEMNIFICATION. - -------------------------- Under the terms of the Delaware Business Trust Act and the Registrant's Agreement and Declaration of Trust and By-Laws, no officer or Trustee of the Fund shall have any liability to the Fund or its shareholders for damages, except to the extent such limitation of liability is precluded by Delaware law, the Agreement and Declaration of Trust, or the By-Laws. The Delaware Business Trust Act, section 3817, permits a business trust to indemnify any Trustee, beneficial owner, or other person from and against any claims and demands whatsoever. Section 3803 protects a Trustee, when acting in such capacity, from liability to any person other than the business trust or beneficial owner for any act, omission, or obligation of the business trust or any Trustee thereof, except as otherwise provided in the Agreement and Declaration of Trust. The Agreement and Declaration of Trust provides that the Trustees shall not be liable for any neglect or wrong-doing of any officer, agent, employee, manager or underwriter of the Fund, nor shall any Trustee be responsible for the act or By-Laws, the Fund may indemnify to the fullest extent each Trustee and officer of the Fund acting in such capacity, except each Trustee and officer of the Fund acting in such capacity, except as otherwise provided in the Agreement and Declaration of Trust. The Agreement and Declaration of Trust provides that the Trustees shall not be liable for any neglect or wrong-doing of any officer, agent, employee, manager or underwriter of the Fund, nor shall any Trustee be responsible for the act or omission of any other Trustee. Subject to the provisions of ;the By-Laws, the Fund may indemnify to the fullest extent each Trustee and officer of the Fund acting in such capacity, except that no provision in the Agreement and Declaration of Trust shall be effective to protect or purport to protect and indemnify any Trustee or officer of the Fund from or against any liability to the Fund or any shareholder to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. The By-Laws provide indemnification for each Trustee and officer who is a party or is threatened to be made a party to any proceeding, by reason of service in such capacity, to the fullest extent, if it is determined that Trustee or officer acted in good faith and reasonably believed: (a) in the case of conduct in his official capacity as an agent of the Fund, that his conduct was in the Fund's best interests and (b) in all other cases, that his conduct was at least not opposed to the Fund's best interests and (c) in the case of a criminal proceeding, that he had no reasonable cause to believe the conduct of that person was unlawful. However, there shall be no indemnification for any liability arising by reason of willful misfeasance, bad faith, gross negligence, or the reckless disregard of the duties involved in the conduct of the Trustee's or officer's office. Further, no indemnification shall be made: (a) In respect of any proceeding as to which any Trustee or officer of the Fund shall have been adjudged to be liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the person's official capacity; or (b) In respect of any proceeding as to which any Trustee or officer of the Fund shall have been adjudged to be liable in the performance of that person's duty to the Fund, unless and only to the extent that the court in which that action was brought shall determine upon application that in view of all the relevant circumstances of the case, that person is fairly and reasonably entitled to indemnity for the expenses which the court shall determine; however, in such case, indemnification with respect to any proceeding by or in the right of the Fund or in which liability shall have been adjudged by reason of the disabling conduct set forth in the preceding paragraph shall be limited to expenses; or (c) Of amounts paid in settling or otherwise disposing of a proceeding, with or without court approval, or of expenses incurred in defending a proceeding which is settled or otherwise disposed of without court approval, unless the required court approval set forth in the By-Laws is obtained. In any event, the Fund shall indemnify each officer and Trustee against reasonable expenses incurred in connection with the successful defense of any proceeding to which each such officer or Trustee is a party by reason of service in such Capacity, provided that the Board of Trustees, including a majority who are disinterested, non-party Trustees, also determines that such officer or Trustee was not liable by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of his or her duties or office. The Fund shall advance to each officer and Trustee who is made a party to the proceeding by reason of service in such capacity the expenses incurred by such person in connection therewith, if (a) the officer or Trustee affirms in writing that his good faith belief that he has met the standard of conduct necessary for indemnification, and gives a written undertaking to repay the amount of advance if it is ultimately determined that he has not met those requirements, and (b) a determination that the facts then known to those making the determination would not preclude indemnification. The Trustees and officers of the Fund are entitled and empowered under the Declaration of Trust and By-Laws, to the fullest extent permitted by law, to purchase errors and omissions liability insurance with assets of the Fund, whether or not the fund would have the power to indemnify him against such liability under the Declaration of Trust or By-Laws. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to Trustees, officers, the underwriter or control persons of the Registrant pursuant to the foregoing provisions, the Registrant has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable. See also Item 32. ITEM 28. BUSINESS AND OTHER CONNECTIONS OF ADVISOR. - ---------------------------------------------------- Timothy Partners, Ltd. ("Advisor") serves as investment advisor of the Fund. The following persons serving as directors or officers of the Advisor have held the following positions with the Advisor for the past two years.
Position and Positions with Name and Offices with Offices with Business Address Timothy Partners, Ltd. the Registrant ---------------- ---------------------- -------------- Arthur D. Ally President of Covenant President and Fund, Inc.; Managing Trustee General Partner of Timothy Partners, Ltd. and Individual General
Partner of Timothy Partners, Ltd.
Covenant Financial Management, Inc. is a marketing/consulting firm owned by Arthur Ally that will render consulting advise to the Advisor with regard to marketing plans to be employed to target potential investor groups that might be interested in investing in the Fund because of its investment objectives and criteria. ITEM 29. PRINCIPAL UNDERWRITER. - ------------------------------- (a) Fund/Plan FPS Broker Services, Inc. ("FPSB"), the principal underwriter for the Registrant's securities, currently acts as principal underwriter for the following entities: Bjurman Funds CT&T Funds Farrell Alpha Strategies Focus Trust, Inc. IAA Trust Mutual Funds Matthews International McM Funds Polynous Trust Sage\Tso Trust Smith Breeden Series Fund Smith Breeden Short Duration U.S. Government Fund Smith Breeden Trust The Stratton Funds, Inc. Stratton Growth Fund, Inc. Stratton Monthly Dividend Shares, Inc. Trainer, Wortham First Mutual Funds (b) The table below sets forth certain information as to the Underwriter's Directors, Officers and Control Persons:
Name and Principal Position and Offices Position and Offices Business Address with Underwriter with Registrant - ------------------ -------------------- -------------------- Kenneth J. Kempf Director and None 3200 Horizon Drive President King of Prussia, PA 19406-0903 Conshohocken, PA 19428-0874 Lynne Cannon Senior Vice None Director 3200 Horizon Drive President and Principal King of Prussia, PA 19406-0903 Conshohocken, PA 19428-0874 Rocco J. Cavalieri Director and None 3200 Horizon Drive Vice President King of Prussia, PA 19406-0903
Gerald J. Holland Director, and None 3200 Horizon Drive Senior Vice President King of Prussia, PA 19406-0903 and Principal Joseph M. O'Donnell, Esq. Director and None 3200 Horizon Drive Vice President King of Prussia, PA 19406-0903 Sandra L. Adams Assistant Vice President None 3200 Horizon Drive and Principal King of Prussia, PA 19406-0903 John H. Leven Treasurer None 3200 Horizon Drive King of Prussia, PA 19406-0903 Mary P. Efstration Secretary None 3200 Horizon Drive King of Prussia, PA 19406-0903 Bruno DiStefano Principal None 3200 Horizon Drive King of Prussia, PA 19406-0903
James W. Stratton may be considered a control person of the Underwriter due to his direct or indirect ownership of FPS Services, Inc., the parent of the Underwriter. (c) Not applicable. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS. - ------------------------------------------- Each account, book or other document required to be maintained by Section 31(a) of the 1940 Act and Rules 17 CFR 270.31a-1 to 31a-3 promulgated thereunder, is maintained by the Fund at 1304 West Fairbanks Avenue, Winter Park, Florida 32789, except for those maintained by the Fund's Custodian, The Bank of New York, 48 Wall Street, New York, New York 10286, and the Fund's Administrator, Transfer, Redemption and Dividend Disbursing Agent and Accounting Services Agent, FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903. ITEM 31. MANAGEMENT SERVICES. - ------------------------------ Not applicable. ITEM 32. UNDERTAKINGS. - ----------------------- (a) Inapplicable. (b) Inapplicable. (c) The Registrant hereby undertakes to furnish each person to whom a Prospectus is delivered with a copy of the respective latest annual report to shareholders, upon request and without charge. (d) The Registrant hereby undertakes to promptly call a meeting of shareholders for the purpose of voting upon the question of removal of any Trustee when requested in writing to do so by the record holders of not less than 10 percent of the Registrant's outstanding shares and to assist its shareholders in accordance with the requirements of Section 16(c) of the Investment Company Act of 1940, as amended relating to shareholder communications. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, as amended, the Registrant hereby certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment No. 5 to its Registration Statement pursuant to Rule 485(a) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 4 to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in Winter Park, State of Florida, on the 26th day of February 1997 6. THE TIMOTHY PLAN By: /s/ Arthur D. Ally -------------------------------------- Arthur D. Ally, President & Trustee Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 5 to the Registrant's Registration Statement has been signed below by the following persons in the capacities indicated.
Signature Title Date - --------- ----- ---- /s/ Arthur D. Ally* President and Trustee February 26, 1997 - ------------------- /s/ Joseph E. Boatwright* Secretary and Trustee February 26, 1997 - ------------------------- /s/ Wesley Pennington* Treasurer and Trustee February 26, 1997 /s/ Mark Schweizer* Trustee February 26, 1997 - ------------------- /s/ Jock M. Sneddon* Trustee February 26, 1997 /s/ Philip B. Crosby* Trustee February 26, 1997 /s/ Daniel D. Busby* Trustee February 26, 1997
*By: /s/ Gretchen B. Zepernick ------------------------- Gretchen B. Zepernick, as Attorney-in-Fact & Agent, pursuant to Power of Attorney INDEX TO EXHIBITS ON FORM N-1A EXHIBIT 99B5(b)(ii) Sub-Investment Advisory Agreement 99B8(a) Custody Agreement 99B11(a) Auditors Consent 99B14(a) Form of 403(b)(7) Retirement Plan 99B19 Powers of Attorney 99B27(a) Financial Data Schedule-Institutional Class 99B27(b) Financial Data Schedule-Retail Class EX-99.B5II 2 SUB-INVESTMENT ADVISORY AGREEMENT EXHIBIT 99B5(II) SUB-INVESTMENT ADVISORY AGREEMENT BETWEEN TIMOTHY PARTNERS, LTD. AND AWAD & ASSOCIATES SUB-INVESTMENT ADVISORY AGREEMENT (the "Agreement") made this 1st day of January , 1997, by and between TIMOTHY PARTNERS, LTD. (hereinafter referred to as the "Investment Adviser") and AWAD & ASSOCIATES, a division of Raymond James & Associates (hereinafter referred to as the "Investment Manager"), which Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one instrument. WITNESSETH: ---------- WHEREAS, the General Partners (the "Partners") of the Investment Adviser wish to enter into a contract with the Investment Manager to render the Investment Adviser the following services: To furnish research, analysis, advice and recommendations with respect to the purchase and sale of securities and the making of investment commitments by the Investment Adviser regarding assets of The Timothy Plan (hereinafter ----------------- referred to as the "Fund") subject to oversight by the Board of Trustees of the Fund and the supervision of the Investment Adviser. NOW THEREFORE, in consideration of the mutual agreements herein contained, and intending to be bound, the parties agree as follows: 1. As compensation for the services enumerated above, the Investment Adviser will pay the Investment Manager an annual fee, which fee shall be payable monthly. The amount of such fee shall equal 0.42% of the average daily net assets of the Fund with respect to the first $10 million in assets of the Fund, 0.40% of the next $5 million in assets, 0.35% of the next $10 million in assets, and 0.25% of assets over $25 million. 2. This Agreement shall become effective as of the date first above written, subject to the approval of the shareholders of the Fund in accordance with the provisions of the Investment Company Act of 1940 (the "Act"). 3. This Agreement shall continue for a period ending two years from its effective date. It may be renewed thereafter by the Investment Adviser and the Investment Manager for successive periods not exceeding one year only so long as such renewal and continuance is specifically approved at least annually by the Fund's Board of Trustees or by a vote of the majority of the outstanding voting securities of the Fund as prescribed by the Act and provided further that such continuance is approved at least annually thereafter by a vote of a majority of the Fund's Trustees, who are not parties to such Agreement or interested persons of such a party, cast in person at a meeting called for the purpose of voting on such approval. This Agreement will terminate automatically without the payment of any penalty upon termination of the Investment Advisory Agreement or upon sixty days' written notice by the Fund to the Investment Manager that the Trustees or the shareholders by vote of a majority of the outstanding voting securities of the Fund, as provided by the Act, has terminated the Investment Advisory Agreement. This Agreement may also be terminated by the Investment Manager without penalty upon sixty days' written notice to the Fund. This Agreement shall terminate automatically in the event of its assignment or the assignment of the Investment Advisory Agreement. 4. Subject to the supervision of the Board of Trustees of the Fund and the Investment Adviser, the Investment Manager will provide recommendations for a continuous investment program for the Fund, including investment research and management with respect to securities and investments, including cash and cash equivalents in the Fund. The Investment Manager will recommend to the Investment Adviser from time to time what securities and other investments should be purchased, retained or sold by the Fund. The Investment Manager will provide the services under this Agreement in accordance with the Fund's investment objective, policies and restrictions as stated in the Prospectus. The Investment Manager further agrees that it: a. will conform with all applicable Rules and Regulations of the SEC and will, in addition, conduct its activities under this Agreement in accordance with regulations of any other Federal or State agencies which now has or in the future will have jurisdiction over its activities; b. will recommend placement of orders pursuant to its investment determinations for the Fund either directly with any broker or dealer, or with the issuer. In recommending placement of orders with brokers or dealers, the Investment Manager will attempt to assist the Investment Adviser to obtain the best net price and the most favorable execution of its orders. Consistent with this obligation, when the execution and price offered by two or more brokers or dealers are comparable, the Investment Manager has been advised that the Fund has authorized the Investment Adviser, in its discretion, to purchase and sell securities to and from brokers and dealers who promote the sale of Fund shares. In no instance will securities be purchased from or sold to the Investment Manager or any affiliated person of the Investment Manager as principal. Notwithstanding the foregoing sentence, the Investment Manager may arrange for the execution of brokered transactions through an affiliated broker dealer in conformity with policies and procedures for such purpose if, when, and as established by the Trustees of the Fund. c. will provide, at its own cost, all office space and facilities necessary to furnish the foregoing services to be provided by the Investment Manager of the Fund. 5. It is expressly understood and agreed that the services to be rendered by the Investment Manager to the Investment Adviser under the provisions of this Agreement are not to be deemed to be exclusive, and the Investment Manager shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be materially impaired thereby, and provided further that the services to be rendered by the Investment Manager to the Investment Adviser under this Agreement and the compensation provided for in Paragraph 1 hereof shall be limited solely to services with reference to the Fund. 6. The Investment Adviser agrees that it will furnish currently to the Investment Manager all information reasonably necessary to permit the Investment Manager to give the advice called for under this Agreement and such information with reference to the Fund that is reasonably necessary to permit the Investment Manager to carry out its responsibilities under this Agreement, and the parties agree that they will from time to time consult and make appropriate arrangements as to specific information that is required under this paragraph and the frequency and manner with which it shall be supplied. 7. The Investment Manager shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Investment Adviser or the Fund in connection with any matters to which this Agreement relates except that nothing herein contained shall be construed to protect the Investment Manager against any liability by reason of the Investment Manager's willful misfeasance, bad faith, or gross negligence in the performance of its duties or by reckless disregard of its obligations or duties under this Agreement. 8. In compliance with the provisions of the Investment Advisory Agreement between the Fund and the Investment Adviser, the Investment Manager agrees with the Investment Adviser that, subject to the terms and conditions of this Paragraph 9, the Fund may use the name "Timothy" in, or as a portion of, its name so long as the Investment Adviser, or any successor in interest, continues as the Investment Adviser. Should the Fund terminate the Investment Adviser or any successor in interest, or if the Investment Adviser shall give notice of termination of the Investment Advisory Agreement, then the Investment Adviser may elect to notify the Fund in writing that permission to use the name "Timothy" has been withdrawn. It is understood that the Fund has, in its Investment Advisory Agreement, expressly agreed that it, its Officers, Trustees and Shareholders upon receipt of such notice, will take all necessary action and proceed expeditiously to change the name of the Fund and not use any other name or take any action which would indicate the Fund's continued association with the Investment Adviser. If the use of the name "Timothy" is so withdrawn as aforesaid, it is understood and agreed that there shall be no limitation with respect to the future use of the name "Timothy" by the Investment Adviser or its successor in interest. 9. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without applying the principles of conflicts of law thereunder. 10. Any notice to be given hereunder may be given by personal notification or by first class mail, postage prepaid, to the party specified at the address stated below: a. To the Investment Adviser at: ---------------------------- Timothy Partners, Ltd. 1304 West Fairbanks Avenue Winter Park, FL 32789 Attn: Arthur D. Ally b. To the Investment Manager at: ---------------------------- Awad and Associates 477 Madison Ave 16th Floor New York, NY 10022 Attn: James Awad c. To the Fund at: -------------- The Timothy Plan 1304 West Fairbanks Avenue Winter Park, FL 32789 Attn: Arthur D. Ally d. With copies to: -------------- Joseph V. Del Raso, Esquire Stradley, Ronon, Stevens & Young 2600 One Commerce Square Philadelphia, PA 19103-7098 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized officers as of the day and year first above written. ATTEST: THE TIMOTHY PLAN _________________________ By:__________________________ ATTEST: TIMOTHY PARTNERS, LTD. By: COVENANT FUNDS, INC. Managing General Partner _________________________ By:__________________________ ATTEST: AWAD & ASSOCIATES _________________________ By:__________________________ EX-99.B8A 3 CUSTODY AGREEMENT EXHIBIT 99.B.8.A CUSTODY AGREEMENT Agreement made as of this day of , 199 , between The Timothy Plan, a Delaware business trust organized and existing under the laws of the State of Delaware, having its principal office and place of business at 1304 West Fairbanks Avenue, Winter Park Florida 32789 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a banking business, having its principal office and place of business at 48 Wall Street, New York, New York 10286 (hereinafter called the "Custodian"). W I T N E S S E T H : WHEREAS, the Fund represents that pursuant to the Custody Administration and Agency Agreement between Fund/Plan Services, Inc. ("Fund/Plan") and the Fund, Fund/Plan (a) has agreed to perform certain administrative functions which may include the functions of administrator, transfer agent and accounting services agent and (b) has been appointed by the Fund to act as its agent in respect of certain transactions contemplated in this Agreement; and WHEREAS, the Fund represents that (a) Fund/Plan has agreed to act as Fund's agent in respect of certain transactions contemplated in this Agreement and (b) the Bank is authorized and directed to rely upon and follow Certificates and instructions given by Fund/Plan, the Fund's agent, in respect of transactions contemplated in this Agreement. NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the Fund and the Custodian agree as follows: ARTICLE I DEFINITIONS Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: 1. "Administrator" shall mean Fund/Plan Services, Inc. and such successors or permitted assigns as may succeed and perform its duties under the Administration Agreement. 2. "Administration Agreement" shall mean that certain separate agreement entitled "Custody Administration and Agency Agreement" dated as of _______________, 199 between the Fund and the Fund/Plan Services, Inc. 3. "Book-Entry System" shall mean the Federal Reserve/Treasury book- entry system for United States and federal agency securities, its successor or successors and its nominee or nominees. 4. "Call Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities. 5. "Certificate" shall mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement to be given to the Custodian which is actually received by the Custodian and signed on behalf of the Fund by any two Officers, and the term Certificate shall also include instructions communicated to the Custodian by the Administrator by Terminal Link. 6. "Clearing Member" shall mean a registered broker-dealer which is a clearing member under the rules of O.C.C. and a member of a national securities exchange qualified to act as a custodian for an investment company, or any broker-dealer reasonably believed by the Custodian to be such a clearing member. 7. "Collateral Account" shall mean a segregated accountso denominated which is specifically allocated to a Series and pledged to the Custodian as security for, and in of, the Custodian's issuance of (a) any Put Option guarantee letter or similar document described in paragraph 8 of Article V herein, or (b) any receipt described in Article V or VIII herein. 8. "Covered Call Option" shall mean an exchange traded option entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities (excluding Futures Contracts) which are owned by the writer thereof and subject to appropriate restrictions. 9. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing agency registered with the Securities andExchange Commission, its successor or successors and its nominee or nominees. The term "Depository" shall further mean and include any other person authorized to act as a depository under the Investment Company Act of 1940, its successor or successors and its nominee or nominees, specifically identified in a certified copy of a resolution of the Fund's Board of Trustees specifically approving deposits therein by the Custodian. 10. "Financial Futures Contract" shall mean the firm commitment to buy or sell fixed income securities including, without limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and Eurodollar certificates of deposit, during a specified month at an agreed upon price. 11. "Futures Contract" shall mean a Financial Futures Contract and/or Stock Index Futures Contracts. 12. "Futures Contract Option" shall mean an option with respect to a Futures Contract. 13. "Margin Account" shall mean a segregated account in the name of a broker, dealer, futures commission merchant, or a Clearing Member, or in the name of the Fund for the benefit of a broker, dealer, futures commission merchant, or Clearing Member, or otherwise, in accordance with an agreement between the Fund, the Custodian and a broker, dealer, futures commission merchant or a Clearing Member (a "Margin Account Agreement"), separate and distinct from the custody account, in which certain Securities and/or money of the Fund shall be deposited and withdrawn from time to time in connection with such transactions as the Fund may from time to time determine. Securities held in the Book-Entry System or the Depository shall be deemed to have been deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting an appropriate entry in its books and records. 14. "Money Market Security" shall be deemed to include, without limitation, certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as to interest and principal by the government of the United States or agencies or instrumentalities thereof, any tax, bond or revenue anticipation note issued by any state or municipal government or public authority, commercial paper, certificates of deposit and bankers' acceptances, repurchase agreements with respect to the same and bank time deposits, where the purchase and sale of such securities normally requires settlement in federal funds on the same day as such purchase or sale. 15. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency registered under Section 17A of the Securities Exchange Act of 1934, its successor or successors, and its nominee or nominees. 16. "Officers" shall be deemed to include the President any Vice President, the Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary, any Assistant Clerk, any Assistant Treasurer, and any other person or persons, including officers or employees of the Administrator, whether or not any such other person is an officer of the Fund, duly authorized by the Board of Trustees of the Fund to execute any Certificate, instruction, notice or other instrument on behalf of the Fund and listed in the Certificate annexed hereto as Appendix A or such other Certificate as may be received by the Custodian from time to time. 17. "Option" shall mean a Call Option, Covered Call Option, Stock Index Option and/or a Put Option. 18. "Oral Instructions" shall mean verbal instructions actually received by the Custodian from an Officer or from a person reasonably believed by the Custodian to be an Officer. 19. "Put Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and tender of the specified underlying Securities, to sell such Securities to the writer thereof for the exercise price. 20. "Reverse Repurchase Agreement" shall mean an agreement pursuant to which the Fund sells Securities and agrees to repurchase such Securities at a described or specified date and price. 21. "Security" shall be deemed to include, without limitation, Money Market Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures Contracts, Stock Index Futures Contract Options, Financial Futures Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks and other securities having characteristics similar to common stocks, preferred stocks, debt obligations issued by state or municipal governments and by public authorities, (including, without limitation, general obligation bonds, revenue bonds, industrial bonds and industrial development bonds), bonds, debentures, notes, mortgages or other obligations, and any certificates, receipts, warrants or other instruments representing rights to receive, purchase, sell or subscribe for the same, or evidencing or representing any other rights or interest therein, or any property or assets. 22. "Senior Security Account" shall mean an account maintained and specifically allocated to a Series under the terms of this Agreement as a segregated account, by recordation or otherwise, within the custody account in which certain Securities and/or other assets of the Fund specifically allocated to such Series shall be deposited and withdrawn from time to time in accordance with Certificates received by the Custodian in connection with such transactions as the Fund may from time to time determine. 23. "Series" shall mean the various portfolios, if any, of the Fund as described from time to time in the current and effective prospectus for the Fund and listed on Appendix B hereto as amended from time to time. 24. "Shares" shall mean the shares of beneficial interest of the Fund, each of which is, in the case of a Fund having Series, allocated to a particular Series. 25. "Stock Index Futures Contract" shall mean a bilateral agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified dollar amount times the difference between the value of a particular stock index at the close of the last business day of the contract and the price at which the futures contract is originally struck. 26. "Stock Index Option" shall mean an exchange traded option entitling the holder, upon timely exercise, to receive an amount of cash determined by reference to the difference between the exercise price and the value of the index on the date of exercise. 26. "Terminal Link" shall mean an electronic data transmission link between the Administrator on behalf of the Fund and the Custodian requiring in connection with each use of the Terminal Link by or on behalf of the Administrator on behalf of the Fund use of an authorization code provided by the Custodian and at least two access codes established by the Administrator on behalf of the Fund. ARTICLE II APPOINTMENT OF CUSTODIAN 1. The Fund hereby constitutes and appoints the Custodian as custodian of the Securities and moneys at any time owned by the Fund during the period of this Agreement. 2. The Custodian hereby accepts appointment as such custodian and agrees to perform the duties thereof as hereinafter set forth. ARTICLE III CUSTODY OF CASH AND SECURITIES 1. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, the Fund will deliver or cause to be delivered to the Custodian all Securities and all moneys owned by it, at any time during the period of this Agreement, and shall specify with respect to such Securities and money the Series to which the same are specifically allocated. The Custodian shall segregate, keep and maintain the assets of the Series separate and apart. The Custodian will not be responsible for any Securities and moneys not actually received by it. The Custodian will be entitled to reverse any credits made on the Fund's behalf where such credits have been previously made and moneys are not finally collected. The Fund shall deliver to the Custodian a certified resolution of the Board of Trustees of the Fund, substantially in the form of Exhibit A hereto, approving, authorizing and instructing the Custodian on a continuous and on-going basis to deposit in the Book-Entry System all Securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated and to utilize the Book-Entry System to the extent possible in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities and deliveries and returns of Securities collateral. Prior to a deposit of Securities specifically allocated to a Series in the Depository, the Fund shall deliver to the Custodian a certified resolution of the Board of Trustees of the Fund, substantially in the form of Exhibit B hereto, approving, authorizing and instructing the Custodian on a continuous and ongoing basis until instructed to the contrary by a Certificate actually received by the Custodian to deposit in the Depository all Securities specifically allocated to such Series eligible for deposit therein, and to utilize the Depository to the extent possible with respect to such Securities in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities, and deliveries and returns of Securities collateral. Securities and moneys deposited in either the Book-Entry System or the Depository will be represented in accounts which include only assets held by the Custodian for customers, including, but not limited to, accounts in which the Custodian acts in a fiduciary or representative capacity and will be specifically allocated on the Custodian's books to the separate account for the applicable Series. Prior to the Custodian's accepting, utilizing and acting with respect to Clearing Member confirmations for Options and transactions in Options for a Series as provided in this Agreement, the Custodian shall have received a certified resolution of the Fund's Board of Trustees, substantially in the form of Exhibit C hereto, approving, authorizing and instructing the Custodian on a continuous and on- going basis, until instructed to the contrary by a Certificate actually received by the Custodian, to accept, utilize and act in accordance with such confirmations as provided in this Agreement with respect to such Series. 2. The Custodian shall establish and maintain separate accounts, in the name of each Series, and shall credit to the separate account for each Series all moneys received by it for the account of the Fund with respect to such Series. Money credited to a separate account for a Series shall be disbursed by the Custodian only: (a) As hereinafter provided; (b) Pursuant to Certificates setting forth the name and address of the person to whom the payment is to be made, the Series account from which payment is to be made and the purpose for which payment is to be made; or (c) In payment of the fees and in reimbursement of the expenses and liabilities of the Custodian attributable to such Series. 3. Promptly after the close of business on each day, the Custodian shall furnish the Administrator with confirmations and a summary, on a per Series basis, of all transfers to or from the account of the Fund for a Series, either hereunder or with any co-custodian or sub-custodian appointed in accordance with this Agreement during said day. Where Securities are transferred to the account of the Fund for a Series, the Custodian shall also by book-entry or otherwise identify as belonging to such Series a quantity of Securities in a fundian (or its nominee) or shown on the Custodian's account on the books of the Book-Entry System or the Depository. At least monthly and from time to time, the Custodian shall furnish the Administrator with a detailed statement, on a per Series basis, of the Securities and moneys held by the Custodian for the Fund. 4. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, all Securities held by the Custodian hereunder, which are issued or issuable only in bearer form, except such Securities as are held in the Book-Entry System, shall be held by the Custodian in that form; all other Securities held hereunder may be registered in the name of the Fund, in the name of any duly appointed registered nominee of the Custodian as the Custodian may from time to time determine, or in the name of the Book-Entry System or the Depository or their successor or successors, or their nominee or nominees. The Fund agrees to furnish or cause to be furnished to the Custodian appropriate instruments to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of its registered nominee or in the name of the Book-Entry System or the Depository any Securities which it may hold hereunder and which may from time to time be registered in the name of the Fund. The Custodian shall hold all such Securities specifically allocated to a Series which are not held in the Book-Entry System or in the Depository in a separate account in the name of such Series physically segregated at all times from those of any other person or persons. 5. Except as otherwise provided in this Agreement and unless otherwise instructed to the contrary by a Certificate, the Custodian by itself, or through the use of the Book-Entry System or the Depository with respect to Securities held hereunder and therein deposited, shall with respect to all Securities held for the Fund hereunder in accordance with preceding paragraph 4: (a) Collect all income due or payable; (b) Present for payment and collect the amount payable upon such Securities which are called, but only if either (i) the Custodian receives a written notice of such call, or (ii) notice of such call appears in one or more of the publications listed in Appendix C annexed hereto, which may beamended at any time by the Custodian without the prior notification or consent of the Fund; (c) Present for payment and collect the amount payable upon all Securities which mature; (d) Surrender Securities in temporary form for definitive Securities; (e) Execute, as custodian, any necessary declarations or certificates of ownership under the Federal Income Tax Laws or the laws or regulations of any other taxing authority now or hereafter in effect; and (f) Hold directly, or through the Book-Entry System or the Depository with respect to Securities therein deposited, for the account of a Series, all rights and similar securities issued with respect to any Securities held by the Custodian for such Series hereunder. 6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or through the use of the Book-Entry System or the Depository, shall: (a) Execute and deliver to such persons as may be designated in such Certificate proxies, consents, authorizations, and any other instruments whereby the authority of the Fund as owner of any Securities held by the Custodian hereunder for the Series specified in such Certificate may be exercised; (b) Deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate in exchange for other Securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege and receive and hold hereunder specifically allocated to such Series any cash or other Securities received in exchange; (c) Deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any corporation, and receive and hold hereunder specifically allocated to such Series such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery; (d) Make such transfers or exchanges of the assets of the Series specified in such Certificate, and take such other steps as shall be stated in such Certificate to be for the purpose of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Fund; and (e) Present for payment and collect the amount payable upon Securities not described in preceding paragraph 5(b) of this Article which may be called as specified in the Certificate. 7. Notwithstanding any provision elsewhere contained herein, the Custodian shall not be required to obtain possession of any instrument or certificate representing any Futures Contract, any Option, or any Futures Contract Option until after it shall have determined, or shall have received a Certificate from the Fund stating, that any such instruments or certificates are available. The Fund shall deliver to the Custodian such a Certificate no later than the business day preceding the availability of any such instrument or certificate. Prior to such availability, the Custodian shall comply with Section 17(f) of the Investment Company Act of 1940, as amended, in connection with the purchase, sale, settlement, closing out or writing of Futures Contracts, Options, or Futures Contract Options by making payments or deliveries specified in Certificates received by the Custodian in connection with any such purchase, sale, writing, settlement or closing out upon its receipt from a broker, dealer, or futures commission merchant of a statement or confirmation reasonably believed by the Custodian to be in the form customarily used by brokers, dealers, or future commission merchants with respect to such Futures Contracts, Options, or Futures Contract Options, as the case may be, confirming that such Security is held by such broker, dealer or futures commission merchant, in book- entry form or otherwise, in the name of the Custodian (or any nominee of the Custodian) as custodian for the Fund, provided, however, that notwithstanding the foregoing, payments to or deliveries from the Margin Account and payments with respect to Securities to which a Margin Account relates, shall be made in accordance with the terms and conditions of the Margin Account Agreement. Whenever any such instruments or certificates are available, the Custodian shall, notwithstanding any provision in this Agreement to the contrary, make payment for any Futures Contract, Option, or Futures Contract Option for which such instruments or such certificates are available only against the delivery to the Custodian of such instrument or such certificate, and deliver any Futures Contract, Option or Futures Contract Option for which such instruments or such certificates are available only against receipt by the Custodian of payment therefor. Any such instrument or certificate delivered to the Custodian shall be held by the Custodian hereunder in accordance with, and subject to, the provisions of this Agreement. ARTICLE IV PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS, FUTURES CONTRACTS AND FUTURES CONTRACT OPTIONS 1. Promptly after each purchase of Securities by the Fund, other than a purchase of an Option, a Futures Contract, or a Futures Contract Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian (i) with respect to each purchase of Securities which are not Money Market Securities, a Certificate, and (ii) with respect to each purchase of Money Market Securities, a Certificate or Oral Instructions, specifying with respect to each such purchase: (a) the Series to which such Securities are to be specifically allocated; (b) the name of the issuer and the title of the Securities; (c) the number of shares or the principal amount purchased and accrued interest, if any; (d) the date of purchase and settlement; (e) the purchase price per unit; (f) the total amount payable upon such purchase; (g) the name of the person from whom or the broker through whom the purchase was made, and the name of the clearing broker, if any; and (h) the name of the broker to whom payment is to be made. The Custodian shall, upon receipt of Securities purchased by or for the Fund, pay to the broker specified in the Certificate out of the moneys held for the account of such Series the total amount payable upon such purchase, provided that the same conforms to the total amount payable as set forth in such Certificate or Oral Instructions. 2. Promptly after each sale of Securities by the Fund, other than a sale of any Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase Agreement, the Fund shall deliver or cause the Administrator to deliver to the Custodian (i) with respect to each sale of Securities which are not Money Market Securities, a Certificate, and (ii) with respect to each sale of Money Market Securities, a Certificate or Oral Instructions, specifying with respect to each such sale: (a) the Series to which such Securities were specifically allocated; (b) the name of the issuer and the title of the Security; (c) the number of shares or principal amount sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per unit; (f) the total amount payable to the Fund upon such sale; (g) the name of the broker through whom or the person to whom the sale was made, and the name of the clearing broker, if any; and (h) the name of the broker to whom the Securities are to be delivered. The Custodian shall deliver the Securities specifically allocated to such Series to the broker specified in the Certificate against payment upon receipt of the total amount payable to the Fund upon such sale, provided that the same conforms to the total amount payable as set forth in such Certificate or Oral Instructions. ARTICLE V OPTIONS 1. Promptly after the purchase of any Option by the Fund, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each Option purchased: (a) the Series to which such Option is specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Options purchased; (d) the expiration date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the total amount payable by the Fund in connection with such purchase; (h) the name of the Clearing Member through whom such Option was purchased; and (i) the name of the broker to whom payment is to be made. The Custodian shall pay, upon receipt of a Clearing Member's statement confirming the purchase of such Option held by such Clearing Member for the account of the Custodian (or any duly appointed and registered nominee of the Custodian) as custodian for the Fund, out of moneys held for the account of the Series to which such Option is to be specifically allocated, the total amount payable upon such purchase to the Clearing Member through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such Certificate. 2. Promptly after the sale of any Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such sale: (a) the Series to which such Option was specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Options sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g) the total amount payable to the Fund upon such sale; and (h) the name of the Clearing Member through whom the sale was made. The Custodian shall consent to the delivery of the Option sold by the Clearing Member which previously supplied the confirmation described in preceding paragraph 1 of this Article with respect to such Option against payment to the Custodian of the total amount payable to the Fund, provided that the same conforms to the total amount payable as set forth in such Certificate. 3. Promptly after the exercise by the Fund of any Call Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Call Option: (a) the Series to which such Call Option was specifically allocated; (b) the name of the issuer and the title and number of shares subject to the Call Option; (c) the expiration date; (d) the date of exercise and settlement; (e) the exercise price per share; (f) the total amount to be paid by the Fund upon such exercise; and (g) the name of the Clearing Member through whom such Call Option was exercised. The Custodian shall, upon receipt of the Securities underlying the Call Option which was exercised, pay out of the moneys held for the account of the Series to which such Call Option was specifically allocated the total amount payable to the Clearing Member through whom the Call Option was exercised, provided that the same conforms to the total amount payable as set forth in such Certificate. 4. Promptly after the exercise by the Fund of any Put Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series to which such Put Option was specifically allocated; (b) the name of the issuer and the title and number of shares subject to the Put Option; (c) the expiration date; (d) the date of exercise and settlement; (e) the exercise price per share; (f) the total amount to be paid to the Fund upon such exercise; and (g) the name of the Clearing Member through whom such Put Option was exercised. The Custodian shall, upon receipt of the amount payable upon the exercise of the Put Option, deliver or direct the Depository to deliver the Securities specifically allocated to such Series, provided the same conforms to the amount payable to the Fund as set forth in such Certificate. 5. Promptly after the exercise by the Fund of any Stock Index Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series to which such Stock Index Option was specifically allocated; (b) the type of Stock Index Option (put or call); (c) the number of Options being exercised; (d) the stock index to which such Option relates; (e) the expiration date; (f) the exercise price; (g) the total amount to be received by the Fund in connection with such exercise; and (h) the Clearing Member from whom such payment is to be received. 6. Whenever the Fund writes a Covered Call Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Covered Call Option: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares for which the Covered Call Option was written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Covered Call Option was written; and (g) the name of the Clearing Member through whom the premium is to be received. The Custodian shall deliver or cause to be delivered, in exchange for receipt of the premium specified in the Certificate with respect to such Covered Call Option, such receipts as are required in accordance with the customs prevailing among Clearing Members dealing in Covered Call Options and shall impose, or direct the Depository to impose, upon the underlying Securities specified in the Certificate specifically allocated to such Series such restrictions as may be required by such receipts. Notwithstanding the foregoing, the Custodian has the right, upon prior written notification to the Fund, at any time to refuse to issue any receipts for Securities in the possession of the Custodian and not deposited with the Depository underlying a Covered Call Option. 7. Whenever a Covered Call Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate instructing the Custodian to deliver, or to direct the Depository to deliver, the Securities subject to such Covered Call Option and specifying: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares subject to the Covered Call Option; (c) the Clearing Member to whom the underlying Securities are to be delivered; and (d) the total amount payable to the Fund upon such delivery. Upon the return and/or cancellation of any receipts delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver, or direct the Depository to deliver, the underlying Securities as specified in the Certificate against payment of the amount to be received as set forth in such Certificate. 8. Whenever the Fund writes a Put Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series for which such Put Option was written; (b) the name of the issuer and the title and number of shares for which the Put Option is written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Put Option is written; (g) the name of the Clearing Member through whom the premium is to be received and to whom a Put Option guarantee letter is to be delivered; (h) the amount of cash, and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Senior Security Account for such Series; and (i) the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be deposited into the Collateral Account for such Series. The Custodian shall, after making the deposits into the Collateral Account specified in the Certificate, issue a Put Option guarantee letter substantially in the form utilized by the Custodian on the date hereof, and deliver the same to the Clearing Member specified in the Certificate against receipt of the premium specified in said Certificate. Notwithstanding the foregoing, the Custodian shall be under no obligation to issue any Put Option guarantee letter or similar document if it is unable to make any of the representations contained therein. 9. Whenever a Put Option written by the Fund and described in the preceding paragraph is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series to which such Put Option was written; (b) the name of the issuer and title and number of shares subject to the Put Option; (c) the Clearing Member from whom the underlying Securities are to be received; (d) the total amount payable by the Fund upon such delivery; (e) the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be withdrawn from the Collateral Account for such Series and (f) the amount of cash and/or the amount and kind of Securities, specifically allocated to such Series, if any, to be withdrawn from the Senior Security Account. Upon the return and/or cancellation of any Put Option guarantee letter or similar document issued by the Custodian in connection with such Put Option, the Custodian shall pay out of the moneys held for the account of the Series to which such Put Option was specifically allocated the total amount payable to the Clearing Member specified in the Certificate as set forth in such Certificate against delivery of such Securities, and shall make the withdrawals specified in such Certificate. 10. Whenever the Fund writes a Stock Index Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series for which such Stock Index Option was written; (b) whether such Stock Index Option is a put or a call; (c) the number of options written; (d) the stock index to which such Option relates; (e) the expiration date; (f) the exercise price; (g) the Clearing Member through whom such Option was written; (h) the premium to be received by the Fund; (i) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Senior Security Account for such Series; (j) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Collateral Account for such Series; and (k) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in a Margin Account, and the name in which such account is to be or has been established. The Custodian shall, upon receipt of the premium specified in the Certificate, make the deposits, if any, into the Senior Security Account specified in the Certificate, and either (1) deliver such receipts, if any, which the Custodian has specifically agreed to issue, which are in accordance with the customs prevailing among Clearing Members in Stock Index Options and make the deposits into the Collateral Account specified in the Certificate, or (2) make the deposits into the Margin Account specified in the Certificate. 11. Whenever a Stock Index Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series for which such Stock Index Option was written; (b) such information as may be necessary to identify the Stock Index Option being exercised; (c) the Clearing Member through whom such Stock Index Option is being exercised; (d) the total amount payable upon such exercise, and whether such amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the amount of cash and/or amount and kind of Securities, if any, to be withdrawn from the Senior Security Account for such Series; and the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Collateral Account for such Series. Upon the return and/or cancellation of the receipt, if any, delivered pursuant to the preceding paragraph of this Article, the Custodian shall pay out of the moneys held for the account of the Series to which such Stock Index Option was specifically allocated to the Clearing Member specified in the Certificate the total amount payable, if any, as specified therein. 12. Whenever the Fund purchases any Option identical to a previously written Option described in paragraphs, 6, 8 or 10 of this Article in a transaction expressly designated as a "Closing Purchase Transaction" in order to liquidate its position as a writer of an Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to the Option being purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the Series for which the Option was written; (c) the name of the issuer and the title and number of shares subject to the Option, or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Options held; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the type of Option (put or call); (h) the date of such purchase; (i) the name of the Clearing Member to whom the premium is to be paid; and (j) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Collateral Account, a specified Margin Account, or the Senior Security Account for such Series. Upon the Custodian's payment of the premium and the return and/or cancellation of any receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the Option being liquidated through the Closing Purchase Transaction, the Custodian shall remove, or direct the Depository to remove, the previously imposed restrictions on the Securities underlying the Call Option. 13. Upon the expiration, exercise or consummation of a Closing Purchase Transaction with respect to any Option purchased or written by the Fund and described in this Article, the Custodian shall delete such Option from the statements delivered to the Fund pursuant to paragraph 3 Article III herein, and upon the return and/or cancellation of any receipts issued by the Custodian, shall make such withdrawals from the Collateral Account, and the Margin Account and/or the Senior Security Account as may be specified in a Certificate received in connection with such expiration, exercise, or consummation. ARTICLE VI FUTURES CONTRACTS 1. Whenever the Fund shall enter into a Futures Contract, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Futures Contract, (or with respect to any number of identical Futures Contract(s)): (a) the Series for which the Futures Contract is being entered; (b) the category of Futures Contract (the name of the underlying stock index or financial instrument); (c) the number of identical Futures Contracts entered into; (d) the delivery or settlement date of the Futures Contract(s); (e) the date the Futures Contract(s) was (were) entered into and the maturity date; (f) whether the Fund is buying (going long) or selling (going short) on such Futures Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series; (h) the name of the broker, dealer, or futures commission merchant through whom the Futures Contract was entered into; and (i) the amount of fee or commission, if any, to be paid and the name of the broker, dealer, or futures commission merchant to whom such amount is to be paid. The Custodian shall make the deposits, if any, to the Margin Account in accordance with the terms and conditions of the Margin Account Agreement. The Custodian shall make payment out of the moneys specifically allocated to such Series of the fee or commission, if any, specified in the Certificate and deposit in the Senior Security Account for such Series the amount of cash and/or the amount and kind of Securities specified in said Certificate. 2. (a) Any variation margin payment or similar payment required to be made by the Fund to a broker, dealer, or futures commission merchant with respect to an outstanding Futures Contract, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. (b) Any variation margin payment or similar payment from a broker, dealer, or futures commission merchant to the Fund with respect to an outstanding Futures Contract, shall be received and dealt with by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 3. Whenever a Futures Contract held by the Custodian hereunder is retained by the Fund until delivery or settlement is made on such Futures Contract, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Futures Contract and the Series to which the same relates; (b) with respect to a Stock Index Futures Contract, the total cash settlement amount to be paid or received, and with respect to a Financial Futures Contract, the Securities and/or amount of cash to be delivered or received; (c) the broker, dealer, or futures commission merchant to or from whom payment or delivery is to be made or received; and (d) the amount of cash and/or Securities to be withdrawn from the Senior Security Account for such Series. The Custodian shall make the payment or delivery specified in the Certificate, and delete such Futures Contract from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein. 4. Whenever the Fund shall enter into a Futures Contract to offset a Futures Contract held by the Custodian hereunder, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the items of information required in a Certificate described in paragraph 1 of this Article, and (b) the Futures Contract being offset. The Custodian shall make payment out of the money specifically allocated to such Series of the fee or commission, if any, specified in the Certificate and delete the Futures Contract being offset from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein, and make such withdrawals from the Senior Security Account for such Series as may be specified in such Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. ARTICLE VII FUTURES CONTRACT OPTIONS 1. Promptly after the purchase of any Futures Contract Option by the Fund, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series to which such Option is specifically allocated; (b) the type of Futures Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option purchased; (d) the expiration date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the amount of premium to be paid by the Fund upon such purchase; (h) the name of the broker or futures commission merchant through whom such option was purchased; and (i) the name of the broker, or futures commission merchant, to whom payment is to be made. The Custodian shall pay out of the moneys specifically allocated to such Series, the total amount to be paid upon such purchase to the broker or futures commissions merchant through whom the purchase was made, provided that the same conforms to the amount set forth in such Certificate. 2. Promptly after the sale of any Futures Contract Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such sale: (a) Series to which such Futures Contract Option was specifically allocated; (b) the type of Future Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g) the total amount payable to the Fund upon such sale; and (h) the name of the broker of futures commission merchant through whom the sale was made. The Custodian shall consent to the cancellation of the Futures Contract Option being closed against payment to the Custodian of the total amount payable to the Fund, provided the same conforms to the total amount payable as set forth in such Certificate. 3. Whenever a Futures Contract Option purchased by the Fund pursuant to paragraph 1 is exercised by the Fund, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series to which such Futures Contract Option was specifically allocated; (b) the particular Futures Contract Option (put or call) being exercised; (c) the type of Futures Contract underlying the Futures Contract Option; (d) the date of exercise; (e) the name of the broker or futures commission merchant through whom the Futures Contract Option is exercised; (f) the net total amount, if any, payable by the Fund; (g) the amount, if any, to be received by the Fund; and (h) the amount of cash and/or the amount and kind of Securities to be deposited in the Senior Security Account for such Series. The Custodian shall make, out of the moneys and Securities specifically allocated to such Series, the payments, if any, and the deposits, if any, into the Senior Security Account as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 4. Whenever the Fund writes a Futures Contract Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series for which such Futures Contract Option was written; (b) the type of Futures Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option; (d) the expiration date; (e) the exercise price; (f) the premium to be received by the Fund; (g) the name of the broker or futures commission merchant through whom the premium is to be received; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series. The Custodian shall, upon receipt of the premium specified in the Certificate, make out of the moneys and Securities specifically allocated to such Series the deposits into the Senior Security Account, if any, as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 5. Whenever a Futures Contract Option written by the Fund which is a call is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series to which such Futures Contract Option was specifically allocated; (b) the particular Futures Contract Option exercised; (c) the type of Futures Contract underlying the Futures Contract Option; (d) the name of the broker or futures commission merchant through whom such Futures Contract Option was exercised; (e) the net total amount, if any, payable to the Fund upon such exercise; (f) the net total amount, if any, payable by the Fund upon such exercise; and (g) the amount of cash and/or the amount and kind of Securities to be deposited in the Senior Security Account for such Series. The Custodian shall, upon its receipt of the net total amount payable to the Fund, if any, specified in such Certificate make the payments, if any, and the deposits, if any, cate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 6. Whenever a Futures Contract Option which is written by the Fund and which is a put is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series to which such Option was specifically allocated; (b) the particular Futures Contract Option exercised; (c) the type of Futures Contract underlying such Futures Contract Option; (d) the name of the broker or futures commission merchant through whom such Futures Contract Option is exercised; (e) the net total amount, if any, payable to the Fund upon such exercise; (f) the net total amount, if any, payable by the Fund upon such exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn from or deposited in, the Senior Security Account for such Series, if any. The Custodian shall, upon its receipt of the net total amount payable to the Fund, if any, specified in the Certificate, make out of the moneys and Securities specifically allocated to such Series, the payments, if any, and the deposits, if any, into the Senior Security Account as specified in the Certificate. The deposits to and/or withdrawals from the Margin Account, if any, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 7. Whenever the Fund purchases any Futures Contract Option identical to a previously written Futures Contract Option described in this Article in order to liquidate its position as a writer of such Futures Contract Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to the Futures Contract Option being purchased: (a) the Series to which such Option is specifically allocated; (b) that the transaction is a closing transaction; (c) the type of Future Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Option Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the name of the broker or futures commission merchant to whom the premium is to be paid; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Senior Security Account for such Series. The Custodian shall effect the withdrawals from the Senior Security Account specified in the Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 8. Upon the expiration, exercise, or consummation of a closing transaction with respect to, any Futures Contract Option written or purchased by the Fund and described in this Article, the Custodian shall (a) delete such Futures Contract Option from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in the case of an exercise such deposits into the Senior Security Account as may be specified in a Certificate. The deposits to and/or withdrawals from the Margin Acwith the terms and conditions of the Margin Account Agreement. 9. Futures Contracts acquired by the Fund through the exercise of a Futures Contract Option described in this Article shall be subject to Article VI hereof. ARTICLE VIII SHORT SALES 1. Promptly after any short sales by any Series of the Fund, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series for which such short sale was made; (b) the name of the issuer and the title of the Security; (c) the number of shares or principal amount sold, and accrued interest or dividends, if any; (d) the dates of the sale and settlement; (e) the sale price per unit; (f) the total amount credited to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and kind of Securities, if any, which are to be deposited in a Margin Account and the name in which such Margin Account has been or is to be established; (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in a Senior Security Account, and (i) the name of the broker through whom such short sale was made. The Custodian shall upon its receipt of a statement from such broker confirming such sale and that the total amount credited to the Fund upon such sale, if any, as specified in the Certificate is held by such broker for the account of the Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a receipt or make the deposits into the Margin Account and the Senior Security Account specified in the Certificate. 2. In connection with the closing-out of any short sale, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such closing out: (a) the Series for which such transaction is being made; (b) the name of the issuer and the title of the Security; (c) the number of shares or the principal amount, and accrued interest or dividends, if any, required to effect such closing-out to be delivered to the broker; (d) the dates of closing-out and settlement; (e) the purchase price per unit; (f) the net total amount payable to the Fund upon such closing-out; (g) the net total amount payable to the broker upon such closing- out; (h) the amount of cash and the amount and kind of Securities to be withdrawn, if any, from the Margin Account; (i) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Senior Security Account; and (j) the name of the broker through whom the Fund is effecting such closing-out. The Custodian shall, upon receipt of the net total amount payable to the Fund upon such closing-out, and the return and/or cancellation of the receipts, if any, issued by the Custodian with respect to the short sale being closed-out, pay out of the moneys held for the account of the Fund to the broker the net total amount payable to the broker, and make the withdrawals from the Margin Account and the Senior Security Account, as the same are specified in the Certificate. ARTICLE IX REVERSE REPURCHASE AGREEMENTS 1. Promptly after the Fund enters a Reverse Repurchase Agreement with respect to Securities and money held by the Custodian hereunder, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate, or in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions specifying: (a) the Series for which the Reverse Repurchase Agreement is entered; (b) the total amount payable to the Fund in connection with such Reverse Repurchase Agreement and specifically allocated to such Series; (c) the broker or dealer through or with whom the Reverse Repurchase Agreement is entered; (d) the amount and kind of Securities to be delivered by the Fund to such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in a Senior Security Account for such Series in connection with such Reverse Repurchase Agreement. The Custodian shall, upon receipt of the total amount payable to the Fund specified in the Certificate or Oral Instructions make the delivery to the broker or dealer, and the deposits, if any, to the Senior Security Account, specified in such Certificate or Oral Instructions. 2. Upon the termination of a Reverse Repurchase Agreement described in preceding paragraph 1 of this Article, the Fund shall deliver or cause the Administrator to deliver a Certificate or, in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions to the Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and the Series for which same was entered; (b) the total amount payable by the Fund in connection with such termination; (c) the amount and kind of Securities to be received by the Fund and specifically allocated to such Series in connection with such termination; (d) the date of termination; (e) the name of the broker or dealer with or through whom the Reverse Repurchase Agreement is to be terminated; and (f) the amount of cash and/or the amount and kind of Securities to be withdrawn from the Senior Securities Account for such Series. The Custodian shall, upon receipt of the amount and kind of Securities to be received by the Fund specified in the Certificate or Oral Instructions, make the payment to the broker or dealer, and the withdrawals, if any, from the Senior Security Account, specified in such Certificate or Oral Instructions. ARTICLE X LOAN OF PORTFOLIO SECURITIES OF THE FUND 1. Promptly after each loan of portfolio Securities specifically allocated to a Series held by the Custodian hereunder, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such loan: (a) the Series to which the loaned Securities are specifically allocated; (b) the name of the issuer and the title of the Securities, (c) the number of shares or the principal amount loaned, (d) the date of loan and delivery, (e) the total amount to be delivered to the Custodian against the loan of the Securities, including the amount of cash collateral and the premium, if any, separately identified, and (f) the name of the broker, dealer, or financial institution to which the loan was made. The Custodian shall deliver the Securities thus designated to the broker, dealer or financial institution to which the loan was made upon receipt of the total amount designated as to be delivered against the loan of Securities. The Custodian may accept payment in connection with a delivery otherwise than through the Book- Entry System or Depository only in the form of a certified or bank cashier's check payable to the order of the Fund or the Custodian drawn on New York Clearing House funds and may deliver Securities in accordance with the customs prevailing among dealers in securities. 2. Promptly after each termination of the loan of Securities by the Fund, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such loan termination and return of Securities: (a) the Series to which the loaned Securities are specifically allocated; (b) the name of the issuer and the title of the Securities to be returned, (c) the number of shares or the principal amount to be returned, (d) the date of termination, (e) the total amount to be delivered by the Custodian (including the cash collateral for such Securities minus any offsetting credits as described in said Certificate), and (f) the name of the broker, dealer, or financial institution from which the Securities will be returned. The Custodian shall receive all Securities returned from the broker, dealer, or financial institution to which such Securities were loaned and upon receipt thereof shall pay, out of the moneys held for the account of the Fund, the total amount payable upon such return of Securities as set forth in the Certificate. ARTICLE XI CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY ACCOUNTS, AND COLLATERAL ACCOUNTS 1. The Custodian shall, from time to time, make such deposits to, or withdrawals from, a Senior Security Account as specified in a Certificate received by the Custodian. Such Certificate shall specify the Series for which such deposit or withdrawal is to be made and the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be deposited in, or withdrawn from, such Senior Security Account for such Series. In the event the Certificate fails to specify the Series, the name of the issuer, the title and the number of shares or the principal amount of any particular Securities to be deposited by the Custodian into, or withdrawn from, a Senior Securities Account, the Custodian shall be under no obligation to make any such deposit or withdrawal and shall so notify the Administrator. 2. The Custodian shall make deliveries or payments from a Margin Account to the broker, dealer, futures commission merchant or Clearing Member in whose name, or for whose benefit, the account was established as specified in the Margin Account Agreement. 3. Amounts received by the Custodian as payments or distributions with respect to Securities deposited in any Margin Account shall be dealt with in accordance with the terms and conditions of the Margin Account Agreement. 4. The Custodian shall have a continuing lien and security interest in and to any property at any time held by the Custodian in any Collateral Account described herein. In accordance with applicable law the Custodian may enforce its lien and realize on any such property whenever the Custodian has made payment or delivery pursuant to any Put Option guarantee letter or similar document or any receipt issued hereunder by the Custodian. In the event the Custodian should realize on any such property net proceeds which are less than the Custodian's obligations under any Put Option guarantee letter or similar document or any receipt, such deficiency shall be a debt owed the Custodian by the Fund within the scope of Article XIV herein. 5. On each business day the Custodian shall furnish the Fund with a statement with respect to each Margin Account in which money or Securities are held specifying as of the close of business on the previous business day: (a) the name of the Margin Account; (b) the amount and kind of Securities held therein; and (c) the amount of money held therein. The Custodian shall make available upon request to any broker, dealer, or futures commission merchant specified in the name of a Margin Account a copy of the statement furnished the Fund with respect to such Margin Account. 6. Promptly after the close of business on each business day in which cash and/or Securities are maintained in a Collateral Account for any Series, the Custodian shall furnish the Administrator with a statement with respect to such Collateral Account specifying the amount of cash and/or the amount and kind of Securities held therein. No later than the close of business next succeeding the delivery to the Fund of such statement, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying the then market value of the Securities described in such statement. In the event such then market value is indicated to be less than the Custodian's obligation with respect to any outstanding Put Option guarantee letter or similar document, the Fund shall promptly specify or cause the Administrator to promptly specify in a Certificate the additional cash and/or Securities to be deposited in such Collateral Account to eliminate such deficiency. ARTICLE XII PAYMENT OF DIVIDENDS OR DISTRIBUTIONS 1. The Fund shall deliver or cause the Administrator to deliver to the Custodian a copy of the resolution of the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, either (i) setting forth with respect to the Series specified therein the date of the declaration of a dividend or distribution, the date of payment thereof, the record date as of which shareholders entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on the payment date, or (ii) authorizing with respect to the Series specified therein the declaration of dividends and distributions on a daily basis and authorizing the Custodian to rely on Oral Instructions or a Certificate setting forth the date of the declaration of such dividend or distribution, the date of payment thereof, the record date as of which shareholders entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent on the payment date. 2. Upon the payment date specified in such resolution, Oral Instructions or Certificate, as the case may be, the Custodian shall pay out of the moneys held for the account of each Series the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with respect to such Series. ARTICLE XIII SALE AND REDEMPTION OF SHARES 1. Whenever the Fund shall sell any Shares, it shall deliver or cause the Administrator to deliver to the Custodian a Certificate duly specifying: (a) The Series, the number of Shares sold, trade date, and price; and (b) The amount of money to be received by the Custodian for the sale of such Shares and specifically allocated to the separate account in the name of such Series. 2. Upon receipt of such money from the Transfer Agent, the Custodian shall credit such money to the separate account in the name of the Series for which such money was received. 3. Upon issuance of any Shares of any Series described in the foregoing provisions of this Article, the Custodian shall pay, out of the money held for the account of such Series, all original issue or other taxes required to be paid by the Fund in connection with such issuance upon the receipt of a Certificate specifying the amount to be paid. 4. Except as provided hereinafter, whenever the Fund desires the Custodian to make payment out of the money held by the Custodian hereunder in connection with a redemption of any Shares, it shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) The number and Series of Shares redeemed; and (b) The amount to be paid for such Shares. 5. Upon receipt from the Transfer Agent of an advice setting forth the Series and number of Shares received by the Transfer Agent for redemption and that such Shares are in good form for redemption, the Custodian shall make payment to the Transfer Agent out of the moneys held in the separate account in the name of the Series the total amount specified in the Certificate delivered pursuant to the foregoing paragraph 4 of this Article. 6. Notwithstanding the above provisions regarding the redemption of any Shares, whenever any Shares are redeemed pursuant to any check redemption privilege which may from time to time be offered by the Fund, the Custodian, unless otherwise instructed by a Certificate, shall, upon receipt of an advice from the Fund or its agent setting forth that the redemption is in good form for redemption in accordance with the check redemption procedure, honor the check presented as part of such check redemption privilege out of the moneys held in the separate account of the Series of the Shares being redeemed. ARTICLE XIV OVERDRAFTS OR INDEBTEDNESS 1. If the Custodian, should in its sole discretion advance funds on behalf of any Series which results in an overdraft because the moneys held by the Custodian in the separate account for such Series shall be insufficient to pay the total amount payable upon a purchase of Securities specifically allocated to such Series, as set forth in a Certificate or Oral Instructions, or which results in an overdraft in the separate account of such Series for some other reason, or if the Fund is for any other reason indebted to the Custodian with respect to a Series, including any indebtedness to The Bank of New York under the Fund's Cash Management and Related Services Agreement, (except a borrowing for investment or for temporary or emergency purposes using Securities as collateral pursuant to a separate agreement and subject to the provisions of paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to be a loan made by the Custodian to the Fund for such Series payable on demand and shall bear interest from the date incurred at a rate per annum (based on a 360-day year for the actual number of days involved) equal to 1/2% over Custodian's prime commercial lending rate in effect from time to time, such rate to be adjusted on the effective date of any change in such prime commercial lending rate but in no event to be less than 6% per annum. In addition, the Fund hereby agrees that the Custodian shall have a continuing lien and security interest in and to any property specifically allocated to such Series at any time held by it for the benefit of such Series or in which the Fund may have an interest which is then in the Custodian's possession or control or in possession or control of any third party acting in the Custodian's behalf. The Fund authorizes the Custodian, in its sole discretion, at any time to charge any such overdraft or indebtedness together with interest due thereon against any balance of account standing to such Series' credit on the Custodian's books. In addition, the Fund hereby covenants that on each Business Day on which either it intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a third party, or which next succeeds a Business Day on which at the close of business the Fund had outstanding a Reverse Repur-chase Agreement or such a borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian, in writing, of each such borrowing, shall specify the Series to which the same relates, and shall not incur any indebtedness not so specified other than from the Custodian. 2. The Fund will cause to be delivered to the Custodian by any bank (including, if the borrowing is pursuant to a separate agreement, the Custodian) from which it borrows money for investment or for temporary or emergency purposes using Securities held by the Custodian hereunder as collateral for such borrowings, a notice or undertaking in the form currently employed by any such bank setting forth the amount which such bank will loan to the Fund against delivery of a stated amount of collateral. The Fund shall promptly deliver to the Custodian a Certificate specifying with respect to each such borrowing: (a) the Series to which such borrowing relates; (b) the name of the bank, (c) the amount and terms of the borrowing, which may be set forth by incorporating by reference an attached promissory note, duly endorsed by the Fund, or other loan agreement, (d) the time and date, if known, on which the loan is to be entered into, (e) the date on which the loan becomes due and payable, (f) the total amount payable to the Fund on the borrowing date, (g) the market value of Securities to be delivered as collateral for such loan, including the name of the issuer, the title and the number of shares or the principal amount of any particular Securities, and (h) a statement specifying whether such loan is for investment purposes or for temporary or emergency purposes and that such loan is in conformance with the Investment Company Act of 1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing date specified in a Certificate the specified collateral and the executed promissory note, if any, against delivery by the lending bank of the total amount of the loan payable, provided that the same conforms to the total amount payable as set forth in the Certificate. The Custodian may, at the option of the lending bank, keep such collateral in its possession, but such collateral shall be subject to all rights therein given the lending bank by virtue of any promissory note or loan agreement. The Custodian shall deliver such Securities as additional collateral as may be specified in a Certificate to collateralize further any transaction described in this paragraph. The Fund shall cause all Securities released from collateral status to be returned directly to the Custodian, and the Custodian shall receive from time to time such return of collateral as may be tendered to it. In the event that the Fund fails to specify in a Certificate the Series, the name of the issuer, the title and number of shares or the principal amount of any particular Securities to be delivered as collateral by the Custodian, the Custodian shall not be under any obligation to deliver any Securities. ARTICLE XV TERMINAL LINK 1. At no time and under no circumstances shall the Administrator on behalf of the Fund be obligated to have or utilize the Terminal Link, and the provisions of this Article shall apply if, but only if, the Fund in its sole and absolute discretion directs the Administrator to utilize the Terminal Link to transmit Certificates to the Custodian. 2. The Terminal Link shall be utilized by the Administrator on behalf of the Fund only for the purpose of providing Certificates to the Custodian with respect to transactions involving Securities or for the transfer of money to be applied to the payment of dividends, distributions or redemptions of Fund Shares, and shall be utilized by the Custodian only for the purpose of providing notices to the Administrator. Such use shall commence only after the Fund shall have delivered or caused the Administrator to have delivered to the Custodian a Certificate substantially in the form of Exhibit D and shall have established access codes. Each use of the Terminal Link by the Administrator shall constitute a representation and warranty that the Terminal Link is being used only for the purposes permitted hereby, that at least two Officers have each utilized an access code, that such safekeeping procedures have been established, and that such use does not contravene the Investment Company Act of 1940, as amended, or the rules or regulations thereunder. 3. The Administrator shall obtain and maintain at its own cost and expense all equipment and services, including, but not limited to communications services, necessary for it to utilize the Terminal Link, and the Custodian shall not be responsible for the reliability or availability of any such equipment or services. 4. The Fund and the Administrator each acknowledge that any data bases made available as part of, or through the Terminal Link and any proprietary data, software, processes, information and documentation (other than any such which are or become part of the public domain or are legally required to be made available to the public) (collectively, the "Information"), are the exclusive and confidential property of the Custodian. The Fund and the Administrator shall, and shall cause others to which either discloses the Information, to keep the Information confidential by using the same care and discretion it uses with respect to its own confidential property and trade secrets, and shall neither make nor permit any disclosure without the express prior written consent of the Custodian. 5. Upon termination of this Agreement for any reason, the Fund and the Administrator shall return to the Custodian any and all copies of the Information which are in its respective possession or under its respective control, or which either distributed to third parties. The provisions of this Article shall not affect the copyright status of any of the Information which may be copyrighted and shall apply to all Information whether or not copyrighted. 6. The Custodian reserves the right to modify the Terminal Link from time to time without notice to the Fund or the Administrator except that the Custodian shall give the Administrator notice not less than 75 days in advance of any modification which would materially adversely affect the Administrator's operation, and the Administrator agrees that the it shall not modify or attempt to modify the Terminal Link without the Custodian's prior written consent. The Fund acknowledges that any software or procedures provided the Fund as part of the Terminal Link are the property of the Custodian and, accordingly, the Administrator agrees that any modifications to the Terminal Link, whether by the Administrator, or by the Custodian and whether with or without the Custodian's consent, shall become the property of the Custodian. 7. Neither the Custodian nor any manufacturers and suppliers it utilizes or the Fund utilizes in connection with the Terminal Link makes any warranties or representations, express or implied, in fact or in law, including but not limited to warranties of merchantability and fitness for a particular purpose. 8. The Administrator will cause its officers and employees to treat the authorization codes and the access codes applicable to Terminal Link with extreme care, and the Fund and the Administrator irrevocably authorizes the Custodian to act in accordance with and rely on Certificates received by it through the Terminal Link. The Fund acknowledges that it is the Administrator's responsibility to assure that only Officers use the Terminal Link, and that Custodian shall notbe responsible nor liable for use of the Terminal Link by persons other than such persons or Officers, or by only a single Officer, nor for any alteration, omission, or failure to promptly forward. 9(a). Except as otherwise specifically provided in Section 9(b) of this Article, the Custodian shall have no liability for any losses, damages, injuries, claims, costs or expenses arising out of or in connection with any failure, malfunction or other problem relating to the Terminal Link except for money damages suffered as the direct result of the negligence of the Custodian in an amount not exceeding for any incident $100,000 provided, however, that the Custodian shall have no liability under this Section 9 if the Administrator fails to comply with the provisions of Section 11. 9(b). The Custodian's liability for its negligence in executing or failing to execute in accordance with a Certificate received through Terminal Link shall be only with respect to a transfer of funds which is not made in accordance with such Certificate after such Certificate shall have been duly acknowledged by the Custodian, and shall be contingent upon the Administrator complying with the provisions of Section 12 of this Article, and shall be limited to (i) restoration of the principal amount mistransferred, if and to the extent that the Custodian would be required to make such restoration under applicable law, and (ii) the lesser of (A) the Fund's actual pecuniary loss incurred by reason of its loss of use of the mistransferred funds or the funds which were not transferred, as the case may be, or (B) compensation for the loss of the use of the mistransferred funds or the funds which were not transferred, as the case may be, at a rate per annum equal to the average federal funds rate as computed from the Federal Reserve Bank of New York's daily determination of the effective rate for federal funds, for the period during which a Fund has lost use of such funds. In no event shall the Custodian have any liability for failing to execute in accordance with a Certificate a transfer of funds where the Certificate is received by the Custodian through Terminal Link other than through the applicable transfer module for the particular instructions contained in such Certificate. 10. Without limiting the generality of the foregoing, in no event shall the Custodian or any manufacturer or supplier of its computer equipment, software or services relating to the Terminal Link be responsible for any special, indirect, incidental or consequential damages which the Fund or the Administrator may incur or experience by reason of its use of the Terminal Link even if the Custodian or any manufacturer or supplier has been advised of the possibility of such damages, nor with respect to the use of the Terminal Link shall the Custodian or any such manufacturer or supplier be liable for acts of God, or with respect to the following to the extent beyond such person's reasonable control: machine or computerbreakdown or malfunction, interruption or malfunction of communication facilities, labor difficulties or any other similar or dissimilar cause. 11. The Fund shall cause the Administrator to notify the Custodian of any errors, omissions or interruptions in, or delay or unavailability of, the Terminal Link as promptly as practicable, and in any event within 24 hours after the earliest of (i) discovery thereof, (ii) the Business Day on which discovery should have occurred through the exercise of reasonable care and (iii) in the case of any error, the date of actual receipt of the earliest notice which reflects such error, it being agreed that discovery and receipt of notice may only occur on a business day. The Custodian shall promptly advise the Fund whenever the Custodian learns of any errors, omissions or interruption in, or delay or unavailability of, the Terminal Link. 12. The Custodian shall verify to the Administrator, by use of the Terminal Link, receipt of each Certificate the Custodian receives through the Terminal Link, and in the absence of such verification the Custodian shall not be liable for any failure to act in accordance with such Certificate and neither the Fund nor the Administrator may claim that such Certificate was received by the Custodian. Such verification, which may occur after the Custodian has acted upon such Certificate, shall be accomplished on the same day on which such Certificate is received. ARTICLE XVI DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES 1. The Custodian is authorized and instructed to employ, as sub- custodian for each Series' Foreign Securities (as such term is defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as amended) and other assets, the foreign banking institutions and foreign securities depositories and clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians") to carry out their respective responsibilities in accordance with the terms of the sub-custodian agreement between each such Foreign Sub-Custodian and the Custodian, copies of which have been previously delivered to the Fund and receipt of which is hereby acknowledged (each such agreement, a "Foreign Sub- Custodian Agreement"). Upon receipt of a Certificate, together with a certified resolution substantially in the form attached as Exhibit E of the Fund's Board of Trustees, the Fund may designate any additional foreign sub-custodian with which the Custodian has an agreement for such entity to act as the Custodian's agent, as its sub-custodian and any such additional foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the employment of any one or more Foreign Sub-Custodians for maintaining custody of the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from Schedule I. 2. Each Foreign Sub-Custodian Agreement shall be substantially in the form previously delivered to the Fund and will not be amended in a way that materially adversely affects the Fund without the Fund's prior written consent. 3. The Custodian shall identify on its books as belonging to each Series of the Fund the Foreign Securities of such Series held by each Foreign Sub-Custodian. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims by the Fund or any Series against a Foreign Sub-Custodian as a consequence of any loss, damage, cost, expense, liability or claim sustained or incurred by the Fund or any Series if and to the extent that the Fund or such Series has not been made whole for any such loss, damage, cost, expense, liability or claim. 4. Upon request of the Fund, the Custodian will, consistent with the terms of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any Foreign Sub-Custodian insofar as such books and records relate to the performance of such Foreign Sub-Custodian under its agreement with the Custodian on behalf of the Fund. 5. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of each Series held by Foreign Sub-Custodians, including but not limited to, an identification of entities having possession of each Series' Foreign Securities and other assets, and advices or notifications of any transfers of Foreign Securities to or from each custodial account maintained by a Foreign Sub- Custodian for the Custodian on behalf of the Series. 6. The Custodian shall furnish annually to the Fund, as mutually agreed upon, information concerning the Foreign Sub- Custodians employed by the Custodian. Such information shall be similar in kind and scope to that furnished to the Fund in connection with the Fund's initial approval of such Foreign Sub- Custodians and, in any event, shall include information pertaining to (i) the Foreign Custodians' financial strength, general reputation and standing in the countries in which they are located and their ability to provide the custodial services required, and (ii) whether the Foreign Sub-Custodians would provide a level of safeguards for safekeeping and custody of securities not materially different form those prevailing in the United States. The Custodian shall monitor the general operating performance of each Foreign Sub-Custodian. The Custodian agrees that it will use reasonable care in monitoring compliance by each Foreign Sub-Custodian with the terms of the relevant Foreign Sub-Custodian Agreement and that if it learns of any breach of such Foreign Sub-Custodian Agreement believed by the Custodian to have a material adverse effect on the Fund or any Series it will promptly notify the Fund of such breach. The Custodian also agrees to use reasonable and diligent efforts to enforce its rights under the relevant Foreign Sub-Custodian Agreement. 7. The Custodian shall transmit promptly to the Fund all notices, reports or other written information received pertaining to the Fund's Foreign Securities, including without limitation, notices of corporate action, proxies and proxy solicitation materials. 8. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for securities received for the account of any Series and delivery of securities maintained for the account of such Series may be effected in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. 9. Notwithstanding any other provision in this Agreement to the contrary, with respect to any losses or damages arising out of or relating to any actions or omissions of any Foreign Sub-Custodian the sole responsibility and liability of the Custodian shall be to take appropriate action at the Fund's expense to recover such loss or damage from the Foreign Sub-Custodian. It is expressly understood and agreed that the Custodian's sole responsibility and liability shall be limited to amounts so recovered from the Foreign Sub- Custodian. ARTICLE XVII CONCERNING THE CUSTODIAN 1. Except as hereinafter provided, or as provided in Article XVI neither the Custodian nor its nominee shall be liable for any loss or damage, including counsel fees, resulting from its action or omission to act or otherwise, either hereunder or under any Margin Account Agreement, except for any such loss or damage arising out of its own negligence, willful misconduct, lack of good faith, or reckless disregard of its duties. The Custodian agrees to indemnify and hold harmless the Trust and Trust's Trustees and officers to the extent described above (including reasonable counsel fees) incurred or assessed against any of them as a result of any breach or violation of this Agreement by the Custodian or its officers, employees and agents or its nominees, resulting from their negligence, willful misconduct, lack of good faith, or reckless disregard of its duties. The Custodian may, with respect to questions of law arising hereunder or under any Margin Account Agreement, apply for and obtain the advice and opinion of counsel to the Fund or of its own counsel, at the expense of the Fund, and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with such advice or opinion. The Custodian shall be liable to the Fund for any loss or damage resulting from the use of the Book-Entry System or any Depository arising by reason of any negligence, willful misconduct, lack of good faith, or reckless disregard of its duties on the part of the Custodian or any of its employees or agents. Notwithstanding the foregoing, or any other provision contained in this Agreement, in no event shall the Custodian be liable to the Trust, its Trustees or officers, or any third party, for special, indirect or consequential damages, or lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action. 2. Without limiting the generality of the foregoing the Custodian shall be under no obligation to inquire into, and shall not be liable for: (a) The validity of the issue of any Securities purchase, sold, or written by or for the Fund, the legality of the purchase, sale or writing thereof, or the propriety of the amount paid or received therefor; (b) The legality of the sale or redemption of any Shares, or the propriety of the amount to be received or paid therefor; (c) The legality of the declaration or payment of any dividend by the Fund; (d) The legality of any borrowing by the Fund using Securities as collateral; (e) The legality of any loan of portfolio Securities, nor shall the Custodian be under any duty or obligation to see to it that any cash collateral delivered to it by a broker, dealer, or financial institution or held by it at any time as a result of such loan of portfolio Securities of the Fund is adequate collateral for the Fund against any loss it might sustain as a result of such loan. The Custodian specifically, but not by way of limitation, shall not be under any duty or obligation periodically to check or notify the Fund is sufficient collateral for the Fund, but such duty or obligation shall be the sole responsibility of the Fund. In addition, the Custodian shall be under no duty or obligation to see that any broker, dealer or financial institution to which portfolio Securities of the Fund are lent pursuant to Article XIV of this Agreement makes payment to it of any dividends or interest which are payable to or for the account of the Fund during the period of such loan or at the termination of such loan, provided, however, that the Custodian shall promptly notify the Fund in the event that such dividends or interest are not paid and received when due; or (f) The sufficiency or value of any amounts of money and/or Securities held in any Margin Account, Senior Security Account or Collateral Account in connection with transactions by the Fund. In addition, the Custodian shall be under no duty or obligation to see that any broker, dealer, futures commission merchant or Clearing Member makes payment to the Fund of any variation margin payment or similar payment which the Fund may be entitled to receive from such broker, dealer, futures commission merchant or Clearing Member, to see that any payment received by the Custodian from any broker, dealer, futures commission merchant or Clearing Member is the amount the Fund is entitled to receive, or to notify the Fund of the Custodian's receipt or non- receipt of any such payment. 3. The Custodian shall not be liable for, or considered to be the Custodian of, any money, whether or not represented by any check, draft, or other instrument for the payment of money, received by it on behalf of the Fund until the Custodian actually receives and collects such money directly or by the final crediting of the account representing the Fund's interest at the Book- Entry System or the Depository. 4. The Custodian shall have no responsibility and shall not be liable for ascertaining or acting upon any calls, conversions, exchange offers, tenders, interest rate changes or similar matters relating to Securities held in the Depository, unless the Custodian shall have actually received timely notice from the Depository. In no event shall the Custodian have any responsibility or liability for the failure of the Depository to collect, or for the late collection or late crediting by the Depository of any amount payable upon Securities deposited in the Depository which may mature or be redeemed, retired, called or otherwise become payable. However, upon receipt of a Certificate from the Fund of an overdue amount on Securities held in the Depository the Custodian shall make a claim against the Depository on behalf of the Fund, except that the Custodian shall not be under any obligation to appear in, prosecute or defend any action suit or proceeding in respect to any Securities held by the Depository which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required. 5. The Custodian shall not be under any duty or obligation to take action to effect collection of any amount due to the Fund from the Transfer Agent of the Fund nor to take any action to effect payment or distribution by the Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of the Fund in accordance with this Agreement. 6. The Custodian shall not be under any duty or obligation to take action to effect collection of any amount if the Securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until (i) it shall be directed to take such action by a Certificate and (ii) it shall be assured to its satisfaction of reimbursement of its costs and expenses in connection with any such action. 7. The Custodian may in addition to the employment of Foreign Sub-Custodians pursuant to Article XVI appoint one or more banking institutions as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians including, but not limited to, banking institutions located in foreign countries, of Securities and moneys at any time owned by the Fund, upon such terms and conditions as may be approved in a Certificate or contained in an agreement executed by the Custodian, the Fund and the appointed institution. 8. The Custodian shall not be under any duty or obligation (a) to ascertain whether any Securities at any time delivered to, or held by it or by any Foreign Sub-Custodian, for the account of the Fund and specifically allocated to a Series are such as properly may be held by the Fund or such Series under the provisions of its then current prospectus, or (b) to ascertain whether any transactions by the Fund, whether or not involving the Custodian, are such transactions as may properly be engaged in by the Fund. 9. The Custodian shall be entitled to receive and the Fund agrees to pay to the Custodian all out-of-pocket expenses and such compensation as may be agreed upon from time to time between the Custodian and the Fund. The Fund represents that the Administrator has agreed to pay such compensation and expenses promptly upon receipt of statements therefor, and hereby directs the Custodian to (i) send all statements for compensation to its attention care of Fund/Plan at the following address: Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428, Attention: Mr. Elmer Gardner, Senior Vice President, and (ii) accept all payments made by Fund/Plan in the Fund's name as if such payments were made directly by the Fund. The Fund shall pay to Fund/Plan fees for services (including custodian services provided by the Custodian) in accordance with the Administration Agreement. The Custodian's compensation for services rendered hereunder is set forth in a separate agreement between the Custodian and Fund/Plan. Should Fund/Plan fail to pay or remit such compensation to the Custodian within 20 days of the date the same is due and payable, Custodian shall notify the Fund. If such payment or remittance is not received from Fund/Plan within 15 days of such notice, then the Custodian will be entitled to debit the Custody Account directly for such compensation. The Custodian may charge compensation with respect to which it has properly sent a notice to the Fund, as provided in the preceding sentence, and any expenses with respect to a Series incurred by the Custodian in the performance of its duties pursuant to such agreement against any money specifically allocated to such Series. Unless and until the Fund or the Administrator instructs the Custodian by a Certificate to apportion any loss, damage, liability or expense among the Series in a specified manner, the Custodian shall also be entitled to charge against any money held by it for the account of a Series such Series' pro rata share (based on such Series net asset value at the time of the charge to the aggregate net asset value of all Series at that time) of the amount of any loss, damage, liability or expense, including counsel fees, for which it shall be entitled to reimbursement under the provisions of this Agreement. The expenses for which the Custodian shall be entitled to reimbursement hereunder shall include, but are not limited to, the expenses of sub-custodians and foreign branches of the Custodian incurred in settling outside of New York City transactions involving the purchase and sale of Securities of the Fund. 10. The Custodian shall be entitled to rely upon any Certificate, notice or other instrument in writing received by the Custodian and reasonably believed by the Custodian to be a Certificate. The Custodian shall be entitled to rely upon any Oral Instructions actually received by the Custodian. The Fund agrees to forward or cause the Administrator to forward to the Custodian a Certificate or facsimile thereof confirming such Oral Instructions in such manner so that such Certificate or facsimile thereof is received by the Custodian, whether by hand delivery, telecopier or other similar device, or otherwise, by the close of business of the same day that such Oral Instructions are given to the Custodian. The Fund agrees that the fact that such confirming instructions are not received by the Custodian shall in no way affect the validity of the transactions or enforceability of the transactions hereby authorized by the Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in acting upon Oral Instructions given to the Custodian hereunder concerning such transactions provided such instructions reasonably appear to have been received from an Officer. 11. The Custodian shall be entitled to rely upon any instrument, instruction or notice received by the Custodian and reasonably believed by the Custodian to be given in accordance with the terms and conditions of any Margin Account Agreement. Without limiting the generality of the foregoing, the Custodian shall be under no duty to inquire into, and shall not be liable for, the accuracy of any statements or representations contained in any such instrument or other notice including, without limitation, any specification of any amount to be paid to a broker, dealer, futures commission merchant or Clearing Member. 12. The books and records pertaining to the Fund which are in the possession of the Custodian shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the Investment Company Act of 1940, as amended, and other applicable securities laws and rules and regulations. The Fund, or the Fund's authorized representatives, shall have access to such books and records during the Custodian's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Custodian to the Fund or the Fund's authorized representative, and the Fund shall reimburse the Custodian its expenses of providing such copies. Upon reasonable request of the Fund, the Custodian shall provide in hard copy or on microfilm, whichever the Custodian elects, any records included in any such delivery which are maintained by the Custodian on a computer disc, or are similarly maintained, and the Fund shall reimburse the Custodian for its expenses of providing such hard copy or microfilm. 13. The Custodian shall provide the Fund with any report obtained by the Custodian on the system of internal accounting control of the Book-Entry System, the Depository or O.C.C., and with such reports on its own systems of internal accounting control as the Fund may reasonably request from time to time. 14. The Fund agrees to indemnify the Custodian against and save the Custodian harmless from all liability, claims, losses and demands whatsoever, including attorney's fees, howsoever arising or incurred because of or in connection with this Agreement, including the Custodian's payment or non-payment of checks pursuant to paragraph 6 of Article XIII as part of any check redemption privilege program of the Fund, except for any such liability, claim, loss and demand arising out of the Custodian's own negligence, willful misconduct, lack of good faith, or reckless disregard of its duties. For any legal proceeding giving rise to the indemnification set forth above in this paragraph, the Fund shall be entitled to defend or prosecute any claim in the name of the Custodian at its own expense and through counsel of its own choosing reasonably acceptable to the Custodian if it gives written notice to the Custodian within ten (10) Business days of receiving notice of such claim. Notwithstanding the foregoing, the Custodian may participate in the litigation at its own expense and with counsel of its own choosing. 15. Subject to the foregoing provisions of this Agreement, including, without limitation, those contained in Article XVI the Custodian may deliver and receive Securities, and receipts with respect to such Securities, and arrange for payments to be made and received by the Custodian in accordance with the customs prevailing from time to time among brokers or dealers in such Securities. When the Custodian is instructed to deliver Securities against payment, delivery of such Securities and receipt of payment therefor may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with the Custodian's delivery of Securities pursuant to Certificates or instructions of the Fund or the Administrator which responsibility and liability shall continue until final payment in full has been received by the Custodian. 16. In the event the Custodian is advised by the Fund that the Fund is no longer utilizing the services of the Administrator, then the Custodian shall furnish or give to the Fund the statements or notices described above as to be furnished or given to the Administrator. 17. The Custodian shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against the Custodian. Without limiting the generality of the foregoing, the Custodian shall have no duties or responsibilities by reason of any terms or provisions in the Administration Agreement, and if such Administration Agreement shall cease to be in effect the Custodian shall have no additional duties hereunder. ARTICLE XVIII TERMINATION 1. Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice, provided, however, that if such notice is sent by the Fund and recites that it is being given contemporaneously with a termination of the Custody Administration any Agency Agreement with Fund/Plan, such notice may specify any date of termination selected by the Fund. In the event such notice is given by the Fund, it shall be accompanied by a copy of a resolution of the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, electing to terminate this Agreement and designating a successor custodian or custodians, each of which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. In the event such notice is given by the Custodian, the Fund shall, on or before the termination date, deliver to the Custodian a copy of a resolution of the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, designating a successor custodian or custodians. In the absence of such designation by the Fund, the Custodian may designate a successor custodian which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and the Custodian shall upon receipt of a notice of acceptance by the successor custodian on that date deliver directly to the successor custodian all Securities and moneys then owned by the Fund and held by it as Custodian, after deducting all fees, expenses and other amounts for the payment or reimbursement of which it shall then be entitled. 2. If a successor custodian is not designated by the Fund or the Custodian in accordance with the preceding paragraph, the Fund shall upon the date specified in the notice of termination of this Agreement and upon the delivery by the Custodian of all Securities (other than Securities held in the Book-Entry System which cannot be delivered to the Fund) and moneys then owned by the Fund be deemed to be its own custodian and the Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities held in the Book Entry System which cannot be delivered to the Fund to hold such Securities hereunder in accordance with this Agreement. ARTICLE XIX MISCELLANEOUS 1. Annexed hereto as Appendix A is a Certificate signed by two of the present Officers of the Fund under its seal, setting forth the names and the signatures of the present Officers. The Fund agrees to furnish to the Custodian a new Certificate in similar form in the event that any such present Officer ceases to be an Officer or in the event that other or additional Officers are elected or appointed. Until such new Certificate shall be received, the Custodian shall be fully protected in acting under the provisions of this Agreement upon Oral Instructions or signatures of the present Officers as set forth in the last delivered Certificate. 2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Custodian, shall be sufficiently given if addressed to the Custodian and mailed or delivered to it at its offices at 90 Washington Street, New York, New York 10286, or at such other place as the Custodian may from time to time designate in writing. 3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be sufficiently given if addressed to the Fund and mailed or delivered to it at its office at the address for the Fund first above written, or at such other place as the Fund may from time to time designate in writing, and any notice or other instrument in writing authorized or required to be given to the Administrator shall be sufficiently given if addressed to the Administrator at such address as the Administrator may from time to time designate in writing. 4. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties with the same formality as this Agreement and approved by a resolution of the Board of Trustees of the Fund. 5. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the written consent of the Custodian, or by the Custodian without the written consent of the Fund, authorized or approved by a resolution of the Fund's Board of Trustees. 6. This Agreement shall be construed in accordance with the laws of the State of New York without giving effect to conflict of laws principles thereof. Each party hereby consents to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder and hereby waives its right to trial by jury. 7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective Officers, thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year first above written. The Timothy Plan [SEAL] By:_______________________ Attest: _______________________ THE BANK OF NEW YORK [SEAL] By:_______________________ Attest: _______________________ APPENDIX A I, , President and I, , of The Timothy Plan, a Delaware business trust (the "Fund"), do hereby certify that: The following individuals including officers and employees of the Administrator have been duly authorized by the Board of Trustees of the Fund in conformity with the Fund's Declaration of Trust and By-Laws to give Certificates or Oral Instructions on behalf of the Fund, and the signatures set forth opposite their respective names are their true and correct signatures: Name Signature _____________________ _________________________ APPENDIX B SERIES The Timothy Plan APPENDIX C I, Vincent Blazewicz, a Vice President with THE BANK OF NEW YORK do hereby designate the following publications: The Bond Buyer Depository Trust Company Notices Financial Daily Card Service JJ Kenney Municipal Bond Service London Financial Times New York Times Standard & Poor's Called Bond Record Wall Street Journal EXHIBIT A CERTIFICATION The undersigned, , hereby certifies that he or she is the duly elected and acting of The Timothy Plan, a Delaware business trust (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 199 , (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis to deposit in the Book-Entry System, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Book-Entry System to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of McM FUNDS, as of the day of , 199 . [SEAL] EXHIBIT B CERTIFICATION The undersigned, , hereby certifies that he or she is the duly elected and acting of The Timothy Plan, a Delaware business trust (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 199 , (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary to deposit in the Depository, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Depository to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of McM FUNDS, as of the day of , 199. [SEAL] EXHIBIT B-1 CERTIFICATION The undersigned, , hereby certifies that he or she is the duly elected and acting of The Timothy Plan, a Delaware business trust (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 199 , (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary to deposit in the Participants Trust Company as Depository, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Participants Trust Company to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral. IN WITNESS WHEREOF, I have hereunto set my and the seal of The Timothy Plan, as of the day of , 199 . [SEAL] EXHIBIT C CERTIFICATION The undersigned, , hereby certifies that he or she is the duly elected and acting of The Timothy Plan, a Delaware business trust (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 199 , (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary, to accept, utilize and act with respect to Clearing Member confirmations for Options and transaction in Options, regardless of the Series to which the same are specifically allocated, as such terms are defined in the Custody Agreement, as provided in the Custody Agreement. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The Timothy Plan, as of the day of , 199 . [SEAL] EXHIBIT D The undersigned, , hereby certifies that he or she is the duly elected and acting of The Timothy Plan, a Delaware business trust (the "Fund"), further certifies that the following resolutions were adopted by the Board of Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at all times present and that such resolutions have not been modified or rescinded and are in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody Agreement between The Bank of New York and the Fund dated as of , 199 (the "Cusotdy Agreement") is authorized and instructed on a continuous and ongoing basis to act in accordance with, and to rely on Certificates (as defined in the Custody Agreement) given by to the 199 (the "Custody Agreement Custodian by a Terminal Link (as defined in the Custody Agreement). RESOLVED, that the Fund shall establish access codes and grant us of such access codes only to Officers of the fund as defined in the Custody Agreement, shall establish internal safekeeping procedures to safeguard and protect the confidentiality and availability of such access codes, shall limit its use of the Terminal Link to those purposes permitted by the Custody Agreement, shall require at least two such Officers to utilize their respective access codes in connection with each such Certificate, and shall use the Terminal Link only in a manner that does not contravene the Investment Company Act of 1940, as amended, or the rules and regulations thereunder. RESOLVED, that Officers of the Fund shall, following the establishment of such access codes and such internal safekeeping procedures, advise the Custodian that the same have been established by delivering a Certificate, as defined in the Custody Agreement, and the Custodian shall be entitled to rely upon such advice. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of McM FUNDS, as of the day of , 199 . [SEAL] EXHIBIT E The undersigned, , hereby certifies that he or she is the duly elected and acting of The Timothy Plan, a Delaware business trust (the "Fund"), further certifies that the following resolutions were adopted by the Board of Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at all times present and that such resolutions have not been modified or rescinded and are in full force and effect as of the date hereof. RESOLVED, that the maintenance of the Fund's assets in each country listed in Schedule I hereto be, and hereby is, approved by the Board of Trustees as consistent with the best interests of the Fund and its shareholders; and further RESOLVED, that the maintenance of the Fund's assets with the foreign branches of The Bank of New York (the "Bank") listed in Schedule I located in the countries specified therein, and with the foreign subcustodians and depositories listed in Schedule I located in the countries specified therein be, and hereby is, approved by the Board of Trustees as consistent with the best interest of the Fund and its shareholders; and further RESOLVED, that the Subcustodian Agreements presented to this meeting between the Bank and each of the foreign subcustodians and depositories listed in Schedule I providing for the maintenance of the Fund's assets with the applicable entity, be and hereby are, approved by the Board of Trustees as consistent with the best interests of the Fund and its shareholders; and further RESOLVED, that the appropriate officers of the Fund are hereby authorized to place assets of the Fund with the aforementioned foreign branches and foreign subcustodians and depositories as hereinabove provided; and further RESOLVED, that the appropriate officers of the Fund, or any of them, are authorized to do any and all other acts, in the name of the Fund and on its behalf, as they, or any of them, may determine to be necessary or desirable and proper in connection with or in furtherance of the foregoing resolutions. IN WITNESS WHEREOF, I hereunto set my hand and the seal of The Timothy Plan, as of the day of , 199 . [SEAL] EX-99.B11A 4 AUDITORS CONSENT EXHIBIT 99B11 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the references to our firm in Post-Effective Amendment No. 5 to the Registration Statement of Form N-1A of The Timothy Plan and to the use of our report dated January 17, 1997 on the financial statements and financial highlights. Such financial statements and financial highlights are incorporated by reference in the Statement of Additional Information, which is part of such Registration Statement. TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 17, 1997 EX-99.B14A 5 FORM OF 403(B)(7) RETIREMENT PLAN EXHIBIT 99.14A THE TIMOTHY PLAN SECTION 403(b)(7)' CUSTODIAL ACCOUNT AGREEMENT Section 1. Introduction The Custodial Account established hereby is created pursuant to Section 403(b)(7) of the Code in order to provide a retirement benefit for the Employee named in the Application, which is made a part of this Agreement, through investment in the securities of one or more Funds. Section 2. Definitions The following terms shall have the following meanings unless the context clearly indicates otherwise: (a) Agreement. This Agreement, as amended from time to time, including the Application, which is incorporated herein by reference. (b) Application. The Custodial Account application form made available by the Custodian for the purpose of establishing an account described in Section 403(b)(7) of the Code that permits investments in shares of one or more of the Funds. (c) Beneficiary. The person(s) designated as such by the Employee in the Application, or in such other manner permitted by this Agreement. (d) Church. A "church" or a "qualified church-controlled organization" within the meaning of Section 3121(w)(3)(A) or (B), of the Code respectively. (e) Code. The Internal Revenue Code of 1986, as amended. (f) Custodial Account. The custodial account established by this Agreement. (g) Custodian. National Westminster Bank NJ, or any successor thereto who accepts appointment pursuant to the terms of this Agreement. (h) Elective Deferrals. With respect to any calendar year, the sum of -- (i) employer contributions under a qualified cash or deferred arrangement (as defined in Section 401(k) of the Code), to the extent not includible in gross income under Section 402(a)(8) of. the Code, (ii) employer contributions to a simplified employee pension (as defined in - Section 408(k) of the Code), to the extent not includible in gross income under Section 402(h)(i)(B) of the Code, and (iii) employer contributions to an annuity or custodial account described in Section 403(b) of the Code pursuant to a salary reduction agreement (within the meaning of Section 3121(a)(5)(D) of the Code), other than a contribution made pursuant to a one-time irrevocable election made by the Employee at the time of initial eligibility to enter into such an agreement, or pursuant to a similar arrangement involving a one-time irrevocable election specified in regulations, rulings or other administrative pronouncements issued by the Department of the Treasury. (i) Eligible Employee. Each Employee of the Employer other than (i) nonresident aliens described in Section 410(b)(3)(C) of the Code, (ii) students performing services described in Section 3121(b)(10) of the Code, (iii) employees who normally work less than 20 hours per week, (iv) employees who are participants in an eligible deferred compensation plan described in Section 457 of the Code, or a cash or deferred arrangement described in Section 401(k) of the Code, maintained by the Employer, or who are eligible to contribute to another custodial account or to an annuity described in Section 403(b) of the Code established pursuant to a plan maintained by the Employer, and (v) such other classes of employees which may be excluded for purposes of Section 403(b)(12)(A)(ii) of the Code pursuant to regulations, rulings or other administrative pronouncements issued by the Department of the Treasury. (j) Eligible Retirement Plan. An individual retirement account or individual retirement annuity described in Section 408(a) or (b) of the Code, respectively, or an annuity or custodial account described in Section 403(b) of the Code. (k) Eligible Rollover Distribution. Any distribution from the Custodial Account on or after January 1, 1993, to the Employee, the Employee's surviving spouse, or a spouse or former spouse of the Employee who is an alternate payee (within the meaning of Section 414(p)(8) of the Code) with respect to the Custodial Account, other than - (i) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Employee, the Employee's surviving spouse or such alternate payee, the joint lives (or joint life expectancies) of the Employee and the Employee's designated Beneficiary, or for a specified period of 10 years or more, (ii) any distribution to the extent such distribution is required under Section 403(b)(10) of the Code, (iii) any distribution that is not includible in gross income (without regard to Section 403(b)(8) of the Code), and (iv) any other distribution that is not an "eligible rollover distribution" within the meaning of regulations under Section 402(c)(4) of the Code. (1) Employee. The individual identified as such in the Application. (m) Employer. The entity identified as such in the Application, which must be - (i) a State, a political subdivision of a State, or an agency or instrumentality of one or more of the foregoing, but only if the Employee performs services for an educational organization described in Section 170(b)(1)(A)(ii) as an employee of such State or other entity, or (ii) an entity described in Section 501(c)(3) of the Code and exempt from tax under Section 501(a) of the Code. (n) ERISA. The Employee Retirement Income Security Act of 1974, as amended. (o) Fund. The Timothy Plan or any other regulated investment company within the meaning of Section 851(a) of the Code for which Timothy Partners, Ltd. or Covenant Funds, Inc. serves as the investment adviser and which the Custodian has agreed to hold pursuant to this Agreement., (p) Qualified Organization. Any educational organization, hospital, home health service agency, health and welfare service agency, church, convention or association of churches, or an organization described in Section 414(e)(3)(B)(ii) of the Code. (q) Required Beginning Date. April 1 of the calendar year following the calendar year in which the Employee attains age 70 1/2; except that if the Employee attained age 70 1/2 before January 1, 1988, or in the case of a Custodial Account established pursuant to a governmental plan or a plan maintained by a Church, the Required Beginning Date shall be April 1 of the calendar year following the later of the calendar year in which the Employee attains age 70 1/2 or the calendar year in which he or she retires. (r) Year of Service. Each full year during which the Employee was a full-time employee of the Employer and a fraction of a year (determined in accordance with regulations, rulings or other administrative pronouncements issued by the Department of the Treasury) for each full year during which the Employee was a part-time employee of the Employer and for each part of a year during which the Employee was a full-time or part-time employee of the Employer. For this purpose, all Years of Service by a duly ordained, commissioned, or licensed minister of a church, or a lay person, as an employee of a church, a convention or association of churches, or an organization described in Section 414(e)(3)(B)(ii) of the Code, shall be considered as Years of Service with one employer. Section 3. Contributions (a) Contributions to the Custodial Account may be made by the Employer as a benefit in addition to cash compensation and mar also be made by the Employee through the Employer pursuant to a salary reduction agreement. All contributions must be made in cash. (b) The Custodian shall have no obligation to compel the Employer or the Employee to make any contribution, nor shall the Custodian be required to notify the Employer or Employee if any contribution made exceeds the limitations of Section 402(g), Section 403(b)(2) or Section 415 of the Code. (c) (i) Elective Deferrals to the Custodial Account in any calendar year shall not exceed the greater of $7,000 (as adjusted by the Secretary of the Treasury for years after 1987) or $9,500; provided, however, if the Employer is a Qualified Organization, and the Employee has completed at least 15 Years of Service, this limitation shall be increased by the lesser of the following amounts: (1) $3,000, (2) $15,000 reduced by the total amount of increases pursuant to this clause for all previous years, or (3) the excess of $5,000 multiplied by the number of such Years of Service over the Elective Deferrals made by the Employer on behalf of the Employee in prior years. (ii) Elective Deferrals to the Custodial Account in any calendar year, when combined with other Elective Deferrals made on behalf of the Employee under all plans, contracts or arrangements of the Employer, may not exceed $7,000 (as adjusted by the Secretary of the Treasury for years after 1987), increased by the amount of Elective Deferrals made to the Custodial Account and any other annuities or custodial accounts described in Section 403(b) of the Code on behalf of the Employee under a plan maintained by the Employer, but not to an amount in excess of the limitation set forth in subparagraph (i), above. (d) A transfer of cash from an existing annuity or custodial account described in Section 403(b) of the Code may be made to the Custodial Account, provided that the terms of such annuity or custodial account permit such transfer. Any cash transferred hereunder shall be invested by the Custodian in accordance with written instructions received from the Employee; provided, however, that the amount transferred may be invested only in securities of one or more Funds. Written instructions accompanying any such transfer shall state that the amount being transferred is a transfer from an annuity or custodial account described in Section 403(b) of the Code and shall set forth the name, title or other designation of such custodial account or annuity, as the case may be. (e) The Employee may make a rollover contribution (including a direct rollover) to the Custodial Account of all or a portion of the cash proceeds of any distribution from - (i) another annuity or custodial account described in Section 403(b) of the Code, provided the amount of such contribution would not be included in the Employee's gross income pursuant to Section 403(b)(8) of the Code as a result of such rollover contribution, or (ii) an individual retirement account or annuity described in Section 408 of the Code, provided the amount of such contribution would not be included in the Employee's gross income pursuant to Section 408(d)(3) of the Code as a result of such rollover contribution. Any cash contributed hereunder shall be invested by the Custodian in accordance with written instructions received from the Employee; provided, however, that the amount contributed may be invested only in securities of one or more Funds. (f) Unless the Employer is a Church -- (i) the Employer must permit each Eligible Employee to elect to make contributions of more than $200 pursuant to a salary reduction agreement to one or more annuities or custodial accounts described in Section 403(b) of the Code, and (ii) with respect to contributions to this Custodial Account and other annuities and custodial accounts described in Section 403(b) of the Code, other than contributions made pursuant to salary reduction agreements, the Employer's plan pursuant to which this Custodial Account is established must meet the requirements of Sections 401(a)(4), (5), (17) and (26), Section 401(m) and Section 410(b) of the Code in the same manner as if such plan were a plan described in Section 401(a) of the Code, in accordance with Section 403(b)(12)(A) of the Code. For purposes of this subsection (f), a contribution to an annuity or a custodial account shall be treated as not made pursuant to a salary reduction agreement if it is made pursuant to a one-time irrevocable election made by the Employee at the time of initial eligibility to participate in the plan of which such annuity or custodial account is a part or is made pursuant to a similar arrangement involving a one-time irrevocable election specified in regulations, rulings or other administrative pronouncements issued by the Department of the Treasury. Section 4. The Custodial Account (a) The Custodian shall maintain or cause to have maintained a record of the Custodial Account. The interest of the Employee in the Custodial Account shall at all times be nonforfeitable and the assets therein shall not be commingled with the property of others; provided, however, that investment in securities of a Fund shall not be considered commingling. Contributions to the Custodial Account, and the income thereon, may not be used for or diverted to purposes other than the exclusive benefit of the Employee and his or her Beneficiary. (b) If the Custodial Account is determined to constitute part of a plan subject to Title I of ERISA, the Employer shall be responsible for ensuring that such plan complies at all 1 times with the applicable requirements of ERISA. Neither a Fund, its investment advisor or distributor, the Custodian, nor any of their affiliates shall be the "administrator" (as defined in Section (16)(A) of ERISA) of such plan. Section 5. Investments (a) The Custodian shall invest all contributions less unpaid custodial fees in the securities of the Fund(s) specified in the Application. The Custodian or its nominee shall be the holder of record and the Employee shall be the beneficial owner of all such securities and any other property in the Custodial Account. The Custodian shall have no investment responsibility or discretion with respect to this Custodial Account. The selection of Funds with respect to both the investment of contributions previously made and those to be made in the future may be changed upon receipt by the Custodian of written instructions from the Employee (or the Beneficiary following the death of the Employee), requesting such change, subject to the requirement that the minimum investment in any Fund shall not be smaller than the minimum amount, if any, required for investment in the securities of any selected Fund. Investments may be divided between or among two or more Funds. (b) All cash dividends and capital gain distributions received upon assets in the Custodial Account shall be reinvested bathe securities of the issuing Fund and credited to the Custodial Account. In the event that, with respect to any such dividends and distributions, the Custodian as holder of record may elect to receive such dividend or distribution in either additional shares, cash or other property, the Custodian shall elect to receive such distribution in additional shares. Sales and other charges attributable to the acquisition of securities shall be charged to the Custodial Account. (c) The Custodian shall deliver or cause to be delivered to the Employee all notices, prospectuses, financial statements, proxies, voting instruction cards, and proxy soliciting requests relating to securities held in the Custodial Account. The Custodian in its capacity as such shall not vote any shares of the Fund held hereunder except in accordance with the written instructions of the Employee. (d) Whenever the Custodian requires cash for any purpose provided in this Agreement, it is authorized to redeem proportionately shares held in the Funds in an amount sufficient to provide the required cash. Section 6. Distributions from the Custodial Account (a) The Custodian will, upon receiving written notice from the Employee (or from the Beneficiary following the Employee's death) of the Employee's, attainment of age 59-1/2, disability (as defined in Section 72(m)(7) of the Code), separation from service from the Employer, financial hardship (determined in accordance with Section 403(b)(7) of the Code and any regulations issued thereunder) or death, distribute all or a portion of the assets of the Custodial Account in cash in the manner and at the time specified in such written notice; provided, however, that the Employee (or Beneficiary following the Employee's death) shall provide substantiation of such event in such form and manner as required by the Custodian. (b) Distributions on account of financial hardship will be permitted only from the balance of the Custodial Account as of December 31, 1988, and from salary reduction contributions made subsequent to that date, but not earnings or other contributions subsequent thereto. (c) The Employee shall have the right, prior to completion of distribution of the entire Custodial Account, by written notice signed by the Employee and delivered to the Custodian, to designate, revoke or change a designation of a Beneficiary. Except as ordered by a court of competent jurisdiction, if a designation of Beneficiary is in effect at the time of the Employee's death, the balance in the Custodial Account will be distributed to such Beneficiary in accordance with a method described in Section 7 below, as selected by the Beneficiary, upon receipt of the Custodian of proof of death of the Employee. If prior to completion of such distribution the Beneficiary dies, any remaining balance in the Custodial Account shall be distributed to the Beneficiary's estate. If no such Beneficiary is designated in accordance herewith or if such Beneficiary dies before the Employee dies, the Employee's Beneficiary shall be his or her estate. (d) If the distributed of any Eligible Rollover Distribution from the Custodial Account elects to have such distribution paid directly to an Eligible Retirement Plan and specifies the Eligible Retirement Plan to which such distribution is to be paid (in such form and manner as the Custodian may prescribe), such distribution shall be made in the form of a direct rollover by the Custodian to the Eligible Retirement Plan so specified, in any manner permitted by regulations, rulings and other administrative pronouncements issued by the Department of the Treasury. Section 7. Minimum Distributions to Employee (a) The entire value of the Custodial Account shall be distributed or commence to be distributed, no later than the Employee's Required Beginning Date, over (i) the life of the Employee, or the lives of the Employee and his or her designated Beneficiary, or (ii) a period certain not extending beyond the life expectancy of the Employee, or the joint and last survivor expectancy of the Employee and his or her designated Beneficiary. (b) The amount to be distributed each year, beginning with the calendar year prior to the year in which the Employee attains the Required Beginning Date and for each succeeding calendar year, shall not be less than the quotient obtained by dividing the Employee's Custodial Account balance at the beginning of such year by the lesser of - (i) the life expectancy of the Employee (or the joint life expectancy of the Employee and his or her designated Beneficiary, if applicable), or (ii) if the Employee's spouse is not the designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. Distributions after the death of the Employee shall be distributed using the applicable life expectancy as the relevant divisor without regard to Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. (c) Life expectancy is computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by the Employee by the time distributions are required to begin, life expectancies shall be recalculated annually. Such election shall be irrevocable by the Employee and shall apply to all subsequent years. The life expectancy of a non-spouse Beneficiary may not be recalculated. Instead, life expectancy will be calculated using the attained age of such Beneficiary during the calendar year prior to the year in which the Employee attains the Required Beginning Date, and payments for subsequent years shall be calculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. Section 8. Minimum Distributions Upon Death of Employee (a) If the Employee dies on or after his or her Required Beginning Date, the remaining portion of such interest shall continue to be distributed at least as rapidly as under the method of distribution being used prior to the Employee's death. If the Employee dies before his or her Required Beginning Date, distribution of the Employee's entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Employee's death except to the extent that an election is made by the Employee's designated Beneficiary to receive distributions in accordance with (i) or (ii) below: (i) If the Employee's interest is payable to a designated Beneficiary, then the entire interest of the Employee may be distributed over a certain period not greater than the life expectancy of the designated Beneficiary, commencing on or before December 31 of the calendar year immediately following the calendar year in which the Employee died. (ii) If the designated Beneficiary is the Employee's surviving spouse, the date distributions are required to begin in accordance with (i) above shall not be earlier than the later of (1) December 31 of the calendar year immediately following the calendar year in which the Employee died or (2) December 31 of the calendar year in which the Employee would have attained age 70 1/2. (c) The amount to be distributed each year pursuant to paragraph (b), above, shall be not less than the quotient obtained by dividing the Employee's Custodial Account balance at the beginning of such year by the life expectancy of the designated Beneficiary. (d) Life expectancy is computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. For purposes of distributions beginning after the Employee's death, and if the Employee's surviving spouse is the designated Beneficiary, unless otherwise elected by the surviving spouse by the time distributions are required to begin, the surviving spouse's life expectancy shall be recalculated annually. Such election shall be irrevocable by the surviving spouse and shall apply to all subsequent years. In the case of any other designated Beneficiary, or in the case of a surviving spouse who does makes such an election, life expectancies shall be calculated using the attained age of such Beneficiary during the calendar year in which distributions are required to begin pursuant to this Section, and payments for any subsequent calendar year shall be calculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. (d) If the designated Beneficiary is the Employee's surviving spouse, the surviving spouse may elect to treat the Custodial Account as his or her own for purposes of Section 7 and this Section Section 9. Resignation or Removal of the Custodian (a) The Custodian may resign at any time after the expiration of 30 days from the date of mailing written notice of resignation to The Timothy Plan and the Employee. The Custodian may be removed by The Timothy Plan at any time after the expiration of 30 days from the date of mailing of written notice of removal to the Custodian and the Employee. Any notice hereunder shall specify the effective date of such resignation or removal. (b) Upon receipt of notice of resignation or removal a successor custodian may be appointed by The Timothy Plan, which successor shall be a bank or other qualified person within the meaning of Section 401(f)(2) of the Code. If no such successor custodian is appointed prior to the effective date of the Custodian's resignation or removal, the Custodian may, but shall not be required to, appoint a qualified successor custodian. If a qualified successor custodian is appointed the Custodian shall pay over to such successor the assets of the Custodial Account and all records pertaining thereto and notify the Employer and Employee of such appointment and the transfer of assets and records. In connection with such transfer, however, the Custodian is authorized to reserve such sum of money as is necessary for the payment of its accrued fees. (c) The Custodian shall terminate the Custodial Account if no qualified successor custodian has been appointed prior to the effective date of its resignation or removal. Termination of the Custodial Account shall be effected by distributing the assets of the Custodial Account by a single sum payment in cash. Upon completion of such distribution, the Custodian shall be relieved from all further liability with respect to all amounts so distributed. Section 10. Fees and Charges (a) The fees of the Custodian as set forth in the Application shall be paid when due. Such fees may be revised by the Custodian after 60 days written notice thereof to The Timothy Plan and the Employee (or the Beneficiary following the death of the Employee). (b) Any taxes levied or assessed upon or in respect of the Custodial Account, including any transfer taxes incurred in the investment or reinvestment of the assets of the Custodial Account, and any custodial fees shall be paid from the assets of the Custodial Account from available cash and in the absence thereof the Custodian shall liquidate such securities held in the Custodial Account as are necessary to pay any such taxes and fees in full. (c) All other administrative expenses incurred by the Custodian in the performance of its duties, including fees for legal services rendered to the Custodian and the compensation to the Custodian, shall constitute a charge upon the assets of the Custodial Account. Custodian is hereby authorized to redeem or liquidate sufficient assets of the Custodial Account to pay any of the foregoing items. Section 11. Amendment The Employee and the Custodian hereby delegate to The Timothy Plan the right to amend this Agreement by submitting a copy of any such amendment to the Employer, the Employee and the Custodian; provided, however, the duties and responsibilities of the Custodian shall not be changed without its prior consent. Section 12. Miscellaneous (a) Except as provided by law or by a qualified domestic relations order as defined in Section 414(p) of the Code, any right or benefit hereunder shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such right or benefit shall not in any way be subject to the debts, contracts, liabilities, engagements or torts of the person who is entitled to such right or benefit, nor shall such right or benefit be subject to attachment or legal process for or against such person. Except as otherwise provided by law, the assets held in the Custodial Account are not subject to the claims of the Employer's creditors. (b) The Custodian has appointed Fund/Plan Services, Inc. as its agent for receiving contributions to the Custodial Account and for receiving all written notices required to be forwarded to the Custodian pursuant to this Agreement. (c) The Custodian shall be fully protected in acting upon any written order, Beneficiary designation or-other instrument of the Employee or the Employer believed by the Custodian to be genuine and to have been properly executed and upon which it acts in good faith in taking or omitting to take any action. (d) Upon the expiration of a 30-day period after furnishing to the Employee written confirmation of a transaction or transactions, the Custodian shall be released and discharged from all liability and accountability to the Employee or any third party with respect to such transaction or transactions, except with respect to a transaction or transactions concerning which the Employee files written objections with the Custodian within such 30-day period. (e) Notwithstanding any other provision hereof, the Custodian shall have no responsibility for (i) the initial or continued qualification of the Custodial Account under Section 403(b)(7) of the Code; (ii) determining the amount of or collecting any contribution; (iii) determining the amount, character, or timing of any distribution to the Employee or the Beneficiary other than as instructed pursuant to Sections 6, 7 and 8 of this Agreement; (iv) determining the amount of any limitation applicable to the Employee under Section 402(g), Section 403(b)(2) or Section 415 of the Code; or (v) determining whether any person or persons other than the Employee's designated Beneficiary may be entitled, under applicable law, to receive amounts from the Custodial Account on account of the death of the Employee. (f) The Custodian shall not be responsible for any liability arising out of this Agreement except such liability as is occasioned by the Custodian's own negligence or willful misconduct. The Custodian shall not be responsible for any action or non-action taken in accordance with written instructions or notice received pursuant this Agreement and may rely upon and shall be protected in acting upon any written order from the Employer or Employee or any other notice, request, consent, certificate, Beneficiary designation or other instrument reasonably believed by the Custodian to be genuine and to have been properly executed hereunder. (g) The Custodian shall not be obligated to defend or engage in any suit with respect to the Custodial Account unless the Custodian shall first have agreed in writing to do so and shall have been fully indemnified to the satisfaction of the Custodian. (h) The Custodian will submit reports to the Internal Revenue Service and to the Employer or Employee in such manner and containing such information as may be prescribed by the Internal Revenue Service. (i) This Agreement shall be construed under the laws of the Commonwealth of Pennsylvania except to the extent any such law is superseded by laws of the United States. (j) If any provision of this Agreement is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed and enforced as if such provision had not been included. (k) This Agreement shall become effective upon the effective date set forth in the Application when the Application is countersigned by or on behalf of the Custodian. EX-99.B19 6 POWERS OF ATTORNEY EXHIBIT 99B19 KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and appoints Joseph M. O'Donnell, Gerald J. Holland, William J. Baltrus and Gretchen B. Zepernick and each of them, with full power to act without the other, as a true and lawful attorney-in-fact and agent, with full and several power of substitution, to sign any and all Amendments to Registration Statement No. 33-73248 of The Timothy Plan (the "Trust") to be filed with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended; and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission and to take any appropriate action to qualify or register all or part of the securities of the Trust for sale in various states; granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act requisite and necessary to be done in connection therewith, as fully as that person might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or any substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 29th day of November, 1996. ______________________ JOCK SNEDDON TRUSTEE ACKNOWLEDGMENT -------------- State of Florida ) ) ss: County of Orange ) The foregoing instrument was acknowledged before me this 29th day of November, 1996, by JOCK SNEDDON, TRUSTEE of The Timothy Plan. __________________________ Notary Public KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and appoints Joseph M. O'Donnell, Gerald J. Holland, William J. Baltrus and Gretchen B. Zepernick and each of them, with full power to act without the other, as a true and lawful attorney-in-fact and agent, with full and several power of substitution, to sign any and all Amendments to Registration Statement No. 33-73248 of The Timothy Plan (the "Trust") to be filed with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended; and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission and to take any appropriate action to qualify or register all or part of the securities of the Trust for sale in various states; granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act requisite and necessary to be done in connection therewith, as fully as that person might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or any substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 29th day of November, 1996. ________________________ PHILIP B. CROSBY TRUSTEE ACKNOWLEDGMENT -------------- State of Florida ) ) ss: County of Orange ) The foregoing instrument was acknowledged before me this 29th day of November, 1996, by PHILIP B. CROSBY, TRUSTEE of The Timothy Plan. _____________________________ Notary Public KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and appoints Joseph M. O'Donnell, Gerald J. Holland, William J. Baltrus and Gretchen B. Zepernick and each of them, with full power to act without the other, as a true and lawful attorney-in-fact and agent, with full and several power of substitution, to sign any and all Amendments to Registration Statement No. 33-73248 of The Timothy Plan (the "Trust") to be filed with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended; and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission and to take any appropriate action to qualify or register all or part of the securities of the Trust for sale in various states; granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act requisite and necessary to be done in connection therewith, as fully as that person might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or any substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 29th day of November, 1996. __________________________ DANIEL D. BUSBY TRUSTEE ACKNOWLEDGMENT -------------- State of Florida ) ) ss: County of Orange ) The foregoing instrument was acknowledged before me this 29th day of November, 1996, by DANIEL D. BUSBY, TRUSTEE of The Timothy Plan. _________________________________ Notary Public EX-99.B27A 7 FINANCIAL DATA SCHEDULE-INSTITUTIONAL CLASS [ARTICLE] 6 [CIK] 0000916490 [NAME] THE TIMOTHY PLAN [SERIES] [NUMBER] 1 [NAME] INSTITUTIONAL CLASS [MULTIPLIER] 1 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 10,727,008 [INVESTMENTS-AT-VALUE] 11,646,681 [RECEIVABLES] 26,800 [ASSETS-OTHER] 356 [OTHER-ITEMS-ASSETS] 60,658 [TOTAL-ASSETS] 11,734,495 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 45,303 [TOTAL-LIABILITIES] 45,303 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 10,610,777 [SHARES-COMMON-STOCK] 690,247 [SHARES-COMMON-PRIOR] 609,122 [ACCUMULATED-NII-CURRENT] (5,680) [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] 164,422 [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 919,673 [NET-ASSETS] 11,689,192 [DIVIDEND-INCOME] 190,723 [INTEREST-INCOME] 55,616 [OTHER-INCOME] 0 [EXPENSES-NET] 161,797 [NET-INVESTMENT-INCOME] 84,542 [REALIZED-GAINS-CURRENT] 164,422 [APPREC-INCREASE-CURRENT] 903,008 [NET-CHANGE-FROM-OPS] 1,151,972 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 66,939 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 201,664 [NUMBER-OF-SHARES-REDEEMED] 126,226 [SHARES-REINVESTED] 5,687 [NET-CHANGE-IN-ASSETS] 4,935,758 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] 0 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 78,848 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 356,764 [AVERAGE-NET-ASSETS] 9,275,969 [PER-SHARE-NAV-BEGIN] 10.07 [PER-SHARE-NII] .10 [PER-SHARE-GAIN-APPREC] 1.17 [PER-SHARE-DIVIDEND] .10 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 11.24 [EXPENSE-RATIO] 1.60 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-99.B27B 8 FINANCIAL DATA SCHEDULE-RETAIL CLASS [ARTICLE] 6 [CIK] 0000916490 [NAME] THE TIMOTHY PLAN [SERIES] [NUMBER] 2 [NAME] RETAIL CLASS [MULTIPLIER] 1 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 10,727,008 [INVESTMENTS-AT-VALUE] 11,646,681 [RECEIVABLES] 26,800 [ASSETS-OTHER] 356 [OTHER-ITEMS-ASSETS] 60,658 [TOTAL-ASSETS] 11,734,495 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 45,303 [TOTAL-LIABILITIES] 45,303 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 10,610,777 [SHARES-COMMON-STOCK] 350,224 [SHARES-COMMON-PRIOR] 61,522 [ACCUMULATED-NII-CURRENT] (5,680) [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] 164,422 [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 919,673 [NET-ASSETS] 11,689,192 [DIVIDEND-INCOME] 190,723 [INTEREST-INCOME] 55,616 [OTHER-INCOME] 0 [EXPENSES-NET] 161,797 [NET-INVESTMENT-INCOME] 84,542 [REALIZED-GAINS-CURRENT] 164,422 [APPREC-INCREASE-CURRENT] 903,008 [NET-CHANGE-FROM-OPS] 1,151,972 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 23,283 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 314,924 [NUMBER-OF-SHARES-REDEEMED] 28,244 [SHARES-REINVESTED] 2,022 [NET-CHANGE-IN-ASSETS] 4,935,758 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] 0 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 78,848 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 356,764 [AVERAGE-NET-ASSETS] 9,275,969 [PER-SHARE-NAV-BEGIN] 10.08 [PER-SHARE-NII] .07 [PER-SHARE-GAIN-APPREC] 1.14 [PER-SHARE-DIVIDEND] .07 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 11.22 [EXPENSE-RATIO] 2.20 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
-----END PRIVACY-ENHANCED MESSAGE-----