-----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, SA2EGxIM9w/F4NOjiXdMvnnGmXrPeqzvGP7F3OgY0HCYAio0+K9kUi1je8L2cPKR xJs3JaxgS3YJ/PxdWElXmA== 0001036050-98-000276.txt : 19980227 0001036050-98-000276.hdr.sgml : 19980227 ACCESSION NUMBER: 0001036050-98-000276 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980226 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: N-30D SEC ACT: SEC FILE NUMBER: 811-08228 FILM NUMBER: 98550298 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 N-30D 1 TIMOTHY PLAN ANNUAL 12/31/97 President's Report December 31, 1997 Dear Shareholder: Before discussing this past year and taking a brief glimpse into the future, I would like to express my heartfelt appreciation to the most important component of the Timothy Plan - you our shareholder. Without you and the convictions that led you to invest in Timothy, all our efforts would be for naught! Thank you for your support and encouragement. I am pleased to report that the Timothy message is finally reaching the hearts and minds of concerned Christians and other pro-life, pro-family investors throughout the land. As each of you probably know, our message is simple = There is a moral aspect to investing. We are also committed to the principle that you do not have to sacrifice investment return opportunities to achieve your moral objectives. Since Timothy's birth four years ago, a couple of exciting new organizations (which nicely compliment our efforts) have entered the fray: The Institute for American Values Investing calculates the percentage of assets every mutual fund in the industry has invested in companies that actively support abortion, pornography, or non-traditional family lifestyles. They provide this research to hundreds of Christian brokers on a quarterly updated basis. This tool then enables these brokers to discuss real values-based investing with their clients. We subscribe to this service and would be delighted to run an analysis (free of charge) on any mutual fund you may own. Simply call us at 1-800-TIM-PLAN (1-800-846-7526). The National Association of Christian Financial Consultants (NACFC) has recently been formed to provide a network for Christian financial services professionals who are committed to operating their businesses biblically! This exciting new group will begin with about 200 charter members and should have quite an impact on our culture. Finally, I am confident that you are pleased with the fine performance our new money management firm - Awad & Associates - turned in for us in 1997. Our hats are off to Jim Awad, who personally oversees Timothy Plan investments, and his entire staff. We look forward to an excellent year in 1998 and beyond under their capable direction. Please do not overlook Jim Awad's comments on the next page to get his perspective for the year ahead. Thank you again for being part of our ever-growing family of concerned investors. Yours in Christ, /s/ Arthur D. Ally Arthur D. Ally President Awad & Associates Market Commentary December 31, 1997 Dear Fellow Shareholders: In our opinion, our fund had an excellent year. The return for Class A shares (without factoring front-end sales load) surpassed our comparative benchmark, the Russell 2000, for the year ended December 31, 1997. Looking forward, we expect our good fortune to continue. We believe the requisite building blocks for long-term capital appreciation continue to exist in the stock market and in the domestic economy. We continue to see significant cash flows into the equity markets, despite recent market volatility. Recent academic studies have suggested that individuals between the ages of 50 and 65 save a higher percentage of their income than any other age group. This demographic is growing rapidly and suggests continued demand for equity assets in the next twelve months. The available supply of stocks has declined slightly over the period 1990 through 1997 as the result of stock buybacks, such as the one announced by IBM in early November, and mergers, such as the recently announced acquisition of portfolio company Sano Corporation. This supply/demand imbalance suggests the possibility of higher equity valuations in the future. The domestic economy continues to grow at a reasonable pace while the Federal Reserve appears to be vigilantly monitoring inflation. This combination of moderate economic growth with low inflation is leading to a lower budget deficit and lower long-term interest rates. We expect this trend to continue into 1998 suggesting, again, higher equity valuations. While we continue to have a positive outlook for 1998, we remain ever mindful of the possibility of negative performance. We continue to search for high quality, growing companies with good balance sheets and high insider stock ownership. These are characteristics that should positively withstand the test of time. We maintain a regular dialogue with our portfolio companies to ensure we are fully aware of their progress. We continue to have concentrations in health care, financial services, publishing and real estate industries. Within the health care industry, we believe assisted living facilities companies offer long-term promise as the aging of our population continues. The financial services industry encompassing brokerage, banking, insurance, money management, et.al. and the publishing industry continue to consolidate industries. Our focus has been on local and regional banks such as Doral Financial and IBS Financial and specialized publishers such as John Wiley & Sons, Inc. and Waverly, Inc., we believe to be attractive acquirees. Finally, we continue to selectively add REITs to our portfolio. REITs continue to offer generous yields, low volatility and capital appreciation potential. We continue to be excited by the long-term prospects for our economy, stock market and fund. We look forward to serving you for years to come. James D. Awad Chairman Schedule of Investments December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------ Shares Market Value - ------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS - 85.22% Amusement & Recreation Services - 0.66% 14,500 Ascent Entertainment Group, Inc.*.............................................. $ 150,437 Apparel and Accessory Stores - 1.31% 11,000 Shoe Carnival, Inc.*........................................................... 89,375 10,000 Syms Corp.*.................................................................... 118,750 10,000 U.S. Vision, Inc.*............................................................. 88,750 296,875 Building Constructions - 1.30% 11,000 Blount International Inc., Class A............................................. 293,562 Business Services - 9.43% 22,500 Comdisco, Inc.................................................................. 752,344 18,000 Dynamic Healthcare Technologies, Inc.*......................................... 55,125 5,000 Health Management Systems, Inc.*............................................... 29,688 8,000 Information Resources, Inc.*................................................... 107,000 22,000 LanVision Systems, Inc.*....................................................... 99,000 24,000 Metrika Systems Corp.*......................................................... 366,000 8,000 National Data Corp............................................................. 289,000 8,000 ScanSource, Inc.*.............................................................. 160,000 24,000 StarTek, Inc.*................................................................. 273,000 2,131,157 Chemicals & Allied Products - 3.13% 11,000 Aviron*........................................................................ 298,375 20,000 Lawter International, Inc...................................................... 217,500 10,500 Mississippi Chemical Corp...................................................... 191,625 707,500 Depository Institutions - 2.65% 23,575 IBS Financial Corp............................................................. 416,983 4,500 SIS Bancorp, Inc............................................................... 180,844 597,827 Electric, Gas & Sanitary Services - 2.86% 20,000 Cadiz Land Company, Inc.*...................................................... 171,250 18,000 New Horizons Worldwide, Inc.*.................................................. 258,750 15,000 Philip Services Corp., ADR*.................................................... 215,625 645,625 Electronic Equipment & Components - 2.21% 19,500 Logic Works, Inc.*............................................................. 163,313 17,900 Network Long Distance, Inc.*................................................... 152,150 25,000 WPI Group, Inc.*............................................................... 184,375 499,838
See accompanying notes to financial statements. Schedule of Investments December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------ Shares Market Value - ------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS - continued Engineering, Accounting & Research Management - 1.92% 53 Morrison Knudsen Corp. Warrants, 03/11/2003*................................... $ 152 15,500 Right Management Consultants, Inc.*............................................ 197,625 12,000 Thermo BioAnalysis Corp.*...................................................... 235,500 433,277 Fabricated Metal Products - 2.57% 3,000 Harsco Corp.................................................................... 129,375 22,000 Material Sciences Corp.*....................................................... 268,125 17,000 Miller Industries, Inc.*....................................................... 182,750 580,250 Food & Allied Products - 2.81% 13,000 Smithfield Foods, Inc.*........................................................ 429,000 9,000 Smucker (J.M.) Co., Class B.................................................... 207,000 636,000 Furniture & Fixtures - 3.78% 24,600 Falcon Products, Inc........................................................... 349,012 21,000 Furniture Brands International, Inc.*.......................................... 430,500 5,000 LADD Furniture, Inc.*.......................................................... 75,000 854,512 Health Services - 6.09% 5,000 Alternative Living Services, Inc.*............................................. 147,812 10,000 American Retirement Corp.*..................................................... 200,000 27,000 ARV Assisted Living, Inc.*..................................................... 432,000 4,200 Assisted Living Concepts, Inc.*................................................ 82,950 26,500 Sun Healthcare Group, Inc.*.................................................... 513,438 1,376,200 Home Furnishings & Equipment - 1.94% 36,500 Heilig-Meyers Co............................................................... 438,000 Hotels & Other Lodging Places - 0.37% 5,000 Servico, Inc.*................................................................. 84,375 Insurance Carriers - 0.52% 7,000 Gryphon Holdings, Inc.*........................................................ 117,250 Machinery & Computer Equipment - 6.99% 25,000 EA Industries, Inc.*........................................................... 173,437 15,000 ITEQ, Inc.*.................................................................... 172,500 19,000 JLG Industries, Inc............................................................ 268,375 8,000 Middleby Corp.*................................................................ 62,500 11,500 Printronix, Inc.*.............................................................. 194,781 22,000 Thermo Optek Corp.*............................................................ 338,250 3,080 Thermo Vision Corp.*........................................................... 25,025 17,000 TransAct Technologies, Inc.*................................................... 189,125 25,000 3D Systems Corp.*.............................................................. 154,688 1,578,681
Schedule of Investments December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------ Shares Market Value - ------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS - continued Miscellaneous Manufacturing Industry - 1.01% 10,000 K2, Inc........................................................................ $ 227,500 Photographic, Watches, Optical & Medical Goods - 10.46% 46,000 Angeion Corp.*................................................................. 126,500 22,000 Armor Holdings, Inc.*.......................................................... 244,750 45,000 ATS Medical, Inc.*............................................................. 233,437 14,000 Cooper Companies, Inc.*........................................................ 572,250 21,000 Fluke Corp..................................................................... 547,313 48,000 Somanetics Corp.*.............................................................. 261,000 12,000 Thermedics, Inc.*.............................................................. 196,500 10,000 ThermoQuest Corp.*............................................................. 181,250 2,363,000 Printing & Publishing - 8.21% 14,000 Eltron International, Inc.*.................................................... 423,500 15,000 Houghton Mifflin Co............................................................ 575,625 5,500 Waverly, Inc................................................................... 258,500 11,000 Wiley (John) & Sons, Inc., Class A............................................. 596,750 1,854,375 Railroad Transportation - 1.50% 14,500 Genesee & Wyoming Inc., Class A*............................................... 338,938 Reits & Holding Companies - 10.96% 21,000 Alexander Haagen Properties, Inc............................................... 366,187 5,000 Excel Realty Trust, Inc........................................................ 157,500 15,000 Innkeepers USA Trust........................................................... 232,500 26,000 LTC Properties, Inc............................................................ 539,500 16,000 Meridian Industrial Trust, Inc................................................. 408,000 8,000 Mid-Atlantic Realty Trust...................................................... 117,500 13,000 OMEGA Healthcare Investors, Inc................................................ 502,125 11,000 United Dominion Realty Trust, Inc.............................................. 153,313 2,476,625 Rubber and Miscellaneous Plastics Products - 2.10% 19,500 Cooper Tire & Rubber Co........................................................ 475,312 Textile Mill Products - 0.44% 5,000 Culp, Inc...................................................................... 100,000 Total Common Stocks (Cost $17,541,875)......................................... 19,257,116
See accompanying notes to financial statements. Schedule of Investments December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------- Principal Market Value Amount - ------------------------------------------------------------------------------------------------------------------------- Bonds - 1.34% $ 300,000 American Retirement Corp., 5.75%, 10/01/2002................................... $ 302,250 Total Bonds (Cost $301,800).................................................... 302,250 Short-Term Investments - 13.02% 1,958,603 The Bank of New York Cash Reserve, 4.60%....................................... 1,958,603 983,263 The Bank of New York Fidelity U.S. Treasury Portfolio III, 5.26%............... 983,263 Total Short-Term Investments (Cost $2,941,866)................................. 2,941,866 Total Investmants (Cost $20,785,541)**99.58%................................... 22,501,232 Other Assets, Less Other Liabilities - 0.42%................................... 95,697 Net Assets --- 100.00%......................................................... $22,596,929 * Non-income producing security ** Cost for Federal income tax purposes is $20,785,541 and net unrealized appreciation consists of: Gross unrealized appreciation................................................... $2,770,269 Gross unrealized depreciation................................................... (1,054,578) Net unrealized appreciation................................................... $1,715,691
See accompanying notes to financial statements. Statements of Assets and Liabilities December 31, 1997
Description Amount ASSETS Investments in securities at market value (identified cost $20,785,541) (Note 1)... $ 22,501,232 Receivables:....................................................................... Dividends and interest........................................................... 36,433 Capital stock sold............................................................... 71,331 Deferred organization costs (Note 1)............................................... 15,052 Due from Advisor (Note 3) ......................................................... 10,942 Other assets....................................................................... 413 Total Assets............................................................. 22,635,403 LIABILITIES Capital stock redeemed............................................................. 11,693 Accrued distribution expense (Note 3).............................................. 9,163 Accrued service fee (Note 3)....................................................... 2,282 Accrued expenses................................................................... 15,336 Total Liabilities........................................................ 38,474 NET ASSETS............................................................................ $ 22,596,929 Class A Shares (Note 1): Net assets (Unlimited shares of $0.001 par beneficial interest authorized; 914,727 shares outstanding) ............................... $ 11,208,072 Net asset value and redemption price per Class A Share ($11,208,072 / 914,727 shares).................................................. $ 12.25 Offering price per share ($12.25 / 0.945) ......................................... $ 12.96 Class B Shares (Note 1): Net assets (Unlimited shares of $0.001 par beneficial interest authorized; 938,901 shares outstanding) ............................... $ 11,388,857 Net asset value and offering price per Class B Share ($11,388,857 / 938,901 shares).................................................. $ 12.13 Redemption price per share ($12.13 * 0.95)......................................... $ 11.52 SOURCE OF NET ASSETS At December 31, 1997, net assets consisted of: Paid-in capital ................................................................. 20,694,056 Accumulated net realized gain on investments..................................... 187,182 Net unrealized appreciation on investments....................................... 1,715,691 Net Assets............................................................... $ 22,596,929
See accompanying notes to financial statements. Statement of Operations For the Year Ended December 31, 1997
Description Amount INVESTMENT INCOME Dividends......................................................... $ 172,686 Interest.......................................................... 131,990 Other income...................................................... 6,212 Total Income............................................ 310,888 EXPENSES Investment advisory fees (Note 3)................................. 142,990 Transfer agent fees............................................... 81,746 Administration fees............................................... 65,386 Distribution fees - Class B (Note 3).............................. 55,901 Accounting fees................................................... 38,706 Registration fees................................................. 33,780 Distribution fees - Class A (Note 3).............................. 23,422 Custodian fees.................................................... 18,686 Printing expense.................................................. 15,816 Amortization of organization costs (Note 1)....................... 12,344 Service fees - Class B (Note 3)................................... 11,758 Auditing fees..................................................... 9,000 Insurance expense................................................. 2,343 Miscellaneous expense............................................. 250 Total Expenses.......................................... 512,128 Expenses waived and reimbursed by Advisor (Note 3)... (193,945) Net Expenses............................................ 318,183 Net Investment Loss..................................... (7,295) REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain from security transactions...................... 2,264,075 Net change in unrealized appreciation of investments.............. 796,018 Net realized and unrealized gain on investments......... 3,060,093 Net increase in net assets resulting from operations.... $3,052,798
See accompanying notes to financial statements. Statements of Changes in Net Assets December 31, 1997
Description Year Ended Year Ended December 31, 1997 December 31, 1996 OPERATIONS Net investment income (loss)......................................... $ (7,295) $ 84,542 Net realized gain on investments..................................... 2,264,075 164,422 Net change in unrealized appreciation of investments................. 796,018 903,008 Net increase in net assets resulting from operations.............. 3,052,798 1,151,972 DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income: Class A....................................................... 0 (66,939) Class B....................................................... 0 (23,283) Distributions from net capital gains: Class A....................................................... (1,122,228) 0 Class B....................................................... (1,119,087) 0 Net decrease in net assets resulting from distributions.............. (2,241,315) (90,222) CAPITAL SHARE TRANSACTIONS Shares sold:......................................................... Class A....................................................... 2,955,444 2,096,319 Class B....................................................... 6,742,913 3,317,594 Shares redeemed:..................................................... Class A....................................................... (1,215,244) (1,323,483) Class B....................................................... (541,565) (302,910) Shares reinvested:................................................... Class A....................................................... 1,075,532 63,849 Class B....................................................... 1,079,174 22,639 Increase in net assets derived from capital share transactions (a)... 10,096,254 3,874,008 Total increase in net assets................................. 10,907,737 4,935,758 NET ASSETS Beginning of year.................................................... 11,689,192 6,753,434 End of year (including undistributed net investment income........... of $0 and $0, respectively).......................................... $22,596,929 $11,689,192 (a) Transactions in capital stock were: Shares sold: Class A................................................... 232,439 201,664 Class B................................................... 542,712 314,924 Shares redeemed: Class A................................................... (96,627) (126,226) Class B................................................... (43,891) (28,244) Shares reinvested: Class A................................................... 88,668 5,687 Class B................................................... 89,856 2,022 Increase in shares outstanding............................ 813,157 369,827
See accompanying notes to financial statements. Financial Highlights - Class A The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Description For the For the For the For the Year Ended Year Ended Year Ended Year Ended December December December December 31, 1997 31, 1996 31, 1995 31, 1994* Net Asset Value, Beginning of Period............. $ 11.24 $ 10.07 $ 9.66 $ 10.00 Income From Investment Operations: Net investment income......................... 0.02 0.10 0.11 0.06 Net gains (losses) on securities (both realized and unrealized)............. 2.37 1.17 0.66 (0.34) Total from investment operations......... 2.39 1.27 0.77 (0.28) Less Distributions: Distributions from net investment income... 0.00 (0.10) (0.11) (0.06) Distributions from net capital gains....... (1.38) 0.00 (0.25) 0.00 Total distributions................. (1.38) (0.10) (0.36) (0.06) Net Asset Value, End of Period................... $ 12.25 $ 11.24 $ 10.07 $ 9.66 Total Return..................................... 21.35%/1/ 12.59% 7.93% (2.84%) Ratios/Supplemental Data Net assets, end of period (in 000s)........... $ 11,208 $ 7,760 $ 6,133 $ 2,217 Ratio of expenses to average net assets: Before expense reimbursement............. 2.75% 3.70% 5.84% 18.62%/2/ After expense reimbursement.............. 1.60% 1.60% 1.60% 1.60%/2/ Ratio of net investment income (loss) to average net assets: Before expense reimbursement............. (0.90%) (1.05%) (2.96%) (15.49%)/2/ After expense reimbursement.............. 0.25% 1.05% 1.28% 1.53%/2/ Portfolio turnover rate....................... 136.36% 93.08% 34.12% 8.31% Average commission rate paid.................. $ 0.0580 $ 0.0593 N/R/3/ N/R/3/
* Class A Shares commenced investment operations on March 21, 1994. /1/ Total return calculation does not reflect sales load. /2/ Annualized. /3/ Not Required. See accompanying notes to financial statements. Financial Highlights - Class B The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Description For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 1997 1996 1995 Net Asset Value, Beginning of Period.......... $ 11.22 $ 10.08 $ 10.49 Income From Investment Operations: Net investment income (loss)............... (0.03) 0.07 0.11 Net gains (losses) on securities (both realized and unrealized).......... 2.32 1.14 (0.16) Total from investment operations...... 2.29 1.21 (0.05) Less Distributions: Distributions from net investment income 0.00 (0.07) (0.11) Distributions from net capital gains.... (1.38) 0.00 (0.25) Total distributions.............. (1.38) (0.07) (0.36) Net Asset Value, End of Period................ $ 12.13 $ 11.22 $ 10.08 Total Return.................................. 20.50%/1/ 11.98%/1/ (0.46%)/1/ Ratios/Supplemental Data Net assets, end of period (in 000s)........ $ 11,389 $ 3,929 $ 620 Ratio of expenses to average net assets: Before expense reimbursement.......... 3.41% 4.30% 6.44%/2/ After expense reimbursement........... 2.26% 2.20% 2.20%/2/ Ratio of net investment income (loss) to average net assets: Before expense reimbursement.......... (1.56%) (1.65%) (3.56%)/2/ After expense reimbursement........... (0.41%) 0.45% 0.68%/2/ Portfolio turnover rate.................... 136.36% 93.08% 34.12% Average commission rate paid............... $ 0.0580 $ 0.0593 N/R/3/
* Class B Shares commenced investment operations on August 25, 1995. /1/ Total return calculation does not reflect redemption fee. /2/ Annualized. /3/ Not Required. See accompnaying notes to financial statements. Notes to Financial Statements December 31, 1997 Note 1 - Significant Accounting Policies The Timothy Plan (the "Fund" ) is organized as a series Delaware business trust pursuant to a trust agreement dated December 16, 1993. The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end diversified management investment company. The Fund's primary objective is long-term capital growth, with a secondary objective of current income. The Fund seeks to achieve its investment objective by investing primarily in common stocks and ADRs while abiding by ethical standards established for investments by the Fund. The Fund currently consists of one series comprised of two separate classes of shares (Class A shares and Class B shares) which vary with respect to sales charges, distribution costs, voting rights and dividends. Prior to September 22, 1997, Class A and Class B shares were known as the Institutional Class and Retail Class, respectively. Effective September 22, 1997, Class A changed its load structure from no-load to a front-end sales load, and Class B shares changed from a front end-sales load to a contingent deferred sales charge ("CDSC"). Each class is also subject to different 12b-1 Plan expenses. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles for investment companies. A. Security Valuation. Investments in securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the period. Unlisted securities, or listed securities in which there were no sales, are valued at the mean of the closing bid and ask prices. Short-term obligations with remaining maturities of 60 days or less are valued at cost plus accrued interest which approximates market value. B. Investment Income and Securities Transactions. Security transactions are accounted for on the date the securities are purchased or sold (trade date). Cost is determined and gains and losses are based on the identified cost basis for both financial statement and federal income tax purposes. Dividend income and distributions to shareholders are reported on the ex-dividend date. Interest income and expenses are accrued daily. C. Net Asset Value Per Share. Net asset value per share of the capital stock of the Fund is determined daily as of the close of trading on the New York Stock Exchange by dividing the value of its net assets by the number of Fund shares outstanding. Net Asset Value is calculated separately for each class of the Fund based on expenses applicable to a particular class. The net asset value of the classes may differ because of different fees and expenses charged to each class. D. Organization Costs. Organization costs are being amortized on a straight line basis over five years from inception. E. Federal Income Taxes. It is the policy of the Fund to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. F. Use of Estimates. In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 - Purchases and Sales of Securities Purchases and sales of securities, other than short-term investments, aggregated $27,264,508 and $19,303,970 respectively, for the year ended December 31, 1997. Note 3 - Investment Management Fee and Other Transactions with Affiliates Timothy Partners, LTD., ("TPL") is the investment advisor for the Fund pursuant to an investment advisory agreement (the "Agreement") effective March 21, 1994, as amended August 28, 1995. Under the terms of the Agreement, TPL receives a fee, accrued daily and paid monthly, at an annual rate of 0.85% of the average daily net assets of the Fund. TPL has voluntarily agreed to waive its fees to the extent total annualized expenses, inclusive of distribution expenses, exceed 1.60%, with respect to Class A, and 2.35%, with respect to Class B, of the Fund's average daily net assets. For the year ended December 31, 1997, advisory fees of $137,459 were waived by TPL and TPL reimbursed the Fund $56,486. Notes to Financial Statements December 31, 1997 Effective July 1, 1997, the Fund engaged TPL to act as sole underwriter and accordingly revised the distribution plans (the "Plans") on behalf of each class pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended. The revised Plans provide that the Fund will reimburse TPL or others for expenses actually incurred in the promotion or distribution of shares. Under the Class A Plan, the Fund will reimburse TPL a fee at an annual rate of 0.25%, payable monthly, of the average daily net assets attributable to such class of shares. Under the Class B Plan, the Fund will reimburse TPL a fee at an annual rate of 1.00%, payable monthly, of which, 0.25% may be a service fee, of the average daily net assets attributable to such class of shares. For the period from July 1, 1997 to December 31, 1997, the Fund reimbursed TPL $58,563 for distribution costs incurred. Prior to July 1, 1997, FPS Broker Services, Inc. ("FPSB") acted as sole underwriter to the Fund and the previous plans provided that the Fund would reimburse FPSB or others for expenses actually incurred in the promotion and distribution of shares at the same annual rates noted above. For the period January 1, 1997 to June 30, 1997, the Fund reimbursed FPSB $32,518 for distribution costs incurred. Certain Officers and Trustees of the Fund are affiliated persons of TPL. Note 4 - Special Meeting of Shareholders (unaudited) A special meeting of shareholders was held on January 31, 1997, to elect the seven members to the Board of Trustees, to vote on a new sub-investment advisory agreement among the Fund, Timothy Partners, LTD., and Awad & Associates, a division of Raymond James & Associates, Inc., and to vote on a revised 12b-1 distribution plan on behalf of Class B only. The results were as follows: For the election of the seven members to the Board of Trustees:
Votes for Votes Withheld Arthur D. Ally 514,374 9,727 Joseph E. Boatwright 514,638 9,463 Daniel D. Busby 514,839 9,462 Philip B. Crosby 514,537 9,564 Wesley W. Pennington 514,840 9,261 Mark Schweizer 514,840 9,261 Jock M. Sneddon 514,537 9,564
For the election of the new sub-investment advisory agreement: Grant: 512,562 Withhold: 11,539 For the election of the revised 12b-1 distribution plan on behalf of Class B only: Grant: 166,112 Withhold: 4,272 At a meeting held March 4, 1997, the Board of Trustees appointed a new independent Trustee to fill the vacancy created by the death of Mr. Mark Schweizer. Following a review of possible candidates, the current independent Trustees nominated and the full Board subsequently elected Mr. Scott Fehrenbacher as a Trustee, to serve in such capacity, unless earlier removed or until the election and qualification of his successor. Federal Tax Status of Dividends (unaudited) The following information represents the tax status of dividends and distributions paid by The Timothy Plan during the fiscal year ended December 31, 1997. The information is presented to meet regulatory requirements. Of the $1.376 per share paid to you in cash or reinvested into your account for the fiscal year ended December 31, 1997, $1.114 was derived from short-term capital gains, $0.241 from capital gains taxable at a maximum rate of 28%, and $0.021 from capital gains taxable at a maximum rate of 20%. Further reporting instructions will be included with your 1099-DIV forms. Timothy Plan Performance Graphs Illustration of $10,000 Investment
The Timothy Plan Russell 2000 Index Class A S&P 500 Index 3/21/94 10,000.00 9,450.00 10,000.00 6/94 8,933.05 9,005.85 9,604.80 9/94 9,521.54 9,289.35 10,073.91 12/94 9,307.41 9,181.27 10,071.81 3/95 9,694.41 9,361.86 11,051.35 6/95 10,544.26 9,837.08 12,104.94 9/95 11,538.72 10,036.67 13,066.28 12/95 11,746.53 9,909.08 13,852.38 3/96 12,296.74 10,263.33 14,595.67 6/96 12,885.61 10,469.97 15,249.89 9/96 12,877.43 10,401.09 15,721.38 12/96 13,480.43 11,156.50 17,030.66 3/97 12,735.05 11,077.09 17,488.23 6/97 14,735.49 12,595.72 20,539.12 9/97 16,871.26 13,895.99 22,077.34 12/97 16,246.70 13,538.28 22,711.09
Average Annual Total Return 1 Year: 14.67% Since Inception: 8.34% Past performance is not indicative of future results. Note 1: Effective September 22, 1997, Class A began charging a front-end sales charge on purchases. This front-end sales charge is reflected in the returns. Note 2: The Russell 2000 has been determined to be the most appropriate index to be used for comparative purposes. In the future, the Russell 2000 will be the only index compared to the Fund.
The Timothy Plan Russell 2000 Index Class B S&P 500 Index 8/25/95 10,000.00 10,000.00 10,000.00 9/95 10,197.79 10,066.73 10,447.89 12/95 10,381.46 9,954.12 11,076.46 3/96 10,867.72 10,299.75 11,670.80 6/96 11,388.16 10,487.38 12,193.92 9/96 11,380.93 10,398.50 12,570.92 12/96 11,913.85 11,147.05 13,617.83 3/97 11,255.09 11,057.64 13,983.71 6/97 13,023.06 12,528.02 16,423.22 9/97 14,910.63 13,799.70 17,653.19 12/97 14,358.65 13,131.85 18,159.94
Average Annual Total Return 1 Year: 15.50% Since Inception: 12.27% Past performance is not indicative of future results. Note 1: The Fund returns are net of the CDSC charge placed on redemptions. Effective September 22, 1997, Class A began charging a front-end sales charge on purchases. This front-end sales charge is reflected in the returns. Note 2: As of September 22, 1997 a front-end sales load was no longer placed on purchases. For fiscal years prior to that date, a front-end sales load would have affected the performance of the Fund. Note 3: The Russell 2000 has been determined to be the most appropriate index to be used for comparative purposes. In the future, the Russell 2000 will be the only index compared to the Fund. Report of Independent Certified Public Accounts Board of Trustees and Shareholders The Timothy Plan Winter Park, Florida We have audited the accompanying statement of assets and liabilities of The Timothy Plan, including the schedule of investments, as of December 31, 1997 and the related statement of operations for the year then ended, and the statement of changes in net assets for each of the two years then ended and the financial highlights for each of the three years then ended and for the period March 21, 1994 (commencement of operations) to December 31, 1994. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Timothy Plan as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years then ended and the financial highlights for each of the three years then ended and for the period March 21, 1994 to December 31, 1994, in conformity with generally accepted accounting principles. /s/ Tait, Weller & Baker Philadelphia, Pennsylvania January 16, 1998 The Timothy Plan 1304 West Fairbanks Avenue Winter Park, FL 32789 Board of Trustees Arthur D. Ally Joseph E. Boatwright Daniel D. Busby Philip B. Crosby Scott Fehrenbacher Wesley W. Pennington Jock M. Sneddon Officers Arthur D. Ally, President Joseph E. Boatwright, Secretary Wesley W. Pennington, Treasurer Investment Advisor Timothy Partners, LTD. 1304 West Fairbanks Avenue Winter Park, FL 32789 Distributor Timothy Partners, LTD. 1304 West Fairbanks Avenue Winter Park, FL 32789 Transfer Agent FPS Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406 Auditors Tait, Weller & Baker Eight Penn Center Plaza, Suite 800 Philadelphia, PA 19103 Legal Counsel Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 For additional information or a prospectus, please call: 1-800-846-7526 Visit the Timothy Plan web site on the Internet at: www.timothyplan.com This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. [PHOTO] T H E ============ TIMOTHY ============ P L A N (R) Annual Report December 31, 1997 -----END PRIVACY-ENHANCED MESSAGE-----