TIMOTHY PLAN, 485APOS, 1998-04-16

TIMOTHY PLAN
485APOS, 1998-04-16

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<PAGE>

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. 8 [X]
_______

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]

Amendment No. 9 [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: Dottie Allison, Esq.
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103

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:

[X] ON APRIl 16, 1998 PURSUANT TO PARAGRAPH (A)(1).

================================================================================

As filed with the U.S. Securities and Exchange
Commission on April 16, 1998
<PAGE>

CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>

Part A
Item No. Prospectus Caption
- -------- ------------------
<S> <C>

1. Cover Page............................... Cover Page

2. Synopsis................................. Prospectus Summary 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......... Alternative Purchase Plan, 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
- --------- -----------------------
<S> <C>
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
</TABLE>

Page 2
<PAGE>

<TABLE>

<S> <C>
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
</TABLE>

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. 7 to the Registration Statement.

Page 3
<PAGE>

PROSPECTUS FOR
THE TIMOTHY PLAN
CLASS A SHARES
CLASS B SHARES
MAY 1, 1998

- --------------------------------------------------------------------------------

Distributed By:
Timothy Partners, Ltd. 1304 West Fairbanks Avenue Winter Park, Florida 32789
(800) 846-7526
- --------------------------------------------------------------------------------

THE TIMOTHY PLAN (the "Trust") is an open-end diversified management investment
company. The Trust was organized as a series Delaware business trust and
currently offers shares of two series, designed to offer investors investment
opportunities that best meet their needs. This Prospectus pertains only to The
Timothy Plan series (the "Fund") of the Trust.

The primary objective of the Fund is long-term capital growth and the 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"). There is no
assurance that the Fund's objectives will be achieved.

The Fund currently offers two classes of shares: "CLASS A" shares (formerly,
Institutional Class) and "CLASS B" shares (formerly, Retail Class)
(collectively, the "Classes"). CLASS A shares may be purchased at the net asset
value per share, plus any applicable front-end sales charge. (See "Purchasing
Class A Shares" under "Alternative Purchase Plan"). CLASS B shares may be
purchased at the net asset value per share without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC"), which may be imposed
on redemptions made within five years of purchase. (See "Purchasing Class B
Shares" under "Alternative Purchase Plan"). Both Classes of shares are subject
to different 12b-1 Plan expenses. (See "Plans of Distribution" under "Management
of Funds"). These alternatives permit an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase, the
length of time the investor expects to hold the shares and other circumstances.
(See "Factors to Consider in Choosing a Class of Shares" under "Alternative
Purchase Plan").

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing in the Fund. 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 May 1, 1998, as amended from time
to time, 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 U.S. SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

Visit The Timothy Plan web site on the Internet at:
WWW.TIMOTHYPLAN.COM

Page 4
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................

Expenses of the Fund..................................................

Financial Highlights..................................................

The Fund..............................................................

Investment Objectives and Policies....................................

Risk Factors..........................................................

Investment Restrictions...............................................

Management of the Fund................................................

Alternative Purchase Plan.............................................

How to Purchase Shares................................................

How to Redeem Shares..................................................

Retirement Plans......................................................

Shares of Beneficial Interest.........................................

Dividends, Distributions and Taxes....................................

Determination of Net Asset Value......................................

Performance...........................................................

Investment Application................................................

Automatic Investment Plan Application.................................

Application to Request to Transfer to The Timothy Plan................
</TABLE>

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 5
<PAGE>

PROSPECTUS SUMMARY
================================================================================

THE FUND THE TIMOTHY PLAN (the "Fund") is a separate series of The
Timothy Plan (the "Trust"), an open-end, diversified management
investment company established as a series Delaware business
trust.

MINIMUM There is a minimum $1,000 initial investment for each Class of
PURCHASE shares. There is no minimum investment requirement for
subsequent investments or for qualified retirement plans.

INVESTMENT The primary objective of the Fund is long-term capital growth
OBJECTIVES and the secondary objective is current income. The Fund seeks to
achieve its objectives while abiding by the ethical standards
established for investments by the Fund. As with any mutual
fund, there is no assurance that the Fund will achieve its
objectives.

INVESTMENT The Fund invests in securities issued by companies which, in
POLICY the opinion of the Fund's advisor, conduct business in
This policy precludes 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."

INVESTMENT Timothy Partners, Ltd. ("TPL") is the Fund's investment
ADVISOR advisor and Awad & Associates, a division of Raymond & James,
Inc. (the "Investment Manager"), is the Fund's investment
manager.

DISTRIBUTOR TPL is also the distributor and underwriter of the Fund's
shares.

ALTERNATIVE The Fund offers two classes of shares: CLASS A shares and CLASS
PURCHASE B shares. Each Class has its own sales charge structure.
PLAN Investors may choose the Class of shares that best suits their
investment objectives. Each Class of shares represents an
interest in the same portfolio of investments of the Fund.

CLASS A SHARES. CLASS A shares are offered at net asset value
per share plus a maximum initial sales charge of 5.50% of the
offering price, reduced on investments of $25,000 or more. CLASS
A shares are subject to an annual 12b-1 distribution and service
fee of up to 0.25% of the Fund's average daily net assets of the
attributable CLASS A shares.

CLASS B SHARES. CLASS B shares are offered at net asset value
per share and are subject to a maximum contingent deferred sales
charge of 5.00% of redemption proceeds on redemptions made
within the first year after purchase and declining thereafter to
0.00% after the fifth year. CLASS B shares are subject to a
combined annual distribution fee and service fee of up to 1.00%
of the Fund's average daily net assets attributable to CLASS B
shares. CLASS B shares will automatically convert to CLASS A
shares once the economic equivalent of a 5.50% sales charge is
recovered through the distribution fee. (See "Conversion
Feature" under "Alternative Purchase Plan").

The above information is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus.

Page 6
<PAGE>

EXPENSES OF THE FUND

The following table illustrates all expenses and fees that a shareholder of the
Fund's CLASS A and CLASS B will incur.

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... 5.50%/1/ none
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)...................................................... none none
Redemption Fees............................................................................... none/2/ none/2/
Contingent Deferred Sales Charge (CDSC)/3/.................................................... none *
(as a percentage of the lesser of original purchase price or redemption proceeds)
</TABLE>

* A CDSC is imposed on CLASS B shares purchased on or after September 26,
1997 at the following declining rates:

REDEMPTION WITHIN PERCENTAGE
- ----------------- ----------
<S> <C>
First Year............................. 5.0%
Second Year............................ 4.0%
Third Year............................. 3.0%
Fourth Year............................ 2.0%
Fifth Year............................. 1.0%
Sixth Year and thereafter.............. None
</TABLE>

/1/ CLASS A shareholders who purchased shares on or before September 22, 1997
are not subject to the front-end sales load on future purchases. No charge
is assessed on shares derived from reinvestment of dividends or capital
gains distributions. The front-end sales load is reduced for purchases of
$25,000 and over. See "Purchasing Class A Shares" under "Alternative
Purchase Plan".

/2/ UMB Bank KC NA charges $9.00 per redemption for redemptions remitted by
wire. There may be fees for redemptions made through broker\dealers,
financial institutions and others.

/3/ CLASS B shareholders who purchased shares on or before September 22, 1997
are not subject to the CDSC upon redemption of such shares.

- --------------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)

<TABLE>
<CAPTION>
CLASS A CLASS B
-------- --------
<S> <C> <C>
Management and Advisory Expenses After Expense Reimbursements*... 0.00% 0.00%
12b-1 Fees 1..................................................... 0.25% 1.00%/2/
Other Expenses After Expense Reimbursements...................... 1.35% 1.35%
----- ------
Total Operating Costs After Expense Reimbursements............... 1.60% 2.35%
</TABLE>

* The purpose of this table is to assist the investor in understanding the
various expenses that an investor in the Fund will bear directly or
indirectly. TPL has voluntarily agreed to waive its fees and reimburse the
Fund for its other expenses, so that the total annual operating expenses of
CLASS A and CLASS B will not exceed 1.60% and 2.35%, respectively, of each
Class' respective average daily net assets. Prior to September 22, 1997,
TPL had voluntarily agreed to waive its management fees and reimburse
expenses so that CLASS B'S (the former "Retail Class") total annual
operating expenses would not exceed 2.20%. CLASS B'S expense information is
restated to reflect current fees. Absent any fee waiver and expense
reimbursements, "Management and Advisory Expenses " would have been 0.85%
for each Class of shares and "Other Expenses " for CLASS A shares would
have been 2.75% and for CLASS B shares would have been 3.41%.

Page 7
<PAGE>

Example
The following example illustrates the expenses that an investor in either Class
would have directly or indirectly paid on a $1,000 investment in the Fund at the
end of the periods presented assuming a 5% annual rate of return.

1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
(1) Assuming a complete redemption at end of period
CLASS A $70* $103* $137* $235*
CLASS B $74** $103** $136** $190

(2) Assuming no redemption
CLASS A $70* $103* $137* $235*
CLASS B $24 $73 $126 $190
</TABLE>

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 CLASS A are subject to a front-end sales load and
shareholders of CLASS B are subject to a CDSC. Each Class is subject to
different 12b-1 Plan expenses; therefore, expenses and performance figures will
vary between the Classes.
- --------------------------------------------------------------------------------

1 CLASS A shares and CLASS B shares are subject to an annual 12b-1 distribution
and service fee of up to 0.25% and 1.00%, respectively, of the average daily
net assets attributable to each Class of shares (of which, up to 0.25% may be
used as a service fee). (See "Plans of Distribution" under "Management of
Fund").

2 Long-term holders of CLASS A and CLASS B 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.

* Assumes maximum front-end sales load.

** Assumes deduction of the applicable CDSC.

Page 8
<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights for each of the periods presented have been
audited by Tait, Weller & Baker, independent auditors, whose unqualified report
thereon appears in the Fund's Annual Report. The Annual Report, which is
incorporated by reference into the Statement of Additional Information, contains
additional performance information and is available upon request without charge.

The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.

<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 /*/
------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C>
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/
</TABLE>
/*/ Class A Shares commenced investment operations on March 21, 1994.
/1/ Total return calculation does not reflect sales load.
/2/ Annualized.
/3/ Not Required.

Page 9

<PAGE>

<TABLE>
<CAPTION>
Class B
------------------------------------------------
For the Year For the Year For the Period
Ended Ended Ended
December 31, December 31, December 31,
1997 1996 1995 *
------------- ------------ --------------
<S> <C> <C> <C>
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/
</TABLE>
* Class B Shares commenced investment operations on August 25, 1995.
/1/ Total return calculation does not reflect redemption fee.
/2/ Annualized.
/3/ Not Required.

Page 10

<PAGE>

THE FUND

INVESTMENT OBJECTIVES AND POLICIES

Set forth below are the investment objectives and policies of the Fund. The
investment objectives of the Fund are considered fundamental policies 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 primary 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., serves as sub-investment advisor to Timothy Partners, Ltd.
("TPL") and will select the investments for the Fund, but will not invest in
securities which TPL determines are Excluded Securities. TPL 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, TPL will compile and maintain a list of companies that it determines,
by using information gathered from its own proprietay research in addition to
material published by three Christian ministries, participate directly or
indirectly in either pornography or abortion. TPL will use its best judgment in
determining which companies, through their corporate practices in either of
these two areas, need to be placed on the Excluded Securities list. TPL also
reserves the right to exercise its best judgment 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 TPL 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). TPL retains the right to change the
ministries whose information it reviews, at its discretion.

Page 11
<PAGE>

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 ("NYSE"), 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 such temporary defensive
strategies.

TPL 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 TPL 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 TPL, in eliminating the Excluded
Securities as potential investments.

ADVISOR AND INVESTMENT MANAGER. The principals of the managing general partner
of TPL have been engaged in various aspects of the retail brokerage and
financial advisory business for over 20 years. The Investment Manager has
advised individuals, pension funds, trusts and institutions. Awad & Associates,
a division of Raymond James & Associates, Inc., currently manages approximately
$960 million in these accounts. The Investment Manager currently serves as co-
investment advisor to two other investment companies: Heritage Series Trust:
Heritage Small Cap Stock Fund and the Calvert New Visions Small Cap Fund. TPL
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 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.

Page 12
<PAGE>

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 creditworthiness 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 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 (the "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.

Page 13
<PAGE>

SMALL-CAP INVESTMENTS. The Fund may invest in small capitalization companies,
which may offer greater opportunities for growth of capital than investments in
larger, more established companies. However, investing in smaller, newer
issuers generally involves greater risks than investing in larger, more
established issuers. Companies in which the Fund is likely to invest may have
limited product lines, markets or financial resources and may lack management
depth. The securities issued by such companies may have limited marketability
and may be subject to more abrupt or erratic market movements than securities
of larger, more established companies or the market averages in general. In
addition, many small capitalization companies may be in the early stages of
development. Accordingly, an investment in the Fund may not be appropriate for
all investors.

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 TPL 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;

(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% 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% of the value of its net assets, but only to secure
borrowing for temporary or emergency purposes, such as to effect
redemptions; or

Page 14
<PAGE>

("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.

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. ("TPL") is a Florida limited partnership organized on
December 6, 1993. TPL supervises the investment of the assets of the Fund in
accordance with the objectives, policies and restrictions of the Fund. TPL
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, TPL 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). TPL retains the
right to change the ministries whose information it reviews, at its discretion.

For its services, TPL 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 TPL to: (i)
the Investment Manager for assisting in the selection of portfolio securities
for the Fund and (ii) Covenant 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. TPL's fee is higher than that charged by
other funds, but is comparable to fees charged by funds with similar investment
objectives. TPL 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"), which is the
managing general partner of TPL, located at 1304 West Fairbanks Avenue, Winter
Park, FL 32789. Mr. Ally is also an individual general partner of TPL. Neither
TPL nor its managing general partners previously has served as an advisor to any
other registered investment company, but TPL 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.

TPL and CFM have entered into an agreement dated February 23, 1994, as amended
April 23, 1996, whereby TPL 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 TPL, payable by TPL 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 shareholder of 100% of CFM.

Investment Manager
- ------------------

Awad & Associates (the "Investment Manager"), a division of Raymond James &
Associates, Inc., serves as the investment manager pursuant to a sub-investment
advisory agreement among the Fund, Timothy Partners, Ltd. and Awad & Associates,
dated January 1, 1997.

The Investment Manager has offices at 477 Madison Avenue, New York, New York
10022. The Investment Manager

Page 15
<PAGE>

is a joint venture between James D. Awad, a twenty-nine year veteran of the
investment management business, and Raymond James Financial, a diversified
financial services firm traded on the NYSE. The Investment Manager has been
retained by TPL pursuant to a sub-investment 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. TPL reviews the portfolio to insure
compliance with the Fund's ethical standards.

The Investment Manager's investment policy committee, comprised of James D.
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 part-
time 1965 and full-time since 1969, 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 $960 million in assets at
December 31, 1997 for clients on a separate account basis utilizing the same
investment methodology that it will employ for the Fund.

The Investment Manager effects 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 TPL equal to
0.42% of the average daily net assets of the Trust 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 two other
investment companies: Heritage Series Trust: Heritage Small Cap Stock Fund and
Calvert New Vision Small Cap Fund. At January 1, 1998, Awad & Associates
managed $158 million in net assets of Heritage Small Cap Stock 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. Awad & Associates managed $90
million in net assets for the Calvert New Vision Small Cap Fund and received an
advisory fee of .40% of its average daily net assets.

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 employed 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. The Investment Manager believes that
its philosophy as a small capitalization, value-oriented investor would tend to
eliminate from its investment portfolio the securities of companies directly
involved in alcohol production, tobacco production or casino gambling, companies
which would most likely have too large a capitalization and which would be much
more mature and seasoned than the companies customarily acquired for the
Investment Manager's core portfolio. Based upon the foregoing, the Investment
Manager estimates that if the screening criteria that will be used in managing
the Fund (using data available as of December 31,1996) had been applied with
respect to the accounts included below, an insignificant percentage of the
investments in the accounts at any one time over the 11-year period ended
December 31, 1996 would have been prohibited investments, and the differential
in performance would have been immaterial. It cannot be determined that future
holdings of the Fund would be substantially identical to those in the otherwise
similar accounts managed by the Investment Manager.

These performance figures include the results of accounts exclusively managed by
the Fund's portfolio manager, Jim Awad, while he was employed at a previous
firm, BMI Capital, for the period from 1/1/86 through 3/12/92. These results are
shown net of management fees and commissions. The results presented from 3/13/92
forward represent only those accounts managed exclusively by Jim Awad at Awad &
Associates through Raymond James & Associates, and these results are shown net
of the highest wrap fee applicable to the accounts (which includes management
fees and commissions). These figures are a time-weighted average for the entire
period, all of which would not be duplicated in any individual account and would
not necessarily result in the same return for the investors. 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 the Code; such conditions, if applicable,
may have lowered the returns for the separately managed accounts. The
performance presented does not represent the historical performance of the Fund
and is not indicative of the Fund's future performance.

Page 16
<PAGE>

Source: All performance data was supplied by TPL and the Investment Manager.

AVERAGE ANNUAL TOTAL RETURN
===========================
<TABLE>
<CAPTION>
COMPOSITE PAST PERFORMANCE OF PAST PERFORMANCE OF PAST PERFORMANCE OF
THROUGH PAST PERFORMANCE THE TIMOTHY THE TIMOTHY OF RUSSELL 2000
- ------- OF AWAD & ASSOCIATES PLAN CLASS A/1/ PLAN CLASS B/1/ INDEX
AND BMI CAPITAL --------------- --------------- -----
---------------
WITH WITHOUT WITH WITHOUT
---- ------- ---- -------
SALES Load SALES LOAD CDSC CDSC
----------- ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1997 25.7% 14.7% 21.4% 15.5% 20.5% 22.4%
1996 15.4% 6.4% 12.6% 7.0% 12.0% 16.5%
1995 45.7% 2.0% 7.9% -5.5% -0.5% 28.5%
1994 2.4% -8.2% -2.8% N/A N/A -1.9%
1993 10.3% N/A N/A N/A N/A 18.9%
1992 13.3% N/A N/A N/A N/A 18.4%
1991 39.8% N/A N/A N/A N/A 46.0%
1990 -13.2% N/A N/A N/A N/A -19.5%
1989 9.7% N/A N/A N/A N/A 16.2%
1988 26.0% N/A N/A N/A N/A 24.9%
1987 -5.4% N/A N/A N/A N/A -10.8%
1986 17.6% N/A N/A N/A N/A 4.0%

ANNUALIZED RETURNS THROUGH DECEMBER 31, 1997
- ---------------------------------------------

One Year 25.7% 14.7% 21.4% 15.5% 20.5% 22.4%
Three Years 28.2% 11.7% 13.8% N/A N/A 22.3%
Five Years 17.1% N/A N/A N/A N/A 16.4%
Ten Years 16.3% N/A N/A N/A N/A 15.8%
</TABLE>

Notes:
------
1: "Past Performance of the Fund" relates to the Institutional Class and
Retail Class shares of the series of the Trust known as The Timothy Plan.
Effective September 26, 1997, the Institutional Class and Retail Class
shares were redesignated as Class A and Class B, respectively.

2: The annualized return is calculated from monthly data, allowing for
compounding. The formula used is in accordance with the acceptable methods
set forth by the Association for Investment Management Research, the Bank
Administration Institute and the Investment Council Association of America.
Market value of the accounts was derived from the sum of the accounts'
total assets, including cash, cash equivalents, short-term investments and
securities valued at current market prices.

3: The Russell 2000 Index is an unmanaged index of common stock prices
comprised of the smallest 2000 stocks in the Russell 3000 Index, which is
an annual ranking of 3000 common stocks by market capitalization. The
Russell 2000 Index represents approximately 10% of the total market
capitalization of the Russell 3000 Index. The Russell 2000 Index is
generally considered representative of securities similar to those invested
in by the Investment Manager for the purpose of the composite performance
numbers set forth above.

4: The Investment Manager's average annual management fee while at BMI
Capital over the period 1/1/82 - 3/12/92 was 1% or 100 basis points. During
this period, fees on the Investment Manager's individual accounts ranged
from 0.5% to 1% (50 basis points to 100 basis points). The Investment
Manager's performance figures reported are net of commissions and
management fees.

5: The Composite Past Performance of Awad & Associates reported in the
preceding table for the period 3/13/92 -- 12/31/97 was based on a universe
of "wrap fee" accounts managed for various broker/dealers which are
coordinated through Raymond James & Associates. The total value of these
accounts at 12/31/97 was approximately $197 million out of a total client
base of $960 million. The performance figures in the table represent all
accounts that were managed with investment strategies and objectives
substantially similar to those of the Fund. The performance

Page 17
<PAGE>

figures are shown net of the highest wrap fee applicable to the accounts (which
includes all management fees and commissions paid to Raymond James &
Associates). The performance figures reported are net of those wrap fees.

UNDERWRITER
- -----------

Timothy Partners, Ltd. ("TPL") 1304 West Fairbanks Avenue, Winter Park, Florida,
was engaged pursuant to an agreement effective July 1, 1997 to act as
underwriter for the Fund. 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. TPL also acts as investment advisor for the Fund. TPL
is not compensated for providing underwriting services to the Fund.

PLANS OF DISTRIBUTION
- ---------------------

The Fund has adopted two plans of distribution ("CLASS A PLAN" and "CLASS B
PLAN") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended, whereby it may reimburse TPL or others for expenses actually incurred
by TPL or others in the promotion and distribution of the shares of each
respective Class ("distribution expenses") and servicing its shareholders by
providing personal services and/or maintaining shareholder accounts ("service
fees").

Under the CLASS A PLAN, the Fund reimburses TPL and others for distribution
expenses at an annual rate of 0.25% (of which, the full amount may be service
fees), payable on a monthly basis, of the Fund's aggregate average daily net
assets attributable to CLASS A shares.

Under the CLASS B PLAN, the Fund reimburses TPL and others for distribution
expenses and service fees at an annual rate of 1.00% (0.25% of which is a
service fee) payable on a monthly basis, of the Fund's aggregate average daily
net assets attributable to CLASS B shares. Amounts paid under the CLASS B PLAN
are paid to TPL to compensate it for the services provided and the expenses
borne by TPL and others in the distribution of CLASS B shares, including the
payment of commissions for sales of CLASS B shares. The CLASS B PLAN is
designed to permit an investor to purchase such shares without the assessment of
a front-end sales load and at the same time permit the distributor to compensate
authorized dealers with respect to such shares. In this regard, the purpose and
function of the combined CDSC and distribution fee is to provide for the
financing of the distribution of CLASS B shares.

Other 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 Fund shares.

All expenses of distribution and marketing in excess of the maximum amounts
permitted by the CLASS A PLAN and CLASS B PLAN per annum will be borne by TPL
and any amounts paid for the above services will be paid pursuant to a servicing
or other agreement. The CLASS A PLAN and CLASS B PLAN also cover any payments
made by the Fund, TPL, the Investment Manager, or other parties on behalf of the
Fund, TPL, or the Investment Manager,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
- -------------

Declaration Service Company ("DSC"), 555 North Lane, Suite 6160, Conshohocken,
PA 19428, is the Fund's administrator pursuant to an Agreement with the Fund
dated May 1, 1998. Under the agreement, DSC receives a fee for these services.

CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING/PRICING AGENT
- -----------------------------------------------------------
Star Bank, 425 Walnut Street, M.L. 6118, Cincinnati, OH 45202-1118, is the
custodian for the securities and cash of the Fund.

DSC 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.

DSC also performs certain accounting and pricing services for the Fund. This
includes the daily calculation of the Fund's net asset value.

EXPENSES
- --------

Expenses attributable to the Fund, but not a particular Class, will be allocated
to each Class on the basis of relative net assets. Except as indicated above.
The Fund is responsible for the payment of its expenses, other than those borne
by TPL. These expenses may include, but are not limited to: (a) management
fees; (b) the charges and expenses of the

Page 18
<PAGE>

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.

ALTERNATIVE PURCHASE PLAN

The Alternative Purchase Plan permits an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase and
the length of time the investor expects to hold the shares. The primary
difference between the Classes lies in their sales charge structures and ongoing
expenses. CLASS A and CLASS B shares represent interests in the same portfolio
of investments of the Fund.

PURCHASING CLASS A SHARES
- -------------------------

APPLICABLE SALES CHARGES

CLASS A 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
<TABLE>
<CAPTION>

AS A % OF AS A % OF DEALER CONCESSION
OFFERING NET AMOUNT AS A PERCENTAGE OF
AMOUNT OF YOUR INVESTMENT PRICE INVESTED OFFERING PRICE
- ------------------------- ----- -------- --------------
<S> <C> <C> <C>
$1,000 but under $25,000...... 5.50% 5.82% 5.25%
$25,000 but under $50,000..... 4.25% 4.44% 4.00%
$50,000 but under $100,000.... 3.00% 3.09% 2.75%
$100,000 but under $250,000... 2.00% 2.04% 1.75%
$250,000 but under $500,000... 1.00% 1.01% 0.75%
$500,000 or over.............. 0.00% 0.00% 0.00%

- --------------------------------------------------------------------------------
</TABLE>

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.

EXEMPTIONS FROM SALES CHARGES

CLASS A shareholders who purchased shares on or before September 22, 1997 are
not subject to the sales charge on past or future purchases. In addition, the
Fund will waive sales charges for purchases by fee-based Registered Investment
Advisers for their clients, broker/dealers with wrap fee accounts, registered
brokers for their personal investment accounts, employees and employer related
accounts of the Advisor and for an organization's retirement plan that places
either (i) 200 or more participants or (ii) $300,000 or more of combined
participant initial assets into the Fund. Shares of CLASS A purchased under
the above circumstances will be issued at the net asset value next determined
after receipt of the purchase order in proper

Page 19
<PAGE>

form by the transfer agent.

REDUCED SALES CHARGES

The sales charge for purchases of CLASS A shares of the Fund may be reduced
through Rights of Accumulation or Letter of Intent. To qualify for a reduced
sales charge, investors must so notify their authorized dealer, the Fund or the
Fund's transfer agent or 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 in related accounts 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 5.50% of the indicated
amount in escrow for payment of a higher sales load if the full 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.

PURCHASING CLASS B SHARES
- -------------------------

CONTINGENT DEFERRED SALES CHARGE

A contingent deferred sales charge (CDSC) is imposed on certain redemptions of
CLASS B shares. Because CLASS B shares are sold without an initial sales
charge, the entire amount of an investor's purchase payment is invested in the
Fund. CLASS B shares which are held for five years or more after purchase
(calculated from the last day of the month in which the shares were purchased)
will not be subject to any charge upon redemption. Shares redeemed sooner than
five years after purchase may, however, be subject to a contingent deferred
sales charge upon redemption. The charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no charge is assessed on
shares derived from reinvestment of dividends or capital gains distributions.

The amount of the CDSC, if any, varies depending on the number of years from the
time of payment for the purchase of CLASS B shares until the time of redemption
of such shares. Solely for purposes of determining the number of years from the
time of any payment for the purchases of shares, all payments during a month are
aggregated and deemed to have been made on the last day of the month. The amount
of any applicable CDSC will be calculated by multiplying the lesser of the
original purchase price or the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below.

REDEMPTION WITHIN PERCENTAGE
----------------- ----------
<S> <C>
First Year.......................... 5.0%
Second Year......................... 4.0%
Third Year.......................... 3.0%
Fourth Year......................... 2.0%
Fifth Year.......................... 1.0%
Sixth Year and thereafter........... None
</TABLE>

In determining whether a CDSC is applicable to a redemption, it is assumed that
the redemption is first, of any shares in the shareholder's account that are not
subject to a CDSC; second, of shares held for over five years or shares acquired
pursuant to reinvestment of dividends or distributions, and third, of shares
held longest during the five-year period.

A commission or transaction fee of 4.00% of the purchase amount will be paid by
the Fund's distributor to authorized dealers at the time of purchase.
Additionally, the distributor may, from time to time, pay additional promotional
incentives in the form of cash or other compensation to authorized dealers that
sell CLASS B shares of the Fund.

Page 20
<PAGE>

CONTINGENT DEFERRED SALES CHARGE WAIVERS

The CDSC is waived on redemptions of CLASS B shares (i) following the death or
disability (as defined in the Code) of a shareholder; (ii) in connection with
certain distributions from an IRA or other retirement plans; (iii) pursuant to
the Fund's Systematic Cash Withdrawal Plan, but limited to 10% annually of the
initial value of the account; and (iv) effected pursuant to the right of the
Fund to liquidate a shareholder's account as described under "How to Redeem
Shares."

CONVERSION FEATURE

CLASS B shares automatically convert to CLASS A shares once the economic
equivalent of a 5.50% sales charge is recovered by the Fund for each investment
account. The sales charge is recoverable by the Fund through the distribution
fee paid pursuant to the CLASS B PLAN. The purpose of the conversion feature is
to relieve the long-time shareholders FROM THE higher distribution fee
associated with the CLASS B shares, once distributors have been adequately
compensated for the higher distribution expenses attributable to the CLASS B
shares through payments made pursuant to the CLASS B PLAN. Such conversion will
be on the basis of the relative net asset values per share, without the
imposition of any sales load, fee or other charge.

CLASS B shares acquired through reinvestment of dividends will convert to CLASS
A shares pro rata with CLASS B shares not acquired through dividend
reinvestment.

FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES

In deciding which Class of shares to purchase, investors should take into
consideration their investment goals, present and anticipated purchase amounts
and time horizons. Investors should consider whether, during the anticipated
life of their investment in the Fund, the accumulated distribution fees and the
CDSC on CLASS B shares prior to the conversion would be less than the initial
sales charge on CLASS A shares purchased at the same time, and to what extent
such differential would be offset by the higher dividends per share on CLASS A
shares. To assist investors in making this determination, investors should
refer to the Example under " Expenses of the Fund," regarding the effect of the
charges applicable to each Class of shares. In this regard, CLASS A shares may
be more beneficial to the investor who qualifies for reduced initial sales
charges or purchase at net asset value, as described under "Alternative Purchase
Plan - Purchasing Class A Shares."

Over time, the cumulative expense of the 1.00% annual service and distribution
fees on the CLASS B shares of the Fund will approximate or exceed the expense of
the maximum 5.50% initial sales charge plus the 0.25% annual distribution and
service fee on the CLASS A shares of the Fund. CLASS A shares are subject to a
lower distribution fee and, accordingly, receive correspondingly higher
dividends per share. However, because initial sales charges are deducted at the
time of purchase, investors in CLASS A shares do not have all their funds
invested initially and, therefore, initially own fewer shares. Other investors
might determine that it is more advantageous to purchase CLASS B shares and have
all their funds invested initially, while remaining subject to a CDSC. Ongoing
distribution fees on CLASS B shares are offset to the extent of the additional
funds originally invested and any return realized on those funds. However,
there can be no assurance as to the return, if any, which will be realized on
such additional funds.

CLASS A shares may be appropriate for investors who prefer to pay the sales
charge up front, want to take advantage of the reduced sales charges available
on larger investments, wish to maximize their current income from the start,
prefer not to pay redemption charges or have a longer-term investment horizon.
CLASS B shares may be appropriate for investors who wish to avoid a front-end
sales charge, put 100% of their investment dollars to work immediately or have a
longer-term investment horizon. CLASS B shareholders pay a CDSC if they redeem
during the first five years after purchase, unless a sales charge waiver
applies. Investors expecting to redeem during this period should consider the
cost of the applicable CDSC in addition to the annual CLASS B service and
distribution fee, as compared with the cost of the applicable initial sales
charge and annual service and distribution fee applicable to CLASS A shares.

HOW TO PURCHASE SHARES

GENERAL
- -------
Shares of the Fund may be purchased directly from the Fund or through authorized
dealers at the net asset value per share, plus the applicable sales charge for
CLASS A shares and at the net asset value per share for CLASS B shares. While
no sales charge is imposed at the time CLASS B shares are purchased, a CDSC
charge may be imposed at the time of redemption. (See "Purchasing Class B
Shares" under "Alternative Purchase Plan"). 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

Page 21
<PAGE>

by a third-party. The minimum initial investment for CLASS A shares and CLASS B
shares is $1,000 with no minimum for subsequent investments. The Fund reserves
the right to vary the initial investment minimum and minimums for additional
investments at any time. There is no minimum initial investment requirement for
qualified retirement plans.

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 Declaration Service
Company, P.O. Box 844, Conshohocken, PA 19428-0844. All checks for purchase of
shares must be drawn on U.S. banks and be made payable to the Fund 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 to the address set forth
above. Please enclose the remittance portion of the confirmation of your
previous investment or indicate on your check or a separate piece of paper your
name, address and account number.

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 of purchase. Minimums of broker/dealers or accounts opened through a
fund network may apply.

Wire orders for shares of the Fund received by DSC 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.

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 Systemto:

Star Bank
ABA # 042000013
For: The Timothy Plan
A/C #
Further Credit: Your Timothy Plan A/C NO.
FBO: Your Name

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 Declaration Service
Company at (800) 662-0201.

Page 22
<PAGE>

HOW TO REDEEM SHARES

Fund shares may be redeemed at their net asset value (subject to any applicable
CDSC for CLASS B shares) 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.

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 TPL 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 555 North Lane, Suite 6160, Conshohocken, PA 19428.

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

Page 23
<PAGE>

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, accompanied by a signature
guarantee, 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.

SYSTEMATIC CASH WITHDRAWAL PLAN
- -------------------------------

The Fund offers a Systematic Cash Withdrawal Plan ("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.

CLASS B shareholders who establish a Withdrawal Plan may redeem up to 10%
annually of the shareholder's initial account balance without incurring a
contingent deferred sales charge. Initial account balance means the amount of
the shareholder's investment at the time the election to participate in the
Withdrawal Plan is made. (See "Purchasing Class B Shares - Waiver of Contingent
Deferred Sales Charge").

REDEMPTION BY AUTOMATED CLEARING HOUSE ("ACH")
- ----------------------------------------------

A shareholder may elect to have redemption proceeds, cash distributions or
systematic cash withdrawal payments transferred to a bank, savings and loan
association or credit union that is an on-line member of the ACH system. There
are no fees charged by the Fund associated with the use of the ACH service.

ACH redemption requests must be received by the Fund's transfer agent before
4:00 p.m. New York time to receive that day's closing net asset value. ACH
redemptions will be sent on the day following the shareholder's request. The
funds from the ACH redemption will normally be available two days after the
redemption has been processed.

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

Page 24
<PAGE>

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 Retirement Plans is available
from DSC or by reviewing the Statement of Additional Information.

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. 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 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.

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 annually. 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 DSC in writing thirty days prior to record date.

Dividends paid by the Fund with respect to its CLASS A and CLASS B shares are
calculated in the same manner and at the same time. Both CLASS A and CLASS B
shares of the Fund will share proportionately in the investment income and
expenses of the Fund, except that the per share dividends of CLASS B shares will
be less than per share dividends of CLASS A shares as a result of additional
distribution expenses charged to CLASS B shares.

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
by-product 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,

Page 25
<PAGE>

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. All or a portion of any applicable 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 share of each Class of the Fund is determined by the
Fund as of the close of regular trading on each day that 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 26
<PAGE>

PERFORMANCE

From time to time the Fund may advertise performance data. Fund performance may
be shown by presenting one or more performance measurements, including average
total return and aggregate annual total return. 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 connection with investments in 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 Russell 2000 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 operating expenses of each Class. 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 CLASS A shares and CLASS B shares will differ because of
CLASS A'S front-end sales charge (when applicable) and CLASS B'S CDSC (when
applicable) and higher 12b-1 distribution expenses. 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
Semi-Annual Report dated June 30, 1997 and Annual Report dated December 31,
1997, which may be obtained without charge by contacting the Fund at (800) TIM-
PLAN.

Page 27
<PAGE>

TIMOTHY PLAN(R)

APPLICATION FOR CLASS A AND CLASS B

MAIL TO:
THE TIMOTHY PLAN C/O DECLARATION SERVICE COMPANY, P.O. BOX 844
CONSHOHOCKEN, PA 19428-0844

- ----------------------------------------------------------
BROKER DEALER: __________________________________________

REGISTERED REP: _________________________________________

BRANCH #:__________________ REP #: ____________

BRANCH NAME: ____________________________________________

BRANCH ADDRESS: _________________________________________

PHONE NUMBER: ( ) - Ext:
- ----------------------------------------------------------

1. INITIAL INVESTMENT ($1,000 minimum)
FORM OF PAYMENT
[_] Check for $_____________ enclosed. (make payable to "The Timothy Plan -
Class A or B") You must indicate which class of shares in which you
- -
wish to invest.

[_] Class A [_] Class B (Please check one.)

[_] By Wire/*1/ An initial purchase of $_____________________ was wired on
___ _______ _____ ______________________________________
Date by Name of your Bank or Broker

to account # _____________________
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.
<TABLE>
<S> <C> <C> <C>
Income Dividends (check one box/line only) [_] reinvested [_] paid in cash
Capital Gains Distributions (check one box/line only) [_] reinvested [_] paid in cash
</TABLE>

5. LETTER OF INTENT (CLASS A ONLY)
[_] I intend to purchase although I am not obligated to do so, shares of the
Fund within a 13-month period which, together with the total asset value of
shares owned, will aggregate at least (check one):
[_] $25,000 [_] $50,000 [_] $100,000 [_] $250,000 [_] $500,000

RIGHTS OF ACCUMULATION
I would like to apply Rights of Accumulation, if available, to my purchases of
Fund shares. I understand that the exercise of these rights is subject to
confirmation of my holdings by the Fund's transfer agent, Declaration Service
Company. I agree to notify Declaration Service Company of my desire to apply
these rights at the time of purchase and to provide the account numbers, names
and relationships of each person to me.

- ---------------------------------------------------------
Fund Account Title Fund Account Number

*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: Star Bank, ABA # 042000013 for credit to The Timothy Plan, AC # . Be
sure to include your name and account number on the wire.

*2 (Joint ownership with rights of survivorship unless otherwise noted).

Page 28
<PAGE>

<S> <C>

6. 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 __________.

To send cash distributions via the Automated Clearing House System ("ACH"), please contact the Fund at (800) TIM-PLAN to obtain
the proper form(s).

7. TELEPHONE PRIVILEGES See page XX of the Prospectus for more detail.
[ ] REDEEM SHARES BY TELEPHONE

I (we) authorize Declaration Service Company 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 or
Declaration Service Company 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

8. AUTOMATIC INVESTMENT PLAN (For this option - please complete and send in form on pages XX and XX of the Prospectus).

9. 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

10. 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 Declaration Service Company 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.

11. 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 laws of
(Name of Corporation)

_____________________________________and were adopted at a meeting of the Board of Directors or Trustees of the organization or
(state)
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.

</TABLE>

Page 29
<PAGE>

AUTOMATIC INVESTMENT PLAN APPLICATION
- --------------------------------------------------------------------------------

HOW DOES IT WORK?

1. Declaration Service Company, through our bank, Star Bank, 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 Declaration Service Company
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 The Timothy Plan, c/o Declaration Service Company,
P.O. Box 844, Conshohocken, PA 19428-0844

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: The Timothy Plan
c/o Declaration Service Company
P.O. Box 844
Conshohocken, PA 19428-0844

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 - [_] CLASS A OR [_] CLASS B. (Please check one).

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, Declaration Service Company 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, Declaration Service Company 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 Declaration Service Company
upon 30-days written notice or at any time by the investor by written notice to
Declaration Service Company which is received not later than 5 business days
prior to the above designed investment date.

Signature(s): ___________________________________________________________

___________________________________________________________

Page 30
<PAGE>

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
Declaration Service Company, Star Bank and payable to "THE TIMOTHY PLAN - CLASS
A or CLASS B".

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 Declaration
Service Company 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 Declaration Service
Company 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 31
<PAGE>

TIMOTHY PLAN/(R)/ BROKER DEALER: __________________________
REGISTERED REP: __________________________
BRANCH #:____________ REP #: ___________
CLASS A AND CLASS B BRANCH NAME: ____________________________
Request for Transfer BRANCH ADDRESS: _________________________
PHONE NUMBER: ( ) - Ext:

MAIL TO:
THE TIMOTHY PLAN C/O DECLARATION SERVICE COMPANY, P.O. BOX 844, CONSHOHOCKEN, PA
19428-0844

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

<TABLE>
<S> <C> <C> <C> <C>
Type of Account: [_] Individual [_] Joint [_] UGMA [_] Trust
Type of Assets: [_] Mutual Fund [_] Money Market [_] CD (Immediately/At Maturity)
[_] Securities
</TABLE>

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 [_] Class A or [_] Class B. You
must indicate which class of shares in which you wish to invest. (Please
check one.)
Mail to: The Timothy Plan, c/o Declaration Service Company, P.O. Box 844,
Conshohocken, PA 19428-0844

5. INVESTOR'S AUTHORIZATION

- ------------------------------- ----------------- -----------------------
Signature of Participant Date Signature Guarantee

Page 32
<PAGE>

THIS PAGE INTENTIONALLY LEFT BLANK.

Page 33
<PAGE>

NOTES

Page 34
<PAGE>

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
Timothy Partners, Ltd
1304 West Fairbanks Avenue
Winter Park, FL 32789

SHAREHOLDER SERVICES
Declaration Service Company
555 North Lane
Suite 6160
Conshohocken, PA 19428

CUSTODIAN
Star Bank
425 Walnut Street
M.L. 6118
Cincinnati, OH 45202-1118

LEGAL COUNSEL
Pepper, Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103

AUDITORS
Tait, Weller & Baker
Two Penn Center
Suite 800
Philadelphia, PA 19103

For Additional Information About The Timothy Plan, Please Call:
(800) TIM-PLAN

Visit The Timothy Plan web site on the Internet at:
WWW.TIMOTHYPLAN.COM
<PAGE>

PROSPECTUS FOR
THE TIMOTHY PLAN VARIABLE SERIES
MAY 1, 1998

- --------------------------------------------------------------------------------

Distributed By:
Timothy Partners, Ltd., 1304 West Fairbanks Avenue, Winter Park,
Florida 32789
(800) 846-7526
- --------------------------------------------------------------------------------

The Fund is intended to be a funding vehicle for variable annuity contracts ("VA
Contracts") offered through separate accounts of the Annuity Investors Life
Insurance Company (the "Insurance Company").

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing in the Fund through a VA
Contract offered by the Insurance Company. Investors should read and retain
this Prospectus for future reference.

More information about the Fund has been filed with the U.S. Securities and
Exchange Commission, and is contained in the "Statement of Additional
Information" dated May 1, 1998, as amended from time to time, 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).

SHARES OF THE FUND MAY BE PURCHASED ONLY BY THE SEPARATE ACCOUNTS OF INSURANCE
COMPANIES, FOR THE PURPOSE OF FUNDING VARIABLE ANNUITY CONTRACTS. THE FUND MAY
NOT BE AVAILABLE IN YOUR STATE DUE TO VARIOUS INSURANCE REGULATIONS. PLEASE
CHECK WITH YOUR INSURANCE COMPANY FOR AVAILABILITY. IF THE FUND IS NOT
AVAILABLE IN YOUR STATE, THIS PROSPECTUS IS NOT TO BE CONSIDERED A SOLICITATION.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
SEPARATE ACCOUNT OF THE SPECIFIC INSURANCE PRODUCT, WHICH ACCOMPANIES THIS
PROSPECTUS.
<PAGE>

Visit The Timothy Plan web site on the Internet at:
WWW.TIMOTHYPLAN.COM

Page 37
<PAGE>

TABLE OF CONTENTS

PAGE
<S> <C>
Prospectus Summary..............................................

The Fund........................................................

Investment Objectives and Policies..............................

Risk Factors....................................................

Investment Restrictions.........................................

Management of the Fund..........................................

Purchases and Redemptions of Shares.............................

Shares of Beneficial Interest...................................

Dividends, Distributions and Taxes..............................

Determination of Net Asset Value................................

Performance.....................................................
</TABLE>

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 38
<PAGE>

PROSPECTUS SUMMARY
================================================================================

THE FUND THE TIMOTHY PLAN VARIABLE SERIES (the "Fund") is a separate
series of The Timothy Plan (the "Trust"), an open-end,
diversified management investment company established as a
series Delaware business trust. The Fund is designed to
provide an investment vehicle for variable annuity contracts
("VA Contracts") offered by the Annuity Investors Life
Insurance Company (the "Insurance Company").

INVESTMENT The primary objective of the Fund is long-term capital
OBJECTIVES growth and the secondary objective is current income. The
Fund seeks to achieve its objectives while abiding by the
ethical standards established for investments by the Fund. As
with any mutual fund, there is no assurance that the Fund
will achieve its objectives.

INVESTMENT The Fund invests in securities issued by companies which, in
POLICY the opinion of the Fund's advisor, conduct business in
accordance with certain ethical standards. This policy
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."

INVESTMENT Timothy Partners, Ltd. ("TPL") is the Fund's investment
ADVISOR advisor and Awad & Associates (the "Investment Manager"),
a division of Raymond & James, Inc., is the Fund's
investment manager.

DISTRIBUTOR TPL is also the distributor and underwriter of the Fund's
shares.

PURCHASES Purchases and redemptions of shares may be made only by the
AND Insurance Company for its separate accounts at the
REDEMPTIONS direction of VA Contract owners. Please refer to the
prospectus of your VA Contract for information on how to
direct investments in, or redemptions from, the Fund and any
fees that may apply.

The above information is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus.

Page 39
<PAGE>

THE FUND

THE TIMOTHY PLAN (the "Trust") is an open-end, diversified management investment
company commonly known as a mutual fund. The Trust was established as a series
Delaware business trust on December 16, 1993. The Trust currently offers two
series of shares: The Timothy Plan and The Timothy Plan Variable Series. This
Prospectus only pertains to The Timothy Plan Variable Series (the "Fund").
Shares of the Fund are offered only for the purpose of funding variable annuity
contracts ("VA Contracts") offered through separate accounts of the Annuity
Investors Life Insurance Company (the "Insurance Company").

INVESTMENT OBJECTIVES AND POLICIES

Page 40
<PAGE>

advisor to Timothy Partners, Ltd. (the "TPL") and will select the investments
for the Fund, but will not invest in securities which TPL determines are
Excluded Securities. TPL 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, TPL will
compile and maintain a list of companies that it determines, by using
information gathered from its own proprietary research in addition to material
published by three Christian ministries, participate directly or indirectly in
either pornography or abortion. TPL will use its best judgment in determining
which companies, through their corporate practices in either of these two areas,
need to be placed on the Excluded Securities list. TPL also reserves the right
to exercise its best judgment 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.

Page 41
<PAGE>

RISK FACTORS

ADVISOR AND INVESTMENT MANAGER. The principals of the managing general partner
of TPL have been engaged in various aspects of the retail brokerage and
financial advisory business for over 20 years. The Investment Manager has
advised individuals, pension funds, trusts and institutions. Awad & Associates,
a division of Raymond James & Associates, Inc., currently manages approximately
$960 million in these accounts. The Investment Manager currently serves as co-
investment advisor to two other investment companies: Heritage Series Trust:
Heritage Small Cap Stock Fund and the Calvert New Visions Small Cap Fund . TPL
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.

RISKS OF CERTAIN FIXED INCOME SECURITIES

Page 42
<PAGE>

Page 43
<PAGE>

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 (the "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 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;

Page 44
<PAGE>

(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 TPL 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;

(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% 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% 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.

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. ("TPL") is a Florida limited partnership organized on
December 6, 1993. TPL supervises the investment of the assets of the Fund in
accordance with the objectives, policies and restrictions of the Fund. TPL
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, TPL 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). TPL retains the
right to change the ministries whose information it reviews, at its discretion.

Page 45
<PAGE>

For its services, TPL is paid an annual fee equal to 1.0% 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 TPL to: (i) the
Investment Manager for assisting in the selection of portfolio securities for
the Fund and (ii) Covenant 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. TPL's fee is higher than that charged by
other funds, but is comparable to fees charged by funds with similar investment
objectives. TPL has offices located at 1304 West Fairbanks Avenue, Winter Park,
FL 32789.

Certain administrative and recordkeeping services that would otherwise be
performed by the Advisor or its service providers may be performed by the
Insurance Company. The Advisor or its service providers may make payments to
the Insurance Company to defray the cost of providing these types of services.

INVESTMENT MANAGER
- ------------------
Awad & Associates (the "Investment Manager"), a division of Raymond James &
Associates, Inc., serves as the investment manager pursuant to a sub-investment
advisory agreement among the Fund, Timothy Partners, Ltd. and Awad & Associates,
dated January 1, 1997.

The Investment Manager has offices at 477 Madison Avenue, New York, New York
10022. The Investment Manager is a joint venture between James D. Awad, a
twenty-nine year veteran of the investment management business, and Raymond
James Financial, a diversified financial services firm traded on the NYSE. The
Investment Manager has been retained by TPL pursuant to a sub-investment
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. TPL reviews the portfolio to insure

Page 46
<PAGE>

compliance with the Fund's ethical standards.

The Investment Manager's investment policy committee, comprised of James D.
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 part-time
since 1965 and full-time since 1969, 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 $960 million in assets at
December 31, 1997 for clients on a separate account basis utilizing the same
investment methodology that it will employ for the Fund.

The Investment Manager effects 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 TPL equal to
0.42% of the average daily net assets of the Trust 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.

The Investment Manager currently serves as co-investment advisor to two other
investment companies: Heritage Series Trust: Heritage Small Cap Stock Fund and
the Calvert New Visions Small Cap Fund. At January 1, 1998, Awad & Associates
managed $158 million in net assets of Heritage Small Cap Stock 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. As of the same date, Awad &
Associates managed $90 million in net assets of the Calvert New Vision Small Cap
Fund and received an advisory fee of 0.40% of its average daily net assets.

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 employed 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. The Investment Manager believes that
its philosophy as a small capitalization, value-oriented investor would tend to
eliminate from its investment portfolio the securities of companies directly
involved in alcohol production, tobacco production or casino gambling, companies
which would most likely have too large a capitalization and which would be much
more mature and seasoned than the companies customarily acquired for the
Investment Manager's core portfolio. Based upon the foregoing, the Investment
Manager estimates that if the screening criteria that will be used in managing
the Fund (using data available as of December 31,1996) had been applied with
respect to the accounts included below, an insignificant percentage of the
investments in the accounts at any one time over the 11-year period ended
December 31, 1996 would have been prohibited investments, and the differential
in performance would have been immaterial. It cannot be determined that future
holdings of the Fund would be substantially identical to those in the otherwise
similar accounts managed by the Investment Manager.

Page 47
<PAGE>

Jim Awad at Awad & Associates through Raymond James & Associates, and these
results are shown net of the highest wrap fee applicable to the accounts (which
includes management fees and commissions). These figures are a time-weighted
average for the entire period, all of which would not be duplicated in any
individual account and would not necessarily result in the same return for the
investors. Total operating expenses for the Variable Series are lower than the
expenses of the Class A and Class B shares of The Timothy Plan. 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 the Code; such conditions, if applicable,
may have lowered the returns for the separately managed accounts. The
performance does not reflect any charges, fees, and expenses imposed under the
policies and annuity contracts. Such performance would in each case be lower if
it reflected these charges, fees and expenses. See the contract form or
disclosure document for the policy or annuity contract. The performance
presented does not represent the historical performance of the Fund and is not
indicative of the Fund's future performance.

Source: All performance data was supplied by TPL and the Investment Manager.

AVERAGE ANNUAL TOTAL RETURN
===========================
<TABLE>
<CAPTION>
COMPOSITE PAST PERFORMANCE OF
THROUGH PAST PERFORMANCE OF RUSSELL 2000
- ------- OF AWAD & ASSOCIATES INDEX
AND BMI CAPITAL -----
---------------
<S> <C> <C>
1997 25.7% 22.4%
1996 15.4% 16.5%
1995 45.7% 28.5%
1994 2.4% -1.9%
1993 10.3% 18.9%
1992 13.3% 18.4%
1991 39.8% 46.0%
1990 -13.2% -19.5%
1989 9.7% 16.2%
1988 26.0% 24.9%
1987 -5.4% -10.8%
1986 17.6% 4.0%

ANNUALIZED RETURNS THROUGH DECEMBER 31, 1997
- ---------------------------------------------
<S> <C> <C>
One Year 25.7% 22.4%
Three Years 28.2% 22.3%
Five Years 17.1% 16.4%
Ten Years 16.3% 15.8%
</TABLE>

Page 48
<PAGE>

2: The annualized return is calculated from monthly data, allowing for
compounding. The formula used is in accordance with the acceptable methods set
forth by the Association for Investment Management Research, the Bank
Administration Institute and the Investment Council Association of America.
Market value of the accounts was derived from the sum of the accounts' total
assets, including cash, cash equivalents, short-term investments and securities
valued at current market prices.

3: The Russell 2000 Index is an unmanaged index of common stock prices
comprised of the smallest 2000 stocks in the Russell 3000 Index, which is an
annual ranking of 3000 common stocks by market capitalization. The Russell 2000
Index represents approximately 10% of the total market capitalization of the
Russell 3000 Index. The Russell 2000 Index is generally considered
representative of securities similar to those invested in by the Investment
Manager for the purpose of the composite performance numbers set forth above.

4: The Investment Manager's average annual management fee while at BMI Capital
over the period 1/1/82 - 3/12/92 was 1% or 100 basis points. During this
period, fees on the Investment Manager's individual accounts ranged from 0.5% to
1% (50 basis points to 100 basis points). The Investment Manager's performance
figures reported are net of commissions and management fees.

5: The Composite Past Performance of Awad & Associates reported in the
preceding table for the period 3/13/92 -- 12/31/97 were based on a universe of
"wrap fee" accounts managed for various broker/dealers which are coordinated
through Raymond James & Associates. The total value of these accounts at
12/31/97 was approximately $197 million out of a total client base of $960
million. The performance figures in the table represent all accounts that were
managed with investment strategies and objectives substantially similar to those
of the Fund. The performance figures are shown net of the highest wrap fee
applicable to the accounts (which includes all management fees and commissions
paid to Raymond James & Associates). The performance figures reported are net
of those wrap fees.

UNDERWRITER
- -----------
Timothy Partners, Ltd. ("TPL") 1304 West Fairbanks Avenue, Winter Park, Florida,
was engaged pursuant to an agreement effective July 1, 1997 to act as
underwriter for the Fund. 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. TPL also acts as investment advisor for the Fund. TPL
is not compensated for providing underwriting services to the Fund.

ADMINISTRATOR
- -------------
Declaration Service Company ("DSC"), 555 North Lane, Suite 6160, Conshohocken,
PA 19428, is the Fund's administrator pursuant to an Administration Services
Agreement (the "Agreement") with the Fund dated May 1, 1998.

The services DSC 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

Page 49
<PAGE>

materials, periodic reports to shareholders, registration statements, and other
documents; and responding to shareholder inquiries. Compensation for said
services will be charged at $20,000.

DSC also performs certain accounting and pricing services for the Fund. This
includes the daily calculation of the Fund's net asset value.

EXPENSES
- --------
The Fund is responsible for the payment of its expenses, other than those borne
by TPL. 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.

PURCHASES AND REDEMPTIONS OF SHARES

Purchases and redemptions of shares may be made only by Insurance Company for
its separate accounts at the direction of VA Contract owners. Please refer to
the prospectus of your VA Contract for information on how to direct investments
in or redemptions from the Fund and any fees that may apply. Generally, the
Insurance Company places orders for shares based upon payments and withdrawal
requests received from VA Contract owners during the day and places an order to
purchase or redeem the net number of shares by the following morning. Orders
are usually executed at the net asset value per share determined at the end of
the business day that a payment or withdrawal request is received by the
Insurance Company. There are no sales or redemption charges. However, certain
sales or deferred sales charges and other charges may apply to your VA Contract.
Those charges are disclosed in the separate account prospectus. The Trust
reserves the right to suspend the offering of Fund shares, or to reject any
specific purchase order.

Page 50
<PAGE>

Redemption proceeds will normally be wired to the Insurance Company on the next
business day after receipt of the redemption instructions by the Fund, but in no
event later than 7 days following receipt of instructions. The Fund may suspend
redemptions or postpone payments when the NYSE is closed or when trading is
restricted for any reason (other than weekends or holidays) or under emergency
circumstances as determined by the U.S. Securities and Exchange Commission.

ADDITIONAL INFORMATION
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.

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. There are no 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.

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 anually. 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.

The Fund intends 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

Page 51
<PAGE>

and diversification of its assets.

The Fund also intends to comply with the diversification requirements of Section
817(h) of the Code for variable annuity contracts and variable life insurance
policies so that the VA Contract owners should not be subject to federal tax on
distributions of dividends and income from the Fund to the Participating
Insurance Company separate accounts. VA Contract owners should review the
prospectus for their VA Contract for information regarding the tax consequences
to them of purchasing a contract or policy.

Under current tax law, dividends or capital gain distributions from the Fund are
not currently taxable when left to accumulate within a VA contract. Depending
on the VA contract, withdrawals from the contracts may be subject to ordinary
income tax and, in addition, to a 10% penalty tax on withdrawals before age 59
1/2 .

Distributions paid by the Fund from long-term capital gains 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 by-product 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 as
if paid by the Fund and received by the shareholder on December 31 of the
calendar year in which they are declared.

Page 52
<PAGE>

DETERMINATION OF NET ASSET VALUE

The price of the Fund's shares is the net asset value per share. Net asset
value is determined by the Fund as of the close of regular trading on each day
that 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 management fees, are
accrued daily and taken into account for the purpose of determining the net
asset value.

PERFORMANCE

From time to time the Fund may advertise performance data in connection with
the total return for the appropriate VA Contract of the Insurance Company. Fund
performance may be shown by presenting one or more performance measurements,
including average total return and aggregate annual total return. 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 connection with investments in
the Fund will not be included in the Fund's calculations of total returns.

Page 53
<PAGE>

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 and the composition of the investments
in the Fund. 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.

TOTAL RETURNS AND YIELDS QUOTED FOR THE FUND INCLUDE THE FUND'S EXPENSES, BUT
MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO ANY PARTICULAR INSURANCE
PRODUCT. BECAUSE SHARES OF THE FUND MAY BE PURCHASED ONLY THROUGH VA CONTRACTS,
YOU SHOULD CAREFULLY REVIEW THE PROSPECTUS OF YOUR VA CONTRACT FOR INFORMATION
ON RELEVANT CHARGES AND EXPENSES. Excluding these charges from quotations of
the Fund's performance has the effect of increasing the performance quoted. You
should bear in mind the effect of these charges when comparing the Fund's
performance to that of other mutual funds.

Further information about the performance of the Fund is included in the Fund's
Semi-Annual Report dated June 30, 1997 and Annual Report, dated December 31,
1997, which may be obtained without charge by contacting the Fund at (800) TIM-
PLAN. Shareholders may obtain current performance information about the Fund by
calling (800) TIM-PLAN.

Page 54
<PAGE>

THIS PAGE INTENTIONALLY LEFT BLANK.

Page 55
<PAGE>

NOTES

Page 56
<PAGE>

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
Timothy Partners, Ltd
1304 West Fairbanks Avenue
Winter Park, FL 32789

SHAREHOLDER SERVICES
Declaration Service Company
555 North Lane
Suite 6160
Conshohocken, PA 19428

CUSTODIAN
Star Bank
425 Walnut Street
M.L. 6118
Cincinnati, OH 45202-1118

LEGAL COUNSEL
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103

AUDITORS
Tait, Weller & Baker
Eight Penn Center
Suite 800
Philadelphia, PA 19103-2108

For Additional Information About The Timothy Plan, Please Call:
(800) TIM-PLAN

Visit The Timothy Plan web site on the Internet at:
WWW.TIMOTHYPLAN.COM
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

THE TIMOTHY PLAN
THE TIMOTHY PLAN-CLASS A AND CLASS B
AND
THE TIMOTHY PLAN VARIABLE SERIES

MAY 1, 1998

- --------------------------------------------------------------------------------
Timothy Partners, Ltd.
1304 West Fairbanks Avenue
Winter Park, Florida 32789
(800) 846-7526
- --------------------------------------------------------------------------------
This Statement of Additional Information is in addition to and supplements the
current Prospectuses of The Timothy Plan (the "Trust"), which currently consists
of two separate investment series: THE TIMOTHY PLAN and THE TIMOTHY PLAN
VARIABLE SERIES.

THE TIMOTHY PLAN (the "Trust") is an open-end diversified investment company,
currently offering two series of shares (collectively, the "Funds"). The Timothy
Plan series (referred to herein as the "Timothy Fund") currently offers two
classes of shares: Class A (formerly, Institutional Class) and Class B
(formerly, Retail Class). The Timothy Plan Variable Series (referred to herein
as the "Timothy Variable Fund") is a single class series of the Trust whose
shares are only offered to insurance companies for the purpose of funding
variable annuity contracts ("VA Contracts") offered through separate accounts of
the Annuity Investors Life Insurance Company (the "Insurance Company").

- --------------------------------------------------------------------------------

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS BUT SUPPLEMENTS AND
SHOULD BE READ IN CONJUNCTION WITH THE TIMOTHY PLAN AND THE TIMOTHY PLAN
VARIABLE SERIES PROSPECTUSES. COPIES OF THE PROSPECTUSES MAY BE OBTAINED FROM
THE TRUST WITHOUT CHARGE BY WRITING THE TRUST AT 1304 WEST FAIRBANKS AVENUE,
WINTER PARK, FLORIDA 32789 OR BY CALLING THE TRUST AT (800) 846-7526. RETAIN
THIS STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE.

- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
<S> <C>
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 TRUST....................................

DISTRIBUTION PLANS....................................................

TAXATION..............................................................

GENERAL INFORMATION...................................................

Audits and Reports...............................................

Miscellaneous....................................................

PERFORMANCE...........................................................

Comparisons and Advertisements...................................

FINANCIAL STATEMENTS..................................................
</TABLE>

Page 59
<PAGE>

THE TIMOTHY PLAN - INVESTMENTS

Each Fund seeks to achieve its objectives by making investments selected in
accordance with that Fund's investment restrictions and policies. Each Fund
will vary its investment strategy as described in that Fund's Prospectus to
achieve its objectives. This Statement of Additional Information contains
further information concerning the techniques and operations of the Funds, the
securities in which they will invest, and the policies they will follow.

THE TIMOTHY FUND issues two classes of shares (Class A and Class B) that invest
in the same portfolio of securities. Class A and Class B shares differ with
respect to sales structure and 12b-1 Plan expenses.

THE TIMOTHY VARIABLE FUND issues only one class of shares and is intended to be
a funding vehicle for variable annuity contracts ("VA Contracts") offered
through separate accounts of Annuity Investors Life Insurance Company (the
"Insurance Company").

Both Funds have a primary investment objective of long-term capital growth and a
secondary objective of current income. The Funds seek to achieve their stated
objectives by investing in securities issued by companies which, in the opinion
of the Funds' Advisor, conduct business in accordance with the stated philosophy
and principles of the Funds. The following information supplements the
information provided in each Fund's Prospectus.

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 Funds invest.

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 Funds 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 Funds 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 Funds with opportunities which are consistent with the Funds'
investment objectives and policies.

WARRANTS The Funds 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 Funds 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 Funds 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 Funds do not
consider any ADRs purchased to be foreign. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The

Page 60
<PAGE>

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 each 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 that 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 Funds to purchase or sell
securities for short-term trading purposes, but the Funds may sell securities to
recognize gains or avoid potential for loss. The Funds 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. Each Fund presently estimates
that its annualized portfolio turnover rate generally will not exceed a range of
50% to 75%, and may be lower than 50%, during most periods. The portfolio
turnover rate for the Timothy Fund for the fiscal years ended December 31,
1996 and 1997 was 93.08% and 136.36%, respectively. As of December 31, 1997,
the Timothy Variable Fund had not commenced operations and therefore, did not
have any portfolio turnover to report. High portfolio turnover would involve
additional transaction costs (such as brokerage commissions) which are borne by
the Funds, or adverse tax effects. (See "Dividends, Distributions and Taxes"
in each Fund's Prospectus.)

INVESTMENT RESTRICTIONS

In addition to those set forth in the Funds' current Prospectuses, the Funds
have adopted the Investment Restrictions set forth below, which are fundamental
policies of each Fund, and which cannot be changed without the approval of a
majority of the outstanding voting securities of each Fund. 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 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 a 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 Trust has entered into an advisory agreement with Timothy Partners,
Ltd.(TPL), effective January 19,

Page 61
<PAGE>

1994, as amended August 28, 1995 and September 1, 1997, for the provision of
investment advisory services on behalf of the Timothy Fund, subject to the
supervision and direction of the Fund's Board of Trustees. Pursuant to the
Investment Advisory Agreement, the Trust is obligated to pay TPL a monthly fee
equal to an annual rate of 0.85% of the Timothy 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 Funds' shares are offered for sale.

With respect to the Timothy Fund, for the period March 21, 1994 (commencement of
operations) through December 31, 1994 and for the years ended December 31, 1995,
1996 and 1997, advisory fees of $7,938, $41,257, $78,848 and $142,990,
respectively, were payable to TPL and TPL reimbursed the Timothy Fund $135,114,
$189,534 $194,967, and $193,945, respectively. TPL has voluntarily undertaken
to waive its advisory fee and reimburse expenses on behalf of the Timothy Fund
to the extent normal operating expenses (including investment advisory fees but
excluding interest, taxes, brokerage fees, commissions and extraordinary
charges) exceed 1.35% of the Fund's average daily net assets.

The Trust has entered into an advisory agreement with Timothy Partners, Ltd.
(TPL), effective May 1, 1998 for the provision of investment advisory services
on behalf of the Timothy Variable Fund, subject to the supervision and direction
of the Fund's Board of Trustees. Pursuant to the Investment Advisory Agreement,
the Trust is obligated to pay TPL a monthly fee equal to an annual rate of 1.00%
of the Timothy Variable 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.

No advisory fee information is included for the Timothy Variable Fund since
this Fund had not commenced operations as of December 31, 1997. TPL has
voluntarily undertaken to waive its advisory fee and reimburse expenses on
behalf of the Timothy Variable Fund to the extent normal operating expenses
(including investment advisory fees but excluding interest, taxes, brokerage
fees, commissions and extraordinary charges) exceed 1.35% of the Fund's average
daily net assets.

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 Trust, and only if the terms of the renewal thereof have been
approved by the vote of a majority of the Trustees of the Trust 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 TPL and Awad & Associates (the "Investment
Manager"), dated January 1, 1997, as amended May 1, 1998 (the "Sub-Investment
Advisory Agreement"), the Investment Manager provides advice and assistance to
TPL in the selection of appropriate investments for the Funds, subject to the
supervision and direction of the Funds' Board of Trustees. As compensation for
its services, with respect to each Fund, the Investment Manager receives from
TPL 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 securities
of the Trust, and only if the terms of renewal thereof have been approved by the
vote of a majority of the Trustees of the Trust 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, TPL paid Systematic Financial Management, L.P. for
advice and assistance in the selection of appropriate investments for the
Timothy 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, TPL paid Systematic Financial Management, L.P. sub-advisory fees of
$3,969, $20,628 and $46,381, respectively. For the fiscal year ended December
31, 1997, TPL paid Awad & Associates $66,356 for sub-investment advisory
services on behalf of the Timothy Fund.

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UNDERWRITER

Effective July 1, 1997, Timothy Partners, Ltd. (TPL), 1304 West Fairbanks
Avenue, Winter Park, Florida 32789, acts as an underwriter of the Timothy Funds'
shares for the purpose of facilitating the registration of shares of the Funds
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. TPL is not compensated for providing underwriting services to the
Funds.

In that regard, TPL has agreed at its own expense to qualify as a broker/dealer
under all applicable federal or state laws in those states which the Funds shall
from time to time identify to TPL as states in which it wishes to offer its
shares for sale, in order that state registrations may be maintained by the
Funds.

TPL 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.

The Funds 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.

ADMINISTRATOR

Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken, PA 19428,
(the "Administrator"), provides certain services to the Trust 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 Funds; (2) coordinates with, and monitors, any third parties furnishing
services to the Funds; (3) provides the Funds 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 Funds 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
Funds required by applicable law; (6) prepares and, after approval by the Funds,
files and arranges for the distribution of proxy materials and periodic reports
to shareholders of the Funds as required by applicable law; (7) prepares and,
after approval by the Funds, 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 Funds for their approval
invoices 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 Funds as may be necessary in the opinion of the
Administrator to perform its duties under the agreement.

Prior to May 1, 1998, FPS Services, Inc., 3200 Horizon Drive, King of Prussia,
PA 19406, served as the Administrator. For the period March 21, 1994
(commencement of operations) through December 31, 1994 and for the fiscal years
ended December 31, 1995, 1996 and 1997, the Trust paid $39,583, $54,297,
$62,581 and $ 65,386, 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 Funds, 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 Funds 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 Funds'
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 Funds. Brokerage may also
be allocated to dealers in consideration of the each Fund's share distribution
but only when execution and price are comparable to that offered by other
brokers. For the fiscal years ended December 31, 1996 and 1997, the Timothy
Fund incurred brokerage

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commissions of $32,684 and $133,628, respectively. No information is provided
for the Timothy Variable Fund as that Fund had not commenced operations as of
December 31, 1997.

TPL, through the Investment Manager, is responsible for making the Funds',
portfolio decisions subject to instructions described in each Fund's Prospectus.
The Board of Trustees may however impose limitations on the allocation of
portfolio brokerage.

Securities held by one Fund may also be held by the other Fund or other accounts
for which TPL or the Investment Manager serves as an advisor, or held by TPL or
the Investment Manager for their own accounts. If purchases or sales of
securities for a Fund or other entities for which they act as investment advisor
or for their advisory clients arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective entities and clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of TPL or Investment
Manager during the same period may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse
effect on price.

On occasions when TPL or the Investment Manager deems the purchase or sale of a
security to be in the best interests of one Fund as well as the other Fund or
other accounts, they may to the extent permitted by applicable laws and
regulations, but will not be obligated to, aggregate the securities to be sold
or purchased for the Fund with those to be sold or purchased for the other Fund
or accounts in order to obtain favorable execution and lower brokerage
commissions. In that event, allocation of the securities purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Investment
Manager in the manner it considers to be most equitable and consistent with its
fiduciary obligations to the Funds and to such other accounts. In some cases
this procedure may adversely affect the size of the position obtainable for a
Fund.

The Board of Trustees of the Funds periodically reviews the brokerage placement
practices of the Investment Manager on behalf of the Funds, and reviews the
prices and commissions, if any, paid by the Funds to determine if they were
reasonable.

The Investment Manager also may consider sales of the VA Contracts by a broker-
dealer as a factor in the selection of broker-dealers to execute transactions
for the Timothy Variable Fund. In addition, the Investment Manager may place
portfolio trades for both Funds with its affiliated brokers, including Raymond
James or its affiliates. As stated above, any such placement of trades will be
subject to the ability of the affiliated broker-dealer to provide best
execution, the Trust's procedures governing such affiliated trades and the
Conduct Rules of the National Association of Securities Dealers, Inc.

PURCHASE OF SHARES
THE TIMOTHY FUND

The shares of the Timothy 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 Class A 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 (TIMOTHY FUND ONLY)

Shares of the Timothy Fund are available to all types of tax-deferred retirement
plans such as Individual Retirement Accounts (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 Timothy Fund sponsors an 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 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.

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If you are entitled to receive a distribution from a qualified retirement plan,
you may rollover all or part of that distribution into the Timothy 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 Timothy 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 Timothy 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.

The Timothy Fund also offers a Roth IRA. While contributions to a Roth IRA are
not currently deductible, the amounts within the accounts accumulate tax-free
and qualified distributions will not be included in a shareholder's taxable
income. The contribution limit is $2,000 annually ($4,000 for joint returns) in
aggregate with contributions to traditional IRAs. Certain income phaseouts
apply.

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 Timothy 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.

TIMOTHY VARIABLE FUND

The Timothy Variable Fund currently only offers its shares to the Annuity
Investors Life Insurance Company, but may, in the future, offer its shares to
other insurance company separate accounts. The separate accounts invest in
shares of the Timothy Variable Fund in accordance with the allocation
instructions received from holders of the VA contracts. Shares of the Timothy
Variable Fund are sold at net asset value as described in that Fund's
Prospectus.

REDEMPTIONS

The redemption price will be based upon the net asset value per share (subject
to any applicable CDSC for Class B shares) 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. Class B shares of the
Timothy 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 Timothy Fund.

Payment for shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Funds reserve 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 Funds is not reasonably predictable or it is not reasonably
practicable for the Funds 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 Funds.

Pursuant to the Trust'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 Trust 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 Trust, 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 Trust. Any
portfolio securities paid or distributed in-kind would be valued as described
under "Determination of Net Asset Value" in the each 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 Funds.

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In-kind payments need not constitute a cross-section of the a 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 TRUST

The Trustees and principal executive officers and their principal occupations
for the past five years are listed below.

<TABLE>
<CAPTION>
POSITION AND
OFFICE HELD WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- --- ---------------- --------------------------
<S> <C> <C> <C>

Arthur D. Ally * 56 President and President, Covenant Financial
1304 West Fairbanks Ave Trustee Management, Inc. (1990-present); General
Winter Park, Florida Partner, Timothy Partners, Ltd. (1993-present)

Joseph E. Boatwright * 67 Secretary and Consultant, Greater Orlando Baptist
1410 Hyde Park Drive Trustee Assoc. (Ministerial) (1996-present)
Winter Park, Florida Retired; prior thereto Senior Pastor;
Aloma Baptist Church (1970-1996)

Wesley W. Pennington 67 Trustee President, Westwind Holdings, Inc.
442 Raymond Ave. (Developmental) (1997-present); President
Longwood, Florida & Sole Shareholder, Weston, Inc., (fabric)
treatment) (1979-1997); Secretary/
Treasurer, American Call to Greatness
(publishing) (1994-1995); President & Sole
Shareholder, Designer Services Group,
Inc. (Furniture storage & delivery)
(1980-1994)

Jock M. Sneddon * 50 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 * 71 Trustee Owner and Founder; Career IV, Inc.
P.O. Box 1927 (lecturing),(1991-present);Founder, Philip
Winter Park, FL Crosby, Associates, Inc. (1979-1991 and
from 1997- present); Director, Security
National Bank (banking) (1991-1995);
Trustee, Rollins College (education)
(1994-present)

Daniel D. Busby, CPA 56 Trustee Partner, Busby, Keller & Co.; Consultant
P.O. Box 50188 to Non-Profit Organizations (1997-present)
Indianapolis, IN

Scott Fehrenbacher 38 Trustee President, Institute for American
13621 171st N.E. Values Investing (1996-current); prior
Redmond, WA thereto Stockbroker, Linsco/Private Ledger
(1990-1996)
</TABLE>

* These Trustees and officers are considered "interested persons" of the Funds
within the meaning of 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 Funds' investment advisor and as a result of being a
Trustee and/or officer of the

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Funds. Mr. Ally is also considered an "interested person" because of his
affiliation with TPL, the Fund's principal underwriter.

The officers conduct and supervise the daily business operations of the Funds,
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 Funds
who are affiliated with TPL is paid by TPL, and not by the Fund. For the fiscal
year ended December 31, 1997, the Timothy 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 TPL for the calendar year ended December
31, 1997. As of December 31, 1997, the Timothy Variable Fund had not commenced
operations and therefore, no compensation was paid to its Board of
Trustees.

DISTRIBUTION PLANS (APPLICABLE ONLY TO THE TIMOTHY FUND)

As noted in the Timothy Fund's Prospectus, each Class of the Timothy Fund has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act (collectively, the
"Plans") whereby the Fund may pay up to a maximum of 0.25% for Class A shares
and up to a maximum of 1.00% for Class B shares (of which, up to 0.25% may be
service fees to be paid by each respective class of shares to TPL, 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 Timothy Fund's shares. The fees are paid
on a monthly basis, based on the Fund's average daily net assets attributable to
such class of shares.

Pursuant to the Plans, TPL, as underwriter, is entitled to a reimbursement each
month (up to the maximum of 0.25% for Class A shares and 1.00% for Class B
shares per annum of average net assets of the Timothy Fund) for the actual
expenses incurred in the distribution and promotion of the Timothy 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 Class A shares or 1.00% for Class B shares per annum will
be borne by the TPL without any reimbursement or payment by the Timothy Fund.

Prior to July 1, 1997, FPS Broker Services, Inc. (FPSB) served as the Fund's
sole underwriter. For the period ended December 31, 1994 and fiscal year ended
December 31, 1995, the Fund reimbursed FPSB $1,985 and $11,606, respectively,
for distribution costs incurred by the Fund. For the fiscal year ended December
31, 1996, the Fund reimbursed FPSB $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 Class B shares
(formerly, the Retail Class). For the period January 1, 1997 to June 30, 1997,
the Timothy Fund reimbursed FPSB $32,518 for distribution costs incurred as
follows: $10,505 compensation to dealers for Class A shares and $19,423 as
compensation to dealers for Class B shares and $2,590 for servicing the Class B
shareholder accounts.

Effective July 1, 1997, Timothy Partners, Ltd. (TPL), serves as the Timothy
Funds' sole underwriter. For the period July 1, 1997 to December 31, 1997, the
Fund reimbursed TPL $58,563 for distribution-related expenses as follows:
$12,917 compensation to delaers for Class A shares and $34, 074 compensation to
dealers for Class B shares and $10,572 for servicng the Class B shareholder
accounts.

The Plans also provide that to the extent that the Timothy Fund, TPL, the
Investment Manager, or other parties on behalf of the Fund, TPL, the Investment
Manager makes payments that are deemed to be payments for the financing of any
activity primarily intended to result in the sale of shares issued by the Fund
within the context of Rule 12b-1, such payments shall be deemed to be made
pursuant to the Plans. In no event shall the payments made under the Plans,
plus any other payments deemed to be made pursuant to the Plans, exceed the
amount permitted to be paid pursuant to the Conduct Rules 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 Trustees, has concluded

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that in the exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plans will benefit
the Fund and its shareholders.

The Plans have 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
Plans 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 Plans. 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 Plans 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 Plans 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 Plans 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 Plans, 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 Plans should be continued.

TAXATION

The both Funds intend 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) distribute at least 90% of its dividends,
interest and certain other taxable income each year; and (iii) 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 each 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.

As noted in its Prospectus, the Timothy Variable Fund must, and intends to,
comply with the diversification requirements imposed by Section 817(h) of the
Code and the regulations thereunder. These requirements, which are in addition
to the diversification requirements mentioned above, place certain limitations
on the proportion of the Timothy Variable Fund's assets that may be represented
by any single investment (which includes all securities of the same issuer). For
purposes of Section 817(h), all securities of the same issuer, all interests in
the same real property project, and all interests in the same commodity are
treated as a single investment. In addition, each U.S. Government agency or
instrumentality is treated as a separate issuer, while the securities of a
particular foreign government and its agencies, instrumentalities and political
subdivisions all will be considered securities issued by the same issuer. For
information concerning the consequences of failure to meet the requirements of
Section 817(h), refer to the respective prospectuses for the VA Contracts.

An excise tax at the rate of 4% will be imposed on the excess, if any, of the
Funds' "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 Funds intend to make distributions

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sufficient to avoid imposition of the excise tax. Distributions declared by the
Funds 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 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 Funds.
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 Funds 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 Funds 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 the Timothy Fund will share proportionately in the
investment income and expenses of that Fund, except that each class will incur
different distribution 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 Trust 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 Funds, including the
annual audited financial statements and a list of securities owned.

MISCELLANEOUS
- -------------

As of April 2, 1998, the officers and Trustees, as a group, owned benefically
19,419.952 outstanding voting shares of Class A shares and 559.977 of Class B
shares, which in the aggregate amounts to 19,979.929 shares of the Trust.

As of April 2, 1998, no one owned of record or exercised voting control over 5%
of the outstanding shares of the Class A or Class B shares of the Trust.

PERFORMANCE

Performance information for the Class A and Class B shares of the Timothy Fund
and the Timothy Variable Fund will vary due to the effect of expense ratios on
the performance calculations. TOTAL RETURNS AND YIELDS QUOTED FOR THE TIMOTHY
VARIABLE FUND INCLUDE THE FUND'S EXPENSES, BUT MAY NOT INCLUDE CHARGES AND
EXPENSES ATTRIBUTABLE TO ANY PARTICULAR INSURANCE PRODUCT. BECAUSE SHARES OF
THE TIMOTHY VARIABLE FUND MAY BE PURCHASED ONLY THROUGH VARIABLE ANNUITY
CONTRACTS, YOU SHOULD CAREFULLY REVIEW THE PROSPECTUS OF YOUR VA CONTRACT FOR
INFORMATION ON RELEVANT CHARGES AND EXPENSES. Excluding these charges from
quotations of the Timothy Variable Fund's performance has the effect of
increasing the

Page 69
<PAGE>

performance quoted. You should bear in mind the effect of these
charges when comparing the Timothy Variable Fund'd performance to that of other
mutual funds.

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 Funds 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 Funds may include their
distribution rates in advertisements. The distribution rate is the amount of
distributions per share made by a Fund over a 12-month period divided by the
current maximum offering price.

U.S. Securities and Exchange Commission ("Commission") rules require the use of
standardized performance quotations or, alternatively, that every non-
standardized performance quotation furnished by the Funds be accompanied by
certain standardized performance information computed as required by the
Commission. Current yield and total return quotations used by the Funds are
based on the standardized methods of computing performance mandated by the
Commission. An explanation of those and other methods used by the Funds 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 Commission 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 Class A
shares, for the period March 21, 1994 (commencement of operations) through
December 31, 1996, and for the one year period ended December 31, 1996 and
December 31, 1997, was 4.01%, 6.40% and 14.67%, respectively. The average
annual total return for Class B shares, for the period August 25, 1995
(commencement of operations) through December 31, 1996 and for the one year
period ended December 31, 1996, and December 31, 1997 was 5.46%, 6.98% and
15.50%, respectively. For the periods March 21, 1994 through December 31, 1997
and the three year period ended December 31, 1997 the average annual total
return for the Class A was 8.34% and 11.68%, respectively. For the period
August 25, 1995 through December 31, 1997 the average annual total return for
Class B was 12.27%. 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. No performance
information has been provided for the Timothy Variable Fund since it had not
commenced operations as of December 31, 1997.

COMPARISONS AND ADVERTISEMENTS
- ------------------------------

To help investors better evaluate how an investment in the Funds might satisfy
their investment objective, advertisements regarding the Funds may discuss total
return for the Funds as reported by various financial publications.
Advertisements may also compare total return to total return as reported by
other investments, indices, and averages. The following publications, indices,
and averages may be used:

Lipper Mutual Fund Performance Analysis;
Lipper Mutual Fund Indices;
CDA Weisenberger; and

Page 70
<PAGE>

Morningstar

From time to time, the Funds may also include in sales literature and
advertising (including press releases) TPL comments on current news items,
organizations which violate the Funds' 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 Timothy Fund Financial Statements, including the notes thereto, dated
December 31, 1997, which have been audited by Tait, Weller & Baker, are
incorporated by reference from the Timothy Fund's 1997 Annual Report to
Shareholders. There are no Financial Statements for the Timothy Variable Fund
since that Fund had not commenced operations as of December 31, 1997.

Page 71
<PAGE>

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
Timothy Partners, Ltd.
1304 West Fairbanks Ave.
Winter Park, FL 32789

SHAREHOLDER SERVICES
Declaration Service Company
555 North Lane
Suite 6160
Conshohocken, PA 19428

CUSTODIAN
Star Bank
425 Walnut Street
M.L. 6118
Cincinnati, OH 45202-1118

LEGAL COUNSEL

Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103

AUDITORS
Tait, Weller & Baker
Eight Penn Center
Suite 800
Philadelphia, PA 19103-2108
<PAGE>

POST EFFECTIVE AMENDMENT NO. 8
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 for the Timothy Plan Series of the Trust 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, 1997 (audited):

(i) Schedule of Investments at December 31, 1997.
(ii) Statement of Assets and Liabilities at December 31, 1997.
(iii) Statement of Operations for the period ended December 31, 1997.
(iv) Statement of Changes in Net Assets for the year ended December 31,
1997.
(v) Notes to Financial Statements.
(vi) Financial Highlights.
(vii) Report of Independent Accountants

(2) The financial statements of The Timothy Plan Variable Series are not
available as the Series did not commence operations as of December 31,
1997.

(3) 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) Form of Amendment to Investment Advisory Agreement dated May 1,
1998 between the Registrant and Timothy Partners, Ltd. is filed
herewith electronically.

(a)(ii) Form of Investment Advisory Agreement dated May 1, 1998, between
the Registrant, on behalf of The Timothy Plan Variable Series, and
Timothy Partners, Ltd. dated May 1, 1998 is filed herewith
electronically.

(a)(iii) Amendment dated March 12, 1997 to Investment Advisory Agreement
dated January 19, 1994 between Registrant and Timothy Partners,
Ltd. is incorporated herein by reference to Post-Effective No. 6
as Exhibit No. 99(5)(a)(i) to Item 24 as electronically filed on
July 18, 1997.

(a)(iv) 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)(v) 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)(i) Form of Amendment to Sub-Investment Advisory Agreement dated May
1, 1998 between Timothy Partners, Ltd., Awad & Associates and the
Registrant is filed herewith electronically.

(b)(ii) Sub-Investment Advisory Agreement dated January 1, 1997 among
Timothy Partners, Ltd., Awad & Associates and the Registrant is
incorporated by reference to Post-Effective Amendment No. 5 as
Exhibit 99(5)(b)(i).

(6) (a) DISTRIBUTION AGREEMENTS:
(a)(i) Underwriting Agreement dated July 1, 1997 between the Registrant
and Timothy Partners, Ltd. is incorporated herein by reference to
Post-Effective No. 6 as Exhibit No. 99(6)(a)(i) to Item 24 as
electronically filed on July 18, 1997.

(b) None

Page 73
<PAGE>

(7) None

(8) CUSTODIAN AGREEMENT

(a) Custodian Agreement between Registrant and The Bank of New
York, dated November 11, 1994 is incorporated herein by
reference to Post Effective Amendment No. 5.

(9) OTHER MATERIAL CONTRACTS:

(a)(i) Form of Amendment dated May 1,1998 to Shareholder Services
Agreement dated January 19, 1994 between the Registrant and FPS
Services, Inc., is filed herewith electronically.

(a)(ii) 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)(iii) 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) Form of Amendment dated May 1, 1998 to Administration Agreement
dated January 19, 1994 between the Registrant and FPS Services,
Inc. is filed herewith electronically.

(b)(ii) 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)(iii) 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)(ii) to Item 24 as electronically filed on April 26,
1996.

(c)(i) Form of Amendment dated May 1, 1998 to Accounting Series
Agreement dated February 23, 1996 between the Registrant and
FPS Services, Inc., is filed herewith electronically.

(c)(ii) 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.

(e)(i) Form of Participation Agreement dated May 1, 1998 among the
Registrant on behalf of The Timothy Plan Variable Series,
Annuity Investors Life Insurance Company and Timothy Partners,
Ltd. is filed herewith electronically.

(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 incorporated herein by
reference to exhibit 99(14)(a) of Post-Effective No. 5.

(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)(i) Addendum dated July 1, 1997 on behalf of Class A shares is
incorporated herein by reference to Post-Effective No. 6 as
Exhibit No.99(15)(a)(i) to Item 24 as electronically filed on
July 18, 1997.

(a)(ii) 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)(i) Distribution Plan dated September 22, 1997 on behalf of Class B
shares is incorporated herein by

Page 74
<PAGE>

reference to Post-Effective No. 6 as Exhibit No. 99(15)(b)(i)
to Item 24 as electronically filed on July 18, 1997 filed
herewith.

(b)(ii) Addendum dated July 1, 1997 on behalf of Class B shares is
incorporated herein by reference to Post-Effective No. 6 as
Exhibit No. 99(15)(b)(ii) to Item 24 as electronically filed on
July 18, 1997.

(b)(iii) 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 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
No. 6 as Exhibit No. 99(18) to Item 24 as electronically filed on July
18, 1997.

(19) Powers of Attorney are incorporated herein by reference to Post-Effective
No. 5 as Exhibit No. 99(19) to Item 24 as electronically filed on
February 27, 1997 and on behalf of Scott Fehrenbacher incorporated herein
by reference to Post-Effective No. 6 as Exhibit No. 99(19) to Item 24 as
electronically filed on July 18, 1997.

(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.
- -----------------------------------------
<TABLE>
<CAPTION>

Number of Record Holders
TITLE OF CLASS as of January 29, 1998
--------------
<S> <C>
Class A Common Stock, 1209
par value $0.001 per share

Class B Common Stock, 1184
par value $0.001 per share
</TABLE>

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.

Page 75
<PAGE>

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. ("TPL") serves as investment advisor of the Fund. The
following persons serving as directors or officers of TPL have held the
following positions with TPL for the past two years.

Position and Positions with
Name and Offices with Offices with
Business Address Timothy Partners, Ltd. the Registrant
- ---------------- ---------------------- --------------
<S> <C> <C>
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.
</TABLE>

Covenant Financial Management, Inc. is a marketing/consulting firm owned by
Arthur Ally that will render consulting advise to TPL 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.

Page 76
<PAGE>

ITEM 29. PRINCIPAL UNDERWRITER.
- -------------------------------

(a) Timothy Partners, Ltd. (TPL) is the principal underwriter for the
Registrants securities and currently acts as underwriter for the Registrant
only.

(b) The table below sets forth certain information as to the Underwriter's
Directors, Officers and Control Persons:

Name and Position and Offices Positions and Offices
Business Address with Underwriter with the Registrant
- ---------------- ------------------------ ---------------------
<S> <C> <C>
Arthur D. Ally President of Covenant President and
1304 West Fairbanks Avenue Fund, Inc.; Managing Trustee
Winter Park, Florida 32789 General Partner of
Timothy Partners, Ltd.
and Individual General
Partner of Timothy
Partners, Ltd.
</TABLE>

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) The Registrant undertakes to file a Post-Effective Amendment including the
financial statements of The Timothy Plan Variable Series, which need not be
certified, within four to six months of commencement of operations.

(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.

Page 77
<PAGE>

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. 8
to its Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment No. 7 to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in Winter Park, State of Florida, on the 17th day of April,
1998.

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. 8 to the Registrant's Registration Statement has been signed
below by the following persons in the capacities indicated.

Signature Title Date
- --------- ----- ----
<S> <C> <C>

/s/ Arthur D. Ally*
- ---------------------------- President and Trustee April 16, 1998

/s/ Joseph E. Boatwright*
- ---------------------------- Secretary and Trustee April 16, 1998

/s/ Wesley Pennington*
- ---------------------------- Treasurer and Trustee April 16, 1998

/s/ Scott Fehrenbacher
- ---------------------------- Trustee April 16, 1998

/s/ Jock M. Sneddon*
- ---------------------------- Trustee April 16, 1998

/s/ Philip B. Crosby*
- ---------------------------- Trustee April 16, 1998

/s/ Daniel D. Busby*
- ---------------------------- Trustee April 16, 1998
</TABLE>

*By: /s/ Gerald J. Holland
-------------------------------------
Gerald J. Holland, as
Attorney-in-Fact & Agent, pursuant
to Power of Attorney

Page 78
<PAGE>

INDEX TO EXHIBITS ON FORM N-1A

EXHIBIT

99B9(c)(i) Form of Participation Agreement
99B11(a) Auditors Consent
99B27(a) Financial Data Schedule- Class A
99B27(b) Financial Data Schedule- Class B

Page 79

<PAGE>

Exhibit 99B9.(c)(i)

Participation Agreement

THIS AGREEMENT is made as of May 1, 1998, by and among Annuity Investors Life
Insurance Company ("Company"), on its own behalf and on behalf of each separate
account of the Company set forth on Exhibit A-1 to this Agreement as it may be
amended from time to time (collectively, "Account"), The Timothy Plan Variable
Series ("Fund") on its own behalf and on behalf of the portfolios listed on
Exhibit A to this Agreement as it may be amended from time to time
("Portfolios"), and Timothy Partners, Ltd. (the "Advisor" and "Distributor"),
who serves as both advisor and distributor for The Timothy Plan Variable Series
(each, a "Party" and collectively, the "Parties").

WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Fund, on behalf of the Account to
fund the variable annuity contracts that use the Fund as an underlying
investment medium (the "Contracts");

WHEREAS, the Company, Adviser and Distributor desires to facilitate the purchase
and redemption of shares of the Fund by the Company for the Account through one
account in the Fund (an "Omnibus Account") to be maintained of record by the
Company, subject to the terms and conditions of this Agreement;

WHEREAS, the Company desires to provide administrative services and functions
(the "Services") for purchasers of Contracts ("Owners") on the terms and
conditions set forth herein;

WHEREAS, the Company has registered or will register certain variable life
insurance policies and/or variable annuity contracts under the Securities Act of
1933, as amended (the "1933 Act");

WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the Investment Company Act of 1940, as amended (the "1940
Act"); and

WHEREAS, the Company desires to utilize the Fund and/or one or more Portfolios
as an investment vehicle of the Account.

NOW, THEREFORE, in consideration of the mutual promises set forth herein, the
Company, Fund, Adviser and Distributor agree as follows:

1. PERFORMANCE OF SERVICES. Company agrees to perform the administrative
functions and services specified in Exhibit B attached hereto with respect
to the shares of the Fund included in the Account.

2. THE OMNIBUS ACCOUNTS.

2:1 The Omnibus Account will be opened based upon the information contained
in Exhibit C hereto: In connection with the Omnibus Account, Company
represents and warrants that it is authorized to act on behalf of each
Owner effecting transactions in the Omnibus Account and that the
information specified on Exhibit C hereto is correct.

2:2 The Fund shall designate the Omnibus Account with an account number.
This account number will be the means of identification when the
Parties are transacting in the Omnibus Account. The assets in the
Account are segregated from the Company's own assets. The Adviser
agrees to cause the Omnibus Account to be kept open on the Fund's
books, as applicable, regardless of a lack of activity or small
position size except to the extent the Company takes specific action to
close an Omnibus Account or to the extent the Fund's prospectus
reserves the right to close accounts which are inactive or of a small
position size. In the latter two cases, the Adviser will give prior
notice to the Company before closing an Omnibus Account.

2.3 The Company agrees to provide Adviser such information as Adviser or
Distributor may reasonably request concerning Owners as may be
necessary or advisable to enable Company
<PAGE>

and Distributor to comply with applicable laws, including state "Blue
Sky" laws relating to the sales of shares of the Fund to the Accounts.

3. FUND SHARES TRANSACTIONS.

3:1 IN GENERAL. Shares of the Fund shall be sold on behalf of the Fund by
Distributor and purchased by Company for the Account and' indirectly
for the appropriate subaccount thereof at the net asset value next
computed after receipt by Distributor of each order of the Company or
its designee, in accordance with the provisions of this Agreement, the
then current prospectus of the Fund, and the Contracts. The Board of
Directors of the Fund ("Directors") may refuse to sell shares of the
applicable Fund to any person, or suspend or terminate the offering of
shares of the Fund if such action is required by law or by regulatory
authorities having jurisdiction. Company agrees to purchase and redeem
the shares of the Fund in accordance with the provisions of this
Agreement, of the Contract and of the then current prospectus for the
Contract and Fund. Except as necessary to implement transactions as
specified in the Contracts or as initiated by the Owners, or as
otherwise permitted by state or federal laws or regulations, Company
shall not redeem shares of Fund attributable to the contract.

3.2 PURCHASE AND REDEMPTION ORDERS. On each day that the Fund is open for
business (a "Business Day"), the Company shall aggregate and calculate
the net purchase or redemption order resulting from investment in and
redemptions under the Contracts for shares of the Fund that it received
prior to the close of trading on the New York Stock Exchange (the
"NYSE") (i.e. 4:00 p.m., Eastern time, unless the NYSE closes at an
earlier time in which case such earlier time shall apply) and
communicate to Distributor, by telephone or facsimile (or by such other
means as the Parties hereto may agree to in writing), the net aggregate
purchase or redemption order (if any) for the Omnibus Account for such
Business Day (such Business Day is sometimes referred to herein as the
"Trade Date"). The Company will communicate such orders to Distributor
prior to 9:00 a.m., Eastern Time, on the next Business Day following
the Trade Date. All trades communicated to Distributor by the foregoing
deadline shall be treated by Distributor as if they were received by
Distributor prior to the close of trading on the Trade Date.

3.3 SETTLEMENT OF TRANSACTIONS.

(a) PURCHASES. Company will wire, or arrange for the wire of the
purchase price of each purchase order to the custodian for the
Fund in accordance with written instructions provided by
Distributor to the Company so that either (1) such funds are
received by the custodian for the Fund prior to 1:00 p.m.,
Eastern time, on the next Business Day following the Trade Date,
or (2) Distributor is provided with a Federal Funds wire system
reference number prior to such 1:00 p.m. deadline evidencing the
entry of the wire transfer of the purchase price to the
applicable custodian into the Federal Funds wire system prior to
such time. Company agrees that if it fails to provide funds to
the Fund's custodian by the close of business on the next
Business Day following the Trade Date, then, at the option of
Distributor, (i) the transaction may be canceled, or (ii) the
transaction may be processed at the next-determined net asset
value for the applicable Fund after purchase order funds are
received. In such event, the Company shall indemnity and hold
harmless Distributor, Adviser, and the Fund from any liabilities,
costs and damages either may suffer as a result of such failure.

(b) REDEMPTIONS. The Adviser will use its best efforts to cause to be
transmitted to such custodial account as Company shall direct in
writing, the proceeds of all redemption orders placed by Company
by 9:00 a.m., Eastern time, on the Business Day immediately
following the Trade Date, by wire transfer on that Business Day.
Should Company need to extend the settlement on a trade, it will
contact Adviser to discuss the extension. For purposes of
determining the length of settlement, Adviser agrees to treat the
Account no less favorably than other shareholders of the Fund.
Each wire transfer of redemption proceeds shall indicate, on the
Federal Funds wire

2
<PAGE>

system, the amount thereof attributable to the Fund; provided,
however, that if the number of entries would be too great to be
transmitted through the Federal Funds wire system, the Adviser
shall, on the day the wire is sent, fax such entries to Company
or, if possible, send via direct or indirect systems access until
otherwise directed by the Company in writing.

(c) AUTHORIZED PERSONS. The following persons are each duly
authorized to act on behalf of the Company and the Account under
this Agreement. The Fund, Adviser and Distributor are entitled to
conclusively rely on verbal or written instructions that Adviser
or Distributor reasonably believes were originated by any one of
said persons. The Company shall inform Adviser and Distributor of
additions to or subtractions from this list of authorized persons
pursuant to Section 13, hereof:

Lynn Laswell Laura Lally
John Burress Anniece Griece
Brian Sponaugle Todd Gayhart
Debbie Plummer

3.4 BOOK ENTRY ONLY. Issuance and transfer of shares of the Fund will be by
book entry only. Stock certificates will not be issued to the Company
or the Account. Shares of the Fund ordered from Distributor will he
recorded in the appropriate book entry title for the Account.

3.5 DISTRIBUTION INFORMATION. The Adviser or Distributor shall provide the
Company with all distribution announcement information as soon as it is
announced by the Fund. The distribution information shall set forth, as
applicable, ex-date, record date, payable date, distribution rate per
share, record date share balances, cash and reinvested payment amounts
and all other information reasonably requested by the Company. Where
possible, the Adviser or Distributor shall provide the Company with
direct or indirect systems access to the Adviser's systems for
obtaining such distribution information.

3.6 REINVESTMENT. All dividends and capital gains distributions will be
automatically reinvested on the payable date in additional shares of
the Fund at net asset value in accordance with the Fund's then current
prospectus.

3.7 PRICING INFORMATION. Distributor shall use its best efforts to furnish
to the Company prior to 7:00 p.m., Eastern time, on each Business Day
the Fund's closing net asset value for that day, and if appropriate,
the daily accrual for interest rate factor, (mil rate). Such
information shall be communicated via fax, or indirect or direct
systems access acceptable to the Company.

3.8 PRICE ERRORS.

(a) In the event adjustments are required to correct any error in the
computation of the net asset value of shares of the Fund, the
Fund or Adviser shall promptly notify Company after discovering
the need for those adjustments which result in a reimbursement to
an Account in accordance with such Fund's then current policies
on reimbursement. Notification may be made orally or via direct
or indirect systems access. Any such notification shall be
promptly followed by a letter written on Fund or Adviser
letterhead and shall state for each day for which an error
occurred the incorrect price, the correct price, and, to the
extent communicated to the Fund's shareholder, the reason for the
price change. Fund and Adviser agree that Company may send this
writing, or derivation thereof (so long as such derivation is
approved in advance by Fund or Adviser, which approval shall not
be unreasonably withheld) to Owners that are affected by the
price change.

(b) If the Account received amounts in excess of the amounts to which
it otherwise would have been entitled prior to an adjustment for
an error, Company, when requested by Fund or Adviser, will use
its best efforts to collect such excess amounts from the Account.
In no event, however, shall Company be liable to Fund or Adviser

3
<PAGE>

for any such amounts.

(c) If an adjustment is to be made in accordance with subsection (a)
above to correct an error which has caused the Account to receive
an amount less than that to which it is entitled, Fund or Adviser
shall make all necessary adjustments (within the parameters
specified in subsection (a)) to the number of shares owned in the
Account and distribute to the Company the amount of such
underpayment for credit to the Account.

3.9 AGENCY. Distributor hereby appoints the Company as its agent for the
limited purpose of accepting purchase and redemption instructions
pursuant to Sections 3.1,3.2 and 3.3..

3.10 QUARTERLY REPORTS. Adviser agrees to provide Company a statement of Fund
assets as soon as practicable and in any event within 30 days after the
end of each fiscal year quarter, and a statement certifying the
compliance by the Fund during that fiscal quarter with the
diversification requirements and qualification as a regulated investment
company. In the event of a breach of Section 6.4(a), Adviser will take
all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Treasury Regulation 1.8 i 7-5.

4. PROXY SOLICITATIONS AND VOTING. The Company shall, at its expense, distribute
or arrange for the distribution of all proxy materials furnished by the Fund
to the Account and shall: (i) solicit voting instructions from Owners; (ii)
vote the Fund shares in accordance with instructions received from Owners;
and (iii) vote the Fund shares for which no instructions have been received,
as well as shares attributable to it, in the same proportion as Fund shares
for which instructions have been received from Owners, so long as and to the
extent that the Securities and Exchange Commission (the "SEC") continues to
interpret the 1940 Act, to require pass-through voting privileges for various
contract owners. The Company and its agents will not recommend action in
connection with, or oppose or interfere with, the solicitation of proxies for
the Fund shares held for Owners.

5. CUSTOMER COMMUNICATIONS.

5.1 PROSPECTUSES. "The Adviser or Distributor, at its expense, will provide
the Company with as many printed copies of the current prospectus(es) for
the Fund and/or Portfolios as the Company may reasonably request for
distribution to existing or prospective Owners, and/or, at the Company's
request, a single camera ready copy of each such prospectus, which the
Company will print at its expense, and/or, at the Company's request, a
single digital copy of each such prospectus, which the Company will
reproduce in digital format at its expense. The Company will distribute
the Fund and/or Portfolio prospectus(es) to existing and prospective
Owners at its expense."

5.2 SHAREHOLDER MATERIALS. The Adviser and Distributor shall, as applicable,
provide in bulk to the Company or its authorized representative, at a
single address and at no expense to the Company, the following
shareholder communications materials prepared for circulation to Owners
in quantities requested by the Company which are sufficient to allow
mailing thereof by the Company and, to the extent required by applicable
law, to all Owners: proxy or information statements, annual reports,
semi-annual reports, and all updated prospectuses, supplements and
amendments thereof. Neither the Fund, the Advisor nor Distributor shall
be responsible for the cost of distributing such materials to Owners.

6. REPRESENTATIONS AND WARRANTIES.

6.1 THE COMPANY REPRESENTS AND WARRANTS THAT:

(a) It is an insurance company duly organized and in good standing under
the laws of the State of Ohio and that it has legally and validly
established the Account prior to any issuance or sale thereof as a
segregated asset account and that the Company

4
<PAGE>

has and will maintain the capacity to issue all Contracts that may
be sold; and that it is and will remain duly registered, licensed,
qualified and in good standing to sell the Contracts in all the
jurisdictions in which such Contracts are to be offered or sold;

(b) It is and will remain duly registered and licensed in all material
respects under all applicable federal and state securities and
insurance laws and shall perform its obligations hereunder in
compliance in all material respects with any applicable state and
federal laws;

(c) The Contracts are and will be registered under the 1933 Act, and are
and will be registered and qualified for sale in the states where so
required; and the Account is and will be registered as a unit
investment trust in accordance with the 1940 Act and shall be a
segregated investment account for the Contracts;

(d) The Contracts are currently treated as annuity contracts, under
applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Company will maintain such treatment
and will notify Adviser, Distributor and Fund promptly upon having a
reasonable basis for believing that the Contracts have ceased to be
so treated or that they might not be so treated in the future;

(e) It is registered as a transfer agent pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended (the "1934 Act") unless
it is not required to be registered as such.

(f) The arrangements provided for in this Agreement will be disclosed to
the Owners; and

(g) It or its subsidiary is registered as a broker-dealer under the 1934
Act and any applicable state securities laws, including as a result
of entering into and performing the Services set forth in this
Agreement, unless it is not required to be registered as such.

6.2 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement are and will be registered under the 1933 Act and the Fund is
and will be registered as a registered investment company under the
Investment Company Act of 1940, in each case, except to the extent the
Company is so notified in writing.

6.3 DISTRIBUTOR REPRESENTS AND WARRANTS THAT:

(a) It is and will be a member in good standing of the NASD and is and
will be registered as a broker-dealer with the SEC; and

(b) It will sell and distribute Fund shares in accordance with all
applicable state and federal laws and regulations.

6.4 ADVISER REPRESENTS AND WARRANTS THAT:

(a) It will cause each Fund to invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable
annuity contracts under the Code and the regulations issued
thereunder, and that each Fund will comply with Section 817(h) of
the Code as amended from time to time and with all applicable
regulations promulgated thereunder;

6.5 EACH OF THE PARTIES HERETO REPRESENTS AND WARRANTS TO THE OTHERS THAT:

5
<PAGE>

(a) It has full power and authority under applicable law and has taken
all action necessary, to enter into and perform this Agreement and
the person executing this Agreement on its behalf is duly authorized
and empowered to execute and deliver this Agreement;

(b) This Agreement constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms and it shall
comply in all material respects with all laws, rules and regulations
applicable to it by virtue of entering into this Agreement;

(c) Except for the effectiveness of the Registration Statement filed by
the Fund under the 1933 Act and 1940 Act, no consent or
authorization of, filing with, or other act by or in respect of any
governmental authority, is required in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement.

(d) The execution, performance and delivery of this Agreement will not
result in it violating any applicable law or breaching or otherwise
impairing any of its contractual obligations;

(e) Each Party hereto is entitled to rely on any written records or
instructions provided to it by another Party; and

(f) Its directors, officers, employees. and investment advisers, and
other individuals/entities dealing with the money or securities of
the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the amount required by the
applicable rules of the National Association of Securities Dealers,
Inc. ("NASD") and the federal securities laws, which bond shall
include coverage for larceny and embezzlement and shall be issued by
a reputable bonding company.

7. SALES MATERIAL AND INFORMATION.

7.1 NASD FILINGS. The Company shall promptly inform Distributor as to the
status of all sales literature filings pertaining to the Fund and
shall promptly notify Distributor of all approvals or disapprovals of
sales literature filings with the NASD. For purposes of this Section
7, the phrase "sales literature or other promotional material" shall
be construed in accordance with all applicable securities laws and
regulations.

7.2 COMPANY REPRESENTATIONS. The Company shall not make any material
representations concerning the Adviser, the Distributor or the Fund
other than the information or representations contained in: (a) a
registration statement of the Fund or prospectus of the Fund, as
amended or supplemented from time to time; (b) published reports or
statements of the Fund which are in the public domain or approved by
Distributor or the Fund; or (c) sales literature or, other promotional
material of the Fund.

7.3 THE ADVISOR. DISTRIBUTOR AND FUND REPRESENTATIONS. None of Adviser,
Distributor or the Fund shall make any material representations
concerning the Company other than the information or representations
contained in: (a) a registration statement or prospectus for the
Contracts, as amended or supplemented from time to time; (b) published
reports or statements of the Contracts or the Account which are in the
public domain or are approved by the Company; or (c) sales literature
or other promotional material of the Company.

7.4 TRADEMARKS ETC. Except to the extent required by applicable law, no
Party shall use any other Party's names, logos, trademarks or service
marks, whether registered or unregistered, without the prior consent
of such Party.

7.5 INFORMATION FROM DISTRIBUTOR AND ADVISER. Upon request, Distributor or
Adviser will provide to Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, solicitations for voting

6
<PAGE>

instructions, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the
Fund, in final form as filed with the SEC, NASD and other regulatory
authorities.

7.6 INFORMATION FROM COMPANY. Company will provide to Distributor at least
one complete copy of all registration statements, prospectuses,
Statements of Additional Information, reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no action letters and all
amendments to any of the above, that relate to the Fund and the
Contracts, in final form as filed with the SEC, NASD and other
regulatory authorities.

7.7 REVIEW OF MARKETING MATERIALS. If so requested by Company, the Adviser
or Distributor will use its best efforts to review sales literature
and other marketing materials prepared by Company which relate to the
Fund, the Adviser or Distributor for factual accuracy as to such
entities, provided that the Adviser or Distributor is provided at
least five (5) Business Days to review such materials. Neither the
Adviser nor Distributor will review such materials for compliance with
applicable laws. Company shall provide the Adviser with copies of all
sales literature and other marketing materials which refer to the
Fund, the Company or Distributor within five (5) Business Days after
their first use, regardless of whether the Adviser or Distributor has
previously reviewed such materials. If so requested by the Adviser or
Distributor, Company shall cease to use any sales literature or
marketing materials which refer to the Fund, the Adviser or
Distributor that the Adviser or Distributor determines to be
inaccurate, misleading or otherwise unacceptable.

8. FEES AND EXPENSES.

8.1 FUND REGISTRATION EXPENSES. Fund or Distributor shall bear the cost of
registration and qualification of Fund shares; preparation and filing
of Fund prospectuses and registration statements, proxy materials and
reports; preparation of all other statements and notices relating to
the Fund or Distributor required by any federal or state law; payment
of all applicable fees, including, without limitation, any fees due
under Rule 24f-2 of the 1940 Act, relating to the Fund; and all taxes
on the issuance or transfer of Fund shares on the Fund's records.

8.2 CONTRACT REGISTRATION EXPENSES. The Company shall bear the expenses
for the costs of preparation and filing of the Company's prospectus
and registration statement with respect to the Contracts; preparation
of all other statements and notices relating to the Account or the
Contracts required by any federal or state law; expenses for the
solicitation and sale of the Contracts including all costs of printing
and distributing all copies of advertisements, prospectuses,
Statements of Additional Information, proxy materials, and reports to
Owners or potential purchasers of the Contracts as required by
applicable state and federal law; payment of all applicable fees
relating to the Contracts; all costs of drafting, filing and obtaining
approvals of the Contracts in the various states under applicable
insurance laws; filing of annual reports on form N-SAR, and all other
costs associated with ongoing compliance with all such laws and its
obligations hereunder.

9. INDEMNIFICATION.

9.1 INDEMNIFICATION BY COMPANY.

(a) Company agrees to indemnify and hold harmless the Fund, Adviser and
Distributor and each of their directors, officers, employees and
agents, and each person, if any, who controls any of them within the
meaning of Section 15 of the 1933 Act (each, an "Indemnified Party"
and collectively, the "Indemnified Parties" for purposes of this
Section 9.1) from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of Company), and expenses (including reasonable legal fees
and expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or

7
<PAGE>

otherwise (collectively, hereinafter "Losses"), insofar as such
Losses:

(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement, prospectus or sales literature for the
Contracts or contained in the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this paragraph 9.1(a) shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with written information furnished to Company by or
on behalf of the Fund, Distributor or Adviser for use in the
registration statement or prospectus for the Contracts or in
the Contracts (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund
shares; or

(ii) arise out of, or as a result of, statements or representations
or wrongful conduct of Company or its agents, with respect to
the sale or distribution of the Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature covering the Fund or any
amendment thereof or supplement thereto, or the omission or
alleged omission to State therein a material fact required to
be stated therein, or necessary to make the statements therein
not misleading, if such a statement or omission was made in
reliance upon written information furnished to the Fund,
Adviser or Distributor or on behalf of Company; or

(iv) arise out of, or as a result of, any failure by Company or
persons under its control to provide the Services and furnish
the materials contemplated under the terms of this Agreement;
or

(v) arise out of, or result from, any material breach of any
representation or warranty made by Company or persons under its
control in this Agreement or arise out of or result from any
other material breach of this Agreement by Company or persons
under its control: as limited by and in accordance with the
provisions of Sections 9.1(b) and 9.1(c) hereof; or

(vi) arise out of, or as a result of, adherence by Adviser or
Distributor to instructions that it reasonably believes were
originated by persons specified in Section 32(c), hereof

This indemnification provision is in addition to any liability, which
the Company may otherwise have.

(b) Company shall not be liable under this indemnification provision with
respect to any Losses to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.

(c) Company shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served

8
<PAGE>

upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but
failure to notify Company of any such claim shall not relieve Company
from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case
any such action is brought against any Indemnified Party, and it
notified the Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the
Indemnifying Party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any
additional counsel obtained by it, and the Indemnifying Party shall
not be liable to such Indemnified Party under this Section for any
legal or other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof other than reasonable
costs of investigation. The Indemnified Party may not settle any
action without the written consent of the Indemnifying Party. The
Indemnifying Party may not settle any action without the written
consent of the Indemnified Party unless such settlement completely and
finally releases the Indemnified Party from any and all liability. In
either event, consent shall not be unreasonably withheld

(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against the Indemnified
Parties in connection with the issuance or sale of Fund shares or the
Contracts or the operation of the Fund.

9.2 INDEMNIFICATION BY ADVISER AND DISTRIBUTOR.

(a) Adviser and Distributor agrees to indemnify and hold harmless Company
and each of its directors, officers, employees and agents and each
person, if any, who controls Company within the meaning of Section 15
of the 1933 Act ("Indemnified Party" and collectively, the
"Indemnified Parties" for purposes of this Section 9.2) against any
and all Losses to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as
such Losses:

(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this Section 9.2(a) shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with written information furnished to the Fund,
Adviser or Distributor by or on behalf of Company for use in the
registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or

(ii) arise out of, or as a result of, statements or representations
or wrongful conduct of Adviser or Distributor or persons under
its control, with respect to the sale or distribution of Fund
shares; or

(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance
upon written information furnished to Company by or on behalf of
Adviser or Distributor; or

9
<PAGE>

(iv) arise out of, or as a result of, any failure by Adviser or
Distributor or persons under its control to provide the services
and furnish the materials contemplated under the terms of this
Agreement; or

(v) arise out of or result from any material breach of any
representation or warranty made by Adviser or Distributor or
persons under its control in this Agreement or arise out of or
result from any other material breach of this Agreement by
Adviser or Distributor or persons under its control; as limited
by and in accordance with the provisions of Sections 9.2(b) and
9.2(c) hereof.

This indemnification provision is in addition to any liability which
Adviser and Distributor may otherwise have.

(b) Adviser and Distributor shall not be liable under this
indemnification provision with respect to any Losses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement or to Company.

(c) Adviser and Distributor shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
Adviser and Distribution in writing within a reasonable time after the
summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify Adviser and
Distributor of any such claim shall not relieve Adviser and
Distributor from any liability which it may have to the Indemnified
Party otherwise than on account of this indemnification provision. In
case any such action is brought against any Indemnified Party, and it
notified the Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the
Indemnifying Party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any
additional counsel obtained by it, and the Indemnifying Party shall
not be liable to such Indemnified Party under this Section for any
legal or other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof other than reasonable
costs of investigation. The Indemnified Party may not settle any
action without the written consent of the Indemnifying Party. The
Indemnifying Party may not settle any action without the written
consent of the Indemnified Party unless such settlement completely and
finally releases the Indemnified Party from any and all liability. In
either event, consent shall not be unreasonably withheld.

(d) The Indemnified Parties will promptly notify Adviser and Distributor
of the commencement of any litigation or proceedings against the
Indemnified Parties in connection with the issuance or sale of the
Contracts or the operation of the Account.

10. POTENTIAL CONFLICTS.

10.1 MONITORING BY DIRECTORS FOR CONFLICTS OF INTEREST. The Directors of
each Fund will monitor the Fund for any potential or existing material
irreconcilable conflict of interest between the interests of the
contract owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter

10
<PAGE>

ruling, no-action or interpretive letter, or any similar action by
insurance, tax or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d)
the manner in which the investments of the Fund are being managed; (e)
a difference in voting instructions given by variable annuity contract
owners; or (f) a decision by Company to disregard the voting
instructions of Owners. The Directors shall promptly inform the
company, in writing, if they determine that an irreconcilable material
conflict exists and the implications thereof.

10.2 MONITORING BY THE COMPANY FOR CONFLICTS OF INTEREST. The Company will
promptly notify the Directors, in writing, of any potential or
existing material irreconcilable conflicts of interest, as described
in Section 10.1 above, of which it is aware. The Company will assist
the Directors in carrying out their responsibilities under any
applicable provisions of the federal securities laws and any exemptive
orders granted by the SEC ("Exemptive Order") by providing the
Directors, in a timely manner, with all information reasonably
necessary for the Directors to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to
inform the Directors whenever Owner voting instructions are
disregarded.

10.3 REMEDIES. If it is determined by a majority of the Directors, or a
majority of disinterested Directors, that a material irreconcilable
conflict exists, as described in Section 10.1 above, the Company
shall, at its own expense take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and
including, but not limited to: (a) withdrawing the assets allocable to
some or all of the separate accounts from the applicable Fund and
reinvesting such assets in a different investment medium, including
(but not limited to) another fund managed by the Adviser, or
submitting the question whether such segregation should be implemented
to a vote of all affected owners and, as appropriate, the assets of
any particular group that votes in favor of such segregation, or
offering to the affected owners the option of making such a change;
and (b) establishing a new registered management investment company or
managed separate account.

10.4 CAUSES OF CONFLICTS OF INTEREST.

(a) STATE INSURANCE REGULATORS. If a material irreconcilable
conflict arises because a particular state insurance
regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the applicable
Fund and terminate this Agreement with respect to such
Account within the period of time permitted by such decision,
but in no event later than six months after the Directors
inform the Company in writing that it has determined that
such decision has created an irreconcilable material
conflict; provided however, that such withdrawal and
termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a
majority of the disinterested Directors. Until the end of the
foregoing period, the Distributor and Fund shall continue to
accept and implement orders by the Company for the purchase
(and redemption) of shares of the Fund to the extent such
actions do not violate applicable law.

(b) DISREGARD OF OWNER VOTING. If a material irreconcilable
conflict arises because of Company's decision to disregard
Owner voting instructions and that decision represents a
minority position or would preclude a majority vote, Company
may be required, at the applicable Fund's election, 10
withdraw the Account's investment in said Fund. No charge or
penalty will be imposed against the Account as a result of
such withdrawal.

10.5 LIMITATIONS ON CONSEQUENCES. For purposes of Sections 10.3
through 10.5 of this Agreement, a majority of the disinterested
Directors shall determine whether any proposed action adequately
remedies any irreconcilable material conflict. In no event will
the Fund, the Adviser or the Distributors be required to
establish a new funding medium for any of the Contracts. The
Company shall not be required by Section 10.3 to establish a new
funding medium

11
<PAGE>

for the Contracts if an offer to do so has been declined by vote of a
majority of Owners affected by the irreconcilable material conflict.
In the event that the Directors determine that any proposed action
does not adequately remedy any irreconcilable material conflict, then
the Company will withdraw the Account's investment in the applicable
Fund and terminate this Agreement as quickly as may be required to
comply with applicable law, but in no event later than six (6) months
after the Directors inform the Company in writing of the foregoing
determination, provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict.

10.6 CHANGES IN LAWS. If and to the extent that Rule 6e-2 and Rule 6e-
3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive
relief from any provision of the Act or the rules promulgated
thereunder with respect to mixed or shared funding, (as defined
in the Exemptive Order, if any) on terms and conditions
materially different from those contained in the Exemptive Order,
if any, then (a) the Funds and/or the Company, as appropriate,
shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 10.1, 10.2,
10.3 and 10.4 of this Agreement shall continue in effect only to
the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or
adopted.

11. MAINTENANCE OF RECORDS.

(a) Recordkeeping and other administrative services to Owners shall be the
responsibility of the Company and shall not be the responsibility of
the Fund, Adviser or Distributor. None of the Fund, the Adviser or
Distributor shall maintain separate accounts or records for Owners.
Company shall maintain and preserve all records as required by law to
be maintained and preserved in connection with providing the Services
and in making shares of the Fund available to the Account.

(b) Upon the request of the Adviser or Distributor, the Company shall
provide copies of all the historical records relating to transactions
between the Fund and the Account, written communications regarding the
Fund to or from the Account and other materials, in each case (1) as
are maintained by the Company in the ordinary course of its business
and in compliance with applicable law, and (2) as may reasonably be
requested to enable the Adviser and Distributor, or its
representatives, including without limitation its auditors or legal
counsel, to (A) monitor and review the Services, (B) comply with any
request of a governmental body or self-regulatory organization or the
Owners, (C) verify compliance by the Company with the terms of this
Agreement, (D) make required regulatory reports, or (E) perform general
customer supervision. The Company agrees that it will permit the
Adviser and Distributor or such representatives of either to have
reasonable access to its personnel and records in order to facilitate
the monitoring of the quality of the Services.

(c) Upon the request of the Company, the Adviser and Distributor shall
provide copies of all the historical records relating to transactions
between the Fund and the Account, written communications regarding the
Fund to or from the Account and other materials, in each case (1) as
are maintained by the Adviser and Distributor, as the case may be, in
the ordinary course of its business and in compliance with applicable
law, and (2) as may reasonably be requested to enable the Company, or
its representatives, including without limitation its auditors or legal
counsel, to (A) comply with any request of a governmental body or self-
regulatory organization or the Owners, (B) verify compliance by the
Adviser and Distributor with the terms of this Agreement, (C) make
required regulatory reports, or (D) perform general customer
supervision.

(d) The Parties agree to cooperate in good faith in providing records to
one another pursuant to this Section 11.

12
<PAGE>

12. TERM AND TERMINATION.

12.1 TERM AND TERMINATION WITHOUT CAUSE. The initial term of this Agreement
shall be for a period of one year from the date hereof. Unless
terminated by any Party upon not less than thirty (30) days prior written
notice to the other Parties, this Agreement shall thereafter
automatically renew from year to year, subject to termination at the
next applicable renewal date upon not less than 30 days prior written
notice. Any Party may terminate this Agreement following the initial
term upon six (6) months advance written notice to the other Parties.

12.2 TERMINATION BY FUND, DISTRIBUTOR OR ADVISER FOR CAUSE. Adviser, Fund or
Distributor may terminate this Agreement immediately by written notice to
the Company, if any of them shall determine, in its sole judgment
exercised in good faith, that (a) the Company has suffered a material
adverse change in its business, operations, financial condition or
prospectus since the date of this Agreement or is the subject of material
adverse publicity; or (b) any of the Contracts are not registered, issued
or sold in accordance with applicable state and federal law or such law
precludes the use of Fund shares as the underlying investment media of
the Contracts issued or to be issued by the Company.

12.3 TERMINATION BY COMPANY FOR CAUSE. Company may terminate this Agreement by
written notice to the Adviser, Fund and Distributor in the event that (a)
the Fund shares are not registered, issued or sold in accordance with
applicable state or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued or to
be issued by the Company; (b) the Fund ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any successor
or similar provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or (c) the Fund fails to meet the diversification
requirements specified in Section 6.4(a).

12.4 TERMINATION BY ANY PARTY. This Agreement may be terminated by any Party
at any time (A) by giving 30 days' written notice to the other Parties in
the event of an material breach of this Agreement by the other Party or
Parties that is not cured during such 30-day period, and (B) (i) upon
institution of formal proceedings relating to the legality of the terms
and conditions of this Agreement against the Account, Company, Fund,
Adviser or Distributor by the NASD, the SEC or any other regulatory body
provided that the terminating Patty has a reasonable belief that the
institution of formal proceedings is not without foundation and will have
a material adverse impact on the terminating Party, (ii) by the non-
assigning Party upon the assignment of this Agreement in contravention of
the terms hereof, or (iii) as is required by law, order or instruction by
a court of competent jurisdiction or a regulatory body or self-regulatory
organization with jurisdiction over the terminating Party.

12.5 LIMIT ON TERMINATION. Notwithstanding the termination of this Agreement
with respect to the Fund, for so long as any Contracts remain outstanding
and Invested in the Fund each Party hereto shall continue to perform such
of its duties hereunder as are necessary to ensure the continued tax
deferred status thereof and the payment of benefits thereunder, except to
the extent proscribed by law, the SEC or other regulatory body.
Notwithstanding the foregoing, nothing in this Section 12.5 obligates the
Fund to continue in existence. In the event that the Fund elects to
terminate its operations, the Company shall, as soon as practicable,
obtain an exemptive order or order of substitution from the SEC to remove
all Owners from the Fund.

13. NOTICES.

All notices hereunder shall be given in writing (and shall be deemed to
have been duly given upon receipt) by delivery in person, by facsimile, by
registered or certified mail or by overnight delivery (postage prepaid,
return receipt requested) to the respective Parties as follows:

13
<PAGE>

IF TO TIMOTHY VARIABLE:

The Timothy Plan Variable Series
1304 West Fairbanks Avenue
Winter Park, FL 32789
Facsimile: (407) 644-4574
e-mail: [email protected]

IF TO ADVISER:

Timothy Partners,
Ltd.
1304 West Fairbanks Avenue
Winter Park, FL 32789
Facsimile: (407) 644-4574
e-mail: [email protected]

IF TO DISTRIBUTOR:

Timothy Partners, Ltd.
1304 West Fairbanks Avenue
Winter Park, FL 32789
Facsimile: (407) 644-4574
e-mail: [email protected]

IF TO COMPANY:

Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark F. Muething
Facsimile No.: (513) 357-3397

14. MISCELLANEOUS.

14.1 CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way affect the construction or effect of
any provisions hereof.

14.2 ENFORCEABILITY. If any portion 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.

14.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one
and the same instrument.

14.4 REMEDIES NOT EXCLUSIVE. The rights, remedies and obligations contained
in this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the
Parties hereto are entitled to under state and federal jaws.

14.5 CONFIDENTIALITY. Subject to the requirements of legal process and
regulatory authority, the Fund and Distributor shall treat as
confidential the names and addresses of the owners of the Contracts
and all information reasonably identified as confidential in writing
by the Company hereto and, except as permitted by this Agreement,
shall not disclose, disseminate or utilize such names and addresses
and other confidential information without the express written consent
of the Company until such time as it may come into the public domain.

14
<PAGE>

14.6 GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Ohio applicable to
agreements fully executed and to he performed therein; exclusive of
conflicts of laws.

14.7 SURVIVABILITY. Sections 6, 7.2, 7.3, 7.4, 9, 11 and 12.5 hereof shall
survive termination of this Agreement. In addition, all provisions of
this Agreement shall survive termination of this Agreement in the
event that any Contracts are invested in the Fund at the time the
termination becomes effective and shall survive for so long as such
Contracts remain so invested.

14.8 AMENDMENT AND WAIVER. No modification of any provision of this
Agreement will be binding unless in writing and executed by the Party
to be bound thereby. No waiver of any provision of this Agreement will
be binding unless in writing and executed by the Party granting such
waiver. Notwithstanding anything in this Agreement to the contrary,
the Company may unilaterally amend Exhibit A hereto to add additional
series of The Timothy Plan Variable Funds ("New Funds") as Funds by
sending to the Company a written notice of the New Funds. Any valid
waiver of a provision set forth herein shall not constitute a waiver
of any other provision of this Agreement. In addition, any such waiver
shall constitute a present waiver of such provision and shall not
constitute a permanent fixture waiver of such provision.

14.9 ASSIGNMENT. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and
assigns; provided however that neither this Agreement nor any rights,
privileges, duties or obligations of the Parties may be assigned by
any Party without the written consent of the other Parties or as
expressly contemplated by this Agreement.

14.10 ENTIRE AGREEMENT. This Agreement contains the full and complete
understanding between the Parties with respect to the transactions
covered and contemplated hereunder, and supersedes all prior
agreements and understandings between the Parties relating to the
subject matter hereof, whether oral or written, express or implied.

14.11 RELATIONSHIP OF PARTIES: NO JOINT VENTURE, ETC. Except for the limited
purpose provided in Section 3.8, it is understood and agreed that the
Company shall be acting as an independent contractor and not as an
employee or agent of the Adviser, Distributor or the Fund, and none of
the Parties shall hold itself out as an agent of any other Party with
the authority to bind such Party. Neither the execution nor
performance of this Agreement shall be deemed to create a partnership
or joint venture by and among any of the Company, Fund, Adviser, or
Distributor.

14.12 EXPENSES. All expenses incident to the performance by each Party of
its respective duties under this Agreement shall be paid by that
Party.

14.13 TIME OF ESSENCE. Time shall be of the essence in this Agreement.

14.14 NON-EXCLUSIVITY. Each of the Parties acknowledges and agrees that this
Agreement and the arrangements described herein are intended to be
non-exclusive and that each of the Parties is free to enter into
similar agreements and arrangements with other entities.

14.15 OPERATIONS OF FUNDS. In no way shall the provisions of this Agreement
limit the authority of the Fund, the Company or Distributor to take
such action as it may deem appropriate or advisable in connection with
all matters relating to the operation of such Fund and the sale of its
shares. In no way shall the provisions of this Agreement limit the
authority of the Company to take such action as it may deem
appropriate or advisable in connection with all matters relating to
the provision of Services or the shares of fund other than the Fund
offered to the Account.

15
<PAGE>

IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be
duly executed as of the date first above written.

Annuity Investor Life Insurance Company

By: _________________________________
Name: Mark F. Muething
Title: Senior Vice President

Timothy Partners, Ltd. - Adviser

By: _________________________________
Name: Arthur D. Ally
Title: General Partner

Timothy Partners, Ltd. - Distributor

By: _________________________________
Name: Arthur D. Ally
Title: General Partner

The Timothy Plan Variable Series
on behalf of the Fund

By: _________________________________
Name: Arthur D. Ally
Title: President

16
<PAGE>

Exhibit A

The Fund:

The Timothy Plan Variable Series

17
<PAGE>

Exhibit A-1

Separate Accounts:

Annuity Investors Variable Account B

18
<PAGE>

Exhibit B

The Services

Company shall perform the following services. Such services shall be the
responsibility of the Company and shall not be the responsibility of the Fund,
Adviser or Distributor.

1. Maintain separate records for each Account, which records shall reflect Fund
shares ("Shares") purchased and redeemed, including the date and price for
all transactions, Share balances, and the name and address of each Owner,
including zip codes and tax identification numbers.

2. Credit contributions to individual Owner accounts and invest such
contributions in shares of the Funds to the extent so designated by the
Owner.

3. Disburse or credit to the Owners, and maintain records of, all proceeds of
redemptions of Fund shares and all other distributions not reinvested in
shares.

4. Prepare and transmit to the Owners, periodic account statements showing,
among other things, the total number of Fund shares owned as of the
statement closing date, purchases and redemptions of shares during the
period covered by the statement, the net asset value of the Funds as of a
recent date, and the dividends and other distributions paid during the
Statement period (whether paid in cash or reinvested in shares).

5. Transmit to the Owners, as required by applicable law, prospectuses, proxy
materials, shareholder reports, and other information provided by the
Adviser, Distributor or Fund and required to be sent to shareholders under
the Federal securities laws.

6. Transmit to Distributor purchase orders and redemption requests placed by
the Account and arrange for the transmission of funds to and from the Fund.

7. Transmit to Distributor such periodic reports as Distributor shall
reasonably conclude is necessary to enable the Fund to comply with
applicable Federal securities and state Blue-Sky requirements.

8. Transmit to the each Account confirmations of purchase orders and redemption
requests placed by each Account.

9. Maintain all account balance information for the Account and daily and
monthly purchase summaries expressed in shares and dollar amounts.

10. Prepare, transmit and file any Federal, state and local government reports
and returns as required by law with respect to each account maintained on
behalf of the Account.

11. Respond to Owners' inquiries regarding, among other things, share prices,
account balances, dividend options, dividend amounts, and dividend payment
dates.

19
<PAGE>

Exhibit C

Account Information

1. Entity in whose name each Account will be opened:

Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, OH 45201-5423

2. Employer ID number (For internal use only):

31 - 1021738

3. Authorized contact persons: The following persons are authorized on behalf
of the Company to effect transactions in each Account:
<TABLE>
<CAPTION>

<S> <C> <C> <C>
Lynn Laswell 513-412-2924 John Burress 513-412-3194
Brian Sponaugle 513-412-2931 Anniece Griece 513-412-2935
Todd Gayhart 513-412-2932 Debbie Plummer 513-412-2938
Laura Lally 513-412-2933
</TABLE>
4. Will the Accounts have telephone exchange? [ ] Yes [ X ] No
(This option lets Company redeem shares by telephone and apply the proceeds
for purchase in another identically registered Timothy Funds account.)

5. Will the Accounts have telephone redemption? [ ] Yes [ X ] No
(This option lets Company sell shares by telephone. The proceeds will be
wired to the bank account specified below.)

6. All dividends and capital gains will be reinvested automatically.

7. Instructions for all outgoing wire transfers:

The Provident Bank
Cincinnati, OH 45202
ABA # 042000424
For the Account of Annuity Investors
Life Insurance Company Depository
Account
Account # 0697-394
Amount:
Attn.: Wire Transfer Department

8. If this Account information Form contains changed information, the
undersigned authorized officer has executed this amended Account Information
Form as of the date set forth below and acknowledges the agreements and
representations set forth in the Participation Agreement between the Company,
the Fund, Adviser and Distributor:

______________________________________ ___________________
(Signature of Authorized Officer) (Date)

9. Company represents under penalty of perjury that:

(i) The employer ID number on this form is correct; and

20
<PAGE>

(ii) Company is not subject to backup withholding because (a) Company is
exempt from backup withholding, (b) Company has not been notified by
the IRS that it is subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has
notified the Company that it is no longer subject to backup
withholding. (Cross out (ii) if Company has been notified by the IRS
that it is subject to backup withholding because of underreporting
interest or dividends on its tax return.)

Please Note: Distributor employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and may not be liable
for losses due to unauthorized or fraudulent instructions. Please see the
prospectus for the applicable Fund' for more information on the telephone
exchange and redemption privileges.

21
<PAGE>

April 25, 1998

Annuity Investors Life insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark F. Muething

Dear Mark:

Re: Fee letter relating to the Annuity Investors Life Insurance Company
Participation Agreement.

Pursuant to the Participation Agreement by and among The Timothy Plan Variable
Series (the "Fund"), and Annuity Investors Life Insurance Company (the
"Company") dated May 1, 1998 (the "Participation Agreement"), the Company will
provide certain administrative services on behalf of the registered investment
companies or series thereof specified in Exhibit A.

In recognition of the reduction in administrative expenses that derives from the
performance of said administrative services, The Timothy Plan Variable Series
Fund agrees to pay the Company the fee specified below.

(a) For average aggregate amounts (as calculated in paragraph (b), below)
invested through variable insurance products issued by the Company with
the Fund, the monthly fee shall equal the percentage (calculated
paragraph (b), below) of the applicable annual fee for each Fund
specified in Exhibit A.

(b) For purposes of computing the fee contemplated in paragraph (a) above,
the Fund shall calculate and pay to the Company an amount equal to the
product of: (a) the product of (i) the number of calendar days in the
applicable month divided by the number of calendar days in that year
(365 or 366 as applicable) and (ii) the applicable percentage specified
in Exhibit A, hereto, multiplied by (b) the average daily market value
of the investments held in such Fund pursuant to the Participation
Agreement computed by totaling the aggregate investment (share net asset
value multiplied by the total number of shares held) on each day during
the calendar month and dividing by the total number of days during such
month.

(c) The Fund shall calculate the amount of the payment to be made pursuant
to this Letter Agreement at the end of each calendar month and will make
such payment to the Company within 30 days after receiving the report
referenced in paragraph (e), below. Fees will be paid by wire transfer
or by check. All payments hereunder shall be considered final unless
disputed by the Company in writing within 60 days of receipt.

(d) The parties agree that the fees contemplated herein are solely for
shareholder servicing and other administrative services provided by the
Company and do not constitute payment in any manner for investment
advisory, distribution, trustee, or custodial services.

(e) The Company agrees to provide the Fund by the 15th day of each month
with a report, which indicates the number of Owners that hold Contract
interests in each Account as of the last day of the prior month.

(f) If requested in writing by the Fund, and at the Fund's expense, the
Company shall provide to the Fund, by February 14th of each year a
"Special Report" from a nationally recognized accounting firm reasonably
acceptable to the Fund which substantiates for each month of the prior
calendar year: (a) the number of Owners that hold, through an Account,
interests in each Account maintained by the Company on the last day of
each month which held shares for which the fee provided or in this
Letter Agreement was received by the Company, (b) that

22
<PAGE>

any fees billed to the Fund for such month were accurately determined in
accordance with this Letter Agreement, and (c) such other information in
connection with this Agreement and the Participation Agreement as may be
reasonably requested by the Fund.

(g) The parties hereto agree that the Fund may unilaterally amend Schedule A
hereto to add additional investment companies or series thereof ("New
Funds") as Funds subject to the provisions of this Letter Agreement by
sending to the Company a written notice of the New Funds and indicating
therein the fees to be paid to the Company with respect to the
administrative services provided pursuant to the Participation
Agreement in connection with such New Funds.

(h) This Letter Agreement shall terminate upon termination of the
Participation Agreement. Accordingly, all payments pursuant to this
Letter Agreement shall cease upon termination of the Participation
Agreement.

(i) Capitalized terns not otherwise defined herein shall have the meaning
assigned to herein in the Participation Agreement.

If you are in agreement with the foregoing, please sign and date below where
indicated and return one copy of this signed letter agreement to me.

Very truly yours,

Arthur D. Ally
President

Accepted and agreed as of May 1, 1998 by
Annuity Investors Life Insurance Company

By: _______________________________
Name: Mark F. Muething
Title: Senior Vice President

23
<PAGE>

Exhibit A to Letter dated April 25, 1998

The Funds subject to this Agreement and applicable annual fees are as follows:

Fund Annual Fee

The Timothy Plan Variable Series .20%

<PAGE>

Exhibit 11

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the references to our firm in Post-Effective Amendment No. 8
to the Registration Statement on Form N-1A of The Timothy Plan and to the use of
our report dated January 16, 1998 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.

/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER

Philadelphia, Pennsylvania
April 15, 1998

<PAGE>

<ARTICLE> 6
<CIK> 0000916490
<NAME> THE TIMOTHY PLAN
<SERIES>
<NUMBER> 1
<NAME> CLASS A
</SERIES>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 20,785,541
<INVESTMENTS-AT-VALUE> 22,501,232
<RECEIVABLES> 82,273
<ASSETS-OTHER> 413
<OTHER-ITEMS-ASSETS> 15,052
<TOTAL-ASSETS> 22,635,403
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,474
<TOTAL-LIABILITIES> 38,474
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,694,056
<SHARES-COMMON-STOCK> 914,727
<SHARES-COMMON-PRIOR> 690,247
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 187,182
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,715,691
<NET-ASSETS> 11,208,072
<DIVIDEND-INCOME> 172,686
<INTEREST-INCOME> 131,990
<OTHER-INCOME> 6,212
<EXPENSES-NET> 318,183
<NET-INVESTMENT-INCOME> (7,295)
<REALIZED-GAINS-CURRENT> 2,264,075
<APPREC-INCREASE-CURRENT> 796,018
<NET-CHANGE-FROM-OPS> 3,052,798
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,122,228
<DISTRIBUTIONS-OTHER> 0
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<PAGE>

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