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