<PAGE>
June 30, 1998
Dear Shareholder:
We believe there are two very important questions every shareholder should ask
about the investment of his or her funds: (1) Where is my money invested? and
(2) What are the investment returns? There is also a third, very critical
question: (3) Which of the first two questions is most important?
The answer to (3), of course, depends on whether you hold a biblical or
secular worldview. At any rate, since both (1) and (2) are so very important,
I want to address both issues in this letter:
(1) Your Timothy Plan is committed to holding the line on where we invest
your money. We now screen out about 450 of the 7,000+ publicly traded
companies in the marketplace due to their consistent support or
involvement in activities that are undermining the moral value system
of our nation. This includes areas such as abortion and pornography as
well as the production of alcohol, tobacco or casino gambling. Our
principles are based on our biblical worldview and we try to make
every decision based on asking What would Jesus do? (WWJD).
(2) Although our performance thus far this year is not what we would like
it to be, we take comfort in the investment talent (as evidenced by
his 30-year performance history) of our money manager, Jim Awad,
President of Awad & Associates. I believe Mr. Awad has a very accurate
perspective on what is actually going on in the marketplace and I
recommend that you carefully review his letter on the following page.
If I have learned anything in my 20+ years in this industry it is
this: It takes time to make money in the stock market. Although there
have always been short-term challenges, the market has always
eventually rewarded real underlying value. Our portfolio, across the
board, is comprised of high quality and (we believe) undervalued
companies that should benefit from the fact that the market is,
ultimately, an efficient allocator of capital.
I want to personally thank you for your faithfulness in being part of the
Timothy Plan family. I am confident that time will clearly prove that wise
investors need not sacrifice investment performance opportunities to maintain
the integrity of their moral convictions.
Sincerely,
LOGO
/s/ Arthur D. Ally
Arthur D. Ally
President
<PAGE>
AWAD & ASSOCIATES
MARKET COMMENTARY
JUNE 30, 1998
AMERICA ON SALE
Most investors have focused on the fifty largest stocks and these stocks have
indeed done quite well in the marketplace!
Beneath these fifty stocks, though, are several thousand public companies
whose stocks have not participated in the recent advance in equity prices. Not
well known to most investors, these equities have been ignored as most
investors flooded into the big names familiar to all.
Many of these unrecognized companies are excellent in quality when one
examines profitibilty, management and balance sheets. In addition, they are
selling at compelling valuations.
Ultimately, the marketplace is an efficient allocator of capital and prices
stocks accordingly to relative value. When it does so in today's environment,
the stock prices of these companies have the potential to appreciate
substantially.
The Timothy Plan is filled with companies like this!
James D. Awad
Chairman
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCKS - 94.39%
AEROSPACE - 1.03%
10,000 Kellstrom Industries Inc. ................................. $ 289,688
-----------
AMUSEMENT & RECREATION SERVICES - 2.44%
34,500 Ascent Entertainment Group, Inc.*.......................... 383,813
15,000 Florida Panthers Holdings.................................. 295,312
-----------
679,125
-----------
APPAREL AND ACCESSORY STORES - 2.97%
21,000 Shoe Carnival, Inc.*....................................... 291,375
20,000 Sirena Apparel Group Inc.*................................. 135,000
15,000 Syms Corp.*................................................ 213,750
15,000 U.S. Vision, Inc.*......................................... 185,625
-----------
825,750
-----------
BUILDING CONSTRUCTIONS - 1.84%
18,000 Blount International Inc., Class A......................... 513,000
-----------
BUSINESS SERVICES - 13.38%
45,000 Comdisco, Inc.............................................. 855,000
15,000 Cunningham Graphics Intl Inc............................... 258,750
38,900 Doral Financial Corp. ..................................... 680,750
28,000 Dynamic Healthcare Technologies, Inc.*..................... 54,250
25,000 Health Management Systems, Inc.*........................... 281,250
27,000 LanVision Systems, Inc.*................................... 119,813
29,000 Metrika Systems Corp.*..................................... 485,750
8,000 National Data Corp......................................... 350,000
2,652 Omega WorldWide Inc.*...................................... 20,056
13,000 ScanSource, Inc.*.......................................... 250,250
29,000 StarTek, Inc.*............................................. 364,312
-----------
3,720,181
-----------
CHEMICALS & ALLIED PRODUCTS - 3.71%
26,000 Aviron*.................................................... 810,875
13,500 Mississippi Chemical Corp.................................. 221,906
-----------
1,032,781
-----------
CONSUMER PRODUCTS & SERVICES - 1.62%
18,000 Gibson Greetings Inc. ..................................... 450,000
-----------
DEPOSITORY INSTITUTIONS - 1.23%
15,000 Staten Island Bancorp Inc. ................................ 341,250
-----------
ELECTRIC, GAS & SANITARY SERVICES - 3.63%
20,000 Cadiz Land Company, Inc.*.................................. 231,250
28,000 New Horizons Worldwide, Inc.*.............................. 546,000
56,000 Philip Services Corp., ADR*................................ 231,000
-----------
1,008,250
-----------
ELECTRONIC EQUIPMENT & COMPONENTS - 1.83%
13,000 Ametek, Inc. .............................................. 381,062
9,500 Richardson Electronics, Ltd. .............................. 128,250
-----------
509,312
-----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SCHEDULE OF INVESTMENTS JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCKS - CONTINUED
ENGINEERING, ACCOUNTING & RESEARCH MANAGEMENT - 0.75%
53 Morrison Knudsen Corp. Warrants, 03/11/2003*.............. $ 311
15,500 Right Management Consultants, Inc.*....................... 209,250
-----------
209,561
-----------
FABRICATED METAL PRODUCTS - 2.63%
8,000 Harsco Corp. ............................................. 366,500
47,000 Miller Industries, Inc.*.................................. 364,250
-----------
730,750
-----------
FOOD & ALLIED PRODUCTS - 5.40%
15,000 Corn Products Intl Inc. .................................. 508,125
14,000 Smithfield Foods, Inc.*................................... 427,000
23,200 Smucker (J.M.) Co., Class B............................... 565,500
-----------
1,500,625
-----------
HEALTH SERVICES - 4.31%
25,000 American Retirement Corp.*................................ 443,750
4,200 Assisted Living Concepts, Inc.*........................... 72,450
33,500 Sun Healthcare Group, Inc.*............................... 489,937
18,000 Transition Systems Inc. .................................. 191,250
-----------
1,197,387
-----------
HOTELS & OTHER LODGING PLACES - 3.65%
17,000 Gaylord Entertainment Co. ................................ 548,250
31,200 Servico, Inc.*............................................ 468,000
-----------
1,016,250
-----------
INSURANCE CARRIERS - 2.35%
15,000 Annuity And Life RE....................................... 331,875
19,500 Gryphon Holdings, Inc.*................................... 321,750
-----------
653,625
-----------
MACHINERY & COMPUTER EQUIPMENT - 7.37%
65,000 EA Industries, Inc.*...................................... 199,063
20,000 ITEQ, Inc.*............................................... 148,750
19,000 JLG Industries, Inc....................................... 384,750
33,000 Middleby Corp.*........................................... 202,125
11,500 Printronix, Inc.*......................................... 184,000
3,080 Thermo Vision Corp.*...................................... 21,560
34,000 Tokheim Corp. ............................................ 697,000
24,000 TransAct Technologies, Inc.*.............................. 213,000
-----------
2,050,248
-----------
MISCELLANEOUS MANUFACTURING INDUSTRY - 1.27%
20,000 K2, Inc. ................................................. 352,500
-----------
PHOTOGRAPHIC, WATCHES, OPTICAL & MEDICAL GOODS - 11.77%
66,000 Angeion Corp.*............................................ 140,250
37,000 Armor Holdings, Inc.*..................................... 425,500
45,000 ATS Medical, Inc.*........................................ 313,596
5,000 Bergen Brunswig Corp. .................................... 231,875
6,666 Bindley Western Industries................................ 219,978
11,000 Cooper Companies, Inc.*................................... 400,813
10,000 Elan Corp PLC--Spons ADR*................................. 643,125
21,000 Fluke Corp. .............................................. 690,375
48,000 Somanetics Corp.*......................................... 165,000
6,000 Thermolase Corp*.......................................... 43,500
-----------
3,274,012
-----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SCHEDULE OF INVESTMENTS JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCKS - CONTINUED
PRINTING & PUBLISHING - 6.45%
23,000 Eltron International, Inc.*.......................... $ 632,500
15,500 Houghton Mifflin Co. ................................ 492,125
11,000 Wiley (John) & Sons, Inc., Class A................... 669,625
------------
1,794,250
------------
RAILROAD TRANSPORTATION - 2.67%
19,500 Genesee & Wyoming Inc., Class A*..................... 370,500
7,500 Kansas City Southern Industries...................... 372,187
------------
742,687
------------
REITS & HOLDING COMPANIES - 8.46%
16,000 Alexander Haagen Properties, Inc. ................... 241,000
12,500 Correctional Properties Trust........................ 253,125
8,000 Excel Realty Trust, Inc. ............................ 230,500
25,000 Innkeepers USA Trust................................. 315,625
26,000 LTC Properties, Inc. ................................ 484,250
16,000 Meridian Industrial Trust, Inc. ..................... 368,000
23,000 Mid-Atlantic Realty Trust............................ 283,188
5,000 OMEGA Healthcare Investors, Inc. .................... 175,625
------------
2,351,313
------------
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS - 0.95%
8,000 Rubbermaid Inc. ..................................... 265,500
------------
TELECOMMUNICATIONS - 2.65%
4,826 Ixc Communications Inc. ............................. 234,062
40,000 Periphonics Corporation*............................. 502,500
------------
736,562
------------
TOTAL COMMON STOCKS (COST $24,856,813)............... 26,244,607
------------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
BONDS - 1.70%
$500,000 American Retirement Corp., 5.75%, 10/01/2002......... 472,500
------------
TOTAL BONDS (COST $521,300).......................... 472,500
------------
<CAPTION>
SHARES
------
<C> <S> <C>
SHORT-TERM INVESTMENTS - 4.50%
1,252,060 Star Bank Treasury Fund.............................. 1,252,060
------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,252,060)....... 1,252,060
------------
TOTAL INVESTMENTS (COST $26,630,173)** - 100.59%..... 27,969,167
OTHER ASSETS LESS OTHER LIABILITIES - (0.59%)........ (164,141)
------------
NET ASSETS - 100.00%................................. $27,805,026
============
* Non-income producing security
** Cost for Federal income tax purposes is $26,630,173 and net unrealized
appreciation consists of:
Gross unrealized appreciation........................ $ 3,122,642
Gross unrealized depreciation........................ (1,783,648)
------------
Net unrealized appreciation.......................... $ 1,338,994
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities at market value (identified cost
$26,630,173) (Note 1)........................................... $27,969,167
Receivables:
Securities sold................................................. 472,099
Dividends and interest.......................................... 38,525
Capital stock sold.............................................. 175,837
Deferred organization costs (Note 1)............................. 8,930
Other assets..................................................... 1,729
-----------
TOTAL ASSETS................................................... 28,666,287
-----------
LIABILITIES
Payable for securities sold...................................... 114,366
Capital stock redeemed........................................... 682,619
Payable for advisory fees (Note 3)............................... 23,505
Accrued distribution expense (Note 3)............................ 12,141
Accrued service fee (Note 3)..................................... 3,084
Accrued expenses................................................. 25,546
-----------
TOTAL LIABILITIES.............................................. 861,261
-----------
NET ASSETS........................................................ $27,805,026
===========
CLASS A SHARES (NOTE 1):
Net assets (Unlimited shares of $0.001 par beneficial
interest authorized; 1,089,434 shares outstanding)............. $13,482,624
===========
Net asset value and redemption price per Class A Share
($13,482,624 divided by 1,089,434 shares)...................... $ 12.38
===========
Offering price per share ($12.38 divided by 0.945).............. $ 13.10
===========
CLASS B SHARES (NOTE 1):
Net assets (Unlimited shares of $0.001 par beneficial
interest authorized; 1,174,122 shares outstanding)............. $14,322,402
===========
Net asset value and offering price per Class B Share
($14,322,402 divided by 1,174,122 shares)...................... $ 12.20
===========
Redemption price per share ($12.20 * 0.95)...................... $ 11.59
===========
SOURCE OF NET ASSETS
At June 30, 1998, net assets consisted of:
Paid-in capital................................................. 25,767,880
Undistributed net investment income............................. (15,815)
Accumulated net realized gain on investments.................... 713,967
Net unrealized appreciation on investments...................... 1,338,994
-----------
NET ASSETS..................................................... $27,805,026
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends............................................................ $ 144,641
Interest............................................................. 95,171
---------
TOTAL INCOME........................................................ 239,812
---------
EXPENSES
Investment advisory fees (Note 3).................................... 109,594
Transfer agent fees.................................................. 38,937
Administration fees.................................................. 25,006
Distribution fees - Class B (Note 3)................................. 49,408
Accounting fees...................................................... 18,079
Registration fees.................................................... 29,773
Distribution fees - Class A (Note 3)................................. 15,764
Custodian fees....................................................... 8,750
Printing expense..................................................... 2,992
Amortization of organization costs (Note 1).......................... 6,121
Service fees - Class B (Note 3)...................................... 16,469
Auditing fees........................................................ 4,500
Insurance expense.................................................... 1,384
Miscellaneous expense................................................ 1,169
---------
TOTAL EXPENSES...................................................... 327,946
Expenses waived and reimbursed by Advisor (Note 3)................. (72,319)
---------
NET EXPENSES........................................................ 255,627
---------
NET INVESTMENT LOSS................................................. (15,815)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions......................... 526,785
Net change in unrealized depreciation of investments................. (376,697)
---------
Net realized and unrealized gain on investments...................... 150,088
---------
Net increase in net assets resulting from operations................. $ 134,273
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment loss........................ $ (15,815) $ (7,295)
Net realized gain on investments........... 526,785 2,264,075
Net change in unrealized appreciation
(depreciation) of investments............. (376,697) 796,018
----------- -----------
Net increase in net assets resulting from
operations............................... 134,273 3,052,798
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net capital gains:
Class A................................... 0 (1,122,228)
Class B................................... 0 (1,119,087)
----------- -----------
Net decrease in net assets resulting from
distributions............................ 0 (2,241,315)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold:
Class A................................... 3,308,072 2,955,444
Class B................................... 3,741,856 6,742,913
Shares redeemed:
Class A................................... (1,130,541) (1,215,244)
Class B................................... (845,563) (541,565)
Shares reinvested:
Class A................................... 0 1,075,532
Class B................................... 0 1,079,174
----------- -----------
Increase in net assets derived from capital
share transactions (a).................... 5,073,824 10,096,254
----------- -----------
Total increase in net assets.............. 5,208,097 10,907,737
----------- -----------
NET ASSETS
Beginning of year.......................... 22,596,929 11,689,192
----------- -----------
End of year (including undistributed net
investment loss of ($15,890) and $0,
respectively)............................. $27,805,026 $22,596,929
=========== ===========
(a)Transactions in capital stock were:
Shares sold:
Class A................................ 265,499 232,439
Class B................................ 304,901 542,712
Shares redeemed:
Class A................................ (90,792) (96,627)
Class B................................ (69,680) (43,891)
Shares reinvested:
Class A................................ 0 88,668
Class B................................ 0 89,856
----------- -----------
Increase in shares outstanding............ 409,928 813,157
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
CLASS A
----------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
------------- ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 12.25 $ 11.24
------- -------
Income From Investment Operations:
Net investment income......................... 0.01 0.02
Net gains (losses) on securities (both
realized and unrealized)..................... 0.12 2.37
------- -------
Total from investment operations............. 0.13 2.39
------- -------
Less Distributions
Distributions from net investment income...... 0.00 0.00
Distributions from net capital gains.......... 0.00 (1.38)
------- -------
Total distributions.......................... 0.00 (1.38)
------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 12.38 $ 12.25
======= =======
TOTAL RETURN.................................... 1.06% 21.35% /1/
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s)............ $13,483 $11,208
Ratio of expenses to average net assets:
Before expense reimbursement.................. 2.29% /2/ 2.75%
After expense reimbursement................... 1.60% /2/ 1.60%
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement.................. (0.57%)/2/ (0.90%)
After expense reimbursement................... 0.12% /2/ 0.25%
Portfolio turnover rate........................ 35.39% 136.36%
</TABLE>
* Class A Shares commenced investment operations on March 21, 1994.
/1/ Total return calculation does not reflect sales load.
/2/ Annualized.
See accompanying notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
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 PERIOD
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 *
------------ ------------ --------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.. $ 10.07 $ 9.66 $10.00
------- ------- ------
Income From Investment Operations:
Net investment income............... 0.10 0.11 0.06
Net gains (losses) on securities
(both realized and unrealized)..... 1.17 0.66 (0.34)
------- ------- ------
Total from investment operations... 1.27 0.77 (0.28)
------- ------- ------
Less Distributions
Distributions from net investment
income............................. (0.10) (0.11) (0.06)
Distributions from net capital
gains.............................. 0.00 (0.25) 0.00
------- ------- ------
Total distributions................ (0.10) (0.36) (0.06)
------- ------- ------
NET ASSET VALUE, END OF PERIOD........ $ 11.24 $ 10.07 $ 9.66
======= ======= ======
TOTAL RETURN.......................... 12.59% 7.93% 2.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s).. $ 7,760 $ 6,133 $2,217
Ratio of expenses to average net
assets:
Before expense reimbursement........ 3.70% 5.84% 18.62%/2/
After expense reimbursement......... 1.60% 1.60% 1.60%/2/
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement........ 1.05% 2.96% 15.49%/2/
After expense reimbursement......... 1.05% 1.28% 1.53%/2/
Portfolio turnover rate.............. 93.08% 34.12% 8.31%
</TABLE>
* Class A Shares commenced investment operations on March 21, 1994.
/1/ Total return calculation does not reflect sales load.
/2/ Annualized.
See accompanying notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
CLASS B
----------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
------------- ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 12.13 $ 11.22
------- -------
Income From Investment Operations:
Net investment income (loss).................. (0.02) (0.03)
Net gains (losses) on securities (both
realized and unrealized)..................... 0.09 2.32
------- -------
Total from investment operations............. 0.07 2.29
------- -------
Less Distributions
Distributions from net investment income...... 0.00 0.00
Distributions from net capital gains.......... 0.00 (1.38)
------- -------
Total distributions.......................... 0.00 (1.38)
------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 12.20 $ 12.13
======= =======
TOTAL RETURN.................................... 0.58% 20.50% /1/
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s)............ $14,322 $11,389
Ratio of expenses to average net assets:
Before expense reimbursement.................. 2.75%/2/ 3.41%
After expense reimbursement................... 2.35%/2/ 2.26%
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement.................. (0.75%)/2/ (1.56%)
After expense reimbursement................... (0.35%)/2/ (0.41%)
Portfolio turnover rate........................ 35.39% 136.36%
</TABLE>
* Class B Shares commenced investment operations on August 25, 1995.
/1/ Total return calculation does not reflect redemption fee.
/2/ Annualized.
See accompanying notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
CLASS B
-----------------------------
FOR THE YEAR FOR THE PERIOD
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 *
------------ --------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $10.08 $10.49
------ ------
Income From Investment Operations:
Net investment income (loss).................................. 0.07 0.11
Net gains (losses) on securities (both realized and
unrealized).................................................. 1.14 (0.16)
------ ------
Total from investment operations.......................... 1.21 (0.05)
------ ------
Less Distributions
Distributions from net investment income...................... (0.07) (0.11)
Distributions from net capital gains.......................... 0.00 (0.25)
------ ------
Total distributions....................................... (0.07) (0.36)
------ ------
NET ASSET VALUE, END OF PERIOD.................................. $11.22 $10.08
====== ======
TOTAL RETURN.................................................... 11.98% /1/ 0.46% /1/
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of period (in 000s)........................... $3,929 $ 620
Ratio of expenses to average net
assets:.
Before expense reimbursement................................ 4.30% 6.44%/2/
After expense reimbursement................................. 2.20% 2.20%/2/
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement................................ 1.65% 3.56%/2/
After expense reimbursement................................. 0.45% 0.68%/2/
Portfolio turnover rate....................................... 93.08% 34.12%
</TABLE>
* Class B Shares commenced investment operations on August 25, 1995.
/1/ Total return calculation does not reflect redemption fee.
/2/ Annualized.
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
- -------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The Timothy Plan (the "Fund" ) is organized as a series of 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 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 $14,687,355 and $8,142,210 respectively, for the six months ended
June 30, 1998.
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
- -------------------------------------------------------------------------------
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 six months ended June
30, 1998, advisory fees of $62,375 were waived by TPL and TPL reimbursed the
Fund $9,944. 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 and 0.75% may be payable to outside broker/dealers,
of the average daily net assets attributable to such class of shares. For the
period from January 1, 1998 to June 30, 1998, the Fund reimbursed TPL $65,172
for distribution costs incurred.
<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
Declaration Services Group
555 North Lane
Conshohocken, PA 19428
AUDITORS
Tait, Weller & Baker
Two Penn Center Plaza, Suite 700
Philadelphia, PA 19102
LEGAL COUNSEL
Pepper Hamilton, LLP
3000 Two Logan 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.
LOGO
THE
TIMOTHY
PLAN
SEMI-ANNUAL
REPORT
June 30, 1998
