<PAGE>
T H E
=======
TIMOTHY
=======
PLAN/R/
TIMOTHY PLAN
FAMILY OF FUNDS
Timothy Plan
Small-Cap Value Fund
Timothy Plan
Large/Mid-Cap Value Fund
Timothy Plan
Fixed-Income Fund
Timothy Plan
Money Market Fund
<PAGE>
(THIS PAGE IS NOT PART OF THE PROSPECTUS.)
<PAGE>
Contents
2 Risk/Return Summary
2 Timothy Plan Small-Cap Value Fund
3 Timothy Plan Large/Mid-Cap Value Fund
4 Timothy Plan Fixed-Income Fund
5 Timothy Plan Money Market Fund
5 Fees and Expenses
5 Shareholder Fees
5 Annual Fund Operating Expenses
6 Investing in the Funds
6 Opening and Adding to Your Account
7 Choosing the Class of Shares that is Best for You
7 Class A shares
8 Class B shares
8 Class C shares
9 Factors to Consider When Choosing a Share Class
9 Purchase by Mail
9 Financial Service Organizations
9 Automatic Investment Plan
10 Retirement Plans
10 Other Purchase Information
10 How to Sell (Redeem) Shares
10 By Mail
11 Signature Guarantees
11 By Telephone
11 By Automated Clearing House ("ACH")
12 Redemption at the Options of the Trust
11 Dividends and Distributions
12 Timothy Plan
12 Management of the Fund
12 Investment Adviser
12 Investment Managers
14 Distribution Services
14 Fund Service Providers
14 Custodian
14 Transfer, Dividend Disbursing and Accounting Services Agent
14 Federal Taxes
14 General Information
15 Distribution Fees
15 Financial Highlights
16 Class A Table
16 Class B Table
17 For More Information
Timothy Plan
Family of Funds
Prospectus May 3, 1999
of Timothy Plan
(the "Trust")
As Supplemented on June 30, 1999
This Prospectus offers the following Portfolios ("Funds") of the Trust:
Timothy Plan Small-Cap Value Fund
(formerly the Timothy Plan Series)
Timothy Plan Large/Mid-Cap Value Fund
Timothy Plan Fixed-Income Fund
Timothy Plan Money Market Fund
The Timothy Plan was established to provide an investment alternative for people
who want to invest according to certain ethical standards. Each Fund invests in
a different market segment, and each Fund has its own investment objectives.
however, all the funds have one thing in common. They do not invest in any
company that is involved in the business of alcohol production, tobacco
production or casino gambling, or which are involved, either directly or
indirectly, in pornography or abortion.
The Funds are distributed through Timothy Partners, Ltd., 1304 West Fairbanks
Avenue, Winter Park, Florida 32789.
<PAGE>
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Anyone who
tells you otherwise is committing a crime.
2
<PAGE>
RISK/RETURN SUMMARY
THE TIMOTHY PLAN BELIEVES THAT IT HAS A RESPONSIBILITY TO INVEST IN A MORAL AND
ETHICAL MANNER. ACCORDINGLY, AS A MATTER OF FUNDAMENTAL POLICY, THE FUND WILL
NOT INVEST IN ANY COMPANY THAT IS INVOLVED IN THE BUSINESS OF ALCOHOL
PRODUCTION, TOBACCO PRODUCTION, CASINO GAMBLING, OR WHICH IS INVOLVED, EITHER
DIRECTLY OR INDIRECTLY, IN PORNOGRAPHY OR ABORTION. SUCH COMPANIES ARE REFERRED
TO THROUGHOUT THIS PROSPECTUS AS "EXCLUDED SECURITIES". EXCLUDED SECURITIES WILL
NOT BE PURCHASED BY ANY FUND OF THE TRUST. TIMOTHY PARTNERS LTD.("TPL") IS
INVESTMENT ADVISER TO THE FUND, AND IS RESPONSIBLE FOR DETERMINING THOSE
COMPANIES THAT ARE EXCLUDED SECURITIES. TPL ALSO RESERVES THE RIGHT TO EXERCISE
ITS BEST JUDGEMENT TO EXCLUDE INVESTMENT IN OTHER COMPANIES WHOSE CORPORATE
PRACTICES MAY NOT FALL WITHIN THE EXCLUSIONS DESCRIBED ABOVE, BUT NEVERTHELESS
COULD BE FOUND OFFENSIVE TO BASIC, TRADITIONAL JUDEO-CHRISTIAN VALUES.
BECAUSE NONE OF THE FUNDS WILL INVEST IN EXCLUDED SECURITIES, THE POOL OF
SECURITIES FROM WHICH EACH FUND MAY CHOOSE MAY BE LIMITED TO A CERTAIN DEGREE.
ALTHOUGH TPL BELIEVES THAT EACH FUND CAN ACHIEVE ITS INVESTMENT OBJECTIVE WITHIN
THE PARAMETERS OF ETHICAL INVESTING, ELIMINATING EXCLUDED SECURITIES AS
INVESTMENTS MAY HAVE AN ADVERSE EFFECT ON A FUND'S PERFORMANCE. HOWEVER, "TOTAL
RETURN" IS MORE THAN JUST NUMBERS. IT IS ALSO INVESTING IN A WAY THAT SUPPORTS
AND REFLECTS YOUR BELIEFS AND IDEALS. EACH OF OUR FUNDS STRIVES TO MAXIMIZE
BOTH KINDS OF TOTAL RETURN.
TIMOTHY PLAN SMALL-CAP VALUE FUND
Investment objective and strategies
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL GROWTH. ITS SECONDARY
OBJECTIVE IS CURRENT INCOME. THE FUND SEEKS TO ACHIEVE ITS OBJECTIVES BY
PRIMARILY INVESTING IN SMALL-CAP STOCKS AND AMERICAN DEPOSITORY RECEIPTS.
SMALL-CAP STOCKS IS A REFERENCE TO THE COMMON STOCK OF SMALLER COMPANIES --
COMPANIES WHOSE TOTAL MARKET CAPITALIZATION IS GENERALLY GREATER THAN $200
MILLION AND LESS THAN $1 BILLION. AMERICAN DEPOSITORY RECEIPTS ("ADR'S") ARE
CERTIFICATES ISSUED BY UNITED STATES BANKS TO EVIDENCE AN OWNERSHIP INTEREST IN
AN UNDERLYING NON-USA COMPANY'S STOCK. ADR'S GENERALLY TRADE ON UNITED STATES
STOCK EXCHANGES IN THE SAME WAY THAT AMERICAN COMMON STOCKS TRADE.
IN CHOOSING THE SECURITIES IN WHICH TO INVEST, THE FUND WILL USE EXTENSIVE
FUNDAMENTAL ANALYSIS TO DEVELOP EARNINGS FORECASTS AND TO IDENTIFY ATTRACTIVE
INVESTMENT OPPORTUNITIES RELATIVE TO MARKET VALUATION. INDIVIDUAL COMPANIES ARE
SCRUTINIZED CONCERNING THEIR INDIVIDUAL GROWTH PROSPECTS AND THEIR COMPETITIVE
POSITIONS WITHIN THEIR RESPECTIVE INDUSTRIES. INDIVIDUAL COMPANY ANALYSIS
FOCUSES UPON THE OUTLOOK FOR SALES, PROFIT MARGINS, RETURNS ON CAPITAL, CASH
FLOW AND EARNINGS PER SHARE.
THE FUND MAY ALSO INVEST UP TO 30% OF ITS NET ASSETS IN A VARIETY OF OTHER
SECURITIES, AND FOR TEMPORARY DEFENSIVE PURPOSES, MAY INVEST UP TO 100% OF ITS
ASSETS IN OBLIGATIONS OF THE UNITED STATES GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES, COMMERCIAL PAPER, AND CERTIFICATES OF DEPOSIT AND BANKERS
ACCEPTANCES. WHEN THE FUND TAKES A TEMPORARY DEFENSIVE POSITION, IT WILL NOT BE
INVESTING ACCORDING TO ITS INVESTMENT OBJECTIVE, AND AT SUCH TIMES, THE
PERFORMANCE OF THE FUND WILL BE DIFFERENT THAN IF IT HAD INVESTED STRICTLY
ACCORDING TO ITS OBJECTIVES.
3
<PAGE>
Primary risks
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE PRIMARY RISK OF INVESTING IN
THE FUND IS THE RISK OF LOSS DUE TO PRICE DECLINES IN STOCKS HELD BY THE FUND.
YOUR RISK OF LOSS IS GREATER IF YOU HOLD YOUR SHARES FOR A SHORT PERIOD OF TIME.
BECAUSE THE FUND IS AN EQUITY FUND AND INVESTS IN SMALLER COMPANIES, IT IS
SUBJECT TO THE RISKS INHERENT IN THE STOCK MARKET IN GENERAL, AND THE RISKS OF
INVESTING IN SMALLER COMPANIES IN PARTICULAR. THE STOCK MARKET IS CYCLICAL,
WITH PRICES GENERALLY RISING AND FALLING OVER PERIODS OF TIME. SOME OF THESE
PRICE CYCLES CAN BE PRONOUNCED AND LAST FOR A LONG TIME. SMALLER COMPANIES ARE
PARTICULARLY SUSCEPTIBLE TO PRICE SWINGS, BECAUSE, DUE TO THEIR SIZE, THEY OFTEN
DO NOT HAVE THE RESOURCES AVAILABLE TO THEM THAT ARE AVAILABLE TO LARGER
COMPANIES. HOWEVER, THE STOCK MARKET, ALTHOUGH MORE VOLATILE THAN OTHER TYPES OF
INVESTMENTS, HISTORICALLY HAS OUTPERFORMED OTHER TYPES OF INVESTMENTS OVER THE
LONG TERM. SMALL-CAP STOCKS, ALTHOUGH MORE SUSCEPTIBLE TO PRICE MOVEMENTS, ALSO
ENJOY GROWTH POTENTIAL THAT IS OFTEN NOT AVAILABLE FOR LARGER COMPANIES. AS A
RESULT, PRUDENT INVESTING IN SMALLER COMPANIES CAN RESULT IN GREATER CAPITAL
GROWTH THAN INVESTING IN LARGER COMPANIES.
THE FUND IS APPROPRIATE FOR INVESTORS WHO UNDERSTAND THE RISKS OF INVESTING IN
THE STOCK MARKET AND WHO ARE WILLING TO ACCEPT MODERATE AMOUNTS OF VOLATILITY
AND RISK.
THE BAR CHART AND TABLE BELOW HELP SHOW THE RETURNS AND RISKS OF INVESTING IN
THE FUND. THEY SHOW CHANGES IN THE FUND'S YEARLY PERFORMANCE OVER THE LIFETIME
OF THE FUND. THEY ALSO COMPARE THE FUND'S PERFORMANCE TO THE PERFORMANCE OF THE
RUSSELL 2000 INDEX** DURING EACH PERIOD. YOU SHOULD BE AWARE THAT THE FUND'S
PAST PERFORMANCE MAY NOT BE AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
4
<PAGE>
Past Performance
Year-by-year Total Returns for Class A Shares ended December 31
[Graph appears here]
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDING ON DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Class A*(1) Class B(2) Russell 2000 Index**
<S> <C> <C> <C>
One (16.00) (11.26) (3.45)%
Year % %
Inception 4.10% 4.88% 11.53%
</TABLE>
Because the Timothy Plan Large/Mid-Cap Value Fund, Fixed-Income Fund and Money
Market Fund did not offer their shares prior to January 1, 1998, no performance
bar charts/tables are included for those Funds.
* CLASS A SHARES COMMENCED INVESTMENT OPERATIONS ON MARCH 21, 1994.
** THE RUSSELL 2000 INDEX IS A WIDELY RECOGNIZED, UNMANAGED INDEX OF 2000
SMALL-CAPITALIZATION COMPANIES IN THE UNITED STATES. THE INDEX ASSUMES
REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS AND DOES NOT REFLECT ANY
ASSET-BASED CHARGES FOR INVESTMENT MANAGEMENT OR OTHER EXPENSES.
(1) TOTAL RETURN CALCULATION REFLECTS A MAXIMUM INITIAL SALES LOAD OF 5.5%.
(2) CLASS B SHARES COMMENCED INVESTMENT OPERATIONS ON AUGUST 25, 1995.
TIMOTHY PLAN LARGE/MID-CAP VALUE FUND
Investment objective and strategies
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL GROWTH. ITS SECONDARY
OBJECTIVE IS CURRENT INCOME. THE FUND SEEKS TO ACHIEVE ITS OBJECTIVES BY
PRIMARILY INVESTING IN COMMON STOCK AND ADRS. THE LARGE/MID-CAP VALUE FUND WILL
INVEST IN THE COMMON STOCK OF COMPANIES WHOSE TOTAL MARKET CAPITALIZATION
GENERALLY EXCEEDS $1 BILLION. BECAUSE THE FUND WILL INVEST IN LARGER COMPANIES,
IT MAY NOT BE SUBJECT TO THE SAME LEVEL OF PRICE VOLATILITY AS THE SMALL-CAP
VALUE FUND. ALSO, LARGER COMPANIES MAY PAY A REGULAR
5
<PAGE>
DIVIDEND, AND THE FUND WILL BENEFIT FROM SUCH INVESTMENTS TO A GREATER DEGREE
THAN THE SMALL-CAP VALUE FUND, SINCE SMALLER COMPANIES ARE LESS LIKELY TO PAY
REGULAR DIVIDENDS .
IN CHOOSING THE SECURITIES IN WHICH TO INVEST, THE FUND WILL USE EXTENSIVE
FUNDAMENTAL ANALYSIS TO DEVELOP EARNINGS FORECASTS AND TO IDENTIFY ATTRACTIVE
INVESTMENT OPPORTUNITIES RELATIVE TO MARKET VALUATION. INDIVIDUAL COMPANIES ARE
SCRUTINIZED CONCERNING THEIR INDIVIDUAL GROWTH PROSPECTS AND THEIR COMPETITIVE
POSITIONS WITHIN THEIR RESPECTIVE INDUSTRIES. INDIVIDUAL COMPANY ANALYSIS
FOCUSES UPON THE OUTLOOK FOR SALES, PROFIT MARGINS, RETURNS ON CAPITAL, CASH
FLOW AND EARNINGS PER SHARE.
THE FUND MAY ALSO INVEST UP TO 30% OF ITS NET ASSETS IN A VARIETY OF OTHER
SECURITIES, AND FOR TEMPORARY DEFENSIVE PURPOSES, MAY INVEST UP TO 100% OF ITS
ASSETS IN OBLIGATIONS OF THE UNITED STATES GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES, COMMERCIAL PAPER, AND CERTIFICATES OF DEPOSIT AND BANKERS
ACCEPTANCES. WHEN THE FUND TAKES A TEMPORARY DEFENSIVE POSITION, IT WILL NOT BE
INVESTING ACCORDING TO ITS INVESTMENT OBJECTIVE, AND AT SUCH TIMES, THE
PERFORMANCE OF THE FUND WILL BE DIFFERENT THAT IF IT HAD INVESTED STRICTLY
ACCORDING TO ITS OBJECTIVES.
Primary risks
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. INVESTING IN LARGER COMPANIES IS
DESIGNED TO DECREASE THE RISK OF LOSS TO THE FUND AND TO PROVIDE FOR LONG-TERM
GROWTH WITH SOME POTENTIAL FOR CURRENT INCOME. LARGER COMPANIES, BECAUSE OF
THEIR INCREASED MANAGEMENT DEPTH, BROADER MARKET AFFILIATIONS, AND CAPITAL
RESOURCES, OFFER THE POTENTIAL FOR LONG-TERM GROWTH WITH REDUCED RISK. THE
PRIMARY RISK OF INVESTING IN THE FUND IS THE RISK OF LOSS DUE TO PRICE DECLINES
IN STOCKS HELD BY THE FUND. YOUR RISK OF LOSS IS GREATER IF YOU HOLD YOUR
SHARES FOR A SHORT PERIOD OF TIME. THE STOCK MARKET IS CYCLICAL, WITH PRICES
GENERALLY RISING AND FALLING OVER PERIODS OF TIME. SOME OF THESE PRICE CYCLES
CAN BE PRONOUNCED AND LAST FOR A LONG TIME.
YOU SHOULD BE AWARE THAT, LIKE ALL THE TIMOTHY PLAN FUNDS, THE FUND IS SUBJECT
TO THE ETHICAL RESTRICTIONS ON INVESTING DESCRIBED ON THE FRONT PAGE OF THIS
PROSPECTUS. ACCORDINGLY, THE FUND MAY HAVE DIFFICULTY INVESTING IN A VARIETY OF
"LARGE-CAP" COMPANIES BECAUSE OF THE LIKELIHOOD THAT SUCH COMPANIES WILL BE
INVOLVED, DIRECTLY OR INDIRECTLY, IN A PROHIBITED ACTIVITY. YOU SHOULD ALSO BE
AWARE THAT THIS IS A NEW FUND WITHOUT AN OPERATING HISTORY, AND THIS LACK OF
OPERATING HISTORY MAY POSE ADDITIONAL RISKS.
THE FUND IS APPROPRIATE FOR INVESTORS WHO UNDERSTAND THE RISKS OF INVESTING IN
COMMON STOCK AND WHO ARE WILLING TO ACCEPT SOME VOLATILITY AND RISK.
TIMOTHY PLAN FIXED-INCOME FUND
Investment objective and strategies
THE FUND SEEKS TO GENERATE A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH
PRUDENT INVESTMENT RISK. TO ACHIEVE ITS GOAL, THE FUND NORMALLY INVESTS IN A
DIVERSIFIED PORTFOLIO OF DEBT SECURITIES. THESE INCLUDE CORPORATE BONDS,
CONVERTIBLE SECURITIES, U.S. GOVERNMENT AND AGENCY SECURITIES AND PREFERRED
SECURITIES. THE FUND WILL ONLY PURCHASE HIGH QUALITY SECURITIES.
6
<PAGE>
IN ADDITION TO THE SECURITIES LISTED ABOVE, THE FUND MAY ALSO INVEST UP TO 15%
OF THE FUND'S NET ASSETS (VALUED AT THE TIME OF INVESTMENT) IN CHURCH BONDS.
CHURCH BONDS ARE GENERALLY FIXED-INCOME DEBT SECURITIES ISSUED BY CHURCH
ORGANIZATIONS TO RAISE MONEY FOR CAPITAL IMPROVEMENTS. THE FUND WILL ONLY
INVEST IN INVESTMENT GRADE CHURCH BONDS AND WILL GENERALLY HOLD SUCH SECURITIES
TO MATURITY. BECAUSE THE FUND DOES NOT INTEND TO TRADE ANY CHURCH BONDS THAT IT
MAY HOLD, THE FUND WILL GENERALLY VALUE SUCH SECURITIES USING THE AMORTIZED COST
METHOD.
IN MANAGING ITS PORTFOLIO, THE FUND CONCENTRATES ON SECTOR ANALYSIS, INDUSTRY
ALLOCATION AND SECURITIES SELECTION: DECIDING WHICH TYPES OF BONDS AND
INDUSTRIES TO EMPHASIZE AT A GIVEN TIME, AND THEN WHICH INDIVIDUAL BONDS TO BUY.
THE FUND ATTEMPTS TO ANTICIPATE SHIFTS IN THE BUSINESS CYCLE IN DETERMINING
TYPES OF BONDS AND INDUSTRY SECTORS TO TARGET. IN CHOOSING INDIVIDUAL
SECURITIES, THE FUND SEEKS OUT SECURITIES THAT APPEAR TO BE UNDER-VALUED WITHIN
THE EMPHASIZED INDUSTRY SECTOR.
DURING PERIODS OF UNCERTAINTY, THE FUND MAY INVEST UP TO 100% OF ITS ASSETS IN
OBLIGATIONS OF THE UNITED STATES GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES,
COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT AND BANKERS ACCEPTANCES. WHEN THE
FUND TAKES A TEMPORARY DEFENSIVE POSITION, IT WILL NOT BE INVESTING ACCORDING TO
ITS INVESTMENT OBJECTIVE, AND AT SUCH TIMES, THE PERFORMANCE OF THE FUND WILL BE
DIFFERENT THAT IF IT HAD INVESTED STRICTLY ACCORDING TO ITS OBJECTIVES.
Primary risks
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE MAJOR FACTORS INFLUENCING THE
FUND'S PERFORMANCE ARE INTEREST RATES AND CREDIT RISK. WHEN INTEREST RATES
RISE, BOND PRICES FALL; THE HIGHER THE FUND'S DURATION (A CALCULATION REFLECTING
TIME RISK, TAKING INTO ACCOUNT BOTH THE AVERAGE MATURITY OF THE FUND'S PORTFOLIO
AND ITS AVERAGE COUPON RETURN), THE MORE SENSITIVE THE FUND IS TO INTEREST RATE
RISK.
THE FUND COULD LOSE MONEY IF ANY BONDS IT OWNS ARE DOWNGRADED IN CREDIT RATING
OR GO INTO DEFAULT. FOR THIS REASON, THE FUND WILL ONLY INVEST IN HIGH GRADE
BONDS. IF CERTAIN INDUSTRY SECTORS OR TYPES OF SECURITIES DON'T PERFORM AS WELL
AS THE FUND EXPECTS, THE FUND'S PERFORMANCE COULD SUFFER. THIS IS ALSO A NEW
FUND WITHOUT AN OPERATING HISTORY, AND THIS LACK OF HISTORY COULD POSE
ADDITIONAL RISKS TO THE FUND.
THIS FUND IS APPROPRIATE FOR INVESTORS WHO WANT A HIGH LEVEL OF CURRENT INCOME
AND ARE WILLING TO ACCEPT A MINOR DEGREE OF VOLATILITY AND RISK.
TIMOTHY PLAN MONEY MARKET FUND
Investment objective and strategies
THE FUND SEEKS A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH THE PRESERVATION
OF CAPITAL. THE FUND ALSO ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00. IN PURSUING THESE GOALS, THE FUND WILL INVEST PRIMARILY IN SHORT-TERM
DEBT INSTRUMENTS, SUCH AS OBLIGATIONS OF THE U.S. GOVERNMENT AND ITS AGENCIES,
CERTIFICATES OF DEPOSIT, BANKERS ACCEPTANCES, COMMERCIAL PAPER, AND SHORT-TERM
CORPORATE NOTES. THE FUND MAY ALSO INVEST IN REPURCHASE AGREEMENTS. UNDER
NORMAL CIRCUMSTANCES, THE FUND WILL NOT INVEST IN ANY
7
<PAGE>
SECURITY WITH A MATURITY IN EXCESS OF 397 DAYS.
THE FUND WILL USE BOTH THE AMORTIZED COST METHOD AND THE MARKET-TO-MARKET COST
METHOD TO COMPUTE ITS NET ASSET VALUE. THIS MEANS THAT SECURITIES PURCHASED BY
THE FUND ARE NOT MARKED-TO-MARKET. INSTEAD, ANY PREMIUM PAID OR DISCOUNT
REALIZED WILL BE AMORTIZED OR ACCRUED OVER THE LIFE OF THE SECURITY AND
CREDITED/DEBITED DAILY AGAINST THE TOTAL ASSETS OF THE FUND.
THE FUND WILL ONLY PURCHASE SECURITIES FOR THE FUND THAT ARE INVESTMENT GRADE.
THIS MEANS THAT THE SECURITY HAS A RATING OF AT LEAST "A" AS RATED BY STANDARD &
POORS OR A COMPARABLE RATING BY ANOTHER NATIONALLY RECOGNIZED RATING AGENCY.
THE FUND MAY ALSO INVEST IN DEBT SECURITIES THAT HAVE NOT BEEN RATED BY ONE OF
THE MAJOR RATING AGENCIES, SO LONG AS THE FUND'S INVESTMENT MANAGER HAS
DETERMINED THAT THE SECURITY IS OF COMPARABLE CREDIT QUALITY TO SIMILARLY RATED
SECURITIES
Primary risks
AN INVESTMENT IN THE FUND IS NOT GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND. THE MAJOR FACTORS INFLUENCING THE FUND'S
PERFORMANCE ARE INTEREST RATES AND CREDIT RISK. THE FUND WILL MINIMIZE CREDIT
RISK BY PURCHASING ONLY HIGH QUALITY INVESTMENT GRADE SECURITIES. THE FUND WILL
MINIMIZE INTEREST RATE RISK BY LIMITING THE MATURITY RANGE OF ITS SECURITIES.
YOU SHOULD BE AWARE THAT, ALTHOUGH THE FUND WILL TAKE ALL REASONABLE STEPS TO
MAINTAIN A STABLE NET ASSET VALUE, EXTRAORDINARY EVENTS MAY TRANSPIRE WHICH
PREVENT THE FUND FROM DOING SO. ALSO, THIS IS A NEW FUND WITHOUT A PRIOR
OPERATING HISTORY, AND THIS LACK OF HISTORY COULD POSE ADDITIONAL RISKS TO THE
FUND.
THE FUND IS APPROPRIATE FOR INVESTORS WHO ARE SEEKING A HIGH LEVEL OF CURRENT
INCOME AND PRESERVATION OF CAPITAL.
FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE TIMOTHY PLAN SMALL-CAP VALUE FUND ("SMALL"), TIMOTHY PLAN
LARGE/MID-CAP VALUE FUND ("MID"), TIMOTHY PLAN FIXED-INCOME FUND ("FIXED"), AND
TIMOTHY PLAN MONEY MARKET FUND ("MM").
<TABLE>
<CAPTION>
Class A/1/ Class B/2/ Class C/3/ No-Load4
Shareholder Fees: SMALL MID FIXED SMALL MID FIXED SMALL MID FIXED MM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(fees deducted from your investment)
Maximum sales charge on purchases 5.50%/1/ 5.50% 4.25% NONE NONE NONE NONE NONE NONE NONE
(as a percentage of offering price)
Maximum deferred sales charges None NONE NONE 5.00%/2/ 5.00% 5.00% NONE NONE NONE NONE
(as a percentage of the lesser of original
purchase price or redemption proceeds)
Redemption Fees* None NONE NONE NONE NONE NONE NONE NONE NONE NONE
</TABLE>
<TABLE>
<CAPTION>
Class A/1/ Class B/2/ Class C/3/ No-Load4
Annual Fund Operating Expenses: SMALL MID FIXED SMALL MID FIXED SMALL MID FIXED MM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(fees deducted from your investment)
Management fees 0.85% 0.85% 0.60% 0.85% 0.85% 0.60% 0.85% 0.85% 0.60% 0.60%
Distribution/Service (12b-1) fees 0.25% 0.25% 0.25% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 0.00%
Other expenses/5,6/ 0.99% 0.50% 0.50% 0.99% 0.50% 0.50% 0.50% 0.50% 0.50% 0.25%
-------------------------------------------------------------------------------
Total annual fund operating expenses/6/ 2.09% 1.60% 1.35% 2.84% 2.35% 2.10% 2.35% 2.35% 2.10% 0.85%
</TABLE>
8
<PAGE>
* FIRSTAR BANK, THE FUNDS' CUSTODIAN, CHARGES A FEE OF $9 ON REDEMPTIONS PAID
BY WIRE TRANSFER.
1. CLASS A SHAREHOLDERS OF THE SMALL-CAP VALUE FUND WHO PURCHASED SHARES ON OR
BEFORE SEPTEMBER 22, 1997 ARE NOT SUBJECT TO THE FRONT-END SALES LOAD ON
FUTURE PURCHASES.
2. CLASS B SHAREHOLDERS OF THE SMALL-CAP VALUE FUND WHO PURCHASED SHARES ON OR
BEFORE SEPTEMBER 22, 1997 ARE NOT SUBJECT TO DEFERRED SALES CHARGES UPON
REDEMPTION OF SUCH SHARES.
3. CLASS C SHARES ARE BEING OFFERED FOR THE FIRST TIME BY THIS PROSPECTUS.
4. NO-LOAD SHARES ARE ONLY OFFERED BY THE MONEY MARKET FUND. THE MONEY MARKET
FUND IS BEING OFFERED FOR THE FIRST TIME BY THIS PROSPECTUS.
5. BECAUSE THE LARGE/MID-CAP, FIXED-INCOME AND MONEY MARKET FUNDS ARE NEW
FUNDS, OTHER EXPENSES ARE ESTIMATED FOR EACH FUND'S FIRST YEAR OF
OPERATIONS.
6. FOR ITS FISCAL YEAR ENDING ON DECEMBER 31, 1998, TPL REIMBURSED A TOTAL OF
$124,004 IN FEES AND EXPENSES OF THE SMALL-CAP VALUE FUND. AS A RESULT OF
THESE REIMBURSEMENTS, NET MANAGEMENT FEES WERE 0.85% OF AVERAGE NET ASSETS
AND NET "OTHER EXPENSES" WERE 0.50% FOR CLASS A SHARES AND 0.50% FOR CLASS B
SHARES. NET TOTAL ANNUAL FUND OPERATING EXPENSES FOR THE SMALL-CAP VALUE
FUND, AFTER ALL FEE WAIVERS AND EXPENSE REIMBURSEMENTS, WAS 1.60% FOR CLASS
A SHARES AND 2.35% FOR CLASS B SHARES. TPL HAS AGREED TO WAIVE RECEIPT OF
ITS FEES AND/OR ASSUME CERTAIN EXPENSES OF THE SMALL-CAP VALUE, LARGE/MID-
CAP VALUE, AND FIXED-INCOME FUNDS TO INSURE THAT EACH FUND'S TOTAL ANNUAL
EXPENSES DO NOT EXCEED THE TOTAL ANNUAL EXPENSES SET FORTH IN THE TABLE
ABOVE AS ADJUSTED IN THIS FOOTNOTE. TPL HAS MADE THE SAME COMMITMENT TO KEEP
THE MONEY MARKET FUND'S TOTAL ANNUAL EXPENSES AT NOT GREATER THAN 0.85%. IF
THE ADVISER WAIVES FEES OR ASSUMES EXPENSES OF A FUND, SUCH ACTIONS WOULD
HAVE THE EFFECT OF LOWERING THE EXPENSE RATIO AND INCREASING THE YIELD TO
INVESTORS. TPL MAY TERMINATE ITS AGREEMENT AT ANY TIME, AND WILL NOTIFY YOU
IF IT DOES SO.
The hypothetical example below shows what your expenses would be if you invested
$10,000 in Class A shares of each Fund (no-load shares of the Money Market Fund)
for the time periods indicated, reinvested all distributions, and then redeemed
all your shares at the end of those periods. The Example assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. This example is for comparison only, and does not represent
the Fund's actual expenses and returns, either past or future.
<TABLE>
<CAPTION>
Small-Cap Large/Mid-Cap Fixed-Income Money Market
<S> <C> <C> <C> <C>
One year $ 750 $ 653 $ 615 $ 137
Three years $ 1,169 $ 1,127 $ 1,011 $ 428
Five years $ 1,612
Ten years $ 2,838
</TABLE>
THE $9 FEE THAT YOU WOULD HAVE TO PAY IF YOU REDEEMED YOUR SHARES BY WIRE
TRANSFER IS NOT INCLUDED IN THESE FIGURES. A MAXIMUM SALES CHARGE OF 5.50% FOR
THE SMALL-CAP VALUE FUND AND LARGE/MID-CAP VALUE FUND, AND 4.25% FOR THE FIXED-
INCOME FUND, IS INCLUDED IN THE EXPENSE CALCULATIONS.
INVESTING IN THE FUNDS
OPENING AND ADDING TO YOUR ACCOUNT
YOU CAN INVEST DIRECTLY IN EACH FUND IN A NUMBER OF WAYS. SIMPLY CHOOSE THE ONE
THAT IS MOST CONVENIENT FOR YOU. ANY QUESTIONS YOU MAY HAVE CAN BE ANSWERED BY
CALLING 1-800-662-0201. YOU MAY ALSO PURCHASE FUND SHARES THROUGH AUTHORIZED
BROKER/DEALERS OR OTHER FINANCIAL ORGANIZATIONS.
PAYMENTS FOR FUND SHARES SHOULD BE IN U.S. DOLLARS, AND IN ORDER TO AVOID FEES
AND DELAYS, SHOULD BE DRAWN ON A U.S. BANK. PLEASE REMEMBER THAT THE TRUST
RESERVES THE RIGHT TO REJECT ANY PURCHASE ORDER FOR FUND SHARES. THE MINIMUM
INITIAL INVESTMENT AMOUNT FOR EACH FUND, IN ANY CLASS OF SHARES, IS $1000.00 FOR
REGULAR ACCOUNTS. THERE IS NO MINIMUM PURCHASE REQUIREMENT FOR ADDITIONAL
PURCHASES, AND THERE IS NO MINIMUM PURCHASE REQUIREMENT FOR QUALIFIED RETIREMENT
PLANS.
9
<PAGE>
<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT TO ADD TO ACCOUNT
<S> <C> <C>
By Mail: COMPLETE AN ACCOUNT REGISTRATION FORM, MAKE A CHECK PAYABLE TO THE MAKE YOUR CHECK PAYABLE TO THE FUND OF
FUND OF YOUR CHOICE AND MAIL THE FORM VIA POST OFFICE OR OVERNIGHT YOUR CHOICE AND MAIL IT TO THE ADDRESS
COURIER TO: AT LEFT. PLEASE INCLUDE YOUR ACCOUNT
NUMBER AND SHARE CLASS ON YOUR CHECK.
Unified Fund Services, Inc. OR USE THE CONVENIENT FORM ATTACHED TO
431 NORTH PENNSYLVANIA STREET YOUR REGULAR FUND STATEMENT.
INDIANAPOLIS, INDIANA 46204
By Wire: FIRST CALL THE TRUST'S TRANSFER AGENT AT 1-800-662-0201 TO REQUEST AN ASK YOUR BANK TO WIRE IMMEDIATELY
ACCOUNT NUMBER AND TO FURNISH THE TRUST WITH YOUR TAXPAYER AVAILABLE FUNDS TO THE LOCATION
IDENTIFICATION NUMBER. DESCRIBED AT THE LEFT, EXCEPT THAT THE
WIRE SHOULD NOTE THAT IT IS TO MAKE
ASK YOUR BANK TO WIRE FUNDS TO ACCOUNT OF: SUBSEQUENT PURCHASE RATHER THAN TO OPEN
FIRSTAR BANK, N.A. A NEW ACCOUNT.
CINTI/TRUST ABA#: 0420-0001-3
CREDIT: THE TIMOTHY PLAN INCLUDE YOUR NAME AND FUND ACCOUNT
ACCOUNT #: 488889866 NUMBER, AND THE CLASS OF SHARES TO BE
FURTHER CREDIT: THE (NAME) FUND. PURCHASED.
THE WIRE SHOULD STATE THAT THE PURCHASE IS IN YOUR NAME(S) AND STATE
THE CLASS OF SHARES TO BE PURCHASED. THE WIRE SHOULD ALSO STATE THAT
YOU ARE OPENING A NEW FUND ACCOUNT.
</TABLE>
THE TIMOTHY PLAN WANTS YOU TO BE KEPT CURRENT REGARDING THE STATUS OF YOUR
ACCOUNT IN THE FUND. TO ASSIST YOU, THE FOLLOWING STATEMENTS AND REPORTS WILL
BE SENT TO YOU:
Confirmation Statements: AFTER EVERY TRANSACTION THAT AFFECTS YOUR
ACCOUNT BALANCE OR YOUR ACCOUNT REGISTRATION.
Account Statements: QUARTERLY.
Financial Reports: SEMI-ANNUALLY -- TO REDUCE FUND EXPENSES, ONLY
ONE COPY OF THE FUND REPORT WILL BE MAILED TO
EACH TAXPAYER IDENTIFICATION NUMBER EVEN IF
YOU HAVE MORE THAN ONE ACCOUNT IN THE FUND.
CHOOSING THE CLASS OF SHARES THAT IS BEST FOR YOU
EXCEPT FOR THE MONEY MARKET FUND, WHICH OFFERS ONLY NO-LOAD SHARES, EACH FUND
OFFERS YOU A CHOICE OF THREE DIFFERENT CLASSES OF SHARES IN WHICH TO INVEST.
THE MAIN DIFFERENCES BETWEEN EACH CLASS ARE SALES CHARGES AND ONGOING FEES. IN
CHOOSING WHICH CLASS OF SHARES TO PURCHASE, YOU SHOULD CONSIDER WHICH WILL BE
MOST BENEFICIAL TO YOU, GIVEN THE AMOUNT OF YOUR PURCHASE AND THE LENGTH OF TIME
YOU EXPECT TO HOLD THE SHARES. ALL THREE CLASSES OF SHARES IN ANY FUND
REPRESENT INTERESTS IN THE SAME PORTFOLIO OF INVESTMENTS IN THAT FUND.
CLASS A SHARES.
CLASS A SHARES ARE OFFERED AT THEIR PUBLIC OFFERING PRICE, WHICH IS NET ASSET
VALUE PER SHARE PLUS THE APPLICABLE SALES CHARGE. THE SALES CHARGE VARIES,
DEPENDING ON WHICH FUND YOU CHOOSE AND HOW MUCH YOU INVEST. THERE ARE NO SALES
CHARGES ON REINVESTED DISTRIBUTIONS. FOR THE SMALL-CAP VALUE FUND AND LARGE/MID-
CAP VALUE FUND, THE FOLLOWING SALES
10
<PAGE>
CHARGES APPLY:
<TABLE>
<CAPTION>
Dealer Concession as a
As a % of percentage of offering
Amount Invested Offering price price
<S> <C> <C>
$0 to 24,999 5.50% 5.25%
$25,000 to 49,999 4.25% 4.00%
$50,000 to 99,999 3.00% 2.75%
$100,000 to 249,999 2.00% 1.75%
$250,000 to 499,999 1.00% 0.75%
$500,000 and up 0.00% 0.00%
</TABLE>
THE FOLLOWING SALES CHARGES APPLY TO THE FIXED-INCOME FUND:
<TABLE>
<CAPTION>
Dealer Concession as a
As a % of percentage of offering
Amount Invested Offering price price
<S> <C> <C>
$0 to 24,999 4.25% 4.00%
$25,000 to 49,999 3.25% 3.00%
$50,000 to 99,999 2.25% 2.00%
$100,000 to 249,999 1.25% 1.00%
$250,000 to 499,999 0.75% 0.50%
$500,000 and up 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 TO SELL SHARES
OF THE FUNDS. THE DEALER'S CONCESSION MAY BE CHANGED FROM TIME TO TIME. THE
DISTRIBUTOR MAY FROM TIME TO TIME OFFER INCENTIVE COMPENSATION TO DEALERS WHO
SELL SHARES OF THE FUNDS 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 DEEMED TO BE AN "UNDERWRITER" UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
Exemptions from sales charges
CLASS A SHAREHOLDERS WHO PURCHASED THEIR SHARES ON OR BEFORE SEPTEMBER 22, 1997
ARE NOT SUBJECT TO SALES CHARGES ON PAST OR FUTURE PURCHASES OF THE SMALL-CAP
VALUE FUND. ALSO, THE FUNDS WILL WAIVE SALES CHARGES FOR PURCHASES BY FEE-BASED
REGISTERED INVESTMENT ADVISERS FOR THEIR CLIENTS, BROKER/DEALERS WITH WRAP FEE
ACCOUNTS, REGISTERED INVESTMENT ADVISERS OR BROKERS FOR THEIR OWN ACCOUNTS,
EMPLOYEES AND EMPLOYEE RELATED ACCOUNTS OF THE ADVISER, 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 FUNDS.
FOR PURCHASERS THAT QUALIFY FOR FEE WAIVER, SHARES WILL BE PURCHASED AT NET
ASSET VALUE.
Reduced sales charges
11
<PAGE>
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE BY AGGREGATING THE NET ASSET VALUE OF
ALL YOUR LOAD SHARES PREVIOUSLY PURCHASED IN ANY FUND WITH THE DOLLAR AMOUNT OF
SHARES TO BE PURCHASED. FOR EXAMPLE, IF YOU ALREADY OWNED CLASS A, CLASS B, OR
CLASS C SHARES IN ONE OR MORE OF THE FUNDS WITH AN AGGREGATE NET ASSET VALUE OF
$450,000, AND YOU DECIDED TO PURCHASE AN ADDITIONAL $60,000 OF CLASS A SHARES OF
ANY FUND, THERE WOULD BE NO SALES CHARGE ON THAT PURCHASE BECAUSE YOU HAD
ACCUMULATED MORE THAN $500,000 IN ALL FUNDS OF THE TRUST.
Letter of intent
YOU CAN IMMEDIATELY QUALIFY FOR A REDUCED OR ELIMINATED SALES CHARGE BY SIGNING
A NON-BINDING LETTER OF INTENT STATING YOUR INTENTION TO BUY AN AMOUNT OF SHARES
IN THE FUND(S) DURING THE NEXT THIRTEEN (13) MONTHS SUFFICIENT TO QUALIFY FOR
THE REDUCTION. YOUR LETTER WILL NOT APPLY TO PURCHASES MADE MORE THAN 90 DAYS
PRIOR TO THE LETTER. DURING THE TERM OF YOUR LETTER OF INTENT, THE TRANSFER
AGENT WILL HOLD IN ESCROW SHARES REPRESENTING THE HIGHEST APPLICABLE SALES LOAD
FOR THE FUND(S) IN WHICH YOU HAVE PURCHASED SHARES, EACH TIME YOU MAKE A
PURCHASE. ANY SHARES YOU REDEEM DURING THAT PERIOD WILL COUNT AGAINST YOUR
COMMITMENT. IF, BY THE END OF YOUR COMMITMENT TERM, YOU HAVE PURCHASED ALL THE
SHARES YOU COMMITTED TO PURCHASE, THE ESCROWED SHARES WILL BE RELEASED TO YOU.
IF YOU HAVE NOT PURCHASED THE FULL AMOUNT OF YOUR COMMITMENT, YOUR ESCROWED
SHARES WILL BE REDEEMED IN AN AMOUNT EQUAL TO THE SALES CHARGE THAT WOULD APPLY
IF YOU HAD PURCHASED THE ACTUAL AMOUNT IN YOUR ACCOUNT(S) ALL AT ONCE. ANY
ESCROWED SHARES NOT NEEDED TO SATISFY THAT CHARGE WOULD BE RELEASED TO YOU.
CLASS B SHARES
UNLIKE CLASS A SHARES, CLASS B SHARES ARE SOLD AT NET ASSET VALUE, WITHOUT AN
INITIAL SALES CHARGE. INSTEAD, A CONTINGENT DEFERRED SALES CHARGE ("CDSC") IS
IMPOSED ON CERTAIN REDEMPTIONS OF CLASS B SHARES. THIS MEANS THAT ALL OF YOUR
INITIAL INVESTMENT IS INVESTED IN THE FUND, AND YOU WILL ONLY INCUR A SALES
CHARGE IF YOU REDEEM SHARES WITHIN FIVE YEARS. IN THAT CASE, A CDSC MAY BE
IMPOSED ON YOUR REDEMPTION. IF A CDSC IS IMPOSED, IT WILL BE CALCULATED ON AN
AMOUNT EQUAL TO THE LESSER OF THE CURRENT MARKET VALUE OR THE COST OF THE SHARES
REDEEMED. WHAT THIS MEANS IS THAT NO SALES CHARGE IS IMPOSED ON INCREASES IN
THE NET ASSET VALUE OF YOUR SHARES ABOVE THEIR ORIGINAL PURCHASE PRICE. ALSO,
NO CHARGE IS ASSESSED ON SHARES DERIVED FROM REINVESTMENT OF DIVIDEND OR CAPITAL
GAINS DISTRIBUTIONS.
THE AMOUNT OF THE CDSC, IF ANY, VARIES DEPENDING ON THE NUMBER OF YEARS YOU HAVE
HELD YOUR SHARES. TO DETERMINE THAT TIME PERIOD, ALL PURCHASES MADE IN ANY
MONTH ARE AGGREGATED TOGETHER AND DEEMED TO HAVE BEEN MADE ON THE LAST DAY OF
THE MONTH. FOR CLASS B SHARES OF THE SMALL-CAP, LARGE/MID-CAP, AND FIXED-INCOME
FUNDS, THE FOLLOWING CDSC CHARGES APPLY:
Redemption Within CDSC Percentage
FIRST YEAR.................5.00%
SECOND YEAR................4.00%
THIRD YEAR.................3.00%
FOURTH YEAR................2.00%
FIFTH YEAR.................1.00%
SIXTH YEAR AND THEREAFTER..NONE
12
<PAGE>
WHEN YOU SEND A REDEMPTION REQUEST TO THE TRUST, UNLESS YOU SPECIFY OTHERWISE,
SHARES NOT SUBJECT TO THE CDSC ARE REDEEMED FIRST, THEN SHARES THAT HAVE BEEN
HELD THE LONGEST, AND SO ON. THAT WAY, YOU WILL BE SUBJECT TO THE SMALLEST
CHARGE POSSIBLE.
13
<PAGE>
CDSC 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 PLAN (III) ANNUAL
WITHDRAWALS UP TO 10% OF THE VALUE OF THE ACCOUNT, (IV) PURSUANT TO THE RIGHT OF
A FUND TO LIQUIDATE A SHAREHOLDER'S ACCOUNT.
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
FEES PAID UNDER EACH FUND'S PLAN OF DISTRIBUTION FOR ITS CLASS B SHARES. CLASS B
SHARES CONVERTING TO CLASS A SHARES ARE NOT SUBJECT TO ADDITIONAL SALES CHARGES.
CLASS C SHARES
WHEN YOU PURCHASE CLASS C SHARES, ALL OF YOUR INITIAL INVESTMENT IS IMMEDIATELY
INVESTED IN THE FUND OF YOUR CHOICE. TO COMPENSATE THE SELLING BROKER/DEALER
FOR ITS SALES AND PROMOTIONAL EFFORTS, PLUS ITS CONTINUING SERVICES TO THE FUND
AND YOUR ACCOUNT, THE FUND WILL PAY THE BROKER/DEALER A CONTINUING ANNUAL FEE OF
UP TO 0.75% OF NET ASSETS ATTRIBUTABLE TO CLASS C SHARES; AND IF THE
BROKER/DEALER PROVIDES ADDITIONAL SHAREHOLDER SERVICES IT MAY RECEIVE AN
ADDITIONAL SERVICING FEE OF UP TO 0.25% OF FUND ASSETS ATTRIBUTABLE TO CLASS C
SHARES. THESE FEES ARE CHARGED TO YOUR CLASS C SHARES PURSUANT TO EACH FUND'S
PLAN OF DISTRIBUTION FOR CLASS C SHARES.
FACTORS TO CONSIDER WHEN CHOOSING A SHARE CLASS
WHEN DECIDING WHICH CLASS OF SHARES TO PURCHASE, YOU SHOULD CONSIDER YOUR
INVESTMENT GOALS, PRESENT AND FUTURE AMOUNTS YOU MAY INVEST IN THE FUND(S), AND
THE LENGTH OF TIME YOU INTEND TO HOLD YOUR SHARES. YOU SHOULD CONSIDER, GIVEN
THE LENGTH OF TIME YOU MAY HOLD YOUR SHARES, WHETHER THE ONGOING EXPENSES OF
CLASS C OR CLASS B SHARES WILL BE GREATER THAN THE FRONT-END SALES CHARGE OF
CLASS A SHARES, AND TO WHAT EXTENT SUCH DIFFERENCES MAY BE OFFSET BY THE HIGHER
DIVIDENDS ON CLASS A SHARES. TO HELP YOU MAKE A DETERMINATION AS TO WHICH CLASS
OF SHARES TO BUY, PLEASE REFER BACK TO THE EXAMPLES OF FUND EXPENSES OVER TIME
IN THE RISK/RETURN SUMMARY.
PURCHASE BY MAIL
YOUR PURCHASE ORDER, IF IN PROPER FORM AND ACCOMPANIED BY PAYMENT, WILL BE
PROCESSED UPON RECEIPT BY UNIFIED FUND SERVICES, INC., THE FUND'S TRANSFER
AGENT. IF THE TRANSFER AGENT RECEIVES YOUR ORDER AND PAYMENT BY THE CLOSE OF
REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE (CURRENTLY 4:00 P.M. EAST COAST
TIME), YOUR SHARES WILL BE PURCHASED AT THE FUND'S PUBLIC OFFERING PRICE
CALCULATED AT THE CLOSE OF REGULAR TRADING ON THAT DAY. OTHERWISE, YOUR SHARES
WILL BE PURCHASED AT THE PUBLIC OFFERING PRICE DETERMINED AS OF THE CLOSE OF
REGULAR TRADING ON THE NEXT BUSINESS DAY.
YOU CAN MAIL YOUR APPLICATION AND CHECK TO THE TRUST AT:
UNIFIED FUND SERVICES, INC.
431 NORTH PENNSYLVANIA STREET
14
<PAGE>
INDIANAPOLIS, INDIANA 46204
ALL APPLICATIONS TO PURCHASE SHARES OF THE FUND(S) ARE SUBJECT TO ACCEPTANCE OR
REJECTION BY AUTHORIZED OFFICERS OF THE TRUST AND ARE NOT BINDING UNTIL
ACCEPTED. APPLICATIONS WILL NOT BE ACCEPTED UNLESS THEY ARE ACCOMPANIED BY
PAYMENT IN U.S. FUNDS. PAYMENT MUST BE MADE BY CHECK OR MONEY ORDER DRAWN ON A
U.S. BANK, SAVINGS & LOAN OR CREDIT UNION. THE CUSTODIAN WILL CHARGE A $20.00
FEE AGAINST YOUR ACCOUNT, IN ADDITION TO ANY LOSS SUSTAINED BY THE FUND, FOR ANY
PAYMENT CHECK RETURNED TO THE CUSTODIAN FOR INSUFFICIENT FUNDS. THE TRUST
RESERVES THE RIGHT TO REFUSE TO ACCEPT APPLICATIONS UNDER CIRCUMSTANCES OR IN
AMOUNTS CONSIDERED DISADVANTAGEOUS TO SHAREHOLDERS. IF YOU PLACE AN ORDER FOR
FUND SHARES THROUGH A SECURITIES BROKER, AND YOU PLACE YOUR ORDER IN PROPER FORM
BEFORE 4:00 P.M. EAST COAST TIME ON ANY BUSINESS DAY IN ACCORDANCE WITH THEIR
PROCEDURES, YOUR PURCHASE WILL BE PROCESSED AT THE PUBLIC OFFERING PRICE
CALCULATED AT 4:00 P.M. ON THAT DAY, IF THE SECURITIES BROKER THEN TRANSMITS
YOUR ORDER TO THE TRANSFER AGENT BEFORE THE END OF ITS BUSINESS DAY (WHICH IS
USUALLY 5:00 P.M. EAST COAST TIME). THE SECURITIES BROKER MUST SEND TO THE
TRANSFER AGENT IMMEDIATELY AVAILABLE FUNDS IN THE AMOUNT OF THE PURCHASE PRICE
WITHIN THREE BUSINESS DAYS FOR THE ORDER.
15
<PAGE>
FINANCIAL SERVICE ORGANIZATIONS
IF YOU ARE A CLIENT OF A SECURITIES BROKER OR OTHER FINANCIAL ORGANIZATION, YOU
SHOULD NOTE THAT SUCH ORGANIZATIONS MAY CHARGE A SEPARATE FEE FOR ADMINISTRATIVE
SERVICES IN CONNECTION WITH INVESTMENTS IN FUND SHARES AND MAY IMPOSE ACCOUNT
MINIMUMS AND OTHER REQUIREMENTS. THESE FEES AND REQUIREMENTS WOULD BE IN
ADDITION TO THOSE IMPOSED BY THE FUND(S). IF YOU ARE INVESTING THROUGH A
SECURITIES BROKER OR OTHER FINANCIAL ORGANIZATION, PLEASE REFER TO ITS PROGRAM
MATERIALS FOR ANY ADDITIONAL SPECIAL PROVISIONS OR CONDITIONS THAT MAY BE
DIFFERENT FROM THOSE DESCRIBED IN THIS PROSPECTUS (FOR EXAMPLE, SOME OR ALL OF
THE SERVICES AND PRIVILEGES DESCRIBED MAY NOT BE AVAILABLE TO YOU). SECURITIES
BROKERS AND OTHER FINANCIAL ORGANIZATIONS HAVE THE RESPONSIBILITY OF
TRANSMITTING PURCHASE ORDERS AND FUNDS, AND OF CREDITING THEIR CUSTOMERS'
ACCOUNTS FOLLOWING REDEMPTIONS, IN A TIMELY MANNER IN ACCORDANCE WITH THEIR
CUSTOMER AGREEMENTS AND THIS PROSPECTUS.
AUTOMATIC INVESTMENT PLAN
YOU MAY PURCHASE SHARES OF ANY FUND THROUGH AN AUTOMATIC INVESTMENT PLAN. THE
PLAN PROVIDES A CONVENIENT WAY FOR YOU TO HAVE MONEY DEDUCTED DIRECTLY FROM YOUR
CHECKING, SAVINGS, OR OTHER ACCOUNTS FOR INVESTMENT IN SHARES OF THE FUND(S).
THE MINIMUM INVESTMENT UNDER THIS PLAN IS $100 PER MONTH. YOU CAN TAKE
ADVANTAGE OF THE PLAN BY FILLING OUT THE AUTOMATIC INVESTMENT SECTION OF THE
APPLICATION. YOU MAY ONLY SELECT AN ACCOUNT MAINTAINED AT A DOMESTIC FINANCIAL
INSTITUTION WHICH IS AN ACH MEMBER FOR AUTOMATIC WITHDRAWALS UNDER THE PLAN.
THE TRUST MAY ALTER, MODIFY, AMEND OR TERMINATE THE PLAN AT ANY TIME, BUT WILL
NOTIFY YOU IF IT DOES SO. FOR MORE INFORMATION, CALL THE TRANSFER AGENT AT 1-
800-662-0201.
RETIREMENT PLANS
RETIREMENT PLANS MAY PROVIDE YOU WITH A METHOD OF INVESTING FOR YOUR RETIREMENT
BY ALLOWING YOU TO EXCLUDE FROM YOUR TAXABLE INCOME, SUBJECT TO CERTAIN
LIMITATIONS, THE INITIAL AND SUBSEQUENT INVESTMENTS IN YOUR PLAN AND ALSO
ALLOWING SUCH INVESTMENTS TO GROW WITHOUT THE BURDEN OF CURRENT INCOME TAX UNTIL
MONIES ARE WITHDRAWN FROM THE PLAN. CONTACT YOUR INVESTMENT PROFESSIONAL OR
CALL THE FUND AT 1-800-846-7526 TO RECEIVE INFORMATION CONCERNING YOUR OPTIONS.
OTHER PURCHASE INFORMATION
YOU MAY EXCHANGE ANY CLASS OF SHARES IN ANY FUND FOR THE SAME CLASS OF SHARES IN
ANY OTHER FUND WITHOUT INCURRING ANY ADDITIONAL SALES CHARGES. HOWEVER, IF YOU
EXCHANGE SHARES IN ONE FUND FOR A DIFFERENT CLASS OF SHARES IN ANOTHER FUND, YOU
WILL BE SUBJECT TO ANY APPLICABLE SALES CHARGES IN YOUR NEWLY ACQUIRED FUND.
ALSO, AN EXCHANGE OF SHARES IS A TAXABLE EVENT. THAT MEANS THAT WHEN YOU
EXCHANGE SHARES, YOU MAY REALIZE A CAPITAL GAIN ON THE SHARES YOUR ARE
EXCHANGING, WHICH MAY BE TAXABLE TO YOU. YOU SHOULD CAREFULLY CONSIDER THE TAX
CONSEQUENCES OF EXCHANGING SHARES OF THE FUNDS.
FEDERAL REGULATIONS REQUIRE THAT YOU PROVIDE A CERTIFIED TAXPAYER IDENTIFICATION
NUMBER WHENEVER YOU OPEN OR REOPEN AN ACCOUNT. CONGRESS HAS MANDATED THAT IF
ANY SHAREHOLDER FAILS TO PROVIDE AND CERTIFY TO THE ACCURACY OF THE
SHAREHOLDER'S SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION NUMBER,
THE COMPANY WILL BE REQUIRED TO WITHHOLD A PERCENTAGE, CURRENTLY 31%, OF ALL
DIVIDENDS, DISTRIBUTIONS AND PAYMENTS, INCLUDING
16
<PAGE>
REDEMPTION PROCEEDS, TO SUCH SHAREHOLDER AS A BACK-UP WITHHOLDING PROCEDURE.
FOR ECONOMY AND CONVENIENCE, SHARE CERTIFICATES WILL NOT BE ISSUED.
THE PUBLIC OFFERING PRICE FOR THE FUNDS IS BASED UPON EACH FUND'S NET ASSET
VALUE PER SHARE. NET ASSET VALUE PER SHARE, PER CLASS, IS CALCULATED BY ADDING
THE VALUE OF FUND INVESTMENTS, CASH AND OTHER ASSETS, SUBTRACTING FUND
LIABILITIES FOR EACH SHARE CLASS, AND THEN DIVIDING THE RESULT BY THE NUMBER OF
SHARES OUTSTANDING FOR EACH CLASS. THE ASSETS OF EACH FUND ARE VALUED AT MARKET
VALUE OR, IF MARKET QUOTES CANNOT BE READILY OBTAINED, FAIR VALUE IS USED AS
DETERMINED BY THE BOARD OF TRUSTEES. THE NET ASSET VALUE OF THE FUND'S SHARES
IS COMPUTED ON ALL DAYS ON WHICH THE NEW YORK STOCK EXCHANGE IS OPEN FOR
BUSINESS AT THE CLOSE OF REGULAR TRADING HOURS ON THE EXCHANGE, CURRENTLY 4:00
P.M. EAST COAST TIME. CLASS A SHARES ARE SOLD AT NET ASSET VALUE PLUS THE
APPLICABLE SALES CHARGE. NO-LOAD SHARES (MONEY MARKET FUND ONLY), CLASS B AND
CLASS C SHARES ARE SOLD AT NET ASSET VALUE.
17
<PAGE>
HOW TO SELL (REDEEM) YOUR SHARES
YOU MAY SELL (REDEEM) YOUR SHARES AT ANY TIME. YOU MAY REQUEST THE SALE OF YOUR
SHARES EITHER BY MAIL, BY TELEPHONE OR BY WIRE.
BY MAIL
SALE REQUESTS SHOULD BE MAILED VIA U.S. MAIL OR OVERNIGHT COURIER SERVICE TO:
Unified Fund Services, Inc.
431 NORTH PENNSYLVANIA STREET
INDIANAPOLIS, INDIANA 46204
THE SELLING PRICE FOR NO-LOAD, CLASS A AND CLASS C SHARES BEING REDEEMED WILL BE
THE FUND'S PER SHARE NET ASSET VALUE NEXT CALCULATED AFTER RECEIPT OF ALL
REQUIRED DOCUMENTS IN GOOD ORDER. THE SELLING PRICE FOR CLASS B SHARES BEING
REDEEMED WILL BE THE FUND'S PER SHARE NET ASSET VALUE NEXT CALCULATED AFTER
RECEIPT OF ALL REQUIRED DOCUMENTS IN GOOD ORDER, LESS ANY APPLICABLE CDSC.
PAYMENT OF REDEMPTION PROCEEDS WILL BE MADE NO LATER THAN THE THIRD BUSINESS DAY
AFTER THE VALUATION DATE UNLESS OTHERWISE EXPRESSLY AGREED BY THE PARTIES AT THE
TIME OF THE TRANSACTION.
GOOD ORDER MEANS THAT THE REQUEST MUST INCLUDE:
1. YOUR ACCOUNT NUMBER.
2. THE NUMBER OF SHARES TO BE SOLD (REDEEMED) OR THE DOLLAR VALUE OF THE
AMOUNT TO BE REDEEMED.
3. THE SIGNATURES OF ALL ACCOUNT OWNERS EXACTLY AS THEY ARE REGISTERED ON THE
ACCOUNT.
4. ANY REQUIRED SIGNATURE GUARANTEES.
5. Any supporting legal documentation that is required in the case of estates,
trusts, corporations or partnerships and certain other types of accounts.
SIGNATURE GUARANTEES
A SIGNATURE GUARANTEE OF EACH OWNER IS REQUIRED TO REDEEM SHARES IN THE
FOLLOWING SITUATIONS, FOR ALL SIZE TRANSACTIONS:
(I) IF YOU CHANGE THE OWNERSHIP ON YOUR ACCOUNT;
(II) WHEN YOU WANT THE REDEMPTION PROCEEDS SENT TO A DIFFERENT ADDRESS THAN
IS REGISTERED ON THE ACCOUNT;
(III) IF THE PROCEEDS ARE TO BE MADE PAYABLE TO SOMEONE OTHER THAN THE
ACCOUNT'S OWNER(S);
(IV) ANY REDEMPTION TRANSMITTED BY FEDERAL WIRE TRANSFER TO YOUR BANK; AND
(V) IF A CHANGE OF ADDRESS REQUEST HAS BEEN RECEIVED BY THE TRUST OR UNIFIED
FUND SERVICES, INC. WITHIN 15 DAYS PREVIOUS TO THE REQUEST FOR
REDEMPTION.
IN ADDITION, SIGNATURE GUARANTEES ARE REQUIRED FOR ALL REDEMPTIONS OF $25,000 OR
MORE FROM ANY FUND SHAREHOLDER ACCOUNT. A REDEMPTION WILL NOT BE PROCESSED
UNTIL THE SIGNATURE GUARANTEE, IF REQUIRED, IS RECEIVED IN GOOD ORDER.
SIGNATURE GUARANTEES ARE DESIGNED TO PROTECT BOTH YOU AND THE TRUST FROM FRAUD.
TO OBTAIN A SIGNATURE GUARANTEE, YOU SHOULD VISIT A BANK, TRUST COMPANY, MEMBER
OF A NATIONAL
18
<PAGE>
SECURITIES EXCHANGE OR OTHER BROKER/DEALER, OR OTHER ELIGIBLE GUARANTOR
INSTITUTION. (NOTARIES PUBLIC CANNOT PROVIDE SIGNATURE GUARANTEES.) GUARANTEES
MUST BE SIGNED BY AN AUTHORIZED PERSON AT ONE OF THESE INSTITUTIONS, AND BE
ACCOMPANIED BY THE WORDS "SIGNATURE GUARANTEE."
BY TELEPHONE
YOU MAY REDEEM YOUR SHARES IN THE FUND BY CALLING THE TRANSFER AGENT AT 1-800-
662-0201 IF YOU ELECTED TO USE TELEPHONE REDEMPTION ON YOUR ACCOUNT APPLICATION
WHEN YOU INITIALLY PURCHASED SHARES. REDEMPTION PROCEEDS MUST BE TRANSMITTED
DIRECTLY TO YOU OR TO YOUR PRE-DESIGNATED ACCOUNT AT A DOMESTIC BANK.
SHARES PURCHASED BY CHECK FOR WHICH A REDEMPTION REQUEST HAS BEEN RECEIVED WILL
NOT BE REDEEMED UNTIL THE CHECK OR PAYMENT RECEIVED FOR INVESTMENT HAS CLEARED.
BY AUTOMATED CLEARING HOUSE ("ACH")
YOU MAY REQUEST THE REDEMPTION PROCEEDS BE TRANSFERRED TO YOUR DESIGNATED BANK
IF IT IS A MEMBER BANK OR A CORRESPONDENT OF A MEMBER BANK OF THE ACH SYSTEM.
THERE IS NO FEE CHARGED BY THE TRUST. ACH REDEMPTION REQUESTS MUST BE RECEIVED
BY THE TRANSFER AGENT BEFORE 4:00 P.M. NEW YORK TIME TO RECEIVE THAT DAY'S
CLOSING NET ASSETS VALUE. ACH REDEMPTIONS WILL BE SENT ON THE DAY FOLLOWING
YOUR REDEMPTION REQUEST. ACH REDEMPTION FUNDS ARE NORMALLY AVAILABLE TWO DAYS
AFTER THE REDEMPTION HAS BEEN PROCESSED.
REDEMPTION AT THE OPTION OF THE TRUST
IF THE VALUE OF THE SHARES IN YOUR ACCOUNT FALLS TO LESS THAN $1000, THE TRUST
MAY NOTIFY YOU THAT, UNLESS YOUR ACCOUNT IS INCREASED TO $1000 IN VALUE, IT WILL
REDEEM ALL YOUR SHARES AND CLOSE THE ACCOUNT BY PAYING YOU THE REDEMPTION
PROCEEDS AND ANY DIVIDENDS AND DISTRIBUTIONS DECLARED AND UNPAID AT THE DATE OF
REDEMPTION. YOU WILL HAVE SIXTY DAYS AFTER NOTICE TO BRING THE ACCOUNT UP TO
$1000 BEFORE ANY ACTION IS TAKEN. THIS MINIMUM BALANCE REQUIREMENT DOES NOT
APPLY TO IRAS AND OTHER TAX-SHELTERED INVESTMENT ACCOUNTS. THIS RIGHT OF
REDEMPTION SHALL NOT APPLY IF THE VALUE OF YOUR ACCOUNT DROPS BELOW $1000 AS THE
RESULT OF MARKET ACTION. THE TRUST RESERVES THIS RIGHT BECAUSE OF THE EXPENSE
TO THE FUND OF MAINTAINING VERY SMALL ACCOUNTS.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS PAID BY THE FUND ARE DERIVED FROM ITS NET INVESTMENT INCOME. NET
INVESTMENT INCOME WILL BE DISTRIBUTED AT LEAST ANNUALLY. THE FUND'S NET
INVESTMENT INCOME IS MADE UP OF DIVIDENDS RECEIVED FROM THE STOCKS IT HOLDS, AS
WELL AS INTEREST ACCRUED AND PAID ON ANY OTHER OBLIGATIONS THAT MIGHT BE HELD IN
ITS PORTFOLIO.
THE FUND REALIZES CAPITAL GAINS WHEN IT SELLS A SECURITY FOR MORE THAN IT PAID
FOR IT. THE FUND MAY MAKE DISTRIBUTIONS OF ITS NET REALIZED CAPITAL GAINS
(AFTER ANY REDUCTIONS FOR CAPITAL LOSS CARRY FORWARDS), GENERALLY, ONCE A YEAR.
UNLESS YOU ELECT TO HAVE YOUR DISTRIBUTIONS PAID IN CASH, YOUR DISTRIBUTIONS
WILL BE REINVESTED IN ADDITIONAL SHARES OF THE FUND. YOU MAY CHANGE THE MANNER
IN WHICH YOUR
19
<PAGE>
DIVIDENDS ARE PAID AT ANY TIME BY WRITING TO THE TRANSFER AGENT.
TIMOTHY PLAN
THE TIMOTHY PLAN ("TRUST") WAS ORGANIZED AS A DELAWARE BUSINESS TRUST, AND IS A
MUTUAL FUND COMPANY OF THE TYPE KNOWN AS AN OPEN-END, DIVERSIFIED MANAGEMENT
INVESTMENT COMPANY. IT IS AUTHORIZED TO CREATE AN UNLIMITED NUMBER OF SERIES OF
SHARES (EACH A "FUND") AND AN UNLIMITED NUMBER OF SHARE CLASSES WITHIN EACH
SERIES. A MUTUAL FUND PERMITS AN INVESTOR TO POOL HIS OR HER ASSETS WITH THOSE
OF OTHERS IN ORDER TO ACHIEVE ECONOMIES OF SCALE, TAKE ADVANTAGE OF PROFESSIONAL
MONEY MANAGERS AND ENJOY OTHER ADVANTAGES TRADITIONALLY RESERVED FOR LARGE
INVESTORS. THE TRUST CURRENTLY OFFERS FOUR SERIES BY THIS PROSPECTUS; THE
TIMOTHY PLAN SMALL-CAP VALUE FUND, THE TIMOTHY PLAN LARGE/MID-CAP VALUE FUND,
THE TIMOTHY PLAN FIXED-INCOME FUND, AND THE TIMOTHY PLAN MONEY MARKET FUND. THE
FUNDS' SHARES ARE FULLY PAID AND NON-ASSESSABLE. THEY ARE ENTITLED TO SUCH
DIVIDENDS AND DISTRIBUTIONS AS MAY BE PAID WITH RESPECT TO THE SHARES AND SHALL
BE ENTITLED TO SUCH SUMS ON LIQUIDATION OF THE FUNDS AS SHALL BE DETERMINED.
OTHER THAN THESE RIGHTS, THEY HAVE NO PREFERENCE AS TO CONVERSION, EXCHANGE,
DIVIDENDS, RETIREMENT OR OTHER FEATURES AND HAVE NO PREEMPTION RIGHTS. THERE
ARE FOUR CLASSES OF SHARES OFFERED BY THE TRUST.
SHAREHOLDER MEETINGS WILL NOT BE HELD UNLESS REQUIRED BY FEDERAL OR STATE LAW OR
IN CONNECTION WITH AN UNDERTAKING GIVEN BY THE FUND (SEE STATEMENT OF ADDITIONAL
INFORMATION).
MANAGEMENT OF THE FUND
THE BUSINESS AFFAIRS OF THE TRUST ARE MANAGED UNDER THE GENERAL SUPERVISION OF A
BOARD OF TRUSTEES.
INVESTMENT ADVISER
TIMOTHY PARTNERS LTD., (" TPL") IS A FLORIDA LIMITED PARTNERSHIP ORGANIZED ON
DECEMBER 6, 1993. TPL SUPERVISES THE INVESTMENT OF THE ASSETS OF EACH FUND IN
ACCORDANCE WITH THE OBJECTIVES, POLICIES AND RESTRICTIONS OF THE TRUST. TPL
APPROVES THE PORTFOLIO OF SECURITIES SELECTED BY THE INVESTMENT MANAGERS. TO
DETERMINE WHICH SECURITIES ARE EXCLUDED SECURITIES, TPL CONDUCTS ITS OWN
RESEARCH AND CONSULTS A NUMBER OF CHRISTIAN MINISTRIES ON THESE ISSUES. TPL
RETAINS THE RIGHT TO CHANGE THE SOURCES FROM WHOM IT ACQUIRES ITS INFORMATION,
AT ITS DISCRETION.
FOR ITS SERVICES, TPL IS PAID AN ANNUAL FEE EQUAL TO 0.85% ON THE SMALL-CAP
VALUE FUND, 0.85% ON THE LARGE/MID-CAP VALUE FUND, 0.60% ON THE FIXED-INCOME
FUND, AND 0.60% ON THE MONEY MARKET FUND. A PORTION OF THE ADVISORY FEES ARE
PAID BY TPL TO: (1) THE INVESTMENT MANAGERS FOR ASSISTING IN THE SELECTION OF
PORTFOLIO SECURITIES FOR EACH FUND, AND (2) COVENANT FINANCIAL MANAGEMENT
("CFM") AS REIMBURSEMENT FOR EXPENSES RELATED TO THE DAILY OPERATIONS OF THE
TRUST PERFORMED BY CFM. THESE FEES ALSO COVER THE EXPENSES OF POSTAGE,
MATERIALS, FULFILLMENT OF SHAREHOLDER REQUESTS, AND A VARIETY OF OTHER
20
<PAGE>
ADMINISTRATIVE AND MARKETING EXPENSES. TPL HAS OFFICES AT 1304 WEST FAIRBANKS
AVENUE, WINTER PARK, FLORIDA, 32789. AS OF DECEMBER 31, 1998, ADVISORY FEES
PAYABLE TO TPL FOR ITS SERVICES TO THE SMALL-CAP VALUE FUND WERE $215,187, AND
TPL REIMBURSED A TOTAL OF $124,004 TO THE TRUST.
ARTHUR D. ALLY, PRESIDENT, CHAIRMAN AND TRUSTEE OF THE TRUST, IS PRESIDENT AND
70% SHAREHOLDER OF COVENANT FUNDS, INC. ("CFI"). CFI IS THE MANAGING GENERAL
PARTNER OF TPL. TPL HAS BEEN THE ADVISER TO THE FUNDS SINCE THEIR INCEPTIONS.
MR. ALLY HAS OVER TWENTY-ONE YEARS EXPERIENCE IN THE INVESTMENT INDUSTRY. PRIOR
TO FOUNDING TPL, MR. ALLY WORKED FOR PRUDENTIAL BACHE, SHEARSON LEHMAN BROTHERS
AND INVESTMENT MANAGEMENT & RESEARCH. SOME OR ALL OF THESE FIRMS MAY BE
UTILIZED BY AN INVESTMENT MANAGER TO EXECUTE PORTFOLIO TRADES FOR A FUND.
NEITHER MR. ALLY NOR ANY AFFILIATED PERSON OF THE TRUST WILL RECEIVE ANY BENEFIT
FROM SUCH TRANSACTIONS.
TPL AND CFM HAVE ENTERED INTO AN AGREEMENT WHEREBY TPL PAYS CFM FOR CERTAIN
OVERHEAD EXPENSES RELATED TO THE DAILY OPERATIONS OF THE TRUST THAT CFM CARRIES
OUT. THESE EXPENSES INCLUDE: SALARY OF ADMINISTRATIVE PERSONNEL, SHAREHOLDER
FULFILLMENT, PHONE LINES AND OFFICE SPACE, AND POSTAGE AND SUPPLIES. THE ANNUAL
FEE IS AN AMOUNT TO COVER CFM'S COSTS IN PROVIDING SUCH 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.
INVESTMENT MANAGERS
Small-Cap Value Fund
AWAD ASSET MANAGEMENT, INC. ("AWAD"), A WHOLLY-OWNED SUBSIDIARY OF RAYMOND JAMES
FINANCIAL, IS THE INVESTMENT MANAGER FOR THE SMALL-CAP VALUE FUND. AWAD HAS
OFFICES AT 477 MADISON AVENUE, NEW YORK, NEW YORK 10022, AND IT IS A JOINT
ENTERPRISE BETWEEN JAMES D. AWAD, A THIRTY YEAR VETERAN OF THE INVESTMENT
MANAGEMENT BUSINESS, AND RAYMOND JAMES FINANCIAL, A DIVERSIFIED FINANCIAL
SERVICES FIRM TRADED ON THE NEW YORK STOCK EXCHANGE. AWAD SELECTS THE
INVESTMENTS FOR THE SMALL-CAP VALUE FUND'S PORTFOLIO, SUBJECT TO THE INVESTMENT
RESTRICTIONS OF THE TRUST AND UNDER THE SUPERVISION OF TPL.
JAMES D. AWAD, DAN VERU AND CAROL EGAN MAKE UP THE TEAM RESPONSIBLE FOR MANAGING
THE DAY-TO-DAY INVESTMENTS FOR THE FUND. JAMES AWAD IS THE SENIOR INVESTMENT
OFFICER OF THE INVESTMENT MANAGER. PRIOR TO FORMING AWAD ASSET MANAGEMENT,
INC., MR. AWAD WAS FOUNDER AND PRESIDENT OF BMI CAPITAL. HE ALSO MANAGED
ASSETS AT NEUBERGER & BERMAN, CHANNING MANAGEMENT AND FIRST INVESTMENT CORP.
MR. AWAD HAS BEEN INVOLVED EITHER FULL OR PART-TIME IN THE INVESTMENT BUSINESS
SINCE 1965.
FOR ITS SERVICES AS INVESTMENT MANAGER TO THE SMALL-CAP VALUE FUND, AWAD IS PAID
AN ANNUAL FEE BY TPL EQUAL TO 0.42% OF THE FUND'S AVERAGE DAILY ASSETS UP TO $10
MILLION, 0.40% FOR THE NEXT $5 MILLION IN AVERAGE DAILY NET ASSETS, 0.35% FOR
THE NEXT $10 MILLION IN AVERAGE DAILY NET ASSETS, AND 0.25% OF AVERAGE DAILY NET
ASSETS OVER $25 MILLION. AS OF DECEMBER 31, 1998, TPL PAID AWAD A TOTAL OF
$98,405 FOR ITS SERVICES TO THE SMALL-CAP VALUE FUND.
AWAD & ASSOCIATES HAS SERVED AS INVESTMENT MANAGER TO THE FUND SINCE JANUARY 1,
1997. IT ALSO SERVES AS INVESTMENT CO-ADVISER TO TWO OTHER INVESTMENT
COMPANIES: HERITAGE SMALL-
21
<PAGE>
CAP STOCK FUND AND CALVERT NEW VISION SMALL-CAP FUND. AS OF DECEMBER 31, 1998,
AWAD & ASSOCIATES MANAGED IN EXCESS OF $900 MILLION IN ASSETS.
Large/Mid-Cap Value Fund
FOX ASSET MANAGEMENT, INC. ("FOX"), 44 SYCAMORE AVENUE, LITTLE SILVER, NJ
07739, IS RESPONSIBLE FOR THE INVESTMENT AND REINVESTMENT OF THE LARGE/MID-CAP
VALUE FUND'S ASSETS. MR. J. PETER SKIRKANICH, PRESIDENT AND MAJORITY
SHAREHOLDER OF FOX, IS RESPONSIBLE FOR THE DAY-TO-DAY RECOMMENDATIONS REGARDING
THE INVESTMENT OF THE FUND'S PORTFOLIO. FOX WAS FOUNDED IN 1987, AND OFFERS
INVESTMENT ADVICE AND SERVICES TO INDIVIDUALS, INSTITUTIONS, TRUSTS, CHARITIES
AND REGULATED INVESTMENT COMPANIES. AS OF DECEMBER 31, 1998, FOX MANAGED
APPROXIMATELY $2.2 BILLION IN ASSETS.
MR. SKIRKANICH IS THE FOUNDER OF FOX, SERVES AS CHAIRMAN OF THE FIRM'S
INVESTMENT COMMITTEE, AND IS THE FIRM'S CONTROLLING SHAREHOLDER, WITH AN
APPROXIMATE HOLDING OF 73% OF THE FIRM'S OUTSTANDING STOCK. MR. SKIRKANICH WAS
FORMERLY MANAGING DIRECTOR OF DREMAN VALUE MANAGEMENT, INC., AN INVESTMENT
COUNSELING FIRM. PRIOR TO THAT, HE WAS A VICE PRESIDENT OF INVESTMENTS AT
KIDDER, PEABODY & COMPANY AND SHEARSON/AMERICAN EXPRESS, WHERE HE MANAGED
INDIVIDUAL AND CORPORATE ACCOUNTS FOR TWELVE YEARS. HE BEGAN HIS INVESTMENT
CAREER AS AN ANALYST WITH PRUDENTIAL BACHE SECURITIES.
PRIOR TO EMBARKING ON HIS INVESTMENT CAREER, MR. SKIRKANICH SERVED THREE YEARS
WITH THE U.S. STATE DEPARTMENT AND TWO YEARS WITH ERNST & WHINNEY IN BOTH THE
TAX AND AUDIT AREAS. MR. SKIRKANICH IS A GRADUATE OF THE WHARTON SCHOOL,
UNIVERSITY OF PENNSYLVANIA. CURRENTLY HE SERVES AS A TRUSTEE ON THE BOARD OF
OVERSEERS FOR THE SCHOOL OF ENGINEERING AND APPLIED SCIENCES AT THE UNIVERSITY.
BY GUBERNATORIAL APPOINTMENT, HE ALSO SERVES AS A MEMBER OF THE STATE INVESTMENT
COUNCIL FOR THE STATE OF NEW JERSEY.
FOR ITS SERVICES AS INVESTMENT MANAGER TO THE LARGE/MID-CAP VALUE FUND, FOX IS
PAID AN ANNUAL FEE BY TPL EQUAL TO 0.42% OF THE FUND'S AVERAGE DAILY ASSETS UP
TO $10 MILLION, 0.40% FOR THE NEXT $5 MILLION IN AVERAGE DAILY NET ASSETS, 0.35%
FOR THE NEXT $10 MILLION IN AVERAGE DAILY NET ASSETS, AND 0.25% OF AVERAGE DAILY
NET ASSETS OVER $25 MILLION. AS OF DECEMBER 31, 1998, THE LARGE/MID-CAP VALUE
FUND HAD NOT COMMENCED OFFERING ITS SHARES, SO NO FEES WERE PAYABLE TO FOX AS OF
THAT DATE.
Fixed-Income Fund and Money Market Fund
CARR & ASSOCIATES, INC.("CARR"), 150 BROADWAY, SUITE 509, NEW YORK, NEW YORK,
SERVES AS INVESTMENT MANAGER TO THE FIXED-INCOME AND MONEY MARKET FUNDS. CARR
WAS FOUNDED BY MICHAEL F. CARR IN 1989 AND HAS PROVIDED INVESTMENT ADVISORY
SERVICES TO INSTITUTIONAL AND INDIVIDUAL INVESTORS SINCE THAT TIME. EACH OF THE
FIRM'S CO-PRINCIPALS IS A CHARTERED FINANCIAL ANALYST WITH OVER 38 YEARS OF
INVESTMENT INDUSTRY EXPERIENCE.
MICHAEL F. CARR, PRESIDENT AND CHIEF INVESTMENT OFFICER FOR THE FIRM, IS
RESPONSIBLE FOR THE DAY-TO-DAY RECOMMENDATIONS REGARDING THE INVESTMENT OF THE
FUNDS' PORTFOLIOS. MR. CARR HAS SPENT HIS ENTIRE 40 YEAR CAREER IN THE
INVESTMENT INDUSTRY. IMMEDIATELY PRIOR TO FOUNDING THE FIRM, MR. CARR WAS A
SENIOR VICE PRESIDENT OF SHEARSON LEHMAN HUTTON. MR. CARR IS A CHARTERED
FINANCIAL ANALYST AND A MEMBER OF THE ASSOCIATION FOR INVESTMENT MANAGEMENT AND
RESEARCH AND THE NEW YORK SOCIETY OF SECURITY ANALYSTS. A GRADUATE OF THE
UNIVERSITY OF NOTRE DAME, MR. CARR RECEIVED HIS MASTERS OF BUSINESS
ADMINISTRATION DEGREE FROM NEW YORK UNIVERSITY.
22
<PAGE>
FOR ITS SERVICES AS INVESTMENT MANAGER TO THE FIXED-INCOME FUND, CARR IS PAID AN
ANNUAL FEE BY TPL EQUAL TO 0.20% OF THE FUND'S AVERAGE DAILY ASSETS. FOR ITS
SERVICES TO THE MONEY MARKET FUND, CARR IS PAID AN ANNUAL FEE BY TPL EQUAL TO
0.08% OF THE FUND'S AVERAGE DAILY NET ASSETS. AS OF DECEMBER 31, 1998, THE
FIXED-INCOME AND MONEY MARKET FUNDS HAD NOT COMMENCED OFFERING THEIR SHARES, SO
NO FEES WERE PAYABLE TO FOX AS OF THAT DATE.
DISTRIBUTION SERVICES
TIMOTHY PARTNERS LTD. ("TPL") ACTS AS PRINCIPAL UNDERWRITER FOR THE TRUST. THE
PURPOSE OF ACTING AS AN UNDERWRITER IS TO FACILITATE THE REGISTRATION OF THE
FUNDS' SHARES UNDER STATE SECURITIES LAWS AND TO ASSIST IN THE SALE OF SHARES.
TPL ALSO ACTS AS INVESTMENT ADVISER TO THE TRUST. TPL IS NOT COMPENSATED FOR
PROVIDING UNDERWRITING SERVICES TO THE TRUST.
FUND SERVICE PROVIDERS
CUSTODIAN
FIRSTAR BANK, N.A., 425 WALNUT STREET, M.L. 6118, CINCINNATI, OHIO 45202-1118,
HOLDS THE INVESTMENTS AND OTHER ASSETS OF THE FUNDS. THE CUSTODIAN IS
RESPONSIBLE FOR RECEIVING AND PAYING FOR SECURITIES PURCHASED, DELIVERING
AGAINST PAYMENT FOR SECURITIES SOLD, RECEIVING AND COLLECTING INCOME FROM
INVESTMENTS, MAKING ALL PAYMENTS COVERING EXPENSES OF THE FUNDS, AND PERFORMING
OTHER ADMINISTRATIVE DUTIES, ALL AS DIRECTED BY PERSONS AUTHORIZED BY THE TRUST.
THE CUSTODIAN DOES NOT EXERCISE ANY SUPERVISORY FUNCTION IN SUCH MATTERS AS THE
PURCHASE AND SALE OF PORTFOLIO SECURITIES, PAYMENT OF DIVIDENDS, OR PAYMENT OF
EXPENSES OF ANY FUND. PORTFOLIO SECURITIES OF THE FUNDS ARE MAINTAINED IN THE
CUSTODY OF THE CUSTODIAN, AND MAY BE ENTERED IN THE FEDERAL RESERVE BOOK ENTRY
SYSTEM, OR THE SECURITY DEPOSITORY SYSTEM OF THE DEPOSITORY TRUST COMPANY.
TRANSFER, DIVIDEND DISBURSING AND ACCOUNTING SERVICES AGENT
UNIFIED FUND SERVICES, INC. PROVIDES TRANSFER AGENCY AND DIVIDEND DISBURSING
SERVICES FOR THE FUND. THIS MEANS THAT ITS JOB IS TO MAINTAIN, ACCURATELY, THE
ACCOUNT RECORDS OF ALL SHAREHOLDERS IN THE FUND AS WELL AS TO ADMINISTER THE
DISTRIBUTION OF INCOME EARNED AS A RESULT OF INVESTING IN THE FUND. UNIFIED
FUND SERVICES, INC. ALSO PROVIDES ACCOUNTING SERVICES TO THE FUND INCLUDING
PORTFOLIO ACCOUNTING SERVICES, EXPENSE ACCRUAL AND PAYMENT SERVICES, VALUATION
AND FINANCIAL REPORTING SERVICES, TAX ACCOUNTING SERVICES AND COMPLIANCE CONTROL
SERVICES.
23
<PAGE>
FEDERAL TAXES
AS WITH ANY INVESTMENT, YOU SHOULD CONSIDER THE TAX IMPLICATIONS OF AN
INVESTMENT IN THE TRUST. THE FOLLOWING IS ONLY A SHORT SUMMARY OF THE IMPORTANT
TAX CONSIDERATIONS GENERALLY AFFECTING THE FUNDS AND THEIR SHAREHOLDERS. YOU
SHOULD CONSULT YOUR TAX ADVISER WITH SPECIFIC REFERENCE TO YOUR OWN TAX
SITUATION.
THE TRUST INTENDS TO QUALIFY AND MAINTAIN ITS QUALIFICATION AS A "REGULATED
INVESTMENT COMPANY" UNDER THE INTERNAL REVENUE CODE (HEREAFTER THE "CODE"),
MEANING THAT TO THE EXTENT A FUND'S EARNINGS ARE PASSED ON TO SHAREHOLDERS AS
REQUIRED BY THE CODE, THE TRUST ITSELF IS NOT REQUIRED TO PAY FEDERAL INCOME
TAXES ON THE EARNINGS. ACCORDINGLY, EACH FUND WILL PAY DIVIDENDS AND MAKE SUCH
DISTRIBUTIONS AS ARE NECESSARY TO MAINTAIN ITS QUALIFICATION AS A REGULATED
INVESTMENT COMPANY UNDER THE CODE.
BEFORE YOU PURCHASE SHARES OF ANY FUND, YOU SHOULD CONSIDER THE EFFECT OF BOTH
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS THAT ARE EXPECTED TO BE DECLARED OR
THAT HAVE BEEN DECLARED BUT NOT YET PAID. WHEN THE FUND MAKES THESE PAYMENTS,
ITS SHARE PRICE WILL BE REDUCED BY THE AMOUNT OF THE PAYMENT, SO THAT YOU WILL
IN EFFECT HAVE PAID FULL PRICE FOR THE SHARES AND THEN RECEIVED A PORTION OF
YOUR PRICE BACK AS A TAXABLE DIVIDEND DISTRIBUTION.
THE TRUST WILL NOTIFY YOU ANNUALLY AS TO THE TAX STATUS OF DIVIDEND AND CAPITAL
GAINS DISTRIBUTIONS PAID BY THE FUNDS. SUCH DIVIDENDS AND CAPITAL GAINS MAY
ALSO BE SUBJECT TO STATE AND LOCAL TAXES.
YOU MAY REALIZE A TAXABLE GAIN OR LOSS WHEN REDEEMING SHARES OF A FUND DEPENDING
ON THE DIFFERENCE IN THE PRICES AT WHICH YOU PURCHASED AND SOLD THE SHARES.
BECAUSE YOUR STATE AND LOCAL TAXES MAY BE DIFFERENT THAN THE FEDERAL TAXES
DESCRIBED ABOVE, YOU SHOULD SEE YOUR TAX ADVISER REGARDING THESE TAXES.
GENERAL INFORMATION
TOTAL RETURN FOR THE FUNDS MAY BE CALCULATED ON AN AVERAGE ANNUAL TOTAL RETURN
BASIS OR AN AGGREGATE TOTAL RETURN BASIS. AVERAGE ANNUAL TOTAL RETURN REFLECTS
THE AVERAGE ANNUAL PERCENTAGE CHANGE IN VALUE OF AN INVESTMENT OVER THE
MEASURING PERIOD. AGGREGATE TOTAL RETURN REFLECTS THE TOTAL PERCENTAGE CHANGE
IN VALUE OF AN INVESTMENT OVER THE MEASURING PERIOD. BOTH MEASURES ASSUME THE
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS.
TOTAL RETURN OF EACH FUND MAY BE COMPARED TO THOSE OF MUTUAL FUNDS WITH SIMILAR
INVESTMENT OBJECTIVES AND TO BOND, STOCK OR OTHER RELEVANT INDICES OR TO
RANKINGS PREPARED BY INDEPENDENT SERVICES OR OTHER FINANCIAL OR INDUSTRY
PUBLICATIONS THAT MONITOR MUTUAL FUND PERFORMANCE.
DISTRIBUTION FEES
THE TRUST HAS ADOPTED DISTRIBUTION PLANS (THE "DISTRIBUTION PLANS"), PURSUANT TO
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, BY CLASS OF
SHARES, FOR EACH FUND. THE DISTRIBUTION PLANS PROVIDE FOR FEES TO BE DEDUCTED
FROM THE AVERAGE NET ASSETS OF THE FUNDS IN ORDER TO REIMBURSE TPL OR OTHERS FOR
EXPENSES ACTUALLY INCURRED IN THE PROMOTION AND SALE OF SHARES OF EACH FUND.
24
<PAGE>
UNDER THE CLASS A PLAN, THE CLASS A SHARES OF EACH FUND COMPENSATE TPL AND
OTHERS FOR DISTRIBUTION EXPENSES AT A MAXIMUM ANNUAL RATE OF 0.25% (OF WHICH,
THE FULL AMOUNT MAY BE SERVICE FEES), PAYABLE ON A MONTHLY BASIS, OF EACH FUND'S
AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO CLASS A SHARES. AS OF DECEMBER 31,
1998, $30,886 IN 12B-1 FEES WERE ACCRUED BY THE SMALL-CAP VALUE FUND. THE
LARGE/MID-CAP VALUE AND FIXED-INCOME FUNDS HAD NOT COMMENCED OFFERING THEIR
SHARES AS OF DECEMBER 31, 1998, SO NO FEES HAD ACCRUED UNDER THE PLAN FOR THOSE
TWO FUNDS.
UNDER THE CLASS B PLAN, THE CLASS B SHARES OF EACH FUND COMPENSATE TPL AND
OTHERS FOR DISTRIBUTION AND SERVICE FEES AT A MAXIMUM ANNUAL RATE OF 1.00%
(0.25% OF WHICH IS A SERVICE FEE) PAYABLE ON A MONTHLY BASIS, OF EACH FUND'S
AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO CLASS B SHARES. AMOUNTS PAID UNDER THE
CLASS B PLAN ARE PAID TO TPL TO COMPENSATE IT FOR SERVICES PROVIDED AND EXPENSES
INCURRED IN THE DISTRIBUTION OF CLASS B SHARES, INCLUDING THE PAYING OF
COMMISSIONS FOR SALES OF CLASS B SHARES. THE CLASS B PLAN IS DESIGNED TO ALLOW
INVESTORS TO PURCHASE CLASS B SHARES WITHOUT INCURRING A FRONT-END SALES LOAD
AND TO PERMIT THE DISTRIBUTOR TO COMPENSATE AUTHORIZED DEALERS FOR SELLING SUCH
SHARES. ACCORDINGLY, THE CLASS B PLAN COMBINED WITH THE CDSC FOR CLASS B SHARES
IS TO PROVIDE FOR THE FINANCING OF THE DISTRIBUTION OF CLASS B SHARES. AS OF
DECEMBER 31, 1998, $97,212 IN 12B-1 FEES WERE ACCRUED BY THE SMALL-CAP VALUE
FUND. THE LARGE/MID-CAP VALUE AND FIXED-INCOME FUNDS HAD NOT COMMENCED OFFERING
THEIR SHARES AS OF DECEMBER 31, 1998, SO NO FEES HAD ACCRUED UNDER THE PLAN FOR
THOSE TWO FUNDS.
UNDER THE CLASS C PLAN, CLASS C SHARES OF EACH FUND COMPENSATE TPL AND OTHERS
FOR DISTRIBUTION AND SERVICE FEES AT AN ANNUAL RATE OF 1.00% (0.25% OF WHICH IS
A SERVICE FEE) PAYABLE ON A MONTHLY BASIS, OF EACH FUND'S AVERAGE DAILY NET
ASSETS ATTRIBUTABLE TO CLASS C SHARES. AMOUNTS PAID UNDER THE CLASS C PLAN ARE
PAID TO TPL TO COMPENSATE IT FOR SERVICES PROVIDED AND EXPENSES INCURRED IN THE
DISTRIBUTION OF CLASS C SHARES, INCLUDING THE PAYING OF ONGOING "TRAILER"
COMMISSIONS FOR SALES OF CLASS C SHARES. THE CLASS C PLAN IS DESIGNED TO ALLOW
INVESTORS TO PURCHASE CLASS C SHARES WITHOUT INCURRING A FRONT-END SALES LOAD OR
A CDSC CHARGE, AND TO PERMIT THE DISTRIBUTOR TO COMPENSATE AUTHORIZED DEALERS
FOR SELLING SUCH SHARES. ACCORDINGLY, THE CLASS C PLAN'S PURPOSE IS TO PROVIDE
FOR THE FINANCING OF THE DISTRIBUTION OF CLASS C SHARES. CLASS C SHARES ARE
BEING OFFERED FOR THE FIRST TIME BY THIS PROSPECTUS, SO NO FEES HAD ACCRUED
UNDER THIS PLAN AS OF DECEMBER 31, 1998.
THE DISTRIBUTION PLANS PROVIDE THAT THE FUNDS MAY FINANCE ACTIVITIES WHICH ARE
PRIMARILY INTENDED TO RESULT IN THE SALE OF THE FUND'S SHARES, INCLUDING BUT NOT
LIMITED TO, ADVERTISING, PRINTING OF PROSPECTUSES AND REPORTS FOR OTHER THAN
EXISTING SHAREHOLDERS, PREPARATION AND DISTRIBUTION OF ADVERTISING MATERIALS AND
SALES LITERATURE, AND PAYMENTS TO DEALERS AND SHAREHOLDER SERVICING AGENTS.
THE DISTRIBUTION PLANS ARE REVIEWED ANNUALLY BY THE TRUST'S BOARD OF TRUSTEES,
AND MAY BE RENEWED ONLY BY MAJORITY VOTE OF THE SHAREHOLDERS OF THE AFFECTED
FUND'S CLASS, OR BY MAJORITY VOTE OF THE BOARD, AND IN BOTH CASES ALSO A
MAJORITY VOTE OF THE DISINTERESTED TRUSTEES OF THE TRUST, AS THAT TERM IS
DEFINED IN THE 1940 ACT.
25
<PAGE>
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE SMALL-CAP
VALUE FUND'S FINANCIAL PERFORMANCE SINCE ITS INCEPTION ON MARCH 21, 1994.
CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE
TOTAL RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR WOULD HAVE EARNED
(OR LOST) ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS
AND DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY TAIT, WELLER & BAKER,
WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS, ARE INCLUDED IN THE
TRUST'S ANNUAL REPORT, WHICH IS AVAILABLE WITHOUT CHARGE UPON REQUEST.
THE LARGE/MID-CAP VALUE FUND, THE FIXED-INCOME FUND, AND THE MONEY MARKET FUND
ARE NEW FUNDS BEING OFFERED FOR THE FIRST TIME BY THIS PROSPECTUS. ACCORDINGLY,
THESE FUNDS HAVE NOT YET OBTAINED AN OPERATING HISTORY AND HAVE NO FINANCIAL
INFORMATION TO REPORT. HOWEVER, FINANCIAL HIGHLIGHTS FOR THESE FUNDS WILL BE
AVAILABLE WITH THE PUBLICATION OF THE TRUST'S NEXT ANNUAL REPORT.
<TABLE>
<CAPTION>
Class A
For the Year Ended December 31,
1998 1997 1996 1995 1994*
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.25 $ 11.24 $ 10.07 $ 9.66 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01 0.02 0.10 0.11 0.06
Net Gains (Losses) on Securities (1.30) 2.37 1.17 0.66 (0.34)
(both realized and unrealized)
Total from Investment Operations (1.29) 2.39 1.27 0.77 (0.28)
Less Distributions
From Net Investment Income 0.00 0.00 (0.10) (0.11) (0.06)
From Net Capital Gains (0.07) (1.38) 0.00 (0.25) 0.00
Total Distributions (0.07) (1.38) (0.10) (0.36) (0.06)
Net Asset Value, End of Period $ 10.89 $12.25 $11.24 $10.07 $ 9.66
Total Return (10.50)/1/% (2.84)/1/%
21.35/1/% 12.59/1/% 7.93/1/%
Ratios/Supplemental Data
Net Assets, end of Period (in 000s) $ 13,287 $11,208 $ 7,760 $6,133 $ 2,217
Before Expense Reimbursements 2.09% 2.75% 3.70% 5.84% 18.62%/2/
After Expense Reimbursements 1.60% 1.60% 1.60% 1.60% 1.60%/2/
Ratio of Net Investment Income (Loss) to
Average Net Assets
Before Expense Reimbursements (1.15)% (0.90)% 1.05% 2.96% 15.49%/2/
After Expense Reimbursements (0.66)% 0.25% 1.05% 1.28% 1.53%/2/
Portfolio Turnover Rate 69.42% 136.36% 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.
26
<PAGE>
<TABLE>
<CAPTION>
Class B
For the Year Ended December 31,
1998 1997 1996 1995*
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.13 $ 11.22 $ 10.08 $ 10.49
INCOME FROM INVESTMENT OPERATIONS (0.07) (0.03) 0.07 0.11
Net Investment Income
Net Gains (Losses) on Securities (1.29) 2.32 1.14 (0.16)
(both realized and unrealized)
Total from Investment Operations (1.36) 2.29 1.21 (0.05)
Less Distributions
From Net Investment Income 0.00 0.00 (0.07) (0.11)
From Net Capital Gains (0.07) (1.38) 0.00 (0.25)
Total Distributions (0.07) (1.38) (0.07) (0.36)
Net Asset Value, End of Period $ 10.70 $ 12.13 $ 11.22 $ 10.08
Total Return (11.26)/1/% 20.50/1/% 11.98/1/% (0.46)/1/%
Ratios/Supplemental Data
NET ASSETS, END OF PERIOD (IN 000S) $ 14,114 $11,389 $ 3,929 $ 620
Before Expense Reimbursements 2.84% 3.41% 4.30% 6.44/2/%
After Expense Reimbursements 2.35% 2.26% 2.20% 2.20/2/%
Ratio of Net Investment Income (Loss) to
Average Net Assets
Before Expense Reimbursements (1.90)% (1.56)% 1.65% 3.56/2/%
After Expense Reimbursements (1.41)% (0.41)% 0.45% 0.68/2/%
Portfolio Turnover Rate 69.42% 136.36% 93.08% 34.12%
</TABLE>
* Class B Shares commenced investment operations on August 10, 1995.
1 Total return calculation does not reflect sales load.
2 Annualized.
27
<PAGE>
FOR MORE INFORMATION
ADDITIONAL INFORMATION ABOUT THE TRUST IS AVAILABLE IN THE TRUST'S ANNUAL REPORT
TO SHAREHOLDERS, DATED DECEMBER 31, 1998 AND ITS SEMI-ANNUAL REPORT TO
SHAREHOLDERS, DATED JUNE 31, 1998. IN THE TRUST'S ANNUAL AND SEMI-ANNUAL
REPORTS, YOU WILL FIND A DISCUSSION OF THE MARKET CONDITIONS AND INVESTMENT
STRATEGIES THAT SIGNIFICANTLY AFFECTED THE TRUST'S PERFORMANCE DURING ITS LAST
YEAR OF OPERATIONS.
Statement of Additional Information (SAI)
THE SAI CONTAINS MORE DETAILED INFORMATION REGARDING THE TRUST. A CURRENT SAI,
DATED MAY 3, 1999, HAS BEEN FILED WITH THE SEC AND IS INCORPORATED BY REFERENCE
INTO (IS LEGALLY A PART OF) THIS PROSPECTUS.
TO REQUEST A FREE COPY OF THE SAI, OR THE TRUST'S LATEST ANNUAL OR SEMI-ANNUAL
REPORT, PLEASE CONTACT THE TRUST.
<TABLE>
<CAPTION>
Timothy Plan Securities and Exchange
Commission
<S> <C> <C>
By Phone: 1-800-846-7526 1-800-SEC-0330
- ------------------------------------------------------------------------------------------------
By Mail: THE TIMOTHY PLAN PUBLIC REFERENCE SECTION
C/O TIMOTHY PARTNERS, LTD. SECURITIES AND EXCHANGE
1304 WEST FAIRBANKS AVENUE COMMISSION
WINTER PARK, FLORIDA 32789 WASHINGTON, D.C. 20549-6009
(A DUPLICATION FEE IS REQUIRED)
- ------------------------------------------------------------------------------------------------
By E-mail: [email protected]
- ------------------------------------------------------------------------------------------------
By Internet: HTTP://WWW.TIMOTHYPLAN.COM HTTP://WWW.SEC.GOV
- ------------------------------------------------------------------------------------------------
In Person: PUBLIC REFERENCE ROOM
SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C.
(CALL 1-800-SEC-0330 FOR MORE INFORMATION)
- ------------------------------------------------------------------------------------------------
</TABLE>
THE TIMOTHY PLAN INVESTMENT COMPANY ACT NO. 811-0822
28
<PAGE>
THE TIMOTHY PLAN
(the "Trust")
PROSPECTUS
May 3, 1999
This Prospectus offers the following Portfolios ("Funds") of the Trust:
THE TIMOTHY PLAN SMALL-CAP VARIABLE SERIES
(FORMERLY THE TIMOTHY PLAN VARIABLE SERIES)
THE TIMOTHY PLAN LARGE/MID-CAP VARIABLE SERIES
THE TIMOTHY PLAN FIXED-INCOME VARIABLE SERIES
These Funds are intended to be funding vehicles for Variable Annuity Contracts
("VA Contracts") offered through separate accounts of the Annuity Investors Life
Insurance Company (the "Insurance Company"). The Trust has filed an Application
For Exemptive Order under the Investment Company Act of 1940, as amended, to
allow these Funds to be offered through the separate accounts of various
insurance companies. If, as and when the Trust's Application is approved, the
Trust intends to enter into Participation Agreements with additional Insurance
Companies to offer the Funds. You will be informed of any such change.
The Timothy Plan was established to provide an investment alternative for people
who want to invest according to certain ethical standards. Each Fund invests in
a different market segment, and each Fund has its own investment objectives.
However, all the Funds have one thing in common. They do not invest in any
company that is involved in the business of alcohol production, tobacco
production or casino gambling, or which are involved, either directly or
indirectly, in pornography or abortion.
The Funds are distributed through Timothy Partners, Ltd.
1304 West Fairbanks Avenue, Winter Park, Florida 32789.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
- -------------------------------------------------------------------------------
29
<PAGE>
TABLE OF CONTENTS
Risk/Return Summary
Fees And Expenses
Purchases and Redemptions of Shares
Dividends and Distributions
The Timothy Plan
Management of the Fund
Brokerage Allocation
Fund Service Providers
Federal Taxes
General Information
Distribution Fees
Financial Highlights
- --------------------------------------------------------------------------------
30
<PAGE>
RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------
The Timothy Plan believes that it has a responsibility to invest in a moral and
ethical manner. Accordingly, as a matter of fundamental policy, the Fund will
not invest in any company that is involved in the business of alcohol
production, tobacco production, casino gambling, or which is involved, either
directly or indirectly, in pornography or abortion. Such companies are referred
to throughout this Prospectus as "Excluded Securities". Excluded Securities will
not be purchased by any Fund of the Trust. Timothy Partners Ltd.("TPL") is
investment adviser to the Fund, and is responsible for determining those
companies that are Excluded Securities. TPL also reserves the right to exercise
its best judgement to exclude investment in other companies whose corporate
practices may not fall within the exclusions described above, but nevertheless
could be found offensive to basic traditional Judeo Christian values.
Because none of the Funds will invest in Excluded Securities, the pool of
securities from which each Fund may choose may be limited to a certain degree.
Although TPL believes that each Fund can achieve its investment objective within
the parameters of ethical investing, eliminating Excluded Securities as
investments may have an adverse effect on a Fund's performance. However, "Total
Return" is more than just numbers. It is also investing in a way that supports
and reflects your beliefs and ideals. Each of our Funds strives to maximize
both kinds of total return.
- --------------------------------------------------------------------------------
THE TIMOTHY PLAN SMALL-CAP VARIABLE SERIES
The Fund's investment objective is long-term capital growth. Its secondary
objective is current income. The Fund seeks to achieve its objectives by
primarily investing in small-cap stocks and American Depository Receipts.
Small-Cap stocks is a reference to the common stock of smaller companies-
companies whose total market capitalization is greater than $200 Million and
less than $6Billion. American Depository Receipts ("ADRs") are certificates
issued by United States banks to evidence an ownership interest in an underlying
non-USA company's stock. ADRs generally trade on United States Stock Exchanges
in the same way that American common stock trades.
In choosing the securities in which to invest, the Fund will use extensive
fundamental analysis to develop earnings forecasts and to identify attractive
investment opportunities relative to market valuation. Individual companies are
scrutinized concerning their individual growth prospects and their competitive
positions within their respective industries. Individual company analysis
focuses upon the outlook for sales, profit margins, returns on capital, cash
flow and earnings per share.
The Fund may also invest up to 30% of its net assets in a variety of other
securities, and for temporary defensive purposes, may invest up to 100% of its
assets in obligations of the United States Government, its agencies and
instrumentalities, commercial paper, and certificates of deposit and bankers
acceptances. When the Fund takes a temporary defensive position, it will not be
investing according to its investment objective, and at such times, the
performance of the Fund will be different that if it had invested strictly
according to its objectives.
PRIMARY RISKS
You may lose money by investing in the Fund. The primary risk of investing in
the Fund is the risk of loss due to price declines in stocks held by the Fund.
Your risk of loss is greater if you hold
31
<PAGE>
your shares for a short period of time. Because the Fund is an equity fund and
invests in smaller companies, it is subject to the risks inherent in the stock
market in general, and the risks of investing in smaller companies in
particular. The stock market is cyclical, with prices generally rising and
falling over periods of time. Some of these price cycles can be pronounced and
last for a long time. Smaller companies are particularly susceptible to price
swings, because, due to their size, they often do not have the resources
available to them that are available to larger companies. However, the stock
market, although more volatile than other types of investments, historically has
outperformed other types of investments over the long term. Small cap stocks,
although more susceptible to price movements, also enjoy growth potential that
is often not available for larger companies. As a result, prudent investing in
smaller companies can result in greater capital growth than investing in larger
companies.
The Fund is appropriate for investors who understand the risks of investing in
the stock market and who are willing to accept moderate amounts of volatility
and risk.
- --------------------------------------------------------------------------------
Because the Timothy Plan Small-Cap Variable Series had not completed a full year
of operations as of December 31, 1998, a performance bar chart and table are not
included in this prospectus.
- --------------------------------------------------------------------------------
THE TIMOTHY PLAN LARGE/MID-CAP VARIABLE SERIES
The Fund's investment objective is long-term capital growth. Its secondary
objective is current income. The Fund seeks to achieve its objectives by
primarily investing in common stock and ADRs. The LARGE/MID-CAP VALUE FUND will
invest in the common stock of companies whose total market capitalization
exceeds $6 Billion. Because the Fund will invest in larger companies, it may not
be subject to the same level of price volatility as the SMALL-CAP VALUE FUND.
Also, larger companies often pay a regular dividend, and the Fund will benefit
from such investments to a greater degree than the SMALL-CAP VALUE FUND, since
smaller companies are less likely to pay regular dividends.
In choosing the securities in which to invest, the Fund will use extensive
fundamental analysis to develop earnings forecasts and to identify attractive
investment opportunities relative to market valuation. Individual companies are
scrutinized concerning their individual growth prospects and their competitive
positions within their respective industries. Individual company analysis
focuses upon the outlook for sales, profit margins, returns on capital, cash
flow and earnings per share.
The Fund may also invest up to 30% of its net assets in a variety of other
securities, and for temporary defensive purposes, may invest up to 100% of its
assets in obligations of the United States Government, its agencies and
instrumentalities, commercial paper, and certificates of deposit and bankers
acceptances. When the Fund takes a temporary defensive position, it will not be
investing according to its investment objective, and at such times, the
performance of the Fund will be different that if it had invested strictly
according to its objectives.
PRIMARY RISKS
You may lose money by investing in the Fund. Investing in larger companies is
designed to decrease the risk of loss to the Fund and to provide for long term
growth with some potential for current income. Larger companies, because of
their increased management depth, broader market affiliations, and capital
resources, offer the potential for long-term growth with reduced risk. The
32
<PAGE>
primary risk of investing in the Fund is the risk of loss due to price declines
in stocks held by the Fund. Your risk of loss is greater if you hold your
shares for a short period of time. The stock market is cyclical, with prices
generally rising and falling over periods of time. Some of these price cycles
can be pronounced and last for a long time.
You should be aware that, like all the Timothy Plan Funds, the Fund is subject
to the ethical restrictions on investing described on the front page of this
Prospectus. Accordingly, the Fund may have difficulty investing in a variety of
"Large-Cap" companies because of the likelihood that such company will be
involved, directly or indirectly, in a prohibited activity. You should also be
aware that this is a new Fund without an operating history, and this lack of
operating history may pose additional risks.
The Fund is a new Fund being offered for the first time by this Prospectus. The
Fund may be appropriate for investors who understand the risks of investing in
common stock and who are willing to accept some volatility and risk.
- --------------------------------------------------------------------------------
THE TIMOTHY PLAN FIXED-INCOME VARIABLE SERIES
The Fund seeks to generate a high level of current income consistent with
prudent investment risk. To achieve its goal, the Fund normally invests in a
diversified portfolio of debt securities. These include corporate bonds, U.S.
Government and agency securities and preferred securities. The Fund will only
purchase securities for the Fund that are investment grade. This means that the
security has a rating of at least "AA" as rated by Standard & Poors, or of
comparable quality. The Fund may also invest in debt securities that have not
been rated by one of the major rating agencies, so long as the Fund's investment
manager has determined that the security is of comparable credit quality to
similar rated securities.
In managing its portfolio, the Fund concentrates on sector analysis, industry
allocation and securities selection: deciding which types of bonds and
industries to emphasize at a given time, and then which individual bonds to buy.
The Fund attempts to anticipate shifts in the business cycle in determining
types of bonds and industry sectors to target. In choosing individual
securities, the Fund seeks out securities that appear to be undervalued within
the emphasized industry sector.
During periods of uncertainty, the Fund may invest up to 100% of its assets in
obligations of the United States Government, its agencies and instrumentalities,
commercial paper, certificates of deposit and bankers acceptances. When the
Fund takes a temporary defensive position, it will not be investing according to
its investment objective, and at such times, the performance of the Fund will be
different that if it had invested strictly according to its objectives.
PRIMARY RISKS
You may lose money by investing in the Fund. The major factors influencing the
Fund's performance are interest rates and credit risk. When interest rates
rise, bond prices fall; the higher the Fund's duration ( a calculation
reflecting time risk, taking into account both the average maturity of the
Fund's portfolio and its average coupon return), the more sensitive the Fund is
to interest rate risk.
33
<PAGE>
The Fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. For this reason, the Fund will only invest in investment
grade bonds. If certain industry sectors or types of securities don't perform
as well as the Fund expects, the Fund's performance could suffer. This is also
a new Fund without an operating history, and this lack of history could pose
additional risks to the Fund.
This Fund is a new Fund being offered for the first time by this Prospectus.
The Fund may be appropriate for investors who want a high level of current
income and are willing to accept a minor degree of volatility and risk.
- --------------------------------------------------------------------------------
PURCHASES AND REDEMPTIONS OF SHARES
Purchases and Redemptions of Shares in any of the Funds may be made only by
Insurance Company for its separate accounts at the direction of VA Account
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 on
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 of 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 offering
prospectus. The Trust reserves the right to suspend the offering of any of the
Fund's shares, or to reject any purchase order.
Purchase orders for shares of the Funds which are received by the transfer agent
in proper form prior to the close of trading hours on the New York Stock
Exchange (NYSE) (currently 4:00 p.m. Eastern Time) on any day that the Funds
calculate their net asset value, are priced according to the net asset value
determined on that day. Purchase orders for shares of a 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.
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 Funds 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 Securities and Exchange Commission.
Other Purchase Information
- --------------------------
If the Trustees determine that it would be detrimental to the best interests of
the remaining shareholders of a Fund to make payments in cash, a Fund may pay
the redemption price, in whole or in part by distribution in-kind of readily
marketable securities, from that Fund, within certain limits prescribed by the
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
34
<PAGE>
assets to cash.
For economy and convenience, share certificates will not be issued.
The public offering price for the Funds is based upon each Fund's net asset
value per share. Net asset value per share, per Class, is calculated by adding
the value of Fund investments, cash and other assets, subtracting Fund
liabilities for each share Class, and then dividing the result by the number of
shares outstanding for each Class . The assets of each Funds are valued at
market value or, if market quotes cannot be readily obtained, fair value is
used as determined by the Board of Trustees. The net asset value of the
Fund's shares is computed on all days on which the New York Stock Exchange is
open for business at the close of regular trading hours on the Exchange,
currently 4:00 p.m. East Coast time.
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 markets, 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 values as determined by the Board of trustees. Money market securities
with less than 60 remaining to maturity when acquired by a Fund will be valued
on an amortized cost basis by the Funds, 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 a Fund acquires a money market security with more than 60 days
remaining to its maturity, it will be valued at amortized cost when it reaches
60 days to maturity unless the Trustees determine that such a valuation will not
fairly represent its fair market value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each 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 Funds will distribute net realized capital gains,
if any, once annually. Expenses of the Funds, including advisory fees, are
accrued each day. Reinvestments of dividends and distributions in additional
shares of the Funds will be made at the net assets value determined on the ex-
date of the dividend or distribution.
The Funds intend to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code (the "Code"). As such, the Funds will not be
subject to federal income tax, or to any excise tax, to the extent their
earnings are distributed in accordance with the timing requirements imposed by
the Code and by meeting certain other requirements relating to the sources of
the Funds' income and diversification of their assets.
The Funds also intend 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 a Fund to the Participating Insurance
Company separate accounts. VA Contract owners should review the
35
<PAGE>
prospectus of their VA Contract for information regarding the tax consequences
of purchasing a contract or policy.
Under current tax law, dividends or capital gains distributions from a Fund are
not currently taxable when left to accumulate within a VA Contract. Depending
on the VA Contract, withdrawals from the Contract may be subject to ordinary
income tax, and an additional penalty of 10% on withdrawals before age 59 1/2.
THE TIMOTHY PLAN
The Timothy Plan ("Trust") was organized as a Delaware business trust, and is a
mutual fund company of the type known as an open-end, diversified management
investment company. It is authorized to create an unlimited number of series
of shares (each a "Fund") and an unlimited number of share classes within each
series. A mutual fund permits an investor to pool his or her assets with those
of others in order to achieve economies of scale, take advantage of professional
money managers and enjoy other advantages traditionally reserved for large
investors. The Trust currently offers three series by this Prospectus; The
Timothy Plan Small-Cap Variable Series, the Timothy Plan Mid-Cap Variable
Series, and The Timothy Plan Fixed-Income Variable Series. The Funds shares are
fully paid and non-assessable. They are entitled to such dividends and
distributions as may be paid with respect to the shares and shall be entitled to
such sums on liquidation of the Fund as shall be determined. Other than these
rights, they have no preference as to conversion, exchange, dividends,
retirement or other features and have no preemption rights. There are four
Classes of shares offered by the Trust.
Shareholder meetings will not be held unless required by Federal or State law or
in connection with an undertaking given by the Fund (See Statement of
Additional Information).
MANAGEMENT OF THE FUND
The business affairs of the Trust are managed under the general supervision of
a Board of Trustees.
Investment Adviser
- ------------------
Timothy Partners Ltd., ("TPL") is a Florida limited partnership organized on
December 6, 1993. TPL supervises the investment of the assets of each Fund in
accordance with the objectives, policies and restrictions of the Trust. TPL
approves the portfolio of securities selected by the investment managers. To
determine which securities are Excluded Securities, TPL conducts its own
research and consults a number of Christian ministries on these issues. TPL
retains the right to change the sources from whom it acquires its information,
at its discretion.
For its services, TPL is paid an annual fee equal to 0.85% on the SMALL-CAP
VALUE FUND, 1.00% on the LARGE/MID-CAP VALUE FUND, 0.60% on the Fixed-Income
Fund, and 0.60% on the Money Market Fund. A portion of the advisory fees are
paid by TPL to: (1) the investment managers for assisting in the selection of
portfolio securities for each fund, and (2) Covenant Financial Management
("CFM") as reimbursement for expenses related to the daily operations of the
Trust performed by CFM. These fees also cover the expenses of postage,
materials, fulfillment of shareholder requests, and a variety of other
administrative and marketing expenses. TPL has
36
<PAGE>
offices at 1304 West Fairbanks Avenue, Winter Park, Florida, 32789.
Arthur D. Ally. President, Chairman and Trustee of the Trust, is President and
70% shareholder of CFM. CFM is the managing general partner of TPL. TPL has
been the Adviser to the Funds since their inceptions. Mr. Ally has over
seventeen years experience in the investment industry prior to founding TPL,
having worked for Prudential Bache, Shearson Lehman Brothers and Investment
Management & Research. Some or all of these firms may be utilized by an
investment manage to execute portfolio trades for a Fund. Neither Mr. Ally nor
any affiliated person of the Trust will receive any benefit from such
transactions.
TPL and CFM have entered into an agreement whereby TPL pays CFM for certain
overhead expenses related to the daily operations of the Trust that CFM carries
out. These expenses include: salary of administrative personnel. Shareholder
fulfillment, phone lines and office space, and postage and supplies. The annual
fee is an amount to cover CFM's costs in providing such 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 100%
shareholder of CFM.
Investment Managers
- -------------------
SMALL-CAP VALUE FUND
--------------------
Awad & Associates ("Awad"), a division of Raymond James & Associates, Inc., is
the investment manager for the SMALL-CAP VALUE FUND. Awad has offices at 477
Madison Avenue, New York, New York 10022, and it is a joint enterprise 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
New York Stock Exchange. Awad selects the investments for the SMALL-CAP VALUE
FUND's portfolio, subject to the investment restrictions of the Trust and under
the supervision of TPL.
James D. Awad, Dan Veru and Carol Egan make up the tem responsible for managing
the day-to-day investments for the Fund. James Awad is the Senior investment
officer of the investment manager. Prior to forming Awad & Associates, Mr. Awad
was founder and president of BMI Capital. He also managed assets at Neuberger &
Berman, Channing Management and First Investment Corp. Mr. Awad has been
involved either full or part-time in the investment business since 1965.
For its services as investment manager to the SMALL-CAP VALUE FUND, Awad is paid
an annual fee by TPL equal to 0.42% of the Fund's average daily assets up to $10
million, 0.40% for the next $5 million in average daily net assets, 0.35% for
the next $10 million in average daily net assets, and 0.25% of average daily net
assets over $25 million.
Awad & Associates has served as investment manager to the Fund since January 1,
1997. It also serves as investment co-adviser to two other investment
companies: Heritage Small-Cap Stock Fund and Calvert New Vision Small Cap Fund.
As of December 31, 1998, Awad & Associates managed in excess of $900 million in
assets.
LARGE/MID-CAP VALUE FUND
------------------------
Fox Asset Management, Inc. ("Fox"), 44 Sycamore Avenue, Little Silver, NJ
07739, is responsible
37
<PAGE>
for the investment and reinvestment of the LARGE/MID-CAP VALUE FUND's assets.
Mr. J. Peter Skirkanich, President and majority shareholder of Fox, is
responsible for the day-to-day recommendations regarding the investment of the
Fund's portfolio. Fox was founded in 1987, and offers investment advice and
services to individuals, institutions, trusts, charities and regulated
investment companies. As of December 31, 1998, Fox managed approximately $2.2
Billion in assets.
Mr. Skirkanich is the founder of the firm, serves as chairman of the firm's
investment committee, and is the firm's controlling shareholder, with an
approximate holding of 73% of the firm's outstanding stock. Mr. Skirkanich was
formerly Managing Director of Dreman Value Management, Inc., an investment
counseling firm. Prior to that, he was a Vice President of Investments at
Kidder, Peabody & Company and Shearson/American Express, where he managed
individual and corporate accounts for twelve years. He began his investment
career as an analyst with Prudential Bache Securities.
Prior to embarking on his investment career, Mr. Skirkanich served three years
with the U.S. State Department and two years with Ernst & Whinney in both the
tax and audit areas. Mr. Skirkanich is a graduate of the Wharton School,
University of Pennsylvania. Currently he serves as a trustee on the Board of
Overseers for the School of Engineering and Applied Sciences at the University.
By gubernatorial appointment, he also serves as a member of the State Investment
Council for the State of New Jersey.
For its services as investment manager to the Mid-Cap Series, Fox is paid an
annual fee by TPL equal to 0.42% of the Fund's average daily assets up to $10
million, 0.40% for the next $5 million in average daily net assets, 0.35% for
the next $10 million in average daily net assets, and 0.25% of average daily net
assets over $25 million.
FIXED-INCOME FUND
-----------------
Carr & Associates, Inc. ("Carr"), 150 Broadway, Suite 509, New York, New York,
serves as investment manager to the Fixed Income Variable Series. Carr was
founded by Michael F. Carr in 1989 and has provided investment advisory services
to institutional and individual investors since that time. Each of the Firm's
co-principals is a Chartered Financial Analyst with over 38 years of investment
industry experience.
Michael F. Carr, President and Chief Investment Officer for the Firm, is
responsible for the day to day recommendations regarding the investment of the
Funds' portfolios. Mr. Carr has spent his entire 40 year career in the
investment industry. Immediately prior to founding the firm, Mr. Carr was a
Senior Vice President of Shearson Lehman Hutton. Mr. Carr is a Chartered
Financial Analyst and a member of the Association for Investment Management and
Research and the New York Society of Security Analysts. A graduate of the
University of Notre Dame, Mr. Carr received his Masters of Business
Administration degree from New York University.
For its services as investment manager to the Fixed-Income Series, Carr is paid
an annual fee by TPL equal to 0.20% of the Fund's average daily assets.
BROKERAGE ALLOCATION
38
<PAGE>
Timothy Partners Ltd.. ("TPL") acts as principal underwriter for the Trust. The
purpose of acting as an underwriter is to facilitate the registration of the
Funds' shares under state securities laws and to assist in the sale of shares.
TPL also acts as Investment Adviser to the Trust. TPL is not compensated for
providing underwriting services to the Trust.
FUND SERVICE PROVIDERS
Custodian
- ---------
Star Bank, N.A., 425 Walnut Street, M.L. 6118, Cincinnati, Ohio 45202-1118.
holds the investments and other assets of the Funds. The Custodian is
responsible for receiving and paying for securities purchased, delivering
against payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Funds, and
performing other administrative duties, all as directed by persons authorized by
the Trust. The Custodian does not exercise any supervisory function in such
matters as the purchase and sale of portfolio securities, payment of dividends,
or payment of expenses of any Fund. Portfolio securities of the Funds are
maintained in the custody of the Custodian, and may be entered in the Federal
Reserve Book Entry System, or the security depository system of The Depository
Trust Company.
Transfer, Dividend Disbursing And Accounting Services Agent
- -----------------------------------------------------------
Declaration Service Company provides transfer agency and dividend disbursing
services for the Fund. This means that its job is to maintain, accurately, the
account records of all shareholders in the Fund as well as to administer the
distribution of income earned as a result of investing in the Fund. Declaration
Service Company also provides accounting services to the Fund including
portfolio accounting services, expense accrual and payment services, valuation
and financial reporting services, tax accounting services and compliance control
services.
GENERAL INFORMATION
Total return for the Funds may be calculated on an average annual total return
basis or an aggregate total return basis. Average annual total return reflects
the average annual percentage change in value of an investment over the
measuring period. Aggregate total return reflects the total percentage change
in value of an investment over the measuring period. Both measures assume the
reinvestment of dividends and distributions.
Because these Funds are offered only through separate accounts, any Fund
advertising in which the performance of a Fund is mentioned will be accompanied
by separate account performance information relating to that Fund.
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE SMALL-CAP
VARIABLE SERIES' FINANCIAL PERFORMANCE SINCE ITS INCEPTION ON MAY 22, 1998.
CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE
TOTAL RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR WOULD HAVE EARNED
(OR LOST) ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS
AND DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY TAIT,
39
<PAGE>
WELLER & BAKER, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS, ARE
INCLUDED IN THE TRUST'S ANNUAL REPORT, WHICH IS AVAILABLE WITHOUT CHARGE UPON
REQUEST.
40
<PAGE>
THE MID-CAP VARIABLE SERIES AND THE FIXED-INCOME VARIABLE SERIES ARE NEW FUNDS
BEING OFFERED FOR THE FIRST TIME BY THIS PROSPECTUS. ACCORDINGLY, THESE FUNDS
HAVE NOT YET OBTAINED AN OPERATING HISTORY AND HAVE NO FINANCIAL INFORMATION TO
REPORT. HOWEVER, FINANCIAL HIGHLIGHTS FOR THESE FUNDS WILL BE AVAILABLE WITH
THE PUBLICATION OF THE TRUST'S NEXT ANNUAL REPORT.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock outstanding throughout each
period presented.
---------------------
For the Period
05/22/98 * to
12/31/98
---------------------
<S><C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.................................................................... $ 10.00
---------------------
Income From Investment Operations:
Net investment income.................................................. 0.08
Net gains on securities
(both realized and unrealized)........................................ 0.30
---------------------
Total from investment operations..................................... 0.38
---------------------
NET ASSET VALUE, END OF PERIOD............................................ $ 10.38
=====================
TOTAL RETURN.............................................................. 3.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s).................................... $ 301
Ratio of expenses to average net assets:
Before expense reimbursement / waiver................................ 2.88%/1/
After expense reimbursement / waiver................................. 1.20%/1/
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
<S><C> <C> <C>
Ratio of net investment income to average net assets:
Before expense reimbursement / waiver................................ 0.98%/1/
After expense reimbursement / waiver................................. 2.66%/1/
Portfolio turnover rate................................................ 3%
</TABLE>
* Commencement of operations
/1/Annualized.
See accompanying notes to financial statements.
42
<PAGE>
FOR MORE INFORMATION
Additional information about the Trust is available in the Trust's annual report
to shareholders, dated December 31, 1998 and its semi-annual report to
shareholders, dated June 31, 1998. In the Trust's annual and semi-annual
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Trust's performance during its last
year of operations.
STATEMENT OF ADDITIONAL BY MAIL:
INFORMATION (SAI)
The Timothy Plan.
The SAI contains more detailed c/o Declaration Service Company
Information on all aspects of the 555 north Lane, Suite 6160
Trust. A current SAI, dated May 3, Conshohocken, PA 19428
1999, has been filed with the SEC
and is incorporated by reference BY PHONE: 1-800-626-0201
into (is legally a part of) this
prospectus. ON THE INTERNET:
www.timothyplan.com
To request a free copy of the SAI,
or the Trust's latest annual or semi- Or you may view or obtain these
annual Report, please contact the documents from the SEC.
Trust.
IN PERSON: at the SEC's Public Reference
Room in Washington, D.C.
BY PHONE: 1-800-SEC-0330
BY MAIL: Public Reference Section,
Securities and Exchange Commission,
Washington, D.C. 20549-6009
(duplicating fee required)
ON THE INTERNET:
www.sec.gov
The Timothy Plan
Investment Company Act No.
811-08228
43
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE TIMOTHY PLAN
A Delaware Business Trust and registered investment
management company offering the following series:
THE TIMOTHY PLAN-SMALL-CAP VALUE FUND
THE TIMOTHY PLAN LARGE/MID-CAP VALUE FUND
THE TIMOTHY PLAN FIXED-INCOME FND
THE TIMOTHY PLAN MONEY MARKET FUND
AND
THE TIMOTHY PLAN SMALL-CAP VARIABLE SERIES
THE TIMOTHY PLAN MID-CAP VARIABLE SERIES
THE TIMOTHY PLAN FIXED-INCOME VARIABLE SERIES
MAY 3, 1999
As Supplemented June 30, 1999
- --------------------------------------------------------------------------------
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 seven separate investment series, The Timothy Plan Small-Cap Value Fund, The
Timothy Plan Large/Mid-Cap Value Fund, The Timothy Plan Fixed-Income Fund, the
Timothy Plan Money Market Fund, The Timothy Plan Small-Cap Variable Series, The
Timothy Plan Mid-Cap Variable Series, and The Timothy Plan Fixed-Income Variable
Series.
THE TIMOTHY PLAN (the "Trust") is an open-end diversified investment company,
currently offering seven series of shares (collectively, the "Funds"). The
Timothy Plan Small-Cap Value Fund, The Timothy Plan Large/Mid-Cap Value Fund,
and The Timothy Plan Fixed-Income Fund (referred to herein as the "Timothy
Funds") currently offers three classes of shares: Class A, Class B, and Class C.
The Timothy Plan Money Market Fund (the "Money Market Fund"), and The Timothy
Plan .Small-Cap Variable Series, The Timothy Plan Mid-Cap Variable Series, and
The Timothy Plan Fixed-income Variable Series (referred to herein as the
"Timothy Variable Funds") offers a single class of shares of the Trust without
any sales charges or ongoing sales or distribution fees. The Timothy Variable
Funds' shares are only offered to insurance companies for the purpose of funding
variable annuity contracts ("VA Contracts"). Presently the Timothy Variable
44
<PAGE>
Funds are only offered through offered through separate accounts of the Annuity
Investors Life Insurance Company (the "Insurance Company"). The Trust has filed
an Application for Exemptive Order with the Securities and Exchange Commission,
which, when approved, will allow the Timothy Variable Funds to be offered
through the separate accounts of multiple insurance companies.
- --------------------------------------------------------------------------------
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.
TABLE OF CONTENTS
THE TIMOTHY PLAN - INVESTMENTS........................................
INVESTMENT RESTRICTIONS...............................................
INVESTMENT ADVISOR....................................................
INVESTMENT MANAGERS....................................................
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...................................................
45
<PAGE>
Audits and Reports...............................................
Miscellaneous....................................................
PERFORMANCE...........................................................
Comparisons and Advertisements...................................
FINANCIAL STATEMENTS..................................................
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 FUNDS issue three classes of shares (Class A, Class B, and Class C)
that invest in the same portfolio of securities. Class A, Class B, and Class C
shares differ with respect to sales structure and 12b-1 Plan expenses.
THE TIMOTHY MONEY MARKET FUND offers a single class of shares, the No-load
class.
THE TIMOTHY VARIABLE FUNDS issue only one class of shares and are intended to be
funding vehicles for variable annuity contracts ("VA Contracts") offered through
separate accounts of Annuity Investors Life Insurance Company and other
Participating Insurance Companies, if allowed (the "Insurance Companies").
Each Fund has its own investment objectives and policies, and each invests in
its own portfolio of securities. Each Fund s seeks to achieve its 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
46
<PAGE>
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 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 ("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 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
47
<PAGE>
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 any 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 Plan Small-Cap Value Fund for the fiscal years
ended December 31, 1996, 1997, and 1998 was 93.08%, 136.36%, and 69.42%
respectively. As of December 31, 1998, the portfolio turnover rate for the
Timothy Plan Small-Cap Variable Series Fund was 3.00%. The Timothy Plan
Large/Mid-Cap Value Fund, the Timothy Plan Fixed-Income Fund, The Timothy Plan
Money Market Fund, the Timothy Plan Mid-Cap Variable Series, and The Timothy
plan Fixed-income Variable Series had not commenced operations as of December
31, 1998 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
48
<PAGE>
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. But in no event
may a Fund 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
a single class.
(9) as to 75% of a Fund's total assets, invest more than 5% of its 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)
(10) purchase or sell commodities or commodity futures contracts, other than
those related to stock indexes.
(11) make loans of money or securities, except (I) by purchase of fixed income
securities in which a Fund may invest consistent with its investment objectives
and policies; or (ii) by investment in repurchase agreements.
(12) invest in securities of any company if any officer of trustee of the
Funds or TPL owns more than 0.5% of the outstanding securities of such company
and such officers and trustees, in the aggregate, own more than 5% of the
outstanding securities of such company.
(13) borrow money, except that a Fund may borrow from banks (I) for temporary
or emergency purposes in an amount not exceeding of the Fund's assets or (ii) to
meet
49
<PAGE>
redemption requests that might otherwise require the untimely disposition of
portfolio securities, in an amount not to exceed 33% of the value of the Fund's
total assets (including the amount borrowed) at the time the total assets, the
Fund will not purchase securities. Interest paid on borrowing will reduce net
income.
(14) pledge, mortgage hypothecate, ort otherwise encumber its assets, except
in an mount 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
(15) 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 is no readily available market
quotations, or in repurchase agreements maturing in more than 7 days, if all
such securities would constitute more than 10% of a Fund's net assets.
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, 1994, as amended August 28, 1995, September 1,
1997, and May 1, 1999,for the provision of investment advisory services on
behalf of the Trust to the Timothy Funds, subject to the supervision and
direction of the Trust's Board of Trustees. 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 Plan Small-Cap Value Fund, for the years ended
December 31, 1996, 1997, and 1998, advisory fees of $78,848, $142,990, and
$215,187 respectively, were payable to TPL and TPL reimbursed the Timothy Fund
$194,967, $193,945, and $124,004 respectively. TPL has voluntarily undertaken
to waive its advisory fee and reimburse expenses on behalf of the Fund to the
extent normal operating expenses (including investment advisory fees but
excluding interest, taxes, brokerage fees, commissions and extraordinary
charges) exceed certain percentages for each Fund. The percentages for each
Fund are set forth in the Funds' Prospectus. The Timothy Plan Large/Mid-Cap
Value Fund, Fixed -income Fund and Money Market Fund had not commenced
operations as of December 31, 1998, so no advisory fees were payable to TPL from
those Funds.
The Trust has entered into an advisory agreement with Timothy Partners, Ltd.
(TPL), effective May 1, 1998, as amended on May 1, 1999, for the provision of
investment advisory services on behalf of the Timothy Variable Funds, subject to
the supervision and direction of the Fund's Board of Trustees.
50
<PAGE>
As of December 31, 1998, advisory fees payable to TPL for its services to the
Timothy Plan Small-Cap Variable Series were $ 876 and the amount reimbursed by
TPL to the Fund was $ 1,487. The Mid-Cap Variable Series and the Fixed-Income
Variable Series had not commenced operations prior to December 31, 1998, so no
advisory fees were payable to TPL.
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 MANAGERS
Pursuant to an agreement between TPL and Awad & Associates ("Awad"), dated
January 1, 1997, as amended May 1, 1998 (the "Sub-Investment Advisory
Agreement"), Awad provides advice and assistance to TPL in the selection of
appropriate investments for Small-Cap Value Fund and the Small-Cap Variable
Series, subject to the supervision and direction of the Funds' Board of
Trustees. As compensation for its services, with respect to each Fund, Awad
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.
Pursuant to an agreement between TPL and Carr & Associates, Inc. ("Carr"), dated
July 1, 1999 (the "Sub-Investment Advisory Agreement"), Carr provides advice and
assistance to TPL in the selection of appropriate investments for Fixed-Income
Fund, Money Market Fund and the Fixed-income Variable Series, subject to the
supervision and direction of the Funds' Board of Trustees. As compensation for
its services, with respect to the Fixed-Income Fund and Fixed-Income Variable
series, Carr receives from TPL an annual fee at a rate equal to 0.20% of the
average net assets of the Funds. As compensation for its services with respect
to the money Market Fund, Carr receives from TPL an annual fee at a rate equal
to 0.08% of the average net assets of the Fund.
Pursuant to an agreement between TPL and Fox Asset Management, Inc. ("Fox"),
dated July1, 1999 (the "Sub-Investment Advisory Agreement"), Fox provides advice
and assistance to TPL in the selection of appropriate investments for Large/Mid-
Cap Value Fund and the Mid-Cap Variable Series, subject to the supervision and
direction of the Funds' Board of Trustees. As compensation for its services,
with respect to each Fund, Fox 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 Agreements are each initially effective for two
years. The
51
<PAGE>
Agreements may be renewed by the parties after their initial terms
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 Agreements will terminate automatically in the event of their
assignment.
Prior to January 1, 1997, TPL paid Systematic Financial Management, L.L.P. for
advice and assistance in the selection of appropriate investments for the
Timothy Plan Small-Cap Value 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.L.P. sub-advisory
fees of $3,969, $20,628 and $46,381, respectively. For the fiscal year ended
December 31, 1997and 1998, TPL paid Awad & Associates $66,356 and $98,405,
respectively for sub-investment advisory services on behalf of the Timothy Plan
Small-Cap Value Fund and Small Cap Variable Series.
Effective July 1, 1997, Timothy Partners, Ltd. (TPL), 1304 West Fairbanks
Avenue, Winter Park, Florida 32789, acts as an underwriter of the Timothy Funds'
and the Timothy Variable 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
Unified Fund Services, Inc., 431 North Pennsylvania Street, Indianapolis,
Indiana 46204, (the "Administrator"), provides certain services to the Trust
pursuant to an Administrative Services Agreement with the Trust dated July 1,
1999.
52
<PAGE>
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 July 1, 1999, Declaration Service Company, 555 North Lane, Suite 6160,
Conshohocken, PA 19428, served as the Administrator. 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, 1997, and 1998, the Trust paid $39,583, $54,297, $62,581,$ 65,386 and
$113,738, 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, 1997 and 1998, the
Timothy Plan Small-Cap Value Fund incurred brokerage commissions of $32,684,
$133,628,and $119,972 respectively.
TPL, through the Investment Managers, is responsible for making the Funds',
portfolio
53
<PAGE>
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 another or Variable 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 an Investment Manager deems the purchase or sale of a
security to be in the best interests of one Fund or more Funds 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 an 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 Managers 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 Managers 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 Funds. In addition, the Investment Managers may place
portfolio trades for both Funds with affiliated brokers. 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 FUNDS
The shares of the Timothy Funds 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
54
<PAGE>
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 FUNDS ONLY)
Shares of the Timothy Funds 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 Funds sponsor 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.
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 Funds' 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 Funds also sponsor 403(b)(7) Retirement Plans. The Funds offer 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 Funds also offer 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.
55
<PAGE>
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 Funds at (800) TIM-PLAN (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 FUNDS
The Timothy Variable Funds currently only offer their shares to the Annuity
Investors Life Insurance Company, but may, in the future, offer their shares to
other insurance company separate accounts. The Trust has filed an Application
For Exemptive Order with the Securities and Exchange Commission seeking an order
from the Commission allowing the Timothy Variable Funds to be offered to
multiple insurance company separate accounts. The separate accounts invest in
shares of the Timothy Variable Funds in accordance with the allocation
instructions received from holders of the VA contracts. Shares of the Timothy
Variable Funds are sold at net asset value as described in each 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 Funds may be redeemed through certain brokers, financial institutions or
service organizations, banks and bank trust departments who may charge 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 Funds.
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
56
<PAGE>
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.
In-kind payments need not constitute a cross-section of a Fund's' portfolio.
Where a shareholder has requested redemption of all or a part of the
shareholder's investment, and where a Fund completes such redemption in-kind,
that 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
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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
W. T. Fyler, Jr. 42 Trustee Founder of W.T. Fyler, Jr./Ephesus, Inc., a
640 Fort Washinton Ave. registered investment advisory firm.
Suite 6C, New York President of Ephesus since its founding in
New York 10040 1998. Formerly an investment counselor
With Robert Thomas Securities (1991-1998).
BA degree from Drew University (1981).
Founding member and Vice President of the
National Association of Christian financial
consultants. Holds Series 7, 63 and 65
Securities licenses.
</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 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, 1998, the Timothy Funds 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, 1998. As of December 31, 1998, the Timothy Variable Funds did not pay
compensation to any of its trustees.
DISTRIBUTION PLANS (APPLICABLE ONLY TO THE TIMOTHY FUNDS)
As noted in the Timothy Funds' Prospectus, each Class of the Timothy Funds 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 and Class C 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
58
<PAGE>
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 fee each month (up
to the maximum of 0.25% for Class A shares and 1.00% for Class B and Class C
shares per annum of average net assets of the Timothy Fund) for expenses
incurred in the distribution and promotion of the Timothy Funds' 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 and Class C shares
per annum will be borne by the TPL without any additional payments by the
Timothy Fund. You should be aware that it is possible that Plan accruals will
exceed the actual expenditures by TPL for eligible services. Accordingly, such
fees are not strictly tied to the provision of such services.
Effective July 1, 1997, Timothy Partners, Ltd. (TPL), began serving as the
Timothy Funds' sole underwriter. For the period July 1, 1997 to December 31,
1997, the Small-Cap Value Fund reimbursed TPL $58,563 for distribution-related
expenses as follows: $12,917 compensation to dealers for Class A shares and $34,
074 compensation to dealers for Class B shares and $10,572 for servicing the
Class B shareholder accounts. As of December 31, 1998, the Small-Cap Value Fund
reimbursed TPL $63,290 for distribution-related expenses as follows: $30,886
compensation to dealers for Class A shares and $32,404 compensation to dealers
for Class B shares and for servicing the Class B shareholder accounts
The Plans also provide that to the extent that the Timothy Funds, TPL, the
Investment Managers, or other parties on behalf of the Funds, TPL, or the
Investment Managers make payments that are deemed to be payments for the
financing of any activity primarily intended to result in the sale of shares
issued by the Fund within the context of Rule 12b-1, such payments shall be
deemed to be made pursuant to the 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
59
<PAGE>
the non-interested Trustees, has concluded that in the exercise of their
reasonable business judgment and in light of their fiduciary duties, there is a
reasonable likelihood that the Plans will benefit the Fund and its shareholders.
The Plans have been approved by the Funds' 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 Board of Trustees, including a majority of
the Trustees who are non-interested persons of the Funds 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 Timothy Funds and the Timothy Variable 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,
60
<PAGE>
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 Funds 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 Funds' 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 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
61
<PAGE>
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 Funds 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, 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 Small-
Cap Value Fund and the Timothy Small-Cap Variable Fund will vary due to the
effect of expense ratios on the performance calculations. TOTAL RETURNS AND
YIELDS QUOTED FOR THE TIMOTHY SMALL-CAP 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 FUNDS MAY BE
62
<PAGE>
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 performance quoted. You should bear
in mind the effect of these charges when comparing the Timothy Variable Funds'
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
63
<PAGE>
of the one, five or ten-year periods (or fractional portion thereof).
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
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 Plan Small-Cap Value Fund's Financial Statements, including the
notes thereto, dated December 31, 1998, which have been audited by Tait, Weller
& Baker, are incorporated by reference from the Timothy Fund's 1998 Annual
Report to Shareholders. The Timothy Plan Small-Cap Variable Series Financial
Statements, including the notes thereto, dated December 31, 1998, which have
been audited by Tait, Weller & Baker, are incorporated by reference from the
Timothy Fund's 1998 Annual Report to Shareholders.
64
