SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
----------
TIMOTHY PLAN
(Name of Registrant as Specified in its Charter)
----------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE
TIMOTHY PLAN FIXED INCOME FUND
&
TIMOTHY PLAN MONEY MARKET FUND
1304 West Fairbanks Avenue
Winter Park, FL 32789
Toll Free 800-662-0201
The Timothy Plan (the "Trust") is holding a special meeting of the
shareholders of the Timothy Plan Fixed Income Fund and Timothy Plan Money Market
Fund (the "Special Meeting") on Friday, August 13, at 900 a.m., Eastern Time.
The Special Meeting will be held at the offices of the Trust's Administrator,
Citco Mutual Fund Services, Inc., located at 83 General Warren Boulevard, Suite
200, Malvern, PA 19355.
The Trust is a Delaware business trust, registered with the Securities and
Exchange Commission ("SEC") and operating as an open-end management investment
company. The Trust has authorized the division of its shares into various series
("Funds") and currently offers shares of twelve Funds to the public. The Trust
further has authorized the division of its shares into various classes, each
with different sales charges and/or ongoing fees. The Timothy Plan Fixed Income
Fund (the "Fixed Income Fund") offers Class A Shares, which are sold to the
public with a front-end sales charge, and Class C shares, which are sold with a
contingent deferred sales charge of 1% for the first year and an ongoing
distribution and servicing (12b-1) fee of 1.00%. The Timothy Plan Money Market
Fund (the "Money Market Fund") offers only No-Load shares to the public, with no
front-end or contingent deferred sales charges.
THERE IS ONLY ONE ITEM FOR CONSIDERATION AT THE SPECIAL MEETING. THE
SHAREHOLDERS OF THE FIXED INCOME FUND AND THE MONEY MARKET FUND ARE BEING ASKED
TO APPROVE A NEW SUB-INVESTMENT ADVISORY AGREEMENT ON BEHALF OF THEIR FUND WITH
BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. ("BHM&S"), A REGISTERED INVESTMENT
ADVISORY COMPANY.
Carr & Associates, Inc., each Fund's current sub-advisor, is resigning its
position as of July 1, 2004. The engagement of BHM&S is necessary in order to
maintain professional investment management expertise for both Funds. The
proposed sub-advisory agreements with BHM&S will NOT result in an increase in
either Fund's overall expense structure. The details of the proposed
sub-advisory agreement are contained in the accompanying proxy materials, and we
urge you to read them carefully.
You may vote at the Special Meeting if you are the record owner of
shares of the Fixed Income Fund or the Money Market Fund as of the close of
business on May 28, 2004. If you attend the Special Meeting, you may vote your
shares in person. If you expect to attend the Special Meeting, please call the
Trust at 1-800-662-0201 to inform them.
Your vote on this proposal is very important. If you own Fund shares
in more than one account of the Trust, you will receive a proxy statement and
one proxy card for each of your accounts. You will need to fill out each proxy
card in order to vote the shares you hold for each account.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE FILL
IN, DATE, SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE PAID
ENVELOPE. YOU MAY ALSO RETURN YOUR COMPLETED PROXY CARD BY FAXING IT TO THE
TRUST AT 610-232-1777. PLEASE VOTE NOW TO HELP SAVE THE COST OF ADDITIONAL
SOLICITATIONS.
As always, we thank you for your confidence and support.
By Order of the Board of Trustees,
Arthur Ally
Chairman
June 17, 2004
THE TIMOTHY PLAN
SPECIAL MEETING OF THE SHAREHOLDERS OF
THE
TIMOTHY PLAN FIXED INCOME FUND
&
TIMOTHY PLAN MONEY MARKET FUND
1304 West Fairbanks Avenue
Winter Park, FL 32789
Toll Free: 800-662-0201
- --------------------------------------------------------------------------------
PROXY STATEMENT
DATED JUNE 17, 2004
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 13, 2004
INTRODUCTION
The Board of Trustees (the "Board") of the Timothy Plan (the "Trust") has
voted to call a special meeting of all shareholders of the Timothy Plan
Fixed Income Fund (the "Fixed Income Fund") and Timothy Plan Money Market
Fund (the "Money Market Fund"), in order to seek shareholder approval of
one proposal relating to each Fund. The Special Meeting will be held at
the offices of Citco Mutual Fund Services, Inc. ("Citco"), at 9:00 a.m.,
Eastern Time, on Friday, August 13, 2004. Citco serves as Administrator to
the Trust. If you expect to attend the Special Meeting in person, please
call the Trust at 1-800-662-0201 to inform them of your intentions. This
proxy was first mailed to eligible shareholders on or about June 14, 2004.
ITEMS FOR CONSIDERATION
The Special Meeting will be held to consider the following items of
business:
1. Approval of a new sub-investment advisory agreement with Barrow,
Hanley, Mewhinney & Strauss, Inc. "BHM&S") for the Fixed Income
Fund;
2. Approval of a new sub-investment advisory agreement with Barrow,
Hanley, Mewhinney & Strauss, Inc. "BHM&S") for the Money Market
Fund; and
3. Such other business as may properly come before the shareholders of
either Fund.
ELIGIBILITY TO VOTE
If you were the record owner of any shares of the Fixed Income Fund or the
Money Market Fund as of the close of business on May 28, 2004 (the "Record
Date"), then you are eligible to vote at the Special Meeting. As of the
Record Date, the Fixed Income Fund had approximately 2,375,407 shares
issued and outstanding, and the Money Market Fund had approximately
3,285,804 shares issued and outstanding. Each full share counts as one
vote, and fractional shares count as fractional votes.
VOTING BY PROXY
The simplest and quickest way for you to vote is to complete, sign, date
and return the enclosed proxy card(s) in the postage paid envelope
provided. The Board urges you to fill out and return your proxy card(s)
even if you plan to attend the Special Meeting. Returning your proxy
card(s) will not affect your right to attend the Special Meeting and vote.
The Board has named Theresa McNamee and Joseph Carlin as proxies, and
their names appear on your proxy card(s). By signing and returning your
proxy card(s) to the Trust, you are appointing those persons to vote for
you at the Special Meeting. If you fill in and return your proxy card(s)
to the Trust in time to vote, one of the appointed proxies will vote your
shares as you have directed on your proxy. If you sign and return your
proxy card(s), but do not make specific choices, one of the appointed
proxies will vote your shares in favor of all items relating to your
proxy.
If an additional matter is presented for vote at the Special Meeting, one
of the appointed proxies will vote in accordance with his/her best
judgment. At the time this proxy statement was printed, the Board was not
aware of any other matter that needed to be acted upon at the Special
Meeting other than the one Proposal discussed in this proxy statement.
If you appoint a proxy by signing and returning your proxy card(s), you
can revoke that appointment at any time before it is exercised. You can
revoke your proxy by sending in another proxy with a later date, or by
notifying the Trust's Secretary in writing, that you have revoked your
proxy prior to the Special Meeting. The Trust's Secretary is Mr. Joseph
Boatwright and he may be reached at the following address: 1304 West
Fairbanks Avenue, Winter Park, FL 32789.
VOTING IN PERSON
If you attend the Special Meeting and wish to vote in person, you will be
given one ballot for each of your accounts when you arrive. If you have
already voted by proxy and wish to vote in person instead, you will be
given an opportunity to do so during the Special Meeting. If you attend
the Special Meeting, but your shares are held in the name of your broker,
bank or other nominee, you must bring with you a letter from that nominee
stating that you are the beneficial owner of the shares on the Record Date
and authorizing you to vote.
REQUIREMENT OF A QUORUM
A quorum is the number of outstanding shares, as of the Record Date, that
must be present in person or by proxy in order for the Trust to hold a
valid shareholder meeting. The Trust cannot hold a valid shareholder
meeting unless there is a quorum of shareholders. For this Special
Meeting, 1,187,705 (50% + 1) eligible shares of the Fixed Income Fund must
be present, in person or by proxy, to constitute a quorum, and 1,642,903
(50% + 1) eligible shares of the Money Market Fund must be present, in
person or by proxy, to constitute a quorum.
Under rules applicable to broker-dealers, if your broker holds your shares
in its name, the broker is not allowed to vote your shares unless it has
received voting instructions from you. If your broker does not vote your
shares because it has not received instructions from you, those shares
will be considered broker non-votes. Broker non-votes and abstentions
count as present for purposes of establishing a quorum, and count as votes
cast against the Proposal.
REQUIRED VOTES TO APPROVE THE PROPOSAL
The affirmative vote of a "majority" of the shares entitled to vote as of
the Record Date of the each Fund are required in order to approve the
Proposal relating to that Fund. If a "majority" of the shares of one Fund
approve the Proposal, but the other Fund does not obtain approval of a
"majority" of its shares, the Proposal will become effective only for the
approving Fund.
For purposes of approving shareholder proposals, the Investment Company
Act of 1940, as amended (the "1940 Act") defines a "majority" of the
outstanding voting securities of a Fund as the lesser of (a) the vote of
holders of at least 67% of the voting securities of the Fund present in
person or by proxy, if more than 50% of such shares are present in person
or by proxy; or (b) the vote of holders of more than 50% of the
outstanding voting securities of the Fund.
Broker non-votes will not count as votes cast and will have the effect of
votes against the relevant Proposal.
ADJOURNMENTS
The appointed proxies may propose to adjourn the Special Meeting, either
in order to solicit additional proxies or for other purposes. If there is
a proposal to adjourn the Special Meeting, the affirmative vote of a
majority of the shares present at the Special Meeting, in person or by
proxy, is required to approve the adjournment.
COST OF THE SHAREHOLDER MEETING AND PROXY SOLICITATION
Each Fund is paying its proportionate share of the costs of the Special
Meeting. Certain of employees of TPL, or their designees, will be
conducting proxy solicitations.
WHO TO CALL WITH QUESTIONS
Please call the Trust at 1-800-662-0201 with any questions you may have
relating to this proxy statement. Also, at your request, the Trust will
send you a free copy of its most recent audited annual report, dated
December 31, 2003. Simply call the Trust to request a copy of the report.
PROPOSAL # 1. APPROVAL OF A NEW SUB-INVESTMENT ADVISORY AGREEMENT WITH
BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. ("BHM&S") ON BEHALF
OF THE FIXED INCOME FUND
BACKGROUND
The Timothy Plan Fixed Income Fund (the "Fixed Income Fund") invests the
majority of its assets in fixed income securities with the objective of
providing a high level of current income consistent with prudent
investment risk. The Fixed Income Fund offers Class A and Class C shares.
Class A shares of the Fund commenced investment operations on July 14,
1999, and Class C shares commenced investment operations on February 2,
2004.
Timothy Partners, Ltd. ("TPL"), 1304 West Fairbanks Avenue, Winter Park,
FL 32789, serves as investment adviser to the Fund under a written
investment advisory agreement approved by the Board and separately
ratified by the Fund's shareholders. The investment advisory agreement
with TPL has been in effect since the Fund's inception in July, 1999 and
was last renewed by the Board on February 27, 2004.
TPL is a Florida limited partnership organized on December 6, 1993, and is
registered with the Securities and Exchange Commission ("SEC") as an
investment adviser. Mr. Arthur D. Ally is President of TPL and is
responsible for the day-to-day activities of TPL. Covenant Funds, Inc., a
Florida corporation ("CFI"), is the managing general partner of TPL. Mr.
Ally also is President and 70% shareholder of CFI. Mr. Ally had over
eighteen years experience in the investment industry prior to founding
TPL, having worked for Prudential Bache, Shearson Lehman Brothers and
Investment Management & Research. In addition to his positions as
President of TPL and CFI, Mr. Ally also serves as President and Chairman
of the Board of Trustees of the Trust. Mr. Ally does not receive any
compensation for his services to the Trust as an officer or Trustee of the
Trust, but he does receive compensation from TPL as a result of his
ownership interest in TPL and service as an officer and director of TPL.
For its services to the Fixed Income Fund, TPL receives a fee, calculated
daily and paid monthly, equal to an annual rate of 0.60% of the average
daily net assets of the Fund.
THE INVESTMENT MANAGEMENT STRUCTURE
Along with most of the Timothy Plan funds, the Fixed Income Fund operates
under a "manager of managers" structure. Under that structure, TPL serves
as the investment advisor to the Fund and is responsible for the overall
management and supervision of the Fund and its operations. However, the
day-to-day selection of securities for the Fund and the provision of a
continuing and cohesive Fund investment strategy is handled by one or more
sub-advisors. One of TPL's principal responsibilities to the Fund as
investment advisor is to select and recommend suitable firms to offer
day-to-day investment management services to the Fund as sub-advisors.
These sub-advisory firms are paid for their services to the Funds by TPL
out of the fees paid to TPL by the Fund.
Carr & Associates, Inc. ("Carr"), 150 Broadway, Suite 509, New York, NY,
has served as sub-investment adviser to the Fixed Income Fund under a
written sub-advisory agreement between the Trust, TPL & Carr since the
inception of the Fund in July, 1999. Carr's sub-advisory agreement was
originally approved by the Fund's shareholders immediately prior to the
Fund's commencement of operations and was last renewed by the Board on
February 27, 2004.
On or about April 28, 2004, TPL, on behalf of the Board of Trustees,
informed Carr that its agreement to serve as sub-advisor to the Fund was
being terminated, such termination to become effective as of July 1, 2004.
This action was taken after ongoing consultations by and between TPL and
the Board concerning Carr's internal structure and capabilities. Given the
Trust's mandate of providing extraordinary stewardship for all of the
Trust's Funds, TPL and the Board ultimately agreed that the Trust had
matured to a point where a larger firm with greater resources would likely
be beneficial to the Fund's future growth and would better serve the
Fund's shareholders.
TPL, in anticipation of the departure of Carr, engaged the firm of UBS
PRIME Consultant to assist it in a search to find a new sub-advisor for
the Fund. A thorough search and vetting process involving a number of
candidates was undertaken, and after interviewing a number of potential
replacements, TPL and UBS submitted Barrow, Hanley, Mewhinney & Strauss,
Inc. ("BHM&S") to the Board for its consideration.
BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. ("BHM&S")
BHM&S, 3232 McKinney Avenue, 15th Floor, Dallas, TX 75204, was established
in 1979 as a Nevada corporation and is registered with the Securities and
Exchange Commission as an investment advisory firm under the Investment
Advisers Act of 1940, as amended. As of May 15, 2004, BHM&S managed in
excess of $34 billion in assets for 167 clients.
Mr. James P. Barrow is President of BHM&S and was a founding member of the
firm. Mr. Barrow has been an investment professional for over 42 years.
BHM&S utilizes a team of investment professionals to manage their fixed
income portfolio clients. The team consists of David R. Hardin, Mark
Luchsinger, CFA, Scott McDonald, CFA, Debbie Petruzzelli, and the team's
Chief Investment Officer, John S. Williams, CFA. The members of the fixed
income team average in excess of 20 years experience in the investment
field.
In addition to providing investment management services to retirement
plans, Taft-Hartley Plans, Healthcare institutions, public institutions,
foundations and individuals, BHM&S also serves as advisor or sub-advisor
to the AAdvantage Funds, AB Funds Trust, ICMA Vantagepoint Equity Income
Fund, and Vanguard Windsor II Fund.
BOARD CONSIDERATIONS
On May 20th and 21st, 2004, the Board met to consider, among other
matters, a new sub-investment advisor for the Fixed Income Fund, and after
full deliberation, selected BHM&S to serve in that capacity.
During its deliberations, the Board reviewed the qualifications of BHM&S
and heard a presentation by representatives of UBS PRIME Consultant and
TPL relating to BHM&S. UBS and TPL both reported that prior to the Board
meeting, John S. Williams, CFA, Chief Investment Officer of Fixed Income
investments for BHM&S had traveled to the Trust's offices in Florida and
made a formal presentation. Mr. Wesley Pennington, the Board's senior
independent Trustee, had attended the presentation. UBS, TPL and Mr.
Pennington were unanimous in their praise for the firm and their
confidence in the firm's ability to serve the Fixed Income Fund.
The Board received written information relating to the experience,
strengths, other clients and past investment performance of BHM&S and
noted with approval the firm's consistently above-average investment
performance, its size and level of expertise, and quality of clientele.
The Board noted with further approval that no officer or trustee of the
Fund or Trust was affiliated with BHM&S, and that no compensation was to
be paid to BHM&S other than advisory fees under the agreement. The Board
also reviewed the financial condition of BHM&S and questioned both TPL and
UBS at length to assure themselves that BHM&S was financially capable of
undertaking the responsibilities of serving the Fund.
The Board then turned its attention to the terms of the proposed
sub-advisory agreement. Under the terms of the proposed sub-advisory
agreement with BHM&S, BHM&S would be responsible for providing day-to-day
investment advice and choosing the securities in which the Fixed Income
Fund invests. BHM&S would report directly to TPL, and TPL would be
responsible to report to the Board for any errors or omissions made by
BHM&S. BHM&S would not be responsible for mistakes or errors of judgment
in its management of the investments of the Fund unless those mistakes or
errors of judgment resulted from gross negligence, willful misfeasance or
intentional wrongdoing. The proposed sub-advisory agreement would have an
initial term of two years, and may be renewed annually thereafter by
affirmative vote of a majority of the Board of Trustees and a separate
concurring majority vote of the Trust's independent Trustees. The proposed
sub-advisory agreement may be terminated by any party at any time, without
penalty, upon sixty (60) days written notice. The proposed sub-advisory
agreement would become effective immediately upon receipt of shareholder
approval. A copy of the proposed sub-advisory agreement with BHM&S is
included as Exhibit B to this proxy, which is incorporated by reference
into this discussion as if fully set forth herein.
The Board then discussed the proposed fees payable to BHM&S for its
services to the Fund. Since those fees would be paid to BHM&S by TPL out
of the fees it received from the Fund, the Board sought TPL's opinion
concerning the reasonableness of the proposed fee structure. TPL reported
to the Board that BHM&S was at least as competitive as the other
candidates it had interviewed with respect to its proposed fees. TPL
further reported that because BHM&S's proposed fees were so reasonable,
TPL would be able to maintain its current level of service to the Funds
without the need to seek an overall fee increase.
Based on the Board's review and UBS and TPL's recommendation, the Board
unanimously voted to approve BHM&S as sub-advisor to the Fixed Income Fund
and to seek shareholder approval of their choice. The Board then entered
into an interim agreement with BHM&S to provide sub-advisory services to
the Fund for a period not to exceed 150 days, commencing on July 1, 2004.
The interim agreement will expire at the end of that time or immediately
upon approval of a permanent agreement by the Fund's shareholders,
whichever shall first occur.
FEES AND EXPENSES
If BHM&S becomes the new Sub-Advisor to the Fixed Income Fund, TPL will
pay a portion of the fee it currently receives from the Fixed Income Fund
to BHM&S. BHM&S has agreed to serve as Sub-Advisor to the Fixed Income
Fund for fees based upon the following schedule:
Market Value Annual Percentage
------------ -----------------
First $ 20,000,000 0.375 of 1%
Next $ 30,000,000 0.25 of 1%
Next $100,000,000 0.20 of 1%
Above $150,000,000 0.15 of 1%
The fees paid to BHM&S on behalf of the Fixed Income Fund under the
sub-advisory agreement will be paid by TPL out of the fees received by TPL
under its Investment Advisory Agreement with the Fixed Income Fund, so
overall fees to the Fixed Income Fund's shareholders will not change.
BHM&S may temporarily agree to accept a fee based on accumulating Fund
assets in order to assist Fund growth. In either event, overall fees to
shareholders will remain the same.
FINANCIAL EFFECT ON THE FUND
If BHM&S becomes the new Sub-Advisor to the Fixed Income Fund, the fees
paid by shareholders of the Fixed Income fund will remain exactly the
same. Fixed Income Fund shareholders currently pay total investment
advisory fees of 0.60% per annum of the average daily assets of the Fund.
That fee will not change if BHM&S becomes the new Sub-Advisor to the Fixed
Income Fund. TPL receives the 0.60% advisory fee, and will pay 0.25% of
that fee to BHM&S, and will retain 0.35% of the fee. The table below shows
the overall expenses of the Fixed Income Fund before and after the
engagement of BHM&S.
FIXED INCOME FUND CLASS A CLASS C
ANNUAL OPERATING EXPENSES -------------------- --------------------
CURRENT PROPOSED CURRENT PROPOSED
------- -------- ------- --------
MANAGEMENT FEE (1) 0.60% 0.60% 0.60% 0.60%
SERVICE & DISTRIBUTION (12b-1) FEES 0.25% 0.25% 1.00% 1.00%
OTHER EXPENSES (2) 0.58% 0.58% 0.58% 0.58%
----- ----- ----- -----
TOTAL ANNUAL OPERATING EXPENSES
(before reimbursement by Advisor) 1.43% 1.43% 2.18% 3.73%
----- ----- ----- -----
REIMBURSEMENT BY ADVISOR 0.08% 0.08% 0.08% 0.08%
TOTAL ANNUAL OPERATING EXPENSES (3)
(after reimbursement by Advisor) 1.35% 1.35% 2.10% 2.10%
===== ===== ===== =====
(1) Management Fees currently include a fee equal to an annual rate of
0.60% of the average daily net assets of the Fund, which is paid to
the Funds' Adviser, TPL. From that fee, TPL pays Carr a fee equal to
an annual rate of 0.20% of the average daily net assets of the Fund.
Under the proposed BHM&S agreement, Management Fees would continue to
include a fee equal to an annual rate of 0.60% of the average daily
net assets of the Fund, paid to the Funds' Adviser, TPL. From that
fee, TPL would pay BHM&S a fee equal to an annual rate of 0.25% of
the average daily net assets of the Fund.
(2) Other Expenses include administration fees, transfer agency fees and
all other ordinary operating expenses of the Fund not listed above,
and reflect actual expenses incurred by the Fund for the Fund's
fiscal year ended December 31, 2003.
(3) Timothy Partners, Ltd. is contractually obligated to waive its fees
and/or reimburse the Fund to the extent necessary to maintain certain
overall expense caps for each Class. The expense cap of the Fund is
as follows: For Class A shares, the expense cap is 1.35%. For Class C
shares of the Fund, the expense cap is 2.10%.
The following example is intended to help you compare the cost of
investing in this Fund versus the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your investment
has a 5% annual return each year and that the Fund's operating
expenses remain the same each year. Although your actual costs may be
higher or lower, based on these assumptions, your costs under the
current fee structure and proposed fee structure would be:
--------------------------------- ---------------------------- ---------------------------- -------------------------
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
--------------------------------- ---------------------------- ---------------------------- -------------------------
CURRENT PROPOSED CURRENT PROPOSED CURRENT PROPOSED CURRENT PROPOSED
---------------- ---------------- ------------- -------------- ------------- -------------- ------------ ------------
CLASS A $ 557 $ 557 $ 851 $ 851 $ 1,156 $ 1,156 $ 2,059 $ 2,059
CLASS C $ 313 $ 313 $ 674 $ 674 $ 1,162 $ 1,162 $ 2,507 $ 2,507
If you did not redeem your shares, your costs would be:
--------------------------------- ---------------------------- ---------------------------- -------------------------
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
--------------------------------- ---------------------------- ---------------------------- -------------------------
CURRENT PROPOSED CURRENT PROPOSED CURRENT PROPOSED CURRENT PROPOSED
---------------- ---------------- ------------- -------------- ------------- -------------- ------------ ------------
CLASS A $ 557 $ 557 $ 851 $ 851 $ 1,156 $ 1,156 $ 2,059 $ 2,059
CLASS C $ 213 $ 213 $ 674 $ 674 $ 1,162 $ 1,162 $ 2,507 $ 2,507
If the Fund's shareholders do not approve this Proposal, the Trust will consider
other alternatives.
BOARD RECOMMENDATION
- --------------------------------------------------------------------------------
THE FUND'S BOARD OF TRUSTEES , INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
- --------------------------------------------------------------------------------
PROPOSAL # 2. APPROVAL OF A NEW SUB-INVESTMENT ADVISORY AGREEMENT WITH
BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. ("BHM&S") ON BEHALF
OF THE MONEY MARKET FUND
BACKGROUND
The Timothy Plan Money Market Fund (the "Money Market Fund") invests
primarily in high quality short term debt instruments with the objective
of providing current income consistent with the preservation of capital
and maintaining a stable net asset value of $1.00 per share. The Money
Market Fund offers only No-load Class shares. The Money Market Fund
commenced investment operations on July 12, 1999.
Timothy Partners, Ltd. ("TPL"), 1304 West Fairbanks Avenue, Winter Park,
FL 32789, serves as investment adviser to the Fund under a written
investment advisory agreement approved by the Board and separately
ratified by the Fund's shareholders. The investment advisory agreement
with TPL has been in effect since the Fund's inception in July, 1999 and
was last renewed by the Board on February 27, 2004.
TPL is a Florida limited partnership organized on December 6, 1993, and is
registered with the Securities and Exchange Commission ("SEC") as an
investment adviser. Mr. Arthur D. Ally is President of TPL and is
responsible for the day-to-day activities of TPL. Covenant Funds, Inc., a
Florida corporation ("CFI"), is the managing general partner of TPL. Mr.
Ally also is President and 70% shareholder of CFI. Mr. Ally had over
eighteen years experience in the investment industry prior to founding
TPL, having worked for Prudential Bache, Shearson Lehman Brothers and
Investment Management & Research. In addition to his positions as
President of TPL and CFI, Mr. Ally also serves as President and Chairman
of the Board of Trustees of the Trust. Mr. Ally does not receive any
compensation for his services to the Trust as an officer or Trustee of the
Trust, but he does receive compensation from TPL as a result of his
ownership interest in TPL and service as an officer and director of TPL.
For its services to the Money Market Fund, TPL receives a fee, calculated
daily and paid monthly, equal to an annual rate of 0.60% of the average
daily net assets of the Fund. TPL has been waiving its entire fee since
May 15, 2003 in order to assist the Fund to maintain an acceptable total
expense ratio.
THE INVESTMENT MANAGEMENT STRUCTURE
Along with most of the Timothy Plan Funds, the Money Market Fund operates
under a "manager of managers" structure. Under that structure, TPL serves
as the investment advisor to the Fund and is responsible for the overall
management and supervision of the Fund and its operations. However, the
day-to-day selection of securities for the Fund and the provision of a
continuing and cohesive Fund investment strategy is handled by one or more
sub-advisors. One of TPL's principal responsibilities to the Fund as
investment advisor is to select and recommend suitable firms to offer
day-to-day investment management services to the Fund as sub-advisors.
These sub-advisory firms are paid for their services to the Funds by TPL
out of the fees paid to TPL by the Fund.
Carr & Associates, Inc. ("Carr"), 150 Broadway, Suite 509, New York, NY,
has served as sub-investment adviser to the Money Market Fund under a
written sub-advisory agreement between the Trust, TPL & Carr since the
inception of the Fund in July, 1999. Carr's sub-advisory agreement was
originally approved by the Fund's shareholders immediately prior to the
Fund's commencement of operations and was last renewed by the Board on
February 27, 2004.
On or about April 28, 2004, TPL, on behalf of the Board of Trustees,
informed Carr that its agreement to serve as sub-advisor to the Fund was
being terminated, such termination to become effective as of July 1, 2004.
This action was taken after ongoing consultations by and between TPL and
the Board concerning Carr's internal structure and capabilities. Given the
Trust's mandate of providing extraordinary stewardship for all of the
Trust's Funds, TPL and the Board ultimately agreed that the Trust had
matured to a point where a larger firm with greater resources would likely
be beneficial to the Fund's future growth and would better serve the
Fund's shareholders.
TPL, in anticipation of the departure of Carr, engaged the firm of UBS
PRIME Consultant to assist it in a search to find a new sub-advisor for
the Fund. A thorough search and vetting process involving a number of
candidates was undertaken, and after interviewing a number of potential
replacements, TPL and UBS submitted Barrow, Hanley, Mewhinney & Strauss,
Inc. ("BHM&S") to the Board for its consideration.
BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. ("BHM&S")
BHM&S, 3232 McKinney Avenue, 15th Floor, Dallas, TX 75204, was established
in 1979 as a Nevada corporation and is registered with the Securities and
Exchange Commission as an investment advisory firm under the Investment
Advisers Act of 1940, as amended. As of May 15, 2004, BHM&S managed in
excess of $34 billion in assets for 167 clients.
Mr. James P. Barrow is President of BHM&S and was a founding member of the
firm. Mr. Barrow has been an investment professional for over 42 years.
BHM&S utilizes a team of investment professionals to manage their fixed
income portfolio clients. The team consists of David R. Hardin, Mark
Luchsinger, CFA, Scott McDonald, CFA, Debbie Petruzzelli, and the team's
Chief Investment Officer, John S. Williams, CFA. The members of the fixed
income team average in excess of 20 years experience in the investment
field.
In addition to providing investment management services to retirement
plans, Taft-Hartley Plans, Healthcare institutions, public institutions,
foundations and individuals, BHM&S also serves as advisor or sub-advisor
to the AAdvantage Funds, AB Funds Trust, ICMA Vantagepoint Equity Income
Fund, and Vanguard Windsor II Fund.
BOARD CONSIDERATIONS
On May 20th and 21st, 2004, the Board met to consider, among other
matters, a new sub-investment advisor for the Money Market Fund, and after
full deliberation, selected BHM&S to serve in that capacity.
During its deliberations, the Board reviewed the qualifications of BHM&S
and heard a presentation by representatives of UBS PRIME Consultant and
TPL relating to BHM&S. UBS and TPL both reported that prior to the Board
meeting, John S. Williams, CFA, Chief Investment Officer of Fixed Income
investments for BHM&S had traveled to the Trust's offices in Florida and
made a formal presentation. Mr. Wesley Pennington, the Board's senior
independent Trustee, had attended the presentation. UBS, TPL and Mr.
Pennington were unanimous in their praise for the firm and their
confidence in the firm's ability to serve the Money Market Fund.
The Board received written information relating to the experience,
strengths, other clients and past investment performance of BHM&S and
noted with approval the firm's size and level of expertise, and quality of
clientele. The Board noted with further approval that no officer or
trustee of the Fund or Trust was affiliated with BHM&S, and that no
compensation was to be paid to BHM&S other than advisory fees under the
agreement. The Board noted with further approval BHM&S's agreement to
waive receipt of their management fees for the Money Market Fund until
such time as the Fund achieved more favorable operating conditions. The
Board also reviewed the financial condition of BHM&S and questioned both
TPL and UBS at length to assure themselves that BHM&S was financially
capable of undertaking the responsibilities of serving each Fund.
The Board then turned its attention to the terms of the proposed
sub-advisory agreement. Under the terms of the proposed sub-advisory
agreement with BHM&S, BHM&S would be responsible for providing day-to-day
investment advice and choosing the securities in which the Money Market
Fund invests. BHM&S would report directly to TPL, and TPL would be
responsible to report to the Board for any errors or omissions made by
BHM&S. BHM&S would not be responsible for mistakes or errors of judgment
in its management of the investments of the Fund unless those mistakes or
errors of judgment resulted from gross negligence, willful misfeasance or
intentional wrongdoing. The proposed sub-advisory agreement would have an
initial term of two years, and may be renewed annually thereafter by
affirmative vote of a majority of the Board of Trustees and a separate
concurring majority vote of the Trust's independent Trustees. The proposed
sub-advisory agreement may be terminated by any party at any time, without
penalty, upon sixty (60) days written notice. The proposed sub-advisory
agreement would become effective immediately upon receipt of shareholder
approval. A copy of the proposed sub-advisory agreement with BHM&S is
included as Exhibit B to this proxy, which is incorporated by reference
into this discussion as if fully set forth herein.
The Board then discussed the proposed fees payable to BHM&S for its
services to the Fund. Since those fees would be paid to BHM&S by TPL out
of the fees it received from the Fund, the Board sought TPL's opinion
concerning the reasonableness of the proposed fee structure. TPL reported
to the Board that BHM&S was at least as competitive as the other
candidates it had interviewed with respect to its proposed fees, and was
the only candidate willing to provide services to the Money Market Fund
and waive its fee for doing so. TPL further reported that because BHM&S's
proposed fees were so reasonable, TPL would be able to maintain its
current level of service to the Funds without the need to seek an overall
fee increase.
Based on the Board's review and UBS and TPLS's recommendation, the Board
unanimously voted to approve BHM&S as sub-advisor to the Money Market Fund
and to seek shareholder approval of their choice. The Board then entered
into an interim agreement with BHM&S to provide sub-advisory services to
the Fund for a period not to exceed 150 days, commencing on July 1, 2004.
The interim agreement will expire at the end of that time or immediately
upon approval of a permanent agreement by each Fund's shareholders,
whichever shall first occur.
FEES AND EXPENSES
If BHM&S becomes the new Sub-Advisor to the Money Market Fund, TPL will
pay a portion of the fee it currently receives from the Money Market Fund
to BHM&S. BHM&S has agreed to serve as Sub-Advisor to the Money Market
Fund for a fee of 0.08% of the average daily net assets of the Fund, but
will waive all fees until such time as mutually agreed by both BHM&S and
TPL:
The fees paid to BHM&S on behalf of the Money Market Fund under the
sub-advisory agreement, if any, will be paid by TPL out of the fees
received by TPL under its Investment Advisory Agreement with the Money
Market Fund, so overall fees to the Fixed Income Fund's shareholders will
not change.
FINANCIAL EFFECT ON THE FUNDS
MONEY MARKET FUND
If BHM&S becomes the new Sub-Advisor to the Money Market Fund, the fees
paid by shareholders of the Fund will remain exactly the same. Money
Market Fund shareholders currently pay total investment advisory fees of
0.60% per annum of the average daily assets of the Fund. That fee will not
change if BHM&S becomes the new Sub-Advisor to the Fixed Income Fund. TPL
receives the 0.60% advisory fee, and will pay 0.08% of that fee to BHM&S,
and will retain 0.52% of the fee. The table below shows the overall
expenses of the Money Market Fund before and after the engagement of
BHM&S.
MONEY MARKET FUND NO-LOAD CLASS
ANNUAL OPERATING EXPENSES --------------------
CURRENT PROPOSED
------- --------
MANAGEMENT FEE (1) 0.60% 0.60%
SERVICE & DISTRIBUTION (12B-1) FEES 0.00% 0.00%
OTHER EXPENSES (2) 0.80% 0.80%
----- -----
TOTAL ANNUAL OPERATING EXPENSES
(before reimbursement by Advisor) 1.40% 1.40%
----- -----
REIMBURSEMENT BY ADVISOR (3) 0.92% 0.92%
TOTAL ANNUAL OPERATING EXPENSES
(after reimbursement by Advisor) 0.48% 0.48%
===== =====
(1) Management Fees currently include a fee equal to an annual rate of 0.60%
of the average daily net assets of the Fund, which is paid to the Funds'
Adviser, TPL. From that fee, TPL pays Carr a fee equal to an annual rate
of 0.08% of the average daily net assets of the Fund. Under the proposed
BHM&S agreement, Management Fees would continue to include a fee equal to
an annual rate of 0.60% of the average daily net assets of the Fund, paid
to the Funds' Adviser, TPL. From that fee, TPL would pay BHM&S a fee equal
to an annual rate of 0.08% of the average daily net assets of the Fund.
(2) Other Expenses include administration fees, transfer agency fees and all
other ordinary operating expenses of the Fund not listed above, and
reflect actual expenses incurred by the Fund for the Fund's fiscal year
ended December 31, 2003.
(3) Timothy Partners, Ltd. Has agreed to waive its fees and/or reimburse the
Fund to the extent necessary to maintain certain overall expense caps the
Fund. The expense cap of the Fund the fiscal year ended December 31, 2003
was 0.48%. BHM&S has agreed to waive receipt of their fees to assist TPL
in maintaining acceptable expense levels for the Fund.
The following example is intended to help you compare the cost of investing in
this Fund versus the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% annual return each year and that the
Fund's operating expenses remain the same each year. Although your actual costs
may be higher or lower, based on these assumptions, your costs under the current
fee structure and proposed fee structure would be:
- ----------------------------------- ------------------------------ ---------------------------- ---------------------------
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ----------------------------------- ------------------------------ ---------------------------- ---------------------------
CURRENT PROPOSED CURRENT PROPOSED CURRENT PROPOSED CURRENT PROPOSED
- ------------------ ---------------- -------------- --------------- ------------- -------------- ------------ --------------
$ 87 $ 87 $ 271 $ 271 $ 471 $ 471 $ 1,049 $ 1,049
- ------------------ ---------------- -------------- --------------- ------------- -------------- ------------ --------------
If you did not redeem your shares, your costs would be the same:
If the Fund's shareholders do not approve this Proposal, the Trust will consider
other alternatives.
BOARD RECOMMENDATION
- --------------------------------------------------------------------------------
THE FUND'S BOARD OF TRUSTEES , INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
- --------------------------------------------------------------------------------
OTHER INFORMATION
UNDERWRITER
Timothy Partners, Ltd. ("TPL") 1304 West Fairbanks Avenue, Winter Park, FL
32789, in addition to serving as investment adviser to the Funds, also
serves as principal underwriter to the Trust's shares. TPL is a
broker/dealer registered as such with the Securities and Exchange
Commission and is a member in good standing of the National Association of
Securities Dealers.
TPL is not directly compensated by the Trust for its distribution
services. However, TPL generally retains dealer concessions on sales of
Class A Fund shares as set forth in the Trust's prospectus and may retain
some or all of the fees paid by the Fund's pursuant to 12b-1 Plans of
Distribution. With respect to Class A shares, TPL may pay some or all of
the dealer concession to selling brokers and dealers from time to time, at
its discretion. A broker or dealer who receives more than 90% of a selling
commission may be considered an "underwriter" under federal law. With
respect to both Class A and Class B shares, TPL may pay some or all of the
collected 12b-1 fees to selling brokers and dealers from time to time, at
its discretion
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING
Citco Mutual Fund Services, Inc., 83 General Warren Blvd., Suite 200,
Malvern, PA 19355, provides administrative, transfer agent, and accounting
services to the Fund pursuant to a written agreement with the Trust, dated
July 1, 2001.
PROPOSALS OF SHAREHOLDERS
As a Delaware Business Trust, the Trust is not required to hold annual
shareholder meetings, but will hold special meetings as required or deemed
desirable. Since the Trust does not hold regular meetings of shareholders,
the anticipated date of the next shareholders meeting cannot be provided.
Any shareholder proposal that may properly be included in the proxy
solicitation material for a special shareholder meeting must be received
by the Trust no later than four months prior to the date when proxy
statements are mailed to shareholders.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board is not aware of any matters that will be presented for action at
the meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the
accompanying form will confer upon the person or persons entitled to vote
the shares represented by such proxy the discretionary authority to vote
the shares as to any such other matters in accordance with their best
judgment in the interest of the Trust.
FINANCIAL STATEMENTS
The financial statements for each Fund and the Trust are incorporated
herein by reference to the Trust's unaudited semi-annual financial report,
dated June 30, 2003, and the Trust's audited annual financial report,
dated December 31, 2003.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
EXHIBIT A
TOTAL OUTSTANDING SHARES
OF EACH FUND, BY CLASS AND TOTAL
AS OF MAY 28, 2004
- ---------------------- ------------------ ----------------- ---------------- ---------------------- ------------------
FUND CLASS A CLASS B CLASS C NO-LOAD CLASS TOTAL
- ---------------------- ------------------ ----------------- ---------------- ---------------------- ------------------
FIXED INCOME 1,968,999.320 388,899.156 17,508.489 NA 2,375,406.965
- ---------------------- ------------------ ----------------- ---------------- ---------------------- ------------------
MONEY MARKET NA NA NA 3,285,804.080 3,285,804.080
- ---------------------- ------------------ ----------------- ---------------- ---------------------- ------------------
HOLDERS OF MORE THAN
5% OF EACH FUND'S SHARES
AS OF MAY 28, 2004
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
SHARE NO. OF % OF SHARE % OF TOTAL
NAME & ADDRESS OF SHAREHOLDER FUND CLASS SHARES CLASS FUND SHARES
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
National Financial Services Co., Fixed
for the exclusive benefit of its customers Income A 1,134,537 57.62% 47.76%
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
National Financial Services Co., Fixed
for the exclusive benefit of its customers Income B 23,449 6.03% Less than 1%
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
National Financial Services Co., Fixed
for the exclusive benefit of its customers Income B 22,229 5.72% Less than 1%
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
RBC Dain Rauscher for the exclusive benefit Fixed
of its customers Income C 4,004 22.87% Less than 1%
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
Harry & Pamela Miller
935 Bremer Road Fixed
Dover, PA 17315 Income C 1,016 5.80% Less than 1%
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
LPL Financial Services, Inc., for the Fixed
exclusive benefit of its customers Income C 951 5.43% Less than 1%
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
FirstStar Trustee
for the exclusive benefit of Band & Co.
PO Box 1787 Money
Milwaukee, WI 53201 Market NL 469,068 14.28% 14.28%
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
Michindoh Conference, Inc.
6567 S. 725 West Money
Pleasant Lake, IN 46779 Market NL 171,064 5.21% 5.21%
- ----------------------------------------------- ---------- ------------ -------------- --------------- -----------------
TIMOTHY PLAN OFFICER/DIRECTOR OWNERSHIP OF FUND SHARES
AS OF MAY 28, 2004
- ----------------------------------------------------------- ------------------------------------- --------------------
DOLLAR RANGE OF
DOLLAR RANGE OF SHARES SHARES OWNED, ALL
NAME OWNED, BY FUND FUNDS
- ----------------------------------------------------------- ------------------------------------- --------------------
Arthur D. Ally, Interested Trustee, President, Treasurer Fixed Income- $0.00 - $10,000 $0.00 - $10,000
- ----------------------------------------------------------- ------------------------------------- --------------------
Joseph Boatwright, Interested Trustee, Secretary Money Market- $0.00 - $10,000 $0.00 - $10,000
- ----------------------------------------------------------- ------------------------------------- --------------------
Fixed Income- $50,000 - $100,000
Jock Sneddon, Interested Trustee Money Market- + $100,000 + $100,000
- ----------------------------------------------------------- ------------------------------------- --------------------
Mathew Staver, Interested Trustee None None
- ----------------------------------------------------------- ------------------------------------- --------------------
Charles Nelson, Independent Trustee None None
- ----------------------------------------------------------- ------------------------------------- --------------------
Wesley Pennington, Independent Trustee None None
- ----------------------------------------------------------- ------------------------------------- --------------------
Scott Preissler, Independent Trustee None None
- ----------------------------------------------------------- ------------------------------------- --------------------
Alan Ross, Independent Trustee None None
- ----------------------------------------------------------- ------------------------------------- --------------------
Robert Scraper, Independent Trustee None None
- ----------------------------------------------------------- ------------------------------------- --------------------
EXHIBIT B
SUB-ADVISORY AGREEMENT
THE TIMOTHY PLAN
THIS AGREEMENT is made and entered into as of the 1st day of July
2004, by and between The Timothy Plan, a Delaware business trust (the "Trust"),
Timothy Partners, Ltd., a Florida Limited Partnership and Investment Adviser to
the Trust (the "Adviser"), and Barrow, Hanley, Mewhinney & Strauss, Inc., a
Nevada corporation (the "Investment Manager").
WHEREAS, the Trust is a diversified, open-end management investment
company, registered under the Investment Company Act of 1940, as amended (the
"Act"), and authorized to issue an indefinite number of series of shares
representing interests in separate investment portfolios (each referred to as a
"Series" and collectively, as the "Series"); and
WHEREAS, the Trust presently issues twelve Series as follows:
The Timothy Plan Small Cap Value Fund (formerly the Timothy Plan), The Timothy
Plan Large/Mid Cap Value Fund, The Timothy Plan Large/Mid Cap Growth Fund, The
Timothy Plan Patriot Fund, the Timothy Plan Aggressive Growth Fund, The Timothy
Plan Strategic Growth Fund, The Timothy Plan Conservative Growth Fund, Timothy
Plan Fixed Income Fund, The Timothy Plan Money Market Fund, The Timothy Plan
Small Cap Variable Series (formerly the Timothy Plan Variable Series), The
Timothy Plan Conservative Growth Portfolio Variable Fund, The Timothy Plan
Strategic Growth Portfolio Variable Fund; and
WHEREAS, Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of asset
management; and
WHEREAS, Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and engages in the business of asset
management; and
WHEREAS, the Trust has engaged the Adviser to provide investment
management services to the Trust, and
WHEREAS, the Adviser desires to retain Investment Manager to render
certain investment management services to the Timothy Plan Fixed Income Fund and
the Timothy Plan Money Market Fund (the "Portfolios"), and Investment Manager is
willing to render such services; and
WHEREAS, the Trust consents to the engagement of Investment Manager
by Adviser.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1) OBLIGATIONS OF INVESTMENT MANAGER
a) SERVICES. Investment Manager agrees to perform the following
services (the "Services") for the Portfolios:
i) manage the investment and reinvestment of each Portfolio's
assets;
ii) continuously review, supervise, and administer the investment
program of each Portfolio;
iii) determine, in its discretion, the securities to be purchased,
retained or sold (and implement those decisions);
iv) provide the Trust and Adviser with fund investment transaction
records concerning Investment Manager's activities which the
Trust is required to maintain including but not limited
duplicate confirms of each transaction; and
v) render regular reports to the Trust's and Adviser's officers
and directors concerning Investment Manager's discharge of the
foregoing responsibilities.
The foregoing services described in this Paragraph 1(a) collectively
are hereafter called the "Services"
Investment Manager shall discharge the foregoing responsibilities
subject to the control of the officers and directors of the Adviser
and trustees of the Trust and in compliance with such policies as
the trustees may from time to time establish, and in compliance with
the objectives, policies, and limitations of the Portfolios set
forth in the Trust's prospectus and statement of additional
information, as amended from time to time, and with all applicable
laws and regulations. All Services to be furnished by Investment
Manager under this Agreement may be furnished through the medium of
any directors, officers or employees of Investment Manager or
through such other parties as Investment Manager may determine from
time to time.
Investment Manager agrees, at its own expense or at the expense of
one or more of its affiliates, to render the Services and to provide
the office space, furnishings, equipment and personnel in sufficient
amounts and manner to perform the Services on the terms and for the
compensation provided herein.
Investment Manager shall authorize and permit any of its officers,
directors and employees, who may be elected as directors or officers
of the Trust, to serve in the capacities in which they are elected.
Unless expressly assumed under this Agreement by Investment Manager,
the Trust shall pay all costs and expenses normally incurred in
connection with the Trust's operation and organization.
b) BOOKS AND RECORDS. All books and records prepared and maintained by
Investment Manager for the benefit of the Trust under this Agreement
shall be the property of the Trust and, upon request therefore,
Investment Manager shall surrender to the Trust copies of such of
the books and records so requested. The Trust acknowledges that
Investment Manager is required to maintain books and records of its
activities, and agrees to allow Investment Manager to retain copies
of such records of the Trust as required under federal law.
Investment Manager agrees not to use any records of the Trust for
any purpose other than for the provision of the Services to the
Trust.
2) PORTFOLIO TRANSACTIONS. Investment Manager is authorized to select the
brokers or dealers that will execute the purchases and sales of portfolio
securities for the Portfolios and is directed to use commercially
reasonable efforts to obtain the best net results as described in the
Trust's prospectus from time to time. The Trust has adopted procedures
pursuant to Rules 17(a) and 17(f) under the Investment Company Act of 1940
relating to transactions among a Portfolio and affiliated person thereof
(Rule 17(a)), and transactions between a Portfolio and an affiliated
broker or dealer (Rule 17(f)). Investment Manager shall at all times
conduct its activities in compliance with such procedures. Investment
Manager shall prepare a report at the end of each fiscal quarter reporting
on Investment Manager's compliance with such procedures and setting forth
in reasonable detail any transactions which were in violation of such
procedures. Investment Manager will promptly communicate to the officers
and the directors of the Adviser and Trust such other information relating
to Portfolio transactions as they may reasonably request.
3) COMPENSATION OF INVESTMENT MANAGER. For its Services rendered to the
Portfolios, the Adviser will pay to Investment Manager fees as set forth
in Schedule A attached hereto.
The fees described above shall be computed daily based upon the net asset
value of the Portfolios as determined by a valuation made in accordance
with the Trust's procedures for calculating Portfolio net asset value as
described in the Trust's Prospectus and/or Statement of Additional
Information. During any period when the determination of a Portfolio's net
asset value is suspended by the trustees of the Trust, the net asset value
of a share of that Portfolio as of the last business day prior to such
suspension shall, for the purpose of this Paragraph 3, be deemed to be net
asset value at the close of each succeeding business day until it is again
determined.
The fees described above are annual fees, payable 1/12th monthly. Fees for
Services rendered during any month will be paid within five (5) business
days after the end of the month in which such Services were rendered. In
the event that this Agreement is terminated prior to the end of a month in
which Investment Manager is providing Services, the Adviser shall pay to
Investment Manager fees accumulated during that month to the date of
termination within five (5) business days after the end of the month in
which such Services were rendered.
4) STATUS OF INVESTMENT MANAGER. The services of Investment Manager to the
Trust are not to be deemed exclusive, and Investment Manager shall be free
to render similar services to others. Notwithstanding the foregoing,
Investment Manager shall not render services to other registered
investment companies which employ similar moral screening processes
without first obtaining the prior written consent of the Trust to render
such services.
In order to assist Investment Manager in performing the Services to the
Portfolios, the Trust and/or Adviser may from time to time provide
Investment Manager with information, documents, research or writings
designated as proprietary by the Trust or the Adviser. Investment Manager
agrees that, upon being informed that information, documents, research or
writings provided to it are deemed proprietary by the Trust and/or the
Adviser, Investment Manager agrees that it shall use such proprietary
documents only to assist it in performing the Services to the Portfolios,
and further agrees not to use, distribute, or publish, for its own benefit
or for the benefit of others, information, documents, research or writings
designated as proprietary by the Trust or the Adviser.
In rendering its Services to the Portfolios, Investment Manager shall be
deemed to be an independent contractor.
Unless expressly authorized or requested by the Trust, Investment Manager
shall have no authority to act for or represent the Trust in any way other
than as an independent contractor providing the Services described in this
Agreement. The parties to this Agreement acknowledge and agree that the
Trust may, form time to time, authorize Investment Manager to act for or
represent the Trust under limited circumstance.
In such circumstance, Investment Manager may be deemed to be an agent of
the Trust. Except for those circumstances in which the Trust has
specifically authorized Investment Manager to act for or represent the
Trust, Investment Manager shall in no way be deemed an agent of the Trust.
Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of Investment Manager, who may also be a
director, officer, or employee of the Trust, to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar
nature or a dissimilar nature.
5) PERMISSIBLE INTERESTS. Trustees, agents, and stockholders of the Trust are
or may be interested in Investment Manager (or any successor thereof) as
directors, partners, officers, or stockholders, or otherwise, and
directors, partners, officers, agents, and stockholders of Investment
Manager are or may be interested in the Trust as trustees, stockholders or
otherwise; and Adviser (or any successor) is or may be interested in the
Trust as a stockholder or otherwise.
6) LIABILITY OF INVESTMENT MANAGER. Investment Manager assumes no
responsibility under this Agreement other than to render the services
called for hereunder in good faith. Investment Manager shall not be liable
for any error of judgment or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940) or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of, or from reckless disregard by it of its obligations and duties under,
this Agreement.
7) TERM. This Agreement shall remain in effect until July 01, 2006, and from
year to year thereafter provided such continuance is approved at least
annually by (1) the vote of a majority of the Board of Trustees of the
Trust or (2) a vote of a "majority" (as that term is defined in the
Investment Company Act of 1940) of the Trust's outstanding securities,
provided that in either event the continuance is also approved by the vote
of a majority of the trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any such
party, which vote must be cast in person at meeting called for the purpose
of voting on such approval; provided, however, that;
a) the Trust or Adviser may, at any time and without the payment of any
penalty, terminate this Agreement upon 60 days written notice to
Investment Manager;
b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
c) Investment Manager may terminate this Agreement without payment of
penalty on 60 days written notice to the Trust; and
d) the terms of paragraph 6 of this Agreement shall survive the
termination of this Agreement.
8) NOTICES. Except as otherwise provided in this Agreement, any notice or
other communication required by or permitted to be given in connection
with this Agreement will be in writing and will be delivered in person or
sent by first class mail, postage prepaid or by prepaid overnight delivery
service to the respective parties as follows:
If to the Trust: If to the Adviser: If to the Investment Manager:
---------------- ------------------ -----------------------------
The Timothy Plan Timothy Partners, Ltd. Barrow, Hanley, Mewhinney, & Strauss, Inc.
1304 West Fairbanks Avenue 1304 West Fairbanks Avenue 3232 McKinney Ave., 15th Flr.
Winter Park, FL 32789 Winter Park, FL 32789 Dallas, TX 75204
Arthur D. Ally, President By: Covenant Funds, Inc. John S. Williams, CFA
Managing General Partner J. Scott McDonald, CFA
Arthur D. Ally, President
9) AMENDMENTS. No provision of this Agreement maybe changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of
the Fund's outstanding voting securities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and the year first written above.
BARROW, HANLEY,
THE TIMOTHY PLAN TIMOTHY PARTNERS, LTD. MEWHINNEY & STRAUSS, INC.
- -------------------------------- ------------------------------ ----------------------------
Arthur D. Ally, President Arthur D. Ally, James P. Barrow, President
President of General Partner
- -------------------------------- ------------------------------ ----------------------------
Joseph Boatwright, Secretary Bonnie Ally, Secretary
- -------------------------------- ------------------------------ ----------------------------
================================================================================
SCHEDULE "A"
The Investment Manager will manage the Timothy Plan Fixed-Income Fund, assuming
an initial allocation of $20 million, at the rate of 0.25%, the annual fee for
an account value of $100 million. If the account does not reach the anticipated
level of at least $100 million in assets within a reasonable time, the standard
fee schedule as presented below would become effective from that time forward
until the next breakpoint set forth below shall become effective. This Fee
Schedule allows for rights of accumulation up to $100 million in assets at
0.25%, which represents the average fee at that level of assets. A reasonable
assumption of potential growth in assets over time allows this right of
accumulation.
FIXED INCOME ACCOUNTS
Core, Core Plus, Intermediate Maturity
Market Value Annual Percentage
------------ -----------------
First $ 20,000,000 0.375 of 1%
Next $ 30,000,000 0.25 of 1%
Next $100,000,000 0.20 of 1%
Above $150,000,000 0.15 of 1%
The Investment Manager will manage the Timothy Plan Money Market Fund at an
annual fee of 0.08%. The fee will be waived until a mutually agreed upon time to
began payment.
================================================================================
- --------------------------------------------------------------------------------
BALLOT
- --------------------------------------------------------------------------------
TIMOTHY PLAN FIXED INCOME FUND SHAREHOLDERS ONLY!
PROPOSAL # 1. APPROVE THE SUB-INVESTMENT ADVISORY AGREEMENT WITH BARROW,
HANLEY, MEWHINNEY & STRAUSS, INC. FOR ITS SERVICES TO THE
TIMOTHY PLAN FIXED INCOME FUND
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
TIMOTHY PLAN MONEY MARKET FUND SHAREHOLDERS ONLY!
PROPOSAL # 2. APPROVE THE SUB-INVESTMENT ADVISORY AGREEMENT WITH BARROW,
HANLEY, MEWHINNEY & STRAUSS, INC. FOR ITS SERVICES TO THE
TIMOTHY PLAN MONEY MARKET FUND
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SIGNATURE(S)
All registered owners of account shown to the left must sign. If signing for a
corporation, estate or trust, please indicate your capacity or title.
X
- --------------------------------------------------------------------------------
Signature Date
X
- --------------------------------------------------------------------------------
Signature Date
PLEASE VOTE TODAY!
Please vote all issues shown on your ballot.
Please vote on each issue using blue or black ink to mark an X in one of the
three boxes provided on each ballot. On all Items, mark -- For, Against or
Abstain. Then sign, date and return your ballot in the accompanying postage-paid
envelope. All registered owners of an account, as shown in the address on the
ballot, must sign the ballot. If you are signing for a corporation, trust or
estate, please indicate your title or position.
THANK YOU FOR MAILING YOUR BALLOT PROMPTLY!
Your vote is needed! Please vote on the reverse side of this form and sign in
the space provided. Return your completed proxy in the enclosed envelope today.
You may receive additional proxy cards for your other accounts with the Trust.
These are not duplicates; you should sign and return each proxy card in order
for your votes to be counted. Please return them as soon as possible to help
save the cost of additional mailings.
The signers of this proxy hereby appoint Theresa McNamee and Joseph Carlin, and
each of them, attorneys and proxies, with power of substitution in each, to vote
all shares for the signers at the special meeting of shareholders to be held
August 13, 2004, and at any adjournments thereof, as specified herein, and in
accordance with their best judgment, on any other business that may properly
come before this meeting.
Your shares will be voted in accordance with your designations on this proxy. If
no specification is made herein, all shares will be voted "FOR" the proposals
set forth on this proxy. THE PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE
TRUST WHICH RECOMMENDS A VOTE "FOR" EACH PROPOSAL.