December 31, 2019
Dear Timothy Plan ETF Shareholder:
Timothy Partners, Ltd. is pleased to have
added four (4) Exchange Traded Funds (“ETFs”) to our Timothy Plan Mutual Fund Family (TPLC and TPHD were launched 5-1-19 and TPSC and TPIF were added 12-3-19).
Although the markets have been rather mixed during this period, we believe our
strategy as implemented by our sub-advisor, Victory Capital Management (“VCM”), with our Biblically Responsible screens and VCM’s smart beta index management style have thus far proven to be
very competitive in these various markets. Our returns were 9.01% and 9.00% from inception to December 31, 2019 in the US Large Cap Core and High Dividend Stock ETFs, respectively, compared to the Victory US Large Cap Volatility Weighted BRI
Index at 9.39% return and the Victory US Large Cap High Yield Dividend Volatility Weighted BRI Index at 9.38%. The other two ETFs, the US Small Cap Core and International ETFs were available for less than a month, and although they were both showing
positive results, it is too early to characterize their performance patterns. In all four ETFs the smart beta strategy utilized by our sub-advisor for the past few years will continue to be employed.
ETF’s are designed to mimic their indexes, so future performance will align with Index performance.
As you know, no one can predict future events or
investment results, nevertheless we believe you will be pleased with our performance over full market cycles. Please review VCM’s report that follows for more detailed information.
Thank you for your convictions that led you to become part of the Timothy Plan Family of Funds.
Sincerely,
Arthur D. Ally, President
1
Timothy Plan US Large
Cap Core ETF – TPLC
Letter from the Manager – December 31, 2019
The Timothy Plan US Large Cap Core ETF (“Fund”) seeks to provide investment results that track the performance of the Victory US Large Cap Volatility Weighted
BRI Index (“Index”) before fees and expenses.
Since the inception date of May 1, 2019 through December 31, 2019, the Fund returned 9.01%
compared to the Index’s return of 9.39%. The primary difference in performance versus the underlying benchmark can be attributed to underlying fund fees.
When
comparing performance relative to a broad market-cap based Index, such as the S&P 500, Industrials and Consumer Discretionary sectors contributed positively to the Funds relative performance. Information
Technology and Health Care detracted from performance relative to the S&P 500. Underweights to the top 10 companies within the S&P 500, which accounted for 24% of its composition, was a key driver in relative underperformance.
VICTORY CAPITAL MANAGEMENT, INC.
2
Timothy Plan High
Dividend Stock ETF – TPHD
Letter from the Manager – December 31, 2019
The Timothy Plan High Dividend Stock ETF (“Fund”) seeks to provide investment results that track the performance of the Victory US Large Cap High Dividend
Volatility Weighted BRI Index (“Index”) before fees and expenses.
Since the inception date of May 1, 2019 through December 31, 2019, the Fund
returned 9.00% compared to the Index’s return of 9.38%. The primary difference in performance versus the underlying benchmark can be attributed to underlying fund fees.
When comparing performance relative to a broad market-cap based Index such as the Russell 1000 Value, the Utilities and
Financials sectors contributed positively to the Funds relative performance. Materials and Consumer Discretionary sectors detracted from performance relative to the Russell 1000 Value. Positive stock selection within the top quartile of the highest
yields stocks was a key factor in outperformance relative to the Russell 1000 Value.
VICTORY CAPITAL MANAGEMENT, INC.
3
Fund Performance - (Unaudited)
December 31, 2019
Timothy Plan US Large Cap Core ETF
The graph reflects investment growth of a hypothetical
$10,000 investment of the Fund. Past performance is no guarantee of future results.
The graph reflects investment growth of a hypothetical $10,000 investment of the Fund. Past performance is no guarantee of future results.
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Statements of Assets and Liabilities
|
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|
|
Timothy Plan
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
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|
Timothy Plan US Small
Cap Core ETF
|
|
|
|
Timothy Plan US Large
Cap Core ETF
|
|
|
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|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
Investments, at value (Cost $9,849,296 and $126,672,202)
|
|
$
|
10,197,513
|
|
|
$
|
134,418,771
|
|
|
Cash and cash equivalents
|
|
|
21,152
|
|
|
|
244,998
|
|
|
Deposits with brokers for futures contracts
|
|
|
100
|
|
|
|
46,867
|
|
|
Interest and dividends receivable
|
|
|
7,401
|
|
|
|
121,565
|
|
|
Receivable for capital shares issued
|
|
|
—
|
|
|
|
10,864,976
|
|
|
Variation margin receivable on open futures contracts
|
|
|
—
|
|
|
|
770
|
|
|
Total Assets
|
|
|
10,226,166
|
|
|
|
145,697,947
|
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|
LIABILITIES:
|
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|
|
|
|
|
|
|
|
Payable for investments purchased
|
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|
—
|
|
|
|
10,849,856
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|
|
Accrued expenses and other payables:
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|
|
|
|
|
|
|
|
Investment advisory fees
|
|
|
4,359
|
|
|
|
53,078
|
|
|
Total Liabilities
|
|
|
4,359
|
|
|
|
10,902,934
|
|
|
Net Assets
|
|
$
|
10,221,807
|
|
|
$
|
134,795,013
|
|
|
NET ASSETS CONSIST OF:
|
|
|
|
|
|
|
|
|
|
Capital
|
|
$
|
9,873,590
|
|
|
$
|
128,027,475
|
|
|
Total distributable earnings/(loss)
|
|
|
348,217
|
|
|
|
6,767,538
|
|
|
Net Assets
|
|
$
|
10,221,807
|
|
|
$
|
134,795,013
|
|
|
|
|
|
|
Shares Outstanding (unlimited shares authorized, no par value):
|
|
|
400,000
|
|
|
|
4,950,000
|
|
|
Net asset value:
|
|
|
$25.55
|
|
|
|
$27.23
|
|
See notes to financial
statements.
61
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|
|
Statements of Assets and Liabilities
|
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|
Timothy Plan
|
|
December 31, 2019
|
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|
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|
|
|
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|
Timothy Plan High
Dividend Stock ETF
|
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|
|
Timothy Plan
International ETF
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|
ASSETS:
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|
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Investments, at value (Cost $87,668,881 and $22,253,151)
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$
|
93,816,902
|
|
|
$
|
22,922,585
|
|
|
Cash and cash equivalents
|
|
|
115,460
|
|
|
|
67,961
|
|
|
Deposits with brokers for futures contracts
|
|
|
24,545
|
|
|
|
100
|
|
|
Interest and dividends receivable
|
|
|
204,021
|
|
|
|
35,062
|
|
|
Receivable for capital shares issued
|
|
|
2,679,276
|
|
|
|
—
|
|
|
Receivable for investments sold
|
|
|
—
|
|
|
|
3,842
|
|
|
Variation margin receivable on open futures contracts
|
|
|
385
|
|
|
|
—
|
|
|
Reclaims receivable
|
|
|
—
|
|
|
|
175
|
|
|
Total Assets
|
|
|
96,840,589
|
|
|
|
23,029,725
|
|
|
LIABILITIES:
|
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|
|
|
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|
|
Payable for foreign currency (Cost $2,161)
|
|
|
—
|
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|
|
2,154
|
|
|
Payable for investments purchased
|
|
|
2,669,527
|
|
|
|
—
|
|
|
Accrued expenses and other payables:
|
|
|
|
|
|
|
|
|
|
Investment advisory fees
|
|
|
39,018
|
|
|
|
9,297
|
|
|
Total Liabilities
|
|
|
2,708,545
|
|
|
|
11,451
|
|
|
Net Assets
|
|
$
|
94,132,044
|
|
|
$
|
23,018,274
|
|
|
NET ASSETS CONSIST OF:
|
|
|
|
|
|
|
|
|
|
Capital
|
|
$
|
88,737,317
|
|
|
$
|
22,334,992
|
|
|
Total distributable earnings/(loss)
|
|
|
5,394,727
|
|
|
|
683,282
|
|
|
Net Assets
|
|
$
|
94,132,044
|
|
|
$
|
23,018,274
|
|
|
|
|
|
|
Shares Outstanding (unlimited shares authorized, no par value):
|
|
|
3,500,000
|
|
|
|
900,000
|
|
|
Net asset value:
|
|
|
$26.89
|
|
|
|
$25.58
|
|
See notes to financial
statements.
62
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Statements of Operations
|
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Timothy Plan
|
|
For the Period Ended December 31, 2019
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|
Timothy Plan US
Small Cap Core ETF(a)
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|
Timothy Plan US
Large Cap Core
ETF(b)
|
|
|
|
|
|
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|
|
Investment Income:
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
|
$11,815
|
|
|
|
$874,850
|
|
|
Interest income
|
|
|
27
|
|
|
|
549
|
|
|
Foreign tax withholding
|
|
|
—
|
|
|
|
(259)
|
|
|
Total Income
|
|
|
11,842
|
|
|
|
875,140
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Investment advisory fees
|
|
|
4,359
|
|
|
|
261,554
|
|
|
Total Expenses
|
|
|
4,359
|
|
|
|
261,554
|
|
|
Net Investment Income (Loss)
|
|
|
7,483
|
|
|
|
613,586
|
|
|
Net Realized/Unrealized Gains (Losses) from Investment Transactions:
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) from investment transactions
|
|
|
—
|
|
|
|
(1,013,012)
|
|
|
Net realized gains (losses) from in-kind transactions
|
|
|
58,371
|
|
|
|
1,411,775
|
|
|
Net realized gains (losses) from futures transactions
|
|
|
—
|
|
|
|
7,977
|
|
|
Net change in unrealized appreciation/depreciation on investments
|
|
|
348,217
|
|
|
|
7,746,569
|
|
|
Net change in unrealized appreciation/depreciation on futures
transactions
|
|
|
—
|
|
|
|
4,554
|
|
|
Net realized/unrealized gains on investments
|
|
|
406,588
|
|
|
|
8,157,863
|
|
|
Change in net assets resulting from operations
|
|
$
|
414,071
|
|
|
|
$8,771,449
|
|
|
(a)
|
For the period from the commencement of operations on December 3, 2019 through December 31, 2019.
|
|
(b)
|
For the period from the commencement of operations on May 1, 2019 through December 31, 2019.
|
See notes to financial
statements.
63
|
|
|
|
|
|
|
Statements of Operations
|
|
Timothy Plan
|
|
For the Period Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Plan High
Dividend Stock ETF(a)
|
|
|
|
Timothy Plan
International ETF(b)
|
|
|
|
|
|
|
|
|
Investment Income:
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
$
|
1,520,214
|
|
|
$
|
46,192
|
|
|
Interest income
|
|
|
618
|
|
|
|
261
|
|
|
Foreign tax withholding
|
|
|
(657)
|
|
|
|
(7,066)
|
|
|
Total Income
|
|
|
1,520,175
|
|
|
|
39,387
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Investment advisory fees
|
|
|
237,373
|
|
|
|
9,296
|
|
|
Total Expenses
|
|
|
237,373
|
|
|
|
9,296
|
|
|
Net Investment Income (Loss)
|
|
|
1,282,802
|
|
|
|
30,091
|
|
|
Net Realized/Unrealized Gains (Losses) from Investment Transactions and foreign currency
translations:
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) from investment transactions and foreign currency translations
|
|
|
(813,370)
|
|
|
|
13,397
|
|
|
Net realized gains (losses) from in-kind transactions
|
|
|
1,274,259
|
|
|
|
—
|
|
|
Net realized gains (losses) from futures transactions
|
|
|
15,421
|
|
|
|
—
|
|
|
Net change in unrealized appreciation/depreciation on investments and foreign currency translations
|
|
|
6,148,021
|
|
|
|
669,652
|
|
|
Net change in unrealized appreciation/depreciation on futures
transactions
|
|
|
(137)
|
|
|
|
—
|
|
|
Net realized/unrealized gains on investments and foreign currency
translations
|
|
|
6,624,194
|
|
|
|
683,049
|
|
|
Change in net assets resulting from operations
|
|
$
|
7,906,996
|
|
|
|
$713,140
|
|
|
(a)
|
For the period from the commencement of operations on May 1, 2019 through December 31, 2019.
|
|
(b)
|
For the period from the commencement of operations on December 3, 2019 through December 31, 2019.
|
See notes to financial
statements.
64
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Plan
|
|
Statements of Changes in
Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Plan
US Small Cap
Core ETF
|
|
|
Timothy Plan
US Large Cap
Core ETF
|
|
|
|
|
For the Period
December 3,
2019(a)
through
December
31,
2019
|
|
|
For the Period
May 1, 2019(a)
through
December 31,
2019
|
|
|
From Investment Activities:
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
$7,483
|
|
|
|
$613,586
|
|
|
Net realized gains (losses) from investment transactions
|
|
|
58,371
|
|
|
|
406,740
|
|
|
Net change in unrealized appreciation/depreciation on
investments
|
|
|
348,217
|
|
|
|
7,751,123
|
|
|
Change in net assets resulting from operations
|
|
|
414,071
|
|
|
|
8,771,449
|
|
|
Distributions to Shareholders:
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
(7,507
|
)
|
|
|
(593,505
|
)
|
|
Change in net assets resulting from distributions to
shareholders
|
|
|
(7,507
|
)
|
|
|
(593,505
|
)
|
|
Change in net assets resulting from capital transactions
|
|
|
9,815,243
|
|
|
|
126,617,069
|
|
|
Change in net assets
|
|
|
10,221,807
|
|
|
|
134,795,013
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
—
|
|
|
|
—
|
|
|
End of period
|
|
|
$10,221,807
|
|
|
|
$134,795,013
|
|
|
Capital Transactions:
|
|
|
|
|
|
|
|
|
|
Proceeds from shares issued
|
|
|
$11,097,743
|
|
|
|
$139,366,129
|
|
|
Cost of shares redeemed
|
|
|
(1,282,500
|
)
|
|
|
(12,749,060
|
)
|
|
Change in net assets resulting from capital transactions
|
|
|
$9,815,243
|
|
|
|
$126,617,069
|
|
|
|
|
|
|
Share Transactions:
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
450,000
|
|
|
|
5,450,000
|
|
|
Redeemed
|
|
|
(50,000
|
)
|
|
|
(500,000
|
)
|
|
Change in Shares
|
|
|
400,000
|
|
|
|
4,950,000
|
|
|
(a)
|
Commencement of operations.
|
See notes to financial
statements.
65
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Plan
|
|
Statements of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Plan
High Dividend
Stock ETF
|
|
|
Timothy Plan
International
ETF
|
|
|
|
|
For the Period
May 1, 2019(a)
through
December 31,
2019
|
|
|
For the Period
December 3,
2019(a)
through
December
31,
2019
|
|
|
From Investment Activities:
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
$1,282,802
|
|
|
|
$30,091
|
|
|
Net realized gains (losses) from investment transactions
|
|
|
476,310
|
|
|
|
13,397
|
|
|
Net change in unrealized appreciation/depreciation on
investments
|
|
|
6,147,884
|
|
|
|
669,652
|
|
|
Change in net assets resulting from operations
|
|
|
7,906,996
|
|
|
|
713,140
|
|
|
Distributions to Shareholders:
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
(1,238,011
|
)
|
|
|
(29,857
|
)
|
|
Change in net assets resulting from distributions to
shareholders
|
|
|
(1,238,011
|
)
|
|
|
(29,857
|
)
|
|
Change in net assets resulting from capital transactions
|
|
|
87,463,059
|
|
|
|
22,334,991
|
|
|
Change in net assets
|
|
|
94,132,044
|
|
|
|
23,018,274
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
—
|
|
|
|
—
|
|
|
End of period
|
|
$
|
94,132,044
|
|
|
$
|
23,018,274
|
|
|
Capital Transactions:
|
|
|
|
|
|
|
|
|
|
Proceeds from shares issued
|
|
|
$103,751,741
|
|
|
$
|
22,334,991
|
|
|
Cost of shares redeemed
|
|
|
(16,288,682
|
)
|
|
|
—
|
|
|
Change in net assets resulting from capital transactions
|
|
|
$87,463,059
|
|
|
$
|
22,334,991
|
|
|
|
|
|
|
Share Transactions:
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
4,150,000
|
|
|
|
900,000
|
|
|
Redeemed
|
|
|
(650,000
|
)
|
|
|
—
|
|
|
Change in Shares
|
|
|
3,500,000
|
|
|
|
900,000
|
|
|
(a)
|
Commencement of operations.
|
See notes to financial
statements.
66
|
|
|
|
|
|
|
|
Timothy Plan
|
|
Financial Highlights
|
|
For a Share Outstanding Throughout Each Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Plan
US Small Cap
Core ETF
|
|
|
|
|
Timothy Plan
US Large Cap
Core ETF
|
|
|
|
|
Timothy Plan
High
Dividend
Stock ETF
|
|
|
|
|
Timothy Plan
International
ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
December 3,
2019(a) to
December 31,
2019
|
|
|
|
|
For the period
May 1, 2019(a)
to
December 31,
2019
|
|
|
|
|
For the period
May 1, 2019(a)
to
December 31,
2019
|
|
|
|
|
For the period
December 3,
2019(a) to
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value, Beginning of Period
|
|
|
|
|
$24.73
|
|
|
|
|
|
$25.16
|
|
|
|
|
|
$25.10
|
|
|
|
|
|
$24.80
|
|
|
|
|
|
Investment Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income (Loss)(b)
|
|
|
|
|
0.02
|
|
|
|
|
|
0.21
|
|
|
|
|
|
0.48
|
|
|
|
|
|
0.04
|
|
|
Net Realized and Unrealized Gains (Losses) on Investments
|
|
|
|
|
0.82
|
|
|
|
|
|
2.04
|
|
|
|
|
|
1.74
|
|
|
|
|
|
0.77
|
|
|
|
|
|
Total from Investment Activities
|
|
|
|
|
0.84
|
|
|
|
|
|
2.25
|
|
|
|
|
|
2.22
|
|
|
|
|
|
0.81
|
|
|
|
|
|
Distributions to Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
(0.18
|
)
|
|
|
|
|
(0.43
|
)
|
|
|
|
|
(0.03
|
)
|
|
|
|
|
Total Distributions
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
(0.18
|
)
|
|
|
|
|
(0.43
|
)
|
|
|
|
|
(0.03
|
)
|
|
|
|
|
Net Asset Value, End of Period
|
|
|
|
|
$25.55
|
|
|
|
|
|
$27.23
|
|
|
|
|
|
$26.89
|
|
|
|
|
|
$25.58
|
|
|
|
|
|
|
|
|
Total Return (excludes sales charge)(c)
|
|
|
|
|
3.39
|
%
|
|
|
|
|
9.01
|
%
|
|
|
|
|
9.00
|
%
|
|
|
|
|
3.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Expenses to Average Net Assets(d)
|
|
|
|
|
0.52
|
%
|
|
|
|
|
0.52
|
%
|
|
|
|
|
0.52
|
%
|
|
|
|
|
0.62
|
%
|
|
Ratio of Net Investment Income (Loss) to Average Net
Assets(d)
|
|
|
|
|
0.89
|
%
|
|
|
|
|
1.22
|
%
|
|
|
|
|
2.81
|
%
|
|
|
|
|
1.99
|
%
|
|
Net Assets, End of Period (000’s)
|
|
|
|
|
$10,222
|
|
|
|
|
|
$134,795
|
|
|
|
|
|
$94,132
|
|
|
|
|
|
$23,018
|
|
|
Portfolio Turnover(c)
|
|
|
|
|
—
|
|
|
|
|
|
17
|
%
|
|
|
|
|
23
|
%
|
|
|
|
|
12
|
%
|
|
|
|
Amounts designated as “—” are 0 or have been rounded to 0.
|
(a)
|
Commencement of operations.
|
|
(b)
|
Per share net investment income (loss) has been calculated using the average daily shares method.
|
|
(c)
|
Not annualized for periods less than one year.
|
|
(d)
|
Annualized for periods less than one year.
|
See notes to financial
statements.
67
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
1. ORGANIZATION:
The Timothy Plan (the “Trust”) was organized
pursuant to a trust agreement dated December 16, 1993 as a Delaware business trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end
investment company and thus is determined to be an investment company for accounting purposes. The Trust follows the investment company accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 946 “Financial Services—Investment Companies.” The Trust is comprised of multiple series funds, four of which are exchange-traded funds (“ETFs”), and are authorized
to issue an unlimited number of shares, which are units of beneficial interest with no par value. Each ETF is classified as diversified under the 1940 Act.
The
accompanying financial statements are those of the Timothy Plan US Small Cap Core ETF (“US Small Cap Core ETF”), Timothy Plan US Large Cap Core ETF (“US Large Cap Core ETF”), Timothy Plan High Dividend Stock ETF (“High
Dividend Stock ETF”), and Timothy Plan International ETF (“International ETF”) (individually, a “Fund” and collectively, the “Funds”). The US Large Cap Core ETF and High Dividend Stock ETF commenced
operations on May 1, 2019 and the US Small Cap Core ETF and International ETF commenced operations on December 3, 2019. The Funds seek to provide investment results that track the performance of an underlying index, before fees and expenses. The
underlying indices for the US Small Cap Core ETF, US Large Cap Core ETF, High Dividend Stock ETF, and the International ETF are the Victory US Small Cap Volatility Weighted BRI Index, Victory US Large Cap Volatility Weighted BRI
Index, Victory US Large Cap High Dividend Volatility Weighted BRI Index, and Victory International 500 Volatility Weighted BRI Index (individually, an “Index” and collectively, the “Indices”), respectively. The remaining
series funds are presented in separate annual reports.
Under the Trust’s organizational documents, its officers and Board of Trustees (the “Board”)
are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts with their vendors and others that provide for general
indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote.
2. SIGNIFICANT ACCOUNTING POLICIES:
Shares of the Funds are listed and traded
on the New York Stock Exchange (“NYSE” or the “Exchange”). The Funds’ shares are offered at net asset value (“NAV”) only in aggregations of 50,000 Shares (each a “Creation Unit”). The Funds will issue and
redeem Creation Units principally in exchange for a basket of securities included in the respective Fund’s Index (the “Deposit Securities”), together with the deposit of a specified cash payment (the “Cash Component”), plus
transaction fees (“Transaction Fees”) as further described below. Shares trade on the Exchange at market prices that may be below, at, or above NAV.
68
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
Shares of a Fund may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a
broker-dealer or other participant in the clearing process through the Continuous Net Settlement System (“Clearing Process”) of the National Securities Clearing Corporation (“NSCC”) or (ii) a DTC participant and, in each
case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the
shares directly from a Fund.
The Funds reserve the right to offer creations and redemptions of Shares for cash. In addition, Shares may be issued in advance of
receipt of Deposit Securities subject to various conditions, including a requirement to maintain on deposit with the Trust cash equal to up to 105% of the market value of the missing Deposit Securities. In each instance of such cash creations or
redemptions, transaction fees may be imposed and may be higher than the transaction fees associated with in-kind creations or redemptions.
Transaction Fees include a fixed fee (“Fixed Fee”) payable to the Custodian (“Citibank N.A.”), which is imposed on each creation and redemption
transaction regardless of the number of Creation Units involved in the transaction. Transaction Fees may also include an additional variable charge (“Variable Charge”) for purchases and redemptions of Creation Units for cash or involving cash-in-lieu, to compensate each Fund and its ongoing shareholders for brokerage and market impact expenses relating to Creation Unit transactions. Under certain
circumstances, the Transaction Fees may be waived or adjusted. In such cases, the Authorized Participant will reimburse each Fund for, among other things, any difference between the market value at which the securities and/or financial instruments
were purchased by each Fund and the cash-in-lieu amount, applicable registration fees, brokerage commissions and certain taxes and other costs and expenses related to
the execution of trades resulting from such transaction (up to the maximum amount shown below). In addition, purchasers of Creation Units are responsible for the costs of transferring the Deposit Securities to the account of each Fund. Variable fees
received by each Fund are displayed in the Capital Share Transaction section of the Statements of Changes in Net Assets as an increase to Paid-In-Capital.
Investors who use the services of a broker, or other such intermediary may be charged a fee for such services.
69
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
The Transaction Fees for each Fund are listed below:
|
|
|
|
|
|
|
|
|
Fee for In-Kind and
Cash Purchases and
Redemptions
|
|
Maximum
Additional Variable
Charge for
Cash
Purchases and
Redemptions*
|
|
US Small Cap Core ETF
|
|
$250
|
|
2.00%
|
|
|
|
|
|
US Large Cap Core ETF
|
|
$500
|
|
2.00%
|
|
|
|
|
|
High Dividend Stock ETF
|
|
$250
|
|
2.00%
|
|
|
|
|
|
International ETF
|
|
$4,500
|
|
2.00%
|
* As a percentage of the amount invested.
The
following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America
(“GAAP”). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Funds follow the specialized accounting and reporting requirements under GAAP that are
applicable to investment companies.
Investment Valuation:
The
Funds record investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for
valuing the Funds’ investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical
securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those
securities, etc.)
• Level 3 — significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of
investments)
70
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation
techniques are not necessarily an indication of the risk associated with entering into those investments.
Portfolio securities listed or traded on securities
exchanges, American Depositary Receipts (“ADRs”) and Rights, are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the NASDAQ Official Closing Price. If there have been no
sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as
Level 1 in the fair value hierarchy.
Futures contracts are valued at the settlement price established each day by the board of trade or an exchange on
which they are traded. These valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in
open-end investment companies are valued at net asset value. These valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments for which there are no such quotations, or for which quotations do not appear reliable, are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Trust’s Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair
value.
A summary of the valuations as of December 31, 2019, based upon the three levels defined above, is included in the table below while the breakdown, by
category, of investments is disclosed in the Schedules of Portfolio Investments:
US Small Cap Core ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 -
Quoted Prices
|
|
|
Level 2 - Other
Significant
Observable
Inputs
|
|
|
Level 3 - Other
Significant
Unobservable
Inputs
|
|
|
Total
|
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
10,197,513
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
10,197,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities
|
|
|
10,197,513
|
|
|
|
–
|
|
|
|
–
|
|
|
|
10,197,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
10,197,513
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
10,197,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
US Large Cap Core ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 -
Quoted Prices
|
|
|
Level 2 - Other
Significant
Observable
Inputs
|
|
|
Level 3 - Other
Significant
Unobservable
Inputs
|
|
|
Total
|
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
134,418,771
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
134,418,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities
|
|
|
134,418,771
|
|
|
|
–
|
|
|
|
–
|
|
|
|
134,418,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Instruments*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts
|
|
|
4,554
|
|
|
|
–
|
|
|
|
–
|
|
|
|
4,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
134,423,325
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
134,423,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High Dividend Stock ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 -
Quoted Prices
|
|
|
Level 2 - Other
Significant
Observable
Inputs
|
|
|
Level 3 - Other
Significant
Unobservable
Inputs
|
|
|
Total
|
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
93,816,902
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
93,816,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities
|
|
|
93,816,902
|
|
|
|
–
|
|
|
|
–
|
|
|
|
93,816,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Instruments*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts
|
|
|
(137)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(137)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
93,816,765
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
93,816,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 -
Quoted Prices
|
|
|
Level 2 - Other
Significant
Observable
Inputs
|
|
|
Level 3 - Other
Significant
Unobservable
Inputs
|
|
|
Total
|
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
22,920,698
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
22,920,698
|
|
|
Rights
|
|
|
1,887
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities
|
|
|
22,922,585
|
|
|
|
–
|
|
|
|
–
|
|
|
|
22,922,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
22,922,585
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
22,922,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
*Other Financial Instruments would include any derivative instruments, such as futures contracts. These investments are generally at the unrealized
appreciation/(depreciation) on the instrument.
Real Estate Investment Trusts (“REITs”):
The Funds may invest in REITs which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in
income-producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Funds or when such
information becomes known.
Investment Companies:
The Funds may
invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the
last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Investment Transactions and Related Income:
Changes in holdings of
investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date on the last business day of the reporting period. Interest
income is recognized on an accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Withholding taxes on interest, dividends
and gains as a result of certain investments in ADRs by the Funds have been provided for in accordance with each investment’s applicable country’s tax rules and rates.
Futures Contracts:
During the period ended December 31, 2019, the
US Large Cap Core ETF and High Dividend Stock ETF Funds used futures contracts to provide market exposure on the Funds’ cash balances. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures
contract, and to maintain the Fund’s open positions in futures contracts, the Fund would be required to deposit with its custodian or futures broker in a segregated account in the name of the futures broker an amount of cash, U.S. government
securities, suitable money market instruments, or other liquid securities, known as “initial margin.” The margin required for a particular futures contract is set by the exchange on
73
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Notes to Financial Statements
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The Timothy Plan
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|
December 31, 2019
|
which the contract is traded, and may be significantly modified from time to time by the exchange during the term of the contract. Futures contracts are customarily purchased and sold on margins
that may range upward from less than 5% of the value of the contract being traded. If the price of an open futures contract changes (by increase in underlying instrument or index in the case of a sale or by decrease in the case of a purchase) so
that the loss on the futures contract reaches a point at which the margin on deposit does not satisfy margin requirements, the broker will require an increase in the margin. However, if the value of a position increases because of favorable price
changes in the futures contract so that the margin deposit exceeds the required margin, the broker will pay the excess to a Fund. These subsequent payments, called “Variation Margin,” to and from the futures broker, are made on a daily
basis as the price of the underlying assets fluctuate making the long and short positions in the futures contract more or less valuable, a process known as “marking to the market.” The Funds recorded a payable or receivable on variation
margin. The Funds expect to earn interest income on its margin deposits. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, elements of market risk
(generally equity price risk related to stock futures, interest rate risk related to bond futures, and foreign currency risk related to currency futures) and exposure to loss in excess of the variation margin disclosed in the Statements of Assets
and Liabilities. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in fair value of the underlying securities and the prices of futures contracts, the possibility of an illiquid market,
and the inability of the counterparty to meet the terms of the contract. The monthly average notional amount for these contracts were $102,796 and $163,156 for US Large Cap Core ETF and High Dividend Stock ETF, respectively, for the period
ended December 31, 2019. Realized gains and losses are reported as “Net realized gains/(losses) from futures transactions” on the Statements of Operations.
Summary of Derivative Instruments
The following is a summary of the fair
values of derivative instruments on the Statements of Assets and Liabilities, categorized by risk exposure, as of December 31, 2019:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
Fund
|
|
Primary Risk
Exposure
|
|
Statements of Asset
and Liabilities
Location
|
|
Total Fair
Value
|
|
|
Statements of Asset
and Liabilities
Location
|
|
Total Fair
Value
|
|
|
|
|
Equity Risk
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Large Cap Core ETF
|
|
Equity Contracts
|
|
Receivable for variation margin on futures contracts*
|
|
$
|
4,554
|
|
|
Payable for variation margin on futures contracts*
|
|
$
|
-
|
|
|
High Dividend Stock ETF
|
|
|
|
Receivable for variation margin on futures contracts*
|
|
|
-
|
|
|
Payable for variation margin on futures contracts*
|
|
|
137
|
|
* For futures contracts, the amounts represent the cumulative appreciation/(depreciation) of these futures contracts as
reported in the Schedule of Portfolio Investments. Only the current day’s variation margin is reported within the Statements of Assets and Liabilities as Variation Margin on futures contracts.
74
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Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
The following is a summary of the effect of derivative instruments on the Statements of Operations, categorized by risk exposure, for the year ended December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized Gains (Losses)
on Derivatives
Recognized as a Result
from Operations
|
|
|
Change in Unrealized
Appreciation/
(Depreciation) on
Derivatives
Recognized as a
Result from
Operations
|
|
|
Fund
|
|
Primary Risk Exposure
|
|
Net realized gains
(losses) from futures
transactions
|
|
|
Change in unrealized
appreciation
(depreciation) on
futures transactions
|
|
|
|
|
Equity Risk
|
|
|
|
|
|
|
|
US Large Cap Core ETF
|
|
Equity Contracts
|
|
$
|
7,977
|
|
|
$
|
4,554
|
|
|
High Dividend Stock ETF
|
|
Equity Contracts
|
|
|
15,421
|
|
|
|
(137
|
)
|
Foreign Currency Translations:
The
accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities of a Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of
securities, income receipts and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange
rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as net change in unrealized appreciation/depreciation on investments and foreign currency translations on the Statements
of Operations. Any realized gains or losses from these fluctuations are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statements of Operations.
Foreign Taxes:
The Funds may be subject to foreign taxes related to
foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in
the foreign jurisdictions in which the Funds invest.
Dividends to Shareholders:
Dividends from net investment income, if any, are declared and paid monthly for the Funds. Distributable net realized gains, if any, are declared and distributed at
least annually from each Fund.
The amounts of dividends from net investment income and distributions from net realized gains are determined in accordance with
federal income tax regulations, which may differ from GAAP. To the extent these “book/tax” differences are permanent in nature (i.e., that they result from other than timing of recognition “temporary difference”), such amounts
are reclassified within the components of net assets based on their federal tax-basis
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Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of capital. Net investment losses incurred by a Fund may be reclassified as an offset to capital on the accompanying Statements of Assets and Liabilities.
Federal Income Taxes:
It is the policy of each Fund to continue to
qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized
gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Funds identifies its major tax jurisdiction as U.S. Federal.
As of and during the period ended December 31, 2019, the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if
any, related to unrecognized tax benefits as income tax expense on the Statements of Operations. During the period, the Funds did not incur any interest or penalties. For the current open tax year, management of the Funds has concluded that there
are no significant uncertain tax positions that would require recognition in the financial statements. Further, management of the Funds is not aware of any tax positions for which it is reasonably possible that the total amounts of any unrecognized
tax benefits will significantly change over the next fiscal year.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) and in-kind transactions
associated with purchases and sales for the period ended December 31, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding in-kind
transactions
|
|
|
Associated with in-kind
transactions
|
|
|
Fund
|
|
Purchases
|
|
|
Sales
|
|
|
Purchases
|
|
|
Sales
|
|
|
US Small Cap Core ETF
|
|
$
|
46,329
|
|
|
$
|
—
|
|
|
$
|
11,024,342
|
|
|
$
|
1,279,746
|
|
|
US Large Cap Core ETF
|
|
|
12,778,214
|
|
|
|
12,519,316
|
|
|
|
138,896,113
|
|
|
|
12,722,270
|
|
|
High Dividend Stock ETF
|
|
|
14,982,317
|
|
|
|
14,468,140
|
|
|
|
103,390,024
|
|
|
|
16,299,022
|
|
|
International ETF
|
|
|
3,605,312
|
|
|
|
1,585,358
|
|
|
|
20,220,710
|
|
|
|
—
|
|
For the period ended December 31, 2019, there were no purchases or sales of U.S. Government Securities.
4. FEES AND TRANSACTIONS WITH AFFILIATES AND OTHER PARTIES:
Timothy Partners,
Ltd. (“TPL” or the “Advisor”), a Florida limited partnership, serves as the Funds’ investment advisor pursuant to an Investment Advisory Agreement. Subject at all times to the supervision and approval of the Board, the
Advisor is responsible for the
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|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
overall management of the Funds. The Advisor has arranged for distribution, custody, fund administration, transfer agency and all other services necessary for the Funds to operate. The Advisor
receives a fee for its services, (the “Management Fee”). From the Management Fee, the Advisor is obligated to pay or arrange for the payment of substantially all expenses of the Funds, including the cost of transfer agency, custody, fund
administration and accounting, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, acquired fund fees and expenses, taxes and extraordinary expenses such as
litigation and other expenses not incurred in the ordinary course of the Fund’s business. The Advisor’s Management Fee is designed to cause substantially all of the Funds’ expenses to be paid and to compensate the Advisor for
providing services for the Funds. US Large Cap Core ETF, US Small Cap Core ETF and High Dividend Stock ETF pay a Management Fee equivalent to 0.52% and International ETF pays a Management Fee equivalent to 0.62% of the Fund’s
average daily net assets, computed daily and paid monthly.
Victory Capital Management, Inc., a New York corporation, serves as the Funds’ sub-advisor pursuant to a written sub-advisory agreement with the Advisor and receives fees from the Advisor for these services.
Citibank, N.A. serves as the Funds’ Custodian and Transfer Agent pursuant to a Global Custodial and Agency Services Agreement with the Trust. Citi Fund Services
Ohio, Inc. (“Citi”), an affiliate of Citibank, N.A., acts as the Funds’ administrator and fund accountant pursuant to a Services Agreement with the Trust.
Foreside Fund Services, LLC (“Foreside”) serves as the Funds’ distributor.
Drake Compliance LLC provides compliance services to the Trust.
Certain officers
and/or interested trustees of the Funds are also officers and/or employees of the Advisor.
5. INVESTMENT RISKS:
Each Fund may be subject to other risks in addition to these identified risks.
ETF Risk
The NAV of a Fund can fluctuate up or down, and you could lose
money investing in a Fund if the prices of the securities owned by the Fund decline. In addition, a Fund may be subject to the following risks: (1) the market price of a Fund’s shares may trade above or below its NAV; (2) an active
trading market for a Fund’s shares may not develop or be maintained; or (3) trading of a Fund’s shares may be halted if the listing exchange’s officials deem such action appropriate, the shares are delisted from the exchange, or
the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.
77
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|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
Market Risk
The prices of the securities, particularly the common
stocks, in which the Funds invest, may decline for a number of reasons. The price declines of common stocks, in particular, may be steep, sudden, and/or prolonged. Adverse market conditions, sometimes in response to general economic or industry
news, may cause the prices of a Fund’s holdings to fall as part of a broad market decline. In addition, certain unanticipated events, such as natural disasters, terrorist attacks, and other geopolitical events, can have a dramatic adverse
effect on securities held by a Fund.
Foreign Securities Risk
Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations can involve additional risks relating to political,
economic, or regulatory conditions in foreign countries. These risks include fluctuations in foreign currencies; imposition of additional taxes; trading, settlement, custodial and other operational risks; and risk arising from the less stringent
investor protection and disclosure standards of some foreign markets. All of these factors can make foreign investments more volatile and potentially less liquid than U.S. investments. In addition, foreign markets can perform differently from the
U.S. market.
Excluded Security Risk
Because the Index omits
Excluded Securities, the Fund may be riskier than other funds that invest in a broader array of securities. Biblically Responsible Investing (“BRI”) may not be successful. Because the Index is reconstituted only at prescribed times during
the year, the Fund may temporarily hold securities that do not comply with the BRI screening criteria if the application of the criteria or the nature of a company’s business changes in between these dates.
6. FEDERAL INCOME TAX INFORMATION:
As of December 31, 2019, the cost
basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation and net unrealized appreciation (depreciation) for investments were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Cost of
Investments
for Federal
Tax Purposes
|
|
Gross Unrealized
Appreciation
|
|
Gross Unrealized
Depreciation
|
|
Net Unrealized
Appreciation
(Depreciation)
|
|
US Small Cap Core ETF
|
|
$9,849,296
|
|
$437,549
|
|
$ (89,332)
|
|
$ 348,217
|
|
US Large Cap Core ETF
|
|
126,666,716
|
|
8,689,775
|
|
(937,720)
|
|
7,752,055
|
|
High Dividend Stock ETF
|
|
87,642,360
|
|
6,911,656
|
|
(737,114)
|
|
6,174,542
|
|
International ETF
|
|
22,268,043
|
|
768,054
|
|
(113,512)
|
|
654,542
|
78
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
The tax character of distributions paid to shareholders during the period ended December 31, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended December 31, 2019
|
|
|
|
|
Distributions Paid From:
|
|
|
|
|
|
|
|
|
Fund
|
|
Ordinary
Income
|
|
|
Total Taxable
Distributions
|
|
|
Total Distributions
Paid*
|
|
|
US Small Cap Core ETF
|
|
$
|
7,507
|
|
|
$
|
7,507
|
|
|
$
|
7,507
|
|
|
US Large Cap Core ETF
|
|
|
593,505
|
|
|
|
593,505
|
|
|
|
593,505
|
|
|
High Dividend ETF
|
|
|
1,238,011
|
|
|
|
1,238,011
|
|
|
|
1,238,011
|
|
|
International ETF
|
|
|
29,857
|
|
|
|
29,857
|
|
|
|
29,857
|
|
* Total distributions paid may differ from the Statement of Changes in Net Assets because distributions are recognized when
actually paid for tax purposes.
As of December 31, 2019, the components of accumulated earnings/(deficit) on a tax basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Undistributed
Ordinary
Income
|
|
|
Accumulated
Earnings
|
|
|
Accumulated
Capital and
Other
Losses
|
|
|
Unrealized
Appreciation
(Depreciation)*
|
|
|
Total
Accumulated
Earnings/
(Deficit)
|
|
|
US Small Cap Core ETF
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
348,217
|
|
|
$
|
348,217
|
|
|
US Large Cap Core ETF
|
|
|
7,089
|
|
|
|
7,089
|
|
|
|
(991,606
|
)
|
|
|
7,752,055
|
|
|
|
6,767,538
|
|
|
High Dividend ETF
|
|
|
16,139
|
|
|
|
16,139
|
|
|
|
(795,954
|
)
|
|
|
6,174,542
|
|
|
|
5,394,727
|
|
|
International ETF
|
|
|
28,523
|
|
|
|
28,523
|
|
|
|
—
|
|
|
|
654,759
|
**
|
|
|
683,282
|
|
* The difference between book-basis and tax-basis unrealized appreciation (depreciation) is
attributable primarily to tax deferral of losses on wash sales, futures mark to market, return of capital from underlying investments and passive foreign investment company mark to market.
** The amount includes $217 of unrealized appreciation on foreign currency translation.
At December 31, 2019, the Funds had net capital loss carry forwards (“CLCFs”) for federal income tax purposes which are available to reduce the future capital
gain distributions to shareholders.
CLCFs not subject to expiration:
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Short-Term Amount
|
|
|
Total
|
|
|
US Large Cap Core ETF
|
|
$
|
991,606
|
|
|
$
|
991,606
|
|
|
High Dividend ETF
|
|
|
795,954
|
|
|
|
795,954
|
|
During the period ended December 31, 2019, the Funds realized the following net capital gains (losses) resulting from in-kind
redemptions, in which shareholders exchanged Fund shares for securities held by the Fund rather than for cash. Because such gains (losses) are
79
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|
|
|
|
Notes to Financial Statements
|
|
|
|
|
The Timothy Plan
|
|
December 31, 2019
|
not taxable to the Fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized gains (losses) to paid-in capital.
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Short-Term Amount
|
|
|
Total
|
|
|
US Small Cap Core ETF
|
|
|
$ (58,371
|
)
|
|
|
$ (58,371
|
)
|
|
US Large Cap Core ETF
|
|
|
(1,410,406
|
)
|
|
|
(1,410,406
|
)
|
|
High Dividend ETF
|
|
|
(1,274,259
|
)
|
|
|
(1,274,259
|
)
|
7. RECENT ACCOUNTING PRONOUNCEMENTS:
In
August 2018, the FASB issued Accounting Standards Update No. 2018-13, “Disclosure Framework - Changes to Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurement. In addition, the amendments clarify that materiality is an
appropriate consideration when evaluating disclosure requirements. ASU 2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019 and interim periods within
those fiscal years. The Funds have adopted ASU 2018-13 with the financial statements prepared as of December 31, 2019.
8. SUBSEQUENT EVENTS:
Management has evaluated subsequent events through the
date these financial statements were issued.
Distributions
On February
12, the Funds declared and paid, respectively, a distribution from ordinary income for the following amounts:
|
|
|
|
|
|
|
Fund
|
|
Amount
|
|
|
US Small Cap Core ETF
|
|
$
|
9,320
|
|
|
US Large Cap Core ETF
|
|
|
32,432
|
|
|
High Dividend Stock ETF
|
|
|
99,267
|
|
80
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
The Timothy Plan
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments, of Timothy Plan US Small Cap Core
ETF, Timothy Plan US Large Cap Core ETF, Timothy Plan High Dividend Stock ETF, and Timothy Plan International ETF (the “Funds”), four of the portfolios constituting The Timothy Plan, as of December 31, 2019, and the related statements
of operations, changes in net assets, including the related notes, and the financial highlights for the period May 1, 2019 (commencement of operations) through December 31, 2019, for Timothy Plan US Large Cap Core ETF and Timothy Plan High
Dividend Stock ETF, and the related statements of operations, changes in net assets, including the related notes, and the financial highlights for the period December 3, 2019 (commencement of operations) through December 31, 2019, for
Timothy Plan US Small Cap Core ETF and Timothy Plan International ETF (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of
each of the Funds as of December 31, 2019, the results of their operations, changes in their net assets and the financial highlights for the periods indicated above, in conformity with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These financial
statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud.
Our audit
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian and brokers. Our audit also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies advised by Timothy Partners, Ltd., since 2005.
COHEN & COMPANY, LTD.
Cleveland, Ohio
February 28, 2020
COHEN & COMPANY, LTD.
800.229.1099 | 866.818.4538 | cohencpa.com
Registered
with the Public Company Accounting Oversight Board
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Other Information (Unaudited)
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Timothy Plan
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December 31, 2019
|
For the year ended December 31, 2019, the Funds paid qualified dividend income for the purposes of reduced individual federal income tax rates of:
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Amount
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US Large Cap Core ETF
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100%
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High Dividend ETF
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100%
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Dividends qualified for corporate dividends received deductions of:
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Amount
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US Large Cap Core ETF
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100%
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High Dividend ETF
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100%
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The following Funds intend to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign
source income and foreign tax expense per outstanding share on December 31, 2019, were as follows:
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Foreign
Source
Income
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Foreign
Tax
Expense
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International ETF
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0.04
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0.01
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82
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Other Information (Unaudited)
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Timothy Plan
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December 31, 2019
|
Proxy Voting and Form N-PORT Information
Proxy Voting:
Information regarding the policies and procedures that each
Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 800-539-3863. The information is also
included in the Funds’ Statement of Additional Information, which is available on the SEC’s website at www.sec.gov.
Information relating to how the Funds
voted proxies relating to portfolio securities held during the period ended June 30 is available on the SEC’s website at www.sec.gov.
Availability of
Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarters of each
fiscal year on Form N- PORT. Forms N- PORT are available on the SEC’s website at www.sec.gov.
Expense Examples:
As a shareholder of the Funds, you may incur two types of
costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of
investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000
invested at the beginning of the period and held for the periods presented below.
The Actual Expense figures in the table below provide information about
actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on each Fund’s
actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
83
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Other Information (Unaudited)
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|
Timothy Plan
|
|
December 31, 2019
|
Please note the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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Fund
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|
Beginning
Account
Value
7/1/19
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Actual
Ending
Account
Value
12/31/19
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Hypothetical
Ending
Account
Value
12/31/19
|
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|
Actual
Expenses
Paid
During
Period
7/1/19 -
12/31/19*
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Hypothetical
Expenses
Paid During
Period
7/1/19 -
12/31/19*
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Annualized
Expense
Ratio
During
Period
7/1/19 -
12/31/19
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US Small Cap Core ETF
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|
ETF Shares
|
|
$
|
1,000
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|
$
|
1,033.90
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|
$
|
1,022.63
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|
$
|
0.42
|
**
|
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$
|
2.65
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0.52
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%
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US Large Cap Core ETF
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ETF Shares
|
|
$
|
1,000
|
|
|
$
|
1,081.90
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|
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$
|
1,022.58
|
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$
|
2.73
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$
|
2.65
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0.52
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%
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High Dividend Stock ETF
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|
ETF Shares
|
|
$
|
1,000
|
|
|
$
|
1,094.30
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$
|
1,022.58
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$
|
2.74
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$
|
2.65
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0.52
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%
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International ETF
|
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|
ETF Shares
|
|
$
|
1,000
|
|
|
$
|
1,032.50
|
|
|
$
|
1,022.18
|
|
|
$
|
0.50
|
**
|
|
$
|
3.16
|
|
|
|
0.62
|
%
|
*Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio,
multiplied by 184/365 (to reflect the one half year period).
**Expenses are equal to the average account value over the period, multiplied by the
Fund’s annualized expense ratio, multiplied by 29/365 (to reflect the number of days from commencement of operations on December 3, 2019 through December 31, 2019).
84