Registration No. 333-43587
Rule 497(e)
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Prospectus Dated July 21, 1998
PAX WORLD MONEY MARKET FUND, INC.
INDIVIDUAL INVESTOR CLASS
600 FIFTH AVENUE
NEW YORK, NY 10020
212-830-5220
The Pax World Money Market Fund, Inc. (the "Fund") is designed to meet the
short-term investments needs of individual investors ("Individual Investors"),
institutional investors ("Institutional Investors"), and investors utilizing the
Fund as a sweep vehicle ("Sweep Investors") in connection with an account with a
broker-dealer that has entered into an agreement with the Fund's distributor,
Reich & Tang Distributors, Inc. (the "Distributor"). There are no sales loads,
exchange or redemption fees associated with the Fund.
The Fund offers three classes of shares. This Prospectus offers the
Individual Investor Class shares for individual investors. The Individual
Investor Class shares of the Fund are subject to a service fee pursuant to the
Fund's Rule 12b-1 Distribution and Service Plan and are sold through financial
intermediaries who provide servicing to Individual Investor Class shareholders
for which they receive compensation from Pax World Management Corp. (the
"Advisor"), Reich & Tang Asset Management, L.P. (the "Sub-Advisor") or the
Distributor. See "Description of Common Stock".
The Fund seeks to maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity and to maintain a
stable net asset value of $1 per share. There can be no assurance that these
objectives will be achieved. The Fund seeks to achieve these objectives by
investing in short-term money market obligations with maturities of 397 days or
less, including bank certificates of deposit, time deposits, bankers'
acceptances, high quality commercial paper, securities issued or guaranteed by
certain agencies or instrumentalities of the United States Government, and
repurchase agreements calling for resale in 397 days or less backed by the
foregoing securities.
Consistent with the other members of the Pax World Fund Family, the Fund
seeks to achieve its objective by investing in issuers that produce life
supportive goods and services and that are not to any degree engaged in
manufacturing defense or weapons-related products. The policy of the Fund is to
exclude from its portfolio securities of (i) companies engaged in military
activities, (ii) companies appearing on the United States Department of Defense
list of 100 largest contractors (a copy of which may be obtained from the Office
of the Secretary, Department of Defense, Washington, D.C. 20310) if five percent
(5%) or more of the gross sales of such companies are derived from contracts
with the United States Department of Defense, (iii) other companies contracting
with the United States Department of Defense if five percent (5%) or more of the
gross sales of such companies are derived from contracts with the United States
Department of Defense, and (iv) companies which derive revenue from the
manufacture of liquor, tobacco and/or gambling products. See "Introduction".
(Continued on Next Page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing in Individual Investor Class
shares of the Fund. Additional information about the Fund, including additional
information concerning risk factors relating to an investment in the Fund, has
been filed with the Securities and Exchange Commission and is available upon
request and without charge by calling or writing the Fund at the above address.
The "Statement of Additional Information" bears the same date as this Prospectus
and is incorporated by reference into this Prospectus in its entirety. The
Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains the Statement of Additional Information and other reports and
information regarding the Fund which have been filed electronically with the
Securities and Exchange Commission. This Prospectus should be read and retained
by investors for future reference.
Pax World Management Corp., 222 State Street, Portsmouth, New Hampshire
03801-3853 is the Advisor to the Fund. Reich & Tang Asset Management, L.P. acts
as Sub-Advisor of the Fund and Reich & Tang Distributors, Inc. acts as
Distributor of the Fund's shares. Pax World Management Corp. and Reich & Tang
Asset Management L.P. are each registered investment advisers. Reich & Tang
Distributors, Inc. is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Pax World Management Corp. is
responsible for determining whether contemplated investments satisfy the social
responsibility criteria applied to the Fund. Reich & Tang Asset Management L.P.
performs the day to day portfolio management of the Fund utilizing the
securities of issuers approved by the Advisor.
An investment in the Fund is neither insured nor guaranteed by the United
States Government. The Fund seeks to maintain an investment portfolio with a
dollar-weighted average maturity of 90 days or less, and to value its investment
portfolio at amortized cost and maintain a net asset value of $1.00 per share.
There can be no assurance that the Fund's objectives will be achieved or that
the Fund's stable net asset value of $1.00 per share can be maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
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TABLE OF CONTENTS
Page
TABLE OF FEES AND EXPENSES.......................................... 4
INTRODUCTION........................................................ 5
INVESTMENT OBJECTIVES, POLICIES AND RISKS........................... 6
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION.................. 10
INVESTMENT RESTRICTIONS............................................. 12
MANAGEMENT OF THE FUND.............................................. 13
DESCRIPTION OF COMMON STOCK......................................... 15
HOW TO PURCHASE AND REDEEM SHARES................................... 16
DIRECT PURCHASE AND REDEMPTION PROCEDURES .......................... 17
Initial Purchase of Shares.................................... 17
AUTOMATIC INVESTMENT PLAN........................................... 18
Subsequent Purchases of Shares................................ 18
Redemption of Shares.......................................... 19
Systematic Withdrawal Plan.................................... 21
Exchange Privilege............................................ 21
INDIVIDUAL RETIREMENT ACCOUNTS...................................... 22
DISTRIBUTION AND SERVICE PLAN....................................... 23
DIVIDENDS, DISTRIBUTIONS AND TAXES.................................. 24
NET ASSET VALUE..................................................... 25
GENERAL INFORMATION ................................................ 25
Year 2000..................................................... 26
CUSTODIAN AND TRANSFER AGENT....................................... 26
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TABLE OF FEES AND EXPENSES
Estimated Annual Operating Expenses
-----------------------------------
(as a percentage of average net assets)
THE PAX WORLD MONEY MARKET FUND
INDIVIDUAL INVESTOR CLASS
Management Fees........................................ .15%
12b-1 Fees............................................. .25%
Other Expenses......................................... .20%
Administration Fees............................. .10%----
Total Fund Operating Expenses.......................... .60%
====
THE PAX WORLD MONEY MARKET FUND
INDIVIDUAL INVESTOR CLASS
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Example 1 Year 3 Years
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You would pay the following expenses on
a $1,000 investment, assuming 5% annual
return and redemption at the end of
each time period:....................... $6 $19
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The purpose of the above fee table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The Advisor and/or Sub-Advisor at their discretion
may voluntarily waive all or a portion of the Management Fees and Administration
Fees and voluntarily reimburse the Fund's other operating expenses. The
Distributor at its discretion may voluntarily waive all or a portion of the
12b-1 Fees. The expenses shown are at the levels anticipated for the current
year. For a further discussion of these fees see "Management of the Fund" and
"Distribution and Service Plan" herein.
The figures reflected in this example should not be considered to be a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
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INTRODUCTION
Pax World Money Market Fund, Inc. (the "Fund") is a no-load, open-end
management investment company offering investors a managed portfolio of money
market instruments, together with a high degree of liquidity. The Individual
Investor Class shares of the Fund are designed to meet the short-term investment
needs of individual investors. The net asset value of each Fund share is
expected to remain constant at $1.00, although this cannot be assured.
The investment objective of the Fund is to maximize current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity. There is no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund may not be changed without
shareholder approval.
The Fund endeavors, consistent with its investment objective, to make a
contribution to world peace through investment in companies producing
life-supportive goods and services. The policy of the Fund is to invest in
securities of companies whose business is essentially directed toward
non-military and life-supportive activities. For example, the Fund seeks to
invest in such industries as health care, education, housing, food, retail,
pollution control and leisure time among others.
The policy of the Fund is to exclude from its portfolio securities of (i)
companies engaged in military activities, (ii) companies appearing on the United
States Department of Defense list of 100 largest contractors (a copy of which
may be obtained from the Office of the Secretary, Department of Defense,
Washington, D.C. 20310) if five percent (5%) or more of the gross sales of such
companies are derived from contracts with the United States Department of
Defense, (iii) other companies contracting with the United States Department of
Defense if five percent (5%) or more of the gross sales of such companies are
derived from contracts with the United States Department of Defense, and (iv)
companies which derive revenue from the manufacture of liquor, tobacco and/or
gambling products.
The Fund attempts to achieve its objective through investment in short-term
money market obligations with maturities of 397 days or less, including bank
certificates of deposit, time deposits, bankers' acceptances, high quality
commercial paper, securities issued or guaranteed by certain agencies or
instrumentalities of the United States Government, and repurchase agreements
calling for resale in 397 days or less backed by the foregoing securities. The
Fund seeks to maintain an investment portfolio with a dollar-weighted average
maturity of 90 days or less, and to value its investment portfolio at amortized
cost and maintain a net asset value of $1.00 per share. There can be no
assurance that this value will be maintained.
The Fund's investment advisor is Pax World Management Corp. (the
"Advisor"), which is a registered investment advisor and which currently acts as
manager or advisor to two other open-end management investment companies, the
Pax World Fund, Incorporated (the "Pax World Fund") and the Pax World Growth
Fund, Inc. (the "Pax World Growth Fund"). The Fund's Sub-Advisor is Reich & Tang
Asset Management L.P. (the "Sub-Advisor"), which is a registered investment
advisor and which currently acts as manager or administrator to seventeen other
open-end management investment companies. (See "Management of the Fund" herein.)
The Fund's shares are distributed through Reich & Tang Distributors, Inc. (the
"Distributor"), with whom the Fund has entered into a Distribution Agreement and
Shareholder Servicing Agreement (with respect to Individual Investor Class and
Broker Service Class shares of the Fund only) pursuant to the Fund's
distribution and service plan adopted under Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"). (See "Distribution and Service
Plan" herein.)
On any day on which the New York Stock Exchange is open for trading ("Fund
Business Day"), investors may, without charge by the Fund, initiate purchases
and redemptions of shares of the Fund's common stock at their net asset value,
which will be determined daily. (See "How to Purchase and
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Redeem Shares" and "Net Asset Value" herein.) Dividends from accumulated net
income are declared by the Fund on each Fund Business Day. The Fund pays
interest dividends monthly on the last calendar day of the month or, if the last
calendar day of the month is not a Fund Business Day, on the preceding Fund
Business Day.
Net capital gains, if any, will be distributed at least annually, and in no
event later than 60 days after the end of the Fund' fiscal year. All dividends
and distributions of capital gains are automatically invested in additional
shares of the same class of the Fund unless a shareholder has elected by written
notice to the Fund to receive either of such distributions in cash. (See
"Dividends, Distributions and Taxes" herein.)
The Fund may from time to time advertise its current yield and effective
yield for the Fund (computed separately for each Class of shares). The Fund's
current yield is calculated by dividing its average daily net income per share
of the Fund (excluding realized gains or losses) for a recent seven-day period
by its constant net asset value per share of $1.00 and annualizing the result on
a 365-day basis. The Fund's effective yield is calculated by increasing its
current yield according to a formula that takes into account the compounding
effect of the reinvestment of dividends. Performance for each Class of shares
may vary due to variations in expenses of each Class of shares. (See "How to
Purchase and Redeem Shares" herein.)
An investment in the Fund entails certain risks, including risks associated
with the purchase of when-issued securities, repurchase agreements and privately
placed securities, as well as certain risks associated with the purchase of
foreign issues. Risk factors for the Fund are further described under "Risk
Factors and Additional Investment Information" herein.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
Social Criteria of Fund
The policy of the Fund is to seek investments in issuers that are not to
any degree engaged in manufacturing defense or weapons-related products. The
policy of the Fund is to exclude from its portfolio securities of (i) companies
engaged in military activities, (ii) companies appearing on the United States
Department of Defense list of 100 largest contractors (a copy of which may be
obtained from the Office of the Secretary, Department of Defense, Washington,
D.C. 20310) if five percent (5%) or more of the gross sales of such companies
are derived from contracts with the United States Department of Defense, (iii)
other companies contracting with the United States Department of Defense if five
percent (5%) or more of the gross sales of such companies are derived from
contracts with the United States Department of Defense, and (iv) companies which
derive revenue from the manufacture of liquor, tobacco and/or gambling products.
In order to properly supervise a securities portfolio containing the
limitations described above, care must be exercised to continuously monitor
developments of the issuers whose securities are included in the Fund.
Developments and trends in the economy and financial markets are also
considered, and the screening of many securities is required to implement the
investment philosophy of the Fund. The Advisor, Pax World Management Corp., is
responsible for such supervision and screening of the securities included in the
Fund.
If it is determined after the initial purchase by the Fund that the
company's activities fall within the exclusion described above (either by
acquisition, merger or otherwise), the securities of such company will be
eliminated from the portfolio as soon thereafter as possible taking into
consideration (i) any gain or loss which may be realized from such elimination,
(ii) the tax implications of such elimination, (iii) market timing, and the
like. In no event, however, will such security be retained longer
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than six (6) months from the time the Fund learns of the investment
disqualification. This requirement may cause the Fund to dispose of the security
at a time when it may be disadvantageous to do so.
The Fund's investment objective is a fundamental policy and may not be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the 1940 Act. Investment policies
that are not fundamental may be modified by the Board of Directors.
Permitted Investments:
United States Government Securities: short-term obligations issued or
guaranteed by agencies or instrumentalities of the United States Government the
proceeds of which are earmarked for a specific purpose which complies with the
investment objectives and policies of the Fund. These include issues of agencies
and instrumentalities established under the authority of an act of Congress.
These securities are not supported by the full faith and credit of the United
States Treasury, some are supported by the right of the issuer to borrow from
the Treasury, and still others are supported only by the credit of the agency or
instrumentality. Although obligations of federal agencies and instrumentalities
are not debts of the United States Treasury, in some cases payment of interest
and principal on such obligations is guaranteed by the United States Government,
e.g., obligations of the Federal Housing Administration, the Export-Import Bank
of the United States, the Small Business Administration, the Government National
Mortgage Association, the General Services Administration and the Maritime
Administration; in other cases payment of interest and principal is not
guaranteed, e.g., obligations of the Federal Home Loan Bank System and the
Federal Farm Credit Bank.
Domestic and Foreign Bank Obligations: certificates of deposit, time
deposits, commercial paper, bankers' acceptances issued by domestic banks,
foreign branches of domestic banks, foreign subsidiaries of domestic banks, and
domestic and foreign branches of foreign banks and corporate instruments
supported by bank letters of credit. (See "Risk Factors and Additional
Investment Information" herein.) Certificates of deposit are certificates
representing the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable deposits maintained
in a bank for a specified period of time (in no event longer than seven days) at
a stated interest rate. Time deposits and certificates of deposit which may be
held by the Fund will not benefit from insurance from the Federal Deposit
Insurance Corporation (the "FDIC"). Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the face amount of the instrument upon maturity. The Fund limits its
investments in obligations of domestic banks, foreign branches of domestic banks
and foreign subsidiaries of domestic banks to banks having total assets in
excess of one billion dollars or the equivalent in other currencies. The Fund
limits its investments in obligations of domestic and foreign branches of
foreign banks to dollar-denominated obligations of such banks which at the time
of investment have more than $5 billion, or the equivalent in other currencies,
in total assets and which are considered by the Fund's Board of Directors to be
First Tier Eligible Securities (as defined below) at the time of acquisition.
The Fund generally limits investments in bank instruments to (a) those which are
fully insured as to principal by the FDIC or (b) those issued by banks which at
the date of their latest public reporting have total assets in excess of $1.5
billion. However, the total assets of a bank will not be the sole factor
determining the Fund's investment decisions and the Fund may invest in bank
instruments issued by institutions which the Fund's Board of Directors believes
present minimal credit risks.
U.S. dollar-denominated obligations issued by foreign branches of domestic
banks or foreign branches of foreign banks ("Eurodollar" obligations) and
domestic branches of foreign banks ("Yankee dollar" obligations).: The Fund will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total assets
at the time of purchase, provided that there is no limitation on the Fund
investments in (a) Eurodollar obligations, if the domestic
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parent of the foreign branch issuing the obligations is unconditionally liable
in the event that the foreign branch fails to pay on the Eurodollar obligation
for any reason; and (b) Yankee dollar obligations, if the U.S. branch of the
foreign bank is subject to the same regulation as U.S. banks. Eurodollar, Yankee
dollar and other foreign bank obligations include time deposits, which are
non-negotiable deposits maintained in a bank for a specified period of time at a
stated interest rate. The Fund will limit its purchases of time deposits to
those which mature in seven days or less, and will limit its purchases of time
deposits maturing in two to seven days to 10% of the Fund's total assets at the
time of purchase.
Eurodollar and other foreign obligations involve special investment risks,
including the possibility that liquidity could be impaired because of future
political and economic developments, that the obligations may be less marketable
than comparable domestic obligations of domestic issuers, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that deposits may be seized or nationalized, that foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on those obligations,
that the selection of foreign obligations may be more difficult because there
may be less information publicly available concerning foreign issuers, that
there may be difficulties in enforcing a judgment against a foreign issuer or
that the accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign issuers may differ from those applicable to
domestic issuers. In addition, foreign banks are not subject to examination by
United States Government agencies or instrumentalities.
Since the Fund may contain securities issued by foreign agencies or
instrumentalities, and by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign banks,
and commercial paper issued by foreign issuers, the Fund may be subject to
additional investment risks with respect to those securities that are different
in some respects from those incurred by a fund which invests only in debt
obligations of the United States and domestic issuers, although such obligations
may be higher yielding when compared to the securities of the United States and
domestic issuers. In making foreign investments, therefore, the Fund will give
appropriate consideration to the following factors, among others.
Foreign securities markets generally are not as developed or efficient as
those in the United States. Securities of some foreign issuers are less liquid
and more volatile than securities of comparable United States issuers.
Similarly, volume and liquidity in most foreign securities markets are less than
in the United States and, at times, volatility of price can be greater than in
the United States. The issuers of some of these securities, such as bank
obligations, may be subject to less stringent or different regulation than are
United States issuers. In addition, there may be less publicly available
information about a non-United States issuer and non-United States issuers
generally are not subject to uniform accounting and financial reporting
standards, practices and requirements comparable to those applicable to United
States issuers.
Because evidences of ownership of such securities usually are held outside
the United States, the Fund will be subject to additional risks which include
possible adverse political and economic developments, possible seizure or
nationalization of foreign deposits and possible adoption of governmental
restrictions which might adversely affect the payment of principal and interest
on the foreign securities or might restrict the payment of principal and
interest to the issuer, whether from currency blockage or otherwise.
Furthermore, some of these securities may be subject to stamp or other
excise taxes levied by foreign governments, which have the effect of increasing
the cost of such securities and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Income earned or received
by the Fund from sources within foreign countries may be reduced by withholding
and other taxes imposed by such countries. Tax conventions between certain
countries and the United States,
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however, may reduce or eliminate such taxes. The Advisor and Sub-Advisor will
attempt to minimize such taxes by timing of transactions and other strategies,
but there can be no assurance that such efforts will be successful. All such
taxes paid by the Fund will reduce its net income available for distribution to
shareholders. The Advisor and Sub-Advisor will consider available yields, net of
any required taxes, in selecting foreign securities.
Variable Amount Master Demand Notes: unsecured demand notes that permit
investment of fluctuating amounts of money at variable rates of interest
pursuant to arrangements with issuers who meet the foregoing quality criteria.
The interest rate on a variable amount master demand note is periodically
redetermined according to a prescribed formula. Although there is no secondary
market in master demand notes, the payee may demand payment of the principal and
interest upon notice not exceeding five business or seven calendar days.
Commercial Paper and Certain Debt Obligations: commercial paper or
short-term debt obligations that have been determined by the Fund's Board of
Directors to present minimal credit risks and that are First Tier Eligible
Securities (as defined below) at the time of acquisition, so that the Fund is
able to employ the amortized cost method of valuation. Commercial paper
generally consists of short-term unsecured promissory notes issued by
corporations, banks or other borrowers.
The Fund may only purchase securities that have been determined by the
Fund's Board of Directors to present minimal credit risks and that are First
Tier Eligible Securities at the time of acquisition. The term First Tier
Eligible Securities means (i) securities that have remaining maturities of 397
days or less and are rated in the highest short-term rating category by any two
nationally recognized statistical rating organizations ("NRSROs") or in such
category by the only NRSRO that has rated the securities (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors); (ii) securities that have remaining maturities of
397 days or less but that at the time of issuance were long-term securities and
whose issuer has received from the Requisite NRSROs a rating with respect to
comparable short-term debt in the highest short-term rating category; and (iii)
unrated securities determined by the Fund's Board of Directors to be of
comparable quality. Where the issuer of a long-term security with a remaining
maturity which would otherwise qualify it as a First Tier Eligible Security does
not have rated short-term debt outstanding, the long-term security is treated as
unrated but may not be purchased if it has a long-term rating from any NRSRO
that is below the two highest long-term categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities or participation certificates. While there are several organizations
that currently qualify as NRSROs, two eamples of NRSROs are Standard & Poor's
Rating Services, a division of the McGraw-Hill Companies ("S&P") and Moody's
Investors Service, Inc. ("Moody's"). The two highest ratings by Moody's for debt
securities are "Aaa" and "Aa" or by S&P are "AAA" and "AA". The highest rating
for domestic and foreign commercial paper is "Prime-1" by Moody's or "A-1" by
S&P and "VMIG-1" and "VMIG-2" by Moody's or "SP-1/AA" by S&P in the case of
variable and floating rate demand notes. (See "Description of Ratings" in the
Statement of Additional Information.)
Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced so that it ceases to be a First
Tier Eligible Security. If this occurs, the Board of Directors of the Fund shall
reassess promptly whether the security presents minimal credit risks and shall
cause the Fund to take such action as the Board of Directors determines is in
the best interest of the Fund and its shareholders. However, reassessment is not
required if the security is disposed of or matures within five business days of
the Advisor and Sub-Advisor becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of the Advisor's
and Sub-Advisor's actions.
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In addition, in the event that a security (1) is in default, (2) ceases to
be an eligible investment under Rule 2a-7 or (3) is determined to no longer
present minimal credit risks, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interest of the Fund. In the event that the security is
disposed of, it shall be disposed of as soon as practicable, consistent with
achieving an orderly disposition by sale, exercise of any demand feature, or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of the Fund's total
assets, the Fund shall promptly notify the Securities and Exchange Commission of
such fact and of the actions that the Fund intends to take in response to the
situation.
The Fund may enter into repurchase agreements providing for resale in 397
days or less covering any of the foregoing securities which may have maturities
in excess of 397 days, provided that the instruments serving as collateral for
the agreements are eligible for inclusion in the Fund.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. Delayed delivery agreements are commitments by the Fund to dealers or
issuers to acquire securities beyond the customary same-day settlement for money
market instruments. These commitments fix the payment price and interest rate to
be received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Advisor and
the Sub-Advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales of
shares of the Fund; therefore, to assure that the Fund will be as fully invested
as possible in instruments meeting its investment objective, the Fund may enter
into delayed delivery agreements, but only to the extent of anticipated funds
available for investment during a period of not more than five business days.
Money market obligations are sometimes offered on a "when-issued" basis,
that is, the date for delivery of and payment for the securities is not fixed at
the date of purchase, but is set after the securities are issued (normally
within forty-five days after the date of the transaction). The payment
obligation and the interest rate that will be received on the securities are
fixed at the time the buyer enters into the commitment. The Fund will only make
commitments to purchase such money market instruments with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable.
If the Fund enters into a delayed delivery agreement or purchases a
when-issued security, it will direct Investors Fiduciary Trust Company, the
Fund's custodian (the "Custodian") to place cash or other high grade securities
(including money market obligations) in a separate account of the Fund in an
amount equal to its delayed delivery agreements or when-issued commitments. If
the market value of such securities declines, additional cash or securities will
be placed in the account on a daily basis so that the market value of the
account will equal the amount of the Fund's delayed delivery agreements and
when-issued commitments. To the extent that funds are in a separate account,
they will not be available for new investment or to meet redemptions. Investment
in securities on a when-issued basis and use of delayed agreements may increase
the Fund's exposure to market fluctuation; or may increase the possibility that
the Fund will incur a short-term loss, if the Fund must engage in portfolio
transactions in order to honor a when-issued commitment or accept delivery of a
security under a delayed delivery agreement. The Fund will employ techniques
designed to minimize these risks.
No additional delayed delivery agreements or when-issued commitments will
be made if more than 25% of the Fund's net assets would become so committed. The
Fund will enter into when-issued
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and delayed delivery transactions only when the time period between trade date
and settlement date is at least 30 days and not more than 120 days.
Repurchase Agreements
When the Fund purchases securities, it may enter into a repurchase
agreement with the seller wherein the seller agrees, at the time of sale, to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This arrangement
results in a fixed rate of return insulated from market fluctuations during such
period. The Fund may enter into repurchase agreements with member banks of the
Federal Reserve System and with broker-dealers who are recognized as primary
dealers in United States government securities by the Federal Reserve Bank of
New York whose creditworthiness has been reviewed and found to meet the
investment criteria of the Fund. Although the securities subject to the
repurchase agreement might bear maturities exceeding 397 days, settlement for
the repurchase would never be more than one year after the Fund's acquisition of
the securities and normally would be within a shorter period of time. The resale
price will be in excess of the purchase price, reflecting an agreed upon market
rate effective for the period of time the Fund's money will be invested in the
security, and will not be related to the coupon rate of the purchased security.
At the time the Fund enters into a repurchase agreement the value of the
underlying security, including accrued interest, will be equal to or exceed the
value of the repurchase agreement and, in the case of a repurchase agreement
exceeding one day, the seller will agree that the value of the underlying
security, including accrued interest, will at all times be equal to or exceed
the value of the repurchase agreement. The Fund may engage in a repurchase
agreement with respect to any security in which it is authorized to invest, even
though the underlying security may mature in more than one year. The collateral
securing the seller's obligation must be of a credit quality at least equal to
the Fund's investment criteria for Fund securities and will be held by the
Fund's custodian or in the Federal Reserve Book Entry System. Nevertheless, if
the seller of a repurchase agreement fails to repurchase the obligation in
accordance with the terms of the agreement, the Fund which entered into the
repurchase agreement may incur a loss to the extent that the proceeds it
realized on the sale of the underlying obligation are less than the repurchase
price. Repurchase agreements may be considered loans to the seller of the
underlying security. Income with respect to repurchase agreements is not
tax-exempt. If bankruptcy proceedings are commenced with respect to the seller,
the Fund's realization upon the collateral may be delayed or limited. The Fund
may invest no more than 10% of its net assets in illiquid securities including
repurchase agreements maturing in more than seven days. (See "Investment
Restrictions" herein.) The Fund may, however, enter into "continuing contract"
or "open" repurchase agreements under which the seller is under a continuing
obligation to repurchase the underlying obligation from the Fund on demand and
the effective interest rate is negotiated on a daily basis.
Securities purchased pursuant to a repurchase agreement are held by the
Fund's custodian and (i) are recorded in the name of the Fund with the Federal
Reserve Book Entry System or (ii) the Fund receives daily written confirmation
of each purchase of a security and a receipt from the custodian. The Fund
purchases securities subject to a repurchase agreement only when the purchase
price of the security acquired is equal to or less than its market price at the
time of purchase.
Privately Placed Securities
The Fund may invest in securities issued as part of privately negotiated
transactions between an issuer and one or more purchasers. Except with respect
to certain commercial paper issued in reliance on the exemption from regulations
in Section 4(2) of the Securities Act of 1933 (the "Securities Act") and
securities subject to Rule 144A of the Securities Act which are discussed below,
these securities are typically not readily marketable and are therefore
considered illiquid securities. The
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<PAGE>
price the Fund pays for illiquid securities, and any price received upon resale,
may be lower than the price paid or received for similar securities with a more
liquid market. Accordingly, the valuation of privately placed securities
purchased by the Fund will reflect any limitations on their liquidity.
The Fund may purchase securities that are not registered ("restricted
securities") under the Securities Act, but can be offered and sold to "qualified
institutional buyers" under Rule 144A of the Securities Act. The Fund may also
purchase certain commercial paper issued in reliance on the exemption from
regulations in Section 4(2) of the Securities Act ("4(2) Paper"). However, the
Fund will not invest more than 10% of its net assets in illiquid investments,
which include securities for which there is no readily available market,
securities subject to contractual restriction on resale, certain investments in
asset-backed and receivable-backed securities and restricted securities (unless,
with respect to these securities and 4(2) Paper, the Fund's Directors
continuously determine, based on the trading markets for the specific restricted
security, that it is liquid). The Directors may adopt guidelines and delegate to
the Advisor or Sub-Advisor the daily function of determining and monitoring
liquidity of restricted securities and 4(2) Paper. The Directors, however, will
retain sufficient oversight and be ultimately responsible for these
determinations.
Since it is not possible to predict with assurance exactly how this market
for restricted securities sold and offered under Rule 144A will develop, the
Directors will carefully monitor the Fund's investments in these securities,
focusing on such factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
INVESTMENT RESTRICTIONS
The Fund operates under the following investment restrictions which,
together with the investment objective of the Fund, may not be changed without
shareholder approval and which apply to the Fund.
The Fund may not:
* invest more than 5% of the total market value of the Fund's assets
(determined at the time of the proposed investment and giving effect
thereto) in the securities of any one issuer other than the United
States Government, its agencies or instrumentalities;
* invest more than 25% of the value of the Fund's total assets in
securities of companies in the same industry (excluding United States
government securities and certificates of deposit and bankers'
acceptances of domestic banks) if the purchase would cause more than
25% of the value of the Fund's total assets to be invested in
companies in the same industry (for the purpose of this restriction
wholly-owned finance companies are considered to be in the industry of
their parents if their activities are similarly related to financing
the activities of their parents);
* acquire securities that are not readily marketable or repurchase
agreements calling for resale within more than seven days if, as a
result thereof, more than 10% of the value of its net assets would be
invested in such illiquid securities;
* invest more than 5% of the Fund's assets in securities that are
subject to underlying puts from the same institution, and no single
bank shall issue its letter of credit and no single financial
institution shall issue a credit enhancement covering more than 5% of
the total assets of the Fund. However, if the puts are exercisable by
the Fund in the event of default on payment of principal and interest
on the underlying security, then the Fund may invest up to 10% of its
assets in securities underlying puts issued or guaranteed by the same
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<PAGE>
institution; additionally, a single bank can issue its letter of
credit or a single financial institution can issue a credit
enhancement covering up to 10% of the Fund's assets, where the puts
offer the Fund such default protection;
* make loans, except that the Fund may purchase for the Fund the debt
securities described above under "Investment Objectives, Policies and
Risks" and may enter into repurchase agreements as therein described;
* borrow money, unless (i) the borrowing does not exceed 10% of the
total market value of the assets of the Fund with respect to which the
borrowing is made (determined at the time of borrowing but without
giving effect thereto) and (ii) the money is borrowed from one or more
banks as a temporary measure for extraordinary or emergency purposes
or to meet unexpectedly heavy redemption requests; in addition the
Fund will not make additional investments when borrowings exceed 5% of
the Fund's net assets; and
* pledge, mortgage, assign or encumber any of the Fund's assets except
to the extent necessary to secure a borrowing permitted by the
foregoing clause made with respect to the Fund.
MANAGEMENT OF THE FUND
Management, Advisory and Sub-Advisory Agreements
The Fund's Board of Directors, which is responsible for the overall
management and supervision of the Fund, has employed Pax World Management Corp.,
222 State Street, Portsmouth, New Hampshire 03801 (the "Advisor"), to act as
investment advisor to the Fund. The Advisor was incorporated in 1970 under the
laws of the State of Delaware and is a registered investment advisor, under the
1940 Act. Pursuant to the terms of an Advisory Agreement entered into between
the Fund and the Advisor (the "Advisory Agreement"), the Advisor, subject to the
supervision of the Board of Directors of the Fund, is responsible for
determining whether contemplated investments satisfy the social responsibility
criteria applied to the Fund and for overseeing the performance of the
Sub-Advisor. Under the Advisory Agreement, the Fund will pay the Advisor an
annual advisory fee of .15% of the Fund's average daily net assets. As of
December 31, 1997, the Advisor had over $600,000,000 in assets under management
by virtue of serving as the Advisor to the Pax World Fund, and the Pax World
Growth Fund. The Advisor has no clients other than the Fund, the Pax World Fund
and the Pax World Growth Fund. Reich & Tang Asset Management L.P. will serve as
the Sub-Advisor of the Fund under a Sub-Advisory Agreement entered into between
the Advisor and the Sub-Advisor (the "Sub-Advisory Agreement"). The Advisor and
Sub-Advisor provide persons satisfactory to the Fund's Board of Directors to
serve as officers of the Fund. Such officers, as well as certain other employees
and Directors of the Fund, may be officers of the Advisor, Reich & Tang Asset
Management, Inc., the sole general partner of the Sub-Advisor or employees of
the Sub-Advisor or its affiliates. Due to the services performed by the Advisor
and Sub-Advisor, the Fund currently has no employees and its officers are not
required to devote full-time to the affairs of the Fund. The Statement of
Additional Information contains general background information regarding each
Director and principal officer of the Fund.
The Sub-Advisor is a Delaware limited partnership and a registered
investment advisor, under the 1940 Act, with its principal office at 600 Fifth
Avenue, New York, New York 10020. The Sub-Advisor, as of February 28, 1998, was
investment manager, advisor or supervisor with respect to assets aggregating
approximately $11.28 billion. The Sub-Advisor acts as manager or administrator
of seventeen other registered investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
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<PAGE>
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was
the limited partner and owner of a 99.5% interest in the Sub-Advisor replacing
New England Investment Companies, L.P. ("NEICLP") as the limited partner and
owner of such interest in the Sub-Advisor, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
NEICOP changed its name to Nvest Companies, L.P. ("Nvest Companies").
Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of Nvest
Companies) is the sole general partner and owner of the remaining 0.5% interest
of the Sub-Advisor. Nvest Corporation, a Massachusetts Corporation (formerly
known as New England Investment Companies, Inc.), serves as the managing general
partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of
Metropolitan Life Insurance Company ("MetLife"). Also, MetLife directly and
indirectly owns approximately 47% of the outstanding partnership interests of
Nvest Companies and may be deemed a "controlling person" of the Sub-Advisor.
Reich & Tang, Inc. owns, directly and indirectly, approximately 13% of the
outstanding partnership interests of Nvest Companies.
Nvest Companies is a holding company offering to institutional clients a
broad array of investment styles across a wide range of asset categories through
thirteen subsidiaries, divisions and affiliates. Its business units include AEW
Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth Management,
L.P., Graystone Partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P.,
Loomis, Sayles & Company, L.P., New England Investment Associates, Inc., Reich &
Tang Capital Management, Reich & Tang Funds, Vaughan-Nelson, Scarborough &
McConnell, Inc., and Westpeak Investment Advisors, L.P. These affiliates in the
aggregate are investment advisors or managers to 80 other registered investment
companies.
The recent name change did not result in a change in control of the
Sub-advisor and has no impact upon the Sub-Advisor's performance of its
responsibilities and obligations.
On January 30, 1998 the Board of Directors, including a majority of the
Directors who are not interested persons (as defined in the 1940 Act) of the
Fund, the Advisor or the Sub-Advisor, approved an Investment Advisory Agreement
with the Advisor and a Sub-Advisory Agreement with the Sub-Advisor each
effective April 9, 1998 which have terms which extend to January 31, 2000 and
may be continued in force thereafter for successive twelve-month periods
beginning each February 1, provided that such continuance is specifically
approved annually by majority vote of the Fund's outstanding voting securities
or by a majority of the Directors who are not parties to the Investment Advisory
Agreement and Sub-Advisory Agreement or interested persons of any such party, by
votes cast in person at a meeting called for the purpose of voting on such
matter. The Investment Advisory Agreement and Sub-Advisory Agreement were
approved by the sole shareholder of the Fund on March 18, 1998.
Pursuant to the terms of a Sub-Advisory Agreement between the Advisor and
the Sub-Advisor, the Sub-Advisor manages the Fund's portfolio of securities and
makes the decisions with respect to the purchase and sale of investments,
subject to the general control of the Board of Directors of the Fund and the
determination of the Advisor that the contemplated investments satisfy the
social responsibility criteria applied to the Fund. Under the Sub-Advisory
Agreement, the Advisor will pay the Sub-Advisor an annual management fee of
.075% of the Fund's average daily net assets from its advisory fee. The
management fees are accrued daily and paid monthly. The Sub-Advisor, at its
discretion, may voluntarily waive all or a portion of the management fee.
Pursuant to an Administrative Services Agreement for the Fund, the
Sub-Advisor performs clerical, accounting supervision and office service
functions for the Fund and provides the Fund with personnel to (i) supervise the
performance of bookkeeping and related services by Investors Fiduciary
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<PAGE>
Trust Company, the Fund's bookkeeping agent; (ii) prepare reports to and filings
with regulatory authorities; and (iii) perform such other administrative
services as the Fund may from time to time request of the Sub-Advisor. The
personnel rendering such services may be employees of the Sub-Advisor or its
affiliates. The Fund reimburses the Sub-Advisor for all of the Fund's operating
costs including rent, depreciation of equipment and facilities, interest and
amortization of loans financing equipment used by the Fund and all the expenses
incurred to conduct the Fund's affairs. The amount of such reimbursement must be
agreed upon between the Fund and the Sub-Advisor. The Sub-Advisor, at its
discretion, may voluntarily waive all or a portion of the administrative
services fee and the operating expense reimbursement. For its services under the
Administrative Services Agreement, the Sub-Advisor receives an annual fee of
.10% of the Fund's average daily net assets.
Any portion of the total fees received by the Advisor and Sub-Advisor and
their past profits may be used to provide shareholder services and for
distribution of Fund shares. (See "Distribution and Service Plan" herein.) The
fees are accrued daily and paid monthly.
In addition, Reich & Tang Distributors, Inc., the Distributor, receives a
servicing fee equal to .25% per annum of the average daily net assets of the
Individual Investor Class shares (the "Shareholder Servicing Fee") of the Fund
under the Shareholder Servicing Agreement with the Distributor. The fees are
accrued daily and paid monthly. Investment management fees and operating
expenses, which are attributable to the three Classes of shares of the Fund,
will be allocated daily to each Class of shares based on the percentage of
shares outstanding for each Class at the end of the day.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on
November 26, 1997 in Maryland, consists of twenty billion shares of stock having
a par value of one tenth of one cent ($.001) per share. Except as noted below,
each share has equal dividend, distribution, liquidation and voting rights
within the Fund and a fractional share has those rights in proportion to the
percentage that the fractional share represents of a whole share. Generally,
shares will be voted in the aggregate except if voting by Fund Class is required
by law or the matter involved affects only one Fund Class, in which case shares
will be voted separately by Fund Class. There are no conversion or preemptive
rights in connection with any shares of the Fund. All shares when issued in
accordance with the terms of the offering will be fully paid and nonassessable.
Shares of the Fund are redeemable at net asset value, at the option of the
shareholder. On March 18, 1998, the Advisor purchased $100,000 of the Fund's
shares at an initial subscription price of $1.00 per share.
The Fund is subdivided into three classes of shares of beneficial interest.
Each share, regardless of Class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) each
Class of shares will have different class designations; (ii) only the Individual
Investor Class and Broker Service Class shares will be assessed a Shareholder
Servicing Fee of .25% of the average daily net assets of the Individual Investor
Class and Broker Service Class shares of the Fund pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund (the "Plan"); (iii) only the holders
of the Individual Investor Class and Broker Service Class shares will be
entitled to vote on matters pertaining to the Plan and any related agreements
applicable to that Class in accordance with provisions of Rule 12b-1; (iv) only
the Broker Service Class shares will be assessed an additional sub-transfer
agent accounting fee of .20% of the average daily net assets of the Broker
Service Class shares of the Fund; and (v) the exchange privilege will permit
shareholders to exchange their shares only for shares of a fund that
participates in an Exchange Privilege Program with the Fund. Payments that are
made under the Plan will be calculated
15
<PAGE>
and charged daily to the appropriate Class prior to determining daily net asset
value per share and dividends/distributions.
Generally, all shares will be voted in the aggregate, except if voting by
Class is required by law or the matter involved affects only one Class, in which
case shares will be voted separately by Class. The shares of the Fund have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares outstanding voting for the election of directors can elect 100% of
the directors if the holders choose to do so, and, in that event, the holders of
the remaining shares will not be able to elect any person or persons to the
Board of Directors. The Fund's By-laws provide that the holders of a majority of
the outstanding shares of the Fund present at a meeting in person or by proxy
will constitute a quorum for the transaction of business at all meetings.
HOW TO PURCHASE AND REDEEM SHARES
The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a sales charge for either sales or redemptions.
All transactions in Fund Individual Investor Class shares are effected through
the Fund's Individual Investor Class transfer agent which accepts orders for
purchases and redemptions from the Distributor and from shareholders directly.
With respect to the Individual Investor Class of shares, the minimum initial
investment is $250. (See "Direct Purchase and Redemption Procedures" herein.)
The minimum amount for subsequent investments is $50 for all shareholders.
In order to maximize earnings, the Fund normally has its assets as fully
invested as is practicable. Many securities in which the Fund invests require
immediate settlement in funds of Federal Reserve member banks on deposit at a
Federal Reserve bank (commonly known as "Federal Funds"). Accordingly, the Fund
does not accept a subscription or invest an investor's payment in portfolio
securities until the payment has been converted into Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share for each Class made after acceptance of the investor's purchase
order. Funds will not be invested by the Fund during the period before the
Fund's receipt of Federal Funds and its issuance of Fund shares. The Fund
reserves the right to reject any purchase order for its shares.
Shares are issued as of 12:00 noon, New York City time, on any Fund
Business Day, as defined herein, on which an order for the shares and
accompanying Federal Funds are received by the Fund's transfer agent before
12:00 noon, New York City time. Orders accompanied by Federal Funds and received
after 12:00 noon, New York City time on a Fund Business Day will not result in
share issuance until the following Fund Business Day. Fund shares begin accruing
income on the day the shares are issued to an investor.
There is no redemption charge, no minimum period of investment and no
restriction on frequency of withdrawals. Proceeds of redemptions are paid by
check or bank wire. Unless other instructions are given in proper form to the
Fund's transfer agent, a check for the proceeds of a redemption will be sent to
the shareholder's address of record. If a shareholder elects to redeem all the
shares of the Fund he owns, all dividends credited to the shareholder up to the
date of redemption are paid to the shareholder in addition to the proceeds of
the redemption.
The date of payment upon redemption may not be postponed for more than
seven days after shares are tendered for redemption, and the right of redemption
may not be suspended, except for any period during which the New York Stock
Exchange, Inc. is closed (other than customary weekend and holiday closings) or
during which the Securities and Exchange Commission determines that trading
thereon is restricted, or for any period during which an emergency (as
determined by the Securities and Exchange Commission) exists as a result of
which disposal by the Fund of its securities is not
16
<PAGE>
reasonably practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or for such other
period as the Securities and Exchange Commission may by order permit for the
protection of the shareholders of the Fund.
Redemption requests received by the Fund's Individual Investor Class
transfer agent before 12:00 noon, New York City time, on any day on which the
New York Stock Exchange, Inc. is open for trading become effective at 12:00 noon
that day. A redemption request received after 12:00 noon on any day on which the
New York Stock Exchange, Inc. is open for trading becomes effective on the next
Fund Business Day. Shares redeemed are not entitled to participate in dividends
declared on the day or after the day a redemption becomes effective.
The Fund has reserved the right to redeem the shares of any shareholder if
the net asset value of all the remaining shares in his account after a
withdrawal is less than $250 or the Fund may impose a monthly service charge of
$10 on such accounts. Written notice of any such mandatory redemption will be
given at least 30 days in advance to any shareholder whose account is to be
redeemed. During the notice period any shareholder who receives such a notice
may (without regard to the normal $50 requirement for an additional investment)
make a purchase of additional shares to increase his total net asset value at
least to the minimum amount and thereby avoid such mandatory redemption.
The Fund has reserved the right to charge individual shareholder accounts
for expenses actually incurred by such account for postage, wire transfers and
certain other shareholder expenses, as well as to impose a monthly service
charge for accounts whose balance falls below the minimum amount.
DIRECT PURCHASE AND REDEMPTION PROCEDURES
The following purchase and redemption procedures apply to investors who
wish to invest in Individual Investor Class shares of the Fund directly. These
investors may obtain the application form necessary to open an account by
telephoning the Fund at 800-767-1729 (toll free).
All shareholders will receive from the Fund a monthly statement listing the
total number of shares of the Fund owned as of the statement closing date,
purchases and redemptions of shares of the Fund during the month covered by the
statement and the dividends paid on shares of the Fund of each shareholder
during the statement period (including dividends paid in cash or reinvested in
additional shares of the Fund). Certificates for Fund shares will not be issued
to an investor.
Initial Purchase of Shares
Mail
Prospective shareholders may purchase Individual Investor Class shares of
the Fund by sending a check made payable to the Fund along with a completed
application form to the transfer agent for the Individual Investor Class at:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899-8930
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member bank of the Federal Reserve
System can normally be converted into Federal Funds within two business days
after receipt of the check. Checks drawn on a non-member bank may take
substantially longer to convert into Federal Funds and to be invested in Fund
shares. An investor's subscription will not be accepted until the Fund receives
Federal Funds.
17
<PAGE>
Bank Wire
Shareholders may purchase Individual Investor Class shares of the Fund
(other than initial purchases) by wire transfer. To do so, investors must
telephone the transfer agent for the Individual Investor Class at 800-372-7827
(toll free) and then instruct a member commercial bank to wire money immediately
to:
PNC Bank, Philadelphia, PA
ABA #031-0000-53
For Pax World Money Market Fund, Inc.
Account # 85-5100-7715
Fund Account #
Account of (Investor's Name)
An investor planning to wire funds should instruct his bank early in the
day so the wire transfer can be accomplished the same day. There may be a charge
by the investor's bank for transmitting the money by bank wire, and there also
may be a charge for use of Federal Funds. The Fund does not charge investors in
the Fund for its receipt of wire transfers. Payment in the form of a "bank wire"
received prior to 12:00 noon, New York City time, on a Fund Business Day will be
treated as a Federal Funds payment received on that day.
Personal Delivery
Deliver a check made payable to "Pax World Money Market Fund, Inc." along
with a completed application form to:
Pax World Fund Family
c/o PFPC, Inc.
400 Bellevue Parkway
Wilmington, DE 19809
AUTOMATIC INVESTMENT PLAN
You may elect to establish telephone purchase privileges or an Automatic
Investment Plan where shares can be bought monthly or quarterly. Automatic
investments are made on the 20th day of the month by electronically debiting
your checking or savings account and transferring the funds into your Pax World
Money Market account. The minimum investment for both programs is $50. Each of
these options appears on the application form. Once the account is opened, you
can call the Fund at 800-767-1729 for a form to add these options to an existing
account.
You may purchase shares of the Fund (minimum of $50) by having salary,
dividend payments, interest payments or any other payments designated by you, or
by having federal salary, social security, or certain veteran's military or
other payments from the federal government, automatically deposited into your
Fund account. To enroll in any one of these programs, you must file with the
Fund a completed EFT Application, Pre-authorized Credit Application, or a Direct
Deposit Sign-Up Form for each type of payment that you desire. The appropriate
form may be obtained from your broker or the Fund. You may elect at any time to
terminate your participation by notifying in writing the appropriate depositing
entity and/or federal agency. Death or legal incapacity will automatically
terminate your participation. Further, the Fund may terminate your participation
upon 30 days' notice to you.
Subsequent Purchases of Shares
There is a $50 minimum for each subsequent purchase. All payments should
clearly indicate the shareholder's account number. Provided that the information
on the application form on file with
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<PAGE>
the Fund is still applicable, a shareholder may reopen an account without filing
a new application form at any time during the year the shareholder's account is
closed or during the following calendar year.
Subsequent purchases can be made either by bank wire or by personal
delivery, as indicated above, or by mailing a check to the Fund's Individual
Investor Class transfer agent at:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899-8930
Redemption of Shares
A redemption is effected immediately following, and at a price determined
in accordance with, the next determination of net asset value per share of each
Class of the Fund following receipt by the Fund's transfer agent of the
redemption order. Normally payment for redeemed shares is made on the Fund
Business Day the redemption is effected, provided the redemption request is
received prior to 12:00 noon, New York City time and on the next Fund Business
Day if the redemption request is received after 12:00 noon, New York City time.
However, redemption requests will not be effected unless the check (including a
certified or cashier's check) used for investment has been cleared for payment
by the investor's bank, currently considered by the Fund to occur within 15 days
after investment.
A shareholder's original application form permits the shareholder to redeem
by written request and to elect one or more of the additional redemption
procedures described below. An Individual Investor Class shareholder may only
change the instructions indicated on his original application form by
transmitting a written direction to the Fund's transfer agent. Requests to
change the redemption option will require a signature guaranteed letter. When a
signature guarantee is called for, the Individual Investor Class shareholder
should have "Signature Guaranteed" stamped under his signature and guaranteed by
an eligible guarantor institution. A signature guarantee may be obtained from a
domestic bank or trust company, broker, dealer, clearing agency or savings
association who are participants in a medallion program recognized by the
Securities Transfer Association. The three recognized medallion programs are
Securities Transfer Agent Medallion Program (STAMP), Stock Exchanges Medallion
Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program
(MSP). Signature guarantees which are not a part of these programs will not be
accepted.
Written Requests
Individual Investor Class shareholders may make a redemption in any amount
by sending a written request to:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899-8930
All written requests for redemptions over $10,000 must be signed by the
shareholder with a signature guarantee unless the Shareholder Redemption Option
has been filed with the transfer agent. Normally, the redemption proceeds are
paid by check and are mailed to the shareholder of record.
Shareholder Redemption Option - Shareholders may request a redemption of up
to $10,000 without a signature guarantee. The request must be in writing and
must be signed by all registered owners. For amounts over $10,000, shareholders
may file a Shareholder Redemption Option form to waive the signature guarantee
requirement for written redemptions. The check must be made payable to all
owners on the account and will only be sent to a pre-authorized bank account or
to the address of record, and that address cannot have been changed within the
last 30 days. To request a Shareholder Redemption Option Form, call the Fund at
800-767-1729.
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<PAGE>
Check Writing Privileges
By making the appropriate election on the application form, an Individual
Class shareholder may request a supply of checks which may be used to effect
redemptions from any one or more of the Classes of shares of the Fund in which
the shareholder is invested. The checks will be issued in the shareholder's name
and the shareholder will receive a separate supply of checks for each Class of
shares of the Fund for which checks are requested. Checks may be drawn in any
amount of $250 or more for Individual Investor Class shareholders and may be
used like an ordinary commercial bank check except that they may not be
certified. The checks are drawn on a special account maintained by the Fund with
the agent bank. When a check is presented to the Fund's agent bank, it instructs
the transfer agent to redeem a sufficient number of full and fractional shares
in the shareholder's account to cover the amount of the check. The canceled
check is usually returned to the shareholder. The use of a check to make a
withdrawal enables the shareholder in the Fund to receive dividends on the
shares to be redeemed up to the Fund Business Day on which the check clears.
Fund shares purchased by check may not be redeemed by check until the check has
cleared, which could take up to 15 days following the date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The
Fund reserves the right to impose a charge or impose a different minimum check
amount in the future, if the Board of Directors determines that doing so is in
the best interest of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures,
rules and regulations of the Fund's agent bank governing checking accounts.
Checks drawn on a jointly owned account may, at the shareholder's election,
require only one signature. Checks in amounts exceeding the value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check or a post-dated check. The Fund
reserves the right to terminate or modify the check redemption procedure at any
time or to impose additional fees following notification to the Fund's
shareholders.
Telephone
Telephone Redemptions have a cap of $10,000, and can be done no more than
once every 30 days. Any one shareholder or a pre-authorized representative can
call for a telephone redemption.
The Fund accepts telephone requests for redemption from Individual Investor
Class shareholders who elect this option. The proceeds of a telephone redemption
will be sent to the Individual Investor Class shareholder at his or her address
or to his or her bank account as set forth in the application form or in a
subsequent signature guaranteed written authorization. Redemptions following an
investment by check will not be effected until the check has cleared, which
could take up to 15 days after investment. The Fund may accept telephone
redemption instructions from any one shareholder listed in the registration, or
any pre-authorized representative. The Fund does not require a minimum wire
amount, however, there is a $10 fee for all outgoing wires. The Fund will employ
reasonable procedures to confirm that telephone redemption instructions are
genuine, and will require that Individual Investor Class shareholders electing
such option provide a form of personal identification. The failure by the Fund
to employ such reasonable procedures may cause the Fund to be liable for any
losses incurred by investors due to telephone redemptions based upon
unauthorized or fraudulent instructions. The telephone redemption option may be
modified or discontinued at any time upon 60 days written notice to Individual
Investor Class shareholders.
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<PAGE>
A shareholder of Individual Investor Class shares making a telephone
withdrawal should call the transfer agent at 800-372-7827 and state (i) the name
of the shareholder appearing on the Fund's records, (ii) his or her account
number with the Fund, (iii) the amount to be withdrawn and (iv) the name of the
person requesting the redemption. This privilege only allows the check to be
made payable to the owner(s) of the account and may only be sent to the address
of record, or to a pre-authorized bank account. The request cannot be honored if
an address change has been made for the account within 30 days of the telephone
redemption request. If there are multiple account owners, the transfer agent may
rely on the instructions of only one owner. This account option is not available
for retirement account shares. The transfer agent may record all calls.
Systematic Withdrawal Plan
Shareholders may elect to withdraw shares and receive payment from the Fund
of a specified amount automatically. Systematic withdrawals may be made on a
monthly, bi-monthly, quarterly, semi-annual or annual basis. The withdrawal
payments of the specified amount are made by the Fund on the 25th day of the
month. Whenever such 25th day of the month is not a Fund Business Day, the
payment date is the Fund Business Day preceding the 25th day of the month. In
order to make a payment, a number of shares equal in aggregate net asset value
to the payment amount are redeemed at their net asset value on the Fund Business
Day immediately preceding the date of payment. To the extent that the
redemptions to make plan payments exceed the number of shares purchased through
reinvestment of dividends and distributions, the redemptions reduce the number
of shares purchased on original investment, and may ultimately liquidate a
shareholder's investment.
The election to receive automatic withdrawal payments may be made at the
time of the original subscription by so indicating in a letter accompanying the
application form. The election may also be made, changed or terminated at any
later time by sending a signature guaranteed written request to the transfer
agent.
Exchange Privilege
Individual Investor Class shareholders of the Fund are entitled to exchange
some or all of their shares in the Fund for shares of the Pax World Fund or the
Pax World Growth Fund. If only one class of shares is available in a particular
fund, the shareholder of the Fund is entitled to exchange his or her shares for
the shares available in that fund.
An exchange of shares in the Fund pursuant to the exchange privilege is, in
effect, a redemption of Fund shares (at net asset value) followed by the
purchase of shares of the investment company into which the exchange is made (at
net asset value) and may result in a shareholder realizing a taxable gain or
loss for Federal income tax purposes.
There is no charge for the exchange privilege or limitation as to frequency
of exchanges. The minimum amount for an exchange is $50, except that
shareholders who are establishing a new account with an investment company
through the exchange privilege must insure that a sufficient number of shares
are exchanged to meet the minimum initial investment required for the investment
company into which the exchange is being made.
The exchange privilege provides Individual Investor Class shareholders of
the Fund with a convenient method to shift their investment among different
investment companies when they feel such a shift is desirable. The exchange
privilege is available to shareholders resident in any state in which shares of
the investment company being acquired may legally be sold. Shares may be
exchanged only between investment company accounts registered in identical
names. Before making an exchange, the investor should review the current
prospectus of the investment company into which
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<PAGE>
the exchange is to be made. Prospectuses may be obtained by contacting the
Advisor at the address or telephone number set forth on the cover page of this
Prospectus.
Instructions for exchanges may be made by sending a signature guaranteed
written request to:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899-8930
or, for shareholders who have elected that option, by telephone. The signature
guarantee must be by a recognized medallion program as described under
"Redemption of Shares" herein. The Fund reserves the right to reject any
exchange request and may modify or terminate the exchange privilege at any time.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund has available a form of individual retirement account ("IRA") for
investment in shares of the Fund's Individual Investor Class shares only.
Individuals earning compensation generally may make IRA contributions of up to
the lesser of their compensation or $2,000 annually. However, the deductibility
of an individual's IRA contribution may be reduced or eliminated if the
individual or, in the case of a married individual filing jointly, either the
individual or the individual's spouse is an active participant in an
employer-sponsored retirement plan. Thus, in the case of an active participant,
the deduction will be reduced proportionately if adjusted gross income is within
a phase out range and will not be available if adjusted gross income is above
the phase out range. For 1998, the phase out range is $30,000 to $40,000 for
single individuals and $50,000 to $60,000 for married couples filing a joint
return, with annual increases thereafter. An individual is not considered an
active participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant. In addition, an individual with a
non-working spouse may establish a separate IRA for the spouse and annually
contribute a total of up to $4,000 to the two IRAs, provided that no more than
$2,000 may be contributed to the IRA of either spouse. However, the deduction
for an individual, who is not an active participant in an employer sponsored
retirement plan but whose spouse is, is phased out at adjusted gross income
between $150,000 and $160,000. The minimum investment required to open an IRA is
$250.
Withdrawals from an IRA, other than that portion, if any, of the withdrawal
considered to be a return of the investor's non-deductible IRA contribution, are
taxed as ordinary income when received. Such withdrawals may be made without
penalty after the participant reaches age 59 1/2, and must commence shortly
after age 70 1/2. Except for withdrawals to pay for certain qualified higher
education expense and first time home buyer expense, withdrawals before age 59
1/2 or the failure to commence withdrawals on a timely basis after age 70 1/2
may involve the payment of certain penalties.
The Fund also makes available Education IRA's and Roth IRA's. Education
IRA's permit eligible individuals to contribute up to $500 per year per
beneficiary under 18 years old. The $500 annual contribution limit is phased out
for single individuals with modified adjusted gross income between $90,000 and
$110,000 and for married couples filing a joint return with modified adjusted
gross income between $150,000 and $160,000. Above the phase out ranges no
contribution is allowed. Distributions from an Education IRA are generally
excluded from income when used for qualified higher education expenses.
An individual may make an annual contribution of up to $2,000 to a Roth
IRA. Unlike a traditional IRA, contributions to a Roth IRA are not deductible.
However, distributions are generally excluded from income provided they occur at
least five years after the first contribution to the IRA and are either after
the individual reaches age 59 1/2, because of death or disability, or for first
time home
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<PAGE>
buyer's expenses. The maximum annual contribution to a Roth IRA is just like any
other IRA, the lesser of the individual's compensation or $2,000. However, the
maximum annual contribution to a Roth IRA is reduced by contributions to any
other IRA and is phased out for single individuals with adjusted gross income
between $95,000 and $110,000 and for married couples filing a joint return with
adjusted gross income between $150,000 and $160,000. The requirement that
distributions from an IRA must commence at age 70 1/2 does not apply to a Roth
IRA.
Fund Individual Investor Class shares may also be a suitable investment
for assets of other types of qualified pension or profit-sharing plans,
including cash or deferred or salary reduction "section 401(k) plans" which give
participants the right to defer portions of their compensation for investment on
a tax-deferred basis until distributions are made from the plans.
An investor should contact the Fund to obtain further information
concerning a Fund IRA and required disclosure statement. An investor should
consult their tax advisor as well, particularly in view of changes in the tax
law.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by Rule 12b-1. Effective April 9, 1998, the Fund's Board of
Directors adopted a distribution and service plan (the "Plan") and, pursuant to
the Plan, the Fund and the Distributor entered into a Distribution Agreement and
a Shareholder Servicing Agreement.
Reich & Tang Asset Management, Inc. serves as the sole general partner for
Reich & Tang Asset Management L.P. and is the sole shareholder of the
Distributor.
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares and, for nominal consideration and as agent for the Fund, will
solicit orders for the purchase of the Fund's shares, provided that any orders
will not be binding on the Fund until accepted by the Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect to the Individual Investor Class shares, a service fee equal to .25% per
annum of the Individual Investor Class shares' average daily net assets (the
"Shareholder Servicing Fee") for providing personal shareholder services and for
the maintenance of shareholder accounts. The fee is accrued daily and paid
monthly.
The Plan and the Shareholder Servicing Agreement for the Individual
Investor Class provide that, in addition to the Shareholder Servicing Fee, the
Fund will pay for (i) telecommunications expenses including the cost of
dedicated lines and CRT terminals, incurred by the Distributor in carrying out
its obligations under the Shareholder Servicing Agreement with respect to
Individual Investor Class shares and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing application forms for shareholder accounts.
The Plan provides that the Advisor and Sub-Advisor may make payments from
time to time from their own resources, which may include the advisory fee, the
management fee and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, for performing shareholder servicing and
related administrative functions on behalf of the Fund; (ii) to defray the cost
of, and to compensate certain others, for providing assistance in distributing
the shares; and (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors, and to defray the cost of the preparation
and printing of brochures and other promotional materials, mailings to
prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor may also make payments
from time to time from its own resources, which may include the
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<PAGE>
Shareholder Servicing Fee (with respect to Individual Investor Class and Broker
Service Class shares) and past profits, for the purposes enumerated in (i)
above. The Distributor will determine the amount of such payments made pursuant
to the Plan, provided that such payments will not increase the amount which the
Fund is required to pay to the Advisor, Sub-Advisor or Distributor for any
fiscal year under either the Advisory Agreement or the Sub-Advisory Agreement,
the Administrative Services Contract or the Shareholder Servicing Agreement in
effect for that year.
The Glass-Steagall Act and other applicable laws and regulations prohibit
banks and other depository institutions from engaging in the business of
underwriting, selling or distributing most types of securities. However, in the
opinion of the Sub-Advisor based on the advice of counsel, these laws and
regulations do not prohibit such depository institutions from providing other
services for investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to shareholders or change
in the Fund's net asset value. In addition, state securities laws on this issue
may differ from the interpretations of Federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared by the Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same Class having an aggregate net asset
value as of the payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are subscribed for
and may be changed by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution. If the shareholder makes
no election, the Fund will make the distribution in shares. There is no sales or
other charge in connection with the reinvestment of dividends and capital gains
distributions.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by the Fund of income and capital gains
from investments. Except as described herein, the Fund's net investment income
(including net realized short-term capital gains, if any) will be declared as a
dividend on each Fund Business Day. The Fund declares dividends for Saturdays,
Sundays and holidays on the previous Fund Business Day. The Fund generally pays
dividends monthly after the close of business on the last calendar day of each
month or after the close of business on the previous Fund Business Day if the
last calendar day of each month is not a Fund Business Day. Capital gains
distributions, if any, will be made at least annually, and in no event later
than 60 days after the end of the Fund's fiscal year. There is no fixed dividend
rate, and there can be no assurance that the Fund will pay any dividends or
realize any capital gains.
The Individual Investor Class and Broker Service Class shares will bear the
Shareholder Servicing Fee under the Plan. As a result, the net income of and the
dividends payable to the Individual Investor Class and Broker Service Class
shares will be lower than the net income of and dividends payable to the
Institutional Class shares of the Fund. Dividends paid to each Class of shares
of the Fund will, however, be declared and paid on the same days at the same
times and, except as noted with respect to the Shareholder Servicing Fee payable
under the Plan, will be determined in the same manner and paid in the same
amounts.
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<PAGE>
The Fund intends to qualify for and elect special treatment applicable to a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. To qualify as a regulated investment company, the Fund must meet
certain complex tests concerning its investments and distributions. For each
year the Fund qualifies as a regulated investment company, it will not be
subject to federal income tax on income distributed to its shareholders in the
form of dividends or capital gains distributions. Additionally, the Fund will
not be subject to a federal excise tax if the Fund distributes at least 98% of
its ordinary income and 98% of its capital gain income to its shareholders.
Dividends of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income but will not
be eligible, in the case of corporate shareholders, for the dividend-received
deduction.
The Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to shareholders who have not complied with Internal Revenue Service regulations.
In connection with this withholding requirement, a shareholder will be asked to
certify on his or her application that the social security or tax identification
number provided is correct and that the shareholder is not subject to 31% backup
withholding for previous underreporting to the Internal Revenue Service.
NET ASSET VALUE
The Fund determines the net asset value of the shares of the Fund (computed
separately for each Class of shares) as of 12:00 noon, New York City time, by
dividing the value of the Fund's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued but
excluding capital stock and surplus) by the number of shares outstanding at the
time the determination is made. The Fund determines its net asset value on each
Fund Business Day. Fund Business Day for this purpose means any day on which the
Fund's custodian is open for trading. Purchases and redemptions will be effected
at the time of determination of net asset value next following the receipt of
any purchase or redemption order. (See "How to Purchase and Redeem Shares" and
"Direct Purchase and Redemption Procedures" herein.)
In order to maintain a stable net asset value per share of $1.00 for each
Class, the Fund's portfolio securities are valued at their amortized cost.
Amortized cost valuation involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, except that if fluctuating interest rates cause the market value of the
Fund's portfolio to deviate more than 1/2 of 1% from the value determined on the
basis of amortized cost, the Board of Directors will consider whether any action
should be initiated to prevent any material dilutive effect on investors.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the stated value of an instrument is higher or
lower than the price an investment company would receive if the instrument were
sold. There is no assurance that the Fund will maintain a stable net asset value
per share of $1.00.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on
November 26, 1997 and it is registered with the Securities and Exchange
Commission as an open-end management investment company.
The Fund prepares semi-annual unaudited and annual audited reports which
include a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (i) for the election of directors, (ii) for approval of revised
investment advisory contracts with respect to a
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<PAGE>
particular class or series of stock, (iii) for approval of revisions to the
Fund's distribution agreement with respect to a particular class or series of
stock, and (iv) upon the written request of holders of shares entitled to cast
not less than 25% of all the votes entitled to be cast at such meeting. Annual
and other meetings may be required with respect to such additional matters
relating to the Fund as may be required by the Act including the removal of Fund
director(s) and communication among shareholders, any registration of the Fund
with the SEC or any state, or as the Directors may consider necessary or
desirable. Each Director serves until the next meeting of the shareholders
called for the purpose of considering the election or reelection of such
Director or of a successor to such Director, and until the election and
qualification of his or her successor, elected at such a meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders.
For further information with respect to the Fund and the shares offered
hereby, reference is made to the Fund's Registration Statement filed with the
Securities and Exchange Commission and copies thereof may be obtained upon
payment of certain duplicating fees.
Year 2000
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Sub-Advisor is in the process of working with the Fund's
service providers to prepare for the year 2000. Based on information currently
available, the Sub-Advisor does not expect that the Fund will incur significant
operating expenses or be required to incur materials costs to be year 2000
compliant. Although the Sub-Advisor does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania Street, Kansas City,
Missouri 64105, is the custodian for the Fund's cash and securities. PFPC, Inc.,
400 Bellevue Parkway, Wilmington, Delaware 19809 is the transfer and dividend
disbursing agent for Individual Investor Class shares of the Fund. The Fund's
custodian and transfer agent do not assist in, and are not responsible for,
investment decisions involving assets of the Fund.
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Pax World Money Market - Individual Investor Class
Do not use this application to open an IRA or other retirement account. Please
call 1-800-767-1729 if you need a retirement application.
Please Mail to Pax World Fund Family, P.O. Box 8930, Wilmington, DE 19899-8930.
- --------------------------------------------------------------------------------
1. Type of Account (check one)
[ ] Individual [ ] JointTenants [ ] Gift/Transfer to a Minor
Complete A only Complete A & B Complete C only
[ ] Trust [ ] Corporation [ ] Partnership or Other Entity
Complete D only Complete E only Complete E only
- --------------------------------------------------------------------------------
A__________________________________________-____-____________________/___/______
First Name, Middle Name, Social Security Number Birthdate (mm dd yy)
Last Name (Required to open your account)
B__________________________________________-____-____________________/___/______
First Name, Middle Name, Social Security Number Birthdate (mm dd yy)
Last Name (Required to open your account)
JointTenants will have rights of survivorship unless otherwise specified.
- --------------------------------------------------------------------------------
C Custodian's Name (only one permitted)_________________________________________
as custodian for Minor's Name (only one permitted)____________________________
under the ______ Uniform Gifts ______ Uniform Transfers
State to Minor's Act, or State to Minor's Act.
____-____-______ ___/___/____
Minor's Social Security Number Birthdate (mm dd yy)
(Required to open your account)
- --------------------------------------------------------------------------------
D Name of Trustee_______________________________________________________________
Name of Second Trustee________________________________________________________
Name of Trust_________________________________________________________________
___________________________________________ _______________________________
Date of Trust (mm dd yy) (Required to open Taxpayer Identification Number
your account) (Required to open your account)
-------------------------------------------------------------------------------
E ______________________________________________________________________________
Name of Corporation or other entity. If other entity, please specify type in
the space below, e.g., partnership, club, etc.
_______________________________________ _____________________________
Taxpayer Identification Number BUSINESS TYPE
(Required to open your account)
- --------------------------------------------------------------------------------
2. Your Mailing Address
_____________________________________________________________________________
Street address and Apartment or Box number
_____________________________________________________________________________
City State ZipCode
I am a citizen of [ ] U.S. [ ] Other______________________
Please Sepcify Country
(___)___________________ (__)____________________
Area Code Day Phone Area Code Evening Phone
- --------------------------------------------------------------------------------
3 Your Initial Investment (Minimum $250.)
I have enlcosed a check (do not send cash) made payable to Pax World Money
Market Fund, Inc. $Amount ($250 minimum)____________
- --------------------------------------------------------------------------------
4 Choose How You Wish to Receive Any Dividends and Capital Gains.
If not completed, Option A will be assigned.
A. [ ] I would like all dividends and capital gains reinvested in my account.
B. [ ] I would like all dividends and capital gains paid to me in cash.
C. [ ] I would like all dividends paid to me in cash and capital gains
reinvested in my account.
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5. Telephone Purchases/Exchanges/Redemptions; Automatic Investment Plan
A. [ ] I hereby authorize the Fund and transfer agent to honor telephoned
instructions to purchase/exchange/redeem shares, when directed and as
specified, by transmitting the proceeds, if applicable, to me at my address
of record or by crediting/debiting my preauthorized bank account. I hereby
ratify any such instructions and agree to indemnify the Fund and its
transfer agent from all loss, liability, cost, damage and expense for
acting upon such instructions.
[ ] I want this privilege for MY REPRESENTATIVE OF RECORD to have authority
to give instructions for telephone purchases/exchanges/redemptions. The
nane of my current representative of record for third party administration
is (name, institution, if any):________________________________________
[ ] I would like to invest in Pax World Money Market Fund automatically. I
understand that I will receive a confirmation of each transaction and the
deduction from my bank account will appear on my bank statement.
Please invest $_________ (minimum $50) in Pax World Money Market Fund
on the 20th day of every [ ] month [ ] quarter beginning_________________
Your automatic investment program normally becomes active 20 business days
after your application is processed.
B. Please attach a voided unsigned check or savings deposit slip for the bank
account to be credited/debited in connection with Telephone
Purchases/Exchanges/Redemptions/Automatic Investments
Bank Name___________________________________________________________________
Name on Bank Account________________________________________________________
(Note: One common name must appear on both your Pax World Money Market Fund
account registration and bank account registration).
Your Bank Account Number____________________________________________________
Your Signature______________________________________________________________
Signature (If Joint Account)________________________________________________
This is a [ ] Checking [ ] Savings Account
As a convenience to me, you are hereby requested and authorized to pay and
charge to my account debits drawn on my account by and payable to the order of
Pax World Money market Fund, Inc. This authority is to remain in effect until
revoked by me in writing and, until you actually receive such notice, I agree
you shall be fully protected in honoring any such check. I further agree that if
any such check is dishonored, whether with or without cause and whether
intentionally or inadvertently, you shall be under no liability whatsover. This
option, if exercised become a part of the account application and the terms,
representations and conditions thereof.
- --------------------------------------------------------------------------------
6. Your Signature
All registered owners or legal representatives must sign this section before the
Fund can open your account.
The undersigned warrant(s) that the undersigned has (have) full authority and is
(are) of legal age to purchase shares of Pax World Money market Fund and has
(have) received and read a current Prospectus of the Fund and agree(s) to its
terms. The Fund and its Transfer Agent will not be liable for acting upon
instructions or inquires believed to be genuine.
Taxpayer Identification Number Certification: As required by Federal law, I/we
certify under penalties of perjury that (1) the Social Security Number or
Taxpayer Identification Number listed above is correct, and (2) I/WE HAVE NOT
been notified by the IRS that I/we are subject to backup withholding. It is
understood that failure to supply correct numbers above may subject me/us to a
penalty of $50 for each failure.
Check this box if you ARE subject to 31% backup withholding. [ ]
[ ] I/we do not have a SSN or TIN, but have applied for one and will provide it
within 60 days. I/we understand that failure to do so will result in a 31%
backup withholding.
____________________________________________
Signature Date
____________________________________________
Signature Date
____________________________________________
Dealer No. (If applicable) Dealer Name
- --------------------------------------------------------------------------------
7. Checkwriting
After you have completed and returned this Checkwriting signature card, the Fund
will mail your checks, pre-printed with your name and address, to you.
Indicate number of required signatures_____________________
If left blank, only one signature will be required on all checks.
By signing below: I/we authorize PNC Bank to honor checks drawn by me/us on this
account. The minimum check amount is $250.
I/we accept the checkwriting terms and conditions on the reverse side.
1)________________________________________________________
Owner's or Custodian's Name (first, middle initial, last)
________________________________________________________
Signature Date of Birth (m, d, y)
2)________________________________________________________
Joint Owner's Name (first, middle initial, last)
________________________________________________________
Signature Date of Birth (m, d, y)
28
<PAGE>
- --------------------------------------------------------------------------------
The Checkwriting privilege allows you to withdraw money from your Pax World
Money Market account with ease and is available to individual, joint tenant and
gift to minor money market accounts.
Checkwriting privileges will be subject to the customary rules and regulations
governing checking accounts and may be terminated by the Fund or PNC Bank.
Neither the Fund nor PNC Bank shall incur liability for honoring such checks,
for effecting redemptions to pay for such checks, or for returning checks which
have not been accepted.
When a payable check is presented to the Custodian for payment, a sufficient
number of full and fractional shares from the shareholder's account to cover the
amount of the check will be redeemed at the net asset value next determined. If
there are insufficient shares in the shareholder's account, the check may be
returned. Checks presented for payment which would require the redemption of
shares purchased by check or by electronic funds transfer within the previous 10
business days may not be honored. Generally, there is no charge to you for the
clearance of checks, but the Fund does reserve the right to charge a service
fee for checks returned for insufficient funds, stop payment, or check copy
services.
This checkwriting procedure for redemption enables shareholders to receive the
daily dividends declared on the shares to be redeemed until such time as the
check is presented for payment.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Unfold here for New Account Application
NEW ACCOUNT INSTRUCTIONS
1. TYPE OF ACCOUNT. An account may be registered as only one of the following:
* Individual Supply the Social Security
* Joint Tenants Number of the registered
* A Custodial Account under account owner who is to be
the Uniform Gifts to Minors Account taxed.
* A Trust Supply the Taxpayer Identifica-
* A Corporation, Partnership, tion Number of the legal entity
Organization, Fiduciary, etc. or organization that will report
income and/or gains.
Please check the box that corresponds to the type of account you are opening and
fill in the required information exactly as you wish it to appear on the
account.
2. YOUR MAILING ADDRESS. Please complete all information requested as it is
required to open your account.
3. YOUR INITIAL INVESTMENT. An initial investment of at least $250 is required
to open an account. Additional purchases must be at least in the amount of
$50.
4. RECEIVING YOUR DIVIDENDS AND CAPITAL GAINS. Check the option you prefer for
receiving your dividend and capital gain distributions. If you do not
select an option, all dividends and capital gains will be reinvested in
your account.
5. TELEPHONE PURCHASES/EXCHANGES/REDEMPTIONS; AUTOMATIC INVESTMENT PLAN. In
this section, you can authorize telephone privileges for yourself and/or
your representative of record. With the Fund's Automatic Investment Plan,
you can have $50 or more automatically withdrawn from your bank account and
invested in your Pax World Money Market Fund account monthly or quarterly.
If you check any of the boxes in Section 5A, be sure to include your bank
account information in Section 5B.
6. YOUR SIGNATURE(S). Please be sure to sign this application. If the account
is registered in the name of:
* an individual - the individual must sign.
* joint tenants - both must sign.
* a custodian for a minor - the custodian must sign.
* a trustee or other fiduciary - the fiduciary(s) must sign and
indicate capacity.
* a corporation or other organization - an officer must sign and indicate
capacity.
ANY QUESTIONS? Call a Pax World Money Market Fund service representative at
1-800-767-1729 (toll free) for assistance.
Please return you completed application in the self-addressed envelope. If
envelope is missing, mail to:
PAX WORLD FUND FAMILY
P.O. BOX 8930
WILMINGTON, DE 19899-8930
29
<PAGE>
THE PAX WORLD FUND FAMILY Prospectus &
222 State Street Application
Portsmouth, NH 03801-3853
http://www.paxfund.com/ PAX
World
- -Pax World Money Market Fund - Money
A No-Load Fund Market
Fund
For general fund information, please call:
1-800-767-1729
For shareholder account information, please call:
1-800-372-7827
[GRAPHIC OMITTED]
Transfer and Dividend Disbursing Agent -
PFPC, Inc.
P.O. Box 8950
Wilmington, DE 19899 PROSPECTUS
&
General Counsel - APPLICATION
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
July 21, 1998
Independent Auditors -
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
Investment Adviser -
Pax World Management Corp.
222 State STreet
Portsmouth, NH 03801-3853
All Account Inquiries should be addressed to:
Pax World Money Market Fund
P.O. Box 8930
Wilmington, DE 19899-8930
Printed in the USA on recycled paper [GRAPHIC OMITTED]
30
<PAGE>
Registration No. 333-43587
Rule 497(e)
- --------------------------------------------------------------------------------
Prospectus Dated July 21, 1998
PAX WORLD MONEY MARKET FUND, INC.
INSTITUTIONAL CLASS
BROKER SERVICE CLASS
600 FIFTH AVENUE
NEW YORK, NY 10020
212-830-5220
The Pax World Money Market Fund, Inc. (the "Fund") is designed to meet the
short-term investment needs of individual investors ("Individual Investors"),
institutional investors ("Institutional Investors"), and investors utilizing the
Fund as a sweep vehicle ("Sweep Investors") in connection with an account with a
broker-dealer that has entered into an agreement with the Fund's distributor,
Reich & Tang Distributors, Inc. (the "Distributor"). There are no sales loads,
exchange or redemption fees associated with the Fund.
The Fund offers three classes of shares. This Prospectus offers the
Institutional Class shares for Institutional Investors and the Broker Service
Class shares for Sweep Investors of clearing broker-dealers that have entered
into an agreement with the Distributor ("Clearing Brokers"). The Institutional
Class shares of the Fund are not subject to a service fee and either are sold
directly to Institutional Investors or are sold through financial intermediaries
that do not receive compensation from Pax World Management Corp. (the
"Advisor"), Reich & Tang Asset Management L.P. (the "Sub-Advisor") or the
Distributor. The Broker Service Class shares of the Fund are subject to a
service fee pursuant to the Fund's Rule 12b-1 Distribution and Service Plan and
are sold through financial intermediaries who provide servicing to Broker
Service Class shareholders for which they receive compensation from the Advisor,
the Sub-Advisor or the Distributor. The Broker Service Class shares are subject
to an additional sub-transfer agent accounting fee. See "Description of Common
Stock."
The Fund seeks to maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity and to maintain a
stable net asset value of $1 per share. There can be no assurance that these
objectives will be achieved. The Fund seeks to achieve these objectives by
investing in short-term money market obligations with maturities of 397 days or
less, including bank certificates of deposit, time deposits, bankers'
acceptances, high quality commercial paper, securities issued or guaranteed by
certain agencies or instrumentalities of the United States Government, and
repurchase agreements calling for resale in 397 days or less backed by the
foregoing securities.
Consistent with the other members of the Pax World Fund Family, the Fund
seeks to achieve its objective by investing in issuers that produce life
supportive goods and services and that are not to any degree engaged in
manufacturing defense or weapons-related products. The policy of the Fund is to
exclude from its portfolio securities of (i) companies engaged in military
activities, (ii) companies appearing on the United States Department of Defense
list of 100 largest contractors (a copy of which may be obtained from the Office
of the Secretary, Department of Defense, Washington, D.C. 20310) if five percent
(5%) or more of the gross sales of such companies are derived from contracts
with the United States Department of Defense, (iii) other companies contracting
with the United States Department
(Continued on Next Page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
of Defense if five percent (5%) or more of the gross sales of such companies are
derived from contracts with the United States Department of Defense, and (iv)
companies which derive revenue from the manufacture of liquor, tobacco and/or
gambling products. See "Introduction".
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing in Institutional Class or
Broker Service Class shares of the Fund. Additional information about the Fund,
including additional information concerning risk factors relating to an
investment in the Fund, has been filed with the Securities and Exchange
Commission and is available upon request and without charge by calling or
writing the Fund at the above address. The "Statement of Additional Information"
bears the same date as this Prospectus and is incorporated by reference into
this Prospectus in its entirety. The Securities and Exchange Commission
maintains a web site (http://www.sec.gov) that contains the Statement of
Additional Information and other reports and information regarding the Fund
which have been filed electronically with the Securities and Exchange
Commission. This Prospectus should be read and retained by investors for future
reference.
Pax World Management Corp., 222 State Street, Portsmouth, New Hampshire
03801-3853 is the Advisor to the Fund. Reich & Tang Asset Management L.P. acts
as Sub-Advisor of the Fund and Reich & Tang Distributors, Inc. acts as
Distributor of the Fund's shares. Pax World Management Corp. and Reich & Tang
Asset Management L.P. are each registered investment advisers. Reich & Tang
Distributors, Inc. is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Pax World Management Corp. is
responsible for determining whether contemplated investments satisfy the social
responsibility criteria applied to the Fund. Reich & Tang Asset Management L.P.
performs the day to day portfolio management of the Fund utilizing the
securities of issuers approved by the Advisor.
An investment in the Fund is neither insured nor guaranteed by the United
States Government. The Fund seeks to maintain an investment portfolio with a
dollar-weighted average maturity of 90 days or less, and to value its investment
portfolio at amortized cost and maintain a net asset value of $1.00 per share.
There can be no assurance that the Fund's objectives will be achieved or that
the Fund's stable net asset value of $1.00 per share can be maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
2
<PAGE>
TABLE OF CONTENTS
Page
TABLE OF FEES AND EXPENSES............................................. 4
INTRODUCTION........................................................... 5
INVESTMENT OBJECTIVES, POLICIES AND RISKS.............................. 6
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION..................... 10
INVESTMENT RESTRICTIONS................................................ 12
MANAGEMENT OF THE FUND................................................. 13
DESCRIPTION OF COMMON STOCK............................................ 15
HOW TO PURCHASE AND REDEEM SHARES...................................... 16
Investments Through Participating Organizations................... 17
Investments Through Clearing Brokers.............................. 18
DIRECT PURCHASE AND REDEMPTION PROCEDURES ............................. 18
Initial Purchase of Shares....................................... 19
Electronic Funds Transfers (EFT), Pre-authorized Credit
and Direct Deposit Privilege..................................... 20
Subsequent Purchases of Shares................................... 20
Redemption of Shares............................................. 20
Specified Amount Automatic Withdrawal Plan....................... 22
Exchange Privilege............................................... 22
DISTRIBUTION AND SERVICE PLAN.......................................... 23
DIVIDENDS, DISTRIBUTIONS AND TAXES..................................... 24
NET ASSET VALUE........................................................ 25
GENERAL INFORMATION ................................................... 25
Year 2000........................................................ 26
CUSTODIAN AND TRANSFER AGENT........................................... 26
3
<PAGE>
TABLE OF FEES AND EXPENSES
Estimated Annual Operating Expenses
(as a percentage of average net assets)
THE PAX WORLD MONEY MARKET FUND
-------------------------------
INSTITUTIONAL CLASS BROKER SERVICE CLASS
------------------- --------------------
Management Fees.................... .15% .15%
12b-1 Fees......................... None .25%
Other Expenses..................... .20% .40%
Administration Fees......... .10% .10%
--- ---
Total Fund Operating Expenses...... .35% .80%
===== =====
THE PAX WORLD MONEY MARKET FUND
-------------------------------
<TABLE>
INSTITUTIONAL CLASS BROKER SERVICE CLASS
------------------- --------------------
<S> <C> <C> <C> <C>
-------------------------- ------------ ------------- ------------- --------------
Example 1 Year 3 Years 1 Year 3 Years
----------------------------------- ------------ ------------- ------------- --------------
----------------------------------- ------------ ------------- ------------- --------------
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return and
redemption at the end of each $4 $11 $8 $26
time period:......................
----------------------------------- ------------ ------------- ------------- --------------
</TABLE>
The purpose of the above fee table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The Advisor and/or Sub-Advisor at their discretion
may voluntarily waive all or a portion of the Management Fees and Administration
Fees and voluntarily reimburse the Fund's other operating expenses. The
Distributor at its discretion may voluntarily waive all or a portion of the
12b-1 Fees. The expenses shown are at the levels anticipated for the current
year. For a further discussion of these fees see "Management of the Fund" and
"Distribution and Service Plan" herein.
The figures reflected in this example should not be considered to be a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
4
<PAGE>
INTRODUCTION
Pax World Money Market Fund, Inc. (the "Fund") is a no-load, open-end
management investment company offering investors a managed portfolio of money
market instruments, together with a high degree of liquidity. The Institutional
Class shares of the Fund are designed to meet the short-term investment needs of
institutional investors ("Institutional Investors"). The Broker Service Class
shares of the Fund are designed to meet the short-term investment needs of
investors utilizing the Fund as a sweep vehicle ("Sweep Investors") in
connection with an account with a broker-dealer that has entered into an
agreement with the Fund's Distributor, Reich & Tang Distributors, Inc. The net
asset value of each Fund share is expected to remain constant at $1.00, although
this cannot be assured.
The investment objective of the Fund is to maximize current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity. There is no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund may not be changed without
shareholder approval. The Fund endeavors, consistent with its investment
objective, to make a contribution to world peace through investment in companies
producing life-supportive goods and services. The policy of the Fund is to
invest in securities of companies whose business is essentially directed toward
non-military and life-supportive activities. For example, the Fund seeks to
invest in such industries as health care, education, housing, food, retail,
pollution control and leisure time among others. The policy of the Fund is to
exclude from its portfolio securities of (i) companies engaged in military
activities, (ii) companies appearing on the United States Department of Defense
list of 100 largest contractors (a copy of which may be obtained from the Office
of the Secretary, Department of Defense, Washington, D.C. 20310) if five percent
(5%) or more of the gross sales of such companies are derived from contracts
with the United States Department of Defense, (iii) other companies contracting
with the United States Department of Defense if five percent (5%) or more of the
gross sales of such companies are derived from contracts with the United States
Department of Defense, and (iv) companies which derive revenue from the
manufacture of liquor, tobacco and/or gambling products.
The Fund attempts to achieve its objective through investment in short-term
money market obligations with maturities of 397 days or less, including bank
certificates of deposit, time deposits, bankers' acceptances, high quality
commercial paper, securities issued or guaranteed by certain agencies or
instrumentalities of the United States Government, and repurchase agreements
calling for resale in 397 days or less backed by the foregoing securities. The
Fund seeks to maintain an investment portfolio with a dollar-weighted average
maturity of 90 days or less, and to value its investment portfolio at amortized
cost and maintain a net asset value of $1.00 per share. There can be no
assurance that this value will be maintained.
The Fund's investment advisor is Pax World Management Corp. (the "Advisor")
which is a registered investment advisor and which currently acts as manager or
advisor to two other open-end management investment companies, the Pax World
Fund, Incorporated (the "Pax World Fund") and the Pax World Growth Fund, Inc.
(the "Pax World Growth Fund"). The Fund's Sub-Advisor is Reich & Tang Asset
Management L.P. (the "Sub-Advisor"), which is a registered investment advisor
and which currently acts as manager or administrator to seventeen other open-end
management investment companies. (See "Management of the Fund" herein.) The
Fund's shares are distributed through Reich & Tang Distributors, Inc. (the
"Distributor"), with whom the Fund has entered into a Distribution Agreement and
Shareholder Servicing Agreement (with respect to Individual Investor Class and
Broker Service Class shares of the Fund only) pursuant to the Fund's
distribution and service plan adopted
5
<PAGE>
under Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). (See "Distribution and Service Plan" herein.)
On any day on which the New York Stock Exchange is open for trading ("Fund
Business Day"), investors may, without charge by the Fund, initiate purchases
and redemptions of shares of the Fund's common stock at their net asset value,
which will be determined daily. (See "How to Purchase and Redeem Shares" and
"Net Asset Value" herein.) Dividends from accumulated net income are declared by
the Fund on each Fund Business Day. The Fund pays interest dividends monthly on
the last calendar day of the month or, if the last calendar day of the month is
not a Fund Business Day, on the preceding Fund Business Day.
Net capital gains, if any, will be distributed at least annually, and in no
event later than 60 days after the end of the Fund's fiscal year. All dividends
and distributions of capital gains are automatically invested in additional
shares of the same class of the Fund unless a shareholder has elected by written
notice to the Fund to receive either of such distributions in cash. (See
"Dividends, Distributions and Taxes" herein.)
The Fund may from time to time advertise its current yield and effective
yield for the Fund (computed separately for each Class of shares). The Fund's
current yield is calculated by dividing its average daily net income per share
of the Fund (excluding realized gains or losses) for a recent seven-day period
by its constant net asset value per share of $1.00 and annualizing the result on
a 365-day basis. The Fund's effective yield is calculated by increasing its
current yield according to a formula that takes into account the compounding
effect of the reinvestment of dividends. Performance for each Class of shares
may vary due to variations in expenses of each Class of shares. Any fees charged
by a Participating Organization (as defined under "How to Purchase and Redeem
Shares" herein) directly to a customer's account will not be included in yield
calculations. (See "How to Purchase and Redeem Shares - Investments through
Participating Organizations" herein.)
An investment in the Fund entails certain risks, including risks associated
with the purchase of when-issued securities, repurchase agreements and privately
placed securities, as well as certain risks associated with the purchase of
foreign issues. Risk factors for the Fund are further described under "Risk
Factors and Additional Investment Information" herein.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
Social Criteria of Fund
The policy of the Fund is to seek investments in issuers that are not to
any degree engaged in manufacturing defense or weapons-related products. The
policy of the Fund is to exclude from its portfolio securities of (i) companies
engaged in military activities, (ii) companies appearing on the United States
Department of Defense list of 100 largest contractors (a copy of which may be
obtained from the Office of the Secretary, Department of Defense, Washington,
D.C. 20310) if five percent (5%) or more of the gross sales of such companies
are derived from contracts with the United States Department of Defense, (iii)
other companies contracting with the United States Department of Defense if five
percent (5%) or more of the gross sales of such companies are derived from
contracts with the United States Department of Defense, and (iv) companies which
derive revenue from the manufacture of liquor, tobacco and/or gambling products.
In order to properly supervise a securities portfolio containing the
limitations described above, care must be exercised to continuously monitor
developments of the issuers whose securities are included in the Fund.
Developments and trends in the economy and financial markets are also
considered, and the screening of many securities is required to implement the
investment philosophy of
6
<PAGE>
the Fund. The Advisor, Pax World Management Corp., is responsible for such
supervision and screening of the securities included in the Fund.
If it is determined after the initial purchase by the Fund that the
company's activities fall within the exclusion described above (either by
acquisition, merger or otherwise), the securities of such company will be
eliminated from the portfolio as soon thereafter as possible taking into
consideration (i) any gain or loss which may be realized from such elimination,
(ii) the tax implications of such elimination, (iii) market timing, and the
like. In no event, however, will such security be retained longer than six (6)
months from the time the Fund learns of the investment disqualification. This
requirement may cause the Fund to dispose of the security at a time when it may
be disadvantageous to do so.
The Fund's investment objective is a fundamental policy and may not be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the 1940 Act. Investment policies
that are not fundamental may be modified by the Board of Directors.
Permitted Investments:
United States Government Securities: short-term obligations issued or
guaranteed by agencies or instrumentalities of the United States Government the
proceeds of which are earmarked for a specific purpose which complies with the
investment objectives and policies of the Fund. These include issues of agencies
and instrumentalities established under the authority of an act of Congress.
These securities are not supported by the full faith and credit of the United
States Treasury, some are supported by the right of the issuer to borrow from
the Treasury, and still others are supported only by the credit of the agency or
instrumentality. Although obligations of federal agencies and instrumentalities
are not debts of the United States Treasury, in some cases payment of interest
and principal on such obligations is guaranteed by the United States Government,
e.g., obligations of the Federal Housing Administration, the Export-Import Bank
of the United States, the Small Business Administration, the Government National
Mortgage Association, the General Services Administration and the Maritime
Administration; in other cases payment of interest and principal is not
guaranteed, e.g., obligations of the Federal Home Loan Bank System and the
Federal Farm Credit Bank.
Domestic and Foreign Bank Obligations: certificates of deposit, time
deposits, commercial paper, bankers' acceptances issued by domestic banks,
foreign branches of domestic banks, foreign subsidiaries of domestic banks, and
domestic and foreign branches of foreign banks and corporate instruments
supported by bank letters of credit. (See "Risk Factors and Additional
Investment Information" herein.) Certificates of deposit are certificates
representing the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable deposits maintained
in a bank for a specified period of time (in no event longer than seven days) at
a stated interest rate. Time deposits and certificates of deposit which may be
held by the Fund will not benefit from insurance from the Federal Deposit
Insurance Corporation (the "FDIC"). Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the face amount of the instrument upon maturity. The Fund limits its
investments in obligations of domestic banks, foreign branches of domestic banks
and foreign subsidiaries of domestic banks to banks having total assets in
excess of one billion dollars or the equivalent in other currencies. The Fund
limits its investments in obligations of domestic and foreign branches of
foreign banks to dollar-denominated obligations of such banks which at the time
of investment have more than $5 billion, or the equivalent in other currencies,
in total assets and which are considered by the Fund's Board of Directors to be
First Tier Eligible Securities (as defined below) at the time of acquisition.
The Fund generally limits investments in bank instruments to (a) those which are
fully insured as to principal by the FDIC or (b) those issued by banks which at
the date of their latest public reporting have total assets in excess of $1.5
billion. However, the total assets of a bank will not be the sole factor
determining the Fund's investment decisions and
7
<PAGE>
the Fund may invest in bank instruments issued by institutions which the Fund's
Board of Directors believes present minimal credit risks.
U.S. dollar-denominated obligations issued by foreign branches of domestic
banks or foreign branches of foreign banks ("Eurodollar" obligations) and
domestic branches of foreign banks ("Yankee dollar" obligations): The Fund will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total assets
at the time of purchase, provided that there is no limitation on the Fund
investments in (a) Eurodollar obligations, if the domestic parent of the foreign
branch issuing the obligations is unconditionally liable in the event that the
foreign branch fails to pay on the Eurodollar obligation for any reason; and (b)
Yankee dollar obligations, if the U.S. branch of the foreign bank is subject to
the same regulation as United States banks. Eurodollar, Yankee dollar and other
foreign bank obligations include time deposits, which are non-negotiable
deposits maintained in a bank for a specified period of time at a stated
interest rate. The Fund will limit its purchases of time deposits to those which
mature in seven days or less, and will limit its purchases of time deposits
maturing in two to seven days to 10% of the Fund's total assets at the time of
purchase.
Eurodollar and other foreign obligations involve special investment risks,
including the possibility that liquidity could be impaired because of future
political and economic developments, that the obligations may be less marketable
than comparable domestic obligations of domestic issuers, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that deposits may be seized or nationalized, that foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on those obligations,
that the selection of foreign obligations may be more difficult because there
may be less information publicly available concerning foreign issuers, that
there may be difficulties in enforcing a judgment against a foreign issuer or
that the accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign issuers may differ from those applicable to
domestic issuers. In addition, foreign banks are not subject to examination by
United States Government agencies or instrumentalities.
Since the Fund may contain securities issued by foreign agencies or
instrumentalities, and by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign banks,
and commercial paper issued by foreign issuers, the Fund may be subject to
additional investment risks with respect to those securities that are different
in some respects from those incurred by a fund which invests only in debt
obligations of the United States and domestic issuers, although such obligations
may be higher yielding when compared to the securities of the United States and
domestic issuers. In making foreign investments, therefore, the Fund will give
appropriate consideration to the following factors, among others.
Foreign securities markets generally are not as developed or efficient as
those in the United States. Securities of some foreign issuers are less liquid
and more volatile than securities of comparable United States issuers.
Similarly, volume and liquidity in most foreign securities markets are less than
in the United States and, at times, volatility of price can be greater than in
the United States. The issuers of some of these securities, such as bank
obligations, may be subject to less stringent or different regulation than are
United States issuers. In addition, there may be less publicly available
information about a non-United States issuer and non-United States issuers
generally are not subject to uniform accounting and financial reporting
standards, practices and requirements comparable to those applicable to United
States issuers.
Because evidences of ownership of such securities usually are held outside
the United States, the Fund will be subject to additional risks which include
possible adverse political and economic developments, possible seizure or
nationalization of foreign deposits and possible adoption of
8
<PAGE>
governmental restrictions which might adversely affect the payment of principal
and interest on the foreign securities or might restrict the payment of
principal and interest to the issuer, whether from currency blockage or
otherwise.
Furthermore, some of these securities may be subject to stamp or other
excise taxes levied by foreign governments, which have the effect of increasing
the cost of such securities and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Income earned or received
by the Fund from sources within foreign countries may be reduced by withholding
and other taxes imposed by such countries. Tax conventions between certain
countries and the United States, however, may reduce or eliminate such taxes.
The Advisor and Sub-Advisor will attempt to minimize such taxes by timing of
transactions and other strategies, but there can be no assurance that such
efforts will be successful. All such taxes paid by the Fund will reduce its net
income available for distribution to shareholders. The Advisor and Sub-Advisor
will consider available yields, net of any required taxes, in selecting foreign
securities.
Variable Amount Master Demand Notes: unsecured demand notes that permit
investment of fluctuating amounts of money at variable rates of interest
pursuant to arrangements with issuers who meet the foregoing quality criteria.
The interest rate on a variable amount master demand note is periodically
redetermined according to a prescribed formula. Although there is no secondary
market in master demand notes, the payee may demand payment of the principal and
interest upon notice not exceeding five business or seven calendar days.
Commercial Paper and Certain Debt Obligations: commercial paper or
short-term debt obligations that have been determined by the Fund's Board of
Directors to present minimal credit risks and that are First Tier Eligible
Securities (as defined below) at the time of acquisition, so that the Fund is
able to employ the amortized cost method of valuation. Commercial paper
generally consists of short-term unsecured promissory notes issued by
corporations, banks or other borrowers.
The Fund may only purchase securities that have been determined by the
Fund's Board of Directors to present minimal credit risks and that are First
Tier Eligible Securities at the time of acquisition. The term First Tier
Eligible Securities means (i) securities that have remaining maturities of 397
days or less and are rated in the highest short-term rating category by any two
nationally recognized statistical rating organizations ("NRSROs") or in such
category by the only NRSRO that has rated the securities (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors); (ii) securities that have remaining maturities of
397 days or less but that at the time of issuance were long-term securities and
whose issuer has received from the Requisite NRSROs a rating with respect to
comparable short-term debt in the highest short-term rating category; and (iii)
unrated securities determined by the Fund's Board of Directors to be of
comparable quality. Where the issuer of a long-term security with a remaining
maturity which would otherwise qualify it as a First Tier Eligible Security does
not have rated short-term debt outstanding, the long-term security is treated as
unrated but may not be purchased if it has a long-term rating from any NRSRO
that is below the two highest long-term categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities or participation certificates. While there are several organizations
that currently qualify as NRSROs, two examples of NRSROs are Standard & Poor's
Rating Services, a division of the McGraw-Hill Companies ("S&P") and Moody's
Investors Service, Inc. ("Moody's"). The two highest ratings by Moody's for debt
securities are "Aaa" and "Aa" or by S&P are "AAA" and "AA". The highest rating
for domestic and foreign commercial paper is "Prime-1" by Moody's or "A-1" by
S&P and "VMIG-1" and "VMIG-2" by Moody's or "SP-1/AA" by S&P) in the case of
variable and floating rate demand notes. (See "Description of Ratings" in the
Statement of Additional Information.)
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Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced so that it ceases to be a First
Tier Eligible Security. If this occurs, the Board of Directors of the Fund shall
reassess promptly whether the security presents minimal credit risks and shall
cause the Fund to take such action as the Board of Directors determines is in
the best interest of the Fund and its shareholders. However, reassessment is not
required if the security is disposed of or matures within five business days of
the Advisor and Sub-Advisor becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of the Advisor's
and Sub-Advisor's actions.
In addition, in the event that a security (1) is in default, (2) ceases to
be an eligible investment under Rule 2a-7 or (3) is determined to no longer
present minimal credit risks, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interest of the Fund. In the event that the security is
disposed of, it shall be disposed of as soon as practicable, consistent with
achieving an orderly disposition by sale, exercise of any demand feature, or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of the Fund's total
assets, the Fund shall promptly notify the Securities and Exchange Commission of
such fact and of the actions that the Fund intends to take in response to the
situation.
The Fund may enter into repurchase agreements providing for resale in 397
days or less covering any of the foregoing securities which may have maturities
in excess of 397 days, provided that the instruments serving as collateral for
the agreements are eligible for inclusion in the Fund.
RISK FACTORS AND ADDITIONAL INVESTMENT INFORMATION
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. Delayed delivery agreements are commitments by the Fund to dealers or
issuers to acquire securities beyond the customary same-day settlement for money
market instruments. These commitments fix the payment price and interest rate to
be received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Advisor and
the Sub-Advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales of
shares of the Fund; therefore, to assure that the Fund will be as fully invested
as possible in instruments meeting its investment objective, the Fund may enter
into delayed delivery agreements, but only to the extent of anticipated funds
available for investment during a period of not more than five business days.
Money market obligations are sometimes offered on a "when-issued" basis,
that is, the date for delivery of and payment for the securities is not fixed at
the date of purchase, but is set after the securities are issued (normally
within forty-five days after the date of the transaction). The payment
obligation and the interest rate that will be received on the securities are
fixed at the time the buyer enters into the commitment. The Fund will only make
commitments to purchase such money market instruments with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable.
If the Fund enters into a delayed delivery agreement or purchases a
when-issued security, it will direct Investors Fiduciary Trust Company, the
Fund's custodian (the "Custodian") to place cash or other high grade securities
(including money market obligations) in a separate account of the Fund in an
amount equal to its delayed delivery agreements or when-issued commitments. If
the market value of such securities declines, additional cash or securities will
be placed in the account on a daily basis so that the market value of the
account will equal the amount of the Fund's delayed delivery agreements and
when-issued commitments. To the extent that funds are in a separate account,
they will not be
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available for new investment or to meet redemptions. Investment in securities on
a when-issued basis and use of delayed agreements may increase the Fund's
exposure to market fluctuation; or may increase the possibility that the Fund
will incur a short-term loss, if the Fund must engage in portfolio transactions
in order to honor a when-issued commitment or accept delivery of a security
under a delayed delivery agreement. The Fund will employ techniques designed to
minimize these risks.
No additional delayed delivery agreements or when-issued commitments will
be made if more than 25% of the Fund's net assets would become so committed. The
Fund will enter into when-issued and delayed delivery transactions only when the
time period between trade date and settlement date is at least 30 days and not
more than 120 days.
Repurchase Agreements
When the Fund purchases securities, it may enter into a repurchase
agreement with the seller wherein the seller agrees, at the time of sale, to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This arrangement
results in a fixed rate of return insulated from market fluctuations during such
period. The Fund may enter into repurchase agreements with member banks of the
Federal Reserve System and with broker-dealers who are recognized as primary
dealers in United States government securities by the Federal Reserve Bank of
New York whose creditworthiness has been reviewed and found to meet the
investment criteria of the Fund. Although the securities subject to the
repurchase agreement might bear maturities exceeding 397 days, settlement for
the repurchase would never be more than one year after the Fund's acquisition of
the securities and normally would be within a shorter period of time. The resale
price will be in excess of the purchase price, reflecting an agreed upon market
rate effective for the period of time the Fund's money will be invested in the
security, and will not be related to the coupon rate of the purchased security.
At the time the Fund enters into a repurchase agreement the value of the
underlying security, including accrued interest, will be equal to or exceed the
value of the repurchase agreement and, in the case of a repurchase agreement
exceeding one day, the seller will agree that the value of the underlying
security, including accrued interest, will at all times be equal to or exceed
the value of the repurchase agreement. The Fund may engage in a repurchase
agreement with respect to any security in which it is authorized to invest, even
though the underlying security may mature in more than one year. The collateral
securing the seller's obligation must be of a credit quality at least equal to
the Fund's investment criteria for Fund securities and will be held by the
Fund's custodian or in the Federal Reserve Book Entry System. Nevertheless, if
the seller of a repurchase agreement fails to repurchase the obligation in
accordance with the terms of the agreement, the Fund which entered into the
repurchase agreement may incur a loss to the extent that the proceeds it
realized on the sale of the underlying obligation are less than the repurchase
price. Repurchase agreements may be considered loans to the seller of the
underlying security. Income with respect to repurchase agreements is not
tax-exempt. If bankruptcy proceedings are commenced with respect to the seller,
the Fund's realization upon the collateral may be delayed or limited. The Fund
may invest no more than 10% of its net assets in illiquid securities including
repurchase agreements maturing in more than seven days. (See "Investment
Restrictions" herein.) The Fund may, however, enter into "continuing contract"
or "open" repurchase agreements under which the seller is under a continuing
obligation to repurchase the underlying obligation from the Fund on demand and
the effective interest rate is negotiated on a daily basis.
Securities purchased pursuant to a repurchase agreement are held by the
Fund's custodian and (i) are recorded in the name of the Fund with the Federal
Reserve Book Entry System or (ii) the Fund receives daily written confirmation
of each purchase of a security and a receipt from the custodian. The Fund
purchases securities subject to a repurchase agreement only when the purchase
price of the security acquired is equal to or less than its market price at the
time of purchase.
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Privately Placed Securities
The Fund may invest in securities issued as part of privately negotiated
transactions between an issuer and one or more purchasers. Except with respect
to certain commercial paper issued in reliance on the exemption from regulations
in Section 4(2) of the Securities Act of 1933 (the "Securities Act") and
securities subject to Rule 144A of the Securities Act which are discussed below,
these securities are typically not readily marketable and are therefore
considered illiquid securities. The price the Fund pays for illiquid securities,
and any price received upon resale, may be lower than the price paid or received
for similar securities with a more liquid market. Accordingly, the valuation of
privately placed securities purchased by the Fund will reflect any limitations
on their liquidity.
The Fund may purchase securities that are not registered ("restricted
securities") under the Securities Act, but can be offered and sold to "qualified
institutional buyers" under Rule 144A of the Securities Act. The Fund may also
purchase certain commercial paper issued in reliance on the exemption from
regulations in Section 4(2) of the Securities Act ("4(2) Paper"). However, the
Fund will not invest more than 10% of its net assets in illiquid investments,
which include securities for which there is no readily available market,
securities subject to contractual restriction on resale, certain investments in
asset-backed and receivable-backed securities and restricted securities (unless,
with respect to these securities and 4(2) Paper, the Fund's Directors
continuously determine, based on the trading markets for the specific restricted
security, that it is liquid). The Directors may adopt guidelines and delegate to
the Advisor or Sub-Advisor the daily function of determining and monitoring
liquidity of restricted securities and 4(2) Paper. The Directors, however, will
retain sufficient oversight and be ultimately responsible for these
determinations.
Since it is not possible to predict with assurance exactly how this market
for restricted securities sold and offered under Rule 144A will develop, the
Directors will carefully monitor the Fund's investments in these securities,
focusing on such factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
INVESTMENT RESTRICTIONS
The Fund operates under the following investment restrictions which,
together with the investment objective of the Fund, may not be changed without
shareholder approval and which apply to the Fund. The Fund may not:
* invest more than 5% of the total market value of the Fund's assets
(determined at the time of the proposed investment and giving effect
thereto) in the securities of any one issuer other than the United
States Government, its agencies or instrumentalities;
* invest more than 25% of the value of the Fund's total assets in
securities of companies in the same industry (excluding United States
government securities and certificates of deposit and bankers'
acceptances of domestic banks) if the purchase would cause more than
25% of the value of the Fund's total assets to be invested in
companies in the same industry (for the purpose of this restriction
wholly-owned finance companies are considered to be in the industry of
their parents if their activities are similarly related to financing
the activities of their parents);
* acquire securities that are not readily marketable or repurchase
agreements calling for resale within more than seven days if, as a
result thereof, more than 10% of the value of its net assets would be
invested in such illiquid securities;
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<PAGE>
* invest more than 5% of the Fund's assets in securities that are
subject to underlying puts from the same institution, and no single
bank shall issue its letter of credit and no single financial
institution shall issue a credit enhancement covering more than 5% of
the total assets of the Fund. However, if the puts are exercisable by
the Fund in the event of default on payment of principal and interest
on the underlying security, then the Fund may invest up to 10% of its
assets in securities underlying puts issued or guaranteed by the same
institution; additionally, a single bank can issue its letter of
credit or a single financial institution can issue a credit
enhancement covering up to 10% of the Fund's assets, where the puts
offer the Fund such default protection;
* make loans, except that the Fund may purchase for the Fund the debt
securities described above under "Investment Objectives, Policies and
Risks" and may enter into repurchase agreements as therein described;
* borrow money, unless (i) the borrowing does not exceed 10% of the
total market value of the assets of the Fund with respect to which the
borrowing is made (determined at the time of borrowing but without
giving effect thereto) and (ii) the money is borrowed from one or more
banks as a temporary measure for extraordinary or emergency purposes
or to meet unexpectedly heavy redemption requests; in addition, the
Fund will not make additional investments when borrowings exceed 5% of
the Fund's net assets; and
* pledge, mortgage, assign or encumber any of the Fund's assets except
to the extent necessary to secure a borrowing permitted by the
foregoing clause made with respect to the Fund.
MANAGEMENT OF THE FUND
Management, Advisory and Sub-Advisory Agreements
The Fund's Board of Directors, which is responsible for the overall
management and supervision of the Fund, has employed Pax World Management Corp.,
222 State Street, Portsmouth, New Hampshire 03801 (the "Advisor"), to act as
investment advisor to the Fund. The Advisor was incorporated in 1970 under the
laws of the State of Delaware and is a registered investment advisor, under the
1940 Act. Pursuant to the terms of an Advisory Agreement entered into between
the Fund and the Advisor (the "Advisory Agreement"), the Advisor, subject to the
supervision of the Board of Directors of the Fund, is responsible for
determining whether contemplated investments satisfy the social responsibility
criteria applied to the Fund and for overseeing the performance of the
Sub-Advisor. Under the Advisory Agreement, the Fund will pay the Advisor an
annual advisory fee of .15% of the Fund's average daily net assets. As of
December 31, 1997, the Advisor had over $600,000,000 in assets under management
by virtue of serving as the Advisor to the Pax World Fund and the Pax World
Growth Fund. The Advisor has no clients other than the Fund, the Pax World Fund
and the Pax World Growth Fund. Reich & Tang Asset Management L.P. will serve as
the Sub-Advisor of the Fund under a Sub-Advisory Agreement entered into between
the Advisor and the Sub-Advisor (the "Sub-Advisory Agreement"). The Advisor and
Sub-Advisor provide persons satisfactory to the Fund's Board of Directors to
serve as officers of the Fund. Such officers, as well as certain other employees
and Directors of the Fund, may be officers of the Advisor, Reich & Tang Asset
Management, Inc., the sole general partner of the Sub-Advisor or employees of
the Sub-Advisor or its affiliates. Due to the services performed by the Advisor
and Sub-Advisor, the Fund currently has no employees and its officers are not
required to devote full-time to the affairs of the Fund. The Statement of
Additional Information contains general background information regarding each
Director and principal officer of the Fund.
The Sub-Advisor is a Delaware limited partnership and a registered
investment advisor, under the 1940 Act, with its principal office at 600 Fifth
Avenue, New York, New York 10020. The Sub-
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Advisor, as of February 28, 1998, was investment manager, advisor or supervisor
with respect to assets aggregating approximately $11.28 billion. The Sub-Advisor
acts as manager or administrator of seventeen other registered investment
companies and also advises pension trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was
the limited partner and owner of a 99.5% interest in the Sub-Advisor replacing
New England Investment Companies, L.P. ("NEICLP") as the limited partner and
owner of such interest in the Sub-Advisor, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
NEICOP changed its name to Nvest Companies, L.P. ("Nvest Companies").
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Sub-Advisor. Nvest Corporation, a Massachusetts Corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of
Metropolitan Life Insurance Company ("MetLife"). Also, MetLife directly and
indirectly owns approximately 47% of the outstanding partnership interests of
Nvest Companies and may be deemed a "controlling person" of the Sub-Advisor.
Reich & Tang, Inc. owns, directly and indirectly, approximately 13% of the
outstanding partnership interests of Nvest Companies.
Nvest Companies is a holding company offering to institutional clients a
broad array of investment styles across a wide range of asset categories through
thirteen subsidiaries, divisions and affiliates. Its business units include AEW
Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth Management,
L.P., Graystone Partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P.,
Loomis, Sayles & Company, L.P., New England Investment Associates, Inc., Reich &
Tang Capital Management, Reich & Tang Funds, Vaughan-Nelson, Scarborough &
McConnell, Inc., and Westpeak Investment Advisors, L.P. These affiliates in the
aggregate are investment advisors or managers to 80 other registered investment
companies.
The recent name change did not result in a change in control of the
Sub-Advisor and has no impact upon the Sub-Advisor's performance of its
responsibilities and obligations.
On January 30, 1998 the Board of Directors, including a majority of the
Directors who are not interested persons (as defined in the 1940 Act) of the
Fund, the Advisor or the Sub-Advisor, approved an Investment Advisory Agreement
with the Advisor and a Sub-Advisory Agreement with the Sub-Advisor, each
effective April 9, 1998 which have terms which extend to January 31, 2000 and
may be continued in force thereafter for successive twelve-month periods
beginning each February 1, provided that such continuance is specifically
approved annually by majority vote of the Fund's outstanding voting securities
or by a majority of the Directors who are not parties to the Investment Advisory
Agreement and Sub-Advisory Agreement or interested persons of any such party, by
votes cast in person at a meeting called for the purpose of voting on such
matter. The Investment Advisory Agreement and Sub-Advisory Agreement were
approved by the sole shareholder of the Fund on March 18, 1998.
Pursuant to the terms of a Sub-Advisory Agreement between the Advisor and
the Sub-Advisor, the Sub-Advisor manages the Fund's portfolio of securities and
makes the decisions with respect to the purchase and sale of investments,
subject to the general control of the Board of Directors of the Fund and the
determination of the Advisor that the contemplated investments satisfy the
social responsibility criteria applied to the Fund. Under the Sub-Advisory
Agreement, the Advisor will pay the Sub-Advisor an annual management fee of
.075% of the Fund's average daily net assets from its advisory fee. The
management fees are accrued daily and paid monthly. The Sub-Advisor, at its
discretion, may voluntarily waive all or a portion of the management fee.
Pursuant to an Administrative Services Agreement for the Fund, the
Sub-Advisor performs clerical, accounting supervision and office service
functions for the Fund and provides the Fund with
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<PAGE>
personnel to (i) supervise the performance of bookkeeping and related services
by Investors Fiduciary Trust Company, the Fund's bookkeeping agent; (ii) prepare
reports to and filings with regulatory authorities; and (iii) perform such other
administrative services as the Fund may from time to time request of the
Sub-Advisor. The personnel rendering such services may be employees of the
Sub-Advisor or its affiliates. The Fund reimburses the Sub-Advisor for all of
the Fund's operating costs including rent, depreciation of equipment and
facilities, interest and amortization of loans financing equipment used by the
Fund and all the expenses incurred to conduct the Fund's affairs. The amount of
such reimbursement must be agreed upon between the Fund and the Sub-Advisor. The
Sub-Advisor, at its discretion, may voluntarily waive all or a portion of the
administrative services fee and the operating expense reimbursement. For its
services under the Administrative Services Agreement, the Sub-Advisor receives
an annual fee of .10% of the Fund's average daily net assets.
Any portion of the total fees received by the Advisor and Sub-Advisor and
their past profits may be used to provide shareholder services and for
distribution of Fund shares. (See "Distribution and Service Plan" herein.) The
fees are accrued daily and paid monthly.
In addition, Reich & Tang Distributors, Inc., the Distributor, receives a
servicing fee equal to .25% per annum of the average daily net assets of the
Broker Service Class shares (the "Shareholder Servicing Fee") of the Fund under
the Shareholder Servicing Agreement with the Distributor. The fees are accrued
daily and paid monthly. Investment management fees and operating expenses, which
are attributable to the three Classes of shares of the Fund, will be allocated
daily to each Class of shares based on the percentage of shares outstanding for
each Class at the end of the day.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on
November 26, 1997 in Maryland, consists of twenty billion shares of stock having
a par value of one tenth of one cent ($.001) per share. Except as noted below,
each share has equal dividend, distribution, liquidation and voting rights
within the Fund and a fractional share has those rights in proportion to the
percentage that the fractional share represents of a whole share. Generally,
shares will be voted in the aggregate except if voting by Fund Class is required
by law or the matter involved affects only one Fund Class, in which case shares
will be voted separately by Fund Class. There are no conversion or preemptive
rights in connection with any shares of the Fund. All shares when issued in
accordance with the terms of the offering will be fully paid and nonassessable.
Shares of the Fund are redeemable at net asset value, at the option of the
shareholder. On March 18, 1998, the Advisor purchased $100,000 of the Fund's
shares at an initial subscription price of $1.00 per share.
The Fund is subdivided into three classes of shares of beneficial interest.
Each share, regardless of Class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) each
Class of shares will have different class designations; (ii) only the Individual
Investor Class and Broker Service Class shares will be assessed a Shareholder
Servicing Fee of .25% of the average daily net assets of the Individual Investor
Class and Broker Service Class shares of the Fund pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund (the "Plan"); (iii) only the holders
of the Individual Investor Class and Broker Service Class shares will be
entitled to vote on matters pertaining to the Plan and any related agreements
applicable to that Class in accordance with provisions of Rule 12b-1; (iv) only
the Broker Service Class shares will be assessed an additional sub-transfer
agent accounting fee of .20% of the average daily net assets of the Broker
Service Class shares of the Fund; and (v) the exchange privilege will permit
shareholders to exchange their shares only for shares of a fund that
participates in an Exchange Privilege Program with the Fund. Payments that are
made under the Plan will be calculated and charged daily to the appropriate
Class prior to determining daily net asset value per share and
dividends/distributions.
Generally, all shares will be voted in the aggregate, except if voting by
Class is required by law or the matter involved affects only one Class, in which
case shares will be voted separately by Class. The shares of the Fund have
non-cumulative voting rights, which means that the holders of more than
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<PAGE>
50% of the shares outstanding voting for the election of directors can elect
100% of the directors if the holders choose to do so, and, in that event, the
holders of the remaining shares will not be able to elect any person or persons
to the Board of Directors. The Fund's By-laws provide that the holders of a
majority of the outstanding shares of the Fund present at a meeting in person or
by proxy will constitute a quorum for the transaction of business at all
meetings.
HOW TO PURCHASE AND REDEEM SHARES
Investors who have accounts with Participating Organizations (as defined
below) may invest in the Fund through their Participating Organizations in
accordance with the procedures established by the Participating Organizations.
Certain Participating Organizations are compensated by the Distributor from its
Shareholder Servicing Fee and by the Sub-Advisor from its management fee for the
performance of these services. An investor who purchases shares through a
Participating Organization that receives payment from the Sub-Advisor or the
Distributor will become an Individual Investor Class or Broker Service Class
shareholder. (See "Investments Through Participating Organizations" herein.) All
other investors, and investors who have accounts with Participating
Organizations but who do not wish to invest in the Fund through their
Participating Organizations, may invest in the Fund directly as Institutional
Class shareholders of the Fund and not receive the benefit of the servicing
functions performed by a Participating Organization. Institutional Class shares
may also be offered to investors who purchase their shares through Participating
Organizations who do not receive compensation from the Distributor or the
Sub-Advisor because they may not be legally permitted to receive such as
fiduciaries. The Sub-Advisor pays the expenses incurred in the distribution of
Institutional Class shares. Participating Organizations whose clients become
Institutional Class shareholders will not receive compensation from the
Sub-Advisor or Distributor for the servicing they may provide to their clients.
(See "Direct Purchase and Redemption Procedures" herein.) With respect to the
Institutional Class of shares, the minimum initial investment in the Fund is
$100,000.
Broker Service Class shares will only be offered to the clearance clients
of clearing broker-dealers that have entered into an agreement with the
Distributor ("Clearing Brokers"). Broker Service Class shares are subject to a
service fee pursuant to the Fund's Rule 12b-1 Distribution and Service Plan. The
Clearing Brokers provide shareholder servicing to Broker Service Class
shareholders and are compensated for such by the Sub-Advisor and/or the
Distributor. (See "Investments Through Clearing Brokers" herein.) With respect
to the Broker Service Class of shares, the minimum initial investment in the
Fund is $1,000. The minimum amount for subsequent investments is $100 for all
shareholders.
The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a sales charge for either sales or redemptions.
All transactions in Fund Institutional Class or Broker Service Class shares are
effected through the Fund's Institutional Class transfer agent or Clearing
Brokers, respectively, which accept orders for purchases and redemptions from
the Distributor and from shareholders directly.
In order to maximize earnings, the Fund normally has its assets as fully
invested as is practicable. Many securities in which the Fund invests require
immediate settlement in funds of Federal Reserve member banks on deposit at a
Federal Reserve bank (commonly known as "Federal Funds"). Accordingly, the Fund
does not accept a subscription or invest an investor's payment in portfolio
securities until the payment has been converted into Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share for each Class made after acceptance of the investor's or
Clearing Broker's purchase order. An investor's funds will not be invested by
the Fund during the period before the Fund's receipt of Federal Funds and its
issuance of Fund shares. The Fund reserves the right to reject any purchase
order for its shares.
Shares are issued as of 12:00 noon, New York City time, on any Fund
Business Day, as defined herein, on which an order for the shares and
accompanying Federal Funds are received by the Fund's transfer agent before
12:00 noon, New York City time. Orders accompanied by Federal Funds and received
after 12:00 noon, New York City time on a Fund Business Day will not result in
share issuance until the following Fund Business Day. Fund shares begin accruing
income on the day the shares are issued to an investor.
16
<PAGE>
There is no redemption charge, no minimum period of investment and no
restriction on frequency of withdrawals. Proceeds of redemptions are paid by
check or bank wire. Unless other instructions are given in proper form to the
Fund's transfer agent, a check for the proceeds of a redemption will be sent to
the shareholder's address of record. If a shareholder elects to redeem all the
shares of the Fund he owns, all dividends credited to the shareholder up to the
date of redemption are paid to the shareholder in addition to the proceeds of
the redemption.
The date of payment upon redemption may not be postponed for more than
seven days after shares are tendered for redemption, and the right of redemption
may not be suspended, except for any period during which the New York Stock
Exchange, Inc. is closed (other than customary weekend and holiday closings) or
during which the Securities and Exchange Commission determines that trading
thereon is restricted, or for any period during which an emergency (as
determined by the Securities and Exchange Commission) exists as a result of
which disposal by the Fund of its securities is not reasonably practicable or as
a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the
Securities and Exchange Commission may by order permit for the protection of the
shareholders of the Fund.
Redemption requests received by the Fund's Institutional Class transfer
agent or Clearing Brokers before 12:00 noon, New York City time, on any day on
which the New York Stock Exchange, Inc. is open for trading become effective at
12:00 noon that day. A redemption request received after 12:00 noon on any day
on which the New York Stock Exchange, Inc. is open for trading becomes effective
on the next Fund Business Day. Shares redeemed are not entitled to participate
in dividends declared on the day or after the day a redemption becomes
effective.
The Fund has reserved the right to redeem the shares of any shareholder if
the account value of all the remaining shares in his account after a withdrawal
is less than $500 or the Fund may impose a monthly service charge of $10 on such
accounts. Written notice of any such mandatory redemption will be given at least
30 days in advance to any shareholder whose account is to be redeemed. During
the notice period any shareholder who receives such a notice may (without regard
to the normal $100 requirement for an additional investment) make a purchase of
additional shares to increase his total account value at least to the minimum
amount and thereby avoid such mandatory redemption.
The Fund has reserved the right to charge individual shareholder accounts
for expenses actually incurred by such account for postage, wire transfers and
certain other shareholder expenses, as well as to impose a monthly service
charge for accounts whose account value falls below the minimum amount.
Investments Through Participating Organizations
Investors who have accounts with Participating Organizations ("Participant
Investors") may, if they wish, invest in the Fund through the Participating
Organizations with which they have accounts. "Participating Organizations" are
securities brokers, banks and financial institutions or other industry
professionals or organizations which have entered into shareholder servicing
agreements with the Distributor with respect to investment of their customer
accounts in the Fund. When instructed by its customer to purchase or redeem Fund
shares, the Participating Organization, on behalf of the customer, transmits to
the Fund's transfer agent a purchase or redemption order, and in the case of a
purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are
shareholders in the Fund each purchase and redemption of Fund shares for the
customers' accounts. Also, Participating Organizations may send their customers
periodic account statements showing the total number of Fund shares owned by
each customer as of the statement closing date, purchases and redemptions of
Fund shares by each customer during the period covered by the statement and the
income earned by Fund shares of each customer during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
Participant Investors whose Participating Organizations have not undertaken to
provide such statements will receive them from the Fund directly.
Participating Organizations may charge Participant Investors a fee in
connection with their use of specialized purchase and redemption procedures
offered to Participant Investors by the Participating
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Organizations. In addition, Participating Organizations offering purchase and
redemption procedures similar to those offered to shareholders who invest in the
Fund directly may impose charges, limitations, minimums and restrictions in
addition to or different from those applicable to shareholders who invest in the
Fund directly. Accordingly, the net yield to investors who invest through
Participating Organizations may be less than by investing in the Fund directly.
A Participant Investor should read this Prospectus in conjunction with the
materials provided by the Participating Organization describing the procedures
under which Fund shares may be purchased and redeemed through the Participating
Organization.
In the case of qualified Participating Organizations, orders received by
the Fund's transfer agent before 12:00 noon, New York City time, on a Fund
Business Day without accompanying Federal Funds, will result in the issuance of
shares on that day provided that the Federal Funds required in connection with
the orders are received by the Fund's transfer agent before 4:00 p.m., New York
City time, on that day. Orders for which Federal Funds are received after 4:00
p.m., New York City time, will not result in share issuance until the following
Fund Business Day. Participating Organizations are responsible for instituting
procedures to insure that purchase orders by their respective clients are
processed expeditiously.
Investments Through Clearing Brokers
Investors who maintain accounts with Clearing Brokers may, if they wish,
invest in the Fund through such Clearing Brokers ("Broker Service Class
Shareholders"). When instructed by its customer to purchase or redeem Fund
shares, the Clearing Brokers, on behalf of the customer, transmit to the Fund's
transfer agent a purchase or redemption order, and in the case of a purchase
order, payment for the shares being purchased.
Clearing Brokers may confirm to their customers who are shareholders in the
Fund each purchase and redemption of Fund shares for the customers' accounts.
Also, Clearing Brokers may send their customers periodic account statements
showing the total number of Fund shares owned by each customer as of the
statement closing date, purchases and redemptions of Fund shares by each
customer during the period covered by the statement and the income earned by
Fund shares of each customer during the statement period (including dividends
paid in cash or reinvested in additional Fund shares).
Clearing Brokers may charge Broker Service Class Shareholders a fee in
connection with their use of specialized purchase and redemption procedures
offered to them by Clearing Brokers. In addition, Clearing Brokers offering
purchase and redemption procedures similar to those offered to shareholders who
invest in the Fund directly may impose charges, limitations, minimums and
restrictions in addition to or different from those applicable to shareholders
who invest in the Fund directly. Accordingly, the net yield to investors who
invest through Clearing Brokers may be less than by investing in the Fund
directly. A Broker Service Class Shareholder should read this Prospectus in
conjunction with the materials provided by the Clearing Brokers describing the
procedures under which Fund shares may be purchased and redeemed through the
Clearing Brokers.
In the case of Clearing Brokers, orders received by the Fund's transfer
agent before 12:00 noon, New York City time, on a Fund Business Day without
accompanying Federal Funds, will result in the issuance of shares on that day
provided that the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will not result in share issuance until the following Fund Business
Day. Clearing Brokers are responsible for instituting procedures to insure that
purchase orders by their respective clients are processed expeditiously.
DIRECT PURCHASE AND REDEMPTION PROCEDURES
The following purchase and redemption procedures apply to investors who
wish to invest in the Fund directly. These investors may obtain the subscription
order form necessary to open an account by telephoning the Fund at either
212-830-5220 (within New York State) or 800-241-3263 (toll free outside New York
State).
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All shareholders will receive from the Fund a monthly statement listing the
total number of shares of the Fund owned as of the statement closing date,
purchases and redemptions of shares of the Fund during the month covered by the
statement and the dividends paid on shares of the Fund of each shareholder
during the statement period (including dividends paid in cash or reinvested in
additional shares of the Fund). Certificates for Fund shares will not be issued
to an investor.
Initial Purchase of Shares
Mail
Investors may send a check made payable to the Fund along with a completed
subscription order form to:
Pax World Money Market Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, NY 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member bank of the Federal Reserve
System can normally be converted into Federal Funds within two business days
after receipt of the check. Checks drawn on a non-member bank may take
substantially longer to convert into Federal Funds and to be invested in Fund
shares. An investor's subscription will not be accepted until the Fund receives
Federal Funds.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of
money among banks, an investor should first obtain a new account number by
telephoning the Fund at either 212-830-5220 (within New York State) or
800-241-3263 (toll free outside New York State) and then instruct a member
commercial bank to wire money immediately to:
Investors Fiduciary Trust Company
ABA #101003621
Reich & Tang Funds
DDA #890752-954-6
For Pax World Money Market Fund, Inc.
Account of (Investor's Name)
Fund Account #______________________
SS #/Tax I.D.#_____________________
The investor should then promptly complete and mail the subscription order
form.
An investor planning to wire funds should instruct his bank early in the
day so the wire transfer can be accomplished the same day. There may be a charge
by the investor's bank for transmitting the money by bank wire, and there also
may be a charge for use of Federal Funds. The Fund does not charge investors in
the Fund for its receipt of wire transfers. Payment in the form of a "bank wire"
received prior to 12:00 noon, New York City time, on a Fund Business Day will be
treated as a Federal Funds payment received on that day.
Personal Delivery
Deliver a check made payable to "Pax World Money Market Fund, Inc." along with a
completed subscription order form to:
Pax World Money Market Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue - 9th Floor
New York, NY 10020
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Electronic Funds Transfers (EFT), Pre-authorized Credit and Direct Deposit
Privilege
Investors may purchase shares of the Fund (minimum of $100) by having
salary, dividend payments, interest payments or any other payments designated by
them, or by having federal salary, social security, or certain veteran's
military or other payments from the federal government, automatically deposited
into a Fund account. Investors can also have money debited from their checking
account. To enroll in any one of these programs, an investor must file with the
Fund a completed EFT Application, Pre-authorized Credit Application, or a Direct
Deposit Sign-Up Form for each type of payment that the investor desires to
include in the Privilege. The appropriate form may be obtained from your broker
or the Fund. Investors may elect at any time to terminate their participation by
notifying in writing the appropriate depositing entity and/or federal agency.
Death or legal incapacity will automatically terminate an investor's
participation in the Privilege. Further, the Fund may terminate an investor's
participation upon 30 days' notice.
Subsequent Purchases of Shares
There is a $100 minimum for each subsequent purchase. All payments should
clearly indicate the shareholder's account number. Provided that the information
on the subscription order form on file with the Fund is still applicable, a
shareholder may reopen an account without filing a new subscription order form
at any time during the year the shareholder's account is closed or during the
following calendar year.
Subsequent purchases can be made either by bank wire or by personal
delivery, as indicated above, or by mailing a check to the Fund's transfer agent
at:
Pax World Money Market Fund, Inc.
P.O. Box 13232
Newark, NJ 07101-3232
Redemption of Shares
A redemption is effected immediately following, and at a price determined
in accordance with, the next determination of net asset value per share of each
Class of the Fund following receipt by the Fund's transfer agent of the
redemption order. Normally payment for redeemed shares is made on the Fund
Business Day the redemption is effected, provided the redemption request is
received prior to 12:00 noon, New York City time and on the next Fund Business
Day if the redemption request is received after 12:00 noon, New York City time.
However, redemption requests will not be effected unless the check (including a
certified or cashier's check) used for investment has been cleared for payment
by the investor's bank, currently considered by the Fund to occur within 15 days
after investment.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee. When a
signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature and guaranteed by an eligible guarantor
institution which includes a domestic bank, a domestic savings and loan
institution, a domestic credit union, a member bank of the Federal Reserve
System or a member firm of a national securities exchange, pursuant to the
Fund's transfer agent's standards and procedures.
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Written Requests
Shareholders may make a redemption in any amount by sending a written
request to:
Pax World Money Market Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, NY 10020
All written requests for redemption must be signed by the shareholder with
signature guaranteed. Normally, the redemption proceeds are paid by check mailed
to the shareholder of record.
Check Writing Privileges
By making the appropriate election on the subscription order form, a Broker
Service Class Shareholder may request a supply of checks which may be used to
effect redemptions from any one or more of the Classes of shares of the Fund in
which the shareholder is invested. The checks will be issued in the
shareholder's name and the shareholder will receive a separate supply of checks
for each Class of shares of the Fund for which checks are requested. Checks may
be drawn in any amount determined by the Clearing Broker for Broker Service
Class Shareholders, and may be used like an ordinary commercial bank check
except that they may not be certified. The checks are drawn on a special account
maintained by the Fund with the agent bank. When a check is presented to the
Fund's agent bank, it instructs the transfer agent to redeem a sufficient number
of full and fractional shares in the shareholder's account to cover the amount
of the check. The canceled check is usually returned to the shareholder. The use
of a check to make a withdrawal enables the Broker Service Class Shareholders in
the Fund to receive dividends on the shares to be redeemed up to the Fund
Business Day on which the check clears. Fund shares purchased by check may not
be redeemed by check until the check has cleared, which could take up to 15 days
following the date of purchase.
There is no charge to the Broker Service Class Shareholder for checks
provided by the Fund. The Fund reserves the right to impose a charge or impose a
different minimum check amount in the future, if the Board of Directors
determines that doing so is in the best interest of the Fund and its
shareholders.
Broker Service Class Shareholders electing the checking option are subject
to the procedures, rules and regulations of the Fund's agent bank governing
checking accounts. Checks drawn on a jointly owned account may, at the
shareholder's election, require only one signature. Checks in amounts exceeding
the value of the shareholder's account at the time the check is presented for
payment will not be honored. Since the dollar value of the account changes
daily, the total value of the account may not be determined in advance and the
account may not be entirely redeemed by check. In addition, the Fund reserves
the right to charge the shareholder's account a fee up to $20 for checks not
honored as a result of an insufficient account value, a check deemed not
negotiable because it has been held longer than six months, an unsigned check or
a post-dated check. The Fund reserves the right to terminate or modify the check
redemption procedure at any time or to impose additional fees following
notification to the Fund's Broker Service Class Shareholders.
Telephone
The Fund accepts telephone requests for redemption from Institutional Class
Shareholders who elect this option. The proceeds of a telephone redemption will
be sent to the shareholder at his or her address or to his or her bank account
as set forth in the subscription order form or in a subsequent signature
guaranteed written authorization. Redemptions following an investment by check
will not be effected until the check has cleared, which could take up to 15 days
after investment. The Fund may accept telephone redemption instructions from any
person with respect to accounts of shareholders who elect this service, and thus
shareholders risk possible loss of dividends in the event of a telephone
redemption not authorized by them. Telephone requests to wire redemption
proceeds must be for amounts in excess of $1,000. The Fund will employ
reasonable procedures to confirm that telephone redemption instructions are
genuine, and will require that Institutional Class Shareholders electing such
option provide a form of personal identification. The failure by the Fund to
employ such reasonable
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procedures may cause the Fund to be liable for any losses incurred by investors
due to telephone redemptions based upon unauthorized or fraudulent instructions.
The telephone redemption option may be modified or discontinued at any time upon
60 days written notice to shareholders.
A shareholder of Institutional Class shares making a telephone withdrawal
should call the Fund at 212-830-5220 (within New York State) or 800-241-3263
(toll free outside New York State) and state (i) the name of the shareholder
appearing on the Fund's records, (ii) his or her account number with the Fund,
(iii) the amount to be withdrawn and (iv) the name of the person requesting the
redemption. Usually, the proceeds are sent to the investor on the same Fund
Business Day the redemption is effected, provided the redemption request is
received prior to 12:00 noon, New York City time and on the next Fund Business
Day if the redemption request is received after 12:00 noon, New York City time.
Specified Amount Automatic Withdrawal Plan
Shareholders may elect to withdraw shares and receive payment from the Fund
of a specified amount of $50 or more automatically on a monthly or quarterly
basis. The monthly or quarterly withdrawal payments of the specified amount are
made by the Fund on the 23rd day of the month. Whenever such 23rd day of the
month is not a Fund Business Day, the payment date is the Fund Business Day
preceding the 23rd day of the month. In order to make a payment, a number of
shares equal in aggregate net asset value to the payment amount are redeemed at
their net asset value on the Fund Business Day immediately preceding the date of
payment. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the
time of the original subscription by so indicating on the subscription order
form for Institutional Class Shareholders or by so indicating on the appropriate
form from their Clearing Broker for Broker Service Class Shareholders. The
election may also be made, changed or terminated at any later time by sending a
signature guaranteed written request to the transfer agent.
Exchange Privilege
Shareholders of the Fund are entitled to exchange some or all of their
shares in the Fund for shares of the Pax World Fund or the Pax World Growth Fund
as well as certain other investment companies which retain Pax World Management
Corp. as its investment advisor or sub-advisor and which participate in the
exchange privilege program with the Fund. If only one class of shares is
available in a particular fund, the shareholder of the Fund is entitled to
exchange his or her shares for the shares available in that fund.
An exchange of shares in the Fund pursuant to the exchange privilege is, in
effect, a redemption of Fund shares (at net asset value) followed by the
purchase of shares of the investment company into which the exchange is made (at
net asset value) and may result in a shareholder realizing a taxable gain or
loss for Federal income tax purposes.
There is no charge for the exchange privilege or limitation as to frequency
of exchanges. The minimum amount for an exchange is $1,000, except that
shareholders who are establishing a new account with an investment company
through the exchange privilege must insure that a sufficient number of shares
are exchanged to meet the minimum initial investment required for the investment
company into which the exchange is being made.
The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be sold. Shares may be exchanged only between
investment company accounts registered in identical names. Before making an
exchange, the investor should review the current prospectus of the investment
company into which the exchange is to be made. Prospectuses may be obtained by
contacting the Distributor at the address or telephone number set forth on the
cover page of this Prospectus.
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Instructions for exchanges may be made by sending a signature guaranteed
written request to:
Pax World Money Market Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, NY 10020
or, for shareholders who have elected that option, by telephone. The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by Rule 12b-1. Effective April 9, 1998, the Fund's Board of
Directors adopted a distribution and service plan (the "Plan") and, pursuant to
the Plan, the Fund and the Distributor entered into a Distribution Agreement and
a Shareholder Servicing Agreement.
Reich & Tang Asset Management, Inc. serves as the sole general partner for
Reich & Tang Asset Management L.P. and is the sole shareholder of the
Distributor.
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares and, for nominal consideration and as agent for the Fund, will
solicit orders for the purchase of the Fund's shares, provided that any orders
will not be binding on the Fund until accepted by the Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect to the Broker Service Class shares, a service fee equal to .25% per
annum of the Broker Service Class shares' average daily net assets (the
"Shareholder Servicing Fee") for providing personal shareholder services and for
the maintenance of shareholder accounts. The fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for payments to Clearing Brokers with respect to their provision of such
services to their clients or customers who are shareholders of the Broker
Service Class shares of the Fund.
The Plan and the Shareholder Servicing Agreement for the Broker Service
Class provide that, in addition to the Shareholder Servicing Fee, the Fund will
pay for (i) telecommunications expenses including the cost of dedicated lines
and CRT terminals, incurred by the Distributor and Clearing Brokers in carrying
out their obligations under the Shareholder Servicing Agreement with respect to
Broker Service Class shares and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.
The Plan provides that the Advisor and Sub-Advisor may make payments from
time to time from their own resources, which may include the advisory fee, the
management fee and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, including Participating Organizations and
Clearing Brokers with whom the Distributor has entered into written agreements,
for performing shareholder servicing and related administrative functions on
behalf of the Fund; (ii) to defray the costs of, and to compensate certain
others, including Participating Organizations and Clearing Brokers for providing
assistance in distributing the Broker Service Class shares; and (iii) to pay the
costs of printing and distributing the Fund's prospectus to prospective
investors, and to defray the cost of the preparation and printing of brochures
and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
shares. The Distributor may also make payments from time to time from its own
resources, which may include the Shareholder Servicing Fee (with respect to
Individual Investor Class and Broker Service Class shares) and past profits, for
the purposes enumerated in (i) above. The Distributor will determine the amount
of such payments made pursuant to the Plan, provided that such payments will not
increase the
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amount which the Fund is required to pay to the Advisor, Sub-Advisor or
Distributor for any fiscal year under either the Advisory Agreement or the
Sub-Advisory Agreement, the Administrative Services Contract or the Shareholder
Servicing Agreement in effect for that year.
The Clearing Brokers whose clearance clients offer the Broker Service Class
shares to their retail brokerage clients have contracted with the Distributor to
perform certain sub-transfer agent accounting services for those clients who
have invested in the Broker Service Class shares of the Fund. In consideration
of the provision of these sub-transfer agency accounting services, the Clearing
Brokers will receive sub-transfer agency fees from the Distributor or its
affiliate, the Fund's transfer agent. As a result of the payment of the
sub-transfer agency accounting fees to these broker-dealers, Broker Service
Class shares will have higher transfer agency charges than the other classes of
the Fund.
The broker-dealers whose clients are Sweep Investors have contracted with
the Distributor to perform certain sub-transfer agent accounting services for
those clients who have invested in the Broker Service Class shares of the Fund.
In consideration of the provision of these sub-transfer agent accounting
services, the broker-dealers will receive sub-transfer agency fees from the
Distributor or its affiliate, the Fund's transfer agent. As a result of the
payment of the sub-transfer agent accounting fees to these broker-dealers,
Broker Service Class shares will have higher transfer agency charges than the
other classes of the Fund.
The Glass-Steagall Act and other applicable laws and regulations prohibit
banks and other depository institutions from engaging in the business of
underwriting, selling or distributing most types of securities. However, in the
opinion of the Sub-Advisor based on the advice of counsel, these laws and
regulations do not prohibit such depository institutions from providing other
services for investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to shareholders or change
in the Fund's net asset value. In addition, state securities laws on this issue
may differ from the interpretations of Federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared by the Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same Class having an aggregate net asset
value as of the payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are subscribed for
and may be changed by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution. If the shareholder makes
no election, the Fund will make the distribution in shares. There is no sales or
other charge in connection with the reinvestment of dividends and capital gains
distributions.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by the Fund of income and capital gains
from investments. Except as described herein, the Fund's net investment income
(including net realized short-term capital gains, if any) will be declared as a
dividend on each Fund Business Day. The Fund declares dividends for Saturdays,
Sundays and holidays on the previous Fund Business Day. The Fund generally pays
dividends monthly after the close of business on the last calendar day of each
month or after the close of business on the previous Fund Business Day if the
last calendar day of each month is not a Fund Business Day. Capital gains
distributions, if any, will be made at least annually, and in no event later
than 60 days after the end of the Fund's fiscal year. There is no fixed dividend
rate, and there can be no assurance that the Fund will pay any dividends or
realize any capital gains.
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The Individual Investor Class and Broker Service Class shares will bear the
Shareholder Servicing Fee under the Plan. As a result, the net income of and the
dividends payable to the Individual Investor Class and Broker Service Class
shares will be lower than the net income of and dividends payable to the
Institutional Class shares of the Fund. Dividends paid to each Class of shares
of the Fund will, however, be declared and paid on the same days at the same
times and, except as noted with respect to the Shareholder Servicing Fee payable
under the Plan, will be determined in the same manner and paid in the same
amounts.
The Fund intends to qualify for and elect special treatment applicable to a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. To qualify as a regulated investment company, the Fund must meet
certain complex tests concerning its investments and distributions. For each
year the Fund qualifies as a regulated investment company, it will not be
subject to federal income tax on income distributed to its shareholders in the
form of dividends or capital gains distributions. Additionally, the Fund will
not be subject to a federal excise tax if the Fund distributes at least 98% of
its ordinary income and 98% of its capital gain income to its shareholders.
Dividends of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income but will not
be eligible, in the case of corporate shareholders, for the dividend-received
deduction.
The Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to shareholders who have not complied with Internal Revenue Service regulations.
In connection with this withholding requirement, a shareholder will be asked to
certify on his or her application that the social security or tax identification
number provided is correct and that the shareholder is not subject to 31% backup
withholding for previous underreporting to the Internal Revenue Service.
NET ASSET VALUE
The Fund determines the net asset value of the shares of the Fund (computed
separately for each Class of shares) as of 12:00 noon, New York City time, by
dividing the value of the Fund's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued but
excluding capital stock and surplus) by the number of shares outstanding at the
time the determination is made. The Fund determines its net asset value on each
Fund Business Day. Fund Business Day for this purpose means any day on which the
Fund's custodian is open for trading. Purchases and redemptions will be effected
at the time of determination of net asset value next following the receipt of
any purchase or redemption order. (See "How to Purchase and Redeem Shares" and
"Direct Purchase and Redemption Procedures" herein.)
In order to maintain a stable net asset value per share of $1.00 for each
Class, the Fund's portfolio securities are valued at their amortized cost.
Amortized cost valuation involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, except that if fluctuating interest rates cause the market value of the
Fund's portfolio to deviate more than 1/2 of 1% from the value determined on the
basis of amortized cost, the Board of Directors will consider whether any action
should be initiated to prevent any material dilutive effect on investors.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the stated value of an instrument is higher or
lower than the price an investment company would receive if the instrument were
sold. There is no assurance that the Fund will maintain a stable net asset value
per share of $1.00.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on
November 26, 1997 and it is registered with the Securities and Exchange
Commission as an open-end management investment company.
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The Fund prepares semi-annual unaudited and annual audited reports which
include a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (i) for the election of directors, (ii) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (iii) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (iv) upon the written
request of holders of shares entitled to cast not less than 25% of all the votes
entitled to be cast at such meeting. Annual and other meetings may be required
with respect to such additional matters relating to the Fund as may be required
by the Act including the removal of Fund director(s) and communication among
shareholders, any registration of the Fund with the SEC or any state, or as the
Directors may consider necessary or desirable. Each Director serves until the
next meeting of the shareholders called for the purpose of considering the
election or reelection of such Director or of a successor to such Director, and
until the election and qualification of his or her successor, elected at such a
meeting, or until such Director sooner dies, resigns, retires or is removed by
the vote of the shareholders.
For further information with respect to the Fund and the shares offered
hereby, reference is made to the Fund's Registration Statement filed with the
Securities and Exchange Commission and copies thereof may be obtained upon
payment of certain duplicating fees.
Year 2000
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Sub-Advisor is in the process of working with the Fund's
service providers to prepare for the year 2000. Based on information currently
available, the Sub-Advisor does not expect that the Fund will incur significant
operating expenses or be required to incur materials costs to be year 2000
compliant. Although the Sub-Advisor does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is the custodian for the Fund's cash and securities. Reich & Tang
Services, Inc., 600 Fifth Avenue, New York, New York 10020 is the transfer agent
and dividend agent for the Institutional Class and Broker Service Class shares
of the Fund. The Fund's custodian and transfer agent do not assist in, and are
not responsible for, investment decisions involving assets of the Fund.
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THE PAX WORLD FUND FAMILY Prospectus
222 State Street
Portsmouth, NH 03801-3853
http://www.paxfund.com/ PAX
World
- -Pax World Money Market Fund - Money
A No-Load Fund Market
Fund
For general fund information and/or shareholder
account information, please call:
1-212-830-5220 (within New York State)
1-800-241-3263 (toll free outside New York State)
[GRAPHIC OMITTED]
Transfer and Dividend Disbursing Agent -
PFPC, Inc.
P.O. Box 8950
Wilmington, DE 19899 PROSPECTUS
General Counsel -
Battle Fowler LLP INSTITUTIONAL CLASS
75 East 55th Street BROKER SERVICE CLASS
New York, NY 10022
July 21, 1998
Independent Auditors -
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
Investment Adviser -
Pax World Management Corp.
222 State STreet
Portsmouth, NH 03801-3853
All Account Inquiries should be addressed to:
Pax World Money Market Fund
c/o Reich & Tang Funds
New York, NY 10020
Printed in the USA on recycled paper [GRAPHIC OMITTED]
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Registration No. 333-43587
Rule 497(e)
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PAX WORLD MONEY 600 Fifth Avenue, New York, NY 10020
MARKET FUND, INC. (212) 830-5200
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STATEMENT OF ADDITIONAL INFORMATION
July 21, 1998
Relating to the Prospectus for the Institutional Class and Broker Service Class
Shares of Pax World Money Market Fund, Inc. dated July 21, 1998 and the
Prospectus for the Individual Investor Class Shares of Pax World Money Market
Fund, Inc. dated July 21, 1998.
This Statement of Additional Information, although not in itself a prospectus,
expands upon and supplements the information contained in the current
prospectuses of the Institutional Class Shares and Broker Service Class Shares
of Pax World Money Market Fund, Inc., and the Individual Investor Class Shares
of Pax World Money Market Fund, Inc. and should be read in conjunction with each
respective prospectus. The Fund's respective prospectus may be obtained from any
Participating Organization (as defined under "Purchase and Redemption of Shares
and Other Purchase and Redemption Procedures") or by writing or calling the
Fund. This Statement of Additional Information is incorporated by reference into
the respective prospectus in its entirety.
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Table of Contents
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Investment Objectives, Policies and Risks..........2 Compensation Table.........................14
Investments and Investment Techniques..............3 Distribution and Service Plan..............14
Investment Restrictions............................8 Description of Common Stock................15
Portfolio Transactions.............................8 Custodian and Transfer Agents..............16
Purchase and Redemption of Shares and Other Net Asset Value............................16
Purchase and Redemption Procedures......8 Description of Ratings.....................17
Yield Quotations...................................9 Independent Auditor's Report...............18
Management, Advisory and Sub-Advisory Agreements...9 Financial Statements.......................18
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INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Pax World Money Market Fund, Inc. (the "Fund") is a no-load, open-end
management investment company consisting of money market instruments which are
designed to meet the short-term investment needs of individual, corporate and
institutional investors. There are no sales loads, exchange or redemption fees
associated with the Fund.
Social Criteria of Fund
The policy of the Fund is to seek to invest in companies that are not to any
degree engaged in manufacturing defense or weapons-related products. The policy
of the Fund is to exclude from its portfolio securities of (i) companies engaged
in military activities, (ii) companies appearing on the United States Department
of Defense list of 100 largest contractors (a copy of which may be obtained from
the Office of the Secretary, Department of Defense, Washington, D.C. 20310) if
five percent (5%) or more of the gross sales of such companies are derived from
contracts with the United States Department of Defense, (iii) other companies
contracting with the United States Department of Defense if five percent (5%) or
more of the gross sales of such companies are derived from contracts with the
United States Department of Defense, and (iv) companies which derive revenue
from the manufacture of liquor, tobacco and/or gambling products.
In order to properly supervise a securities portfolio containing the limitations
described above, care must be exercised to continuously monitor developments of
the companies whose securities are included in the Fund. Developments and trends
in the economy and financial markets are also considered, and the screening of
many securities is required to implement the investment philosophy of the Fund.
The Advisor, Pax World Management Corp., is responsible for such supervision and
screening of the securities included in the Fund.
A detailed description of the types and quality of the securities in which the
Fund may invest is further described in each of the Fund's Prospectuses and is
incorporated herein by reference. The investment objectives stated below for the
Fund are fundamental and may be changed only with the approval of a majority of
outstanding shares of the Fund.
General Investment Objectives and Policies of the Fund
The Fund's investment objectives are to maximize current income and to maintain
liquidity and a stable net asset value of $1.00 per share of each Class. The
Fund attempts to accomplish these objectives by investing exclusively in high
quality, short-term money market obligations with maturities of 397 days or
less. The Fund will only purchase high quality money market instruments that
have been determined by the Fund's Board of Directors to present minimal credit
risks and that are First Tier Eligible Securities at the time of acquisition, so
that the Fund is able to employ the amortized cost method of valuation. The term
First Tier Eligible Securities means (i) securities that have remaining
maturities of 397 days or less and are rated in the highest short-term rating
category by any two nationally recognized statistical rating organizations
("NRSROs") or in such category by the only NRSRO that has rated the securities
(collectively, the "Requisite NRSROs") (acquisition in the latter situation must
also be ratified by the Board of Directors); (ii) securities that have remaining
maturities of 397 days or less but that at the time of issuance were long-term
securities and whose issuer has received from the Requisite NRSROs a rating with
respect to comparable short-term debt in the highest short-term category; and
(iii) unrated securities determined by the Fund's Board of Directors to be of
comparable quality. Where the issuer of a long-term security with a remaining
maturity which would otherwise qualify it as a First Tier Eligible Security does
not have rated short-term debt outstanding, the long-term security is treated as
unrated but may not be purchased if it has a long-term rating from any NRSRO
that is below the two highest long-term categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities or participation certificates. There can be no assurance that the
Fund can achieve these objectives or that it will be able to maintain a stable
net asset value of $1.00 per share of each Class.
Risk Factors
The Fund may invest in certain foreign securities. Investment in obligations of
foreign issuers and in foreign branches of domestic banks involves somewhat
different investment risks from those affecting obligations of United States
domestic issuers. There may be limited publicly available information with
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respect to foreign issuers and foreign issuers are not generally subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to domestic companies. There may also be less government
supervision and regulation of foreign securities exchanges, brokers and listed
companies than in the United States. Foreign securities markets have
substantially less volume than national securities exchanges and securities of
some foreign companies are less liquid and more volatile than securities of
comparable domestic companies. Brokerage commissions and other transaction costs
on foreign securities exchanges are generally higher than in the United States.
Dividends and interest paid by foreign issuers may be subject to withholding and
other foreign taxes, which may decrease the net return on foreign investments as
compared to dividends and interest paid to the Fund by domestic companies.
Additional risks include future political and economic developments, the
possibility that a foreign jurisdiction might impose or change withholding taxes
on income payable with respect to foreign securities, the possible seizure,
nationalization or expropriation of the foreign issuer or foreign deposits and
the possible adoption of foreign governmental restrictions such as exchange
controls.
The investment objectives and policies of the Fund are pursued through the
following additional strategies employed in the management of the Fund which are
described under "Investments and Investment Techniques":
1. Change in Ratings
2. Amortized Cost Valuation of Portfolio Securities
3. Variable Rate Demand Instruments
4. When-Issued Securities
5. Repurchase Agreements
6. Participation Interests
7. Domestic and Foreign Bank Obligations, Certificates of Deposit,
Commercial Paper, Time Deposits and Bankers' Acceptances
8. Privately Placed Securities
INVESTMENTS AND INVESTMENT TECHNIQUES
Change in Ratings
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchases. To
the extent that the ratings accorded by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies ("S&P") for securities may change as a result of changes in these
ratings systems, the sub-advisor for the Fund, Reich & Tang Asset Management
L.P. (the "Sub-Advisor"), will attempt to use comparable ratings as standards
for its investment in debt securities in accordance with the investment policies
contained therein. However, if the Fund holds any variable rate demand
instruments with stated maturities in excess of one year, such instruments must
maintain their high quality rating or must be sold from the Fund. (See "Variable
Rate Demand Instruments" herein.) The Board of Directors of the Fund shall
reassess promptly whether the security presents minimal credit risks and shall
cause the Fund to take such action as the Board of Directors determines is in
the best interest of the Fund and its shareholders. However, reassessment is not
required if the security is disposed of or matures within five business days of
the Sub-Advisor becoming aware of the new rating and provided further that the
Board of Directors is subsequently notified of the Sub-Advisor's actions.
In addition, in the event that a security (1) is in default, (2) ceases to be an
Eligible Security under Rule 2a-7 of the Investment Company Act of 1940 (the
"1940 Act") or (3) is determined to no longer present minimal credit risks, the
Fund will dispose of the security absent a determination by the Fund's Board of
Directors that disposal of the security would not be in the best interests of
the Fund. In the event that the security is disposed of, it shall be disposed of
as soon as practicable consistent with achieving an orderly disposition by sale,
exercise of any demand feature, or otherwise. In the event of a default with
respect to a security which immediately before default accounted for 1/2 of 1%
or more of the Fund's total assets, the Fund shall promptly notify the
Securities and Exchange Commission of such fact and of the actions that the Fund
intends to take in response to the situation.
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Amortized Cost Valuation of Portfolio Securities
Pursuant to Rule 2a-7 under the 1940 Act, the Fund uses the amortized cost
method of valuing its investments, which facilitates the maintenance of the
Fund's per share net asset value at $1.00. The amortized cost method involves
initially valuing a security at its cost and thereafter amortizing to maturity
any discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument.
Consistent with the provisions of Rule 2a-7, the Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less, purchases only
instruments having effective maturities of 397 days or less, and invests only in
securities determined by or under the direction of the Board of Directors to be
of high quality with minimal credit risks.
The Board of Directors has also established procedures designed to stabilize, to
the extent reasonably possible, the Fund's price per share at $1.00 of each
Class as computed for the purpose of sales and redemptions. Such procedures
include review of the Fund's investments by the Board of Directors at such
intervals as it deems appropriate to determine whether the Fund's net asset
value calculated by using available market quotations or market equivalents
(i.e., determination of value by reference to interest rate levels, quotations
of comparable securities and other factors) deviates from $1.00 per share for
each Class based on amortized cost. Market quotations and market equivalents
used in such review may be obtained from an independent pricing service approved
by the Board of Directors.
The extent of deviation between the Fund's net asset value based upon available
market quotations or market equivalents and $1.00 per share based on amortized
cost, will be periodically examined by the Board of Directors. If such deviation
exceeds 1/2 of 1%, the Board of Directors will promptly consider what action, if
any, will be initiated. In the event the Board of Directors determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, they will take such corrective action as
they regard to be necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding part or all of dividends or payment of
distributions from capital or capital gains; redemptions of shares in kind; or
establishing a net asset value per share by using available market quotations or
equivalents. The Fund may hold cash for the purpose of stabilizing its net asset
value per share. Holdings of cash, on which no return is earned, would tend to
lower the yield on the Fund's shares.
Variable Rate Demand Instruments
The Fund may purchase variable rate demand instruments. Variable rate demand
instruments that the Fund will purchase are tax exempt Municipal Securities or
taxable (variable amount master demand notes) debt obligations that provide for
a periodic adjustment in the interest rate paid on the instrument and permit the
holder to demand payment of the unpaid principal balance plus accrued interest
at specified intervals upon a specified number of days' notice either from the
issuer or by drawing on a bank letter of credit, a guarantee, insurance or other
credit facility issued with respect to such instrument.
The variable rate demand instruments in which the Fund may invest are payable on
not more than thirty calendar days' notice either on demand or at specified
intervals not exceeding one year depending upon the terms of the instrument. The
terms of the instruments provide that interest rates are adjustable at intervals
ranging from daily to up to one year and their adjustments are based upon the
prime rate of a bank or other appropriate interest rate adjustment index as
provided in the respective instruments. The Fund will decide which variable rate
demand instruments it will purchase in accordance with procedures prescribed by
its Board of Directors to minimize credit risks. Utilizing the amortized cost
method of valuation, the Fund may only purchase variable rate demand instruments
if (i) the instrument is subject to an unconditional demand feature, exercisable
by the Fund in the event of default in the payment of principal or interest on
the underlying securities, which itself qualifies as a First Tier Eligible
Security or (ii) the instrument is not subject to an unconditional demand
feature but does qualify as a First Tier Eligible Security and has a long-term
rating by the Requisite NRSROs in one of the two highest rating categories or,
if unrated, is determined to be of comparable quality by the Fund's Board of
Directors. If an instrument is ever deemed to be of less than high quality, the
Fund either will sell it in the market or exercise the demand feature.
The variable rate demand instruments in which the Fund may invest include
participation certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable
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rate, tax-exempt Municipal Securities (expected to be concentrated in industrial
revenue bonds) or taxable debt obligations (variable amount master demand notes)
owned by such institutions or affiliated organizations. A participation
certificate would give the Fund an undivided interest in the obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the obligation and provides the demand repurchase feature described
below. Where the institution issuing the participation certificate does not meet
the Fund's high quality standards, the participation certificate is backed by an
irrevocable letter of credit or guaranty of a bank (which may be a bank issuing
a confirming letter of credit, or a bank serving as agent of the issuing bank
with respect to the possible repurchase of the participation certificate or a
bank serving as agent of the issuer with respect to the possible repurchase of
the issue) or insurance policy of an insurance company that the Board of
Directors of the Fund has determined meets the prescribed quality standards for
the Fund. The Fund has the right to sell the participation certificate back to
the institution and, where applicable, draw on the letter of credit, guarantee
or insurance after no more than 30 days' notice either on demand or at specified
intervals not exceeding 397 days (depending on the terms of the participation),
for all or any part of the full principal amount of the Fund's participation
interest in the security, plus accrued interest. The Fund intends to exercise a
demand only (1) upon a default under the terms of the bond documents, (2) as
needed to provide liquidity to the Fund in order to make redemptions of the Fund
shares, or (3) to maintain a high quality investment portfolio. The institutions
issuing the participation certificates may retain a service and letter of credit
fee (where applicable) and a fee for providing the demand repurchase feature, in
an amount equal to the excess of the interest paid on the instruments over the
negotiated yield at which the participation certificates were purchased by the
Fund. The total fees generally range from 5% to 15% of the applicable "prime
rate"1 or other interest rate index. With respect to insurance, the Fund will
attempt to have the issuer of the participation certificate bear the cost of the
insurance, although the Fund retains the option to purchase insurance if
necessary, in which case the cost of insurance will be an expense of the Fund
subject to the expense limitation on investment company expenses prescribed by
any state in which the Fund's shares are qualified for sale. The Sub-Advisor has
been instructed by the Fund's Board of Directors to continually monitor the
pricing, quality and liquidity of the variable rate demand instruments held by
the Fund, including the participation certificates, on the basis of published
financial information and reports of the rating agencies and other bank
analytical services to which the Fund may subscribe. Although these instruments
may be sold by the Fund, the Fund intends to hold them until maturity, except
under the circumstances stated above (see "Dividends, Distributions and Taxes"
in the Prospectuses).
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or securities increase,
the potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The Fund may contain variable rate demand instruments on which
stated minimum or maximum rates, or maximum rates set by state law, limit the
degree to which interest on such variable rate demand instruments may fluctuate;
to the extent it does, increases or decreases in value may be somewhat greater
than would be the case without such limits. Additionally, the Fund may contain
variable rate demand participation certificates in fixed rate Municipal
Securities and taxable debt obligations (the Fund will not acquire a variable
note demand participation certificate in fixed rate municipal securities without
an opinion of counsel). The fixed rate of interest on these obligations will be
a ceiling on the variable rate of the participation certificate. In the event
that interest rates increased so that the variable rate exceeded the fixed rate
on the obligations, the obligations could no longer be valued at par and this
may cause the Fund to take corrective action, including the elimination of the
instruments. Because the adjustment of interest rates on the variable rate
demand instruments is made in relation to movements of the applicable banks'
prime rate, or other interest rate adjustment index, the variable rate demand
instruments are not comparable to long-term fixed rate securities. Accordingly,
interest rates on the variable rate demand instruments may be higher or lower
than current market rates for fixed rate obligations or obligations of
comparable quality with similar maturities.
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1 The "prime rate" is generally the rate charged by a bank to its creditworthy
customers for short-term loans. The prime rate of a particular bank may differ
from other banks and will be the rate announced by each bank on a particular
day. Changes in the prime rate may occur with great frequency and generally
become effective on the date announced.
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For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest rate
adjustment. The maturity of a variable rate demand instrument will be determined
in the same manner for purposes of computing the Fund's dollar-weighted average
portfolio maturity. If a variable rate demand instrument ceases to meet the
investment criteria of the Fund, it will be sold in the market or through
exercise of the repurchase demand.
When-Issued Securities
The Fund may purchase debt obligations offered on a "when-issued" or "delayed
delivery" basis. When so offered, the price, which is generally expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued securities takes place at a later date.
Normally, the settlement date occurs within one month of the purchase of debt
obligations; during the period between purchase and settlement, no payment is
made by the purchaser to the issuer and no interest accrues to the purchaser. To
the extent that assets of the Fund are not invested prior to the settlement of a
purchase of securities, the Fund will earn no income; however, it is intended
that the Fund will be fully invested to the extent practicable and subject to
the policies stated above. While when-issued securities may be sold prior to the
settlement date, it is intended that the Fund will purchase such securities with
the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a debt
obligation on a when-issued basis, it will record the transaction and reflect
the value of the security in determining its net asset value. The Fund does not
believe that the net asset value or income of the Fund's securities portfolios
will be adversely affected by their purchase of debt obligations on a
when-issued basis. The Fund will establish a segregated account in which it will
maintain cash and marketable securities equal in value to commitments for
when-issued securities. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date.
Repurchase Agreements
When the Fund purchases securities, it may enter into a repurchase agreement
with the seller wherein the seller agrees, at the time of sale, to repurchase
the security at a mutually agreed upon time and price. The Fund may enter into
repurchase agreements with member banks of the Federal Reserve System and with
broker-dealers who are recognized as primary dealers in United States government
securities by the Federal Reserve Bank of New York. Although the securities
subject to a repurchase agreement, might bear maturities exceeding one year,
settlement for the repurchase would never be more than 397 days after the Fund's
acquisition of the securities and normally would be within a shorter period of
time. The resale price will be in excess of the purchase price, reflecting an
agreed upon market rate effective for the period of time the Fund's money will
be invested in the security, and will not be related to the coupon rate of the
purchased security. At the time the Fund enters into a repurchase agreement the
value of the underlying security, including accrued interest, will be equal to
or exceed the value of the repurchase agreement, and, in the case of a
repurchase agreement exceeding one day, the seller will agree that the value of
the underlying security, including accrued interest, will at all times be equal
to or exceed the value of the repurchase agreement. The Fund may engage in a
repurchase agreement with respect to any security in which the Fund is
authorized to invest, even though the underlying security may mature in more
than one year. The collateral securing the seller's obligation must be of a
credit quality at least equal to the Fund's investment criteria for the Fund
securities and will be held by the Fund custodian or in the Federal Reserve Book
Entry System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
the Fund to the seller subject to the repurchase agreement and is, therefore,
subject to the Fund's investment restrictions applicable to loans. It is not
clear whether a court would consider the securities purchased by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase of the security under a repurchase
agreement, the Fund may encounter delay and incur costs before being able to
sell the security. Delays may result in the loss of interest or the decline in
the price of the security. If the court characterized the transaction as a loan
and the Fund has not perfected a security interest in the security, the Fund may
be required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
the risk of losing some or all of the principal and income
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involved in the transaction. As with any unsecured debt obligation purchased for
the Fund, the Sub-Advisor seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller. Apart from the risk of bankruptcy or insolvency proceedings, there is
also the risk that the seller may fail to repurchase the security, in which case
the Fund may incur a loss if the proceeds to the Fund of the sale to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund involved will direct the seller of the
security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Fund will be unsuccessful in seeking
to impose on the seller a contractual obligation to deliver additional
securities.
Participation Interests
The Fund may purchase from banks participation interests in all or part of
specific holdings of Municipal or other debt obligations (including corporate
loans). Where the institution issuing the participation does not meet the Fund's
quality standards, the participation may be backed by an irrevocable letter of
credit or guarantee that the Board of Directors has determined meets the
prescribed quality standards of the Fund. Thus, even if the credit of the
selling bank does not meet the quality standards of the Fund, the credit of the
entity issuing the credit enhancement will meet such prescribed quality
standards. The Fund will have the right to sell the participation interest back
to the bank for the full principal amount of the Fund's interest in the
Municipal or debt obligation plus accrued interest, but only (1) as required to
provide liquidity to the Fund, (2) to maintain the quality standards of the
Fund's investment portfolio or (3) upon a default under the terms of the debt
obligation. The selling bank may receive a fee from the Fund in connection with
the arrangement. When purchasing bank participation interests, the Fund will
treat both the bank and the underlying borrower as the issuer of the instrument
for the purpose of complying with the diversification requirement of the
investment restrictions discussed below.
Domestic and Foreign Bank Obligations, Certificates of Deposit and Bankers'
Acceptances
The Fund may purchase certificates of deposit, time deposits, bankers'
acceptances, commercial paper and other obligations issued or guaranteed by the
50 largest banks in the United States. For this purpose, banks are ranked by
total deposits as shown by their most recent annual financial statements. The
"other obligations" in which the Fund may invest include instruments (such as
bankers' acceptances, commercial paper and certificates of deposit) issued by
United States subsidiaries of the 50 largest banks in the United States where
the instruments are guaranteed as to principal and interest by such banks. At
the time the Fund invests in any certificate of deposit, bankers' acceptance or
other bank obligation, the issuer or its parent must have its debt rated within
the quality standards of the Fund or if unrated be of comparable quality as
determined by the Fund's Board of Directors.
Privately Placed Securities
The Fund may invest in securities issued as part of privately negotiated
transactions between an issuer and one or more purchasers. Except with respect
to certain commercial paper issued in reliance on the exemption from regulations
in Section 4(2) of the Securities Act of 1933 (the "Securities Act") and
securities subject to Rule 144A of the Securities Act which are discussed below,
these securities are typically not readily marketable, and therefore are
considered illiquid securities. The price the Fund pays for illiquid securities,
and any price received upon resale, may be lower than the price paid or received
for similar securities with a more liquid market. Accordingly, the valuation of
privately placed securities by the Fund will reflect any limitations on their
liquidity. As a matter of policy, the Fund will not invest more than 10% of the
market value of the total assets of the Fund in repurchase agreements maturing
in over seven days and other illiquid investments. The Fund may purchase
securities that are not registered ("restricted securities") under the
Securities Act, but can be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act. The Fund may also purchase certain
commercial paper issued in reliance on the exemption from regulations in Section
4(2) of the Securities Act ("4(2) Paper"). However, the Fund will not invest
more than 10% of its net assets in illiquid investments, which include
securities for which there is no ready market, securities subject to contractual
restriction on resale, certain investments in asset-backed and receivable-backed
securities and restricted securities (unless, with respect to these securities
and 4(2) Paper, the Fund's Directors continuously determine, based on the
trading markets for the specific restricted security, that it is liquid). The
Directors may adopt guidelines and delegate to the Sub-Advisor the daily
function of determining and monitoring liquidity of restricted securities and
4(2) Paper. The Directors, however, will retain sufficient oversight and be
ultimately responsible for the determinations.
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Since it is not possible to predict with assurance exactly how this market for
restricted securities sold and offered under Rule 144A will develop, the
Directors will carefully monitor the Fund investments in these securities,
focusing on such factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which are in addition
to those described in the Prospectus. Under the following restrictions, which
may not be changed without the approval by a majority vote of the Fund's
outstanding shares and which apply to the Fund, the Fund may not:
(a) invest in securities of companies that have conducted operations for less
than three years, including the operations of predecessors;
(b) invest in or hold securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund, the Advisor or the Sub-Advisor,
individually owning beneficially more than 1/2 of 1% of the securities of
the issuer, in the aggregate own more than 5% of the issuer's securities;
(c) (1) make investments for the purpose of exercising control over any issuer
or other person; (2) purchase securities having voting rights at the time
of purchase; (3) purchase securities of other investment companies, except
in connection with a merger, acquisition, consolidation, reorganization or
acquisition of assets; (4) invest in real estate, including real estate
limited partnerships (other than debt obligations secured by real estate or
interests therein or debt obligations issued by companies which invest in
real estate or interests therein); (5) invest in commodities, commodity
contracts, commodity options, interests and leases in oil, gas or other
mineral exploration or development programs (the Fund may, however,
purchase and sell securities of companies engaged in the exploration,
development, production, refining, transportation and marketing of oil, gas
or minerals); (6) purchase restricted securities or purchase securities on
margin; (7) make short sales of securities or intentionally maintain a
short position in any security or write, purchase or sell puts, calls,
straddles, spreads or any combination thereof; (8) act as an underwriter of
securities or (9) issue senior securities, except insofar as the Fund may
be deemed to have issued a senior security in connection with any permitted
borrowing; and
(d) invest more than 25% of the value of the Fund's total assets in securities
of companies in the same industry (excluding U.S. Government securities).
PORTFOLIO TRANSACTIONS
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There are usually no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price.
Allocation of transactions, including their frequency, to various dealers is
determined by the Sub-Advisor in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.
Investment decisions for the Fund will be made independently from those for any
other investment companies or accounts that may now be or may hereafter become
managed by the Sub-Advisor or its affiliates. If, however, the Fund and other
investment companies or accounts managed by the Sub-Advisor are simultaneously
engaged in the purchase or sale of the same security, the transactions may be
averaged as to price and allocated equitably to each account. In some cases,
this policy might adversely affect the price paid or received by the Fund or the
size of the position obtainable for the Fund. In addition, when purchases or
sales of the same security for the Fund and for other investment companies
managed by the Sub-Advisor occur contemporaneously, the purchase or sale orders
may be aggregated in order to obtain any price advantage available to large
denomination purchasers or sellers.
8
<PAGE>
No portfolio transactions are executed with the Sub-Advisor or its affiliates
acting as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Sub-Advisor or its
affiliates.
PURCHASE AND REDEMPTION OF SHARES AND OTHER PURCHASE AND REDEMPTION PROCEDURES
The material relating to the purchase and redemption of shares of each Class in
the respective Prospectuses is herein incorporated by reference.
YIELD QUOTATIONS
The Fund calculates a seven-day yield quotation (computed separately for each
Class of shares) using a standard method prescribed by the rules of the
Securities and Exchange Commission. Under that method, the Fund's yield figure,
which is based on a chosen seven-day period, is computed as follows: the Fund's
return for the seven-day period (which is obtained by dividing the net change in
the value of a hypothetical account having a balance of one share at the
beginning of the period by the value of such account at the beginning of the
period, which is expected to always be $1.00) is multiplied by (365/7) with the
resulting annualized yield figure carried to the nearest one hundredth of one
percent. For purposes of the foregoing computation, the determination of the net
change in account value during the seven-day period reflects (i) dividends
declared on the original share and on any additional shares, including the value
of any additional shares purchased with dividends paid on the original share,
and (ii) fees charged to all shareholder accounts. Realized capital gains or
losses and unrealized appreciation or depreciation of the Fund's portfolio
securities are not included in the computation.
The Fund also compiles a compound effective yield quotation (computed separately
for each Class of shares) for a seven-day period by using a formula prescribed
by the Securities and Exchange Commission. Under that formula, the Fund's
unannualized return for the seven-day period (described in the preceding
paragraph) is compounded by adding one to the base period return, raising the
sum to a power equal to 365/7 and subtracting one from the result (i.e.,
effective yield = (base return +1) 365/7-1).
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period for the Fund is
not an indication, or representation by the Fund, of future yields or rates of
return on the Fund's shares. The Fund's yields are not fixed or guaranteed, and
an investment in the Fund is not insured. Accordingly, the Fund's yield
information may not necessarily be used to compare Fund shares with investment
alternatives which, like money market instruments or bank accounts, may provide
a fixed rate of interest. In addition, investments in the Fund may not
necessarily be used to compare with investment alternatives which are insured or
guaranteed.
Investors who purchase the Fund's shares directly may realize a higher yield
than investors who have accounts with Participating Organizations ("Participant
Investors") because they will not be subject to any fees or charges that may be
imposed by Participating Organizations. "Participating Organizations" are
securities brokers, banks and financial institutions or other industry
professionals or organizations which have entered into shareholder servicing
agreements with the Distributor with respect to investment of their customer
accounts in the Fund.
MANAGEMENT, ADVISORY AND SUB-ADVISORY AGREEMENTS
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed Pax World Management Corp., 222 State
Street, Portsmouth, New Hampshire 03801-3853 (the "Advisor"), to act as
investment advisor to the Fund. It was incorporated in 1970 under the laws of
the State of Delaware. Pursuant to the terms of an Advisory Agreement entered
into between the Fund and the Advisor (the "Advisory Agreement"), the Advisor,
subject to the supervision of the Board of Directors of the Fund, is responsible
for determining whether contemplated investments satisfy the social
responsibility criteria applied to the Fund and overseeing the performance of
the Sub-Advisor. Under the Advisory Agreement, the Fund will pay the Advisor an
annual advisory fee of .15% of the Fund's average daily net assets. As of
December 31, 1997, the Advisor had over $600,000,000 in assets under management
by virtue of serving as the Advisor to the Pax World Fund, Incorporated (the
"Pax World Fund") and the Pax World Growth Fund, Inc. (the "Pax World Growth
Fund"). The Advisor has no clients other than the Fund, the Pax World Fund and
the Pax World Growth Fund. Reich & Tang Asset Management L.P. will serve as the
Sub-Advisor of the Fund under a Sub-Advisory Agreement entered into between the
Advisor and Sub-Advisor (the "Sub-Advisory Agreement"). The Sub-Advisor
9
<PAGE>
provides persons satisfactory to the Fund's Board of Directors to serve as
officers of the Fund. Such officers, as well as certain other employees and
Directors of the Fund, may be officers of Reich & Tang Asset Management, Inc.,
the sole general partner of the Sub-Advisor or employees of the Sub-Advisor or
its affiliates. Due to the services performed by the Sub-Advisor, the Fund
currently has no employees and its officers are not required to devote full-time
to the affairs of the Fund. This Statement of Additional Information contains
general background information regarding each Director and principal officer of
the Fund.
The Sub-Advisor is a Delaware limited partnership with principal offices at 600
Fifth Avenue, New York, New York 10020. The Sub-Advisor, as of July 31, 1997,
was investment manager, advisor or supervisor with respect to assets aggregating
approximately $10.67 billion. In addition to the Fund, Reich & Tang Asset
Management L.P.'s advisory clients include, among others, California Daily Tax
Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland
Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida
Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund,
Inc. and Tax Exempt Proceeds Fund, Inc. The Sub-Advisor also advises pension
trusts, profit sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Sub-Advisor replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Sub-Advisor, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
NEICOP changed its name to Nvest Companies, L.P. ("Nvest Companies").
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Sub-Advisor. Nvest Corporation, a Massachusetts corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Sub-Advisor. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
Nvest Companies is a holding company offering to institutional clients a broad
array of investment styles across a wide range of asset categories through
thirteen subsidiaries, divisions and affiliates. Its business units include AEW
Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth Management,
L.P., Graystone Partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P.,
Loomis, Sayles & Co., L.P., New England Funds Management, L.P., Reich & Tang
Capital Management, Reich & Tang Funds, Vaughan-Nelson, Scarborough & McConnell
L.P. and Westpeak Investment Advisors, L.P. These affiliates, in the aggregate,
are investment advisors or sub-advisors of 80 other registered investment
companies.
On January 30, 1998 the Board of Directors, including a majority of the
Directors who are not interested persons (as defined in the 1940 Act) of the
Fund, the Advisor or the Sub-Advisor, approved an Investment Advisory Agreement
with the Advisor effective April 9,1998, which has a term which extends to March
31, 2000 and may be continued in force thereafter for successive twelve-month
periods beginning each April 9, provided that such continuance is specifically
approved annually by majority vote of the Fund's outstanding voting securities
or by a majority of the Directors who are not parties to the Investment Advisory
Agreement or interested persons of any such party, by votes cast in person at a
meeting called for the purpose of voting on such matter. The Investment Advisory
Agreement and Sub-Advisory Agreement were approved by the sole shareholder of
the Fund on March 18, 1998.
Pursuant to the Sub-Advisory Agreement, the Sub-Advisor manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund and the determination of the Advisor that the contemplated investments
satisfy the social responsibility criteria applied to the Fund.
The Sub-Advisory Agreement is terminable without penalty by the Fund on sixty
days' written notice when authorized either by majority vote of its outstanding
voting shares or by a vote of a majority of its
10
<PAGE>
Board of Directors, or by the Sub-Advisor on sixty days' written notice, and
will automatically terminate in the event of its assignment. The Sub-Advisory
Agreement provides that in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Sub-Advisor, or of reckless disregard of its
obligations thereunder, the Sub-Advisor shall not be liable for any action or
failure to act in accordance with its duties thereunder.
For its services under the Sub-Advisory Agreement, the Sub-Advisor receives from
the Advisor a fee equal to .075% per annum of the Fund's average daily net
assets from its advisory fee. The fees are accrued daily and paid monthly.
Investment management fees and operating expenses which are attributable to each
Class of the Fund will be allocated daily to each Class based on the percentage
of outstanding shares at the end of the day. Additional shareholder services
provided by Participating Organizations to Institutional Class shareholders
pursuant to the distribution and service plan shall be compensated by Reich &
Tang Distributors, Inc. (the "Distributor") from its shareholder servicing fee,
the Sub-Advisor from its management fee and the Fund itself. Expenses incurred
in the distribution of Institutional Class shares and the servicing of
Institutional Class shares shall be paid by the Sub-Advisor.
Pursuant to the Administrative Services Agreement with the Fund, the Sub-Advisor
also performs clerical, accounting supervision, office service and related
functions for the Fund and provides the Fund with personnel to (i) supervise the
performance of bookkeeping and related services by Investors Fiduciary Trust
Company, the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to
and filings with regulatory authorities, and (iii) perform such other services
as the Fund may from time to time request of the Sub-Advisor. The personnel
rendering such services may be employees of the Sub-Advisor, of its affiliates
or of other organizations. The Fund pays the Sub-Advisor for such personnel and
for rendering such services at rates which must be agreed upon by the Fund and
the Sub-Advisor, provided that the Fund does not pay for services performed by
any such persons who are also officers of the general partner of the
Sub-Advisor. It is intended that such rates will be the actual costs of the
Sub-Advisor. The Fund also reimburses the Sub-Advisor for all of the Fund's
operating costs, including rent, depreciation of equipment and facilities,
interest and amortization of loans financing equipment used by the Fund and all
of the expenses incurred to conduct the Fund's affairs. The amounts of such
reimbursements must be agreed upon between the Fund and the Sub-Advisor. The
Sub-Advisor, at its discretion, may voluntarily waive all or a portion of the
administrative services fee and the operating expense reimbursement. For its
services under the Administrative Services Agreement, the Sub-Advisor receives
from the Fund a fee equal to .10% per annum of the Fund's average daily net
assets.
Any portion of the total fees received by the Sub-Advisor may be used to provide
shareholder services and for distribution of Fund shares. (See "Distribution and
Service Plan" herein.)
Expense Limitation
The Sub-Advisor has agreed, pursuant to the Sub-Advisory Agreement, to reimburse
the Fund for its expenses (exclusive of interest, taxes, brokerage and
extraordinary expenses) which in any year exceed the limits on investment
company expenses prescribed by any state in which the Fund's shares are
qualified for sale. For the purpose of this obligation to reimburse expenses,
the Fund's annual expenses are estimated and accrued daily, and any appropriate
estimated payments are made to it on a monthly basis. Subject to the obligations
of the Sub-Advisor to reimburse the Fund for its excess expenses as described
above, the Fund has, under the Sub-Advisory Agreement, confirmed its obligation
for payment of all its other expenses, including taxes, brokerage fees and
commissions, commitment fees, certain insurance premiums, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent's fees,
telecommunications expenses, auditing and legal expenses, bookkeeping agent
fees, costs of forming the corporation and maintaining corporate existence,
compensation of disinterested Directors, costs of investor services,
shareholder's reports and corporate meetings, Securities and Exchange Commission
registration fees and expenses, state securities laws registration fees and
expenses, expenses of preparing and printing the Fund's prospectus for delivery
to existing shareholders and of printing application forms for shareholder
accounts and the fees and reimbursements payable to the Sub-Advisor under the
Sub-Advisory Agreement and the Administrative Services Agreement and the
Distributor under the Shareholder Servicing Agreement.
The Fund may from time to time contract to have management services performed by
third parties as discussed herein and the management of the Fund intends to do
so whenever it appears advantageous to the Fund. The Fund's expenses for such
services are among the expenses subject to the expense limitation described
above. As a result of the recent passage of the National Securities Markets
Improvement Act of 1996, all state expense limitations have been eliminated at
this time.
11
<PAGE>
The Fund has reserved the right to charge individual shareholder accounts for
expenses actually incurred by such account for postage, wire transfers and
certain other shareholder expenses, as well as to impose a monthly service
charge for accounts whose account value falls below the minimum amount.
Directors and Officers
The Directors and Officers of the Fund, and their principal occupations for the
past five years, are listed below. The address of each such person, unless
otherwise indicated, is 600 Fifth Avenue, New York, New York 10020. Mr. Duff may
be deemed an "interested person" of the Fund, as defined in the 1940 Act, on the
basis of his affiliation with the Sub-Advisor.
Steven W. Duff, 44 - Director of the Fund, has been President of the Mutual
Funds division of the Sub-Advisor since September 1994. Mr. Duff was formerly
Director of Mutual Fund Administration at NationsBank with which he was
associated from June 1981 to August 1994. Mr. Duff is President and a Director
of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Georgia Daily Municipal Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., Short Term Income Fund, Inc. and Virginia Daily Municipal Income Fund,
Inc., President and Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund and Pennsylvania Daily Municipal Income Fund,
President of Cortland Trust, Inc., President and Chief Executive Officer of Tax
Exempt Proceeds Fund, Inc., Executive Vice President of Reich & Tang Equity
Fund, Inc.
Dr. W. Giles Mellon, 67 - Director of the Fund, is Professor of Business
Administration and Area Chairman of Economics in the Graduate School of
Management, Rutgers University with which he has been associated since 1966. His
address is Rutgers University Graduate School of Management, 92 New Street,
Newark, New Jersey 07102. Dr. Mellon is also a Director of Back Bay Funds, Inc.,
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Georgia
Daily Municipal Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc., and
Virginia Daily Municipal Income Fund, Inc. and a Trustee of Florida Daily
Municipal Income Fund, Institutional Daily Income Fund and Pennsylvania Daily
Municipal Income Fund.
Robert Straniere, 57 - Director of the Fund, has been a member of the New York
State Assembly and a partner with Straniere & Straniere Law Firm since 1981. His
address is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also
a Director of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Georgia Daily Municipal Fund, Inc., Life Cycle Mutual
Funds, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc. and a Trustee of Florida Daily Municipal Income
Fund, Institutional Daily Income Fund and Pennsylvania Daily Municipal Income
Fund.
Dr. Yung Wong, 59 - Director of the Fund, was Director of Shaw Investment
Management (U.K.) Limited from 1994 to October 1995 and formerly was a General
Partner of Abacus Partners Limited Partnership (a general partner of a venture
capital investment firm) from 1984 to 1994. His address is 29 Alden Road,
Greenwich, Connecticut 06831. Dr. Wong has been a Director of Republic Telecom
Systems Corporation (a provider of telecommunications equipment) since January
1989 and of TelWatch, Inc. (a provider of network management software) since
August 1989. Dr. Wong is also a Director of Back Bay Funds, Inc., California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund Inc., Georgia Daily Municipal
Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc. and a Trustee of Florida Daily Municipal Income
Fund, Institutional Daily Income Fund and Pennsylvania Daily Municipal Income
Fund. Dr. Wong is also a Trustee of Eclipse Financial Asset Trust.
Thomas W. Grant, 56- President of the Fund, has been President of the Advisor
since 1996 and President of H.G. Wellington & Co., Inc. since 1991. His address
is 14 Wall Street, New York, New York 10005. Mr. Grant is also the President and
a Director of Pax World Growth Fund, Inc. and Vice Chairman of the Board and
President of Pax World Fund, Incorporated.
12
<PAGE>
Laurence A. Shadek, 48- Executive Vice-President of the Fund, has been Chairman
of the Board of the Advisor since 1996 and Executive Vice-President of H.G.
Wellington & Co., Inc. since 1986. His address is 14 Wall Street, New York, New
York 10005. Mr. Shadek is also Chairman of the Board of Pax World Growth Fund,
Inc. and Chairman of the Board of Pax World Fund, Incorporated.
Bernadette N. Finn, 50 - Vice President and Secretary of the Fund, has been Vice
President of the Mutual Funds division of the Sub-Advisor since September 1993.
Ms. Finn was formerly Vice President and Assistant Secretary of Reich & Tang,
Inc. with which she was associated from September 1970 to September 1993. Ms.
Finn is also Secretary of Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Daily Tax Free Income Fund, Inc., Florida Daily Municipal Income Fund, Georgia
Daily Municipal Fund, Inc., Michigan Daily Tax Free Income Funds, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund and Tax Exempt Proceeds Fund, Inc., a Vice President and
Secretary of Delafield Fund, Inc., Institutional Daily Income Fund, Reich & Tang
Equity Fund, Inc., Short Term Income Fund, Inc. and Virginia Daily Municipal
Income Fund, Inc.
Molly Flewharty, 46 - Vice President of the Fund, has been Vice President of the
Mutual Funds division of the Sub-Advisor since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. with which she was associated from
December 1977 to September 1993. Ms. Flewharty is also a Vice President of Back
Bay Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund,
Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund, Georgia Daily
Municipal Fund, Inc., Institutional Daily Income Fund, Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily
Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc.
Richard De Sanctis, 41 - Treasurer of the Fund, has been Vice President and
Treasurer of the Sub-Advisor since September 1993. Mr. De Sanctis was formerly
Controller of Reich & Tang, Inc. from January 1991 to September 1993 and Vice
President and Treasurer of Cortland Financial Group, Inc. and Vice President of
Cortland Distributors, Inc. from 1989 to December 1990. Mr. De Sanctis is also
Treasurer of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Georgia Daily
Municipal Fund, Inc., Institutional Daily Income Fund, Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily
Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc. and is Vice President and Treasurer of Cortland
Trust, Inc.
Rosanne Holtzer, 33 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Sub-Advisor since December 1997. Ms. Holtzer
was formerly Manager of Fund Accounting for the Sub-Advisor with which she was
associated with from June 1986. She is also Assistant Treasurer of Back Bay
Funds, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income
Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund, Georgia
Daily Municipal Fund, Inc., Institutional Daily Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc., and Virginia
Daily Municipal Income Fund, Inc. and is Vice President and Assistant Treasurer
of Cortland Trust, Inc.
Directors of the Fund not affiliated with the Sub-Advisor receive from the Fund
an annual retainer of $1,000 and a fee of $250 for each meeting of the Board of
Directors attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Directors who are affiliated with the Sub-Advisor
do not receive compensation from the Fund.
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- --------------------------------------------------------------------------------
COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
- ------------------------ ---------------------- ---------------------- ------------------ --------------------------
- ------------------------ ---------------------- ---------------------- ------------------ --------------------------
Name of Person, Aggregate Pension or Estimated Annual Total Compensation from
Position Compensation from Retirement Benefits Benefits upon Fund and Fund Complex
Registrant for Accrued as Part of Retirement Paid to Directors*
Fiscal Year Fund Expenses
- ------------------------ ---------------------- ---------------------- ------------------ --------------------------
- ------------------------ ---------------------- ---------------------- ------------------ --------------------------
W. Giles Mellon, $2,000 0 0 $52,250 (16 Funds)
Director
Robert Straniere, $2,000 0 0 $55,250 (16 Funds)
Director
Yung Wong, $2,000 0 0 $52,250 (16 Funds)
Director
- ------------------------ ---------------------- ---------------------- ------------------ --------------------------
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ended January 31, 1998 (and, with respect to certain of the
funds in the Fund Complex, estimated to be paid during the fiscal year ended
January 31, 1999). The parenthetical number represents the number of investment
companies (including the Fund) from which such person receives compensation that
are considered part of the same Fund Complex as the Fund, because, among other
things, they have a common investment advisor.
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
Matters in connection with Massachusetts law are passed upon by Dechert, Price &
Rhoads, Ten Post Office Square South, Boston, Massachusetts 02109-4603.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission requires that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
distribution and service plan (the "Plan") and, pursuant to the Plan, the Fund
has entered into a Distribution Agreement and a Shareholder Servicing Agreement
with the Distributor as distributor of the Fund's shares.
Reich & Tang Asset Management, Inc. serves as the sole general partner for Reich
& Tang Asset Management L.P. and is the sole shareholder of the Distributor.
Under the Plan, the Fund and the Distributor will enter into a Shareholder
Servicing Agreement, with respect to the Fund's Individual Investor Class and
Broker Service Class shares. For its services under the Shareholder Servicing
Agreement (with respect to Individual Investor Class and Broker Service Class
shares only), the Distributor receives from the Fund a fee equal to .25% per
annum of the Individual Investor Class and Broker Service Class shares of the
Fund's average daily net assets (the "Shareholder Servicing Fee") for providing
personal shareholder services and for the maintenance of shareholder accounts.
The fee is accrued daily and paid monthly and any portion of the fee may be
deemed to be used by the Distributor for payments to Clearing Brokers with
respect to servicing their clients or customers who are shareholders of the
Individual Investor Class and Broker Service Class of the Fund. The
Institutional Class shareholders do not receive the benefit of such services
from Clearing Brokers and, therefore, will not be assessed a Shareholder
Servicing Fee.
Under the Distribution Agreement, the Distributor, for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses, including the cost of dedicated lines and CRT
14
<PAGE>
terminals, incurred by the Clearing Brokers and Distributor in carrying out
their obligations under the Shareholder Servicing Agreement with respect to the
Fund's Individual Investor Class and Broker Service Class shares and (ii)
preparing, printing and delivering the Fund's prospectus to existing
shareholders of the Fund and preparing and printing subscription application
forms for shareholder accounts.
The Plan provides that the Sub-Advisor may make payments from time to time from
its own resources, which may include the advisory fee, the management fee, and
past profits for the following purposes: (i) to defray the costs of, and to
compensate others, including Participating Organizations and Clearing Brokers
with whom the Distributor has entered into written agreements for performing
shareholder servicing and related administrative functions on behalf of the
Fund; (ii) to defray the costs of, and to compensate others, including certain
Participating Organizations and Clearing Brokers, for providing assistance in
distributing the Fund's Individual Investor Class and Broker Service Class
shares; and (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors, and to defray the cost of the preparation
and printing of brochures and other promotional materials, mailings to
prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor may also make payments
from time to time from its own resources, which may include the Shareholder
Servicing Fee with respect to Individual Investor Class and Broker Service Class
shares and past profits for the purpose enumerated in (i) above. The Distributor
will determine the amount of such payments made pursuant to the Plan, provided
that such payments will not increase the amount that the Fund is required to pay
to the Sub-Advisor and the Distributor for any fiscal year under the Advisory
Agreement or the Sub-Advisory Agreement, the Administrative Services Contract or
the Shareholder Servicing Agreement in effect for that year.
In accordance with Rule 12b-1, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan was most recently approved on January 30, 1998 by the Board of
Directors, including a majority of the Directors who are not interested persons
(as defined in the 1940 Act) of the Fund or the Sub-Advisor, and shall continue
until March 31, 1999. The Plan provides that it may continue in effect for
successive annual periods provided it is approved by the Individual Investor
Class and Broker Service Class shareholders or by the Board of Directors,
including a majority of directors who are not interested persons of the Fund and
who have no direct or indirect interest in the operation of the Plan or in the
agreements related to the Plan. The Plan further provides that it may not be
amended to increase materially the costs which may be spent by the Fund for
distribution pursuant to the Plan without Individual Investor Class and Broker
Service Class shareholder approval, and the other material amendments must be
approved by the Directors in the manner described in the preceding sentence. The
Plan may be terminated at any time by a vote of a majority of the disinterested
Directors of the Fund or the Fund's Individual Investor Class and Broker Service
Class shareholders.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on November 26,
1997 in Maryland, consists of twenty billion shares of stock having a par value
of one tenth of one cent ($.001) per share. Except as noted below, each share
has equal dividend, distribution, liquidation and voting rights within the Fund
and a fractional share has those rights in proportion to the percentage that the
fractional share represents of a whole share. Generally, shares will be voted in
the aggregate except if voting by Fund Class is required by law or the matter
involved affects only one Fund Class, in which case shares will be voted
separately by Fund Class. There are no conversion or preemptive rights in
connection with any shares of the Fund. All shares when issued in accordance
with the terms of the offering will be fully paid and nonassessable. Shares of
the Fund are redeemable at net asset value, at the option of the shareholder. On
March 18, 1998, the Sub-Advisor purchased $100,000 of the Fund's shares at an
initial subscription price of $1.00 per share.
The Fund is subdivided into three classes of shares of beneficial interest,
Institutional Class, Individual Investor Class and Broker Service Class. Each
share, regardless of Class, will represent an interest in the same portfolio of
investments and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations, qualifications,
designations and terms and conditions, except that: (i) each Class of shares
will have different class designations; (ii) only the Individual
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Investor Class and Broker Service Class shares will be assessed a Shareholder
Servicing Fee of .25% of the average daily net assets of the Individual Investor
Class and Broker Service Class shares of the Fund pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund; (iii) only the holders of the
Individual Investor Class and Broker Service Class shares will be entitled to
vote on matters pertaining to the Plan and any related agreements applicable to
that class in accordance with provisions of Rule 12b-1; (iv) only the Broker
Service Class shares will be assessed an additional sub-transfer agent
accounting fee of .20% of the average daily net assets of the Broker Service
Class shares of the Fund; and (v) the exchange privilege will permit
shareholders to exchange their shares only for shares of a fund that
participates in an Exchange Privilege Program with the Fund. Payments that are
made under the Plan will be calculated and charged daily to the appropriate
Class prior to determining daily net asset value per share and
dividends/distributions.
Generally, all shares will be voted in the aggregate, except if voting by Class
is required by law or the matter involved affects only one Class, in which case
shares will be voted separately by Class. The shares of the Fund have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares outstanding voting for the election of directors can elect 100% of
the directors if the holders choose to do so, and, in that event, the holders of
the remaining shares will not be able to elect any person or persons to the
Board of Directors. The Fund's By-laws provide that the holders of a majority of
the outstanding shares of the Fund present at a meeting in person or by proxy
will constitute a quorum for the transaction of business at all meetings.
As of April 9, 1998, there are no persons who own 5% or more of any Class of the
Fund's shares.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of Directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
beneficial interest, (c) for approval of revisions to the Fund's Distribution
Agreement with respect to a particular class or series of beneficial interest
and (d) upon the written request of holders of shares entitled to cast not less
than 10% of all the votes entitled to be cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act including the removal of Fund
Director(s) and communication among shareholders, any registration of the Fund
with the Securities and Exchange Commission or any state, or as the Directors
may consider necessary or desirable. For example, procedures for calling a
shareholder's meeting for the removal of Directors of the Fund, similar to those
set forth in Section 16(c) of the 1940 Act, are available to shareholders of the
Fund. A meeting for such purpose can be called by the holders of at least 10% of
the Fund's outstanding shares of beneficial interest. The Fund will aid
shareholder communications with other shareholders as required under Section
16(c) of the 1940 Act. Each Director serves until the next meeting of the
shareholders called for the purpose of considering the election or reelection of
such Director or of a successor to such Director, and until the election and
qualification of his or her successor, elected at such a meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders.
CUSTODIAN AND TRANSFER AGENTS
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for its cash and securities. Reich & Tang Services, Inc.,
600 Fifth Avenue, New York, New York 10020 is transfer agent and dividend
disbursing agent for the Institutional Class and Broker Service Class shares of
the Fund. PFPC, Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809 is the
transfer agent and dividend agent for Individual Investor Class shares of the
Fund. The custodian and transfer agents do not assist in, and are not
responsible for, investment decisions involving assets of the Fund.
NET ASSET VALUE
Pursuant to rules of the Securities and Exchange Commission, the Board of
Directors has established procedures to stabilize the Fund's net asset value at
$1.00 per share of each Class. These procedures include a review of the extent
of any deviation of net asset value per share, based on available market rates,
from $1.00. Should that deviation exceed 1/2 of 1%, the Board will consider
whether any action should be initiated to eliminate or reduce material dilution
or other unfair results to shareholders. Such action may include redemption of
shares in kind, selling portfolio securities prior to maturity, reducing or
withholding dividends and utilizing a net asset value per share as determined by
using available market quotations. The Fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less, will not purchase any instrument
with a remaining maturity greater than 397 days or subject to a repurchase
agreement having a duration of greater than one year, will limit portfolio
investments, including
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repurchase agreements, to those United States dollar-denominated instruments
that the Fund's Board of Directors determines present minimal credit risks, and
will comply with certain reporting and record-keeping procedures. The Fund has
also established procedures to ensure that portfolio securities meet the quality
criteria as provided in Rule 2a-7 of the 1940 Act. (See "Investment Objectives,
Policies and Risks" in the Prospectus.)
DESCRIPTION OF RATINGS
Commercial Paper and Corporate Bond Ratings
Description of Prime-1 and A-1 Commercial Paper Ratings
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist with
the issuer; and (8) recognition by management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
Commercial paper rated A by S&P has the following characteristics. Liquidity
ratios are adequate to meet cash requirements. Long-term senior debt rating
should be A or better. In some cases, BBB credits may be allowed if other
factors outweigh the BBB rating. The issuer should have access to at least two
additional channels of borrowing. Basic earnings and cash flow should have an
upward trend with allowances made for unusual circumstances. Typically, the
issuer's industry should be well established and the issuer should have a strong
position within its industry and the reliability and quality of management
should be unquestioned. Issuers rated A are further referred by use of numbers
1, 2 and 3 to denote relative strength within this highest classification.
Description of Aa and AA Corporate Bond Ratings
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa (Moody's highest rating), they comprise
what are generally known as high-grade bonds. Aa bonds are rated lower than the
best bonds because margins of protection may not be as large as Aaa securities
or fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
Bonds rated AA by S&P are judged to be high-quality debt obligations. Their
capacity to pay principal and interest is considered very strong, and in the
majority of instances they differ from AAA issues only in a small degree. Bonds
rated AAA are considered by S&P to be highest grade obligations and indicate an
extremely strong capacity to pay principal and interest.
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McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Directors and Shareholder
Pax World Money Market Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Pax
World Money Market Fund, Inc. as of March 18, 1998. This financial statement is
the responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Georgia Daily Municipal
Income Fund, Inc. as of March 18, 1998, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
March 19, 1998
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PAX WORLD MONEY MARKET FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
March 18, 1998
ASSETS
Cash $100,000
Deferred organization expense 64,000
________
Total Assets 164,000
LIABILITIES
Payable for deferred organization expense 64,000
_______
Total Liabilities 64,000
NET ASSETS
Net assets applicable to 100,000 Institutional shares of
common stock outstanding, $.001 par value per share;
20,000,000,000 shares authorized $100,000
==========
Net asset value, offering and redemption price per share $ 1.00
==========
See Notes to Financial Statement.
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PAX WORLD MONEY MARKET FUND, INC.
NOTES TO FINANCIAL STATEMENT
Note 1. Pax World Money Market Fund, Inc. (the "Fund") was incorporated under
the laws of the state of Maryland on November 26, 1997 and is authorized to
issue 20,000,000,000 shares of common stock, $.001 par value. The Fund is
subdivided into three classes of shares: Institutional Class, Individual
Investor Class and Broker Service Class. The Fund is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company and has had no operations to date other than those
relating to its organization and the sale and issuance of 100,000
Institutional shares of common stock interest to Pax World Management
Corp., its Advisor. The Advisory Agreement, the Sub-Advisory Agreement, the
Administrative Services Contract, and the Shareholder Servicing Agreement
are described elsewhere in the Prospectus and Statement of Additional
Information.
Note 2. Organizational expenses are being deferred and will be amortized on a
straight-line basis over a five year period. During the amortization period
the proceeds of any redemption of initial shares by any holder thereof will
be reduced by a pro rata portion of any then unamortized organization
expense, based on the ratio of the shares redeemed to the total initial
shares outstanding immediately prior to the redemption.
20
