As filed with the Securities and Exchange Commission on April 7, 1998
Registration No. 333-43587
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
PAX WORLD MONEY MARKET FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5220
BERNADETTE N. FINN
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)
Copy to: MICHAEL R. ROSELLA, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
It is proposed that this filing will become effective: (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (Date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant declares that an indefinite amount of its shares of beneficial
interest is being registered by this Registration Statement pursuant to Section
24(f) under the Investment Company Act of 1940, as amended, and Rule 24f-2
thereunder.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may declare.
654547.1
<PAGE>
PAX WORLD MONEY MARKET FUND, INC.
Registration Statement on Form N-1A
-----------------------
CROSS REFERENCE SHEET -
Pursuant to Rule 404(c)
-----------------------
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
<S> <C> <C>
1. Cover Page........................ Cover Page
2. Synopsis.......................... Introduction; Table of Fees and Expenses
3. Condensed Financial
Information....................... Financial Highlights
4. General Description of
Registrant........................ General Information; Investment Objectives, Policies and
Risks
5. Management of the Fund............ Distribution and Service Plan; Management of the Fund;
Custodian and Transfer Agents
5a. Management's Discussion of
Fund Performance.................. Not Applicable
6. Capital Stock and Other
Securities........................ Description of Common Stock; How to Purchase and
Redeem Shares; General Information; Dividends and
Distributions; Dividends, Distributions and Taxes
7. Purchase of Securities Being
Offered........................... How to Purchase and Redeem Shares; Distribution and
Service Plan; Net Asset Value
8. Redemption or Repurchase.......... How to Purchase and Redeem Shares
9. Legal Proceedings................. Not Applicable
</TABLE>
654547.1
<PAGE>
<TABLE>
<CAPTION>
Part B
<S> <C> <C>
Item No. Caption in Statement of Additional Information
10. Cover Page........................ Cover Page
11. Table of Contents................. Contents
12. General Information and
History........................... Management, Advisory and Sub-Advisory Agreements
13. Investment Objectives and
Policies.......................... Investment Objectives, Policies and Risks
14. Management of the Registrant...... Management, Advisory and Sub-Advisory Agreements
15. Control Persons and
Principal Holders of Management, Advisory and Sub-Advisory Agreements;
Securities........................ Description of Common Stock
16. Investment Advisory and Management, Advisory and Sub-Advisory Agreements;
Other Services.................... Expense Limitation; Distribution and Service Plan;
Custodian and Transfer Agents
17. Brokerage Allocation.............. Portfolio Transactions
18. Capital Stock and Other
Securities........................ Description of Common Stock
19. Purchase, Redemption and
Pricing of Securities
Being Offered..................... How to Purchase and Redeem Shares; Net Asset Value
20. Tax Status........................ Not Applicable
21. Underwriters...................... Distribution and Service Plan
22. Calculations of Yield
Quotations of Money Market
Funds............................. Yield Quotations
23. Financial Statements.............. Independent Auditor's Report; Statement of Net Assets;
Statement of Operations; Statement of Changes in Net
Assets; Notes to Financial Statements
</TABLE>
654547.1
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS
April__, 1998
PAX WORLD MONEY MARKET FUND, INC. 600 FIFTH AVENUE
NEW YORK, N.Y. 10020
INSTITUTIONAL CLASS
BROKER SERVICE CLASS (212) 830-5220
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Pax World Money Market Fund, Inc. (the "Fund") is designed to meet the
short-term investment needs of institutional investors ("Institutional
Investors"), individual 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 the Advisor, 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 Shares."
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" on
page 4.
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 referenced 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 (the "Advisor") is the advisor to the Fund. Reich & Tang Asset
Management, L.P. will act 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. will be responsible for determining whether
contemplated investments satisfy the social responsibility criteria applied to
the Fund. Reich & Tang Asset Management L.P. will perform 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.
619109.5
1
<PAGE>
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.
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.
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE
IN WHICH SAID OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
619109.5
2
<PAGE>
TABLE OF FEES AND EXPENSES
Estimated Annual Operating Expense
- ---------------------------------------
(as a percentage of average net assets)
The Pax World Money Market Fund
-------------------------------
<TABLE>
<S> <C> <C>
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
-------------------------------
Institutional Class Broker Service Class
------------------- --------------------
EXAMPLE 1 Year 3 Years 1 Year 3 Years
------ ------- ------ -------
$4 $11 $8 $26
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return and
redemption at the end of each 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 Fee. 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.
619109.5
3
<PAGE>
INTRODUCTION
Pax World Money Market Fund, Inc. (the "Fund") is a no-load, diversified,
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, retailing,
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 forgoing 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, Inc. and the Pax World Growth Fund, Inc. 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 [fifteen] 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 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 within 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
619109.5
4
<PAGE>
directly to a customers account will not be included in yield calculations. See
"How to Purchase and Redeem Shares - Investments through Participating
Organizations."
An investment in the Fund entails certain risks, including risks associated with
the purchase of when-issued securities, repurchase agreements and with 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 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. 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
619109.5
5
<PAGE>
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 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 such 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, 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
619109.5
6
<PAGE>
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 "SP-1/AA" by S&P or "VMIG-1" and "VMIG-2" by Moody's 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.
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
619109.5
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<PAGE>
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 a 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.
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
619109.5
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<PAGE>
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:
o 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;
o 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);
o 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;
o 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;
o 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;
o 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 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 and furthermore the Fund will not
make additional investments when borrowings exceed 5% of the
Fund's net assets; and
o pledge, mortgage, assign or encumber any of the Fund's assets
except to the extent necessary to secure a borrowing permitted
by clause (d) 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
619109.5
9
<PAGE>
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, 1996, the Advisor had over $600,000,000 in
assets under management by virtue of serving as the Advisor to the Pax World
Fund, Inc. (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 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 July 31, 1997, was investment
manager, advisor or supervisor with respect to assets aggregating approximately
$10.67 billion. The Sub-Advisor acts as manager or administrator of fifteen
other registered investment companies and also advises pension trusts,
profit-sharing trusts and endowments.
New England Investment Companies, L.P. ("NEICLP") is the limited partner and
owner of a 99.5% interest in the Sub- Advisor. Reich & Tang Asset Management,
Inc. (a wholly-owned subsidiary of NEICLP) is the general partner and owner of
the remaining .5% interest of the Sub-Advisor. New England Investment Companies,
Inc. ("NEIC"), a Massachusetts Corporation, serves as the sole general partner
of NEICLP.
On August 30, 1996, The New England Mutual Life Insurance Company ("The New
England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Sub-Advisor is an indirect
wholly-owned subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its
sole general partner, is now an indirect subsidiary of MetLife. Also, MetLife
New England Holdings, Inc., a wholly-owned subsidiary of MetLife, owns
approximately 48.5% of the outstanding limited partnership interest of NEICLP
and may be deemed a "controlling person" of the Sub- Advisor. Reich & Tang, Inc.
owns approximately 16% of the outstanding partnership units of NEICLP.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which exceeded $1.6 trillion at December 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through thirteen subsidiaries, divisions and
affiliates to institutional clients. 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.
On , 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 Pax World Management Corp. and a Sub-Advisory Agreement with Reich & Tang
Asset Management L.P. each effective , 1998 which have terms which
extend to , 2000 and may be continued in force thereafter for
successive twelve-month periods beginning each , 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 , 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.
619109.5
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<PAGE>
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 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. 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; (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 Plans 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 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 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
619109.5
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<PAGE>
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 Manager 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.
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
net asset value of all the remaining shares in his account after a withdrawal is
less than $500. 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 or
the Fund may impose a monthly service charge of $10 on such accounts. 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 net asset value at least to the minimum
amount and thereby avoid such mandatory redemption.
619109.5
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<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 net asset 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 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
Persons who maintain accounts with Clearing Brokers may, if they wish, invest in
the Fund through such Clearing Brokers. When instructed by its customer to
purchase or redeem Fund shares, the Clearing Brokers, 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.
Clearing Brokers may confirm to their customers who are shareholders in the Fund
("Broker Service Class Shareholders") 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
619109.5
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<PAGE>
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 at 800-241-[3263] (toll free outside New York
State).
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, New York 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 at 800-241-[3263]
(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 #890752-951-1
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:
Reich & Tang Funds
600 Fifth Avenue - 9th Floor
New York, New York 10020
619109.5
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<PAGE>
Electronic Funds Transfers (EFT),
Pre-authorized Credit and Direct
Deposit Privilege
You may purchase shares of the Fund (minimum of $100) 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. You can also have money debited from your checking 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 to include in the Privilege. 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 in the Privilege. Further, the Fund
may terminate your participation upon 30 days' notice to you.
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.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 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.
Written Requests
Shareholders may make a redemption in any amount by sending a written request
to:
Pax Funds Inc.
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 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
619109.5
15
<PAGE>
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 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 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 interests 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
and 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 address or to his 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 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; outside New York State at 800-241-3263 and state
(i) the name of the shareholder appearing on the Fund's records, (ii) his
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.
619109.5
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<PAGE>
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 Inc. or the Pax World Growth Fund
Inc., 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.
Instructions for exchanges may be made by sending a signature guaranteed written
request to:
Pax World Fund Family
c/o PFPC, Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
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 ______, 1997, the Fund's Board of
Directors adopted a distribution and service plan (the "Plan") and, pursuant to
the Plan, the Fund and Reich & Tang Distributors, Inc. (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
619109.5
17
<PAGE>
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 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 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,
619109.5
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<PAGE>
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 shareholder who have not complied with IRS regulations. In connection with
this withholding requirement, a shareholder will be asked to certify on his
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 IRS.
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 "Purchase and Redemption of Shares" and
"Other Purchase and Redemption Procedures" herein.)
In order to maintain a stable net asset value per share for each Class of $1.00,
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 a
diversified, 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 (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) 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
619109.5
19
<PAGE>
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 AGENTS
Investors Fiduciary Trust Company, 801 Pennsylvania Street, Kansas City,
Missouri 64105, is the custodian for the Fund's cash and securities. Reich &
Tang Services L.P., 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.
619109.5
20
<PAGE>
TABLE OF CONTENTS
-----------------
Table of Fees and Expenses PAX
Selected Financial Information WORLD
Introduction MONEY
Investment Objectives, MARKET FUND, INC.
Policies and Risks PROSPECTUS
Social Criteria of Portfolio April, 1998
Risk Factors and Additional
Investment Information
Investment Restrictions
Management of the Fund
Description of Common Stock
How to Purchase and Redeem Shares
Investments Through
Participating Organizations
Investment Through Clearing Brokers
Direct Purchase and
Redemption Procedures
Initial Purchase of Shares
Electronic Fund Transfers (EFT),
Pre-Authorized Credit
and Direct Deposit Privilege
Subsequent Purchases of Shares
Redemption of Shares
Specified Amount Automatic
Withdrawal Plan
Exchange Privilege
Distribution and Service Plan
Dividends, Distributions and Taxes
Net Asset Value
General Information
Custodian and Transfer Agents
619109.5
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
April__, 1998
PAX WORLD MONEY MARKET FUND, INC. 600 FIFTH AVENUE
NEW YORK, N.Y. 10020
INDIVIDUAL INVESTOR CLASS (212) 830-5220
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Pax World Money Market Fund, Inc. (the "Fund") is designed to meet the
short-term investment needs of institutional investors ("Institutional
Investors"), individual 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 the Advisor, the Sub-Advisor or the
Distributor. See "Description of Shares."
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" on
page 4.
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 referenced 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 (the "Advisor") is the advisor to the Fund. Reich & Tang Asset
Management, L.P. will act 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. will be responsible for determining whether
contemplated investments satisfy the social responsibility criteria applied to
the Fund. Reich & Tang Asset Management L.P. will perform 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.
652644.3
1
<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.
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE
IN WHICH SAID OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
652644.3
2
<PAGE>
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
------------------
EXAMPLE 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 $6 $19
time period:
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 Fee. 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.
652644.3
3
<PAGE>
INTRODUCTION
Pax World Money Market Fund, Inc. (the "Fund") is a no-load, diversified,
open-end management investment company offering investors 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, retailing,
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 forgoing 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, Inc. and the Pax World Growth Fund, Inc. 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 [fifteen] 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 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 within 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 directly to a customers account will not be
included in yield calculations. See "How to Purchase and Redeem Shares
Investments through Participating Organizations."
652644.3
4
<PAGE>
An investment in the Fund entails certain risks, including risks associated with
the purchase of when-issued securities, repurchase agreements and with 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 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. 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
652644.3
5
<PAGE>
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 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 such 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, 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
652644.3
6
<PAGE>
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 "SP- 1/AA" by S&P or "VMIG-1" and "VMIG-2" by Moody's 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.
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
652644.3
7
<PAGE>
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 a 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.
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.
652644.3
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<PAGE>
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:
o 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;
o 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);
o 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;
o 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;
o 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;
o 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 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 and furthermore the Fund will not
make additional investments when borrowings exceed 5% of the
Fund's net assets; and
o pledge, mortgage, assign or encumber any of the Fund's assets
except to the extent necessary to secure a borrowing permitted
by clause (d) made with respect to the Fund.
652644.3
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<PAGE>
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, 1996, the Advisor had
over $600,000,000 in assets under management by virtue of serving as the Advisor
to the Pax World Fund, Inc. (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 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 July 31, 1997, was investment
manager, advisor or supervisor with respect to assets aggregating approximately
$10.67 billion. The Sub-Advisor acts as manager or administrator of [fifteen]
other registered investment companies and also advises pension trusts,
profit-sharing trusts and endowments.
New England Investment Companies, L.P. ("NEICLP") is the limited partner and
owner of a 99.5% interest in the Sub-Advisor. Reich & Tang Asset Management,
Inc. (a wholly-owned subsidiary of NEICLP) is the general partner and owner of
the remaining .5% interest of the Sub-Advisor. New England Investment Companies,
Inc. ("NEIC"), a Massachusetts Corporation, serves as the sole general partner
of NEICLP.
On August 30, 1996, The New England Mutual Life Insurance Company ("The New
England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Sub-Advisor is an indirect
wholly-owned subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its
sole general partner, is now an indirect subsidiary of MetLife. Also, MetLife
New England Holdings, Inc., a wholly-owned subsidiary of MetLife, owns
approximately 48.5% of the outstanding limited partnership interest of NEICLP
and may be deemed a "controlling person" of the Sub-Advisor. Reich & Tang, Inc.
owns approximately 16% of the outstanding partnership units of NEICLP.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which exceeded $1.6 trillion at December 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through thirteen subsidiaries, divisions and
affiliates to institutional clients. 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.
On , 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 Pax World
Management Corp. and a Sub-Advisory Agreement with Reich & Tang Asset Management
L.P. each effective , 1998 which have terms which extend to , 2000 and may be
continued in force thereafter for successive twelve-month periods beginning each
, 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
652644.3
10
<PAGE>
of voting on such matter. The Investment Advisory Agreement and Sub-Advisory
Agreement were approved by the sole shareholder of the Fund on , 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 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. 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 , 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; (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 Plans 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
652644.3
11
<PAGE>
to elect any person or persons to the Board of Directors. The Fund's By-laws
provide 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 $500. (See "Direct Purchase and Redemption Procedures" herein.)
The minimum amount for subsequent investments is $100 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 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 $500. 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 or
the Fund may impose a monthly service charge of $10 on such accounts. 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 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 net asset value falls below the minimum amount.
652644.3
12
<PAGE>
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 subscription order form necessary to open an account by
telephoning the Fund at 800-372-7827 (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
subscription order form to the transfer agent for the Individual Investor Class
at:
Pax World Money Market Fund Inc.
c/o Pax World Fund Family
P.O. Box 8930
Wilmington, Delaware 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.
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 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:
_________________________
_________________________
_________________________
Electronic Funds Transfers (EFT),
Pre-authorized Credit and Direct
Deposit Privilege
You may purchase shares of the Fund (minimum of $100) 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. You can also have money debited from your checking 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 to include in the
652644.3
13
<PAGE>
Privilege. 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 in the Privilege.
Further, the Fund may terminate your participation upon 30 days' notice to you.
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 Individual Investor Class
transfer agent at:
Pax World Money Market Fund Inc.
PFPC, Inc.
P.O. Box 8950
Wilmington, Delaware 19899
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. An Individual Investor Class 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 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 Money Market Fund Inc.
c/o Pax World Fund Family
P.O. Box 8930
Wilmington, Delaware 19899-8930
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, 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
652644.3
14
<PAGE>
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
interests 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 and 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
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 address or to
his 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 Individual Investor
Class 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 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.
A shareholder of Individual Investor Class shares making a telephone withdrawal
should call PFPC, Inc. at 800-372-7827 and state (i) the name of the shareholder
appearing on the Fund's records, (ii) his 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. The
request cannot be honored if an address change has been made for the account
within 60 days of the telephone redemption request. If there are multiple
account owners, PFPC, Inc. may rely on the instructions of only one owner. This
account option is not available for retirement account shares or shares
represented by a certificate. PFPC, Inc. may record all calls.
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
Individual Investor 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
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, Inc. or the
Pax World Growth Fund, Inc. 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.
652644.3
15
<PAGE>
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 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 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.
Instructions for exchanges may be made by sending a signature guaranteed written
request to:
Pax World Fund Family
PFPC, Inc.
P.O. Box 8930
Wilmington, Delaware 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 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
652644.3
16
<PAGE>
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 ______, 1997, the Fund's Board of
Directors adopted a distribution and service plan (the "Plan") and, pursuant to
the Plan, the Fund and Reich & Tang Distributors, Inc. (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 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, 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 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.
652644.3
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<PAGE>
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 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.
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 shareholder who have not complied with IRS regulations. In connection with
this withholding requirement, a shareholder will be asked to certify on his
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 IRS.
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 "Purchase and Redemption of Shares" and
"Other Purchase and Redemption Procedures" herein.)
In order to maintain a stable net asset value per share for each Class of $1.00,
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.
652644.3
18
<PAGE>
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 a
diversified, 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 (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) 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 AGENTS
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 agent and
dividend agent for Individual Investor Class shares of the Fund. The Fund's
custodian and transfer agents do not assist in, and are not responsible for,
investment decisions involving assets of the Fund.
652644.3
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<PAGE>
TABLE OF CONTENT
----------------
Table of Fees and Expenses PAX
Selected Financial Information WORLD
Introduction MONEY
Investment Objectives, MARKET FUND, INC.
Policies and Risks PROSPECTUS
Social Criteria of Portfolio April __, 1998
Risk Factors and Additional
Investment Information
Investment Restrictions
Management of the Fund
Description of Common Stock
How to Purchase and Redeem Shares
Direct Purchase and
Redemption Procedures
Initial Purchase of Shares
Electronic Fund Transfers (EFT),
Pre-Authorized Credit
and Direct Deposit Privilege
Subsequent Purchases of Shares
Redemption of Shares
Specified Amount Automatic
Withdrawal Plan
Exchange Privilege
Individual Retirement Accounts
Distribution and Service Plan
Dividends, Distributions and Taxes
Net Asset Value
General Information
Custodian and Transfer Agents
652644.3
<PAGE>
PAX WORLD
MONEY MARKET FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
APRIL ____, 1998
Relating to the Prospectus for the Institutional
Class and Broker Service Class Shares of Pax
World Money Market Fund, Inc. dated April ____, 1998
and the Prospectus for the Individual Investor
Class Shares of Pax World Money Market Fund,
Inc. dated April ____, 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 of Pax World Money Market Fund,
Inc., and the Individual Investor Class and Broker Service Class Shares of Pax
World Money Market Fund, Inc. (each the "Fund") and should be read in
conjunction with each respective prospectus. The Fund's respective prospectus
may be obtained from any Participating Organization or by writing or calling the
Fund. This Statement of Additional Information is incorporated by reference into
the respective prospectus in its entirety.
Table of Contents
Investment Objectives, Policies and Risks.......................
Investments and Investment Techniques...........................
Investment Restrictions.........................................
Portfolio Transactions..........................................
Purchase and Redemption of Shares and Other
Purchase and Redemption Procedures............................
Yield Quotations................................................
Management, Advisory and Sub-Advisory Agreements................
Distribution and Service Plan...................................
Description of Common Stock.....................................
Custodian and Transfer Agents...................................
Net Asset Value.................................................
Description of Ratings..........................................
652637.1
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Pax World Money Market Fund, Inc. (the "Fund") is a diversified, 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
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
652637.1
-2-
<PAGE>
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.
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 of each Class as
computed for the purpose of sales and redemptions at $1.00. 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.
652637.1
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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 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
- --------
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.
652637.1
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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 Prospectus).
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.
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
652637.1
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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 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
standard. 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
652637.1
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"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.
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 officers and directors of the Fund or officers and directors of the
Fund, the Advisor and 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 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 transporting 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 commission 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
652637.1
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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.
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 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 Participant Investors because they will not be subject to any fees or
charges that may be imposed by Participating Organizations.
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. 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, 1996, the
Advisor had over $600,000,000 in assets under management by virtue of serving as
the Advisor to the Pax World Fund, Inc. (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 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
652637.1
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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. 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 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.
New England Investment Companies, L.P. ("NEICLP") is the limited partner and
owner of a 99.5% interest in the Sub-Advisor. Reich & Tang Asset Management,
Inc. (a wholly-owned subsidiary of NEICLP) is the general partner and owner of
the remaining .5% interest of the Sub-Advisor.
On August 30, 1996, The New England Mutual Life Insurance Company ("The New
England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Sub-Advisor remains an indirect
wholly-owned subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its
sole general partner, is now an indirect subsidiary of MetLife. Also, MetLife
New England Holdings, Inc., a wholly-owned subsidiary of MetLife, owns
approximately 48.5% of the outstanding limited partnership interest of NEICLP
and may be deemed a "controlling person" of the Sub-Advisor. Reich & Tang, Inc.
owns approximately 16% of the outstanding partnership units of NEICLP.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which exceeded $1.6 trillion at December 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through thirteen subsidiaries, divisions and
affiliates to institutional clients. 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 , 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 Pax World Management Corp. effective , 1998 which has a term
which extends to , 2000 and may be continued in force thereafter for
successive twelve-month periods beginning each , 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 was approved by the sole
shareholder of the Fund on , 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 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
652637.1
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<PAGE>
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 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 record keeping 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.
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 net asset 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, 43 - 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 California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free
Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income 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. and Short Term Income Fund, Inc., President and
Trustee of Florida Daily Municipal Income
652637.1
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<PAGE>
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, 66 - 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 California Daily Tax
Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc., Delafield 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. and Short Term
Income Fund, Inc., and a Trustee of Florida Daily Municipal Income Fund and
Pennsylvania Daily Municipal Income Fund.
Robert Straniere, 55 - 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 California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield 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. and Short Term Income Fund, Inc., and
a Trustee of Florida Daily Municipal Income Fund and Pennsylvania Daily
Municipal Income Fund.
Dr. Yung Wong, 58 - 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 California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income
Fund, Inc., Delafield 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. and Short Term Income Fund, Inc., and
a Trustee of Florida Daily Municipal Income Fund and Pennsylvania Daily
Municipal Income Fund.
Thomas W. Grant, 56- President of the Fund, has been President of Pax World
Management Corp. 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 of Directors of Pax World Fund, Inc.
Lawrence A. Shadek, 47- Executive Vice-President of the Fund, has been Chairman
of the Board of Pax World Management Corp. 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 and a
Director of Pax World Growth Fund, Inc. and Chairman of the Board of Directors
of Pax World Fund, Inc.
Bernadette N. Finn, 49 - 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 with from September 1970 to September 1993.
Ms. Finn is also Secretary of 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, 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., Reich & Tang
Equity Fund, Inc. and Short Term 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 with
from December 1977 to September 1993. Ms. Flewharty is also a Vice President of
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.
Lesley M. Jones, 49 - Vice President of the Fund, has been Senior Vice President
of the Mutual Funds division of the Sub- Advisor since September 1993. Ms. Jones
was formerly Senior Vice President of Reich & Tang, Inc. with which she was
associated with from April 1973 to September 1993. Ms. Jones is also a Vice
President of 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, 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. and Short Term Income
Fund, Inc.
652637.1
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<PAGE>
Dana E. Messina, 40 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds division of the Sub-Advisor since January 1995 and
was Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated with from
December 1980 to September 1993. Ms. Messina is also Vice President of
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 Funds, Inc.
Richard De Sanctis, 40 - 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 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, 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. and is Vice President and 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. See Compensation Table.
<TABLE>
COMPENSATION TABLE
<CAPTION>
(1) (2) (3) (4) (5)
Name of Person, Aggregate Compensation from Pension or Retirement Benefits Estimated Annual Benefits Total Compensation from
Position Registrant for Fiscal Year Accrued as Part of Fund upon Retirement Fund and Fund Complex
Expenses Paid to Directors*
<S> <C> <C> <C> <C>
W. Giles Mellon, $-- 0 0 (13 Funds)
Director
Robert Straniere, $-- 0 0 (13 Funds)
Director
Yung Wong, $-- 0 0 (13 Funds)
Director
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ended ________, 1998 (and, with respect to certain of the funds
in the Fund Complex, estimated to be paid during the fiscal year ended ________,
199__). 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 respect to Institutional Class shares only) with the Reich & Tang
Distributors, Inc. (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.
652637.1
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<PAGE>
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 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 _________, 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 __________. 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
652637.1
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<PAGE>
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 , 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 Investor Class
and Broker Service 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 Plans 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 _______, 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 Director 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, 127 West 10th Street, Kansas City, Missouri
64105, is custodian for its cash and securities. Reich & Tang Services L.P., 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
652637.1
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<PAGE>
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 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 rate 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.
652637.1
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<PAGE>
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 Pax World Money Market
Fund, Inc. as of March 18, 1998, in conformity with generally accepted
accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
March 19, 1998
<PAGE>
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
------------
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.
<PAGE>
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.
<PAGE>
<TABLE>
PART C - OTHER INFORMATION
<S> <C> <C>
Item 24. Financial Statements and Exhibits.
* (A) Financial Statements
Included in Prospectus Part A:
(1) Table of Fees and Expenses
Included in Statement of Additional Information Part B:
(1) Report of McGladrey & Pullen, LLP, independent accountants, dated March 19, 1998; and
(2) Statement of Net Assets (audited).
(B) Exhibits
** (1) Articles of Incorporation of the Registrant.
** (2) By-Laws of the Registrant.
(3) Not applicable.
(4) Not applicable.
* (5) Form of Advisory Agreement between the Registrant and Pax World Management Corp.
* (5.1) Form of Sub-Advisory Agreement between Pax World Management Corp. and Reich & Tang
Management L.P.
* (6) See Form of Distribution Agreement filed as Exhibit 15.2.
(7) Not applicable.
* (8) Form of Custody Agreement between the Registrant and Investors Fiduciary Trust Company.
(9) Not Applicable.
* (9.1) Form of Administrative Services Agreement between the Registrant and Reich & Tang Asset
Management L.P.
* (10) Consent Opinion of Messrs. Battle Fowler LLP as to the use of their name
under the headings "Federal Income Taxes" in the Prospectus and "Counsel and
Auditors" in the Statement of Additional Information.
* (11) Consent of Independent Accountants filed as Exhibit 11 herein.
(12) Not Applicable.
- --------
* Filed herewith.
** Filed with Registration Statement No. 333-43587 on December 31, 1997, and incorporated by reference herein.
</TABLE>
654547.1
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<TABLE>
<S> <C> <C>
* (13) Written assurance of Pax World Management Corp. that its purchase of shares of the Registrant was for
investment purposes without any present intention of redeeming or reselling.
(14) Not Applicable.
* (15.1) Form of Distribution and Service Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940.
* (15.2) Form of Distribution Agreement between the Registrant and Reich & Tang Distributors, Inc.
* (15.3) Form of Shareholder Servicing Agreements (with
respect to Broker Service Class and Individual
Investor Class only) between the Registrant and Reich
& Tang Distributors, Inc.
* (16) Powers of Attorney.
** (17) Financial Data Schedule (For EDGAR Filing Only)
* (18) 18f-3 Multi-Class Plan
Item 25. Persons controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of April 6, 1998
--------------- ------------------------
Common Stock
(par value $.0001)
Institutional Class 1
Individual Investor Class 1
Broker Service Class 1
</TABLE>
Item 27. Indemnification.
In accordance with Section 2-418 of the General
Corporation Law of the State of Maryland, Article NINTH of the
Registrant's Articles of Incorporation provides as follows:
"NINTH: (a) The Corporation shall indemnify (i) its
currently acting and former directors and officers, whether
serving the Corporation or at its request any other entity, to
the fullest extent required or permitted by the General Laws of
the State of Maryland now or hereafter in force, including the
advance of expenses under the procedures and to the fullest
extent permitted by law, and (ii) other employees and agents to
such extent as shall be authorized by the Board of Directors or
the By-Laws and as permitted by law. Nothing contained herein
shall be construed to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
The foregoing rights of
- --------
* Filed herewith.
** To be filed by amendment
654547.1
C-2
<PAGE>
indemnification shall not be exclusive of any other rights to
which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such by-laws, resolutions or
contracts implementing such provisions or such indemnification
arrangements as may be permitted by law. No amendment of the
charter of the Corporation or repeal of any of its provisions
shall limit or eliminate the right of indemnification provided
hereunder with respect to acts or omissions occurring prior to
such amendment or repeal.
(b) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment
Company Act of 1940, no director or officer of the Corporation
shall be personally liable to the Corporation or its stockholders
for money damages; provided, however, that nothing herein shall
be construed to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. No
amendment of the charter of the Corporation or repeal of any of
its provisions shall limit or eliminate the limitation of
liability provided to directors and officers hereunder with
respect to any act or omission occurring prior to such amendment
or repeal."
In Section 7 of the Distribution Agreement relating to the
securities being offered hereby, the Registrant agrees to
indemnify Pax World Money Market Fund, Inc. and any person who
controls Pax World Money Market Fund, Inc., within the meaning of
the Securities Act of 1933, against certain types of civil
liabilities arising in connection with the Registration Statement
or Prospectus.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Securities Act") may be
permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than a payment by
the Registrant of expenses incurred or paid by a director,
officer or the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Insofar as the Investment Company Act of 1940 may be
concerned, in the event that a claim for indemnification is
asserted by a director, officer or controlling person of the
Registrant in connection with the securities being registered,
the Registrant will not make such indemnification unless (i) the
Registrant has submitted, before a court or other body, the
question of whether the person to be indemnified was liable by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of duties, and has obtained a final decision
on the merits that such person was not liable by reason of such
conduct or (ii) in the absence of such decision, the Registrant
shall have obtained a reasonable determination, based upon a
review of the facts, that such person was not liable by virtue of
such conduct, by (a) the vote of a majority of directors who are
neither interested persons as such term is defined in the
Investment Company Act of 1940, nor parties to the proceeding or
(b) an independent legal counsel in a written opinion.
The Registrant will not advance attorneys' fees or other
expenses incurred by the person to be indemnified unless the
Registrant shall have received an undertaking by or on behalf of
such person to repay the advance unless it is ultimately
determined that such person is entitled to indemnification and
one of the following conditions shall have occurred: (x) such
person shall provide security for his undertaking, (y) the
Registrant shall be insured against losses arising by reason of
any lawful advances or (z) a majority of the disinterested,
non-party directors of the
654547.1
C-3
<PAGE>
Registrant, or an independent legal counsel in a written opinion,
shall have determined that based on a review of readily available
facts there is reason to believe that such person ultimately will
be found entitled to indemnification.
Item 28. Business and Other Connections of Investment Adviser.
The description of the Reich & Tang Asset Management L.P.
("RTAMLP") under the caption "Management of the Fund" in the Prospectus and
"Management and Investment Management Contract" in the Statement of Additional
Information constituting parts A and B, respectively, of the Registration
Statement are incorporated herein by reference.
New England Investment Companies, L.P. ("NEICLP") is the limited
partner and owner of 99.5% interest in Reich & Tang Asset Management L.P. (the
"Manager"). Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of
NEICLP) is the sole general partner of NEICLP and is the sole shareholder of
Reich & Tang Distributors, Inc.
On August 30, 1996, The New England Mutual Life Insurance Company
and Metropolitan Life Insurance Company ("MetLife") merged, with MetLife being
the continuing company. The Manager remains a wholly-owned subsidiary of NEICLP,
but Reich & Tang Asset Management, Inc., its sole general partner, is now an
indirect subsidiary of MetLife. Also, MetLife New England Holding, Inc., a
wholly-owned subsidiary of MetLife, owns 51% of the outstanding limited
partnership interest of NEICLP and may be deemed a "controlling person" of the
Manager. Reich & Tang, Inc. owns approximately 16% of the outstanding
partnership units of NEICLP.
Registrant's investment adviser, RTAMLP, is a registered
investment adviser. RTAMLP's investment advisory clients include 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, Institutional Daily Income Fund, New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., Michigan Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Short Term Income Fund, Inc., and Tax
Exempt Proceeds Fund, Inc., registered investment companies whose addresses are
600 Fifth Avenue, New York, New York 10020, which invest principally in money
market instruments, Delafield Fund, Inc. and Reich & Tang Equity Fund, Inc.,
registered investment companies whose addresses are 600 Fifth Avenue, New York,
New York 10020, which invest principally in equity securities. In addition,
Reich & Tang Asset Management L.P. is the sole general partner of Alpha
Associates, August Associates, Reich & Tang Minutus L.P., Reich & Tang Minutus
II, L.P., Reich & Tang Equity Partnerships L.P. and Tucek Partners, L.P.,
private investment partnerships organized as limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of NEIC
since October 1992, Chairman of the Board of NEIC since December 1992, Group
Executive Vice President, Bank of America, responsible for the global asset
management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies, a wholly owned subsidiary of
Security Pacific Corporation, from April 1988 to April 1992, Director of The New
England since March 1993, Chairman of the Board of Directors of NEIC's
subsidiaries other than Loomis, Sayles & Company, Incorporated ("Loomis") and
Back Bay Advisors, Inc. ("Back Bay"), where he serves as a Director, and
Chairman of the Board of Trustees of all of the mutual funds in the TNE Fund
Group and the Zenith Funds. G. Neal Ryland, Executive Vice President, Treasurer
and Chief Financial Officer NEIC since July 1993, Executive Vice President and
Chief Financial Officer of The Boston Company, a diversified financial services
company, from March 1989 until July 1993; from September 1985 to December 1988,
Mr. Ryland was employed by Kenner Parker Toys, Inc. as Senior Vice President and
Chief Financial Officer. Edward N. Wadsworth, Executive Vice President, General
Counsel, Clerk and Secretary of NEIC since December 1989, Senior Vice President
and Associate General Counsel of The New England from 1984 until December 1992,
and Secretary of Westpeak and Draycott and the Treasurer of NEIC. Lorraine C.
Hysler has been Secretary of RTAM since July 1994, Assistant Secretary of NEIC
since September 1993, Vice President of the Mutual Funds Group of NEICLP from
September 1993 until July 1994, and Vice President of Reich & Tang Mutual Funds
since July 1994. Ms. Hysler joined Reich & Tang, Inc. in May 1977 and served as
Secretary from April 1987 until September 1993. Richard E. Smith, III has been a
Director of Reich & Tang Asset Management Inc. since July 1994, President and
Chief Operating Officer of the Capital Management Group of NEICLP from May 1994
until July 1994, President and Chief Operating Officer of the Reich & Tang
Capital Management Group since July 1994, Executive Vice President and Director
of Rhode Island Hospital Trust from March 1993 to May 1994, President, Chief
Executive Officer and Director of USF&G Review Management Corp. from January
1988 until September 1992. Steven W. Duff has been a Director of RTAM since
October 1994, President and Chief Executive Officer of Reich & Tang Funds
654547.1
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<PAGE>
since August 1994, Senior Vice President of NationsBank from June 1981 until
August 1994; Mr. Duff is President and a Director of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free
Income 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. and Short Term Income Fund, Inc.,
President and Trustee of Florida Daily Municipal Income Fund, Pennsylvania Daily
Municipal Income Fund, President and Chief Executive Officer of Tax Exempt
Proceeds Fund, Inc., and Executive Vice President of Reich & Tang Equity Fund,
Inc. Bernadette N. Finn has been Vice President - Compliance of RTAM since July
1994, Vice President of Mutual Funds Division of NEICLP from September 1993
until July 1994, Vice President of Reich & Tang Funds since July 1994. Ms. Finn
joined Reich & Tang, Inc. in September 1970 and served as Vice President from
September 1982 until May 1987 and as Vice President and Assistant Secretary from
May 1987 until September 1993. Ms. Finn is also Secretary of 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, 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., Reich & Tang Equity Fund, Inc. and Short Term Income Fund,
Inc. Richard De Sanctis has been Vice President and Treasurer of RTAM since July
1994, Assistant Treasurer of NEIC since September 1993 and Treasurer of the
Mutual Funds Group of NEICLP from September 1993 until July 1994, Treasurer of
the Reich & Tang Funds since July 1994. Mr. De Sanctis joined Reich & Tang, Inc.
in December 1990 and served as Controller of Reich & Tang, Inc., from January
1991 to September 1993. Mr. De Sanctis was 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 AEW Commercial
Mortgage Securities Fund, 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, 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.,
Reich & Tang Government Securities Trust, Tax Exempt Proceeds Fund, Inc. and
Short Term Income Fund, Inc. and is Vice President and Treasurer of Cortland
Trust, Inc.
Item 29. Principal Underwriters.
(a) Reich & Tang Distributors, Inc., the Registrant's
Distributor, is also distributor for 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, 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, Inc., Pennsylvania
Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income
Fund, Inc. and Tax Exempt Proceeds Fund, Inc.
(b) The following are the directors and officers of Reich & Tang
Distributors, Inc. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons the principal address is 600 Fifth Avenue, New York, New York 10020.
654547.1
C-5
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name With the Distributor With Registrant
<S> <C> <C>
Richard E. Smith III President and Director None
Peter S. Voss Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
Steven W. Duff Director President and Director
Robert F. Hoerle Managing Director None
Peter J. DeMarco Executive Vice President None
Bernadette N. Finn Vice President - Compliance Secretary
and Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Treasurer Treasurer
Richard I. Weiner Vice President None
</TABLE>
(c) Not applicable
Item 30. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained in the physical possession of Registrant at Reich &
Tang Asset Management L.P., 600 Fifth Avenue, New York, New York 10020 the
Registrant's Manager; Reich & Tang Services, 600 Fifth Avenue, New York, New
York 10020, the Registrant's transfer agent and dividend distributing agent; and
at Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64104, the Registrant's custodian.
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the effective
date of its Securities Act Registration Statement.
654547.1
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of New York, and
State of New York, on the 7th day of April, 1998.
PAX WORLD MONEY MARKET FUND, INC.
By:/s/ Bernadette N. Finn
----------------------
Bernadette N. Finn, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated
below.
Signature Title Date
(1) Principal Executive Officer:
Steven W. Duff Chairman April 7, 1998
By: /s/ Steven W. Duff
------------------
Steven W. Duff
(2) Principal Financial and Treasurer April 7, 1998
Accounting Officer
By: /s/ Richard De Sanctis
----------------------
Richard De Sanctis
(3) Majority of Directors
Steven W. Duff Director April 7, 1998
Dr. W. Giles Mellon Director
Robert Straniere Director
Dr. Yung Wong Director
By: /s/ Steven W. Duff
--------------------
Steven W. Duff
By: /s/ Bernadette N. Finn
------------------------
Bernadette N. Finn
Attorney-in-Fact*
- --------
* Filed herewith.
654547.1
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<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
<S> <C> <C>
* (1) Articles of Incorporation of the Registrant.
* (2) By-Laws of the Registrant.
(3) Not applicable.
(4) Not applicable.
(5) Form of Advisory Agreement between the Registrant and Pax World Management Corp.
(5.1) Form of Sub-Advisory Agreement between Pax World Management Corp. and Reich &
Tang Management L.P.
(6) See Form of Distribution Agreement filed as Exhibit 15.2.
(7) Not applicable.
(8) Form of Custody Agreement between the Registrant and Investors Fiduciary Trust Company.
(9) Not applicable.
(9.1) Form of Administrative Services Agreement between the Registrant and Reich & Tang Asset
Management L.P.
(10) Consent of Messrs. Battle Fowler LLP as to the
legality of the securities being registered,
including their consent to the filing thereof and
as to the use of their name under the headings
"Federal Income Taxes" and "Counsel and Auditors"
in the Statement of Additional Information.
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Written assurance of Pax World Management Corp. that its purchase of shares of the
registrant was for investment purposes without any present intention of redeeming or
reselling.
(14) Not applicable.
(15.1) Form of Distribution and Service Plan pursuant to
Rule 12b-1 under the Investment Company Act of
1940
(15.2) Form of Distribution Agreement between the Registrant and Reich & Tang Distributors, Inc.
(15.3) Form of Shareholder Servicing Agreements (with respect to Broker Service Class and
Individual Investor Class only) between the Registrant and Reich & Tang Distributors, Inc.
(16) Powers of Attorney.
** (17) Financial Data Schedule (For EDGAR Filing Only).
(18) 18f-3 Multi-Class Plan.
- --------
* Filed with Registration Statement No. 333-43587 on December 31, 1997, and incorporated by reference herein.
** To be filed by amendment.
</TABLE>
654547.1
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<PAGE>
FORM OF
ADVISORY AGREEMENT
PAX WORLD MONEY MARKET FUND, INC.
the "Fund"
New York, New York
April _, 1998
Pax World Management Corp.
222 State Street
Portsmouth, New Hampshire 03801
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in accordance with the
limitations, specified in our Articles of Incorporation, By-Laws and
Registration Statement filed with the Securities and Exchange Commission under
the Investment Company Act of 1940 (the "1940 Act") and the Securities Act of
1933, including the Prospectus forming a part thereof (the "Registration
Statement"), all as from time to time in effect, and in such manner and to such
ext ent as may from time to time be authorized by our Board of Directors. We
enclose copies of the documents listed above and will furnish you such
amendments thereto as may be made from time to time.
2. (a) We hereby employ you to manage the investment and
reinvestment of our assets as above specified, and, without limiting the
generality of the foregoing, to provide the investment management services
specified below.
(b) Subject to the general control of our Board
of Directors, you will (i) review and screen all contemplated investments to
ensure that they each satisfy the social criteria reflective of the investment
philosophy of the Fund (as described in the Prospectuses) and (ii) make
decisions with respect to all purchases and sales of the portfolio securities.
To carry out such decisions, you are hereby authorized, as our agent and
attorney-in-fact for our account and at our risk and in our name, to place
orders for the investment and reinvestment of our assets. In all purchases,
sales and other transactions in our portfolio securities you are authorized to
exercise full discretion and act for us in the same manner and with the same
force and effect as our Fund itself might or could do with
-1-
641579.3
<PAGE>
respect to such purchases, sales or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
(c) You will report to our Board of Directors at
each meeting thereof all changes in our portfolio since your prior report, and
will also keep us in touch with important developments affecting our portfolio
and, on your initiative, will furnish us from time to time with such information
as you may believe appropriate for this purpose, whether concerning the
individual entities whose securities are included in our portfolio, the
activities in which such entities engage, Federal income tax policies applicable
to our investments, or the conditions prevailing in the money market or the
economy generally. You will also furnish us with such statistical and analytical
information with respect to our portfolio securities as you may believe
appropriate or as we may reasonably request. In making such purchases and sales
of our portfolio securities, you will comply with the policies set from time to
time by our Board of Directors as well as the limitations imposed by our
Articles of Incorporation and by the provisions of the Internal Revenue Code and
the 1940 Act relating to regulated investment companies and the limitations
contained in the Registration Statement.
(d) It is understood that you will from time to
time employ, subcontract with or otherwise associate with yourself, entirely at
your expense, such persons as you believe to be particularly fitted to assist
you in the execution of your duties hereunder.
(e) You or your affiliates will also furnish us,
at your own expense, such investment advisory supervision and assistance as you
may believe appropriate or as we may reasonably request subject to the
requirements of any regulatory authority to which you may be subject. You and
your affiliates will also pay the expenses of promoting the sale of our shares
(other than the costs of preparing, printing and filing our registration
statement, printing copies of the prospectus contained therein and complying
with other applicable regulatory requirements), except to the extent that we are
permitted to bear such expenses under a plan adopted pursuant to Rule 12b-1
under the 1940 Act or a similar rule.
3. We agree, subject to the limitations described below, to be
responsible for, and hereby assume the obligation for payment of, all our
expenses, including: (a) brokerage and commission expenses, (b) Federal, state
or local taxes, including issue and transfer taxes incurred by or levied on us,
(c) commitment fees and certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of our custodian,
-2-
641579.3
<PAGE>
(f) charges, expenses and payments relating to the issuance, redemption,
transfer and dividend disbursing functions for us, (g) recurring and
nonrecurring legal and accounting expenses, including those of the bookkeeping
agent, (h) telecommunications expenses, (i) the costs of organizing and
maintaining our existence as a trust, (j) compensation, including directors'
fees, of any of our directors, officers or employees who are not your officers
or officers of your affiliates, and costs of other personnel providing clerical,
accounting supervision and other office services to us as we may request, (k)
costs of shareholder's services including, charges and expenses of persons
providing confirmations of transactions in our shares, periodic statements to
shareholders, and recordkeeping and shareholders' services, (l) costs of
shareholders' reports, proxy solicitations, and fund meetings, (m) fees and
expenses of registering our shares under the appropriate Federal securities laws
and of qualifying such shares under applicable state securities laws, including
expenses attendant upon the initial registration and qualification of such
shares and attendant upon renewals of, or amendments to, those registrations and
qualifications, (n) expenses of preparing, printing and delivering our
prospectus to existing shareholders and of printing shareholder application
forms for shareholder accounts, (o) payment of the fees and expenses provided
for herein, under the Administrative Services Agreement, and pursuant to the
Shareholder Servicing Agreement, with respect to the Individual Investor Class
and Broker Service Class shares only, and Distribution Agreement, and (p) any
other distribution or promotional expenses contemplated by an effective plan
adopted by us pursuant to Rule 12b-1 under the Act. Our obligation for the
foregoing expenses is limited by your agreement to be responsible, while this
Agreement is in effect, for any amount by which our annual operating expenses
(excluding taxes, brokerage, interest and extraordinary expenses) exceed the
limits on investment company expenses prescribed by any state in which our
shares are qualified for sale.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a fee at
the annual rate of .15% of the Fund's average daily net assets. Your fee will be
accrued by us daily, and will be payable on the last day of each calendar month
for services
-3-
641579.3
<PAGE>
performed hereunder during that month or on such other schedule as you shall
request of us in writing. You may use any portion of this fee for distribution
of our shares, or for making servicing payments to organizations whose customers
or clients are our shareholders. You may waive your right to any fee to which
you are entitled hereunder, provided such waiver is delivered to us in writing.
Any reimbursement of our expenses, to which we may become entitled pursuant to
paragraph 3 hereof, will be paid to us at the same time as we pay you.
6. This Agreement will become effective on the date hereof and
shall continue in effect until ____________ __, 2000 and thereafter for
successive twelve-month periods (computed from each ), provided that such
continuation is specifically approved at least annually by our Board of
Directors or by a majority vote of the holders of our outstanding voting
securities, as defined in the 1940 Act and the rules thereunder, and, in either
case, by a majority of those of our directors who are neither party to this
Agreement nor, other than by their service as directors of the trust, interested
persons, as defined in the 1940 Act and the rules thereunder, of any such person
who is party to this Agreement. Upon the effectiveness of this Agreement, it
shall supersede all previous Agreements between us covering the subject matter
hereof. This Agreement may be terminated at any time, without the payment of any
penalty, (i) by vote of a majority of our outstanding voting securities, as
defined in the 1940 Act and the rules thereunder, or (ii) by a vote of a
majority of our entire Board of Directors, on sixty days' written notice to you,
or (iii) by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your employees, who may also be a director, officer or
employee of ours, or of a person affiliated with us, as defined in the 1940 Act,
to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
-4-
641579.3
<PAGE>
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
PAX WORLD MONEY MARKET FUND, INC.
By:
------------------------------
Name:
Title:
ACCEPTED: April _, 1998
PAX WORLD MANAGEMENT CORP.
By:___________________________________
Name:
Title:
-5-
641579.3
<PAGE>
FORM OF
SUB-ADVISORY AGREEMENT
PAX WORLD MANAGEMENT CORP.
the "Advisor"
222 State Street
Portsmouth, New Hampshire 03801
April __, 1998
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10022
Gentlemen:
WHEREAS, we have entered into an Advisory Agreement with Pax
World Money Market Fund, Inc., (the "Fund"), dated April __, 1998 (the "Advisory
Agreement") pursuant to which we have been employed to manage the investment and
reinvestment of the Fund, subject to the general control of the Fund's Board of
Directors; and
WHEREAS, pursuant to Section 2(d) of the Advisory Agreement
we are permitted from time to time to employ, subcontract with or otherwise
associate with, entirely at our expense, such persons as we believe to be
particularly fitted to assist us in the execution of the duties set forth under
the Advisory Agreement.
We herewith confirm our agreement with you as follows:
1. The Fund, as provided in the Advisory Agreement, proposes
to engage in the business of investing and reinvesting its assets in securities
of the type, and in accordance with the limitations, specified in its Articles
of Incorporation, By-Laws and Registration Statement filed with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the "1940
Act") and the Securities Act of 1933, including the Prospectuses forming a part
thereof (the "Registration Statement"), all as from time to time in effect, and
in such manner and to such extent as may from time to time be authorized by the
Fund's Board of Directors. We enclose copies of the documents listed above and
will furnish you such amendments thereto as may be made from time to time.
2. (a) We have been employed to manage the investment and
reinvestment of the Fund's assets as above specified, and, without limiting the
generality of the foregoing, to provide the investment management services
specified in the Advisory Agreement.
677349.2
<PAGE>
(b) Subject to the general control of the Board of
Directors of the Fund, our general supervision, and our determination that
contemplated investments satisfy the social criteria applied to the Fund (as
described in the Prospectuses)(the "Social Criteria"), we hereby subcontract
with you to make decisions with respect to all purchases and sales of the
portfolio securities. To carry out such decisions, you are hereby authorized, as
our agent and attorney-in-fact to place orders for the investment and
reinvestment of the Fund's assets. In all purchases, sales and other
transactions in the Fund's portfolio securities you are authorized to exercise
full discretion and act for us in the same manner and with the same force and
effect as the Fund itself might or could do with respect to such purchases,
sales or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such purchases, sales
or other transactions. Notwithstanding anything herein, you will have no
obligation for determining whether potential investments satisfy the Social
Criteria nor will you be responsible or liable for any decision we make
regarding same.
(c) You will report to the Fund's Board of Directors at
each meeting thereof all changes in the Fund's portfolio since your prior
report, and will also keep us in touch with important developments affecting the
Fund's portfolio and, on your initiative, will furnish us from time to time with
such information as you may believe appropriate for this purpose, whether
concerning the individual entities whose securities are included in the Fund's
portfolio, the activities in which such entities engage, Federal income tax
policies applicable to our investments, or the conditions prevailing in the
money market or the economy generally. You will also furnish us with such
statistical and analytical information with respect to the Fund's portfolio
securities as you may believe appropriate or as we may reasonably request. In
making such purchases and sales of the Fund's portfolio securities, you will
comply with the policies set from time to time by the Fund's Board of Directors
as well as the limitations imposed by our Articles of Incorporation and by the
provisions of the Internal Revenue Code and the 1940 Act relating to regulated
investment companies and the limitations contained in the Registration
Statement.
(d) It is understood that you will from time to time
employ, subcontract with or otherwise associate with yourself, entirely at your
expense, such persons as you believe to be particularly fitted to assist you in
the execution of your duties hereunder.
(e) You or your affiliates will also furnish us, at
your own expense, such investment advisory supervision and assistance as you may
believe appropriate or as we may reasonably request subject to the requirements
of any regulatory authority
-2-
677349.2
<PAGE>
to which you may be subject. You and your affiliates will also pay the expenses
of promoting the sale of our shares (other than the costs of preparing, printing
and filing our registration statement, printing copies of the prospectus
contained therein and complying with other applicable regulatory requirements),
except to the extent that the Fund is permitted to bear such expenses under a
plan adopted pursuant to Rule 12b-1 under the 1940 Act or a similar rule.
(f) It is understood that nothing in this section shall
limit the Advisor's obligation as set forth in the Advisory Agreement to screen
all contemplated investments to ensure that they satisfy the Social Criteria
reflective of the investment philosophy of the Fund (as described in the
Prospectuses).
3. We will expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us and the
Fund, and we agree as an inducement to your undertaking these services that you
will not be liable hereunder for any mistake of judgment or for any other cause,
provided that nothing herein shall protect you against any liability to us or to
our security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
4. In consideration of the foregoing we will pay you
one-half of the fee paid to us pursuant to the Advisory Agreement between us and
the Fund, which is at the annual rate of .15% of the Fund's average daily net
assets. Your fee will be accrued daily, and will be payable on the last day of
each calendar month for services performed hereunder during that month or on
such other schedule as you shall request of us in writing. You may use any
portion of this fee for distribution of the Fund's shares, or for making
servicing payments to organizations whose customers or clients are the Fund's
shareholders. You may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing. Any reimbursement
of our expenses, to which we may become entitled pursuant to paragraph 3 hereof,
will be paid to us at the same time as we pay you.
5. This Agreement will become effective on the date hereof
and shall continue in effect until ____________ __, 2000 and thereafter for
successive twelve-month periods (computed from each ), provided that such
continuation is specifically approved at least annually by the Fund's Board of
Directors or by a majority vote of the holders of the Fund's outstanding voting
securities, as defined in the 1940 Act and the rules thereunder, and, in either
case, by a majority of those of the Fund's directors who are neither party to
this Agreement nor, other than by their service as directors of the trust,
interested
-3-
677349.2
<PAGE>
persons, as defined in the 1940 Act and the rules thereunder, of any such person
who is party to this Agreement. Upon the effectiveness of this Agreement, it
shall supersede all previous Agreements between us covering the subject matter
hereof. This Agreement may be terminated at any time, without the payment of any
penalty, (i) by vote of a majority of the Fund's outstanding voting securities,
as defined in the 1940 Act and the rules thereunder, (ii) by a vote of a
majority of the Fund's entire Board of Directors, on sixty days' written notice
to you, (iii) by us on sixty days' written notice to you, (iv) by you on sixty
days' written notice to us, or (v) upon the termination of the Advisory
Agreement.
6. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
7. Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or restrict your
right, or the right of any of your employees, who may also be a director,
officer or employee of the Fund, or of a person affiliated with the Fund, as
defined in the 1940 Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
-4-
677349.2
<PAGE>
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
PAX WORLD MANAGEMENT CORP.
By: ____________________________________
Name:
Title:
ACCEPTED: April __, 1998
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC., as General Partner
By:___________________________________
Name:
Title:
PAX WORLD MONEY MARKET FUNDS, INC.
By:___________________________________
Name:
Title:
-5-
677349.2
<PAGE>
FORM OF
CUSTODY AGREEMENT
THIS AGREEMENT made the ___ day of April, 1998, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the state of Missouri, having its trust office located at 801 Pennsylvania
Street, Kansas City, Missouri 64105 ("Custodian"), and Pax World Money Market
Fund, Inc., a Maryland corporation, having its principal office and place of
business at 600 Fifth Avenue, New York, New York 10020 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to
accept such appointment;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and
appoints Custodian as custodian of the securities and monies
at any time owned by the Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to
Custodian:
1. That it is a corporation or trust (as specified
above) duly organized and existing and in good
standing under the laws of its state of organization,
and that it is registered under the Investment
Company Act of 1940 (the "1940 Act"); and
2. That it has the requisite power and authority under
applicable law, its articles of incorporation and
its bylaws to enter into this Agreement; that it
has taken all requisite action necessary to appoint
Custodian as custodian for the Fund; that this
Agreement has been duly executed and delivered by
Fund; and that this Agreement constitutes a legal,
valid and binding obligation of Fund, enforceable
in accordance with its terms.
698902.1
1
<PAGE>
B. Custodian hereby represents, warrants and acknowledges to
Fund:
1. That it is a trust company duly organized and
existing and in good standing under the laws of the
State of Missouri; and
2. That it has the requisite power and authority under
applicable law, its charter and its bylaws to enter
into and perform this Agreement; that this Agreement
has been duly executed and delivered by Custodian;
and that this Agreement constitutes a legal, valid
and binding obligation of Custodian, enforceable in
accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery Of Assets
Except as permitted by the 1940 Act, Fund will deliver or
cause to be delivered to Custodian on the effective date of
this Agreement, or as soon thereafter as practicable, and from
time to time thereafter, all portfolio securities acquired by
it and monies then owned by it or from time to time coming
into its possession during the time this Agreement shall
continue in effect. Custodian shall have no responsibility or
liability whatsoever for or on account of securities or monies
not so delivered.
B. Delivery of Accounts and Records
Fund shall turn over or cause to be turned over to Custodian
all of the Fund's relevant accounts and records previously
maintained. Custodian shall be entitled to rely conclusively
on the completeness and correctness of the accounts and
records turned over to it, and Fund shall indemnify and hold
Custodian harmless of and from any and all expenses, damages
and losses whatsoever arising out of or in connection with any
error, omission, inaccuracy or other deficiency of such
accounts and records or in the failure of Fund to provide, or
to provide in a timely manner, any accounts, records or
information needed by the Custodian to perform its functions
hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets
of Fund delivered to it from time to time segregated in a
separate account, and if Fund is
698902.1
2
<PAGE>
comprised of more than one portfolio of investment securities
(each a "Portfolio") Custodian shall keep the assets of each
Portfolio segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any
person except as permitted by the provisions of this Agreement
or any agreement executed by it according to the terms of
Section 3.S. of this Agreement. Upon delivery of any such
assets to a subcustodian pursuant to Section 3.S. of this
Agreement, Custodian will create and maintain records
identifying those assets which have been delivered to the
subcustodian as belonging to the Fund, by Portfolio if
applicable. The Custodian is responsible for the safekeeping
of the securities and monies of Fund only until they have been
transmitted to and received by other persons as permitted
under the terms of this Agreement, except for securities and
monies transmitted to subcustodians appointed under Section
3.S. of this Agreement, for which Custodian remains
responsible to the extent provided in Section 3.S. hereof.
Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company (DTC),
Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved
by the Fund (as such entities are defined at 17 CFR Section
270.17f-4(b)) (each a "Depository" and collectively, the
"Depositories").
D. Registration of Securities
The Custodian shall at all times hold registered securities of
the Fund in the name of the Custodian, the Fund, or a nominee
of either of them, unless specifically directed by
instructions to hold such registered securities in so-called
"street name," provided that, in any event, all such
securities and other assets shall be held in an account of the
Custodian containing only assets of the Fund, or only assets
held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the
Custodian at all times shall indicate the Fund or other
customer for which such securities and other assets are held
in such account and the respective interests therein. If,
however, the Fund directs the Custodian to maintain securities
in "street name", notwithstanding anything contained herein to
the contrary, the Custodian shall be obligated only to utilize
its best efforts to timely collect income due the Fund on such
securities and to notify the Fund of relevant corporate
actions including, without limitation, pendency of calls,
maturities, tender or
698902.1
3
<PAGE>
exchange offers. All securities, and the ownership thereof by
Fund, which are held by Custodian hereunder, however, shall at
all times be identifiable on the records of the Custodian. The
Fund agrees to hold Custodian and its nominee harmless for any
liability as a shareholder of record of securities held in
custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other
securities or cash issued or paid in connection with any
reorganization, recapitalization, merger, consolidation,
split-up of shares, change of par value, conversion or
otherwise, and will deposit any such securities in accordance
with the terms of any reorganization or protective plan.
Without instructions, Custodian is authorized to exchange
securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par
value of the stock is changed, and, upon receiving payment
therefor, to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption,
except that Custodian shall receive instructions prior to
surrendering any convertible security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of
securities shall be made by it, deliver to Custodian
instructions which shall specify with respect to each such
purchase:
1. If applicable, the name of the Portfolio making
such purchase;
2. The name of the issuer and description of the
security;
3. The number of shares and the principal amount
purchased, and accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage
commission, taxes and other expenses payable in
connection with the purchase;
698902.1
4
<PAGE>
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or
dealer through whom the purchase was made.
9. Whether the security is to be received in
certificated form or via a specified Depository.
In accordance with such instructions, Custodian will pay for out of monies held
for the account of Fund, but only insofar as such monies are available for such
purpose, and receive the portfolio securities so purchased by or for the account
of Fund, except that Custodian may in its sole discretion advance funds to the
Fund which may result in an overdraft because the monies held by the Custodian
on behalf of the Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall be made by
the Custodian only upon receipt of securities: (a) by the Custodian; (b) by a
clearing corporation of a national exchange of which the Custodian is a member;
or (c) by a Depository. Notwithstanding the foregoing, (i) in the case of a
repurchase agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities underlying such
repurchase agreement have been transferred by book-entry into the account
maintained with such Depository by the Custodian, on behalf of its customers,
provided that the Custodian's instructions to the Depository require that the
Depository make payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such account; (ii) in the case
of time deposits, call account deposits, currency deposits and other deposits,
foreign exchange transactions, futures contracts or options, the Custodian may
make payment therefor before receipt of an advice or confirmation evidencing
said deposit or entry into such transaction; and (iii) in the case of the
purchase of securities, the settlement of which occurs outside of the United
States of America, the Custodian may make, or cause a subcustodian appointed
pursuant to Section 3.S.2. of this Agreement to make, payment therefor in
accordance with generally accepted local custom and market practice.
G. Sales and Deliveries of Investments of the Fund - Other
than Options and Futures
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been
made, deliver to Custodian instructions specifying with
respect to each such sale:
1. If applicable, the name of the Portfolio making
such sale;
698902.1
5
<PAGE>
2. The name of the issuer and description of the
securities;
3. The number of shares and principal amount sold, and
accrued interest, if any;
4. The date on which the securities sold were purchased
or other information identifying the securities sold
and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission,
taxes or other expenses payable in connection with
such sale;
8. The total amount to be received by Fund upon such
sale; and
9. The name and address of the broker or dealer through
whom or person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the Custodian; (b) credit to the account of
the Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) credit to the
account of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such securities shall be delivered in
accordance with "street delivery custom" to a broker or its clearing
agent; or (ii) in the case of the sale of securities, the settlement of
which occurs outside of the United States of America, the Custodian may
make, or cause a subcustodian appointed pursuant to Section 3.S.2. of
this Agreement to make, payment therefor in accordance with generally
accepted local custom and market practice.
H. Purchases or Sales of Options and Futures
Fund will, on each business day on which a purchase or sale of
the following options and/or futures shall be made by it,
deliver to Custodian instructions which shall specify with
respect to each such purchase or sale:
698902.1
6
<PAGE>
1. If applicable, the name of the Portfolio making
such purchase or sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer
through whom the sale or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold; c. The
exercise price; d. The premium; e. The multiple; f.
The expiration date; g. Whether the transaction is an
opening,
exercising, expiring or closing transaction;
h. Whether the transaction involves a put or
call;
i. Whether the option is written or purchased;
and
j. The name and address of the broker or dealer
through whom the sale or purchase was made,
or other applicable settlement instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the
contract and, when available, the closing
level, thereof;
b. The index level on the date the contract is
entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in
addition to instructions, and if not already
in the possession of Custodian, Fund shall
deliver a substantially complete and
executed custodial safekeeping account and
procedural
698902.1
7
<PAGE>
agreement which shall be incorporated by
reference into this Custody Agreement); and
f. The name and address of the futures
commission merchant through whom the sale or
purchase was made, or other applicable
settlement instructions.
5. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund, and
subject to such additional terms and conditions as Custodian
may require:
1. Upon receipt of instructions, Custodian will
release or cause to be released securities held in
custody to the pledgee designated in such
instructions by way of pledge or hypothecation to
secure any loan incurred by Fund; provided,
however, that the securities shall be released
only upon payment to Custodian of the monies
borrowed, except that in cases where additional
collateral is required to secure a borrowing
already made, further securities may be released
or caused to be released for that purpose upon
receipt of instructions. Upon receipt of
instructions, Custodian will pay, but only from
funds available for such purpose, any such loan
upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the
note or notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated
in such instructions; provided, however, that the
securities will be released only upon deposit with
Custodian of full cash collateral as specified in
such instructions, and
698902.1
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<PAGE>
that Fund will retain the right to any dividends,
interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned
securities, Custodian will release the cash
collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time to
time by the Fund in writing.
K. Deposit Accounts
Custodian will open and maintain one or more special purpose
deposit accounts in the name of Custodian ("Accounts"),
subject only to draft or order by Custodian upon receipt of
instructions. All monies received by Custodian from or for the
account of Fund shall be deposited in said Accounts. Barring
events not in the control of the Custodian such as strikes,
lockouts or labor disputes, riots, war or equipment or
transmission failure or damage, fire, flood, earthquake or
other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m.,
Kansas City time, on the second business day after deposit of
any check into an Account, Custodian agrees to make Fed Funds
available to the Fund in the amount of the check. Deposits
made by Federal Reserve wire will be available to the Fund
immediately and ACH wires will be available to the Fund on the
next business day. Income earned on the portfolio securities
will be credited to the Fund based on the schedule attached as
Exhibit A. The Custodian will be entitled to reverse any
credited amounts where credits have been made and monies are
not finally collected. If monies are collected after such
reversal, the Custodian will credit the Fund in that amount.
Custodian may open and maintain Accounts in its own banking
department, or in such other banks or trust companies as may
be designated by it or by Fund in writing, all such Accounts,
however, to be in the name of Custodian and subject only to
its draft or order. Funds received and held for the account of
different Portfolios shall be maintained in separate Accounts
established for each Portfolio.
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<PAGE>
L. Income and other Payments to the Fund
Custodian will:
1. Collect, claim and receive and deposit for the
account of Fund all income and other payments
which become due and payable on or after the
effective date of this Agreement with respect to
the securities deposited under this Agreement and
credit the account of Fund in accordance with the
schedule attached hereto as Exhibit A. If, for
any reason, the Fund is credited with income that
is not subsequently collected, Custodian may
reverse that credited amount.
2. Execute ownership and other certificates and
affidavits for all federal, state and local tax
purposes in connection with the collection of bond
and note coupons; and
3. Take such other action as may be necessary or proper
in connection with:
a. the collection, receipt and deposit of such
income and other payments, including but not
limited to the presentation for payment of:
1. all coupons and other income items
requiring presentation; and
2. all other securities which may
mature or be called, redeemed,
retired or otherwise become payable
and regarding which the Custodian
has actual knowledge, or should
reasonably be expected to have
knowledge; and
b. the endorsement for collection, in the name
of Fund, of all checks, drafts or other
negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt of
instructions and upon being indemnified to its satisfaction against the
costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to instructions.
Unless prior instructions have been received to the contrary, Custodian
will, without further instructions, sell any rights held for the
account of Fund
698902.1
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<PAGE>
on the last trade date prior to the date of expiration of
such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on
the shares of capital stock of Fund ("Fund Shares") by the
Board of Directors of Fund, Fund shall deliver to Custodian
instructions with respect thereto. On the date specified in
such instructions for the payment of such dividend or other
distribution, Custodian will pay out of the monies held for
the account of Fund, insofar as the same shall be available
for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to
pay the amount per share payable in cash on Fund Shares issued
and outstanding on the record date established by such
resolution.
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund,
Fund or its agent shall advise Custodian of the aggregate
dollar amount to be paid for such shares and shall confirm
such advice in writing. Upon receipt of such advice, Custodian
shall charge such aggregate dollar amount to the account of
Fund and either deposit the same in the account maintained for
the purpose of paying for the repurchase or redemption of Fund
Shares or deliver the same in accordance with such advice.
Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of
Fund Shares have been cancelled and removed from the
shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will
deposit or cause to be deposited with Custodian the amount
received for such shares. Custodian shall not have any duty or
responsibility to determine that Fund Shares purchased from
Fund have been added to the proper shareholder account or
accounts or that the proper number of such shares have been
added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or
mailed to Fund all proxies properly signed, all notices of
meetings, all proxy statements
698902.1
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<PAGE>
and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will,
upon receipt of instructions, execute and deliver or cause its
nominee to execute and deliver or mail or have delivered or
mailed such proxies or other authorizations as may be
required. Except as provided by this Agreement or pursuant to
instructions hereafter received by Custodian, neither it nor
its nominee will exercise any power inherent in any such
securities, including any power to vote the same, or execute
any proxy, power of attorney, or other similar instrument
voting any of such securities, or give any consent, approval
or waiver with respect thereto, or take any other similar
action.
Q. Disbursements
Custodian will pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other
obligations of Fund (including but not limited to obligations
in connection with the conversion, exchange or surrender of
securities owned by Fund, interest charges, dividend
disbursements, taxes, management fees, custodian fees, legal
fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund a
detailed statement of the amounts received or paid and of
securities received or delivered for the account of Fund
during each business day. Custodian will, from time to time,
upon request by Fund, render a detailed statement of the
securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are
necessary to enable it to do so. Custodian will permit such
persons as are authorized by Fund, including Fund's
independent public accountants, reasonable access to such
records or will provide reasonable confirmation of the
contents of such records, and if demanded, Custodian will
permit federal and state regulatory agencies to examine the
securities, books and records. Upon the written instructions
of Fund or as demanded by federal or state regulatory
agencies, Custodian will instruct any subcustodian to permit
such persons as are authorized by Fund, including Fund's
independent public
698902.1
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<PAGE>
accountants, reasonable access to such records or to provide
reasonable confirmation of the contents of such records, and
to permit such agencies to examine the books, records and
securities held by such subcustodian which relate to Fund.
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this
Agreement, all or any of the monies or securities
of Fund may be held in Custodian's own custody or
in the custody of one or more other banks or trust
companies acting as subcustodians as may be
selected by Custodian. Any such subcustodian
selected by the Custodian must have the
qualifications required for a custodian under the
1940 Act, as amended. It is understood that
Custodian initially intends to appoint United
Missouri Bank, N.A. (UMB) and United Missouri
Trust Company of New York (UMTCNY) as
subcustodians. Custodian shall be responsible to
the Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions
or omissions of UMB, UMTCNY and any other
subcustodians selected and appointed by Custodian
(except subcustodians appointed at the request of
Fund and as provided in Subsection 2 below) to the
same extent Custodian would be responsible to the
Fund under Section 5. of this Agreement if it
committed the act or omission itself. Upon
request of the Fund, Custodian shall be willing to
contract with other subcustodians reasonably
acceptable to the Custodian for purposes of (i)
effecting third-party repurchase transactions with
banks, brokers, dealers, or other entities through
the use of a common custodian or subcustodian, or
(ii) providing depository and clearing agency
services with respect to certain variable rate
demand note securities, or (iii) for other
reasonable purposes specified by Fund; provided,
however, that the Custodian shall be responsible
to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from
the actions or omissions of any such subcustodian
only to the same extent such subcustodian is
responsible to the Custodian. The Fund shall be
entitled to review the Custodian's contracts with
any such subcustodians appointed at the request of
Fund. Custodian shall be responsible to the Fund
for any loss, damage or expense suffered or
incurred by the Fund resulting from the actions or
omissions of any Depository only to the same
698902.1
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<PAGE>
extent such Depository is responsible to
Custodian.
2. Notwithstanding any other provisions of this
Agreement, Fund's foreign securities (as defined
in Rule 17f-5(c)(1) under the 1940 Act) and Fund's
cash or cash equivalents, in amounts deemed by the
Fund to be reasonably necessary to effect Fund's
foreign securities transactions, may be held in
the custody of one or more banks or trust
companies acting as subcustodians, and thereafter,
pursuant to a written contract or contracts as
approved by Fund's Board of Directors, may be
transferred to accounts maintained by any such
subcustodian with eligible foreign custodians, as
defined in Rule 17f-5(c)(2). Custodian shall be
responsible to the Fund for any loss, damage or
expense suffered or incurred by the Fund resulting
from the actions or omissions of any foreign
subcustodians or a domestic subcustodian
contracting with such foreign subcustodians only
to the same extent such domestic subcustodian is
responsible to the Custodian.
T. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records
maintained by Custodian pursuant to this Agreement are the
property of Fund, and will be made available to Fund for
inspection or reproduction within a reasonable period of time,
upon demand. Custodian will assist Fund's independent
auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts
and records but shall be reimbursed by Fund for all expenses
and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from Fund of
the necessary information or instructions, Custodian will
supply information from the books and records it maintains for
Fund that Fund needs for tax returns, questionnaires, periodic
reports to shareholders and such other reports and information
requests as Fund and Custodian shall agree upon from time to
time.
U. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as
they agree upon, and Custodian may conclusively assume that no
procedure approved or directed by Fund or its accountants or
other advisors conflicts with or violates any requirements of
its
698902.1
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<PAGE>
prospectus, articles of incorporation, bylaws, any applicable
law, rule or regulation, or any order, decree or agreement by
which Fund may be bound. Fund will be responsible to notify
Custodian of any changes in statutes, regulations, rules,
requirements or policies which might necessitate changes in
Custodian's responsibilities or procedures.
V. Overdrafts
If Custodian shall in its sole discretion advance funds to the
account of the Fund which results in an overdraft in any
Account because the monies held therein by Custodian on behalf
of the Fund are insufficient to pay the total amount payable
upon a purchase of securities as specified in Fund's
instructions or for some other reason, the amount of the
overdraft shall be payable by the Fund to Custodian upon
demand together with the overdraft charge set forth on the
then-current Fee Schedule from the date advanced until the
date of payment. Fund hereby grants Custodian a lien on and
security interest in the assets of the Fund to secure the full
amount of any outstanding overdraft and related overdraft
charges.
W. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the
issuer or trustee thereof, or to the agent of such issuer or
trustee, for the purpose of exercise or sale, provided that
the new securities, cash or other assets, if any, are to be
delivered to the Custodian; and (b) deposit securities upon
invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered
to the Custodian or the tendered securities are to be returned
to the Custodian.
INSTRUCTIONS.
A. The term "instructions", as used herein, means written
(including telecopied or telexed) or oral instructions which
Custodian reasonably believes were given by a designated
representative of Fund. Fund shall deliver to Custodian,
prior to delivery of any assets to Custodian and thereafter
from time to time as changes therein are necessary, written
instructions naming one or more designated representatives
to give instructions in the name and on behalf of Fund,
which instructions may be received and accepted by Custodian
as conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be
698902.1
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<PAGE>
in full force and effect (and Custodian will be fully protected in
acting in reliance thereon) until receipt by Custodian of notice to the
contrary. Unless such written instructions delegating authority to any
person to give instructions specifically limit such authority to
specific matters or require that the approval of anyone else will first
have been obtained, Custodian will be under no obligation to inquire
into the right of such person, acting alone, to give any instructions
whatsoever which Custodian may receive from such person. If Fund fails
to provide Custodian any such instructions naming designated
representatives, any instructions received by Custodian from a person
reasonably believed to be an appropriate representative of Fund shall
constitute valid and proper instructions hereunder.
B. No later than the next business day immediately following
each oral instruction, Fund will send Custodian written
confirmation of such oral instruction. At Custodian's sole
discretion, Custodian may record on tape, or otherwise, any
oral instruction whether given in person or via telephone,
each such recording identifying the parties, the date and
the time of the beginning and ending of such oral
instruction.
LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall at all times use reasonable care and due
diligence and act in good faith in performing its duties
under this Agreement. Custodian shall not be responsible
for, and the Fund shall indemnify and hold Custodian
harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian, incurred
by Custodian or for which Custodian may be held to be
liable, arising out of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement or
any instructions provided to it hereunder, provided that
Custodian has acted in good faith and with due diligence and
reasonable care; and
2. The Fund's refusal or failure to comply with the terms
of this Agreement (including without limitation the
Fund's failure to pay or reimburse Custodian under this
indemnification provision), the Fund's negligence or
willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be
and remain true and correct in all respects at all
times.
698902.1
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<PAGE>
B. Custodian may request and obtain at the expense of Fund the
advice and opinion of counsel for Fund or of its own counsel
with respect to questions or matters of law, and it shall be
without liability to Fund for any action taken or omitted by
it in good faith, in conformity with such advice or opinion.
If Custodian reasonably believes that it could not prudently
act according to the instructions of the Fund or the Fund's
accountants or counsel, it may in its discretion, with
notice to the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon which
they are consulted, and Custodian shall not be liable for any actions
taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any
action which involves the payment of money by Custodian, or
which might make it or its nominee liable for payment of
monies or in any other way, Custodian shall be indemnified
and held harmless by Fund against any liability on account
of such action; provided, however, that nothing herein shall
obligate Custodian to take any such action except in its
sole discretion.
E. Custodian shall be protected in acting as custodian
hereunder upon any instructions, advice, notice, request,
consent, certificate or other instrument or paper appearing
to it to be genuine and to have been properly executed and
shall be entitled to receive upon request as conclusive
proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or
designated representative of Fund.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or
for Fund, the legality of the purchase of any securities or
foreign currency positions or evidence of ownership required
by Fund to be received by Custodian, or the propriety of the
decision to purchase or amount paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for
which the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
698902.1
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<PAGE>
4. The legality of the repurchase or redemption of any Fund
Shares, or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or
the legality of the issue of any Fund Shares in payment of any
stock dividend.
G. Custodian shall not be liable for, or considered to be
Custodian of, any money represented by any check, draft,
wire transfer, clearinghouse funds, uncollected funds, or
instrument for the payment of money to be received by it on
behalf of Fund until Custodian actually receives such money;
provided, however, that it shall advise Fund promptly if it
fails to receive any such money in the ordinary course of
business and shall cooperate with Fund toward the end that
such money shall be received.
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not be responsible or liable for the failure
or delay in performance of its obligations under this
Agreement, or those of any entity for which it is
responsible hereunder, arising out of or caused, directly or
indirectly, by circumstances beyond the affected entity's
reasonable control, including, without limitations: any
interruption, loss or malfunction of any utility,
transportation, computer (hardware or software) or
communication service; inability to obtain labor, material,
equipment or transportation, or a delay in mails;
governmental or exchange action, statute, ordinance,
rulings, regulations or direction; war, strike, riot,
emergency, civil disturbance, terrorism, vandalism,
explosions, labor disputes, freezes, floods, fires,
tornados, acts of God or public enemy, revolutions, or
insurrection.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY ACT
OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED
OF THIS POSSIBILITY THEREOF.
698902.1
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<PAGE>
6. COMPENSATION. In consideration for its services hereunder,
Fund will pay to Custodian such compensation as shall be set
forth in a separate fee schedule to be agreed to by Fund and
Custodian from time to time. A copy of the initial fee
schedule is attached hereto and incorporated herein by
reference. Custodian shall also be entitled to receive, and
Fund agrees to pay to Custodian, on demand, reimbursement
for Custodian's cash disbursements and reasonable out-of-
pocket costs and expenses, including attorney's fees,
incurred by Custodian in connection with the performance of
services hereunder. Custodian may charge such compensation
against monies held by it for the account of Fund.
Custodian will also be entitled to charge against any monies
held by it for the account of Fund the amount of any loss,
damage, liability, advance, overdraft or expense for which
it shall be entitled to reimbursement from Fund, including
but not limited to fees and expenses due to Custodian for
other services provided to the Fund by Custodian. Custodian
will be entitled to reimbursement by the Fund for the
losses, damages, liabilities, advances, overdrafts and
expenses of subcustodians only to the extent that (i)
Custodian would have been entitled to reimbursement
hereunder if it had incurred the same itself directly, and
(ii) Custodian is obligated to reimburse the subcustodian
therefor.
7. TERM AND TERMINATION. The initial term of this Agreement
shall be for a period of __________. Thereafter, either
party to this Agreement may terminate the same by notice in
writing, delivered or mailed, postage prepaid, to the other
party hereto and received not less than ninety (90) days
prior to the date upon which such termination will take
effect. Upon termination of this Agreement, Fund will pay
Custodian its fees and compensation due hereunder and its
reimbursable disbursements, costs and expenses paid or
incurred to such date and Fund shall designate a successor
custodian by notice in writing to Custodian by the
termination date. In the event no written order designating
a successor custodian has been delivered to Custodian on or
before the date when such termination becomes effective,
then Custodian may, at its option, deliver the securities,
funds and properties of Fund to a bank or trust company at
the selection of Custodian, and meeting the qualifications
for custodian set forth in the 1940 Act and having not less
than Two Million Dollars ($2,000,000) aggregate capital,
surplus and undivided profits, as shown by its last
published report, or apply to a court of competent
jurisdiction for the appointment of a successor custodian or
other proper relief, or take any other lawful action under
the circumstances; provided, however, that Fund shall
698902.1
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<PAGE>
reimburse Custodian for its costs and expenses, including reasonable
attorney's fees, incurred in connection therewith. Custodian will, upon
termination of this Agreement and payment of all sums due to Custodian
from Fund hereunder or otherwise, deliver to the successor custodian so
specified or appointed, or as specified by the court, at Custodian's
office, all securities then held by Custodian hereunder, duly endorsed
and in form for transfer, and all funds and other properties of Fund
deposited with or held by Custodian hereunder, and Custodian will
co-operate in effecting changes in book-entries at all Depositories.
Upon delivery to a successor custodian or as specified by the court,
Custodian will have no further obligations or liabilities under this
Agreement. Thereafter such successor will be the successor custodian
under this Agreement and will be entitled to reasonable compensation
for its services. In the event that securities, funds and other
properties remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to appoint a successor
custodian, the Custodian shall be entitled to compensation as provided
in the then-current fee schedule hereunder for its services during such
period as the Custodian retains possession of such securities, funds
and other properties, and the provisions of this Agreement relating to
the duties and obligations of the Custodian shall remain in full force
and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to Fund
at 600 Fifth Avenue, New York, New York 10020, or at such other address as Fund
may have designated to Custodian in writing, will be deemed to have been
properly given to Fund hereunder; and notices, requests, instructions and other
writings addressed to Custodian at its offices at 127 West 10th Street, Kansas
City, Missouri 64105, Attention: Custody Department, or to such other address as
it may have designated to Fund in writing, will be deemed to have been properly
given to Custodian hereunder.
9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes
hereunder as a separate party apart from each
other Portfolio. Unless the context otherwise
requires, with respect to every transaction
covered by this Agreement, every reference herein
to the Fund shall be deemed to relate solely to
the particular Portfolio to which such transaction
relates. Under no circumstances shall the rights,
obligations or remedies with respect to a
particular Portfolio constitute a right,
698902.1
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<PAGE>
obligation or remedy applicable to any other
Portfolio. The use of this single document to
memorialize the separate agreement of each Portfolio
is understood to be for clerical convenience only and
shall not constitute any basis for joining the
Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement,
provided that Custodian consents to such addition.
Rates or charges for each additional Portfolio shall
be as agreed upon by Custodian and Fund in writing.
10. MISCELLANEOUS.
A. This Agreement shall be construed according to, and
the rights and liabilities of the parties hereto
shall be governed by, the laws of the State of
Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be
binding upon, inure to the benefit of and be
enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The representations and warranties and the
indemnifications extended hereunder are intended to
and shall continue after and survive the expiration,
termination or cancellation of this Agreement.
D. No provisions of the Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by each party
hereto.
E. The failure of either party to insist upon the
performance of any terms or conditions of this
Agreement or to enforce any rights resulting from
any breach of any of the terms or conditions of
this Agreement, including the payment of damages,
shall not be construed as a continuing or
permanent waiver of any such terms, conditions,
rights or privileges, but the same shall continue
and remain in full force and effect as if no such
forbearance or waiver had occurred. No waiver,
release or discharge of any party's rights
hereunder shall be effective unless contained in a
written instrument signed by the party sought to
be charged.
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<PAGE>
F. The captions in the Agreement are included for
convenience of reference only, and in no way define
or delimit any of the provisions hereof or otherwise
affect their construction or effect.
G. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an
original but all of which together shall constitute
one and the same instrument.
H. If any part, term or provision of this Agreement
is determined by the courts or any regulatory
authority to be illegal, in conflict with any law
or otherwise invalid, the remaining portion or
portions shall be considered severable and not be
affected, and the rights and obligations of the
parties shall be construed and enforced as if the
Agreement did not contain the particular part,
term or provision held to be illegal or invalid.
I. This Agreement may not be assigned by either party
hereto without the prior written consent of the other
party.
J. Neither the execution nor performance of this
Agreement shall be deemed to create a partnership or
joint venture by and between Custodian and Fund.
K. Except as specifically provided herein, this
Agreement does not in any way affect any other
agreements entered into among the parties hereto and
any actions taken or omitted by either party
hereunder shall not affect any rights or obligations
of the other party hereunder.
698902.1
22
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective duly authorized
officers.
INVESTORS FIDUCIARY TRUST COMPANY
By:______________________________
Title:___________________________
PAX WORLD MONEY MARKET FUND, INC.
By:______________________________
Title:___________________________
698902.1
23
<PAGE>
EXHIBIT A
INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TRANSACTION DTC PHYSICAL
----------- --- --------
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
- ------------------------------- --------------------- --------------------- --------------------- ---------------------
Calls Put As Received C or F* As Received C or F*
Maturities As Received C or F* Mat. Date C or F*
Tender Reorgs. As Received C As Received C
Dividends Paydate C Paydate C
Floating Rate Int. Paydate C Paydate C
Floating Rate Int. N/A As Rate C
(No Rate) Received
Mtg. Backed P&I Paydate C Paydate + 1 C
Bus. Day
Fixed Rate Inc. Paydate C Paydate C
Euroclear N/A Paydate C
TRANSACTION FED
----------- ---
TYPE CREDIT DATE FUNDS TYPE
- ------------------------------- --------------------- ---------------------
Calls Put
Maturities Mat. Date F
Tender Reorgs. N/A
Dividends N/A
Floating Rate Int. N/A
Floating Rate Int. N/A
(No Rate)
Mtg. Backed P&I Paydate F
Fixed Rate Inc. Paydate F
Euroclear
Legend
C = Clearinghouse Funds F = Fed Funds N/A = Not Applicable * Availability based
on how received.
</TABLE>
698902.1
24
<PAGE>
FORM OF
ADMINISTRATIVE SERVICES CONTRACT
PAX WORLD MONEY MARKET FUND, INC.
the "Fund"
New York, New York
April _, 1998
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in accordance with the
limitations, specified in our Declaration of Trust, By-Laws and Registration
Statement filed with the Securities and Exchange Commission under the Investment
Company Act of 1940 (the "1940 Act") and the Securities Act of 1933, including
the Prospectus forming a part thereof (the "Registration Statement"), all as
from time to time in effect, and in such manner and to such extent as may from
time to time be authorized by our Board of Directors. We enclose copies of the
documents listed above and will furnish you such amendments thereto as may be
made from time to time.
2. (a) We hereby employ you as our administrator (the
"Administrator") to provide all management and administrative services
reasonably necessary for our operation, other than those services you provide to
us pursuant to the Investment Management Contract. The services to be provided
by you shall include but not be limited to those enumerated on Exhibit A hereto.
The personnel providing these services may be your employees or employees of
your affiliates or of other organizations. You shall make periodic reports to
the Fund's Board of Directors in the performance of your obligations under this
Agreement and the execution of your duties hereunder is subject to the general
control of the Board of Directors.
(b) It is understood that you will from time to
time employ, subcontract with or otherwise associate with yourself, entirely at
your expense, such persons as you believe to be particularly fitted to assist
you in the execution of your duties hereunder. While this agreement is in
effect, you or
641596.1
1
<PAGE>
persons affiliated with you, other than us ("your affiliates"), will provide
persons satisfactory to our Board of Directors to be elected or appointed
officers or employees of our corporation. These shall be a president, a
secretary, a treasurer, and such additional officers and employees as may
reasonably be necessary for the conduct of our business.
(c) You or your affiliates will also provide
persons, who may be our officers, to (i) supervise the performance of
bookkeeping and related services and calculation of net asset value and yield by
our bookkeeping agent and (ii) prepare reports to and the filings with
regulatory authorities, and (iii) perform such clerical, other office and
shareholder services for us as we may from time to time request of you. Such
personnel may be your employees or employees of your affiliates or of other
organizations. Notwithstanding the preceding, you shall not be required to
perform any accounting services not expressly provided for herein.
(d) You or your affiliates will also furnish us
such administrative and management supervision and assistance and such office
facilities as you may believe appropriate or as we may reasonably request
subject to the requirements of any regulatory authority to which you may be
subject. On behalf of the Fund, we will reimburse you for all of our operating
costs incurred by you including rent, depreciation of equipment and facilities,
interest and amortization of loans financing equipment used by us and all the
expenses incurred by you to conduct our affairs. The amounts of such
reimbursements shall from time to time be agreed upon between us. You or your
affiliates will also pay the expenses of promoting the sale of our shares (other
than the costs of preparing, printing and filing our Registration Statement,
printing copies of the prospectus contained therein and complying with other
applicable regulatory requirements), except to the extent that we are permitted
to bear such expenses under a plan adopted pursuant to Rule 12b-1 under the 1940
Act or a similar rule.
3. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
4. In consideration of the foregoing, the Fund will pay you a
fee of .10% of the Fund's average daily net assets. Your fee will be accrued by
us daily, and will be payable on the
641596.1
2
<PAGE>
last day of each calendar month for services performed hereunder during that
month or on such other schedule as we may agree in writing. You may use any
portion of this fee for distribution of our shares, or for making payments to
organizations whose customers or clients are our shareholders. You may waive
your right to any fee to which you are entitled hereunder, provided such waiver
is delivered to us in writing.
5. This Agreement will become effective on the date hereof and
shall continue in effect until and thereafter for successive twelve-month
periods (computed from each ), provided that such continuation is specifically
approved at least annually by our Board of Directors and by a majority of those
of our directors who are neither party to this Agreement nor, other than by
their service as directors of the Fund, interested persons, as defined in the
1940 Act, of any such person who is party to this Agreement. This Agreement may
be terminated at any time, without the payment of any penalty, (i) by vote of a
majority of the outstanding voting securities of each respective Portfolio
voting separately, as defined in the 1940 Act, or (ii) by a vote of a majority
of our entire Board of Directors, on sixty days' written notice to you, or by
you on sixty days' written notice to us.
6. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
7. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
8. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the 1940 Act.
641596.1
3
<PAGE>
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
PAX WORLD MONEY MARKET FUND, INC.
By:
-------------------------------
Name:
Title:
ACCEPTED: April _, 1998
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC.,
as General Partner
By:
-----------------------------
Name:
Title:
641596.1
4
<PAGE>
Exhibit A
Administration Services To Be Performed
By Reich & Tang Asset Management L.P.
---------------------------------------
Administration Services
- -----------------------
1. In conjunction with Fund counsel, prepare and file all
Post-Effective Amendments to the Registration Statement, all
state and federal tax returns and all other required
regulatory filings.
2. In conjunction with Fund counsel, prepare and file all Blue
Sky filings, reports and renewals.
3. Coordinate, but not pay for, required Fidelity Bond and
Directors and Officers Insurance (if any) and monitor their
compliance with Investment Company Act.
4. Coordinate the preparation and distribution of all materials
for Directors, including the agenda for meetings and all
exhibits thereto, and actual and projected quarterly
summaries.
5. Coordinate the activities of the Fund's Manager, Custodian,
Legal Counsel and Independent Accountants.
6. Prepare and file all periodic reports to shareholders and
proxies and provide support for shareholder meetings.
7. Monitor daily and periodic compliance with respect to all
requirements and restrictions of the Investment Company Act,
the Internal Revenue Code and the
Prospectus.
8. Monitor daily the Fund's bookkeeping services agent's
calculation of all income and expense accruals, sales and
redemptions of capital shares outstanding.
9. Evaluate expenses, project future expenses, and process
payments of expenses.
10. Monitor and evaluate performance of accounting and accounting
related services by Fund's bookkeeping services agent. Nothing
herein shall be construed to require you to perform any
accounting services not expressly provided for in this
Agreement.
641596.1
5
<PAGE>
BATTLE FOWLER LLP
A LIMITED LIABILITY PARTNERSHIP
75 East 55th Street
New York, New York 10022
(212) 856-7000
(212) 856-6858
(212) 856-7816
April 6, 1998
Pax World Money Market Fund, Inc.
600 Fifth Avenue
New York, New York 10022
Gentlemen:
We have acted as counsel to Pax World Money Market Fund, Inc.,
a Maryland corporation (the "Fund"), in connection with the preparation and
filing of Registration Statement No. 333-43587 on Form N-1A and all amendments
thereto (the "Registration Statement") covering shares of Common Stock, par
value $.001 per share, of the Fund.
We have examined copies of the Articles of Incorporation and
By-Laws of the Fund, the Registration Statement, and such other corporate
records, proceedings and documents, including the consent of the Board of
Directors and the minutes of the meeting of the Board of Directors of the Fund,
as we have deemed necessary for the purpose of this opinion. In our examination
of such material, we have assumed the genuineness of all signatures and the
conformity to original documents of all copies submitted to us. As to various
questions of fact material to such opinion, we have relied upon statements and
certificates of officers and representatives of the Fund and others.
We are not admitted to the practice of law in any jurisdiction
but the State of New York and we do not express any opinion as to the laws of
other states or jurisdictions except as to matters of Federal law and, with
respect to the limited scope of this opinion, Maryland corporate law.
Based upon and subject to the foregoing, we are of the opinion
that the shares of Common Stock, par value $.001 per share,
701257.1
<PAGE>
2
Pax World Money Market Fund, Inc. April 6, 1998
of the Fund, to be issued in accordance with the terms of the offering, as set
forth in the Prospectus and Statement of Additional Information included as part
of the Registration Statement, and when issued and paid for, will constitute
validly authorized and legally issued shares of Common Stock, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to us in
the Registration Statement under the heading in the Statement of
Additional Information: "Counsel and Auditors".
Very truly yours,
/s/ BATTLE FOWLER
701257.1
<PAGE>
McGladrey & Pullen, LLP
-----------------------
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated March 19, 1998, on the
financial statement referred to therein, in this Registration Statement on Form
N-1A of Pax World Money Market Fund, Inc., as filed with the Securities and
Exchange Commission.
We also consent to the reference to our Firm in the Statement of
Additional Information under the caption "Counsel and Auditors."
/s/ McGladrey & Pullen, LLP
New York, New York
March 19, 1998
<PAGE>
PAX WORLD MANAGEMENT CORP.
222 State Street
Portsmouth, New Hampshire 03801
April , 1998
Board of Directors of
Pax World Money Market Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
I hereby subscribe for 100,000 shares of Institutional Class
Common Stock, $0.001 par value per share, of Pax World Money
Market Fund, Inc., a Maryland Corporation (the "Fund"), at $1.00
per share for a purchase price of $100,000. My payment in full
is confirmed.
I hereby represent and agree that I am purchasing these
shares of stock for investment purposes, for my own account and
risk and not with a view to any sale, division or other
distribution thereof within the meaning of the Securities Act of
1933 as amended, nor with any present intention of distributing
or selling such shares. I further agree that if any of such
shares are redeemed during the period that the deferred
organizational expenses of the Fund are being amortized, I will
reimburse the Fund the then unamortized organizational expenses
in the same ratio as the number of shares redeemed bears to the
number of such shares held at the time of redemption.
Very truly yours,
PAX WORLD MANAGEMENT CORP.
By: /s/ Lawrence A. Shadek
-----------------------
Confirmed and Accepted:
PAX WORLD MONEY MARKET FUND, INC.
By: /s/ Bernadette Finn
-------------------
619966.2
PAX WORLD MONEY MARKET FUND, INC.
FORM OF
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
The Distribution and Service Plan (the "Plan") is adopted by
Pax World Money Market Fund, Inc. (the "Fund") in accordance with the provisions
of Rule 12b-1 under the Investment Company Act of 1940 (the "Act").
The Plan
--------
1. The Fund and the Distributor, have entered into a
Distribution Agreement, in a form satisfactory to the Fund's Board of Directors,
under which the Distributor will act as distributor of the Fund's shares.
Pursuant to the Distribution Agreement, the Distributor, as agent of the Fund,
will solicit orders for the purchase of the Fund's shares, provided that any
subscriptions and orders for the purchase of the Fund's shares will not be
binding on the Fund until accepted by the Fund as principal.
2. The Fund and the Distributor have entered into a
Shareholder Servicing Agreement with respect to the Individual Investor Class
and Broker Service Class shares of the Fund, in a form satisfactory to the
Fund's Board of Directors, which provides that the Distributor will be paid a
service fee for providing or for arranging for others to provide all personal
-1-
641617.1
<PAGE>
shareholder servicing and related maintenance of shareholder account functions
not performed by us or our transfer agent.
3. The Manager may make payments from time to time from its
own resources, which may include the management fees and administrative services
fees received by the Manager from the Fund and from other companies, and past
profits for the following purposes:
(i) to pay the costs of, and to compensate others, including
organizations whose customers or clients are Individual Investor Class
and Broker Service Class Fund Shareholders ("Participating
Organizations"), for performing personal shareholder servicing and
related maintenance of shareholder account functions on behalf of the
Fund;
(ii) to compensate Participating Organizations for providing
assistance in distributing the Fund's Individual Investor Class and
Broker Service Class Shares; and
(iii) to pay the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel of the Distributor and
other persons, 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 service fee and past profits for the purpose enumerated in
(i) above. Further, the
-2-
641617.1
<PAGE>
Distributor may 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 (1) the Manager for any fiscal year under the Investment
Management Contract or the Administrative Services Agreement in effect for that
year or otherwise or (2) to the Distributor under the Shareholder Servicing
Agreement in effect for that year or otherwise. The Investment Management
Contract will also require the Manager to reimburse the Fund for any amounts by
which the Fund's annual operating expenses, including distribution expenses,
exceed in the aggregate in any fiscal year the limits prescribed by any state in
which the Fund's shares are qualified for sale.
4. The Fund will pay for (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by the
Distributor and Participating Organizations in carrying out its obligations
under the Shareholder Servicing Agreement with respect to the Individual
Investor Class and Broker Service Class shares of the Fund 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.
5. Payments by the Distributor or Manager to Participating
Organizations as set forth herein are subject to compliance by them with the
terms of written agreements in a form
-3-
641617.1
<PAGE>
satisfactory to the Fund's Board of Directors to be entered into between the
Distributor and the Participating Organizations.
6. The Fund and the Distributor will prepare and furnish to
the Fund's Board of Directors, at least quarterly, written reports setting forth
all amounts expended for servicing and distribution purposes by the Fund, the
Distributor and the Manager, pursuant to the Plan and identifying the servicing
and distribution activities for which such expenditures were made.
7. The Plan became effective upon approval by (i) a majority
of the outstanding voting securities of the Fund (as defined in the Act), and
(ii) a majority of the Board of Directors of the Fund, including a majority of
the Directors who are not interested persons (as defined in the Act) of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreement entered into in connection with the Plan, pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
8. The Plan will remain in effect until ___________ __, 1999
unless earlier terminated in accordance with its terms, and thereafter may
continue in effect for successive annual periods if approved each year in the
manner described in clause (ii) of paragraph 7 hereof.
9. The Plan may be amended at any time with the approval of
the Board of Directors of the Fund, provided that (i) any material amendments of
the terms of the Plan will be
-4-
641617.1
<PAGE>
effective only upon approval as provided in clause (ii) of para graph 7 hereof,
and (ii) any amendment which increases materially the amount which may be spent
by the Fund pursuant to the Plan will be effective only upon the additional
approval as provided in clause (i) of paragraph 7 hereof (with each class of the
Fund voting separately).
10. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by a vote of a majority of the outstanding voting securities of the Fund
(with each class of the Fund voting separately) (as defined in the Act).
-5-
641617.1
<PAGE>
FORM OF
DISTRIBUTION AGREEMENT
PAX WORLD MONEY MARKET FUND, INC.
the "Fund"
600 Fifth Avenue
New York, New York 10020
April __, 1998
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein
contained and of the payment by us to you of a fee of $1 per year and on the
terms and conditions set forth herein we have agreed that you shall be, for the
period of this agreement, a distributor, as our agent, for the unsold portion of
such number of shares of Common Stock, $.001 par value per share, as may be
effectively registered from time to time under the Securities Act of 1933, as
amended (the "1933 Act"). This agreement is being entered into pursuant to the
Distribution and Service Plan (the "Plan") adopted by us in accordance with Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act").
2. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of shares of our Common Stocks as shall then be effectively
registered under the Act. All subscriptions for shares of our Common Stock
obtained by you shall be directed to us for acceptance and shall not be binding
on us until accepted by us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell shares of our Common
Stock through other distributors or directly to investors through subscriptions
received by us at our principal office in New York, New York. The right given to
you under this agreement shall not apply to shares of our Common Stock issued in
connection with (a) the merger or consolidation of any other investment company
with us, (b) our acquisition by purchase or otherwise of all or substantially
all of the assets or stock of any other investment company, or (c) the
reinvestment in shares of our Common Stock by our shareholders of dividends or
641565.1
<PAGE>
other distributions or any other offering by us of securities to our
shareholders.
3. You will use your best efforts to obtain subscriptions to
shares of our Common Stock upon the terms and conditions contained herein and in
our Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of shares of our Common Stock, such other
information with respect to us and shares of our Common Stock as you may
reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent.
With respect to the Individual Investor Class and Broker
Service Class Shares of the Fund, you will arrange for organizations whose
customers or clients are shareholders of our Fund ("Participating
Organizations") to enter into agreements with you for the performance of
shareholder servicing and related administrative functions not performed by you
or the Transfer Agent. Pursuant to our Shareholder Servicing Agreement with you
with respect to the Individual Investor Class and Broker Service Class Shares,
you may make payments to Participating Organizations for performing shareholder
servicing and related administrative functions with respect to the Individual
Investor Class and Broker Service Class Shares. Such payments will be made only
pursuant to written agreements approved in form and substance by our Board of
Directors to be entered into by you and the Participating Organizations. It is
recognized that we shall have no obligation or liability to you or any
Participating Organization for any such payments under the agreements with
Participating Organizations. Our obligation is solely to make payments to you
under the Shareholder Servicing Agreement (with respect to the Individual
Investor Class and Broker Service Class Shares) and to the Manager under the
Investment Management Contract and the Administrative Services Contract. All
sales of our shares effected through you will be made in compliance with all
applicable federal securities laws and regulations and the Constitution, rules
and regulations of the National Association of Securities Dealers, Inc.
("NASD").
-2-
641565.1
<PAGE>
4. We reserve the right to suspend the offering of shares of
our Common Stock at any time, in the absolute discretion of our Board of
Directors, and upon notice of such suspension you shall cease to offer shares of
our Common Stocks hereunder.
5. Both of us will cooperate with each other in taking such
action as may be necessary to qualify shares of our Common Stock for sale under
the securities laws of such states as we may designate, provided, that you shall
not be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to the
Sub-Advisory Agreement in effect between us and the Sub-Advisor, we will pay all
fees and expenses of registering shares of our Common Stock under the Act and of
qualification of shares of our Common Stocks, and to the extent necessary, our
qualification under applicable state securities laws. You will pay all expenses
relating to your broker-dealer qualification.
6. We represent to you that our Registration Statement and
Prospectus have been carefully prepared to date in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement and
Prospectus contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein are or will be true
and correct at the time indicated or the effective date as the case may be; and
that neither our Registration Statement nor our Prospectus, when they shall
become effective or be authorized for use, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of shares
of our Common Stock. We will from time to time file such amendment or amendments
to our Registration Statement and Prospectus as, in the light of future
development, shall, in the opinion of our counsel, be necessary in order to have
our Registration Statement and Prospectus at all times contain all material
facts required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of shares of our Common Stock. If we shall not
file such amendment or amendments within fifteen days after our receipt of a
written request from you to do so, you may, at your option, terminate this
agreement immediately. We will not file any amendment to our Registration
Statement or Prospectus without giving you reasonable notice thereof in advance;
provided, however, that nothing in this agreement shall in any way limit our
right to file such amendments to our Registration Statement or Prospectus, of
whatever character, as we may deem advisable, such right being in all respects
absolute and unconditional. We represent and warrant to you that any
-3-
641565.1
<PAGE>
amendment to our Registration Statement or Prospectus hereafter filed by us will
be carefully prepared in conformity within the requirements of the 1933 Act and
the 1940 Act and the SEC's rules and regulations thereunder and will, when it
becomes effective, contain all statements required to be stated therein in
accordance with the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder; that all statements of fact contained therein will, when
the same shall become effective, be true and correct; and that no such
amendment, when it becomes effective, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of our
shares.
7. We agree to indemnify, defend and hold you, and any person
who controls you within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which you or
any such controlling person may incur, under the 1933 Act or the 1940 Act, or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in our Registration Statement or
Prospectus in effect from time to time or arising out of or based upon any
alleged omission to state a material fact required to be stated in either of
them or necessary to make the statements in either of them not misleading;
provided, however, that in no event shall anything herein contained be so
construed as to protect you against any liability to us or our security holders
to which you would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of your duties, or by reason of
your reckless disregard of your obligations and duties under this agreement. Our
agreement to indemnify you and any such controlling person is expressly
conditioned upon our being notified of any action brought against you or any
such controlling person, such notification to be given by letter or by telegram
addressed to us at our principal office in New York, New York, and sent to us by
the person against whom such action is brought within ten days after the summons
or other first legal process shall have been served. The failure so to notify us
of any such action shall not relieve us from any liability which we may have to
the person against whom such action is brought other than on account of our
indemnity agreement contained in this paragraph 7. We will be entitled to assume
the defense of any suit brought to enforce any such claim, and to retain counsel
of good standing chosen by us and approved by you. In the event we do elect to
assume the defense of any such suit and retain counsel of good standing approved
by you, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case we do
not elect to assume the defense of any such suit, or in case you, in
-4-
641565.1
<PAGE>
good faith, do not approve of counsel chosen by us, we will reimburse you or the
controlling person or persons named as defendant or defendants in such suit, for
the fees and expenses of any counsel retained by you or them. Our
indemnification agreement contained in this paragraph 7 and our representations
and warranties in this agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of you or any controlling
person and shall survive the sale of any shares of our Common Stock made
pursuant to subscriptions obtained by you. This agreement of indemnity will
inure exclusively to your benefit, to the benefit of your successors and
assigns, and to the benefit of any of your controlling persons and their
successors and assigns. We agree promptly to notify you of the commencement of
any litigation or proceeding against us in connection with the issue and sale of
any shares of our Common Stock.
8. You agree to indemnify, defend and hold us, our several
officers and directors, and any person who controls us within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or directors, or any
such controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
relieve you from any liability which you may have to us, to our officers
-5-
641565.1
<PAGE>
or directors, or to such controlling person other than on account of your
indemnity agreement contained in this paragraph 8.
9. We agree to advise you immediately:
a. of any request by the SEC for amendments to
our Registration Statement or Prospectus or for additional
information,
b. of the issuance by the SEC of any stop order
suspending the effectiveness of our Registration Statement or
Prospectus or the initiation of any proceedings for that purpose,
c. of the happening of any material event which
makes untrue any statement made in our Registration Statement or Prospectus or
which requires the making of a change in either of them in order to make the
statements therein not misleading, and
d. of all action of the SEC with respect to any
amendments to our Registration Statement or Prospectus.
10. This agreement will become effective on the date hereof
and will remain in effect thereafter for successive twelve-month periods
(computed from each ____________), provided that such continuation is
specifically approved at least annually by vote of our Board of Directors and of
a majority of those of our directors who are not interested persons (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to the Plan, cast in person
at a meeting called for the purpose of voting on this agreement. This agreement
may be terminated at any time, without the payment of any penalty, (i) by vote
of a majority of our entire Board of Directors, and by a vote of a majority of
our Directors who are not interested persons (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreement related to the Plan, or (ii) by vote of a majority of our
outstanding voting securities, as defined in the Act, on sixty days' written
notice to you, or (iii) by you on sixty days' written notice to us.
11. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
para graph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the SEC thereunder.
12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees who may
-6-
641565.1
<PAGE>
also be a director, officer or employee of ours, or of a person affiliated with
us, as defined in the 1940 Act, to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
another corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
PAX WORLD MONEY MARKET FUND, INC.
By: ____________________________________
Accepted: April __, 1998
REICH & TANG DISTRIBUTORS, INC.
By: ___________________________________
-7-
641565.1
<PAGE>
FORM OF
SHAREHOLDER SERVICING
AGREEMENT
PAX WORLD MONEY MARKET FUND, INC.
BROKER SERVICE CLASS SHARES
(the "Fund")
600 Fifth Avenue
New York, New York 10020
April __, 1998
Reich & Tang Distributors, Inc. ("Distributor")
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan, as amended, adopted by us in accordance with Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below on behalf of the Broker Service Class Shares.
You will perform, or arrange for others including organizations whose customers
or clients are shareholders of our corporation (the "Participating
Organizations") to perform, all personal shareholder servicing and related
maintenance of shareholder account functions ("Shareholder Services") not
performed by us or our transfer agent.
2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that we will pay for
(i) telecommunications expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and Participating Organizations in
rendering such services to the Broker Service Class Shareholders, and (ii)
preparing, printing and delivering our prospectus to existing shareholders and
preparing and printing subscription application forms for shareholder accounts.
3. You may make payments from time to time from your own
resources, including the fee payable hereunder and past profits to compensate
Participating Organizations, for providing Shareholder Services to the Broker
Service Class Shareholders of the Fund. Payments to Participating Organizations
to compensate
642335.1
<PAGE>
them for providing Shareholder Services are subject to compliance by them with
the terms of written agreements satisfactory to our Board of Directors to be
entered into between the Distributor and the Participating Organizations. The
Distributor will in its sole discretion determine the amount of any payments
made by the Distributor pursuant to this Agreement, provided, however, that no
such payment will increase the amount which we are required to pay either to the
Distributor under this Agreement or to the Advisor or the Sub-Advisor under the
Advisory Agreement, the Sub- Advisory Agreement, the Administrative Services
Agreement, or otherwise.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of your performance, we will pay you a
service fee as defined by Article III, Section 26(b)(9) of the Rules of Fair
Practice, as amended, of the National Association of Securities Dealers, Inc. at
the annual rate of one quarter of one percent (0.25%) of the Fund's Broker
Service Class Share's average daily net assets. Your fee will be accrued by us
daily, and will be payable on the last day of each calendar month for services
performed hereunder during that month or on such other schedule as you shall
request of us in writing. You may waive your right to any fee to which you are
entitled hereunder, provided such waiver is delivered to us in writing.
6. This Agreement will become effective on the date hereof and
thereafter for successive twelve-month periods (computed from each ___________),
provided that such continuation is specifically approved at least annually by
vote of our Board of Directors and of a majority of those of our directors who
are not interested persons (as defined in the Act) and have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan, cast in person at a meeting called for the purpose of
voting on this Agreement. This Agreement may be terminated at any time, without
the payment of any penalty, (i) by vote of a majority of our entire Board of
Directors, and by a vote of a majority of our Directors who are not interested
persons (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by vote of a majority of the outstanding voting securities of the Fund's
Broker Service Class Shares, as defined in the Act, on sixty
642335.1
2
<PAGE>
days' written notice to you, or (iii) by you on sixty days' written notice
to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission
thereunder.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees or the right of any officers or directors of
Reich & Tang Asset Management, Inc., your general partner, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your under standing,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
PAX WORLD MONEY MARKET FUND, INC.
BROKER SERVICE CLASS SHARES
By:
_______________________________________
ACCEPTED: April ___, 1998
REICH & TANG DISTRIBUTORS, INC.
By: _____________________________________
642335.1
3
<PAGE>
FORM OF
SHAREHOLDER SERVICING
AGREEMENT
PAX WORLD MONEY MARKET FUND, INC.
INDIVIDUAL INVESTOR CLASS SHARES
(the "Fund")
600 Fifth Avenue
New York, New York 10020
April ___, 1998
Reich & Tang Distributors, Inc. ("Distributor")
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan, as amended, adopted by us in accordance with Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below on behalf of the Individual Investor Class
Shares. You will perform, or arrange for others including organizations whose
customers or clients are shareholders of our corporation (the "Participating
Organizations") to perform, all personal shareholder servicing and related
maintenance of shareholder account functions ("Shareholder Services") not
performed by us or our transfer agent.
2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that we will pay for
(i) telecommunications expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and Participating Organizations in
rendering such services to the Individual Investor Class Shareholders, and (ii)
preparing, printing and delivering our prospectus to existing shareholders and
preparing and printing subscription application forms for shareholder accounts.
3. You may make payments from time to time from your own
resources, including the fee payable hereunder and past profits to compensate
Participating Organizations, for providing Shareholder Services to the
Individual Investor Class Shareholders of the Fund. Payments to Participating
642306.1
<PAGE>
Organizations to compensate them for providing Shareholder Services are subject
to compliance by them with the terms of written agreements satisfactory to our
Board of Directors to be entered into between the Distributor and the
Participating Organizations. The Distributor will in its sole discretion
determine the amount of any payments made by the Distributor pursuant to this
Agreement, provided, however, that no such payment will increase the amount
which we are required to pay either to the Distributor under this Agreement or
to the Advisor or the Sub-Advisor under the Advisory Agreement, the Sub-Advisory
Agreement, the Administrative Services Agreement, or otherwise.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of your performance, we will pay you a
service fee as defined by Article III, Section 26(b)(9) of the Rules of Fair
Practice, as amended, of the National Association of Securities Dealers, Inc. at
the annual rate of one quarter of one percent (0.25%) of the Fund's Individual
Investor Class Share's average daily net assets. Your fee will be accrued by us
daily, and will be payable on the last day of each calendar month for services
performed hereunder during that month or on such other schedule as you shall
request of us in writing. You may waive your right to any fee to which you are
entitled here under, provided such waiver is delivered to us in writing.
6. This Agreement will become effective on the date hereof and
thereafter for successive twelve-month periods (computed from each ___________),
provided that such continuation is specifically approved at least annually by
vote of our Board of Directors and of a majority of those of our directors who
are not interested persons (as defined in the Act) and have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan, cast in person at a meeting called for the purpose of
voting on this Agreement. This Agreement may be terminated at any time, without
the payment of any penalty, (i) by vote of a majority of our entire Board of
Directors, and by a vote of a majority of our Directors who are not interested
persons (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by vote of a majority of the outstanding voting securities of the Fund's
Individual Investor Class Shares, as defined in the Act, on sixty
642306.1
2
<PAGE>
days' written notice to you, or (iii) by you on sixty days'written notice to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission
thereunder.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees or the right of any officers or directors of
Reich & Tang Asset Management, Inc., your general partner, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your under standing,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
PAX WORLD MONEY MARKET FUND, INC.
INDIVIDUAL INVESTOR CLASS SHARES
By:_____________________________________
ACCEPTED: April ___, 1998
REICH & TANG DISTRIBUTORS, INC.
By: _____________________________________
642306.1
3
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Pax World Money Market Fund, Inc.
(the "Fund") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Robert Straniere
---------------------
Robert Straniere
663004.1
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Bernadette N. Finn, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
in any and all capacities, the Registration Statement on Form N-1A, and any and
all amendments thereto (including pre-effective amendments) filed by Pax World
Money Market Fund, Inc. (the "Fund") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorney
and agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Steven W. Duff
-------------------
Steven W. Duff
663004.1
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Pax World Money Market Fund, Inc.
(the "Fund") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Dr. W. Giles Mellon
------------------------
Dr. W. Giles Mellon
663004.1
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Pax World Money Market Fund, Inc.
(the "Fund") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Dr. Yung Wong
-----------------
Dr. Yung Wong
663004.1
<PAGE>
PAX WORLD MONEY MARKET FUND, INC.
RULE 18f-3 MULTI-CLASS PLAN
April , 1998
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), the following sets forth the method for
allocating fees and expenses among each class of shares of Pax World Money
Market Fund, Inc. (the "Company" or "Multi-Class Fund"). In addition, this Rule
18f-3 Multi-Class Plan (the "Plan") sets forth the shareholder servicing
arrangements, distribution arrangements, conversion features, exchange
privileges and other shareholder services of each class of shares in the
Multi-Class Fund.
The Company is an open-end series investment company
registered under the 1940 Act and the shares of which are registered on Form
N-1A under the Securities Act of 1933 (Reg. No. 333-43587). Upon the effective
date of this Plan, the Company hereby elects to offer multiple classes of
pursuant to the provisions of Rule 18f-3 and this Plan.
II. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Company shall
allocate to each class of shares (i) any fees and expenses incurred by the
Company in connection with the distribution of such class of shares under a
distribution and service plan adopted for such class of shares pursuant to Rule
12b-1, and (ii) any fees and expenses incurred by the Company under a
shareholder servicing plan in connection with the provision of shareholder
services to the holders of such class of shares. In addition, pursuant to Rule
18f-3, the Company may allocate the following fees and expenses to a particular
class of shares:
(i) transfer agent fees and related expenses
identified by the transfer agent as being
attributable to such class of shares;
(ii) printing and postage expenses related to
preparing and distributing materials such as
shareholder reports, prospectuses, reports,
and proxies to current shareholder of such
class of shares or to regulatory agencies
with respect to such class of shares;
(iii) blue sky registration or qualification fees
incurred by such class of shares;
698878.1
<PAGE>
(iv) Securities and Exchange Commission
registration fees incurred by such class of
shares;
(v) the expense of administrative personnel and
services (including, but not limited to,
those of a fund accountant, or divided
paying agent charged with calculating net
asset values or determining or paying
dividends 1 ) as required to support the
shareholders of such class of shares;
(vi) litigation or other legal expenses relating
solely to such class of shares;
(vii) fees of the Company's Directors incurred as
a result of issues relating to such class of
shares; and
(viii) independent accountants' fees relating
solely to such class of shares.
The initial determination of the class expenses that will be
allocated by the Company to a particular class of shares and any subsequent
changes thereto will be reviewed by the Board of Directors and approved by a
vote of the Directors of the Company, including a majority of the Directors who
are not interested persons of the Company.
Income, realized and unrealized capital gains and losses, and
any expenses of the Multi-Class Fund not allocated to a particular class of the
Fund pursuant to this Plan shall be allocated to each class of the Fund on the
basis of the net asset value of that class in relation to the net asset of the
Fund.
III. Class Arrangements.
The following summarizes the Rule 12b-1 distribution fees,
shareholder servicing fees, exchange privileges and other shareholder services
applicable to each class of shares of the Multi-Class Fund. Additional details
regarding such fees and services are set forth in the Fund's current Prospectus
and Statement of Additional Information.
A. Institutional Class Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
- ---------------------
1. Rule 18f-3 requires that services related to the management of the
portfolio's assets, such as custodial fees, be borne by the fund and not
by class.
698878.1
<PAGE>
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: None.
6. Conversion Features: None.
7. Exchange Privileges: None
8. Other Incidental Shareholder Services: As provided
in the Prospectus.
B. Individual Investor Class Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: Up to
.25% per annum of average daily net assets.
6. Conversion Features: None.
7. Exchange Privileges: As provided in the
Prospectus.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
C. Broker Service Class C Shares
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
698878.1
<PAGE>
5. Rule 12b-1 Shareholder Servicing Fees: Up to
.25 per annum of the average daily net
assets.
6. Sub-Accounting/Transfer Agent Fee: .20% per
annum of the average daily net assets.
7. Conversion Features: None.
8. Exchange Privileges: None.
9. Other Incidental Shareholder Services: As
provided in the Prospectus.
IV. Board Review.
The Board of Directors of the Company shall review this Plan
as frequently as it deems necessary. Prior to any material amendments to this
Plan, the Company's Board of Directors, including a majority of the Directors
that are not interested persons of the Company, shall find that the Plan, as
proposed to be amended (including any proposed amendments to the method of
allocating class and/or fund expenses, is in the best interest of each class of
shares of a Multi-Class Fund individually and the Fund as a whole. In
considering whether to approve any proposed amendments(s) to the Plan, the
Directors of the Company shall request and evaluate such information as they
consider reasonably necessary to evaluate the proposed amendments(s) to the
Plan.
In making its initial determination to approve this Plan, the
Board focused on, among other things, the relationship between or among the
classes and examined potential conflicts of interest between classes regarding
the allocation of fees, services, waivers and reimbursement of expenses, and
voting rights. The Board evaluated the level of services provided to each class
and the cost of those services to ensure that the services are appropriate and
the allocation of expenses is reasonable. In approving any subsequent amendments
to this Plan, the Board shall focus on and evaluate such factors as well as any
others deemed necessary by the Board.
698878.1
<PAGE>
