Rule 497(c)
Registration No. 333-43587
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PAX WORLD MONEY MARKET FUND
PROSPECTUS & APPLICATION
_________
P A X
WORLD
MONEY
MARKET
F U N D
_________
Prospectus Dated
June 1, 1999
PAX WORLD MONEY MARKET FUND, INC.
INDIVIDUAL INVESTOR CLASS
A Socially Responsible Money Market Fund
600 Fifth Avenue, New York, NY 10020
Telephone: 212-830-5220
For shareholder account information: 800-372-7827
Website: http:\\www.paxfund.com
A money market fund whose investment objective is to maximize current
income to the extent consistent with preservation of capital, maintenance of
liquidity and stability of principal. The Fund will seek to achieve this
objective by investing in short-term obligations of issuers that produce goods
and services that improve the quality of life and that are not to any degree
engaged in manufacturing defense or weapons-related products.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors are advised to
read this prospectus and retain it for future reference.
________________________________________________________________________________
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________________________________________________________________________
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TABLE OF CONTENTS
Page
Risk/Return Summary: Investments, Risks
and Performance............................................................. 3
Fee Table................................................................... 5
Investment Objectives, Principal Investment
Strategies and Related Risks................................................ 6
Management, Organization and Capital Structure.............................. 8
Shareholder Information..................................................... 9
Distribution Arrangements................................................... 18
Financial Highlights........................................................ 20
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I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE
Investment Objectives
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The Fund seeks to maximize current income to the extent consistent with
preservation of capital, maintenance of liquidity and stability of principal.
There can be no assurance that the Fund will achieve its investment objectives.
Principal Investment Strategies
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The Fund is committed to making a contribution to world peace through
investment in companies that produce goods and services that improve the quality
of life. Therefore, the Fund seeks to invest in industries such as healthcare,
education, housing, food, retail, pollution control and leisure time and exclude
investments in the military, liquor, tobacco or gambling industries.
The Fund intends to achieve its investment objectives by investing
principally in short-term, high quality debt instruments including:
(i) high quality commercial paper;
(ii) repurchase agreements; and
(iii) bank certificates of deposit.
The Fund is a money market fund and seeks to maintain an investment
portfolio with a dollar-weighted average maturity of 90 days or less, to value
its investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
Principal Risks
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o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can each
decline in value.
o The amount of income the Fund generates will vary with changes in
prevailing interest rates.
o An investment in the Fund is not a bank deposit and is not insured by the
Federal Deposit Insurance Corporation or any other governmental agency.
o If a vendor defaults on its repurchase obligation pursuant to a repurchase
agreement, the Fund might lose money to the extent proceeds from the sale
of collateral are less than the repurchase price. If the vendor files for
bankruptcy, the Fund may be delayed or incur costs in selling the
collateral.
o The Fund's policy to invest in issuers that produce goods and services that
improve the quality of life and to sell any investments which are found to
violate this policy may result in (i) the Fund foregoing certain higher
yielding investments or (ii) the Fund having to sell an investment at a
time when it is disadvantageous to do so.
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Risk/Return Bar Chart and Table
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A Bar Chart and Table, showing the annual and average total returns for the
Fund, will be available once the Fund has been in operation for a full calendar
year.
The Fund's current 7-day yield may be obtained by calling the Fund at
212-830-5220 or toll-free outside of New York at 800-241-3263.
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FEE TABLE
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases........................... None
Wire Redemption Fee................................................$10.00
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees............................................... .15%
Distribution and Service (12b-1) Fees......................... .25%
Other Expenses................................................ .45%
Administration Fees....................................10%
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Total Annual Fund Operating Expenses.......................... .85%
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The Adviser has voluntarily waived the entire Management Fee and
Administration Fee with respect to the Institutional Class, Broker
Service Class and Individual Investor Class shares during the past year.
After such waivers, the Management Fee, with respect to the Institutional
Class, Broker Service Class and Individual Investor Class was 0.00%. The
Administration Fee, with respect to the Institutional Class, Broker
Service Class and Individual Investor Class was 0.00%. The actual Total
Annual Fund Operating Expenses for the Institutional Class was 0.35%, for
the Broker Service Class 0.80% and for the Individual Investor Class
0.60%. This fee waiver arrangement may be terminated at any time at the
option of the Adviser.
Example
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This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
Assume that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$87 $271 $471 $1,049
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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STATEGIES AND RELATED RISKS
Investment Objectives
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The Fund is a money market fund whose investment objectives are to seek
maximum current income to the extent consistent with the preservation of
capital, maintenance of liquidity and stability of principal. There is no
assurance that the Fund will achieve its investment objectives.
The Fund's investment objectives may not be changed without the approval of
the holders of a majority of the Fund's outstanding voting securities that would
be affected by such a change.
Principal Investment Strategies and Related Risks
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Social Criteria of Fund
The Fund endeavors, consistent with its investment objective, to make a
contribution to world peace through investment in companies that produce goods
and services that improve the quality of life. The policy of the Fund is to
invest in securities of companies whose business is essentially directed toward
non-military and life-supportive activities. For example, the Fund seeks to
invest in such industries as health care, education, housing, food, retail,
pollution control and leisure time, among others.
The policy of the Fund is to exclude from its portfolio securities of:
(i) companies engaged in military activities,
(ii) companies appearing on the United States Department of Defense
list of 100 largest contractors (a copy of which may be obtained
from the Office of the Secretary, Department of Defense,
Washington, D.C. 20310) if five percent (5%) or more of the gross
sales of such companies are derived from contracts with the
United States Department of Defense,
(iii)other companies contracting with the United States Department of
Defense if five percent (5%) or more of the gross sales of such
companies are derived from contracts with the United States
Department of Defense, and
(iv) companies which derive revenue from the manufacture of liquor,
tobacco and/or gambling products.
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 Fund's investment adviser, 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.
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Generally
In order to maintain a share price of $1.00, the Fund must comply with
certain industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have, or are deemed to have, a remaining
maturity of 397 days or less. Also, the average maturity for all securities
contained in each individual portfolio of the Fund, on a dollar-weighted basis,
will be 90 days or less.
The Fund will only invest in securities which have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but that
have been determined by the Fund's Board of Directors to be of comparable
quality.
Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. If this occurs, the Board of Directors of the Fund shall
reassess the security's credit risks and shall take such action as the Board of
Directors determines is in the best interest of the Fund and its shareholders.
Reassessment is not required, however, if the security is disposed of or matures
within five business days after the investment adviser and sub-adviser become
aware of the new rating and provided further that the Board of Directors is
subsequently notified of the investment adviser's and sub-adviser's actions.
The Fund's investment adviser and sub-adviser consider the following
factors when buying and selling securities for the Fund: (i) availability of
cash, (ii) redemption requests, (iii) yield management, (iv) credit management
and (v) social criteria.
Investments
The Fund intends to primarily invest in the following securities and
transactions:
Commercial Paper and Certain Debt Obligations: The Fund may purchase
commercial paper or similar debt obligations. Commercial paper is generally
considered to be short term unsecured debt of corporations.
Repurchase Agreements: The Fund may enter into repurchase agreements
provided that the instruments serving as collateral for the agreements are
eligible for inclusion in the Fund. A repurchase agreement arises when a buyer
purchases a security and simultaneously agrees with the vendor to resell the
security to the vendor at an agreed upon time and price.
Bank Obligations: The Fund may purchase certificates of deposit, time
deposits and bankers' acceptances issued by domestic banks, foreign branches of
domestic banks, foreign subsidiaries of domestic banks, and domestic and foreign
branches of foreign banks. 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 purchased 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. 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 $1 billion 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.
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Risks
The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.
If the seller of a repurchase agreement fails to repurchase the obligation
in accordance with the terms of the agreement, the Fund may incur a loss to the
extent that the proceeds it realizes 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.
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 Fund's investment adviser and sub-adviser are in the process
of working with the Fund's service providers to prepare for the Year 2000. Based
on information currently available, the investment adviser and sub-adviser do
not expect that the Fund will incur material costs to be Year 2000 compliant.
Although the investment adviser and sub-adviser do 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 an adverse impact on the Fund. The
Year 2000 problem may also adversely affect issuers of the securities contained
in the Fund, to varying degrees based upon various factors, and thus may have a
corresponding adverse affect on the Fund's performance. The investment adviser
and sub-adviser are unable to predict what affect, if any, the Year 2000 problem
will have on such issuers.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
Management, Advisory and Sub-Advisory Agreements
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The Fund's investment adviser is Pax World Management Corp. (the
"Adviser"), whose principal office is located at 222 State Street, Portsmouth,
New Hampshire 03801. The Adviser was incorporated in 1970 under the laws of the
State of Delaware and is a registered investment adviser under the Investment
Company Act of 1940 (the "1940 Act"). As of December 31, 1998, the Adviser had
over $863,000,000 in assets under management by virtue of serving as the Adviser
to the Fund, the Pax World Fund, Inc., and the Pax World Growth Fund, Inc. The
Adviser has no clients other than the Fund, the Pax World Fund, Inc. and the Pax
World Growth Fund, Inc.
Pursuant to the Advisory Agreement entered into between the Fund and the
Adviser, the Adviser, 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-Adviser, Reich & Tang Asset Management
L.P.. Under the Advisory Agreement, the Fund will pay the Adviser an annual
advisory fee of .15% of the Fund's average daily net assets.
Reich & Tang Asset Management L.P. will serve as the Sub-Adviser of the
Fund under a Sub-Advisory Agreement. The Sub-Adviser is a Delaware limited
partnership and a registered investment adviser under the 1940 Act, with its
principal office at 600 Fifth Avenue, New York, New York 10020. The Sub-Adviser,
as of April 30, 1999, was investment manager, adviser or supervisor with respect
to assets aggregating
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approximately $13.3 billion. The Sub-Adviser acts as manager or administrator of
seventeen other registered investment companies and also advises pension trusts,
profit-sharing trusts and endowments.
Pursuant to the terms of a Sub-Advisory Agreement between the Adviser and
the Sub-Adviser, the Sub-Adviser 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 Adviser that the contemplated investments satisfy the
social responsibility criteria applied to the Fund. Under the Sub-Advisory
Agreement, the Adviser will pay the Sub-Adviser 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 Adviser and
Sub-Adviser, at their discretion, may voluntarily waive all or a portion of
their respective management fees.
Pursuant to an Administrative Services Agreement, the Sub-Adviser performs
clerical, accounting supervision and office service functions for the Fund. The
Sub-Adviser 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-Adviser. The personnel rendering such
services may be employees of the Sub-Adviser or its affiliates. The Fund
reimburses the Sub-Adviser 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-Adviser.
The Sub-Adviser, 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-Adviser
receives an annual fee of .10% of the Fund's average daily net assets.
Any portion of the total fees received by the Adviser and Sub-Adviser 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 Fund's Distributor,
receives a servicing fee equal to .25% per annum of the average daily net assets
of the Individual Investor Class shares 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.
IV. SHAREHOLDER INFORMATION
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 the Fund's Individual Investor Class shares are effected
through the Fund's Individual Investor Class transfer agent which accepts orders
for purchases and redemptions from the Distributor and from shareholders
directly. With respect to the Individual Investor Class of shares, the minimum
initial investment is $250. (See "Direct Purchase and Redemption Procedures"
herein.) The minimum amount for subsequent investments is $50 for all
shareholders.
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The Fund has reserved the right to charge individual shareholder accounts
for expenses actually incurred by such account for postage, wire transfers and
certain other shareholder expenses, as well as to impose a monthly service
charge for accounts whose balance falls below the minimum amount.
Pricing of Fund Shares
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The net asset value of each Class of the Fund's shares is determined as of
12:00 noon, New York City time, on each Fund Business Day. Fund Business Day
means weekdays (Monday through Friday) except days on which the New York Stock
Exchange is closed for trading (i.e., national holidays). The net asset value of
a Class is computed by dividing the value of the Fund's net assets for such
Class (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 total number of shares outstanding for such Class. The Fund intends to
maintain a stable net asset value at $1.00 per share although there can be no
assurance that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. 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.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
Shares are issued as of the first determination of the Fund's net asset
value per share for each Class made after receipt of the investor's purchase
order. In order to maximize earnings on its portfolio, the Fund normally has its
assets as fully invested as is practicable. Many securities in which the Fund
invests require the immediate settlement in funds of Federal Reserve member
banks on deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
The Fund does not accept a purchase order until an investor's payment has been
converted into Federal Funds and is received by the Fund's transfer agent.
Orders accompanied by Federal Funds and received after 12:00 noon, New York City
time, on a Fund Business Day will result in the issuance of shares on the
following Fund Business Day. Fund shares begin accruing income on the day the
shares are issued to an investor. The Fund reserves the right to reject any
purchase order for its shares. Certificates for Fund shares will not be issued
to an investor.
Direct Purchase and Redemption Procedures
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The following purchase and redemption procedures apply to investors who
wish to invest in Individual Investor Class shares of the Fund directly. These
investors may obtain the application form necessary to open an account by
telephoning the Fund at 800-767-1729 (toll free).
All shareholders will receive from the Fund a monthly statement listing the
total number of shares of the Fund owned as of the statement closing date,
purchases and redemptions of shares of the Fund during the month covered by the
statement and the dividends paid on shares of the Fund (including dividends paid
in cash or reinvested in additional shares of the Fund).
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Initial Purchase of Shares
Mail
Prospective shareholders may purchase Individual Investor Class shares of
the Fund by sending a check made payable to the Fund along with a completed
application form to the transfer agent for the Individual Investor Class at:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899-8930
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member bank of the Federal Reserve
System can normally be converted into Federal Funds within two business days
after receipt of the check. Checks drawn on a non-member bank may take
substantially longer to convert into Federal Funds and to be invested in Fund
shares. An investor's subscription will not be accepted until the Fund receives
Federal Funds. Prospective shareholders who wish to register their account in
the name of a beneficiary for the purposes of transferring their account upon
their death may do so subject to the following understanding: the laws of the
state listed as the shareholder's address at the time of registration shall
govern such transfer if such state has adopted the Uniform Transfer on Death
Securities Registration Act; otherwise the Uniform Transfer on Death Securities
Registration Act, as adopted by the State of Delaware shall apply.
Bank Wire
Shareholders may purchase Individual Investor Class shares of the Fund
(other than initial purchases) by wire transfer. To do so, investors must
telephone the transfer agent for the Individual Investor Class at 800-372-7827
(toll free) and then instruct a member commercial bank to wire money immediately
to:
PNC Bank, Philadelphia, PA
ABA #031-0000-53
For Pax World Money Market Fund, Inc.
Account # 85-5100-7715
Account #
Account of (Investor's Name)
An investor planning to wire funds should instruct their bank so the wire
transfer can be accomplished before 12:00 noon, New York City time, on the same
day. There may be a charge by the investor's bank for transmitting the money by
bank wire, and there also may be a charge for use of Federal Funds. The Fund
does not charge investors in the Fund for its receipt of wire transfers. Payment
in the form of a "bank wire" received prior to 12:00 noon, New York City time,
on a Fund Business Day will be treated as a Federal Funds payment received on
that day.
Personal Delivery
Deliver a check made payable to "Pax World Money Market Fund, Inc." along
with a completed application form to:
Pax World Fund Family
c/o PFPC, Inc.
400 Bellevue Parkway
Wilmington, DE 19809
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Automatic Investment Plan
You may elect to establish telephone purchase privileges or an Automatic
Investment Plan where shares can be bought monthly or quarterly. Automatic
investments are made on the 20th day of the month by electronically debiting
your checking or savings account and transferring the funds into your Pax World
Money Market account. The minimum investment for both programs is $50. Each of
these options appears on the application form. Once the account is opened, you
can call the Fund at 800-767-1729 for a form to add these options to an existing
account.
You may purchase shares of the Fund (minimum of $50) by having salary,
dividend payments, interest payments or any other payments designated by you, or
by having federal salary, social security, or certain veteran's military or
other payments from the federal government, automatically deposited into your
Fund account. To enroll in any one of these programs, you must file with the
Fund a completed EFT Application, Pre-authorized Credit Application, or a Direct
Deposit Sign-Up Form for each type of payment that you desire. The appropriate
form may be obtained from your broker or the Fund. You may elect at any time to
terminate your participation by notifying in writing the appropriate depositing
entity and/or federal agency. Death or legal incapacity will automatically
terminate your participation. Further, the Fund may terminate your participation
upon 30 days' notice to you.
Subsequent Purchases of Shares
Subsequent purchases can be made either by bank wire or by personal
delivery, as indicated above, or by mailing a check to:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899-8930
There is a $50 minimum for each subsequent purchase. All payments should
clearly indicate the shareholder's account number.
Provided that the information on the application form on file with the Fund
is still applicable, a shareholder may reopen an account without filing a new
application form at any time during the year the shareholder's account is closed
or during the following calendar year.
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. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective.
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
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the Fund's transfer agent. Requests to institute or change any of the additional
redemption procedures will require a signature guaranteed letter. 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 any domestic bank or trust company, broker, dealer,
clearing agency or savings association who are participants in a medallion
program recognized by the Securities Transfer Agents Association. The three
recognized medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and the New York Stock
Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees which are
not a part of these programs will not be accepted. The Transfer Agent reserves
the right to request additional information from, and make reasonable inquiries
of, any eligible guarantor institution.
There is no redemption charge (except for a $10 wire redemption fee), 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 or she
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 7
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.
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 or her account after a
withdrawal is less than $250. 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 $50 requirement for an additional investment)
make a purchase of additional shares to increase his total net asset value at
least to the minimum amount and thereby avoid such mandatory redemption.
Written Requests
Individual Investor Class shareholders may make a redemption in any amount
by sending a written request to:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899-8930
All written requests for redemptions over $10,000 must be signed by the
shareholder with a signature guarantee unless the Shareholder Redemption Option
has been filed with the transfer agent. Normally, the redemption proceeds are
paid by check and are mailed to the shareholder of record.
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Shareholder Redemption Option - Shareholders may request a redemption of up
to $10,000 without a signature guarantee. The request must be in writing and
must be signed by all registered owners. For amounts over $10,000, shareholders
may file a Shareholder Redemption Option Form to waive the signature guarantee
requirement for written redemptions. The check must be made payable to all
owners on the account and will only be sent to a pre-authorized bank account or
to the address of record, and that address cannot have been changed within the
last 30 days. To request a Shareholder Redemption Option Form, call the Fund at
800-767-1729.
Check Writing Privileges
By making the appropriate election on the application form, an Individual
Class shareholder may request a supply of checks which may be used to effect
redemptions from any one or more of the Classes of shares of the Fund in which
the shareholder is invested. The checks will be issued in the shareholder's name
and the shareholder will receive a separate supply of checks for each Class of
shares of the Fund for which checks are requested. Checks may be drawn in any
amount of $250 or more for Individual Investor Class shareholders and may be
used like an ordinary commercial bank check except that they may not be
certified. The checks are drawn on a special account maintained by the Fund with
the agent bank. When a check is presented to the Fund's agent bank, it instructs
the transfer agent to redeem a sufficient number of full and fractional shares
in the shareholder's account to cover the amount of the check. The 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. Investors who purchase Fund shares by check may not receive their
redemption proceeds until the check has cleared, which could take up to 15 days
following the date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The
Fund reserves the right to impose a charge or impose a different minimum check
amount in the future, if the Board of Directors determines that doing so is in
the best interest of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures,
rules and regulations of the Fund's agent bank governing checking accounts.
Checks drawn on a jointly owned account may, at the shareholder's election,
require only one signature. Checks in amounts exceeding the value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check or a post-dated check. The Fund
reserves the right to terminate or modify the check redemption procedure at any
time or to impose additional fees following notification to the Fund's
shareholders.
Telephone
Redemptions by telephone must be in amounts of at least $1,000 and may not
be for more than $10,000 in the aggregate in any thirty (30) day period. Any one
shareholder or a pre-authorized representative can call for a telephone
redemption.
The Fund accepts telephone requests for redemption from Individual Investor
Class shareholders who elect this option. The proceeds of a telephone redemption
will be sent to the Individual Investor Class shareholder at his or her address
or to his or her bank account as set forth in the application form or in a
subsequent signature guaranteed written authorization. Redemptions following an
investment by check will not be effected until the check has cleared, which
could take up to 15 days after investment. The Fund may
14
<PAGE>
accept telephone redemption instructions from any one shareholder listed in the
registration, or any pre-authorized representative. The Fund does not require a
minimum wire amount, however, there is a $10 fee for all outgoing wires. The
Fund will employ reasonable procedures to confirm that telephone redemption
instructions are genuine, and will require that Individual Investor Class
shareholders electing such option provide a form of personal identification. The
failure by the Fund to employ such reasonable procedures may cause the Fund to
be liable for any losses incurred by investors due to 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 the transfer agent at 800-372-7827 and state (i) the name
of the shareholder appearing on the Fund's records, (ii) his or her account
number with the Fund, (iii) the amount to be withdrawn and (iv) the name of the
person requesting the redemption. This privilege only allows the check to be
made payable to the owner(s) of the account and may only be sent to the address
of record, or to a pre-authorized bank account. The request cannot be honored if
an address change has been made for the account within 30 days of the telephone
redemption request. If there are multiple account owners, the transfer agent may
rely on the instructions of only one owner. This account option is not available
for retirement account shares or shares represented by a certificate. The
transfer agent may record all calls.
Systematic Withdrawal Plan
- --------------------------------------------------------------------------------
Shareholders with a minimum of $10,000 invested in the Fund may elect to
withdraw shares and receive payment from the Fund of a specified amount
automatically. Systematic withdrawals may be made on a monthly, bi-monthly,
quarterly, semi-annual or annual basis. The withdrawal payments of the specified
amount are made by the Fund on the 25th day of the month. Whenever such 25th day
of the month is not a Fund Business Day, the payment date is the Fund Business
Day preceding the 25th day of the month. In order to make a payment, a number of
shares equal in aggregate net asset value to the payment amount are redeemed at
their net asset value on the Fund Business Day immediately preceding the date of
payment. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the
time of the original subscription by so indicating in a letter accompanying the
application form. The election may also be made, changed or terminated at any
later time by sending a signature guaranteed written request to the transfer
agent.
Exchange Privilege
- --------------------------------------------------------------------------------
Individual Investor Class shareholders of the Fund are entitled to exchange
some or all of their shares in the Fund for shares of the Pax World Fund, 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. It is contemplated that this
exchange privilege will be applicable to any new Pax World Mutual Funds.
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.
15
<PAGE>
There is no charge for the exchange privilege or limitation as to frequency
of exchanges. The minimum amount for an exchange is $50, except that
shareholders who are establishing a new account with an investment company
through the exchange privilege must insure that a sufficient number of shares
are exchanged to meet the minimum initial investment required for the investment
company into which the exchange is being made.
The exchange privilege provides Individual Investor Class shareholders of
the Fund with a convenient method to shift their investment among different
investment companies when they feel such a shift is desirable. The exchange
privilege is available to shareholders resident in any state in which shares of
the investment company being acquired may legally be sold. Shares may be
exchanged only between investment company accounts registered in identical
names. Before making an exchange, the investor should review the current
prospectus of the investment company into which the exchange is to be made.
Prospectuses may be obtained by contacting the Adviser at the address or
telephone number set forth on the cover page of this Prospectus.
Instructions for exchanges may be made by sending a signature guaranteed
written request to:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899-8930
or, for shareholders who have elected that option, by telephone. The 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 1999, the phase out range is $31,000 to $41,000 for
single individuals and $51,000 to $61,000 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.
16
<PAGE>
The Fund also makes available Education IRAs and Roth IRAs. Education IRAs
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 $95,000 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
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.
Dividends and Distributions
- --------------------------------------------------------------------------------
Each dividend and capital gains distribution declared by the Fund on its
outstanding shares will, at the election of each shareholder, be paid either in
cash or in additional shares of the same Class having an aggregate net asset
value equal to the cash amount. The election to receive dividends and
distributions in cash or shares is made at the time shares are subscribed for,
and may be changed by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution. If the shareholder makes
no election, the Fund will make the distribution in shares. There is no sales or
other charge in connection with the reinvestment of dividends and capital gains
distributions.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, the amount and timing of any such dividend or distribution depends on the
realization by the Fund of income and capital gains from investments. Except as
described herein, the Fund's net investment income (including any net realized
short-term capital gains) 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.
17
<PAGE>
Because the Individual Investor Class and Broker Service Class shares bear
the Shareholder Servicing Fee under the Plan, 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.
Tax Consequences
- --------------------------------------------------------------------------------
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 in which 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. 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 dividends-received deduction. Dividends
and distributions are treated in the same manner for federal income tax purposes
whether shareholders receive cash or additional shares.
The Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemption
proceeds) paid to shareholders who have not complied with Internal Revenue
Service regulations. In connection with this withholding requirement, a
shareholder will be asked to certify on his or her application that the social
security or tax identification number provided is correct and that the
shareholder is not subject to 31% backup withholding for previous underreporting
to the IRS.
Distributions of net capital gains, if any, designated by the Fund as
capital gain dividends are taxable to shareholders as long-term capital gains,
regardless of the length of time the Fund's shares have been held by the
shareholder. Foreign shareholders may be subject to special withholding
requirements. Foreign shareholders should consult their tax advisors about the
federal, state and local tax consequences in their particular circumstances.
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- --------------------------------------------------------------------------------
Investors do not pay a sales charge to purchase shares of the Fund.
However, the Fund pays fees in connection with the distribution of shares and
for services provided to the Institutional Class and Broker Service Class
shareholders. The Fund pays these fees from its assets on an ongoing basis and
therefore, over time, the payment of these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and
service plan (the "Plan") and, pursuant to the Plan, the Fund and the
Distributor have entered into a Distribution Agreement and a Shareholder
Servicing Agreement.
18
<PAGE>
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares and, for nominal consideration (i.e., $1.00) and as agent for
the Fund, will solicit orders for the purchase of the Fund's shares, provided
that any orders will not be binding on the Fund until accepted by the Fund as
principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect to the Individual Investor Class shares, a service fee equal to .25% per
annum of the Individual Investor Class shares' average daily net assets (the
"Shareholder Servicing Fee") for providing personal shareholder services and for
the maintenance of shareholder accounts. The fee is accrued daily and paid
monthly.
The Plan and the Shareholder Servicing Agreement for the Individual
Investor Class provide that, in addition to the Shareholder Servicing Fee, the
Fund will pay for (i) telecommunications expenses including the cost of
dedicated lines and CRT terminals, incurred by the Distributor in carrying out
its obligations under the Shareholder Servicing Agreement with respect to
Individual Investor Class shares and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing application forms for shareholder accounts. These payments are limited
to a maximum of .05% per annum of the Individual Investor Class Shares' average
daily net assets.
The Plan provides that the Adviser and Sub-Adviser 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 Adviser, Sub-Adviser 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.
19
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the
Fund's financial performance of all classes of the Pax World Money Market Fund,
Inc. for the life of the Fund. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by McGladrey and Pullen, LLP, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
May 27, 1998 January 13, 1999
(Commencement of Sales) to (Commencement of Sales) to
January 31, 1999 January 31, 1999
---------------------------- ---------------------------
INDIVIDUAL BROKER
INVESTOR INSTITUTIONAL SERVICE
CLASS CLASS CLASS
----- ----- -----
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
Income from investment operations:
Net investment income.................... 0.032 0.034 0.002
Less distributions:
Dividends from net investment income..... ( 0.032) ( 0.034) ( 0.002)
-------- -------- --------
Net asset value, end of period............... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total Return................................. 4.82%* 5.08%* 4.22%*
Ratios/Supplemental Data
Net assets, end of period (000).............. $ 5,495 $119,309 $ 70
Ratios to average net assets:
Expenses (net of fees waived)............ 0.60%* 0.35%* 0.80%*
Net investment income.................... 4.59%* 4.90%* 4.16%*
Advisory and administrative
services fees waived................... 0.25%* 0.25%* 0.25%*
</TABLE>
* Annualized
20
<PAGE>
[This page intentionally left blank]
<PAGE>
Pax World Money Market Fund, Inc. - Individual Investor Class
Do not use this application to open an IRA or other retirement account.
Please call 1-800-767-1729 if you need a retirement application.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Please Mail to Pax World Money Market Fund, Inc. , P.O. Box 8930, Wilmington, DE 19899-8930.
- ----------------------------------------------------------------------------------------------------------------------------------
1. Type of Account (check one) Broker/Dealer Name & No. _____________
Branch No. & Address__________________
[ ] Individual [ ] JointTenants [ ] Gift/Transfer to a Minor ______________________________________
Complete A only Complete A & B only Complete C only Represenative's Name & No.____________
[ ] Trust [ ] Corporation [ ] Partnership or Other Entity
Complete D only Complete E only Complete E only
- ----------------------------------------------------------------------------------------------------------------------------------
A__________________________________________________-____-____________________/___/______
First Name, Middle Name, Last Name Social Security Number Birthdate (mm dd yy)
(Required to open your account)
B__________________________________________________-____-____________________/___/______
First Name, Middle Name, Last Name Social Security Number Birthdate (mm dd yy)
(Required to open your account)
Joint Tenants will have rights of survivorship unless otherwise specified.
- ----------------------------------------------------------------------------------------------------------------------------------
C Custodian's Name (only one permitted)__________________________________________________
as custodian for Minor's Name (only one permitted)_____________________________________
under the ______ Uniform Gifts ______ Uniform Transfers ____-____-______ ___/___/____
State to Minor's Act, or State to Minor's Act. Minor's Social Security Number Birthdate (mm dd yy)
(Required to open your account)
- ----------------------------------------------------------------------------------------------------------------------------------
D Name of Trustee_______________________________________________________________
Name of Second Trustee (if any)_______________________________________________
Name of Trust_________________________________________________________________
___________________________________________ _______________________________
Date of Trust (mm dd yy) (Required to open your account) Taxpayer Identification Number(Required to open your account)
----------------------------------------------------------------------------------------------------------------------------------
E ______________________________________________________________________________
Name of Corporation or other entity. If other entity, please specify type in the space below, e.g., partnership, club, etc.
_______________________________________ _____________________________
Taxpayer Identification Number (Required to open your account) Business Type
- ----------------------------------------------------------------------------------------------------------------------------------
2. Your Mailing Address
_____________________________________________________________________________
Street address and Apartment or Box number
_____________________________________________________________________________
City State Zip Code
I am a citizen of [ ] U.S. [ ] Other______________________ (___)___________________ (__)____________________
Please Specify Country Area Code Day Phone Area Code Evening Phone
- ----------------------------------------------------------------------------------------------------------------------------------
3 Your Initial Investment (Minimum $250.)
I have enlcosed a check (do not send cash) made payable to Pax World Money Market Fund, Inc. $Amount ($250 minimum)____________
- ----------------------------------------------------------------------------------------------------------------------------------
4 Choose How You Wish to Receive Any Dividends and Capital Gains.
If not completed, Option A will be assigned.
A. [ ] I would like all dividends and capital gains reinvested in my account.
B. [ ] I would like all dividends and capital gains paid to me in cash.
C. [ ] I would like all dividends paid to me in cash and capital gains reinvested in my account.
<PAGE>
5. Account Options
Please check the options you wish to add to your account.
A. [ ] Telephonic Exchange - Allows you to move funds between identically registered Pax World accounts.
[ ] Telephone Purchase and Redemption - Check this box and complete Section B below to opt for Teelphone Purchase, and to
allow Telephone Redemptions to be electronically transmitted to your bank account. If the box is checked and Section B is
not completed, Telephone Purchases will not be accepted and Telephone Redemptions will be sent to the address of record
on your account.
[ ] Check here if you want your Representative of Record to have authority to give instructions for Telephone Exchanges,
Purchases, and Redemptions. The name of your current representative for third party administration is:
_______________________________________________________________________________________________
[ ] Shareholder Redemption Option - Authorizes the Fund and its transfer agenet to waive the signature guarantee requirement
for written redemption requests over $10,000 (up to $10,000 may be obtained with just your signature(s)).
[ ] Automatic Investment (Section B is required for this option) - Allows you to invest automatically each month or quarter by
electronically debiting your checking or savings account. Funds are transferred via the Automated Claring House (ACH)
system, and the plan takes approximately 20 days to go into effect. Pleae invest $__________ (minimum $50) on the 20th day
of every [ ] month [ ] quarter, beginning in the month of ___________.
I hereby authorize the Fund and its transfer agent to honor telephoned
instructions processed under the above-selected account options to
purchase/exchange/redeem shares, when directed and as specified, by
transmitting the proceeds, if applicable, to me at my address of
record or by crediting/debiting my preauthorized bank account. I
hereby ratify any such instructions and agree to indemnify the Fund
and its transfer agent from all loss, liability, cost, damage and
expense for acting upon such instructions. I understand that if I
submit a change of address, certain privileges will be suspended for a
period of 30 days, and that all checks will be issued in the name(s)
of all registered owner(s).
B. Please provide your bank account information.
Please attach a voided unsigned check or savings deposit slip for the bank account to be used in conjunction with
electronic (ACH) transactions.
Bank Name_____________________________________________________________
Name on Bank Account__________________________________________________
(Note: One common name must appear on both your Pax World Money Market Fund account registration and bank account
registration).
Your Bank Account Number___________________________________ This is a [ ] Checking [ ] Savings Account
As a convenience to me, you are hereby requested and authorized to pay
and charge to my account debits drawn on my account by and payable to
the order of Pax World Money Market Fund, Inc. This authority is to
remain in effect until revoked by me in writing and, until you
actually receive such notice, I agree you shall be fully protected in
honoring any such check. I further agree that if any such check is
dishonored, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsover. This option,
if exercised, shall become a part of the account application and the
terms, representations and conditions thereof.
- ----------------------------------------------------------------------------------------------------------------------------------
6. Your Signature
All registered owners or legal representatives must sign this section before the
Fund can open your account.
The undersigned warrant(s) that the undersigned has (have) full authority and is
(are) of legal age to purchase shares of Pax World Money market Fund and has
(have) received and read a current Prospectus of the Fund and agree(s) to its
terms. The Fund and its transfer agent will not be liable for acting upon
instructions or inquires believed to be genuine.
Taxpayer Identification Number Certification: As required by Federal law, I/we
certify under penalties of perjury that (1) the Social Security Number or
Taxpayer Identification Number listed above is correct, and (2) I/WE HAVE NOT
been notified by the IRS that I/we are subject to backup withholding. It is
understood that failure to supply correct numbers above may subject me/us to a
penalty of $50 for each failure.
Check this box if you ARE subject to 31% backup withholding. [ ]
[ ] I/we do not have a SSN or TIN, but have applied for one and will provide it
within 60 days. I/we understand that failure to do so will result in a 31%
backup withholding.
____________________________________________
Signature Date
____________________________________________
Signature Date
</TABLE>
- --------------------------------------------------------------------------------
7. Checkwriting
After you have completed and returned this Checkwriting signature card, the Fund
will mail your checks, pre-printed with your name and address, to you.
Indicate number of required signatures_____________________
If left blank, only one signature will be required on all checks.
By signing below: I/we authorize PNC Bank to honor checks drawn by me/us on this
account. The minimum check amount is $250.
I/we accept the checkwriting terms and conditions on the reverse side.
1)________________________________________________________
Owner's or Custodian's Name (first, middle initial, last)
__________________________________________________________
Signature Date of Birth (mm dd yy)
2)________________________________________________________
Joint Owner's Name (first, middle initial, last)
__________________________________________________________
Signature Date of Birth (mm dd yy)
<PAGE>
- --------------------------------------------------------------------------------
The Checkwriting privilege allows you to withdraw money from your Pax World
Money Market Fund account with ease and is available to individual, joint tenant
and gift to minor money market accounts.
Checkwriting privileges will be subject to the customary rules and regulations
governing checking accounts and may be terminated by the Fund or PNC Bank.
Neither the Fund nor PNC Bank shall incur liability for honoring such checks,
for effecting redemptions to pay for such checks, or for returning checks which
have not been accepted.
When a payable check is presented to the Fund's custodian for payment, a
sufficient number of full and fractional shares from the shareholder's account
to cover the amount of the check will be redeemed at the net asset value next
determined. If there are insufficient shares in the shareholder's account, the
check may be returned. Checks presented for payment which would require the
redemption of shares purchased by check or by electronic funds transfer within
the previous 10 business days may not be honored. Generally, there is no charge
to you for the clearance of checks, but the Fund does reserve the right to
charge a service fee for checks returned for insufficient funds, stop payment,
or check copy services.
This checkwriting procedure for redemption enables shareholders to receive the
daily dividends declared on the shares to be redeemed until such time as the
check is presented for payment.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Unfold here for New Account Application
NEW ACCOUNT INSTRUCTIONS
1. Type of Account. An account may be registered as only one of the following:
* Individual Supply the Social Security
* Joint Tenants Number of the registered
* A Custodial Account under account owner who is to be
the Uniform Gifts to Minors Account taxed.
* A Trust Supply the Taxpayer Identifica-
* A Corporation, Partnership, tion Number of the legal entity
Organization, Fiduciary, etc. or organization that will report
income and/or gains.
Please check the box that corresponds to the type of account you are opening and
fill in the required information exactly as you wish it to appear on the
account.
2. Your Mailing Address. Please complete all information requested as it is
required to open your account.
3. Your Initial Investment. An initial investment of at least $250 is required
to open an account. Additional purchases must be at least in the amount of
$50.
4. Receiving Your Dividends and Capital Gains. Check the option you prefer for
receiving your dividend and capital gain distributions. If you do not
select an option, all dividends and capital gains will be reinvested in
your account.
5. Account Options. In this section you can authorize telephone privileges for
yourself and/or your representative of record. With the Fund's Automatic
Investment Plan, you can have $50 or more automatically withdrawn from your
bank account and invested in your Pax World Money Market Fund account
monthly or quarterly. If you are electing an option that involves the
electronic transfer of funds, be sure to provide the bank account
information in section B. If possible, please attach a voided check or
deposit slip for the bank account that is to be debited/credited.
6. YOUR SIGNATURE(S). Please be sure to sign this application. If the account
is registered in the name of:
* an individual - the individual must sign.
* joint tenants - both must sign.
* a custodian for a minor - the custodian must sign.
* a trustee or other fiduciary - the fiduciary(s) must sign and
indicate capacity.
* a corporation or other organization - an officer must sign and indicate
capacity.
ANY QUESTIONS? Call a Pax World service representative at 1-800-767-1729 (toll
free) for assistance.
Please return your completed application in the self-addressed envelope. If
envelope is missing, mail to:
PAX WORLD FUND FAMILY
P.O. BOX 8930
WILMINGTON, DE 19899-8930
<PAGE>
_______
P A X
WORLD
MONEY
MARKET
F U N D
_______
PROSPECTUS & APPLICATION
INDIVIDUAL INVESTOR CLASS
June 1, 1999
________________________________________________________________________________
Pax World Money Market Fund, Inc. P A X [Graphic Omitted]
A Socialy Responsible Fund WORLD
FUND
FAMILY
Investment Adviser - 222 State Street
Pax World Management Corp. Portsmouth, NH 03801-3853
222 State Street www.paxfund.com
Portsmouth, NH 03801-3853
Investment Sub-Adviser -
Reich & Tang Asset Management L.P. For General Fund Information,
600 Fifth Avenue please call: 1-800-767-1729
New York, NY 10020
Transfer and Dividend Disbursing Agent - For Shareholder Account Information,
PFPC, Inc. please call: 1-800-372-7827
P.O. Box 8950
Wilmington, DE 19899
For Broker Services, please call:
General Counsel: 1-800-635-1404
Battle Fowler LLP
75 East 55th Street All Account Inquiries should be addressed to:
Pax World Money Market Fund, Inc.
P.O. Box 8930
Wilmington, DE 19899-8930
[graphic omitted]
Printed in the USA on recycled paper
A Statement of Additional Information (SAI) dated June 1, 1999, and
the Fund's Annual and Semi-Annual Reports include additional information about
the Fund and its investments and are incorporated by reference into this
prospectus. You may obtain the SAI and the Annual and Semi-Annual Reports and
other material incorporated by reference without charge by calling the Fund at
1-800-767-1729. To request other information, please call your financial
intermediary or the Fund.
A current SAI has been filed with the Securities and Exchange
Commission. You may visit the Securities and Exchange Commission's Internet
website (www.sec.gov) to view the SAI, material incorporated by reference and
other information. These materials can also be reviewed and copied at the
Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
811-8591 PAXIN699P
<PAGE>
Rule 497(c)
Registration No. 333-43587
================================================================================
PAX WORLD MONEY MARKET FUND
PROSPECTUS
_________
P A X
WORLD
MONEY
MARKET
F U N D
_________
Prospectus Dated
June 1, 1999
PAX WORLD MONEY MARKET FUND, INC.
INSTITUTIONAL CLASS
BROKER SERVICE CLASS
A Socially Responsible Money Market Fund
600 Fifth Avenue, New York, NY 10020
Telephone: 212-830-5220
For shareholder account information: 800-241-3263
Website: http:\\www.paxfund.com
A money market fund whose investment objective is to maximize current
income to the extent consistent with preservation of capital, maintenance of
liquidity and stability of principal. The Fund will seek to achieve this
objective by investing in short-term obligations of issuers that produce goods
and services that improve the quality of life and that are not to any degree
engaged in manufacturing defense or weapons-related products.
This Prospectus sets forth concisely the information about the Fund
that a prospective investor ought to know before investing. Investors are
advised to read this prospectus and retain it for future reference.
________________________________________________________________________________
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
Risk/Return Summary: Investments, Risks
and Performance.............................................................. 3
Fee Table.................................................................... 5
Investment Objectives, Principal Investment
Strategies and Related Risks................................................. 6
Management, Organization and Capital Structure............................... 8
Shareholder Information...................................................... 9
Distribution Arrangements....................................................19
Financial Highlights.........................................................20
2
<PAGE>
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE
Investment Objectives
- --------------------------------------------------------------------------------
The Fund seeks to maximize current income to the extent consistent with
preservation of capital, maintenance of liquidity and stability of principal.
There can be no assurance that the Fund will achieve its investment objectives.
Principal Investment Strategies
- --------------------------------------------------------------------------------
The Fund is committed to making a contribution to world peace through
investment in companies that produce goods and services that improve the quality
of life. Therefore, the Fund seeks to invest in industries such as healthcare,
education, housing, food, retail, pollution control and leisure time and exclude
investments in the military, liquor, tobacco or gambling industries.
The Fund intends to achieve its investment objectives by investing
principally in short-term, high quality debt instruments including:
(i) high quality commercial paper;
(ii) repurchase agreements; and
(iii) bank certificates of deposit.
The Fund is a money market fund and seeks to maintain an investment
portfolio with a dollar-weighted average maturity of 90 days or less, to value
its investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
Principal Risks
- --------------------------------------------------------------------------------
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can each
decline in value.
o The amount of income the Fund generates will vary with changes in
prevailing interest rates.
o An investment in the Fund is not a bank deposit and is not insured by the
Federal Deposit Insurance Corporation or any other governmental agency.
o If a vendor defaults on its repurchase obligation pursuant to a repurchase
agreement, the Fund might lose money to the extent proceeds from the sale
of collateral are less than the repurchase price. If the vendor files for
bankruptcy, the Fund may be delayed or incur costs in selling the
collateral.
o The Fund's policy to invest in issuers that produce goods and services that
improve the quality of life and to sell any investments which are found to
violate this policy may result in (i) the Fund foregoing certain higher
yielding investments or (ii) the Fund having to sell an investment at a
time when it is disadvantageous to do so.
3
<PAGE>
Risk/Return Bar Chart and Table
- --------------------------------------------------------------------------------
A Bar Chart and Table, showing the annual and average total returns for the
Fund, will be available once the Fund has been in operation for a full calendar
year.
The Fund's current 7-day yield may be obtained by calling the Fund at
212-830-5220 or toll-free outside of New York at 800-241-3263.
4
<PAGE>
FEE TABLE
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C> <C>
INSTITUTIONAL CLASS BROKER SERVICE CLASS
Management Fees...................................... .15% .15%
Distribution and Service (12b-1) Fees................. .00% .25%
Other Expenses........................................ .45% .65%
Administration Fees...................... .10% .10%
--- ---
Total Annual Fund Operating Expenses.................. .60% 1.05%
==== =====
</TABLE>
The Adviser has voluntarily waived the entire Management Fee and
Administration Fee with respect to the Institutional Class, Broker Service
Class and Individual Investor Class shares during the past year. After such
waivers, the Management Fee, with respect to the Institutional Class,
Broker Service Class and Individual Investor Class was 0.00%. The
Administration Fee, with respect to the Institutional Class, Broker Service
Class and Individual Investor Class was 0.00%. The actual Total Annual Fund
Operating Expenses for the Institutional Class was 0.35%, for the Broker
Service Class 0.80% and for the Individual Investor Class 0.60%. This fee
waiver arrangement may be terminated at any time at the option of the
Adviser.
Example
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Broker Service Class: $107 $334 $579 $1,283
Institutional Class: $ 61 $192 $335 $ 750
5
<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STATEGIES AND RELATED RISKS
Investment Objectives
- --------------------------------------------------------------------------------
The Fund is a money market fund whose investment objectives are to seek
maximum current income to the extent consistent with the preservation of
capital, maintenance of liquidity and stability of principal. There is no
assurance that the Fund will achieve its investment objectives.
The Fund's investment objectives may not be changed without the approval of
the holders of a majority of the Fund's outstanding voting securities that would
be affected by such a change.
Principal Investment Strategies and Related Risks
- --------------------------------------------------------------------------------
Social Criteria of Fund
The Fund endeavors, consistent with its investment objective, to make a
contribution to world peace through investment in companies that produce goods
and services that improve the quality of life. The policy of the Fund is to
invest in securities of companies whose business is essentially directed toward
non-military and life-supportive activities. For example, the Fund seeks to
invest in such industries as health care, education, housing, food, retail,
pollution control and leisure time, among others.
The policy of the Fund is to exclude from its portfolio securities of:
(i) companies engaged in military activities,
(ii) companies appearing on the United States Department of Defense
list of 100 largest contractors (a copy of which may be obtained
from the Office of the Secretary, Department of Defense,
Washington, D.C. 20310) if five percent (5%) or more of the gross
sales of such companies are derived from contracts with the
United States Department of Defense,
(iii)other companies contracting with the United States Department of
Defense if five percent (5%) or more of the gross sales of such
companies are derived from contracts with the United States
Department of Defense, and
(iv) companies which derive revenue from the manufacture of liquor,
tobacco and/or gambling products.
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 Fund's investment adviser, 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.
6
<PAGE>
Generally
In order to maintain a share price of $1.00, the Fund must comply with
certain industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have, or are deemed to have, a remaining
maturity of 397 days or less. Also, the average maturity for all securities
contained in each individual portfolio of the Fund, on a dollar-weighted basis,
will be 90 days or less.
The Fund will only invest in securities which have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but that
have been determined by the Fund's Board of Directors to be of comparable
quality.
Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. If this occurs, the Board of Directors of the Fund shall
reassess the security's credit risks and shall take such action as the Board of
Directors determines is in the best interest of the Fund and its shareholders.
Reassessment is not required, however, if the security is disposed of or matures
within five business days after the investment adviser and sub-adviser become
aware of the new rating and provided further that the Board of Directors is
subsequently notified of the investment adviser's and sub-adviser's actions.
The Fund's investment adviser and sub-adviser consider the following
factors when buying and selling securities for the Fund: (i) availability of
cash, (ii) redemption requests, (iii) yield management, and (iv) social
criteria.
Investments
The Fund intends to primarily invest in the following securities and
transactions:
Commercial Paper and Certain Debt Obligations: The Fund may purchase
commercial paper or similar debt obligations. Commercial paper is generally
considered to be short term unsecured debt of corporations.
Repurchase Agreements: The Fund may enter into repurchase agreements
provided that the instruments serving as collateral for the agreements are
eligible for inclusion in the Fund. A repurchase agreement arises when a buyer
purchases a security and simultaneously agrees with the vendor to resell the
security to the vendor at an agreed upon time and price.
Bank Obligations: The Fund may purchase certificates of deposit, time
deposits and bankers' acceptances issued by domestic banks, foreign branches of
domestic banks, foreign subsidiaries of domestic banks, and domestic and foreign
branches of foreign banks. 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 purchased 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. 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 $1 billion 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.
7
<PAGE>
Risks
The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.
If the seller of a repurchase agreement fails to repurchase the obligation
in accordance with the terms of the agreement, the Fund may incur a loss to the
extent that the proceeds it realizes 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.
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 Fund's investment adviser and sub-adviser are in the process
of working with the Fund's service providers to prepare for the Year 2000. Based
on information currently available, the investment adviser and sub-adviser do
not expect that the Fund will incur material costs to be Year 2000 compliant.
Although the investment adviser and sub-adviser do 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 an adverse impact on the Fund. The
Year 2000 problem may also adversely affect issuers of the securities contained
in the Fund, to varying degrees based upon various factors, and thus may have a
corresponding adverse affect on the Fund's performance. The investment adviser
and sub-adviser are unable to predict what affect, if any, the Year 2000 problem
will have on such issuers.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
Management, Advisory and Sub-Advisory Agreements
- --------------------------------------------------------------------------------
The Fund's investment adviser is Pax World Management Corp. (the
"Adviser"), whose principal office is located at 222 State Street, Portsmouth,
New Hampshire 03801. The Adviser was incorporated in 1970 under the laws of the
State of Delaware and is a registered investment adviser under the Investment
Company Act of 1940 (the "1940 Act"). As of December 31, 1998, the Adviser had
over $863,000,000 in assets under management by virtue of serving as the Adviser
to the Fund, the Pax World Fund, Inc. and the Pax World Growth Fund, Inc. The
Adviser has no clients other than the Fund, the Pax World Fund, Inc. and the Pax
World Growth Fund, Inc.
Pursuant to the Advisory Agreement entered into between the Fund and the
Adviser, the Adviser, 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-Adviser, Reich & Tang Asset Management
L.P. Under the Advisory Agreement, the Fund will pay the Adviser an annual
advisory fee of .15% of the Fund's average daily net assets.
Reich & Tang Asset Management L.P. will serve as the Sub-Adviser of the
Fund under a Sub-Advisory Agreement. The Sub-Adviser is a Delaware limited
partnership and a registered investment adviser under the 1940 Act, with its
principal office at 600 Fifth Avenue, New York, New York 10020. The Sub-Adviser,
as of April 30, 1999, was investment manager, adviser or supervisor with respect
to assets aggregating approximately $13.3 billion. The Sub-Adviser acts as
manager or administrator of seventeen other registered investment companies and
also advises pension trusts, profit-sharing trusts and endowments.
8
<PAGE>
Pursuant to the terms of a Sub-Advisory Agreement between the Adviser and
the Sub-Adviser, the Sub-Adviser 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 Adviser that the contemplated investments satisfy the
social responsibility criteria applied to the Fund. Under the Sub-Advisory
Agreement, the Adviser will pay the Sub-Adviser 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 Adviser and
Sub-Adviser, at their discretion, may voluntarily waive all or a portion of
their respective management fees.
Pursuant to an Administrative Services Agreement, the Sub-Adviser performs
clerical, accounting supervision and office service functions for the Fund. The
Sub-Adviser 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-Adviser. The personnel rendering such
services may be employees of the Sub-Adviser or its affiliates. The Fund
reimburses the Sub-Adviser 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-Adviser.
The Sub-Adviser, 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-Adviser
receives an annual fee of .10% of the Fund's average daily net assets.
Any portion of the total fees received by the Adviser and Sub-Adviser 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 Fund's Distributor,
receives a servicing fee equal to .25% per annum of the average daily net assets
of the Broker Service Class shares 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.
IV. SHAREHOLDER INFORMATION
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 the Fund's 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.
The Fund has reserved the right to charge individual shareholder accounts
for expenses actually incurred by such account for postage, wire transfers and
certain other shareholder expenses, as well as to impose a monthly service
charge for accounts whose balance falls below the minimum amount.
9
<PAGE>
Pricing of Fund Shares
- --------------------------------------------------------------------------------
The net asset value of each Class of the Fund's shares is determined as of
12:00 noon, New York City time, on each Fund Business Day. Fund Business Day
means weekdays (Monday through Friday) except days on which the New York Stock
Exchange is closed for trading (i.e., national holidays). The net asset value of
a Class is computed by dividing the value of the Fund's net assets for such
Class (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 total number of shares outstanding for such Class. The Fund intends to
maintain a stable net asset value at $1.00 per share although there can be no
assurance that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. 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.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
Shares are issued as of the first determination of the Fund's net asset
value per share for each Class made after receipt of the investor's or Clearing
Broker's purchase order. In order to maximize earnings on its portfolio, the
Fund normally has its assets as fully invested as is practicable. Many
securities in which the Fund invests require the immediate settlement in funds
of Federal Reserve member banks on deposit at a Federal Reserve Bank (commonly
known as "Federal Funds"). The Fund does not accept a purchase order until an
investor's payment has been converted into Federal Funds and is received by the
Fund's transfer agent. Orders accompanied by Federal Funds and received after
12:00 noon, New York City time, on a Fund Business Day will result in the
issuance of shares on the following Fund Business Day. Fund shares begin
accruing income on the day the shares are issued to an investor. The Fund
reserves the right to reject any purchase order for its shares. Certificates for
Fund shares will not be issued to an investor.
Purchase of Fund Shares
- --------------------------------------------------------------------------------
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. Certain Participating Organizations are compensated by the
Distributor from its Shareholder Servicing Fee and by the Sub-Adviser 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-Adviser or the Distributor will become an Individual Investor Class or
Broker Service Class shareholder. All other investors, and investors who have
accounts with Participating Organizations but who do not wish to invest in the
Fund through their Participating Organizations, may invest in the Fund directly
as Institutional Class shareholders of the Fund and not receive the benefit of
the servicing functions performed by a Participating Organization. Institutional
Class shares may also be offered to investors who purchase their shares through
Participating Organizations who do not receive compensation from the Distributor
or the Sub-Adviser because they may not be legally permitted to receive such as
fiduciaries. The Sub-Adviser 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-Adviser or Distributor for the servicing
10
<PAGE>
they may provide to their clients. With respect to the Institutional Class of
shares, the minimum initial investment in the Fund is $100,000.
Broker Service Class shares will only be offered to the clearance clients
of clearing broker-dealers that have entered into an agreement with the
Distributor ("Clearing Brokers"). Broker Service Class shares are subject to a
service fee pursuant to the Fund's Rule 12b-1 Distribution and Service Plan. The
Clearing Brokers provide shareholder servicing to Broker Service Class
shareholders and are compensated for such by the Sub-Adviser and/or the
Distributor. 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.
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. 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
11
<PAGE>
behalf of the customer, transmit to the Fund's transfer agent a purchase or
redemption order, and in the case of a purchase order, payment for the shares
being purchased.
Clearing Brokers may confirm to their customers who are shareholders in the
Fund ("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 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 (including dividends paid
in cash or reinvested in additional shares of the Fund).
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
12
<PAGE>
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.
Prospective shareholders who wish to register their account in the name of a
beneficiary for the purposes of transferring their account upon their death may
do so subject to the following understanding: the laws of the state listed as
the shareholder's address at the time of registration shall govern such transfer
if such state has adopted the Uniform Transfer on death Securities Registration
Act; otherwise the Uniform Transfer on Death Securities Registration Act, as
adopted by the State of Delaware shall apply.
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 #890752-954-6
For Pax World Money Market Fund, Inc.
Account of (Investor's Name)
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 their bank so the wire
transfer can be accomplished before 12:00 noon, New York City time, on the same
day. There may be a charge by the investor's bank for transmitting the money by
bank wire, and there also may be a charge for use of Federal Funds. The Fund
does not charge investors in the Fund for its receipt of wire transfers. Payment
in the form of a "bank wire" received prior to 12:00 noon, New York City time,
on a Fund Business Day will be treated as a Federal Funds payment received on
that day.
Personal Delivery
Deliver a check made payable to "Pax World Money Market Fund, Inc." along
with a completed subscription order form to:
Pax World Money Market Fund, Inc.
c/o Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
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.
13
<PAGE>
Subsequent Purchases of Shares
Subsequent purchases can be made either by bank wire or by personal
delivery, as indicated above, or by mailing a check to:
Pax World Money Market Fund, Inc.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
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.
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. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective.
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 guaranteed letter.
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 any domestic bank or trust company, broker, dealer,
clearing agency or savings association who are participants in a medallion
program recognized by the Securities Transfer Agents Association. The three
recognized medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and the New York Stock
Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees which are
not a part of these programs will not be accepted. The Transfer Agent reserves
the right to request additional information from, and make reasonable inquiries
of, any eligible guarantor institution.
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.
14
<PAGE>
The date of payment upon redemption may not be postponed for more than 7
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.
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.
Written Requests
Shareholders may make a redemption in any amount by sending a written
request to:
Pax World Money Market Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
All written requests for redemption must be signed by the shareholder with
a signature guarantee. Normally, the redemption proceeds are paid by check and
are mailed to the shareholder of record.
Check Writing Privileges
By making the appropriate election on the subscription order form, a Broker
Service Class Shareholder may request a supply of checks which may be used to
effect redemptions from any one or more of the Classes of shares of the Fund in
which the shareholder is invested. The checks will be issued in the
shareholder's name and the shareholder will receive a separate supply of checks
for each Class of shares of the Fund for which checks are requested. Checks may
be drawn in any amount determined by the Clearing Broker for Broker Service
Class Shareholders, and may be used like an ordinary commercial bank check
except that they may not be certified. The checks are drawn on a special account
maintained by the Fund with the agent bank. When a check is presented to the
Fund's agent bank, it instructs the transfer agent to redeem a sufficient number
of full and fractional shares in the shareholder's account to cover the amount
of the check. The canceled check is usually returned to the shareholder. The use
of a check to make a withdrawal enables the Broker Service Class Shareholder in
the Fund to receive dividends on the shares to be redeemed up to the Fund
Business Day on which the check clears. Investors who purchase Fund shares may
not receive their redemption proceeds 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.
15
<PAGE>
Broker Service Class Shareholders electing the checking option are subject
to the procedures, rules and regulations of the Fund's agent bank governing
checking accounts. Checks drawn on a jointly owned account may, at the
shareholder's election, require only one signature. Checks in amounts exceeding
the value of the shareholder's account at the time the check is presented for
payment will not be honored. Since the dollar value of the account changes
daily, the total value of the account may not be determined in advance and the
account may not be entirely redeemed by check. In addition, the Fund reserves
the right to charge the shareholder's account a fee up to $20 for checks not
honored as a result of an insufficient account value, a check deemed not
negotiable because it has been held longer than six months, an unsigned check or
a post-dated check. The Fund reserves the right to terminate or modify the check
redemption procedure at any time or to impose additional fees following
notification to the Fund's Broker Service Class Shareholders.
Telephone
The Fund accepts telephone requests for redemption from Institutional Class
Shareholders who elect this option. The proceeds of a telephone redemption will
be sent to the shareholder at his or her address or to his or her bank account
as set forth in the subscription order form or in a subsequent signature
guaranteed written authorization. Redemptions following an investment by check
will not be effected until the check has cleared, which could take up to 15 days
after investment. The Fund may accept telephone redemption instructions from any
person with respect to accounts of shareholders who elect this service, and thus
shareholders risk possible loss of dividends in the event of a telephone
redemption not authorized by them. Telephone requests to wire redemption
proceeds must be for amounts in excess of $1,000. The Fund will employ
reasonable procedures to confirm that telephone redemption instructions are
genuine, and will require that Institutional Class Shareholders electing such
option provide a form of personal identification. The failure by the Fund to
employ such reasonable procedures may cause the Fund to be liable for any losses
incurred by investors due to 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
or her account number with the Fund, (iii) the amount to be withdrawn and (iv)
the name of the person requesting the redemption. Usually, the proceeds are sent
to the investor on the same Fund Business Day the redemption is effected,
provided the redemption request is received prior to 12:00 noon, New York City
time and on the next Fund Business Day if the redemption request is received
after 12:00 noon, New York City time.
Systematic 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.
16
<PAGE>
The election to receive automatic withdrawal payments may be made at the
time of the original subscription by so indicating on the subscription order
form for Institutional Class Shareholders or by so indicating on the appropriate
form from their Clearing Broker for Broker Service Class Shareholders. The
election may also be made, changed or terminated at any later time by sending a
signature guaranteed written request to the transfer agent.
Exchange Privilege
- --------------------------------------------------------------------------------
Shareholders of the Fund are entitled to exchange some or all of their
shares in the Fund for shares of the Pax World Fund, Inc. or the Pax World
Growth Fund, Inc., as well as certain other investment companies which retain
Pax World Management Corp. as its investment adviser or sub-adviser 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. It
is contemplated that this exchange privilege will be applicable to any new Pax
World Mutual Funds.
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.
Dividends and Distributions
- --------------------------------------------------------------------------------
Each dividend and capital gains distribution declared by the Fund on its
outstanding shares will, at the election of each shareholder, be paid either in
cash or in additional shares of the same Class having an aggregate net asset
value equal to the cash amount. The 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
17
<PAGE>
to the record date for a particular dividend or distribution. If the shareholder
makes no election, the Fund will make the distribution in shares. There is no
sales or other charge in connection with the reinvestment of dividends and
capital gains distributions.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, the amount and timing of any such dividend or distribution depends on the
realization by the Fund of income and capital gains from investments. Except as
described herein, the Fund's net investment income (including any net realized
short-term capital gains) 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.
Because the Individual Investor Class and Broker Service Class shares bear
the Shareholder Servicing Fee under the Plan, 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.
Tax Consequences
- --------------------------------------------------------------------------------
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 in which 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. 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 dividends-received deduction. Dividends
and distributions are treated in the same manner for federal income tax purposes
whether shareholders receive cash or additional shares.
The Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemption
proceeds) paid to shareholders who have not complied with Internal Revenue
Service regulations. In connection with this withholding requirement, a
shareholder will be asked to certify on his or her application that the social
security or tax identification number provided is correct and that the
shareholder is not subject to 31% backup withholding for previous underreporting
to the IRS.
Distributions of net capital gains, if any, designated by the Fund as
capital gain dividends are taxable to shareholders as long-term capital gains,
regardless of the length of time the Fund's shares have been held by the
shareholder. Foreign shareholders may be subject to special withholding
requirements. Foreign shareholders should consult their tax advisors about the
federal, state and local tax consequences in their particular circumstances.
18
<PAGE>
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- --------------------------------------------------------------------------------
Investors do not pay a sales charge to purchase shares of the Fund.
However, the Fund pays fees in connection with the distribution of shares and
for services provided to the Institutional Class and Broker Service Class
shareholders. The Fund pays these fees from its assets on an ongoing basis and
therefore, over time, the payment of these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and
service plan (the "Plan") and, pursuant to the Plan, the Fund and the
Distributor have entered into a Distribution Agreement and a Shareholder
Servicing Agreement.
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares and, for nominal consideration( i.e., $1.00) 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. 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 or Clearing Broker in carrying
out its 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 application forms for shareholder accounts. These payments are limited
to a maximum of .05% per annum of the Broker Service Class Shares' average daily
net assets.
The Plan provides that the Adviser and Sub-Adviser may make payments from
time to time from their own resources, which may include the advisory fee, the
management fee and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, including Participating Organizations and
Clearing Brokers with whom the Distributor has entered into written agreements,
for performing shareholder servicing and related administrative functions on
behalf of the Fund; (ii) to defray the cost 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 Adviser,
Sub-Adviser 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.
19
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the Fund's
financial performance of all classes of the Pax World Money Market Fund, Inc.
for the life of the Fund. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by McGladrey and Pullen, LLP, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
May 27, 1998 January 13, 1999
(Commencement of Sales) to (Commencement of Sales) to
January 31, 1999 January 31, 1999
---------------------------- ---------------------------
INDIVIDUAL BROKER
INVESTOR INSTITUTIONAL SERVICE
CLASS CLASS CLASS
----- ----- -----
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
Income from investment operations:
Net investment income.................... 0.032 0.034 0.002
Less distributions:
Dividends from net investment income..... ( 0.032) ( 0.034) ( 0.002)
-------- -------- --------
Net asset value, end of period............... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total Return................................. 4.82%* 5.08%* 4.22%*
Ratios/Supplemental Data
Net assets, end of period (000).............. $ 5,495 $119,309 $ 70
Ratios to average net assets:
Expenses (net of fees waived)............ 0.60%* 0.35%* 0.80%*
Net investment income.................... 4.59%* 4.90%* 4.16%*
Advisory and administrative
services fees waived................... 0.25%* 0.25%* 0.25%*
</TABLE>
* Annualized
20
<PAGE>
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<PAGE>
[This page intentionally left blank]
<PAGE>
_______
P A X
WORLD
MONEY
MARKET
F U N D
_______
PROSPECTUS
INSTITUTIONAL CLASS/BROKER SERVICE CLASS
June 1, 1999
________________________________________________________________________________
Pax World Money Market Fund, Inc. P A X [Graphic Omitted]
A Socialy Responsible Fund WORLD
FUND
FAMILY
Investment Adviser - 222 State Street
Pax World Management Corp. Portsmouth, NH 03801-3853
222 State Street www.paxfund.com
Portsmouth, NH 03801-3853
Investment Sub-Adviser -
Reich & Tang Asset Management L.P. For General Fund Information and/or
600 Fifth Avenue Shareholder Account Information,
New York, NY 10020 please call: 1-800-241-3263
Transfer and Dividend Disbursing Agent -
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, NY 10020
General Counsel:
Battle Fowler LLP
75 East 55th Street All Account Inquiries should be addressed to:
Pax World Money Market Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, NY 10020
[graphic omitted]
Printed in the USA on recycled paper
A Statement of Additional Information (SAI) dated June 1, 1999, and the
Fund's Annual and Semi-Annual Reports include additional information about the
Fund and its investments and are incorporated by reference into this prospectus.
You may obtain the SAI and the Annual and Semi-Annual Reports and other material
incorporated by reference without charge by calling the Fund at 1-800-767-1729.
To request other information, please call your financial intermediary or the
Fund.
A current SAI has been filed with the Securities and Exchange Commission.
You may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington, D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
811-8591 PAXI&B699P
<PAGE>
Rule 497(c)
Registration No. 333-43587
================================================================================
PAX WORLD MONEY 600 Fifth Avenue, New York, NY 10020
MARKET FUND, INC. (212) 830-5200
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
June 1, 1999
Relating to the Prospectus for the Institutional Class and Broker Service Class
Shares of Pax World Money Market Fund, Inc. and for the Individual Investor
Class Shares of Pax World Money Market Fund, Inc. each dated June 1, 1999.
This Statement of Additional Information (SAI) is not a prospectus. This SAI
expands upon and supplements the information contained in the current
Prospectuses of the Institutional Class Shares and Broker Service Class Shares
of Pax World Money Market Fund, Inc., and the Individual Investor Class Shares
of Pax World Money Market Fund, Inc. and should be read in conjunction with each
respective prospectus.
A Prospectus for each Class of Fund shares may be obtained from any
Participating Organization or by writing or calling the Fund toll-free at
1-800-767-1729.
The Financial Statements of the Fund have been incorporated by reference to the
Fund's Annual Report. The Annual Report is available, without charge, upon
request by calling the toll-free number provided.
This Statement of Additional Information is incorporated by reference into the
respective prospectus in its entirety.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Table of Contents
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Fund History................................................2 Purchase, Redemption and Pricing of Shares.................16
Description of the Fund and its Investments and Risks.......2 Taxation of the Fund.......................................17
Management of the Fund......................................9 Underwriters...............................................18
Control Persons and Principal Holders of Securities.........11 Calculation of Performance Data............................18
Investment Advisory and Other Services......................12 Financial Statements ......................................19
Brokerage Allocation and Other Practices....................15 Description of Ratings.....................................20
Capital Stock and Other Securities..........................15
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<PAGE>
I. FUND HISTORY
The Fund was incorporated on November 26, 1997 in the state of Maryland.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end, diversified management investment company. The Fund's
investment objectives are to seek as high a level of current income to the
extent consistent with preserving capital and maintaining liquidity. No
assurance can be given that these objectives will be achieved.
The following discussion expands upon the description of the Fund's investment
objectives and policies in the Prospectus.
The Fund may only purchase United States dollar-denominated securities that have
been determined by the Fund's Board of Directors to present minimal credit risks
and that are Eligible Securities at the time of acquisition. The term Eligible
Securities means: (i) securities which have or are deemed to have remaining
maturities of 397 days or less and rated in the two highest short-term rating
categories by any two nationally recognized statistical rating organizations
("NRSROs") or in such categories by the only NRSRO that has rated the Municipal
Obligations (collectively, the "Requisite NRSROs"); or (ii) unrated securities
determined by the Fund's Board of Directors to be of comparable quality. In
addition, securities which have or are deemed to have remaining maturities of
397 days or less but that at the time of issuance were long-term securities
(i.e. with maturities greater than 366 days) are deemed unrated and may be
purchased if such had received a long-term rating from the Requisite NRSROs in
one of the three highest rating categories. Provided, however, that such may not
be purchased if it (i) does not satisfy the rating requirements set forth in the
preceding sentence and (ii) has received a long-term rating from any NRSRO that
is not within the three highest long-term rating 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. 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 S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; and "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's
in the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's or "SP-1/AA" by S&P.
Such instruments may produce a lower yield than would be available from less
highly rated instruments.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
Subsequent to its purchase by the Fund, a rated security may cease to be rated
or its rating may be reduced below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall promptly reassess
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 investment
adviser and sub-adviser becoming aware of the new rating and provided further
that the Board of Directors is subsequently notified of the investment adviser's
and sub-adviser's actions.
In addition, in the event that a security (i) is in default, (ii) ceases to be
an Eligible Security under Rule 2a-7 of the Investment Company Act of 1940 (the
"1940 Act") or (iii) is determined to no longer present minimal credit risks, or
an event of insolvency occurs with respect to the issues of a portfolio security
or the provider of any Demand Feature or Guarantee, 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. Disposal of the
security shall occur 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 SEC of such fact and of the actions that the Fund intends to
take in response to the situation.
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<PAGE>
The Fund shall not invest more than 5% of the total market value of any
Portfolio'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.
The Fund intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code (the "Code"). For the Fund to
qualify, at the close of each quarter of the taxable year, at least 50% of the
value of its total assets must consist of cash, government securities,
investment company securities and other securities. They must be limited in
respect of any one issuer to not more than 5% in value of the total assets of
the Fund and to not more than 10% of the outstanding voting securities of such
issuer. In addition, at the close of each quarter of its taxable year, not more
than 25% in value of the Fund's total assets may be invested in securities of
one issuer (however, this restriction does not apply to the Fund's investing in
Government securities). The limitations described in this paragraph regarding
qualification as a "regulated investment company" are not fundamental policies
and may be revised if applicable Federal income tax requirements are revised.
(See "Federal Income Taxes" herein.)
Description of Investments
The following discussion expands upon the description of the Fund's primary
investments and also outlines other types of securities and transactions which,
although not primary investments, the Fund is permitted to invest in.
Repurchase Agreements
When the Fund purchases securities, it may enter into a repurchase agreement
with the seller wherein the seller agrees, at the time of sale, to repurchase
the security at a mutually agreed upon time and price. The Fund may enter into
repurchase agreements with member banks of the Federal Reserve System and with
broker-dealers who are recognized as primary dealers in United States government
securities by the Federal Reserve Bank of New York. Although the securities
subject to a repurchase agreement might bear maturities exceeding one year,
settlement for the repurchase would never be more than 397 days after the Fund's
acquisition of the securities and normally would be within a shorter period of
time. The resale price will be in excess of the purchase price, reflecting an
agreed upon market rate effective for the period of time the Fund's money will
be invested in the security, and will not be related to the coupon rate of the
purchased security. At the time the Fund enters into a repurchase agreement, the
value of the underlying security, including accrued interest, will be equal to
or exceed the value of the repurchase agreement, and, in the case of a
repurchase agreement exceeding one day, the seller will agree that the value of
the underlying security, including accrued interest, will at all times be equal
to or exceed the value of the repurchase agreement. The Fund may engage in a
repurchase agreement with respect to any security in which the Fund is
authorized to invest, even though the underlying security may mature in more
than one year. The collateral securing the seller's obligation must be of a
credit quality at least equal to the Fund's investment criteria for the Fund
securities and will be held by the Fund custodian or in the Federal Reserve Book
Entry System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
the Fund to the seller subject to the repurchase agreement and is, therefore,
subject to the Fund's investment restrictions applicable to loans. It is not
clear whether a court would consider the securities purchased by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase of the security under a repurchase
agreement, the Fund may encounter delay and incur costs before being able to
sell the security. Delays may result in the loss of interest or the decline in
the price of the security. If the court characterized the transaction as a loan
and the Fund has not perfected a security interest in the security, the Fund may
be required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for the Fund, the
Sub-Adviser 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.
3
<PAGE>
Commercial Paper and Certain Debt Obligations
The Fund may purchase 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.
Domestic and Foreign Bank Obligations
The Fund may purchase certificates of deposit, time deposits, commercial paper,
bankers' acceptances issued by domestic banks, foreign branches of domestic
banks, foreign subsidiaries of domestic banks, and domestic and foreign branches
of foreign banks and corporate instruments supported by bank letters of credit.
(See "Risk Factors and Additional Investment Information" herein.) Certificates
of deposit are certificates representing the obligation of a bank to repay funds
deposited with it for a specified period of time. Time deposits are
non-negotiable deposits maintained in a bank for a specified period of time (in
no event longer than seven days) at a stated interest rate. Time deposits and
certificates of deposit which may be held by the Fund will not benefit from
insurance from the Federal Deposit Insurance Corporation (the "FDIC"). Bankers'
acceptances are credit instruments evidencing the obligation of a bank to pay a
draft drawn on it by a customer. These instruments reflect the obligation both
of the bank and of the drawer to pay the face amount of the instrument upon
maturity. The Fund limits its investments in obligations of domestic banks,
foreign branches of domestic banks and foreign subsidiaries of domestic banks to
banks having total assets in excess of $1 billion or the equivalent in other
currencies. The Fund limits its investments in obligations of domestic and
foreign branches of foreign banks to dollar-denominated obligations of such
banks which at the time of investment have more than $5 billion, or the
equivalent in other currencies, in total assets and which are considered by the
Fund's Board of Directors to be First Tier Eligible Securities (as defined
below) at the time of acquisition. The Fund generally limits investments in bank
instruments to (a) those which are fully insured as to principal by the FDIC or
(b) those issued by banks which at the date of their latest public reporting
have total assets in excess of $1.5 billion. However, the total assets of a bank
will not be the sole factor determining the Fund's investment decisions and the
Fund may invest in bank instruments issued by institutions which the Fund's
Board of Directors believes present minimal credit risks.
U.S. dollar-denominated obligations issued by foreign branches of domestic banks
or foreign branches of foreign banks ("Eurodollar" obligations) and domestic
branches of foreign banks ("Yankee dollar" obligations)
The Fund will limit its aggregate investments in foreign bank obligations,
including Eurodollar obligations and Yankee dollar obligations, to 25% of its
total assets at the time of purchase, provided that there is no limitation on
the Fund's 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 the Fund's total assets at the
time of purchase.
Eurodollar and other foreign obligations involve special investment risks,
including the possibility that liquidity could be impaired because of future
political and economic developments, that the obligations may be less marketable
than comparable domestic obligations of domestic issuers, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that deposits may be seized or nationalized, that foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on those obligations,
that the selection of foreign obligations may be more difficult because there
may be less information publicly available concerning foreign issuers, that
there may be difficulties in enforcing a judgment against a foreign issuer or
that the accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign issuers may differ from those applicable to
domestic issuers. In addition, foreign banks are not subject to examination by
United States Government agencies or instrumentalities.
Since the Fund may contain Eurodollar and other foreign obligations issued by
foreign governments, foreign and domestic banks and other 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
4
<PAGE>
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 regulations 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.
Pax World Management Corp. (the "Adviser") and Reich & Tang Asset Management
L.P. (the "Sub-Adviser") 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 Adviser and Sub-Adviser
will consider available yields, net of any required taxes, in selecting foreign
securities.
United States Government Securities
The Fund may purchase 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.
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
5
<PAGE>
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 expenses prescribed by any state in
which the Fund's shares are qualified for sale. The Sub-Adviser 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 and Distributions" and "Tax
Consequences" in the Prospectuses).
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or securities increase,
the potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The Fund may contain variable rate demand instruments on which
stated minimum or maximum rates, or maximum rates set by state law, limit the
degree to which interest on such variable rate demand instruments may fluctuate;
to the extent it does, increases or decreases in value may be somewhat greater
than would be the case without such limits. Additionally, the Fund may contain
variable rate demand participation certificates in fixed rate Municipal
Securities and taxable debt obligations (the Fund will not acquire a variable
note demand participation certificate in fixed rate municipal securities without
an opinion of counsel). The fixed rate of interest on these obligations will be
a ceiling on the variable rate of the participation certificate. In the event
that interest rates increased so that the variable rate exceeded the fixed rate
on the obligations, the obligations could no longer be valued at par and this
may cause the Fund to take corrective action, including the elimination of the
instruments. Because the adjustment of interest rates on the variable rate
demand instruments is made in relation to movements of the applicable banks'
prime rate, or other interest rate adjustment index, the variable rate demand
instruments are not comparable to long-term fixed rate securities. Accordingly,
interest rates on the variable rate demand instruments may be higher or lower
than current market rates for fixed rate obligations or obligations of
comparable quality with similar maturities.
- --------
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.
6
<PAGE>
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.
Participation Interests
The Fund may purchase from banks participation interests in all or part of
specific holdings of Municipal or other debt obligations (including corporate
loans). Where the institution issuing the participation does not meet the Fund's
quality standards, the participation may be backed by an irrevocable letter of
credit or guarantee that the Board of Directors has determined meets the
prescribed quality standards of the Fund. Thus, even if the credit of the
selling bank does not meet the quality standards of the Fund, the credit of the
entity issuing the credit enhancement will meet such prescribed quality
standards. The Fund will have the right to sell the participation interest back
to the bank for the full principal amount of the Fund's interest in the
Municipal or debt obligation plus accrued interest, but only (1) as required to
provide liquidity to the Fund, (2) to maintain the quality standards of the
Fund's investment portfolio or (3) upon a default under the terms of the debt
obligation. The selling bank may receive a fee from the Fund in connection with
the arrangement. When purchasing bank participation interests, the Fund will
treat both the bank and the underlying borrower as the issuer of the instrument
for the purpose of complying with the diversification requirement of the
investment restrictions discussed below.
Privately Placed Securities
The Fund may invest in securities issued as part of privately negotiated
transactions between an issuer and one or more purchasers. Except with respect
to certain commercial paper issued in reliance on the exemption from regulations
in Section 4(2) of the Securities Act of 1933 (the "Securities Act") and
securities subject to Rule 144A of the Securities Act which are discussed below,
these securities are typically not readily marketable, and therefore are
considered illiquid securities. The price the Fund pays for illiquid securities,
and any price received upon resale, may be lower than the price paid or received
for similar securities with a more liquid market. Accordingly, the valuation of
privately placed securities by the Fund will reflect any limitations on their
liquidity. As a matter of policy, the Fund will not invest more than 10% of the
market value of the total assets of the Fund in repurchase agreements maturing
in over seven days and other illiquid investments. The Fund may purchase
securities that are not registered ("restricted securities") under the
Securities Act, but can be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act. The Fund may also purchase certain
commercial paper issued in reliance on the exemption from regulations in Section
4(2) of the Securities Act ("4(2) Paper"). However, the Fund will not invest
more than 10% of its net assets in illiquid investments, which include
securities for which there is no ready market, securities subject to contractual
restriction on resale, certain investments in asset-backed and receivable-backed
securities and restricted securities (unless, with respect to these securities
and 4(2) Paper, the Fund's Directors continuously determine, based on the
trading markets for the specific restricted security, that it is liquid). The
Directors
7
<PAGE>
may adopt guidelines and delegate to the Sub-Adviser 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 fundamental investment restrictions. They may
not be changed without the approval by a majority vote of the Fund's outstanding
shares. The term "majority vote of the Fund's outstanding shares" means the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the outstanding shares
of the Fund. The Fund may not:
(a) invest in securities of companies that have conducted operations for less
than three years, including the operations of predecessors;
(b) invest in or hold securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund, the Adviser or the Sub-Adviser,
individually owning beneficially more than 1/2 of 1% of the securities of
the issuer, in the aggregate own more than 5% of the issuer's securities;
(c) (1) make investments for the purpose of exercising control over any issuer
or other person; (2) purchase securities having voting rights at the time
of purchase; (3) purchase securities of other investment companies, except
in connection with a merger, acquisition, consolidation, reorganization or
acquisition of assets; (4) invest in real estate, including real estate
limited partnerships (other than debt obligations secured by real estate or
interests therein or debt obligations issued by companies which invest in
real estate or interests therein); (5) invest in commodities, commodity
contracts, commodity options, interests and leases in oil, gas or other
mineral exploration or development programs (the Fund may, however,
purchase and sell securities of companies engaged in the exploration,
development, production, refining, transportation and marketing of oil, gas
or minerals); (6) purchase restricted securities or purchase securities on
margin; (7) make short sales of securities or intentionally maintain a
short position in any security or write, purchase or sell puts, calls,
straddles, spreads or any combination thereof; (8) act as an underwriter of
securities or (9) issue senior securities, except insofar as the Fund may
be deemed to have issued a senior security in connection with any permitted
borrowing;
(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);
(e) 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;
(f) 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);
(g) 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;
(h) 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;
8
<PAGE>
(i) make loans, except that the Fund may purchase the debt securities described
above under "Description of the Fund and its Investments and Risks" and may
enter into repurchase agreements as therein described;
(j) borrow money, unless (i) the borrowing does not exceed 10% of the total
market value of the assets of the Fund with respect to which the borrowing
is made (determined at the time of borrowing but without giving effect
thereto) and (ii) the money is borrowed from one or more banks as a
temporary measure for extraordinary or emergency purposes or to meet
unexpectedly heavy redemption requests; in addition the Fund will not make
additional investments when borrowings exceed 5% of the Fund's net assets;
and
(k) pledge, mortgage, assign or encumber any of the Fund's assets except to the
extent necessary to secure a borrowing permitted by the foregoing clause
made with respect to the Fund.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of a Fund's portfolio's assets will not
constitute a violation of such restriction.
III. MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, employs Pax World Management Corp. to serve as
Adviser to the Fund. Reich & Tang Asset Management L.P. will serve as the
Sub-Adviser of the Fund under a Sub-Advisory Agreement entered into between the
Adviser and Sub-Adviser. Due to the services performed by the Sub-Adviser, the
Fund currently has no employees and its officers are not required to devote
full-time to the affairs of the Fund.
The Directors and Officers of the Fund, and their principal occupations for the
past five years, are listed below. Unless otherwise indicated, the address of
each such person, is 600 Fifth Avenue, New York, New York 10020. Mr. Steven
Duff, Director of the Fund, may be deemed an "interested person" of the Fund, as
defined in the 1940 Act, on the basis of his affiliation with the Sub-Adviser.
Steven W. Duff, 45 - Director of the Fund, has been President of the Mutual
Funds division of the Sub-Adviser 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
Director/Trustee of 14 funds in the Reich & Tang Fund Complex, President of Back
Bay Funds, Inc., Executive Vice President of Reich & Tang Equity Fund, Inc., and
President and Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.
Dr. W. Giles Mellon, 68 - Director of the Fund, is Professor of Business
Administration 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 Director/Trustee of 15 other funds in the Reich & Tang Fund Complex.
Robert Straniere, 57 - Director of the Fund, has been a member of the New York
State Assembly and a partner with Straniere & Straniere Law Firm since 1981. His
address is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also
a Director/Trustee of 15 other funds in the Reich & Tang Fund Complex and a
Director of Life Cycle Mutual Funds, Inc.
Dr. Yung Wong, 60 - 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/Trustee of 15 other funds in the Reich
& Tang Fund Complex. Dr. Wong is also a Trustee of Eclipse Financial Asset
Trust.
Thomas W. Grant, 58 - President of the Fund, has been President of the Adviser
since 1996 and President of H.G. Wellington & Co., Inc. since 1991. His address
is 14 Wall Street, New York, New York 10005. Mr. Grant is also the President and
a Director of Pax World Growth Fund, Inc. and Vice Chairman of the Board and
President of Pax World Fund, Inc.
Laurence A. Shadek, 49 - Executive Vice-President of the Fund, has been Chairman
of the Board of the Adviser since 1996 and Executive Vice-President of H.G.
Wellington & Co., Inc. since 1986. His address is 14 Wall Street, New York, New
York 10005. Mr. Shadek is also Chairman of the Board of Pax World Growth Fund,
Inc. and Chairman of the Board of Pax World Fund, Inc.
Bernadette N. Finn, 51 - Secretary of the Fund, has been Vice President of the
Mutual Funds division of the Sub-Adviser since September 1993. Ms. Finn was
formerly Vice President and Assistant Secretary of Reich &
9
<PAGE>
Tang, Inc. with which she was associated from September 1970 to September 1993.
Ms. Finn is Secretary of 13 other funds in Reich & Tang Fund Complex, and a Vice
President and Secretary of 5 funds in the Reich & Tang Fund Complex.
Molly Flewharty, 46 - Vice President of the Fund, has been Vice President of the
Mutual Funds division of the Sub-Adviser since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. with which she was associated from
December 1977 to September 1993. Ms. Flewharty is Vice President of 18 other
funds in the Reich & Tang Fund Complex.
Richard De Sanctis, 41 - Treasurer of the Fund, has been Vice President and
Treasurer of the Sub-Adviser 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
Treasurer of 17 other funds in the Reich & Tang Fund Complex and is Vice
President and Treasurer of Cortland Trust, Inc.
Rosanne Holtzer, 33 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Sub-Adviser since December 1997. Ms. Holtzer
was formerly Manager of Fund Accounting for the Sub-Adviser with which she was
associated with from June 1986. She is Assistant Treasurer of 18 other funds in
the Reich & Tang Fund Complex.
Directors of the Fund not affiliated with the Sub-Adviser 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-Adviser
do not receive compensation from the Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMPENSATION TABLE
(1) (2) (3) (4) (5)
Name of Person, Estimated Aggregate Pension or Retirement Estimated Annual Total Compensation
Position Compensation from Benefits Accrued as Part Benefits upon from Fund and Fund
Registrant for Fiscal Year of Fund Expenses Retirement Complex Paid to
Directors*
W. Giles Mellon,
Director $2,000 0 0 $58,500 (16 Funds)
Robert Straniere,
Director $2,000 0 0 $58,500 (16 Funds)
Yung Wong,
Director $2,000 0 0 $58,500 (16 Funds)
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ended January 31, 1999. The parenthetical number represents the
number of investment companies (including the Fund) from which such person
receives compensation that are considered part of the same Fund Complex as the
Fund, because, among other things, they have a common investment adviser.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On May 3, 1999 there were 108,790,593 Institutional Class of shares outstanding,
375,329 Broker Service Class of shares outstanding and 7,473,931 Individual
Investor Class of shares outstanding. As of May 3, 1999, the amount of shares
owned by all officers and directors of the Fund, as a group, was less than 1% of
the outstanding shares. Set forth below is certain information as to persons who
owned 5% or more of the Fund's outstanding shares as of May 3, 1999:
Name and Address % of Class Nature of Ownership
- ---------------- ---------- -------------------
Institutional Class
Pax World Management Corp.
Balanced Fund
222 State Street
Portsmouth, NH 03801 98.55% Beneficial
10
<PAGE>
Broker Service Class
Mrs. Mary Ingram Grant
c/o H.G. Wellington & Co., Inc.
14 Wall Street
New York, NY 10005 32.85% Record
Laurence A. Shadek IRA
H.G. Wellington & Co., Inc. TTEE
14 Wall Street
New York, NY 10005 19.40% Record
Estate of Alice W. Grant
Michael D. Grant, Jr., Thomas
W. Grant & Patricia G. Warner
c/o H.G. Wellington & Co., Inc.
14 Wall Street
New York, NY 10005 14.52% Record
Estate of Michael D. Grant
Michael D. Grant, Jr., Thomas
W. Grant & Patricia G. Warner
c/o H.G. Wellington & Co., Inc.
14 Wall Street
New York, NY 10005 7.54% Record
Ruotolo Associates Profit
Sharing Plan
c/o H.G. Wellington & Co., Inc.
14 Wall Street
New York, NY 10005 7.06% Record
Rutolo Associates
Attn: George Rutolo
c/o H.G. Wellington & Co., Inc.
14 Wall Street
New York, NY 10005 6.16% Record
Individual Investor Class
Pax World Money Market Fund
P.O Box 8950
Wilmington, DE 19899
Attn: Ray Werkmeister 100.00% Beneficial
V. INVESTMENT ADVISORY AND OTHER SERVICES
The Investment Adviser for the Fund is Pax World Management Corp., a Delaware
corporation incorporated in 1970 with principal offices at 222 State Street,
Portsmouth, New Hampshire 03801-3853. As of December 31, 1998, the Adviser had
over $863,000,000 in assets under management by virtue of serving as Adviser to
the Pax World Fund, Incorporated and the Pax World Growth Fund, Inc. The Adviser
has no other clients other than the Fund, the Pax World Fund and the Pax World
Growth Fund.
The Sub-Adviser is a Delaware limited partnership with principal offices at 600
Fifth Avenue, New York, New York 10020. The Sub-Adviser, as of April 30, 1999,
was investment manager, adviser or supervisor with respect to assets aggregating
approximately $13.3 billion. In addition to the Fund, the Sub-Adviser acts as
investment manager and administrator of seventeen other investment companies and
also advises pension trusts, profit sharing trusts and endowments.
11
<PAGE>
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Sub-Adviser replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Sub-Adviser, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
NEICOP changed its name to Nvest Companies, L.P. ("Nvest Companies").
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Sub-Adviser. Nvest Corporation, a Massachusetts corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Sub-Adviser. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
Nvest Companies is a holding company offering to institutional clients a broad
array of investment styles across a wide range of asset categories through
thirteen subsidiaries, divisions and affiliates. Its business units include AEW
Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth Management,
L.P., Graystone Partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P.,
Loomis, Sayles & Co., L.P., New England Funds, L.P., Reich & Tang Capital
Management, Reich & Tang Funds, Snyder Capital Management, L.P., Vaughan,
Nelson, Scarborough & McCullough, L.P. and Westpeak Investment Advisors, L.P.
These affiliates, in the aggregate, are investment advisers or sub-advisers of
80 other registered investment companies.
On January 30, 1998 the Board of Directors, including a majority of the
Directors who are not interested persons (as defined in the 1940 Act) of the
Fund, the Adviser or the Sub-Adviser, approved an Investment Advisory Agreement
with the Adviser effective April 9, 1998, which has a term which extends to
March 31, 2000 and may be continued in force thereafter for successive
twelve-month periods beginning each April 9, provided that such continuance is
specifically approved annually by majority vote of the Fund's outstanding voting
securities or by a majority of the Directors who are not parties to the
Investment Advisory Agreement or interested persons of any such party, by votes
cast in person at a meeting called for the purpose of voting on such matter. The
Investment Advisory Agreement and Sub-Advisory Agreement were approved by the
sole shareholder of the Fund on March 18, 1998.
Pursuant to the terms of an Advisory Agreement entered into between the Fund and
the Adviser (the "Advisory Agreement"), the Adviser, 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-Adviser. Under the Advisory
Agreement, the Fund will pay the Adviser an annual advisory fee of .15% of the
Fund's average daily net assets. For the Fund's fiscal year ended January 31,
1999, the Adviser received an Advisory fee totaling $71,643, all of which was
waived.
Pursuant to the Sub-Advisory Agreement, the Sub-Adviser 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 Adviser 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 who are not
interested parties, or by the Sub-Adviser 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-Adviser, or of reckless disregard of its
obligations thereunder, the Sub-Adviser 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-Adviser receives from
the Adviser a fee equal to .075% per annum of the Fund's average daily net
assets from its advisory fee. The fees are accrued daily and paid monthly.
Investment management fees and operating expenses which are attributable to each
Class of the Fund will be allocated daily to each Class based on the percentage
of outstanding shares at the end of the day. Additional shareholder services
provided by Participating Organizations to Institutional Class shareholders
pursuant to the distribution and service plan shall be compensated by Reich &
Tang Distributors,
12
<PAGE>
Inc. (the "Distributor") from its shareholder servicing fee, the Sub-Adviser
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-Adviser. For the Fund's fiscal year ended
January 31, 1999, the Sub-Adviser received Sub-Advisory fees totaling $35,822,
all of which was waived.
Pursuant to the Administrative Services Agreement with the Fund, the Sub-Adviser
also performs clerical, accounting supervision, office service and related
functions for the Fund and provides the Fund with personnel to (i) supervise the
performance of bookkeeping and related services by Investors Fiduciary Trust
Company, the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to
and filings with regulatory authorities, and (iii) perform such other services
as the Fund may from time to time request of the Sub-Adviser. The personnel
rendering such services may be employees of the Sub-Adviser, of its affiliates
or of other organizations. The Fund pays the Sub-Adviser for such personnel and
for rendering such services at rates which must be agreed upon by the Fund and
the Sub-Adviser, 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-Adviser. It is intended that such rates will be the actual costs of the
Sub-Adviser. The Fund also reimburses the Sub-Adviser 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-Adviser. The
Sub-Adviser, 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-Adviser receives
from the Fund a fee equal to .10% per annum of the Fund's average daily net
assets. For the Fund's fiscal year ended January 31, 1999, the Sub-Adviser
received administration fees totaling $47,762, all of which was waived.
Any portion of the total fees received by the Sub-Adviser may be used to provide
shareholder services and for distribution of Fund shares. (See "Distribution and
Service Plan" herein.)
Expense Limitation
The Sub-Adviser 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-Adviser 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-Adviser 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 account value falls below the minimum amount.
Distribution and Service Plan
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission requires that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
distribution and service plan (the "Plan") and, pursuant to the Plan, the Fund
has entered into a Distribution Agreement and a Shareholder Servicing Agreement
with the Distributor as distributor of the Fund's shares.
13
<PAGE>
Reich & Tang Asset Management, Inc. serves as the sole general partner for Reich
& Tang Asset Management L.P. and is the sole shareholder of the Distributor.
Under the Plan, the Fund and the Distributor will enter into a Shareholder
Servicing Agreement, with respect to the Fund's Individual Investor Class and
Broker Service Class shares. For its services under the Shareholder Servicing
Agreement (with respect to Individual Investor Class and Broker Service Class
shares only), the Distributor receives from the Fund a fee equal to .25% per
annum of the Individual Investor Class and Broker Service Class shares of the
Fund's average daily net assets (the "Shareholder Servicing Fee") for providing
personal shareholder services and for the maintenance of shareholder accounts.
The fee is accrued daily and paid monthly and any portion of the fee may be
deemed to be used by the Distributor for payments to Clearing Brokers with
respect to servicing their clients or customers who are shareholders of the
Individual Investor Class and Broker Service Class of the Fund. The
Institutional Class shareholders do not receive the benefit of such services
from Clearing Brokers and, therefore, will not be assessed a Shareholder
Servicing Fee.
Under the Distribution Agreement, the Distributor, for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses, including the cost of dedicated lines and CRT 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-Adviser 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-Adviser and the Distributor for any fiscal year under the Advisory
Agreement or the Sub-Advisory Agreement, the Administrative Services Contract or
the Shareholder Servicing Agreement in effect for that year.
In accordance with Rule 12b-1, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan was most recently approved on January 21, 1999 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-Adviser, and shall continue
until March 31, 2000. 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.
14
<PAGE>
Custodian and Transfer Agents
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services,
Inc., 600 Fifth Avenue, New York, New York 10020 is transfer agent and dividend
disbursing agent for the Institutional Class and Broker Service Class shares of
the Fund. PFPC, Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809 is the
transfer agent and dividend agent for Individual Investor Class shares of the
Fund. The custodian and transfer agents do not assist in, and are not
responsible for, investment decisions involving assets of the Fund.
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.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There are usually no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price.
Allocation of transactions, including their frequency, to various dealers is
determined by the Sub-Adviser 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-Adviser or its affiliates. If, however, the Fund and other
investment companies or accounts managed by the Sub-Adviser are simultaneously
engaged in the purchase or sale of the same security, the transactions may be
averaged as to price and allocated equitably to each account. In some cases,
this policy might adversely affect the price paid or received by the Fund or the
size of the position obtainable for the Fund. In addition, when purchases or
sales of the same security for the Fund and for other investment companies
managed by the Sub-Adviser 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-Adviser or its affiliates
acting as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Sub-Adviser or its
affiliates.
VII. CAPITAL STOCK AND OTHER SECURITIES
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 Adviser 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
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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 Plan will be calculated and charged daily to the appropriate
Class prior to determining daily net asset value per share and
dividends/distributions.
Generally, all shares will be voted in the aggregate, except if voting by Class
is required by law or the matter involved affects only one Class, in which case
shares will be voted separately by Class. The shares of the Fund have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares outstanding voting for the election of directors can elect 100% of
the directors if the holders choose to do so, and, in that event, the holders of
the remaining shares will not be able to elect any person or persons to the
Board of Directors. The Fund's By-laws provide that the holders of a majority of
the outstanding shares of the Fund present at a meeting in person or by proxy
will constitute a quorum for the transaction of business at all meetings.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of Directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
beneficial interest, (c) for approval of revisions to the Fund's Distribution
Agreement with respect to a particular class or series of beneficial interest
and (d) upon the written request of holders of shares entitled to cast not less
than 10% of all the votes entitled to be cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act including the removal of Fund
Director(s) and communication among shareholders, any registration of the Fund
with the Securities and Exchange Commission or any state, or as the Directors
may consider necessary or desirable. For example, procedures for calling a
shareholder's meeting for the removal of Directors of the Fund, similar to those
set forth in Section 16(c) of the 1940 Act, are available to shareholders of the
Fund. A meeting for such purpose can be called by the holders of at least 10% of
the Fund's outstanding shares of beneficial interest. The Fund will aid
shareholder communications with other shareholders as required under Section
16(c) of the 1940 Act. Each Director serves until the next meeting of the
shareholders called for the purpose of considering the election or reelection of
such Director or of a successor to such Director, and until the election and
qualification of his or her successor, elected at such a meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
The material relating to the purchase and redemption of shares in the prospectus
for each class of shares offered is hereby incorporated by reference.
Net Asset Value
Pursuant to rules of the Securities and Exchange Commission, the Board of
Directors has established procedures to stabilize the Fund's net asset value at
$1.00 per share of each Class. These procedures include a review of the extent
of any deviation of net asset value per share, based on available market rates,
from $1.00. Should that deviation exceed 1/2 of 1%, the Board will consider
whether any action should be initiated to eliminate or reduce material dilution
or other unfair results to shareholders. Such action may include redemption of
shares in kind, selling portfolio securities prior to maturity, reducing or
withholding dividends and utilizing a net asset value per share as determined by
using available market quotations. The Fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less, will not purchase any instrument
with a remaining maturity greater than 397 days or subject to a repurchase
agreement having a duration of greater than one year, will limit portfolio
investments, including 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, Principal Investment Strategies and
Related Risks" in the Prospectus.)
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IX. TAXATION OF THE FUND
Federal Income Taxes
The Fund intends to qualify for and elects to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, the Fund
must distribute to shareholders at least 90% of its investment company taxable
income (which includes, among other items, dividends, taxable interest and the
excess of net short-term capital gains over net long-term capital losses), and
meet certain diversification of assets, source of income, and other requirements
of the Code. By meeting these requirements, the Fund generally will not be
subject to Federal income tax on its investment company taxable income and net
capital gains (the excess of net long-term capital gains over net short-term
capital losses) designated by the Fund as capital gain dividends and distributed
to shareholders. If the Fund does not meet all of these Code requirements, it
will be taxed as an ordinary corporation and its distributions will generally be
taxed to shareholders as ordinary income. In determining the amount of net
capital gains to be distributed, any capital loss carryover from prior years
will be applied against capital gains to reduce the amount of distributions
paid.
Amounts, other than tax-exempt interest, not distributed on a timely basis in
accordance with a calendar year distribution requirement may be subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, the Fund
must distribute for the calendar year an amount equal to the sum of (1) at least
98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain losses) for the one-year period ending October 31
of such year, and (3) all ordinary income and capital gain net income (adjusted
for certain ordinary losses) for previous years that were not distributed during
such years.
Generally, on the sale or exchange of obligations held for more than one year,
gain realized by the Fund that is not attributable to accrued market discount
will be long-term capital gain. However, gain on the disposition of a bond
purchased at a market discount generally will be treated as ordinary income
rather than capital gain, to the extent of the accrued market discount.
Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions from the Fund are not eligible
for the dividends-received deduction available to corporations. Distributions of
net capital gains, if any, designated by the Fund as capital gain dividends are
taxable to shareholders as long-term capital gains, regardless of the length of
time the Fund's shares have been held by the shareholder. All distributions are
taxable to the shareholder whether reinvested in additional shares or received
in cash. Shareholders will be notified annually as to the Federal tax status of
distributions.
Upon the taxable disposition (including a sale or redemption) of shares of the
Fund, a shareholder may realize a gain or loss, depending upon its basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands, and will be long-term or
short-term, generally depending upon the shareholder's holding period for the
shares. Non-corporate shareholders are subject to tax at a maximum rate of 20%
on capital gains resulting from the disposition of shares held for more than 12
months. However, a loss realized by a shareholder on the disposition of Fund
shares with respect to which capital gains dividends have been paid will, to the
extent of such capital gain dividends, also be treated as long-term capital loss
if such shares have been held by the shareholder for six months or less.
Income received by the Fund from sources within foreign countries may be subject
to withholding and other similar income taxes imposed by the foreign country,
which may decrease the net return on foreign investments as compared to
dividends and interest paid by domestic issuers. The Fund does not expect to be
eligible to elect to allow shareholders to claim such foreign taxes or a credit
against their U.S. tax liability.
The Fund is required to report to the Internal Revenue Service ("IRS") all
distributions to shareholders except in the case of certain exempt shareholders.
Distributions by the Fund (other than distributions to exempt shareholders) are
generally subject to withholding of Federal income tax at a rate of 31% ("backup
withholding") if (1) the shareholder fails to furnish the Fund with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the Fund or a shareholder that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do
so, the shareholder fails to certify that he or she is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions (whether reinvested in additional shares or taken in cash) will be
reduced by the amounts required to be withheld.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be subject
to state and local taxes, and the treatment of distributions under state and
local income tax laws may differ from the Federal income tax treatment.
Shareholders should consult their tax
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advisors with respect to particular questions of Federal, state and local
taxation. Shareholders who are not U.S. persons should consult their tax
advisors regarding U.S. foreign tax consequences of ownership of shares of the
Fund, including the likelihood that distributions to them would be subject to
withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
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 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. In the opinion of the
Sub-Adviser, however, 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.
XI. CALCULATION OF PERFORMANCE DATA
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the Securities and Exchange Commission. Under that
method, the Fund's portfolios' yield figures, which are based on a chosen
seven-day period, are computed as follows: the portfolio's return for the
seven-day period 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 (expected to
always be $1.00). This quotient is multiplied by (365/7) with the resulting
annualized 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. Therefore annualized yields may be different
from effective yields quoted for the same period.
The portfolio's "effective yield" for each Class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: the unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = [(base period return +
1)365/7] - 1.
Although published yield information is useful to investors in reviewing the
Fund's portfolios' performance, investors should be aware that the Fund's
portfolios' yields fluctuate from day to day. The Fund's portfolios' yields for
any given period are not an indication, or representation by the Fund, of future
yields or rates of return on the Fund's shares, and may not provide a basis for
comparison with bank deposits or other investments that pay a fixed yield for a
stated period of time. 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.
The Fund may from time to time advertise its portfolios' tax equivalent current
yield. The tax equivalent yield for each Class is computed based upon a 30-day
(or one month) period ended on the date of the most recent balance sheet
included in this Statement of Additional Information. It is computed by dividing
that portion of the yield of the Fund (as computed pursuant to the formulae
previously discussed) which is tax exempt by one minus a stated income tax rate
and adding the quotient to that portion, if any, of the yield of the Fund that
is not tax exempt. The tax equivalent yield for the Fund may also fluctuate
daily and does not provide a basis for determining future yields.
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The Fund may from time to time advertise a tax equivalent effective yield table
which shows the yield that an investor would need to receive from a taxable
investment in order to equal a tax-free yield from the Fund. This is calculated
by dividing that portion of the Fund's effective yield that is tax-exempt by one
minus a stated income tax rate and adding the quotient to that portion, if any,
of the Fund's effective yield that is not tax-exempt.
The Fund's yield for the Institutional Class for the seven-day period ended
January 31, 1999 was 4.60% which is equivalent to an effective yield of 4.70%.
The Fund's yield for the Broker Service Class for the seven-day period ended
January 31, 1999 was 4.15% which is equivalent to an effective yield of 4.23%.
The Fund's yield for the Individual Investor Class for the seven-day period
ended January 31, 1999 was 4.35% which is equivalent to an effective yield of
4.44%.
XII. FINANCIAL STATEMENTS
The audited financial statements for the Fund for the fiscal year ended January
31, 1999 and the report therein of McGladrey & Pullen, LLP, are herein
incorporated by reference to the Fund's Annual Report. The Annual Report is
available upon request and without charge.
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DESCRIPTION OF RATINGS*
Description of Moody's Investors Service, Inc.'s Two Highest Municipal Bond
Ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in 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.
Con. ( c ) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (i) earnings of projects under construction, (ii) earnings of
projects unseasoned in operating experience, (iii) rentals which begin when
facilities are completed, or (iv) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Description of Moody's Investors Service, Inc.'s Two Highest Ratings of State
and Municipal Notes and Other Short-Term Loans:
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:
MIG-1: Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2: Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of Standard & Poor's Rating Services Two Highest Debt Ratings:
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only to a small degree.
Plus ( + ) or Minus ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
Description of Standard & Poor's Rating Services Two Highest Commercial Paper
Ratings:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Moody's Investors Service, Inc.'s Two Highest Commercial Paper
Ratings:
Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues: Prime-1, highest
quality; Prime-2, higher quality.
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* As described by the rating agencies.
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