Rule 497(c)
Registration No. 333-43587
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Prospectus
PAX WORLD MONEY
MARKET FUND, INC.
MMA Praxis Class
September 13, 1999
A money market fund whose investment objective is to maximize current income to
the extent consistent with preservation of captial, 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 imporve the quality of life and that are ot 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.
[Grapic Omitted]
M M A
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
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3 Risk/Return Summary: Investments, 7 Management, Organization and Capital
Risks and Performance Structure
4 Fee Table 8 Shareholder Information
5 Investment Objectives, Principal Investment 18 Distribution Arrangements
Strategies and Related Risks
20 Financial Highlights
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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.
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
toll-free at 1-800-9-PRAXIS.
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FEE TABLE
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This table describes the fees and expenses that you may pay if you buy and
hold shares of the MMA Praxis Class of the Fund.
MMA Praxis Class
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 Distributor intends to voluntarily waive all or a portion of the
Distribution and Service (12b-1) Fees to cap the Total Annual Fund
Operating Expenses at 0.60%. MMA may reimburse the Fund for any expenses
over 0.60%. This fee waiver arrangement may be terminated at any time at
the option of the Distributor.
* Based on estimated amounts for the current fiscal year.
Example
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other money market 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
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MMA Praxis Class $87 $271
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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
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 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.
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.
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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 July 30, 1999, the Adviser had over
$1,010,292,131 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 July 30, 1999, was investment manager, adviser or supervisor with respect
to assets aggregating approximately $13.9 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.
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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 MMA Praxis 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 four 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 MMA Praxis Class are effected through the Fund's
MMA Praxis Class transfer agent which accepts orders for purchases and
redemptions from the Distributor and from shareholders directly. With respect to
the MMA Praxis Class, the minimum initial investment is $500. (See "Purchasing
and Adding to Your Shares" herein.) The minimum amount for subsequent
investments is $50 for all shareholders.
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, Eastern Standard 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
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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 MMA Praxis Class
transfer agent. Orders accompanied by Federal Funds and received after 12:00
noon, Eastern Standard 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.
Purchasing And Adding To Your Shares
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You may purchase MMA Praxis Class shares of the Fund through the
Distributor or through investment representatives, who may charge additional
fees and may require higher minimum investments or impose other limitations on
buying and selling shares. If you purchase shares through an investment
representative, that party is responsible for transmitting orders by close of
business and may have an earlier cut-off time for purchase and sale requests.
Consult your investment representative for specific information.
All shareholders will receive from the MMA Praxis Class transfer agent, on
behalf of the Fund, a quarterly 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).
All purchases must be in U.S. dollars. A fee will be charged for any
checks that do not clear. The Fund reserves the right to reject third-party
checks.
The Fund may waive the following minimum purchase requirements and the
Distributor may reject a purchase order if it considers it in the best interest
of the Fund and its shareholders.
Minimum Minimum
Initial Subsequent
Account Type Investment Investment
Regular (non-retirement) $500 $50
Retirement $500 $50
Automatic Investment Plan $ 50 $50
Instructions For Opening Or Adding To An Account
By Regular Mail
How to make an Initial Investment in MMA Praxis Class shares:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "MMA Praxis Mutual Funds"
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3. Mail to: MMA Praxis Mutual Funds, P.O. Box 182446, Columbus, OH 43218-2446
How to make Subsequent Investments in MMA Praxis Class shares:
1. Use the investment slip attached to your account statement. Or, if
unavailable,
2. Include the following information on a piece of paper:
o Money Market Fund and MMA Praxis Class
o Amount invested
o Account name
o Account number
Include your account number on your check.
3. Mail to: MMA Praxis Mutual Funds
P.O. Box 182446
Columbus, OH 43218-2446
By Overnight Service
See instructions 1-2 above for subsequent investments.
3. Send to: MMA Praxis Mutual Funds
c/o BISYS Fund Services
Attn: T.A. Operations, 3435 Stelzer Road
Columbus, OH 43219
Electronic Purchases
Your bank must participate in the Automated Clearing House (ACH) and must
be a United States Bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
1-800-9-PRAXIS. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-9-PRAXIS to arrange a transfer from your bank account.
When an electronic purchase or sale is made through the Automated Clearing
House (ACH), it may take up to eight days to clear.
By Wire Transfer
Wire transfers allow financial institutions to send funds to each other, almost
instantaneously.
Note: Your bank may charge a wire transfer fee.
For Initial Investment:
Please call 1-800-9-PRAXIS for a confirmation number and instructions for
returning your completed application.
For Initial and Subsequent Investments:
Instruct your bank to wire transfer your investment to:
Huntington National Bank
Routing Number: ABA #044000024
DDA#01899607545
Include:
Your name.
Your confirmation number.
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Prior to instructing your bank to wire the funds, call 1-800-9-PRAXIS to
advise us of the amount being transferred and the name of your bank.
You can add to your account by using the convenient options described
below. The Fund reserves the right to change or eliminate these privileges at
any time with 60 days notice.
Automatic Investment Plan
You can make automatic investments in the MMA Praxis Class of the Fund
from your bank account. Automatic investments can be as little as $50, once
you've invested the minimum required to open the account. You may elect at any
time to terminate your participation by writing to the Fund at P.O. Box 182446,
Columbus, OH 43218-2446. Death or legal incapacity will automatically terminate
your participation. Further, the Fund may terminate your participation upon 30
days' notice to you.
To invest regularly from your bank account:
o Complete the Automatic Investment Plan portion on your Account
Application.
Make sure you note:
- Your bank name, address and account number.
- The amount you wish to invest automatically (minimum $50).
- How often you want to invest (every month, twice a month or 4 times
a year).
o Attach a voided personal check.
Selling Your Shares
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As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.
You may sell your shares at any time. Your sales price will be the next
NAV after your sell order is received by the Fund, its transfer agent, or your
investment representative. Normally you will receive your proceeds within a week
after your request is received. See "General Policies on Selling Shares" below.
Instructions For Selling Shares
By Telephone (unless you have declined telephone sales privileges)
1. Call 1-800-9-PRAXIS with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer).
By Mail
1. Write a letter of instruction indicating:
o Your Fund and account number.
o Amount you wish to redeem.
o Address where your check should be sent.
o Account owner signature.
2. Mail to: MMA Praxis Mutual Funds, P.O. Box 182446, Columbus, OH 43218-2446
By Overnight Service
See instruction 1 above.
2. Send to: MMA Praxis Mutual Funds, c/o BISYS Fund Services, Attn: T.A.
Operations, 3435 Stelzer Road, Columbus, OH 43219
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Wire Transfer
You must indicate this option on your application.
Call 1-800-9-PRAXIS to request a wire transfer.
If you call by 12:00 noon Eastern Standard Time, your payment will generally be
wired on the same business day.
If you call by 4 p.m. Eastern Standard Time, your payment will normally be wired
to your bank on the next business day.
Note: Your financial institution may also charge a separate fee.
Automatic Withdrawal Plan
You can receive automatic payments from your account monthly, quarterly or
annually. The minimum withdrawal is $50. To activate this feature:
o Make sure you've checked the appropriate box on the Account
Application. Or call 1-800-9-PRAXIS.
o Include a voided personal check.
o Your account must have a value of $10,000 or more to start
withdrawals.
o If the value of your account falls below $500 due to your
withdrawals, you may be asked to add sufficient funds to bring the
account back to $500 within 60 days, or the Fund may close your
account and mail the proceeds to you.
Check Writing Privileges
By making the appropriate election on the application form, an MMA Praxis
Class shareholder may request a supply of checks which may be used to effect
redemptions from the Fund. The checks will be issued in the shareholder's name.
Checks may be drawn in any amount of $250 or more for MMA Praxis 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 Fund's MMA Praxis Class 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
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the check redemption procedure at any time or to impose additional fees
following notification to the Fund's shareholders.
An MMA Praxis Class shareholder must maintain a minimum $2,000 balance to
be eligible to elect the check writing privilege. If an account balance falls
below $2,000 for a non-retirement account only, the account will be charged a
$10.00 administrative fee by the Fund's MMA Praxis Class transfer agent. This
charge may be waived if the shareholder maintains at least $10,000 in all MMA
Praxis funds, based upon shareholder accounts with common taxpayer
identification numbers.
General Policies On Selling 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 the
MMA Praxis Class of the Fund following receipt by the Fund's MMA Praxis Class
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, Eastern Standard Time and on
the next Fund Business Day if the redemption request is received after 12:00
noon, Eastern Standard 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.
Redemptions In Writing Required
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which include each of
the following:
o Redemptions over $10,000.
o Your account registration or the name(s) in your account has changed
within the last 15 days.
o The check is not being mailed to the address on your account.
o The check is not being made payable to the owner of the account.
o The redemption proceeds are being transferred to another Fund
account with a different registration.
A signature guarantee can be obtained from a financial institution, such
as a bank, broker-dealer, credit union, clearing agency, or savings association.
Verifying Telephone Redemptions
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity. Given
these precautions, unless you have specifically indicated on your application
that you do not want the telephone redemption feature, you may be responsible
for any fraudulent telephone orders. If appropriate precautions have not been
taken, the Fund's MMA Praxis Class transfer agent may be liable for losses due
to unauthorized transactions.
Redemptions Within 15 Business Days Of Initial Investment
When you have made your initial investment by check, you cannot redeem any
portion of it until the Fund's MMA Praxis Class transfer agent is satisfied that
the check has cleared (which may require up to 15 days). You can avoid this
delay by purchasing shares with a certified check.
-13-
<PAGE>
Delayed Redemption Request
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.
Closing Of Small Accounts
If your Fund account falls below $500 due to your redemptions, the Fund
may ask you to increase your balance. If it is still below $500 after 60 days,
the Fund may close your account and send you the proceeds at the current NAV.
Undeliverable Redemption Checks
For any shareholder who chooses to receive distributions in cash: If
distribution checks are returned and marked as "undeliverable" or remain
uncashed for six months, your account will be changed automatically so that all
future distributions are reinvested in your account. Checks that remain uncashed
for six months will be canceled and the money reinvested in your account in the
Fund.
Exchanging Your Shares
- --------------------------------------------------------------------------------
Instructions For Exchanging Shares
You can exchange your shares in the MMA Praxis Class of the Fund for
shares of an MMA Praxis Mutual Fund (which are offered through a separate
prospectus). No transaction fees are charged for exchanges. If you wish to
exchange your MMA Praxis Class shares of the Fund, you may be required to pay
any applicable front-end sales charge.
You must meet the minimum investment requirements for the fund into which
you are exchanging. Exchanges from one fund to another are taxable. Exchanges
may be made by sending a signature guaranteed written request to MMA Praxis
Mutual Funds, P.O. Box 182446, Columbus, OH 43218-2446, or by calling
1-800-9-PRAXIS. Please provide the following information:
o Your name and telephone number.
o The exact name on your account and account number.
o Taxpayer identification number (usually your Social Security
number).
o Dollar value or number of shares to be exchanged.
o The name of the Fund from which the exchange is to be made and the
account number.
o The name of the Fund into which the exchange is being made. If this
is an existing account, please provide the account number.
See "Selling Your Shares" for important information about telephone
transactions.
Notes On Exchanges
To prevent disruption in the management of the Fund, due to market timing
strategies, exchange activity may be limited to 4 exchanges within a calendar
year.
-14-
<PAGE>
The registration and tax identification numbers of the two accounts must
be identical.
The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
When exchanging from a fund that has no sales charge or a lower sales
charge to a fund with a higher sales charge, you may pay the difference.
Be sure to read carefully the Prospectus of any fund into which you wish
to exchange shares.
MMA Praxis Individual Retirement Account ("IRA")
- --------------------------------------------------------------------------------
An MMA Praxis IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement programs.
MMA Praxis IRA contributions may be tax-deductible and earnings are
tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted or eliminated for individuals who participate in
certain employer pension plans and whose annual income exceeds certain limits.
Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn income on a tax-deferred basis. MMA Praxis offers
the following types of IRAs:
o Traditional o Education
o Roth o Simplified Employee Pension (SEP)
A SEP/IRA may be established on a group basis by an employer who wishes to
sponsor a tax-sheltered retirement program by making contributions into IRAs on
behalf of all eligible employees.
All MMA Praxis IRA distribution requests must be made in writing to the
Fund. Any additional deposits to an MMA Praxis IRA must distinguish the type and
year of the contribution.
For more information on an MMA Praxis IRA, or to request an MMA Praxis IRA
application, call the Fund at 1-800-9-PRAXIS. Shareholders are advised to
consult a tax adviser regarding IRA contribution and withdrawal requirements and
restrictions.
Savings Incentive Match Plans For Employees (Simple IRA Plans)
- --------------------------------------------------------------------------------
An MMA Praxis SIMPLE IRA Plan gives employers the ability to offer
tax-deferred IRA accounts to their employees that are funded with salary
reduction contributions and employer matching or non-elective contributions.
403(b)(7) Defined Contribution Plan
- --------------------------------------------------------------------------------
An MMA Praxis 403(b)(7) Defined Contribution Plan offers employers that
are tax-exempt organizations the ability to establish tax-deferred accounts for
their employees that also permit salary reduction contributions.
Directed Dividends
- --------------------------------------------------------------------------------
A shareholder with an account having a current market value of at least
$5,000 may elect to have all income dividends and capital gains distributions
reinvested in an MMA Praxis Fund (provided the other fund is maintained at its
minimum required balance). The entire directed dividend (100%) must be
reinvested into the other fund if this option is chosen. This option is
available only to the same shareholder involving funds with the same shareholder
registration.
The Directed Dividend Option may be modified or terminated by the Fund at
any time after notice to the participating shareholders. Participation in the
Directed Dividend Option may be terminated or changed by the shareholder at any
time by writing the Fund's MMA Praxis Class transfer agent.
-15-
<PAGE>
Automatic Voluntary Charitable Contributions To The Mennonite Foundation
- --------------------------------------------------------------------------------
The Mennonite Foundation, Inc. was organized as a not-for-profit, public
foundation in 1952 and received 501(c)(3) tax status in 1953. The Foundation's
primary purposes are to facilitate the missions of church institutions through a
wide range of planned giving and asset management services, and to provide
stewardship education seminars in church and other settings.
In keeping with the socially responsible objectives of the Fund, MMA
Praxis Class shareholders may elect to make automatic, voluntary contributions
of all or a percentage of their income dividends and/or capital gains to The
Mennonite Foundation, Inc. In order to make such an election, shareholders must
elect to receive income dividends and/or capital gain distributions in cash.
Shareholders may indicate their desire to contribute by completing the
appropriate section of the account application regarding dividend elections. In
order to qualify for the automatic charitable contributions plan, shareholders
are required to maintain a minimum balance of $10,000 in the account from which
voluntary contributions are made.
The Foundation will manage contributions received from shareholders in the
Foundation's "Charitable Gift Fund," under current operating procedures.
Shareholders may advise the Foundation, with respect to their contributions, as
to the identity of desired charitable distributees, and the possible timing and
amounts of distributions. The Charitable Gift Fund has a minimum distribution
amount of $100. The Foundation retains legal and equitable control of the
Charitable Gift Fund, and follows a published list of guidelines when
determining whether to make a distribution. Shareholders with an account balance
under $10,000 may also participate in The Mennonite Foundation Charitable Gift
Fund by making contributions directly to the Foundation.
In 1998, the Foundation disbursed approximately $23.2 million to church
and charitable organizations.
Contributions to the Foundation are charitable contributions, and subject
to tax law limitations, are tax deductible on the itemized tax return of the
contributor, although the contributor must nevertheless include in income the
income dividends and/or capital gains contributed to the Foundation.
Shareholders who contribute to the Foundation will receive an annual report of
Foundation activities during the year.
The directors of the Foundation serve in a voluntary capacity, and are not
paid directly or indirectly for their service to the Foundation, except for
expenses associated with directors' meetings.
You may obtain additional information, including the operating procedures
of the Charitable Gift Fund, by writing to The Mennonite Foundation, 1110 N.
Main Street, P.O. Box 483, Goshen, Indiana 46528.
Charitable Gift Option
- --------------------------------------------------------------------------------
The Charitable Gift Option allows certain shareholders of the MMA Praxis
Class of the Fund to designate all or any portion of their accounts to
automatically be transferred to a church or charitable organization at the death
of the shareholder. To participate in the Charitable Gift Option, shareholders
should call 1-800-9-PRAXIS for more information and to receive the necessary
enrollment forms. For a shareholder to change the Charitable Gift Option
instructions or to discontinue the feature, a written request must be sent to
the Fund's MMA Praxis Class transfer agent. It shall be the responsibility of
the shareholder to ascertain the tax-exempt qualification of a receiving
organization. Neither the Fund, nor the Fund's MMA Praxis Class transfer agent
will verify the qualifications of any receiving organizations, or issue any
charitable receipts. An investor should consult with his or her own tax counsel
and estate planner as to the availability and tax and probate consequences of
this feature of the Fund under applicable state or federal law.
-16-
<PAGE>
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.
Because the MMA Praxis Class bears a Shareholder Servicing Fee under the
Plan, the net income of and the dividends payable to the MMA Praxis Class will
be lower than the net income of and dividends payable to any other classes of
the Fund which do not bear such a fee. 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 purchase of shares in the Fund will be the purchase of an asset and
the shareholder's basis for its shares in the Fund will be its cost of the
shares, including any fees or expenses. The sale of shares in the Fund will be
the taxable disposition of an asset, with gain or loss recognized in an amount
equal to the difference between the shareholder's tax basis for the shares and
the proceeds received on the sale. The exchange of shares of one Portfolio for
shares of another Portfolio, if available, will also be treated as a taxable
disposition of the shares exchanged, on which gain or loss will be recognized.
In either case, loss recognition may be affected by the loss disallowance rules
of the Internal Revenue Code of 1986, as amended (the "Code").
The Fund intends to continue to qualify to be treated as a "regulated
investment company" under the Code. 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 expects that its distributions, as a result of its
investment objectives, will consist primarily of ordinary income. A shareholder
who elects to reinvest in additional shares will be treated for tax purposes as
if it had received and reinvested the cash dividend.
-17-
<PAGE>
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 regarding the supplying of their taxpayer identification
numbers and the reporting of income. 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 MMA Praxis 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), 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 MMA Praxis Class shares, a service fee equal to .25% per annum of
the MMA Praxis 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 MMA Praxis Class
shares provide that 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 MMA Praxis Class shares and (ii) preparing, printing
and delivering the Fund's prospectus to existing shareholders of the Fund and
preparing and printing application forms for shareholder accounts.
The Plan provides that the 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
-18-
<PAGE>
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 MMA
Praxis Class) 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 Individual Investor
Class, the Institutional Class, and the Broker Service Class of the Fund
(assuming reinvestment of all dividends and distributions). There are no
highlights for the MMA Praxis Class shares because there were no shares issued
in this Class during the fiscal year ended January 31, 1999. All classes have
substantially similar annual returns because the shares are invested in the same
portfolio of securities and the annual returns differ only to the extent the
classes do not have the same expenses. If the expenses of the MMA Praxis Class
are higher than the expenses of these other classes, then your annual returns
may be lower. 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>
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
September 13, 1999
Relating to the Prospectuses for the Institutional Class 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.,
each dated June 1, 1999 and the Prospectus for the MMA Praxis Class
Shares dated September 13, 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,
the Individual Investor Class Shares and the MMA Praxis 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 into
the SAI from the Fund's Annual Report. The Annual Report is available, without
charge, upon request by calling the toll-free number provided. The material
relating to the purchase, redemption and pricing of shares has been incorporated
by reference to the Prospectuses for each Class of shares.
This Statement of Additional Information is incorporated by reference into the
respective Prospectuses in its entirety.
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
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........10 Calculation of Performance Data.......................18
Investment Advisory and Other Services.....................11 Financial Statements .................................19
Brokerage Allocation and Other Practices...................15 Description of Ratings................................20
Capital Stock and Other Securities.........................15
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 for each Class of shares.
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.
-2-
<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 will never be more than 397 days after the Fund's
acquisition of the securities and normally will 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.
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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
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<PAGE>
only in debt obligations of the United States and domestic issuers, although
such obligations may be higher yielding when compared to the securities of the
United States and domestic issuers. In making foreign investments, therefore,
the Fund will give appropriate consideration to the following factors, among
others.
Foreign securities markets generally are not as developed or efficient as those
in the United States. Securities of some foreign issuers are less liquid and
more volatile than securities of comparable United States issuers. Similarly,
volume and liquidity in most foreign securities markets are less than in the
United States and, at times, volatility of price can be greater than in the
United States. The issuers of some of these securities, such as bank
obligations, may be subject to less stringent or different 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 debt obligations (variable amount master demand notes) 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
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to an unconditional demand feature but does qualify as a First Tier Eligible
Security and has a long-term rating by the Requisite NRSROs in one of the two
highest rating categories or, if unrated, is determined to be of comparable
quality by the Fund's Board of Directors. If an instrument is ever deemed to be
of less than high quality, the Fund either will sell it in the market or
exercise the demand feature.
The variable rate demand instruments in which the Fund may invest include
participation certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable rate, tax-exempt Municipal
Securities (expected to be concentrated in industrial revenue bonds) or taxable
debt obligations (variable amount master demand notes) owned by such
institutions or affiliated organizations. A participation certificate would give
the Fund an undivided interest in the obligation in the proportion that the
Fund's participation interest bears to the total principal amount of the
obligation and provides the demand repurchase feature described below. Where the
institution issuing the participation certificate does not meet the Fund's high
quality standards, the participation certificate is backed by an irrevocable
letter of credit or guaranty of a bank (which may be a bank issuing a confirming
letter of credit, or a bank serving as agent of the issuing bank with respect to
the possible repurchase of the participation certificate or a bank serving as
agent of the issuer with respect to the possible repurchase of the issue) or
insurance policy of an insurance company that the Board of Directors of the Fund
has determined meets the prescribed quality standards for the Fund. The Fund has
the right to sell the participation certificate back to the institution and,
where applicable, draw on the letter of credit, guarantee or insurance after no
more than 30 days' notice either on demand or at specified intervals not
exceeding 397 days (depending on the terms of the participation), for all or any
part of the full principal amount of the Fund's participation interest in the
security, plus accrued interest. The Fund intends to exercise a demand only (1)
upon a default under the terms of the bond documents, (2) as needed to provide
liquidity to the Fund in order to make redemptions of the Fund shares, or (3) to
maintain a high quality investment portfolio. The institutions issuing the
participation certificates may retain a service and letter of credit fee (where
applicable) and a fee for providing the demand repurchase feature, in an amount
equal to the excess of the interest paid on the instruments over the negotiated
yield at which the participation certificates were purchased by the Fund. The
total fees generally range from 5% to 15% of the applicable "prime rate"1 or
other interest rate index. With respect to insurance, the Fund will attempt to
have the issuer of the participation certificate bear the cost of the insurance,
although the Fund retains the option to purchase insurance if necessary, in
which case the cost of insurance will be an expense of the Fund subject to the
expense limitation on investment company 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
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1 The "prime rate" is generally the rate charged by a bank to its creditworthy
customers for short-term loans. The prime rate of a particular bank may
differ from other banks and will be the rate announced by each bank on a
particular day. Changes in the prime rate may occur with great frequency and
generally become effective on the date announced.
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<PAGE>
variable rate demand instruments may be higher or lower than current market
rates for fixed rate obligations or obligations of comparable quality with
similar maturities.
For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest rate
adjustment. The maturity of a variable rate demand instrument will be determined
in the same manner for purposes of computing the Fund's dollar-weighted average
portfolio maturity. If a variable rate demand instrument ceases to meet the
investment criteria of the Fund, it will be sold in the market or through
exercise of the repurchase demand.
When-Issued Securities
The Fund may purchase debt obligations offered on a "when-issued" or "delayed
delivery" basis. When so offered, the price, which is generally expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued securities takes place at a later date.
Normally, the settlement date occurs within one month of the purchase of debt
obligations; during the period between purchase and settlement, no payment is
made by the purchaser to the issuer and no interest accrues to the purchaser. To
the extent that assets of the Fund are not invested prior to the settlement of a
purchase of securities, the Fund will earn no income; however, it is intended
that the Fund will be fully invested to the extent practicable and subject to
the policies stated above. While when-issued securities may be sold prior to the
settlement date, it is intended that the Fund will purchase such securities with
the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a debt
obligation on a when-issued basis, it will record the transaction and reflect
the value of the security in determining its net asset value. The Fund does not
believe that the net asset value or income of the Fund's securities portfolios
will be adversely affected by their purchase of debt obligations on a
when-issued basis. The Fund will establish a segregated account in which it will
maintain cash and marketable securities equal in value to commitments for
when-issued securities. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date.
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
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<PAGE>
no ready market, securities subject to contractual restriction on resale,
certain investments in asset-backed and receivable-backed securities and
restricted securities (unless, with respect to these securities and 4(2) Paper,
the Fund's Directors continuously determine, based on the trading markets for
the specific restricted security, that it is liquid). The Directors may adopt
guidelines and delegate to the Sub-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
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<PAGE>
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;
(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 W.
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 is also a Director/Trustee of 15 other
funds in the Reich & Tang Fund Complex, and 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.
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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 & 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, 42 - 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, 35 - 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 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 July 30, 1999 there were 119,464,186 Institutional Class of shares
outstanding, 1,581,013 Broker Service Class of shares outstanding, 9,160,516
Individual Investor Class of shares outstanding and no MMA Praxis Class of
shares outstanding. As of July 30, 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 July 30, 1999:
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Name and Address % of Class Nature of Ownership
Institutional Class
Pax World Management Corp.
Balanced Fund
222 State Street
Portsmouth, NH 03801 84.86% Beneficial
Fifth Third Bank
Fifth Third Center
MD #1090 F2
Cincinnati, OH 45263 13.19% Record
Broker Service Class
H.G. Wellington & Co., Inc.
for the Benefit of Pax World
Money Market Fund Customers
14 Wall Street
New York, NY 10005 100.00% 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 July 30, 1999, the Adviser had over
$1,010,292,131 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 July 30, 1999,
was investment manager, adviser or supervisor with respect to assets aggregating
approximately $13.9 billion. In addition to the Fund, the Sub-Adviser acts as
investment manager and administrator of eighteen other investment companies and
also advises pension trusts, profit sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Sub-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 a broad array of investment styles
across a wide range of asset categories through more than seventeen
subsidiaries, divisions and affiliates offering a wide array of
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investment styles and products to institutional clients. Its business units, in
addition to the manager, include AEW Capital Management, L.P., Back Bay
Advisors, L.P., Capital Growth Management L.P., Greystone Partners, L.P., Harris
Associates, L.P., Jurika & Voyles, L.P., Kobrick Funds, LLC, Loomis, Sayles &
Company, L.P., New England Funds, L.P., Nvest Advisor Services, L.P., Nvest
Associates, Inc., Nvest Retirement Services, Nvest Services Company, Snyder
Capital Management, L.P., Vaughan, Nelson, Scarborough & McCullough, L.P., and
Westpeak Investment Advisors, L.P. These affiliates in the aggregate are
investment advisors or managers of more than 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, 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, its affiliates or
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
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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
The Fund's distributor is Reich & Tang Distributors, Inc., a Delaware
corporation with principal offices at 600 Fifth Avenue, New York, New York
10020.
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission requires that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
distribution and service plan (the "Plan") and, pursuant to the Plan, the Fund
has entered into a Distribution Agreement and a Shareholder Servicing Agreement
(with respect to the Individual Investor Class, Broker Service Class and the MMA
Praxis Class) with the Distributor as distributor of the Fund's shares.
Reich & Tang Asset Management, Inc. serves as the sole general partner for Reich
& Tang Asset Management L.P. and is the sole shareholder of the Distributor.
Under the Plan, the Fund and the Distributor will enter into a Shareholder
Servicing Agreement, with respect to the Fund's Individual Investor Class,
Broker Service Class and MMA Praxis Class shares. For its services under the
Shareholder Servicing Agreement (with respect to Individual Investor Class,
Broker Service Class and MMA Praxis Class shares only), the Distributor receives
from the Fund a fee equal to .25% per annum of the Individual Investor Class,
Broker Service Class and MMA Praxis 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,
Broker Service Class or MMA
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<PAGE>
Praxis 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.
For the Fund's fiscal year ended January 31, 1999, the amount payable to the
Distributor under the Distribution and Service Plan and Shareholder Servicing
Agreement adopted thereunder pursuant to Rule 12b-1 under the 1940 Act, totaled
$4,185 for the Individual Investor Class and $10 for the Broker Service Class,
$0 of which was waived.
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 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, Broker Service Class and MMA
Praxis 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, Broker Service Class
and MMA Praxis 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, Broker Service Class and MMA Praxis 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,
Broker Service Class and MMA Praxis 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, Broker Service Class and MMA Praxis Class shareholders.
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
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<PAGE>
agent for Individual Investor Class shares of the Fund. BISYS Fund Services,
Inc., 3435 Stelzer Road, Columbus, Ohio 43219, is the transfer agent for the MMA
Praxis 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.
The Fund is subdivided into four classes of shares of beneficial interest;
Institutional Class, Individual Investor Class, Broker Service Class and MMA
Praxis Class. Each share, regardless of Class, will represent an interest in the
same portfolio of investments and will have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) each
Class of shares will have different class designations; (ii) only the Individual
Investor Class, Broker Service Class and MMA Praxis Class shares will be
assessed a Shareholder Servicing Fee of .25% of the average daily net assets of
the Individual Investor Class, Broker Service Class and MMA Praxis Class shares
of the Fund pursuant to the Rule 12b-1 Distribution and Service Plan of the
Fund; (iii) only the
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holders of the Individual Investor Class, Broker Service Class and MMA Praxis
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, redemption and pricing of shares in the
prospectus for each Class of Shares is located in the Shareholder Information
section of each prospectus and 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 continue to qualify to be treated as a regulated investment
company under 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 distributed to shareholders
or on its 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. 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 as 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 backup 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, distributions
(whether requested to be 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
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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 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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<PAGE>
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%. There are no seven-day yields available for the MMA Praxis Class shares
since these shares were not yet in existence as of January 31, 1999.
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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<PAGE>
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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