PAX WORLD HIGH YIELD FUND INC, N-1A, 1999-07-01

PAX WORLD HIGH YIELD FUND INC
N-1A, 1999-07-01

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Bresler Goodman & Unterman, LLP
521 Fifth Avenue
New York, NY 10175

July 1, 1999

U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Pax World High Yield Fund, Inc.

Ladies and Gentlemen:

On behalf of our client, Pax World High Yield Fund, Inc. (the "Company"),
enclosed herewith for filing with the Securities and Exchange Commission is one
(1) Form N-1A, Registration Statement under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended.

Please do not hesitate to contact the undersigned or Lee D. Unterman, Esq.
of this office should you have any questions or comments with regard to any of
the foregoing or the attached Form N-1A.

Sincerely,

/s/ Kevin J. Lake

Kevin J. Lake

kjl/cs
Enclosure

<PAGE>

As filed with the Securities and Exchange Commission
on July 1, 1999

Registration No. __-_____

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT NO. |_|
POST-EFFECTIVE AMENDMENT NO. |_|

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. |_|
(Check appropriate box or boxes)

PAX WORLD HIGH YIELD FUND, INC.
(Exact name of registrant as specified in charter)

222 STATE STREET
PORTSMOUTH, NH 03801
(Address of Principal Executive Offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
800-767-1729

PAX WORLD MANAGEMENT CORP.
222 STATE STREET
PORTSMOUTH, NH 03801
ATTENTION: LAURENCE A. SHADEK
THOMAS W. GRANT
(Name and Address of Agent for Service)

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE
AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.

Registrant hereby elects, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, to register an indefinite number of shares by this
Registration Statement. In accordance with Rule 24f-2, a registration fee, in
the amount of $500.00, is being paid herewith.

Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.

<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)

<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
------------- --------

PART A

<S> <C> <C>
Item 1. Front and Back Cover Pages................. Front Cover Page; Back Cover Page

Item 2. Risk / Return Summary: Investments,
Risks and Performance...................... Risk / Return Summary: Investments, Risks and
Performance

Item 3. Risk / Return Summary: Fee Table........... Risk / Return Summary: Fee Table

Item 4. Investment Objectives, Principal Investment
Strategies and Related Risks............... Investment Objectives, Principal Investment
Strategies and Related Risks
Item 5. Management's Discussion of Fund
Performance................................ Not Applicable

Item 6. Management, Organization and Capital
Structure.................................. Management, Organization and Capital Structure
of the Fund

Item 7. Shareholder Information.................... (i) Shareholder Guide; (ii) Shareholder Services; and
(iii) Additional Information

Item 8. Distribution Arrangements.................. (i) Management, Organization and Capital Structure
of the Fund - Distribution; and (ii) Shareholder
Guide - How to Purchase Shares

Item 9. Financial Highlights Information........... Not Applicable

PART B

Item 10. Cover Page and Table of Contents.......... Cover Page; Table of Contents

Item 11. Fund History.............................. Fund History

Item 12. Description of the Fund and
Its Investments and Risks................. (i) Investment Objectives, Strategies and Philosophy;
(ii) Investments and Special Considerations; Risk
Factors; (iii) Investment Restrictions
</TABLE>

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<TABLE>
<CAPTION>
<S> <C> <C>
Item 13. Management of the Fund.................... (i) Management of the Fund; (ii) Investment Advisory and Other
Services - Adviser

Item 14. Control Persons and Principal Holders of
Securities................................ (i) Management of the Fund; (ii) Investment Advisory and Other
Services - Adviser

Item 15. Investment Advisory and Other
Services.................................. (i) Management of the Fund; (ii) Investment Advisory and Other
Services - Adviser; (iii) Portfolio Transactions and Brokerage

Item 16. Brokerage Allocation and Other
Practices................................. Portfolio Transactions and Brokerage

Item 17. Capital Stock and Other Securities........ Purchase, Redemption and Exchange of Fund Shares

Item 18. Purchase, Redemption and Pricing
of Shares................................. (i) Net Asset Value; (ii) Purchase, Redemption and Exchange of Fund
Shares

Item 19. Taxation of the Fund...................... Taxes

Item 20. Underwriters.............................. Investment Advisory and Other Services - Distribution

Item 21. Calculation of Performance Data........... Calculation of Performance Data

Item 22. Financial Statements...................... Financial Statements

</TABLE>

PART C

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED __________, 1999

PAX WORLD HIGH YIELD FUND, INC.

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<PAGE>

PART A

Prospectus Dated ___________, 1999

PAX WORLD HIGH YIELD FUND, INC.

A Diversified High Yield Fund
222 State Street, Portsmouth, NH 03801-3853
For shareholder account information: 800-372-7827
Portsmouth, NH office: 800-767-1729 / 603-431-8022
Website: http://www.paxfund.com

Pax World High Yield Fund, Inc. (the "Fund") is a mutual fund that seeks to
make a contribution to world peace by investing in companies that produce goods
and services that improve the quality of life and that are not, to any degree,
engaged in manufacturing defense or weapons-related products. To denote this
endeavor, the Fund adopted the name "Pax World".

The Fund's primary investment objective is to seek high current income. The
Fund will, however, also seek capital appreciation as a secondary objective to
the extent that such objective is consistent with its primary objective of
seeking high current income.

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.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

TABLE OF CONTENTS

Page

RISK / RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE.................. 3
What is the Fund's Investment Objective / Goal?.......................... 3
What are the Principal Investment Strategies of the Fund?................ 3
What are the Principal Risks of Investing in the Fund?................... 4
RISK / RETURN SUMMARY: FEE TABLE........................................... 5
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND RELATED RISKS.......................................................... 6
Investment Objectives.................................................... 6
Principal Investment Strategies.......................................... 6
Related Risks............................................................ 7
Convertible Securities................................................. 7
Corporate and Other Debt Securities.................................... 8
Foreign Securities..................................................... 9
Porfolio Turnover...................................................... 10
Securities of Financially and Operationally Troubled Issuers........... 10
Zero Coupon, Pay-in-Kind or Deferred Payment Securities................ 11
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
OF THE FUND................................................................ 11
Incorporation............................................................ 11
Description of Common Stock.............................................. 11
Officers and Directors................................................... 12
Adviser.................................................................. 12
Distribution............................................................. 13
Custodian and Transfer and Dividend Disbursing Agent..................... 14
Shareholder Meetings..................................................... 14
HOW THE FUND VALUES ITS SHARES............................................. 15
SHAREHOLDER GUIDE.......................................................... 15
How to Purchase Shares................................................... 15
In General............................................................. 15
Investing by Mail...................................................... 16
Investing by Telephone................................................. 16
Investing by Wire Transfer............................................. 17
How to Sell Your Shares.................................................. 17
In General............................................................. 17
Redemptions by Written Request......................................... 17
Redemptions by Telephone............................................... 18
Involuntary Redemptions................................................ 18
Waiver of Sales Charge................................................. 19
How to Exchange Your Shares.............................................. 19
In General............................................................. 19
Exchanges by Mail...................................................... 19
Exchanges by Telephone................................................. 20

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TAXES, DIVIDENDS AND DISTRIBUTIONS......................................... 20
Taxation of the Fund..................................................... 20
Taxation of Shareholders................................................. 20
Withholding Taxes........................................................ 20
Dividends and Distributions.............................................. 21
SHAREHOLDER SERVICES....................................................... 21
Automatic Reinvestment of Dividends and/or Distributions................. 21
Automatic Investment Plan................................................ 21
Tax-Deferred Retirement Plans............................................ 22
Systematic Withdrawal Plan............................................... 22
Reports to Shareholders.................................................. 22
Shareholder Inquiries.................................................... 22
THE PAX WORLD FUND FAMILY.................................................. 22
ADDITIONAL INFORMATION..................................................... 23

RISK / RETURN SUMMARY: INVESTMENTS,
RISKS AND PERFORMANCE

WHAT IS THE FUND'S INVESTMENT OBJECTIVE / GOAL?

WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE FUND?

Under normal market conditions, the Fund intends to invest at least
seventy-five percent (75%) of its total assets in fixed income securities (such
as bonds, notes and debentures), and at least sixty percent (60%) of its total
assets in high yield, lower rated fixed income securities (commonly referred to
as "junk bonds"). The Fund may also invest in (i) common stocks and other
equity-related securities, including equity securities that were attached to or
included in a unit with high yield fixed income securities at the time of
purchase, convertible securities and preferred stock, and (ii) debt and equity
securities of foreign issuers. In addition, the Fund may use hedging instruments
to try to manage investment risks or increase income. The Fund will not invest
in obligations issued or guaranteed by foreign government treasuries or the U.S.
Treasury, however, because the proceeds thereof may be used to manufacture
defense or weapons-related products or for a purpose which does not otherwise
comply with the Fund's socially conscious objectives and policies. In addition,
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. 20301) 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

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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.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

The principal risks of investing in the Fund are (i) price volatility, (ii)
credit risk, (iii) interest rate risk, (iv) risks associated with foreign
security investments, (v) risks associated with socially responsible investing,
and (vi) management risk.

- Price volatility refers to the fact that securities values tend to
fluctuate in response to activities specific to the company as well as
general market, economic and political conditions. These values can
fluctuate widely.

- Credit risk refers to the possibility that the issuer of a security
will be unable, or is perceived to be unable, to make interest
payments and/or repay the principal on its debt.

- Interest rate risk refers to fluctuations in the value of a
fixed-income security, including corporate and other debt instruments,
resulting from changes in interest rates. In general, if interest
rates rise, fixed-income security prices fall; and if interest rates
fall, fixed-income security prices rise. Interest rate risk is
generally greater for fixed-income securities with longer durations.

- The Fund's investments in foreign securities may subject the Fund to
the risks of political or economic instability in the country of the
issuer, the possibility of imposition of exchange controls and the
risk of currency fluctuations. In addition, securities denominated in
a foreign currency will be affected by changes in currency exchange
rates and in exchange control regulations, and costs may be incurred
by the Fund in connection with conversions between currencies.

- The Fund's socially conscious objectives may limit the availability of
investment opportunities more than is customary with other mutual
funds. Pax World Management Corp. (the "Adviser") believes, however,
that there are sufficient investment opportunities among companies
that meet the Fund's socially conscious objective to permit full
investment in securities, if the Adviser believes it is desirable.

- The Adviser strives to anticipate market movements and the risks
described above and actively manages the Fund based upon its judgment.
Management risk, which exists in varying amounts in most mutual funds,
refers to the possibility that the Adviser may fail to anticipate
these movements or risks, or to execute the Fund's strategy
effectively.

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Investors should understand that all investments involve risk and there can
be no guarantee against loss resulting from an investment in the Fund, nor can
there be any assurance that the Fund's investment objective will be attained.

RISK / RETURN SUMMARY: FEE TABLE

This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)(1):
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)............................. 0%
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, as applicable)............................. 0%
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends and Other Distributions
(as a percentage of offering price)............................. 0%
Redemption Fees (as a percentage of amount redeemed,
if applicable).................................................. 1.0%
Exchange Fees (as a percentage of average net assets)............. 0%

Estimated Annual Fund Net Operating Expenses (as a percentage of
average net assets) (expenses that are deducted from Fund assets):
Management Fee................................................... ___%
Distribution and/or Service (12b-1) Fees......................... ___%
Other Expenses................................................... ___%
Total Estimated Annual Fund Net Operating Expenses.................. ___%

(1) Pursuant to the rules of the National Association of Securities
Dealers, Inc., the aggregate initial sales charges, deferred sales charges and
asset-based sales charges on shares of the Fund may not exceed 6.25% of total
gross sales, subject to certain exclusions. This 6.25% limitation is imposed on
the Fund rather than on a per shareholder basis.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear, whether
directly or indirectly. "Other Expenses" include operating expenses of the Fund,
such as directors' and professional fees, registration fees, reports to
shareholders, transfer agency and custodian fees, and is based on amounts
estimated to be incurred for the year ended December 31, 1999.

Example

The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. It assumes that
you invest $10,000 in the Fund for the time periods

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indicated and then redeem all of your shares at the end of those periods. It
also assumes 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

$_______ $________

Shares of the Fund which are redeemed within six (6) months of purchase are
subject to a one percent (1.0%) contingent deferred sales charge which is not
reflected in the above table. The expenses shown in the above table would be
greater if the such contingent deferred sales charges were included.

As noted in the table above, the Fund does not charge sales fees (loads) on
reinvested dividends and other distributions and, therefore, the foregoing
example does not reflect sales charges (loads) on reinvested dividends and other
distributions.

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES AND RELATED RISKS

INVESTMENT OBJECTIVES

PRINCIPAL INVESTMENT STRATEGIES

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<PAGE>

In addition, the Fund reserves the right to hold temporarily other types of
securities, including commercial paper, bankers' acceptances, and high quality
money market securities or cash (foreign currencies or United States dollars),
in such proportions as, in the opinion of the Adviser, prevailing market,
economic or political conditions warrant. The Fund may also temporarily hold
cash and invest in high quality foreign or domestic money market instruments
pending investment of proceeds from new sales of Fund shares or to meet ordinary
daily cash needs.

Consistent with its social criteria, the Fund will seek investments in
companies that produce goods and services that improve the quality of life and
are not to any degree engaged in manufacturing defense or weapons-related
products. By way of illustration, the Fund will invest in such industries as
building supplies, computer software, education, food, health care, household
appliances, housing, leisure time, pollution control, publishing, retail,
technology and telecommunications, among others. The Fund will endeavor (but is
not required) to invest in companies which have adopted and administer fair
employment and pollution control policies to the extent information reflecting
such policies and administrative practices is available to the Fund.

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 if five percent
(5%) or more of the gross sales of such companies are derived from contracts
with the United States Department of Defense, (iii) other companies contracting
with the United States Department of Defense if five percent (5%) or more of the
gross sales of such companies are derived from contracts with the United States
Department of Defense, and (iv) companies which derive revenue from the
manufacture of liquor, tobacco and/or gambling products.

In order to properly supervise a securities portfolio containing the
limitations described above, care must be exercised to continuously monitor
developments of the companies whose securities are included in the portfolio.
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.

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.

In addition, the Fund is subject to certain investment restrictions which,
like its investment objective, constitute fundamental policies. Fundamental
policies cannot be changed without the approval of a majority of the Fund's
outstanding voting securities (which is defined as the vote at a special or
annual meeting of the shareholders of the Fund, duly called, (i) of sixty-seven
percent (67%) of the voting securities present at such meeting if the holders of
more than fifty percent (50%) of the outstanding voting securities are present
or represented by proxy, or (ii) of more than fifty percent (50%) of the
outstanding voting securities, whichever is less). Investment policies that are
not fundamental may be modified by the Board of Directors of the Fund.

RELATED RISKS

Convertible Securities

A convertible security can be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the same
or a different issuer. Convertible securities are senior to

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common stocks in a corporation's capital structure, but are usually subordinated
to similar nonconvertible securities. While providing a fixed income stream
(generally higher in yield than the income derivable from a common stock but
lower than that afforded by a similar nonconvertible security), a convertible
security also affords an investor the opportunity, through its conversion
feature, to participate in the capital appreciation dependent upon a market
price advance in the convertible security's underlying common stock.

In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security) or
its "conversion value" (i.e., its value upon conversion into its underlying
common stock). The price of a convertible security is influenced, in part, by
the market value of the security's underlying stock. The price of a convertible
security tends to increase as the market value of the underlying stock rises,
and it tends to decrease as the market value of the underlying stock declines.
While no securities investment is without some risk, investments in convertible
securities generally entail less risk than investments in the common stock of
the same issuer.

Corporate and Other Debt Securities

The Fund may invest in corporate and other debt obligations of domestic and
foreign issuers. Such securities are used by issuers to borrow money from
investors. The issuer pays the investor a fixed or variable rate of interest and
are required to repay the amount borrowed at maturity.

Investment grade debt securities are rated within the four highest quality
grades as determined by Moody's Investors Service (Moody's) (currently Aaa, Aa,
A and Baa for bonds), or Standard & Poor's Ratings Group (S&P) (currently AAA,
AA, A and BBB for bonds), or by another nationally recognized statistical rating
organization. Debt rated BB, B, CCC, CC, C and D by Standard & Poor's, and
debt rated Ba, B, Caa, Ca and C by Moody's is regarded by the rating agency, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
Within this category, BB/Ba indicates the lowest degree of speculation and D/C
the highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions. Similarly, debt rated Ba or BB and
below is regarded by the relevant rating agency as speculative. Debt rated C by
Standard & Poor's is the lowest rated debt that is not in default as to
principal or interest and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing. Such securities
are also generally considered to be subject to greater risk than securities with
higher ratings with regard to a deterioration of general economic conditions.
Debt rated D by Standard & Poor's is in payment default. Moody's does not have a
D rating. These ratings, however, represent the rating agencies' opinions
regarding credit quality and are not a guarantee of quality. Rating agencies
attempt to evaluate the safety of principal and interest payments and do not
evaluate the risks of fluctuations in market value. Also, rating agencies may
fail to make timely changes in credit ratings in response to subsequent events,
so that an issuer's current financial condition may be better or worse than a
rating indicates.

Corporate and other debt securities are subject to the risk of an issuer's
inability to meet principal and interest payments on the obligations (credit
risk) and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). In addition, lower rated or
unrated (i.e., high yield or high risk) securities (commonly referred to as
"junk bonds") are more likely to react to developments affecting credit and
market risks than are more highly rated securities, which react primarily to
movements in the general level of interest rates.

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Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Fund experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the Fund's portfolio and increasing
the exposure of the Fund to the risks of high yield securities.

Under adverse economic conditions, there is also a risk that highly
leveraged issuers may be unable to service their debt obligations or to repay
their obligations upon maturity. During an economic downturn or recession,
securities of highly leveraged issuers are more likely to default than
securities of higher rated issuers. In addition, the secondary market for high
yield securities, which is concentrated in relatively few market makers, may not
be as liquid as the secondary market for more highly rated securities. Under
adverse market or economic conditions, the secondary market for high yield
securities could contract further, independent of any specific adverse changes
in the condition of a particular issuer. As a result, the Adviser could find it
more difficult to sell these securities or may be able to sell the securities
only at prices lower than if such securities were widely traded. Under
circumstances where the Fund owns the majority of an issue, market and credit
risks may be greater.

Investors should carefully consider the relative risks of investing in high
yield securities and understand that such securities are not generally meant for
short term investing.

Foreign Securities

The Fund is permitted to invest in foreign corporate, as well as
government, securities, provided the proceeds of such government securities are
earmarked for a specific purpose that complies with the investment objectives
and policies of the Fund. "Foreign government securities" include debt
securities issued or guaranteed, as to payment of principal and interest, by
quasi-governmental entities, governmental agencies, supranational entities and
other governmental entities (collectively, "Government Entities") of foreign
countries denominated in the currencies of such countries or in U.S. dollars
(including debt securities of a Government Entity in any such country
denominated in the currency of another such country). Debt securities of
"quasi-governmental entities" are issued by entities owned by a national, state,
or equivalent government or are obligations of a political unit that are not
backed by the national government's "full faith and credit" and general taxing
powers. A "supranational entity" is an entity constituted by the national
governments of several countries to promote economic development. Examples of
such supranational entities include, among others, the Asian Development Bank,
the European Investment Bank and the World Bank (International Bank for
Reconstruction and Development).

The Fund believes that in many instances such foreign securities may
provide higher yields than securities of domestic issuers which have similar
maturities and quality. Many of these investments currently enjoy increased
liquidity, although under certain market conditions, such securities may be less
liquid than the securities of United States corporations, and are certainly less
liquid than securities issued or guaranteed by the United States Government, its
instrumentalities or agencies.

Foreign investment involves certain risks, which should be considered
carefully by an investor in the Fund. These risks include political or economic
instability in the country of issue, the difficulty of predicting international
trade patterns, the possibility of imposition of exchange controls and the risk
of currency fluctuations. Such securities may also be subject to greater
fluctuations in price than securities issued by United States corporations or
issued or guaranteed by the United States Government, its instrumentalities or
agencies. In addition, there may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of securities exchanges, brokers and listed

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companies abroad than in the United States, and, with respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation or
diplomatic developments which could affect investment in those countries. In the
event of a default of any such foreign debt obligations, it may be more
difficult for the Fund to obtain or to enforce a judgment against the issuers of
such securities. Foreign currency denominated securities may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and costs may be incurred in connection with conversions between
various currencies. It may not be possible to hedge against the risks of
currency fluctuations.

Portfolio Turnover

As a result of the investment policies described above, the Fund may engage
in a substantial number of portfolio transactions. While as a matter of policy,
the Fund will try to limit the turnover of its portfolio, it is possible that,
as a result of the Fund's investment policies and social criteria, its portfolio
turnover rate may exceed seventy-five percent (75%), although the Fund's
portfolio turnover rate is not expected to exceed one hundred fifteen percent
(115%). The portfolio turnover rate is generally the percentage computed by
dividing the lesser of portfolio purchases or sales (excluding all securities,
including options, whose maturities or expiration date at acquisition were one
year or less) by the monthly average value of the portfolio. High portfolio
turnover (over one hundred fifteen percent (115%)) involves correspondingly
greater brokerage commissions and other transaction costs, which are borne
directly by the Fund. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders, are
treated as ordinary income. As a result, a proportionately greater amount of
distributions to shareholders may be taxed as ordinary income rather than
long-term capital gains compared to investment companies with lower portfolio
turnover.

Securities of Financially and Operationally Troubled Issuers

The Fund may invest in debt or equity securities of financially troubled or
bankrupt companies (financially troubled issuers) and in debt or equity
securities of companies that in the view of the Adviser are currently
undervalued, out-of-favor or price depressed relative to their long-term
potential for growth and income (operationally troubled issuers). Although the
Fund will invest in select companies which in the view of the Adviser have the
potential over the long term for capital growth, there can be no assurance that
such financially or operationally troubled companies can be successfully
transformed into profitable operating companies.

It is anticipated that many of such portfolio investments may not be widely
traded and that the Fund's position in such securities may be substantial
relative to the market for such securities. As a result, the Fund may experience
delays and incur losses and other costs in connection with the sale of its
portfolio securities. In addition, securities of financially troubled issuers
are more volatile than securities of companies not experiencing financial
difficulties. The market prices of such securities are subject to erratic and
abrupt market movements and the spread between bid and asked prices may be
greater than normally expected. Securities of financially troubled issuers are
also more likely to go into default than securities of other issuers during an
economic downturn or recession. In addition, the securities of financially and
operationally troubled issuers may require the Adviser to participate in
bankruptcy proceedings, reorganizations or financial restructurings on behalf of
the Fund. To the extent the Fund invests in such securities, it may have a more
active participation in the affairs of issuers than is generally assumed by an
investor. This may subject the Fund to litigation risks or prevent the Fund from
disposing of securities. In a bankruptcy or other proceedings, the Fund as a
creditor may be unable to enforce its rights in any

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collateral or may have its security interest in any collateral challenged,
disallowed or subordinated to the claims of the creditors.

Zero Coupon, Pay-In-Kind or Deferred Payment Securities

The Fund may invest in zero coupon, pay-in-kind or deferred payment
securities. Zero coupon securities are securities that are sold at a discount to
par value and on which interest payments are not made during the life of the
security. Upon maturity, the holder is entitled to receive the par value of the
security. While interest payments are not made on such securities, holders of
such securities are deemed to have received annually "phantom income." The Fund
accrues income with respect to these securities for federal income tax and
accounting purposes prior to the receipt of cash payments. Pay-in-kind
securities are securities that have interest payable by delivery of additional
securities. Upon maturity, the holder is entitled to receive the aggregate par
value of the securities. Deferred payment securities are securities that remain
a zero coupon security until a predetermined date, at which time the stated
coupon rate becomes effective and interest becomes payable at regular intervals.
Zero coupon, pay-in-kind and deferred payment securities may be subject to
greater fluctuation in value and lesser liquidity in the event of adverse market
conditions than comparable rated securities paying cash interest at regular
intervals.

There are certain risks related to investing in zero coupon, pay-in-kind
and deferred payment securities. These securities generally are more sensitive
to movements in interest rates and are less liquid than comparably rated
securities paying cash interest at regular intervals. Consequently, such
securities may be subject to greater fluctuation in value. During a period of
severe market conditions, the market for such securities may become even less
liquid. In addition, as these securities do not pay cash interest, the Fund's
investment exposure to these securities and their risks, including credit risk,
will increase during the time these securities are held in the Fund's portfolio.
Further, to maintain its qualification for pass-through treatment under the
federal tax laws, the Fund is required to distribute income to its shareholders
and, consequently, may have to dispose of its portfolio securities under
disadvantageous circumstances to generate the cash, or may have to leverage
itself by borrowing the cash to satisfy these distributions, as they relate to
the distribution of "phantom income" and the value of the paid-in-kind interest.
The required distributions will result in an increase in the Fund's exposure to
such securities.

MANAGEMENT, ORGANIZATION AND CAPITAL
STRUCTURE OF THE FUND

INCORPORATION

The Fund was incorporated under the laws of the State of Delaware on June
15, 1999. The Fund is registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company commonly known as a mutual fund.

DESCRIPTION OF COMMON STOCK

The Fund is currently authorized to issue 25,000,000 shares of Common
Stock, $1.00 par value per share. Shares of the Fund, when issued, are fully
paid, non-assessable, fully transferable and

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redeemable at the option of the holder. Shares are also redeemable at the option
of the Fund under certain circumstances as described under "Shareholder Guide --
How to Sell Your Shares" below.

Each share of common stock is equal as to earnings, assets and voting
privileges. There are no conversion, preemptive or other subscription rights. In
the event of liquidation, each share of common stock of the Fund is entitled to
its portion of all of the Fund's assets after all debts and expenses of the Fund
have been paid. The Fund's shares do not have cumulative voting rights for the
election of Directors.

OFFICERS AND DIRECTORS

The Fund's officers conduct and supervise the daily business operations of
the Fund. The Fund's Board of Directors, in addition to overseeing the Adviser,
decides upon matters of general policy. The Fund's Adviser furnishes daily
investment advisory services. Members of the Board of Directors of the Fund are
reimbursed for their travel expenses for attending meetings of the Board of
Directors plus $300.00 to affiliated directors and $1,000.00 to unaffiliated
directors. In addition, the Fund pays $500.00 to each member of the Audit
Committee for attendance at each meeting of the Audit Committee, plus
reimbursement for travel expenses incurred in connection with attending such
meetings.

ADVISER

Pax World Management Corp., 222 State Street, Portsmouth, NH 03801-3853
(the "Adviser"), is the adviser to the Fund. It was incorporated in 1970 under
the laws of the State of Delaware. Pursuant to the terms of an Advisory
Agreement entered into between the Fund and the Adviser (the "Advisory
Agreement"), the Adviser, subject to the supervision of the Board of Directors
of the Fund, is responsible for managing the assets of the Fund in accordance
with the Fund's investment objective, investment program and policies. As of
December 31, 1998, the Adviser had over $863,000,000 in assets under management
by virtue of serving as the adviser to the Pax World Fund, Incorporated, the Pax
World Growth Fund, Inc. and the Pax World Money Market Fund, Inc., a socially
responsible money market fund which is being advised by the Adviser for the
specific purpose of assuring that the social responsibility screens used by such
fund are the same as those applied to the Fund. The Adviser has no clients other
than the Fund, the Pax World Fund, the Pax World Growth Fund and the Pax World
Money Market Fund, although the Adviser may undertake to advise other clients in
the future.

Pursuant to the terms of the Advisory Agreement, the Adviser will be
compensated as follows: in the event that the average daily net assets of the
Fund are less than $5,000,000, the Adviser will be compensated by the Fund for
its services at an annual rate of $25,000; in the event that the average daily
net assets of the Fund are equal to or in excess of $5,000,000, the Adviser will
be compensated by the Fund for its services at an annual rate of one percent
(1%) of average daily net assets up to and including $25,000,000 and
three-quarters of one percent (.75%) of average daily net assets in excess of
$25,000,000.

The Adviser has, however, agreed to supply and pay for such services as are
deemed by the Board of Directors of the Fund to be necessary or desirable and
proper for the continuous operations of the Fund (excluding all taxes and
charges of governmental agencies and brokerage commissions incurred in
connection with portfolio transactions) which are in excess of one and one-half
percent (1.5%) of the average daily net assets of the Fund per annum. Such
expenses include (i) management and distribution fees; (ii) the fees of
affiliated and unaffiliated Directors; (iii) the fees of the Fund's custodian
and transfer agent; (iv) the fees of the Fund's legal counsel and independent
accountants; and (v) expenses related to

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shareholder communications including all expenses of shareholders' and Board of
Directors' meetings and of preparing, printing and mailing reports, proxy
statements and prospectuses to shareholders.

Mr. Thomas W. Grant, the President of the Adviser, is also the President of
H. G. Wellington & Co., Inc., 14 Wall Street, New York, NY 10005 (the
"Distributor"), and has been associated with that firm since 1991. Mr. Grant
served previously with the firm of Fahnestock & Co. for twenty-six years as a
partner, managing director and senior officer. His duties encompassed branch
office management, corporate finance, syndications and municipal and corporate
bonds. Mr. Grant serves as a member of the Board of Directors of the Fund.

Mr. Laurence A. Shadek, the Chairman of the Board of Directors of the
Adviser, is also an Executive Vice-President of the Distributor and, together
with members of his family, owns a twenty-six and sixty-seven one hundredths
percent (26.67%) interest in the Distributor. Mr. Shadek has been associated
with that firm since March 1986. He was previously associated with Stillman,
Maynard & Co., where he was a general partner. Mr. Shadek's investment
experience includes twelve years as a limited partner and Account Executive with
the firm Moore & Schley. Mr. Shadek serves as a member of the Board of Directors
of the Fund.

Ms. Diane Keefe, an employee of the Adviser, is the Portfolio Manager of
the Fund. She is the person responsible for the day-to-day management of the
Fund's portfolio. Ms. Keefe received her Bachelor of Arts degree in Political
Economy from Wellesley College and a Masters of Business Administration in
Finance from Columbia University Graduate School of Business. From 1984 to 1985,
Ms. Keefe was an Associate in the Municipal Investment Banking Division of
PaineWebber, Inc. In 1986, Ms. Keefe became a Vice President of Oppenheimer
Government Securities, Inc. and in 1987 became a Vice President of Dillon, Read
& Co. where she was engaged in the institutional sales of mortgage backed
securities until 1988 and specialized in the institutional sale of preferred
stock and provided advice with respect to bond and preferred stock repurchase
programs until 1989. Prior to joining the Adviser in 1999, Ms. Keefe was a
Senior Vice President in the Taxable Fixed Income Department of Dillon, Read &
Co., Inc. from 1989 until its merger with Swiss Bank Corp. in September 1998 at
which time Ms. Keefe was appointed as a Director in the Rates Division of Swiss
Bank Corp. where she continued her specialization in the global high yield
securities market. Ms. Keefe is a Chartered Financial Analyst and a member of
the New York Society of Securities Analysts and the Association of Investment
Management and Research. In addition, Ms. Keefe has served on the Co-op America
Board of Directors for over 10 years and has served as its Chairperson for the
last 3 years. Ms. Keefe is also a Co-Chairperson of the Peace and Service
Committee and a member of the Finance Committee of the Wilton, CT Monthly
Meeting, Religious Society of Friends (Quakers) and a member of the Board of
Directors of the Norwalk, CT Land Trust.

The Adviser is responsible for decisions to buy and sell securities for the
Fund and the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. In placing orders for portfolio
securities of the Fund, the Fund is required to give primary consideration to
obtaining the most favorable price and efficient execution. Within the framework
of this policy, the Fund will consider the research and investment services
provided by brokers and dealers who effect or are parties to portfolio
transactions of the Fund. Orders may be directed to any broker including, to the
extent and in the manner permitted by applicable law, the Distributor and its
affiliates.

DISTRIBUTION

The Fund maintains a distribution expense plan (the "Plan") pursuant to
Rule 12b-1 under the Investment Company Act that allows the Fund to pay
distribution and other fees for the sale and distribution of the Fund's shares
and for services provided to the Fund's shareholders. Because these fees

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are paid out of the Fund's assets on an on-going basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.

The Plan provides that the Fund may incur distribution expenses of up to
twenty-five hundredths of one percent (.25%) per annum of its average daily net
assets to finance activity which is primarily intended to result in the sale of
Fund shares. Such expenses include (but are not limited to) travel and telephone
expenses, preparation and distribution of sales literature and advertising,
compensation to be paid to and expenses to be incurred by officers, directors
and/or employees of the Fund, or other third parties for their distributional
service if sales of Fund shares are made by such third parties during a fiscal
year. So long as the Fund is operating within such limitation, however, the Fund
may pay to one or more of its 12b-1 distributors (i) up to twenty-five
hundredths of one percent (.25%) per annum of its average daily net assets for
personal service and/or the maintenance of shareholder accounts as defined by
Rule 2830 of the National Association of Securities Dealers Rules of Conduct,
and (ii) total distribution fees (including the service fee of .25 of 1%) up to
thirty-five hundredths of one percent (.35%) per annum of its average daily net
assets.

The Plan may be terminated at any time, without penalty, by (a) the vote of
a majority of the members of the Board of Directors of the Fund who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan or
(b) the vote of the holders of a majority of the outstanding shares of the Fund.
If the Plan is terminated, the payment of fees to third parties under the Plan
would be discontinued.

Pursuant to the Plan, the Fund has entered into a distribution agreement
(the "Distribution Agreement") with the Distributor. Under the Distribution
Agreement, the Distributor serves as distributor of the Fund's shares and, for
nominal consideration and as agent for the Fund, solicits orders for the
purchase of Fund shares, provided, however, that orders are not binding on the
Fund until accepted by the Fund as principal.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110
(the "Custodian"), serves as the custodian for the Fund's portfolio securities
and cash and, in that capacity, maintains certain financial and accounting books
and records pursuant to an agreement with the Fund.

PFPC, Inc., 400 Bellevue Parkway, Wilmington, DE 19809 (the "Transfer
Agent"), serves as the transfer agent and dividend disbursing agent for the Fund
and in those capacities maintains certain books and records for the Fund.
Shareholder inquiries relating to a shareholder account should be directed to
the Transfer Agent at Pax World Fund Family, P.O. Box 8930, Wilmington, DE
19899-8930.

SHAREHOLDER MEETINGS

The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings of
shareholders unless, for example, the election of directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of ten percent
(10%) or more of the Fund's outstanding shares for the purpose of voting on the
removal of one or more directors or to transact any other business.

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<PAGE>

HOW THE FUND VALUES ITS SHARES

The Fund's net asset value per share or "NAV" is determined by subtracting
its liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares. For valuation purposes, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents. The
Board of Directors of the Fund has fixed the specific time of day for the
computation of the Fund's NAV to be as of [4:00] P.M., New York time.

Portfolio securities are valued on the basis of market quotations or, if
not readily available, at fair value as determined in good faith under
procedures established by the Fund's Board of Directors.

The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem shares have been received by the Fund or days on which changes in the
value of the Fund's portfolio securities do not materially affect the NAV. The
New York Stock Exchange is closed on the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

SHAREHOLDER GUIDE

HOW TO PURCHASE SHARES

In General

Shares of the Fund are offered for sale by the Fund on a continuous basis
at the NAV. The Fund will compute its NAV once daily as of 4:00 P.M., New York
time, on days that the New York Stock Exchange is open for trading except on
days on which no orders to purchase, sell or redeem shares have been received by
the Fund or days on which changes in the value of the Fund's portfolio
securities do not materially affect the NAV. NAV is computed by dividing the
value of the Fund's net assets (i.e., the value of its assets less liabilities)
by the total number of shares of the Fund outstanding. The Fund's investments
are valued on the basis of market value or, where market quotations are not
readily available, fair value as determined in good faith under procedures
established by the Fund's Board of Directors.

If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the New York Stock Exchange (currently 4:00 P.M., New
York time) on a business day, Fund shares will be purchased at the NAV
determined as of the close of trading on the floor of the New York Stock
Exchange on that day; otherwise, Fund shares will be purchased at the NAV
determined as of the close of trading on the floor of the New York Stock
Exchange on the next business day, except where shares are purchased through
certain financial institutions that have entered into agreements with the Fund
as provided below.

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<PAGE>

time, on the following business day) will be based on the NAV, determined as of
the close of trading on the floor of the New York Stock Exchange on the day that
such order was received by such financial institution. Otherwise, the orders
will be based on the next determined NAV. It is the financial institution's
responsibility to transmit orders so that they will be received by the Transfer
Agent or such other entity on a timely basis.

If a stock certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares.

The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares.

Some prospective purchasers of Fund shares may be effecting transactions
through a securities broker-dealer which may result in transaction and other
fees and charges, including postage and handling charges, by such broker-dealer.
Such transaction and other fees and charges would not be incurred if such
purchase transactions were made directly with the Fund.

Investing by Mail

Prospective shareholders may purchase shares of the Fund by completing and
signing the "New Account Application" enclosed with this Prospectus and sending
the application, together with a check to the Transfer Agent at Pax World Fund
Family, P.O. Box 8930, Wilmington, DE 19899-8930 or by overnight delivery c/o
PFPC, Inc., 400 Bellevue Parkway, Wilmington, DE 19809. Purchases without full
payment will not be processed until payment is received. A confirmation of the
purchase will be issued showing the account number and number of shares owned
and the ownership of shares shall be recorded on the books of the Transfer Agent
in an account under the shareholder's name. Prospective shareholders who wish to
register their account in the name of a beneficiary for the purposes of
transferring their account upon their death may do so subject to the following
understanding: the laws of the state listed as the shareholder's address at the
time of registration shall govern such transfer if such state has adopted the
Uniform Transfer on Death Securities Registration Act; otherwise the Uniform
Transfer on Death Securities Registration Act, as adopted by the State of
Delaware, shall apply.

Investing by Telephone

In order to purchase shares by telephone, you must authorize telephone
purchases on your initial application form or by written notice to the Transfer
Agent. Thereafter, you may call the Fund at 800-372- 7827 (toll-free) to execute
a telephone purchase of shares, on weekdays, except holidays, between the hours
of 8:00 A.M. and 6:00 P.M., New York time. For your protection and to prevent
fraudulent purchases, your telephone call may be recorded and you will be asked
to provide your personal identification number. A written confirmation of the
purchase transaction will be sent to you. Neither the Fund nor its agents will
be liable for any loss, liability or cost which results from acting upon
instructions reasonably believed to be genuine under the foregoing procedures.
All purchases will be made on the basis of the NAV of the Fund next determined
after the funds are received.

In periods of severe market or economic conditions, the telephone purchase
of shares may be difficult to implement and you should make purchases by mail by
writing to the Transfer Agent at the address noted above.

The Fund may accept telephone orders from broker-dealers which have been
previously approved by the Fund by telephoning 800-635-1404 (toll-free). It is
the responsibility of such broker-dealers to promptly forward purchase orders
and payments for such orders to the Fund. The Fund reserves the right

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to cancel any purchase order for which payment has not been received by the
third (3rd) business day following the investment.

Investing by Wire Transfer

Shareholders may purchase shares of the Fund (other than initial purchases)
by wire transfer. To do so, you must (i) telephone the Transfer Agent at
800-372-7827 (toll-free) (individual shareholders) or 800-635-1404 (toll-free)
(broker/dealers) to advise the Transfer Agent that you would like to purchase
shares of the Fund by wire transfer and then (ii) give instructions to your bank
to transfer funds by wire to the following account:

Bank Name: PNC Bank, Philadelphia, PA
ABA Number: 031-0000-53
Account Name: Pax World High Yield Fund, Inc.
Account No.: 85-5100-7715
Further Credit: Name of Shareholder and Account Number

If you arrange for receipt by the Custodian of federal funds prior to
4:00 P.M., New York time, on a business day, you may purchase shares of the
Fund as of that day.

HOW TO SELL YOUR SHARES

In General

You can redeem shares of the Fund at any time for cash at the NAV per share
next determined after the redemption request is received in proper form by the
Transfer Agent, minus a contingent deferred sales charge of one percent (1.0%)
for shares redeemed within six (6) months of purchase. In some cases, however,
sales are not subject to a contingent deferred sales charge, and the sale price
is the NAV.

Redemptions by Written Request

If you hold shares in non-certificate form, a written request for
redemption signed by you exactly as the account is registered is required. If
you hold certificates, the certificates signed in the names(s) shown on the face
of the certificates, must be received by the Transfer Agent in order for the
redemption request to be processed. If redemption is requested by a corporation,
partnership, trust or fiduciary, written evidence of authority acceptable to the
Transfer Agent must be submitted before such request will be accepted. All
correspondence and documents concerning redemptions should be directed to the
Transfer Agent at Pax World Fund Family, P.O. Box 8930, Wilmington, DE
19899-8930 or by overnight delivery c/o PFPC, Inc., 400 Bellevue Parkway,
Wilmington, DE 19809.

If the proceeds of the redemption (i) exceed $10,000.00 (unless the record
owner has provided to the Transfer Agent a Shareholder Redemption Option form
authorizing the Transfer Agent to redeem shares of the Fund upon written
instructions without a signature guarantee), (ii) are to be paid to a person
other than the record owner, (iii) are to be sent to an address other than the
address on the Transfer Agent's records or within thirty (30) days after the
Transfer Agent has been notified of an address change, or (iv) are to be paid to
a corporation, partnership, trust or fiduciary, the signature(s) on the
redemption request and on the certificates, if any, or stock power must be
guaranteed by an "eligible guarantor institution." An

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"eligible guarantor institution" includes any domestic bank or trust company,
broker, dealer, clearing agency or savings association who are participants in a
medallion program recognized by the Securities Transfer Agents Association. The
three recognized medallion programs are Securities Transfer Agents Medallion
Program (STAMP), Stock Exchanges Medallion Program (SEMP) and the New York Stock
Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees which are
not a part of these programs will not be accepted. The Transfer Agent reserves
the right to request additional information from, and make reasonable inquiries
of, any eligible guarantor institution.

Payment for shares presented for redemption will be made by check within
seven (7) days after receipt by the Transfer Agent of the certificate and/or
written request except as indicated below. Such payment may be postponed or the
right of redemption suspended at times (i) when the New York Stock Exchange is
closed for other than customary weekends and holidays, (ii) when trading on such
Exchange is restricted, (iii) when an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to determine the value of
its net assets, or (iv) during any other period when the Securities and Exchange
Commission (the "SEC"), by order, so permits; provided that applicable rules and
regulations of the SEC shall govern as to whether the conditions prescribed in
(ii), (iii) or (iv) exist.

Payment for redemption of recently purchased shares will be delayed until
the Fund or the Transfer Agent has been advised that the purchase check has been
honored, up to fifteen (15) days from the time of receipt of the purchase check
by the Transfer Agent. Such delay may be avoided by purchasing shares by wire or
by certified or official bank check.

Redemptions by Telephone

Redemptions by telephone must be in amounts of at least $1,000.00 and may
not be for more than $10,000.00 in the aggregate in any thirty (30) day period.
In addition, the proceeds from a telephone redemption may be paid only to the
owner(s) of record and may be sent only to the address of record or a
pre-authorized bank account, and cannot be made within thirty (30) days after
the Transfer Agent has been notified of an address change. If there are multiple
owners of record, the Transfer Agent may rely upon the instructions of only one
owner of record.

In order to redeem shares by telephone, you must authorize telephone
redemptions on your initial application form or by written notice to the
Transfer Agent and hold shares in non-certificate form. Thereafter, you may call
the Fund at 800-372-7827 (toll-free) to execute a telephone redemption of
shares, on weekdays, except holidays, between the hours of 8:00 A.M. and 6:00
P.M., New York time. For your protection and to prevent fraudulent redemptions,
your telephone call may be recorded and you will be asked to provide your
personal identification number. A written confirmation of the redemption
transaction will be sent to you. Neither the Fund nor its agents will be liable
for any loss, liability or cost which results from acting upon instructions
reasonably believed to be genuine under the foregoing procedures.

Involuntary Redemptions

In order to reduce expenses of the Fund, the Board of Directors may redeem
all of the shares of any shareholder, other than a shareholder which is an IRA
or other tax-deferred retirement plan, whose account has a balance of less than
$250.00 due to a redemption. The Fund will give any such shareholder sixty (60)
days' prior written notice in which to purchase sufficient additional shares to
avoid such redemption.

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Waiver of Sales Charges

No contingent deferred sales charges are imposed on shares of the Fund sold
in exchange of shares of the Pax World Fund, the Pax World Growth Fund or the
Pax World Money Market Fund. It is also contemplated that no contingent deferred
sales charges will be imposed on shares of the Fund sold in exchange of shares
of each new Pax World mutual fund. In addition, shares of the Fund may be sold
at NAV, without payment of a contingent deferred sales charge, by (i) any
investor provided that the amount invested by such investor in the Fund or other
Pax World Mutual Funds totals, immediately after such sale, at least $1,000,000;
(ii) any pension, profit-sharing or other employee benefit plans qualified under
Section 401 of the Internal Revenue Code, IRAs, Education IRAs, Roth IRAs,
SIMPLE IRAs, Simplified Employee Pension -- IRA plans and retirement and
deferred compensation and annuity plans and trusts used to fund those plans,
including, but not limited to, those defined in Sections 401(a), 403(b) or 457
of the Internal Revenue Code and "rabbi trusts"; (iii) trustees, officers,
directors, employees (including retirees) and sales representatives of the Fund,
the Adviser or certain affiliated companies, for themselves, their spouses and
their dependent children; (iv) registered representatives and employees of
broker-dealers having selling group agreements with the Fund, for themselves,
their spouses and their dependent children; (v) investment advisers or financial
planners who place trades for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee for their services
and clients of such investment advisors or financial planners who place trades
for their own accounts if the accounts are linked to the master account of such
investment advisor or financial planner on the books and records of the broker
or agent, or (vi) at the discretion of the Board of Directors of the Fund.

You must notify the Transfer Agent that you are entitled to the reduction
or waiver of the sales charge. The reduction or waiver will be granted subject
to confirmation of your entitlement.

HOW TO EXCHANGE YOUR SHARES

In General

As a shareholder of the Fund, you have an exchange privilege with the Pax
World Fund, the Pax World Growth Fund and the Pax World Money Market Fund,
subject to the minimum investment requirement of such funds. No sales charge
will be imposed at the time of exchange. An exchange will be treated as a
redemption and purchase for tax purposes and any gain on such transaction may be
subject to federal income tax. All exchanges will be made on the basis of the
relative NAV of the two funds next determined after the request is received in
good order. The exchange privilege is available only in states where the
exchange may legally be made. It is contemplated that this exchange privilege
will be applicable to any new Pax World Mutual Funds.

Exchanges by Mail

You may exchange shares by mail by writing to the Transfer Agent at Pax
World Fund Family, P.O. Box 8930, Wilmington, DE 19899-8930 or by overnight
delivery c/o PFPC, Inc., 400 Bellevue Parkway, Wilmington, DE 19809.

If you hold certificates, the certificates, signed in the name(s) shown on
the face of the certificates, must be returned to the Transfer Agent in order
for the shares to be exchanged.

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<PAGE>

Exchanges by Telephone

In order to exchange shares by telephone, you must authorize telephone
exchanges on your initial application form or by written notice to the Transfer
Agent and hold shares in non-certificate form. Thereafter, you may call the Fund
at 800-372-7827 (toll-free) on weekdays, except holidays, between the hours of
8:00 A.M. and 6:00 P.M., New York time, to exchange shares between accounts that
are registered in the same names. For your protection and to prevent fraudulent
exchanges, your telephone call may be recorded and you will be asked to provide
your personal identification number. A written confirmation of the exchange
transaction will be sent to you. Neither the Fund nor its agents will be liable
for any loss, liability or cost which results from acting upon instructions
reasonably believed to be genuine under the foregoing procedures.

In periods of severe market or economic conditions the telephone exchange
of shares may be difficult to implement and you should make exchanges by mail by
writing to the Transfer Agent at the address noted above.

TAXES, DIVIDENDS AND DISTRIBUTIONS

TAXATION OF THE FUND

The Fund is qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"). Accordingly, the Fund will not be subject
to federal income taxes on its net investment income and capital gains, if any,
that it distributes to its shareholders.

TAXATION OF SHAREHOLDERS

All dividends out of net investment income, together with distributions of
net short-term capital gains, will be taxable as ordinary income to the
shareholder whether or not reinvested. Any net long-term capital gains
distributed to shareholders will be taxable as such to the shareholder, whether
or not reinvested and regardless of the length of time a shareholder has owned
his or her shares. The maximum federal long-term capital gains rate for
individual shareholders is currently twenty percent (20%), and the maximum
federal tax rate for ordinary income is currently thirty-nine and six-tenths
percent (39.6%).

Any gain or loss realized upon a sale or redemption of shares by a
shareholder who is not a dealer in securities will be treated as (i) long-term
capital gain or loss if the shares have been held more than twelve (12) months
and (ii) otherwise as short-term capital gain or loss. Any such loss, however,
on shares that are held for six (6) months or less, will be treated as a
long-term capital loss to the extent of any capital gain distributions received
by the shareholder.

WITHHOLDING TAXES

Under U.S. Treasury Regulations, the Fund is required by federal law to
withhold and remit to the U.S. Treasury thirty-one percent (31%) of dividend,
capital gain income and redemption proceeds, payable

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<PAGE>

on the accounts of those shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law. In connection with this
withholding requirement, therefore, a purchaser of the Fund's shares will be
asked to certify on the Fund's application that the Social Security or tax
identification number provided is correct and that such purchaser is not subject
to thirty-one percent (31%) back-up withholding for previously underreporting to
the Internal Revenue Service.

Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.

DIVIDENDS AND DISTRIBUTIONS

The Fund expects to pay dividends on net investment income, if any, monthly
and to make distributions of any capital gains in excess of net capital losses
at least annually. Dividends and distributions will be paid in additional Fund
shares, based on the NAV at the close of business on the ex-dividend date or
such other date as the Board of Directors may determine, unless the shareholder
elects in writing not less than five (5) days prior to the ex-dividend date to
receive (i) such dividends in cash and distributions in additional shares or
(ii) such dividends and distributions in cash. Such election should be submitted
to the Transfer Agent at Pax World Fund Family, P.O. Box 8930, Wilmington, DE
19899-8930. The Fund will notify each shareholder after the close of the Fund's
taxable year of both the dollar amount and the taxable status of that year's
dividends and distributions on a per share basis.

When the Fund goes "ex-dividend", its NAV is reduced by the amount of the
dividend or distribution. If you buy shares just prior to the ex-dividend date,
the price you pay will include the dividend or distribution and a portion of
your investment will be returned to you as a taxable distribution. You should,
therefore, consider the timing of dividends when making your purchases.

SHAREHOLDER SERVICES

The Fund offers investors the following special programs:

Automatic Reinvestment of Dividends and/or Distributions. For your
convenience, all dividends and distributions, if any, will be automatically
reinvested in additional full and fractional shares of the Fund at the NAV
prevailing at the close of business on the ex-dividend date unless and
until you notify the Transfer Agent in writing at least five (5) days prior
to such ex-dividend date that you elect to receive (i) such dividends in
cash and distributions in additional shares or (ii) such dividends and
distributions in cash. Stock certificates will not be physically issued on
reinvestment of such dividends and distributions, but a record of the
shares purchased will be added to your account and a confirmation of such
reinvestment will be sent to you by the Transfer Agent.

Automatic Investment Plan. Under the Fund's Automatic Investment Plan,
you may make regular monthly or quarterly purchases of the Fund's shares
via an automatic debit to a bank account. For additional information about
this service, you may contact

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<PAGE>

the Transfer Agent directly at 800-372-7827 (toll-free) between the hours
of 8:00 A.M. and 6:00 P.M., New York time.

Tax-Deferred Retirement Plans. Various tax-deferred retirement plans
and accounts, including IRAs, Education IRAs, Roth IRAs, SIMPLE IRAs,
Simplified Employee Pension IRA plans and "tax-sheltered accounts" under
Section 403(b)(7) of the Internal Revenue Code, are available through the
Fund. Information regarding the establishment of these plans, the
administration, custodial fees and other details is available from the Fund
or the Transfer Agent. If you are considering adopting such a plan, you
should consult with your own legal or tax adviser with respect to the
establishment and maintenance of such a plan.

Systematic Withdrawal Plan. A systematic withdrawal plan is available
to shareholders, which provides for monthly, bi-monthly, quarterly or
semi-annual checks. Shares of the Fund which are redeemed within six (6)
months of purchase pursuant to the systematic withdrawal plan, however, are
subject to a one percent (1.0%) contingent deferred sales charge.

Reports to Shareholders. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited
by independent accountants. In order to reduce duplicate mailing and
printing expenses, the Fund will provide one annual and semi-annual
shareholder report and one annual prospectus per household.

You may request additional copies of such reports by writing to the
Fund at 222 State Street, Portsmouth, NH 03801-3853, telephoning the Fund
at 800-767-1729 (toll-free), visiting the Fund's web site at
http://www.paxfund.com or visiting the SEC's web site at http://www.sec.gov
for such purpose. In addition, monthly unaudited financial data is
available upon request from the Fund.

Shareholder Inquiries. Inquiries should be directed to the Transfer
Agent at Pax World Fund Family, P.O. Box 8930, Wilmington, DE 19899-8930,
or by telephone at 800-372-7827 (toll-free) or, from outside the United
States, at 302-791-2844 (collect).

THE PAX WORLD FUND FAMILY

Pax World Management Corp. currently offers four mutual funds designed to
meet your individual needs -- the Pax World Fund, Pax World Growth Fund, Pax
World High Yield Fund and Pax World Money Market Fund. We welcome you to review
the investment options available through our family of funds. For more
information on the Pax World Fund Family, including charges and expenses,
contact your financial adviser or telephone the Fund at 800-767-1729 (toll-free)
for a free prospectus. Read the prospectus carefully before you invest or send
money.

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<PAGE>

ADDITIONAL INFORMATION

Year 2000. As the year 2000 approaches, an issue has emerged regarding how
existing application software programs and operating systems can accommodate
this date value. Failure to adequately address this issue could have potentially
serious repercussions. The Adviser is in the process of working with the Fund's
service providers to prepare for the year 2000. Based on information currently
available, the Adviser does not expect that the Fund will incur significant
operating expenses or be required to incur material costs to be year 2000
compliant. Although the Adviser does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.

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<PAGE>

PAX WORLD HIGH YIELD FUND
PROSPECTUS & APPLICATION

[PAX WORLD HIGH YIELD FUND LOGO]

PROSPECTUS & APPLICATION

____________, 1999

<TABLE>
<S> <C>
Pax World High Yield Fund [PAX WORLD HIGH YIELD FUND
A Diversified High Yield Fund LOGO]
222 State Street
Investment Adviser- Portsmouth, NH 03801-3853
Pax World Management Corp. http://www.paxfund.com
222 State Street
Portsmouth, NH 03801-3853 For General Fund Information, please call:
1-800-767-1729
Transfer and Dividend Disbursing Agent-
PFPC, Inc. For Shareholder Account Information,
P.O. Box 8950 please call:
Wilmington, DE 19899-8950 1-800-372-7827

General Counsel- For Broker Services, please call:
Bresler Goodman & Unterman, LLP 1-800-635-1404
521 Fifth Avenue
New York, NY 10175 All Account Inquiries should be addressed to:
Pax World Fund Family
Independent Auditors- P.O. Box 8930
Pannell Kerr Forster PC Wilmington, DE 19899-8930
125 Summer Street
Boston, MA 02110-2326
</TABLE>

Additional information about the Fund has been filed with the Securities
and Exchange Commission (the "SEC") in a Statement of Additional Information
dated the date hereof, and in the Fund's annual and semi-annual reports to
shareholders, which information is incorporated herein by reference (is legally
considered a part of this Prospectus) and is available without charge upon
request to the Fund at the address or telephone number noted above, or by
visiting the Fund's web site at http://www.paxfund.com. In addition, you will
find in the Fund's annual report a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. The SEC maintains a web site (http://www.sec.gov) that
contains the Statement of Additional Information, the Fund's annual and
semi-annual reports to shareholders, and other reports and information regarding
the Fund which have been filed electronically with the SEC. In addition,
information about the Fund may be obtained at a reasonable charge from the
Public Reference Section of the SEC or may be examined, without charge, at the
Public Reference Room at the office of the SEC in Washington, D.C. Information
on the operation of the Public Reference Room may be obtained by calling the SEC
at 800-SEC-0330 (toll-free).

Investment Company Act file no.: ________________

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<PAGE>

PART B

PAX WORLD HIGH YIELD FUND, INC.

222 State Street, Portsmouth, NH 03801-3853
For shareholder account information: 800-372-7827
Portsmouth, NH office: 800-767-1729
603-431-8022
Website: http://www.paxfund.com

Statement of Additional Information
dated __________, 1999

This Statement of Additional Information is not a Prospectus and should
be read in conjunction with the Fund's Prospectus dated the date hereof
to which it relates, a copy of which may be obtained by writing to the
Fund at 222 State Street, Portsmouth, NH 03801-3853, telephoning the
Fund at 800-767-1729 (toll-free), visiting the Fund's web site at
http://www.paxfund.com or visiting the Securities and Exchange Commission's
web site at http://www.sec.gov for such purpose.

<PAGE>

TABLE OF CONTENTS

Page

FUND HISTORY................................................................ 3
INVESTMENT OBJECTIVE , STRATEGIES AND PHILOSOPHY............................ 3
Investment Objective............................................... 3
Investment Strategies.............................................. 3
Investment Philosophy.............................................. 4
INVESTMENTS AND SPECIAL CONSIDERATIONS; RISK FACTORS........................ 4
Asset-Backed Securities............................................ 4
Bank Debt.......................................................... 5
Forward Foreign Currency Exchange Contracts........................ 5
Illiquid and Restricted Securities................................. 6
Lending of Securities.............................................. 7
Options on Foreign Currencies...................................... 7
Options on Futures Contracts....................................... 7
Options on Securities.............................................. 8
Options on Securities Indices...................................... 9
Position Limits.................................................... 10
Real Estate Investment Trusts...................................... 10
Repurchase Agreements.............................................. 11
Segregated Accounts................................................ 11
Short Sales Against-the-Box........................................ 11
Short-term Investments............................................. 11
U.S. Government Agency and/or Instrumentality Securities........... 11
When-Issued and Delayed Delivery Securities........................ 12
INVESTMENT RESTRICTIONS..................................................... 12
MANAGEMENT OF THE FUND...................................................... 15
INVESTMENT ADVISORY AND OTHER SERVICES...................................... 17
Adviser............................................................ 17
Distribution....................................................... 19
Custodian, Transfer and Dividend Disbursing Agent
and Independent Accountants............................... 20
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 20
NET ASSET VALUE............................................................. 21
CALCULATION OF PERFORMANCE DATA............................................. 22
Average Annual Total Return........................................ 23
PURCHASE, REDEMPTION AND EXCHANGE OF FUND SHARES............................ 23
Purchase of Shares................................................. 23
In General................................................ 23
Sale of Shares..................................................... 24
In General................................................ 24
Involuntary Redemption.....................................24
Waiver of Sales Charges................................... 24
Exchange of Shares................................................. 25
TAXES ................................................................... 25
SHAREHOLDER SERVICES........................................................ 26
Automatic Reinvestment of Dividends and/or Distributions........... 26
Automatic Investment Plan.......................................... 27
Tax-Deferred Retirement Plans and Accounts......................... 27

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<PAGE>

Systematic Withdrawal Plans........................................ 27
Reports to Shareholders............................................ 28
Shareholder Inquiries.............................................. 28
FINANCIAL STATEMENTS........................................................ 29

FUND HISTORY

Pax World High Yield Fund, Inc. (the "Fund") is a socially responsible,
open-end, diversified investment management company which was incorporated under
the laws of the State of Delaware on June 15, 1999.

INVESTMENT OBJECTIVE, STRATEGIES
AND PHILOSOPHY

INVESTMENT OBJECTIVE

The Fund's primary investment objective is to seek high current income.
The Fund will, however, also seek capital appreciation as a secondary objective
to the extent that such objective is consistent with its primary objective of
seeking high current income.

INVESTMENT STRATEGIES

The Fund reserves the right to hold temporarily other types of securities
without limit, including commercial paper, bankers' acceptances and high quality
money market securities or cash (foreign currencies or United States dollars),
in such proportions as, in the opinion of the Adviser, prevailing market,
economic or political conditions warrant. The Fund may also temporarily hold
cash and invest in high quality foreign or domestic money market instruments
pending investment of proceeds from new sales of Fund shares or to meet ordinary
daily cash needs.

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<PAGE>

INVESTMENT PHILOSOPHY

Consistent with its social criteria, the Fund seeks investments in
companies that produce goods and services that improve the quality of life and
that are not, to any degree, engaged in manufacturing defense or weapons-related
products. By way of illustration, the Fund will invest in such industries as
building supplies, computer software, education, food, health care, household
appliances, housing, leisure time, pollution control, technology and
telecommunications, among others. The Fund's portfolio will consist primarily of
companies located in the United States.

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. 20301) 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.

There can be no assurance that the Fund's investment objective will be
achieved.

INVESTMENTS AND SPECIAL CONSIDERATIONS;
RISK FACTORS

Asset-Backed Securities

The Fund may invest in asset-backed securities ("ABSs"). An ABS represents
an interest in a pool of assets such as receivables from credit card loans,
automobile loans and other trade receivables. Changes in the market's perception
of the asset backing the security, the creditworthiness of the servicing agent
for the loan pool, the originator of the loans, or the financial institution
providing any credit enhancement will all affect the value of the ABS, as will
the exhaustion of any credit enhancement. The risks of investing in ABSs
ultimately will depend upon the payment of the consumer loans by the individual
borrowers. In its capacity as purchaser of the ABS, the Fund will generally have
no recourse to the entity that originated the loans in the event of default by
the borrower. In addition, the loans underlying the ABSs are subject to
prepayments, which may shorten the weighted average life of such securities and
may lower their return.

-4-

<PAGE>

Bank Debt

The Fund may invest in bank debt which includes interests in loans to
companies or their affiliates undertaken to finance a capital restructuring or
in connection with recapitalizations, acquisitions, leveraged buyouts,
refinancings or other financially leveraged transactions and may include loans
which are designed to provide temporary or "bridge" financing to a borrower
pending the sale of identified assets, the arrangement of longer-term loans or
the issuance and sale of debt obligations. These loans, which may bear fixed or
floating rates, are generally arranged through private negotiations between a
corporate borrower and one or more financial institutions ("Lenders"), including
banks. The Fund's investment may be in the form of participations in loans
("Participations") or of assignments of all or a portion of loans from third
parties ("Assignments").

Participations differ both from the public and private debt securities
typically held by the Fund and from Assignments. In Participations, the Fund has
a contractual relationship only with the Lender, not with the borrower. As a
result, the Fund has the right to receive payments of principal, interest and
any fees to which it is entitled only from the Lender selling the Participation
and only upon receipt by the Lender of the payments from the borrower. In
connection with purchasing Participations, the Fund generally will have no right
to enforce compliance by the borrower with the terms of the loan agreement
relating to the loan. Thus, the Fund assumes the credit risk of both the
borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender, the Fund may be treated as a general creditor of the
Lender and may not benefit from any set-off between the Lender and the borrower.
In Assignments, by contrast, the Fund acquires direct rights against the
borrower, except that under certain circumstances such rights may be more
limited than those held by the assigning Lender.

Investments in Participations and Assignments otherwise bear risks common
to other debt securities, including the risk of nonpayment of principal and
interest by the borrower, the risk that any loan collateral may become impaired
and that the Fund may obtain less than the full value for loan interests sold
because they are illiquid. The Fund may have difficulty disposing of Assignments
and Participations. Because the market for such instruments is not highly
liquid, the Fund anticipates that such instruments could be sold only to a
limited number of institutional investors. The lack of a highly liquid secondary
market may have an adverse impact on the value of such instruments and will have
an adverse impact on the Fund's ability to dispose of particular Assignments or
Participations in response to a specific economic event, such as deterioration
in the creditworthiness of the borrower.

Forward Foreign Currency Exchange Contracts

The Fund may enter into forward foreign currency exchange contracts in
limited circumstances. When the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when the Fund
anticipates the receipt in a foreign currency of dividends or interest payments
on a security which it holds, the Fund may desire to "lock-in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Fund may be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.

Additionally, when the Adviser believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, the
Fund may enter into a forward contract for a fixed

-5-

<PAGE>

amount of dollars, to sell the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110 (the "Custodian"), the Fund's custodian, will place
cash or liquid securities into a segregated account of the Fund in an amount
equal to the value of the Fund's total assets committed to the consummation of
forward foreign currency exchange contracts. If the value of the securities
placed in the segregated account declines, additional cash or securities will be
placed in the account on a daily basis so that the value of the account will
equal the amount of the Fund's commitments with respect to such contracts.

The Fund generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.

If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Should forward contract prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent that the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase.

Should forward contract prices increase, the Fund will suffer a loss to the
extent that the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.

Illiquid and Restricted Securities

The Fund may not invest more than fifteen percent (15%) of its net assets
in repurchase agreements which have a maturity of longer than seven (7) days or
in other illiquid securities, including securities that are illiquid by virtue
of the absence of a readily available market (either within or outside of the
United States) or legal or contractual restrictions on resale. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), securities which are
otherwise not readily marketable and repurchase agreements having a maturity of
longer than seven (7) days. Securities which have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven (7) days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid for the purposes of this limitation.
The Adviser will monitor the liquidity of such restricted securities subject to
the supervision of the Board of Directors. In reaching liquidity decisions, the
Adviser will consider, inter alia, the following factors: (i) the frequency of
trades and quotes for the security; (ii) the number of dealers wishing to
purchase or sell the security and the number of other potential purchasers;
(iii) dealer

-6-

<PAGE>

undertakings to make a market in the security, and (iv) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). In addition, in order for commercial paper that is issued in
reliance on Section 4(2) of the Securities Act to be considered liquid, (i) it
must be rated in one of the at least two nationally recognized statistical
rating organizations ("NRSRO"), or if only one NRSRO rates the securities, by
that NRSRO, or, if unrated, be of comparable quality in the view of the Adviser;
and (ii) it must not be "traded flat" (i.e., without accrued interest) or in
default as to principal or interest. Repurchase agreements subject to demand are
deemed to have a maturity equal to the notice period.

Lending of Securities

Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans do not exceed in the aggregate twenty percent (20%) of
the value of the Fund's total assets and provided that such loans are callable
at any time by the Fund and are at all times secured by cash or equivalent
collateral that is equal to at least the market value, determined daily, of the
loaned securities. The advantage of such loans is that the Fund continues to
receive payments in lieu of the interest and dividends of the loaned securities,
while at the same time earning interest either directly from the borrower or on
the collateral which will be invested in short-term obligations.

A loan may be terminated by the borrower on one business days' notice or by
the Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms deemed by the
investment adviser to be creditworthy. On termination of the loan, the borrower
is required to return the securities to the Fund, and any gain or loss in the
market price during the loan would inure to the Fund.

Since voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loan, in whole or
in part as may be appropriate, to permit the exercise of such rights if the
matters involved would have a material effect on the Fund's investment in the
securities which are the subject of the loan. The Fund will pay reasonable
finders', administrative and custodial fees in connection with a loan of its
securities or may share the interest earned on collateral with the borrower.

Options on Foreign Currencies

Options on foreign currencies involve the currencies of two nations and
therefore, developments in either or both countries affect the values of options
on foreign currencies. Risks include those described in under "Investments and
Special Considerations; Risk Factors - Foreign Securities," above, and include
government actions affecting currency valuation and the movements of currencies
from one country to another.

Options on Futures Contracts

The Fund may enter into options on futures contracts for certain bona fide
hedging, risk management and return enhancement purposes. This includes the
ability to purchase put and call options

-7-

<PAGE>

and write (i.e., sell) "covered" put and call options on futures contracts that
are traded on commodity and futures exchanges.

If the Fund purchases an option on a futures contract, it has the right but
not the obligation, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call or a short position if
the option is a put) at a specified exercise price at any time during the option
exercise period.

Unlike purchasing an option, which is similar to purchasing insurance to
protect against a possible rise or fall of security prices or currency values,
the writer or seller of an option undertakes an obligation upon exercise of the
option to either buy or sell the underlying futures contract at the exercise
price. A writer of a call option has the obligation upon exercise to assume a
short futures position and a writer of a put option has the obligation to assume
a long futures position. Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract at exercise exceeds (in the case of a call) or is less than (in
the case of a put) the exercise price of the option on the futures contract. If
there is no balance in the writer's margin account, the option is "out of the
money" and will not be exercised. The Fund, as the writer, has income in the
amount it was paid for the option. If there is a margin balance, the Fund will
have a loss in the amount of the balance less the premium it was paid for
writing the option.

When the Fund writes a put or call option on futures contracts, the option
must either be "covered" or, to the extent not "covered," will be subject to
segregation requirements. The Fund will be considered "covered" with respect to
a call option it writes on a futures contract if the Fund owns the securities or
currency which is deliverable under the futures contract or an option to
purchase that futures contract having a strike price equal to or less than the
strike price of the "covered" option. A Fund will be considered "covered" with
respect to a put option it writes on a futures contract if it owns an option to
sell that futures contract having a strike price equal to or greater than the
strike price of the "covered" option.

To the extent the Fund is not "covered" as described above with respect to
written options, it will segregate and maintain for the term of the option cash
or other liquid assets equal to the fluctuating value of the optioned futures.
If the Fund writes a put option that is not "covered," the segregated amount
would have to be at all times equal in value to the exercise price of the put
(less any initial margin deposited by the Fund) with respect to such option.

Options on Securities

The Fund may purchase and write (i.e., sell) put and call options on
securities that are traded on U.S. or foreign securities exchanges or that are
traded in the over-the-counter markets.

A call option is a short-term contract pursuant to which the purchaser, in
return for a premium paid, has the right to buy the security underlying the
option at a specified exercise price at any time during the term of the option.
The writer of the call option, who receives the premium, has the obligation,
upon exercise of the option, to deliver the underlying security against payment
of the exercise price.

A put option is a similar contract which gives the purchaser, in return for
a premium, the right to sell the underlying security at a specified price during
the term of the option. The writer of the put option who receives the premium,
has the obligation to buy the underlying security upon exercise at the exercise
price.

A call option written by the Fund is "covered" if (i) the Fund owns the
security underlying the option or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by the Custodian) or (ii) the Fund
holds

-8-

<PAGE>

on a share-for-share basis a call on the same security as the call written where
the exercise price of the call held is equal to or less than the exercise price
of the call written or greater than the exercise price of the call written if
the difference is maintained by the Fund in cash, U.S. Government securities or
other liquid high-grade debt obligations in a segregated account with the
Custodian.

A put option written by the Fund is "covered" if the Fund maintains cash,
U.S. Government securities or other liquid high-grade debt obligations with a
value equal to the exercise price in a segregated account with the Custodian, or
else holds on a share-for-share basis a put on the same security as the put
written where the exercise price of the put held is equal to or greater than the
exercise price of the put written.

The Fund may also purchase a "protective put," i.e., a put option acquired
for the purpose of protecting a portfolio security from a decline in market
value. In exchange for the premium paid for the put option, the Fund acquires
the right to sell the underlying security at the exercise price of the put
regardless of the extent to which the underlying security declines in value. The
loss to the Fund is limited to the premium paid for, and transaction costs in
connection with, the put plus the initial excess, if any, of the market price of
the underlying security over the exercise price. However, if the market price of
the security underlying the put rises, the profit the Fund realizes on the sale
of the security will be reduced by the premium paid for the put option less any
amount (net of transaction costs) for which the put may be sold. Similar
principles apply to the purchase of puts on stock indices, as described below.

The Fund may write put and call options on stocks only if they are covered,
and such options must remain covered so long as the Fund is obligated as a
writer. The Fund does not intend to purchase options on equity securities if the
aggregate premiums paid for such outstanding options would exceed five percent
(5%) of the Fund's total assets.

Options on Securities Indices

In addition to options on securities, the Fund may also purchase and sell
put and call options on securities indices traded on U.S. or foreign securities
exchanges or traded in the over-the-counter markets. Options on securities
indices are similar to options on securities except that, rather than the right
to take or make delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the securities index upon
which the option is based is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars times a specified multiple (the
multiplier). The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. All settlements on options on indices
are in cash, and gain or loss depends on price movements in the securities
market generally (or in a particular industry or segment of the market) rather
than price movements in individual securities.

The multiplier for an index option performs a function similar to the unit
of trading for a stock option. It determines the total dollar value per contract
of each point in the difference between the exercise price of an option and the
current level of the underlying index. A multiplier of One Hundred (100) means
that a one-point difference will yield One Hundred Dollars ($100.00). Options on
different indices may have different multipliers. Because exercises of index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on specific stocks,
cannot provide in advance for, or cover, its potential settlement obligations by
acquiring and holding the underlying securities. In addition, unless the Fund
has other liquid assets which are sufficient to satisfy the exercise of a call,
the Fund would be required to liquidate portfolio securities or borrow in order
to satisfy the exercise.

-9-

<PAGE>

Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular security, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of security prices in the market generally or in an
industry or market segment rather than movements in the price of a particular
security. Accordingly, successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict correctly movements in
the direction of the securities market generally or of a particular industry.
This requires different skills and techniques than predicting changes in the
price of individual stocks.

The distinctive characteristics of options on indices create certain risks
that are not present with stock options.

Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, the Fund would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, may be unable to exercise an option it holds, which could
result in losses to the Fund. It is the Fund's policy to purchase or write
options only on indices which include a number of stocks sufficient to minimize
the likelihood of a trading halt in the index.

The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index option contracts. The
Fund will not purchase or sell any index option contract unless and until, in
the Adviser's opinion, the market for such options has developed sufficiently
that the risk in connection with such transactions is not substantially greater
than the risk in connection with options on securities in the index.

The Fund will write put options on stock indices and foreign currencies
only if they are covered by segregating with the Fund's Custodian an amount of
cash, U.S. Government securities, or liquid assets equal to the aggregate
exercise price of the puts. The Fund does not intend to purchase options on
securities indices if the aggregate premiums paid for such outstanding options
would exceed ten percent (10%) of the Fund's total assets.

Position Limits

Transactions by the Fund in futures contracts and options will be subject
to limitations, if any, established by each of the exchanges, boards of trade or
other trading facilities (including NASDAQ) governing the maximum number of
options in each class which may be written or purchased by a single investor or
group of investors acting in concert, regardless of whether the options are
written on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. An exchange, board of trade or other trading facility may order the
liquidation of positions in excess of these limits, and it may impose certain
other sanctions.

Real Estate Investment Trusts

The Fund may purchase real estate investment trusts ("REITs"). REITs are
investment vehicles that invest primarily in either real estate or real estate
loans. The value of a REIT is affected by changes in the value of the properties
owned by the REIT or security mortgage loans held by the REIT. REITs are
dependent upon cash flow from their investments to repay financing costs and the
management skill of the REIT's manager. REITs are also subject to risks
generally associated with investments in real estate.

-10-

<PAGE>

Repurchase Agreements

The Fund will enter into repurchase transactions only with parties meeting
creditworthiness standards approved by the Fund's Board of Directors. The
Adviser will monitor the creditworthiness of such parties, under the general
supervision of the Board of Directors. In the event of a default or bankruptcy
by a seller, the Fund will promptly seek to liquidate the collateral. To the
extent that the proceeds from any sale of such collateral upon a default in the
obligation to repurchase are less than the repurchase price, the Fund will
suffer a loss.

Segregated Accounts

When the Fund is required to segregate assets in connection with certain
hedging transactions, it will maintain cash or liquid assets in a segregated
account. "Liquid assets" mean cash, U.S. Government securities, equity
securities, debt obligations or other liquid, unencumbered assets
marked-to-market daily, including foreign securities, high yield fixed income
securities and distressed securities.

Short Sales Against-the-Box

The Fund may make short sales against-the-box for the purpose of deferring
realization of gain or loss for federal income tax purposes. A short sale
"against-the-box" is a short sale in which the Fund owns an equal amount of the
securities sold short or securities convertible into or exchangeable for,
without payment of any further consideration, securities of the same issue as,
and equal in amount to, the securities sold short.

Short-term Investments

When conditions dictate a defensive strategy, the Fund may temporarily
invest in money market instruments, including commercial paper of corporations,
certificates of deposit, bankers' acceptances and other obligations of domestic
and foreign banks and repurchase agreements (described more fully above). Such
investments may be subject to certain risks, including future political and
economic developments, the possible imposition of withholding taxes on interest
income, the seizure or nationalization of foreign deposits and foreign exchange
controls or other restrictions.

U.S. Government Agency and/or Instrumentality Securities

The Fund may invest in securities issued by U.S. Government agencies or
instrumentalities, the proceeds of which are earmarked for a specific purpose
which complies with the investment objectives and policies of the Fund, such as
the Federal Farm Credit Bank, the Federal Home Loan Bank and the Federal
National Mortgage Association, other than the U.S. Treasury. These obligations
may or may not be backed by the full faith and credit of the United States. In
the case of securities not backed by the full faith and credit of the United
States, the Fund must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality issuing or guaranteeing the
obligation does not meet its commitments. Obligations of the Government National
Mortgage Association, the Farmers Home Administration and the Small Business
Administration are backed by the full faith and credit of the United States.
Securities in which the Fund may invest which are not backed by the full faith
and credit of the United States include

-11-

<PAGE>

obligations such as those issued by the Federal Home Loan Bank, the Federal Home
Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association,
the Student Loan Marketing Association and Resolution Funding Corporation, each
of which has the right to borrow from the U.S. Treasury to meet its obligations,
and obligations of the Farm Credit System, the obligations of which may be
satisfied only by the individual credit of the issuing agency. FHLMC investments
may include collateralized mortgage obligations.

In connection with its commitment to assist in the development of housing,
the Fund may invest in mortgage-backed securities, including those which
represent undivided ownership interests in pools of mortgages, e.g., Government
National Mortgage Association and Federal Home Loan Mortgage Corporation
certificates. The U.S. Government or the issuing agency or instrumentality
guarantees the payment of interest on and principal of these securities.
However, the guarantees do not extend to the yield or value of the securities
nor do the guarantees extend to the yield or value of the Fund's shares. These
securities are in most cases "pass-through" instruments, through which the
holders receive a share of all interest and principal payments from the
mortgages underlying the securities, net of certain fees. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through certificates.
Mortgage-backed securities are often subject to more rapid repayment than their
maturity date would indicate as a result of the pass-through of prepayments of
principal on the underlying mortgage obligations. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-backed securities
can be expected to accelerate. The Fund's ability to invest in high-yielding
mortgage-backed securities will be adversely affected to the extent that
prepayments of mortgages must be reinvested in securities which have lower
yields than the prepaid mortgages. Moreover, prepayments of mortgages which
underlie securities purchased at a premium could result in capital losses.

The Fund may invest in both Adjustable Rate Mortgage Securities, which are
pass-through mortgage securities collateralized by adjustable rate mortgages,
and Fixed-Rate Mortgage Securities, which are collateralized by fixed-rate
mortgages.

When-Issued and Delayed Delivery Securities

From time to time, in the ordinary course of business, the Fund may
purchase or sell securities on a when-issued or delayed delivery basis, that is,
delivery and payment can take place a month or more after the date of the
transaction. The Fund will limit such purchases to those in which the date for
delivery and payment falls within one hundred twenty (120) days of the date of
the commitment. The Fund will make commitments for such when-issued transactions
only with the intention of actually acquiring the securities. The Fund's
Custodian will maintain, in a separate account of the Fund, cash, U.S.
Government securities or other liquid high-grade debt obligations having a value
equal to or greater than such commitments. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition, it could, as
with the disposition of any other portfolio security, incur a gain or loss due
to market fluctuations.

INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A "majority of the Fund's
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) sixty-seven percent (67%) of the shares
represented at a meeting at

-12-

<PAGE>

which more than fifty percent (50%) of the outstanding voting shares are present
in person or represented by proxy or (ii) more than fifty percent (50%) of the
outstanding voting shares.

The Fund may not:

1. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
provided that the deposit or payment by the Fund of initial or
maintenance margin in connection with futures or options is not
considered the purchase of a security on margin.

2. Make short sales of securities or maintain a short position if, when
added together, more than twenty-five percent (25%) of the value of
the Fund's net assets would be (i) deposited as collateral for the
obligation to replace securities borrowed to effect short sales and
(ii) allocated to segregated accounts in connection with short sales.
Short sales "against-the-box" are not subject to this limitation.

3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow from banks up to twenty percent (20%) of the
value of its total assets (calculated when the loan is made) for
temporary, extraordinary or emergency purposes or for the clearance of
transactions. The Fund may pledge up to twenty percent (20%) of the
value of its total assets to secure such borrowings. For purposes of
this restriction, the purchase or sale of securities on a when-issued
or delayed delivery basis, forward foreign currency exchange contracts
and collateral arrangements relating thereto, and collateral
arrangements with respect to futures contracts and options thereon and
with respect to the writing of options and obligations of the Fund to
Directors pursuant to deferred compensation arrangements are not
deemed to be a pledge of assets or the issuance of a senior security.

4. Purchase any security if as a result: (i) with respect to seventy-five
percent (75%) of the Fund's total assets, more than fifteen percent
(15%) of the Fund's total assets (determined at the time of
investment) would then be invested in securities of a single issuer,
other than the Pax World Money Market Fund, Inc. (the "Pax World Money
Market Fund"), (ii) more than twenty-five percent (25%) of the Fund's
total assets (determined at the time of the investment) would be
invested in a single industry, or (iii) the Fund would own more than
ten percent (10%) of the outstanding voting securities of a single
issuer, other than the Pax World Money Market Fund.

5. Purchase any security if, as a result, the Fund would then have more
than fifteen percent (15%) of its total assets (determined at the time
of investment) invested in securities of companies (including
predecessors) less than three (3) years old, except that the Fund may
invest in securities issued by the Pax World Money Market Fund, the
securities of any U.S. Government agency or instrumentality (other
than the U.S. Treasury), and in any security guaranteed by such an
agency or instrumentality, the proceeds of which are earmarked for a
specific purpose which complies with the investment objectives and
policies of the Fund, such as the Federal Farm Credit Bank, the
Federal Home Loan Bank and the Federal National Mortgage Association.

-13-

<PAGE>

6. Buy or sell real estate or interests in real estate, except that the
Fund may purchase and sell securities which are secured by real
estate, securities of companies which invest or deal in real estate
and publicly traded securities of real estate investment trusts. The
Fund may not purchase interests in real estate limited partnerships
which are not readily marketable.

7. Buy or sell commodities or commodity contracts. (For the purposes of
this restriction, futures contracts on currencies and on securities
indices and forward foreign currency exchange contracts are not deemed
to be commodities or commodity contracts.)

8. Act as underwriter except to the extent that, (i) in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws, and (ii) the Fund
may invest up to five percent (5%) of the value of its assets (at time
of investment) in portfolio securities which the Fund might not be
free to sell to the public without registration of such securities
under the Securities Act. The Fund's position in such restricted
securities may adversely affect the liquidity and marketability of
such restricted securities and the Fund may not be able to dispose of
its holdings in these securities at reasonable price levels. The Fund
has not adopted a fundamental investment policy with respect to
investments in restricted securities. See "Investments and Special
Considerations; Risk Factors -- Illiquid and Restricted Securities"
above.

9. Make investments for the purpose of exercising control or management.

10. Invest in interests in oil, gas or other mineral exploration or
development programs, except that the Fund may invest in the
securities of companies which invest in or sponsor such programs.

11. Make loans, except that the Fund may enter into repurchase
transactions with parties meeting creditworthiness standards approved
by the Fund's Board of Directors. See "Investments and Special
Considerations; Risk Factors - Repurchase Agreements" above.

12. Invest more than forty percent (40%) of the value of its assets in
securities of foreign issuers.

In order to comply with certain "blue sky" restrictions, the Fund will not as a
matter of operating policy:

1. Invest in oil, gas and mineral leases.

2. Invest in securities of any issuer if, to the knowledge of the Fund,
any Officer or Director of the Fund or the Adviser owns more than
one-half of one percent (.5%) of the outstanding securities of such
issuer, and such Officers and Directors who own more than one-half of
one percent (.5%), own in the aggregate more than five percent (5%) of
the outstanding securities of such issuer.

3. Purchase warrants if, as a result, the Fund would then have more than
five percent (5%) of its assets (determined at the time of investment)
invested in warrants. Warrants will be valued at the lower of cost or
market and investment in warrants which are not listed on

-14-

<PAGE>

the New York Stock Exchange or American Stock Exchange or a major
foreign exchange will be limited to two percent (2%) of the Fund's net
assets (determined at the time of investment). For purposes of this
limitation, warrants acquired in units or attached to securities are
deemed to be without value.

Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the percentage
limitation is met at the time the investment is made, a later change in
percentage resulting from changing total or net asset value will not be
considered a violation of such policy.

MANAGEMENT OF THE FUND

The officers of the Fund are responsible for the day-to-day operations of
the Fund and the Board of Directors of the Fund, in addition to overseeing the
Adviser, is responsible for the general policy of the Fund. The Board of
Directors meets four (4) times per year, reviews portfolio selections and
bonding requirements, declares dividends, if any, and reviews the activities of
the executive officers of the Fund. Such activities are consistent with their
fiduciary obligations as directors under the General Corporation Law of the
State of Delaware. The Fund's Adviser furnishes daily investment advisory
services.

The following table reflects the name and address, position held with the
Fund and principal occupation during the past five (5) years for those persons
who are the officers and directors of the Fund.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, Address and Age With the Fund Principal Occupation(s) During Past Five Years
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carl H. Doerge, Jr. Director (since Director, Pax World Fund, Incorporated (1998-present);
867 Remsen Lane 1999) Director, Pax World Growth Fund, Inc. (1997-present);
Oyster Bay, NY 11771***; (60) Private investor (1995-present); Executive Vice President
and Managing Director, Smith Barney (1971-1995)
- --------------------------------------------------------------------------------------------------------------------
Thomas W. Grant President; Director President, Pax World Money Market Fund, Inc. (1998-
14 Wall Street (since 1999) present); President, Pax World Growth Fund, Inc. (1997-
New York, NY 10005*/**; (57) present); Vice Chairman of the Board, Pax World Fund,
Incorporated (1996-present); President, Pax World
Management Corp. (1996-present); President, H.G.
Wellington & Co., Inc. (1991-present)
- --------------------------------------------------------------------------------------------------------------------
Anita D. Green Assistant Co-Treasurer, Pax World Fund, Incorporated (1998-
c/o Pax World Management Corp. Treasurer (since present); Assistant Treasurer, Pax World Growth Fund,
222 State Street 1999) Inc. (1997-present); Manager-Shareholder Services for the
Portsmouth, NH 03801-3853; (34) Pax World Fund Family, Pax World Management Corp.
(1990-present)
- --------------------------------------------------------------------------------------------------------------------
John L. Kidde Director (since Director, Pax World Growth Fund, Inc. (1997-present);
c/o KDM Development Corporation 1999) President, KDM Development Corporation (1988-present)
209 Cooper Avenue, Suite 5-D
Upper Montclair, NJ 07043; (64)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

-15-

<PAGE>

<TABLE>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joy L. Liechty Director (since Director, Pax World Growth Fund, Inc. (1997-present);
1403 Ashton Court 1999) Director, Pax World Fund, Incorporated (1991-present);
Goshen, IN 46526; (45) Client and Sales Advocate, Mennonite Mutual Aid
Association, Goshen, IN 46526 (1989-present)
- --------------------------------------------------------------------------------------------------------------------
James M. Shadek Treasurer (since Treasurer, Pax World Growth Fund, Inc. (1997 - present);
14 Wall Street 1999) Senior Vice President for Social Research, Pax World
New York, NY 10005*; (46) Management Corp. (1996-present); Account Executive,
H.G. Wellington & Co., Inc. (1986-present)
- --------------------------------------------------------------------------------------------------------------------
Laurence A. Shadek Chairman of the Executive Vice President, Pax World Money Market Fund,
14 Wall Street Board; Director Inc. (1998-present); Chairman of the Board, Pax World
New York, NY 10005*/**; (49) (since 1999) Growth Fund, Inc. (1997- present); Chairman of the Board,
Pax World Fund, Incorporated (1996-present); Chairman
of the Board, Pax World Management Corp. (1996-
present); Executive Vice President, H.G. Wellington &
Co., Inc. (1986-present)
- --------------------------------------------------------------------------------------------------------------------
Sanford C. Sherman Director (since Director, Pax World Fund, Incorporated (1992-present);
91 Hillside Drive 1999) President and Chief Executive Officer, Piscataqua Savings
Portsmouth, NH 03801***;(62) Bank, Portsmouth, NH (1981-present); various other
positions, including Vice President and Treasurer,
Piscataqua Savings Bank, Portsmouth, NH (1960-1981)
- --------------------------------------------------------------------------------------------------------------------
Janet Lawton Spates Assistant Co-Treasurer, Pax World Fund, Incorporated (1998-
c/o Pax World Management Corp. Treasurer (since present); Assistant Treasurer, Pax World Growth Fund,
222 State Street 1999) Inc. (1997-present); Operations Manager for the Pax
Portsmouth, NH 03801-3853; (29) World Fund Family, Pax World Management Corp. (1992-
present)
- --------------------------------------------------------------------------------------------------------------------
Nancy S. Taylor Director (since Director, Pax World Growth Fund, Inc. (1997-present);
5298 N. Riffle Way 1999) Director, Pax World Fund, Incorporated (1997-present);
Boise, ID 83703***; (43) Senior minister, First Congregational Church, Boise, ID
(1992-present); Associate minister, Immanuel
Congregational Church, Hartford, CT (1987-1992)
- --------------------------------------------------------------------------------------------------------------------
Lee D. Unterman Secretary (since Secretary, Pax World Growth Fund, Inc. (1997- present);
c/o Bresler, Goodman & Unterman, LLP 1999) Secretary, Pax World Fund, Incorporated (1997-present);
521 Fifth Avenue Partner, Bresler Goodman & Unterman, LLP, New York,
New York, NY 10175; (48) NY (1997-present); Partner, Broudy & Jacobson, New
York, NY (1988-1997)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

* Designates an "Interested" officer or director, as defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
by reason of his or her affiliation with the Adviser.

** Designates a member of the Investment Committee. The Investment Committee
has the responsibility of overseeing the investments of the Fund.

*** Designates a member of the Audit Committee. The Audit Committee has the
responsibility of overseeing the establishment and maintenance of an
effective financial control environment, for overseeing the procedures for
evaluating the system of internal accounting control and for evaluating
audit performance.

No person owns of record or beneficially five percent (5%) or more of the
outstanding Common Stock of the Fund (except the Adviser which owns all of the
issued and outstanding shares of the Common Stock of the Fund as of the date
hereof as a result of its initial capital contribution to the Fund) and all

-16-

<PAGE>

officers and directors as a group own less than one percent (1%) of the
outstanding Common Stock of the Fund.

Certain directors and officers of the Fund are also directors and officers
of Pax World Fund, Incorporated and Pax World Growth Fund, Inc., two other
investment companies managed by the Adviser, and the Pax World Money Market
Fund, a socially responsible money market fund which is being advised by the
Adviser for the specific purpose of assuring that the social responsibility
screens used by such fund are the same as those applied to the Fund. None of the
officers or directors are related to one another by blood, marriage or adoption,
except that Laurence A. Shadek and James M. Shadek are brothers.

Members of the Board of Directors of the Fund are reimbursed for their
travel expenses for attending meetings of the Board of Directors plus $300.00
for affiliated directors and $1,000.00 for unaffiliated directors.

In addition, the Fund pays $500.00 to each member of the Audit Committee
for attendance at each meeting of the Audit Committee, plus reimbursement for
travel expenses incurred in connection with attending such meetings.

INVESTMENT ADVISORY AND OTHER SERVICES

ADVISER

Pax World Management Corp., 222 State Street, Portsmouth, NH 03801-3853
(the "Adviser") is the adviser to the Fund. It was incorporated in 1970 under
the laws of the State of Delaware. Pursuant to the terms of an Advisory
Agreement entered into between the Fund and the Adviser (the "Advisory
Agreement"), the Adviser, subject to the supervision of the Board of Directors
of the Fund, is responsible for managing the assets of the Fund in accordance
with the Fund's investment objective, investment program and policies. The
Adviser determines what securities and other instruments are purchased and sold
for the Fund and is responsible for obtaining and evaluating financial data
relevant to the Fund. As of December 31, 1998, the Adviser had over $863,000,000
in assets under management by virtue of serving as the adviser to the Pax World
Fund, the Pax World Growth Fund and the Pax World Money Market Fund. The Adviser
has no clients other than the Fund, the Pax World Fund, the Pax World Growth
Fund and the Pax World Money Market Fund, although the Adviser may undertake to
advise other clients in the future.

-17-

<PAGE>

shareholders' and Board of Directors' meetings and of preparing, printing and
mailing reports, proxy statements and prospectuses to shareholders.

The Advisory Agreement provides that (i) it may be terminated by the Fund
or the Adviser at any time upon not more than sixty (60) days, nor less than
thirty (30) days, written notice, and (ii) will terminate automatically in the
event of its assignment (as defined in the Investment Company Act). In addition,
the Advisory Agreement provides that it may continue in effect for a period of
more than two (2) years from its execution only so long as such continuance is
specifically approved at least annually in accordance with the requirements of
the Investment Company Act. The Advisory Agreement was adopted on __________,
1999 by the Board of Directors, including a majority of the Directors who are
not parties to the contract or interested persons of any such party, as defined
in the Investment Company Act, at a meeting called for the purpose of voting on
such agreement.

Mr. Thomas W. Grant, the President of the Adviser, is also the President of
H.G. Wellington & Co., Inc. (the "Distributor") and has been associated with
that firm since 1991. Mr. Grant served previously with the firm of Fahnestock &
Co. for twenty-six years as a partner, managing director and senior officer. His
duties encompassed branch office management, corporate finance, syndications and
municipal and corporate bonds. Mr. Grant serves as a member of the Board of
Directors of the Fund.

In connection with this offering, the Fund and the Adviser have been
represented by single counsel. Therefore, to the extent that the Fund and this
offering would benefit by further independent review, such benefit will not be
available in this offering.

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<PAGE>

DISTRIBUTION

The Fund maintains a distribution expense plan (the "Plan") pursuant to
Rule 12b-1 under the Investment Company Act pursuant to which the Fund incurs
the expenses of distributing the Fund's shares. These expenses include (but are
not limited to) advertising expenses, the cost of printing and mailing
prospectuses to potential investors, commissions and account servicing fees paid
to, or on account of, broker-dealers or certain financial institutions which
have entered into agreements with the Fund, compensation to and expenses
incurred by officers, directors and/or employees of the Fund for their
distributional services and indirect and overhead costs associated with the sale
of Fund shares (including, but not limited to, travel and telephone expenses).

The Plan provides that the Fund may incur distribution expenses of up to
twenty-five one hundredths of one percent (.25%) per annum of its average daily
net assets to finance activity which is primarily intended to result in the sale
of Fund shares. Such expenses include (but are not limited to) travel and
telephone expenses, preparation and distribution of sales literature and
advertising, compensation to be paid to and expenses to be incurred by officers,
directors and/or employees of the Fund, or other third parties for their
distributional service if sales of Fund shares are made by such third parties
during a fiscal year. So long as the Fund is operating within such limitation,
however, the Fund may pay to one or more of its 12b-1 distributors (i) up to
twenty-five hundredths of one percent (.25%) per annum of its average daily net
assets for personal service and/or the maintenance of shareholder accounts as
defined by Rule 2830 of the National Association of Securities Dealers Rules of
Conduct, and (ii) total distribution fees (including the service fee of
twenty-five hundredths of one percent (.25%)) up to thirty-five hundredths of
one percent (.35%) per annum of its average daily net assets.

The Plan will continue in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Directors,
including a majority vote of the directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan (the "Rule 12b-1 Directors"),
cast in person at a meeting called for the purpose of voting on such
continuance. The Plan may be terminated at any time, without penalty, by the
vote of a majority of the Rule 12b-1 Directors or by the vote of the holders of
a majority of the outstanding shares of the Fund on not more than sixty (60)
days, nor less than thirty (30) days, written notice to any other party to the
Plan. The Plan may not be amended to increase materially the amounts to be spent
for the services described therein without approval by the shareholders of the
Fund, and all material amendments are required to be approved by the Board of
Directors in the manner described above. The Plan will automatically terminate
in the event of its assignment. The Fund will not be obligated to pay expenses
incurred under the Plan if it is terminated or not continued.

Pursuant to the Plan, the Board of Directors will review at least quarterly
a written report of the distribution expenses incurred on behalf of the Fund.
The report will include an itemization of the distribution expenses and the
purposes of such expenditures.

The Plan was adopted on __________, 1999 by the Board of Directors of the
Fund, including a majority of the 12b-1 Directors, at a meeting called for the
purpose of voting on such Plan.

Pursuant to the Plan, the Fund has entered into a Distribution Agreement
(the "Distribution Agreement") with H.G. Wellington & Co., Inc., 14 Wall Street,
New York, NY 10005 (the "Distributor"). Under the Distribution Agreement, the
Distributor serves as distributor of the Fund's shares and, for nominal
consideration and as agent for the Fund, solicits orders for the purchase of
Fund shares, provided, however, that orders are not binding on the Fund until
accepted by the Fund as principal. The Distribution Agreement will continue in
effect from year to year, provided that each such continuance is approved at
least annually by a vote of the Board of Directors, including a majority of the
Rule 12b-1 Directors, cast in

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<PAGE>

person at a meeting called for the purpose of voting on such continuance. The
Distribution Agreement may be terminated at any time, without penalty, by a vote
of a majority of the Rule 12b-1 Directors or by a vote of the holders of a
majority of the outstanding shares of the Fund on sixty (60) days written notice
to the Distributor or by the Distributor on sixty (60) days written notice to
the Fund.

The Distribution Agreement was adopted on __________, 1999 by the Board of
Directors of the Fund, including a majority of the Rule 12b-1 Directors, at a
meeting called for the purpose of voting on such agreement.

In connection with this offering, the Fund and the Distributor have been
represented by single counsel. Therefore, to the extent that the Fund and this
offering would benefit by further independent review, such benefit will not be
available in this offering.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS

State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110
(the "Custodian"), serves as custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with the Fund.

PFPC, Inc., 400 Bellevue Parkway, Wilmington, DE 19809 (the "Transfer
Agent"), serves as the transfer and dividend disbursing agent for the Fund. The
Transfer Agent provides customary transfer agency services to the Fund,
including the handling of shareholder communications, the processing of
shareholder transactions, the maintenance of shareholder account records,
payment of dividends and distributions and related functions. For these
services, the Transfer Agent receives an annual fee per shareholder account of
Ten Dollars ($10.00), a new account set-up fee for each manually established
account of Five Dollars ($5.00) and a monthly inactive zero balance account fee
per shareholder account of Thirty Cents ($0.30). The Transfer Agent is also
reimbursed for its out-of-pocket expenses, including but not limited to postage,
stationery, printing, allocable communication expenses and other costs.
Shareholder inquiries relating to a shareholder account should be directed to
the Transfer Agent at Pax World Fund Family, P.O. Box 8930, Wilmington, DE
19899-8930.

Pannell Kerr Forster PC, 125 Summer Street, Boston, MA 02110 serves as the
Fund's independent accountants, and in that capacity audits the Fund's annual
reports.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Adviser is responsible for decisions to buy and sell securities and
options on securities for the Fund, the selection of brokers and dealers to
effect the transactions and the negotiation of brokerage commissions, if any.
Broker-dealers may receive negotiated brokerage commissions on Fund portfolio
transactions, including options and the purchase and sale of underlying
securities upon the exercise of options. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law, the
Distributor and its affiliates.

Equity securities traded in the over-the-counter market and bonds,
including convertible bonds, are generally traded on a "net" basis with dealers
acting as principal for their own accounts without a stated commission, although
the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation payable to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, certain

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<PAGE>

money market instruments and U.S. Government agency securities may be purchased
directly from the issuer, in which case no commissions or discounts are paid.

In placing orders for portfolio securities of the Fund, the Fund is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Fund will consider
the research and investment services provided by brokers and dealers who effect
or are parties to portfolio transactions of the Fund. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Fund in its investment activities. Commission rates are established pursuant to
negotiations with the broker or dealer based on the quality and quantity of
execution services provided by the broker in the light of generally prevailing
rates. The Fund's policy is to pay higher commissions to brokers, other than the
Distributor, for particular transactions than might be charged if a different
broker had been selected, on occasions when, in the Fund's opinion, this policy
furthers the objective of obtaining best price and execution. In addition, the
Fund is authorized to pay higher commissions on brokerage transactions for the
Fund to brokers other than the Distributor (or any affiliate) in order to secure
research and investment services described above, subject to review by the
Fund's Board of Directors from time to time as to the extent and continuation of
this practice. The allocation of orders among brokers and the commission rates
paid are reviewed periodically by the Fund's Board of Directors.

Subject to the above considerations, the Distributor (or any affiliate) may
act as a securities broker for the fund. In order for the Distributor (or any
affiliate) to effect any portfolio transactions for the Fund, the commissions,
fees or other remuneration received by the Distributor (or any affiliate) must
be reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow the Distributor (or any affiliate) to
receive no more than the remuneration which would be expected to be received by
an unaffiliated broker in a commensurate arm's-length transaction. Furthermore,
the Board of Directors of the Fund, including a majority of the Directors who
are not "interested" persons, has adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to the
Distributor (or any affiliate) are consistent with the foregoing standard. In
accordance with Section 11(a) of the Securities Exchange Act of 1934, the
Distributor may not retain compensation for effecting transactions on a national
securities exchange for the Fund unless the Fund has expressly authorized the
retention of such compensation. The Distributor must furnish to the Fund at
least annually a statement setting forth the total amount of all compensation
retained by the Distributor from transactions effected for the Fund during the
applicable period. Brokerage with the Distributor is also subject to such
fiduciary standards as may be imposed by applicable law.

All of the issued and outstanding shares of capital stock of the Adviser
are currently owned by Mr. Laurence A. Shadek and his three siblings, Messrs.
Thomas F. Shadek and James M. Shadek and Ms. Katherine Shadek Boyle. In
addition, the Shadek family has a twenty-six and sixty-seven one hundredths
percent (26.67%) ownership interest in the Distributor, which is a brokerage
firm which the Fund may utilize to execute security transactions.

NET ASSET VALUE

Under the Investment Company Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Fund. In
accordance with procedures adopted by the Board of Directors, the value of
investments listed on a securities exchange and NASDAQ National Market System

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<PAGE>

securities (other than options on stock and stock indices) are valued at the
last sales price on the day of valuation, or, if there was no sale on such day,
the mean between the last bid and asked prices on such day, as provided by a
pricing service. Corporate bonds (other than convertible debt securities) and
U.S. Government securities that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be over-the-counter, are valued on the basis of valuations provided by a pricing
service which uses information with respect to transactions in bonds, quotations
from bond dealers, agency ratings, market transactions in comparable securities
and various relationships between securities in determining value. Convertible
debt securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed to be
over-the-counter, are valued at the mean between the last reported bid and asked
prices provided by principal market makers or independent pricing agents.
Options traded on an exchange are valued at the mean between the most recently
quoted bid and asked prices on the respective exchange. Should an extraordinary
event, which is likely to affect the value of the security, occur after the
close of an exchange on which a portfolio security is traded, such security will
be valued at fair value considering factors determined in good faith by the
Adviser under procedures established by and under the general supervision of the
Fund's Board of Directors.

Securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith by the
Board of Directors. Short-term debt securities are valued at cost, with interest
accrued or discount amortized to the date of maturity, if their original
maturity was sixty (60) days or less, unless this is determined by the Board of
Directors not to represent fair value. Short-term securities with remaining
maturities of sixty (60) days or more, for which market quotations are readily
available, are valued at their current market quotations as supplied by an
independent pricing agent or principal market maker. The Fund will compute its
net asset value as of 4:00 P.M., New York time, on each day the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem Fund shares have been received or days on which changes in the value
of the Fund's portfolio securities do not affect net asset value. In the event
the New York Stock Exchange closes early on any business day, the net asset
value of the Fund's shares shall be determined at a time between such closing
and 4:00 P.M., New York time.

CALCULATION OF PERFORMANCE DATA

AVERAGE ANNUAL TOTAL RETURN

The Fund may from time to time advertise its average annual total return.
Average annual total return is computed according to the following formula:

P (1+T) (n) = ERV

Where: P = a hypothetical initial payment of $1,000.00
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a
hypothetical $1,000.00 payment made
at the beginning of the one, five or
ten year periods (or fractional
portion thereof).

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<PAGE>

Average annual total return takes into account any applicable initial or
deferred sales charges but does not take into account any federal or state
income taxes that may be payable upon redemption.

PURCHASE, REDEMPTION AND EXCHANGE
OF FUND SHARES

PURCHASE OF SHARES

In General

The minimum initial investment is $250.00; the minimum subsequent
investment is $50.00. There is no minimum investment, however, for SIMPLE IRAs
and "tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code, as amended (the "Internal Revenue Code"). See "Shareholder Services -
Tax-Deferred Retirement Plans and Accounts" below.

Shares of the Fund are offered for sale by the Fund on a continuous basis
at the NAV, plus an initial sales charge. In some cases, however, purchases are
not subject to an initial sales charge, and the offering price is the NAV. See
"Waiver of Sales Charges" below. The Fund will compute its NAV once daily as of
4:00 P.M., New York time, on days that the New York Stock Exchange is open for
trading except on days on which no orders to purchase, sell or redeem shares
have been received by the Fund or days on which changes in the value of the
Fund's portfolio securities do not materially affect the NAV. NAV is computed by
dividing the value of the Fund's net assets (i.e., the value of its assets less
liabilities) by the total number of shares of the Fund outstanding. The Fund's
investments are valued on the basis of market value or, where market quotations
are not readily available, fair value as determined in good faith under
procedures established by the Fund's Board of Directors. For further information
regarding the methods employed in valuing the Fund's investments, see "Net Asset
Value" above.

If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the New York Stock Exchange (currently 4:00 P.M., New
York time) on a business day, Fund shares will be purchased at the public
offering price determined as of the close of trading on the floor of the New
York Stock Exchange on that day; otherwise, Fund shares will be purchased at the
public offering price determined as of the close of trading on the floor of the
New York Stock Exchange on the next business day, except where shares are
purchased through certain financial institutions that have entered into
agreements with the Fund as provided below.

Orders for the purchase of Fund shares received, by certain financial
institutions that have entered into agreements with the Fund, by the close of
trading on the floor of the New York Stock Exchange on any business day and
transmitted to the Transfer Agent or other entity authorized to receive orders
on behalf of the Fund by 8:00 P.M., New York time (or, due to unforeseen
circumstances, by 9:30 A.M., New York time, on the following business day) will
be based on the NAV, plus applicable sales charges, determined as of the close
of trading on the floor of the New York Stock Exchange on the day that such
order was received by such financial institution. Otherwise, the orders will be
based on the next determined NAV, plus applicable sales charges. It is the
financial institution's responsibility to transmit orders so that they will be
received by the Transfer Agent or such other entity on a timely basis.

If a stock certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares. There is no charge to
the investor for issuance of a certificate.

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<PAGE>

The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares.

SALE OF SHARES

In General

Shares of the Fund can be redeemed at any time for cash at the NAV per
share next determined after the redemption request is received in proper form by
the Transfer Agent, minus a contingent deferred sales charge of one percent
(1.0%) for shares redeemed within six (6) months of purchase. In some cases,
however, sales are not subject to a contingent deferred sales charge, and the
sale price is the NAV. See "Waiver of Sales Charges" below.

Involuntary Redemption

In order to reduce expenses of the Fund, the Board of Directors may redeem
all of the shares of any shareholder, other than a shareholder which is an IRA
or other tax-deferred retirement plan, whose account has a balance of less than
$250.00 due to a redemption. The Fund will give any such shareholder sixty (60)
days prior written notice in which to purchase sufficient additional shares to
avoid such redemption.

Waiver of Sales Charges

You must notify the Transfer Agent that you are entitled to the reduction
or waiver of the sales charge. The reduction or waiver will be granted subject
to confirmation of your entitlement.

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<PAGE>

EXCHANGE OF SHARES

The Fund makes available to its shareholders the privilege of exchanging
their shares of the Fund for shares of the Pax World Fund, Pax World Growth Fund
and Pax World Money Market Fund, subject to the minimum investment requirement
of such funds. All exchanges are made on the basis of relative net asset value
next determined after receipt of an order in proper form. An exchange will be
treated as a redemption and purchase for tax purposes. Shares of the Fund may be
exchanged for shares of the Pax World Fund, Pax World Growth Fund and Pax World
Money Market Fund only if legally permissible under applicable state laws. It is
contemplated that this Exchange Privilege will be applicable to any new Pax
World Mutual Funds.

Additional details about the Exchange Privilege and prospectuses for each
of the Pax World Mutual Funds are available from the Fund or the Fund's Transfer
Agent. The Exchange Privilege may be modified, terminated or suspended on sixty
(60) days notice.

TAXES

The Fund is qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. This relieves the Fund (but not its shareholders) from paying federal
income tax on income which is distributed to shareholders and permits net
long-term capital gains of the Fund (i.e., the excess of net long-term capital
gains over net short-term capital losses) to be treated as long-term capital
gains of the shareholders, regardless of how long shareholders have held their
shares in the Fund.

Qualification as a regulated investment company requires, among other
things, that (a) at least ninety percent (90%) of the Fund's annual gross income
(without reduction for losses from the sale or other disposition of securities)
be derived from interest, dividends, and gains from the sale or other
disposition of securities or options thereon or foreign currencies, or other
income (including but not limited to gains from options, futures or forward
contracts) derived with respect to its business of investing in such securities
or currencies; (b) the Fund diversify its holdings so that, at the end of each
quarter of the taxable year (i) at least fifty percent (50%) of the market value
of the Fund's assets is represented by cash, U.S. Government securities and
other securities limited in respect of any one issuer to an amount not greater
than five percent (5%) of the market value of the Fund's assets and ten percent
(10%) of the outstanding voting securities of such issuer, and (ii) not more
than twenty-five percent (25%) of the value of its assets is invested in the
securities of any one industry (other than U.S. Government securities); and (c)
the Fund distribute to its shareholders at least ninety percent (90%) of its net
investment income (including short-term capital gains) other than long-term
capital gains in each year.

Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one (1) year except in certain cases where the Fund acquires a put or
writes a call thereon or makes a short sale against-the-box. Other gains or
losses on the sale of securities will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other termination of options on
securities will generally be treated as gains and losses from the sale of
securities (assuming they do not qualify as Section 1256 contracts). If an
option written by the Fund on securities lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will generally realize short-term capital gain or loss. If
securities are sold by the Fund pursuant to the exercise of a call option
written by it, the Fund will include the premium received in the sale proceeds
of the securities delivered in determining the amount of gain or loss on the
sale. Certain of the Fund's transactions may be subject to wash sale, short
sale, conversion transaction and straddle provisions

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<PAGE>

of the Internal Revenue Code. In addition, debt securities acquired by the Fund
may be subject to original issue discount and market discount rules.

Gain or loss on the sale, lapse or other termination of options on stock
will be capital gain or loss and will be long-term or short-term depending upon
the holding period of the option. In addition, positions which are part of a
straddle will be subject to certain wash sale and short sale provisions of the
Internal Revenue Code. In the case of a straddle, the Fund may be required to
defer the recognition of losses on positions it holds to the extent of any
unrecognized gain on offsetting positions held by the Fund. The conversion
transaction rules may apply to certain transactions to treat all or a portion of
the gain thereon as ordinary income rather than as capital gain.

The Fund is required to distribute ninety-eight percent (98%) of its
ordinary income in the same calendar year in which it is earned. The Fund is
also required to distribute during the calendar year ninety-eight percent (98%)
of the capital gain net income it earned during the twelve (12) months ending on
October 31 of such calendar year, as well as all undistributed ordinary income
and undistributed capital gain net income from the prior year or the twelve (12)
month period ending on October 31 of such prior year, respectively. To the
extent it does not meet these distribution requirements, the Fund will be
subject to a nondeductible four percent (4%) excise tax on the undistributed
amount. For purposes of this excise tax, income on which the Fund pays income
tax is treated as distributed.

Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of the dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of the Fund, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.

The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.

SHAREHOLDER SERVICES

The Fund makes available to its shareholders the following privileges and
plans:

AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR
DISTRIBUTIONS

For the convenience of investors, all dividends and distributions, if any,
will be automatically reinvested in additional full and fractional shares of the
Fund. An investor may direct the Transfer Agent in writing not less than five
(5) days prior to the ex-dividend date to receive (i) such dividends in cash and
distributions in additional shares or (ii) such dividends and distributions in
cash. Any shareholder who receives a cash payment representing a dividend or
distribution may reinvest such dividend or distribution at net asset value by
returning the check or the proceeds to the Transfer Agent within thirty (30)
days after the payment date. Such investment will be made at the net asset value
per share next determined after receipt of the check or proceeds by the Transfer
Agent.

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<PAGE>

AUTOMATIC INVESTMENT PLAN

Under the Fund's Automatic Investment Plan, an investor may arrange to have
a fixed amount automatically invested in shares of the Fund monthly or quarterly
by authorizing his or her bank account to be debited to invest specified dollar
amounts in shares of the Fund. The investor's bank must be a member of the
Automatic Clearing House System. Stock certificates are not issued to Automatic
Investment Plan participants.

Further information about this plan and an application form can be obtained
from the Fund or the Transfer Agent.

TAX-DEFERRED RETIREMENT PLANS AND ACCOUNTS

Various tax-deferred retirement plans and accounts, including IRAs,
Education IRAs, Roth IRAs, SIMPLE IRAs, Simplified Employee Pension-IRA plans
and "tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code are available through the Fund. Information regarding the establishment of
these plans, and the administration, custodial fees and other details are
available from the Fund or the Transfer Agent.

Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such plan.

SYSTEMATIC WITHDRAWAL PLANS

A systematic withdrawal plan is available to shareholders through the
Transfer Agent. Such withdrawal plan provides for monthly, bimonthly, quarterly
or semi-annual checks in any amount, except as provided below, up to the value
of the shares in the shareholder's account.

In the case of shares held through the Transfer Agent (i) a $10,000.00
minimum account value applies, (ii) withdrawals may not be for less than $100.00
and (iii) the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan. In addition, shares of the Fund which are
redeemed within six (6) months of purchase pursuant to the systematic withdrawal
plan are subject to a one percent (1.0%) contingent deferred sales charge.

The Transfer Agent acts as agent for the shareholder in redeeming
sufficient full and fractional shares to provide the amount of the periodic
withdrawal payment. The systematic withdrawal plan may be terminated at any
time, and the Fund reserves the right to initiate a fee of up to Five Dollars
($5.00) per withdrawal, upon thirty (30) days written notice to the shareholder.
Withdrawal payments should not be considered as dividends, yield or income. If
periodic withdrawals continuously exceed reinvested dividends and distributions,
the shareholder's original investment will be correspondingly reduced and
ultimately exhausted.

Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. Each
shareholder should consult his or her own tax adviser with regard to the tax
consequences of the plan, particularly if used in connection with a retirement
plan.

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<PAGE>

REPORTS TO SHAREHOLDERS

The Fund will send annual and semi-annual reports. The financial statements
appearing in annual reports are audited by independent accountants. In order to
reduce duplicate mailing and printing expenses, the Fund will provide one annual
and semi-annual shareholder report and one annual prospectus per household. You
may request additional copies of such reports by writing to the Fund at 222
State Street, Portsmouth, NH 03801-3853, telephoning the Fund at 800-767-1729
(toll-free), visiting the Fund's web site at http://www.paxfund.com or visiting
the SEC's web site at http://www.sec.gov for such purpose. In addition, monthly
unaudited financial data are available upon request from the Fund.

SHAREHOLDER INQUIRIES

Inquiries should be directed to the Transfer Agent at Pax World Fund
Family, P.O. Box 8930, Wilmington, DE 19899-8930, or by telephone at
800-372-7827 (toll-free) or, from outside the United States, at 302-791-2844
(collect).

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<PAGE>

FINANCIAL STATEMENTS

<PAGE>

PART C

OTHER INFORMATION

Item 23. Financial Statements and Exhibits.

(a) Financial Statements:

(i) Financial Statements included in the Prospectus constituting
Parts A and B of this Registration Statement:

PartA - Financial Highlights

PartB - Statements of Assets and Liabilities, Operations,
Changes in Net Assets, Notes to Financial
Statements, all as of December 31, 1997, and
Independent Auditors' Report.

(b) Exhibits:

(i) Articles of Incorporation.

(ii) By-Laws.

(iii) Instruments Defining Rights of Security Holders.

(iv) Investment Advisory Contracts. Form of Advisory Agreement between
the Registrant and Pax World Management Corp.

(v) Underwriting Contracts. Form of Distribution Agreement between
Pax World Management Corp. and H. G. Wellington & Co., Inc.

(vi) Bonus or Profit Sharing Contracts. Not Applicable.

(vii) Custodian Agreements.

(A) Form of Custodian Contract between the Registrant and State
Street Bank and Trust Company.

(B) Form of Data Access Services Addendum to Custodian Contract
between the Registrant and State Street Bank and Trust
Company.

(C) Form of Funds Transfer Addendum to Custodian Contract
between the Registrant and State Street Bank and Trust
Company.

(viii) Other Material Contracts.

(A) Form of Transfer Agency Services Agreement between the
Registrant and PFPC, Inc.

(B) Form of Transfer Agency Services Fee Agreement between the
Registrant and PFPC, Inc.

<PAGE>

(ix) Legal Opinion.

(A) Opinion of Counsel.

(B) Consent of Counsel.

(x) Other Opinions. Consent of Independent Certified Public
Accountants.

(xi) Omitted Financial Statements. Not Applicable.

(xii) Initial Capital Agreements. Form of Purchase Agreement.

(xiii) Rule 12b-1 Plan. Form of Distribution and Service Plan.

(xiv) Financial Data Schedule. Not Applicable.

(xv) Rule 18f-3 Plan. Not Applicable.

Item 24. Persons Controlled by or under Common Control with the Fund.

Pax World Fund, Incorporated, Pax World Growth Fund, Inc., Pax World High
Yield Fund, Inc, and Pax World Money Market Fund, Inc. share a common investment
adviser and thus may be deemed to be under common control, although the
Registrant does not concede that they are under commmon control.

Item 25. Indemnification.

As permitted by Section 17(h) and (i) of the Investment Company Act of 1940
(the "1940 Act") and pursuant to Section 8.04 of the Fund's By-Laws (Exhibit 2
to the Registration Statement), officers, directors, employees and agents of the
Registrant will not be liable to the Registrant, any shareholder, officer,
director, employee, agent or other person for any action or failure to act,
except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Section 145 of the General Corporation Law of the State of Delaware permits
indemnification of directors who acted in good faith and reasonably believed
that the conduct was in the best interests of the Registrant.

Section 8 of the Advisory Agreement (Exhibit 5 to the Registration
Statement) and Section 7 of the Sub-Advisory Agreement (Exhibit 5 to the
Registration Statement) limit the liability of the Adviser and the Sub-Adviser,
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their obligations and duties under the Advisory and
Sub-Advisory Agreement.

The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws in a manner consistent with Release No. 11330 of the
Securities and Exchange Commission under the 1940 Act so long as the
interpretation of Section 17(h) and 17(i) of such Act remain in effect and are
consistently applied.

Under Section 17(h) of the 1940 Act, it is the position of the staff of the
Securities and Exchange Commission that if there is neither a court
determination on the merits that the defendant is not liable nor a court
determination that the defendant was not guilty of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of one's office, no indemnification will be permitted unless an
independent legal counsel (not including a counsel who does work for either the
Registrant, its investment adviser, its principal underwriter or persons
affiliated with these persons) determines, based upon a review of the facts,
that the person in question was not guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.

-2-
<PAGE>

Under its Articles of Incorporation, the Registrant may advance funds to
provide for indemnification. Pursuant to the Securities and Exchange Commission
staff's position on Section 17(h) advances will be limited in the following
respect:

(i) Any advances must be limited to amounts used, or to be used, for the
preparation and/or presentation of a defense to the action (including
cost connected with preparation of a settlement);

(ii) Any advances must be accompanied by a written promise by, or on behalf
of, the recipient to repay that amount of the advance which exceeds
the amount to which it is ultimately determined that he is entitled to
receive from the Registrant by reason of indemnification;

(iii) Such promise must be secured by a surety bond or other suitable
insurance; and

(iv) Such surety bond or other insurance must be paid for by the recipient
of such advance.

Item 26. Business and Other Connections of the Investment Adviser.

See "Management, Organization and Corporate Structure of the Fund -
Adviser" in the Prospectus constituting Part A of this Registration Statement
and "Adviser" in the Statement of Additional Information constituting Part B of
this Registration Statement.

The business and other connections of the Adviser's directors and executive
officers are as set forth below. Except as otherwise indicated, the address of
each person is 222 State Street, Portsmouth, NH 03801.

<TABLE>
<CAPTION>
Name Position(s) Held with the Adviser Principal Occupation(s)
---- --------------------------------- -----------------------
<S> <C> <C>
Katherine Shadek Boyle Senior Vice President; Director Senior Vice President, Pax World
Management Corp.

Thomas W. Grant President; Director President, Pax World Management
Corp.; Vice Chairman of the Board
and President, Pax World Fund,
Incorporated; President, Pax World
Growth Fund, Inc.; President, Pax
World High Yield Fund, Inc.;
President, Pax World Money
Market Fund, Inc.; President, H.
G. Wellington & Co., Inc.

James M. Shadek Senior Vice President for Social Senior Vice President for Social
Research; Secretary; Director Research and Secretary, Pax World
Management Corp.; Treasurer, Pax
World Growth Fund, Inc.;
Treasurer, Pax World High Yield
Fund, Inc.; Account Executive, H.
G. Wellington & Co., Inc.
</TABLE>

-3-
<PAGE>

<TABLE>
<CAPTION>
Name Position(s) Held with the Adviser Principal Occupation(s)
---- --------------------------------- -----------------------
<S> <C> <C>
Laurence A. Shadek Chairman of the Board; Director Chairman of the Board, Pax World
Management Corp.; Chairman of
the Board, Pax World Fund,
Incorporated; Chairman of the
Board, Pax World Growth Fund,
Inc.; Chairman of the Board, Pax
World High Yield Fund, Inc.;
Executive Vice President, Pax
World Money Market Fund, Inc.;
Executive Vice President, H. G.
Wellington & Co., Inc.

Thomas F. Shadek Senior Vice President - Marketing; Senior Vice President - Marketing,
Director Pax World Management Corp.
</TABLE>

Item 27. Principal Underwriters

Not applicable.

Item 28. Location of Accounts and Records

The accounts, books and other documents relating to shareholder accounts
and activity required to be maintained by Section 31(a) of the 1940 Act and the
Rules thereunder are maintained by PFPC, Inc. and are located at 400 Bellevue
Parkway, Wilmington, DE 19809-3853. All other accounts, books and other
documents required to be maintained by Section 31(a) of the 1940 Act and the
Rules thereunder are maintained by the Fund at 222 State Street, Portsmouth, NH
03801and by the State Street Bank and Trust Company at 225 Franklin Street,
Boston MA 02110. The Applicant's corporate minute books are kept at the law
offices of Bresler, Goodman & Unterman, LLP, 521 Fifth Avenue, New York, NY
10175.

Item 29. Management Services

Other than as set forth under the captions "Management, Organization and
Corporate Structure of the Fund - Adviser; Sub-Adviser?," "Management,
Organization and Corporate Structure of the Fund - Distribution," and
Management, Organization and Corporate Structure of the Fund - Custodian and
Transfer and Dividend Disbursing Agent" in the Prospectus constituting Part A of
this Registration Statement and the caption "Management of the Fund" in the
Statement of Additional Information constituting Part B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.

Item 30. Undertakings

Not Applicable.

-4-
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of New York, and State of New York, on the 18th day of June, 1999.

PAX WORLD HIGH YIELD FUND, INC.

By:
----------------------------
Thomas W. Grant
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

Chairman of the Board, 6/18/99
- -------------------------- Director
Laurence A. Shadek

President, Director 6/18/99
- --------------------------
Thomas W. Grant

Treasurer 6/18/99
- --------------------------
James M. Shadek

Director 6/18/99
- --------------------------
Carl H. Doerge, Jr.

Director 6/18/99
- --------------------------
John L. Kidde

Director 6/18/99
- --------------------------
Joy L. Liechty

Director 6/18/99
- --------------------------
Sanford C. Sherman

Director 6/18/99
- --------------------------
Nancy S. Taylor

-5-
<PAGE>

PAX WORLD HIGH YIELD FUND, INC.

Exhibit Index

1. Articles of Incorporation.*

2. By-Laws.*

3. Instruments defining rights of security holders.*

4. Form of Advisory Agreement between the Registrant and Pax World
Management Corp.*

5. Form of Distribution Agreement between the Registrant and H. G.
Wellington & Co., Inc.*

6. Not Applicable.

7(a). Form of Custodian Contract between the Registrant and State Street
Bank and Trust Company.*

7(b). Form of Data Access Services Addendum to Custodian Contract between
the Registrant and State Street Bank and Trust Company.*

7(c). Form of Funds Transfer Addendum to Custodian Contract between the
Registrant and State Street Bank and Trust Company.*

8(a). Form of Transfer Agency Services Agreement between the Registrant
and PFPC, Inc.*

8(b). Form of Transfer Agency Services Fee Agreement between the
Registrant and PFPC, Inc.*

8(c). Form of Transfer Agency Services Fee Waiver Agreement between the
Registrant and PFPC, Inc.*

9(a). Opinion of Counsel.**

9(b). Consent of Counsel.**

10. Consent of Independent Certified Public Accountants.**

11. Not Applicable.

12. Form of Purchase Agreement.**

13. Form of Distribution and Service Plan.*

14. Not applicable.

15. Not Applicable.

- ----------

* Filed herewith.
** To be filed by amendment.

Exhibit 1

CERTIFICATE OF INCORPORATION

PAX WORLD HIGH YIELD FUND, INC.

The undersigned, in order to form a corporation for the purpose hereinafter
stated, under and pursuant to the provisions of the General Corporation Law of
the State of Delaware, does hereby certify as follows:

FIRST: The name of the corporation (which is hereinafter referred to as the
"Corporation") is

PAX WORLD HIGH YIELD FUND, INC.

SECOND: The registered office of the Corporation is to be located at 9 East
Loockerman Street, City of Dover, County of Kent, State of Delaware 19901. The
name of its registered agent at that address is National Corporate Research,
Ltd.

THIRD: The purpose of the Corporation is to subscribe for, invest in,
purchase or otherwise acquire, to own, hold, sell, exchange, pledge or otherwise
dispose of, securities of every nature and kind, more particularly the
securities of companies and entities engaged in the furnishing of services or
production or distribution of products essentially of a non-military nature,
including without limitation, stocks, options, indices, bonds, debentures, or
obligations or evidences of indebtedness or ownership issued or created by
associations, trusts or corporations, public or private, whether created,
established or organized under the laws of the United States, any of the States,
or any territory or district or colony or possession thereof, or under the laws
of any foreign country, and also foreign and domestic government and municipal
obligations, currencies, bank acceptances, commercial paper and secured call
loans; to pay for the same in cash or by the issue of stock, bonds or notes of
the Corporation or otherwise; and while owning and holding any such securities,
to exercise all the rights, powers and privileges of a stockholder or owner,
including the right to transfer and convey the said stock or other securities to
one or more persons, firms, associations or corporations subject to voting
trusts or other agreements placing in such persons voting or other powers in
respect of said stocks or other securities; to borrow money or otherwise obtain
credit and to secure the same by mortgaging, pledging or otherwise subjecting as
security the assets of the Corporation; and to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware. In these provisions, purposes shall also be construed as
powers, and powers shall also be construed as purposes, and the enumeration of
specific purposes or powers shall not be construed to limit other statements of
purposes or powers which the Corporation may otherwise have under applicable
law, all of the same being separate and cumulative, and all of the same may be
carried on, promoted and pursued, transacted or exercised in any place
whatsoever.

FOURTH: (1) The total number of shares of stock which the Corporation shall
have authority to issue is twenty-five million (25,000,000) shares of Common
Stock, par value $1.00 per share.

(2) The holders of shares of Common Stock shall be entitled to receive, to
the extent permitted by law, such dividends as may be declared from time to time
by the Board of Directors of the Corporation and shall participate in any and
all dividend distributions on an equal per share basis. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation or any
reduction of the capital stock of the Corporation resulting in the distribution
of any of its assets to its stockholders, the holders of shares of Common Stock
shall be entitled to receive the net assets of the Corporation, after the
Corporation shall have satisfied or made provision for its debts and
obligations, and shall participate in any and all such distributions on an equal
per share basis.

<PAGE>

(3) The holders of shares of Common Stock shall have the exclusive right to
vote for (or to consent with respect to) the election of directors and, except
as otherwise may be required by law, on all other matters requiring action by
the stockholders or submitted to the stockholders for action. Each holder of a
share of the Common Stock shall be entitled to one vote for each share of the
Common Stock standing in his name on the books of the Corporation.

FIFTH: Election of directors need not be by ballot, unless the by-laws of
the Corporation shall so provide. In furtherance and not in limitation of the
powers conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized and empowered, without the assent or vote of the
stockholders, to make, alter, amend and repeal the by-laws of the Corporation,
in any manner not inconsistent with the laws of the State of Delaware or the
Certificate of Incorporation of the Corporation.

SIXTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.

SEVENTH: Except as otherwise provided by statute, any action which might
have been taken by a vote of the stockholders at a meeting thereof may be taken
with the written consent of such of the holders of stock who would have been
entitled to vote upon the action if a meeting were held as have not less than
the minimum percentage of the total vote required for the proposed corporate
action by statute, this Certificate of Incorporation or the by-laws of the
Corporation, as may be applicable, but in the case of the election of a director
or directors, not less than a majority of the stock of the Corporation entitled
to vote thereon; provided that prompt notice shall be given to all stockholders
of the taking of such corporate action without a meeting if less than unanimous
consent is obtained.

EIGHTH: The following additional provisions not inconsistent with law are
hereby established for the management, conduct and regulation of the business
and affairs of the Corporation, and for creating, limiting, defining, and
regulating the powers of the Corporation and of its directors and stockholders:

The Board of Directors may, at any time and from time to time,
contract for management services with PAX WORLD MANAGEMENT CORP., a
Delaware corporation, or with such other association, corporation or firm
as the Board of Directors may deem desirable, every such contract to comply
with such requirements and restrictions as may be set forth in the ByLaws
of the Corporation as from time to time amended; and any such contract may
contain such other terms interpretative of or in addition to said
requirements and restrictions as the Board of Directors may determine. The
Board of Directors may also, at any time and from time to time, contract
with PAX WORLD MANAGEMENT CORP., or with any other corporation, firm or
association, appointing it distributor for the capital stock of the
Corporation,

-2-
<PAGE>

every such contract to comply with such requirements and restrictions as
may be set forth in the By-Laws of the Corporation as from time to time
amended; and any such contract may contain such other terms interpretative
of or in addition to said requirements and restrictions as the Board of
Directors may determine. The fact that any or all of the directors and
officers of the Corporation are also shareholders, directors or officers of
PAX WORLD MANAGEMENT CORP., or may be shareholders, trustees, directors or
officers of some other corporation, firm or association with which such a
management contract or distributor's contract may hereafter be made, shall
not affect the validity of any such contract or disqualify any officer of
director of the Corporation from voting upon or executing the same or
create any liability or accountability based on adverse interest, except as
may be provided by law.

Assets of the Corporation may be held by or deposited with a bank or
trust company or other organization as custodian, pursuant to such
requirements as may be prescribed from time to time by the By-Laws of the
Corporation and by the Board of Directors pursuant to said By-Laws.

Any authorized but unissued stock, as well as any treasury stock, may
be sold for cash or for securities from time to time, by authority of the
Board of Directors, without first being offered to the existing
stockholders, at a price to net the company not less than its net asset
value determined as hereinafter provided and not less than its par value.
Anything herein to the contrary notwithstanding, any part of the shares
from time to time authorized may (subject to any votes of the stockholders
determining the terms and manner of disposition of any such additional
shares) from time to time to be issued to and among the stockholders by way
of a stock dividend for such cash or property in the possession of the
Corporation as surplus as the Board of Directors may determine, or may from
time to time be issued and disposed of through an offering to stockholders
in proportion to their holdings for cash at not less than the net asset
value; provided that no shares shall be so issued to stockholders for cash
in an amount less than the par value of such shares, and no shares shall be
issued as a stock dividend except to the extent of cash or property in the
possession of the Corporation as surplus not less in value than the par
value of the shares so to be issued.

The Board of Directors or any officer or officers or agent or agents
of the Corporation designated from time to time for this purpose by the
Board shall determine the value of all the assets of the Corporation at the
close of trading on the New York Stock Exchange on any day upon which such
Exchange is open for unrestricted trading or at such other times as the
Board of Directors shall designate, and the value of such assets so
determined, less total liabilities of the Corporation (exclusive of capital
stock and surplus) divided by the number of shares outstanding shall be the
net asset value of a share until a new net asset value is determined by the
Board or such officers or agents. In determinations of net asset value all
securities for which market quotations are available shall be appraised at
last sale or bid prices (as nearly as can conveniently be determined) and
other securities and assets at fair value as determined in good faith by or
under authority of the Board in accordance with accounting principles
generally accepted at the time. In determinations of net asset value,
treasury stock shall be treated as if it were unissued. When net

-3-
<PAGE>

asset value is determined as of a time other than the close of unrestricted
trading on the New York Stock Exchange, the Board or such officers or
agents may, but need not, determine such net assets value by adjusting the
net asset value determined as of the preceding close of such Exchange in
such manner (based upon changes in the market prices of selected securities
or changes in market averages or on other standard and readily
ascertainable market data since such close) as the Board or such officers
or agents deem adequate to reflect a fair approximate estimate of the
probable change in net asset value which has occurred since such close. In
determining the net asset value the Board or such officers or agents may
include in liabilities such reserves for taxes, estimated accrued expenses
and contingencies in accordance with accounting principles generally
accepted at the time as the Board or such officers or agent may in its or
their best judgment deem fair and reasonable under the circumstances.

The By-Laws of the Corporation, as from time to time amended, may
prescribe limitations upon the borrowing of money and pledging of assets by
the Corporation.

Any holder of shares of Common Stock, $1.00 par value, of the
Corporation may by presentation of a written request, together with his
certificates, if any, for such shares, duly endorsed, at the office of the
Corporation or at the principal office of a custodian appointed by the
Corporation, redeem his shares for the net asset value thereof as provided
in the By-Laws. Redemptions as aforesaid, or voluntary purchases by the
Corporation of its own stock, shall be made as provided in the By-Laws, and
in accordance with and subject to the requirements of applicable laws and
regulations.

The Corporation may issue, sell, redeem, repurchase, and otherwise
deal in and with shares of its capital stock in fractional denominations to
the same extent as its whole shares, and shares in fractional denominations
shall be shares of capital stock having proportionately to the respective
fractions represented thereby all the rights of whole shares, including,
without limitation, the right to vote, the right to receive dividends and
distributions, and the right to participate upon liquidation of the
Corporation; provided that the issue of shares in fractional denominations
shall be limited to such transactions and be made upon such terms as may be
fixed by or under authority of the By-Laws or the Board of Directors.

PAX WORLD MANAGEMENT CORP. and any other association, corporation,
person, firm or other entity with which the Corporation may have any such
contract for management services or for the distribution of its capital
stock may perform management services for or distribute the capital stock
of any other person, association, corporation, firm or other entity
pursuant to any contract or otherwise, and take any action or do any thing
in connection therewith or related thereto, and no such performance of
management services or distributions of capital stock or taking of any such
action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of PAX WORLD
MANAGEMENT CORP., or any other association, corporation, person, firm or
other entity to or with the Corporation or deemed to violate or give rise
to any duty or obligation of such corporation or

-4-
<PAGE>

any other association, corporation, person, firm or other entity to the
Corporation.

Meetings of stockholders may be held outside the State of Delaware, if
the By-Laws so provide. The books of the Corporation may be kept (subject
to any provision contained in the statutes) outside the State of Delaware
at such place or places as may be designated from time to time by the Board
of Directors or in the By-Laws of the Corporation. Elections of directors
need not be by ballot unless the By-Laws of the Corporation shall so
provide. Whenever the vote of stockholders at a meeting thereof is required
or permitted to be taken for or in connection with any corporate action
(except for the sale, lease or exchange of all or substantially all of the
property and assets of the Corporation) such vote and meeting may be
dispensed with and such corporate action may be taken with the written
consent of the holders having not less than such percentage of the total
number of votes as would have been required to authorize and approve such
action had a meeting been held and had all votes so entitled been cast at
such meeting; provided that in no case shall the written consent be by the
holders of stock having less than the minimum percentage of the total vote
required by a statute of Delaware or of the United States for the proposed
corporate action, and provided further that prompt notice must be given to
all stockholders of the taking of corporate action without a meeting and by
less than unanimous written consent.

NINTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at that time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of said laws.

TENTH: The Corporation shall, to the full extent permitted by the General
Corporation Law of the State of Delaware, as amended from time to time,
indemnify all persons whom it has the power to indemnify pursuant thereto.

ELEVENTH: No director of the Corporation shall have personal liability to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing shall not eliminate or
limit the liability of any director (i) for any breach of such director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which such director derived an
improper personal benefit.

TWELFTH: The name and address of the incorporator is Kevin J. Lake, Esq.,
28th Floor, 521 Fifth Avenue, New York, New York 10175.

IN WITNESS WHEREOF, I have signed this Certificate this 15th day of June,
1999.

------------------------------
Kevin J. Lake
Sole Incorporator

-5-

Exhibit 2

BY-LAWS

PAX WORLD HIGH YIELD FUND, INC.,

A DELAWARE CORPORATION

As adopted on June 15, 1999

<PAGE>

TABLE OF CONTENTS

Page No.
--------

ARTICLE I - Offices........................................................1
SECTION 1.01. Registered Office..................................1
SECTION 1.02. Other Offices......................................1

ARTICLE II - Stockholders..................................................1
SECTION 2.01. Annual Meetings....................................1
SECTION 2.02. Special Meetings...................................1
SECTION 2.03. Notice of Meetings.................................1
SECTION 2.04. Quorum.............................................1
SECTION 2.05. Adjournment........................................2
SECTION 2.06. Organization.......................................2
SECTION 2.07. Voting.............................................2
SECTION 2.08. Stockholders List..................................2
SECTION 2.09. Addresses of Stockholders..........................2
SECTION 2.10. Inspectors of Election.............................2
SECTION 2.11. Action by Consent..................................2

ARTICLE III - Board of Directors...........................................3
SECTION 3.01. General Powers.....................................3
SECTION 3.02. Number, Qualification and Term of Office...........3
SECTION 3.03. Quorum and Manner of Action........................3
SECTION 3.04. Place of Meeting, etc..............................3
SECTION 3.05. Regular Meetings...................................3
SECTION 3.06. Special Meetings...................................3
SECTION 3.07. Action by Consent..................................3
SECTION 3.08. Organization.......................................3
SECTION 3.09. Resignations.......................................4
SECTION 3.10. Removal of Directors...............................4
SECTION 3.11. Vacancies..........................................4
SECTION 3.12. Compensation of Directors..........................4
SECTION 3.13. Committees.........................................4
SECTION 3.14 Contracts..........................................5
SECTION 3.15. Participation in Meetings..........................5
SECTION 3.16. Reliance Upon Records, Information, Opinions,
Reports and Statements.....................5

ARTICLE IV - Officers......................................................5
SECTION 4.01. Number.............................................5
SECTION 4.02. Election, Term of Office and Qualifications........5
SECTION 4.03. Subordinate Officers...............................6
SECTION 4.04. Removal............................................6
SECTION 4.05. Resignations.......................................6
SECTION 4.06. Vacancies..........................................6
SECTION 4.07. Chairman of the Board..............................6
SECTION 4.08. President..........................................6
SECTION 4.09. Executive Vice President...........................6
SECTION 4.10. Vice Presidents....................................7
SECTION 4.11. Secretary..........................................7
SECTION 4.12. Assistant Secretaries..............................7

<PAGE>

SECTION 4.13. Treasurer..............................................7
SECTION 4.14. Assistant Treasurers...................................7
SECTION 4.15. Salaries...............................................8

ARTICLE V - Contracts, Checks, Drafts, Bank Accounts, Etc......................8
SECTION 5.01. Contracts, etc., How Executed..........................8
SECTION 5.02. Checks, Drafts, etc....................................8
SECTION 5.03. Deposits...............................................8
SECTION 5.04. General and Special Bank Accounts......................8
SECTION 5.05. Proxies................................................8

ARTICLE VI - Shares and Their Transfer.........................................9
SECTION 6.01. Certificates of Stock..................................9
SECTION 6.02. Transfer of Stock......................................9
SECTION 6.03. Lost, Destroyed and Mutilated Certificates.............9
SECTION 6.04. Transfer Agent and Registrar; Regulations..............9
SECTION 6.05. Fixing Date for Determination of Stockholders of
Record.........................................9

ARTICLE VII - Seal............................................................10
SECTION 7.01. General...............................................10

ARTICLE VIII - Miscellaneous Provisions.......................................10
SECTION 8.01. Fiscal Year...........................................10
SECTION 8.02. Waivers of Notice.....................................10
SECTION 8.03. Qualifying in Foreign Jurisdictions...................10
SECTION 8.04. Indemnification.......................................10

ARTICLE IX - Amendments.......................................................11
SECTION 9.01. General...............................................11

-ii-
<PAGE>

BY-LAWS

PAX WORLD HIGH YIELD FUND, INC.

ARTICLE I

Offices

SECTION 1.01. Registered Office. The registered office of the Corporation
shall be established and maintained at 9 East Loockerman Street, Dover, Delaware
19901 and National Corporate Research, Ltd. shall be the registered agent of the
Corporation in charge thereof.

SECTION 1.02. Other Offices. The Corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the Corporation may
require.

ARTICLE II

Stockholders

SECTION 2.01. Annual Meetings. Subject to change by resolution of the Board
of Directors, the annual meeting of the stockholders of the Corporation for the
purpose of electing directors and for the transaction of such other business as
may be brought before the meeting shall be held on the fourth Tuesday in April
of each year, if not a legal holiday, and if a legal holiday, then on the next
succeeding day not a legal holiday. The meeting may be held at such time and
such place within or without the State of Delaware as shall be fixed by the
Board of Directors and stated in the notice of the meeting.

SECTION 2.02. Special Meetings. Special meetings of the stockholders may be
called at any time by the Board of Directors, the Chairman of the Board, if any,
or the President. Special meetings shall be held on the date and at the time and
place either within or without the State of Delaware as specified in the notice
thereof.

SECTION 2.03. Notice of Meetings. Except as otherwise expressly required by
law or the Certificate of Incorporation of the Corporation, written notice
stating the place and time of the meeting and, in the case of a special meeting,
the purpose or purposes of such meeting, shall be given by the Secretary to each
stockholder entitled to vote thereat at his address as it appears on the records
of the Corporation not less than ten nor more than sixty days prior to the
meeting. Notice of any meeting of stockholders shall not be required to be given
to any stockholder who shall attend such meeting in person or by proxy; and if
any stockholder shall, in person or by attorney thereunto duly authorized, waive
notice of any meeting, in writing or by telegraph, cable or wireless, whether
before or after such meeting be held, the notice thereof need not be given to
him. The attendance of any stockholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack of notice of
such meeting, shall constitute a waiver of notice by him. Notice of any
adjourned meeting of stockholders need not be given except as provided in
SECTION 2.05 of this ARTICLE II.

SECTION 2.04. Quorum. Subject to the provisions of law in respect of the
vote that shall be required for a specific action, the number of shares the
holders of which shall be present or represented by proxy at any meeting of
stockholders in order to constitute a quorum for the transaction of any business
shall be a majority of all the shares issued and outstanding and entitled to
vote at such meeting.

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SECTION 2.05. Adjournment. At any meeting of stockholders, whether or not
there shall be a quorum present, the holders of a majority of shares voting at
the meeting, whether present in person at the meeting or represented by proxy at
the meeting, may adjourn the meeting from time to time. Except as provided by
law, notice of such adjourned meeting need not be given otherwise than by
announcement of the time and place of such adjourned meeting at the meeting at
which the adjournment is taken. At any adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally called.

SECTION 2.06. Organization. The Chairman of the Board, if any, or in his
absence, the President or, in the absence of both the foregoing officers, the
Executive Vice President, if any, or in the absence of all of the foregoing
officers, a Vice President shall call meetings of the stockholders to order and
shall act as chairman of such meetings. In the absence of the Chairman of the
Board, if any, the President, the Executive Vice President, if any, and a Vice
President, the holders of a majority in number of the shares of the capital
stock of the Corporation present in person or represented by proxy and entitled
to vote at such meeting shall elect a chairman, who may be the Secretary of the
Corporation. The Secretary of the Corporation shall act as secretary of all
meetings of the stockholders; but in the absence of the Secretary, the chairman
may appoint any person to act as secretary of the meeting.

SECTION 2.07. Voting. Each stockholder shall, except as otherwise provided
by law or by the Certificate of Incorporation, at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
capital stock entitled to vote held by such stockholder, but no proxy shall be
voted on after three years from its date, unless said proxy provides for a
longer period. Upon the demand of any stockholder, the vote for directors and
the vote upon any matter before the meeting shall be by ballot. Except as
otherwise provided by law, the Certificate of Incorporation or these By-laws,
all elections for directors shall be decided by plurality vote; all other
matters shall be decided by a majority of the votes cast thereon.

SECTION 2.08. Stockholders List. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
with the address of each and the number of shares held by each, shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole thereof
and may be inspected by any stockholder who is present.

SECTION 2.09. Addresses of Stockholders. Each stockholder shall designate
to the Secretary of the Corporation an address at which notices of meetings and
all other corporate notices may be served upon or mailed to him, and if any
stockholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his last known post office address.

SECTION 2.10. Inspectors of Election. The Board of Directors may at any
time appoint one or more persons to serve as Inspectors of Election at the next
succeeding annual meeting of stockholders or at any other meeting or meetings
and the Board of Directors may at any time fill any vacancy in the office of
Inspector. If the Board of Directors fails to appoint Inspectors, or if any
Inspector appointed be absent or refuse to act, or if his office becomes vacant
and be not filled by the Board of Directors, the Chairman of any meeting of the
stockholders may appoint one or more temporary Inspectors for such meeting. All
proxies shall be filed with the Inspectors of Election of the meeting before
being voted upon.

SECTION 2.11. Action by Consent. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any meeting of
stockholders, or any action which may be taken at any meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote if a consent in writing, setting forth the action so taken, shall be signed
by the holders of outstanding stock having not

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less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.

ARTICLE III

Board of Directors

SECTION 3.01. General Powers. The property, affairs and business of the
Corporation shall be managed by or under the direction of the Board of
Directors.

SECTION 3.02. Number, Qualification and Term of Office. The number of
directors shall be such as the Board of Directors may by resolution direct.
Directors need not be stockholders. Each director shall hold office for the term
for which he is appointed or elected and until his successor shall have been
elected and shall qualify, or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided. Directors need not be
elected by ballot, except upon demand of any stockholder. The Chairman of the
Board, if any, shall be chosen from among the directors.

SECTION 3.03. Quorum and Manner of Action. Except as otherwise provided by
law or these By-laws, a majority of the Board of Directors shall be required to
constitute a quorum for the transaction of business at any meeting, and the act
of a majority of the directors present and voting at any meeting at which a
quorum is present shall be the act of the Board of Directors. In the absence of
a quorum, a majority of the directors present may adjourn any meeting from time
to time until a quorum be had. Notice of any adjourned meeting need not be
given. The directors shall act only as a board and individual directors shall
have no power as such.

SECTION 3.04. Place of Meeting, etc. The Board of Directors may hold its
meetings, have one or more offices and keep the books and records of the
Corporation at such place or places within or without the State of Delaware as
the Board of Directors may from time to time determine or as shall be specified
or fixed in the respective notices or waivers of notice thereof.

SECTION 3.05. Regular Meetings. A regular meeting of the Board of Directors
shall be held for the election of officers and the transaction of other business
as soon as practicable after each annual meeting of stockholders, and other
regular meetings of said Board of Directors shall be held at such times and
places as said Board of Directors shall direct. No notice shall be required for
any regular meeting of the Board of Directors but a copy of every resolution
fixing or changing the time or place of regular meetings shall be mailed to
every director at least three days before the first meeting held in pursuance
thereof.

SECTION 3.06. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if any, or any three directors. The
Secretary or any Assistant Secretary shall give notice of the time and place of
each special meeting by mailing a written notice of the same to each director at
his last known post office address at least two days before the meeting or by
causing the same to be delivered personally or to be transmitted by telegraph,
cable, wireless, telephone or orally at least twenty-four hours before the
meeting to each director.

SECTION 3.07. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee.

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SECTION 3.08. Organization. At each meeting of the Board of Directors, the
Chairman of the Board, if any, or in his absence, a director chosen by a
majority of the directors present shall act as Chairman. The Secretary or, in
his absence, an Assistant Secretary or, in the absence of both the Secretary and
an Assistant Secretary, any person appointed by the chairman of the meeting
shall act as secretary of the meeting.

SECTION 3.09. Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board of Directors, the Chairman of the
Board, if any, the President or the Secretary of the Corporation. The
resignation of any director shall take effect at the time specified therein; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.

SECTION 3.10. Removal of Directors. Except as otherwise provided by law or
the Certificate of Incorporation, any director may be removed, either with or
without cause, at any time by the affirmative vote of a majority in interest of
the holders of record of the stock having voting power at an annual meeting or
at a special meeting of the stockholders called for the purpose; and the vacancy
in the Board of Directors caused by any such removal may be filled by the
stockholders at such meeting or by the Board of Directors in the manner provided
in SECTION 3.11 of this ARTICLE III.

SECTION 3.11. Vacancies. Any vacancy in the Board of Directors caused by
death, resignation, removal (whether or not for cause), disqualification, an
increase in the number of directors or any other cause may be filled by the
majority vote of the remaining directors of the Corporation at the next annual
meeting, any regular meeting or any special meeting called for the purpose. Each
director so elected shall hold office for the unexpired term or for such lesser
term as may be designated and until his successor shall be duly elected and
qualified, or until his death or until he shall resign or shall have been
removed in the manner herein provided. In case all the directors shall die or
resign or be removed or disqualified, any stockholder having voting powers may
call a special meeting of the stockholders, upon notice given as herein provided
for meetings of the stockholders, at which directors may be elected for the
unexpired term.

SECTION 3.12. Compensation of Directors. Directors may receive such sums
for their services and expenses as may be directed by resolution of the Board of
Directors; provided that nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for their services and expenses.

SECTION 3.13. Committees. By resolution or resolutions passed by a majority
of the whole Board of Directors at any meeting of the Board of Directors, the
directors may designate one or more committees, each committee to consist of one
or more directors. To the extent provided in said resolution or resolutions,
unless otherwise provided by law, such committee or committees shall have and
may exercise all of the powers of the Board of Directors in the management of
the business and affairs of the Corporation, including the power and authority
to authorize the seal of the Corporation to be affixed to all papers which may
require it, to declare dividends and to authorize the issuance of shares of
capital stock of the Corporation. Further, the Board of Directors may designate
one or more directors as alternate members of a committee who may replace an
absent or disqualified member at any meeting. In the absence or disqualification
of a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. A committee may
make such rules for the conduct of its business and may appoint such committees
and assistants as it shall from time to time deem necessary. One-third of the
members of a committee shall constitute a quorum for the transaction of business
of such committee. Regular meetings of a committee shall be held at such times
as such committee shall from time to time by resolution determine. No notice
shall be required for any regular meeting of a committee but a copy of every
resolution fixing or changing the time or place of regular meetings shall be
mailed to every member of such committee at least three days before the first
meeting held in pursuance thereof. Special meetings of a committee may be called
by the

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chairman of such committee or the secretary of such committee, or any two
members thereof. The Secretary of the Corporation or the secretary of such
committee shall give notice of the time and place of each Special Meeting by
mail at least two days before such meeting or by telegraph, cable, wireless,
telephone or orally at least twenty-four hours before the meeting to each member
of such committee.

SECTION 3.14. Contracts. (a) No contract or other transaction between this
Corporation and any other corporation shall be impaired, affected or
invalidated, nor shall any director be liable in any way by reason of the fact
that any one or more of the directors of this Corporation is or are interested
in, or is a director or officer, or are directors or officers, of such other
corporation, provided that such facts are disclosed or made known to the Board
of Directors.

(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way be reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section 3.14 shall
not be construed to impair or invalidate or in any way affect any contract or
other transaction which would otherwise be valid under the law (common,
statutory or otherwise) applicable thereto.

SECTION 3.15. Participation in Meetings. Members of the Board of Directors
or of any committee may participate in any meeting of the Board of Directors or
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.

SECTION 3.16. Reliance Upon Records, Information, Opinions, Reports and
Statements. A member of the Board of Directors, or a member of any committee
designated by the Board of Directors, shall, in the performance of his duties,
be fully protected in relying in good faith upon the records of the Corporation
and upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or committees of
the Board of Directors, or by any other person as to matters such member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation.

ARTICLE IV

Officers

SECTION 4.01. Number. The officers of the Corporation shall be a President,
a Secretary and a Treasurer. In addition, the Board of Directors may elect a
Chairman of the Board, an Executive Vice President, one or more Vice Presidents
and such other subordinate officers as may be appointed in accordance with the
provisions of SECTION 4.03 of this ARTICLE IV. Any number of offices may be held
by the same person, except that if there is more than one stockholder the
offices of President and Secretary may not be held by the same person; provided,
however, that when all of the issued and outstanding stock of the Corporation is
owned by one person, such person may hold all or any combination of offices.

SECTION 4.02. Election, Term of Office and Qualifications. The officers
shall be elected annually by the Board of Directors at their first meeting after
each annual meeting of the stockholders of the Corporation. Each officer, except
such officers as may be appointed in accordance with the provisions of SECTION
4.03 of this ARTICLE IV, shall hold office until his successor shall have been
duly elected and

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qualified, or until his death or until he shall have resigned or shall have
become disqualified or shall have been removed in the manner hereinafter
provided.

SECTION 4.03. Subordinate Officers. The Board of Directors or the President
may from time to time appoint such other officers, including one or more
Assistant Treasurers and one or more Assistant Secretaries, and such agents and
employees of the Corporation as may be deemed necessary or desirable. Such
officers, agents and employees shall hold office for such period and upon such
terms and conditions, have such authority and perform such duties as in these
By-laws provided or as the Board of Directors, the Chairman of the Board or the
President may from time to time prescribe. The Board of Directors, the Chairman
of the Board, if any, or the President may from time to time authorize any
officer to appoint and remove agents and employees and to prescribe the powers
and duties thereof.

SECTION 4.04. Removal. Any officer may be removed, either with or without
cause, by the vote of a majority of the whole Board of Directors or, except in
case of any officer elected by the Board of Directors, by any committee or
superior officer upon whom the power of removal may be conferred by the Board of
Directors or by these By-laws.

SECTION 4.05. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Any such resignation shall take effect at the date
of receipt of such notice or at any later time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.

SECTION 4.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these By-laws for
regular election or appointment to such office.

SECTION 4.07. Chairman of the Board. The Chairman of the Board, if any,
shall preside, if present, at all meetings of the stockholders and at all
meetings of the Board of Directors and he shall perform such other duties and
have such other powers as from time to time may be assigned to him by the Board
of Directors or prescribed by these By-laws.

SECTION 4.08. President. The President shall be the chief executive officer
of the Corporation and shall have general direction of the affairs of the
Corporation and general supervision over its several officers, subject, however,
to the control of the Board of Directors and the Chairman of the Board, if any.
The President shall at each annual meeting and from time to time report to the
stockholders and the Board of Directors all matters within his knowledge which
the interest of the Corporation may require to be brought to their notice, may
sign with the Treasurer or an Assistant Treasurer, if any, or the Secretary or
an Assistant Secretary, if any, any or all certificates of stock of the
Corporation, shall preside, in the absence of the Chairman of the Board, at all
meetings of the stockholders and at all meetings of the Board of Directors, may
sign and execute in the name of the Corporation all contracts or other
instruments authorized by the Board of Directors, except in cases where the
signing and execution thereof shall be expressly delegated or permitted by the
Board of Directors or by these Bylaws to some other officer or agent of the
Corporation, and in general shall perform such duties and, subject the other
provisions of these By-laws and to the control of the Board of Directors and the
Chairman of the Board, if any, have such powers incident to the office of
President and perform such other duties and have such other powers as from time
to time may be assigned to him by the Board of Directors, the Chairman of the
Board, if any, or prescribed by these By-laws.

SECTION 4.09. Executive Vice President. Except as otherwise provided
herein, the Executive Vice President, if any, shall, at the request of the
President or in his absence or disability, perform the duties of the President,
and when so acting shall have all the powers of, and be subject to all of the
restrictions upon, the Presi dent, shall preside, in the absence of the Chairman
of the Board, if any, and the President, at all meetings of the

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stockholders, may sign with the Treasurer or an Assistant Treasurer, if any, or
the Secretary or an Assistant Secretary, if any, any or all certificates of
stock of the Corporation and shall perform such other duties and have such other
powers as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board, if any, or the President or prescribed by these
By-laws.

SECTION 4.10. Vice Presidents. Each Vice President, if any, may sign with
the Treasurer or an Assistant Treasurer, if any, or the Secretary or an
Assistant Secretary, if any, certificates of stock of the Corporation and shall
have such other powers and shall perform such other duties as from time to time
may be assigned to him by the Board of Directors, the Chairman of the Board, if
any, or the President or prescribed by these By-laws. In the absence or
disability of the President, the Vice President (if there is no Executive Vice
President, or in the event there be more than one Vice President, the Vice
Presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President and when so acting, shall have all the powers and be
subject to all the restrictions upon the President.

SECTION 4.11. Secretary. The Secretary shall keep or cause to be kept, in
books provided for the purpose, the minutes of the meetings of the stockholders,
the Board of Directors and any committee when so required, shall see that all
notices are duly given in accordance with the provisions of these By-laws and as
required by law, shall be custodian of the records and the seal of the
Corporation and see that the seal is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of these By-laws, shall keep or cause to be kept
a register of the post office address of each stockholder, may sign with the
Chairman of the Board, if any, the President, the Executive Vice President, if
any, or any Vice President certificates of stock of the Corporation, and in
general shall perform such duties and have such powers incident to the office of
Secretary and shall perform such other duties and have such other powers as from
time to time may be assigned to him by the Board of Directors, the Chairman of
the Board, if any, or the President or prescribed by these By-laws.

SECTION 4.12. Assistant Secretaries. Any Assistant Secretary shall, at the
request of the Secretary or in his absence or disability, perform the duties of
the Secretary and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the Secretary and shall perform such other duties and
have such other powers as from time to time may be assigned to him by the Board
of Directors, the Chairman of the Board, if any, the President or the Secretary
or prescribed by these By-laws.

SECTION 4.13. Treasurer. The Treasurer shall have charge and custody of,
and be responsible for, all funds and securities of the Corporation, and deposit
all such funds in the name of the Corporation in such banks, trust companies or
other depositaries as shall be selected in accordance with the provisions of
these By-laws, shall at all reasonable times exhibit his books of account and
records, and cause to be exhibited the books of account and records of any
corporation controlled by the Corporation, to any of the directors of the
Corporation upon application during business hours at the office of the
Corporation, or such other corporation, where such books and records are kept,
shall render a statement of the condition of the finances of the Corporation at
all regular meetings of the Board of Directors and a full financial report at
the annual meeting of the stockholders, shall, if called upon to do so, receive
and give receipts for moneys due and payable to the Corporation from any source
whatsoever, may sign with the Chairman of the Board, if any, the President, the
Executive Vice President or any Vice President certificates of stock of the
Corporation, and in general shall perform such duties and have such powers
incident to the office of Treasurer and such other duties and have such other
powers as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board, if any, or the President or prescribed by these
By-laws.

SECTION 4.14. Assistant Treasurers. Any Assistant Treasurer shall, at the
request of the Treasurer or in his absence or disability, perform the duties of
the Treasurer and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the Treasurer and shall perform such duties and have
such

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other powers as from time to time may be assigned to him by the Board of
Directors, the Chairman of the Board, if any, the President or the Treasurer or
prescribed by these By-laws.

SECTION 4.15. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.

ARTICLE V

Contracts, Checks, Drafts, Bank Accounts, Etc.

SECTION 5.01. Contracts, etc., How Executed. Except as otherwise provided
in these By-laws, the Board of Directors may authorize any officer or officers,
employee or employees or agent or agents of the Corporation to enter into any
contract or execute and deliver any instrument, on behalf and in the name of the
Corporation, and such authority may be general or confined to specific
instances; and, unless so authorized by the Board of Directors or by a committee
appointed in accordance with the provisions of these By-laws or otherwise by
these By-laws, no officer, employee or agent shall have any power or authority
to bind the Corporation by any contract or engagement or to pledge its credit or
render it liable pecuniarily for any purpose or amount.

SECTION 5.02. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, employee or
employees or agent or agents of the Corporation as shall from time to time be
determined by resolution of the Board of Directors.

SECTION 5.03. Deposits. All funds of the Corporation shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositaries as the Board of Directors or committee appointed
by the Board of Directors may designate from time to time or as may be
designated from time to time by any officer or officers, employee or employees
or agent or agents of the Corporation to whom such power may be delegated by the
Board of Directors; and for the purpose of such deposit, any officer or
officers, employee or employees or agent or agents of the Corporation as from
time to time shall be determined by resolution of the Board of Directors or
committee appointed by the Board of Directors may endorse, assign and deliver
checks, drafts and other orders for the payment of money which are payable to
the order of the Corporation.

SECTION 5.04. General and Special Bank Accounts. The Board of Directors or
committee appointed by the Board of Directors may authorize from time to time
the opening and keeping with such banks, trust companies or other depositaries
as it may designate of general and special bank accounts and may make such
special rules and regulations with respect thereto, not inconsistent with the
provisions of these By-laws, as it may deem expedient.

SECTION 5.05. Proxies. Except as otherwise provided in these By-laws or in
the Certificate of Incorporation of the Corporation, and unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board, if
any, or the President may appoint from time to time an attorney or attorneys, or
agent or agents, of the Corporation, on behalf and in the name of the
Corporation, to cast the votes which the Corporation may be entitled to cast as
a stockholder or otherwise in any other corporation any of whose stock or other
securities may be held by the Corporation, at meetings of the holders of the
stock or other securities of such other corporation, or to consent in writing to
any action by such other corporation, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and may
execute or cause to be executed on behalf and in the name of the Corporation and
under its corporate seal, or otherwise, all such written proxies or other
instruments as he may deem necessary or proper in the premises.

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ARTICLE VI

Shares and Their Transfer

SECTION 6.01. Certificates of Stock. Certificates for shares of the capital
stock of the Corporation shall be in such form not inconsistent with law as
shall be approved by the Board of Directors. They shall be numbered in order of
their issue and shall be signed by the Chairman of the Board, if any, the
President, the Executive Vice President, if any, or any Vice President and the
Treasurer or any Assistant Treasurer, if any, or the Secretary or any Assistant
Secretary, if any, of the Corporation, and the seal of the Corporation shall be
affixed thereto. Any of or all the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who shall have
signed or whose facsimile signature shall have been placed upon any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature shall have been used
thereon had not ceased to be such officer or officers of the Corporation.

SECTION 6.02. Transfer of Stock. Transfer of shares of the capital stock of
the Corporation shall be made only on the books of the Corporation by the holder
thereof, or by his attorney thereunto authorized by a power of attorney duly
executed and filed with the Secretary of the Corporation, or a transfer agent of
the Corporation, if any, on surrender of the certificate or certificates for
such shares properly endorsed. A person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof as regards the
Corporation, and the Corporation shall not be bound to recognize any equitable
or other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Delaware; provided that whenever
any transfer of shares shall be made for collateral security, and not
absolutely, such fact, if known to the Secretary or to said transfer agent,
shall be so expressed in the entry of transfer.

SECTION 6.03. Lost, Destroyed and Mutilated Certificates. The holder of any
stock issued by the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor or the failure to
receive a certificate of stock issued by the Corporation, and the Board of
Directors, the Chairman of the Board, if any, the President or the Secretary of
the Corporation may, in its or his discretion, cause to be issued to such holder
a new certificate or certificates of stock, upon compliance with such rules,
regulations and/or procedures as may be prescribed or have been prescribed by
the Board of Directors with respect to the issuance of new certificates in lieu
of such lost, destroyed or mutilated certificate or certificates of stock issued
by the Corporation which are not received, including the posting with the
Corporation of a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.

SECTION 6.04. Transfer Agent and Registrar; Regulations. The Corporation
shall, if and whenever the Board of Directors shall so determine, maintain one
or more transfer offices or agencies, each in the charge of a transfer agent
designated by the Board of Directors, where the shares of the capital stock of
the Corporation shall be directly transferable, and also one or more registry
offices, each in the charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered, and no certificate for shares of
the capital stock of the Corporation, in respect of which a Registrar and/or
Transfer Agent shall have been designated, shall be valid unless countersigned
by such Transfer Agent and registered by such Registrar, if any. The Board of
Directors shall also make such additional rules and regulations as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of the capital stock of the Corporation.

SECTION 6.05. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any

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<PAGE>

adjournment thereof, to express consent to corporate action in writing without a
meeting, to receive payment of any dividend or other distribution or allotment
of any rights, to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any other action, and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of and to vote
at such meeting and any adjournment thereof, to express consent to any such
corporate action, to receive payment of such dividend or to receive such
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid. If the stock transfer books are to be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting in the case of a merger or consolidation, the books shall be
closed at least twenty (20) days before such meeting.

ARTICLE VII

Seal

SECTION 7.01. General. The Board of Directors shall provide a suitable seal
containing the name of the Corporation, which seal shall be in the charge of the
Secretary and which may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. If and when so directed by the
Board of Directors, a duplicate of the seal may be kept and be used by an
officer of the Corporation designated by the Board of Directors.

ARTICLE VIII

Miscellaneous Provisions

SECTION 8.01. Fiscal Year. The fiscal year of the Corporation shall end on
such date of each year as shall be determined by the Board of Directors of the
Corporation.

Section 8.02. Waivers of Notice. Whenever any notice of any nature is
required by law, the provisions of the Certificate of Incorporation or these
By-laws to be given, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.

SECTION 8.03. Qualifying in Foreign Jurisdictions. The Board of Directors
shall have the power at any time and from time to time to take or cause to be
taken any and all measures which they may deem necessary for qualification to do
business as a foreign corporation in any one or more foreign jurisdictions and
for withdrawal therefrom.

SECTION 8.04. Indemnification. Directors, officers, employees and agents of
the Corporation shall not be liable to the Corporation, any stockholder,
officer, director, employee or other person for any action or failure to act
except for willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. The Corporation
shall indemnify directors, officers, employees and agents of the corporation
against judgments, fines, settlements and expenses to the fullest extent
authorized and in the manner permitted by applicable federal and state law. The
Corporation may purchase insurance to protect itself and its directors,
officers, employees and agents against judgments, fines settlements and expenses
to the fullest extent authorized and in the manner permitted by applicable
federal and state law. Nothing contained in this Section 8.04 shall be construed
to indemnify directors, officers, employees and agents of the Corporation
against, nor to permit the corporation to purchase insurance that purports to
protect against, any liability to the Corporation or any

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<PAGE>

stockholder, officer, director, employee, agent or other person to whom he or
she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office.

ARTICLE IX

Amendments

SECTION 9.01. General. These By-laws shall be subject to amendment,
alteration or repeal, and new By-laws not inconsistent with any provision of the
Certificate of Incorporation of the Corporation or any provision of law, may be
made, either by (i) the affirmative vote of the holders of record of a majority
of the outstanding shares of the Common Stock of the Corporation entitled to
vote in respect thereof, given at an annual meeting or at any special meeting,
provided that notice of the proposed amendment, alteration or repeal or of the
proposed new By-laws be included in the notice of such meeting, or (ii) the
affirmative vote of two-thirds of the members of the Board of Directors at any
regular or special meeting.

-11-

Exhibit 3

Instruments Defining Rights of Security Holders

The following is a list of the provisions of the Articles of Incorporation
and By-Laws of Pax World High Yield Fund, Inc. setting forth the rights of
shareholders.

I. Relevant Provisions of Articles of Incorporation:

ARTICLE FOURTH - Common Stock
ARTICLE FIFTH - Election of Directors
ARTICLE SIXTH - Receivership
ARTICLE SEVENTH - Meetings of Stockholders
ARTICLE EIGHTH - Miscellaneous
ARTICLE NINTH - Amendments
ARTICLE TENTH - Indemnification
ARTICLE ELEVENTH - Personal Liability of Directors

II. Relevant Provisions of By-Laws:

ARTICLE II - Stockholders
ARTICLE VI - Shares and Their Transfer
ARTICLE VIII - Indemnification
ARTICLE IX - Amendment of By-Laws

Exhibit 4

PAX WORLD HIGH YIELD FUND, INC.
222 STATE STREET
PORTSMOUTH, NH 03801

__________, 1999

Pax World Management Corp.
222 State Street
Portsmouth, NH 03801

Investment Advisory Agreement

Ladies and Gentlemen:

The undersigned, Pax World High Yield Fund, Inc. (the "Fund"), is an
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Fund is an open-end diversified
management investment company, as defined in the Investment Company Act, and
invests and reinvests its assets in a portfolio of investments. The Fund hereby
engages you, Pax World Management Corp. (the "Adviser"), to act as its
investment adviser and financial agent, subject to the terms and conditions
herein set forth.

Section 1. Management Services

The Fund will, from time to time, furnish to you detailed statements of the
investments and resources of the Fund and information as to its investment
needs, and will make available to you such financial reports, proxy statements,
legal and other information relating to its investment as may be in the
possession of the Fund or available to it.

You shall, at your expense, use your experience, staff and other facilities
to conduct and maintain a continuous review of the Fund's investments, resources
and needs, and shall from time to time furnish to the Directors of the Fund (the
"Directors") or such others as the Directors shall direct, your advice and
recommendations with respect to the purchase and sale of investments by the Fund
and the making of commitments thereto. In conducting such review and furnishing
such advice and recommendations, you shall be guided by the Fund's investment
policy and restrictions as delineated and limited by the statements contained in
the various documents and amendments thereto filed with the Securities and
Exchange Commission (the "SEC").

You shall place at the disposal of the Fund such statistical research,
analytical and technical services and information and reports as may be
reasonably required by the Fund, shall furnish the Fund with, and pay the
salaries of, the executive, administrative and clerical personnel of the Fund,
and in general shall supervise the affairs of the Fund, subject to the control
of the Directors. Your advice and recommendations with respect to the purchase
and sale of investments and the making of investment commitments shall be
submitted at the principal offices of the Fund to the Directors of the Fund, to
an investment committee thereof, or to such other person or persons as the
Directors or such investment committee shall designate for that purpose. The
Directors, such investment committee, or such designated person or persons shall
have full authority to act upon such advice and recommendations and to place
orders on behalf of the Fund for the purchase and sale of investments. Reports
of portfolio recommendations shall be made quarterly to the Directors or more
frequently as the Directors may from time to time determine.

<PAGE>

Section 2. Duties as Financial Agent of the Fund

You shall keep the books and financial records of the Fund, and on behalf
of the Fund, shall compare the value of the principal and income of the Fund and
of its shares (in accordance with the instructions of the Directors) at such
times as the Directors may direct, and shall perform such other services as are
reasonably related to the foregoing duties. You shall furnish to the Fund and
the Directors statements with respect to the valuation of the Fund and its
shares, at such times, and in such forms, as the Directors may prescribe.

Section 3. Brokerage Services

When and if the Directors so request, you shall furnish brokerage services
in connection with the Fund's investments, and may make such charges for those
services as are permitted by law or by the applicable rules of the National
Association of Securities Dealers, Inc., or any stock exchange, but only if and
to the extent that any such charges are permitted by the Articles of
Incorporation and/or By-Laws of the Fund as then in effect.

At any time when you shall have been requested to act in your capacity as
broker in connection with any of the Fund's investments, you shall deposit with
or obtain from the Fund's custodian any and all of such securities and
investments only in accordance with the requirements and provisions of the
custodial agreement entered into between the Fund and the Fund's custodian. It
is the intent hereof that the Fund's custodian shall obtain and maintain the
exclusive possession of, and be responsible for the security and safekeeping of,
the Fund's investments, and that you shall have possession of such investments
only as shall be required to implement transactions normally requiring the
services of a broker, and which have been directed by the Directors or such
other person or persons as the Directors shall designate for that purpose.

Section 4. Additional Services, Expenses, etc.

You shall furnish to the Fund, and pay for, such office space and
facilities, including, without being limited to, stenographic, telephone,
telegraph, mailing, and other facilities as the Directors shall request in
connection with the operations of the Fund. It is the intent of this contract
that, through your staff, you shall supply and pay for such services as are
deemed by the Directors to be necessary or desirable and proper for the
continuous operation of the Fund (excluding all taxes and charges of
governmental agencies and brokerage commissions incurred in connection with
portfolio transactions) which are in excess of one and one-half percent (1-1/2%)
of the average net asset value of the Fund per annum. Such expenses include (i)
management, distribution and sub-advisory fees; (ii) the fees of affiliated and
unaffiliated Directors; (iii) the fees of the Fund's custodian and transfer and
dividend disbursing agent; (iv) the fees of the Fund's legal counsel and
independent accountants; (v) the reimbursement of organization expenses; and
(vi) expenses related to shareholder communications including all expenses of
shareholders' and Board of Directors' meetings and of preparing, printing and
mailing reports, proxy statements and prospectuses to shareholders.

Section 5. Independent Contractor

You shall, for all purposes, be deemed to be an independent contractor and
shall have no authority to act for or represent the Fund unless otherwise
provided. No agreement, bid, offer, commitment, contract or other engagement
entered into by you, whether on your behalf or purported to have been on behalf
of the Fund, shall be binding upon the Fund, and all acts authorized to be done
by you under this contract shall be done by you as an independent contractor and
not as agent.

Section 6. Multiple Capacities, Transactions

Nothing contained in this contract shall be deemed to prohibit you from
acting, and being separately compensated for so acting, in one or more
capacities on behalf of the Fund, including but not limited to, the

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<PAGE>

capacities of investment adviser, broker, and distributor. Whenever you shall be
required to act in multiple capacities, either under this contract or by virtue
of this or any other contract between you and the Fund, you shall maintain
appropriate separate accounts and records for each such capacity.

Except to the extent necessary for the performance of your obligations
hereunder, nothing in this contract shall restrict your right or the right of
any of your directors, officers or employees (whether or not they are directors,
officers or employees of the Fund) to engage in any other business or to devote
time and attention to the management or other aspects of any other business
whether of a similar or dissimilar nature or to render services of any kind to
any other corporation, firm, individual or association or to participate or to
be otherwise interested, as principal, agent or otherwise, in sales, purchases
or other transactions with the Fund or its directors, officers, agents,
attorney, servants, independent contractors, brokers, custodian, underwriters,
distributors and other persons, except as may be prohibited by the Investment
Company Act.

It is understood and agreed that officers, directors, shareholders,
employees and agents of the Fund may be interested in the Adviser as officers,
directors, shareholders, employees and agents and vice versa. Specifically, it
is understood and agreed that the officers, directors, shareholders, employees
and agents of the Adviser may be simultaneously officers and/or directors of the
Fund, but that they are to receive no remuneration solely for acting in those
capacities.

Section 7. Compensation for Services

Except as provided below, you shall receive such compensation for your
services as is provided in this Section, and such payments shall be the only
compensation to which you shall be entitled under this contract. The
compensation referred to herein shall not be deemed to include, and shall be in
addition to (i) any charges you may make to the Fund in your capacity as broker
for purchases or sales of securities and investments pursuant to Section 3
hereof, and (ii) any payments which you may receive in connection with your
services as distributor of the Fund's shares, if such is provided.

Subject to the foregoing exceptions and limitations, the Fund will pay to
you a fee per annum computed at the following rates: in the event that the
average net assets of the Fund are less than $5,000,000.00, you will be
compensated by the Fund for your services hereunder at an annual rate of
$25,000.00; in the event that the average net assets of the Fund are equal to or
in excess of $5,000,000.00, you will be compensated by the Fund for your
services hereunder at an annual rate of one percent (1%) of average net assets
up to and including $25,000,000.00 and three-quarters of one percent (.75%) of
average net assets in excess of $25,000,000.00. The fee shall be paid to you in
monthly installments on the last business day of each month and the amount of
each such payment shall be computed and accrued on the basis of the net asset
value of the Fund at the end of each business day during each calendar month.

Section 8. Liability

You shall give the Fund the benefit of your best judgment and efforts in
rendering the services set forth herein, and the Fund agrees as an inducement to
the undertaking of these services by you that you shall not be liable for any
loss suffered by the Fund resulting from any error of judgment or any mistake of
law or fact in connection with any matters as to which this contact relates,
except that nothing herein contained shall be construed to protect you against
any liability by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties or by reckless disregard of your obligations or
duties under this contract.

Section 9. Approval of Contract Termination

As promptly as practicable after its execution, this contract will be
submitted to the Fund's shareholders for approval at a meeting thereof duly
convened for such purpose. If approved at such meeting by the vote of the

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<PAGE>

holders of a majority of the Fund's outstanding voting shares, the contract
shall be effective __________, 1999 for an initial term expiring June 30, 2000.
Thereafter, the contract will continue in effect for successive yearly terms
ending June 30, following the conclusion of each annual meeting of shareholders,
unless earlier terminated by either party as set forth below, provided that the
renewal of this contract and its terms are specifically approved annually by the
vote of the holders of a majority of the Fund's outstanding shares or annually
by the majority vote of the disinterested Directors. Notwithstanding the
foregoing, this contract is terminable by either party on not more than sixty
(60) days and not less than thirty (30) days written notice, with or without
cause and without payment of any penalty, and will terminate automatically in
the event of any assignment, unless an order is issued by the SEC conditionally
or unconditionally exempting such assignment from the provision of Section 15(a)
of the Investment Company Act, in which event this contract shall continue in
full force and effect.

This contract may not be amended, transferred or assigned, or in any manner
hypothecated or pledged, nor may any new contract become effective, without the
affirmative vote or written consent of the holders of a majority of the
outstanding voting shares of the Fund; provided, however, that this limitation
shall not prevent any non-material amendments to the contract or such amendments
as may be required by federal or state regulatory bodies.

Section 10. Concerning Applicable Provisions of Law, etc.

This contract shall be subject to all applicable provisions of law,
including without being limited to, the applicable provisions of the Investment
Company Act and the Investment Advisers Act of 1940, as amended, and to the
extent that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control.

This contract is executed and delivered in the State of New Hampshire and
the laws of the State of New Hampshire shall, except to the extent that any
applicable provisions of some other laws shall be controlling, govern the
construction, validity and effect of this contract.

The headings preceding the text of the several Sections herein are inserted
solely for convenience of reference and shall not affect the meaning,
construction or effect of this contract.

-4-
<PAGE>

If the foregoing correctly sets forth our understanding, please sign the
enclosed copy of this letter where indicated and return it to the undersigned,
whereupon this letter shall constitute a binding contract between the parties
hereto.

Very truly yours,

PAX WORLD HIGH YIELD FUND, INC.

By:
----------------------------
Laurence A. Shadek
Chairman of the Board

Accepted and agreed to as of
the date first above written:

PAX WORLD MANAGEMENT CORP.

By:
----------------------------
Thomas W. Grant
President

By:
----------------------------
James M. Shadek
Secretary

-5-

Exhibit 5

PAX WORLD HIGH YIELD FUND, INC.
c/o Pax World Management Corp.
222 State Street
Portsmouth, NH 03801-3853

__________, 1999

H.G. Wellington & Co., Inc.
14 Wall Street
New York, NY 10005-2101

Ladies and Gentlemen:

We hereby confirm our agreement with you as follows:

1. In consideration of the agreements on your part herein contained and of
the payment by us to you of a fee of $1 per year and on the terms and conditions
set forth herein we have agreed that you shall be, for the period of this
agreement, a distributor, as our agent, for the unsold portion of such number of
shares of the Common Stock of Pax World High Yield Fund, Inc. (the "Common
Stock") as may be effectively registered from time to time under the Securities
Act of 1933, as amended (the "1933 Act"). This agreement is being entered into
pursuant to the Distribution and Service Plan (the "Plan") adopted by us in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act").

2. We hereby agree that you will act as our agent, and hereby appoint you
our agent, to distribute, offer, and to solicit offers to subscribe to, the
unsold balance of shares of our Common Stock as shall then be effectively
registered under the 1933 Act. All subscriptions for shares of our Common Stock
obtained by you shall be directed to us for acceptance and shall not be binding
on us until accepted by us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell shares of our Common
Stock through other distributors or directly to investors through subscriptions
received by us at our principal office in Portsmouth, New Hampshire. The right
given to you under this agreement shall not apply to shares of our Common Stock
issued in connection with (a) the merger or consolidation of any other
investment company with us, (b) our acquisition by purchase or otherwise of all
or substantially all of the assets or stock of any other investment company, or
(c) the reinvestment in shares of our Common Stock by our shareholders of
dividends or other distributions or any other offering by us of securities to
our shareholders.

3. You will use your best efforts to obtain subscriptions to shares of our
Common Stock upon the terms and conditions contained herein and in our
Prospectus and Statement of Additional Information, as in effect from time to
time. You will send to us promptly all subscriptions placed with you. We shall
furnish you from time to time, for use in connection with the offering of shares
of our Common Stock, such other information with respect to us and shares of our
Common Stock as you may reasonably request. We shall supply you with such copies
of our Registration Statement, Prospectus and Statement of Additional
Information, as in effect from time to time, as you may request. Except as we
may authorize in writing, you are not authorized to give any information or to
make any representation that is not contained in the Registration Statement,
Prospectus or Statement of Additional Information, as then in effect. You may
use employees, agents and other persons, at your cost and expense, to assist you
in carrying out your obligations hereunder, but no such employee, agent or other
person shall be deemed to be our agent or have any rights under this agreement.
You may sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent.

<PAGE>

4. All sales of our shares effected through you will be made in compliance
with all applicable federal securities laws and regulations and the
Constitution, rules and regulations of the National Association of Securities
Dealers, Inc. ("NASD"). We reserve the right to suspend the offering of shares
of our Common Stock at any time, in the absolute discretion of our Board of
Directors, and upon notice of such suspension you shall cease to offer shares of
our Common Stocks hereunder.

5. Both of us will cooperate with each other in taking such action as may
be necessary to qualify shares of our Common Stock for sale under the securities
laws of such states as we may designate, provided, that you shall not be
required to register as a broker-dealer or file a consent to service of process
in any such state where you are not now so registered. We will pay all fees and
expenses of registering shares of our Common Stock under the 1933 Act and of
qualification of shares of our Common Stock, and to the extent necessary, our
qualification under applicable state securities laws. You will pay all expenses
relating to your broker-dealer qualification.

6. We represent to you that our Registration Statement, Prospectus and
Statement of Additional Information have been prepared in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement,
Prospectus and Statement of Additional Information contain all statements
required to be stated therein in accordance with the 1933 Act and the 1940 Act
and the SEC's rules and regulations thereunder; that all statements of fact
contained therein are or will be true and correct at the time indicated; and
that neither our Registration Statement, our Prospectus nor our Statement of
Additional Information, when they shall be authorized for use, will include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading to
a purchaser of shares of our Common Stock. We will from time to time file such
amendment or amendments to our Registration Statement, Prospectus and Statement
of Additional Information as shall, in the opinion of our counsel, be necessary.
We represent and warrant to you that any amendment to our Registration
Statement, Prospectus or Statement of Additional Information hereafter filed by
us will be prepared in conformity within the requirements of the 1933 Act and
the 1940 Act and the SEC's rules and regulations thereunder and will, when it
becomes effective, contain all statements required to be stated therein in
accordance with the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder; that all statements of fact contained therein will, when
the same shall become effective, be true and correct; and that no such
amendment, when it becomes effective, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of our
shares.

7. We agree to indemnify, defend and hold you, your officers and directors,
and any person who controls you within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims, liabilities and
expenses (including the cost of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith) which you
or any such controlling person may incur, under the 1933 Act or the 1940 Act, or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in our Registration Statement, Prospectus
or Statement of Additional Information in effect from time to time or arising
out of or based upon any alleged omission to state a material fact required to
be stated in either of them or necessary to make the statements in either of
them not misleading; provided, however, that in no event shall anything herein
contained be so construed as to protect you against any liability to us or our
security holders to which you would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of your duties,
or by reason of your reckless disregard of your obligations and duties under
this agreement. Our agreement to indemnify you and any such controlling person
is expressly conditioned upon our being notified of any action brought against
you or any such controlling person, such notification to be given by letter or
by telegram addressed to us at our principal office in Portsmouth, New
Hampshire, and sent to us by the person against whom such action is brought
within ten days after the summons or other first legal process shall have been
served. The failure so to notify us of any such action shall not relieve us from
any liability which we may have to the person against whom such action is
brought other than on account of our indemnity agreement contained in this
paragraph. We will be entitled to assume the defense of any suit

-2-
<PAGE>

brought to enforce any such claim, and to retain counsel of good standing chosen
by us and approved by you. In the event we do elect to assume the defense of any
such suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case we do not elect to assume the
defense of any such suit, or in case you, in good faith, do not approve of
counsel chosen by us, we will reimburse you or the controlling person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by you or them. Our indemnification agreement contained in this
paragraph 7 and our representations and warranties in this agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of you or any controlling person and shall survive the sale of any shares
of our Common Stock made pursuant to subscriptions obtained by you. This
agreement of indemnity will inure exclusively to your benefit, to the benefit of
your successors and assigns, and to the benefit of any of your controlling
persons and their successors and assigns. We agree promptly to notify you of the
commencement of any litigation or proceeding against us in connection with the
issue and sale of any shares of our Common Stock.

8. You agree to indemnify, defend and hold us, our several officers and
directors, and any person who controls us within the meaning of Section 15 of
the 1933 Act, free and harmless from and against any and all claims, demands,
liabilities, and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which we, our officers or directors, or any such
controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement, Prospectus or Statement of Additional Information as in effect from
time to time, or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information required to be stated
in the Registration Statement, Prospectus or Statement of Additional Information
or necessary to make such information not misleading. Your agreement to
indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within a reasonable time after the summons or other first legal process
shall have been served. You shall have a right to control the defense of such
action, with counsel of your own choosing, satisfactory to us, if such action is
based solely upon such alleged misstatement or omission on your part, and in any
other event you and we, our officers or directors or such controlling person
shall each have the right to participate in the defense or preparation of the
defense of any such action.

9. We agree to advise you immediately:

a. of any request by the SEC for amendments to our Registration
Statement, Prospectus or Statement of Additional Information or
for additional information,

b. of the issuance by the SEC of any stop order suspending the
effectiveness of our Registration Statement, Prospectus or
Statement of Additional Information or the initiation of any
proceedings for that purpose, and

c. of the happening of any material event which makes untrue any
statement made in our Registration Statement, Prospectus or
Statement of Additional Information or which requires the making
of a change in either of them in order to make the statements
therein not misleading.

10. This agreement will become effective on the date hereof and will remain
in effect thereafter for successive twelve-month periods (computed from each
July 1st), provided that such continuation is specifically approved at least
annually by vote of our Board of Directors and of a majority of those of our
directors who are not

-3-
<PAGE>

interested persons (as defined in the 1940 Act) and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan, cast in person at a meeting called for the purpose of voting on this
agreement. This agreement may be terminated at any time, without the payment of
any penalty, (i) by vote of a majority of our entire Board of Directors, and by
a vote of a majority of our Directors who are not interested persons (as defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, or (ii) by vote
of a majority of our outstanding voting securities, as defined in the Act, on
sixty days' written notice to you, or (iii) by you on sixty days' written notice
to us.

11. This agreement shall be governed by and construed in accordance with
the laws of the State of New York.

12. This agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this agreement shall terminate automatically
in the event of any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and in applicable
rules or regulations of the SEC thereunder.

13. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or restrict your right, the right of any
of your employees who may also be a director, officer or employee of ours, or of
a person affiliated with us, as defined in the 1940 Act, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to another corporation, firm, individual or association.

14. This agreement has been prepared by the law firm of Bresler Goodman &
Unterman, LLP, which has advised the both of us that there is an inherent
conflict of interest in their representation of the both of us. Because of this
conflict, we and our non-interested directors and you will not have the benefit
of independent counsel in the consideration of the fairness of this agreement.
This is to confirm that the both of us are aware of that conflict and that,
notwithstanding such conflict, the both of us have asked Bresler Goodman &
Unterman, LLP to represent the both of us in this regard.

If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.

Very truly yours,

PAX WORLD HIGH YIELD FUND, INC.

By:
----------------------------
Laurence A. Shadek
Chairman of the Board

Accepted and Agreed to
as of the date hereof:

H.G. WELLINGTON & CO., INC.

By:
------------------------------
Thomas W. Grant
President

-4-

Custodian Contract

This Contract between PAX WORLD HIGH YIELD FUND, INC., a corporation
organized and existing under the laws of the State of Delaware having its
principal place of business at 222 State Street, Portsmouth, NH 03801,
hereinafter called the "Fund", and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal place of business at 225
Franklin Street, Boston, MA 02110, hereinafter called the "Custodian",

WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:

1. Employment of Custodian and Property to be Held by It

The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund agrees to deliver to the Custodian all securities and
cash owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of capital stock, $ 1.00 par value, ("Shares") of the Fund as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of the Fund held or received by the Fund and not delivered to
the Custodian.

Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable vote by the
Board of Directors of the Fund, and provided that the Custodian shall have no
more or less responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodians for the Fund's
securities and other assets the foreign banking institutions and foreign
securities depositories designated in Schedule "A" hereto but only in accordance
with the provisions of Article 3.

2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States

2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, to be held by it in
the United States, including all domestic investments owned by the
Fund, other than (a) securities which are maintained pursuant to
Section 2.8 in a clearing agency registered with the Securities and
Exchange Commission ("SEC") under Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies (each, a "U.S.
Securities System") and (b) commercial paper of an issuer for which
the Custodian acts as issuing and paying agent ("Direct Paper") which
is deposited and/or maintained in the Direct Paper System of the
Custodian (the "Direct Paper System") pursuant to Section 2.9.

2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
U.S. Securities System account ("U.S. Securities System Account") of
the Custodian or in the Custodian's Direct Paper book-entry system
account ("Direct Paper System Account") only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:

1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;

2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;

<PAGE>

3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.8 hereof;

4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;

5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;

6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.7 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;

7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except
as may arise from the Custodian's own negligence or willful
misconduct;

8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;

9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;

10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the delivery
of securities owned by the Fund prior to the receipt of such
collateral;

11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;

12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Exchange Act and a member of The National Association
of Securities Dealers, Inc. ("NASD"), relating to compliance with

-2-

<PAGE>

the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;

13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;

14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and

15) For any other proper corporate purpose, but only upon receipt of
Proper Instructions specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such securities
shall be made.

2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.7 or in the name or
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.

2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for
the Fund may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved by
vote of a majority of the Board of Directors of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.

2.5 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to United States registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the

-3-

<PAGE>

securities business, and shall collect on a timely basis all income
and other payments with respect to United States bearer securities if,
on the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation
as and when they become due and shall collect interest when due on
securities held hereunder. Income due the Fund on United States
securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.

2.6 Payment of Fund Monies. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases
only:

1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Fund but only (a) against the delivery of such securities, or
evidence of title to such options, futures contracts or options
on futures contracts, to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name
of the Fund or in the name of a nominee of the Custodian referred
to in Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in Section 2.8
hereof; (c) in the case of a purchase involving the Direct Paper
System, in accordance with the conditions set forth in Section
2.9; (d) in the case of repurchase agreements entered into
between the Fund and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of
the securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected prior
to receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund as defined in
Article 5;

2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;

3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Article 4 hereof;

4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;

-4-

<PAGE>

5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;

6) For payment of the amount of dividends received in respect of
securities sold short;

7) For any other proper purpose, but only upon receipt of Proper
Instructions specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons
to whom such payment is to be made.

2.7 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.

2.8 Deposit of Securities in U.S. Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a
clearing agency registered with the SEC under Section 17A of the
Exchange Act, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies, collectively referred to herein as "U.S.
Securities System" in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following
provisions:

1) The Custodian may keep domestic securities of the Fund in a U.S.
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;

2) The records of the Custodian with respect to domestic securities
of the Fund which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Fund;

3) The Custodian shall pay for domestic securities purchased for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer domestic
securities sold for the account of the Fund upon (i) receipt of
advice from the U.S. Securities System that payment for such
securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund. Copies of
all advices from the U.S. Securities System of transfers of
domestic securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be
provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written advice or notice
and shall furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities System
for the account of the Fund.

-5-

<PAGE>

4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding
domestic securities deposited in the U.S. Securities System;

6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Fund has not
been made whole for any such loss or damage.

2.9 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by the Fund in the Direct
Paper System of the Custodian subject to the following provisions:

1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;

2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;

3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;

4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt
of payment for the account of the Fund;

5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the U.S. Securities System for the account of the Fund;

6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may reasonably
request from time to time;

2.10 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.8 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered
under the

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<PAGE>

Commodity Exchange Act, as amended (the "Commodity Exchange Act")),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by
the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the SEC relating to the
maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of Proper Instructions setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.

2.11 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of the Fund held by it
and in connection with transfers of such securities.

2.12 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.

2.13 Communications Relating to Fund Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund all written information (including, without limitation,
pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund) received by the
Custodian from issuers of the domestic securities being held for the
Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund all written information received by the
Custodian from issuers of the domestic securities whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Fund desires to take action with
respect to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.

2.14 Reports to Fund by Independent Public Accountants. The Custodian shall
provide the Fund, at such times as the Fund may reasonably require,
with reports by independent public accountants on the accounting
system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including domestic securities deposited and/or maintained in a U.S.
Securities System, relating to the services provided by the Custodian
under this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies,
the reports shall so state.

3. Duties of the Custodian with Respect to Property of the Fund Held Outside
of the United States

3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories

-7-

<PAGE>

designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with an approval by the Fund signed by an
authorized officer of the Fund, the Custodian and the Fund may agree
to amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to
act as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the Fund's assets.

3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions. The Custodian shall identify on its books as belonging
to the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.

3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Fund shall be
maintained in a clearing agency which acts as a securities depository
or in a book-entry system for the central handling of securities
located outside the United States (each, a "Foreign Securities
System") only through arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the terms hereof
(Foreign Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities System"). Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.

3.4 Holding Securities. The Custodian may hold securities and other
non-cash property for all of its customers, including the Fund, with a
foreign sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers, provided
however, that (i) the records of the Custodian with respect to
securities and other non-cash property of the Fund which are
maintained in such account shall identify by book-entry those
securities and other non-cash property belonging to the Fund and (ii)
the Custodian shall require that securities and other non-cash
property so held by the foreign sub-custodian be held separately from
any assets of the foreign sub-custodian or of others.

3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that: (a) the Fund's assets
will not be subject to any right, charge, security interest, lien or
claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership of the Fund's assets will
be freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be
maintained identifying the assets as belonging to the Fund; (d)
officers of or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable law the
independent public accountants for the Fund, will be given access to
the books and records of the foreign banking institution relating to
its actions under its agreement with the Custodian; and (e) assets of
the Fund held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.

3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.

-8-

<PAGE>

3.7 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Fund's securities and other assets
and advices or notifications of any transfers of securities to or from
each custodial account maintained by a foreign banking institution for
the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical
possession of such securities.

3.8 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of
Sections 2.2 and 2.6 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians. (b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for securities
received for the account of the Fund and delivery of securities
maintained for the account of the Fund may be effected in accordance
with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless from
any liability as a holder of record of such securities.

3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and each Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.

3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by Section 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this Section 3.10, in
delegating custody duties to State Street London Ltd., the Custodian
shall not be relieved of any responsibility to the Fund for any loss
due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear incident or
other losses under circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care.

3.11 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase or
sale of foreign exchange or of contracts for foreign

-9-

<PAGE>

exchange, or in the event that the Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims
or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose
of the Fund assets to the extent necessary to obtain reimbursement.

3.12 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund.

3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Fund assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by Article 1 of this Contract. (b)
Cash held for the Fund in the United Kingdom shall be maintained in an
interest bearing account established for the Fund with the Custodian's
London branch, which account shall be subject to the direction of the
Custodian, State Street London Ltd. or both.

3.14 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.

4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund

From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.

The Custodian shall receive from the distributor for the Fund's Shares or
from the Transfer Agent of the Fund and deposit into the Fund's account such
payments as are received for Shares of the Fund issued or sold

-10-

<PAGE>

from time to time by the Fund. The Custodian will provide timely notification to
the Fund and the Transfer Agent of any receipt by it of payments for Shares of
the Fund.

5. Proper Instructions

Proper Instructions as used herein means a writing signed or initialled by
one or more person or persons as the Board of Directors shall have from time to
time authorized. Each such writing shall set forth the specific transaction or
type of transaction involved, including a specific statement of the purpose for
which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the instructions are
consistent with the security procedures agreed to by the Fund and the Custodian
including, but not limited to, the security procedures selected by the Fund on
the Funds Transfer Addendum to this Contract. For purposes of this Section,
Proper Instructions shall include instructions received by the Custodian
pursuant to any three-party agreement which requires a segregated asset account
in accordance with Section 2.10.

6. Actions Permitted without Express Authority

The Custodian may in its discretion, without express authority from the
Fund:

1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Fund;

2) surrender securities in temporary form for securities in definitive
form;

3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and

4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as
otherwise directed by the Board of Directors of the Fund.

7. Evidence of Authority

The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.

8. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income

The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall

-11-

<PAGE>

also calculate daily the net income of the Fund as described in the Fund's
currently effective prospectus and shall advise the Fund and the Transfer Agent
daily of the total amounts of such net income and, if instructed in writing by
an officer of the Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The calculations
of the net asset value per share and the daily income of the Fund shall be made
at the time or times described from time to time in the Fund's currently
effective prospectus.

9. Records

The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.

10. Opinion of Fund's Independent Accountant

The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual
reports to the SEC and with respect to any other requirements of such
Commission.

11. Compensation of Custodian

The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.

12. Responsibility of Custodian

So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.

Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by: (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Fund or the Investment Advisor
in their instructions to the Custodian provided such instructions have been in

-12-

<PAGE>

accordance with this Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent jurisdiction.

The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.

If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.

If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.

In no event shall the Custodian be liable for indirect, special or
consequential damages.

13. Effective Period, Termination and Amendment

This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.

Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.

-13-

<PAGE>

14. Successor Custodian

If a successor custodian shall be appointed by the Board of Directors of
the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.

If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.

In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.

In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.

15. Interpretive and Additional Provisions

In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.

16. Massachusetts Law to Apply

This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.

17. Prior Contracts

This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.

-14-

<PAGE>

18. Reproduction of Documents

This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.

19. Shareholder Communications Election

SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.

YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.

NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.

20. Data Access Services Addendum

The Custodian and the Fund agree to be bound by the terms of the Data
Access Services Addendum attached hereto.

[Remainder of page is intentionally left blank]

-15-

<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the _____ day of _______________, 1999.

Attest: PAX WORLD HIGH YIELD FUND, INC.

______________________________ By:___________________________

Attest: STATE STREET BANK AND TRUST COMPANY

______________________________ By:__________________________

-16-
<PAGE>

Schedule A
17f-5 Approval

The Board of Directors of Pax World High Yield Fund, Inc. has approved
certain foreign banking institutions and foreign securities depositories within
State Street's Global Custody Network for use as subcustodians for the Fund's
securities, cash and cash equivalents held outside of the United States. Board
approval is as indicated by the Fund's Authorized Officer:

<TABLE>
<CAPTION>
Fund
Officer
Initials Country Subcustodian Central Depository
- -------- ------- ------------ ------------------
<S> <C> <C> <C>

______ State Street's entire Global Custody Network listed below

______ Argentina Citibank, N.A. Caja de Valores S.A.

______ Australia Westpac Banking Corporation Austraclear Limited

Reserve Bank Information and
Transfer System

______ Austria Erste Bank der Oesterreichischen Oesterreichische Kontrollbank AG
Sparkassen AG (Wertpapiersammelbank Division)

______ Bahrain British Bank of the Middle East None
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)

______ Bangladesh Standard Chartered Bank None

______ Belgium Generale de Banque Caisse Interprofessionnelle de
Depot et de Virement de Titres
S.A.

Banque Nationale de Belgique

______ Bermuda The Bank of Bermuda Limited None

______ Bolivia Banco Boliviano Americano S.A. None

______ Botswana Barclays Bank of Botswana Limited None

______ Brazil Citibank, N.A. Companhia Brasileira de
Liquidacao e Custodia

______ Bulgaria ING Bank N.V. Central Depository AD
Bulgarian National Bank

______ Canada State Street Trust Company Canada The Canadian Depository for
Securities Limited
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Fund
Officer
Initials Country Subcustodian Central Depository
- -------- ------- ------------ ------------------
<S> <C> <C> <C>

______ Chile Citibank, N.A. Deposito Central de Valores S.A.

______ People's The Hongkong and Shanghai Shanghai Securities Central
Republic of Banking Corporation Limited Clearing and Registration
China Shanghai and Shenzhen branches Corporation

Shenzhen Securities Central
Clearing Co., Ltd.

______ Colombia Cititrust Colombia S.A. None
Sociedad Fiduciaria

______ Costa Rica Banco BCT S.A. Central de Valores S.A. (CEVAL)

______ Croatia Privredna Banka Zagreb d.d. Ministry of Finance

National Bank of Croatia

______ Cyprus The Cyprus Popular Bank Ltd. None

______ Czech Republic Ceskoslovenska Obchodni Stredisko cennych papiru(degree)
Banka, A.S.
Czech National Bank

______ Denmark Den Danske Bank Vaerdipapircentralen (the Danish
Securities Center)

______ Ecuador Citibank, N.A. None

______ Egypt National Bank of Egypt Misr Company for Clearing,
Settlement, and Central Depository

______ Estonia Hansabank Eesti Vaartpaberite
Keskdepositoorium
______ Finland Merita Bank Limited The Finnish Central Securities
Depository

______ France Banque Paribas Societe Interprofessionnelle pour la
Compensation des Valeurs
Mobilieres (SICOVAM)

______ Germany Dresdner Bank AG Deutsche Borse Clearing AG

______ Ghana Barclays Bank of Ghana Limited None
</TABLE>

-2-
<PAGE>

<TABLE>
<CAPTION>
Fund
Officer
Initials Country Subcustodian Central Depository
- -------- ------- ------------ ------------------
<S> <C> <C> <C>

______ Greece National Bank of Greece S.A. The Central Securities Depository
(Apothetirion Titlon AE)

The Bank of Greece, System for
Monitoring Transactions in
Securities in Book-Entry Form

______ Hong Kong Standard Chartered Bank The Central Clearing and
Settlement System

Central Money Markets Unit

______ Hungary Citibank Budapest Rt. The Central Depository and
Clearing House (Budapest) Ltd.
(KELER)

______ Iceland Icebank Ltd. None

______ India Deutsche Bank AG The National Securities Depository
Limited

______ The Hongkong and Shanghai The National Securities Depository
Banking Corporation Limited Limited

______ Indonesia Standard Chartered Bank Bank Indonesia

______ Ireland Bank of Ireland Central Bank of Ireland Securities
Settlement Office

______ Israel Bank Hapoalim B.M. The Tel Aviv Stock Exchange
Clearing House Ltd.

Bank of Israel

______ Italy Banque Paribas Monte Titoli S.p.A.

Banca d'Italia

______ Ivory Coast Societe Generale de Banques Depositaire Central -
en Cote d'Ivoire Banque de Reglement

______ Jamaica Scotiabank Jamaica Trust The Jamaican Central Securities
and Merchant Bank Ltd. Depository
</TABLE>

-3-
<PAGE>

<TABLE>
<CAPTION>
Fund
Officer
Initials Country Subcustodian Central Depository
- -------- ------- ------------ ------------------
<S> <C> <C> <C>

______ Japan The Fuji Bank, Limited Japan Securities Depository Center
(JASDEC)

Bank of Japan Net System

______ Sumitomo Bank, Ltd. Japan Securities Depository Center
(JASDEC)

Bank of Japan Net System

______ Jordan British Bank of the Middle East None
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)

______ Kenya Barclays Bank of Kenya Limited Central Bank of Kenya

______ Republic of The Hongkong and Shanghai Korea Securities Depository
Korea Banking Corporation Limited Corporation

______ Latvia JSC Hansabank-Latvija The Latvian Central Depository

______ Lebanon British Bank of the Middle East The Custodian and Clearing
(as delegate of The Hongkong and Centerof Financial Instruments for
Shanghai Banking Corporation the Middle East (MIDCLEAR)
Limited) S.A.L.

The Central Bank of Lebanon

______ Lithuania Vilniaus Bankas AB The Central Securities Depository
of Lithuania

______ Malaysia Standard Chartered Bank The Malaysian Central Depository
Malaysia Berhad Sdn. Bhd.

Bank Negara Malaysia, Scripless
Securities Trading and
Safekeeping Systems

______ Mauritius The Hongkong and Shanghai The Central Depository &
Banking Corporation Limited Settlement Co. Ltd.

______ Mexico Citibank Mexico, S.A. S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores)

______ Morocco Banque Commerciale du Maroc Maroclear
</TABLE>

-4-
<PAGE>

<TABLE>
<CAPTION>
Fund
Officer
Initials Country Subcustodian Central Depository
- -------- ------- ------------ ------------------
<S> <C> <C> <C>

______ The Netherlands MeesPierson N.V. Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V.
(NECIGEF)

De Nederlandsche Bank N.V.

______ New Zealand ANZ Banking Group New Zealand Central Securities
(New Zealand) Limited Depository Limited

______ Norway Christiania Bank og Verdipapirsentralen (the
Kreditkasse Norwegian Registry of Securities)

______ Oman British Bank of the Middle East Muscat Securities Market
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)

______ Pakistan Deutsche Bank AG Central Depository Company of
Pakistan Limited

______ Peru Citibank, N.A. Caja de Valores y Liquidaciones
S.A. (CAVALI)

_____ Philippines Standard Chartered Bank The Philippines Central
Depository, Inc.

The Registry of Scripless Securities
(ROSS) of the Bureau of the
Treasury

______ Poland Citibank (Poland) S.A. The National Depository of
Securities (Krajowy Depozyt
Papierow Wartos'ciowych)

Central Treasury Bills Registrar

______ Bank Polska Kasa Opieki S.A. The National Depository of
Securities (Krajowy Depozyt
Papierow Wartos'ciowych)

Central Treasury Bills Registrar

______ Portugal Banco Comercial Portugues Central de Valores Mobiliarios
(Central)
</TABLE>

-5-
<PAGE>

<TABLE>
<CAPTION>
Fund
Officer
Initials Country Subcustodian Central Depository
- -------- ------- ------------ ------------------
<S> <C> <C> <C>

_______ Romania ING Bank N.V. National Securities Clearing,
Settlement and Depository
Company

Bucharest Stock Exchange
Registry Division

________ Russia Credit Suisse First Boston AO, Moscow None
(as delegate of Credit Suisse
First Boston, Zurich)

______ Singapore The Development Bank The Central Depository (Pte)
of Singapore Limited Limited

Monetary Authority of Singapore

______ Slovak Republic Ceskoslovenska Obchodni Stredisko Cennych Papierov
Banka, A.S.

National Bank of Slovakia

______ Slovenia Bank Austria d.d. Ljubljana Klirinsko Depotna Druzba d.d.

______ South Africa Standard Bank of South Africa Limited The Central Depository Limited

______ Spain Banco Santander, S.A. Servicio de Compensacion y
Liquidacion de Valores, S.A.

Banco de Espana, Central de
Anotaciones en Cuenta

______ Sri Lanka The Hongkong and Shanghai Central Depository System
Banking Corporation Limited (Pvt) Limited

______ Swaziland Standard Bank Swaziland Limited None

______ Sweden Skandinaviska Enskilda Banken Vardepapperscentralen AB (the
Swedish Central Securities
Depository)

______ Switzerland UBS AG Schweizerische Effekten - Giro AG
</TABLE>

-6-
<PAGE>

<TABLE>
<CAPTION>
Fund
Officer
Initials Country Subcustodian Central Depository
- -------- ------- ------------ ------------------
<S> <C> <C> <C>

______ Taiwan Central Trust of China The Taiwan Securities Central or
- ROC Depository Co., Ltd.

______ --------------------------------
(Client Designated Subcustodian)

______ Thailand Standard Chartered Bank Thailand Securities Depository Company
Limited

______ Trinidad Republic Bank Limited None
& Tobago

______ Tunisia Banque Internationale Societe Tunisienne Interprofessionelle de
Arabe de Tunisie Compensation et de Depot de Valeurs
Mobilieres

______ Turkey Citibank, N.A. Takas ve Saklama Bankasi A.S.
(TAKASBANK)

Central Bank of Turkey

______ Ottoman Bank Takas ve Saklama Bankasi A.S.
(TAKASBANK)

Central Bank of Turkey

______ Ukraine ING Bank, Ukraine The National Bank of Ukraine

______ United State Street Bank and Trust None
Kingdom Company, London branch

The Bank of England, The Central Gilts
Office and The Central Moneymarkets
Office

______ Uruguay Citibank, N.A. None

______ Venezuela Citibank, N.A. Central Bank of Venezuela

______ Zambia Barclays Bank of Zambia Lusaka Central Depository Limited
Limited
Bank of Zambia

______ Zimbabwe Barclays Bank of Zimbabwe None
Limited

______ Euroclear (The Euroclear System)/State Street London Limited
</TABLE>

-7-
<PAGE>

<TABLE>
<CAPTION>
Fund
Officer
Initials Country Subcustodian Central Depository
- -------- ------- ------------ ------------------
<S> <C> <C> <C>

______ Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
</TABLE>

Certified by:

- --------------------------------------- --------------------
Fund's Authorized Officer Date

-8-

Exhibit 7(b)

DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN CONTRACT

ADDENDUM to the Custodian Contract between Pax World High Yield Fund, Inc.
(the "Customer") and State Street Bank And Trust Company ("State Street").

PREAMBLE

WHEREAS, State Street has been appointed as custodian of certain assets of
the Customer pursuant to the attached Custodian Contract (the "Custodian
Contract") dated as of _______________, 1999;

WHEREAS, State Street has developed and utilizes proprietary accounting and
other systems, including State Street's proprietary Multicurrency HORIZON(R)
Accounting System, in its role as custodian of the Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and

WHEREAS, State Street makes available to the Customer certain Data Access
Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Addendum.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:

1. SYSTEM AND DATA ACCESS SERVICES

a. System. Subject to the terms and conditions of this Addendum, State
Street hereby agrees to provide the Customer with access to State Street's
Multicurrency HORIZON(SM) Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports and information, solely on computer hardware,
system software and telecommunication links, as listed in Attachment B (the
"Designated Configuration") of the Customer, or certain third parties approved
by State Street that serve as investment advisors or investment managers or in
other service capacities to the Customer such as the Customer's independent
auditors (each, an "Investment Advisor"), solely with respect to the Customer or
on any designated substitute or back-up equipment configuration with State
Street's written consent, such consent not to be unreasonably withheld.

b. Data Access Services. State Street agrees to make available to the
Customer the Data Access Services subject to the terms and conditions of this
Addendum and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of the Customer to originate
electronic instructions to State Street on behalf of the Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Addendum.

c. Additional Services. State Street may from time to time agree to make
available to the Customer additional Systems that are not described in the
attachments to this Addendum. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Addendum shall govern, the Customer's access to and use of any additional System
made available by State Street and/or accessed by the Customer.

<PAGE>

2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE

State Street and the Customer acknowledge that in connection with the Data
Access Services provided under this Addendum, the Customer will have access,
through the Data Access Services, to Customer Data and to functions of State
Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.

3. LIMITATION ON SCOPE OF USE

a. Designated Equipment; Designated Location. The System and the Data
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of the Customer or the Investment Advisor located
in Portsmouth, New Hampshire ("Designated Location").

b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and the Customer agree
that each will engage or retain the services of trained personnel to enable both
parties to perform their respective obligations under this Addendum. State
Street agrees to use commercially reasonable efforts to maintain the System so
that it remains serviceable, provided, however, that State Street does not
guarantee or assure uninterrupted remote access use of the System.

c. Scope of Use. The Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. The Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Addendum, (iii) use the System or the Data Access Services
for any fund, trust or other investment vehicle without the prior written
consent of State Street, (iv) allow access to the System or the Data Access
Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.

d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, the Customer's access to services performed by the System or to
Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, the Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. The Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.

e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.

-2-
<PAGE>

f. No Modification. Without the prior written consent of State Street, the
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.

g. Security Procedures. The Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. The Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified by the
Customer) after such discontinuance, assume responsibility to provide accounting
services under the terms of the Custodian Contract.

h. Inspections. State Street shall have the right to inspect the use of the
System and the Data Access Services by the Customer and the Investment Advisor
to ensure compliance with this Addendum. The on-site inspections shall be upon
prior written notice to the Customer and the Investment Advisor and at
reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Customer's or the Investment Advisor's business.

4. PROPRIETARY INFORMATION

a. Proprietary Information. The Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Customer agrees that it will hold such
Proprietary Information in the strictest confidence and secure and protect it in
a manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder. The Customer further
acknowledges that State Street shall not be required to provide the Investment
Advisor with access to the System unless it has first received from the
Investment Advisor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C to this Agreement. The Customer shall
use all commercially reasonable efforts to assist State Street in identifying
and preventing any unauthorized use, copying or disclosure of the Proprietary
Information or any portions thereof or any of the logic, formats or designs
contained therein.

b. Cooperation. Without limitation of the foregoing, the Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Addendum, and the Customer will, at its expense,
co-operate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.

c. Injunctive Relief. The Customer acknowledges that the disclosure of any
Proprietary Information, or of any information which at law or equity ought to
remain confidential, will immediately give rise to continuing irreparable injury
to State Street inadequately compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.

d. Survival. The provisions of this Section 4 shall survive the termination
of this Addendum.

-3-
<PAGE>

5. LIMITATION ON LIABILITY

a. Limitation on Amount and Time for Bringing Action. The Customer agrees
that any liability of State Street to the Customer or any third party arising
out of State Street's provision of Data Access Services or the System under this
Addendum shall be limited to the amount of the fees paid by the Fund to the
Custodian. In no event shall State Street be liable to the Customer or any
other party for any special, indirect, punitive or consequential damages even if
advised of the possibility of such damages. No action, regardless of form,
arising out of this Addendum may be brought by the Customer more than two years
after the Customer has knowledge that the cause of action has arisen.

b. Limited Warranties. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET.

c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.

d. Regulatory Requirements. As between State Street and the Customer, the
Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.

e. Force Majeure. Neither party shall be liable for any costs or damages
due to delay or nonperformance under this Addendum arising out of any cause or
event beyond such party's control, including without limitation, cessation of
services hereunder or any damages resulting therefrom to the other party, or the
Customer as a result of work stoppage, power or other mechanical failure,
computer virus, natural disaster, governmental action, or communication
disruption.

6. INDEMNIFICATION

The Customer agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful misconduct
in the use by the Customer of the Data Access Services or the System, including
any loss incurred by State Street resulting from a security breach at the
Designated Location or committed by the Customer's employees or agents or the
Investment Advisor and (ii) any loss resulting from incorrect Client Originated
Electronic Financial Instructions. State Street shall be entitled to rely on the
validity and authenticity of Client Originated Electronic Financial Instructions
without undertaking any further inquiry as long as such instruction is
undertaken in conformity with security procedures established by State Street
from time to time.

7. FEES

Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Addendum, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by the Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.

-4-
<PAGE>

8. TRAINING, IMPLEMENTATION AND CONVERSION

a. Training. State Street agrees to provide training, at a designated State
Street training facility or at the Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. The Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Addendum.

b. Installation and Conversion. State Street shall be responsible for the
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. The Customer shall have the following responsibilities
in connection with Installation and Conversion of the System:

(i) The Customer shall be solely responsible for the timely
acquisition and maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services at the
Designated Location.

(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the Installation and
Conversion phase of the System implementation to enable both parties to
perform their respective obligations under this Addendum.

9. SUPPORT

During the term of this Addendum, State Street agrees to provide the
support services set out in Attachment D to this Addendum.

10. TERM OF ADDENDUM

a. Term of Addendum. This Addendum shall become effective on the date of
its execution by State Street and shall remain in full force and effect until
terminated as herein provided.

b. Termination of Addendum. Either party may terminate this Addendum (i)
for any reason by giving the other party at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Customer or thirty days' notice in the case of notice from the Customer to State
Street of termination; or (ii) immediately for failure of the other party to
comply with any material term and condition of the Addendum by giving the other
party written notice of termination. In the event the Customer shall cease doing
business, shall become subject to proceedings under the bankruptcy laws (other
than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Addendum and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Customer.
This Addendum shall in any event terminate as to any Customer within 90 days
after the termination of the Custodian Contract applicable to such Customer.

c. Termination of the Right to Use. Upon termination of this Addendum for
any reason, any right to use the System and access to the Data Access Services
shall terminate and the Customer shall immediately cease use of the System and
the Data Access Services. Immediately upon termination of this Addendum for any
reason, the Customer shall return to State Street all copies of documentation
and other Proprietary Information in its possession; provided, however, that in
the event that either party terminates this Addendum or the Custodian Contract
for any reason other than the Customer's breach, State Street shall provide the
Data Access Services for a period of time and at a price to be agreed upon by
the parties.

-5-
<PAGE>

11. MISCELLANEOUS

a. Assignment; Successors. This Addendum and the rights and obligations of
the Customer and State Street hereunder shall not be assigned by either party
without the prior written consent of the other party, except that State Street
may assign this Addendum to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.

b. Survival. All provisions regarding indemnification, warranty, liability
and limits thereon, and confidentiality and/or protection of proprietary rights
and trade secrets shall survive the termination of this Addendum.

c. Entire Addendum. This Addendum and the attachments hereto constitute the
entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This Addendum is not intended to supersede or modify the duties and liabilities
of the parties hereto under the Custodian Contract or any other agreement
between the parties hereto except to the extent that any such agreement
specifically refers to the Data Access Services or the System. No single waiver
or any right hereunder shall be deemed to be a continuing waiver.

d. Severability. If any provision or provisions of this Addendum shall be
held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.

e. Governing Law. This Addendum shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.

-6-
<PAGE>

ATTACHMENT A

Multicurrency HORIZON(SM) Accounting System
System Product Description

I. The Multicurrency HORIZON(SM) Accounting System is designed to provide
lot level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street provided
information services products.

II. GlobalQuest(R) is designed to provide customer access to the following
information maintained on The Multicurrency HORIZON(SM) Accounting System: 1)
cash transactions and balances; 2) purchases and sales; 3) income receivables;
4) tax refund receivables; 5) daily priced positions; 6) open trades; 7)
settlement status; 8) foreign exchange transactions; 9) trade history; and 10)
daily, weekly and monthly evaluation services.

<PAGE>

ATTACHMENT B

*Designated Configuration

<PAGE>

ATTACHMENT C

Undertaking

The Undersigned understands that in the course of its employment as
Investment Advisor to Pax World High Yield Fund, Inc. (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZON(SM) Accounting System and other information systems
(collectively, the "System").

The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.

The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.

Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.

PAX WORLD MANAGEMENT CORP.

By:________________________________

Title:_____________________________

Date:______________________________

<PAGE>

Undertaking

The undersigned understands that in the course of its employment as
[service provider] to Pax World High Yield Fund, Inc. (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZON(SM) Accounting System and other information systems
(collectively, the "System").

The Undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.

*[NAME OF SERVICE PROVIDER]

By:_________________________________

Title:______________________________

Date:_______________________________

<PAGE>

ATTACHMENT D

Support

During the term of this Addendum, State Street agrees to provide the
following on-going support services:

a. Telephone Support. The Customer Designated Persons may contact State
Street's HORIZON(SM) Help Desk and Customer Assistance Center between the hours
of 8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of
obtaining answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Customer shall provide
to State Street a list of persons, not to exceed five in number, who shall be
permitted to contact State Street for assistance (such persons being referred to
as "the Customer Designated Persons").

b. Technical Support. State Street will provide technical support to assist
the Customer in using the System and the Data Access Services. The total amount
of technical support provided by State Street shall not exceed 10 resource days
per year. State Street shall provide such additional technical support as is
expressly set forth in the fee schedule in effect from time to time between the
parties (the "Fee Schedule"). Technical support, including during installation
and testing, is subject to the fees and other terms set forth in the Fee
Schedule.

c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.

d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.

e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.

f. Limitation on Support. State Street shall have no obligation to support
the Customer's use of the System: (I) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Addendum.

Exhibit 7(c)

FUNDS TRANSFER ADDENDUM

OPERATING GUIDELINES

1. OBLIGATION OF THE SENDER: State Street is authorized to promptly debit
Client's (as named below) account(s) upon the receipt of a payment order in
compliance with the selected Security Procedure chosen for funds transfer and in
the amount of money that State Street has been instructed to transfer. State
Street shall execute payment orders in compliance with the Security Procedure
and with the Client's instructions on the execution date provided that such
payment order is received by the customary deadline for processing such a
request, unless the payment order specifies a later time. All payment orders and
communications received after this time will be deemed to have been received on
the next business day.

2. SECURITY PROCEDURE: The Client acknowledges that the Security Procedure it
has designated on the Selection Form was selected by the Client from Security
Procedures offered by State Street. The Client shall restrict access to
confidential information relating to the Security Procedure to authorized
persons as communicated in writing to State Street. The Client must notify State
Street immediately if it has reason to believe unauthorized persons may have
obtained access to such information or of any change in the Client's authorized
personnel. State Street shall verify the authenticity of all instructions
according to the Security Procedure.

3. ACCOUNT NUMBERS: State Street shall process all payment orders on the basis
of the account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern.

4. REJECTION: State Street reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of State Street's receipt of such payment
order; (b) if initiating such payment order would cause State Street, in State
Street's sole judgment, to exceed any volume, aggregate dollar, network, time,
credit or similar limits upon wire transfers which are applicable to State
Street; or (c) if State Street, in good faith, is unable to satisfy itself that
the transaction has been properly authorized.

5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act
on all authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are received
in a timely manner affording State Street reasonable opportunity to act.
However, State Street assumes no liability if the request for amendment or
cancellation cannot be satisfied.

6. ERRORS: State Street shall assume no responsibility for failure to detect any
erroneous payment order provided that State Street complies with the payment
order instructions as received and State Street complies with the Security
Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.

7. INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility
for lost interest with respect to the refundable amount of any unauthorized
payment order, unless State Street is notified of the unauthorized payment order
within thirty (30) days of notification by State Street of the acceptance of
such payment order. In no event shall State Street be liable for special,
indirect or consequential damages, even if advised of the possibility of such
damages and even for failure to execute a payment order.

8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS:
When a Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association and the New England Clearing House Association, State Street will
act as an Originating Depository Financial Institution and/or Receiving
Depository Institution, as the case may be, with respect to such entries.
Credits given by State Street with respect to an ACH credit entry are
provisional

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until State Street receives final settlement for such entry from the Federal
Reserve Bank. If State Street does not receive such final settlement, the Client
agrees that State Street shall receive a refund of the amount credited to the
Client in connection with such entry, and the party making payment to the Client
via such entry shall not be deemed to have paid the amount of the entry.

9. CONFIRMATION STATEMENTS: Confirmation of State Street's execution of payment
orders shall ordinarily be provided within 24 hours notice which may be
delivered through State Street's proprietary information systems, such as, but
not limited to Horizon and GlobalQuest(R), or by facsimile or callback. The
Client must report any objections to the execution of a payment order within 30
days.

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FUNDS TRANSFER ADDENDUM

Security Procedure(s) Selection Form

Please select one or more of the funds transfer security procedures indicated
below.

|_| SWIFT

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages. SWIFT is considered to be one of the most secure and efficient
networks for the delivery of funds transfer instructions. Selection of this
security procedure would be most appropriate for existing SWIFT members.

|_| Standing Instructions

Standing Instructions may be used where funds are transferred to a broker on the
Client's established list of brokers with which it engages in foreign exchange
transactions. Only the date, the currency and the currency amount are variable.
In order to establish this procedure, State Street will send to the Client a
list of the brokers that State Street has determined are used by the Client. The
Client will confirm the list in writing, and State Street will verify the
written confirmation by telephone. Standing Instructions will be subject to a
mutually agreed upon limit. If the payment order exceeds the established limit,
the Standing Instruction will be confirmed by telephone prior to execution.

|_| Remote Batch Transmission

Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data
communications between the Client and State Street. Security procedures include
encryption and or the use of a test key by those individuals authorized as
Automated Batch Verifiers. Clients selecting this option should have an existing
facility for completing CPU-CPU transmissions. This delivery mechanism is
typically used for high-volume business.

|_| Global Horizon InterchangeSM Funds Transfer Service

Global Horizon Interchange Funds Transfer Service (FTS) is a State Street
proprietary microcomputer-based wire initiation system. FTS enables Clients to
electronically transmit authenticated Fedwire, CHIPS or internal book transfer
instructions to State Street. This delivery mechanism is most appropriate for
Clients with a low-to-medium number of transactions (5-75 per day), allowing
Clients to enter, batch, and review wire transfer instructions on their PC prior
to release to State Street.

|_| Telephone Confirmation (Callback)

Telephone confirmation will be used to verify all non-repetitive funds transfer
instructions received via untested facsimile or phone. This procedure requires
Clients to designate individuals as authorized initiators and authorized
verifiers. State Street will verify that the instruction contains the signature
of an authorized person and prior to execution, will contact someone other than
the originator at the Client's location to authenticate the instruction.

Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures.

|_| Repetitive Wires

For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and currency
amount are variable, a repetitive wire may be implemented. Repetitive wires will
be subject to a mutually

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<PAGE>

agreed upon limit. If the payment order exceeds the established limit, the
instruction will be confirmed by telephone prior to execution. Telephone
confirmation is used to establish this process. Repetitive wire instructions
must be reconfirmed annually. This alternative is recommended whenever funds are
frequently transferred between the same two accounts.

|_| Transfers Initiated by Facsimile

The Client faxes wire transfer instructions directly to State Street Mutual Fund
Services. Standard security procedure requires the use of a random number test
key for all transfers. Every six months the Client receives test key logs from
State Street. The test key contains alpha-numeric characters, which the Client
puts on each document faxed to State Street. This procedure ensures all wire
instructions received via fax are authorized by the Client. We provide this
option for Clients who wish to batch wire instructions and transmit these as a
group to State Street Mutual Fund Services once or several times a day.

|_| Automated Clearing House (ACH)

State Street receives an automated transmission or a magnetic tape from a Client
for the initiation of payment (credit) or collection (debit) transactions
through the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. Clients using ACH must select one or more
of the following delivery options:

|_| Global Horizon Interchange Automated Clearing House Service

Transactions are created on a microcomputer, assembled into batches and
delivered to State Street via fully authenticated electronic transmissions in
standard NACHA formats.

|_| Transmission from Client PC to State Street Mainframe with Telephone
Callback

|_| Transmission from Client Mainframe to State Street Mainframe with Telephone
Callback

|_| Transmission from DST Systems to State Street Mainframe with Encryption

|_| Magnetic Tape Delivered to State Street with Telephone Callback

State Street is hereby instructed to accept funds transfer instructions only via
the delivery methods and security procedures indicated. The selected delivery
methods and security procedure(s) will be effective __________ for payment
orders initiated by our organization.

Key Contact Information

Whom shall we contact to implement your selection(s)?

CLIENT OPERATIONS CONTACT ALTERNATE CONTACT

- ----------------------------------------- -------------------------------
Name Name

- ----------------------------------------- -------------------------------
Address Address

- ----------------------------------------- -------------------------------
City/State/Zip Code City/State/Zip Code

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- ----------------------------------------- -------------------------------
Telephone Number Telephone Number

- ----------------------------------------- -------------------------------
Facsimile Number Facsimile Number

- ----------------------------------------- -------------------------------
SWIFT Number

- -----------------------------------------
Telex Number

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FUND TRANSFER ADDENDUM

INSTRUCTION(S)

TELEPHONE CONFIRMATION

Fund Pax World High Yield Fund, Inc.

Investment Adviser Pax World Management Corp.

Investment Sub-Adviser

Authorized Initiators
Please Type or Print

Please provide a listing of Fund officers or other individuals are currently
authorized to INITIATE wire transfer instructions to State Street:

NAME TITLE (Specify whether SPECIMEN SIGNATURE
position is with Fund,
Investment Adviser or
Investment Sub-Adviser)

- ----------------------- --------------------------- --------------------------

Authorized Verifiers
Please Type or Print

Please provide a listing of Fund officers of other individuals who will be
CALLED BACK to verify the initiation of repetitive wires of $10 million or more
and all non repetitive wire instructions:

NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY)

- ----------------------- --------------------------- --------------------------

Exhibit 8(a)

TRANSFER AGENCY SERVICES AGREEMENT

THIS AGREEMENT is made as of _______________, 1999 by and between PFPC
INC., a Delaware corporation ("PFPC"), and PAX WORLD HIGH YIELD FUND, INC., a
Delaware corporation (the "Fund").

W I T N E S S E T H:

WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and

WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to the
Fund, and PFPC wishes to furnish such services.

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:

1. Definitions. As used in this Agreement:

(a) "1933 Act" means the Securities Act of 1933, as amended.

(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.

(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give
Oral Instructions and Written Instructions on behalf of the Fund
and listed on the Authorized Persons Appendix attached hereto and
made a part hereof or any amendment thereto as may be received by
PFPC. An Authorized Person's scope of authority may be limited by
the Fund by setting forth such limitation in the Authorized
Persons Appendix.

(d) "CEA" means the Commodities Exchange Act, as amended.

(e) "Oral Instructions" means oral instructions received by PFPC from
an Authorized Person or from a person reasonably believed by PFPC
to be an Authorized Person.

(f) "SEC" means the Securities and Exchange Commission.

(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.

(h) "Shares" means the shares of beneficial interest of any series or
class of the Fund.

(i) "Written Instructions" means written instructions signed by an
Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or
facsimile sending device.

<PAGE>

2. Appointment. The Fund hereby appoints PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to the Fund
in accordance with the terms set forth in this Agreement. PFPC accepts such
appointment and agrees to furnish such services.

3. Delivery of Documents. The Fund has provided or, where applicable, will
provide PFPC with the following:

(a) Certified or authenticated copies of the resolutions of the
Fund's Board of Directors, approving the appointment of PFPC or
its affiliates to provide services to the Fund and approving this
Agreement;

(b) A copy of the Fund's most recent effective registration
statement;

(d) A copy of the distribution agreement, if any, with respect to
each class of Shares of the Fund;

(e) A copy of the Fund's administration agreements if PFPC is not
providing the Fund with such services;

(f) Copies of any shareholder servicing agreements made in respect of
the Fund; and

(g) Copies (certified or authenticated where applicable) of any and
all amendments or supplements to the foregoing.

4. Compliance with Rules and Regulations. In performing its duties
hereunder, PFPC will comply with all applicable requirements of the Securities
Laws and any laws, rules and regulations of governmental authorities having
jurisdiction with respect to the duties to be performed by PFPC hereunder.

5. Instructions.

(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions and Written Instructions.

(b) PFPC shall be entitled to rely upon any Oral Instructions and Written
Instructions it receives from an Authorized Person (or from a person reasonably
believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC
may assume that any Oral Instruction or Written Instruction received hereunder
is not in any way inconsistent with the provisions of organizational documents
or this Agreement or of any vote, resolution or proceeding of the Fund's Board
of Directors or of the Fund's shareholders, unless and until PFPC receives
Written Instructions to the contrary.

(c) The Fund agrees to forward to PFPC Written Instructions confirming Oral
Instructions so that PFPC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact that
such confirming Written Instructions are not received by PFPC shall in no way
invalidate the transactions or enforceability of the transactions authorized by
the Oral Instructions. Where Oral Instructions or Written Instructions
reasonably appear to have been received from an Authorized Person, PFPC shall
incur no liability to the Fund in acting upon such Oral Instructions or Written
Instructions provided that PFPC's actions comply with the other provisions of
this Agreement.

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6. Right to Receive Advice.

(a) Advice of the Fund. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.

(b) Advice of Counsel. If PFPC shall be in doubt as to any question of law
pertaining to any action it should or should not take, PFPC may request advice
at its own cost from such counsel of its own choosing (who may be counsel for
the Fund, the Fund's investment adviser or PFPC, at the option of PFPC).

(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC receives from the Fund,
and the advice it receives from counsel, PFPC may rely upon and follow the
advice of counsel. In the event PFPC so relies on the advice of counsel, PFPC
remains liable for any action or omission on the part of PFPC which constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this Agreement.

(d) Protection of PFPC. PFPC shall be protected in any action its takes or
does not take in reliance upon directions, advice or Oral Instructions or
Written Instructions its receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section shall be construed
so as to impose an obligation upon PFPC (i) to seek such directions, advice or
Oral Instructions or Written Instructions, or (ii) to act in accordance with
such directions, advice or Oral instructions or Written Instructions unless,
under the terms of other provisions of this Agreement, the same is a condition
of PFPC's properly taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of PFPC constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this Agreement.

7. Records. PFPC shall prepare and keep records relating to its services to
be provided hereunder as and to the extent required by the 1940 Act and the
rules and regulations thereunder and all other applicable securities laws, rules
and regulations. The books and records pertaining to the Fund, which are in the
possession or under the control of PFPC, shall be the property of the Fund. The
Fund and Authorized Persons shall have access to such books and records at all
times during PFPC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PFPC to the Fund
or to an Authorized Person, at the Fund's expense.

8. Confidentiality. PFPC agrees on its own behalf and that of its employees
to keep confidential all records of the Fund and information relating to the
Fund and its shareholders (past, present and future), unless the release of such
records or information is otherwise consented to, in writing. by the Fund. The
Fund agrees that such consent shall not be unreasonably withheld and may not be
withheld where PFPC may be exposed to civil or criminal contempt proceedings or
when required to divulge such information or records to duly constituted
authorities.

9. Cooperation with Accountants. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
unqualified opinion, as required by the Fund.

10. Disaster Recovery. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure, provided such loss or

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<PAGE>

interruption is not caused by PFPC's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties or obligations under, or other
material noncompliance with, this Agreement.

11. Compensation. As compensation for services rendered by PFPC during the
term of this Agreement, the Fund will pay to PFPC a fee or fees as may be agreed
to from time to time in writing by the Fund and PFPC.

12. Indemnification. The Fund agrees to indemnify and hold harmless PFPC
and its affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly from any
action or omission to act which PFPC takes (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral
Instructions or Written Instructions. Neither PFPC, nor any of its affiliates,
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's or its affiliates' own willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties and obligations
under this Agreement.

13. Responsibility of PFPC.

(a) PFPC shall be under no duty to take any action on behalf of the Fund
except as specifically set forth herein or as may be specifically agreed to by
PFPC in writing. PFPC shall be obligated to exercise care and diligence in the
performance of its duties hereunder, to act in good faith and to use it best
efforts, within reasonable limits, in performing services provided for under
this Agreement. PFPC shall be liable for any damages arising out of PFPC's
failure to perform its duties under this Agreement to the extent such damages
arise out of PFPC's willful misfeasance, bad faith, gross negligence or reckless
disregard of such duties.

(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC, shall not be liable for losses beyond its
control, provided that PFPC has acted in accordance with the standard of care
set forth above; and (ii) PFPC shall not be under any duty or obligation to
inquire into and shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instructions or Written Instruction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to
Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.

(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to the Fund for any consequential,
special or indirect losses or damages which the Fund may incur or suffer by or
as a consequence of PFPC's or its affiliates' performance of the services
provided hereunder, whether or not the likelihood of such losses or damages was
known by PFPC or its affiliates.

14. Description of Services. Unless PFPC receives Written Instructions to
the contrary, PFPC is authorized to take, and shall take, the following actions
without Oral or Written Instructions:

(a) Services Provided on an Ongoing Basis, If Applicable.

(i) Calculate 12b-1 payments;

(ii) Maintain proper shareholder registrations;

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<PAGE>

(iii) Review new applications and correspond with shareholders to
complete or correct information;

(iv) Direct payment processing of checks or wires;

(v) Prepare and certify shareholder lists in conjunction with proxy
solicitations;

(vi) Countersign share certificates;

(vii) Prepare and mail to shareholders confirmation of activity and
periodic statements;

(viii) Provide toll-free lines for direct shareholder use, plus customer
liaison staff for on-line inquiry response;

(ix) Mail duplicate confirmations to broker-dealers of their clients'
activity, whether executed through the broker-dealer or directly
with PFPC;

(x) Provide periodic shareholder lists and statistics to the Fund;

(xi) Provide detailed data for underwriter/broker confirmations;

(xii) Prepare periodic mailing of year-end tax and statement
information;

(xiii) Notify on a timely basis the investment adviser, accounting agent,
and custodian of Fund activity; and

(xiv) Perform other participating broker-dealer shareholder services as
may be agreed upon from time to time.

(b) Services Provided by PFPC Under Oral Instructions or Written
Instructions (which may be standing Instructions or operating procedures).

(i) Accept and post daily Fund purchases and redemptions;

(ii) Accept, post and perform shareholder transfers and exchanges;

(iii) Pay dividends and other distributions;

(iv) Solicit and tabulate proxies; and

(v) Issue and cancel certificates (when requested in writing by the
stockholder); and

(vi) Perform such other duties as the Fund may reasonably request from
time to time.

(c) Purchase of Shares. PFPC shall issue and credit an account of an
investor with the appropriate number of Shares, in the manner described in the
Fund's prospectus, once it receives:

(i) A purchase order;

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<PAGE>

(ii) Proper information to establish a shareholder account; and

(iii) Confirmation of receipt or crediting of funds for such order to
the Fund's custodian.

(d) Redemption of Shares. PFPC shall redeem Shares only if that function is
properly authorized by the certificate of incorporation or resolution of the
Fund's Board of Directors. Shares shall be redeemed and payment therefor shall
be made in accordance with the Fund's prospectus, when the recordholder tenders
Shares in proper form and directs the method of redemption. If Shares are
received in proper form, Shares shall be redeemed before the funds are provided
to PFPC from the Fund's custodian (the "Custodian"). If the recordholder has not
directed that redemption proceeds be wired, when the Custodian provides PFPC
with funds, the redemption check shall be sent to and made payable to therecord
holder, unless:

(i) The surrendered certificate is drawn to the order of an assignee
or holder and the transfer authorization is signed by the
recordholder; or

(ii) Transfer authorizations are signed by the recordholder when Shares
are held in book-entry form.

When a broker-dealer notifies PFPC of a redemption desired by a customer, and
the Custodian provides PFPC with funds, PFPC shall prepare and send the
redemption check to the broker-dealer and made payable to the broker-dealer on
behalf of its customer.

(e) Dividends and Distributions. Upon receipt of a resolution of the Fund's
Board of Directors authorizing the declaration and payment of dividends and
distributions, PFPC shall issue dividends and distributions declared by the Fund
in Shares, or, upon shareholder elections, pay such dividends and distributions
in cash, if provided for in the Fund's prospectus. Such issuance or payment, as
well as payments upon redemption as described above, shall be made after
deduction and payment of the required amount of funds in accordance with any
applicable tax laws or other laws, rules or regulations. PFPC shall prepare and
mail to the Fund's shareholders such tax forms and other information, or
permissible substitute notice, relating to dividends and distributions paid by
the Fund as are required to be filed and mailed by applicable law, rule or
regulation. PFPC shall prepare, maintain and file with the IRS and other
appropriate taxing authorities reports relating to all dividends above a
stipulated amount paid by the Fund to its shareholders as required by tax or
other law, rule or regulation.

(f) Shareholder Account Service.

(i) PFPC shall offer to arrange, in accordance with the prospectus,
for issuance of Shares obtained through:

- Any pre-authorized check plan; and

- Direct purchases through broker wire orders, checks and
applications.

(ii) PFPC shall offer to arrange, in accordance with the prospectus,
for a shareholder's:

- Exchange of Shares for shares of another fund with which
the Fund has exchange privileges;

- Automatic redemption from an account where that shareholder
participates in an automatic redemption plan; and/or

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<PAGE>

- Redemption of Shares from an account with a checkwriting
privilege.

(g) Communications to Shareholders. Upon timely Written Instructions, PFPC
shall address and mail all communications by the Fund to its shareholders,
including:

(i) Reports to shareholders;

(ii) Confirmations of purchases and sales of Fund shares;

(iii) Monthly or quarterly statements;

(iv) Dividend and distribution notices;

(v) Prospectus and Proxy material; and

(vi) Tax form information.

In addition, PFPC will receive and tabulate the proxy cards for the
meetings of the Fund's shareholders.

(h) Records. PFPC shall maintain records of the accounts for each
shareholder showing the following information:

(i) Name, address and United States Tax Identification or Social
Security number;

(ii) Number and class of Shares held and number and class of Shares for
which certificates, if any, have been issued, including
certificate numbers and denominations;

(iii) Historical information regarding the account of each shareholder,
including dividends and distributions paid and the date and price
for all transactions on a shareholder's account;

(iv) Any stop or restraining order placed against a shareholder's
account;

(v) Any correspondence relating to the current maintenance of a
shareholder's account;

(vi) Information with respect to withholdings; and

(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.

(i) Lost or Stolen Certificates. PFPC shall place a stop notice against any
certificate reported to be lost or stolen and comply with all applicable federal
regulatory requirements for reporting such loss or alleged misappropriation. A
new certificate shall be registered and issued only upon:

(i) The shareholder's pledge of a lost instrument bond or such other
appropriate indemnity bond issued by a surety company approved by
PFPC; and

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<PAGE>

(ii) Completion of a release and indemnification agreement signed by
the shareholder to protect PFPC and its affiliates.

(j) Shareholder Inspection of Stock Records. Upon a request from any Fund
shareholder to inspect stock records, PFPC will notify the Fund and the Fund
will issue instructions granting or denying each such request. Unless PFPC has
acted contrary to the Fund's instructions, the Fund agrees and does hereby,
release PFPC from any liability for refusal of permission for a particular
shareholder to inspect the Fund's stock records.

(k) Withdrawal of Shares and Cancellation of Certificates. Upon receipt of
Written Instructions, PFPC shall cancel outstanding certificates surrendered by
the Fund to reduce the total amount of outstanding shares by the number of
shares surrendered by the Fund.

(l) Reports and Information. PFPC shall furnish the Fund with the following
reports:

(i) Reports as to the number of Shares sold in each state or other
jurisdiction, and

(ii) Such periodic and special reports and such other information,
including statistical information concerning stockholder accounts as
the Fund may reasonably request.

PFPC shall furnish to the Fund's Investment Adviser, Administrator and
Custodian and other persons providing services to the Fund with such information
as they may reasonably request in connection with the performance of their
respective duties and obligations with respect to the Fund.

15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by PFPC on sixty (60) days' prior written notice to
the other party.

16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809, (b) if to the Fund, c/o Pax World
Management Corp., 222 State Street, Portsmouth, NY 03801, with a copy to Bresler
Goodman and Unterman, LLP, 521 Fifth Avenue, New York, NY 10175, Attention: Lee
D. Unterman, Esq. and Kevin J. Lake, Esq., or (c) at such other address as shall
have been provided by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered.

17. Amendments. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.

18. Delegation; Assignment. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary or PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the 1940 Act
and the rules and regulations of the SEC thereunder and with this Agreement; and
(iii) PFPC and such delegate (or assignee) promptly provide such information as
the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation (or assignment), including (without limitation) the
capabilities of the delegate (or assignee). Except as provided above, this
Agreement and the rights and duties of PFPC hereunder may not be assigned
without the prior written consent of the Fund.

-8-
<PAGE>

19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

20. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.

21. Miscellaneous.

(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.

(b) Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.

(c) Governing Law. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of conflicts
of law.

(d) Partial Invalidity. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.

(e) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.

(f) Facsimile Signatures. The facsimile signature of any party this
Agreement shall constitute the valid and binding execution hereof by such party.

(g) Internet Access Services. PFPC shall provide to the Fund the internet
access services as set forth on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

PFPC INC.

By:
--------------------------------

Title:_____________________________

PAX WORLD HIGH YIELD FUND, INC.

By:
--------------------------------
Thomas W. Grant
President

-9-
<PAGE>

Authorized Persons Appendix

Name (Type) Signature

- ----------------------------------- -----------------------------------

-10-

Exhibit 8(b)

____________, 1999

PAX WORLD HIGH YIELD FUND, INC.

Re: Transfer Agency Services Fees

Dear Sir/Madam:

This letter constitutes our agreement with respect to compensation to be
paid to PFPC INC. ("PFPC") under the terms of a Transfer Agency Services
Agreement, between PAX WORLD HIGH YIELD FUND, INC. (the "Fund") and PFPC, dated
__________, 1999 (the "Agreement"). Pursuant to Paragraph 11 of that Agreement,
and in consideration of the services to be provided to the Fund, you will pay
PFPC certain fees and reimburse PFPC for certain out-of-pocket expenses incurred
on behalf of the Fund, as follows:

1) Account Fee:

Annual, Semi-Annual Dividend: $10.00 per account per annum
Quarterly Dividend: $12.00 per account per annum
Monthly Dividend: $15.00 per account per annum
Daily Accrual Dividend: $18.00 per account per annum

Inactive Account: $ .30 per account per month

Checkwriting: $ 1.85 per account with checkwriting per annum
$ .10 per check transaction (non-return checks)

$12.50 each stop payment*
$15.00 each non-sufficient funds*
$ 2.50 each check copy*

* May be paid by shareholder.

Fees shall be calculated and paid monthly based on one-twelfth (1/12th) of
the annual fee. An inactive account is defined as having a zero balance
with no dividend payable. Inactive accounts are purged annually after
year-end tax reporting.

2) Monthly Minimum Fee:

$2,500, exculsive of transaction charges, FundSERV and Networking charges,
and out-of-pocket expenses.

3) Transaction Charges:

Master/Omnibus Account $1.00 per purchase/redemption
Wire order desk: $4.00 per purchase/redemption
New Account Opening: $ .40 per account (electronic interface)

$5.00 per account (paper)

12b-1 Calculation: $ .25 per account per cycle

-11-
<PAGE>

4) FundSERV/Networking:

PNC System Access Charges(1):

NSCC FundSERV
Transaction fees: $ .25 per transaction per month

NSCC Networking: $500.00 one time setup charge per fund family

Commission Settlement: $500.00 one time setup charge per fund family

Mutual Fund Profile ( Phase 1)
Base fee: $125.00 one time setup fee per fund family
Ongoing fee: $ 10.00 per month per fund/class

Note: NSCC will deduct is monthly fee on the 15th of each month from PFPC's
cash settlement that day. PFPC will include these charges on its next bill as
out-of-pocket expenses.

(1) Plus: out-of-pocket expenses for settlement; wire charges; etc.

5) Additional Out-of-Pocket Expenses

a. Toll-free lines (if required)
b. Forms, envelopes, checks, checkbooks
c. Postage (bulk, pre-sort, first-class current prevailing rates)
d. Federal Express, delivery, courier services, mailgrams
e. Hardware/phone lines for data transmissions and remote terminal(s) (if
required)
f. Data transmissions: $20.00 per transmission, per end point
g. Microfiche/microfilm
h. Wire fee for receipt: $10.00 per domestic wire
$15.00 per international wire

Wire fee for disbursement: $15.00 per domestic/international wire
i ACH Transaction charge: $ .08 per item
j. Mailing fee: Approximately $.08 per item, standard inserts $.015 each
k. Cost of proxy solicitation, mailing and tabulation:
Processing $350.00 base fee
$ .30 per proxy issued
$100.00 plus travel expenses for judge of elections
Postal and Federal Express as incurred
l. Certificate issuance fee: $2.00 per certificate, any additional
reports/services to be negotiated
m. Record retention storage
n. "B"/"C" notice mailing and IRS levies: $3.00 per item
o. Locating lost shareholders in anticipation of escheating: $7.50 per
name
p. Consolidated statements: $200.00 setup plus $.20 per page, per
production
q. Sales tracking system interfaces: negotiated time and material
r. Fulfillment
s. Audio Response System - $500.00 per month base and $166.67 maintenance
t. Creation of user tapes: $100.00 per occurrence
u. Labels: $.06 each; $100.00 minimum
v. Reruns for bad price, dividend factors, etc.: time and material cost

-12-
<PAGE>

w. Ad hoc reports: Standard $.01 per record processed plus $100.00 set up
fee
x. Individual state tax filing
y. PC Fax: $5.00 per fax
z. Retroactive record dates $100.00 plus $.025 per account
aa. Development/programming cost: negotiated time and material
bb. Conversion/deconversion expenses: to be determined
cc. Disaster recovery (as incurred)
dd. Travel expenses as required
ee. Training expenses as required ($75.00 per hour)
ff. Other services - Must be defined and then will be quoted such as:
401k Administration Interfaces
SEP/IRS and Simple IRA
Payroll Contribution Plans

6) Shareholder Expenses (Which May be Assumed by the Fund):

a. IRA/Keough Processing: $10.00 per account per annum
$ 5.50 new account set-up fee
$ 2.50 per distribution
$25.00 per transfer in or transfer out

b. Exchange Fee $ 5.00

c. Account Transcripts:
(within 3 most recent years) $35.00 each
(more than 3 years) $50.00 each

d. Returned purchase checks $20.00 each

e. Lost Certificate bonding $35.00 service charge and replacement
value charged by the Insurance Company at
the prevailing rate.

f. Federal express charges if
requested by shareholder: $15.00

g. Wire fee for disbursement
if requested by shareholder: $15.00

7) Internet Access Service Charges:

a. One-time Setup Fee $20,000 per fund family

b. Monthly Fee

One-year contract $ 4,600 per month
Two-year contract $ 2,800 per month
Three-year contract $ 2,200 per month

c. Transaction Charges $ 5.00 per transaction (Waived during the first
six months of service)

-13-
<PAGE>

d. Out-of-Pocket Expenses

Out-of-pocket expenses will be billed as they are incurred.

e. Activity Charges $ 5.00 per hit (Tentative: to be discussed with
the Fund before implementation no sooner than
six months from the date hereof.)

8) Miscellaneous

In the event the Fund terminates the Internet Access Services before three
months have elapsed from the set-up date, the Fund will pay to PFPC promptly any
outstanding balance of the setup fee. The monthly fee for Internet Access
Services of $2,200 per month represents a discounted rate, based on the parties'
assumption that the Internet Access Services will be provided by PFPC to the
Fund for three years. In the event that the Fund terminates sooner, the Fund
shall promptly pay to PFPC the difference between the monthly fee that would
have applied for the actual time/period for which the services were provided and
$2,200 per month.

Any fee or out-of-pocket expenses not paid within 30 days of the date of
the original invoice will be charged a late payment fee of 1% per month until
payment of the fees are received by PFPC.

If during the next three years, PFPC is removed from the Transfer Agency
Services Agreement referenced above, the Fund shall pay any costs of time and
material associated with the deconversion and PFPC will recoup 100% of the fees
waived during the first year.

The fee for the period from the date hereof until the end of the year shall
be prorated according to the proportion which such period bears to the full
annual period.

If the foregoing accurately sets forth our agreement and you intend to be
legally bound thereby, please execute a copy of this letter and return it to us.

Very truly yours,

PFPC INC.

By:
------------------------------
Title:

ACCEPTED:

PAX WORLD HIGH YIELD FUND, INC.

By:
----------------------------
Title:

-14-

Exhibit 8(c)

___________, 1999

PAX WORLD HIGH YIELD FUND, INC.

Re: Transfer Agency Services Fee Waiver

Dear Sir/Madam:

PFPC Inc. ("PFPC") agrees to waive certain fees under a Transfer Agency
Services Agreement dated _________, 1999 between PFPC and Pax World High Yield
Fund, Inc. (the "Fund") as follows: for the first two months of the Fund's
operations PFPC shall waive 100% of its monthly minimum fee (excluding account
charges, transaction charges, internet access service charges, miscellaneous
fees and out-of-pocket costs) to the extent the minimum monthly fee is
applicable; thereafter, PFPC's minimum monthly fee shall be charged in
increments of 10% per month. Thus, during the third calendar month of
operations, the Fund will pay 10% of the minimum fee rates; 20% during the
fourth month; 30% during the fifth month; etc.; and 100% during the twelfth
month and thereafter.

Very truly yours,

PFPC INC.

By:
-------------------------------
Title:____________________________

Acknowledged:

PAX WORLD HIGH YIELD FUND, INC.

By:
-------------------------------
Title:____________________________

-15-

Exhibit 13

PAX WORLD HIGH YIELD FUND, INC.

Distribution and Service Plan

Introduction

Pax World High Yield Fund, Inc. (the "Fund") is engaged in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Investment Company Act").

The Distribution and Service Plan (the "Plan") set forth below, which is
designed to conform to the requirements of Rule 12b-1 under the Act and Rule
2830 of the Rules of Conduct of the National Association of Securities Dealers,
Inc. (the "NASD"), has been adopted by the Fund.

The purpose of the Plan is to create incentives to qualified broker-dealers
and their account executives to provide distribution assistance to their
customers who are investors in the Fund, to defray the costs and expenses
associated with the preparation, printing and distribution of prospectuses and
sales literature and other promotional and distribution activities and to
provide for the servicing and maintenance of shareholder accounts. Expenditures
under this Plan by the Fund for Distribution Activities (defined below) are
primarily intended to result in the sale of shares of the Fund within the
meaning of paragraph (a)(2) of Rule 12b-1 promulgated under the Investment
Company Act.

A majority of the Board of Directors of the Fund, including a majority of
those Directors who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), have determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will benefit the Fund and its shareholders.

The Plan

The material aspects of the Plan are as follows:

1. Service and Distribution Activities. The Fund shall engage qualified
broker-dealers and financial institutions to distribute shares of the Fund and
to provide personal service and/or maintain shareholder accounts using their
distribution networks, including sales personnel and branch office and central
support systems. Services provided and activities undertaken to distribute
shares of the Fund are referred to herein as "Distribution Activities"; services
provided and activities undertaken to provide personal service and/or maintain
shareholder accounts are referred to herein as "Service Activities".

2. Payment of Service Fee. The Fund may pay up to .25 of 1% per annum of
the average daily net assets of the shares of the Fund as compensation for
providing Service Activities. The Fund shall calculate and accrue daily amounts
payable hereunder and shall pay such amounts monthly or at such other intervals
as the Board of Directors may determine.

3. Payment for Distribution Activities. As compensation for the performance
of Distribution Activities, the Fund may pay a distribution fee, together with
the service fee (described in Section 2 hereof), of up to .35 of 1% per annum of
the average daily net assets of the shares of the Fund. The Fund shall calculate
and accrue daily amounts payable hereunder and shall pay such amounts monthly or
at such other intervals as the Board of Directors may determine. Amounts payable
under the Plan shall be subject to the limitations of Rule 2830 of the Rules of
Conduct of the NASD.

<PAGE>

4. Quarterly Reports; Additional Information. An appropriate officer of the
Fund will provide to the Board of Directors of the Fund for review, at least
quarterly, a written report specifying in reasonable detail the amounts expended
for Distribution Activities (including payment of the service fee) and the
purposes for which such expenditures were made in compliance with the
requirements of Rule 12b-1. In addition, such officer will provide to the Board
of Directors of the Fund such additional information as the Board shall from
time to time reasonably request.

5. Effectiveness; Continuation. The Plan shall not take effect until it has
been approved by a vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the shares of the Fund.

If approved by a vote of a majority of the outstanding voting securities
(as defined in the Investment Company Act) of the shares of the Fund, the Plan
shall, unless earlier terminated in accordance with its terms, continue in full
force and effect thereafter for so long as such continuance is specifically
approved at least annually by a majority of the Board of Directors of the Fund
and a majority of the Rule 12b-1 Directors by votes cast in person at a meeting
called for the purpose of voting on the continuation of the Plan.

6. Termination. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Investment Company Act) of the
shares of the Fund.

7. Amendments. The Plan may not be amended to change the combined service
and distribution fees to be paid as provided for in Sections 2 and 3 hereof so
as to increase materially the amounts payable under this Plan unless such
amendment shall be approved by the vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the shares of the Fund.
All material amendments of the Plan shall be approved by a majority of the Board
of Directors of the Fund and a majority of the Rule 12b-1 Directors by votes
cast in person at a meeting called for the purpose of voting on the Plan.

8. Rule 12b-1 Directors. While the Plan is in effect, the selection and
nomination of the Directors shall be committed to the discretion of the Rule
12b-1 Directors.

9. Records. The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Section 4 hereof, for a period of
not less than six years from the date of effectiveness of the Plan, such
agreements or reports, and for at least the first two years in an easily
accessible place.

Dated: ______________, 1999

-2-