[PAX WORLD HIGH YIELD FUND LOGO]
Supplement dated December 22, 2000
to the
Prospectus dated October 8, 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
The following information supplements and supersedes any contrary
information contained in the Prospectus of the Pax World High Yield Fund, Inc.
(the "Fund") dated October 8, 1999, and together with such Prospectus, sets
forth concisely the information about the Fund that a prospective investor ought
to know before investing. Additional information about the Fund has been filed
with the Securities and Exchange Commission in an Amendment dated the date
hereof which supplements and supersedes any contrary information contained in
the Statement of Additional Information of the Fund dated October 8, 1999, 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, telephone number or website noted above. The Securities and Exchange
Commission maintains a web site (http://www.sec.gov) that contains the Statement
of Additional Information and other reports and information regarding the Fund
which have been filed electronically with the Securities and Exchange
Commission.
<PAGE>
RISK / RETURN SUMMARY
The information set forth in the bar chart and table below provides some
indication of the risks of investing in the Fund by showing how the Fund's
returns for the periods 10-8-99 (the date operations commenced) to 12-31-99 and
10-8-99 (the date operations commenced) to 9-30-00 compare with the Merrill
Lynch High Yield Master II Index, a broad measure of market performance. Past
performance is not necessarily an indication of how the Fund will perform in the
future.
[RISK / RETURN BAR CHART]
-2.46%* -0.17%*
10-8-99 to 12-31-99 10-8-99 to 9-30-00
(cumulative) (cumulative)
HIGHEST & LOWEST RETURN QUARTER - SINCE INCEPTION TO 9-30-00*
2nd quarter 2000: 1.70%
1st quarter 2000: -0.93%
RISK/RETURN TABLE*
PAX WORLD HIGH YIELD FUND* MERRILL LYNCH HIGH YIELD
MASTER II INDEX
10-8-99 to 12-31-99
(cumulative) -2.46% 1.58%
10-8-99 to 9-30-00
(cumulative) -0.17% 1.22%
*Total return for the periods 10-8-99 (the date operations commenced) to
12-31-99 and 10-8-99 (the date operations commenced) to 9-30-00 is not
annualized. Shares of the Fund that are redeemed within six (6) months of
purchase are subject to a one percent (1.0%) contingent deferred sales charge
that is not reflected in the above bar chart and tables. The returns shown in
the above bar chart and tables would be less if such contingent deferred sales
charges were included.
-2-
<PAGE>
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)(2)..............1.0%
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)........................................0%
Exchange Fees (as a percentage of average net assets)..........0%
FUND NET OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
(expenses that are deducted from Fund assets)(3)(4):
<TABLE>
<CAPTION>
Period October 8, 1999
(the date operations
Six Months Ended commenced) to
June 30, 2000(4) December 31, 1999(4)
<S> <C>
Management Fee......................................0.00% 0.00%
Distribution and/or Service (12b-1) Fees............0.25% 0.25%
Other Expenses......................................0.66% 1.76%
Total Fund Net Operating Expenses (3)......0.91% 2.01%
</TABLE>
(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.
(2) In general, the Fund imposes a contingent deferred sales charge
of one percent (1%) for shares redeemed within six (6) months of
purchase. In some cases, however, sales are not subject to a
contingent deferred sales charge, as more fully described in the
Fund's Prospectus and Statement of Additional Information.
(3) Total expenses, net of expenses assumed by the Adviser.
(4) The percentages set forth below have been annualized for the period
commencing on October 8, 1999 (the date operations commenced) and
ending on December 31, 1999 and the six-month period ended June 30,
2000.
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
incurred for the year ended December 31, 1999 and the six-month period ended
June 30, 2000, respectively.
-3-
<PAGE>
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 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 5 YEARS 10 YEARS
$150 $466 $803 $1,754
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.
FINANCIAL HIGHLIGHTS
The following Financial Highlights Table is intended to help you
understand the Fund's financial performance for the period October 8, 1999 (the
date operations commenced) to December 31, 1999 and for the six months ended
June 30, 2000. Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). The information relating to the period October 8,
1999 (the date operations commenced) to December 31, 1999 has been audited by
Pannell Kerr Forster PC, whose report, along with the Fund's financial
statements, are included in the Statement of Additional Information, a copy of
which is available without charge upon request by writing to the Fund at 222
State Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729
(toll-free).
The following per share data, ratios and supplemental data have been
derived from information provided in the financial statements and the Fund's
underlying financial records.
1. PER SHARE COMPONENTS OF THE NET CHANGE DURING THE PERIOD IN NET ASSET
VALUE (BASED UPON AVERAGE NUMBER OF SHARES OUTSTANDING)
<TABLE>
<CAPTION>
Six Months Period October 8, 1999
Ended (the date operations
June 30, 2000 commenced) to
(Unaudited) December 31, 1999
-------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period................. $9.67 $10.00
----- ------
Income from investment operations
Investment income - net..................... .418 .093
Net realized and unrealized (loss)
on investments........................ (.350) (.330)
----- ------
Total from investment operations............ .068 (.237)
----- ------
Less distributions
Dividends from investment income, net....... .418 .093
----- -----
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Six Months Period October 8, 1999
Ended (the date operations
June 30, 2000 commenced) to
(Unaudited) December 31, 1999
-------------- ----------------------
<S> <C> <C>
Net asset value, end of period....................... $9.32 $9.67
----- -----
2. TOTAL RETURN..................................... .75% (2.46)%
3. RATIOS AND SUPPLEMENTAL DATA
Ratio of total expenses to average
net assets (A)(B)..................... .91% 2.01%
Ratio of investment income - net to
average net assets (A)................ 9.13% 6.40%
Portfolio turnover rate..................... 37.16% 7.10%
Net assets, end of period ('000s)........... $8,042 $2,914
Number of capital shares outstanding,
end of period ('000s)................. 862 301
</TABLE>
(A) These ratios have been annualized for the six months ended June 30,
2000 and the period ended December 31, 1999.
(B) This ratio is based upon total expenses, including the gross
amount of custodian fees (before being reduced pursuant to an
expense offset arrangement), net of expenses assumed by the
Adviser.
ADVISER
Pax World Management Corp., 222 State Street, Portsmouth, NH 03801-3853
(the "Adviser") is the adviser to the Fund. As of December 31, 1999, the Adviser
had over $1,130,000,000 in assets under management by virtue of serving as the
adviser to Pax World Balanced Fund, Inc. ("Pax World Balanced Fund"), Pax World
Growth Fund, Inc. ("Pax World Growth Fund"), the Fund and 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 "Pax
World Money Market Fund"). The Adviser has no clients other than the Pax World
Balanced Fund, the Pax World Growth Fund, the Fund and the Pax World Money
Market Fund, but may undertake to advise other clients in the future.
The aggregate fees incurred by the Fund and payable to the Adviser for the
most recent fiscal year and the period from January 1, 2000 to September 30,
2000 was $2,083 and $43,041, respectively, although all of such fees were
assumed by the Adviser.
The Adviser has 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. The Adviser was required
to supply and assume a total of $23,310 for such services for the most recent
fiscal year and $213,740 for such services for the period from January 1,
2000 to September 30, 2000.
-5-
<PAGE>
DISTRIBUTION
The Fund maintains a distribution expense plan (the "Plan") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, 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. Amounts
incurred by the Fund under the plan for clerical, advertising, printing, postage
and sales expenses (travel, telephone and sales literature) (i) for the most
recent fiscal year totaled approximately $14,273, of which $10,154 was assumed
by the Adviser leaving a net of $4,119 which was paid by the Fund, and (ii) for
the period from January 1, 2000 to September 30, 2000 totaled approximately
$69,207, of which $52,006 was assumed by the Adviser leaving a net of $17,201
which was paid by the Fund.
SHAREHOLDER GUIDE
HOW TO EXCHANGE YOUR SHARES
As a shareholder of the Fund, you have an exchange privilege with the Pax
World Balanced 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, other than the contingent deferred sales change imposed by the Fund with
respect to shares of the Fund sold within six months of purchase in exchange of
shares of the Pax World Money Market Fund, 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 each new Pax
World mutual fund.
-6-
<PAGE>
[PAX WORLD HIGH YIELD FUND LOGO]
Supplement dated December 22, 2000
to the
Statement of Additional Information dated October 8, 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
The following information supplements and supersedes any contrary
information contained in the Statement of Additional Information of the Pax
World High Yield Fund, Inc. (the "Fund") dated October 8, 1999, is not a
prospectus, and should be read in conjunction with the Fund's Prospectus dated
October 8, 1999, as amended, 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 1-800-767-1729, 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.
-7-
<PAGE>
MANAGEMENT OF THE FUND
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>
-------------------------------------------------------------------------------------------------------------------
Name, Address and Age Position with the Fund Principal Occupation During the Past 5 Years
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carl H. Doerge, Jr. Director (since 1999) Mr. Doerge has been a private investor since
867 Remsen Lane 1995. Prior to that, Mr. Doerge was an
Oyster Bay, NY 11771***; (62) Executive Vice President and Managing Director
of Smith Barney for approximately twenty-four
years. Mr. Doerge is also a member of the Board
of Directors of Pax World Balanced Fund, Inc.
(1998-present), Pax World Growth Fund, Inc.
(1997-present) and the Fund (1999-present).
-------------------------------------------------------------------------------------------------------------------
Thomas W. Grant President; Director Mr. Grant is the Vice Chairman of the Board and
14 Wall Street (since 1999) President of Pax World Balanced Fund, Inc.
New York, NY 10005*/**; (59) (1996-present), as well as the President of Pax
World Growth Fund, Inc. (1997-present), the Fund
(1999-present), Pax World Money Market Fund,
Inc. (1998-present), Pax World Management Corp.
(1996-present), and H. G. Wellington & Co.,
Inc. (1992-present). Mr. Grant has been
associated with H. G. Wellington & Co., Inc.
since 1991 and 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 is a graduate of
the University of North Carolina (BA). Mr.
Grant is also a member of the Board of Directors
of Pax World Balanced Fund, Inc. (1996-present),
Pax World Growth Fund, Inc. (1997-present) and
the Fund.
-------------------------------------------------------------------------------------------------------------------
Anita D. Green Assistant Treasurer Ms. Green is the Director of Social Research
c/o Pax World Management Corp. (since 1999) (1996-present). Ms. Green is also a
222 State Street Co-Treasurer of Pax World Management Corp.
Portsmouth, NH 03801-3853; (35) (1998-present) and Pax World Balanced Fund, Inc.
(1998-present) and an Assistant Treasurer of Pax
World Growth Fund, Inc. (1997-present) and the
Fund (1999-present). From 1990 to 2000, Ms.
Green was the Manager - Shareholder Services
for the Pax World Fund Family and Pax World
Management Corp..
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name and Address Position with the Fund Principal Occupation During the Past 5 Years
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John L. Kidde Director (since 1999) Mr. Kidde is the President of KDM Development
c/o KDM Development Corporation Corporation (1988-present). Mr. Kidde is also a
209 Cooper Avenue, Suite 5-D member of the Board of Directors of Pax World
Upper Montclair, NJ 07043; (66) Growth Fund, Inc. (1997-present) and the Fund
(1999-present).
-------------------------------------------------------------------------------------------------------------------
James M. Large, Jr. Director (since 1999) Mr. Large is the Chairman Emeritus of Dime
c/o Dime Bancorp, Inc. Bancorp, Inc. (1998-present). Prior to that,
589 Fifth Avenue Mr. Large was the Chairman (1995-1997) and Chief
New York, NY 10017***; (68) Executive Officer (1995-1996) of Dime Bancorp,
Inc. and the Chairman and Chief Executive
Officer of Anchor Savings Bank / Anchor Bancorp
(1989-1995). Mr. Large is also a member of the
Board of Directors of the Fund (1999-present).
-------------------------------------------------------------------------------------------------------------------
James M. Shadek Treasurer (since 1999) Mr. Shadek is the Treasurer of Pax World Growth
14 Wall Street Fund, Inc. (1997-present) and the Fund
New York, NY 10005*; (48) (1999-present), a Senior Vice President for
Social Research of Pax World Management Corp.
(1996-present) and an Account Executive with H.
G. Wellington & Co., Inc. (1986-present). Mr.
Shadek, together with members of his family,
owns all of the outstanding shares of capital
stock of Pax World Management Corp. and a 26.67%
interest in H. G. Wellington & Co., Inc.
-------------------------------------------------------------------------------------------------------------------
Laurence A. Shadek Chairman of the Board Mr. Shadek is the Chairman of the Board of
14 Wall Street of Directors (since Directors of Pax World Balanced Fund, Inc.
New York, NY 10005*/**; (51) 1999) (1996-present), Pax World Growth Fund, Inc.
(1997-present) and the Fund (1999-present), an
Executive Vice President of Pax World Money
Market Fund (1998-present), the Chairman of the
Board of Pax World Management Corp.
(1996-present), and an Executive Vice-President
of H. G. Wellington & Co., Inc. (1986-present).
Mr. Shadek, together with members of his family,
owns all of the outstanding shares of capital
stock of Pax World Management Corp. and a 26.67%
interest in H. G. Wellington & Co., Inc. Mr.
Shadek has been associated with H. G. Wellington
& Co., Inc. since March 1986 and 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 is a graduate of Franklin &
Marshall College (BA) and New York University,
School of Graduate Business Administration (MBA).
Mr. Shadek is also a member of the Board of
Directors of Pax World Balanced Fund, Inc.
(1996-present), Pax World Growth Fund, Inc.
(1997-present), and the Fund (1999-present).
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name and Address Position with the Fund Principal Occupation During the Past 5 Years
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Janet Lawton Spates Assistant Treasurer Ms. Spates serves as the Operations Manager for
c/o Pax World Management Corp. (since 1999) the Pax World Fund Family and Pax World
222 State Street Management Corp. (1992-present). Ms. Spates is
Portsmouth, NH 03801-3853; (30) also a Co-Treasurer of Pax World Management
Corp. (1998-present) and Pax World Balanced
Fund, Inc. (1998-present) and an Assistant
Treasurer of Pax World Growth Fund, Inc.
(1997-present) and the Fund (1999-present).
-------------------------------------------------------------------------------------------------------------------
Lee D. Unterman Secretary (since 1999) Mr. Unterman serves as the Secretary of Pax
c/o Kurzman Karelsen & Frank, LLP World Balanced Fund, Inc. (1997-present), Pax
230 Park Avenue World Growth Fund, Inc. (1997-present) and the
New York, NY 10169; (50) Fund (1999-present). Mr. Unterman is a partner
with the law firm of Kurzman Karelsen & Frank,
LLP (2000-present) and was a partner at the law
firms of Bresler, Goodman & Unterman, LLP
(1997-2000) and Broudy & Jacobson (1988-1997).
-------------------------------------------------------------------------------------------------------------------
Esther J. Walls Director (since 1999) Ms. Walls is director of Pax World Balance Fund,
Apartment 29-J Inc. (1981-present) and the Fund
160 West End Avenue (1999-present). In addition, Ms. Walls was
New York, NY 10023; (74) Associate Director of Libraries, State
University of New York, Stony Brook, Long
Island, NY (1974-1990).
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* Designates an "Interested" officer or director, as defined in the Investment
Company Act, by reason of his or her affiliation with Pax World Management
Corp.
** 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.
To the knowledge of the Fund, no person owns beneficially five percent
(5%) or more of the outstanding Common Stock of the Fund (except the Fund's
adviser, Pax World Management Corp. (the "Adviser") which owned 44.76% of the
issued and outstanding shares of the Common Stock of the Fund as of December 5,
2000). To the knowledge of the Fund, all officers and directors of the Fund as
a group owned less than one percent (1%) of the outstanding Common Stock of the
Fund as of November 30, 2000.
-10-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Pension or Estimated Annual Total Compensation
Position Compensation from Retirement Benefits Benefits upon from Fund and Fund
Fund (estimated for Accrued As Part of Retirement Complex Paid to
the period from the Fund Expenses Directors (estimated
date hereof through for the period from
12/31/00) the date hereof
through 12/31/00)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Carl H. Doerge, Jr.,
Director $3,000 ----- ----- $16,000 (3)
-------------------------------------------------------------------------------------------------------------------
Thomas W. Grant,
President and Director $1,200 ----- ----- $5,300 (3)
-------------------------------------------------------------------------------------------------------------------
Anita D. Green,
Assistant Treasurer ----- ----- ----- -----
-------------------------------------------------------------------------------------------------------------------
John L. Kidde,
Director $4,000 ----- ----- $9,000 (2)
-------------------------------------------------------------------------------------------------------------------
James M. Large, Jr.,
Director $4,000 ----- ----- $4,000 (1)
-------------------------------------------------------------------------------------------------------------------
James M. Shadek,
Treasurer ----- ----- ----- -----
-------------------------------------------------------------------------------------------------------------------
Laurence A. Shadek,
Chairman of the Board
and Director $1,200 ----- ----- $5,300 (3)
-------------------------------------------------------------------------------------------------------------------
Janet Lawton Spates,
Assistant Treasurer ----- ----- ----- -----
-------------------------------------------------------------------------------------------------------------------
Lee D. Unterman,
Secretary ----- ----- ----- -----
-------------------------------------------------------------------------------------------------------------------
Esther J. Walls,
Director $4,000 ----- ----- $10,000 (2)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The information set forth in the table, above, represents actual amounts
for the period commencing on January 1, 2000 up to but not including the date
hereof, and estimated amounts for the period commencing on the date hereof and
ending on December 31, 2000 with respect to Pax World Balanced Fund, Inc. (the
"Pax World Balanced Fund"), Pax World Growth Fund, Inc. (the "Pax World Growth
Fund"), the Fund and 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 "Pax World Money Market Fund"). The
parenthetical number represents the number of investment companies (including
the Fund) from which such person receives compensation that are considered part
of the same Fund Complex as the Fund, because, among other things, they have a
common investment adviser or sub-adviser.
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. Other than the foregoing
amounts, none of the members
-11-
<PAGE>
of the Board of Directors of the Fund receives compensation from the Fund for
services performed as members of the Board of Directors of the Fund. Director's
fees paid by the Fund in 2000 (actual amounts from January 1, 2000 up to but not
including the date hereof and estimated amounts from the date hereof to December
31, 2000) and travel expenses reimbursed by the Fund in 2000 (actual amounts
from January 1, 2000 up to but not including the date hereof and estimated
amounts from the date hereof to December 31, 2000) to members of the Board of
Directors of the Fund aggregated approximately $17,900 and $20, respectively.
INVESTMENT ADVISORY AND OTHER SERVICES
Pax World Management Corp., 222 State Street, Portsmouth, NH 03801-3853
(the "Adviser") is the adviser to the Fund. 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, 1999, the Adviser had over $1,130,000,000 in assets under
management by virtue of serving as the adviser to the Pax World Balanced Fund,
the Pax World Growth Fund, the Fund and the Pax World Money Market Fund. The
Adviser has no clients other than the Pax World Balanced Fund, the Pax World
Growth Fund, the Fund and the Pax World Money Market Fund, but may undertake to
advise other clients in the future.
The Adviser has 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. The Adviser was required
to supply and assume a total of $23,310 for such services for the most recent
fiscal year and $213,740 for such services for the period from January 1, 2000
to September 30, 2000.
The Advisory Agreement was adopted on June 15, 1999 and approved on June
8, 2000 by the Board of Directors of the Fund, 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.
The approximate amount of the advisory fees of the Fund for the period
commencing on October 8, 1999 (the date operations commenced) and ending on
December 31, 1999 were $2,083 and for the period commencing on January 1, 2000
and ending on September 30, 2000 were $43,041.
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. The Plan was adopted on June 15,
1999 and approved on June 8, 2000 by the Board of Directors of the Fund,
including a majority 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"), at a
meeting called for the purpose of voting on such Plan. During the most
-12-
<PAGE>
recent fiscal year, amounts paid by the Fund under the Plan for clerical,
advertising, printing, postage and sales expenses (travel, telephone and sales
literature) totaled $14,273: advertising - $2,263; printing and postage - $0;
and sales and related expenses - $12,010; and for the period from January 1,
2000 to September 30, 2000, amounts paid by the Fund under the Plan for such
expenses totaled $69,207: advertising - $14,141; printing and postage - $4,083;
and sales and related expenses - $50,983.
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
purchaser of Fund shares, provided, however, that orders are not binding on the
Fund until accepted by the Fund as principal. The Distribution Agreement was
adopted on June 15, 1999, and approved on June 8, 2000 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.
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. For the period commencing on October 8, 1999
(the date operations commenced) and ending on December 31, 1999, brokerage
commissions amounted to approximately $9,412; for the period commencing on
January 1, 2000 and ending on September 30, 2000, brokerage commissions amounted
to approximately $43,182.
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
that the Fund may utilize to execute security transactions. Brokerage
commissions paid by the Fund to the Distributor for the period commencing on
October 8, 1999 (the date operations commenced) and ending on December 31, 1999
totaled $1,044 (11.10% of the total commissions for such period); and brokerage
commissions paid by the Fund to the Distributor for the period commencing on
January 1, 2000 and ending on September 30, 2000 totaled $2,420 (5.60% of the
total commissions for such period).
-13-
<PAGE>
PURCHASE AND EXCHANGE
OF FUND SHARES
EXCHANGE OF SHARES
As a shareholder of the Fund, you may exchange your shares of the Fund for
shares of the Pax World Balanced 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, other than the contingent deferred sales change imposed
by the Pax World High Yield Fund with respect to shares of the Pax World High
Yield Fund sold within six months of purchase in exchange of shares of the Pax
World Money Market Fund, 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 each new Pax World mutual fund.
-14-
<PAGE>
Schedule of Investments (Unaudited)
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, NUMBER
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES VALUE
PREFERRED STOCKS AND WARRANTS: 13.2%
HEALTH CARE: 3.3%
Health Care Property Investors, Inc.
8.60% Preferred Series C .......................... 14,000 $ 268,625
----------
INDUSTRIAL: 1.0%
Federal-Mogul Financing Trust 7.00%
Convertible Preferred ............................. 3,500 80,500
----------
LODGING/LEISURE: 2.2%
Host Marriott Corp. 10.00% Preferred
Class B ........................................... 4,000 88,000
Host Marriott Corp. Financial Trust
6.75% Convertible Preferred ....................... 2,700 89,775
----------
177,775
----------
REAL ESTATE: 1.6%
Equity Residential Properties Trust
Preferred Sh. Ben. Interest
Series F 9.65% .................................... 5,300 126,041
----------
TECHNOLOGY: 0.1%
Metricom, Inc. Warrants expiring
2/15/2010 ......................................... 100 2,000
----------
TELECOMMUNICATIONS: 5.0%
IXC Communications, Inc.
Series B 12.50% Preferred ......................... 400 405,000
----------
TOTAL PREFERRED STOCKS AND WARRANTS ................... 1,059,941
----------
CORPORATE BONDS: 83.7%
PRINCIPAL
AMOUNT
APPAREL/TEXTILES: 3.0%
St. John Knits Int'l Senior Subordinated
Note, 12.50%, due July 1, 2009 .................... $250,000 239,375
----------
BROADCASTING/SATELLITE: 4.8%
EchoStar DBS Corp. Senior Note,
9.375%, due February 1, 2009 ...................... 400,000 386,000
----------
-15-
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CORPORATE BONDS, continued
CABLE: 13.0%
Callahan Nordrhein Westfalen Senior
Note 144, 14.00%, due July 15, 2010 ............... $250,000 $ 250,000
Century Communications Corp. Senior
Note, 8.75%, due October 1, 2007 .................. 305,000 278,313
Charter Communications Holding LLC
Senior Note, 8.625%,
due April 1, 2009 ................................. 100,000 88,375
Telewest Communications, Inc
Senior Note 144A, 0/9.25%,
due April 15, 2009 ................................ 390,000 211,575
United Pan Europe Communications
Senior Note, 10.875%,
due August 1, 2009 ................................ 250,000 218,750
----------
1,047,013
----------
CONSUMER PRODUCTS: 5.0%
Sbarro, Inc. Senior Note, 11.00%, due
September 15, 2009 ................................ 150,000 154,125
Windmere Durable Holdings, Inc. Senior
Note, 10.00%, due July 31, 2008 ................... 250,000 246,250
----------
400,375
----------
ENERGY: 1.3%
Veritas DGC, Inc. Senior Note, 9.75%,
due October 15, 2003 .............................. 100,000 101,500
----------
FINANCIAL: 3.0%
Americredit Corp. Senior Subordinated
Note, 9.875%, due April 15, 2006 .................. 250,000 243,750
----------
FOOD/BEVERAGE: 3.3%
International Home Foods, Inc. Senior
Subordinated Note, 10.375%, due
November 1, 2006 .................................. 250,000 267,500
----------
HEALTH CARE: 4.0%
Dynacare, Inc. 10.75%,
due January 15, 2006 .............................. 180,000 166,500
-16-
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CORPORATE BONDS, continued
HEALTH CARE, continued
Invitrogen Corp. Convertible
Subordinated Note 144A, 5.50%,
due March 1, 2007 ................................. $150,000 $ 158,625
----------
325,125
----------
INDUSTRIAL: 8.1%
Federal-Mogul Corp. Note,
7.375%, due January 15, 2006 ...................... 100,000 72,801
Interface, Inc. Senior Subordinated
Note Series B, 9.50%, due
November 15, 2005 ................................. 250,000 218,750
Mail Well, Inc. Subordinated Notes
Convertible, 5.00%,
due November 1, 2002 .............................. 300,000 249,555
Russell Stanley Holdings, Inc. ......................
Subordinated Note Series B, 10.875%,
due February 15, 2009 ............................. 200,000 108,000
----------
649,106
----------
MEDICAL DEVICES/PHARMACEUTICALS: 1.0%
King Pharmaceuticals, Inc. Senior
Subordinated Note, 10.75%, due
February 15, 2009 ................................. 80,000 82,800
----------
REAL ESTATE: 5.4%
Sunrise Assisted Convertible, 5.50%,
due June 15, 2002 ................................. 500,000 431,875
----------
RETAIL: 5.3%
Finlay Fine Jewelry Corp. Senior Note,
8.375%, due May 1, 2008 ........................... 125,000 111,875
Musicland Group, Inc. Senior
Subordinated Note, 9.00%,
due June 15, 2003 ................................. 250,000 228,750
Musicland Group, Inc. Senior
Subordinated Note, 9.875%,
due March 15, 2008 ................................ 100,000 82,500
----------
423,125
----------
-17-
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CORPORATE BONDS, continued
SERVICES/DISTRIBUTORS: 3.1%
Ingram Micro, Inc. Subordinated
Debenture Convertible, 0/5.375%,
due June 9, 2018 .................................. $400,000 $ 150,000
Nationsrent, Inc. Senior Subordinated
Note, 10.375%, due December 15, 2008 .............. 150,000 96,750
----------
246,750
----------
TECHNOLOGY: 5.9%
Apple Computer, Inc. Note, 6.50%,
due February 15, 2004 ............................. 100,000 91,500
Covad Communications Group, Inc. ....................
Senior Note Series B, 12.00%, due
February 15, 2010 ................................. 150,000 117,750
Globix Corp. Senior Note, 12.50%,
due February 1, 2010 .............................. 100,000 82,500
Metricom, Inc. Senior Note, 13.00%,
due February 15, 2010 ............................. 100,000 69,000
PSINet, Inc. Senior Note Series B,
10.00%, due February 15, 2005 ..................... 125,000 115,625
----------
476,375
----------
TELECOMMUNICATIONS: 15.1%
Clearnet Communications, Inc. Senior
Discount Note, 0/14.75%, due
December 15, 2005 ................................. 250,000 259,375
Intermedia Communications, Inc. Senior
Discount Note Series B, 0/11.25%,
due July 15, 2007 ................................. 250,000 197,500
McLeodUSA, Inc. Senior Note, 9.25%,
due July 15, 2007 ................................. 250,000 242,500
Microcell Telecommunications Senior Note
Series B, 0/14.00%, due June 1, 2006 .............. 250,000 231,875
Microcell Telecommunications Senior
Discount Note, 0/12.00%, due
June 1, 2009 ...................................... 250,000 165,625
Nextel Communications, Inc. Senior
Serial Note 144A, 9.375%, due
November 15, 2009 ................................. 125,000 120,000
----------
1,216,875
----------
-18-
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CORPORATE BONDS, continued
UTILITIES: 2.4%
Azurix Corp. Senior Note 144A,
10.75%, due February 15, 2010 ..................... $200,000 $ 193,500
----------
TOTAL CORPORATE BONDS ................................. 6,731,044
----------
NUMBER
OF SHARES
MONEY MARKET SHARES: 4.8%
Pax World Money Market Fund ....................... 389,250 $ 389,250
----------
TOTAL INVESTMENTS: 101.7% ............................. 8,180,235
Cash, receivables and deferred costs less
liabilities: (1.7%) ............................... (138,125)
Net assets: 100% ...................................... $8,042,110
----------
SEE NOTES TO FINANCIAL STATEMENTS
-19-
<PAGE>
Statement of Assets and Liabilities (Unaudited)
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
ASSETS
Investments, at value - note A
Preferred stocks and warrants (cost - $1,064,617) .............. $1,059,941
Bonds (amortized cost - $6,911,216) ............................ 6,731,044
Pax World Money Market Fund (cost - $389,250) .................. 389,250
----------
8,180,235
Cash ............................................................. 144,099
Receivables
Dividends and interest ......................................... 169,992
Reimbursement of expenses from Adviser - note G ................ 8,511
----------
Total assets ................................................. 8,502,837
----------
LIABILITIES
Payables
Investment securities purchased ................................ 424,142
Dividend payable - note A ...................................... 36,585
----------
Total liabilities ............................................ 460,727
----------
Net assets (equivalent to $9.32 per share
based on 862,496 shares of capital stock
outstanding) - note E .................................... $8,042,110
----------
Net asset value, offering price and redemption
price per share ($8,042,110 / 862,496 shares
outstanding) ............................................. $9.32
----------
SEE NOTES TO FINANCIAL STATEMENTS
-20-
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended June 30, 2000
P A X W O R L D High Yield Fund, Inc.
Investment income
Income - note A
Dividends
Pax World Money Market Fund ................ $ 10,745
Other investments .......................... 61,403 $ 72,148
------------
Interest ..................................... 208,255
---------
280,403
Other income ................................. 688
---------
Total income ............................... 281,091
Expenses
Investment advisory fee - note B ............. 21,680
Distribution expenses - note D ............... 56,846
Printing and mailing ......................... 36,318
Legal fees and related expenses - note B ..... 23,146
Custodian fees - note F ...................... 18,966
Audit fees ................................... 10,001
Directors' fees and expenses - note B ........ 9,217
Transfer agent fee ........................... 6,026
Other ........................................ 806
Registration fees ............................ 772
State taxes .................................. 200
------------
Total expenses ............................. 183,978
Less: Fees paid indirectly - note F ....... (2,043)
Expenses assumed by Adviser -
notes B and G ....................... (158,352)
------------
Net expenses ........................ 23,583
---------
Investment income - net .................... 257,508
---------
Realized and unrealized (loss)
on investments - note C
Net realized (loss) on investments ............. (25,414)
Change in unrealized (depreciation) of
investments for the period ................... (179,369)
---------
Net (loss) on investments .................... (204,783)
---------
Net increase in net assets resulting from
operations ................................. $ 52,725
---------
SEE NOTES TO FINANCIAL STATEMENTS
-21-
<PAGE>
Statement of Changes in Net Assets
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
Period
June 15, 1999
(the date of
Six Months incorporation)
Ended to
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Increase in net assets
Operations
Investment income - net ...................... $ 257,508 $ 22,597
Net realized (loss) on investments ........... (25,414) (119)
Change in unrealized (depreciation)
of investments ............................. (179,369) (5,479)
------------ -----------
Net increase in net assets resulting
from operations .......................... 52,725 16,999
Distributions to shareholders from
investment income - net - note A ........... (257,508) (22,597)
Capital share transactions - note E ............ 5,333,251 2,919,240
------------ -----------
Net increase in net assets ................. 5,128,468 2,913,642
Net assets
Beginning of period ............................ 2,913,642 --
------------ -----------
End of period .................................. $ 8,042,110 $ 2,913,642
------------ -----------
SEE NOTES TO FINANCIAL STATEMENTS
-22-
<PAGE>
Notes to Financial Statements (Unaudited)
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Pax World High Yield Fund, Inc. ("Fund"), incorporated in Delaware on June 15,
1999, is a diversified, open-end management investment company registered under
the Investment Company Act of 1940, as amended. The Fund commenced operations on
August 25, 1999 with the issuance of 10,000 shares of capital stock to Pax World
Management Corp., the Fund's Adviser ("Adviser"). Investment operations
commenced October 13, 1999.
All organization costs were borne by the Adviser.
The Fund's policy is to invest in securities of companies producing goods and
services that improve the quality of life and that are not, to any degree,
engaged in manufacturing defense or weapons-related products. Its 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 it is
consistent with the Fund's primary objective. It seeks to achieve this objective
by investing primarily in high yield, fixed income securities rated BBB or lower
by Standard & Poor's Ratings Group or Moody's Investors Service and other fixed
income securities either similarly rated by another major rating service or
unrated securities which are, in the opinion of the Adviser, of comparable
quality.
VALUATION OF INVESTMENTS
Securities listed on any national, regional or local exchange are valued at the
closing prices on such exchanges. Securities listed on the NASDAQ national
market system are valued using quotations obtained from the market maker where
the security is traded most extensively. Valuations for bonds are obtained from
independent pricing services or broker-dealers, which may or may not be managing
underwriters. Shares in money market funds are valued at $1 per share.
INVESTMENT TRANSACTIONS
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses are determined on the identified cost
basis, which is also used for Federal income tax purposes.
-23-
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
INVESTMENT INCOME
Dividend income is recognized on the ex-dividend date. Interest income is
recognized on the accrual basis and includes accretion of discount and
amortization of premiums.
The Fund amortizes purchase price premium and accretes discount on bonds over
the remaining life of the bonds using the effective interest method of
amortization; for callable bonds, the amortization period is to the most likely
call date. Net discount accretion for the six months ended June 30, 2000 and the
period October 13, 1999 (the date investment operations commenced) to December
31, 1999 was $45,844 and $3,883, respectively.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. The repurchase date is usually
within a day or two of the original purchase, although it may extend over a
number of months. The Fund's repurchase agreements will be fully collateralized
at all times by obligations issued or guaranteed by U.S. Government agencies and
instrumentalities (other than the U.S. Treasury) in an amount at least equal to
the purchase price of the underlying securities (including accrued interest
earned thereon). 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. The Fund has
not experienced any such losses. There were no repurchase agreements outstanding
at June 30, 2000.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
substantially all its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions of investment income are accrued daily (based upon each day's
investment income, net) and are paid monthly on the first business day of the
month subsequent to the month of accrual. Shareholders who redeem shares during
a month receive the dividend accrued to the date of redemption.
Distributions of net realized gain on investments, if any, are recorded on the
ex-dividend date. There were no capital gain distributions during the six months
ended June 30, 2000 and the
-24-
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
period June 15, 1999 (the date of incorporation) to December 31, 1999 since
there was a net realized (loss) on investments for the periods.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an Advisory Agreement ("Agreement") between the Fund and the
Adviser, the Adviser furnishes investment advisory services in connection with
the management of the Fund. Under the 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 its investment objectives, 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. In the event that the
average 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 average net assets of the Fund are equal to or in excess of
$5,000,000, the annual investment advisory fee will be 1% of its average daily
net assets on the first $25,000,000 and 3/4% of its average daily net assets in
excess of that amount. The Adviser has agreed to waive the portion of the
advisory fee necessary to offset the amount of the advisory fee payable by Pax
World Money Market Fund, Inc. to the Adviser with respect to any assets of the
Fund which are invested in the Pax World Money Market Fund, Inc.
Two officers, who are also directors of the Fund, are also officers and
directors of the Adviser. An officer of the Fund, who is not a director of the
Fund, is an officer and director of the Adviser. Two other officers of the Fund,
who are not directors of the Fund, are also officers of the Adviser.
The Adviser has 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
-25-
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
incurred in connection with portfolio transactions) which are in excess of 1.5%
of the average daily net asset value of the Fund per annum. The Adviser has
agreed to reduce this percentage to .85% for fiscal year 2000. 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;
(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. The Adviser was required to supply
and assume a total of $157,580 and $23,310 for such services for the six months
ended June 30, 2000 and the period June 15, 1999 (the date of incorporation) to
December 31, 1999. Additionally, the Adviser assumed, on a voluntary basis,
expenses of $772 and $10 for the six months ended June 30, 2000 and the period
June 15, 1999 (the date of incorporation) to December 31, 1999. Reference is
made to note G.
During the six months ended June 30, 2000, the Fund incurred legal fees and
related expenses of $23,146 with Bresler, Goodman & Unterman, LLP, general
counsel for the Fund. Mr. Lee Unterman, a partner with that firm, is Secretary
of the Fund.
All of the Adviser's capital stock is currently owned by four siblings whose
family has an ownership interest in a brokerage firm which the Fund utilizes to
execute security transactions. Brokerage commissions paid to this firm during
the six months ended June 30, 2000 and the period October 13, 1999 (the date
investment operations commenced) to December 31, 1999 totaled $1,331 and $1,044,
respectively (5.7% and 11.1% of total commissions for the respective periods).
The Fund is permitted to invest in the Pax World Money Market Fund, Inc. which
is also managed by the Adviser.
At June 30, 2000, the Adviser owned 425,551 shares of the Fund's capital stock,
49.3% of the shares outstanding on that date.
NOTE C - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investments, excluding short-term
investments, aggregated $7,038,411 and $1,894,180, respectively, for the six
months ended June 30, 2000. There were no U.S. Government agency bonds purchased
or sold during the period.
-26-
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
Net realized gain or loss on sales of investments is determined on the basis of
identified cost. If determined on an average cost basis, the net realized gain
for the six months ended June 30, 2000 would have been approximately the same.
For Federal income tax purposes, the identified cost of investments owned at
June 30, 2000 was $8,365,083. Gross unrealized appreciation and depreciation of
investments aggregated $176,744 and $361,592, respectively, at June 30, 2000,
resulting in net unrealized (depreciation) of $(184,848).
NOTE D - DISTRIBUTION EXPENSES
The Fund maintains a distribution expense plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, 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 (i) up to twenty-five one hundredths of one percent
(.25%) of the average daily net assets of the Fund per annum may be used to pay
for personal service and/or the maintenance of shareholder accounts (service
fee) and (ii) total distribution fees (including the service fee of .25%) may
not exceed thirty-five one hundredths of one percent (.35%) of the average daily
net assets of the Fund per annum. The Plan may be terminated at any time,
without penalty, by (a) the vote of a majority 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 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 would be
discontinued at that time.
-27-
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
NOTE E - CAPITAL AND RELATED TRANSACTIONS
Transactions in capital stock were as follows:
Period
August 25, 1999
Six Months (the date operations
Ended commenced) to
June 30, 2000 December 31, 1999
--------------------- ---------------------
(Unaudited)
Shares Dollars Shares Dollars
------- ---------- ------- ----------
Shares sold .................. 557,995 $5,303,470 301,192 $2,918,506
Shares issued in
reinvestment of
distributions .............. 9,390 87,680 92 890
------- ---------- ------- ----------
567,385 5,391,150 301,284 2,919,396
Shares redeemed .............. (6,157) (57,899) (16) (156)
------- ---------- ------- ----------
Net increase ................. 561,228 $5,333,251 301,268 $2,919,240
------- ---------- ------- ----------
The components of net assets at June 30, 2000(unaudited), are as follows:
Paid-in capital (25,000,000 shares of $1 par value
authorized) .............................................. $ 8,252,491
Undistributed capital (loss) ............................... (25,533)
Net unrealized (depreciation) of investments ............... (184,848)
--------------
Net assets ............................................... $ 8,042,110
--------------
NOTE F - CUSTODIAN BANK AND CUSTODIAN FEES
State Street Bank and Trust Company is the custodian bank for the Fund's assets.
The custodian fees charged by the bank are reduced, pursuant to an expense
offset arrangement, by an earnings credit which is based upon the average cash
balances maintained at the bank. If the Fund did not have such an offset
arrangement, it could have invested the amount of the offset in an
income-producing asset.
-28-
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
NOTE G - EXPENSES ASSUMED BY ADVISER
The Adviser has assumed certain expenses incurred by the Fund, some in
accordance with the Advisory Agreement (note B) and others on a voluntary basis,
as follows:
Expenses assumed by the Adviser in accordance
with the Advisory Agreement ..................................... $157,580
Expenses assumed by the Adviser on a voluntary
basis - registration fees ....................................... 772
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Total expenses assumed by Adviser ................................. $158,352
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The ratio of net expenses (after subtracting the expenses assumed by the Adviser
in accordance with the Advisory Agreement) to average net assets was .85% for
the six months ended June 30, 2000. (The ratio of total expenses to average net
assets which is required disclosure in the financial highlights is based upon
total expenses for the period after subtracting the expenses assumed by the
Adviser but before the reduction of custodian fees for the income earned
pursuant to an expense offset arrangement. This ratio is .91% for the six months
ended of June 30, 2000.)
Reference is made to note B.
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