PAX WORLD FUND
INCORPORATED
----------------
PART A
PROSPECTUS
PROSPECTUS DATED APRIL 22, 1997
PAX WORLD FUND
INCORPORATED
A NO-LOAD BALANCED FUND
222 State Street, Portsmouth, New Hampshire 03801
For shareholder account information: 1-800-372-7827
Portsmouth, N.H. office: 1-603-431-8022
Portsmouth, N.H. office: 1-800-767-1729
The Prospectus sets forth concisely information about the Fund that a
prospective investor ought to know before investing. The Prospectus should be
retained for future reference. A copy of the Annual Report of the Fund
containing a narrative discussion and line chart of Fund performance may be
obtained without charge by writing the Fund or telephoning any of the above
numbers. Additional information about the Fund has been filed with the
Securities and Exchange Commission and is available by writing to the Fund at
the above address without charge. The Statement of Additional Information is
also dated April 22, 1997.
The Fund seeks investments in companies producing life supportive goods and
services and that are not to any degree engaged in manufacturing defense or
weapons-related products. It excludes securities in companies engaged in
military activities, those companies appearing on the Department of Defense's
100 largest contractors list, and other companies contracting with the Defense
Department if 5% or more of gross sales were derived from such contracts. See
page 3, "Social Criteria of Portfolio."
The investment objectives of the Fund are primarily to provide its
shareholders a diversified holding of securities of companies which offer
primarily income and conservation of principal and secondarily possible
long-term growth of capital through investment in common and preferred stocks
and debt securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Some prospective purchasers of Fund shares may be effecting transactions
through a securities broker-dealer which may result in a transaction fee by such
broker-dealer. Such fee would not be incurred if the purchase transaction is
made directly with the Fund.
TABLE OF CONTENTS
Page
Synopsis................................................................... 3
Financial Highlights....................................................... 5
General Description of the Fund............................................ 6
Management of the Fund..................................................... 6
Investment Adviser......................................................... 8
Transfer and Disbursing Agent.............................................. 9
Fund Annual Expenses....................................................... 9
Brokerage Commission Practices............................................. 9
Capital Stock and Other Matters............................................ 9
Shareholder Distributions.................................................. 10
Tax Status................................................................. 10
How to Purchase Shares..................................................... 10
Automatic Investment Plan.................................................. 11
Shareholder Accounts....................................................... 11
Retirement and Other Programs.............................................. 11
Distribution Expense Plan.................................................. 12
How to Redeem Shares....................................................... 12
Voluntary Income Contribution to Pax World Service......................... 13
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).. 0%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)......................................................... 0%
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)..................................... 0%
Redemption Fees (as a percentage of amount redeemed, if applicable).......... 0%
Exchange Fee................................................................. 0%
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fee.......................................................... 0.51%
12b-1 Fees.............................................................. 0.10%
Other Expenses.......................................................... 0.28%
Total Fund Operating Expenses................................................ 0.89%
</TABLE>
Example 1 year 3 years 5 years 10 years
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) redemption at the end of each
time period........................ $8.90 $27.80 $48.27 $107.18
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the fund will bear directly or
indirectly. (See page 12 for information on 12b-1 Plan.)
The 5% return factor in the example is a required amount by government
regulation and does not represent the actual average return made by Pax World
Fund over the past ten years. Nor should the example be considered a
representation of past or future expenses, as actual expenses may be greater or
lesser than those shown.
2
SYNOPSIS
Pax World Fund, Incorporated (Fund) is an open-end, diversified, no-load
mutual fund organized under Delaware law in February 1970. The Fund endeavors
through its investment objectives to make a contribution to world peace through
investment in companies producing life-supportive goods and services. Thus the
Fund has adopted the name Pax World to denote this endeavor. The Fund portfolio
will consist primarily of companies located in the United States.
The policy of this mutual fund is to invest in securities of companies whose
business is essentially directed toward non-military and life-supportive
activities. For example, the Fund seeks to invest in such industries as health
care, education, housing, food, retail, clothing, pollution control, leisure,
utilities and others. The Fund offers both individual and institutional
investors the opportunity to participate in the benefits of owning a diversified
portfolio.
SIGNIFICANT FEATURES
1. NO SALES CHARGE. There is no sales charge of any kind when you purchase
shares of the Fund. This type of investment company is referred to as a
"no-load" fund, and the net asset value of the shares is quoted daily in the
financial pages of most city newspapers, including the Wall Street Journal.
2. INVESTMENT OBJECTIVES. Investment objectives of the Fund are primarily to
provide its shareholders with a diversified holding of securities of companies
which offer primarily income and conservation of principal and secondarily
possible long-term growth of capital through investment in common and preferred
stocks and debt securities. The Fund attempts to maintain a balance of
investments with approximately 60% of its assets in common and preferred stocks
and 40% in bonds or debentures. Texas residents please see p. 14.
3. SOCIAL CRITERIA OF PORTFOLIO. The Fund seeks investments in companies that
are not to any degree engaged in manufacturing defense or weapons-related
products. The Fund excludes from its portfolio securities of companies: (1)
engaged in military activities, defined as follows: (a) appearing on the
Department of Defense's 100 largest contractors list and (b) other companies
contracting with the Department of Defense if 5% or more of their gross sales
were derived from such contracts; (2) engaged in liquor, tobacco, and gambling
industries. In addition, the Fund will seek out companies with fair employment
and pollution control policies and practices, fair employment practices
consistent with the Americans with Disabilities Act, and invest in some
international development. To date, the latter has been limited to bonds of the
International Bank for Reconstruction and Development. See "General Description
of the Fund."
4. OFFERING PRICE. The shares of common stock ($1 par value) are offered at net
asset value. Minimum initial investment is $250, with subsequent investments at
$50. See "How to Purchase Shares."
5. PROFESSIONAL MANAGEMENT. 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. The officers of the Fund are
responsible for the day-to-day operations and the directors for the general
policy of the Fund.
Certain officers/directors of the Fund are officers/directors and
stockholders of the Adviser. See "Investment Adviser."
Further information concerning the performance of the Fund is contained in
the Annual Report which may be obtained without charge.
3
6. DIVERSIFICATION. All investments entail some degree of risk, but risk can be
significantly reduced by diversifying holdings to minimize the impact of the
portfolio of any single investment. By pooling the funds of many investors with
similar investment objectives, the Fund can give each of them an opportunity to
benefit from a broadly diversified portfolio, a benefit ordinarily available
only to investors with substantial capital to invest. See "General Description
of the Fund."
7. NO REDEMPTION CHARGE. Shares of the Fund are redeemable at net asset value
upon request and without charge. Payment for shares redeemed is made by the Fund
within seven days after the date on which the request in proper form is
received. See "How to Redeem Shares."
8. AUTOMATIC REINVESTMENT. The Fund's automatic reinvestment program provides
shareholders with a convenient method of reinvesting any income or capital gains
distributions in additional shares of the Fund at net asset value. See
"Shareholder Distributions."
9. ADVISER COMPENSATION. Computed daily and paid monthly, the fee (on an annual
basis) is 3/4 of 1% of average net assets on the first $25,000,000 and 1/2 of 1%
of average net assets in excess of that figure, payable to Pax World Management
Corp. Fund expenses (other than interest, brokerage commissions, fees, taxes and
distribution expenses under the Rule 12b-1 Plan) over 1 1/2% of average net
assets are reimbursed by the Adviser.
10. RETIREMENT AND OTHER PROGRAMS. The Fund offers investors special programs,
including automatic reinvestment, voluntary withdrawal plan, group investment
plan, automatic monthly investment plan, and tax-sheltered retirement plans such
as IRAs, SEP-IRAs, and 403(b)s. See Retirement and Other Programs, p. 11.
11. PAX WORLD SERVICE. Voluntary contributions may be made, by those with
regular accounts, to Pax World Service which provides financial support to
organizations and projects which encourage international understanding,
reconciliation, and development. See. p. 13.
12. CUSTODIAN BANK. State Street Bank and Trust Company is the custodian bank.
13. TRANSFER AND DISBURSING AGENT. PFPC, Inc. is the transfer and disbursing
agent.
14. AUDITORS. Pannell Kerr Forster, P.C., independent certified public
accountants, are the auditors of the Fund for the fiscal year ended December 31,
1996. Copies of the Annual Report of the Fund may be obtained upon request at no
charge. Shareholders are furnished annual reports of the Fund.
15. DISTRIBUTION EXPENSE PLAN. The Plan provides that the Fund may incur
distribution-related expenses of up to twenty-five hundredths of one percent
(0.25%) per annum of its average daily net assets to finance activity which is
primarily intended to result in the sale of Fund shares. 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 hundreths of one percent (0.25%)
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. Rule 12b-1 fees paid
during 1996 amounted to approximately $502,000. See "Distribution Expense Plan."
This Synopsis should be read in conjunction with the more detailed information
in this Prospectus.
PAX WORLD FUND, INCORPORATED
For further information write or call the Fund
222 State Street
Portsmouth, New Hampshire 03801
1-800-767-1729
4
PAX WORLD FUND, INCORPORATED
FINANCIAL HIGHLIGHTS
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 YEAR IN NET ASSET VALUE
(BASED UPON AVERAGE NUMBER OF SHARES OUTSTANDING).
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .... $16.33 $13.39 $13.55 $14.27 $14.99 $13.97 $13.98 $11.92 $11.58 $13.19
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income - net .550 .80 .49 .51 .64 .82 .60 .61 .61 .55
Realized and unrealized
gain (loss) on
investments - net.... 1.122 3.07 (.15) (.66) (.39) 2.17 .86 2.32 .71 (.15)
------ ------- -------- -------- -------- ------- ------- ------- ------- --------
Total from investment
operations .......... 1.672 3.87 .34 (.15) .25 2.99 1.46 2.93 1.32 .40
----- ------ -------- -------- -------- ------ ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net
investment income..... .550 .79(A) .50 .50 .67 .77 .61 .62 .61 .75
Distributions from
realized gains ....... .892 .14(A) - .07 .13 1.04 .84 .25 .37 1.24
Tax return of capital.... - - - - .17 .16 .02 - - .02
-------- -------- --------- --------- -------- ------- ---------------- -------- -------
Total distributions...... 1.442 .93 .50 .57 .97 1.97 1.47 .87 .98 2.01
----- ------- -------- ------- -------- ------- ------- ------- ------ -------
Net asset value,
end of year ......... $ 16.56 $ 16.33 $ 13.39 $ 13.55 $ 14.27 $ 14.99 $13.97 $ 13.98 $ 11.92 $ 11.58
------- ------- ------- ------- ------- ------- ------ ------- ------- -------
2. TOTAL RETURN ......... 10.36% 29.19% 2.65% (1.05)% .6% 20.8% 10.5% 24.9% 11.5% 2.6%
3. RATIOS AND SUPPLEMENTAL DATA
Ratio of total expenses
to average net
assets (B) .......... .89% .97% .98% .94% 1.0% 1.2% 1.2% 1.1% 1.1% 1.1%
Ratio of investment
income - net to
average net assets... 3.24% 3.44% 3.66% 3.63% 3.7% 5.1% 5.4% 5.8% 5.0% 4.1%
Portfolio turnover rate 34.55% 28.44% 25.45% 22.15% 17.4% 25.7% 38.9% 37.4% 57.5% 123.9%
Average commission
rate paid (C)......... $ .0599 $ .0714
Net assets, end
of year (`000s)...... $513,433 $476,976 $388,249 $462,762 $469,275 $270,488 $119,831 $ 93,030 $ 73,650 $ 65,787
Number of capital
shares outstanding,
end of year (`000s)... 31,008 29,200 29,000 34,142 32,878 18,042 8,576 6,653 6,177 5,683
-------- -------- -------- -------- -------- -------- --------- -------- --------- ---------
</TABLE>
(A) Reference is made to note A to the financial statements.
(B) In order to conform to current disclosure requirements, the 1996 and 1995
ratios are based upon total expenses, including the gross amount of custodian
fees (before being reduced pursuant to an expense offset arrangement). The
ratios for prior years were based upon net expenses and are not required to be
restated.
(C) The 1996 and 1995 average commission rates are presented to conform to
current disclosure requirements. This disclosure was not required in prior years
and has not been computed for the prior years.
5
GENERAL DESCRIPTION OF THE FUND
The Fund is a balanced fund and intends to invest about 60 percent of its
assets in common and preferred stock and/or securities convertible into common
stock and 40 percent in bonds or debentures which percentage may vary depending
on market conditions.
The Fund may not purchase the securities of any one issuer (except
government agency securities) if immediately after and as a result of such
purchase (a) the market value of the holdings of the Fund in the securities of
such issuer exceeds 5% of the market value of the Fund's total assets, or (b)
the Fund owns more than 10% of the outstanding voting securities or of any one
class of securities of such issuer.
The Fund's objectives and policies described below may be changed only with
a majority of outstanding voting securities which is defined as the vote of a
special or annual meeting of the stockholders duly called, (A) of 67% of the
voting securities present at such meetings if the holders of more than 50% of
the outstanding voting securities are present or represented by proxy or (B) of
more than 50% of the outstanding voting securities, whichever is less.
The investment objectives of the Fund are primarily to provide its
shareholders a diversified holding of securities of companies which offer
primarily income and conservation of principal and secondarily possible
long-term growth of capital through investment in common and preferred stocks
and debt securities. There can be no assurance that the Fund will, in fact,
achieve its objectives.
The policy of the Fund is to exclude from its portfolio:
(1) securities of companies engaged in military activities as defined below;
(2) companies appearing on the Department of Defense's 100 largest
contractors list*;
(3) other companies contracting with the Department of Defense will not be
considered if 5 percent or more of their gross sales for their prior fiscal
year was derived from such contracts;
(4) securities of companies of the liquor tobacco and gambling industries
including their subsidiaries.
If a merger or acquisition causes a security in the portfolio to come within
the foregoing restrictions, the Fund will attempt to eliminate such security
over a six-month period.
The Fund will endeavor (but is not required to do so) 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 Fund will seek investments in companies that produce life supportive
goods and services 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 housing, food, leisure time, education, retailing, pollution
control, health care, household appliances, publishing and building supplies,
among others.
If, after the initial purchase by the Fund, it is determined that the
company's activities fall within the exclusion described above, the securities
of such companies will be eliminated from the portfolio when a gain results from
the sale. In no event, however, will such security be retained longer than six
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.
MANAGEMENT OF THE FUND
The officers of the Fund are responsible for the day-to-day operations of
the Fund and the Directors for the general policy of the Fund. The Board of
Directors meets four times per year and reviews portfolio selections, bonding
requirements, declares dividends and reviews activities of the executive
officers. Such activities are consistent with their fiduciary obligations under
Delaware Corporation Law as Directors.
*Copies may be obtained from the Office of the Secretary, Department of Defense,
Washington, D.C. 20310.
6
The following table reflects the name and address, position held with the Fund
and principal occupation during the past five years for those persons who are
the officers and directors of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Position with Fund Principal Occupation during past 5 years
*Laurence A. Shadek Chairman Chairman of the Board, is an Executive Vice President of
Glen Goin, Box 5 Board of Directors H.G. Wellington & Co., Inc. and has been associated with
Alpine, NJ 07620 (since September that firm since March 1986. He was previously associated
30, 1996) with Stillman Maynard & Co., where he was a general
partner. Mr. Shadek's investment experience includes 12
years as Limited Partner and Account Executive with the
firm Moore & Schley. He is a graduate of Franklin &
Marshall College (BA) and New York University, School of
Graduate Business Administration (MBA).
*Luther E. Tyson, PhD President (since Sociologist, ethicist, and clergyman. From 1966-85 he
69 Wentworth Lane inception) 1970 served as Director of a Department of the Board of Church
P.O. Box 351448 and Society of the United Methodist Church. Dr. Tyson
Palm Coast, FL 32135 currently serves as President of the Fund, pursuant to an
employment agreement with Pax World Management Corp.
(Adviser to the Fund) until September 30, 1997.
*Thomas W. Grant Vice Chairman Vice Chairman of the Fund and President of the Adviser, is
1125 Cedar Ridge Road Board of Directors currently the President of H.G. Wellington & Co., Inc. and
Oyster Bay, NY 11771 (since September has been associated with that firm since 1991. Mr. Grant
30, 1996) served previously with the firm of Fahnestock & Co.,
members of the New York Stock Exchange, for twenty years as
a partner, managing director and senior officer. His duties
encompassed branch office management, corporate finance,
syndication, and municipal and corporate bonds. He is a
graduate of the University of North Carolina (BA).
*Anthony S. Brown Portfolio Manager 1970 to present, Treasurer of the Adviser; portfolio
209 Lafayette Road Executive Vice President manager of the Fund; from July 1982 to December 1990,
Portsmouth, NH 03801 and registered representative with Fahnestock & Co., and from
Treasurer (since August 1987 to December 1990, a Vice President and office
inception) 1970 manager; a trustee of Piscataqua Savings Bank, Portsmouth,
NH since July 1990 and Chairman of the Board since August
1992. Mr. Brown serves in his capacities pursuant to an
employment agreement with the Adviser until September 30,
1997.
7
Name and Address Position with Fund Principal Occupation during past 5 years
C. Lloyd Bailey Director (since An attorney; he served during 1959 - 1979 as Executive
1216 Foulkeways inception) 1970 Director of the United States Committee for UNICEF and
Gwynedd, PA 19436 from 1980-81 as President of that Committee. Since 1981 to
the present he has served as a consultant to that
Committee.
Ralph M. Hayward Director Retired in 1971 after 31 years of employment with Merck
57 Barrell Lane (since 1978) and Co., Rahway, New Jersey where he held various
York Harbor, ME 03911 executive positions. He is currently President and
principal stockholder of Fisher-James Company, Inc. of
Biddeford and Sanford, Maine, an office supply and
equipment dealer.
Joy L. Liechty Director 1989 to present, Client and Sales Advocate of Mennonite
1403 Ashton Court (since 1991) Mutual Aid Association; from 1980-89 Manager of Services of
Client Goshen, IN 46526 Mennonite Mutual Aid Association.
Raymond L. Mannix Director (since Certified public accountant, and Professor Emeritus of
71 Richmond Road inception) 1970 Boston University where he served as a Professor in the
Belmont, MA 02178 College of Business Administration for more than forty
years.
Sanford C. Sherman Director President / CEO, Piscataqua Savings Bank, Portsmouth, NH,
91 Hillside Drive (since 1992) April 1981 to date. Twenty-one years prior thereto, he
Portsmouth, NH 03801 held various other ositions with the bank, including
Treasurer and Vice President; he also served the bank as a
Trustee for twenty years.
Esther J. Walls Director From 1974-1988, Associate Director of Libraries, State
160 West End Avenue (since 1981) University of New York, Stony Brook, L.I., New York.
Apt. 29J Currently, library consultant.
New York, NY 10023
*William M. Prifti Secretary and Attorney, engaged in the private practice of the law since
Suite 204, 220 Broadway General Counsel 1968.
Lynnfield, MA 01940
</TABLE>
*Designates a Director or Officer who is an interested person as defined by the
Investment Company Act of 1940. Members of the Audit Committee: Messrs. Mannix
and Hayward
INVESTMENT ADVISER
The Investment Adviser is Pax World Management Corp., also located at 222
State Street, Portsmouth, NH 03801. The Adviser was organized in 1970 and has
from that time to the present had the Fund as its only client. The Adviser makes
recommendations with respect to the investments and investment policies of the
Fund.
At a special meeting of the shareholders of the Fund on September 27, 1996,
a new investment advisory agreement between the Fund and the new owners of Pax
World Management Corp. was approved. The Advisory Agreement as approved contains
the same provisions as the prior agreement. The officers of the Adviser are:
Chairman--Laurence A. Shadek; President--Thomas W. Grant; Senior Vice President
for Marketing--Thomas F. Shadek; Senior Vice President for Social
Research--James M. Shadek; Senior Vice President--Katherine Shadek Boyle;
Executive Vice President--Luther E. Tyson; and Executive Vice President and
Treasurer--Anthony S. Brown.
8
Laurence A. Shadek is a 25% stockholder of the Adviser along with his
brothers, Thomas F. Shadek and James M. Shadek and sister, Katherine Shadek
Boyle each of whom owns a 25% interest in the Adviser. Such owners may be
considered controlling persons of the Fund within the meaning of the securities
laws. The Adviser received compensation aggregating 3/4 of 1% of average net
assets on the first $25 million and 1/2 of 1% of the average net assets in
excess of that figure for the fiscal year. The purchase by the Shadeks of the
stock of the investment adviser occurred on September 30, 1996.
TRANSFER AND DISBURSING AGENT
The transfer and disbursing agent is PFPC, Inc., 400 Bellevue Parkway,
Wilmington, DE 19809. Shareholder inquiries relating to a shareholder account
should be directed to Pax World Fund, Inc., P.O. Box 8930, Wilmington, DE
19899-8930.
FUND ANNUAL EXPENSES
For the fiscal year ended December 31, 1996, total expenses incurred by the
Fund amounted to 0.89%, or less than 1%, of its average net assets which
includes expenses pursuant to the 12b-1 plan.
BROKERAGE COMMISSION PRACTICES
Brokerage dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and quality of their services. In selecting such dealers the Fund considers
various relevant factors, including, but not limited to, the efficiency of
execution of orders, settlement capability, quality and extent of research and
the reasonableness of any mark-ups or commissions. Any allocation for research
services is arbitrary and not through any prearrangement.
CAPITAL STOCK AND OTHER MATTERS
The Fund, organized in February 1970, is authorized by its Articles of
Incorporation as amended by the stockholders on June 10, 1993 and pursuant to
Delaware law to issue 75,000,000 shares of common stock of a par value of $1 per
share. Such shares have no preference, pre-emptive, conversion or exchange
rights except as outlined in the prospectus. The stock offered hereby will, in
the opinion of General Counsel, when issued and sold, be fully paid and
nonassessable. Each share has one vote in corporate matters (fractional shares
have proportionate voting rights), are freely transferable and are entitled to
dividends as determined by the Board of Directors and in liquidation of the Fund
are entitled to receive the net assets of the Fund. The shares have
noncumulative voting rights, which means that the holders of more than 50
percent of the shares voting for the election of directors can elect 100 percent
of the directors if they choose to do so, and, in such event, the holder of the
remaining less than 50 percent of the shares voting will not be able to elect
any directors.
As of the date of the Prospectus, there are no persons owning 5% or more of
the outstanding stock of the Fund. All officers and Directors of the Fund as a
group own less than 1% of the outstanding stock of the Fund.
9
SHAREHOLDER DISTRIBUTIONS
Shareholders of the Fund will automatically have reinvested all income
dividends and capital gains distributions, if any, in additional shares of the
Fund at net asset value unless the disbursing agent is notified at least ten
days before the record date that the shareholder wishes to elect to:
(1) Receive income dividends in cash and capital gains distributions in
additional shares at net asset value, or (2) Receive all income dividends and
capital gains distributions in cash. The Fund's policy is to distribute annually
to shareholders all, or substantially all, of its net investment income and net
realized capital gains, if any. Income payments are usually made during the
third and fourth quarters in each fiscal year. Any capital gains, likewise, are
usually paid during the fourth quarter.
TAX STATUS
The Fund qualifies for tax treatment as a "regulated investment company"
under subchapter M of the Internal Revenue Code. The Fund will distribute its
net income and gains to shareholders and such distributions have been generally
treated as taxable income since 1986. Shareholders not subject to tax on their
income will not be required to pay tax on amounts distributed to them. The Fund
will inform shareholders of the amount and nature of such income or gains.
The Fund is required by federal law to withhold 31% of income dividends and
capital gains distributions (if any) paid to certain accounts which have not
complied with Internal Revenue Service regulations. In connection with this
withholding requirement, a purchaser of Fund shares will be asked to certify on
our application that the Social Security or tax identification number provided
is correct and that a purchaser is not subject to 31% back-up withholding for
previous underreporting to the IRS.
HOW TO PURCHASE SHARES
The offering price of shares of the Fund will be the net asset value per
share next computed after receipt of the order. No sales charge or load will be
added to such asset value. The net asset value of the Fund's shares is
determined as of the close of business of the New York Stock Exchange on each
business day on which the Exchange is open, by dividing the value of the Fund's
securities, plus any cash and other assets (including dividends accrued but not
collected) less all liabilities (including accrued expenses but excluding the
capital and surplus), by the number of shares outstanding.
In valuing the Fund's assets, a security listed on the New York Stock
Exchange is valued at its last sale price on that Exchange on the day as of
which assets are valued. Lacking any sales on the day, the security is valued at
the mean between the bid and asked price. Securities listed on other exchanges
are similarly valued, using quotations on which the security is traded most
extensively.
To open an account, a purchaser should fill out and sign "The New Account
Application" (see end of Prospectus) and send it and a check made payable to Pax
World Fund, Inc. in an amount of at least $250 to Pax World Fund, Inc., P.O. Box
8930, Wilmington, DE 19899-8930. Once an account is opened, additional shares
may be purchased by sending a check for at least $50 to PFPC, Inc. at the above
mentioned address. Full and fractional shares will be purchased at the offering
price in effect at the close of business of the New York Stock Exchange on the
day payment is received by PFPC, Inc. and the shares will be credited to the
shareholder's account. If the order is received after the close of business on
the New York Stock Exchange or on a day when the stock exchange is not open for
business, the offering price of the shares will be the price determined as of
the close on the following business day. A confirmation will be issued and
mailed to the shareholder giving the particulars of the purchase.
10
Subsequent purchases to existing shareholder accounts may also be made by
wiring an order to the PNC Bank. Prior to wiring funds, please notify
shareholder services by calling 1-800-372-7827. The wire order must contain the
shareholder's account number and the full name(s). The wire order should be sent
to:
PNC Bank
Philadelphia, PA
ABA 031-0000-53
Pax World Fund, Inc.
Credit A/C# 510-077-1
Shareholder Account Number and Full Name(s)
Wire orders received by the PNC Bank will be executed at the Fund's net
asset value per share as next determined after receipt of the wired funds.
Foreign investors are advised to send checks for subscriptions to eliminate
any regulatory problems resulting from late payment. A certified check is not
necessary but checks must be collectible at full face value in United States
funds (that is, the checks should be converted to U.S. funds before transmittal;
checks not so converted will be returned by the Fund).
Income dividends and capital gains distributions, if any, will be reinvested
at net asset value prevailing at the close of business on the ex-dividend date
in additional full and fractional shares unless and until the shareholder
notifies the transfer agent in writing prior to such record date that he/she
elects to receive either dividends or both income dividends and capital gains
distributions together 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 the shareholder's account and a confirmation of such
reinvestment will be sent to the shareholder by the transfer agent.
AUTOMATIC INVESTMENT PLAN
Shareholders may also arrange for a systematic monthly investment ($50
minimum) through participation in the Fund's Automatic Investment Plan. After
the shareholder gives the Fund proper authorization, the shareholder's bank
account will be debited to purchase shares in the Fund. A confirmation will be
sent from the Fund for every transaction and a debit will appear on the
shareholders bank statement. The Pax World Automatic Investment Plan, in
addition to the convenience of investing regularly, enables the shareholder to
practice dollar cost averaging as an investment strategy.
SHAREHOLDER ACCOUNTS
As a convenience to shareholders, the Fund will not ordinarily issue
certificates representing shares of its stock. The shares will be held on
deposit for the shareholders by PFPC, Inc. which will send each shareholder an
up-to-date confirmation and statement of his/her account. Certificates are, of
course, available at any time on written request. Evidence of ownership of
shares in the Fund is the record of shares held in the stockholder s account in
the books of PFPC, Inc. This amount will be confirmed to the investor each time
there is a change in his/her account or any time upon his/her request. Such a
shareholder has all the rights of other shareholders with respect to the shares
held in his/her account and does not risk the loss of stock certificates which
may be costly and time-consuming to replace.
RETIREMENT AND OTHER PROGRAMS
The Fund has the following special purchase plans and information regarding
each may be obtained by writing directly to the Fund at 222 State Street,
Portsmouth, NH 03801.
11
Self-Employed Retirement Plans (IRAs and IRA-SEPS)
Voluntary Withdrawal Plans ($10,000 minimum investment)
Voluntary Reinvestment Plan (of dividends and capital gains)
Group Investments (10 or more persons--group investment minimum $1,000)
Section 403(b) Retirement Plans
Automatic Investment Plan
Uniform Gifts to Minors
DISTRIBUTION EXPENSE PLAN
The stockholders at the annual meeting on June 21, 1984, approved a
distribution expense plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940.
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. During the 1996 fiscal year, amounts paid by the Fund
under the plan for clerical, advertising, printing, postage and sales expenses
(travel, telephone, and sales literature) totaled about $502,000. No amounts
were paid to officers and directors of the Fund in connection with the Plan
other than sales related travel expenses of $5,624 to officers.
HOW TO REDEEM SHARES
Payment of the net proceeds of redemption will be made by PFPC, Inc.
The Fund will redeem out of assets legally available for such purposes all
or any part of the shares of capital stock standing in the name of any holder on
the books of the Fund but only at the net asset value of such shares (as
hereinbefore defined) as of the close of business on the day on which written
demand is received by the Fund. If such demand is made on a day on which the New
York Stock Exchange is not open or after the Exchange is closed on any day, then
the redemptions shall be made at the net asset value determined as of the close
of business on the next succeeding day on which said Exchange is open. The value
of the shares on redemption may be more than the cost to the investor depending
upon the current value of the Fund s investment.
Requests for redemption must be made by written request of the
shareholder(s) directed to Pax World Fund, Inc., P.O. Box 8930, Wilmington, DE
19899-8930 in proper form as described below.
A shareholder has the right to redeem all or any number of his/her shares at
any time by delivering his/her request with any certificates (if certificates
were requested at time of purchase) to PFPC, Inc. at the above mentioned
address.
Certificates and/or written requests will be considered in proper form only
if signed by the shareholder(s) exactly as the shares are registered and with
the signature(s) guaranteed by an "eligible" guarantor such as a U.S. commercial
bank or trust company located or having a correspondent bank in New York City, a
foreign bank with a U.S. commercial bank or trust company as correspondent,
savings associations, and credit unions as defined by the Federal Deposit
Insurance Act. Also included as an "eligible" guarantor are member firms of a
domestic stock exchange. You should verify with the institution that it is an
acceptable (eligible) guarantor prior to signing. A notary public is not an
acceptable guarantor.
Shareholders living abroad may acknowledge their signatures before a U.S.
Consular Officer. Military personnel may acknowledge their signatures before
officers authorized to take acknowledgements, e.g., legal officers and
adjutants.
12
Improperly executed requests will not be recognized by the Fund and such
requests will be returned to the shareholder. The Fund will not mail redemption
proceeds until checks (including certified or cashier's checks) received for the
shares purchased have cleared.
Payment for the shares redeemed as aforesaid, shall be made by the Fund
within seven days after the date on which the request in proper form is
received.
Shareholders may use Pax World Fund's "Redemption Option" to redeem shares
up to $5,000 from accounts without a guaranteed signature. For information and
"Redemption Option" form, write to the Fund at 222 State Street, Portsmouth, NH
03801.
Telephone Redemption
The Fund permits individual shareholders and a representative of record for
an account to redeem shares by telephone in amounts up to $10,000 (within a
thirty day period) by calling PFPC, Inc. at 1-800-372-7827. Telephone
redemptions must be in amounts of $1,000 or more. Instructions must include your
name and account number.
This privilege only allows the check to be made payable to the owner(s) of
the account and may only be sent to the address of record. The request cannot be
honored if an address change has been made for the account within 60 days of the
telephone redemption request.
If there are multiple account owners, PFPC, Inc. may rely on the
instructions of only one owner. This account option is not available for
retirement account shares, shares represented by a certificate, or for newly
purchased (within the prior 15 days) shares. PFPC, Inc. may record all calls.
The Fund reserves the right to refuse a telephone redemption if it believes
it advisable to do so. Neither the Fund nor PFPC, Inc. will be responsible for
the authenticity of redemption instructions received by telephone and believed
to be genuine and any loss therefrom will need be borne by the investor. During
periods of substantial economic or market change, telephone redemptions may be
difficult to complete.
Shares may always be redeemed by mailing the request as described above
under "How to Redeem Shares" if a shareholder is unable to contact PFPC, Inc. by
telephone.
VOLUNTARY INCOME CONTRIBUTION TO PAX WORLD SERVICE
To complement the Fund's objectives of investing in securities of companies
whose businesses are essentially of a non-military nature, the Pax World
Foundation was formed in 1970. Foundation Directors voted in July 1992 to change
the name from Pax World Foundation to Pax World Service. The Service provides
financial support for organizations and projects which encourage international
understanding, reconciliation and development. Overseas activities focus on
funding of projects in the areas of international development and education and
cultural exchange.
The officers and directors of the Service are:
Mr. Larry Ekin, President
Mr. Charles Demere, Chairperson and Director
Ms. Joan Baker, Vice Chairperson and Director
Mr. William H. Wise, Treasurer and Director
Mr. Tom C. Veblen, Secretary and Director
Dr. J. Elliott Corbett, Honorary Chairman
Mr. Edward Bartholomew, Director
Ms. Diana Dajani, Director
Mr. Joseph T. Eldridge, Director
Ms. Lois Hermann, Director
Mr. Samuel Hope, Director
Mr. Arthur Johnson, Director
13
Ms. Phoebe Lansdale, Director
Mr. Luke T. Lee, Director
Ms. Lucille (Sis) Levin, Director
Mr. Douglas Nelson, Director
Mr. John Slattery, Director
Ms. Christine H. Tucker, Director
No compensation will be paid by the Service directly or indirectly to the
officers and directors of the Service except for travel and other reasonable
fees for services rendered on behalf of projects undertaken by the Service.
Pax World Service initiates and supports projects that encourage
international understanding, reconciliation, and sustainable development on
behalf of world peace and the world's poor.
* AGRICULTURE AND REFORESTATION. Provides support for local people in Latin
America working to increase crop yields, construct irrigation systems, and
combat deforestation. Pax's "Seeds for Development" program distributes the
high-protein Tepary bean seeds and the fast-growing Giant Leucaena tree
seeds, especially good for firewood, throughout the globe.
* FRIENDSHIP TOURS. Builds bridges of understanding between peoples and across
national boundaries. Provides opportunity for U.S. citizens to "step behind
the headlines" on educational, fact-finding trips to troubled regions of the
world, and "hands-on" development trips to Latin America.
* WATER PURIFICATION. Developed a solar-powered water purification device that
provides safe drinking water in developing countries.
Fund shareholders may, at their election, make a voluntary contribution to
the Service of a percentage of their Fund income including capital gains.
Contributions to the Service are charitable contributions and such contributions
are tax deductible on the tax return of the contributor. Contributions to the
Service from shareholders of the Fund amounted to $153,159 for the 1996 calendar
year.
Fund shareholders who contribute to the Service receive an annual report of
the activities of the Service, which includes a financial statement. Commencing
in 1976 contributions have been made by shareholders of the Fund and by others
and annual reports have been issued to them accordingly.
A Fund shareholder may indicate on a special form the percentage of income
and/or capital gains the shareholder desires to be deducted for payment to the
Service. Shareholders will receive annually a confirmation for income tax
purposes indicating contributions made.
Additional information may be obtained by writing to Pax World Service, 1111
16th Street, N.W., Suite 120, Washington, D.C. 20036.
FOR TEXAS RESIDENTS ONLY
Investment objectives are hereby clarified and intended to be consistent
with Texas securities regulations.
The Fund does not intend to make and has not made investments in oil, gas
and other mineral leases or arbitrage transactions.
The Fund By-Laws contain an investment restriction which does not allow it
to purchase or sell real property but permits the Fund to make an investment in
readily marketable interests in real estate investment trusts or readily
marketable securities of companies which invest in real estate.
14
PAX WORLD FUND, INCORPORATED
222 State Street
Portsmouth, NH 03801-3853
www.paxfund.com
A NO-LOAD DIVERSIFIED FUND
Transfer and Disbursing Agent
PFPC, Inc.
P.O. Box 8950
Wilmington, DE 19899
General Counsel
William M. Prifti, Esq.
220 Broadway
Suite 204
Lynnfield, MA 01940
Independent Auditors
Pannell Kerr Forster, P.C.
125 Summer Street
Boston, MA 02110
Investment Adviser
Pax World Management Corp.
222 State Street
Portsmouth, NH 03801-3853
1-800-767-1729
All account inquiries should be addressed to:
Pax World Fund, Inc.
P.O. Box 8930
Wilmington, DE 19899-8930
For Shareholder Account Information:
1-800-372-7827
PROSPECTUS & APPLICATION
PAX WORLD FUND
INCORPORATED
---------------------
PART B
STATEMENT OF ADDITIONAL INFORMATION
PART B
PAX WORLD FUND
Incorporated
222 State Street, Portsmouth, New Hampshire 03801
Telephone: 1-603-431-8022
Telephone: 1-800-767-1729
For shareholder account information: 1-800-372-7827
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus which may be obtained by writing the
Fund at its principal address: 222 State Street, Portsmouth, New Hampshire
03801.
A copy of the Annual Report of the Fund containing a narrative discussion
and line chart of Fund performance may be obtained without charge by writing the
Fund or telephoning any of the above numbers.
Statement of Additional Information
dated April 22, 1997 relates to the
Prospectus of the Fund dated April 22, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
General Information and History............................................................... See Prospectus, "Synopsis"
Investment Objectives and Policies................................................................................... 3-B
See also Prospectus "Synopsis" and General Description of the Fund.
Management of the Fund.............................................................................................. 4-B
Controlling Persons and
Principal Holders of Securities..................................... see Prospectus, "Capital Stock and Other Matters."
Investment Advisory and Other Services ...............................................................................5-B
Other Expenses........................................................................................................5-B
Custodian ........................................................................................................... 6-B
Independent Auditors ................................................................................................ 6-B
Brokerage Allocation ................................................................................................ 6-B
Capital Stock....................................................................................................... 6-B
Purchase, Redemption and Pricing of Securities Being Offered ........................................................ 6-B
Tax ................................................................................................................. 7-B
Financial Statements................................................................................................. 8-B
Independent Auditors' Report ....................................................................................... 15-B
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
The policy of this mutual fund is to invest in securities of companies whose
business is essentially directed toward non-military and life-supportive
activities. For example, the Fund will seek to invest in such industries as
health care, education, pollution control, housing, food, retail, clothing and
leisure time. The Fund offers both individual and institutional investors the
opportunity to participate in the benefits of owning a diversified portfolio.
The Fund seeks income and conservation of principal and secondarily possible
long-term growth of capital through investment in common and preferred stocks
and debt securities.
The reader is referred to the Prospectus and the text appearing under the
caption "General Description of the Fund" for other information concerning
investment policies of the Fund. The following material may be considered
additional investment policies of the Fund and the restrictions concerning
investment policies are part of the articles of organization and the by-laws
which may be altered or repealed only by a vote of a majority of the outstanding
voting securities.
These restrictions state that the Fund may not:
1. Purchase the securities of any one issuer (except government securities)
if immediately after and as a result of such purchase (a) the market
value of the holdings of the Fund in the securities of such issuer
exceeds five percent of the market value of the Fund's total assets, or
(b) the Fund owns more than ten percent of the outstanding voting
securities or of any one class of securities of such issuer.
2. Purchase securities of other registered investment companies.
3. Concentrate more than 25% of its investments in one particular industry.
4. Purchase or sell real estate or other interests in real estate which are
not readily marketable.
5. Write, purchase or sell put and call options or combinations thereof.
6. Lend money or securities.
7. Purchase securities on margin or sell short or purchase or sell
commodities.
8. Borrow money except that, as a temporary measure for extraordinary or
emergency purposes and not for investment purposes, the Fund may borrow
from banks up to five percent of its total assets taken at cost.
9. Mortgage or pledge security for indebtedness any securities owned or held
by the Fund except as stated in item 8, above.
10. Participate on a joint and several basis in any trading account in
securities.
11. Invest in companies for the purpose of exercising control of management.
12. Act as an underwriter of securities of other issuers, except that the
Fund may invest up to five percent 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 of 1933. 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.
13. Invest more than ten percent of the value of its assets in securities of
foreign issuers under circumstances that would subject it to federal
interest equalization tax or at prices that reflect such tax. (No such
tax is currently in effect.)
14. Invest more than five percent of its total assets in securities of
companies having a record of less than three years continuous operation
except for those surviving a merger or consolidation.
The Fund may, when market conditions warrant, mintain a conservative
position by retention of cash and investment in certain government or similar
liquid securities (such as commercial paper or certificates of deposit).
To the extent that information is obtainable, the Fund seeks to make initial
investments in companies located in foreign countries recognized by the United
States and which companies contribute to improving the standard of living in
those countries and whose products and services are consistent with the Fund's
objective of non-military investments. The Fund will not invest more than 10% of
its assets in securities of foreign issuers.
The Fund as a balanced fund invests about 60 percent of its assets in common
and preferred stock and/or securities convertible into common stock and 40
percent in bonds or debentures which percentage may vary depending on market
conditions. It does not engage in short-term trading and due to the investment
objectives there will likely be little portfolio turnover. While the rate of
portfolio turnover will not be a limiting factor when management deems changes
appropriate, it is anticipated that, given the Fund's investment objectives, its
annual portfolio turnover rate should not generally exceed 60 percent. A 100%
turnover rate would occur, for example, if all the securities in the Fund s
portfolio were replaced in a period of one year. Portfolio turnover for the
fiscal years ended 1994, 1995, and 1996 was 25.5%, 28.4% and 34.6%,
respectively. A substantial portion of the portfolio of the Fund consists of
securities of companies listed on securities exchanges.
MANAGEMENT OF THE FUND
The following table reflects the name and address, position held with the Fund
and principal occupation during the past five years for those persons who are
the officers and directors of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Position with Fund Principal Occupation during past 5 years
*Laurence A. Shadek Chairman Chairman of the Board, is an Executive Vice President of H.G.
Glen Goin, Box 5 Board of Directors Wellington & Co., Inc. and has been associated with that firm since
Alpine, NJ 07620 (since September March 1986. He was previously associated with Stillman Maynard &
30, 1996) Co., where he was a general partner. Mr. Shadek's investment
experience includes 12 years as Limited Partner and Account
Executive with the firm Moore & Schley. He is a graduate of Franklin
& Marshall College (BA) and New York University, School of Graduate
Business Administration (MBA).
*Luther E. Tyson, PhD President (since Sociologist, ethicist, and clergyman. From 1966-85 he served as
69 Wentworth Lane inception) 1970 Director of a Department of the Board of Church and Society of the
P.O. Box 351448 United Methodist Church. Dr. Tyson currently serves as President of
Palm Coast, FL 32135 the Fund, pursuant to an employment agreement with Pax World
Management Corp. (Adviser to the Fund) until September 30, 1997.
*Thomas W. Grant Vice Chairman Vice Chairman of the Fund and President of the Adviser, is currently
1125 Cedar Ridge Road Board of Directors the President of H.G. Wellington & Co., Inc. and has been associated
Oyster Bay, NY 11771 (since September with that firm since 1991. Mr. Grant served previously with the firm
30, 1996) of Fahnestock & Co., members of the New York Stock Exchange, for
twenty years as a partner, managing director and senior officer. His
duties encompassed branch office management, corporate finance,
syndication, and municipal and corporate bonds. He is a graduate of
the University of North Carolina (BA).
*Anthony S. Brown Portfolio Manager 1970 to present, Treasurer of the Adviser; portfolio manager of the
209 Lafayette Road Executive Vice Fund; from July 1982 to December 1990, registered representative
Portsmouth, NH 03801 President and with Fahnestock & Co., and from August 1987 to December 1990, a Vice
Treasurer (since President and office manager; a trustee of
Piscataqua Savings Bank, inception) 1970 Portsmouth, NH since July
1990 and Chairman of the Board since August 1992. Mr. Brown serves in
his capacities pursuant to an employment agreement with the Adviser
until September 30, 1997.
C. Lloyd Bailey Director (since An attorney; he served during 1959-1979 as Executive Director of the
1216 Foulkeways inception) 1970 United States Committee for UNICEF and from 1980-81 as President of
Gwynedd, PA 19436 that Committee. Since 1981 to the present he has served as a
consultant to that Committee.
Ralph M. Hayward Director Retired in 1971 after 31 years of employment withMerck and Co.,
57 Barrell Lane (since 1978) Rahway, New Jersey where he heldvarious executive positions. He is
York Harbor, ME 03911 currently President and principal stockholder of Fisher-James
Company, Inc. of Biddeford and Sanford, Maine, an office supply and
equipment dealer.
Name and Address Position with Fund Principal Occupation during past 5 years
Joy L. Liechty Director 1989 to present, Client and Sales Advocate of Mennonite Mutual Aid
1403 Ashton Court (since 1991) Association; from 1980-89 Manager of Client Services of Mennonite
Goshen, IN 46526 Mutual Aid Association.
Raymond L. Mannix Director (since Certified public accountant, and Professor Emeritus of Boston 1970
71 Richmond Road inception) University where he served as a Professor in the College of Business
Belmont, MA 02178 Administration for more than forty years.
Sanford C. Sherman Director President/CEO, Piscataqua Savings Bank, Portsmouth, NH, April 1981
91 Hillside Drive (since 1992) to date. Twenty-one years prior thereto, he held various other
Portsmouth, NH 03801 ositions with the bank, including Treasurer and Vice President; he
also served the bank as a Trustee for twenty years.
Esther J. Walls Director From 1974-1988, Associate Director of Libraries, State University of
160 West End Avenue (since 1981) New York, Stony Brook, L.I., New York. Currently, library consultant.
Apt. 29J
New York, NY 10023
*William M. Prifti Secretary and Attorney, engaged in the private practice of the law since 1968.
Suite 204, 220 Broadway General Counsel
Lynnfield, MA 01940
</TABLE>
*Designates a Director or Officer who is an interested person as defined by the
Investment Company Act of 1940. Members of the Audit Committee: Messrs. Mannix
and Hayward
As of September 30, 1996, control of the Fund may be acknowledged to rest
with Laurence A. Shadek, Thomas F. Shadek, James M. Shadek, and Katherine Shadek
Boyle, each of whom owns a 25% interest in the Adviser.
No such person on such date owned of record or beneficially 5% or more of
the outstanding Common Stock of the Fund and all officers and directors as a
group own less than 1% of the outstanding Common Stock of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
At a special meeting of the shareholders of the Fund on September 27, 1996,
a new investment advisory agreement between the Fund and the new owners of Pax
World Management Corp. was approved. The Advisory Agreement as approved contains
the same provisions as the prior agreement. The officers of the Adviser are:
Chairman--Laurence A. Shadek; President--Thomas W. Grant; Senior Vice President
for Marketing--Thomas F. Shadek; Senior Vice President for Social
Research--James M. Shadek; Senior Vice President--Katherine Shadek Boyle;
Executive Vice President--Luther E. Tyson; and Executive Vice President and
Treasurer--Anthony S. Brown.
The Fund has contracted with Pax World Management Corp. to advise and make
recommendations with respect to its investments and investment policies. In
addition, the Adviser has agreed to pay all executive officers' salaries, if
any, and expenses and office rent of the Fund and to reimburse the Fund if and
to the extent the Fund's expenses in any calendar year other than interest,
brokerage commissions, fees, taxes and distribution expenses under the Rule
12b-1 Plan exceed 1 1/2% of average net assets. No reimbursement has been
required since December 31, 1982. The Adviser was organized in 1970, and has had
from that time to the present as its only client, the Fund.
As compensation for its services, the Fund will pay the Adviser an annual
fee of 3/4 of 1% of the Fund's average net assets on the first $25,000,000 and
which fee adjusts to 1/2 of 1% of average net assets in excess of that figure.
This fee is computed on a daily basis and paid monthly.
The following table shows the amount of the advisory fee of the Fund for the
years ended December 31, 1994, 1995 and 1996.
Approximate
Amount of
Fee
Year ended December 31, 1994 . . . . . . . . . . . . . . . . $2,091,000
Year ended December 31, 1995 . . . . . . . . . . . . . . . . $2,192,000
Year ended December 31, 1996 . . . . . . . . . . . . . . . . $2,554,000
The contract with the investment adviser, approved by the shareholders on
September 27, 1996, remains in force for a period of two years after approval by
the shareholders. The contract continues in force year to year so long as the
continuation is specifically approved at least annually either by (i) the Board
of Directors of the Fund or (ii) by a vote of a majority of the outstanding
securities of the Fund, provided that in either event the continuation must be
approved by a vote of a majority of the Directors who are not parties to the
contract or interested persons of the Fund or of the Adviser, cast in person at
a meeting called for the purpose of voting on such an approval or by written
consent. Such independent Board approval has occurred annually. The investment
advisory agreement will terminate automatically in the event of its assignment.
In addition, the contract is terminable at any time without penalty by the Board
of Directors of the Fund or by a vote of a majority of the Fund's shares on
60-days' notice to the Adviser and by the Adviser on 60-days' notice to the
Fund.
OTHER EXPENSES
Non-officer Directors are each paid a fee of $1,000 for attendance at each
Directors' Meeting; officer Directors are each paid $200. For the fiscal year
ended December 31, 1996 Directors' attendance fees amounted to approximately
$33,800 and an additional $15,000 was paid for travel costs.
The Fund has a distribution expense in effect under the provisions of Rule
12b-1 under the Investment Company Act of 1940. During the last fiscal year
approximate amounts paid by the Fund under the Plan were spent on: advertising:
$158,000; printing and postage: $68,000; and sales related expenses: $276,000.
CUSTODIAN
The Fund has engaged the State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110 as custodian for all its security
investments and cash. The custodian has no responsibility for any part in the
purchase and sale of Fund investments or in the declaration of dividends and
distributions. When authorized and directed by the Fund, the custodian may
appoint one or more subcustodians to perform such of the custodian duties as are
specified in such authorization. In addition, the custodian performs portfolio
securities clearance matters, holds securities in safekeeping and assists in the
daily pricing of the net asset value of the shares of the Fund.
PFPC, Inc. is the Fund's transfer and disbursing agent. Accordingly, it will
answer correspondence from shareholders. Therefore, correspondence relating to a
shareholder's account should be directed to PFPC, Inc., the company's Plan
Agent.
INDEPENDENT AUDITORS
Pannell Kerr Forster, P.C. are the independent auditors of the Fund for the
1996 financial statements and are located at 125 Summer Street, Boston,
Massachusetts 02110. They audit the Fund's financial statements as required
under the Investment Company Act of 1940, as amended, including the annual
report to stockholders, financial statements required by Form N-1A, information
needed to prepare the prospectus and documents required for state registration
statements, and they prepare the annual franchise tax statements to the state of
Delaware (state of incorporation) and any other tax returns required to be
prepared by the Fund.
BROKERAGE ALLOCATION
Management's primary consideration in placing orders for the purchase and
sale of portfolio securities is to obtain the best price and prompt, accurate
execution of its orders. Any over-the-counter purchases and sales may be
transacted directly with principal market-makers except in those circumstances
where in the opinion of management better prices and executions are available
elsewhere. The Fund may consider the amount of statistical research received
from brokerage firms in placing any brokerage orders and which may reduce the
cost of such research and other services to the Adviser. Such services may
include standard market reports available to the securities industry and the
public generally. The officers of the Fund make the portfolio decisions,
allocate brokerage orders, and are authorized to pay a brokerage commission in
excess of that which another broker might have charged for effecting the same
transaction in recognition of the value of brokerage or research services
provided by the broker. The Fund is also provided at no cost with the use of a
computer quote equipment by a broker in order to assist the Fund Adviser in
research and market activity and portfolio decisions.
For the years ended December 31, 1994, 1995, and 1996 brokerage commissions
amounted to approximately $382,000, $360,000, and $367,000, respectively.
The brokerage firms selected provide, in the case of goverment agency bonds,
best price and research service. In like manner, equity securities transactions
executed by other brokerage firms are based on price, execution and research
service. Any allocation to research services is arbitrary and not through any
prearrangements.
CAPITAL STOCK
The Fund, organized in February 1970, is authorized by its Articles of
Incorporation as amended by the shareholders on June 10, 1993 and pursuant to
Delaware law to issue 75,000,000 shares of common stock of a par value of $1 per
share. Such shares have no preference, pre-emptive, conversion or exchange
rights except as outlined in the prospectus. The stock offered will, in the
opinion of General Counsel, when issued and sold, be fully paid and
nonassessable. Each share has one vote in corporate matters (fractional shares
have proportionate voting rights), are freely transferable and are entitled to
dividends as determined by the Board of Directors and in liquidation of the Fund
are entitled to receive the net assets of the Fund. The shares have
noncumulative voting rights, which means that the holders of more than 50
percent of the shares voting for the election of directors can elect 100 percent
of the directors if they choose to do so and, in such event, the holders of the
remaining less than 50 percent of the shares voting will not be able to elect
any directors.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
See Part A--Prospectus and caption, "How to Purchase Shares" for details of
the manner in which the Fund shares may be purchased by the public.
The net asset value of the Fund's shares is determined as of the close of
business of the New York Stock Exchange on each business day on which that
Exchange is open, by dividing the value of the Fund s securities, plus any cash
and other assets (including dividends accrued but not collected) less all
liabilities (including accrued expenses but excluding the capital and surplus),
by the number of shares outstanding.
In valuing the Fund's assets, a security listed on the New York Stock
Exchange is valued at its last sale price on that Exchange on the day as of
which assets are valued. Lacking any sales on the day, the security is valued at
the mean between the bid and asked price. Securities listed on other exchanges
are similarly valued, using quotations on which the security is traded most
extensively.
An unlisted security for which over-the-counter market quotations are
readily available is valued on the basis of such quotations the last sale price,
or lacking any such sales quotations, an amount determined by the Fund's
management with the approval of its Board of Directors, not higher than the last
asked price or lower than the last bid price. Securities which are subject to
restrictions as to resale and securities for which over-the-counter quotations
are not readily available, and any other assets shall be valued in good faith by
the Board of Directors at their fair value.
The net asset value for the purpose of any transaction in the shares of the
Fund shall be that which is next computed after receipt of a tender of such
security for redemption or of an order to purchase such security.
Shareholders of the Fund will automatically have reinvested all income
dividends and capital gains distributions, if any, in additional shares of the
Fund at net asset value unless the dividend paying agent is notified at least
ten days before the record date that the shareholder wishes to elect to:
(1) Receive income dividends in cash and capital gains distributions in
additional shares at net asset value, or (2) Receive all income dividends and
capital gains distributions in cash. The Fund s policy is to distribute annually
to
shareholders all, or substantially all, of its net investment income and net
realized capital gains, if any. Income payments are usually made during the
third and fourth quarters in each fiscal year. Capital gains, likewise, are
usually paid during the fourth quarter.
TAX STATUS
The Fund qualifies for tax treatment as a "regulated investment company"
under subchapter M of the Internal Revenue Code. The Fund will distribute its
net income and gains to shareholders and such distributions have been generally
treated as taxable income since 1986. Shareholders not subject to tax on their
income will not be required to pay tax on amounts distributed to them. The Fund
will inform shareholders of the amount and nature of such income or gains.
The Fund is required by federal law to withhold 31% of dividends and capital
gains distributions (if any) paid to certain accounts which have not omplied
with Internal Revenue Service regulations. In connection with this withholding
requirement, a purchaser of Fund shares will be asked to certify on our
application that the Social Security or tax identification number provided is
correct and that a purchaser is not subject to 31% back-up withholding for
previous underreporting to the IRS.
Any dividend or distributions paid shortly after a purchase of shares by an
investor will have the effect of reducing the per share net asset value of
shares by the per share amount of the dividends or distributions. Furthermore,
such dividends or distributions, whether in cash or in shares, although in
effect a return of capital, are subject to income taxes.
The Tax Reform Act of 1986 (the "TRA") was signed into law on October 22,
1986 and changed the rates of tax applicable to ordinary income and capital
gains for individuals after 1986 and for corporations in tax years beginning
after July 1, 1986. The "TRA" repealed the annual dividend exclusion allowance
for individuals, reduced the dividends received deduction for corporations from
85% to 80% and substantially revised the federal income tax treatment of
contributions to retirement plans such as IRAs and 403(b) plans. The "TRA" also
contains other provisions that may affect the shareholders.
Dividends and distributions may also be subject to state and local taxes.
Since January 1, 1984 a stockholder must furnish a correct identification number
(social security number, usually) in order to avoid a penalty under the Internal
Revenue Code provisions.
PAX WORLD FUND, INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Investments, at value - note A
Common stocks (cost - $220,473,813).................................... $297,999,925
Bonds (cost - $214,008,870) ........................................... 212,096,094
-------------
510,096,019
Cash...................................................................... 4,468,131
Receivables
Dividends and interest ................................................. 4,605,618
-------------
Total assets ......................................................... 519,169,768
-------------
LIABILITIES
Payables
Capital stock reacquired ............................................... 5,274,181
Accrued expenses
Investment advisory fee ................................................ 222,908
Transfer agent fee ..................................................... 130,000
Other accrued expenses ................................................. 109,734
--------------
Total liabilities .................................................... 5,736,823
--------------
Net assets (equivalent to $16.56 per share based on
31,008,406 shares of capital stock outstanding) - note E........... $513,432,945
------------
Net asset value, offering price and redemption price per share
($513,432,945 / 31,008,406 shares outstanding) .................... $16.56
------
</TABLE>
See notes to financial statements.
PAX WORLD FUND, INCORPORATED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
<S> <C> <C>
Increase in net assets........................................... 1996 1995
----- -----
Operations
Investment income - net ......................................... $ 16,150,851 $ 14,647,876
Net realized gain on investments ................................ 26,195,518 11,853,476
Change in unrealized appreciation of investments 6,708,0278 83,655,967
------------- --------------
Net increase in net assets resulting from operations ............ 49,054,396 110,157,319
Net equalization (debits) ....................................... (38,061) (143,513)
Distributions to shareholders from
Investment income - net ($.55 and $.79 per share,
respectively) - note A .......................................... (16,099,745) (22,242,270)
Net realized gain on investments
($.892 and $.14 per share, respectively) - note A (26,195,473) (3,936,953)
Capital share transactions - note E ............................. 29,735,468 4,892,325
------------ ------------
Net increase in net assets....................................... 36,456,585 88,726,908
Net assets
Beginning of year ............................................... 476,976,360 388,249,452
------------ ------------
End of year (including undistributed investment
income - net of $332,132 and $319,087, respectively) $513,432,945 $476,976,360
------------ ------------
</TABLE>
See notes to financial statements.
PAX WORLD FUND, INCORPORATED
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Investment income
Income - note A
Dividends ................................................ $ 8,723,197
Interest.................................................. 11,735,322
----------
Total income ........................................... 20,458,519
Expenses
Investment advisory fee - note B ......................... $2,553,873
Transfer agent fee ....................................... 756,988
Distribution expenses - note D ........................... 502,260
Custodian fees - note F .................................. 142,038
Printing ................................................. 137,012
State taxes .............................................. 111,652
Legal fees and related expenses - note B.................. 57,832
Audit fees ............................................... 54,435
Directors fees and expenses - note B 48,784
Registration fees ........................................ 48,763
Other..................................................... 32,649
-----------
Total expenses ......................................... 4,446,286
Less: Fees paid indirectly - note F .................... 138,618
-----------
Net expenses ........................................ 4,307,668
-----------
Investment income - net ................................ 16,150,851
-----------
Realized and unrealized gain on investments - note C
Net realized gain on investments ........................... 26,195,518
Change in unrealized appreciation of investments
for the year.............................................. 6,708,027
-----------
Net gain on investments ................................ 32,903,545
-----------
Net increase in net assets resulting from operations ... $49,054,396
-----------
</TABLE>
See notes to financial statements.
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A - ACCOUNTING POLICIES
Pax World Fund, Incorporated (the "Fund") is a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. Significant accounting policies of the Fund are as follows:
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.
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.
Equalization: The Fund uses the accounting practice known as "equalization"
by which a portion of the proceeds from sales and costs of redemptions of
capital shares, equivalent on a per share basis to the amount of undistributed
net investment income on the date of the transactions, is credited or charged to
undistributed income. As a result, undistributed net investment income per share
is unaffected by sales or redemptions of capital shares.
Equalization is a permanent book/tax difference that causes a difference
between investment income and distributions.
Distributions to Shareholders: All distributions to shareholders are
recorded by the Fund on the ex-dividend dates.
In accordance with the Internal Revenue Code and applicable Revenue Rulings, the
amount of the 1995 distribution which could be designated as a capital gain
dividend ($11,855,124) was reduced by $7,918,171, the amount of the 1994 capital
loss carryover utilized in 1995. The resulting distribution designated as a
capital gain dividend was $3,936,953. The 1995 distribution of net investment
income, correspondingly, was increased by $7,918,171.
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.
Other: The Fund follows industry practice and records security transactions
on the trade date. Dividend income is recognized on the ex-dividend date, and
interest income is recognized on an accrual basis.
NOTE B - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement ("Agreement") with Pax World
Management Corp. ("Adviser") which provides for payment by the Fund of an annual
investment advisory fee of 3/4 of 1% of its average daily net assets on the
first $25,000,000 and 1/2 of 1% of its average daily net assets in excess of
that amount. Two officers, who are also directors of the Fund, are also officers
and directors of the Adviser. Another two officers of the Fund, who are not
directors of the Fund, are also officers of the Adviser. The Agreement provides
for an expense reimbursement from the Adviser if the Fund's total expenses,
exclusive of interest, brokerage commissions or fees, and taxes, but including
the investment advisory fee, exceeds 1-1/2% of the average daily net asset value
of the Fund for any full fiscal year. No expense reimbursement was required for
either 1996 or 1995.
All Directors are paid by the Fund for attendance at directors' meetings.
During 1996, the Fund incurred legal fees and related expenses of $57,832
with William M. Prifti, Esq., general counsel for the Fund. Mr. Prifti 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
1996 totalled $68,224 (18.6% of total 1996 commissions). Of this amount, $22,630
was paid subsequent to the siblings' purchase of Adviser's capital stock on
September 27, 1996 (48.8% of total commissions paid during the September 27,
1996 to December 31, 1996 period).
PAX WORLD FUND, INCORPORATED - NOTES TO FINANCIAL STATEMENTS, continued
NOTE C - INVESTMENTS
Purchases and proceeds from 1996 sales of investments, other than U.S.
Government agency bonds, aggregated $33,703,227 and $117,286,271, respectively.
Purchases and proceeds from 1996 sales and maturities of U.S. Government agency
bonds aggregated $141,778,479 and $52,000,000, respectively.
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 1996 would have been approximately the same
For Federal income tax purposes, the identified cost of investments owned at
December 31, 1996 was $434,482,683.
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. 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, and 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 services, if sales of the Fund
are made by such third parties during a fiscal year. The Board may terminate the
plan at any time with no penalty to the Fund. If the plan is terminated, the
payment of fees to third parties would be discontinued at that time.
NOTE E - CAPITAL AND RELATED TRANSACTIONS
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
---------- ----------
December 31, 1996 December 31, 1995
----------------- -----------------
Shares Dollars Shares Dollars
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Shares sold ................................... 3,151,719 $ 52,809,366 2,834,187 $ 42,166,166
Shares issued in reinvestment of dividends..... 2,360,551 39,060,319 1,512,585 24,008,199
------------ ------------- ----------- ------------
............................................... 5,512,270 91,869,685 4,346,772 66,174,365
Shares redeemed............................... (3,704,015) (62,134,217) (4,146,698) (61,282,040)
----------- ------------ ----------- ------------
Net increase................................... 1,808,255 $ 29,735,468 200,074 $ 4,892,325
------------ ------------ ------------- ------------
The components of net assets at December 31, 1996, are as follows:
Paid-in capital (75,000,000 shares of $1 par value authorized).. $445,407,251
Undistributed investment income................................. 332,132
Excess distribution of capital gains............................ (1,603)
Accumulated prior years net realized losses on investments..... (7,918,171)
Net unrealized appreciation of investments...................... 75,613,336
-------------
Net assets....................................................... $513,432,945
-------------
</TABLE>
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 mantained 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.
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS
COMMON STOCKS
<S> <C> <C> <C>
CONSUMER PRODUCTS
Colgate-Palmolive Co. ........................ 50,000 $ 4,612,500
Liz Claiborne, Inc. .......................... 190,000 7,338,750
----------
11,951,250 2.3%
----------
ELECTRIC UTILITY
Teco Energy, Inc.............................. 200,000 4,825,000 1.0
----------
FOOD
CPC International, Inc. ...................... 175,000 13,562,500
General Mills, Inc. .......................... 200,000 12,675,000
H.J. Heinz Co. ............................... 600,000 21,450,000
----------
47,687,500 9.3
HOME IMPROVEMENT PRODUCTS
Masco Corp.................................... 100,000 3,600,000 .7
----------
LOANS - STUDENT
Student Loan Marketing Association........... 42,600 3,967,125 .8
----------
MAILING EQUIPMENT...............................
Pitney Bowes, Inc. ........................... 166,700 9,085,150 1.8
----------
NATURAL GAS
Bay State Gas Co. ............................ 553,800 15,644,850
Brooklyn Union Gas Co. ....................... 587,600 17,701,450
Enron Corp. .................................. 250,000 10,781,250
Peoples Energy Corp. ......................... 551,900 18,695,612
----------
62,823,162 12.2
----------
PACKAGING
Bemis Co., Inc................................ 50,000 1,843,750 .4
----------
PHARMACEUTICALS
Bristol-Myers Squibb Co. ..................... 100,000 10,875,000
Johnson & Johnson ............................ 236,400 11,760,900
Merck & Co., Inc. ............................ 350,000 27,737,500
Pfizer, Inc. ................................. 118,900 9,853,838
----------
60,227,238 11.7
----------
RETAIL
Darden Restaurants, Inc. ..................... 592,400 5,183,500
Gap, Inc. .................................... 500,000 15,062,500
Home Depot, Inc. ............................. 150,000 7,518,750
Toys R Us, Inc................................ 600,000 18,000,000
Wal-Mart Stores, Inc.......................... 600,000 13,725,000
----------
59,489,750 11.6
----------
</TABLE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS, continued
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS
<S> <C> <C> <C>
COMMON STOCKS, continued
TELECOMMUNICATIONS
AirTouch Communications, Inc. ................ 300,000 $ 7,575,000
BellSouth Corp. .............................. 100,000 4,037,500
NYNEX Corp. .................................. 300,000 14,437,500
U.S. West, Inc. - Communications Group........ 200,000 6,450,000
--------------
32,500,000 6.3%
------------- -------
TOTAL COMMON STOCKS ............................ 297,999,925 58.1%
------------ ------
PRINCIPAL
GOVERNMENT AGENCY BONDS AMOUNT
Federal Farm Credit Banks Consolidated
7.750%, due December 9, 1997 ................. $10,000,000 10,187,790
Federal Home Loan Bank System
5.660%, due November 9, 1998.................. 7,000,000 6,960,590
5.025%, due February 23, 1999................ 9,000,000 8,821,440
5.825%, due March 12, 1999.................... 10,000,000 9,935,900
5.880%, due March 19, 1999.................... 13,000,000 12,955,280
5.660%, due January 12, 2000.................. 5,000,000 4,921,850
Federal National Mortgage Association
7.600%, due January 10, 1997.................. 10,000,000 10,003,100
6.050%, due November 10, 1997................. 14,000,000 14,043,484
7.510%, due November 14, 1997................. 10,000,000 10,155,560
5.620%, due February 10, 1999................. 10,000,000 9,852,390
5.230%, due February 24, 1999................. 8,000,000 7,840,560
6.110%, due September 20, 2000................ 12,000,000 11,936,280
6.080%, due September 25, 2000................ 5,000,000 4,968,750
5.820%, due December 5, 2000.................. 15,000,000 14,756,250
6.340%, due December 20, 2000................. 8,000,000 7,928,720
5.370%, due February 7, 2001.................. 20,000,000 19,315,600
5.410%, due February 13, 2001................. 10,000,000 9,670,300
5.360%, due February 16, 2001................. 10,000,000 9,651,600
6.710%, due July 24, 2001..................... 7,000,000 7,090,790
7.040%, due September 24, 2001................ 11,000,000 11,084,260
International Bank for Reconstruction
& Development
5.875%, due July 16, 1997................... 10,000,000 10,015,600
--------------
TOTAL GOVERNMENT AGENCY BONDS 212,096,094 41.3%
-------------- -------
TOTAL INVESTMENTS ........................ 510,096,019 99.4
Cash and receivables, less liabilities......... 3,336,926 .6
-------------- -------
NET ASSETS............................... $513,432,945 100.0%
-------------- -------
</TABLE>
See notes to financial statements.
Independent Auditors' Report
Board of Directors and Shareholders
Pax World Fund, Incorporated
We have audited the statement of assets and liabilities of Pax World Fund,
Incorporated, including the schedule of investments, at December 31, 1996, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and
financial highlights for each of the ten years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Pax
World Fund, Incorporated at December 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
Pannell Kerr Forster, P.C.
January 17, 1997
