PAX WORLD FUND INC, 497, 1998-05-11

PAX WORLD FUND INC
497, 1998-05-11

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<PAGE>
SUPPLEMENT DATED MAY 11, 1998
TO PROSPECTUS DATED APRIL 22, 1997

PAX WORLD FUND,
Incorporated

A NO-LOAD BALANCED 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 Fund, Incorporated (the
"Fund") dated April 22, 1997, 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 April 22, 1997, 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>
SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<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.................................................................... 0.13%
Other Expenses................................................................ 0.27%
Total Fund Operating Expenses................................................... 0.91%
</TABLE>

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
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............................................... $9.10 $28.42 $49.35 1$09.59
</TABLE>

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.

The 5% return factor in the example is a required amount by government
regulation and does not represent the actual average return made by the 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
<PAGE>
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
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.......................... $ 16.56 $ 16.33 $ 13.39 $ 13.55 $ 14.27 $ 14.99 $ 13.97 $ 13.98 $ 11.92 $ 11.58
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations
Investment income - net (C).... .493 .550 .80 .49 .51 .64 .82 .60 .61 .61
Realized and unrealized gain
(loss) on investments - net
(C)........................... 3.620 1.122 3.07 (.15) (.66) (.39) 2.17 .86 2.32 .71
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations.................... 4.113 1.672 3.87 .34 (.15) .25 2.99 1.46 2.93 1.32
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment
income........................ .503 .550 .79 .50 .50 .67 .77 .61 .62 .61
Distributions from
realized gains................ 1.650 .892 .14 - .07 .13 1.04 .84 .25 .37
Tax return of capital.......... - - - - - .17 .16 .02 - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions............ 2.153 1.442 .93 .50 .57 .97 1.97 1.47 .87 .98
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of year... $ 18.52 $ 16.56 $ 16.33 $ 13.39 $ 13.55 $ 14.27 $ 14.99 $ 13.97 $ 13.98 $ 11.92
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
2. TOTAL RETURN............... 25.12% 10.36% 29.19% 2.65% (1.05)% .6% 20.8% 10.5% 24.9% 11.5%
3. RATIOS AND SUPPLEMENTAL DATA
Ratio of total expenses to
average net assets (A)........ .91% .89% .97% .98% .94% 1.0% 1.2% 1.2% 1.1% 1.1%
Ratio of investment income -
net to
average net assets............ 2.67% 3.24% 3.44% 3.66% 3.63% 3.7% 5.1% 5.4% 5.8% 5.0%
Portfolio turnover rate........ 13.88% 34.55% 28.44% 25.45% 22.15% 17.4% 25.7% 38.9% 37.4% 57.5%
Average commission rate paid
(B)........................... $ .0669 $ .0599 $ .0714
Net assets, end of year
('000s)....................... $629,001 $513,433 $476,976 $388,249 $462,762 $469,275 $270,488 $119,831 $ 93,030 $ 73,650
Number of capital shares
outstanding, end of year
('000s)....................... 33,971 31,008 29,200 29,000 34,142 32,878 18,042 8,576 6,653 6,177
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>

(A) In order to conform to current disclosure requirements, the ratios
subsequent to 1994 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.

(B) The average commission rates are presented for years subsequent to 1994 to
conform to current disclosure requirements. This disclosure was not
required in prior years and has not been computed for the prior years.

3
<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 years for those persons who
are the officers and directors of the Fund.

<TABLE>
<CAPTION>
POSITION
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATION DURING THE PAST 5 YEARS
<S> <C> <C>
C. Lloyd Bailey Director (since 1970) Mr. Bailey is an attorney. From 1959 to 1979, Mr. Bailey served as
1216 Foulkeways the Executive Director of the United States Committee for UNICEF;
Gwynedd, PA 19436 from 1980 to 1981, Mr. Bailey served as President of that Committee;
and from 1981 to 1984, Mr. Bailey served as a consultant to that
Committee. Mr. Bailey is presently retired.

*Thomas W. Grant Vice Chairman of the Board Mr. Grant is the Vice Chairman of the Board and President of the
14 Wall Street of Directors and President Fund, as well as the President of Pax World Growth Fund, Inc., the
New York, NY 10005 (since 1996) President of Pax World Money Market Fund, Inc., the President of Pax
World Management Corp., the Fund's adviser, and the President of
H.G. Wellington & Co., Inc. ("H.G. Wellington"). Mr. Grant has been
associated with H. G. Wellington 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).

Anita D. Green Co-Treasurer (since 1998) Ms. Green is the Co-Treasurer of the Fund, the Assistant Treasurer
c/o Pax World Management Corp. of the Pax World Growth Fund, Inc. and the Manager - Shareholder
222 State Street Services for the Pax World Fund Family. Ms. Green has been
Portsmouth, NH 03801-3853 affiliated with the Pax World Fund Family since 1990.

Michelle L. Guilmette Assistant Treasurer (since Ms. Guilmette is the Assistant Treasurer for the Fund and has held
c/o Pax World Management Corp. 1997) that position since 1997. In addition, Ms. Guilmette has been a
222 State Street Shareholder Services Representative for the Pax World Fund Family
Portsmouth, NH 03801-3853 since 1992.
</TABLE>

4
<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATION DURING THE PAST 5 YEARS
<S> <C> <C>
Joy L. Liechty Director (since 1991) Ms. Liechty is a Client and Sales Advocate with the Mennonite Mutual
1403 Ashton Court Aid Association in Goshen, Indiana. Ms. Liechty has been associated
Goshen, IN 46526 with that organization since 1980, serving as the Manager of Client
Services from 1980 to 1989. Ms. Liechty is also a member of the
Board of Directors of Pax World Growth Fund, Inc.

Raymond L. Mannix Director (since 1970) Mr. Mannix is a certified public accountant and Professor Emeritus
71 Richmond Road of Boston University where he served as a Professor in the College
Belmont, MA 02178 of Business Administration for more than forty years.

*Laurence A. Shadek Chairman of the Board of Mr. Shadek is the Chairman of the Board of Directors of the Fund, as
14 Wall Street Directors (since 1996) well as the Chairman of the Board of the Pax World Growth Fund,
New York, NY 10005 Inc., an Executive Vice President of Pax World Money Market Fund,
Inc., the Chairman of the Board of Pax World Management Corp., the
Fund's adviser (the "Adviser"), and an Executive Vice-President of
H. G. Wellington & Co., Inc. ("H. G. Wellington"). Mr. Shadek,
together with members of his family, owns all of the outstanding
shares of capital stock of the Adviser and a 26.67% interest in H.G.
Wellington. Mr. Shadek has been associated with H. G. Wellington
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).

Sanford C. Sherman Director (since 1992) Mr. Sherman is the President and Chief Executive Officer of the
91 Hillside Drive Piscataqua Savings Bank, Portsmouth, NH, a position he has held
Portsmouth, NH 03801 since April 1981. For 21 years prior thereto, Mr. Sherman held
various other positions with the bank, including Vice President and
Treasurer. Mr. Sherman also served the bank as a Trustee for 20
years.
</TABLE>

5
<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATION DURING THE PAST 5 YEARS
<S> <C> <C>
Janet Lawton Spates Co-Treasurer (since 1998) Ms. Spates is the Co-Treasurer of the Fund, the Assistant Treasurer
c/o Pax World Management Corp. of the Pax World Growth Fund, Inc., and the Operations Manager for
222 State Street the Pax World Fund Family. Ms. Spates has been affiliated with the
Portsmouth, NH 03801-3853 Pax World Fund Family since 1992.

Nancy S. Taylor Director (since 1997) Ms. Taylor is a Senior Minister with the First Congregational Church
5298 N. Riffle Way in Boise, Idaho and has been associated with that organization since
Boise, ID 83703 1992. Prior to that, Ms. Taylor was an Associate Minister with the
Immanuel Congregational Church in Hartford, Connecticut for
approximately five years. Ms. Taylor is also a member of the Board
of Directors of Pax World Growth Fund, Inc.

Lee D. Unterman Secretary (since 1997) Mr. Unterman, who is the Secretary of the Fund, is a partner with
c/o Rosner Bresler Goodman & the law firm of Rosner Bresler Goodman & Unterman, LLP, which he
Unterman, LLP helped found in 1997. Mr. Unterman began his legal career in 1975
521 Fifth Avenue with the law firm of Whitman & Ransom and thereafter became a
New York, NY 10175 partner with the law firm of Broudy & Jacobson, with whom he
practiced for approximately nine and one-half years. Mr. Unterman is
a graduate of Colgate University (BA) and the University of Virginia
School of Law (JD).

Esther J. Walls Director (since 1981) Ms. Walls was Associate Director of Libraries, State University of
Apartment 29-J New York, Stony Brook, Long Island, NY, which position she held from
160 West End Avenue 1974 to 1990.
New York, NY 10023
</TABLE>

* "Interested person", as defined by the Investment Company Act of 1940, as
amended.

The Board has an Audit Committee consisting of Mr. Raymond L. Mannix and Mr.
Sanford C. Sherman, and an Investment Committee consisting of Messrs. Laurence
A. Shadek, Thomas W. Grant, Robert P. Colin (Portfolio Co-Manager of the Fund)
and Christopher H. Brown (Portfolio Co-Manager of the Fund). The Audit Committee
has responsibility for 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. The Investment Committee has responsibility for overseeing the
investments of the Fund.

INVESTMENT ADVISER

Pax World Management Corp., 222 State Street, Portsmouth, NH 03801-3853 (the
"Adviser") is the adviser to the Fund. As of December 31, 1997, the Adviser had
over $634,000,000 in assets under management by virtue of serving as the adviser
to the Fund and the Pax World Growth Fund, Inc. (the "Pax World Growth Fund").
The Adviser has no clients other than the Fund, the Pax World Growth Fund and
the Pax World Money Market Fund, Inc., a socially responsible money market fund
which is being

6
<PAGE>
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 officers of the Adviser are:

Laurence A. Shadek, Chairman of the Board of Directors
Thomas W. Grant, President
Thomas F. Shadek, Senior Vice President - Marketing
James M. Shadek, Senior Vice President for Social Research and Secretary
Katherine Shadek Boyle, Senior Vice President
Anita D. Green, Co-Treasurer
Janet Lawton Spates, Co-Treasurer

Messrs. Robert P. Colin and Christopher H. Brown are the Portfolio
Co-Managers of the Fund. They are the persons responsible for the day-to-day
management of the Fund's portfolio. Mr. Colin received his bachelor of arts
degree from Rutgers University and his masters in business
administration-finance from New York University. Mr. Colin joined H.G.
Wellington Capital Management, a division of H. G. Wellington & Co., Inc., in
1991 as a Senior Vice President and Senior Portfolio Manager. Mr. Colin was one
of the original founders of Faulkner, Dawkins & Sullivan in 1959, serving as
Director of Research and Investment Strategy. After Faulkner, Dawkins & Sullivan
merged with Shearson Lehman, and later, American Express, Mr. Colin worked
briefly for Merrill Lynch Asset Management before joining Bessemer Trust Company
in 1978 as a Senior Portfolio Manager and Director of Research. In 1983, Mr.
Colin joined General Electric Investment Corporation as a Senior Vice President
of Equity Portfolios with responsibilities for various funds under General
Electric's control, including its own pension fund.

Mr. Colin, who is a Chartered Financial Analyst, has contributed numerous
articles on investment research to professional journals and has served as a
consultant to a number of publicly-owned corporations.

Mr. Christopher H. Brown is a graduate of the Boston University School of
Management with a concentration in Finance. Prior to joining the Adviser in
1998, Mr. Brown was an Investment Consultant at Fahnestock and Company, a New
York Stock Exchange brokerage firm, for eleven years.

Mr. Anthony Brown, a former Executive Vice President, Treasurer and
Portfolio Manager of the Fund (1970 - 1998), is currently a consultant to the
Fund. Mr. Brown was a registered representative with Fahnestock & Co. from July
1982 to December 1990, and a Vice President of Fahnestock & Co. from August 1987
to December 1990. Mr. Brown has also been a trustee of the Piscataqua Savings
Bank, Portsmouth, NH since July 1990 and the Chairman of the Board of the bank
since August 1992.

FUND ANNUAL EXPENSES

For the fiscal year ended December 31, 1997, total expenses incurred by the
Fund, which includes expenses pursuant to the 12b-1 plan, amounted to 0.91%, or
less than 1.0%, of its average daily net assets.

NET ASSET VALUE

The Fund computes its net asset value ("NAV") once daily as of 4:15 P.M.,
New York time, on days that the New York Stock Exchange is open for trading
except on days on which no orders to purchase, sell or redeem shares have been
received by the Fund or days on which changes in the value of the Fund's
portfolio securities do not materially affect the NAV. NAV is computed by
dividing the value of the Fund's net assets (i.e., the value of its assets less
liabilities) by the total number of shares of the Fund outstanding. The Fund's
investments are valued based on market value or, where market quotations are not
readily available, based on fair value as determined in good faith under
procedures established by the Fund's Board of Directors.

7
<PAGE>
If an order is received in proper form by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund by the close of trading on
the floor of the New York Stock Exchange (currently 4:00 p.m., New York time) on
a business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day; otherwise, Fund shares will be purchased at the public
offering price determined as of the close of trading on the floor of the New
York Stock Exchange on the next business day, except where shares are purchased
through certain financial institutions that have entered into agreements with
the Fund as provided below.

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

PURCHASES BY TELEPHONE

In order to purchase shares by telephone, you must authorize telephone
purchases on your initial application form or by written notice to the Transfer
Agent. Thereafter, you may call the Fund at 800-372-7827 (toll free) to execute
a telephone purchase of shares, on weekdays, except holidays, between the hours
of 8:00 A.M. and 6:00 P.M., New York time. For your protection and to prevent
fraudulent purchases, your telephone call may be recorded and you will be asked
to provide your personal identification number. A written confirmation of the
purchase transaction will be sent to you. NEITHER THE FUND NOR ITS AGENTS WILL
BE LIABLE FOR ANY LOSS, LIABILITY OR COST WHICH RESULTS FROM ACTING UPON
INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE UNDER THE FOREGOING PROCEDURES.
All purchases will be made on the basis of the NAV of the Fund next determined
after the funds are received.

In periods of severe market or economic conditions, the telephone purchase
of shares may be difficult to implement and you should make purchases by mail by
writing to the Transfer Agent at Pax World Fund Family, P.O. Box 8930,
Wilmington, DE 19899-8930 or by overnight delivery c/o PFPC, Inc. 400 Bellevue
Parkway, Wilmington, DE 19809.

AUTOMATIC INVESTMENT PLAN

Under the Fund's Automatic Investment Plan, you may make regular monthly or
quarterly purchases of the Fund's shares via an automatic debit to a bank
account. For additional information about this service, you may contact the
Transfer Agent directly at 800-372-7827 between the hours of 8:00 A.M. and 6:00
P.M., New York time.

TAX-DEFERRED RETIREMENT PLANS

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

8
<PAGE>
REDEMPTIONS BY WRITTEN REQUEST

If the proceeds of redemption (i) exceed $10,000.00 (unless the record owner
has provided to the Transfer Agent a Shareholder Redemption Option form
authorizing the Transfer Agent to redeem shares of the Fund upon written
instructions without a signature guarantee), (ii) are to be paid to a person
other than the record owner, (iii) are to be sent to an address other than the
address of the Transfer Agent's records or within thirty (30) days after the
Transfer Agent has been notified of an address change, or (iv) are to be paid to
a corporation, partnership, trust or fiduciary, the signature(s) on the
redemption request and on the certificate, if any, or stock power must be
guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any domestic bank or trust company, broker, dealer,
clearing agency or savings association who are participants in a medallion
program recognized by the Securities Transfer Agents Association. The three
recognized medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and the New York Stock
Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees which are
not a part of these programs will not be accepted.

Notwithstanding the foregoing, any shareholder may elect to have the former
redemption by written request procedures (disclosed in the Fund's Prospectus
dated April 22, 1997) apply to such shareholder by giving written notice thereof
to the Fund at 222 State Street, Portsmouth, NH 03801-3853 on or before June 30,
1998.

REDEMPTIONS BY TELEPHONE

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

In order to redeem shares by telephone, you must authorize telephone
redemptions on your initial application form or by written notice to the
Transfer Agent and hold shares in non-certificate form. Thereafter, you may call
the Fund at 800-372-7827 (toll free) to execute a telephone redemption of
shares, on weekdays, except holidays, between the hours of 8:00 A.M. and 6:00
P.M., New York time. For your protection and to prevent fraudulent redemptions,
your telephone call may be recorded and you will be asked to provide your
personal identification number. A written confirmation of the redemption
transaction will be sent to you. NEITHER THE FUND NOR ITS AGENTS WILL BE LIABLE
FOR ANY LOSS, LIABILITY OR COST WHICH RESULTS FROM ACTING UPON INSTRUCTIONS
REASONABLY BELIEVED TO BE GENUINE UNDER THE FOREGOING PROCEDURES.

YEAR 2000

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

9
<PAGE>
SUPPLEMENT DATED MAY 11, 1998 TO THE
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 22, 1997

PAX WORLD FUND,
Incorporated

A NO-LOAD BALANCED 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 Fund, Incorporated (the "Fund") dated April 22, 1997, is not a prospectus,
and should be read in conjunction with the Fund's Prospectus dated April 22,
1997, 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.
<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 years for those persons who
are the officers and directors of the Fund.

<TABLE>
<CAPTION>
POSITION
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATION DURING THE PAST 5 YEARS
<S> <C> <C>
C. Lloyd Bailey Director (since Mr. Bailey is an attorney. From 1959 to
1216 Foulkeways 1970) 1979, Mr. Bailey served as the Executive
Gwynedd, PA 19436 Director of the United States Committee for
UNICEF; from 1980 to 1981, Mr. Bailey served
as President of that Committee; and from
1981 to 1984, Mr. Bailey served as a
consultant to that Committee. Mr. Bailey is
presently retired.

*Thomas W. Grant Vice Chairman of the Mr. Grant is the Vice Chairman of the Board
14 Wall Street Board of Directors and President of the Fund, as well as the
New York, NY 10005 and President (since President of Pax World Growth Fund, Inc.,
1996) the President of Pax World Money Market
Fund, Inc., the President of Pax World
Management Corp., the Fund's adviser, and
the President of H.G. Wellington & Co., Inc.
("H.G. Wellington"). Mr. Grant has been
associated with H.G. Wellington 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).

Anita D. Green Co-Treasurer (since Ms. Green is the Co-Treasurer of the Fund,
c/o Pax World Management 1998) the Assistant Treasurer of the Pax World
Corp. Growth Fund, Inc. and the Manager -
222 State Street Shareholder Services for the Pax World Fund
Portsmouth, NH Family. Ms. Green has been affiliated with
03801-3853 the Pax World Fund Family since 1990.

Michelle L. Guilmette Assistant Treasurer Ms. Guilmette is the Assistant Treasurer for
c/o Pax World Management (since 1997) the Fund and has held that position since
Corp. 1997. In addition, Ms. Guilmette has been a
222 State Street Shareholder Services Representative for the
Portsmouth, NH Pax World Fund Family since 1992.
03801-3853
</TABLE>

2
<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATION DURING THE PAST 5 YEARS
<S> <C> <C>
Joy L. Liechty Director (since Ms. Liechty is a Client and Sales Advocate
1403 Ashton Court 1991) with the Mennonite Mutual Aid Association in
Goshen, IN 46526 Goshen, Indiana. Ms. Liechty has been
associated with that organization since
1980, serving as the Manager of Client
Services from 1980 to 1989. Ms. Liechty is
also a member of the Board of Directors of
Pax World Growth Fund, Inc.

Raymond L. Mannix Director (since Mr. Mannix is a certified public accountant
71 Richmond Road 1970) and Professor Emeritus of Boston University
Belmont, MA 02178 where he served as a Professor in the
College of Business Administration for more
than forty years.

*Laurence A. Shadek Chairman of the Mr. Shadek is the Chairman of the Board of
14 Wall Street Board of Directors Directors of the Fund, as well as the
New York, NY 10005 (since 1996) Chairman of the Board of the Pax World
Growth Fund, Inc., an Executive Vice
President of Pax World Money Market Fund,
Inc., the Chairman of the Board of Pax World
Management Corp., the Fund's adviser (the
"Adviser"), and an Executive Vice-President
of H.G. Wellington & Co., Inc. ("H.G.
Wellington"). Mr. Shadek, together with
members of his family, owns all of the
outstanding shares of capital stock of the
Adviser and a 26.67% interest in H.G.
Wellington. Mr. Shadek has been associated
with H. G. Wellington 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).

Sanford C. Sherman Director (since Mr. Sherman is the President and Chief
91 Hillside Drive 1992) Executive Officer of the Piscataqua Savings
Portsmouth, NH 03801 Bank, Portsmouth, NH, a position he has held
since April 1981. For 21 years prior
thereto, Mr. Sherman held various other
positions with the bank, including Vice
President and Treasurer. Mr. Sherman also
served the bank as a Trustee for 20 years.
</TABLE>

3
<PAGE>
<TABLE>
<CAPTION>
POSITION
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATION DURING THE PAST 5 YEARS
<S> <C> <C>
Janet Lawton Spates Co-Treasurer (since Ms. Spates is the Co-Treasurer of the Fund,
c/o Pax World Management 1998) the Assistant Treasurer of the Pax World
Corp. Growth Fund, Inc., and the Operations
222 State Street Manager for the Pax World Fund Family. Ms.
Portsmouth, NH Spates has been affiliated with the Pax
03801-3853 World Fund Family since 1992.

Nancy S. Taylor Director (since Ms. Taylor is a Senior Minister with the
5298 N. Riffle Way 1997) First Congregational Church in Boise, Idaho
Boise, ID 83703 and has been associated with that
organization since 1992. Prior to that, Ms.
Taylor was an Associate Minister with the
Immanuel Congregational Church in Hartford,
Connecticut for approximately five years.
Ms. Taylor is also a member of the Board of
Directors of Pax World Growth Fund, Inc.

Lee D. Unterman Secretary (since Mr. Unterman, who is the Secretary of the
c/o Rosner Bresler 1997) Fund, is a partner with the law firm of
Goodman & Rosner Bresler Goodman & Unterman, LLP,
Unterman, LLP which he helped found in 1997. Mr. Unterman
521 Fifth Avenue began his legal career in 1975 with the law
New York, NY 10175 firm of Whitman & Ransom and thereafter
became a partner with the law firm of Broudy
& Jacobson, with whom he practiced for
approximately nine and one-half years. Mr.
Unterman is a graduate of Colgate University
(BA) and the University of Virginia School
of Law (JD).

Esther J. Walls Director (since Ms. Walls was Associate Director of
Apartment 29-J 1981) Libraries, State University of New York,
160 West End Avenue Stony Brook, Long Island, NY, which position
New York, NY 10023 she held from 1974 to 1990.
</TABLE>

* "Interested person", as defined by the Investment Company Act of 1940, as
amended.

INVESTMENT ADVISORY AND OTHER SERVICES

The following table shows the amount of the advisory fee of the Fund for the
years ended December 31, 1995, 1996 and 1997:

<TABLE>
<S> <C>
Year ended December 31, 1995: $ 2,192,000
Year ended December 31, 1996: 2,554,000
Year ended December 31, 1997: 2,889,714
</TABLE>

4
<PAGE>
OTHER EXPENSES

The Fund currently pays each unaffiliated Director a fee of $1,000.00, and
each affiliated Director a fee of $200.00, for attendance at each meeting of the
Board of Directors of the Fund, plus reimbursement for travel expenses incurred
in connection with attending such meetings. 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. Director's fees paid by the Fund in 1997 and
travel expenses reimbursed by the Fund to members of the Board of Directors
(including members of the Audit Committee) in 1997 aggregated approximately
$24,600.00 and $10,145.00, respectively.

The Fund has a distribution expense plan in effect under the provisions of
Rule 12b-1 under the Investment Company Act of 1940, as amended. During the last
fiscal year, approximate amounts paid by the Fund under the plan were spent on:
advertising: $325,000.00; printing and postage: $45,000.00; and sales related
expenses: $352,000.00.

BROKERAGE ALLOCATION

For the years ended December 31, 1995, 1996 and 1997, brokerage commissions
amounted to approximately $360,000.00, $367,000.00 and $365,000.00,
respectively.

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 H.G. Wellington & Co., Inc. ("H.G. Wellington"), which is
a brokerage firm which the Fund may utilize to execute security transactions.
Brokerage commissions paid by the Fund to H.G. Wellington during 1996 and 1997
totaled $68,224.00 and $132,372.00, respectively (18.6% and 36.3%, respectively,
of total 1996 and 1997 commissions). Of the 1996 amount, $22,630.00 was paid
subsequent to the Shadek family's purchase of the Adviser's capital stock on
September 27, 1996 (48.8% of total commissions paid during the period September
27, 1996 to December 31, 1996).

PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED

NET ASSET VALUE

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

5
<PAGE>
Orders for the purchase of Fund shares received, by certain financial
institutions that have entered into agreements with the Fund, by the close of
trading on the floor of the New York Stock Exchange on any business day and
transmitted to the Transfer Agent or other entity authorized to receive orders
on behalf of the Fund by 8:00 p.m., New York time (or, due to unforeseen
circumstances, by 9:30 a.m., New York time, on the following business day) will
be based on the NAV determined as of the close of trading on the floor of the
New York Stock Exchange on the day that such order was received by such
financial institution. Otherwise, the orders will be based on the next
determined NAV. It is the financial institution's responsibility to transmit
orders so that they will be received by the Transfer Agent or such other entity
on a timely basis.

PURCHASES BY TELEPHONE

AUTOMATIC INVESTMENT PLAN

TAX-DEFERRED RETIREMENT PLANS

REDEMPTIONS BY WRITTEN REQUEST

6
<PAGE>
on the redemption request and on the certificate, if any, or stock power must be
guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any domestic bank or trust company, broker, dealer,
clearing agency or savings association who are participants in a medallion
program recognized by the Securities Transfer Agents Association. The three
recognized medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and the New York Stock
Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees which are
not a part of these programs will not be accepted.

REDEMPTIONS BY TELEPHONE

YEAR 2000

7
<PAGE>
PAX WORLD FUND, INCORPORATED

FINANCIAL STATEMENTS
AND
FINANCIAL HIGHLIGHTS
FOR YEAR ENDED
DECEMBER 31, 1997

8
<PAGE>
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, 1997, 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, 1997, 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, 1997, 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.

As more fully disclosed in note G, the Fund changed its method of accounting for
bond discounts and premiums in 1997.

/s/ PANNELL KERR FORSTER

January 16, 1998

9
<PAGE>
PAX WORLD FUND, INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997

<TABLE>
<S> <C>
Assets
Investments, at value - note A
Common stocks (cost - $193,450,461)........................................ $ 330,044,150
Bonds (cost - $158,243,397)................................................ 158,560,570
Certificates of deposit (cost - $130,000,000).............................. 130,000,000
-------------
618,604,720
Cash......................................................................... 7,333,953
Receivables
Dividends and interest..................................................... 3,555,217
-------------
Total assets............................................................. 629,493,890
-------------

Liabilities
Payables
Capital stock reacquired................................................... 70,094
Accrued expenses
Investment advisory fee.................................................... 262,568
Transfer agent fee......................................................... 98,000
Other accrued expenses..................................................... 61,825
-------------
Total liabilities........................................................ 492,487
-------------
Net assets (equivalent to $18.52 per share based on 33,970,797 shares of
capital stock outstanding) - note E......................................... $ 629,001,403
-------------
Net asset value, offering price and redemption price per share
($629,001,403 DIVIDED BY 33,970,797 shares outstanding)..................... $ 18.52
-------------
</TABLE>

See notes to financial statements 10
<PAGE>
PAX WORLD FUND, INCORPORATED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C> <C>
Investment income
Income - note A
Dividends................................................... $ 6,506,485
Interest - note G........................................... 13,617,122
-------------
Total income............................................ 20,123,607
Expenses
Investment advisory fee - note B............................ $ 2,889,714
Distribution expenses - note D.............................. 762,366
Transfer agent fee.......................................... 758,116
State taxes................................................. 267,507
Custodian fees - note F..................................... 154,890
Printing.................................................... 88,959
Legal fees and related expenses - note B.................... 63,840
Other....................................................... 59,655
Registration fees........................................... 57,253
Audit fees.................................................. 35,349
Directors' fees and expenses - note B....................... 34,745
-----------
Total expenses.......................................... 5,172,394
Less: Fees paid indirectly - note F..................... 151,555
-----------
Net expenses........................................... 5,020,839
-------------
Investment income - net................................. 15,102,768
-------------
Realized and unrealized gain on investments - note C
Net realized gain on investments.............................. 50,894,781
Change in unrealized appreciation of investments for the
year........................................................ 61,297,526
-------------
Net gain on investments................................. 112,192,307
-------------
Net increase in net assets resulting from operations.... $ 127,295,075
-------------
</TABLE>

See notes to financial statements 11
<PAGE>
PAX WORLD FUND, INCORPORATED
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
Years Ended
December 31
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
Increase in net assets
Operations
Investment income - net................................... $ 15,102,768 $ 16,150,851
Net realized gain on investments.......................... 50,894,781 26,195,518
Change in unrealized appreciation of investments.......... 61,297,526 6,708,027
------------- -------------
Net increase in net assets resulting from
operations.......................................... 127,295,075 49,054,396
Net equalization credits (debits)........................... 54,638 (38,061)
Distributions to shareholders from
Investment income - net ($.503 and $.550 per share,
respectively) - note A.................................. (15,480,324) (16,099,745)
Net realized gain on investments ($1.650 and $.892 per
share, respectively) - note A........................... (50,894,724) (26,195,473)
Capital share transactions - note E......................... 54,593,793 29,735,468
------------- -------------
Net increase in net assets............................ 115,568,458 36,456,585
Net assets
Beginning of year........................................... 513,432,945 476,976,360
------------- -------------
End of year (including undistributed investment income - net
of $9,214 and $332,132, respectively)..................... $ 629,001,403 $ 513,432,945
------------- -------------
</TABLE>

See notes to financial statements 12
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997

<TABLE>
<CAPTION>
Number of Percent of
Name of Issuer and Title of Issue Shares Value Net Assets
- --------------------------------------------------- ------------ ------------- -------------
<S> <C> <C> <C>
COMMON STOCKS
CONSUMER PRODUCTS
Liz Claiborne, Inc............................... 94,000 $ 3,930,375 .6%
-------------
FOOD
CPC International, Inc........................... 100,000 10,775,000
General Mills, Inc............................... 100,000 7,162,500
H.J. Heinz Co.................................... 100,000 5,081,250
-------------
23,018,750 3.7
-------------
HOME IMPROVEMENT PRODUCTS
Masco Corp....................................... 100,000 5,087,500 .8
-------------
LOANS - STUDENT
SLM Holding Corp................................. 42,600 5,926,725 .9
-------------
MAILING EQUIPMENT
Pitney Bowes, Inc................................ 166,700 14,992,581 2.4
-------------
MANUFACTURED HOMES
Champion Enterprises, Inc........................ 550,000 11,309,375
Oakwood Homes Corp............................... 288,700 9,581,231
-------------
20,890,606 3.3
-------------
MEDICAL EQUIPMENT
Medtronic, Inc................................... 200,000 10,462,500 1.7
-------------
NATURAL GAS
Bay State Gas Co................................. 553,800 20,559,825
Enron Corp....................................... 500,000 20,781,250
KeySpan Energy Corp.............................. 587,600 21,631,025
Peoples Energy Corp.............................. 551,900 21,731,063
-------------
84,703,163 13.5
-------------
PACKAGING
Bemis Co., Inc................................... 50,000 2,203,125 .4
-------------
PHARMACEUTICALS
Bristol-Myers Squibb Co.......................... 100,000 9,462,500
Johnson & Johnson................................ 100,000 6,587,500
Merck & Co., Inc................................. 200,000 21,250,000
Pfizer, Inc...................................... 100,000 7,456,250
-------------
44,756,250 7.1
-------------
PUBLISHING
CMP Media, Inc................................... 29,600 510,600 .1
-------------
</TABLE>

See notes to financial statements 13
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Number of Percent of
Name of Issuer and Title of Issue Shares Value Net Assets
- --------------------------------------------------- ------------ ------------- -------------
COMMON STOCKS (CONTINUED)
<S> <C> <C> <C>
RETAIL
Gap, Inc......................................... 750,000 $ 26,578,125
Gymboree Corp.................................... 108,200 2,961,975
Home Depot, Inc.................................. 75,000 4,415,625
Starbucks Corp................................... 200,000 7,675,000
Toys R Us, Inc................................... 600,000 18,862,500
-------------
60,493,225 9.6%
-------------
TELECOMMUNICATIONS
AirTouch Communications, Inc..................... 700,000 29,093,750
BellSouth Corp................................... 100,000 5,631,250
Loral Space Communications....................... 200,000 4,287,500
Southern NE Telecomm. Corp....................... 100,000 5,031,250
U.S. West, Inc. - Communications Group........... 200,000 9,025,000
-------------
53,068,750 8.4
------------- ------
Total common stocks................................ $ 330,044,150 52.5%
------------- ------
</TABLE>

See notes to financial statements 14
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Principal Percent of
Name of Issuer and Title of Issue Amount Value Net Assets
- --------------------------------------------------- ------------ ------------- -------------
GOVERNMENT AGENCY BONDS
<S> <C> <C> <C>
Federal Home Loan Bank System
5.660%, due November 9, 1998..................... $ 7,000,000 $ 6,995,590
5.025%, due February 23, 1999.................... 9,000,000 8,919,810
5.825%, due March 12, 1999....................... 10,000,000 9,962,500
5.880%, due March 19, 1999....................... 13,000,000 13,018,330
5.660%, due January 12, 2000..................... 5,000,000 4,967,200

Federal National Mortgage Association
5.620%, due February 10, 1999.................... 10,000,000 9,987,730
5.230%, due February 24, 1999.................... 8,000,000 7,947,680
6.110%, due September 20, 2000................... 12,000,000 12,080,640
6.080%, due September 25, 2000................... 5,000,000 5,030,450
5.820%, due December 5, 2000..................... 15,000,000 14,995,350
6.340%, due December 20, 2000.................... 8,000,000 7,983,760
5.370%, due February 7, 2001..................... 20,000,000 19,712,400
5.410%, due February 13, 2001.................... 10,000,000 9,856,200
5.360%, due February 16, 2001.................... 10,000,000 9,853,100
6.710%, due July 24, 2001........................ 7,000,000 7,182,630
7.040%, due September 24, 2001................... 10,000,000 10,067,200
-------------
Total government agency bonds.................. 158,560,570 25.2%
-------------
CERTIFICATES OF DEPOSIT
State Street Bank
5.000%, due January 5, 1998...................... 20,000,000 20,000,000
5.000%, due January 6, 1998...................... 25,000,000 25,000,000
5.000%, due January 12, 1998..................... 20,000,000 20,000,000
5.000%, due January 14, 1998..................... 10,000,000 10,000,000
5.000%, due January 20,1998...................... 30,000,000 30,000,000
5.000%, due January 28, 1998..................... 25,000,000 25,000,000
-------------
Total certificates of deposit.................. 130,000,000 20.7%
------------- ------
Total investments.............................. 618,604,720 98.4
Cash and receivables, less liabilities............. 10,396,683 1.6
------------- ------
Net assets..................................... $ 629,001,403 100.0%
------------- ------
</TABLE>

See notes to financial statements 15
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

NOTE A-ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Pax World Fund, Incorporated ("Fund") is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's policy is to invest in securities of companies whose
business is essentially directed toward non-military and life-supportive
activities. Its investment objective is 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.

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. Certificates of deposit are valued at
cost; accrued interest to December 31 is included in interest receivable.

AMORTIZATION OF BOND PREMIUM AND DISCOUNT

Commencing January 1, 1997, the Fund amortizes purchase price premium and
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 first call date. Reference is made to note G. Net discount amortization
for 1997 was $765,743.

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.

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

16
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997

NOTE A-ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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

Pursuant to an Advisory Agreement ("Agreement") between the Fund and Pax
World Management Corp. ("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.
The Agreement provides for payment by the Fund to the Adviser 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 officer of the Fund, who is not a director
of the Fund, is also an officer 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 1997 or 1996.

All Directors are paid by the Fund for attendance at directors' meetings.

During 1997, the Fund incurred legal fees and related expenses of $39,359
with William M. Prifti, Esq., who was general counsel for the Fund through
December 31, 1997. Mr. Prifti was Secretary of the Fund through December 31,
1997. The remaining $24,481 of legal fees and related expenses were incurred
with others.

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
1997 and 1996 totaled $132,372 and $68,224, respectively, (36.3% and 18.6%,
respectively of total 1997 and 1996 commissions). Of the 1996 amount, $22,630
was paid subsequent to the siblings' purchase of the Adviser's capital stock on
September 27, 1996 (48.8% of total commissions paid during the period September
27, 1996 to December 31, 1996).

NOTE C-INVESTMENTS

Purchases and proceeds from sales of investments, excluding short-term
investments and U.S. Government agency bonds, aggregated $69,482,007 and
$147,397,370, respectively, for 1997. Purchases and proceeds from sales and
maturities of U.S. Government agency bonds aggregated $-0-and $55,002,500,
respectively, for 1997.

17
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997

NOTE C-INVESTMENTS (CONTINUED)
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 1997 would have been approximately the same.

For Federal income tax purposes, the identified cost of investments owned at
December 31, 1997 was $481,693,858.

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 to finance activity which is primarily intended
to result in the sale of Fund 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.

NOTE E-CAPITAL AND RELATED TRANSACTIONS

Transactions in capital stock were as follows:

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------------- -------------------------
<S> <C> <C> <C> <C>
Shares Dollars Shares Dollars
---------- ------------- ---------- -------------
Shares sold........................... 2,794,352 $ 50,868,833 3,151,719 $ 52,809,366
Shares issued in reinvestment of
distributions....................... 3,363,399 61,541,465 2,360,551 39,060,319
---------- ------------- ---------- -------------
6,157,751 112,410,298 5,512,270 91,869,685
Shares redeemed....................... (3,195,360) (57,816,505) (3,704,015) (62,134,217)
---------- ------------- ---------- -------------
Net increase.......................... 2,962,391 $ 54,593,793 1,808,255 $ 29,735,468
---------- ------------- ---------- -------------
</TABLE>

18
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997

NOTE E-CAPITAL AND RELATED TRANSACTIONS (CONTINUED)
The components of net assets at December 31, 1997, are as follows:

<TABLE>
<S> <C>
Paid-in capital (75,000,000 shares of $1 par value authorized)............... $ 500,001,044
Undistributed investment income.............................................. 9,214
Excess distribution of capital gains......................................... (1,546)
Accumulated prior years' net realized losses on investments.................. (7,918,171)
Net unrealized appreciation of investments................................... 136,910,862
-------------
Net assets............................................................... $ 629,001,403
-------------
</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 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.

NOTE G-ACCOUNTING CHANGE

Effective January 1, 1997, the Fund adopted the policy of amortizing bond
purchase price discounts and premiums over the remaining lives of the respective
bonds (or to the first call date for callable bonds). The effect of the change
is to reflect the amortization as an adjustment to interest income. Previously,
discounts and premiums were recognized as part of the net realized gain or loss
when the bonds matured or were sold. This change has no net effect on net assets
or on the net increase in net assets resulting from operations.

Upon adopting the new policy, the Fund recognized the cumulative
amortization of discounts and premiums on the bonds held at January 1, 1997.
This resulted in a one-time charge for net discount amortization through January
1, 1997 on bonds held on that date. Thus, there was a net reduction of
approximately $1,040,000 in interest income for the year ended December 31, 1997
(approximately $.03 per share). Correspondingly, there was an identical one-time
credit to net gain on investments for the period.

19
<PAGE>
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)