1997 ANNUAL
REPORT
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P A X
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WORLD
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FUND
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[Graphic Omitted]
ANNUAL
REPORT
DECEMBER 31, 1997
<PAGE>
Dear Pax World Fund Shareholder,
We are pleased to report that Pax World Fund recorded solid growth in
1997. The Fund posted a total return of 25.12%, more than 25% better than the
benchmark Lipper Balanced Fund Index, which posted a 20.05% return for the year.
We credit Portfolio Manager Anthony Brown for the Fund's performance, which
placed us in the top 5% of all balanced funds. Because he raised cash as the
year progressed and increased the Fund's fixed-income holdings to a very
conservative 50% of the portfolio, Tony's results are even more impressive. To
outperform the Lipper Index by 25% with a risk level only 40% as high as the
overall market is truly remarkable.
By most accounts, 1997 was also a good year throughout the U.S. economy.
With inflation growing at a negligible 2% rate and unemployment falling to 4.6%,
the economy was moving upward at a pace that exceeded most economists'
forecasts. However, beneath the patina of a rising economy and advancing stock
and bond prices, the picture was not quite as glowing. Most notably, the
currency and financial crisis which is buffeting virtually every country in
Southeast Asia has created an aura of uncertainty for U.S. businesses as well as
for our stock market. Volatility is on the rise and despite the positive
performance achieved in 1997, three corrections exceeding 7% punctuated the
final result. Moreover, the Dow Jones Industrial Average has failed to exceed
the intraday high set early in August of 1997.
Notwithstanding these concerns, the U.S. economy is expected to achieve
moderate (2-3%) growth in 1998, and corporate profits are forecast to increase
7-8% this year. Admittedly, these growth rates are below those recorded in 1997,
but we believe that sufficient investment opportunities will be created within
that framework, and the Fund's large cash reserves give us the flexibility to
take advantage of those opportunities.
On a personal note, we want to express sincere thanks to you, our
shareholders, who offered us much support and many kind words of encouragement
through our first full year. We also extend thanks to our staff in New
Hampshire, who are second to none in their commitment to our shareholders and to
the values of socially responsible investing.
We encourage as many of you as possible to attend the annual meeting,
which will be held at the State Street Bank and Trust Company, 225 State Street,
Boston, Massachusetts, on June 11. If you can't attend, please feel free to call
or write us in New Hampshire with any thoughts. We value your input.
Sincerely yours,
/s/ Laurence A. Shadek /s/ Thomas W. Grant
Laurence A. Shadek Thomas W. Grant
Chairman President
January 20, 1998
<PAGE>
QUESTIONS AND ANSWERS - Anthony S. Brown, Portfolio Manager
- --------------------------------------------------------------------------------
Q. What factors affected Pax World Fund's performance during the past year?
A. The Pax World Fund out-performed most other balanced funds in 1997 for the
following reasons:
1. We took a conservative stance and lightened up on the equity side of
the portfolio during the summer months.
2. We took the proceeds and invested approximately $130,000,000 in 30 day
certificates of deposit which are not affected by a down market.
3. We had very little exposure in the "high tech" sectors of the market or
the small capital stocks. These two groups suffered the largest
declines during the second half of 1997.
4. We had no foreign market exposure.
Q. How did Pax World Fund's portfolio perform in 1997?
A. The Fund's portfolio finished the year with a total return to shareholders
of 25.12%, and we also paid out the largest capital gain distribution in
the history of the Fund.
Total Return for 1997
PAX WORLD FUND +25.12%
LIPPER BALANCED FUND INDEX +20.05%
DOW JONES INDUSTRIAL AVERAGE +22.64%
Q. What has your investment strategy been during this period?
A. As the stock market continued to rise during the first 7 months of the
year, we continued to lighten up on the equity side of the portfolio and
transferred the proceeds into 30 day certificates of deposit. We felt the
market was over-priced so we chose this method to protect the shareholders
somewhat from a market correction. The Fund's portfolio of investments at
the end of 1997 was very conservative with approximately 50% of assets in
short term government agency bonds and 30 day certificates of deposit. The
approximately 50% of the portfolio in equities is primarily invested in
non-cyclical consumer basic stocks.
Q. What are some examples of stocks you purchased during the year?
A. New positions were taken during the year in the following companies: Loral
Space Communications, Inc., wireless communications; CMP Media Inc.,
publishing textbooks; Champion Enterprises Inc., manufactured housing;
Gymboree Corp., retail baby clothes; Medtronic Inc., medical devices;
Oakwood Homes Corp., manufactured housing; Southern New England
Telecommunications Corp., local telephone co.; Starbucks Corp., retail
coffee chain.
- --------------------------------------------------------------------------------
- ----------------------------------
Security Diversification, 12/31/97
- ----------------------------------
[The following information was represented as a pie chart in the printed
material.]
U.S. Government Agency Bonds 24%
Certificates of Deposit 21%
Natural Gas 13%
Retail 10%
Pharmaceuticals 7%
Telecommunications 8%
Other 14%
- --------------------------
Asset Allocation, 12/31/97
- --------------------------
[The following information was represented as a pie chart in the printed
material.]
Common Stocks 52%
U.S. Government Agency Bonds 24%
Certificates of Deposit 21%
Cash & Equivalents 3%
2
<PAGE>
TEN YEAR ANNUAL TOTAL RETURN
HISTORICAL
- --------------------------------------------------------------------------------
[The following information was represented as a graph in the printed material.]
Pax World Fund, Inc. Lipper Balanced Fund Index
-------------------- --------------------------
1987 $10,000 $10,000
1988 $11,151 $10,786
1989 $13,643 $12,931
1990 $14,688 $12,862
1991 $16,768 $15,478
1992 $16,831 $16,190
1993 $16,726 $17,357
1994 $16,991 $17,137
1995 $19,910 $19,596
1996 $20,946 $20,897
1997 $23,458 $22,902
*Pax World Fund, Inc.
25.12% 1 yr. total return
12.62% 5 yr. avg. total return
12.98% 10 yr. avg. total return
Lipper Balanced Fund Index
20.05% 1 yr. total return
13.42% 5 yr. avg. total return
12.90% 10 yr. avg. total return
*The cumulative total return (compounding reinvested dividends and capital
gains) of Pax World Fund over the past ten years was 238.81%. A $10,000
investment would have grown to $33,881.
The line graph on the above chart for Pax World Fund was adjusted to exclude the
result of cumulatively compounding earnings from dividends and capital gains.
The Lipper Balanced Fund Index also excludes compounding.
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ten Largest Stock Holdings, 12/31/97
- --------------------------------------------------------------------------------
Percent of
Company Net Assets
AirTouch Communications Inc...........................4.6%
Gap Inc...............................................4.2%
Peoples Energy Corp...................................3.5%
KeySpan Energy Corp...................................3.4%
Merck & Co. Inc.......................................3.4%
Enron Corp............................................3.3%
Bay State Gas Co......................................3.3%
Toys R Us Inc. .......................................3.0%
Pitney Bowes Inc......................................2.4%
Champion Enterprises Inc..............................1.8%
- ----------------------------------------------------------
Total 32.9%
- --------------------------------------------------------------------------------
Key Statistics, 12/31/97
- --------------------------------------------------------------------------------
Change in NAV ($16.56 to $18.52)......................$1.96
12 Month Total Return................................25.12%
Net Increase in Net Assets Resulting
From Operations..............................$127.3 million
Total Net Assets.............................$629.0 million
3
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS
December 31, 1997
NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS
- --------------------------------------------------------------------------------
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
-------------
4
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS, continued
NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS
- --------------------------------------------------------------------------------
COMMON STOCKS, continued
PUBLISHING......................
CMP Media, Inc................ 29,600 $ 510,600 .1%
-------------
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
------------- -----
PRINCIPAL
AMOUNT
---------
GOVERNMENT AGENCY BONDS
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
5
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS, continued
PRINCIPAL PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE NET ASSETS
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY BONDS, continued
Federal National Mortgage
Association
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%
------------- -----
See notes to financial statements.
6
<PAGE>
PAX WORLD FUND, INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
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 / 33,970,797 shares outstanding) .............. $ 18.52
------------
</TABLE>
See notes to financial statements
7
<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.
8
<PAGE>
PAX WORLD FUND, INCORPORATED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended
December 31
------------------------------
1997 1996
------------------------------
<S> <C> <C>
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.
9
<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 (the "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.
10
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS, continued
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
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 totalled $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 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
11
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS, continued
proceeds from sales and maturities of U.S. Government agency bonds aggregated
$-0- and $55,002,500, respectively, for 1997.
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
------------------------------ ------------------------------
Shares Dollars Shares Dollars
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
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>
12
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS, continued
The components of net assets at December 31, 1997, are as follows:
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
-------------
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.
13
<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.
(C) Reference is made to note G for the 1997 results.
14
<PAGE>
[LETTERHEAD OF PANNELL KERR FORSTER PC]
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 P.C.
January 16, 1998
15
<PAGE>
Pax World Fund
A No-Load Diversified Balanced Fund
222 State Street
Portsmouth, NH 03801-3853
http://www.paxfund.com/
For General Fund Information, please call:
1-800-767-1729
For Shareholder Account Information:
1-800-372-7827
For Broker Services:
1-800-635-1404
Transfer and Disbursing Agent-
PFPC, Inc.
Attn: Pax World Fund, Inc.
P.O. Box 8950
Wilmington, DE 19899-8950
General Counsel-
Rosner, Bresler, Goodman & Unterman, LLP
521 Fifth Avenue
New York, NY 10175
Independent Auditors-
Pannell Kerr Forster, P.C.
125 Summer Street
Boston, MA 02110-2326
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 Growth Fund, Inc.
P.O. Box 8930
Wilmington, DE 19899-8930
- --------------------------------------------------------------------------------
Pax World Fund, Inc. Total Return
- Periods Ended December 31, 1997 -
Annualized Cumulative
1 Year 25.12% 25.12%
3 Years 21.28% 78.38%
5 Years 12.62% 81.17%
10 Years 12.98% 238.81%
15 Years 13.08% 532.23%
- --------------------------------------------------------------------------------
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