PAX WORLD FUND INC, 485APOS, 1999-02-26

PAX WORLD FUND INC
485APOS, 1999-02-26

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As filed with the Securities and Exchange Commission on February 26, 1999

Registration No. 2-38679

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 38 [X]

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 38 [X]
(Check appropriate box or boxes)

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

222 STATE STREET
PORTSMOUTH, NH 03801-3853
(Address of Principal Executive Offices) (Zip Code)

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

PAX WORLD MANAGEMENT CORP.
222 STATE STREET
PORTSMOUTH, NH 03801-3853
ATTENTION: LAURENCE A. SHADEK
THOMAS W. GRANT
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box):
<TABLE>
<CAPTION>

<S> <C> <C> <C>
[X] Immediately upon filing pursuant to paragraph (b) [ ] On (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1) [ ] On (date) pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2) [ ] On (date) pursuant to paragraph (a)(2) of
rule 485
If appropriate, check the following box:
</TABLE>

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940, Registrant's Rule 24f-2 Notice for fiscal year
ended December 31, 1997 was filed on March 31, 1998.

<PAGE>
CROSS REFERENCE SHEET (AS
REQUIRED BY RULE 495)
<TABLE>
<CAPTION>

N-1A ITEM NO. LOCATION
------------- --------

PART A

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

Item 2. Risk/Return Summary: Investments,
Risks, and Performance.................................... (i) Fund Highlights - Investments and Special
Considerations; Risk Factors;
(ii) Financial Highlights;
(iii) How the Fund Invests - Investment Objective
and Policies;
(iv) How the Fund Invests - Investments and Special
Considerations; Risk Factors;
(v) How the Fund Invests - Investment Restrictions;
(vi) How the Fund Calculates Performance

Item 3. Risk/Return Summary: Fee Table............................ Risk/Return Bar Chart and Table

Item 4. Investment Objectives, Principal Investment
Strategies, and Related Risks............................. (i) Fund Highlights - What is the Fund's Investment
Philosophy?;
(ii) Fund Highlights - What is the Fund's Investment
Objective?;
(iii) Fund Highlights - Investments and Special
Considerations; Risk Factors;
(iv) Financial Highlights;
(v) How the Fund Invests - Investment Objective and
Policies;
(vi) How the Fund Invests - Investments and Special
Considerations; Risk Factors;
(vii) How the Fund Invests - Investment Restrictions;
(viii) How the Fund Calculates Performance

Item 5. Management's Discussion of Fund
Performance............................................... Not Applicable

Item 6. Management, Organization, and Capital
Structure................................................. (i) Fund Highlights - Who Manages the Fund?;
(ii) Fund Highlights - Who Advises the Fund?;
(iii) Fund Highlights - Who Distributes the Fund's Shares?;
(iv) Fund Highlights - How are Dividends and Distributions
Paid?;
(v) Fund Expenses;
(vi) Management of the Fund;
(vii) General Information;

Item 7. Shareholder Information................................... Shareholder Guide

Item 8. Distribution Arrangements................................. (i) Fund Highlights - Who Distributes the Fund's
Shares?;
(ii) Management of the Fund - Distribution;
(iii) Shareholder Guide - How to Purchase Shares

Item 9. Financial Highlights Information.......................... Financial Highlights

PART B

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

Item 11. Fund History............................................. (i) Management of the Fund;
(ii) Adviser

Item 12. Description of the Fund and
Its Investments and Risks................................ (i) Investment Objective and Policies;
(ii) Investments and Special Considerations; Risk Factors;
(iii) Investment Restrictions

Item 13. Management of the Fund................................... (i) Management of the Fund;
(ii) Adviser

Item 14. Control Persons and Principal Holders of
Securities............................................... (i) Management of the Fund;
(ii) Adviser
</TABLE>

Item 15. Investment Advisory and Other
<S> <C> <C> <C>
Services................................................. (i) Management of the Fund;
(ii) Adviser;
(iii) Distribution;
(iv) Custodian, Transfer and Dividend Disbursing Agent and
Independent Accountants;
(v) Portfolio Transactions and Brokerage

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

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

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

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

Item 20. Underwriters............................................. Distribution

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

Item 22. Financial Statements..................................... Financial Statements
</TABLE>

PART C

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

<PAGE>

PROSPECTUS DATED FEBRUARY 26, 1999
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

Pax World Fund, Incorporated (the "Fund") is an open-end, diversified
management investment company which seeks investments in companies producing
goods and services that improve the quality of life and that are not, to any
degree, engaged in manufacturing defense or weapons-related products. The policy
of the Fund is to exclude from its portfolio securities of (i) companies engaged
in military activities, (ii) companies appearing on the United States Department
of Defense list of 100 largest contractors (a copy of which may be obtained from
the Office of the Secretary, Department of Defense, Washington, D.C. 20310),
(iii) other companies contracting with the United States Department of Defense
if five percent (5%) or more of the gross sales of such companies are derived
from contracts with the United States Department of Defense, and (iv) companies
which derive revenue from the manufacture of liquor, tobacco and/or gambling
products. See "Fund Highlights -- What is the Fund's Investment Philosophy?" at
page 3; and "How the Fund Invests -- Investment Objective and Policies" at page
10.

The Fund's investment objective is to provide its shareholders a
diversified holding of securities of companies which offer primarily income and
conservation of principal and secondarily possible long-term growth of capital
through investment in common and preferred stocks and debt securities. The Fund
may also invest in (i) equity securities of other companies, (ii) investment
grade fixed-income securities and (iii) obligations issued or guaranteed by U.S.
or foreign government agencies and instrumentalities, the proceeds of which are
earmarked for a specific purpose which complies with the investment objectives
and policies of the Fund, such as the Federal Farm Credit Bank, the Federal Home
Loan Bank and the Federal National Mortgage Association. The Fund will not
invest in obligations issued or guaranteed by foreign government treasuries or
the U.S. Treasury, however, because the proceeds thereof may be used to
manufacture defense or weapons-related products or for a purpose which does not
otherwise comply with the Fund's socially conscious objectives and policies.
There can be no assurance that the Fund's investment objective will be achieved.
See "Fund Highlights -- What is the Fund's Investment Philosophy?" at page 3;
and "How the Fund Invests -- Investment Objective and Policies" at page 10. The
Fund's address is 222 State Street, Portsmouth, NH 03801-3853 and its telephone
number is 800-767-1729 (toll-free).

This 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 (the
"SEC") in a Statement of Additional Information dated the date hereof, and in
the Fund's annual and semi-annual reports to shareholders, which information is
incorporated herein by reference (is legally considered a part of this
Prospectus) and is available without charge upon request to the Fund at the
address or telephone number noted above, or by visiting the Fund's web site at
www.paxfund.com. In addition, you will find in the Fund's annual report a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during the last fiscal year. The SEC maintains a
web site (http://www.sec.gov) that contains the Statement of Additional
Information, the Fund's annual and semi-annual reports to shareholders, and
other reports and information regarding the Fund which have been filed
electronically with the SEC.

Investors are advised to read the Prospectus and
retain it for future reference.

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

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

1
<PAGE>

TABLE OF CONTENTS
Page

FUND HIGHLIGHTS.......................................................... 3
What is the Pax World Fund?......................................... 3
What is the Fund's Investment Philosophy?........................... 3
What is the Fund's Investment Objective?............................ 4
Investments and Special Considerations; Risk Factors................ 4
Who Manages the Fund?............................................... 4
Who Advises the Fund?............................................... 5
Who Distributes the Fund's Shares?.................................. 5
What is the Minimum Investment?..................................... 6
How Do I Purchase Shares?........................................... 6
How Do I Sell My Shares?............................................ 6
How Are Dividends and Distributions Paid?........................... 6
FUND EXPENSES............................................................ 7
FINANCIAL HIGHLIGHTS..................................................... 8
RISK/RETURN BAR CHART AND TABLE.......................................... 9
HOW THE FUND INVESTS..................................................... 10
Investment Objective and Policies................................... 10
Investments and Special Considerations; Risk Factors................ 11
Corporate and Other Debt Securities............................. 11
Convertible Securities.......................................... 11
Equity-Related Securities....................................... 12
Foreign Securities.............................................. 12
Illiquid and Restricted Securities.............................. 12
Portfolio Turnover.............................................. 12
U.S. Government Agency and/or Instrumentality Securities........ 13
When-Issued and Delayed Delivery Securities..................... 13
Borrowing Money................................................. 14
Investment Restrictions............................................. 14
MANAGEMENT OF THE FUND................................................... 15
Officers and Directors.............................................. 15
Adviser............................................................. 15
Distribution........................................................ 16
Custodian and Transfer and Dividend Disbursing Agent................ 17
HOW THE FUND VALUES ITS SHARES........................................... 17
HOW THE FUND CALCULATES PERFORMANCE...................................... 17
TAXES, DIVIDENDS AND DISTRIBUTIONS....................................... 18
Taxation of the Fund................................................ 18
Taxation of Shareholders............................................ 18
Withholding Taxes................................................... 18
Dividends and Distributions......................................... 19
GENERAL INFORMATION...................................................... 19
Incorporation....................................................... 19
Description of Common Stock......................................... 19

2
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Shareholder Meetings................................................ 20
SHAREHOLDER GUIDE........................................................ 20
How to Purchase Shares.............................................. 20
In General...................................................... 20
Investing by Mail............................................... 21
Investing by Telephone.......................................... 21
Investing by Wire Transfer...................................... 21
How to Sell Your Shares............................................. 22
In General...................................................... 22
Redemptions by Written Request.................................. 22
Redemptions by Telephone........................................ 22
Involuntary Redemptions......................................... 23
How to Exchange Your Shares......................................... 23
In General...................................................... 23
Exchanges by Mail............................................... 23
Exchanges by Telephone.......................................... 23
Shareholder Services................................................ 24
Automatic Reinvestment of Dividends and/or Distributions ....... 24
Automatic Investment Plan....................................... 24
Tax-Deferred Retirement Plans................................... 24
Systematic Withdrawal Plan...................................... 24
Reports to Shareholders......................................... 24
Shareholder Inquiries........................................... 25
VOLUNTARY INCOME CONTRIBUTION TO PAX WORLD SERVICE....................... 25
THE PAX WORLD FUND FAMILY................................................ 26
ADDITIONAL INFORMATION................................................... 26

FUND HIGHLIGHTS

The following summary is intended to highlight certain information
contained in this Prospectus and is qualified in its entirety by the more
detailed information appearing elsewhere herein.

WHAT IS THE PAX WORLD FUND?

The Pax World Fund is a mutual fund. A mutual fund pools the resources of
investors by selling its shares to the public and investing the proceeds of such
sale in a portfolio of securities designed to achieve its investment objective.
Technically, the Fund is an open-end, diversified, no-load management investment
company.

WHAT IS THE FUND'S INVESTMENT PHILOSOPHY?

The Fund endeavors through its investment philosophy to make a contribution
to world peace through investment in companies producing goods and services that
improve the quality of life. Thus, the Fund has adopted the name Pax World to
denote this endeavor. The Fund's portfolio will consist primarily of companies
located in the United States.

3
<PAGE>

The policy of the Fund is to invest in securities of companies whose
business is essentially directed toward non-military activities and which
produce goods and provide services that improve the quality of life. For
example, the Fund seeks to invest in such industries as building supplies,
computer software, education, food, health care, household appliances, housing,
leisure time, pollution control, publishing, retail, technology and
telecommunications, among others.

The Fund seeks investments in companies producing goods and services that
improve the quality of life and that are not, to any degree, engaged in
manufacturing defense or weapons-related products. The policy of the Fund is to
exclude from its portfolio securities of (i) companies engaged in military
activities, (ii) companies appearing on the United States Department of Defense
list of 100 largest contractors, (iii) other companies contracting with the
United States Department of Defense if five percent (5%) or more of the gross
sales of such companies are derived from contracts with the United States
Department of Defense, and (iv) companies which derive revenue from the
manufacture of liquor, tobacco and/or gambling products. See "How the Fund
Invests -- Investment Objective and Policies" at page 10.

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

INVESTMENTS AND SPECIAL CONSIDERATIONS; RISK FACTORS

The Fund intends to invest about 60 percent of its assets in common and
preferred stock and/or securities convertible into common stock and 40 percent
in bonds or debentures which percentage may vary depending on market conditions.
The Fund may also invest in (i) other equity-related securities, (ii) equity
securities of foreign issuers, (iii) investment grade fixed-income securities
and (iv) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, the proceeds of which are earmarked for a specific purpose
which complies with the investment objectives and policies of the Fund, such as
the Federal Farm Credit Bank, the Federal Home Loan Bank and the Federal
National Mortgage Association. The Fund will not invest in obligations issued or
guaranteed by foreign governments or the U.S. Treasury, however, because the
proceeds thereof may be used to manufacture defense or weapons-related products
or for a purpose which does not otherwise comply with the Fund's socially
conscious objectives and policies. See "How the Fund Invests -- Investment
Objective and Policies" at page 10. Investing in securities of foreign companies
involves certain risks and considerations not typically associated with
investments in domestic companies. See "How the Fund Invests -- Investments and
Special Considerations; Risk Factors" at page 11.

WHO MANAGES THE FUND?

The officers of the Fund are responsible for the day-to-day operations of
the Fund and the Board of Directors of the Fund is responsible for the general
policy of the Fund. The Board of Directors meets four times per year, reviews
portfolio selections and bonding requirements, declares dividends, if any, and
reviews the activities of the executive officers of the Fund. Such activities
are consistent with their fiduciary obligations as directors under the General
Corporation Law of the State of Delaware. Members of the Board of Directors of
the Fund are reimbursed for their travel expenses for attending meetings of the
Board of Directors plus a fee of $200.00 to affiliated directors and $1,000.00
to unaffiliated directors.

4
<PAGE>

WHO ADVISES THE FUND?

Pursuant to an Advisory Agreement entered into between the Fund and Pax
World Management Corp., 222 State Street, Portsmouth, NH 03801-3853 (the
"Adviser"), 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 objective, investment program and policies. The Adviser will be
compensated by the Fund for its services at an annual rate of three-quarters of
one percent (.75%) of average daily net assets up to and including $25,000,000
and one-half of one percent (.50%) of average daily net assets in excess of
$25,000,000.

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 is also the Portfolio Manager of
the Pax World Growth Fund, Inc. 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. Mr. Brown joined the Adviser in 1998
and joined H.G. Wellington and Co., Inc. in 1998 as a Senior Vice President.
Prior to that, Mr. Brown was an Investment Consultant at Fahnestock and Co.,
Inc., a New York Stock Exchange brokerage firm, for eleven years, and a First
Vice President from 1994 to 1998.

WHO DISTRIBUTES THE FUND'S SHARES?

The Fund maintains a distribution expense plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
pursuant to which the Fund incurs the expenses of distributing the Fund's
shares.

The Plan provides that the Fund may incur distribution expenses of up to
twenty-five one hundredths of one percent (.25%) per annum of its average daily
net assets to finance activity which is primarily intended to result in the sale
of Fund shares. Such expenses include (but are not limited to) travel and
telephone expenses, preparation and distribution of sales literature and
advertising, compensation to be paid to and expenses to be incurred by officers,
directors and/or employees of the Fund, or other third parties for their
distributional service if sales of Fund shares are made by such third parties
during a fiscal year. So long as the Fund is operating within such limitation,
however, the Fund may pay to one or more of its 12b-1 distributors (i) up to
twenty-five hundredths of one percent (0.25%) per annum of its average daily net
assets for personal service and/or the maintenance of shareholder accounts as
defined by Rule 2830 of the National Association of Securities Dealers Rules of
Conduct, and (ii) total distribution fees (including the service fee of .25 of
1%) up to thirty-five hundredths of one percent (.35%) per annum of its average
daily net assets. During the 1998 fiscal year, amounts paid by the Fund under
the Plan for clerical, advertising, printing, postage and sales expenses
(travel, telephone, and sales literature) totaled about $1,390,243. The Plan may
be terminated at any time, without penalty, by (a) the vote of a majority of the
members of the Board of Directors of the Fund who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan or (b) the vote of the
holders of a majority of the outstanding shares of the Fund. If the Plan is

5
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terminated, the payment of fees to third parties under the Plan would be
discontinued. See "Distribution" in the Statement of Additional Information, a
copy of which is available without charge upon request by writing to the Fund at
222 State Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729
(toll-free).

WHAT IS THE MINIMUM INVESTMENT?

The minimum initial investment is $250.00; the minimum subsequent
investment is $50.00. There is no minimum investment, however, for SIMPLE IRAs
and "tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code. See "Shareholder Guide -- How to Purchase Shares" at page 20 and
"Shareholder Guide -- Shareholder Services" at page 24.

HOW DO I PURCHASE SHARES?

You may purchase shares of the Fund directly from the Fund, through its
transfer agent, PFPC, Inc. (the "Transfer Agent"), at the net asset value per
share (NAV) next determined after receipt of your purchase order by the Transfer
Agent. See "Shareholder Guide -- How to Purchase Shares" at page 20; and "How
The Fund Values its Shares" at page 17.

HOW DO I SELL MY SHARES?

You may redeem your shares at any time at the NAV next determined after the
Transfer Agent receives your sell order. See "Shareholder Guide -- How to Sell
Your Shares" at page 22.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

The Fund expects to pay dividends of net investment income semi-annually
and distributions of net capital gains at least annually. Dividends and
distributions will be automatically reinvested in additional shares of the Fund
at NAV unless you request that they be paid to you in cash. See "Taxes,
Dividends and Distributions" at page 18.

6
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<TABLE>
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FUND EXPENSES

<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price) ...................................................... 0%
Maximum Sales Load Imposed on Reinvested Dividends and Other
Distributions (as a percentage of offering price) .................... 0%
Maximum 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 Fees (as a percentage of average net assets) ..................... 0%

ANNUAL FUND NET OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS) AS OF DECEMBER 31, 1998:
Management Fee ...................................................... 0.51%
12b-1 Fees .......................................................... 0.19%
Other Expenses ...................................................... 0.25%
Total Fund Net Expenses ................................................... 0.95%
</TABLE>

EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000.00 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period:............. $9.50 $29.66 $51.46 $114.07
</TABLE>

As noted in the table above, the Fund charges no redemption fees.

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

The purpose of this table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear, whether
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Management of the Fund" at page 15. "Other Expenses" include
operating expenses of the Fund, such as directors' and professional fees,
registration fees, reports to shareholders, transfer agency and custodian fees,
and is based on amounts incurred for the year ended December 31, 1998.

7
<PAGE>

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
-------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......... $18.52 $16.56 $16.33 $13.39 $13.55
-------- -------- -------- -------- --------
Income from investment operations
Investment income - net (B).............. .468 .493 .550 .80 .49
Realized and unrealized gain (loss)
on investments - net (B)................ 4.008 3.622 1.122 3.07 (.15)
-------- -------- -------- -------- --------
Total from investment operations...... 4.476 4.115 1.672 3.87 .34
-------- -------- -------- -------- --------

Less distributions
Dividends from net investment income .... .468 .503 .550 .79 .50
Distributions from realized gains........ .880 1.650 .892 .14 -
Tax return of capital.................... .008 .002 - - -
-------- -------- -------- -------- --------
Total distributions................... 1.356 2.155 1.442 .93 .50
-------- -------- -------- -------- --------

Net asset value, end of year................ $21.64 $18.52 $16.56 $16.33 $13.39
-------- -------- -------- -------- --------

2. TOTAL RETURN............................ 24.62% 25.12% 10.36% 29.19% 2.65%

3. RATIOS AND SUPPLEMENTAL DATA

Ratio of total expenses to average net
assets (A).............................. .95% .91% .89% .97% .98%

Ratio of investment income - net to
average net assets...................... 2.33% 2.67% 3.24% 3.44% 3.66%

Portfolio turnover rate.................. 28.59% 13.88% 34.55% 28.44% 25.45%

Net assets, end of year ('000s).......... $837,773 $629,001 $513,433 $476,976 $388,249

Number of capital shares outstanding,
end of year ('000s)..................... 38,712 33,971 31,008 29,200 29,000
</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 ratio for 1994 was based upon net expenses and is
not required to be restated.

(B) As of January 1, 1997, the Fund began accreting bond discounts and
amortizing bond premiums and recognized a cumulative adjustment as of that
date, which reduced net investment income and increased net realized and
unrealized gain on investments for 1997 by approximately $.03 per share.

8
<PAGE>
<TABLE>
<CAPTION>

[RISK/RETURN BAR CHART - GRAPHIC NOT INCLUDED]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----

HIGHEST & LOWEST RETURN QUARTER - PAST 10 YEARS

4th quarter 1998: 14.19%
3rd quarter 1990: -5.47%

RISK/RETURN TABLE, AS OF 12/31/98

PAX WORLD FUND LIPPER BALANCED FUND INDEX

1 year 24.62% 15.09%
5 year 17.94% 13.87%
10 year 14.24% 13.32%

The information set forth in the bar chart and table above provides some
indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns for 1, 5 and 10 years compare with the Lipper Balanced Fund
Index, a broad measure of market performance. Past performance is not
necessarily an indication of how the Fund will perform in the future.

9
<PAGE>

HOW THE FUND INVESTS

INVESTMENT OBJECTIVE AND POLICIES

The Fund intends to invest about 60 percent of its assets in common and
preferred stock and/or securities convertible into common stock and 40 percent
in bonds or debentures which percentage may vary depending on market conditions.
The Fund may also invest in (i) other equity-related securities, (ii) equity
securities of foreign issuers, (iii) investment grade fixed-income securities,
and (iv) obligations issued or guaranteed by U.S. or foreign government agencies
and instrumentalities, the proceeds of which are earmarked for a specific
purpose which complies with the investment objectives and policies of the Fund,
such as the Federal Farm Credit Bank, the Federal Home Loan Bank and the Federal
National Mortgage Association. The Fund will not invest in obligations issued or
guaranteed by foreign government treasuries or the U.S. Treasury, however,
because the proceeds thereof may be used to manufacture defense or
weapons-related products or for a purpose which does not otherwise comply with
the Fund's socially conscious objectives and policies.

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

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

The policy of the Fund is to exclude from its portfolio securities of (i)
companies engaged in military activities, (ii) companies appearing on the United
States Department of Defense list of 100 largest contractors, (iii) other
companies contracting with the United States Department of Defense if five
percent (5%) or more of the gross sales of such companies are derived from
contracts with the United States Department of Defense, and (iv) companies which
derive revenue from the manufacture of liquor, tobacco and/or gambling products.

In order to properly supervise a securities portfolio containing the
limitations described above, care must be exercised to continuously monitor
developments of the companies whose securities are included in the portfolio.
Developments and trends in the economy and financial markets are also
considered, and the screening of many securities is required to implement the
investment philosophy of the Fund.

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market timing, and the like. In no event, however, will such security be
retained longer than six (6) months from the time the Fund learns of the
investment disqualification. This requirement may cause the Fund to dispose of
the security at a time when it may be disadvantageous to do so.

The Fund's investment objective is a fundamental policy and may not be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the Investment Company Act.
Investment policies that are not fundamental may be modified by the Board of
Directors.

SHAREHOLDERS SHOULD UNDERSTAND THAT ALL INVESTMENTS INVOLVE RISK AND THERE
CAN BE NO GUARANTEE AGAINST LOSS RESULTING FROM AN INVESTMENT IN THE FUND, NOR
CAN THERE BE ANY ASSURANCE THAT THE FUND'S INVESTMENT OBJECTIVE WILL BE
ATTAINED. See "Investment Objective and Policies" in the Statement of Additional
Information, a copy of which is available without charge upon request by writing
to the Fund at 222 State Street, Portsmouth, NH 03801-3853 or by telephoning
800-767-1729 (toll-free).

INVESTMENTS AND SPECIAL CONSIDERATIONS; RISK FACTORS

CORPORATE AND OTHER DEBT SECURITIES

The Fund may invest in investment grade corporate and other debt
obligations of domestic and foreign issuers. Bonds and other debt securities are
used by issuers to borrow money from investors. The issuer pays the investor a
fixed or variable rate of interest and must repay the amount borrowed at
maturity. Investment grade debt securities are rated within the four highest
quality grades as determined by Moody's Investors Service (Moody's) (currently
Aaa, Aa, A and Baa for bonds), or Standard & Poor's Ratings Group (S&P)
(currently AAA, AA, A and BBB for bonds), or by another nationally recognized
statistical rating organization or, in unrated securities which are, in the
opinion of the Adviser, of equivalent quality.

CONVERTIBLE SECURITIES

A convertible security can be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the same
or a different issuer. Convertible securities are senior to common stocks in a
corporation's capital structure, but are usually subordinated to similar
nonconvertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforded by a similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation dependent upon a market price advance in
the convertible security's underlying common stock.

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

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<PAGE>

EQUITY-RELATED SECURITIES

The Fund may invest in equity-related securities. Equity-related securities
are common stock, preferred stock, rights, warrants and debt securities or
preferred stock which are convertible or exchangeable for common stock or
preferred stock. See "Convertible Securities" above.

FOREIGN SECURITIES

While the Fund intends to invest primarily in domestic securities, it may
invest up to ten percent (10%) of its net assets in foreign securities.
Investors in the Fund should be aware that foreign securities involve certain
risks, including political or economic instability in the country of the issuer,
the difficulty of predicting international trade patterns, the possibility of
imposition of exchange controls and the risk of currency fluctuations. Such
securities may be subject to greater fluctuations in price than securities
issued by domestic companies or issued or guaranteed by U.S. or foreign
government instrumentalities or agencies. In addition, there may be less
publicly available information about a foreign company than about a domestic
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
domestic companies.

Additional costs could be incurred in connection with any international
investment activities engaged in by the Fund. Foreign brokerage commissions are
generally higher than U.S. brokerage commissions. Increased custodian costs as
well as administrative difficulties may also be involved.

If a security is denominated in a foreign currency, it will be affected by
changes in currency exchange rates and in exchange control regulations, and
costs may be incurred in connection with conversions between currencies. Such
changes also will affect the Fund's income and distributions to shareholders. In
addition, although the Fund may receive income in such currencies, the Fund will
be required to compute and distribute its income in U.S. dollars. Therefore, if
the exchange rate for any such currency declines after the Fund's income has
been accrued and translated into U.S. dollars, the Fund could be required to
liquidate portfolio securities to make such distributions, particularly in
instances in which the amount of income the Fund is required to distribute is
not immediately reduced by the decline in such currency.

ILLIQUID AND RESTRICTED SECURITIES

The Fund may not invest more than five percent (5%) of its net assets in
illiquid securities, including securities with legal or contractual restrictions
on resale (restricted securities) and securities that are not readily marketable
in securities markets either within or outside of the United States. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended (the "Securities Act"), and privately placed commercial paper
that have a readily available market are not considered illiquid for purposes of
this limitation. The Adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors. See "Investments and
Special Considerations; Risk Factors -- Illiquid and Restricted Securities" in
the Statement of Additional Information, a copy of which is available without
charge upon request by writing to the Fund at 222 State Street, Portsmouth, NH
03801-3853 or by telephoning 800-767-1729 (toll-free).

PORTFOLIO TURNOVER

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<PAGE>

Brokerage" in the Statement of Additional Information, a copy of which is
available without charge upon request by writing to the Fund at 222 State
Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729 (toll-free). In
addition, high portfolio turnover may result in increased short-term capital
gains, which, when distributed to shareholders, are treated as ordinary income.
See "Taxes, Dividends and Distributions" at page 18.

U.S. GOVERNMENT AGENCY AND/OR INSTRUMENTALITY SECURITIES

The Fund may invest in securities issued or guaranteed by U.S. agencies or
instrumentalities, the proceeds of which are earmarked for a specific purpose
which complies with the investment objectives and policies of the Fund, such as
the Federal Farm Credit Bank, the Federal Home Loan Bank and the Federal
National Mortgage Association. The Fund will not invest in obligations issued or
guaranteed by foreign government treasuries or the U.S. Treasury, however,
because the proceeds thereof may be used to manufacture defense or
weapons-related products or for a purpose which does not otherwise comply with
the Fund's socially conscious objectives and policies. Not all U.S. Government
securities are backed by the full faith and credit of the United States. Some
are supported only by the credit of the issuing agency. See "Investments and
Special Considerations; Risk Factors -- U.S. Government Agency and/or
Instrumentality Securities" in the Statement of Additional Information, a copy
of which is available without charge upon request by writing to the Fund at 222
State Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729
(toll-free).

In connection with its commitment to assist in the development of housing,
the Fund may invest in mortgage-backed securities and other derivative mortgage
products, including those representing an undivided ownership interest in a pool
of mortgages, e.g., Government National Mortgage Association, Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation certificates.
These certificates are in most cases "pass-through" instruments, through which
the holder receives a share of all interest and principal payments from the
mortgages underlying the certificate, net of certain fees.

Mortgage-backed securities are subject to the risk that the principal on
the underlying mortgage loans may be prepaid at any time. Although the extent of
prepayments on a pool of mortgage loans depends on various economic and other
factors, as a general rule prepayments on fixed rate mortgage loans will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. Accordingly, amounts available for reinvestment by the
Fund are likely to be greater during a period of declining interest rates and,
as a result, likely to be reinvested at lower interest rates than during a
period of rising interest rates. Mortgage-backed securities may decrease in
value as a result of increases in interest rates and may benefit less than other
fixed income securities from declining interest rates because of the risk of
prepayment. See "Investments and Special Considerations; Risk Factors -- U.S.
Government Agency and/or Instrumentality Securities" in the Statement of
Additional Information, a copy of which is available without charge upon request
by writing to the Fund at 222 State Street, Portsmouth, NH 03801-3853 or by
telephoning 800-767-1729 (toll-free).

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Fund with payment and delivery taking
place a month or more in the future in order to secure what is considered to be
an advantageous price and yield to the Fund at the time of entering into the
transaction. While the Fund will only purchase securities on a when-issued or
delayed delivery basis with the intention of acquiring the securities, the Fund
may sell the securities before the settlement date, if it is deemed advisable.
At the time the Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis,

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<PAGE>

The Fund will record the transaction and thereafter reflect the value, each
day, of such security in determining the net asset value of the Fund. At the
time of delivery of the securities, the value may be more or less than the
purchase price. State Street Bank and Trust Company, 225 Franklin Street,
Boston, MA 02110, the Fund's custodian (the "Custodian"), will maintain, in a
segregated account of the Fund, cash or other liquid high-grade debt obligations
having a value equal to or greater than the Fund's purchase commitments; the
Custodian will likewise segregate securities sold on a delayed delivery basis.
See "Investments and Special Considerations; Risk Factors -- When-Issued and
Delayed Delivery Securities" in the Statement of Additional Information, a copy
of which is available without charge upon request by writing to the Fund at 222
State Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729
(toll-free).

BORROWING MONEY

From time to time, the Fund may borrow up to five percent (5%) of the value
of its total assets (calculated when the loan is made) for temporary,
extraordinary or emergency purposes. The Fund may pledge up to five percent (5%)
of the value of its total assets to secure such borrowings. Such borrowings may
subject the Fund to greater risks and costs than mutual funds that do not
borrow. For example, the Fund may have to sell a portion of its investments at a
time when it would otherwise not want to sell such investments in order to
comply with the capital coverage requirements of the Investment Company Act,
which require the value of the Fund's assets, less its liabilities other than
borrowings, to be equal to at least three hundred percent (300%) of all
borrowings including the proposed borrowing. In addition, because interest on
money the Fund borrows is an expense of the Fund, the Fund's expenses may
increase more than the expenses of mutual funds that do not borrow and the NAV
per share of the Fund may fluctuate more than the NAV per share of mutual funds
that do not borrow. See "Investments and Special Considerations; Risk Factors --
Borrowing Money" in the Statement of Additional Information, a copy of which is
available without charge upon request by writing to the Fund at 222 State
Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729 (toll-free).

INVESTMENT RESTRICTIONS

The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of a majority of the Fund's outstanding
voting securities (which is defined as the vote at a special or annual meeting
of the shareholders of the Fund, duly called, (i) of sixty-seven percent (67%)
of the voting securities present at such meeting if the holders of more than
fifty percent (50%) of the outstanding voting securities are present or
represented by proxy, or (ii) of more than fifty percent (50%) of the
outstanding voting securities, whichever is less). See "Investment Restrictions"
in the Statement of Additional Information, a copy of which is available without
charge upon request by writing to the Fund at 222 State Street, Portsmouth, NH
03801-3853 or by telephoning 800-767-1729 (toll-free).

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<PAGE>

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

The Fund's officers conduct and supervise the daily business operations of
the Fund. The Fund's Board of Directors, in addition to overseeing the Adviser,
decides upon matters of general policy. The Fund's Adviser furnishes daily
investment advisory services. Members of the Board of Directors of the Fund are
reimbursed for their travel expenses for attending meetings of the Board of
Directors plus $200.00 to affiliated directors and $1,000.00 to unaffiliated
directors. In addition, the Fund pays $500.00 to each member of the Audit
Committee for attendance at each meeting of the Audit Committee, plus
reimbursement for travel expenses incurred in connection with attending such
meetings. See "Management of the Fund" in the Statement of Additional
Information, a copy of which is available without charge upon request by writing
to the Fund at 222 State Street, Portsmouth, NH 03801-3853 or by telephoning
800-767-1729 (toll-free).

ADVISER

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

Pursuant to the terms of the Advisory Agreement, the Adviser will be
compensated by the Fund for its services at an annual rate of three-quarters of
one percent (.75%) of average daily net assets up to and including $25,000,000
and one-half of one percent (.50%) of average daily net assets in excess of
$25,000,000.

The Adviser has, however, agreed to supply and pay for such services as are
deemed by the Board of Directors of the Fund to be necessary or desirable and
proper for the continuous operations of the Fund (excluding all taxes and
charges of governmental agencies and brokerage commissions incurred in
connection with portfolio transactions) which are in excess of one and one-half
percent (1-1/2%) of the average daily net assets of the Fund per annum. Such
expenses include (i) management and distribution fees; (ii) the fees of
affiliated and unaffiliated Directors; (iii) the fees of the Fund's Custodian
and Transfer Agent; (iv) the fees of the Fund's legal counsel and independent
accountants; and (v) expenses related to shareholder communications including
all expenses of shareholders' and Board of Directors' meetings and of preparing,
printing and mailing reports, proxy statements and prospectuses to shareholders.

Thomas W. Grant, the President of the Adviser, is also the President of the
Distributor and has been associated with that firm since 1991. Mr. Grant served
previously with the firm of Fahnestock & Co. for twenty-six years as a partner,
managing director and senior officer. His duties encompassed branch office
management, corporate finance, syndications and municipal and corporate bonds.
Mr. Laurence A. Shadek, the Chairman of the Board of Directors of the Adviser,
is also an Executive Vice-President of the Distributor and, together with
members of his family, own a twenty-six and sixty-seven one hundredths percent
(26.67%) interest in the Distributor. Mr. Shadek has been associated with that
firm since March

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<PAGE>

1986. He was previously associated with Stillman, Maynard & Co., where he was a
general partner. Mr. Shadek's investment experience includes twelve years as a
limited partner and Account Executive with the firm Moore & Schley. Each of Mr.
Grant and Mr. Shadek serves as a member of the Board of Directors of the Fund.

The Adviser is responsible for decisions to buy and sell securities for the
Fund and the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. In placing orders for portfolio
securities of the Fund, the Fund is required to give primary consideration to
obtaining the most favorable price and efficient execution. Within the framework
of this policy, the Fund will consider the research and investment services
provided by brokers and dealers who effect or are parties to portfolio
transactions of the Fund. Orders may be directed to any broker including, to the
extent and in the manner permitted by applicable law, the Distributor and its
affiliates. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information, a copy of which is available without charge upon request
by writing to the Fund at 222 State Street, Portsmouth, NH 03801-3853 or by
telephoning 800-767-1729 (toll-free).

DISTRIBUTION

The Fund maintains a distribution expense plan pursuant to Rule 12b-1 under
the Investment Company Act pursuant to which the Fund incurs the expenses of
distributing the Fund's shares. The Plan provides that the Fund may incur
distribution expenses of up to twenty-five one hundredths of one percent (.25%)
per annum of its average daily net assets to finance activity which is primarily
intended to result in the sale of Fund shares. Such expenses include (but are
not limited to) travel and telephone expenses, preparation and distribution of
sales literature and advertising, compensation to be paid to and expenses to be
incurred by officers, directors and/or employees of the Fund, or other third
parties for their distributional service if sales of Fund shares are made by
such third parties during a fiscal year. So long as the Fund is operating within
such limitation, however, the Fund may pay to one or more of its 12b-1
distributors (i) up to twenty-five hundredths of one percent (0.25%) per annum
of its average daily net assets for personal service and/or the maintenance of
shareholder accounts as defined by Rule 2830 of the National Association of
Securities Dealers Rules of Conduct, and (ii) total distribution fees (including
the service fee of .25 of 1%) up to thirty-five hundredths of one percent (.35%)
per annum of its average daily net assets. During the 1998 fiscal year, amounts
paid by the Fund under the plan for clerical, advertising, printing, postage and
sales expenses (travel, telephone, and sales literature) totaled about
$1,390,243. The Plan may be terminated at any time, without penalty, by (a) the
vote of a majority of the members of the Board of Directors of the Fund who are
not interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan or
(b) the vote of the holders of a majority of the outstanding shares of the Fund.
If the Plan is terminated, the payment of fees to third parties under the Plan
would be discontinued. See "Distribution" in the Statement of Additional
Information, a copy of which is available without charge upon request by writing
to the Fund at 222 State Street, Portsmouth, NH 03801-3853 or by telephoning
800-767-1729 (toll-free).

Pursuant to the Plan, the Fund has entered into a Distribution Agreement
with the Distributor. Under the Distribution Agreement, the Distributor serves
as distributor of the Fund's shares and, for nominal consideration and as agent
for the Fund, solicits orders for the purchase of Fund shares, provided,
however, that orders are not binding on the Fund until accepted by the Fund as
principal. See "Distribution" in the Statement of Additional Information, a copy
of which is available without charge upon request by writing to the Fund at 222
State Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729
(toll-free).

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<PAGE>

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

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

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

HOW THE FUND VALUES ITS SHARES

The Fund's net asset value per share or NAV is determined by subtracting
its liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares. For valuation purposes, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents. The
Board of Directors of the Fund has fixed the specific time of day for the
computation of the Fund's NAV to be as of 4:15 P.M., New York time.

Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors. See "Net Asset Value" in the
Statement of Additional Information, a copy of which is available without charge
upon request by writing to the Fund at 222 State Street, Portsmouth, NH 03801-
3853 or by telephoning 800-767-1729 (toll-free).

The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem shares have been received by the Fund or days on which changes in the
value of the Fund's portfolio securities do not materially affect the NAV. The
New York Stock Exchange is closed on the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. See "Net Asset
Value" in the Statement of Additional Information, a copy of which is available
without charge upon request by writing to the Fund at 222 State Street,
Portsmouth, NH 03801-3853 or by telephoning 800-767-1729 (toll-free).

HOW THE FUND CALCULATES PERFORMANCE

From time to time, the Fund may advertise its total return (including
"average annual" total return and "aggregate" total return) in advertisements or
sales literature. These figures are based on historical earnings and are not
intended to indicate future performance. The "total return" shows how much an
investment in the Fund would have increased (decreased) over a specified period
of time (i.e., one, five, or ten years or since inception of the Fund) assuming
that all distributions and dividends by the Fund were reinvested on the
reinvestment dates during the period and less all recurring fees. The
"aggregate" total return reflects actual performance over a stated period of
time. "Average annual" total return is a hypothetical rate of return that, if
achieved annually, would have produced the same aggregate total return if
performance had been constant over the entire period. "Average annual" total
return smooths out variations in performance. Neither "average annual" total
return nor "aggregate" total return takes into account any federal or state
income taxes which may be payable upon redemption. The Fund also may include
comparative performance information in advertising or marketing the Fund's
shares. Such performance information may include data from Lipper Analytical
Services, Inc., Morningstar Publications, Inc., and other industry publications,
business periodicals and market indices. See "Performance Information" in the
Statement of Additional Information, a copy of which is available

17
<PAGE>

without charge upon request by writing to the Fund at 222 State Street,
Portsmouth, NH 03801-3853 or by telephoning 800-767-1729 (toll-free). Further
performance information will be contained in the Fund's annual and semi-annual
reports to shareholders, which will be available without charge. See
"Shareholder Guide -- Shareholder Services" at page 24.

TAXES, DIVIDENDS AND DISTRIBUTIONS

TAXATION OF THE FUND

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

TAXATION OF SHAREHOLDERS

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

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

WITHHOLDING TAXES

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

Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes. See "Taxes" in the Statement of
Additional Information, a copy of which is available without charge upon request
by writing to the Fund at 222 State Street, Portsmouth, NH 03801-3853 or by
telephoning 800-767-1729 (toll-free).

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

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

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

GENERAL INFORMATION

INCORPORATION

The Fund was incorporated under the laws of the State of Delaware in
February 1970. The Fund is registered under the Investment Company Act as an
open-end management investment company commonly known as a mutual fund.

DESCRIPTION OF COMMON STOCK

The Fund is currently authorized to issue 75,000,000 shares of Common
Stock, $1.00 par value per share. Shares of the Fund, when issued, are fully
paid, nonassessable, fully transferable and redeemable at the option of the
holder. Shares are also redeemable at the option of the Fund under certain
circumstances as described under "Shareholder Guide -- How to Sell Your Shares"
at page 22.

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

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<PAGE>

SHAREHOLDER MEETINGS

The Fund intends to hold annual meetings of shareholders for the election
of directors, ratification of the selection by the Board of Directors of the
independent public accountants for the Fund, and such other matters as may
properly come before such meeting.

SHAREHOLDER GUIDE

HOW TO PURCHASE SHARES

IN GENERAL

Shares of the Fund are offered for sale by the Fund on a continuous basis
at the NAV. The Fund will compute its NAV once daily as of 4:15 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. For further information regarding
the methods employed in valuing the Fund's investments, see "Net Asset Value" in
the Statement of Additional Information.

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

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.

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

The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares. See
"How to Sell Your Shares" at page 22.

<PAGE>

INVESTING BY MAIL

Prospective shareholders may purchase shares of the Fund by completing and
signing the "New Account Application" enclosed with this Prospectus and sending
the application, together with a check to the Transfer Agent at Pax World Fund
Family, P.O. Box 8930, Wilmington, DE 19899-8930 or by overnight delivery c/o
PFPC, Inc., 400 Bellevue Parkway, Wilmington, DE 19809. Purchases without full
payment will not be processed until payment is received. A confirmation of the
purchase will be issued showing the account number and number of shares owned
and the ownership of shares shall be recorded on the books of the Transfer Agent
in an account under the shareholder's name.

INVESTING BY TELEPHONE

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

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

The Fund may accept telephone orders from broker-dealers which have been
previously approved by the Fund by telephoning 800-635-1404 (toll-free). It is
the responsibility of such broker-dealers to promptly forward purchase orders
and payments for such orders to the Fund. The Fund reserves the right to cancel
any purchase order for which payment has not been received by the third (3rd)
business day following the investment.

Transactions in Fund shares through your broker-dealer may be subject to
transaction or other fees, including postage and handling charges, imposed by
your broker/dealer which would otherwise not be charged if the shares were
purchased directly from the Fund.

INVESTING BY WIRE TRANSFER

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

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

If you arrange for receipt by the Custodian of federal funds prior to 4:15
P.M., New York time, on a business day, you may purchase shares of the Fund as
of that day.

21
<PAGE>

HOW TO SELL YOUR SHARES

IN GENERAL

You can redeem shares of the Fund at any time for cash at the NAV per share
next determined after the redemption request is received in proper form by the
Transfer Agent. See "How the Fund Values its Shares" at page 17.

REDEMPTIONS BY WRITTEN REQUEST

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

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

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

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

REDEMPTIONS BY TELEPHONE

Redemptions by telephone must be in amounts of at least $1,000.00 and may
not be for more than $10,000.00 in the aggregate in any thirty (30) day period.
In addition, the proceeds from a telephone redemption may be paid only to the
owner(s) of record and may be sent only to the address of record or a

22
<PAGE>

pre-authorized bank account, and cannot be made within thirty (30) days after
the Transfer Agent has been notified of an address change. If there are multiple
owners of record, the Transfer Agent may rely upon the instructions of only one
owner of record.

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

INVOLUNTARY REDEMPTIONS

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

HOW TO EXCHANGE YOUR SHARES

IN GENERAL

As a shareholder of the Fund, you have an exchange privilege with the Pax
World Growth Fund and the Pax World Money Market Fund, subject to the minimum
investment requirement of such funds. No sales charge will be imposed at the
time of exchange. An exchange will be treated as a redemption and purchase for
tax purposes. See "Purchase, Redemption and Exchange of Fund Shares -- Exchange
of Shares" in the Statement of Additional Information, a copy of which is
available without charge upon request by writing to the Fund at 222 State
Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729 (toll-free).

EXCHANGES BY MAIL

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

If you hold certificates, the certificates, signed in the name(s) shown on
the face of the certificates, must be returned to the Transfer Agent in order
for the shares to be exchanged. See "How to Sell Your Shares" at page 22.

EXCHANGES BY TELEPHONE

In order to exchange shares by telephone, you must authorize telephone
exchanges on your initial application form or by written notice to the Transfer
Agent and hold shares in non-certificate form. Thereafter, you may call the Fund
at 800-372-7827 (toll-free) on weekdays, except holidays, between the hours of
8:00 A.M. and 6:00 P.M., New York time, to exchange shares between accounts that
are registered in the same names. For your protection and to prevent fraudulent
exchanges, your telephone

23
<PAGE>

call may be recorded and you will be asked to provide your personal
identification number. A written confirmation of the exchange transaction will
be sent to you. NEITHER THE FUND NOR ITS AGENTS WILL BE LIABLE FOR ANY LOSS,
LIABILITY OR COST WHICH RESULTS FROM ACTING UPON INSTRUCTIONS REASONABLY
BELIEVED TO BE GENUINE UNDER THE FOREGOING PROCEDURES. All exchanges will be
made on the basis of the relative NAV of the two funds next determined after the
request is received in good order. The exchange privilege is available only in
states where the exchange may legally be made.

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

SHAREHOLDER SERVICES

The Fund offers investors the following special programs:

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

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

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

SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available
to shareholders, which provides for monthly, bi-monthly, quarterly or
semi-annual checks. See "Shareholder Services -- Systematic Withdrawal
Plan" in the Statement of Additional Information, a copy of which is
available without charge upon request by writing to the Fund at 222 State
Street, Portsmouth, NH 03801-3853 or by telephoning 800-767-1729
(toll-free).

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

24
<PAGE>

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

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

For additional information regarding the services and privileges described
above, see "Purchase, Redemption and Exchange of Fund Shares" in the Statement
of Additional Information, a copy of which is available without charge upon
request by writing to the Fund at 222 State Street, Portsmouth, NH 03801-3835,
telephoning the Fund at 800-767-1729 (toll-free), visiting the Fund's web site
at http://www.paxfund.com or visiting the SEC's web site at http://www.sec.gov
for such purpose.

VOLUNTARY INCOME CONTRIBUTION TO PAX WORLD SERVICE

To complement the Fund's objectives of investing in securities of companies
whose businesses are essentially of a non-military nature, the Fund's founders
organized the Pax World Foundation in 1970. In 1992, Pax World Foundation
changed its name to Pax World Service.

Pax World Service seeks to provide investors with an opportunity to amplify
the social benefits of their socially responsible investment by initiating and
supporting projects that encourage international understanding, reconciliation,
and sustainable economic development on behalf of world peace and the world's
poor.

Fund shareholders may, at their election, designate a VOLUNTARY
contribution to the Service of a percentage of their Fund income including
capital gains. A Fund shareholder may indicate on a special form the percentage
of income and/or capital gains the shareholder desires to be deducted for
payment to the Service. The Fund will then automatically calculate the dollar
amount this percentage represents and forward it to the Service on behalf of the
shareholder. Contributions to the Service are charitable contributions and as
such are tax deductible on the tax return of the contributor. Shareholders will
receive annually a confirmation for income tax purposes indicating contributions
made.

In January 1998, Pax World Service became formally affiliated with Mercy
Corps International, based in Portland, Oregon. The resulting agency represents
43 combined years of experience and has provided services or supported projects
in approximately 60 countries around the world. The organization conducts
emergency humanitarian relief, provides assistance with sustainable development
projects, operates a microenterprise program, seeks to bolster the development
of civil society, and provides opportunities for shareholders and other
interested parties to gain first-hand experience and exposure to areas of need
and/or conflict.

The officers of the Service are:

Dr. J. Elliott Corbett, Honorary Chair (Founder); Mr. Neal Keny-Guyer, CEO,
Mercy Corps International; Mr. Larry Ekin, President.

No compensation will be paid by the Service directly or indirectly to the
officers and directors of the Pax World Fund, Pax World Growth Fund or the Pax
World Money Market Fund. No compensation will be paid by the Service directly or
indirectly to the directors of the Service or Mercy Corps International except
for travel and other reasonable fees for services rendered on behalf of projects
undertaken by the Service.

<PAGE>

Fund shareholders who contribute to the Service receive an annual report of
the activities of the Service, which includes PAX FACTS, the Pax World Service
newsletter, and a financial statement. In addition, contributors are eligible to
participate in Pax World Service educational tours.

The Service does not sell or trade its mailing list, and Fund shareholders
who choose to contribute will not be otherwise solicited by the Service.

Additional information may be obtained by writing to Pax World Service at
P.O. Box 33078, Washington, D.C. 20033-3078, by telephoning Pax World Service at
202-293-7290, or by visiting its website at www.paxworld.org.

THE PAX WORLD FUND FAMILY

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

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which
has been incorporated by reference herein, does not contain all the information
set forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act. Copies of the Registration Statement may be obtained at a
reasonable charge from the Public Reference Section of the SEC or may be
examined, without charge, at the Public Reference Room at the office of the SEC
in Washington, D.C or by visiting the SEC's web site at http://www.sec.gov for
such purpose. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 800-SEC-0330 (toll-free).

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.

FOR TEXAS RESIDENTS ONLY: Investment objectives are hereby clarified and
intended to be consistent with Texas securities regulations. The Fund does not
intend to make and has not made investments in oil, gas and other mineral leases
or arbitrage transactions. The Fund By-Laws contain an investment restriction
which does not allow it to purchase or sell real property but permits the Fund
to make an investment in readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest in real
estate.

<PAGE>

PAX WORLD FUND, INCORPORATED

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

STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 26, 1999

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

1
<PAGE>

PAX WORLD FUND, INCORPORATED

STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 26, 1999

Pax World Fund (the "Fund") is an open-end, diversified management
investment company whose investment objective is to provide its shareholders a
diversified holding of securities of companies which offer primarily income and
conservation of principal and secondarily possible long-term growth of capital
through investment in common and preferred stocks and debt securities.

The Fund may also invest in (i) equity securities of other companies
including foreign issuers, (ii) investment grade fixed-income securities and
(iii) obligations issued or guaranteed by U.S. or foreign government agencies
and instrumentalities, the proceeds of which are earmarked for a specific
purpose which complies with the investment objectives and policies of the Fund,
such as the Federal Farm Credit Bank, the Federal Home Loan Bank and the Federal
National Mortgage Association. The Fund will not invest in obligations issued or
guaranteed by foreign government treasuries or the U.S. Treasury, however,
because the proceeds thereof may be used to manufacture defense or
weapons-related products or for a purpose which does not otherwise comply with
the Fund's socially conscious objectives and policies. There can be no assurance
that the Fund's investment objective will be achieved. See "How the Fund Invests
- - -- Investment Objective and Policies" in the Prospectus. The Fund's address is
222 State Street, Portsmouth, NH 03801-3853, and its telephone number is
800-767-1729 (toll-free).

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

<PAGE>

TABLE OF CONTENTS
Page

INVESTMENT OBJECTIVE AND POLICIES......................................... 4
Investment Objective................................................. 4
Investment Philosophy................................................ 4
INVESTMENTS AND SPECIAL CONSIDERATIONS; RISK FACTORS...................... 5
Foreign Securities................................................... 5
Forward Foreign Currency Exchange Contracts.......................... 5
Illiquid and Restricted Securities................................... 5
Portfolio Turnover................................................... 6
Short-Term Investments............................................... 6
U.S. Government Agency and/or Instrumentality Securities............. 6
When-Issued and Delayed Delivery Securities.......................... 7
Borrowing Money...................................................... 7
INVESTMENT RESTRICTIONS................................................... 7
MANAGEMENT OF THE FUND.................................................... 8
ADVISER ............................................................... 11
DISTRIBUTION ............................................................. 12
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT AND INDEPENDENT
ACCOUNTANTS............................................................. 13
PORTFOLIO TRANSACTIONS AND BROKERAGE...................................... 13
PURCHASE, REDEMPTION AND EXCHANGE OF FUND SHARES.......................... 14
Purchase of Shares................................................... 14
In General....................................................... 14
Sale of Shares....................................................... 15
In General....................................................... 15
Involuntary Redemption........................................... 15
Exchange of Shares................................................... 15
NET ASSET VALUE........................................................... 15
PERFORMANCE INFORMATION................................................... 16
Average Annual Total Return.......................................... 16
TAXES..................................................................... 16
SHAREHOLDER SERVICES...................................................... 17
Automatic Reinvestment of Dividends and/or Distributions ............ 17
Automatic Investment Plan............................................ 17
Tax-Deferred Retirement Plans and Accounts........................... 17
Systematic Withdrawal Plan........................................... 17
Reports to Shareholders.............................................. 18
Shareholder Inquiries................................................ 18
FINANCIAL STATEMENTS...................................................... 19

3
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

The Fund may also invest in (i) other equity-related securities, (ii)
equity securities of foreign issuers, (iii) investment grade fixed-income
securities, and (iv) obligations issued or guaranteed by U.S. or foreign
government agencies and instrumentalities, the proceeds of which are earmarked
for a specific purpose which complies with the investment objectives and
policies of the Fund, such as the Federal Farm Credit Bank, the Federal Home
Loan Bank and the Federal National Mortgage Association. The Fund will not
invest in obligations issued or guaranteed by foreign government treasuries or
the U.S. Treasury, however, because the proceeds thereof may be used to
manufacture defense or weapons-related products or for a purpose which does not
otherwise comply with the Fund's socially conscious objectives and policies.
Investing in securities of foreign companies involves certain risks and
considerations not typically associated with investments in domestic companies.
See "How the Fund Invests -- Investments and Special Considerations; Risk
Factors" in the Prospectus.

INVESTMENT PHILOSOPHY

The Fund seeks investments in companies producing goods and services that
improve the quality of life and that are not, to any degree, engaged in
manufacturing defense or weapons-related products. The policy of the Fund is to
exclude from its portfolio securities of (i) companies engaged in military
activities, (ii) companies appearing on the United States Department of Defense
list of 100 largest contractors, (iii) other companies contracting with the
United States Department of Defense if five percent (5%) or more of the gross
sales of such companies are derived from contracts with the United States
Department of Defense, and (iv) companies which derive revenue from the
manufacture of liquor, tobacco and/or gambling products. By way of illustration,
the Fund will invest in such industries as building supplies, computer software,
education, food, health care, household appliances, housing, leisure time,
pollution control, technology and telecommunications, among others. The Fund's
portfolio will consist primarily of companies located in the United States. See
"Fund Highlights -What is the Fund's Investment Philosophy" in the Prospectus.

If it is determined after the initial purchase by the Fund that the
company's activities fall within the exclusion described above (either by
acquisition, merger or otherwise), the securities of such company will be
eliminated from the portfolio as soon thereafter as possible taking into
consideration (i) any gain or loss which may be realized from such elimination,
(ii) the tax implications of such elimination, (iii) market timing, and the
like. In no event, however, will such security be retained longer than six (6)
months from the time the Fund learns of the investment disqualification. This
requirement may cause the Fund to dispose of the security at a time when it may
be disadvantageous to do so.

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

<PAGE>
INVESTMENTS AND SPECIAL CONSIDERATIONS;
RISK FACTORS

FOREIGN SECURITIES

The Fund is permitted to invest up to ten percent (10%) of its net assets
in foreign corporate and government securities. "Foreign government securities"
include debt securities issued or guaranteed, as to payment of principal and
interest, by quasi-governmental entities, governmental agencies, supranational
entities and other governmental entities (collectively, "Government Entities")
of foreign countries denominated in the currencies of such countries or in U.S.
dollars (including debt securities of a Government Entity in any such country
denominated in the currency of another such country).

Debt securities of "quasi-governmental entities" are issued by entities
owned by a national, state, or equivalent government or are obligations of a
political unit that are not backed by the national government's "full faith and
credit" and general taxing powers. A "supranational entity" is an entity
constituted by the national governments of several countries to promote economic
development. Examples of such supranational entities include, among others, the
Asian Development Bank, the European Investment Bank and the World Bank
(International Bank for Reconstruction and Development).

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

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

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

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

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

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

ILLIQUID AND RESTRICTED SECURITIES

The Fund may not invest more than five percent (5%) of its net assets in
illiquid securities, including securities that are illiquid by virtue of the
absence of a readily available market (either within or outside of the United
States) or legal or contractual restrictions on resale. Historically, illiquid
securities have included securities subject to contractual or legal restrictions
on resale because they have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), securities which are otherwise not
readily marketable and repurchase agreements having a maturity of longer than
seven (7)

5
<PAGE>

days. Securities which have not been registered under the Securities Act are
referred to as private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven (7)
days. A mutual fund might also have to register such restricted securities in
order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid. The investment adviser will monitor
the liquidity of such restricted securities subject to the supervision of the
Board of Directors. In reaching liquidity decisions, the investment adviser will
consider, inter alia, the following factors: (i) the frequency of trades and
quotes for the security; (ii) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (iii) dealer
undertakings to make a market in the security, and (iv) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). In addition, in order for commercial paper that is issued in
reliance on Section 4(2) of the Securities Act to be considered liquid, (i) it
must be rated in one of the at least two nationally recognized statistical
rating organizations ("NRSRO"), or if only one NRSRO rates the securities, by
that NRSRO, or, if unrated, be of comparable quality in the view of the
investment adviser; and (ii) it must not be "traded flat" (i.e., without accrued
interest) or in default as to principal or interest.

PORTFOLIO TURNOVER

While as a matter of policy, the Fund will try to limit the turnover of its
portfolio, it is possible that, as a result of the Fund's investment policies
and social criteria, its portfolio turnover rate may exceed thirty-five percent
(35%), although the Fund's portfolio turnover rate is not expected to exceed
sixty percent (60%). The portfolio turnover rate is generally the percentage
computed by dividing the lesser of portfolio purchases or sales (excluding all
securities whose maturities or expiration date at acquisition were one year or
less) by the monthly average value of the portfolio. High portfolio turnover
(over sixty percent (60%)) may involve correspondingly greater brokerage
commissions and other transaction costs, which are borne directly by the Fund.
In addition, high portfolio turnover may also mean that a proportionately
greater amount of distributions to shareholders will be taxed as ordinary income
rather than long-term capital gains compared to investment companies with lower
portfolio turnover. See "Portfolio Transactions and Brokerage" and "Taxes" on
pages 13 and 16, respectively.

SHORT-TERM INVESTMENTS

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

U.S. GOVERNMENT AGENCY AND/OR INSTRUMENTALITY SECURITIES

The Fund may invest in securities issued or guaranteed by U.S. Government
agencies or instrumentalities other than the U.S. Treasury. These obligations
may or may not be backed by the full faith and credit of the United States. In
the case of securities not backed by the full faith and credit of the United
States, the Fund must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality issuing or guaranteeing the
obligation does not meet its commitments. Obligations of the Government National
Mortgage Association, the Farmers Home Administration and the Small Business
Administration are backed by the full faith and credit of the United States.
Securities in which the Fund may invest which are not backed by the full faith
and credit of the United States include obligations such as those issued by the
Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation ("FHLMC"),
the Federal National Mortgage Association, the Student Loan Marketing
Association and Resolution Funding Corporation, each of which has the right to
borrow from the U.S. Treasury to meet its obligations, and obligations of the
Farm Credit System, the obligations of which may be satisfied only by the
individual credit of the issuing agency. FHLMC investments may include
collateralized mortgage obligations.

6
<PAGE>

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

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

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

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

BORROWING MONEY

The Fund will not borrow money except that, as a temporary measure for
extraordinary or emergency purposes and not for investment purposes, it may
borrow up to five percent (5%) of its total assets taken at cost. Pursuant to
the requirements of the Investment Company Act, any such borrowing will be made
only to the extent that the value of the Fund's assets, less its liabilities
other than borrowings, is equal to at least three hundred percent (300%) of all
borrowings including the proposed borrowing. If the value of the Fund's assets,
when computed in that manner, falls below such three hundred percent (300%)
asset coverage requirement, the Fund is required, within three (3) days, to
reduce its bank debt to the extent necessary to meet that coverage requirement.
To do so, the Fund may have to sell a portion of its investments at a time when
it would otherwise not want to sell such investments. In addition, because
interest on money the Fund borrows is an expense of the Fund, the Fund's
expenses may increase more than the expenses of mutual funds that do not borrow
and the NAV per share of the Fund may fluctuate more than the NAV per share of
mutual funds that do not borrow.

INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A "majority of the Fund's
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) sixty-seven percent (67%) of the shares
represented at a meeting at which more than fifty percent (50%) of the
outstanding voting shares are present in person or represented by proxy or (ii)
more than fifty percent (50%) of the outstanding voting shares.

The Fund may not:

1. Purchase the securities of any one issuer (except government
securities) if immediately after and as a result of such purchase
(a) the market value of the holdings of the Fund in the securities
of such issuer exceeds five percent of the market value of the
Fund's total assets, or (b) the Fund owns more than ten percent of
the outstanding voting securities of any one class of securities of
such issuer.

7
<PAGE>

2. Purchase securities of other registered investment companies, other
than the Pax World Money Market Fund.

3. Concentrate more than 25% of its investments in one particular
industry.

4. Purchase or sell real estate or other interests in real estate
which are not readily marketable.

5. Write, purchase or sell put and call options or combinations
thereof.

6. Lend money or securities.

7. Purchase securities on margin or sell short or purchase or sell
commodities.

8. Borrow money except that, as a temporary measure for extraordinary
or emergency purposes and not for investment purposes, the Fund may
borrow from banks up to five percent of its total assets taken at
cost.

9. Mortgage or pledge as security for indebtedness any securities
owned or held by the Fund except as stated in item 8, above.

10. Participate on a joint and several basis in any trading account in
securities.

11. Invest in companies for the purpose of exercising control of
management.

12. Act as an underwriter of securities of other issuers, except that
the Fund may invest up to five percent of the value of its assets
(at time of investment) in portfolio securities which the Fund
might not be free to sell to the public without registration of
such securities under the Securities Act of 1933. The Fund's
position in such restricted securities may adversely affect the
liquidity and marketability of such restricted securities and the
Fund may not be able to dispose of its holdings in these securities
at reasonable price levels.

13. Invest more than ten percent of the value of its assets in
securities of foreign issuers under circumstances that would
subject it to federal interest equalization tax or at prices that
reflect such tax. (No such tax is currently in effect.)

14. Invest more than five percent of its total assets in securities of
companies having a record of less than three years continuous
operation except for the Pax World Money Market Fund and those
surviving a merger or consolidation.

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

MANAGEMENT OF THE FUND

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

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

8
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
POSITION(S) HELD
NAME, ADDRESS AND AGE WITH THE FUND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- - --------------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
C. Lloyd Bailey Director Mr. Bailey is an attorney. From 1959 to 1979, Mr. Bailey served as the
1216 Foulkeways (since 1970) Executive Director of the United States Committee for UNICEF; from
Gwynedd, PA 19436; (80) 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.

- - --------------------------------------------------------------------------------------------------------------------------------
Carl H. Doerge, Jr. Director Mr. Doerge is a private investor (1995-present); he was Executive Vice
867 Remsen Lane (since 1998) President and Managing Director of Smith Barney (1971-1995). Mr.
Oyster Bay, NY 11771***; (60) Doerge is also a member of the Board of Directors of Pax World Growth
Fund, Inc.

- - --------------------------------------------------------------------------------------------------------------------------------
Thomas W. Grant Vice Chairman Mr. Grant is the Vice Chairman of the Board and President of the Fund,
14 Wall Street of the Board of as well as the President of Pax World Growth Fund, Inc., the President
New York, NY 10005*/**; (57) Directors and of Pax World Money Market Fund, Inc., the President of Pax World
President (since Management Corp., the Fund's adviser, and the President of H.G.
1996) 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 Ms. Green is the Co-Treasurer of the Fund, the Assistant Treasurer of
c/o Pax World Management Corp. (since 1998) the Pax World Growth Fund, Inc. and the Manager - Shareholder Services
222 State Street for the Pax World Fund Family. Ms. Green has been affiliated with the
Portsmouth, NH 03801-3853; (34) Pax World Fund Family since 1990.

- - --------------------------------------------------------------------------------------------------------------------------------
Michelle L. Guilmette Assistant Ms. Guilmette is the Assistant Treasurer for the Fund and has held
c/o Pax World Management Corp. Treasurer that position since 1997. In addition, Ms. Guilmette has been a
222 State Street (since 1997) Shareholder Services Representative for the Pax World Fund Family
Portsmouth, NH 03801-3853; (25) since 1992.

- - --------------------------------------------------------------------------------------------------------------------------------
Joy L. Liechty Director Ms. Liechty is a Client and Sales Advocate with the Mennonite Mutual
1403 Ashton Court (since 1991) Aid Association in Goshen, Indiana. Ms. Liechty has been associated
Goshen, IN 46526; (45) 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.

- - --------------------------------------------------------------------------------------------------------------------------------
Laurence A. Shadek Chairman of Mr. Shadek is the Chairman of the Board of Directors of the Fund, as
14 Wall Street the Board of well as the Chairman of the Board of the Pax World Growth Fund, Inc.,
New York, NY 10005*/**; (49) Directors an Executive Vice President of Pax World Money Market Fund, Inc., the
(since 1996) 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).

- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

9
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
POSITION(S) HELD
NAME, ADDRESS AND AGE WITH THE FUND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- - --------------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sanford C. Sherman Director Mr. Sherman is the President and Chief Executive Officer of the
91 Hillside Drive (since 1992) Piscataqua Savings Bank, Portsmouth, NH , a position he has held since
Portsmouth, NH 03801***; (62) 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.

- - --------------------------------------------------------------------------------------------------------------------------------
Janet Lawton Spates Co-Treasurer Ms. Spates is the Co-Treasurer of the Fund, the Assistant Treasurer
c/o Pax World Management Corp. (since 1998) of the Pax World Growth Fund, Inc., and the Operations Manager for the
222 State Street Pax World Fund Family. Ms. Spates has been affiliated with the Pax
Portsmouth, NH 03801-3853; (29) World Fund Family since 1992.

- - --------------------------------------------------------------------------------------------------------------------------------
Nancy S. Taylor Director Rev. Taylor is a Senior Minister with the First Congregational
5298 N. Riffle Way (since 1997) Church in Boise, Idaho and has been associated with that
Boise, ID 83703**;(43) organization since 1992. Prior to that, Rev. Taylor was an Associate
Minister with the Immanuel Congregational Church in Hartford,
Connecticut for approximately five years. Rev. Taylor is also a member
of the Board of Directors of Pax World Growth Fund, Inc.

- - --------------------------------------------------------------------------------------------------------------------------------
Lee D. Unterman Secretary Mr. Unterman, who is the Secretary of the Fund, is a partner with the
c/o Bresler Goodman & (since 1997) law firm of Bresler, Goodman & Unterman, LLP, which he helped found in
Unterman, LLP 1997. Mr. Unterman began his legal career in 1975 with the law firm of
521 Fifth Avenue Whitman & Ransom and thereafter became a partner with the law firm of
New York, NY 10175;(48) 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). Mr. Unterman is also
the Secretary of Pax World Growth Fund, Inc.

- - --------------------------------------------------------------------------------------------------------------------------------
Esther J. Walls Director Ms. Walls was Associate Director of Libraries, State University of New
Apartment 29-J (since 1981) York, Stony Brook, Long Island, NY, which position she held from 1974
160 West End Avenue to 1990.
New York, NY 10023; (72)
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Designates an "Interested" officer or director, as defined in the
Investment Company Act, by reason of his or her affiliation with the
Adviser.
** Designates a member of the Investment Committee. The Investment Committee
has the responsibility of overseeing the investments of the Fund.
*** Designates a member of the Audit Committee. The Audit Committee has the
responsibility of overseeing the establishment and maintenance of an
effective financial control environment, for overseeing the procedures for
evaluating the system of internal accounting control and for evaluating
audit performance.

No person on such date owned of record or beneficially five percent (5%) or
more of the outstanding Common Stock of the Fund and all officers and directors
as a group own less than one percent (1%) of the outstanding Common Stock of the
Fund.

Certain directors and officers of the Fund are also directors and officers
of Pax World Growth Fund, Inc. (the "Pax World Growth Fund"), another investment
company managed by the Adviser, and the Pax World Money Market Fund, Inc., a
socially responsible money market fund which is being advised by the Adviser for
the specific purpose of assuring that the social responsibility screens used by
such fund are the same as those applied to the Fund (the "Pax World Money Market
Fund"). None of the officers or directors are related to one another by blood,
marriage or adoption.

Members of the Board of Directors of the Fund are reimbursed for their
travel expenses for attending meetings of the Board of Directors plus $200.00
for affiliated directors and $1,000.00 for unaffiliated directors.

10
<PAGE>

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 1998 and travel expenses reimbursed by the Fund to
members of the Board of Directors (including members of the Audit Committee) in
1998 aggregated approximately $25,600.00 and $14,741.00, respectively.

ADVISER

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

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

The Advisory Agreement provides that (i) it may be terminated by the Fund
or the Adviser at any time upon sixty (60) days written notice, and (ii) will
terminate automatically in the event of its assignment (as defined in the
Investment Company Act). In addition, the Advisory Agreement provides that it
may continue in effect for a period of more than two (2) years from its
execution only so long as such continuance is specifically approved at least
annually in accordance with the requirements of the Investment Company Act. The
Advisory Agreement was approved by the Board of Directors, including a majority
of the Directors who are not parties to the contract or interested persons of
any such party, as defined in the Investment Company Act, on June 11, 1998.

Thomas W. Grant, the President of the Adviser, is also the President of
H.G. Wellington & Co., Inc. (the "Distributor"), and has been associated with
that firm since 1991. Mr. Grant served previously with the firm of Fahnestock &
Co. for twenty-six years as a partner, managing director and senior officer. His
duties encompassed branch office management, corporate finance, syndications and
municipal and corporate bonds. Mr. Laurence A. Shadek, the Chairman of the Board
of Directors of the Adviser, is also an Executive Vice-President of the
Distributor and, together with members of his family, own a twenty-six and
sixty-seven one hundredths percent (26.67%) interest in the Distributor. Mr.
Shadek has been associated with that firm since March 1986. He was previously
associated with Stillman, Maynard & Co., where he was a general partner. Mr.
Shadek's investment experience includes twelve years as a limited partner and
Account Executive with the firm Moore & Schley. Each of Mr. Grant and Mr. Shadek
serves as a member of the Board of Directors of the Fund.

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 is also the Portfolio Manager of
the Pax World Growth Fund, Inc. 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.

11
<PAGE>

Mr. Christopher H. Brown is a graduate of the Boston University School of
Management with a concentration in Finance. Mr. Brown joined the Adviser in 1998
and joined H.G. Wellington and Co., Inc. in 1998 as a Senior Vice President.
Prior to that, Mr. Brown was an Investment Consultant at Fahnestock and Co., a
New York Stock Exchange brokerage firm, for eleven years, and a First Vice
President from 1994 to 1998.

The following table shows the amount of the advisory fee of the Fund for
the years ended December 31, 1996, 1997 and 1998.

Approximate
Amount of
Fee

Year ended December 31, 1996 ..........................$2,554,000
Year ended December 31, 1997...........................$2,889,714
Year ended December 31, 1998...........................$3,599,066

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

DISTRIBUTION

The Fund maintains a distribution expense plan pursuant to Rule 12b-1 under
the Investment Company Act (the "Plan") pursuant to which the Fund incurs the
expenses of distributing the Fund's shares. The Plan provides that the Fund may
incur distribution expenses of up to twenty-five one hundredths of one percent
(.25%) per annum of its average daily net assets to finance activity which is
primarily intended to result in the sale of Fund shares. Such expenses include
(but are not limited to) travel and telephone expenses, preparation and
distribution of sales literature and advertising, compensation to be paid to and
expenses to be incurred by officers, directors and/or employees of the Fund, or
other third parties for their distributional service if sales of Fund shares are
made by such third parties during a fiscal year. So long as the Fund is
operating within such limitation, however, the Fund may pay to one or more of
its 12b-1 distributors (i) up to twenty-five hundredths of one percent (0.25%)
per annum of its average daily net assets for personal service and/or the
maintenance of shareholder accounts as defined by Rule 2830 of the National
Association of Securities Dealers Rules of Conduct, and (ii) total distribution
fees (including the service fee of .25 of 1%) up to thirty-five hundredths of
one percent (.35%) per annum of its average daily net assets. During the 1998
fiscal year, amounts paid by the Fund under the plan for clerical, advertising,
printing, postage and sales expenses (travel, telephone, and sales literature)
totaled $1,390,243: advertising, $651,255; printing and postage, $139,053; and
sales related expenses, $599,935.

The Plan will continue in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Directors,
including a majority vote of the Rule 12b-1 Directors (as hereinafter defined),
cast in person at a meeting called for the purpose of voting on such
continuance. The Plan may be terminated at any time, without penalty, by the
vote of a majority of the Rule 12b-1 Directors or by the vote of the holders of
a majority of the outstanding shares of the Fund on not more than sixty (60)
days, nor less than thirty (30) days, written notice to any other party to the
Plan. The Plan may not be amended to increase materially the amounts to be spent
for the services described therein without approval by the shareholders of the
Fund, and all material amendments are required to be approved by the Board of
Directors in the manner described above. The Plan will automatically terminate
in the event of its assignment. The Fund will not be obligated to pay expenses
incurred under the Plan if it is terminated or not continued.

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

The Plan was adopted on June 21, 1984 and approved on June 11, 1998 by the
Board of Directors of the Fund, including a majority of the Directors who are
not interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan
(the "Rule 12b-1 Directors"), at a meeting called for the purpose of voting on
such Plan.

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

12
<PAGE>

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

The Distribution Agreement was adopted on June 11, 1998 by the Board of
Directors of the Fund, including a majority of the Rule 12b-1 Directors, cast in
person at a meeting called for the purpose of voting on such agreement.

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

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING
AGENT AND INDEPENDENT ACCOUNTANTS

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

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

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

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

Equity securities traded in the over-the-counter market and bonds,
including convertible bonds, are generally traded on a "net" basis with dealers
acting as principal for their own accounts without a stated commission, although
the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation payable to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, certain money market
instruments and U.S. Government agency securities may be purchased directly from
the issuer, in which case no commissions or discounts are paid.

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

Subject to the above considerations, the Distributor (or any affiliate) may
act as a securities broker for the Fund. In order for the Distributor (or any
affiliate) to effect any portfolio transactions for the Fund, the commissions,
fees or other

13
<PAGE>

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

For the years ended December 31, 1996, 1997 and 1998, brokerage commissions
amounted to approximately $367,000, $365,000 and $507,000, 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 1997 and 1998 totaled $132,372.00 and $140,863.00, respectively (36.3%
and 27.8%, respectively, of total 1997 and 1998 commissions).

PURCHASE, REDEMPTION AND EXCHANGE
OF FUND SHARES

PURCHASE OF SHARES

IN GENERAL

The minimum initial investment is $250.00; the minimum subsequent
investment is $50.00. There is no minimum investment, however, for SIMPLE IRAs
and "tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code, as amended (the "Internal Revenue Code"). See "Shareholder Services" at
page 17.

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

14
<PAGE>

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

SALE OF SHARES

IN GENERAL

Shares of the Fund can be redeemed at any time for cash at the NAV per
share. See "How the Fund Values its Shares" in the Prospectus; and "Net Asset
Value" below.

INVOLUNTARY REDEMPTION

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

EXCHANGE OF SHARES

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

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

NET ASSET VALUE

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

Securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith by the
Board of Directors. Short-term debt securities are valued at cost, with interest
accrued or discount amortized to the date of maturity, if their original
maturity was sixty (60) days or less, unless this is determined by the Board of
Directors not to represent fair value. Short-term securities with remaining
maturities of sixty (60) days or more, for which market quotations are readily
available, are valued at their current market quotations as supplied by an
independent pricing agent or principal market maker. The Fund will compute its
net asset value at 4:15 P.M., New York time, on each day the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem Fund shares have been received or days on which changes in the value
of the Fund's portfolio securities do not affect net asset value. In the event
the New York Stock Exchange closes early on any business day, the net asset
value of the Fund's shares shall be determined at a time between such closing
and 4:15 P.M., New York time.

15
<PAGE>

PERFORMANCE INFORMATION

AVERAGE ANNUAL TOTAL RETURN

The Fund may from time to time advertise its average annual total return.
See "How the Fund Calculates Performance" in the Prospectus.

Average annual total return is computed according to the following formula:

P (1+T) (n) = ERV

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

Average annual total return does not take into account any federal or state
income taxes that may be payable upon redemption.

TAXES

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

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

Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one (1) year. Other gains or losses on the sale of securities will be
short-term capital gains or losses. Certain of the Fund's transactions may be
subject to wash sale, short sale, conversion transaction and straddle provisions
of the Internal Revenue Code. In addition, debt securities acquired by the Fund
may be subject to original issue discount and market discount rules.

In addition, positions which are part of a straddle will be subject to
certain wash sale and short sale provisions of the Internal Revenue Code. In the
case of a straddle, the Fund may be required to defer the recognition of losses
on positions it holds to the extent of any unrecognized gain on offsetting
positions held by the Fund. The conversion transaction rules may apply to
certain transactions to treat all or a portion of the gain thereon as ordinary
income rather than as capital gain.

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

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

16
<PAGE>

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

SHAREHOLDER SERVICES

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

AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS

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

AUTOMATIC INVESTMENT PLAN

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

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

TAX-DEFERRED RETIREMENT PLANS AND ACCOUNTS

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

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

SYSTEMATIC WITHDRAWAL PLAN

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

In the case of shares held through the Transfer Agent (i) a $10,000.00
minimum account value applies, (ii) withdrawals may not be for less than $100.00
and (iii) the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan.

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

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

17
<PAGE>

REPORTS TO SHAREHOLDERS

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

SHAREHOLDER INQUIRIES

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

18
<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, 1998, 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 the
financial highlights for each of the five 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, 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 the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.

/s/ PANNELL KERR FORSTER, P.C.

January 19, 1999

19
<PAGE>
<TABLE>
<CAPTION>

PAX WORLD FUND, INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998

ASSETS

Investments, at value - note A
<S> <C>
Common stocks (cost - $279,762,818) ................................ $528,352,048
Bonds (amortized cost - $213,710,177) .............................. 214,933,547
Pax World Money Market Fund (cost - $87,285,202) ................... 87,285,202
------------
830,570,797

Cash .................................................................. 5,710,304

Receivables
Capital stock sold ................................................. 864,735
Dividends and interest ............................................. 3,709,990
------------

Total assets .................................................... 840,855,826
------------

LIABILITIES

Payables
Investment securities purchased .................................... 1,159,375
Capital stock reacquired ........................................... 1,304,600
Accrued expenses
Investment advisory fee - note B ................................... 339,313
Transfer agent fee ................................................. 115,000
Other accrued expenses ............................................. 165,014
------------

Total liabilities ............................................... 3,083,302
------------

Net assets (equivalent to $21.64 per share based on 38,712,054
shares of capital stock outstanding) - note E ............... $837,772,524
------------

Net asset value, offering price and redemption price per share
($837,772,524 / 38,712,054 shares outstanding) $ 21.64
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

20
<PAGE>

PAX WORLD FUND, INCORPORATED
STATEMENT OF OPERATIONS
Year Ended December 31, 1998

Investment income
Income - note A
<S> <C> <C>
Dividends
Pax World Money Market Fund................ $1,629,146
Other investments.......................... 6,195,418 $ 7,824,564
----------
Interest ..................................... 15,229,468
------------

Total income............................ 23,054,032

Expenses
Investment advisory fee - note B.............. 3,599,066
Distribution expenses - note D................ 1,390,243
Transfer agent fee............................ 799,510
State taxes................................... 324,111
Custodian fees - note F....................... 186,875
Printing and mailing.......................... 173,867
Legal fees and related expenses - note B...... 95,062
Registration fees............................. 66,298
Other......................................... 49,033
Directors' fees and expenses - note B ........ 41,822
Audit fees.................................... 35,904
----------

Total expenses............................. 6,761,791

Less: Fees paid indirectly - note F........ 181,574
----------

Net expenses....................... 6,580,217
------------

Investment income, net..................... 16,473,815
------------

Realized and unrealized gain on investments - note C
Net realized gain on investments................. 32,342,171
Change in unrealized appreciation of investments
for the year.................................... 112,901,738
------------

Net gain on investments.................... 145,243,909
------------

Net increase in net assets resulting from
operations................................ $161,717,724
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

21
<PAGE>
<TABLE>
<CAPTION>

PAX WORLD FUND, INCORPORATED
STATEMENT OF CHANGES IN NET ASSETS

Years Ended
December 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Increase in net assets
Operations
Investment income - net ........................... $ 16,473,815 $ 15,102,768
Net realized gain on investments .................. 32,342,171 50,894,781
Change in unrealized appreciation of investments .. 112,901,738 61,297,526
------------- -------------
Net increase in net assets resulting from
operations .................................... 161,717,724 127,295,075
Net equalization credits ............................. 275,435 54,638
Distributions to shareholders from
Investment income - net ($.468 and $.503 per share,
respectively) - note A .......................... (16,751,495) (15,480,324)
Net realized gain on investments ($.880 and $1.650
per share, respectively) - note A ............... (32,342,583) (50,894,724)
Capital share transactions - note E .................. 95,872,040 54,593,793
------------- -------------
Net increase in net assets ..................... 208,771,121 115,568,458

Net assets
Beginning of year .................................... 629,001,403 513,432,945
------------- -------------

End of year (including undistributed investment
income - net of $6,969 and $9,214, respectively) .. $ 837,772,524 $ 629,001,403
------------- -------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

22
<PAGE>
<TABLE>
<CAPTION>

PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS
December 31, 1998

NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS

COMMON STOCKS

CONSUMER
<S> <C> <C>
Champion Enterprises, Inc......................... 408,200 $ 11,174,475
Gap, Inc.......................................... 750,000 42,187,500
Masco Corp........................................ 200,000 5,750,000
MediaOne Group, Inc............................... 175,000 8,225,000
OfficeMax, Inc.................................... 250,000 3,062,500
Sony Corp. ADR.................................... 50,000 3,587,500
Starbucks Corp.................................... 210,000 11,786,250
Tribune Co........................................ 200,000 13,200,000
Wendy's International, Inc........................ 350,000 7,634,375
-------------
106,607,600 12.7%
-------------

ENERGY
Bay State Gas Co.................................. 553,800 22,048,162
Enron Corp........................................ 500,000 28,531,250
KeySpan Energy Corp............................... 587,600 18,215,600
Peoples Energy Corp............................... 551,900 22,007,013
-------------
90,802,025 10.8
-------------

FINANCIAL
MBIA, Inc......................................... 75,000 4,917,187
SLM Holding Corp.................................. 200,000 9,600,000
Unum Corp......................................... 135,000 7,880,625
-------------
22,397,812 2.7
-------------

HEALTH CARE
Amgen, Inc........................................ 300,000 31,368,750
Baxter International Inc.......................... 120,000 7,717,500
Bristol-Myers Squibb Co........................... 125,000 16,726,563
Guidant Corp...................................... 100,000 11,025,000
Johnson & Johnson................................. 100,000 8,387,500
Medtronic, Inc.................................... 100,000 7,425,000
Merck & Co., Inc.................................. 200,000 29,537,500
-------------
112,187,813 13.4
-------------

TECHNOLOGY
Compaq Computer Corp.............................. 300,000 12,581,250
Computer Associate International, Inc............. 150,000 6,393,750
EMC Corp. (Mass.)................................. 125,000 10,625,000
Fiserv, Inc....................................... 175,000 9,001,563
Pitney Bowes, Inc................................. 350,000 23,121,875
-------------
61,723,438 7.4
-------------
</TABLE>

23
<PAGE>
<TABLE>
<CAPTION>

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

<S> <C> <C>
TELECOMMUNICATIONS
AirTouch Communications, Inc...................... 700,000 $ 50,487,500
BellSouth Corp.................................... 350,000 17,456,250
Loral Space Communications........................ 500,000 8,906,250
MCI Worldcom, Inc................................. 100,000 7,175,000
SBC Communications, Inc........................... 702,720 37,683,360
U.S. West, Inc. - Communications Group............ 200,000 12,925,000
-------------
134,633,360 16.1%

TOTAL COMMON STOCKS............................ 528,352,048 63.1
------------- ----

PRINCIPAL
AMOUNT
GOVERNMENT AGENCY BONDS

Federal Farm Credit Bank
<S> <C> <C>
5.000%, due October 2, 2003....................... $10,000,000 9,931,200

Federal Home Loan Bank System
5.025%, due February 23, 1999..................... 9,000,000 8,998,560
5.880%, due March 19, 1999........................ 13,000,000 13,020,280
5.660%, due January 12, 2000...................... 5,000,000 5,002,350
5.630%, due January 29, 2001...................... 10,000,000 9,990,600
5.025%, due November 5, 2002...................... 10,000,000 9,859,400
5.905%, due December 23, 2002..................... 14,000,000 14,369,740
5.590%, due October 6, 2003....................... 12,000,000 11,896,920
5.250%, due October 27, 2003...................... 10,000,000 9,859,330

Federal Home Loan Mortgage Corp.
6.110%, due June 18, 2003......................... 10,000,000 9,995,300

Federal National Mortgage Association
6.110%, due September 20, 2000.................... 12,000,000 12,219,360
6.080%, due September 25, 2000.................... 5,000,000 5,089,050
5.820%, due December 5, 2000...................... 15,000,000 15,227,400
5.370%, due February 7, 2001...................... 20,000,000 20,153,200
5.410%, due February 13, 2001..................... 10,000,000 10,084,400
5.360%, due February 16, 2001..................... 10,000,000 10,075,000
</TABLE>

24
<PAGE>
<TABLE>
<CAPTION>

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,
CONTINUED
<S> <C> <C>
6.000%, due April 30, 2001........................ $ 9,000,000 $ 9,016,830
6.710%, due July 24, 2001......................... 7,000,000 7,276,710
5.430%, due November 3, 2003...................... 10,000,000 9,881,200
5.375%, due November 17, 2003..................... 8,000,000 7,952,480
--------------

TOTAL GOVERNMENT AGENCY BONDS.................. 209,899,310
--------------

CORPORATE BONDS

American General Finance Corp.
5.750%, due November 1, 2003...................... 2,500,000 2,506,872
Sears Roebuck Acceptance Corp.
6.000%, due March 20, 2003........................ 2,500,000 2,527,365
--------------

TOTAL CORPORATE BONDS.......................... 5,034,237
--------------

TOTAL BONDS.................................... 214,933,547 25.6%
-------------- --------

NUMBER
MONEY MARKET SHARES OF SHARES

<S> <C> <C> <C>
Pax World Money Market Fund.......................... 87,285,202 87,285,202 10.4
-------------- --------

TOTAL INVESTMENTS.............................. 830,570,797 99.1

Cash and receivables, less liabilities............... 7,201,727 .9
-------------- --------

NET ASSETS..................................... $ 837,772,524 100.0%
-------------- --------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

25
<PAGE>

PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1998

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 producing
goods and services that improve the quality of life and that are not, to any
degree, engaged in manufacturing defense or weapons-related products. Its
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. Shares in money market funds are valued
at $1 per share.

INVESTMENT TRANSACTIONS

Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses are determined on the identified cost
basis, which is also used for Federal income tax purposes.

INVESTMENT INCOME

Dividend income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis and includes accretion of discount and
amortization of premiums.

Commencing January 1, 1997, the Fund amortizes purchase price premium and
accretes discount on bonds over the remaining life of the bonds using the
effective interest method of amortization; for callable bonds, the amortization
period is to the first call date. Net discount accretion (premium amortization)
for 1998 and 1997 was $219,398 and ($765,743), respectively. The amount for 1997
is net of the one-time charge for net premium amortization through January 1,
1997 on bonds held on that date. Reference is made to note G.

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
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

26
<PAGE>

PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS, continued

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. Two other officers of the Fund, who are not
directors of the Fund, are also officers of the Adviser. The Agreement provides
for an expense reimbursement from the Adviser if the Fund's total expenses,
exclusive of interest, brokerage commissions or fees, and taxes, but including
the investment advisory fee, exceeds 1-1/2% of the average daily net asset value
of the Fund for any full fiscal year. No expense reimbursement was required for
either 1998 or 1997.

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

During 1998, the Fund incurred legal fees and related expenses of $95,062
with Bresler Goodman & Unterman, LLP, general counsel for the Fund. Mr. Lee
Unterman, a partner with that firm, is Secretary of the Fund.

All of the Adviser's capital stock is currently owned by four siblings
whose family has an ownership interest in a brokerage firm which the Fund
utilizes to execute security transactions. Brokerage commissions paid to this
firm during 1998 and 1997 totaled $140,863 and $132,372, respectively, (27.8%
and 36.3%, respectively of total 1998 and 1997 commissions).

At the June 11, 1998 Annual Meeting, the shareholders approved changes to
the Fund's investment policies to permit the Fund to invest in the Pax World
Money Market Fund, which is also managed by the Adviser.

NOTE C - INVESTMENTS

Purchases and proceeds from sales of investments, excluding short-term
investments and U.S. Government agency bonds, aggregated $155,368,899 and
$101,313,490, respectively, for 1998. Purchases and proceeds from sales and
maturities of U.S. Government agency bonds aggregated $120,062,159 and
$64,900,000, respectively, for 1998.

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 1998 would have been approximately the same.

For Federal income tax purposes, the identified cost of investments owned
at December 31, 1998 was $580,758,197. Gross unrealized appreciation and
depreciation of investments aggregated $251,955,848 and $2,143,248,
respectively, at December 31, 1998, resulting in net unrealized appreciation of
$249,812,600.

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.

27
<PAGE>

PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>

NOTE E - CAPITAL AND RELATED TRANSACTIONS

Transactions in capital stock were as follows:

Year Ended Year Ended
December 31, 1998 December 31, 1997
------------------------------ ------------------------------
Shares Dollars Shares Dollars
------------- ------------- ------------- -------------

<S> <C> <C> <C> <C>
Shares sold .............. 9,126,274 $ 182,396,781 2,794,352 $ 50,868,833
Shares issued in reinvest-
ment of distributions .. 2,232,027 45,625,923 3,363,399 61,541,465
------------- ------------- ------------- -------------
11,358,301 228,022,704 6,157,751 112,410,298

Shares redeemed .......... (6,617,044) (132,150,664) (3,195,360) (57,816,505)
------------- ------------- ------------- -------------
Net increase ............. 4,741,257 $ 95,872,040 2,962,391 $ 54,593,793
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>

The components of net assets at December 31, 1998, are as follows:

<S> <C> <C> <C>
Paid-in capital (75,000,000 shares of $1 par value authorized) $ 595,873,084

Undistributed investment income .............................. 6,969
Excess distribution of capital gains ......................... (1,958)
Accumulated prior years' net realized losses on investments .. (7,918,171)
Net unrealized appreciation of investments ................... 249,812,600
-------------

Net assets ................................................ $ 837,772,524
-------------
</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 accreting bond
purchase price discounts and amortizing bond purchase price 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 accretion
of discounts and amortization of premiums on the bonds held at January 1, 1997.
This resulted in a one-time charge for net premium amortization through January
1, 1997 on bonds held on that date and a net reduction of approximately
$1,040,000 in interest income (and investment income, net) for 1997 (approxi
mately $.03 per share). Correspondingly, there was an identical one-time credit
to net gain on investments for the period.

NOTE H - YEAR 2000 (Unaudited)

State Street Bank and Trust Company (the custodian), PFPC, Inc. (the
transfer agent) and the Adviser all currently use a wide variety of computer
programs and devices which represent the calendar year portion of dates by their
last two digits. These programs and devices are critical to the Fund's
operations. Calculations performed with these truncated date fields may not work
properly with dates from 2000 and beyond.

These entities are in the process of executing detailed plans to modify or
replace significant applications as necessary to ensure Year 2000 compliance.
All necessary systems modifications and testing are expected to be completed by
mid-1999. The Fund does not expect to incur any costs relating to the year 2000
conversion.

28
<PAGE>

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
----------------------
1998 1997 1996 1995 1994
----------------------------------------------------

<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......... $18.52 $16.56 $16.33 $13.39 $13.55
------ ------ ------ ------ ------

Income from investment operations
Investment income - net (B).............. .468 .493 .550 .80 .49
Realized and unrealized gain (loss)
on investments - net (B)................ 4.008 3.622 1.122 3.07 (.15)
------ ------ ------ ------ ------
Total from investment operations...... 4.476 4.115 1.672 3.87 .34
------ ------ ------ ------ ------

Less distributions
Dividends from net investment income..... 468 .503 .550 .79 .50
Distributions from realized gains........ .880 1.650 .892 .14 -
Tax return of capital.................... .008 .002 - - -
------ ------ ------ ------ ------
Total distributions................... 1.356 2.155 1.442 .93 .50
------ ------ ------ ------ ------

Net asset value, end of year................ $21.64 $18.52 $16.56 $16.33 $13.39
------ ------ ------ ------ ------

2. TOTAL RETURN............................ 24.62% 25.12% 10.36% 29.19% 2.65%

3. RATIOS AND SUPPLEMENTAL DATA

Ratio of total expenses to average net
assets (A).............................. .95% .91% .89% .97% .98%

Ratio of investment income - net to
average net assets...................... 2.33% 2.67% 3.24% 3.44% 3.66%

Portfolio turnover rate.................. 28.59% 13.88% 34.55% 28.44% 25.45%

Net assets, end of year ('000s).......... $837,773 $629,001 $513,433 $476,976 $388,249

Number of capital shares outstanding,
end of year ('000s)..................... 38,712 33,971 31,008 29,200 29,000
</TABLE>

<PAGE>

PART C

OTHER INFORMATION

Item 23. Financial Statements and Exhibits.

(a) Financial Statements:

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

Part A - Financial Highlights

Part B - Statements of Assets and
Liabilities, Operations, Changes in
Net Assets, Notes to Financial
Statements, all as of December 31,
1998, and Independent Auditors'
Report.

(b) Exhibits:

(i) Articles of Incorporation. Incorporated by reference
to Amendment No. 24 to the Registrant's Registration
Statement on Form N-1Q filed with the Securities and
Exchange Commission on January 22, 1976 --
Registration No. 2-38679 ("Amendment No. 24 to the
Registration Statement").

(ii) By-Laws. Incorporated by reference to Amendment No.
24 to the Registration Statement.

(iii) Instruments Defining Rights of Security Holders.
Incorporated by reference to Amendment No. 24 to the
Registration Statement.

(iv) Investment Advisory Contracts. Form of Advisory
Agreement between the Registrant and Pax World
Management Corp. Incorporated by reference to
Amendment No. 37 to the Registrant's Registration
Statement on Form N-1A filed with the Securities and
Exchange Commission on February 20, 1997 --
Registration No. 2-38679 ("Amendment No. 37 to the
Registration Statement").

(v) Underwriting Contracts. Form of Distribution
Agreement between the Registrant and H. G. Wellington
& Co., Inc.

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

(vii) Custodian Agreements. Form of Custodian Contract
between the Registrant and State Street Bank and
Trust Company. Incorporated by reference to
Supplemental Prospectus filed with the Securities and
Exchange Commission on or about November 11, 1991.

(viii) Other Material Contracts. Form of Transfer Agency
Services Agreement between the Registrant and PFPC,
Inc. Incorporated by reference to Amendment No. 24 to
the Registration Statement.

(ix) Legal Opinion. Incorporated by reference to Amendment
No. 37 to the Registration Statement. Representation
and Consent of Counsel is filed herewith.

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

(xi) Omitted Financial Statements. Not Applicable.

(xii) Initial Capital Agreements. Not Applicable.

<PAGE>

(xiii) Rule 12b-1 Plan. Form of Distribution and Service
Plan. Incorporated by reference to Amendment No. 24
to the Registration Statement.

(xiv) Financial Data Schedule.

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

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

None.

Item 25. Indemnification.

As permitted by Section 17(h) and (i) of the Investment Company Act of
1940 (the "1940 Act") and pursuant to Article XXX of the Fund's By-Laws (Exhibit
2 to the Registration Statement), any person made a party to any action, suit or
proceeding by reason of the fact that such person, or such person's testator or
intestate is or was an officer, director and employee of the Registrant, or of
any other corporation which such person served as such at the request of the
Registrant, shall be indemnified by the Registrant against the reasonable
expenses, including damages and attorney's fees, actually incurred by such
person in the defense of such action, suit or proceeding, or in connection with
any appeal therein, provided, however, that such indemnification shall not apply
to any acts by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such person's
office. Section 145 of the General Corporation Law of the State of Delaware
permits indemnification of directors who acted in good faith and reasonably
believed that the conduct was in the best interests of the Registrant.

Section 8 of the Advisory Agreement (Exhibit 5 to the Registration
Statement) limits the liability of the Adviser to liabilities arising from
willful misfeasance, bad faith or gross negligence in the performance of its
duties or from reckless disregard by it of its obligations and duties under the
Advisory Agreement.

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

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

<PAGE>

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

See "Fund Highlights -- Who Advises the Fund?" and "Adviser" in the
Prospectus constituting Part A of this Registration Statement and "Adviser" in
the Statement of Additional Information constituting Part B of this Registration
Statement.

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

Name Position(s) Held With the Principal Occupation(s)
Adviser
- - ----------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C>
Katherine Shadek Boyle Senior Vice President; Senior Vice President, Pax World
Director Management Corp.

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

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

Laurence A. Shadek Chairman of the Board; Chairman of the Board, Pax World
Director Management Corp.; Chairman of the Board, Pax World Fund,
Incorporated; Chairman of the Board, Pax World
Growth Fund, Inc.; Executive Vice President, Pax World Money
Market Fund, Inc.; Executive Vice President, H. G.
Wellington & Co., Inc.

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

Item 27. Principal Underwriters

Not Applicable.

Item 28. Location of Accounts and Records

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

Item 29. Management Services

Other than as set forth under the captions "Fund Highlights -- Who
Manages the Fund?" and "Management of the Fund" in the Prospectus and the
captions "Management of the Fund" in the Statement of Additional

<PAGE>

Information, constituting Parts A and B, respectively, of this Post-Effective
Amendment to the Registrant's Registration Statement, the Registrant is not a
party to any management-related service contract.

Item 30. Undertakings

Not Applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of New York, and State of New York, on the 25th day of February, 1999.

PAX WORLD FUND, INCORPORATED

By: /s/ THOMAS W. GRANT
--------------------------------------
Thomas W. Grant
President

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

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

/s/ LAURENCE A. SHADEK Chairman of the Board, 2/25/99
- - ---------------------------------- Director
Laurence A. Shadek

/s/ THOMAS W. GRANT President, Director 2/25/99
- - ----------------------------------
Thomas W. Grant

/s/ ANITA D. GREEN Co-Treasurer 2/25/99
- - ----------------------------------
Anita D. Green

/s/ JANET L. SPATES Co-Treasurer 2/25/99
- - ----------------------------------
Janet L. Spates

/s/ C. LLOYD BAILEY Director 2/25/99
- - ----------------------------------
C. Lloyd Bailey

/s/ CARL H. DOERGE, JR. Director 2/25/99
- - ----------------------------------
Carl H. Doerge, Jr.

/s/ JOY L. LIECHTY Director 2/25/99
- - ----------------------------------
Joy L. Liechty

/s/ SANFORD C. SHERMAN Director 2/25/99
- - ----------------------------------
Sanford C. Sherman

/s/ NANCY S. TAYLOR Director 2/25/99
- - ----------------------------------
Nancy S. Taylor

/s/ ESTHER J. WALLS Director 2/25/99
- - ----------------------------------
Esther J. Walls

<PAGE>

PAX WORLD GROWTH FUND, INC.

Exhibit Index

1. Articles of Incorporation.*

2. By-Laws.*

3. Instruments defining rights of security holders.*

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

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

6. Not Applicable.

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

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

9. Representation and Consent of Counsel.**

10. Consent of Certified Independent Public Accountants.**

11. Not Applicable.

12. Not applicable.

13. Form of Distribution and Service Plan.*

14. Financial Data Schedule.**

15. Not Applicable.

- - ------------

* Previously filed and not filed herewith.
** Filed herewith.

EXHIBIT 5

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

July 1, 1998

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

Ladies and Gentlemen:

We hereby confirm our agreement with you as follows:

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

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

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

4. All sales of our shares effected through you will be made in
compliance with all applicable federal securities laws and regulations and the
Constitution, rules and regulations of the National Association of Securities

<PAGE>

Dealers, Inc. ("NASD"). We reserve the right to suspend the offering of shares
of our Common Stock at any time, in the absolute discretion of our Board of
Directors, and upon notice of such suspension you shall cease to offer shares of
our Common Stocks hereunder.

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

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

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

<PAGE>

of any investigation made by or on behalf of you or any controlling person and
shall survive the sale of any shares of our Common Stock made pursuant to
subscriptions obtained by you. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your successors and assigns, and
to the benefit of any of your controlling persons and their successors and
assigns. We agree promptly to notify you of the commencement of any litigation
or proceeding against us in connection with the issue and sale of any shares of
our Common Stock.

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

9. We agree to advise you immediately:

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

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

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

10. This agreement will become effective on the date hereof and will
remain in effect thereafter for successive twelve-month periods (computed from
each July 1st), provided that such continuation is specifically approved at
least annually by vote of our Board of Directors and of a majority of those of
our directors who are not interested persons (as defined in the 1940 Act) and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan, cast in person at a meeting called for the
purpose of voting on this agreement. This agreement may be terminated at any
time, without the payment of any penalty, (i) by vote of a majority of our
entire Board of Directors, and by a vote of a majority of our Directors who are
not interested persons (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of our outstanding voting
securities, as defined in the Act, on sixty days' written notice to you, or
(iii) by you on sixty days' written notice to us.

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

12. This agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale,

<PAGE>

hypothecation or pledge by you. The terms "transfer", "assignment" and "sale" as
used in this paragraph shall have the meanings ascribed thereto by governing law
and in applicable rules or regulations of the SEC thereunder.

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

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

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

Very truly yours,

PAX WORLD FUND, INCORPORATED

By:______________________________
Laurence A. Shadek
Chairman of the Board

Accepted and Agreed to as of the date hereof:

H.G. WELLINGTON & CO., INC.

By:______________________________
Thomas W. Grant
President

EXHIBIT 9

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

February 25, 1999

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

PAX WORLD FUND, INCORPORATED
----------------------------

Ladies and Gentlemen:

The undersigned has reviewed Post-Effective Amendment No. 38 to
Registration Statement No. 2-38679 of Pax World Fund, Incorporated on Form N-1A
and represents that such documentation, including the Prospectus, does not
contain disclosures which would render it ineligible to become effective
pursuant to paragraph (b) of Rule 485.

/s/ BRESLER GOODMAN & UNTERMAN, LLP

<PAGE>

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

February 25, 1999

To the Shareholders and the Board of Directors
of Pax World Fund, Incorporated:

CONSENT OF COUNSEL
------------------

We consent to the use in Post-Effective Amendment No. 38 to
Registration Statement No. 2-38679 of Pax World Fund, Incorporated on Form N-1A
of the reference to us on the back page of the Prospectus and under the heading
"Adviser; Sub-Adviser" in the Statement of Additional Information.

/s/ BRESLER GOODMAN & UNTERMAN, LLP

EXHIBIT 10

PANNELL KERR FORSTER PC
Certified Public Accountants
18th Floor, 125 Summer Street
Boston, MA 02110

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------

We consent to the use in Post-Effective Amendment No. 38 to
Registration Statement No. 2-38679 of Pax World Fund, Incorporated on Form N-1A
of our report dated January 19, 1999, appearing in the Statement of Additional
Information, which is a part of such Registration Statement, and to the
reference to us on the back page of the Prospectus and under the heading
"Custodian, Transfer and Dividend Disbursing Agent and Independent Accountants"
in the Statement of Additional Information.

/s/ PANNELL KERR FORSTER, P.C.

Boston, Massachusetts
February 25, 1999

<ARTICLE> 6
<LEGEND>
Exhibit 14

This schedule contains summary financial information extracted from the
Financial Statements and Financial Highlights of the Registrant for the period
January 1, 1998 to December 31, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000076721
<NAME> Pax World Fund, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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<INVESTMENTS-AT-COST> 580,758
<INVESTMENTS-AT-VALUE> 830,571
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</TABLE>