PAX WORLD FUND
SEMI-ANNUAL REPORT
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PAX
WORLD
FUND
[Logo]
----------------
SEMI-ANNUAL
REPORT
June 30, 1999
- --------------------------------------------------------------------------------
PAX WORLD FUND
A NO-LOAD BALANCED FUND
INVESTMENT ADVISER--
Pax World Management Corp.
222 State Street
Portsmouth, NH 03801-3853
TRANSFER AND DIVIDEND DISBURSING AGENT--
PFPC, Inc.
P.O. Box 8950
Wilmington, DE 19899-8950
GENERAL COUNSEL--
Bresler Goodman & Unterman, LLP
521 Fifth Avenue
New York, NY 10175
INDEPENDENT AUDITORS--
Pannell Kerr Forster PC
125 Summer Street
Boston, MA 02110-2326
- --------------------------------------------------------------------------------
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PAX
WORLD
FUND
FAMILY
[Logo]
-------------
222 State Street
Portsmouth, NH 03801-3853
WWW.PAXFUND.COM
For General Fund Information, please call:
1-800-767-1729
For Shareholder Account Information, please call:
1-800-372-7827
For Broker Services, please call:
1-800-635-1404
All Account Inquiries should be addressed to:
Pax World Fund Family
P.O. Box 8930
Wilmington, DE 19899
[Recycling Logo]
Printed in the USA on recycled paper
<PAGE>
Dear Pax World Fund Shareholders:
Once again, the Pax World Fund with its balanced approach posted solid
gains for the first half of 1999. For the six-month period ended June 30, 1999,
the total return for the Fund was 8.50%. The media has noticed the Fund's
performance as well, which is reflected in the Fund's numerous top rankings.
While the broad market averages gained in the first half of 1999, many of
the market leaders of the last few years experienced less than stellar
performance during this period. Internet stocks were subjected to profit taking,
many of the health care and bellwether consumer stocks sold off, and even some
technology leaders dropped sharply. Looking ahead, we feel that the outlook for
the second half of 1999 is generally favorable. Economic projections are good,
interest rate projections are non-threatening and inflation remains low. Given
all of this, we believe investors remain confident that equities are the most
attractive path for building capital.
We will continue to seek out quality companies with solid earnings
viability and superior long-term prospects. At the same time, we expect to find
some new attractive investment opportunities in companies that are currently
out-of-favor, including so-called "special situations", and companies that can
benefit from the improving international scene.
Over the past six months, the Fund has seen an increase in the level of
social activity. Anita Green, our Director of Social Research, has been an
active member of several groups that are working to broaden the impact of
socially responsible investing. To cite one example, the Pax World Fund Family
signed on with the Corporate Sunshine Group, which lobbies for improved
corporate environmental reporting.
With regard to corporate dialogue, we have been in touch with Gap, Inc.
concerning an abusive labor lawsuit, and we contacted Wendy's International,
Inc. and Merck & Co. regarding racial discrimination lawsuits. To date, the
Wendy's lawsuit has been satisfactorily resolved and the others are pending. We
anticipate that our participation in this area will increase in keeping with the
overall research activities of the Pax World Fund Family.
The Pax World Fund is ever mindful of its commitment to socially
responsible investing and will continue to follow and improve upon the
guidelines set by our founders.
Respectfully,
/s/Laurence A. Shadek /s/Thomas W. Grant
--------------------- ------------------
Laurence A. Shadek Thomas W. Grant
Chairman President
July 30, 1999
2
<PAGE>
ASSET ALLOCATION, JUNE 30, 1999
(PIE CHART)
Stocks - 63%
Bonds - 27%
Cash & Equivalents - 10%
SECURITY DIVERSIFICATION, JUNE 30, 1999
(PIE CHART)
Bonds - 27%
Consumer - 17%
Telecommunications - 13%
Health Care - 12%
Money Markets & CDs - 10%
Energy - 9%
Technology - 7%
Financial & Real Estate - 4%
PORTFOLIO HIGHLIGHTS
SIX MONTHS ENDED 6/30/99
KEY STATISTICS
Change in NAV ($21.64
to $23.48).....................$1.84
12 Month Total Return
(6/30/98 - 6/30/99)...........21.27%
6 Month Total Return
(12/31/98 - 6/30/99)...........8.50%
Net Increase in Net Assets
Resulting from
Operations.............$72.7 million
Total Net
Assets................$960.8 million
TEN LARGEST STOCK HOLDINGS
PERCENT OF
COMPANY NET ASSETS
Gap Inc.........................5.2%
Vodafone AirTouch PLC...........5.1%
Enron Corp......................4.3%
Amgen Inc.......................3.3%
Merck & Co. Inc.................3.1%
SBC Communications Inc..........2.4%
Pitney Bowes Inc................2.3%
Peoples Energy Corp.............2.2%
Bristol-Myers Squibb Co.........1.8%
Tribune Co......................1.8%
Total..........................31.5%
3
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS
An Annual Meeting of the Shareholders of the Fund was held at 10:45 a.m. on
Thursday, June 10, 1999 at the State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110. The matters voted upon and the number of votes cast
for, against or withheld, as well as the number of abstentions and broker
non-votes as to each matter, are as follows:
(A) to elect a Board of eight Directors, each to hold office until the next
Annual Meeting of the Shareholders of the Fund or until a successor shall have
been chosen and shall have qualified:
C. Lloyd Bailey
For: 21,203,616.702
Against: 607,680.955
Abstain: 0.000
Broker Non-Votes: 0.000
Carl H. Doerge, Jr.
For: 21,298,500.058
Against: 512,797.599
Abstain: 0.000
Broker Non-Votes: 0.000
Thomas W. Grant
For: 21,266,216.690
Against: 545,080.967
Abstain: 0.000
Broker Non-Votes: 0.000
Joy L. Liechty
For: 21,338,910.628
Against: 472,387.029
Abstain: 0.000
Broker Non-Votes: 0.000
Laurence A. Shadek
For: 21,277,225.574
Against: 534,072.083
Abstain: 0.000
Broker Non-Votes: 0.000
Sanford C. Sherman
For: 21,316,808.212
Against: 494,489.445
Abstain: 0.000
Broker Non-Votes: 0.000
Nancy S. Taylor
For: 21,300,925.294
Against: 510,372.363
Abstain: 0.000
Broker Non-Votes: 0.000
Esther J. Walls
For: 21,275,789.425
Against: 535,508.232
Abstain: 0.000
Broker Non-Votes: 0.000
(constituting all of the members of the Board of Directors of the Fund);
(B) to ratify the selection by the Board of Directors of Pannell Kerr
Forster PC as the independent public accountants of the Fund for the year ending
December 31, 1999:
For: 20,858,827.831
Against: 81,452.882
Abstain 871,016.944
Broker Non-Votes: 0.000
(C) to transact such other business as may properly come before such annual
meeting or any adjournment thereof:
For: 19,781,057.681
Against: 305,229.268
Abstain: 1,725,010.708
Broker Non-Votes: 0.000
4
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 1999
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
CONSUMER
Champion Enterprises, Inc......................... 203,000 $ 3,780,875
Costco Companies, Inc............................. 50,000 4,003,125
Gap, Inc.......................................... 1,000,000 50,375,000
Koninklijke Philips Electronics, NV............... 115,000 11,600,625
Masco Corp........................................ 300,000 8,662,500
MediaOne Group, Inc............................... 200,000 14,875,000
OfficeMax, Inc.................................... 100,000 1,200,000
Sony Corp. ADR.................................... 125,000 13,796,875
Starbucks Corp.................................... 450,000 16,903,125
Suiza Foods Corp.................................. 100,000 4,187,500
Tribune Co........................................ 200,000 17,425,000
Wendy's International, Inc........................ 400,000 11,325,000
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158,134,625 16.5%
-------------
ENERGY
Enron Corp........................................ 500,000 40,875,000
KeySpan Energy Corp. ............................. 587,600 15,497,950
NiSource, Inc. ................................... 400,000 10,325,000
Peoples Energy Corp............................... 551,900 20,799,731
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87,497,681 9.1
-------------
FINANCIAL
H&R Block, Inc.................................... 250,000 12,500,000
MBIA, Inc......................................... 125,000 8,093,750
SLM Holding Corp. ................................ 200,000 9,162,500
UnumProvident Corp................................ 150,000 8,212,500
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37,968,750 4.0
-------------
HEALTH CARE
Amgen, Inc........................................ 525,000 31,959,375
Baxter International, Inc......................... 120,000 7,275,000
Bristol-Myers Squibb Co........................... 250,000 17,609,375
Guidant Corp...................................... 200,000 10,287,500
Johnson & Johnson................................. 100,000 9,800,000
Medtronic, Inc.................................... 100,000 7,787,500
Merck & Co., Inc.................................. 400,000 29,600,000
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114,318,750 11.9
-------------
</TABLE>
5
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED
TECHNOLOGY
America Online, Inc............................... 30,000 $ 3,315,000
Apple Computer.................................... 50,000 2,315,625
ASM Lithography Holdings, NV...................... 50,000 2,968,750
Cisco Systems, Inc................................ 100,000 6,443,750
Computer Associates International, Inc............ 150,000 8,250,000
EMC Corp. (Mass.)................................. 250,000 13,750,000
Fiserv, Inc....................................... 262,500 8,219,531
Pitney Bowes, Inc................................. 350,000 22,487,500
SAP Aktiengesellschaft ADR........................ 50,000 1,731,250
--------------
69,481,406 7.2%
-------------
TELECOMMUNICATIONS
BellSouth Corp.................................... 350,000 16,406,250
Cable & Wireless PLC.............................. 200,000 7,925,000
Loral Space Communications........................ 500,000 9,000,000
SBC Communications, Inc........................... 400,000 23,200,000
Telefonos de Mexico "L" ADS....................... 100,000 8,081,250
U.S. West, Inc. - Communications Group............ 225,000 13,218,750
Vodafone AirTouch PLC............................. 250,000 49,250,000
--------------
127,081,250 13.2
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TOTAL COMMON STOCKS............................. 594,482,462 61.9
-------------- -------
PREFERRED STOCKS
CONSUMER
Suiza Foods Corp.
5.5% Capital Trust II Convertible Preferred..... 50,000 1,868,750 .2
ENERGY
NiSource, Inc.
7.75% Series B Convertible Preferred............ 100,000 4,937,500 .5
REAL ESTATE
Equity Residential Properties Trust
7.25% Convertible Preferred Series G............ 160,000 3,810,000 .4
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TOTAL PREFERRED STOCKS.......................... 10,616,250 1.1
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TOTAL STOCKS................................ $ 605,098,712 63.0%
------------- -------
</TABLE>
6
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT AGENCY BONDS
Federal Farm Credit Bank
5.000%, due October 2, 2003....................... $ 10,000,000 $ 9,559,400
Federal Home Loan Bank System
5.250%, due August 9, 2002........................ 10,000,000 9,760,900
5.025%, due November 5, 2002...................... 10,000,000 9,664,100
5.905%, due December 23, 2002..................... 14,000,000 13,958,420
5.750%, due April 28, 2003........................ 7,000,000 6,851,250
6.495%, due June 23, 2003......................... 5,000,000 4,972,650
5.590%, due October 6, 2003....................... 12,000,000 11,668,080
5.250%, due October 27, 2003...................... 10,000,000 9,598,400
5.335%, due February 19, 2004..................... 10,000,000 9,639,100
5.485%, due February 26, 2004..................... 5,000,000 4,844,550
6.000%, due May 25, 2004.......................... 5,885,000 5,774,285
6.805%, due June 28, 2004......................... 5,000,000 5,003,100
6.000%, due October 6, 2004....................... 5,000,000 4,863,300
Federal Home Loan Mortgage Corp.
5.400%, due January 14, 2002...................... 5,000,000 4,939,850
6.110%, due June 18, 2003......................... 10,000,000 9,840,600
Federal National Mortgage Association
6.110%, due September 20, 2000.................... 12,000,000 12,065,640
6.080%, due September 25, 2000.................... 5,000,000 5,025,800
5.820%, due December 5, 2000...................... 15,000,000 15,011,700
5.370%, due February 7, 2001...................... 20,000,000 19,878,200
5.410%, due February 13, 2001..................... 10,000,000 9,943,700
5.360%, due February 16, 2001..................... 10,000,000 9,935,900
6.710%, due July 24, 2001......................... 7,000,000 7,126,840
5.430%, due November 3, 2003...................... 10,000,000 9,659,400
5.375%, due November 17, 2003..................... 8,000,000 7,732,480
5.810%, due February 23, 2004..................... 10,000,000 9,776,600
6.000%, due March 12, 2004........................ 10,000,000 9,835,900
5.880%, due March 25, 2004........................ 9,000,000 8,804,520
6.930%, due June 30, 2004......................... 5,000,000 4,992,200
---------------
TOTAL GOVERNMENT AGENCY BONDS................... $ 250,726,865
---------------
</TABLE>
7
<PAGE>
PAX WORLD FUND, INCORPORATED
SCHEDULE OF INVESTMENTS (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF ISSUER AND TITLE OF ISSUE SHARES VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS
American General Finance Corp.
5.750%, due November 1, 2003....................... $ 2,500,000 $ 2,427,435
Sears Roebuck Acceptance Corp.
6.000%, due March 20, 2003......................... 2,500,000 2,462,938
--------------
TOTAL CORPORATE BONDS........................... 4,890,373
--------------
TOTAL BONDS..................................... 255,617,238 26.6%
-------------- ------
CERTIFICATE OF DEPOSIT
South Shore Bank (Chicago, IL)
4.700%, due October 11, 1999....................... 1,000,000 1,000,000 .1
-------------- ------
NUMBER
MONEY MARKET SHARES OF SHARES
Pax World Money Market Fund.......................... 91,600,776 91,600,776 9.5
-------------- ------
TOTAL INVESTMENTS............................... 953,316,726 99.2
Cash and receivables, less liabilities............... 7,475,122 .8
-------------- ------
NET ASSETS...................................... $ 960,791,848 100.0%
-------------- ------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
8
<PAGE>
PAX WORLD FUND, INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
June 30, 1999
ASSETS
<TABLE>
<CAPTION>
Investments, at value - note A
<S> <C>
Common stocks (cost - $319,081,436)................................................ $ 594,482,462
Preferred stocks (cost - $10,640,072).............................................. 10,616,250
Bonds (amortized cost - $259,750,546).............................................. 255,617,238
Certificate of deposit (cost - $1,000,000)......................................... 1,000,000
Pax World Money Market Fund (cost - $91,600,776)................................... 91,600,776
--------------
953,316,726
Cash.................................................................................... 7,713,965
Receivables
Investment securities sold......................................................... 15,218,685
Dividends and interest............................................................. 4,522,513
---------------
Total assets................................................................... 980,771,889
---------------
LIABILITIES
Payables
Capital stock reacquired........................................................... 568,231
Investment securities purchased.................................................... 18,148,627
Accrued expenses
Investment advisory fee - note B................................................... 395,588
Transfer agent fee................................................................. 80,000
Distribution expenses.............................................................. 250,000
Other accrued expenses - note A.................................................... 537,595
---------------
Total liabilities.............................................................. 19,980,041
---------------
Net assets (equivalent to $23.48 per share based on
40,926,454 shares of capital stock outstanding) - note E.............. $ 960,791,848
---------------
Net asset value, offering price and redemption price per share
($960,791,848 / 40,926,454 shares outstanding)........................ $23.48
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
PAX WORLD FUND, INCORPORATED
STATEMENT OF OPERATIONS (UNAUDITED)
Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Investment income
<S> <C> <C>
Income - note A
Dividends
Pax World Money Market Fund.............................. $ 2,346,185
Other investments........................................ 3,567,686 $ 5,913,871
------------
Interest ..................................................... 6,571,044
------------
Total income.......................................... 12,484,915
Expenses
Investment advisory fee - note B.............................. 2,277,536
Distribution expenses - note D ............................... 876,929
Transfer agent fee............................................ 504,339
Printing and mailing.......................................... 117,983
Custodian fees - note F ...................................... 117,177
Registration fees............................................. 58,084
Legal fees and related expenses - note B...................... 44,442
State taxes................................................... 39,120
Audit fees.................................................... 27,959
Directors' fees and expenses - note B......................... 20,750
Other - note A................................................ 483,175
-------------
Total expenses........................................ 4,567,494
Less: Fees paid indirectly - note F................... (89,236)
-------------
Net expenses................................... 4,478,258
------------
Investment income, net................................ 8,006,657
------------
Realized and unrealized gain on investments - note C
Net realized gain on investments.................................. 43,307,801
Change in unrealized appreciation of investments
for the period ............................................... 21,431,296
-----------
Net gain on investments............................... 64,739,097
-----------
Net increase in net assets resulting
from operations.................................... $72,745,754
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
10
<PAGE>
PAX WORLD FUND, INCORPORATED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
Increase in net assets
Operations
Investment income, net........................... $ 8,006,657 $ 16,473,815
Net realized gain on investments................. 43,307,801 32,342,171
Change in unrealized appreciation
of investments for the period............... 21,431,296 112,901,738
-------------- -------------
Net increase in net assets resulting
from operations......................... 72,745,754 161,717,724
Net equalization credits............................. 230,067 275,435
Distributions to shareholders from
Investment income - net ($-0- and $.468
per share, respectively) - note A........... -- (16,751,495)
Net realized gain on investments ($-0- and
$.880 per share, respectively) - note A..... -- (32,342,583)
Capital share transactions - note E.................. 50,043,503 95,872,040
-------------- -------------
Net increase in net assets.................. 123,019,324 208,771,121
Net assets
Beginning of period.................................. 837,772,524 629,001,403
-------------- ------------
End of period (including undistributed investment
income - net, of $8,243,693 and $6,969,
respectively) ................................... $ 960,791,848 $837,772,524
-------------- ------------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
11
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999
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. Certificates of deposit are valued at cost; accrued interest to
June 30, 1999 is included in dividends and interest receivable.
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.
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 for the six months ended June 30, 1999 and for the
year ended December 31, 1998 was $93,117 and $219,398, respectively.
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.
12
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
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.
EXPENSE ACCRUAL
During the year, the Fund accrues expenses on a daily basis at an annual
rate of 1% of average daily net assets. Since actual expenses are not incurred
uniformly throughout the year, this policy may result in expenses being either
under - or over - accrued during interim periods. Near the end of the year, the
Fund estimates the actual expenses that will be incurred through December 31 and
adjusts the daily accrual accordingly. Management of the Fund has estimated that
at June 30, 1999, expenses were overaccrued by approximately $440,000 ($.01 per
share). This overaccrual is reflected in other accrued expenses on the unaudited
statement of assets and liabilities and in other expenses on the unaudited
statement of operations.
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 the six months ended June 30, 1999.
All Directors are paid by the Fund for attendance at directors' meetings.
During the six months ended June 30, 1999, the Fund incurred legal fees and
related expenses of $44,442 with Bresler Goodman & Unterman, LLP, general
counsel for the Fund. Mr. Lee Unterman, a partner with that firm, is Secretary
of the Fund.
13
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
All of the Adviser's capital stock is currently owned by four siblings
whose family has an ownership interest in a brokerage firm which the Fund
utilizes to execute security transactions. Brokerage commissions paid to this
firm during the six months ended June 30, 1999 and the year ended December 31,
1998 totaled $73,701 and $140,863, respectively, (26.5% and 27.8%, respectively
of total commissions for the six months ended June 30, 1999 and the year ended
December 31, 1998).
At the June 11, 1998 Annual Meeting, 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 - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investments, excluding short-term
investments and U.S. Government agency bonds, aggregated $112,301,770 and
$105,626,340, respectively, for the six months ended June 30, 1999. Purchases
and proceeds from sales and maturities of U.S. Government agency bonds
aggregated $91,922,711 and $46,000,000, respectively, for the six months ended
June 30, 1999.
Net realized gain or loss on sales of investments is determined on the
basis of identified cost. If determined on an average cost basis, the net
realized gain for the six months ended June 30, 1999 would have been
approximately the same.
For Federal income tax purposes, the identified cost of investments owned
at June 30, 1999 was $682,072,830. Gross unrealized appreciation and
depreciation of investments aggregated $278,050,413 and $6,806,517,
respectively, at June 30, 1999, resulting in net unrealized appreciation of
$271,243,896.
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.
14
<PAGE>
PAX WORLD FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
NOTE E - CAPITAL AND RELATED TRANSACTIONS
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
------------- -----------------
Shares Dollars Shares Dollars
--------------------- ------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Shares sold......................... 4,941,485 $110,882,519 9,126,274 $182,396,781
Shares issued in reinvestment
of distributions................. -- -- 2,232,027 45,625,923
------------ ------------ ----------- ------------
4,941,485 110,882,519 11,358,301 228,022,704
Shares redeemed..................... (2,727,085) (60,839,016) (6,617,044) (132,150,664)
------------ ------------ ----------- ------------
Net increase ....................... 2,214,400 $ 50,043,503 4,741,257 $ 95,872,040
------------ ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
The components of net assets at June 30, 1999 (unaudited), are as follows:
<S> <C>
Paid-in capital (75,000,000 shares of $1 par value authorized)..................... $ 645,916,587
Undistributed investment income.................................................... 8,243,693
Undistributed capital gains........................................................ 43,305,843
Accumulated prior years' net realized losses on investments........................ (7,918,171)
Net unrealized appreciation of investments......................................... 271,243,896
--------------
Net assets.................................................................. $960,791,848
--------------
</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 - DIVIDEND DECLARATION
The Board of Directors has declared a dividend from the net investment
income of $.20 per share, payable July 7, 1999, to shareholders of record on
July 1, 1999.
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
fall 1999. The Fund does not expect to incur any costs relating to the year 2000
conversion.
15
<PAGE>
PAX WORLD FUND, INCORPORATED - FINANCIAL HIGHLIGHTS
The following per share data, ratios and supplemental data have been derived
from information provided in the financial statements and the Fund's underlying
financial records.
1. PER SHARE COMPONENTS OF THE NET CHANGE DURING THE PERIOD IN NET ASSET VALUE
(BASED UPON AVERAGE NUMBER OF SHARES OUTSTANDING).
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31
June 30, 1999 1998 1997 1996 1995 1994
------------- ---------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period............................ $21.64 $18.52 $16.56 $16.33 $13.39 $13.55
-------- -------- -------- -------- -------- --------
Income from investment operations
Investment income, net (A) (D)....... .20 .468 .493 .550 .80 .49
Realized and unrealized gain (loss)
on investments - net (A).......... 1.64 4.008 3.622 1.122 3.07 (.15)
-------- -------- -------- -------- -------- --------
Total from investment operations..... 1.84 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 period.......... $23.48 $21.64 $18.52 $16.56 $16.33 $13.39
-------- -------- -------- -------- -------- --------
2. TOTAL RETURN......................... 8.50% 24.62% 25.12% 10.36% 29.19% 2.65%
3. RATIOS AND SUPPLEMENTAL DATA
Ratio of total expenses to average
net assets (B) (C) (D)............. 1.02% .95% .91% .89% .97% .98%
Ratio of investment income, net,
to average net assets (C).......... 1.78% 2.33% 2.67% 3.24% 3.44% 3.66%
Portfolio turnover rate.............. 21.53% 28.59% 13.88% 34.55% 28.44% 25.45%
Net assets, end of period (`000s).... $960,792 $837,773 $629,001 $513,433 $476,976 $388,249
-------- -------- -------- -------- -------- --------
Number of capital shares
outstanding, end of period (`000s). 40,926 38,712 33,971 31,008 29,200 29,000
-------- -------- -------- -------- -------- --------
</TABLE>
(A) 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.
(B) 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.
(C) Unaudited ratios for the six months ended June 30, 1999 have been
annualized.
(D) Reference is made to note A regarding the Fund's expense accrual policy.
16
