PAX WORLD
SEMI-ANNUAL REPORT
PAX WORLD BALANCED FUND
PAX WORLD GROWTH FUND
PAX WORLD HIGH YIELD FUND
30 June 2000
<PAGE>
Dear Pax World Fund Family Shareholders,
In our last letter, we mentioned to our shareholders that "what is in vogue
now can, in today's market, vanish in a cyber-blink." Although the momentum of
the market didn't vanish, many of the stocks representing the "new economy" went
through a wrenching correction throughout the early spring and summer. The steps
we had taken to limit our exposure to the technology sector held us in good
stead during this period. Most recently, the general market has recovered with
the exception of the dot.com universe.
Going forward, the big question for the market is whether the Federal
Reserve is finished raising interest rates and what effect this will have on the
economy. It is too early to tell for certain, but we believe interest rates are
near their peak. With a slight slowdown in the economy, benign inflation and
strong corporate profits, we expect the second half of 2000 to be good and we
remain bullish.
Congratulations are in order for our very own Anita Green, director of
Social Research and Corporate Activities. Anita was the recipient of the "Making
a Difference" award given by Capital Missions Company during the "Making a
Profit While Making a Difference" conference. Anita received a plaque and a
grant of $1,500 to be given to the socially responsible non-profit
organization(s) of her choice.
At the same conference, the Pax World Balanced Fund also received an award
from Business Ethics magazine as the top balanced fund within the socially
responsible investment community.
Please join us in welcoming Paul Gulden as co-manager of the Pax World
Growth Fund. Paul's expertise as a growth stock manager is backed by more than
30 years of investment experience, and we are pleased to have him as part of the
Pax team. In general, the managers of the Balanced, Growth and High Yield Funds
have continued to turn in competitive performance versus their benchmarks and
they are to be commended for a fine job.
We look forward to the remainder of 2000, firmly believing that social
responsibility and superior investment performance can share the spotlight.
Sincerely,
Laurence A. Shadek Thomas W. Grant
Chairman President
August 8, 2000
<PAGE>
Dear Pax World Fund Family Shareholders,
In addition to screening companies and engaging in activities relating to
our screens during the first six months of 2000, Pax World Management Corp.'s
Social Research Department also issued a challenge to the mutual fund industry
as a whole regarding matters of transparency and disclosure.
Historically, when you inquired about our vote on a particular proxy
ballot, Pax World disclosed the information to you in writing. Although
transparency at this level is very rare in the mutual fund industry, Pax World
has taken it even further. In May, we posted our proxy votes on our website,
www.paxfund.com, making them available for viewing by shareholders and the
general public alike. To put this into perspective, only three of the more than
5,500 equity funds available for investment have attained this level of
transparency - and two of them are Pax World funds.
In April, we issued a joint press release with the Silicon Valley Toxics
Coalition announcing our support of the computer recycling and "take-back"
directives sponsored by the European Union (EU). In a letter writing campaign to
key members of the EU, we expressed our belief that computer manufacturers must
accept responsibility for the life-cycle consequences of their products. On June
13, 2000, despite opposition from the United States Government and the American
Electronics Association, the European Commission directives were adopted. Within
five years, producers will be responsible for new "take-back" standards for
electrical and electronic equipment. We hope that increased awareness and
support will result in similar measures being adopted in the United States.
Finally, an update on Gap, Inc. and the class-action lawsuit alleging
abusive labor conditions in the Northern Marianas Islands (Saipan). The majority
of defendants have agreed to settle the suit and allow independent monitors into
the factories. We are disappointed that Gap, Inc. is not among them. The
company's unsatisfactory response along with a decline in its financial
performance has resulted in our divestment of all Gap, Inc. shares.
For the remainder of the year, we look forward to continuing our focus on
research and seeking opportunities for Pax World to uphold the highest level of
social commitment.
Sincerely,
//Anita Green//
Anita Green
Director of Social Research and Corporate Activities
August 8, 2000
<PAGE>
Table of Contents
P A X W O R L D Balanced Fund, Inc.
Portfolio Managers' Comments ....................................... 4
Portfolio Highlights ............................................... 5
Schedule of Investments ............................................ 6
Statement of Assets & Liabilities .................................. 11
Statement of Operations ............................................ 12
Statement of Changes in Net Assets ................................. 13
Notes to Financial Statements ...................................... 14
Financial Highlights ............................................... 19
P A X W O R L D Growth Fund, Inc.
Portfolio Manager's Comments ....................................... 20
Portfolio Highlights ............................................... 21
Schedule of Investments ............................................ 22
Statement of Assets & Liabilities .................................. 24
Statement of Operations ............................................ 25
Statement of Changes in Net Assets ................................. 26
Notes to Financial Statements ...................................... 27
Financial Highlights ............................................... 34
P A X W O R L D High Yield Fund, Inc.
Portfolio Manager's Comments ....................................... 36
Portfolio Highlights ............................................... 37
Schedule of Investments ............................................ 38
Statement of Assets & Liabilities .................................. 43
Statement of Operations ............................................ 44
Statement of Changes in Net Assets ................................. 45
Notes to Financial Statements ...................................... 46
Financial Highlights ............................................... 53
3
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P A X W O R L D Balanced Fund, Inc.
CHRISTOPHER H. BROWN & ROBERT P. COLIN
PORTFOLIO CO-MANAGERS
Q. WHAT WERE THE MOST IMPORTANT FACTORS THAT INFLUENCED THE PERFORMANCE OF PAX
WORLD BALANCED FUND DURING THE FIRST SIX MONTHS OF 2000?
A. Rising interest rates throughout the first half of the year served to
dampen investor enthusiasm for stocks. The Federal Reserve has raised
interest rates six times over the past 18 months and these moves now appear
to be achieving the announced goal of slowing economic growth. We took
advantage of rising interest rates by adding to the bond component of the
Fund's portfolio. Downside volatility was mitigated by purchasing short
maturity bonds and thus maintaining an overall low average maturity
schedule. Also, we purchased or added to a number of common stocks having
attractive dividend yields.
The result of these actions contributed to a rise in interest and dividend
income to the Fund during the first half of the year, which, in turn, aided
the performance of the Fund over that period. Further, the increase in
interest and dividend income to the Fund helped translate into a higher
dividend to our shareholders.
Q. WHAT ARE SOME EXAMPLES OF SECURITIES BOUGHT AND SOLD DURING THIS PERIOD?
A. On the sell side of the ledger, we eliminated three companies from the
portfolio: GAP, MERCK, and PITNEY BOWES. In each of these instances, there
were fundamental concerns about the outlook for their businesses. In the
case of GAP, there were social concerns as well relating to alleged abusive
labor conditions that caused Pax to sell the stock. Two of the Fund's
largest holdings - AMGEN and VODAFONE AIRTOUCH PLC - were reduced in order
to provide funds for various other equity purchases.
With respect to purchases, our idea to augment interest and dividend income
prompted an increase in the bond portfolio weighting from 26% of assets at
year-end 1999 to 29% of assets at mid-year 2000. Additionally, we added to
most of the Fund's high-yielding utility stocks during the period and
established new positions in a number of energy companies including AES
CORP., DYNEGY, and EQUITABLE RESOURCES.
Q. HOW DID THE BALANCED FUND PERFORM DURING THE FIRST SIX MONTHS OF 2000?
A. Led by a 9.1% decline in the Dow Jones Industrial Average, the first half
of 2000 proved to be an adverse period for most stock markets around the
world. Despite this fact, the Balanced Fund achieved a modest gain of
1.54%. The Net Asset Value (NAV) of the Fund rose from $23.40 per share at
year-end 1999 to $23.76 per share as of June 30, 2000. This result was
slightly in excess of the Lipper Balanced Fund Average performance of 1.34%
and was better than the S&P 500 Total Return of - 0.42%.
4
<PAGE>
Portfolio Highlights
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
KEY STATISTICS
Year-to-Date Change
in NAV ($23.40 to $23.76)............ $0.36
Year-to-Date Change in
Total Net Assets ($1.065
to $1.149 billion)............. $8.4 million
Year-to-Date Total Return.............. 1.54%
1 Year Total Return.................... 9.71%
5 Year Average Total
Return.............................. 18.71%
10 Year Average Total
Return.............................. 13.06%
TOTAL RETURN FIGURES INCLUDE REINVESTED DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS,
AND CHANGES IN PRINCIPAL VALUE AND REPRESENT PAST PERFORMANCE, WHICH IS NO
GUARANTEE OF FUTURE RESULTS.
TEN LARGEST STOCK HOLDINGS
PERCENT OF
COMPANY NET ASSETS
Amgen, Inc........................... 5.21%
Enron Corp........................... 5.06%
Vodafone AirTouch,
PLC ADR............................ 3.43%
EMC Corp. (Mass.).................... 3.36%
Sony Corp. ADR....................... 2.06%
Koninklijke Philips
Electronics, NV ADR................ 1.91%
US West, Inc. -
Communications Group............... 1.87%
Peoples Energy Corp. ................ 1.69%
KeySpan Corp......................... 1.61%
SBC Communications, Inc.............. 1.51%
Total................................ 27.71%
ASSET ALLOCATION
(PIE CHART)
US Stocks 53%
Foreign Stocks 10%
Bonds 29%
Cash & Equivalents 8%
SECTOR DIVERSIFICATION
(PIE CHART)
Government Agency Bonds 28%
Corporate Bonds 1%
Consumer Products & Services 14%
Telecommunications 12%
Health Care 12%
Technology 10%
Cash & Equivalents 8%
Energy 7%
Utilities 6%
Financial/Real Estate 2%
5
<PAGE>
Schedule of Investments (Unaudited)
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
PERCENT OF NET ASSETS, NUMBER
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES VALUE
STOCKS: 63.1%
COMMON STOCKS: 61.9%
CONSUMER PRODUCTS AND SERVICES: 13.7%
Best Foods, Inc. .............................. 150,000 $ 10,387,500
Costco Wholesale Corp. ........................ 300,000 9,900,000
CVS Corp. ..................................... 100,000 4,000,000
General Mills, Inc. ........................... 250,000 9,562,500
Koninklijke Philips Electronics, NV ADR ....... 460,000 21,850,000
Masco Corp. ................................... 400,000 7,225,000
MediaOne Group, Inc. .......................... 225,000 14,920,594
RadioShack Corp. .............................. 300,000 14,212,500
Sony Corp. ADR ................................ 250,000 23,578,125
Starbucks Corp. ............................... 420,000 16,038,750
Sysco Corp. ................................... 100,000 4,212,500
Tribune Co. ................................... 400,000 14,000,000
Wendy's International, Inc. ................... 396,540 7,063,369
------------
156,950,838
------------
ENERGY: 7.1%
AES Corp. ..................................... 150,000 6,843,750
Dynegy, Inc. .................................. 100,000 6,831,250
Enron Corp. ................................... 900,000 58,050,000
Equitable Resources, Inc. ..................... 100,000 4,825,000
Questar Corp. ................................. 250,000 4,843,750
------------
81,393,750
------------
FINANCIAL: 1.7%
American Gen Corp. ............................ 200,000 12,200,000
SLM Holding Corp. ............................. 200,000 7,487,500
------------
19,687,500
------------
HEALTH CARE: 12.1%
Abbott Labs ................................... 50,000 2,228,125
Amgen, Inc. ................................... 850,000 59,712,500
Baxter International, Inc. .................... 200,000 14,062,500
Bristol-Myers Squibb Co. ...................... 250,000 14,562,500
Edwards Lifesciences Corp. .................... 200,000 3,700,000
Guidant Corp. ................................. 200,000 9,900,000
Johnson & Johnson ............................. 100,000 10,187,500
Medtronic, Inc. ............................... 225,000 11,207,813
6
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
PERCENT OF NET ASSETS, NUMBER
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES VALUE
COMMON STOCKS, continued
HEALTH CARE, continued
Stryker Corp. ................................. 300,000 $ 13,125,000
------------
138,685,938
------------
TECHNOLOGY: 10.0%
America Online, Inc. .......................... 120,000 6,330,000
Apple Computer ................................ 300,000 15,712,500
ASM Lithography Holdings, NV .................. 150,000 6,618,750
Cisco Systems, Inc. ........................... 200,000 12,712,500
Computer Associates International, Inc. ....... 175,000 8,957,812
EMC Corp. (Mass.) ............................. 500,000 38,468,750
Fiserv, Inc. .................................. 275,000 11,893,750
Microsoft Corp. ............................... 100,000 8,000,000
SAP Aktiengesellschaft ADR .................... 50,000 2,346,875
Yahoo! Inc. ................................... 35,000 4,335,625
------------
115,376,562
------------
TELECOMMUNICATIONS: 12.2%
Allegiance Telecom, Inc. ...................... 100,000 6,400,000
BellSouth Corp. ............................... 365,000 15,558,125
Cable & Wireless, PLC ......................... 200,000 10,012,500
Loral Space & Communications .................. 500,000 3,468,750
McLeodUSA, Inc. ............................... 300,000 6,206,250
SBC Communications, Inc. ...................... 400,000 17,300,000
Telefonos de Mexico, SA ADR
(representing ordinary shares L) ........... 200,000 11,425,000
U.S. West, Inc. - Communications Group ........ 250,000 21,437,500
Vodafone AirTouch, PLC ADR .................... 950,000 39,365,625
WorldCom, Inc. ................................ 200,000 9,175,000
------------
140,348,750
------------
UTILITIES: 5.1%
American Water Works, Inc. .................... 200,000 5,000,000
DPL, Inc. ..................................... 350,000 7,678,125
KeySpan Corp. ................................. 600,000 18,450,000
NiSource, Inc. ................................ 400,000 7,450,000
Peoples Energy Corp. .......................... 600,000 19,425,000
------------
58,003,125
------------
TOTAL COMMON STOCKS .............................. 710,446,463
------------
7
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
PERCENT OF NET ASSETS, NUMBER
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES VALUE
PREFERRED STOCKS: 1.2%
CONSUMER PRODUCTS AND SERVICES: 0.5%
Cox Communications, Inc. Series I
7.000% Convertible Preferred ................ 50,000 $ 3,071,875
Suiza Foods Corp. Capital Trust II
5.500% Convertible Preferred ................ 75,000 2,864,100
------------
5,935,975
------------
REAL ESTATE: 0.3%
Equity Residential Properties Trust
Series G 7.250% Convertible
Preferred ................................... 160,000 3,600,000
------------
UTILITIES: 0.4%
NiSource, Inc. 7.750% Series B
Convertible Preferred ....................... 120,000 4,747,500
------------
TOTAL PREFERRED STOCKS ........................... 14,283,475
------------
TOTAL STOCKS ..................................... 724,729,938
------------
BONDS: 29.0%....................................
PRINCIPAL
GOVERNMENT AGENCY BONDS: 27.7%.................. AMOUNT
Federal Home Loan Bank System
5.250%, due August 9, 2002 .................... $ 10,000,000 9,667,200
6.890%, due August 28, 2002 ................... 5,000,000 4,957,050
7.125%, due October 4, 2002 ................... 10,000,000 9,959,400
5.025%, due November 5, 2002 .................. 10,000,000 9,581,200
5.905%, due December 23, 2002 ................. 14,000,000 13,636,840
7.250%, due February 28, 2003 ................. 10,000,000 9,990,600
5.750%, due April 28, 2003 .................... 7,000,000 6,758,290
6.495%, due June 23, 2003 ..................... 5,000,000 4,891,400
5.590%, due October 6, 2003 ................... 12,000,000 11,482,440
5.335%, due February 19, 2004 ................. 10,000,000 9,457,800
5.485%, due February 26, 2004 ................. 5,000,000 4,750,000
6.000%, due May 25, 2004 ...................... 5,885,000 5,640,419
6.805%, due June 28, 2004 ..................... 5,000,000 4,897,650
6.000%, due October 6, 2004 ................... 5,000,000 4,771,850
6.750%, due November 16, 2004 ................. 5,000,000 4,870,300
7.250%, due February 14, 2005 ................. 5,000,000 4,971,850
8
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
GOVERNMENT AGENCY BONDS, continued
Federal Home Loan Bank System, continued
7.520%, due March 15, 2005 .................... $ 10,000,000 $ 9,982,800
7.250%, due May 13, 2005 ...................... 10,000,000 10,084,400
7.800%, due May 16, 2005 ...................... 10,000,000 10,107,800
Federal Home Loan Mortgage Corp. .................
5.400%, due January 14, 2002 .................. 5,000,000 4,889,050
6.180%, due June 14, 2002 ..................... 5,000,000 4,910,950
6.110%, due June 18, 2003 ..................... 10,000,000 9,704,700
7.500%, due January 12, 2005 .................. 5,000,000 4,975,800
Federal National Mortgage Association
6.110%, due September 20, 2000 ................ 12,000,000 11,990,640
6.080%, due September 25, 2000 ................ 5,000,000 4,995,300
5.820%, due December 5, 2000 .................. 15,000,000 14,932,050
5.370%, due February 7, 2001 .................. 20,000,000 19,809,400
5.410%, due February 13, 2001 ................. 10,000,000 9,903,100
5.360%, due February 16, 2001 ................. 10,000,000 9,900,000
6.710%, due July 24, 2001 ..................... 7,000,000 6,975,920
6.510%, due September 27, 2002 ................ 5,000,000 4,935,930
5.430%, due November 3, 2003 .................. 10,000,000 9,518,700
5.375%, due November 17, 2003 ................. 8,000,000 7,617,520
5.810%, due February 23, 2004 ................. 10,000,000 9,578,100
6.000%, due March 12, 2004 .................... 10,000,000 9,606,200
5.880%, due March 25, 2004 .................... 9,000,000 8,621,730
6.930%, due June 30, 2004 ..................... 5,000,000 4,896,100
7.400%, due June 27, 2005 ..................... 10,000,000 9,943,700
------------
TOTAL GOVERNMENT AGENCY BONDS .................... 318,164,179
------------
CORPORATE BONDS: 1.3%
American General Finance Corp.
5.750%, due November 1, 2003 ................ 5,000,000 4,761,305
Sears Roebuck Acceptance Corp. ................
6.000%, due March 20, 2003 .................. 5,000,000 4,796,535
Vodaphone Airtouch, PLC
7.625%, due February 15, 2005 ................ 5,000,000 5,011,710
------------
TOTAL CORPORATE BONDS ............................ 14,569,550
------------
TOTAL BONDS ...................................... 332,733,729
------------
9
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CERTIFICATES OF DEPOSIT: 0.1%
South Shore Bank (Chicago, IL) 5.650%,
due October 11, 2000 ........................ $ 1,000,000 $ 1,000,000
Self Help Credit Union 6.160%, due
May 30, 2001 ................................ 500,000 500,000
--------------
TOTAL CERTIFICATES OF DEPOSIT .................... 1,500,000
--------------
NUMBER
OF SHARES
MONEY MARKET SHARES: 6.4%
Pax World Money Market Fund ................... 73,246,020 73,246,020
--------------
TOTAL INVESTMENTS: 98.6% ......................... 1,132,209,687
Cash and receivables, less
liabilities: 1.4% ........................... 16,454,559
--------------
Net assets: 100% ................................. $1,148,664,246
--------------
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
Statement of Assets and Liabilities (Unaudited)
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
ASSETS
Investments, at value - note A
Common stocks (cost - $434,218,128) ........................ $ 710,446,463
Preferred stocks (cost - $15,155,252) ...................... 14,283,475
Bonds (amortized cost - $339,693,016) ...................... 332,733,729
Certificates of deposit (cost - $1,500,000) ................ 1,500,000
Pax World Money Market Fund (cost - $73,246,020) ........... 73,246,020
--------------
1,132,209,687
Cash .......................................................... 8,688,638
Receivables
Investment securities sold ................................. 3,422,301
Dividends and interest ..................................... 5,861,804
--------------
Total assets .............................................. 1,150,182,430
--------------
LIABILITIES
Payables
Capital stock reacquired ................................... 221,973
Accrued expenses
Investment advisory fee - note B ........................... 484,899
Transfer agent fee ......................................... 250,000
Distribution expenses - note D ............................. 423,708
Other accrued expenses ..................................... 137,604
--------------
Total liabilities ......................................... 1,518,184
--------------
Net assets (equivalent to $23.76 per share based on
48,352,626 shares of capital stock outstanding)
- note E ................................................. $1,148,664,246
--------------
Net asset value, offering price and redemption price
per share ($1,148,664,246 / 48,352,626 shares
outstanding) ............................................ $23.76
--------------
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended June 30, 2000
P A X W O R L D Balanced Fund, Inc.
Investment income
Income - note A
Dividends
Pax World Money Market Fund ............. $ 2,372,776
Other investments ....................... 4,530,087 $ 6,902,863
------------
Interest ................................ 9,058,518
-----------
Total income .......................... 15,961,381
Expenses
Investment advisory fee - note B .......... 2,842,759
Distribution expenses - note D ............ 1,485,639
Transfer agent fee ........................ 688,225
State taxes ............................... 293,388
Custodian fees - note F ................... 135,913
Printing and mailing ...................... 122,417
Other ..................................... 82,621
Registration fees ......................... 69,559
Legal fees and related expenses
- note B ............................... 61,703
Directors' fees and expenses - note B ..... 19,101
Audit fees ................................ 9,198
------------
Total expenses ........................ 5,810,523
Less: Fees paid indirectly - note F ... (134,321)
------------
Net expenses ........................ 5,676,202
-----------
Investment income, net ................ 10,285,179
-----------
Realized and unrealized gain (loss) on
investments - note C
Net realized gain on investments .......... 60,391,020
Change in unrealized appreciation of
investments for the period .............. (54,898,335)
-----------
Net gain on investments ............... 5,492,685
-----------
Net increase in net assets
resulting from operations............. $15,777,864
-----------
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
Statement of Changes in Net Assets
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
Six Months Year Ended
Ended December 31,
June 30, 2000 1999
-------------- --------------
(Unaudited)
Increase in net assets
Operations
Investment income, net ................. $ 10,285,179 $ 19,311,170
Net realized gain on investments ....... 60,391,020 59,654,186
Change in unrealized appreciation of
investments for the period ........... (54,898,335) 73,483,006
-------------- --------------
Net increase in net assets
resulting from operations ........ 15,777,864 152,448,362
Net equalization credits ................. 275,947 382,410
Distributions to shareholders from
Investment income - net ($-0- and
$.459 per share, respectively) -
note A ............................... -- (19,169,759)
Net realized gain on investments
($-0- and $1.410 per share,
respectively) - note A ............... -- (59,654,097)
Capital share transactions - note E ...... 67,718,636 153,112,359
-------------- --------------
Net increase in net assets ........... 83,772,447 227,119,275
Net assets
Beginning of period .................... 1,064,891,799 837,772,524
-------------- --------------
End of period (including undistributed
investment income - net, of
$11,091,916 and $530,790,
respectively) ........................ $1,148,664,246 $1,064,891,799
-------------- --------------
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
Notes to Financial Statements (Unaudited)
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
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.
At a special meeting held on July 6, 2000, shareholders approved a change in the
name of the Fund from Pax World Fund, Incorporated to Pax World Balanced Fund,
Inc.
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, 2000 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
14
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
30, 2000 and for the year ended December 31, 1999 was $92,333 and $183,942,
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.
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.
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
15
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
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. The Adviser has agreed to waive the portion of the advisory fee
necessary to offset the amount of the advisory fee payable by Pax World Money
Market Fund, Inc. to the Adviser with respect to any assets of the Fund which
are invested in the Pax World Money Market Fund, Inc. 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 1999 or the six
months ended June 30, 2000.
All Directors are paid by the Fund for attendance at directors' meetings.
During the six months ended June 30, 2000, the Fund incurred legal fees and
related expenses of $61,703 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
the six months ended June 30, 2000 and the year ended December 31, 1999 totaled
$103,245 and $145,892, respectively, (30.1% and 29.7%, respectively of total
commissions for the six months ended June 30, 2000 and the year ended December
31, 1999).
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 - INVESTMENTS
Purchases and proceeds from sales of investments, excluding short-term
investments and U.S. Government agency bonds, aggregated $123,749,375 and
$98,824,957, respectively, for the six months ended June 30, 2000. Purchases and
proceeds from sales and maturities of U.S. Government agency bonds aggregated
$69,981,875 and $18,669,700, respectively, for the six months ended June 30,
2000.
16
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
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, 2000 would have been approximately the same.
For Federal income tax purposes, the identified cost of investments owned at
June 30, 2000 was $863,812,416. Gross unrealized appreciation and depreciation
of investments aggregated $301,534,603 and $33,137,332, respectively, at June
30, 2000, resulting in net unrealized appreciation of $268,397,271.
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.
17
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
NOTE E - CAPITAL AND RELATED TRANSACTIONS
Transactions in capital stock were as follows:
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
-------------------------- --------------------------
(Unaudited)
Shares Dollars Shares Dollars
---------- ------------ ---------- ------------
Shares sold .......... 7,410,485 $175,823,937 11,130,593 $254,077,925
Shares issued
in reinvestment
of distributions ... -- -- 3,299,473 73,784,954
---------- ------------ ---------- ------------
7,410,485 175,823,937 14,430,066 327,862,879
Shares redeemed ...... (4,557,212) (108,105,301) (7,642,767) (174,750,520)
---------- ------------ ---------- ------------
Net increase ......... 2,853,273 $ 67,718,636 6,787,299 $153,112,359
---------- ------------ ---------- ------------
The components of net assets at June 30, 2000 (unaudited), are as follows:
Paid-in capital (75,000,000 shares of $1 par value
authorized) ............................................... $ 808,785,908
Undistributed investment income ............................. 11,091,916
Undistributed capital gains ................................. 60,389,151
Net unrealized appreciation of investments .................. 268,397,271
--------------
Net assets ................................................ $1,148,664,246
--------------
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
$.23 per share, payable July 10, 2000, to shareholders of record on July 5,
2000.
18
<PAGE>
Financial Highlights
June 30, 2000
P A X W O R L D Balanced Fund, Inc.
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)
Six Months
Ended Year Ended December 31
June 30, --------------------------------------
2000 1999 1998 1997 1996 1995
------ ------ ------ ------ ------ ------
(Unaudited)
Net asset value,
beginning of period .... $23.40 $21.64 $18.52 $16.56 $16.33 $13.39
------ ------ ------ ------ ------ ------
Income from
investment operations
Investment income,
net (A) .............. .218 .471 .468 .493 .550 .80
Realized and unrealized
gain (loss) on
investments, net (A) ... .148 3.167 4.008 3.622 1.122 3.07
------ ------ ------ ------ ------ ------
Total from investment
operations ......... .366 3.638 4.476 4.115 1.672 3.87
------ ------ ------ ------ ------ ------
Less distributions
Dividends from net
investment income .... -- .459 .468 .503 .550 .79
Distributions from
realized gains ......... -- 1.410 .880 1.650 .892 .14
Tax return of capital .... .006 .009 .008 .002 -- --
------ ------ ------ ------ ------ ------
Total distributions .. .006 1.878 1.356 2.155 1.442 .93
------ ------ ------ ------ ------ ------
Net asset value,
end of period .......... $23.76 $23.40 $21.64 $18.52 $16.56 $16.33
------ ------ ------ ------ ------ ------
2. TOTAL RETURN .............. 1.54% 17.23% 24.62% 25.12% 10.36% 29.19%
3. RATIOS AND SUPPLEMENTAL DATA
Ratio of total expenses
to average net assets (B) 1.03% .89% .95% .91% .89% .97%
Ratio of investment
income, net, to average
net assets (B) ......... 1.83% 2.05% 2.33% 2.67% 3.24% 3.44%
Portfolio turnover rate .. 11.39% 21.09% 28.59% 13.88% 34.55% 28.44%
Net assets, end of
period ('000,000s) ..... $1,149 $1,065 $ 838 $ 629 $ 513 $ 477
Number of capital shares
outstanding, end of
period ('000s) ......... 48,353 45,499 38,712 33,971 31,008 29,200
(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) Unaudited ratios for the six months ended June 30, 2000 have been
annualized.
19
<PAGE>
Portfolio Manager's Comments
June 30, 2000
P A X W O R L D Growth Fund, Inc.
ROBERT P. COLIN, PORTFOLIO MANAGER
Q. WHAT WERE THE MOST IMPORTANT FACTORS THAT INFLUENCED THE PERFORMANCE OF PAX
WORLD GROWTH FUND DURING THE FIRST SIX MONTHS OF 2000?
A. Against a backdrop of rising interest rates by the Federal Reserve Bank,
stock prices were in a declining trend during the first half of the year.
Many of the "success stories" of 1999, which helped Pax World Growth Fund
achieve a 28.3% increase in its Net Asset Value in 1999, were among the
issues hit the hardest during the market sell-off this year.
This was particularly true in the technology, Internet, and
telecommunications sectors. We had taken steps to reduce the portfolio
exposure in these areas and raised the cash equivalent reserve position
from 12.9% at year-end 1999 to a high of 17.7% in April, 2000. These
actions helped to moderate the decline in the Fund's Net Asset Value.
Q. WHAT ARE SOME EXAMPLES OF SECURITIES BOUGHT AND SOLD DURING THIS PERIOD?
A. The most significant changes occurred within the Health Care Services
sector of the portfolio. We increased the weighting from 11% of Fund assets
at year-end 1999 to 18.8% at mid-year 2000. Among the Health Care issues
added to the portfolio were BIOMET, HEALTHEON WEB MD, MEDTRONIC, and
UNITEDHEALTH GROUP.
Among the Technology and Telecommunications stocks that were either reduced
or eliminated were AVT CORP., EXCITEATHOME, NETWORK ASSOCIATES, NEXTEL,
NOVELL, and TELEFONOS DE MEXICO.
Q. HOW DID THE GROWTH FUND PERFORM DURING THE FIRST SIX MONTHS OF 2000?
A. Although Pax World Growth Fund performed better than some financial
averages, including the Dow Jones Industrial Average (-9.1%) and the NASDAQ
Composite (-2.5%), the Net Asset Value (NAV) was down 1.12% from the
year-end value of $14.28 per share.
On June 8, 2000, Pax announced that Paul I. Gulden, Jr. was appointed
co-manager of Pax World Growth Fund. Paul is the division head and chief
investment officer of H.G. Wellington Capital Management, a division of
H.G. Wellington & Co., Inc. He will contribute his knowledge and expertise,
notably in the area of technology, to the overall management of the Fund.
The second half of 2000 has begun on a more positive note and we are
hopeful that this trend will continue throughout the remainder of the year.
20
<PAGE>
Portfolio Highlights
June 30, 2000
P A X W O R L D Growth Fund, Inc.
KEY STATISTICS
Year-to-Date Change in
NAV ($14.28 to $14.12)..............-$0.16
Year-to-Date Change in Total
Net Assets ($22.07 to
$30.32 million)..............$8.25 million
Year-to-Date Total Return.............-1.12%
1 Year Total Return*..................17.57%
6-11-97 to 6-30-00
Average Total Return*...............11.96%
* RATE OF RETURN FIGURES DO NOT INCLUDE THE 2.5% INITIAL SALES CHARGE WHICH WAS
IN EFFECT UNTIL NOVEMBER 1, 1999. THE RETURNS FOR 1 YEAR AS OF JUNE 30, 2000 AND
FOR THE PERIOD JUNE 11, 1997 TO JUNE 30, 2000 WITH THE INITIAL SALES CHARGE
DEDUCTED ARE 14.61% AND 11.03%, RESPECTIVELY.
TOTAL RETURN FIGURES INCLUDE REINVESTED DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS,
AND CHANGES IN PRINCIPAL VALUE AND REPRESENT PAST PERFORMANCE, WHICH IS NO
GUARANTEE OF FUTURE RESULTS.
TEN LARGEST STOCK HOLDINGS
PERCENT OF
COMPANY NET ASSETS
UnitedHealth Group, Inc................ 4.24%
Symbol Technologies, Inc............... 4.01%
Sprint Corp. (PCS Group)
Series 1............................. 3.93%
General Motors Corp. Class H
(GM Hughes Electronics).............. 3.62%
Convergys Corp. ....................... 3.42%
Comcast Corp. Class A.................. 3.34%
Chiron Corp............................ 3.13%
Nextel Communications, Inc.
Class A.............................. 3.03%
Koninklijke Philips
Electronics, NV ADR.................. 2.88%
Fiserv, Inc............................ 2.85%
-----
Total................................. 34.45%
-----
ASSET ALLOCATION
(PIE CHART)
U.S. Common Stocks 76%
Foreign Common Stocks 9%
Cash & Equivalents 15%
SECTOR DIVERSIFICATION
(PIE CHART)
Telecommunications 20%
Energy 2%
Health Care Services 19%
Technology 16%
Cash & Equivalents 15%
Consumer Products & Services 12%
Industrial/Commercial 5%
Electronic Systems & Services 4%
Satellite Systems 4%
Financial/Real Estate 3%
21
<PAGE>
Schedule of Investments (Unaudited)
June 30, 2000
P A X W O R L D Growth Fund, Inc.
PERCENT OF NET ASSETS, NUMBER
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES VALUE
COMMON STOCKS: 84.9%
CONSUMER PRODUCTS AND SERVICES: 12.5%
Comcast Corp. Class A ............................ 25,000 $1,012,500
Koninklijke Philips Electronics, NV ADR .......... 18,400 874,000
Masco Corp. ...................................... 20,000 361,250
MediaOne Group, Inc. ............................. 10,000 663,138
Polaroid Corp. ................................... 25,000 451,563
Ross Stores, Inc. ................................ 25,000 426,562
----------
3,789,013
----------
ELECTRONIC SYSTEMS AND SERVICES: 4.0%
Symbol Technologies, Inc. ........................ 22,500 1,215,000
----------
ENERGY: 2.2%
Calpine Corp. .................................... 10,000 657,500
----------
FINANCIAL/REAL ESTATE: 2.8%
American Gen Corp. ............................... 10,000 610,000
Host Marriott Corp. REIT ......................... 25,000 234,375
----------
844,375
----------
HEALTH CARE SERVICES: 18.8%
Amgen, Inc. ...................................... 10,000 702,500
BioChem Pharmaceuticals, Inc. .................... 10,000 246,250
Biomet, Inc. ..................................... 20,000 768,750
Chiron Corp. ..................................... 20,000 950,000
Elan PLC ADR ..................................... 17,500 847,656
Healtheon WebMD Corp. ............................ 15,000 222,188
Medtronic, Inc. .................................. 10,000 498,125
Thoratec Labs Corp. .............................. 10,000 161,875
UnitedHealth Group, Inc. ......................... 15,000 1,286,250
----------
5,683,594
----------
INDUSTRIAL - COMMERCIAL: 4.7%
Airborne Freight Corp. ........................... 20,000 378,750
Genuine Parts Co. ................................ 15,000 300,000
WW Grainger, Inc. ................................ 10,000 308,125
United Parcel Service, Inc. Class B .............. 7,500 442,500
----------
1,429,375
----------
SATELLITE SYSTEMS: 3.6%
General Motors Corp. Class H
(GM Hughes Electronics) ........................ 12,500 1,096,875
----------
22
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D Growth Fund, Inc.
PERCENT OF NET ASSETS, NUMBER
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES VALUE
COMMON STOCKS, Continued
TECHNOLOGY: 15.9%
America Online, Inc. ............................. 12,500 $ 659,375
BMC Software, Inc. ............................... 10,000 364,844
Compaq Computer Corp. ............................ 30,000 766,875
Computer Assoc. Intl., Inc. ...................... 10,000 511,875
Fiserv, Inc. ..................................... 20,000 865,000
Sanmina Corp. .................................... 10,000 855,000
SAP Aktiengesellschaft ........................... 4,000 187,750
Yahoo! Inc. ...................................... 5,000 619,375
-----------
4,830,094
-----------
TELECOMMUNICATIONS: 20.4%
AT&T Wireless Group .............................. 1,000 27,875
Allegiance Telecom, Inc. ......................... 10,000 640,000
Convergys Corp. .................................. 20,000 1,037,500
Nextel Communications, Inc. Class A .............. 15,000 917,812
Prodigy Communications Corp. ..................... 20,000 210,000
Qwest Communications International, Inc. ......... 15,000 745,312
Sprint Corp. (PCS Group) Series 1 ................ 20,000 1,190,000
Telefonos de Mexico, SA ADR
(representing ordinary shares L) ............... 11,000 628,375
WorldCom, Inc. ................................... 17,500 802,813
-----------
6,199,687
-----------
TOTAL COMMON STOCKS ................................ 25,745,513
MONEY MARKET SHARES: 13.5%
Pax World Money Market Fund ...................... 4,094,851 4,094,851
-----------
TOTAL INVESTMENTS: 98.4% ........................... 29,840,364
Cash, receivables and deferred costs
less liabilities: 1.6% ......................... 478,103
-----------
Net assets: 100% ................................... $30,318,467
-----------
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
Statement of Assets and Liabilities (unaudited)
June 30, 2000
P A X W O R L D Growth Fund, Inc.
ASSETS
Investments, at value - note A
Common stocks (cost - $20,698,118) ........................... $25,745,513
Pax World Money Market Fund (cost - $4,094,851) .............. 4,094,851
-----------
29,840,364
Cash ........................................................... 299,756
Receivables
Dividends and interest ....................................... 37,427
Reimbursement of expenses from Adviser - note G .............. 4,406
Investment securities sold ................................... 589,830
Organization costs - note A .................................... 2,000
Deferred offering costs - note A ............................... 16,858
Deferred registration fees - note A ............................ 8,605
-----------
Total assets ............................................... 30,799,246
-----------
LIABILITIES
Payables
Investment securities purchased .............................. 432,356
Capital stock reacquired ..................................... 20,960
Organization costs, deferred offering costs and
deferred registration fees payable to Adviser - note A ..... 27,463
-----------
Total liabilities .......................................... 480,779
-----------
Net assets (equivalent to $14.12 per share based
on 2,147,645 shares of capital stock
outstanding) - note E .................................. $30,318,467
-----------
Net asset value and redemption price per share
($30,318,467 / 2,147,645 shares outstanding) ........... $14.12
-----------
Offering price per share (effective November 1,
1999, the Board of Directors voted to waive
the 2.5% initial sales charge until further notice) .... $14.12
-----------
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
Statement of Operations (Unaudited)
June 30, 2000
P A X W O R L D Growth Fund, Inc.
Investment income
Income - note A
Dividends
Pax World Money Market Fund ..................... $ 122,944
Other investments ............................... 63,638
---------
Total income .................................. $ 186,582
Expenses
Investment advisory fee - note B .................. 124,512
Distribution expenses - note D .................... 61,332
Transfer agent fee ................................ 44,917
Legal fees and related expenses - note B .......... 21,575
Custodian fees - note F ........................... 20,293
Audit fees ........................................ 15,277
Directors' fees and expenses - note B ............. 14,054
Registration fees - note A ........................ 8,641
Amortization of organization costs,
deferred offering costs and deferred
registration fees - note A ...................... 6,866
Other ............................................. 5,786
Printing and postage .............................. 4,785
---------
Total expenses .................................. 328,038
Less: Fees paid indirectly - note F ............. (8,128)
Expenses assumed by
Adviser - notes B and G ................. (118,748)
---------
Net expenses .............................. 201,162
---------
Investment (loss), net .......................... (14,580)
---------
Realized and unrealized gain (loss) on
investments - note C
Net realized gain on investments .................... 298,738
Change in unrealized appreciation of
investments for the period ........................ (817,239)
---------
Net (loss) on investments ....................... (518,501)
---------
Net (decrease) in net assets
resulting from operations ..................... $(533,081)
---------
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
Statement of Changes in Net Assets
June 30, 2000
P A X W O R L D Growth Fund, Inc.
Six Months Year Ended
Ended December 31,
June 30, 2000 1999
------------ ------------
(Unaudited)
Increase in net assets
Operations
Investment (loss), net ................... $ (14,580) $ (46,308)
Net realized gain on investments ......... 298,738 198
Change in unrealized appreciation
of investments for the period ............ (817,239) 4,602,888
------------ ------------
Net increase (decrease) in net assets
resulting from operations ................ (533,081) 4,556,778
Capital share transactions - note E ........ 8,783,515 5,139,164
------------ ------------
Net increase in net assets ............... 8,250,434 9,695,942
Net assets
Beginning of period ........................ 22,068,033 12,372,091
------------ ------------
End of period (including accumulated
investment loss, net: $116,360 and
$101,780, respectively) .................. $ 30,318,467 $ 22,068,033
------------ ------------
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Growth Fund, Inc.
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Pax World Growth Fund, Inc. ("Fund"), incorporated in Delaware on March 12,
1997, is a diversified, open-end management investment company registered under
the Investment Company Act of 1940, as amended. The Fund commenced operations on
June 9, 1997 with the issuance of 10,000 shares of capital stock to Pax World
Management Corp., the Fund's Adviser ("Adviser"). Investment operations
commenced July 9, 1997.
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 long-term growth of capital. It seeks to achieve this objective by
investing primarily in equity securities (common stock, securities convertible
into common stock and preferred stock) of established companies with
above-average growth prospects. Current income, if any, is incidental.
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 recognized on the ex-dividend date. Interest income is
recognized on the accrual basis.
ORGANIZATION COSTS
Costs incurred in connection with the organization of the Fund ($5,000) were
paid by the Adviser. These costs were capitalized and are being amortized on a
straight-line basis over 60 months from July 9, 1997, the date investment
operations commenced; a corresponding payable to the Adviser was recorded by the
Fund. The costs will be repaid to the Adviser in accordance
27
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Growth Fund, Inc.
with the amortization schedule. Amortization expense of $500 for the six months
ended June 30, 2000, is included on the statement of operations. Reference is
made to note G.
DEFERRED OFFERING COSTS
Costs incurred in connection with the initial offering of the Fund's shares
($42,148) were paid by the Adviser. These costs were capitalized by the Fund and
are being amortized on a straight-line basis over 60 months from July 9, 1997,
the date investment operations commenced; a corresponding payable to the Adviser
was recorded by the Fund. These costs will be repaid to the Adviser in
accordance with the amortization schedule. Amortization expense of $4,215 for
the six months ended June 30, 2000, is included on the statement of operations.
Reference is made to note G.
DEFERRED REGISTRATION FEES
Initial State registration fees were paid by the Adviser. The portion of the
fees incurred for the initial registration of the Fund with the 50 states and
the Commonwealth of Puerto Rico ($21,511), as distinguished from the portion
which represents the recurring, annual fee, was capitalized by the Fund and is
being amortized on a straight-line basis over 60 months from July 9, 1997, the
date investment operations commenced; a corresponding payable to the Adviser was
recorded by the Fund. These costs ill be repaid to the Adviser in accordance
with the amortization schedule. Amortization expense of $2,151 for the six
months ended June 30, 2000, is included on the statement of operations.
Reference is made to note G.
All recurring, annual fees are included on the statement of operations.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. The repurchase date is usually
within a day or two of the original purchase, although it may extend over a
number of months. The Fund's repurchase agreements will be fully collateralized
at all times by obligations issued or guaranteed by U.S. Government agencies and
instrumentalities (other than the U.S. Treasury) in an amount at least equal to
the purchase price of the underlying securities (including accrued interest
earned thereon). In the event of a default or bankruptcy by a seller, the Fund
will promptly seek to liquidate the collateral. To the extent that the proceeds
from any sale of such collateral upon a default in the obligation to repurchase
are less than the repurchase price, the Fund will suffer a loss. The Fund has
not experienced any such losses. There were no repurchase agreements outstanding
at June 30, 2000.
28
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Growth Fund, Inc.
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.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders, if any, are recorded by the Fund on the
ex-dividend dates. There were no distributions made in 1999 because (1) there
was a net investment loss for the year and (2) the net capital gain for 1999 was
$198.
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.
NOTE B - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an Advisory Agreement ("Agreement") between the Fund and the
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. In the event that the
average net assets of the Fund are less than $5,000,000, the Adviser will be
compensated by the Fund for its services at an annual rate of $25,000; in the
event that average net assets of the Fund are equal to or in excess of
$5,000,000, the annual investment Advisory fee will be 1% of its average daily
net assets on the first $25,000,000 and 3/4% of its average daily net assets in
excess of that amount. The Adviser has agreed to waive the portion of the
advisory fee necessary to offset the amount of the advisory fee payable by Pax
World Money Market Fund, Inc. to the Adviser with respect to any assets of the
Fund which are invested in the Pax World Money Market Fund, Inc. Two officers,
who are also directors of the Fund, are also officers and directors of the
Adviser and H.G. Wellington Capital
29
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Growth Fund, Inc.
Management, a division of H.G. Wellington & Co., Inc. ("Sub-Adviser"). Another
officer of the Fund, who is not a director of the Fund, is also an officer and
director to the Adviser. Two other officers of the Fund, who are not directors
of the Fund, are also officers of the Adviser.
The Adviser has 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 1.5% of the average daily net
asset value 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; (v) the reimbursement of organization
expenses; and (vi) 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 Adviser was required to supply and assume a total of $103,741 and $315,025,
respectively, for such services for the six months ended June 30, 2000 and the
year ended December 31, 1999. Additionally, the Adviser assumed, on a voluntary
basis, expenses of $15,007 and $42,508, respectively, for the six months ended
June 30, 2000 and the year ended December 31, 1999. Reference is made to note G.
Pursuant to the terms of a Sub-Advisory Agreement between the Adviser and the
Sub-Adviser, the Sub-Adviser furnishes investment advisory services in
connection with the management of the Fund, 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 Sub-Adviser is
compensated by the Adviser without reimbursement from the Fund.
All Directors are paid by the Fund for attendance at directors' meetings.
During the six months ended June 30, 2000, the Fund incurred legal fees and
related expenses of $21,575 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 the Sub-Adviser, which is a division of the
brokerage firm which the Fund utilizes to execute security transactions.
Brokerage commissions paid to this firm during the six months ended June 30,
2000 and the year ended December 31, 1999 totaled $7,005 and $15,538,
respectively (20.5% and 27.7% of total commissions for the respective periods).
30
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Growth Fund, Inc.
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, aggregated $13,566,737 and $6,409,153, respectively, for the six
months ended June 30, 2000. There were no U.S. Government agency bonds purchased
or sold during the period.
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, 2000, would have been approximately the same.
For Federal income tax purposes, the identified cost of investments owned at
June 30, 2000 was $24,792,969. Gross unrealized appreciation and depreciation of
investments aggregated $7,568,262 and $2,520,867, respectively, at June 30,
2000, resulting in net unrealized appreciation of $5,047,395.
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, pursuant to which the Fund incurs
the expenses of distributing the Fund's 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
31
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Growth Fund, Inc.
shares of the Fund. If the Plan is terminated, the payment of fees to third
parties would be discontinued at that time.
NOTE E - CAPITAL AND RELATED TRANSACTIONS
Transactions in capital stock were as follows:
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
------------------------ ------------------------
(Unaudited)
Shares Dollars Shares Dollars
-------- ----------- -------- -----------
Shares sold .......... 835,400 $12,201,738 646,534 $ 7,753,787
Shares redeemed ...... (233,534) (3,418,223) (212,526) (2,614,623)
-------- ----------- -------- -----------
Net increase ......... 601,866 $ 8,783,515 434,008 $ 5,139,164
-------- ----------- -------- -----------
The components of net assets at June 30, 2000 (unaudited), are as follows:
Paid-in capital (25,000,000 shares of $1 par value
authorized) .............................................. $ 25,088,259
Accumulated net investment (loss) .......................... (116,360)
Undistributed capital gains ................................ 299,173
Net unrealized appreciation of investments ................. 5,047,395
------------
Net assets ............................................... $ 30,318,467
------------
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.
32
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D Growth Fund, Inc.
NOTE G - EXPENSES ASSUMED BY ADVISER
The Adviser has assumed certain expenses incurred by the Fund, some in
accordance with the Advisory Agreement (note B) and others on a voluntary basis,
as follows:
Expenses assumed by the Adviser in accordance
with the Advisory Agreement, including amortization
of the organization costs for the period ($500) .................. $103,741
Expenses assumed by the Adviser on a voluntary basis
Recurring registration fees ...................................... 8,641
Amortization of deferred offering costs .......................... 4,215
Amortization of deferred registration fees ....................... 2,151
--------
Total expenses assumed by Adviser .................................. $118,748
--------
The expenses assumed on a voluntary basis had the effect of reducing the ratio
of net expenses (after subtracting the expenses assumed by the Adviser in
accordance with the Advisory Agreement) to average net assets from 2.38% to
1.50% for the six months ended June 30, 2000. (The ratio of total expenses to
average net assets which is required disclosure in the financial highlights is
based upon total expenses for the year after subtracting the expenses assumed by
the Adviser but before the reduction of custodian fees for the income earned
pursuant to an expense offset arrangement. This ratio is 1.56% for the six
months ended June 30, 2000.)
Reference is made to notes A and B.
33
<PAGE>
Financial Highlights
June 30, 2000
P A X W O R L D Growth Fund, Inc.
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)
Period
June 9, 1997
(the date
operations
Six Months Year Ended commenced)
Ended December 31, to
June 30, ----------------- December 31,
2000 1999 1998 1997
------------- ------ ------ ------------
(Unaudited)
Net asset value, beginning
of period ................... $14.28 $11.13 $ 9.66 $10.00
------ ------ ------ ------
Gain (loss) from
investment operations
Investment (loss) - net ..... (.01) (.02) (.04) (.01)
Net realized and
unrealized gain (loss)
on investments ............ (.15) 3.17 1.51 (.33)
------ ------ ------ ------
Gain (loss) from
investment operations ..... (.16) 3.15 1.47 (.34)
------ ------ ------ ------
Net asset value,
end of period ............... $14.12 $14.28 $11.13 $ 9.66
------ ------ ------ ------
2. TOTAL RETURN .................. (1.12)% 28.30% 15.22% (3.40)%
3. RATIOS AND SUPPLEMENTAL DATA
Ratio of total expenses to
average net assets (A)(B) ... 1.56% 1.58% 1.62% 1.49
Ratio of investment
(loss) - net, to average
net assets (A) ............... (.11)% (.29)% (.61)% (.56)%
Portfolio turnover rate ....... 28.64% 76.40% 96.72% 50.79%
Net assets, end of
period ('000s) .............. $30,318 $22,068 $12,372 $4,605
Number of capital shares
outstanding, end of
period ('000s) .............. 2,148 1,546 1,112 477
(A) These ratios have been annualized for the six months ended June 30, 2000
and the period ended December 31, 1997
(B) Total expenses, net of expenses assumed by the Adviser
34
<PAGE>
This page intentionally
left blank.
35
<PAGE>
Portfolio Manager's Comments
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
DIANE M. KEEFE, PORTFOLIO MANAGER
Q. WHAT WERE THE MOST IMPORTANT FACTORS THAT INFLUENCED THE PERFORMANCE OF THE
PAX WORLD HIGH YIELD FUND IN THE FIRST SIX MONTHS OF 2000?
A. During the 6 month period ended June 30, 2000, the Fund outperformed the
Lipper High Current Yield Bond Index by 2.63% for the following three
reasons: (1) We held some BBB rated REIT preferred stock, which paid high
dividends and appreciated in price during the period; (2) As our portfolio
grew, we were able to increasingly add positions of smaller and mid-sized
issues that yielded 2.5% more than larger issues of similar quality; and
(3) We maintained a shorter bond duration than the high-yield indices in
order to insulate the portfolio from the impact of further Federal Reserve
rate increases.
Q. WHAT WAS YOUR INVESTMENT STRATEGY FOR THE FIRST SIX MONTHS OF 2000?
A. We maintained higher than average credit quality. We held no CCC securities
and more BB or better rated bonds than the high-yield indices. Higher
quality holdings generally reduce volatility of high-yield portfolios as
long as duration remains short to mitigate interest rate risk. We
overweighted three sectors: telecommunications, cable, and technology.
These sectors generally provide the best opportunity to profit from
upgrades in credit quality and industry consolidation. We invested in
leading market share companies with strong management, positive cash flow
and revenue growth trends. We sought relative value among sectors and
companies within sectors using a combination of growth and value investing
techniques -- growth in our telecommunications and technology holdings and
value in our REIT, industrial, and services holdings. We increased exposure
to food and drug sectors because of the recession resistance of their
products. We added to the utility sector, searching for companies with a
technological or clean energy related differential advantage that should
help them compete in a deregulated environment.
Q. WHAT ARE SOME EXAMPLES OF SECURITIES OWNED BY THE HIGH YIELD FUND THAT FIT
YOUR STRATEGY?
A. One of our largest holdings is IXC COMMUNICATIONS 12.5% preferred stock, a
short duration obligation of BROADWING (formerly CINCINNATI BELL) that has
a high dividend rate. We also hold a large position in ECHOSTAR, a direct
TV satellite broadcaster that intends to expand its systems to deliver fast
Internet services to homes in rural areas. The purchase yield was over
9.75% in each case. Both companies have reported strong results since we
bought them. Two new additions to our portfolio are: AZURIX, a provider of
water services; and INTERFACE, a pioneer in sustainable business practices.
36
<PAGE>
Portfolio Highlights
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
KEY STATISTICS
Year-to-Date Change
in NAV ($9.67 to $9.32)............. -$0.35
Year-to-Date Change in Total
Net Assets ($2.91 to
$8.04 million)*.............. $5.13 million
Distributions to Shareholders
(per share)......................... $0.418
30 Day SEC Yield...................... 10.55%
Year-to-Date Total Return.............. 0.75%
10-8-99 to 6-30-00 Cumulative
Total Return........................ -1.73%
* OF THE $5.13 MILLION INCREASE IN TOTAL NET ASSETS FROM DECEMBER 31, 1999 TO
JUNE 30, 2000, PAX WORLD MANAGEMENT CORP. (THE ADVISER) INVESTED $1.5 MILLION.
TOTAL RETURN FIGURES INCLUDE REINVESTED DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS,
AND CHANGES IN PRINCIPAL VALUE AND REPRESENT PAST PERFORMANCE, WHICH IS NO
GUARANTEE OF FUTURE RESULTS.
TEN LARGEST HOLDINGS
PERCENT OF
COMPANY NET ASSETS
Sunrise Assisted Convertible
5.50%, due 6-15-2002................. 5.37%
IXC Communications, Inc.
Series B 12.50% Preferred............ 5.04%
EchoStar DBS Corp. 9.375%,
due 2-1-2009......................... 4.80%
Century Communications
Corp. 8.75%, due 10-1-2007........... 3.46%
Health Care Property Investors,
Inc. 8.60% Preferred Series C........ 3.34%
International Home Foods,
Inc. 10.375%, due 11-1-2006.......... 3.33%
Clearnet Communications, Inc.
0/14.75%, due 12-15-2005............. 3.23%
Callahan Nordrhein Westfalen
144 14.00%, due 7-15-2010............ 3.11%
Mail Well, Inc. Convertible
5.00%, due 11-1-2002.................. 3.10%
Windmere Durable Holdings,
Inc. 10.00%, due 7-31-2008........... 3.06%
Total.................................. 37.84%
ASSET ALLOCATION
(PIE CHART)
US Bonds 67%
Foreign Bonds 17%
Cash & Equivalents 3%
Preferred Stocks 13%
SECTOR DIVERSIFICATION
(PIE CHART)
Telecommunications 20%
Cash & Equivalents 3%
Cable; Broadcasting/Satellite 18%
Technology 6%
Industrial; Services/Distributors 12%
Retail; Apparel/Textiles; Lodging/Leisure 11%
Real Estate; Financial 10%
Consumer Products; Food/Beverage 8%
Health Care; Medical Devices/Pharmaceuticals 8%
Energy; Utilities 4%
37
<PAGE>
Schedule of Investments (Unaudited)
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, NUMBER
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES VALUE
PREFERRED STOCKS AND WARRANTS: 13.2%
HEALTH CARE: 3.3%
Health Care Property Investors, Inc.
8.60% Preferred Series C .......................... 14,000 $ 268,625
----------
INDUSTRIAL: 1.0%
Federal-Mogul Financing Trust 7.00%
Convertible Preferred ............................. 3,500 80,500
----------
LODGING/LEISURE: 2.2%
Host Marriott Corp. 10.00% Preferred
Class B ........................................... 4,000 88,000
Host Marriott Corp. Financial Trust
6.75% Convertible Preferred ....................... 2,700 89,775
----------
177,775
----------
REAL ESTATE: 1.6%
Equity Residential Properties Trust
Preferred Sh. Ben. Interest
Series F 9.65% .................................... 5,300 126,041
----------
TECHNOLOGY: 0.1%
Metricom, Inc. Warrants expiring
2/15/2010 ......................................... 100 2,000
----------
TELECOMMUNICATIONS: 5.0%
IXC Communications, Inc.
Series B 12.50% Preferred ......................... 400 405,000
----------
TOTAL PREFERRED STOCKS AND WARRANTS ................... 1,059,941
----------
CORPORATE BONDS: 83.7%
PRINCIPAL
AMOUNT
APPAREL/TEXTILES: 3.0%
St. John Knits Int'l Senior Subordinated
Note, 12.50%, due July 1, 2009 .................... $250,000 239,375
----------
BROADCASTING/SATELLITE: 4.8%
EchoStar DBS Corp. Senior Note,
9.375%, due February 1, 2009 ...................... 400,000 386,000
----------
38
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CORPORATE BONDS, continued
CABLE: 13.0%
Callahan Nordrhein Westfalen Senior
Note 144, 14.00%, due July 15, 2010 ............... $250,000 $ 250,000
Century Communications Corp. Senior
Note, 8.75%, due October 1, 2007 .................. 305,000 278,313
Charter Communications Holding LLC
Senior Note, 8.625%,
due April 1, 2009 ................................. 100,000 88,375
Telewest Communications, Inc
Senior Note 144A, 0/9.25%,
due April 15, 2009 ................................ 390,000 211,575
United Pan Europe Communications
Senior Note, 10.875%,
due August 1, 2009 ................................ 250,000 218,750
----------
1,047,013
----------
CONSUMER PRODUCTS: 5.0%
Sbarro, Inc. Senior Note, 11.00%, due
September 15, 2009 ................................ 150,000 154,125
Windmere Durable Holdings, Inc. Senior
Note, 10.00%, due July 31, 2008 ................... 250,000 246,250
----------
400,375
----------
ENERGY: 1.3%
Veritas DGC, Inc. Senior Note, 9.75%,
due October 15, 2003 .............................. 100,000 101,500
----------
FINANCIAL: 3.0%
Americredit Corp. Senior Subordinated
Note, 9.875%, due April 15, 2006 .................. 250,000 243,750
----------
FOOD/BEVERAGE: 3.3%
International Home Foods, Inc. Senior
Subordinated Note, 10.375%, due
November 1, 2006 .................................. 250,000 267,500
----------
HEALTH CARE: 4.0%
Dynacare, Inc. 10.75%,
due January 15, 2006 .............................. 180,000 166,500
39
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CORPORATE BONDS, continued
HEALTH CARE, continued
Invitrogen Corp. Convertible
Subordinated Note 144A, 5.50%,
due March 1, 2007 ................................. $150,000 $ 158,625
----------
325,125
----------
INDUSTRIAL: 8.1%
Federal-Mogul Corp. Note,
7.375%, due January 15, 2006 ...................... 100,000 72,801
Interface, Inc. Senior Subordinated
Note Series B, 9.50%, due
November 15, 2005 ................................. 250,000 218,750
Mail Well, Inc. Subordinated Notes
Convertible, 5.00%,
due November 1, 2002 .............................. 300,000 249,555
Russell Stanley Holdings, Inc. ......................
Subordinated Note Series B, 10.875%,
due February 15, 2009 ............................. 200,000 108,000
----------
649,106
----------
MEDICAL DEVICES/PHARMACEUTICALS: 1.0%
King Pharmaceuticals, Inc. Senior
Subordinated Note, 10.75%, due
February 15, 2009 ................................. 80,000 82,800
----------
REAL ESTATE: 5.4%
Sunrise Assisted Convertible, 5.50%,
due June 15, 2002 ................................. 500,000 431,875
----------
RETAIL: 5.3%
Finlay Fine Jewelry Corp. Senior Note,
8.375%, due May 1, 2008 ........................... 125,000 111,875
Musicland Group, Inc. Senior
Subordinated Note, 9.00%,
due June 15, 2003 ................................. 250,000 228,750
Musicland Group, Inc. Senior
Subordinated Note, 9.875%,
due March 15, 2008 ................................ 100,000 82,500
----------
423,125
----------
40
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CORPORATE BONDS, continued
SERVICES/DISTRIBUTORS: 3.1%
Ingram Micro, Inc. Subordinated
Debenture Convertible, 0/5.375%,
due June 9, 2018 .................................. $400,000 $ 150,000
Nationsrent, Inc. Senior Subordinated
Note, 10.375%, due December 15, 2008 .............. 150,000 96,750
----------
246,750
----------
TECHNOLOGY: 5.9%
Apple Computer, Inc. Note, 6.50%,
due February 15, 2004 ............................. 100,000 91,500
Covad Communications Group, Inc. ....................
Senior Note Series B, 12.00%, due
February 15, 2010 ................................. 150,000 117,750
Globix Corp. Senior Note, 12.50%,
due February 1, 2010 .............................. 100,000 82,500
Metricom, Inc. Senior Note, 13.00%,
due February 15, 2010 ............................. 100,000 69,000
PSINet, Inc. Senior Note Series B,
10.00%, due February 15, 2005 ..................... 125,000 115,625
----------
476,375
----------
TELECOMMUNICATIONS: 15.1%
Clearnet Communications, Inc. Senior
Discount Note, 0/14.75%, due
December 15, 2005 ................................. 250,000 259,375
Intermedia Communications, Inc. Senior
Discount Note Series B, 0/11.25%,
due July 15, 2007 ................................. 250,000 197,500
McLeodUSA, Inc. Senior Note, 9.25%,
due July 15, 2007 ................................. 250,000 242,500
Microcell Telecommunications Senior Note
Series B, 0/14.00%, due June 1, 2006 .............. 250,000 231,875
Microcell Telecommunications Senior
Discount Note, 0/12.00%, due
June 1, 2009 ...................................... 250,000 165,625
Nextel Communications, Inc. Senior
Serial Note 144A, 9.375%, due
November 15, 2009 ................................. 125,000 120,000
----------
1,216,875
----------
41
<PAGE>
Schedule of Investments (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
PERCENT OF NET ASSETS, PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE
CORPORATE BONDS, continued
UTILITIES: 2.4%
Azurix Corp. Senior Note 144A,
10.75%, due February 15, 2010 ..................... $200,000 $ 193,500
----------
TOTAL CORPORATE BONDS ................................. 6,731,044
----------
NUMBER
OF SHARES
MONEY MARKET SHARES: 4.8%
Pax World Money Market Fund ....................... 389,250 $ 389,250
----------
TOTAL INVESTMENTS: 101.7% ............................. 8,180,235
Cash, receivables and deferred costs less
liabilities: (1.7%) ............................... (138,125)
Net assets: 100% ...................................... $8,042,110
----------
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
Statement of Assets and Liabilities (Unaudited)
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
ASSETS
Investments, at value - note A
Preferred stocks and warrants (cost - $1,064,617) .............. $1,059,941
Bonds (amortized cost - $6,911,216) ............................ 6,731,044
Pax World Money Market Fund (cost - $389,250) .................. 389,250
----------
8,180,235
Cash ............................................................. 144,099
Receivables
Dividends and interest ......................................... 169,992
Reimbursement of expenses from Adviser - note G ................ 8,511
----------
Total assets ................................................. 8,502,837
----------
LIABILITIES
Payables
Investment securities purchased ................................ 424,142
Dividend payable - note A ...................................... 36,585
----------
Total liabilities ............................................ 460,727
----------
Net assets (equivalent to $9.32 per share
based on 862,496 shares of capital stock
outstanding) - note E .................................... $8,042,110
----------
Net asset value, offering price and redemption
price per share ($8,042,110 / 862,496 shares
outstanding) ............................................. $9.32
----------
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended June 30, 2000
P A X W O R L D High Yield Fund, Inc.
Investment income
Income - note A
Dividends
Pax World Money Market Fund ................ $ 10,745
Other investments .......................... 61,403 $ 72,148
------------
Interest ..................................... 208,255
---------
280,403
Other income ................................. 688
---------
Total income ............................... 281,091
Expenses
Investment advisory fee - note B ............. 21,680
Distribution expenses - note D ............... 56,846
Printing and mailing ......................... 36,318
Legal fees and related expenses - note B ..... 23,146
Custodian fees - note F ...................... 18,966
Audit fees ................................... 10,001
Directors' fees and expenses - note B ........ 9,217
Transfer agent fee ........................... 6,026
Other ........................................ 806
Registration fees ............................ 772
State taxes .................................. 200
------------
Total expenses ............................. 183,978
Less: Fees paid indirectly - note F ....... (2,043)
Expenses assumed by Adviser -
notes B and G ....................... (158,352)
------------
Net expenses ........................ 23,583
---------
Investment income - net .................... 257,508
---------
Realized and unrealized (loss)
on investments - note C
Net realized (loss) on investments ............. (25,414)
Change in unrealized (depreciation) of
investments for the period ................... (179,369)
---------
Net (loss) on investments .................... (204,783)
---------
Net increase in net assets resulting from
operations ................................. $ 52,725
---------
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
Statement of Changes in Net Assets
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
Period
June 15, 1999
(the date of
Six Months incorporation)
Ended to
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Increase in net assets
Operations
Investment income - net ...................... $ 257,508 $ 22,597
Net realized (loss) on investments ........... (25,414) (119)
Change in unrealized (depreciation)
of investments ............................. (179,369) (5,479)
------------ -----------
Net increase in net assets resulting
from operations .......................... 52,725 16,999
Distributions to shareholders from
investment income - net - note A ........... (257,508) (22,597)
Capital share transactions - note E ............ 5,333,251 2,919,240
------------ -----------
Net increase in net assets ................. 5,128,468 2,913,642
Net assets
Beginning of period ............................ 2,913,642 --
------------ -----------
End of period .................................. $ 8,042,110 $ 2,913,642
------------ -----------
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
Notes to Financial Statements (Unaudited)
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Pax World High Yield Fund, Inc. ("Fund"), incorporated in Delaware on June 15,
1999, is a diversified, open-end management investment company registered under
the Investment Company Act of 1940, as amended. The Fund commenced operations on
August 25, 1999 with the issuance of 10,000 shares of capital stock to Pax World
Management Corp., the Fund's Adviser ("Adviser"). Investment operations
commenced October 13, 1999.
All organization costs were borne by the Adviser.
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 primary
investment objective is to seek high current income. The Fund will, however,
also seek capital appreciation as a secondary objective to the extent that it is
consistent with the Fund's primary objective. It seeks to achieve this objective
by investing primarily in high yield, fixed income securities rated BBB or lower
by Standard & Poor's Ratings Group or Moody's Investors Service and other fixed
income securities either similarly rated by another major rating service or
unrated securities which are, in the opinion of the Adviser, of comparable
quality.
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. Valuations for bonds are obtained from
independent pricing services or broker-dealers, which may or may not be managing
underwriters. 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.
46
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
INVESTMENT INCOME
Dividend income is recognized on the ex-dividend date. Interest income is
recognized 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 most likely
call date. Net discount accretion for the six months ended June 30, 2000 and the
period October 13, 1999 (the date investment operations commenced) to December
31, 1999 was $45,844 and $3,883, respectively.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. The repurchase date is usually
within a day or two of the original purchase, although it may extend over a
number of months. The Fund's repurchase agreements will be fully collateralized
at all times by obligations issued or guaranteed by U.S. Government agencies and
instrumentalities (other than the U.S. Treasury) in an amount at least equal to
the purchase price of the underlying securities (including accrued interest
earned thereon). In the event of a default or bankruptcy by a seller, the Fund
will promptly seek to liquidate the collateral. To the extent that the proceeds
from any sale of such collateral upon a default in the obligation to repurchase
are less than the repurchase price, the Fund will suffer a loss. The Fund has
not experienced any such losses. There were no repurchase agreements outstanding
at June 30, 2000.
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.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions of investment income are accrued daily (based upon each day's
investment income, net) and are paid monthly on the first business day of the
month subsequent to the month of accrual. Shareholders who redeem shares during
a month receive the dividend accrued to the date of redemption.
Distributions of net realized gain on investments, if any, are recorded on the
ex-dividend date. There were no capital gain distributions during the six months
ended June 30, 2000 and the
47
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
period June 15, 1999 (the date of incorporation) to December 31, 1999 since
there was a net realized (loss) on investments for the periods.
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.
NOTE B - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an Advisory Agreement ("Agreement") between the Fund and the
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. In the event that the
average net assets of the Fund are less than $5,000,000, the Adviser will be
compensated by the Fund for its services at an annual rate of $25,000; in the
event that average net assets of the Fund are equal to or in excess of
$5,000,000, the annual investment advisory fee will be 1% of its average daily
net assets on the first $25,000,000 and 3/4% of its average daily net assets in
excess of that amount. The Adviser has agreed to waive the portion of the
advisory fee necessary to offset the amount of the advisory fee payable by Pax
World Money Market Fund, Inc. to the Adviser with respect to any assets of the
Fund which are invested in the Pax World Money Market Fund, Inc.
Two officers, who are also directors of the Fund, are also officers and
directors of the Adviser. An officer of the Fund, who is not a director of the
Fund, is an officer and director of the Adviser. Two other officers of the Fund,
who are not directors of the Fund, are also officers of the Adviser.
The Adviser has 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
48
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
incurred in connection with portfolio transactions) which are in excess of 1.5%
of the average daily net asset value of the Fund per annum. The Adviser has
agreed to reduce this percentage to .85% for fiscal year 2000. 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;
(v) the reimbursement of organization expenses; and (vi) 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 Adviser was required to supply
and assume a total of $157,580 and $23,310 for such services for the six months
ended June 30, 2000 and the period June 15, 1999 (the date of incorporation) to
December 31, 1999. Additionally, the Adviser assumed, on a voluntary basis,
expenses of $772 and $10 for the six months ended June 30, 2000 and the period
June 15, 1999 (the date of incorporation) to December 31, 1999. Reference is
made to note G.
During the six months ended June 30, 2000, the Fund incurred legal fees and
related expenses of $23,146 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
the six months ended June 30, 2000 and the period October 13, 1999 (the date
investment operations commenced) to December 31, 1999 totaled $1,331 and $1,044,
respectively (5.7% and 11.1% of total commissions for the respective periods).
The Fund is permitted to invest in the Pax World Money Market Fund, Inc. which
is also managed by the Adviser.
At June 30, 2000, the Adviser owned 425,551 shares of the Fund's capital stock,
49.3% of the shares outstanding on that date.
NOTE C - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investments, excluding short-term
investments, aggregated $7,038,411 and $1,894,180, respectively, for the six
months ended June 30, 2000. There were no U.S. Government agency bonds purchased
or sold during the period.
49
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
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, 2000 would have been approximately the same.
For Federal income tax purposes, the identified cost of investments owned at
June 30, 2000 was $8,365,083. Gross unrealized appreciation and depreciation of
investments aggregated $176,744 and $361,592, respectively, at June 30, 2000,
resulting in net unrealized (depreciation) of $(184,848).
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, pursuant to which the Fund incurs
the expenses of distributing the Fund's 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.
50
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
NOTE E - CAPITAL AND RELATED TRANSACTIONS
Transactions in capital stock were as follows:
Period
August 25, 1999
Six Months (the date operations
Ended commenced) to
June 30, 2000 December 31, 1999
--------------------- ---------------------
(Unaudited)
Shares Dollars Shares Dollars
------- ---------- ------- ----------
Shares sold .................. 557,995 $5,303,470 301,192 $2,918,506
Shares issued in
reinvestment of
distributions .............. 9,390 87,680 92 890
------- ---------- ------- ----------
567,385 5,391,150 301,284 2,919,396
Shares redeemed .............. (6,157) (57,899) (16) (156)
------- ---------- ------- ----------
Net increase ................. 561,228 $5,333,251 301,268 $2,919,240
------- ---------- ------- ----------
The components of net assets at June 30, 2000(unaudited), are as follows:
Paid-in capital (25,000,000 shares of $1 par value
authorized) .............................................. $ 8,252,491
Undistributed capital (loss) ............................... (25,533)
Net unrealized (depreciation) of investments ............... (184,848)
--------------
Net assets ............................................... $ 8,042,110
--------------
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.
51
<PAGE>
Notes to Financial Statements (Unaudited), continued
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
NOTE G - EXPENSES ASSUMED BY ADVISER
The Adviser has assumed certain expenses incurred by the Fund, some in
accordance with the Advisory Agreement (note B) and others on a voluntary basis,
as follows:
Expenses assumed by the Adviser in accordance
with the Advisory Agreement ..................................... $157,580
Expenses assumed by the Adviser on a voluntary
basis - registration fees ....................................... 772
--------
Total expenses assumed by Adviser ................................. $158,352
--------
The ratio of net expenses (after subtracting the expenses assumed by the Adviser
in accordance with the Advisory Agreement) to average net assets was .85% for
the six months ended June 30, 2000. (The ratio of total expenses to average net
assets which is required disclosure in the financial highlights is based upon
total expenses for the period after subtracting the expenses assumed by the
Adviser but before the reduction of custodian fees for the income earned
pursuant to an expense offset arrangement. This ratio is .91% for the six months
ended of June 30, 2000.)
Reference is made to note B.
52
<PAGE>
Financial Highlights
June 30, 2000
P A X W O R L D High Yield Fund, Inc.
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)
Period
October 13, 1999
(the date
investment
operations
Six Months commenced)
Ended to
June 30, December 31,
2000 1999
------ ------
(Unaudited)
Net asset value, beginning of period ......... $ 9.67 $10.00
------ ------
Income from investment operations
Investment income - net .................... .418 .093
Net realized and unrealized (loss)
on investments ........................... (.350) (.330)
------ ------
Total from investment operations ........... .068 (.237)
------ ------
Less distributions
Dividends from investment income, net ...... .418 .093
------ ------
Net asset value, end of period ............... $ 9.32 $ 9.67
------ ------
2. TOTAL RETURN ................................. .75% (2.46)%
3. RATIOS AND SUPPLEMENTAL DATA
Ratio of total expenses to average net
assets (A)(B) .............................. .91% 2.01%
Ratio of investment income - net, to
average net assets (A) ..................... 9.13% 6.40%
Portfolio turnover rate ...................... 37.16% 7.10%
Net assets, end of period ('000s) ............ $8,042 $2,914
Number of capital shares outstanding,
end of period ('000s) ........................ 862 301
(A) These ratios have been annualized for the six months ended June 30, 2000
and the period ended December 31, 1999.
(B) This ratio is based upon total expenses, including the gross amount of
custodian fees (before being reduced pursuant to an expense offset
arrangement), net of expenses assumed by the Adviser.
53
<PAGE>
~ Notes ~
54
<PAGE>
~ Notes ~
55
<PAGE>
~ Notes ~
56
<PAGE>
(INSIDE BACK COVER)
ACCOUNT OPTIONS AND SERVICES*
At Pax World, we are pleased to offer a variety of account options and
shareholder services to help meet your investment needs.
TYPES OF ACCOUNTS
REGULAR ACCOUNTS: Individual, business and trust accounts are available for all
Pax World Funds.
TRADITIONAL IRA: Certain individuals can make tax-deductible contributions to
this account up to a maximum of $2,000 per year. Taxes are paid only when funds
are withdrawn, usually in retirement, when investors may be in a lower tax
bracket.
ROTH IRA: Contributions to a Roth IRA are not deductible, but after five years
some types of withdrawals are tax-free.
SIMPLE IRA: This is an easy-to-maintain retirement plan designed for small
businesses of up to 100 employees.
SEP IRA: This is an employer-funded retirement plan popular with small
businesses and self-employed persons.
EDUCATION IRA & UNIFORM GIFT TO MINORS ACCOUNT (UGMA): These plans provide
excellent ways to save for a child's education.
403(B)(7) PENSION PLAN: This plan is available to persons employed by non-profit
organizations.
SERVICES
AUTOMATIC INVESTMENT PLAN: This plan offers the convenience of "dollar-cost
averaging." You may arrange to have a fixed amount automatically deducted from
your checking or savings account and invested in your Pax account on a monthly
or quarterly basis.
VOLUNTARY WITHDRAWAL PLAN: This plan makes it possible for investors to receive
a monthly check from their Pax account. This plan requires a minimum investment
of $10,000.
ONLINE ACCOUNT ACCESS: Utilizing a unique ID number and PIN, you can access your
Pax account(s) online to review your account balances or histories; purchase or
redeem fund shares (not yet available for IRA accounts); or make exchanges
between different Pax World Funds.
WWW.PAXFUND.COM: Learn all about Pax World through our web site! You can check
Fund performance, read about our portfolio managers, view CONNECTION - our
quarterly newsletter, and see how Pax World voted on various proxies for the
companies in our portfolios.
*For more complete information, including charges and expenses, on any fund at
Pax World Funds, please request a prospectus (which should be read carefully
before investing) by calling (800)767-1729 between 9:00 A.M. and 8:00 P.M.
(Eastern time) Monday through Friday, via e-mail at [email protected] or by
visiting our website at www. paxfund.com anytime.
57
<PAGE>
(BACK COVER)
PAXWORLD
INVESTING FOR POSITIVE CHANGE
PAX World
224 State Street
Portsmouth, NH 03801
800.767.1729
web www.paxfund.com
email [email protected]
For general information:
800.767.1729
For shareholder account information:
800.372.7827
For broker services:
800.635.1404
Address all account inquiries to:
PAX World
P.O. Box 8930
Wilmington, DE 19899
58
