Pax World High Yield Bond Fund
Investment Objective
The High Yield Bond Fund’s primary investment objective is to seek high current income. As a secondary investment objective the High Yield Bond Fund seeks capital appreciation.
Principal Investment Strategies
Under normal market conditions, the High Yield Bond Fund invests at least 80% of its assets (plus any borrowings for investment purposes) in high-yield, fixed income securities (such as bonds, notes and debentures) that are rated below BBB- by Standard & Poor’s Ratings Group or below Baa3 by Moody’s Investors Service, similarly rated by another major rating service, or unrated and determined by the High Yield Bond Fund’s investment adviser to be of comparable quality. These fixed income securities are commonly referred to as “junk bonds.”
The High Yield Bond Fund’s investment adviser anticipates that the dollar-weighted average maturity of the fixed income securities in the High Yield Bond Fund’s investment portfolio will be 10 years or less.
In determining which securities to buy for the High Yield Bond Fund, the investment adviser considers, among other things, the financial history and condition of the issuer, its cash flow trends, analysts’ recommendations and the issuer’s outlook and management team.
The High Yield Bond Fund may consider selling a particular security if any of the original reasons for purchase materially change, if a more attractive investment is identified, to meet redemption requests, or if a company no longer meets Pax World’s environmental, social or governance standards. The investment adviser generally employs fundamental analysis in making these determinations. Fundamental analysis involves the review of financial statements and other data to attempt to predict whether the price of an issuer’s security is undervalued or overvalued.
The High Yield Bond Fund may invest up to 40% of its assets in securities of non-U.S. issuers, including investments in emerging markets.
Management Style
The Fund invests primarily in high-yield, fixed-income securities commonly referred to as “junk bonds” and rated below BBB- by Standard & Poor’s Ratings Group or below Baa3 by Moody’s Investors Service, or unrated securities of comparable quality. The Fund can invest in convertible bonds, preferred stocks, zero-coupon, pay-in-kind, deferred-payment, and other high-yielding securities. Up to 40% of the Fund can be invested in high-yielding debt and equity securities of foreign issuers. In-house research looks closely at the financial history and condition, cash flow trends, analysts’ recommendations, and management of each issue considered.
The Fund seeks securities issued by companies in more economically stable industries or in higher-growth sectors. At times, the Fund may hold large amounts of high-quality cash instruments. When deciding on how much cash to hold, the Fund looks at the anticipated direction of domestic interest rates, the global economic outlook, and their anticipated effect on the high-yield market.
1The High Yield Bond Fund’s investment adviser has contractually agreed to reduce the High Yield Bond Fund’s management fee to 0.50% until at least December 31, 2011. In addition, the investment adviser has contractually agreed to reimburse the High Yield Bond Fund to the extent its “Other Expenses” exceed 0.24% of the average daily net assets of the High Yield Bond Fund. This reimbursement arrangement will remain in effect until at least December 31, 2011.