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PAX World High Yield Fund SRI in the Rockies “Making Lemonade Out of a Sour Credit Market”. October 20, 2002. Diane Keefe, CFA Portfolio Manager www.paxfund.com dkeefe@paxfund.com (212) 266-0327. PAX World High Yield Fund. Launched: October 8, 1999

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slide1

PAX World High Yield Fund

SRI in the Rockies

“Making Lemonade Out of a

Sour Credit Market”

October 20, 2002

Diane Keefe, CFA

Portfolio Manager

www.paxfund.com

dkeefe@paxfund.com

(212) 266-0327

slide2

PAX World High Yield Fund

Launched: October 8, 1999

Assets: $19.1 Million as of September 30, 2002

SEC Yield: 7.4%

No Load Fund Ticker: PAXHX

Primary Objective: High Current Income

Secondary Objective: Capital Appreciation

Pax World High Yield Fund’s Additional Objective:

Consistent with the other members of the PAX World Family, the PAX World High Yield Fund seeks to achieve its objective by investing in companies that produce goods and services that improve the quality of life and that are not to any degree engaged in manufacturing defense or weapons related products.

slide3

Investment Assumptions/ Strategies for 2002-3

Assumptions

Strategies

  • Expect war with Iraq in February
  • Low interest rates make BB have positive performance related to

rolling down the yield curve

  • Keep 10% cash for buying opportunities and get less dependent on any one industry performance
  • Seek BB Investments in 8% - 9 ½% range
  • $ may weaken related to current acct. deficit and deficits rising
  • Maintain or increase exposure to Europe
  • Fallen angels will increase if recession continues
  • Emerging mkts. may catch pneumonia from US severe cold or changes in Brazilian domestic policies
  • Use market corrections as opportunities to upgrade credit quality and diversify
  • Stay away from emerging mkts. until panic in full swing then target Mexico & investment grade companies
  • GDP estimate –1 to +2%
  • Old economy weakness begins to recover if war is brief
  • Purchase high quality cyclicals when leverage begins to decline
  • Technology/Internet/Telecom will continue to lag recovery
  • Maintain underweight in cellular, cable & tech.
  • Energy prices are likely to stay elevated due to geo-political risk
  • 3-D seismic, natural gas, E&P cos.

PAX World High Yield Fund

slide4

Portfolio Structure

Credit Rating Distribution

As of September 30, 2002

PAX World High Yield Fund

slide5

Investment Process

PAX World High Yield Fund

slide6

Pax World HY Fund

Portfolio Statistics

9/30/028/31/02

Average YTM 9.9 % 11.3%

Average Maturity 7.4 Yrs. 7.4 Yrs.

Average Coupon 9.4 % 10.1%

Average Duration 4.5 Yrs. 4.8 Yrs.

Average Moody Rating B2 B2

Average S&P B+ B

PAX World High Yield Fund

slide7

Pax World High Yield FundPortfolio StatisticsAs of July 31, 2002*

Goal: Above Average Performance for

Below Average Risk Achieved in 2000 & 2001

YTD 2002 near-average performance with below average risk

Beta 0.70 0.14 Below Ml HY Index

Std. Deviation 9.02 1.12 Below ML HY Index

Total Return

Last Bull Market (9/30/01-12/30/01) + 4.94 %

Last Bear Market (12/31/01 – 7/31/02) - 7.14 %

Best 1-Year (Ended 11/30/01) +10.34 %

Worst 1-Year (Ended 7/31/02) - 8.02 %

* Provided by morningstar

PAX World High Yield Fund

slide8

Portfolio Sector Holdings

As of September 30, 2002

Pax World High Yield Fund

slide9

Research ProcessPax World High Yield Fund

  • Use proprietary model to determine credit quality and credit trend independent of rating agencies
  • Analyze management strength, competitive position, special situations, and economic forecast implications for industries & companies
  • Social research team reviews for diversity on boards, environmental performance, labor relations, product liability, and discrimination law suits in addition to primary screens against alcohol, tobacco, gaming, & weapons

PAX World High Yield fund

slide10

Top Ten Holdings as of September 30, 2002

  • Market percent
  • Rating Valueof bonds
  • ISTAR Fin’l Inc 8.75% Due 8/15/08 BB+$ 675,705 3.53%
  • Premier Int’l Foods 12% due 9/1/09 B- $ 535,000 2.79%
  • American Achievement 11.625% 1/1/07 B+ $ 512,500 2.68%
  • Weight Watchers 13% due 10/1/09 B $ 503,800 2.63%
  • Roundy’s Inc 8.875% 6/15/12 B $ 490,000 2.56%
  • Comp Gen. De Geo 10.625% 11/15/07 BB $ 469,375 2.45%
  • Bally Total Fitness 9.875% 10/15/07 B- $461,875 2.41%
  • Ingles Mkts Inc 8.875% 12/1/11 B+ $ 457,500 2.39%
  • Hovnanian K Enter. Inc 8% 4/1/12 BB- $ 447,500 2.34%
  • NBTY Inc 8.625% 9/15/07 B+ $ 411,070 2.15%

PAX World High Yield Fund

slide11

Performance vs. Benchmark

Top 16% of High Yield Bond Funds for the 2-year period ended September 30, 2002Comparison to 336 other HY Funds

Qtr ended 1-Yr ended 2-Yrs ended Sept 30, 2002Sept 30, 2002sept 30, 2002

Pax World HY Fund + 0.73 % +0.84 % - 0.60 %

Lipper HY Index - 2.98 % - 3.20 % - 8.11 %

Lipper HY Average - 3.54 % - 2.17 % - 5.87 %

Market benchmarks

10-Year Treasury + 11.10 % +12.76 % +27.57%

S&P 500 Index - 17.27 % - 20.47 % - 41.63 %

PAX World High Yield fund