Guidance on Climate Risks and Opportunities A major highlight of Pax’s public policy advocacy over the past year is the January 2010 vote of the SEC to issue interpretive guidance on climate risk and opportunity disclosure.¹ There are many ways to pursue sustainability in the corporate and investment worlds, but perhaps one of the most satisfying is action that affects many or all public companies.

To read the entire article, download the PDF now.

This document is saved in Adobe Acrobat PDF format. If you do not have Adobe Acrobat Reader installed on your computer you can download it for free from Adobe by selecting the link on the left.

Each of these three funds outperformed their respective indexes for the one year period ended December 31, 2009. The Pax World International Fund returned 39.14 percent, outperforming the MSCI EAFE (Net) ³ Index return of 31.78 percent.  The Pax World Global Green Fund returned 37.52 percent, outperforming the FTSE Environmental Opportunities Index ⁵ return of 34.23 percent, as well as the MSCI World Index’s⁴ return of 29.99%.  The Pax World Small Cap Fund returned 36.87 percent, outperforming the Russell 2000 Index ⁶ return of 27.17 percent. See standardized performance below.

“We continue to be very pleased with the performance of these three relatively new funds, particularly as the market experienced some recovery over the last nine months of 2009” said Pax World President and CEO Joe Keefe.

Each of the three funds follow Pax World’s Sustainable Investing approach, which focuses on the full integration of environmental, social and governance (ESG) factors into investment analysis and decision making. In Pax World’s view, this process helps its fund managers identify companies that are more forward-thinking and acting, better at managing risk and more focused on the long term.

“We think our Sustainable Investing discipline has a lot to offer in today’s investment environment,” adds Keefe.  “Investors who have suffered as a result of short-term thinking and excessive risk taking are looking for investment strategies that are more focused on the long term.  Further, as America and the world transition from an industrial economy fueled by coal and oil to a sustainable economy fueled by clean energy and new technologies, investors are looking for ways to capture the potential investment returns associated with this global shift.”
   
The Pax World International Fund’s investment objective is to seek long-term growth of capital by investing primarily in companies outside of the United States.

“In 2009, the Pax World International Fund benefited from strong stock selection and disciplined risk management across international sectors and regions, including a sizeable allocation to emerging market equities,” said Pax World International Fund Portfolio Manager Ivka Kalus-Bystricky.  “The Fund was also well-served by focusing on investing in stocks, sectors and regions which we believed to have superior sustainability, growth and quality characteristics relative to market expectations.”

The Pax World Global Green Fund invests in environmental markets around the globe, including companies focusing on alternative energy and energy efficiency, water treatment and pollution control, and waste technology and resource management. The Fund is subadvised by London-based Impax Asset Management, one of the world’s leading specialist environmental asset managers.

“The Pax World Global Green Fund had a strong year due to recovery in early cycle and commodity related stocks, as well as the positive evolution of the secular growth trends in global environmental markets,” said Impax Portfolio Manager and Investment Director, Bruce Jenkyn-Jones.  “The sector is currently driven by significant changes across the economy in favor of cleaner and greener products and services, including government subsidies and stimulus, technology development and mandated spending, as well as by heightened global awareness of issues such as pollution and climate change.”

The Pax World Small Cap Fund’s investment objective is to seek long-term growth of capital. It seeks to achieve its objective by investing in small companies that Pax World believes to have attractive valuations and growth prospects and strong management teams that exhibit a high degree of innovation and motivation to grow their business.

“The Pax World Small Cap Fund’s positioning in defensive growth companies and active management of our sector weightings were the primary drivers of our results this year,” said Pax World Small Cap Fund Portfolio Manager Nathan Moser. “In addition, several of our portfolio holdings were acquired as the merger and acquisition environment improved.”  

For more information, visit http://www.paxworld.com/

Performance data quoted represent past performance, which does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For most recent month-end performance information visit www.paxworld.com.

¹Total annual International, Global Green and Small Cap Fund operating expenses for each of the Funds’ Individual Investor Class, gross of any fee waivers or reimbursements, are 7.40%, 3.78% and 12.09%, respectively, as of 12/31/2009. Total Annual International, Global Green and Small Cap Fund operating expenses, net of fee waivers, reimbursements and acquired fund fees and expenses, are 1.40%, 1.40% and 1.24, respectively, as of 12/31/2009.

²The inception date for the Pax World International, Global Green and Small Cap Funds is March 28, 2008.

³The MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged index and is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. As of June 2007 the MSCI EAFE Index consisted of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. Performance for the MSCI EAFE Index is shown “net”, which includes dividend reinvestments after deduction of foreign withholding tax.

⁴The MSCI World Index is an unmanaged index and is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of June 2007 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Performance for the MSCI World Index is shown “net”, which includes dividend reinvestments after deduction of foreign withholding tax.

⁵The FTSE Environmental Opportunities Index measures the performance of global companies that have significant involvement in environmental business activities, including renewable and alternative energy, energy efficiency, water technology and waste & pollution control. The FTSE Environmental Opportunities Index Series requires companies to have at least 20% of their business derived from environmental markets and technologies. The FTSE Environmental Opportunities Index Series is published by a joint venture of Impax Asset Management, Ltd. (“Impax”) with FTSE International.  Impax is also the sub-adviser to the Pax World Global Green Fund.

⁶The Russell 2000 Index is an unmanaged index and measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

Investors cannot invest directly in an index.

You should consider a fund’s investment objectives, risks, and charges and expenses carefully before investing. For this and other information, call 800.767.1729 or visit www.paxworld.com for a fund prospectus and read it carefully before investing. Distributed by ALPS Distributors, Inc.

The Pax World Funds’ sustainable investing policies may inhibit the Funds’ ability to participate in certain attractive investment opportunities that otherwise would be consistent with its investment objectives and other principal investment strategies.

Funds that emphasize investments in smaller companies generally experience greater price volatility. Foreign investing involves special risks such as currency fluctuations and political uncertainty.

The recent growth rate in the stock market has helped to produce short-term returns for some asset classes that are not typical and may not continue in the future. Because of ongoing market volatility, fund performance may be subject to substantial short-term changes.

ABOUT PAX WORLD MANAGEMENT LLC
Pax World Management LLC, the investment adviser to Pax World Funds, launched the nation’s first socially responsible mutual fund in 1971 and is a recognized leader in Sustainable Investing – the integration of environmental, social and governance (ESG) factors into investment analysis and decision making.  With approximately $2.5 billion in assets under management (as of 12/31/09), Pax World offers seven actively managed mutual funds as well as ESG Managers® Portfolios, a series of asset allocation funds featuring asset allocation, manager selection and portfolio construction by Morningstar Associates, LLC.

PAX000657 (1/11)

PORTSMOUTH, N.H. – January 27, 2010 – Pax World Management LLC, investment adviser to Pax World Funds (Pax World) and a leader in the field of Sustainable Investing, today commended the decision of the Securities and Exchange Commission (SEC) to issue guidance on disclosure of climate change risks and opportunities at publicly traded companies.  Pax World was one of two asset management firms that joined with 21 other institutional investment representatives in 2007 to petition the SEC to issue guidance on climate risk disclosure.  The petitioners included the   treasurers, comptrollers or other state officials representing California, Florida, Kentucky, Maine, Maryland, New Jersey, New York, North Carolina, Oregon, Rhode Island and Vermont.¹

The petition, submitted to the SEC in September of 2007, asked the SEC to provide detailed guidance on how companies should be disclosing climate-related material risks to investors. “Recent scientific, legal, and regulatory developments make it unavoidably clear that the risks and opportunities many corporations face in connection with climate change fall squarely within the category of material information that is required to be analyzed and disclosed in many corporate filings,” said the petitioners.  “Yet corporate disclosures of the risks and opportunities created by climate change lag behind these developments, and investors are left with little or in some cases no useful information about corporate exposure to these risks.”  

In a groundbreaking decision issued today, the SEC stated that the new interpretive guidance will provide assistance to companies in reporting several types of material impacts from climate change, including not only possible regulatory or litigation risk, but also extending to the physical impacts of climate change and the possibility of reputational impacts. SEC staff and commissioners pointed out that investors with substantial assets under management have been seeking such guidance for many years, and reiterated that this release is in keeping with the Supreme Court’s language noting that while doubts about materiality are “commonplace,” doubts as to the significance of information to be included should be resolved in favor of investors.  

Pax World, a leader in the field of sustainable investing, has long contended that climate change will have significant material effects on corporate financial performance, and therefore on investment performance. There is now abundant evidence that growing numbers of investors and financial experts agree. In fact, Pax World points out that investment analysts now routinely cover climate change as one of the issues that distinguishes companies as either leaders or laggards in their sectors. The January 14, 2010 Investor Summit on Climate Risk at the United Nations was attended by 450 global investors, including some of the world’s largest financial firms and institutional asset owners. 

“Amid the rising reality of climate change’s impacts on the global economy, what the SEC recognized today was that climate change is a material risk to businesses, and ignoring this is a disservice to investors,” said Julie Gorte, Pax World’s Senior Vice President for Sustainable Investing, “Just as importantly, as companies become more aware of the risks they face,  they will be increasingly conscious of the business opportunities associated with the shift to a cleaner, more sustainable economy.  Climate risk disclosure is a win-win for investors.” 

ABOUT PAX WORLD MANAGEMENT LLC
Pax World Management LLC, the investment adviser to Pax World Funds, launched the nation’s first socially responsible mutual fund in 1971 and is a recognized leader in Sustainable Investing – the integration of environmental, social and governance (ESG) factors into investment analysis and decision making. With approximately $2.4 billion in assets under management², Pax World Funds offers seven actively managed mutual funds as well as ESG Managers Portfolios, a series of asset allocation funds featuring asset allocation, manager selection and portfolio construction by Morningstar Associates.

¹The full list of petitioners includes the California Public Employees’ Retirement System, the California State Controller, the California State Teachers’ Retirement System, the California State Treasurer, Ceres, Environmental Defense, F&C Management, the Florida Chief Financial Officer, Friends of the Earth, the Kentucky State Treasurer, the Maine State Treasurer, the Maryland State Treasurer, the Nathan Cummings Foundation, the New Jersey State Investment Council, the New York City Comptroller, the New York State Attorney General, the New York State Comptroller, the North Carolina State Treasurer, the Oregon State Treasurer, Pax World Management Corporation, the Rhode Island General Treasurer and the Vermont State Treasurer.

²As of 1/26/10

You should consider Pax World Funds’ and ESG Managers Portfolios’ investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a Fund prospectus by calling 800.767.1729 or visiting http://www.paxworld.com. Please read it carefully before investing. Copyright © 2010 Pax World Management LLC. All rights reserved. Distributed by ALPS Distributors, Inc.

Please note that the information below does not constitute tax advice. Please consult your personal tax adviser to determine how new tax laws and your state’s reporting requirements will affect your individual tax return.

QUALIFIED DIVIDENDS:

The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the maximum tax rate on “qualified dividends” to 15% (5% for those in the 10% and 15% income tax bracket). What this means to you: Form 1099-DIV will report the total amount of the distribution paid in box 1a. In box 1b, the Form will report the portion of that distribution that may be considered Qualified Dividend Income.

The percentage of income earned in 2009 by each of the Pax World Funds that is Qualified Dividend Income (QDI) is provided in the table below. This percentage of the total ordinary income distribution is qualified for the QDI tax rate based on how long the fund held the securities that paid dividends. However, in order to enjoy the lower tax rate you would had to have owned your fund shares for at least 60 days during the 120 day period that began 60 days before the fund’s ex-dividend date.

FOR YOUR STATE AND LOCAL TAX RETURNS:

Tax-deferred and tax-exempt account holders (i.e. IRA, SEP-IRA, 403b, self-directed retirement plan) may disregard the following tax information.

Pax World Balanced Fund holds Federal Home Loan Bank (FHLB) and Federal Farm Credit Bank (FFCB) bonds in its portfolio. Interest earned from these bonds is subject to federal income tax, but is generally exempt from state and local income taxes. The pass-through exemption rate for 2009 equals 8.27% of the total income dividend earned.

To calculate the amount of your exemption, multiply the “Dollar Amount” sum of the June and December
“Dividend-Reinvest” or “Dividend-Cash” transactions by .0827 (these transactions are located in the Account Activity section of your year-end statement).

If your state imposes threshold requirements or an intangibles tax, it may affect your ability to claim a pass-through exemption. The following information should be provided to your tax adviser to help determine if you are eligible for any exemptions.

Pax World Growth Fund, Pax World High Yield Bond Fund, Pax World Value Fund, Pax World Women’s Equity Fund, Pax World International Fund, Pax World Small Cap Fund and Pax World Global Green Fund earned no income from federal obligations in 2009.

Again, due to the complexity of each state’s individual requirements, we strongly suggest that you consult your tax advisor.

For questions, please contact us.

PORTSMOUTH, N.H. – January 6, 2010 – Pax World Management LLC, investment adviser to Pax World Funds, has joined with Morningstar Associates to create and manage a unique series of asset allocation funds specifically designed for investment advisors and their clients looking for “socially responsible,” “green” or “sustainable” investments.

The new series of funds, called ESG Managers® Portfolios, are the first non-proprietary, multi-manager asset allocation portfolios consisting of investment managers who integrate environmental, social and governance (ESG) factors into investment analysis and decision making.

ESG Managers® Portfolios consist of four asset allocation portfolios:

• ESG Managers® Aggressive Growth Portfolio
• ESG Managers® Growth Portfolio
• ESG Managers® Moderate Portfolio
• ESG Managers® Conservative Portfolio

Pax World is the investment adviser to ESG Managers® Portfolios while Morningstar Associates is charged with manager selection, asset allocation and portfolio construction and monitoring.

The investment managers selected by Morningstar Associates who will provide sub-advisory services to the funds include some of the best-known managers in the Sustainable Investing industry, such as:

• Access Capital Strategies
• Ariel Investments
• ClearBridge Advisers
• Community Capital Management
• Impax Asset Management
• Miller-Howard Investments
• MMA Capital Management
• Neuberger Berman
• Parnassus Investments
• Pax World Investments
• Portfolio 21 Investments

“By bringing all these managers under one roof in collaboration with Morningstar Associates, Pax World now offers the first series of multi-manager asset allocation funds following a Sustainable Investing approach,” said Joe Keefe, President and CEO of Pax World. “We believe these funds will provide turnkey, one-stop solutions for financial advisors whose clients seek to capture the investment returns associated with superior ESG or sustainability performance.”

Patrick Reinkemeyer, President of Morningstar Associates, added, “Until today, mutual fund investors have never had a comprehensively constructed asset-allocation portfolio composed of many of the industry’s leading investment firms that incorporate ESG factors alongside fundamental financial factors in their security selection. This is a first.”

ESG Managers® Portfolios are available only through financial advisors. To learn more about them, visit www.esgmanagers.com.

About Pax World Management LLC
Pax World Management LLC, the investment adviser to ESG Managers® Portfolios, is a recognized leader in Sustainable Investing – the integration of environmental, social and governance (ESG) factors into investment analysis and decision making. Pax World launched the financial industry’s first socially responsible mutual fund in 1971. Today, in addition to ESG Managers Portfolios®, the company offers Pax World Funds, a family of actively managed Sustainable Investing mutual funds across a range of asset classes.

For more information, visit www.paxworld.com

About Morningstar Associates, LLC and Morningstar, Inc.
Morningstar Associates, LLC, a registered investment advisor and wholly owned subsidiary of Morningstar, Inc., is a leading provider of investment management solutions for institutions and their clients. Through its subadvisory services, asset allocation programs, and managed account programs, Morningstar Associates advises on more than $21 billion in assets (as of Sept. 30, 2009).

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 325,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 4 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. The company has operations in 20 countries and minority ownership positions in companies based in two other countries.

For more information, visit www.morningstar.com.

Contact
Jane Munkelwitz
Solomon McCown
617.933.5021
jmunkelwitz@solomonmccown.com

ESG Manager Portfolios’ are new and have limited operating history.

You should consider ESG Managers® Portfolios’ investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus by calling 877.374.7678 or clicking here. Please read it carefully before investing.

Pax World Management LLC is the investment adviser to the ESG Managers® Portfolios. Morningstar Associates, LLC, a registered investment advisor and wholly owned subsidiary of Morningstar, Inc., serves as portfolio construction adviser to the ESG Managers® Portfolios responsible for manager selection, asset allocation, portfolio construction and monitoring, but does not serve in the capacity of investment advisor to individual investors. The Morningstar name and logo are the property of Morningstar, Inc. Morningstar is not affiliated with Pax World Management LLC.

ESG Managers® Portfolios and Pax World Mutual Funds are distributed by ALPS Distributors, Inc. Member FINRA. ALPS Distributors, Inc. is not affiliated with Morningstar Associates, LLC, Access Capital, Ariel Investments, ClearBridge Advisers, Community Capital Management, Impax Asset Management, Miller/Howard Investments, MMA Capital Management, Neuberger Berman, Parnassus Investments, Pax World Management LLC or Portfolio 21 Investments.

ESG Managers® Portfolios are multi-manager funds, which are a mix of underlying Sleeve Subadviser portfolios. The Funds’ allocations may change due to market fluctuations and other factors.

When investing in bonds, you are subject, but not limited to, the same interest rate, inflation and credit risks associated with the underlying bonds owned by the Fund.

Emerging market investments do involve risk of capital loss from unfavorable fluctuations in currency values, differences in generally accepted accounting principals, economic or political instability in other nations or increased volatility and lower trading volume.

The ESG Managers® Portfolios’ sustainable investing policies may inhibit the funds’ ability to participate in certain attractive investment opportunities that otherwise would be consistent with their investment objectives and other principal investment strategies.