<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 2000
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
---------------------
PRE-EFFECTIVE AMENDMENT [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
---------------------
MORGAN STANLEY DEAN WITTER
DIVERSIFIED INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(Address of Principal Executive Offices)
212-392-1600
(Registrant's Telephone Number)
BARRY FINK, ESQ.
Two World Trade Center
New York, New York 10048
(Name and Address of Agent for Service)
---------------------
COPY TO:
STUART M. STRAUSS, ESQ.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The Exhibit Index is located on page [ ]
PURSUANT TO RULE 429, THIS REGISTRATION STATEMENT RELATES TO SHARES
PREVIOUSLY REGISTERED BY THE REGISTRANT ON FORM N-1A (REGISTRATION NOS. 33- ;
811- ).
================================================================================
<PAGE>
FORM N-14
MORGAN STANLEY DEAN WITTER DIVERSIFIED INCOME TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PART A OF FORM N-14 ITEM NO. PROXY STATEMENT AND PROSPECTUS HEADING
------------------------------ -------------------------------------------------------
<S> <C>
1 (a) ........................ Cross Reference Sheet
(b) ........................ Front Cover Page
(c) ........................ *
2 (a) ........................ *
(b) ........................ Table of Contents
3 (a) ........................ Fee Table
(b) ........................ Synopsis
(c) ........................ Principal Risk Factors
4 (a) ........................ The Reorganization
(b) ........................ The Reorganization -- Capitalization Table (Unaudited)
5 (a) ........................ Registrant's Prospectus
(b) ........................ *
(c) ........................ *
(d) ........................ *
(e) ........................ Available Information
(f) ........................ Available Information
6 (a) ........................ Prospectus of Morgan Stanley Dean Witter World Wide
Income Trust
(b) ........................ Available Information
(c) ........................ *
(d) ........................ *
7 (a) ........................ Introduction -- Proxies
(b) ........................ *
(c) ........................ Introduction; The Reorganization -- Appraisal Rights
8 (a) ........................ The Reorganization
(b) ........................ *
9 .......................... *
<CAPTION>
PART B OF FORM N-14 ITEM NO. STATEMENT OF ADDITIONAL INFORMATION HEADING
------------------------------ --------------------------------------------------------
<S> <C>
10(a) ........................ Cover Page
(b) ........................ *
11 .......................... Table of Contents
12(a) ........................ Additional Information about Morgan Stanley Dean Witter
Diversified Income Trust
(b) ........................ *
(c) ........................
13(a) ........................ Additional Information about Morgan Stanley Dean Witter
World Wide Income Trust
(b) ........................ *
(c) ........................ *
14 ........................ Registrant's Annual Report for the fiscal year ended
October 31, 2000. Morgan Stanley Dean Witter World
Wide Income Trust's Annual Report for the fiscal year
ended October 31, 2000
<CAPTION>
PART C OF FORM N-14 ITEM NO. OTHER INFORMATION HEADING
------------------------------ --------------------------------------------------------
<S> <C>
15 .......................... Indemnification
16 .......................... Exhibits
17 .......................... Undertakings
</TABLE>
----------
* Not Applicable or negative answer
<PAGE>
MORGAN STANLEY DEAN WITTER
WORLD WIDE INCOME TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) 869-NEWS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 27, 2001
TO THE SHAREHOLDERS OF MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
Notice is hereby given of a Special Meeting of the Shareholders of Morgan
Stanley Dean Witter World Wide Income Trust ("World Wide Income") to be held in
the Career Development Room, 61st Floor, Two World Trade Center, New York, New
York 10048, at 9:00 a.m., New York time, on March 27, 2001, and any adjournments
thereof (the "Meeting"), for the following purposes:
1. To consider and vote upon an Agreement and Plan of Reorganization, dated
October 26, 2000 (the "Reorganization Agreement"), between World Wide
Income and Morgan Stanley Dean Witter Diversified Income Trust
("Diversified Income"), pursuant to which substantially all of the assets
of World Wide Income would be combined with those of Diversified Income and
shareholders of World Wide Income would become shareholders of Diversified
Income receiving shares of Diversified Income with a value equal to the
value of their holdings in World Wide Income (the "Reorganization"); and
2. To act upon such other matters as may properly come before the Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is attached
as Exhibit A thereto. Shareholders of record at the close of business on
December 20, 2000 are entitled to notice of, and to vote at, the Meeting. Please
read the Proxy Statement and Prospectus carefully before telling us, through
your proxy or in person, how you wish your shares to be voted. Alternatively, if
you are eligible to vote telephonically by touchtone telephone or electronically
on the Internet (as discussed in the enclosed Proxy Statement) you may do so in
lieu of attending the Meeting in person. THE BOARD OF TRUSTEES OF WORLD WIDE
INCOME RECOMMENDS YOU VOTE IN FAVOR OF THE REORGANIZATION. WE URGE YOU TO SIGN,
DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
BARRY FINK,
Secretary
, 2000
--------------------------------------------------------------------------------
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE TO
BE PRESENT IN PERSON, PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY IN
ORDER THAT THE NECESSARY QUORUM BE REPRESENTED AT THE MEETING. THE ENCLOSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. AS DISCUSSED IN
THE ENCLOSED PROXY STATEMENT, CERTAIN SHAREHOLDERS WILL BE ABLE TO VOTE
TELEPHONICALLY BY TOUCHTONE TELEPHONE OR ELECTRONICALLY ON THE INTERNET BY
FOLLOWING INSTRUCTIONS ON THEIR PROXY CARDS OR ON THE ENCLOSED VOTING
INFORMATION CARD.
--------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY DEAN WITTER
DIVERSIFIED INCOME TRUST
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(800) 869-NEWS
ACQUISITION OF THE ASSETS OF
MORGAN STANLEY DEAN WITTER WORLD WIDE INCOME TRUST
BY AND IN EXCHANGE FOR SHARES OF
MORGAN STANLEY DEAN WITTER DIVERSIFIED INCOME TRUST
This Proxy Statement and Prospectus is being furnished to shareholders of
Morgan Stanley Dean Witter World Wide Income Trust ("World Wide Income") in
connection with an Agreement and Plan of Reorganization, dated October 26, 2000
(the "Reorganization Agreement"), pursuant to which substantially all the assets
of World Wide Income will be combined with those of Morgan Stanley Dean Witter
Diversified Income Trust ("Diversified Income") in exchange for shares of
Diversified Income (the "Reorganization"). As a result of this transaction,
shareholders of World Wide Income will become shareholders of Diversified Income
and will receive shares of Diversified Income with a value equal to the value of
their holdings in World Wide Income. The terms and conditions of this
transaction are more fully described in this Proxy Statement and Prospectus and
in the Reorganization Agreement between World Wide Income and Diversified
Income, attached hereto as Exhibit A. The address of World Wide Income is that
of Diversified Income set forth above. This Proxy Statement also constitutes a
Prospectus of Diversified Income, which is dated , 2000, filed by Diversified
Income with the Securities and Exchange Commission (the "Commission") as part of
its Registration Statement on Form N-14 (the "Registration Statement").
Diversified Income is an open-end diversified management investment company
whose primary investment objective is to seek a high level of current income. As
a secondary objective, the fund seeks to maximize total return, but only to the
extent consistent with its primary objective. The Fund normally invests at least
65% of its total assets in a diversified portfolio of fixed-income securities.
The Investment Manager diversifies investments among the groups in an effort to
reduce overall portfolio risk -- a general downturn in one group may be offset
by a rise in another. The three groups of Fund investments include: (1) global
securities; (2) mortgage-backed securities and U.S. Government securities; and
(3) high yield securities.
This Proxy Statement and Prospectus set forth concisely information about
Diversified Income that shareholders of World Wide Income should know before
voting on the Reorganization Agreement. A copy of the Prospectus for Diversified
Income dated December , 2000, is attached as Exhibit B and incorporated herein
by reference. Also enclosed and incorporated herein by reference is Diversified
Income's Annual Report for the fiscal year ended October 31, 2000. A Statement
of Additional Information relating to the Reorganization, described in this
Proxy Statement and Prospectus (the "Additional Statement"), dated ,
2000, has been filed with the Commission and is also incorporated herein by
reference. Also incorporated herein by reference are World Wide Income's
Prospectus, dated , and Annual Report for its fiscal year ended
October 31, 2000. Such documents are available without charge by calling (800)
869-NEWS (TOLL FREE).
Investors are advised to read and retain this Proxy Statement and Prospectus for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROXY STATEMENT AND PROSPECTUS IS DATED , 2000.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION ............................................................................. 1
General ................................................................................ 1
Record Date; Share Information ......................................................... 1
Proxies ................................................................................ 2
Expenses of Solicitation ............................................................... 2
Vote Required .......................................................................... 3
SYNOPSIS ................................................................................. 3
The Reorganization ..................................................................... 3
Fee Table .............................................................................. 4
Tax Consequences of the Reorganization ................................................. 8
Comparison of World Wide Income and Diversified Income ................................. 8
PRINCIPAL RISK FACTORS ................................................................... 11
THE REORGANIZATION ....................................................................... 13
The Proposal ........................................................................... 13
The Board's Consideration .............................................................. 13
The Reorganization Agreement ........................................................... 14
Tax Aspects of the Reorganization ...................................................... 16
Description of Shares .................................................................. 17
Capitalization Table (unaudited) ....................................................... 18
Appraisal Rights ....................................................................... 18
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS ........................... 18
Investment Objectives and Policies ..................................................... 18
Investment Restrictions ................................................................ 19
ADDITIONAL INFORMATION ABOUT WORLD WIDE INCOME AND DIVERSIFIED
INCOME .................................................................................. 20
General ................................................................................ 20
Financial Information .................................................................. 20
Management ............................................................................. 20
Description of Securities and Shareholder Inquiries .................................... 21
Dividends, Distributions and Taxes ..................................................... 21
Purchases, Repurchases and Redemptions ................................................. 21
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE .............................................. 21
FINANCIAL STATEMENTS AND EXPERTS ......................................................... 21
LEGAL MATTERS ............................................................................ 21
AVAILABLE INFORMATION .................................................................... 21
OTHER BUSINESS ........................................................................... 22
Exhibit A - Agreement and Plan of Reorganization, dated October 26, 2000, by and between
World Wide Income and Diversified Income ................................................ A-1
Exhibit B - Prospectus of Diversified Income dated December , 2000 ..................... B-1
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER
WORLD WIDE INCOME TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) 869-NEWS
--------------------
PROXY STATEMENT AND PROSPECTUS
--------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 27, 2001
INTRODUCTION
GENERAL
This Proxy Statement and Prospectus is being furnished to the shareholders
of Morgan Stanley Dean Witter World Wide Income Trust ("World Wide Income"), an
open-end non-diversified management investment company, in connection with the
solicitation by the Board of Trustees of World Wide Income (the "Board") of
proxies to be used at the Special Meeting of Shareholders of World Wide Income
to be held in the Career Development Room, 61st Floor, Two World Trade Center,
New York, New York 10048 at 9:00 A.M., New York time, on March 27, 2001 and any
adjournments thereof (the "Meeting"). It is expected that the mailing of this
Proxy Statement and Prospectus will be made on or about December 22, 2000.
At the Meeting, World Wide Income shareholders ("Shareholders") will
consider and vote upon an Agreement and Plan of Reorganization, dated October
26, 2000 (the "Reorganization Agreement"), between World Wide Income and Morgan
Stanley Dean Witter Diversified Income Trust ("Diversified Income") pursuant to
which substantially all of the assets of World Wide Income will be combined with
those of Diversified Income in exchange for shares of Diversified Income. As a
result of this transaction, Shareholders will become shareholders of Diversified
Income and will receive shares of Diversified Income equal to the value of their
holdings in World Wide Income on the date of such transaction (the
"Reorganization"). Pursuant to the Reorganization, each Shareholder will receive
the class of shares of Diversified Income that corresponds to the class of
shares of World Wide Income currently held by that Shareholder. Accordingly, as
a result of the Reorganization, each Class A, Class B, Class C and Class D
Shareholder of World Wide Income will receive Class A, Class B, Class C or Class
D shares of Diversified Income, respectively. The shares to be issued by
Diversified Income pursuant to the Reorganization (the "Diversified Income
Shares") will be issued at net asset value without an initial sales charge.
Further information relating to Diversified Income is set forth herein and in
Diversified Income's current Prospectus, dated December , 2000 ("Diversified
Income's Prospectus"), attached to this Proxy Statement and Prospectus and
incorporated herein by reference.
The information concerning World Wide Income contained herein has been
supplied by World Wide Income and the information concerning Diversified Income
contained herein has been supplied by Diversified Income.
RECORD DATE; SHARE INFORMATION
The Board has fixed the close of business on December 20, 2000 as the
record date (the "Record Date") for the determination of the Shareholders
entitled to notice of, and to vote at, the Meeting. As of the Record
1
<PAGE>
Date, there were shares of World Wide Income issued and outstanding.
Shareholders on the Record Date are entitled to one vote per share on each
matter submitted to a vote at the Meeting. A majority of the outstanding shares
entitled to vote, represented in person or by proxy, will constitute a quorum at
the Meeting.
The following persons were known to own of record or beneficially 5% or
more of the outstanding shares of a Class of World Wide Income as of the Record
Date: . As of the Record Date, the trustees and officers of World
Wide Income, as a group, owned less than 1% of the outstanding shares of World
Wide Income.
The following persons were known to own of record or beneficially 5% or
more of the outstanding shares of a Class of Diversified Income as of the Record
Date: . As of the Record Date, the trustees and officers of
Diversified Income, as a group, owned less than 1% of the outstanding shares of
Diversified Income.
PROXIES
The enclosed form of proxy, if properly executed and returned, will be
voted in accordance with the choice specified thereon. The proxy will be voted
in favor of the Reorganization Agreement unless a choice is indicated to vote
against or to abstain from voting on the Reorganization Agreement. The Board
knows of no business, other than that set forth in the Notice of Special Meeting
of Shareholders, to be presented for consideration at the Meeting. However, the
proxy confers discretionary authority upon the persons named therein to vote as
they determine on other business, not currently contemplated, which may come
before the Meeting. Abstentions and, if applicable, broker "non-votes" will not
count as votes in favor of the Reorganization Agreement, and broker "non-votes"
will not be deemed to be present at the meeting for purposes of determining
whether the Reorganization Agreement has been approved. Broker "non-votes" are
shares held in street name for which the broker indicates that instructions have
not been received from the beneficial owners or other persons entitled to vote
and for which the broker does not have discretionary voting authority. If a
Shareholder executes and returns a proxy but fails to indicate how the votes
should be cast, the proxy will be voted in favor of the Reorganization
Agreement. The proxy may be revoked at any time prior to the voting thereof by:
(i) delivering written notice of revocation to the Secretary of World Wide
Income at Two World Trade Center, New York, New York 10048; (ii) attending the
Meeting and voting in person; or (iii) completing and returning a new proxy
(whether by mail or, as discussed below, by touchtone telephone or the Internet)
(if returned and received in time to be voted). Attendance at the Meeting will
not in and of itself revoke a proxy.
In the event that the necessary quorum to transact business or the vote
required to approve or reject the Reorganization Agreement is not obtained at
the Meeting, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of the holders of a majority of shares of
World Wide Income present in person or by proxy at the Meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are entitled to vote in favor of the Reorganization Agreement and will vote
against any such adjournment those proxies required to be voted against the
Reorganization Agreement.
EXPENSES OF SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement and Prospectus, will be borne by World Wide Income
which expenses are expected to approximate $ . World Wide Income and
Diversified Income will bear all of their respective other expenses associated
with the
2
<PAGE>
Reorganization. In addition to the solicitation of proxies by mail, proxies may
be solicited by officers of World Wide Income, and officers and regular
employees of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors" or the
"Investment Manager") and Morgan Stanley Dean Witter Trust FSB ("MSDW Trust"),
an affiliate of MSDW Advisors, personally or by mail, telephone, telegraph or
otherwise, without compensation therefor. Brokerage houses, banks and other
fiduciaries may be requested to forward soliciting material to the beneficial
owners of shares and to obtain authorization for the execution of proxies.
Shareholders whose shares are registered with MSDW Trust will be able to
vote their shares by touchtone telephone or by Internet by following the
instructions on the proxy card or on the Voting Information Card accompanying
this Proxy Statement. To vote by touchtone telephone, Shareholders can call the
toll-free number 1-800-690-6903. To vote by Internet, Shareholders can access
the websites www.msdwt.com or www.proxyvote.com. Telephonic and Internet voting
with MSDW Trust presently are not available to Shareholders whose shares are
held in street name.
In certain instances, MSDW Trust, an affiliate of MSDW Advisors, may call
Shareholders to ask if they would be willing to have their votes recorded by
telephone. The telephone voting procedure is designed to authenticate
Shareholders' identities, to allow Shareholders to authorize the voting of their
shares in accordance with their instructions and to confirm that their
instructions have been recorded properly. No recommendation will be made as to
how a Shareholder should vote on the Reorganization Agreement other than to
refer to the recommendation of the Board. World Wide Income has been advised by
counsel that these procedures are consistent with the requirements of applicable
law. Shareholders voting by telephone in this manner will be asked for their
social security number or other identifying information and will be given an
opportunity to authorize proxies to vote their shares in accordance with their
instructions. To ensure that the Shareholders' instructions have been recorded
correctly, they will receive a confirmation of their instructions in the mail. A
special toll-free number set forth in the confirmation will be available in case
the information contained in the confirmation is incorrect. Although a
Shareholder's vote may be taken by telephone, each Shareholder will receive a
copy of this Proxy Statement and Prospectus and may vote by mail using the
enclosed proxy card or by touchtone telephone or the Internet as set forth
above. The last proxy vote received in time to be voted, whether by proxy card,
touchtone telephone or Internet, will be the vote that is counted and will
revoke all previous votes by the Shareholder.
VOTE REQUIRED
Approval of the Reorganization Agreement by the Shareholders requires the
affirmative vote of a majority (i.e., more than 50%) of the shares of World Wide
Income represented in person or by proxy and entitled to vote at the Meeting,
provided a quorum is present at the Meeting. If the Reorganization Agreement is
not approved by Shareholders, World Wide Income will continue in existence and
the Board will consider alternative actions.
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus. This synopsis
is only a summary and is qualified in its entirety by the more detailed
information contained or incorporated by reference in this Proxy Statement and
Prospectus and the Reorganization Agreement. Shareholders should carefully
review this Proxy Statement and Prospectus and Reorganization Agreement in their
entirety and, in particular, Diversified Income's Prospectus, which is attached
to this Proxy Statement and incorporated herein by reference.
THE REORGANIZATION
The Reorganization Agreement provides for the transfer of substantially all
the assets of World Wide Income, subject to stated liabilities, to Diversified
Income in exchange for the Diversified Income Shares. The
3
<PAGE>
aggregate net asset value of the Diversified Income Shares issued in the
exchange will equal the aggregate value of the net assets of World Wide Income
received by Diversified Income. On or after the closing date scheduled for the
Reorganization (the "Closing Date"), World Wide Income will distribute the
Diversified Income Shares received by World Wide Income to Shareholders as of
the Valuation Date (as defined below under "The Reorganization Agreement") in
complete liquidation of World Wide Income and World Wide Income will thereafter
be dissolved and deregistered under the Investment Company Act of 1940, as
amended (the "1940 Act"). As a result of the Reorganization, each Shareholder
will receive that number of full and fractional Diversified Income Shares equal
in value to such Shareholder's pro rata interest in the net assets of World Wide
Income transferred to Diversified Income. Pursuant to the Reorganization, each
Shareholder will receive the class of shares of Diversified Income that
corresponds to the class of shares of World Wide Income currently held by that
Shareholder. Accordingly, as a result of the Reorganization, each Class A, Class
B, Class C and Class D Shareholder of World Wide Income will become a holder of
Class A, Class B, Class C or Class D shares of Diversified Income, respectively.
Shareholders holding their shares of World Wide Income in certificate form will
be asked to surrender their certificates in connection with the Reorganization.
Shareholders who do not surrender their certificates prior to the Closing Date
will still receive their shares of Diversified Income; however, such
Shareholders will not be able to redeem, transfer or exchange the Diversified
Income Shares received until the old certificates have been surrendered. The
Board has determined that the interests of Shareholders will not be diluted as a
result of the Reorganization.
FOR THE REASONS SET FORTH BELOW UNDER "THE REORGANIZATION -- THE BOARD'S
CONSIDERATION," THE BOARD, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED
PERSONS" OF WORLD WIDE INCOME ("INDEPENDENT TRUSTEES"), AS THAT TERM IS DEFINED
IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT"), HAS
CONCLUDED THAT THE REORGANIZATION IS IN THE BEST INTERESTS OF WORLD WIDE INCOME
AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL OF THE REORGANIZATION AGREEMENT.
FEE TABLE
World Wide Income and Diversified Income each pay expenses for management
of their assets, distribution of their shares and other services, and those
expenses are reflected in the net asset value per share of each fund. The
following table briefly describes the fees and expenses that a shareholder of
World Wide Income and Diversified Income may pay if they buy and hold shares of
each respective fund. These expenses are deducted from each respective fund's
assets and are based on expenses paid by World Wide Income for its fiscal year
ended October 31, 2000, and by Diversified Income for its fiscal year ended
October 31, 2000. The table also sets forth pro forma fees for the surviving
combined fund (Diversified Income) reflecting what the fee schedule would have
been on , 2000, if the Reorganization had been consummated twelve (12)
months prior to that date.
4
<PAGE>
Shareholder Fees
----------------
<TABLE>
<CAPTION>
WORLD PRO FORMA
WIDE DIVERSIFIED COMBINED
INCOME INCOME (DIVERSIFIED INCOME)
--------------- --------------- ---------------------
<S> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES
(AS A PERCENTAGE OF OFFERING PRICE)
Class A ............................................... 4.25%(1) 4.25%(1) 4.25%(1)
Class B ............................................... none none none
Class C ............................................... none none none
Class D ............................................... none none none
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED
DIVIDENDS
Class A ............................................... none none none
Class B ............................................... none none none
Class C ............................................... none none none
Class D ............................................... none none none
MAXIMUM CONTINGENT DEFERRED SALES CHARGE (LOAD) (AS A
PERCENTAGE OF THE LESSER OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PROCEEDS)
Class A ............................................... none (2) none (2) none (2)
Class B ............................................... 5.00%(3) 5.00%(3) 5.00%(3)
Class C ............................................... 1.00%(4) 1.00%(4) 1.00%(4)
Class D ............................................... none none none
REDEMPTION FEES
Class A ............................................... none none none
Class B ............................................... none none none
Class C ............................................... none none none
Class D ............................................... none none none
EXCHANGE FEE
Class A ............................................... none none none
Class B ............................................... none none none
Class C ............................................... none none none
Class D ............................................... none none none
</TABLE>
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
WORLD PRO FORMA
WIDE DIVERSIFIED COMBINED
INCOME INCOME (DIVERSIFIED INCOME)
----------- ------------- ---------------------
<S> <C> <C> <C>
MANAGEMENT FEES(5)
Class A ............................. 0.75 % 0.40 % %
Class B ............................. 0.75 % 0.40 % %
Class C ............................. 0.75 % 0.40 % %
Class D ............................. 0.75 % 0.40 % %
DISTRIBUTION AND SERVICE (12B-1) FEES
Class A ............................. 0. % 0.24 % 0. %
Class B ............................. [0.85]% [0.85]% [0.85]%
Class C ............................. [0.85]% [0.85]% [0.85]%
Class D ............................. none none none
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
WORLD PRO FORMA
WIDE DIVERSIFIED COMBINED
INCOME INCOME (DIVERSIFIED INCOME)
-------- ------------- ---------------------
<S> <C> <C> <C>
OTHER EXPENSES (6)
Class A ............................ % % %
Class B ............................ % % %
Class C ............................ % % %
Class D ............................ % % %
TOTAL ANNUAL FUND OPERATING EXPENSES
Class A ............................ % % %
Class B ............................ % % %
Class C ............................ % % %
Class D ............................ % % %
</TABLE>
----------
(1) Reduced for purchases of $25,000 and over (see "Share Class Arrangements
-- Class A Shares" in each fund's Prospectus).
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a Contingent Deferred Sales Charge ("CDSC") of
1.00% that will be imposed on redemptions made within one year after
purchase, except for certain specific circumstances (see "Purchases,
Exchanges and Redemptions" below and "Share Class Arrangements -- Class A
Shares" in each fund's Prospectus).
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchases, Exchanges and Redemptions" below and "Share Class Arrangements
-- Class C Shares" in each fund's Prospectus).
(5) The combined pro forma rate reflects the current aggregate fee payable by
Diversified Income for management and advisory services, effective as of
October 31, 2000.
(6) The Investment Manager has agreed to reimburse or waive $90,000 in
expenses of the Combined Fund for the first year of combined operations.
EXAMPLE
To attempt to show the effect of these expenses on an investment over time,
the hypotheticals shown below have been created. The Example assumes that an
investor invests $10,000 in either World Wide Income or Diversified Income or
the new combined fund (Diversified Income), that the investment has a 5% return
each year and that the operating expenses for each fund remain the same (as set
forth in the chart above). Although a shareholder's actual costs may be higher
or lower, the tables below show a shareholder's costs at the end of each period
based on these assumptions depending upon whether or not a shareholder sold his
shares at the end of each period.
6
<PAGE>
If a Shareholder SOLD His Shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
World Wide Income
Class A .........
Class B .........
Class C .........
Class D .........
Diversified Income
Class A .........
Class B .........
Class C .........
Class D .........
Pro Forma Combined
Class A .........
Class B .........
Class C .........
Class D .........
</TABLE>
A Shareholder HELD His Shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
World Wide Income
Class A .........
Class B .........
Class C .........
Class D .........
Diversified Income
Class A .........
Class B .........
Class C .........
Class D .........
Pro Forma Combined
Class A .........
Class B .........
Class C .........
Class D .........
</TABLE>
LONG-TERM SHAREHOLDERS OF CLASS B AND CLASS C SHARES OF WORLD WIDE INCOME
AND DIVERSIFIED INCOME MAY PAY MORE IN SALES CHARGES INCLUDING DISTRIBUTION FEES
THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGES PERMITTED BY
THE NASD.
The purpose of the foregoing fee table is to assist the investor or
shareholder in understanding the various costs and expenses that an investor or
shareholder in the fund will bear directly or indirectly. For a more complete
description of these costs and expenses, see "Comparison of World Wide Income
and Diversified Income -- Investment Management and Distribution Plan Fees,
Other Significant Fees, and Purchases, Exchanges and Redemptions" below.
7
<PAGE>
TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to the Reorganization, World Wide Income will receive an
opinion of Mayer, Brown & Platt to the effect that the Reorganization will
constitute a tax-free reorganization for federal income tax purposes, and that
no gain or loss will be recognized by World Wide Income or the shareholders of
World Wide Income for federal income tax purposes as a result of the
transactions included in the Reorganization. For further information about the
tax consequences of the Reorganization, see "The Reorganization -- Tax Aspects
of the Reorganization" below.
COMPARISON OF WORLD WIDE INCOME AND DIVERSIFIED INCOME
INVESTMENT OBJECTIVES AND POLICIES. The primary investment objective of
World Wide Income is to provide a high level of current income. As a secondary
objective, the fund seeks appreciation in the value of its assets. The primary
investment objective of Diversified Income is to seek a high level of current
income. As a secondary objective, the fund seeks to maximize total return but
only to the extent consistent with its primary objective.
World Wide Income seeks to achieve its investment objective by normally
investing at least 65% of its total assets in a portfolio of global fixed-income
securities. The securities may be issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, or investment grade securities issued by U.S.
corporations, foreign governments or foreign corporations, or by organizations
designated or supported by a government or government entity, such as the
European Economic Community and the World Bank. Diversified Income seeks to
achieve its investment objective by normally investing at least 65% of its total
assets in a diversified portfolio of fixed income securities. Morgan Stanley
Dean Witter Advisors Inc., Diversified Income's "Investment Manager," attempts
to equally allocate approximately one-third of the of the fund's assets among
three separate groups or market segments of fixed income securities: global
securities, mortgage-backed and U.S. Government securities, and high yield
securities. Morgan Stanley Dean Witter Advisors Inc., World Wide Income's
"Investment Manager," actively allocates assets of the fund among various
geographical regions, nations, currencies, corporations, and governmental
entities in an attempt to optimize income and, if possible, capital
appreciation. World Wide Income may also invest in zero coupon securities,
forward currency contracts, options and futures, mortgaged-backed securities,
convertible securities and warrants. Diversified Income's global securities
group of investments include fixed-income securities issued by the U.S.
Government, its agencies or instrumentalities, or fixed-income securities issued
by or guaranteed by a foreign government or supranational organization or any of
their instrumentalities or fixed-income securities issued by a corporation, all
of which are rated BBB or above by Standard & Poor's ("S&P") or Baa or above by
Moody's Investors Service ("Moody's") or if unrated, are determined by the
Investment Manager to be of equivalent quality. The global group of investments
also includes certificates of deposit and banker's acceptances issued or
guaranteed by, or time deposits maintained at banks and rated within the two
highest rating categories by S&P, Moody's or Duff & Phelps or if unrated, are
determined by the Investment Manager to be of equivalent quality and commercial
paper rated within the two highest rating categories by S&P, Moody's or Duff &
Phelps or, if unrated, issued by U.S. or foreign companies having outstanding
debt securities rated A or higher by S&P or Moody's. Diversified Income's
mortgage-backed securities and U.S. Government securities group will invest in
fixed-rate and adjustable rate mortgaged-backed securities that are issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or by
private issuers that are rated in the highest bond rating category by S&P or
Moody's, or if not rated, are determined to be of comparable quality by the
Investment Manager. The mortgage-backed and U.S. Government securities group may
also invest in U.S. Treasury securities and U.S. Government agency securities.
Diversified Income's high yield securities group of investments may include high
yield, high risk fixed- income securities rated Baa or lower by Moody's or BBB
or lower by S&P or if not rated, are determined to be of comparable quality by
the Investment Manager.
8
<PAGE>
Fixed-income securities rated Ba or lower by Moody's or BB or lower by S&P are
considered speculative investments, commonly known as "junk bonds." The
securities in the high yield group may include convertible and non-convertible
debt and Rule 144A securities. The processes by which each fund selects common
stocks and other investments may differ and are more fully described under
"Comparison of Investment Objectives, Policies and Restrictions" below.
The principal differences between the funds' investment policies, as well
as certain similarities, are more fully described under "Comparison of
Investment Objectives, Policies and Restrictions" below.
The investment policies of both World Wide Income and Diversified Income
are not fundamental and may be changed by their respective Boards of Trustees.
INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. World Wide Income and
Diversified Income obtain management services from MSDW Advisors. World Wide
Income pays MSDW Advisors monthly compensation calculated daily at an annual
rate of 0.75% of the fund's average daily net assets. With respect to
Diversified Income, the fund pays MSDW Advisors monthly compensation calculated
daily by applying the annual rate of 0.40% to the portion of the fund's average
daily net assets. Each class of both funds' shares is subject to the same
management fee rates applicable to the respective fund.
Both World Wide Income and Diversified Income have adopted similar
distribution plans ("Plans") pursuant to Rule 12b-1 under the 1940 Act. In the
case of Class A and Class C shares, each fund's Plan provides that the fund will
reimburse the Distributor and others for the expenses of certain activities and
services incurred by them in connection with the distribution of the Class A and
Class C Shares of the fund. Reimbursement for these expenses is made in monthly
payments by each fund to the Distributor which will in no event exceed amounts
equal to payments at the annual rates of 0.25% and 0.85% of the average daily
net assets of Class A and Class C shares, respectively. In the case of Class B
shares, each fund's Plan provides that the fund will pay the Distributor a fee,
which is accrued daily and paid monthly, at the annual rate of 0.85% of the
lesser of (a) the average daily aggregate gross sales of the fund's Class B
shares since the inception of the fund (not including reinvestment of dividends
or capital gains distributions), less the average daily aggregate net asset
value of the fund's Class B shares redeemed since the fund's inception upon
which a contingent deferred sales charge ("CDSC") has been imposed or upon which
such charge has been waived; or (b) the average daily net assets of Class B
shares. The 12b-1 fee is paid for the services provided and the expenses borne
by the Distributor and others in connection with the distribution of each fund's
Class B shares. There are no 12b-1 fees applicable to each fund's Class D
shares. For further information relating to the 12b-1 fees applicable to each
class of Diversified Income's shares, see the section entitled "Share Class
Arrangements" in Diversified Income's Prospectus, attached hereto. The
Distributor also receives the proceeds of any contingent deferred sales charge
("CDSC") paid by the funds' shareholders at the time of redemption. The CDSC
schedules applicable to each of World Wide Income and Diversified Income are set
forth below under "Purchases, Exchanges and Redemptions."
OTHER SIGNIFICANT FEES. Both World Wide Income and Diversified Income pay
additional fees in connection with their operations, including legal, auditing,
transfer agent, trustees fees and custodial fees. See "Synopsis -- Fee Table"
above for the percentage of average net assets represented by such "Other
Expenses."
PURCHASES, EXCHANGES AND REDEMPTIONS. Class A shares of each fund are sold
at net asset value plus an initial sales charge of up to 4.25%. The initial
sales charge is reduced for certain purchases. Investments of $1 million or more
(and investment by certain other limited categories of investors) are not
subject to any sales charges at the time of purchase, but are subject to a CDSC
of 1.0% on redemptions made within one year after purchase (except for certain
specific circumstances fully described in each fund's Prospectus).
9
<PAGE>
Class B shares of each fund are offered at net asset value with no initial
sales charge, but are subject to the same CDSC schedule set forth below:
<TABLE>
<CAPTION>
CLASS B SHARES OF WORLD WIDE INCOME AND
YEAR SINCE PURCHASE PAYMENT MADE DIVERSIFIED INCOME
------------------------------------- ----------------------------------------
<S> <C>
First .......................... 5.0%
Second ......................... 4.0%
Third .......................... 3.0%
Fourth ......................... 2.0%
Fifth .......................... 2.0%
Sixth .......................... 1.0%
Seventh and thereafter ......... none
</TABLE>
Class C shares of each fund are sold at net asset value with no initial
sales charge, but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. The CDSC may be waived for certain redemptions (which are
fully described under the section "Share Class Arrangements" in each fund's
Prospectus).
Class D shares of each fund are available only to limited categories of
investors and are sold at net asset value with no initial sales charge or CDSC.
The CDSC charge is paid to the Distributor. Shares of Diversified Income
and World Wide Income are distributed by the Distributor and offered by Dean
Witter Reynolds Inc. and other dealers who have entered into selected dealer
agreements with the Distributor. For further information relating to the CDSC
schedules applicable to each of the classes of shares of World Wide Income and
Diversified Income, see the section entitled "Share Class Arrangements" in each
fund's Prospectus.
Shares of each class of World Wide Income and Diversified Income may be
exchanged for shares of the same class of any other Morgan Stanley Dean Witter
Fund that offers its shares in more than one class, without the imposition of an
exchange fee. Additionally, shares of each class of World Wide Income and
Diversified Income may be exchanged for shares of Morgan Stanley Dean Witter
Short-Term U.S. Treasury Trust, Morgan Stanley Dean Witter North American
Government Income Trust, Morgan Stanley Dean Witter Limited Term Municipal
Trust, Morgan Stanley Dean Witter Short-Term Bond Fund and the five Morgan
Stanley Dean Witter Funds that are money market funds (the foregoing nine funds
are collectively referred to as the "Exchange Funds"), without the imposition of
an exchange fee. Class A shares of World Wide Income and Diversified Income may
also be exchanged for shares of Morgan Stanley Dean Witter Hawaii Municipal
Trust. Upon consummation of the Reorganization, the foregoing exchange
privileges will still be applicable to shareholders of the combined fund
(Diversified Income).
Diversified Income shares distributed to shareholders as a result of the
merger will not be subject to an initial sales charge.
With respect to both funds, no CDSC is imposed at the time of any exchange,
although any applicable CDSC will be imposed upon ultimate redemption. For
purposes of calculating the holding period in determining any applicable CDSC
upon redemption of shares received as a result of the Reorganization, any period
during which the shareholder held shares of a fund that charged a CDSC (e.g.,
World Wide Income) will be counted. During the period of time a Diversified
Income or World Wide Income shareholder remains in an Exchange Fund, the holding
period (for purposes of determining the CDSC rate) is frozen. Both World Wide
Income and Diversified Income provide telephone exchange privileges to their
shareholders. For greater details relating to exchange privileges applicable to
Diversified Income, see the section entitled "How to Exchange Shares" in
Diversified Income's Prospectus.
10
<PAGE>
Shareholders of World Wide Income and Diversified Income may redeem their
shares for cash at any time at the net asset value per share next determined;
however, such redemption proceeds may be reduced by the amount of any applicable
CDSC. Both World Wide Income and Diversified Income offer a reinstatement
privilege whereby a shareholder who has not previously exercised such privilege
whose shares have been redeemed or repurchased may, within thirty-five days
after the date of redemption or repurchase, reinstate any portion or all of the
proceeds thereof in shares of the same class from which such shares were
redeemed or repurchased and receive a pro rata credit for any CDSC paid in
connection with such redemption or repurchase. World Wide Income and Diversified
Income may redeem involuntarily, at net asset value, most accounts valued at
less than $100.
DIVIDENDS. Each fund declares dividends separately for each of its classes.
World Wide Income and Diversified Income each pay dividends from net investment
income monthly. Both funds distribute net capital gains, if any, at least
annually. Each fund, however, may determine either to distribute or to retain
all or part of any net long-term capital gains in any year for reinvestment.
With respect to each fund, dividends and capital gains distributions are
automatically reinvested in additional shares of the same class of shares of the
fund at net asset value unless the shareholder elects to receive cash.
PRINCIPAL RISK FACTORS
The share price or net asset value of Diversified Income and World Wide
Income will fluctuate with changes in the market value of their respective
portfolio securities. The market value of the funds' portfolio securities will
increase or decrease due to a variety of economic, market and political factors,
including movements in interest rates, which cannot be predicted.
Both funds invest in fixed-income securities. Fixed-income securities are
subject to two types of risks: credit risk and interest rate risk. Credit risk
refers to the possibility that an issuer of a security will be unable to make
payments and/or repay the principal on its debt. Interest rate risk refers to
fluctuations in the value of a fixed-income security resulting from changes in
the general level of interest rates. When the general level of interest rates
goes up, the price of most fixed-income securities goes down. When the general
level of interest rates goes down, the price of most fixed-income securities
goes up.
Both funds may invest in foreign securities. With respect to World Wide
Income, the fund normally invests at least 65% of its total assets in a
portfolio of global fixed-income securities. With respect to Diversified Income,
the fund's global securities group, which constitutes approximately one-third of
the fund's assets, will invest in global fixed-income securities. Investments in
foreign securities (including depository receipts) may involve risks in addition
to the risks associated with domestic securities. One additional risk is
currency risk. While the price of fund shares is quoted in U.S. dollars, the
fund generally converts U.S. dollars to a foreign market's local currency to
purchase a security in that market. If the value of that local currency falls
relative to the U.S. dollar, the U.S. dollar value of the foreign security will
decrease. This is true even if the foreign security's local price remains
unchanged. Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation, exchange
control regulation, limitations on the use or transfer of fund assets and any
effects of foreign social, economic or political instability. Foreign companies,
in general, are not subject to the regulatory requirements of U.S. companies
and, as such, there may be less publicly available information about these
companies. Moreover, foreign accounting, auditing and financial reporting
standards generally are different from those applicable to U.S. companies.
Finally, in the event of a default of any foreign debt obligations, it may be
more difficult for the fund to obtain or enforce a judgment against the issuers
of the securities. Securities of foreign issuers may be less liquid than
comparable securities of U.S. issuers and, as such, their price changes may be
more volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their U.S.
counterparts.
11
<PAGE>
Each fund may also invest in mortgage-backed securities. With respect to
Diversified Income, the fund's mortgage-backed securities and U.S. Government
securities group, which constitutes approximately one-third of the fund's
portfolio, may include fixed-rate or adjustable-rate mortgaged-backed securities
that are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or by private issuers that are rated in the highest bond
rating category by Moody's or S&P, or if not rated, are determined to be of
comparable quality by the Investment Manager. World Wide Income may invest up to
35% of its assets, without any credit quality limitations, in U.S. and foreign
mortgage-backed securities, including mortgage pass-through securities.
Mortgage-backed securities have different risk characteristics than traditional
debt securities. Although generally the value of fixed-income securities
increases during periods of falling interest rates and decreases during periods
of rising interest rates, this is not always the case with mortgage-backed
securities. This is due to the fact that principal on underlying mortgages may
be prepaid at any time as well as other factors. Generally, prepayments will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. The rate of prepayments also may be influenced by
economic and other factors. Prepayment risk includes the possibility that, as
interest rates fall, securities with stated interest rates may have the
principal prepaid earlier than expected, requiring the fund to invest the
proceeds at generally lower interest rates. Investments in mortgage-backed
securities are made based upon, among other things, expectations regarding the
rate of prepayments on underlying mortgage pools. Rates of prepayment, faster or
slower than expected by the Investment Manager, could reduce the fund's yield,
increase the volatility of the fund and/or cause a decline in net asset value.
Certain mortgage-backed securities may be more volatile and less liquid than
other traditional types of debt securities. The markets for foreign
mortgage-backed securities may not be as well developed as U.S. markets. Those
markets may be less liquid than the U.S. market and the prices for foreign
mortgage-backed securities may be more volatile than U.S. mortgage-backed
securities.
Each fund may participate in forward currency contracts, which involves
risks. If the Investment Manager of a fund employs a strategy that does not
correlate well with the fund's investments or the currencies in which the
investments are denominated, currency contracts could result in a loss. The
contracts may also increase the fund's volatility and may involve a significant
risk.
Each fund may invest in options and futures, which involves additional
risks. With respect to each fund, the Investment Manager's predictions of
movements in the direction of the bond, currency or interest rates markets may
be inaccurate, and have adverse consequences to the fund (e.g. a reduction in
the fund's net asset value or a reduction in the amount of income available for
distribution) may leave the fund in worse position than if these strategies were
not used. Other risks inherent in the use of options and futures include, for
example, the possible imperfect correlation between the price of options and
futures contracts and movements in the prices of securities being hedged, and
the possible absence of a liquid secondary market for any particular instrument.
Certain options may be over-the-counter options, which are negotiated with
dealers: there is no secondary market for these instruments.
Each fund may invest in convertible stocks and warrants, which may carry
risks associated with both common stock and fixed-income securities. Diversified
Income may also invest in common stock, the value of which generally fluctuates
in response to activities specific to the company as well as to general market,
economic and political conditions.
Diversified Income will invest approximately one-third of its assets in
high yield securities, and World Wide Income may not invest in high yield
securities. High yield securities are commonly known as "junk bonds" and pose
significant risks. The prices of high yield securities are likely to be more
sensitive to adverse economic changes or individual corporate developments than
higher rated securities. During an economic downturn or substantial period of
rising interest rates, junk bond issuers and, in particular, highly leveraged
issuers may experience financial stress that would adversely affect their
ability to service their principal and interest
12
<PAGE>
payment obligations, to meet their projected business goals or to obtain
additional financing. In the event of a default, the Fund may incur additional
expenses to seek recovery. The Rule 144A securities could have the effect of
increasing the level of Fund illiquidity to the extent the Fund may be unable to
find qualified institutional buyers interested in purchasing the securities. In
addition, periods of economic uncertainty and change probably would result in an
increased volatility of market prices of high yield securities and a
corresponding volatility in the Fund's net asset value.
Diversified Income is classified as a diversified mutual fund, whereas
World Wide Income is classified as a non-diversified mutual fund. As a
non-diversified mutual fund, World Wide Income's investments are not required to
meet certain diversification requirements under federal law. Compared with
"diversified" funds, the Fund may invest a greater percentage of its assets in
the securities of an individual corporation or governmental entity. Thus, the
Fund's assets may be concentrated in fewer securities than other funds. A
decline in the value of those investments would cause the Fund's overall value
to decline to a greater degree.
The foregoing discussion is a summary of the principal risk factors. For a
more complete discussion of the risks of each fund, see "Principal Risks" and
"Additional Risk Information" in the Prospectus of World Wide Income and in
Diversified Income's Prospectus attached hereto and incorporated herein by
reference.
THE REORGANIZATION
THE PROPOSAL
The Board of Trustees of World Wide Income, including the Independent
Trustees, having reviewed the financial position of World Wide Income and the
prospects for achieving economies of scale through the Reorganization and having
determined that the Reorganization is in the best interests of World Wide Income
and its Shareholders and that the interests of Shareholders will not be diluted
as a result thereof, recommends approval of the Reorganization by Shareholders
of World Wide Income.
THE BOARD'S CONSIDERATION
At a meeting held on October 26, 2000, the Board, including the Independent
Trustees, unanimously approved the Reorganization Agreement and determined to
recommend that Shareholders approve the Reorganization Agreement. In reaching
this decision, the Board made an extensive inquiry into a number of factors,
particularly the comparative expenses currently incurred in the operations of
World Wide Income and Diversified Income. The Board also considered other
factors, including, but not limited to: the general compatibility of the
investment objectives, policies and restrictions of World Wide Income and
Diversified Income; the terms and conditions of the Reorganization which would
affect the price of shares to be issued in the Reorganization; the tax-free
nature of the Reorganization; and any direct or indirect costs to be incurred by
World Wide Income and Diversified Income in connection with the Reorganization.
In recommending the Reorganization to Shareholders, the Board of World Wide
Income considered that the Reorganization would have the following benefits to
Shareholders:
1. Once the Reorganization is consummated, the expenses which would be
borne by shareholders of each class of the "combined fund" (Diversified Income)
will be appreciably lower on a percentage basis than the expenses per share of
each corresponding class of World Wide Income. This is primarily attributable to
the fact that the investment management fee rate paid by Diversified Income for
its last fiscal year ( %) is substantially lower than the investment management
fee rate paid by World Wide Income for its last fiscal year ( %). The Board also
noted that Diversified Income's "Other Expenses" for its last fiscal year ( %)
were significantly lower than World Wide Income's "Other Expenses" for its last
fiscal year ( %). Furthermore, to the extent that
13
<PAGE>
the Reorganization would result in Shareholders becoming shareholders of a
combined larger fund, further economies of scale could be achieved since various
fixed expenses (e.g., auditing and legal) can be spread over a larger number of
shares. The Board noted that the expense ratio for each class of World Wide
Income was significantly higher (for its fiscal year ended October 31, 2000)
than the expense ratio for each corresponding class of Diversified Income (for
its fiscal year ended October 31, 2000).
2. Shareholders would have continued participation in a fund whose primary
objective is to provide a high level of income. The Board recognized, however,
that Diversified Income has a smaller portion of its assets invested in global
fixed-income securities than World Wide Income. [Nevertheless, the Board also
noted that the portfolios are sufficiently compatible that World Wide Income
would not need to sell a material amount of its holdings to accommodate the
Reorganization.
3. The Reorganization is intended to qualify as a tax-free reorganization
for Federal income tax purposes, pursuant to which no gain or loss will be
recognized by World Wide Income or its Shareholders for Federal income tax
purposes as a result of transactions included in the Reorganization.
The Board of Trustees of Diversified Income, including a majority of the
Independent Trustees of Diversified Income, also have determined that the
Reorganization is in the best interests of Diversified Income and its
shareholders and that the interests of existing shareholders of Diversified
Income will not be diluted as a result thereof. The transaction will enable
Diversified Income to acquire investment securities which are consistent with
Diversified Income's investment objective, without the brokerage costs attendant
to the purchase of such securities in the market. Finally, the Board considered
that even if the benefits enumerated above are not realized, the costs to the
Fund are sufficiently minor to warrant taking the opportunity to realize those
benefits.
THE REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization would be
consummated, as summarized below, are set forth in the Reorganization Agreement.
This summary is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached as Exhibit A to this Proxy Statement and
Prospectus.
The Reorganization Agreement provides that (i) World Wide Income will
transfer all of its assets, including portfolio securities, cash (other than
cash amounts retained by World Wide Income as a "Cash Reserve" in the amount
sufficient to discharge its liabilities not discharged prior to the Valuation
Date (as defined below) and for expenses of the dissolution), cash equivalents
and receivables to Diversified Income on the Closing Date in exchange for the
assumption by Diversified Income of stated liabilities of World Wide Income,
including all expenses, costs, charges and reserves, as reflected on an
unaudited statement of assets and liabilities of World Wide Income prepared by
the Treasurer of World Wide Income as of the Valuation Date (as defined below)
in accordance with generally accepted accounting principles consistently applied
from the prior audited period, and the delivery of the Diversified Income
Shares; (ii) such Diversified Income Shares would be distributed to Shareholders
on the Closing Date or as soon as practicable thereafter; (iii) World Wide
Income would be dissolved; and (iv) the outstanding shares of World Wide Income
would be canceled.
The number of Diversified Income Shares to be delivered to World Wide
Income will be determined by dividing the aggregate net asset value of each
class of shares of World Wide Income acquired by Diversified Income by the net
asset value per share of the corresponding class of shares of Diversified
Income; these values will be calculated as of the close of business of the New
York Stock Exchange on the third business day following the receipt of the
requisite approval by Shareholders of the Reorganization Agreement or at such
other time as World Wide Income and Diversified Income may agree (the "Valuation
Date"). As an illustration, assume that on the Valuation Date, Class B shares of
World Wide Income had an aggregate net asset value (not
14
<PAGE>
including any Cash Reserve of World Wide Income) of $100,000. If the net asset
value per Class B share of Diversified Income were $10 per share at the close of
business on the Valuation Date, the number of Class B shares of Diversified
Income to be issued would be 10,000 ($100,000 (divided by) $10). These 10,000
Class B shares of Diversified Income would be distributed to the former Class B
shareholders of World Wide Income. This example is given for illustration
purposes only and does not bear any relationship to the dollar amounts or shares
expected to be involved in the Reorganization.
On the Closing Date or as soon as practicable thereafter, World Wide Income
will distribute pro rata to its Shareholders of record as of the close of
business on the Valuation Date, the Diversified Income Shares it receives. Each
Shareholder will receive the class of shares of Diversified Income that
corresponds to the class of shares of World Wide Income currently held by that
Shareholder. Accordingly, the Diversified Income Shares will be distributed as
follows: each of the Class A, Class B, Class C and Class D shares of Diversified
Income will be distributed to holders of Class A, Class B, Class C and Class D
shares of World Wide Income, respectively. Diversified Income will cause its
transfer agent to credit and confirm an appropriate number of Diversified Income
Shares to each Shareholder. Certificates for Diversified Income Shares will be
issued only upon written request of a Shareholder and only for whole shares,
with fractional shares credited to the name of the Shareholder on the books of
Diversified Income. Shareholders who wish to receive certificates representing
their Diversified Income Shares must, after receipt of their confirmations, make
a written request to Diversified Income's transfer agent Morgan Stanley Dean
Witter Trust FSB, Harborside Financial Center, Jersey City, New Jersey 07311.
Shareholders of World Wide Income holding their shares in certificate form will
be asked to surrender such certificates in connection with the Reorganization.
Shareholders who do not surrender their certificates prior to the Closing Date
will still receive their shares of Diversified Income; however, such
Shareholders will not be able to redeem, transfer or exchange the Diversified
Income Shares received until the old certificates have been surrendered.
The Closing Date will be the next business day following the Valuation
Date. The consummation of the Reorganization is contingent upon the approval of
the Reorganization by the Shareholders and the receipt of the other opinions and
certificates set forth in Sections 6, 7 and 8 of the Reorganization Agreement
and the occurrence of the events described in those Sections, certain of which
may be waived by World Wide Income or Diversified Income. The Reorganization
Agreement may be amended in any mutually agreeable manner. All expenses of this
solicitation, including the cost of preparing and mailing this Proxy Statement
and Prospectus, will be borne by World Wide Income, which expenses are expected
to approximate $ . World Wide Income and Diversified Income will
bear all of their respective other expenses associated with the Reorganization.
The Reorganization Agreement may be terminated and the Reorganization
abandoned at any time, before or after approval by Shareholders or by mutual
consent of World Wide Income and Diversified Income. In addition, either party
may terminate the Reorganization Agreement upon the occurrence of a material
breach of the Reorganization Agreement by the other party or if, by September
30, 2001, any condition set forth in the Reorganization Agreement has not been
fulfilled or waived by the party entitled to its benefits.
Under the Reorganization Agreement, within one year after the Closing Date,
World Wide Income shall: either pay or make provision for all of its liabilities
and distribute any remaining amount of the Cash Reserve (after paying or making
provision for such liabilities and the estimated cost of making the
distribution) to former Shareholders of World Wide Income that received
Diversified Income Shares. World Wide Income shall be dissolved and deregistered
as an investment company promptly following the distributions of shares of
Diversified Income to Shareholders of record of World Wide Income.
The effect of the Reorganization is that Shareholders who vote their shares
in favor of the Reorganization Agreement are electing to sell their shares of
World Wide Income (at net asset value on the Valuation Date
15
<PAGE>
calculated after subtracting any Cash Reserve) and reinvest the proceeds in
Diversified Income Shares at net asset value and without recognition of taxable
gain or loss for Federal income tax purposes. See "Tax Aspects of the
Reorganization" below. As noted in "Tax Aspects of the Reorganization" below, if
World Wide Income recognizes net gain from the sale of securities prior to the
Closing Date, such gain, to the extent not offset by capital loss carryforwards,
will be distributed to Shareholders prior to the Closing Date and will be
taxable to Shareholders as capital gain.
Shareholders will continue to be able to redeem their shares of World Wide
Income at net asset value next determined after receipt of the redemption
request (subject to any applicable CDSC) until the close of business on the
business day next preceding the Closing Date. Redemption requests received by
World Wide Income thereafter will be treated as requests for redemption of
shares of Diversified Income.
TAX ASPECTS OF THE REORGANIZATION
At least one but not more than 20 business days prior to the Valuation
Date, World Wide Income will declare and pay a dividend or dividends which,
together with all previous such dividends, will have the effect of distributing
to Shareholders all of World Wide Income's investment company taxable income for
all periods since the inception of World Wide Income through and including the
Valuation Date (computed without regard to any dividends paid deduction), and
all of World Wide Income's net capital gain, if any, realized in such periods
(after reduction for any capital loss carryforward).
The Reorganization is intended to qualify for Federal income tax purposes
as a tax-free reorganization under Section 368(a)(1)(C) of the Internal Revenue
Code of 1986, as amended (the "Code").
As a condition to the Reorganization, World Wide Income and Diversified
Income will receive an opinion of Mayer, Brown & Platt to the effect that, based
on certain assumptions, facts, the terms of the Reorganization Agreement and
representations set forth in the Reorganization Agreement or otherwise provided
by World Wide Income and Diversified Income (including a representation to the
effect that Diversified Income has no plan or intention to sell or otherwise
dispose of more than fifty percent of the assets of World Wide Income acquired
in the Reorganization except for dispositions made in the ordinary course of
business):
1. The transfer of World Wide Income's assets in exchange for the
Diversified Income Shares and the assumption by Diversified Income of certain
stated liabilities of World Wide Income followed by the distribution by World
Wide Income of the Diversified Income Shares to Shareholders in exchange for
their World Wide Income shares pursuant to and in accordance with the terms of
the Reorganization Agreement will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code, and World Wide Income and
Diversified Income will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code;
2. No gain or loss will be recognized by Diversified Income upon the
receipt of the assets of World Wide Income solely in exchange for the
Diversified Income Shares and the assumption by Diversified Income of the stated
liabilities of World Wide Income;
3. No gain or loss will be recognized by World Wide Income upon the
transfer of the assets of World Wide Income to Diversified Income in exchange
for the Diversified Income Shares and the assumption by Diversified Income of
the stated liabilities or upon the distribution of Diversified Income Shares to
Shareholders in exchange for their World Wide Income shares;
4. No gain or loss will be recognized by Shareholders upon the exchange of
the shares of World Wide Income for the Diversified Income Shares;
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5. The aggregate tax basis for the Diversified Income Shares received by
each of the Shareholders pursuant to the Reorganization will be the same as the
aggregate tax basis of the shares in World Wide Income held by each such
Shareholder immediately prior to the Reorganization;
6. The holding period of the Diversified Income Shares to be received by
each Shareholder will include the period during which the shares in World Wide
Income surrendered in exchange therefor were held (provided such shares in World
Wide Income were held as capital assets on the date of the Reorganization);
7. The tax basis of the assets of World Wide Income acquired by Diversified
Income will be the same as the tax basis of such assets of World Wide Income
immediately prior to the Reorganization; and
8. The holding period of the assets of World Wide Income in the hands of
Diversified Income will include the period during which those assets were held
by World Wide Income.
The advice of Counsel is not binding on the Internal Revenue Service or the
courts and neither World Wide Income nor Diversified Income has sought a ruling
with respect to the tax treatment of the Reorganization.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE EFFECT, IF
ANY, OF THE PROPOSED TRANSACTION IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
BECAUSE THE FOREGOING DISCUSSION ONLY RELATES TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED TRANSACTION, SHAREHOLDERS SHOULD ALSO CONSULT THEIR
TAX ADVISORS AS TO STATE AND LOCAL TAX CONSEQUENCES, IF ANY, OF THE PROPOSED
TRANSACTION.
DESCRIPTION OF SHARES
Diversified Income shares to be issued pursuant to the Reorganization
Agreement will, when issued, be fully paid and non-assessable by Diversified
Income and transferable without restrictions and will have no preemptive rights.
Class B shares of Diversified Income, like Class B shares of World Wide Income,
have a conversion feature pursuant to which approximately ten (10) years after
the date of the original purchase of such shares, the shares will convert
automatically to Class A shares, based on the relative net asset values of the
two classes. For greater details regarding the conversion feature, including the
method by which the 10 year period is calculated and the treatment of reinvested
dividends, see "Purchase of Fund Shares" in each fund's Prospectus.
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CAPITALIZATION TABLE (UNAUDITED)
The following table sets forth the capitalization of Diversified Income and
World Wide Income as of October 31, 2000 and on a pro forma combined basis as if
the Reorganization had occurred on that date:
<TABLE>
<CAPTION>
NET ASSET
SHARES VALUE
NET ASSETS OUTSTANDING PER SHARE
------------ ------------- ----------
<S> <C> <C> <C>
CLASS A
-----------------------------------
World Wide Income ................. $
Diversified Income ................ $
Combined Fund (pro forma) ......... $
CLASS B
------------------------------------
World Wide Income ................. $
Diversified Income ................ $
Combined Fund (pro forma) ......... $
CLASS C
------------------------------------
World Wide Income ................. $
Diversified Income ................ $
Combined Fund (pro forma) ......... $
CLASS D
------------------------------------
World Wide Income ................. $
Diversified Income ................ $
Combined Fund (pro forma) ......... $
TOTAL CLASS A, B, C, D
------------------------------------
World Wide Income ................. $
Diversified Income ................ $
Combined Fund (pro forma) ......... $
</TABLE>
APPRAISAL RIGHTS
Shareholders will have no appraisal rights in connection with the
Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of Diversified Income is to seek a high
level of current income. As a secondary objective, the fund seeks to maximize
total return but only to the extent consistent with its primary objective. The
primary investment objective of World Wide Income is to provide a high level of
current income. As a secondary objective, the fund seeks capital appreciation on
its assets. Both funds seek to achieve their objectives by investing principally
in fixed-income securities, including global fixed-income securities in
accordance with their respective investment strategies set forth below.
Diversified Income seeks to achieve its investment objective by normally
investing at least 65% of its total assets in a diversified portfolio of fixed
income securities. Morgan Stanley Dean Witter Advisors Inc., Diversified
Income's "Investment Manager," attempts to equally allocate approximately
one-third of the Fund's
18
<PAGE>
assets among three separate groups or market segments of fixed income
securities: global securities, mortgage-backed and U.S. Government securities,
and high yield securities. Diversified Income's global securities group of
investments include investment grade fixed-income securities issued by the U.S.
Government, its agencies or instrumentalities, or investment grade fixed-income
securities issued by or guaranteed by a foreign government or supranational
organization or any of their instrumentalities or fixed-income securities issued
by a corporation, all of which are rated BBB or above by Standard & Poor's
("S&P") or Baa or above Moody's Investors Service ("Moody's") or if unrated, are
determined by the Investment Manager to be of equivalent quality. The global
group of investments also includes certificates of deposit and banker's
acceptances issued or guaranteed by, or time deposits maintained at banks and
rated within the two highest rating categories by S&P, Moody's or Duff & Phelps
or if unrated, are determined by the Investment Manager to be of equivalent
quality and commercial paper rated within the two highest rating categories by
S&P, Moody's or Duff & Phelps or if unrated, issued by U.S. or foreign companies
having outstanding debt securities rated A or higher by S&P or Moody's.
Diversified Income's mortgage-backed securities and U.S. Government securities
group will invest in fixed-rate and adjustable rate mortgaged-backed securities
that are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or by private issuers that are rated in the highest bond
rating category by S&P or Moody's, or if not rated, are determined to be of
comparable quality by the Investment Manager. The mortgage-backed and U.S.
Government securities group may also invest in U.S. Treasury securities and U.S.
Government agency securities. Diversified Income's high yield securities group
of investment may include high yield, high risk fixed income securities rated
Baa or lower by Moody's or BBB or lower by S&P or if not rated, are determined
to be of comparable quality by the Investment Manager. Fixed-income securities
rated Ba or lower by Moody's or BB or lower by S&P are considered speculative
investments, commonly known as "junk bonds." The securities in the high yield
group may include convertible and non-convertible debt and Rule 144A securities.
World Wide Income seeks to achieve its investment objective by normally
investing at least 65% of its total assets in a portfolio of global fixed-income
securities. The securities may be issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, or investment grade securities issued by U.S.
corporations, foreign governments or foreign corporations, or by organizations
designated or supported by a government or government entity, such as the
European Economic Community and the World Bank. World Wide Income actively
allocates assets of the Fund among various geographical regions, nations,
currencies, corporations, and governmental entities in an attempt to optimize
income and, if possible, capital appreciation. World Wide Income may also invest
in zero coupon securities, forward currency contracts, options and futures,
mortgage-backed securities, convertible securities and warrants. World Wide
Income is classified as a non-diversified mutual fund and therefore is not
subject to certain diversification requirements under federal law.
During periods in which, in the opinion of each fund's Investment Manager,
market conditions warrant a reduction of some or all of the respective funds'
securities holdings, the funds may take temporary "defensive" positions that are
inconsistent with each fund's principal investment strategies in which the funds
may invest any amount of their total assets in cash or money market instruments.
The investment policies of both World Wide Income and Diversified Income
are not fundamental and may be changed by their respective Boards. The foregoing
discussion is a summary of the principal differences and similarities between
the investment policies of the funds. For a more complete discussion of each
fund's policies, see "Principal Investment Strategies" and "Additional
Investment Strategy Information" in each fund's Prospectus and "Description of
the Fund and Its Investments and Risks" in each fund's Statement of Additional
Information.
INVESTMENT RESTRICTIONS
The investment restrictions adopted by World Wide Income and Diversified
Income as fundamental policies are substantially similar and are summarized
under the caption "Description of the Fund and Its
19
<PAGE>
Investments and Risks -- Fund Policies/Investment Restrictions" in their
respective Statements of Additional Information. A fundamental investment
restriction cannot be changed without the vote of the majority of the
outstanding voting securities of a fund, as defined in the 1940 Act. The
material differences are as follows: (a) Diversified Income may not (i) invest
more than 5% of the value of its total assets in securities of any one issuer
(other than obligations issued, or guaranteed by, the United States Government,
its agencies or instrumentalities) and (ii) purchase more than 10% of all
outstanding voting securities or any class of voting securities of any one
issuer. World Wide Income does not have these restrictions; (b) both funds may
not invest more than 5% of its total assets in securities of issuers having a
record, together with predecessors, of less than 3 years of continuous
operation. This restriction does not apply to any obligations of the United
States Government, its agencies or instrumentalities and, with respect to
Diversified Income, mortgage-backed securities; (c) both funds have fundamental
restrictions that they may not: (i) purchase securities of other investment
companies, except in connection with a merger, consolidation, reorganization or
acquisition of assets, but World Wide Income may invest up to 10% of the value
of its total assets in the securities of foreign investment companies, but only
under circumstances where purchase of the securities of foreign investment
companies would secure entry to national markets which are otherwise not open to
the fund for investment or where the security is issued by a foreign bank which
is deemed to be an investment company under U.S. securities laws and/or
regulations; (d) both funds are prohibited from purchasing or selling
commodities, except that Diversified Income may purchase or sell (write) futures
contracts and related options thereon whereas World Wide Income may purchase or
sell (write) interest rate, currency and stock and bond index futures contracts
and related options thereon; (e) Diversified Income may not purchase warrants
if, as a result, the fund would then have either more than 5% of its net assets
invested in warrants or more than 2% of its net assets invested in warrants not
listed on the New York or American Stock Exchange; World Wide Income has no such
restriction; (f) Diversified Income may not borrow money in excess of 331/3% of
the fund's total assets (including the proceeds of the borrowing), whereas World
Wide Income may not borrow money (except insofar as the fund may be deemed to
have borrowed by entrance into a reverse repurchase agreement up to an amount
not exceeding 10% of the fund's total assets), except that the fund may borrow
from a bank for temporary or emergency purposes, in amounts not exceeding 5% of
its total assets (not including the amount borrowed); (g) World Wide Income may
not invest more than 10% of its total assets in "illiquid securities"
(securities for which market quotations are not readily available) and
repurchase agreements which have maturities longer than seven days whereas
Diversified Income is restricted by the securities laws from investing more than
15% of its net assets in restricted securities.
ADDITIONAL INFORMATION ABOUT WORLD WIDE INCOME
AND DIVERSIFIED INCOME
GENERAL
For a discussion of the organization and operation of Diversified Income
and World Wide Income, see "The Fund and its Management," "Investment Objective
and Policies," "Investment Restrictions" and "Prospectus Summary" in, and the
cover page of, their respective Prospectuses.
FINANCIAL INFORMATION
For certain financial information about Diversified Income and World Wide
Income, see "Financial Highlights" and "Past Performance" in their respective
Prospectuses.
MANAGEMENT
For information about the respective Board of Trustees, Investment Manager,
and the Distributor of Diversified Income and World Wide Income, see "Fund
Management" in their respective Prospectuses.
20
<PAGE>
DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES
For a description of the nature and most significant attributes of shares
of World Wide Income and Diversified Income, and information regarding
shareholder inquiries, see "Capital Stock and Other Securities" in their
respective Statements of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
For a discussion of Diversified Income's and World Wide Income's policies
with respect to dividends, distributions and taxes, see "Distributions" and "Tax
Consequences" in their respective Prospectuses as well as the discussion herein
under "Synopsis -- Purchases, Exchanges and Redemptions."
PURCHASES, REPURCHASES AND REDEMPTIONS
For a discussion of how Diversified Income's and World Wide Income's shares
may be purchased, repurchased and redeemed, see "How to Buy Shares," "How to
Exchange Shares" and "How to Sell Shares" in their respective Prospectuses.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For a discussion of Diversified Income's performance, see management's
letter to shareholders in its Annual Report for its fiscal year ended October
31, 2000 accompanying this Proxy Statement and Prospectus. For a discussion of
the performance of World Wide Income, see its Annual Report for its fiscal year
ended October 31, 2000.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of Diversified Income, for the fiscal year ended
October 31, 2000, and World Wide Income, for the fiscal year ended October 31,
2000 that are incorporated by reference in the Statement of Additional
Information relating to the Registration Statement on Form N-14 of which this
Proxy Statement and Prospectus forms a part, have been audited by ,
independent accountants. The financial statements have been incorporated by
reference in reliance upon such reports given upon the authority of
as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Diversified
Income will be passed upon by Mayer, Brown & Platt, New York, New York. Such
firm will rely on Massachusetts counsel as to matters of Massachusetts law.
AVAILABLE INFORMATION
Additional information about World Wide Income and Diversified Income is
available, as applicable, in the following documents which are incorporated
herein by reference: (i) Diversified Income's Prospectus dated November , 2000
attached to this Proxy Statement and Prospectus, which Prospectus forms a part
of Post-Effective Amendment No. 11 to Diversified Income's Registration
Statement on Form N-1A (File Nos. 33-44782; 811-6515); (ii) Diversified Income's
Annual Report for its fiscal year ended October 31, 2000, accompanying this
Proxy Statement and Prospectus; (iii) World Wide Income's Prospectus dated
November ,
21
<PAGE>
2000 which Prospectus forms a part of Post-Effective Amendment No. to World Wide
Income's Registration Statement on Form N-1A (File Nos. 33-26375; 811-5744); and
(iv) World Wide Income's Annual Report for its fiscal year ended October 31,
2000. The foregoing documents may be obtained without charge by calling (800)
869-NEWS (toll-free).
World Wide Income and Diversified Income are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith, file reports and other information with the Commission.
Proxy material, reports and other information about World Wide Income and
Diversified Income which are of public record can be inspected and copied at
public reference facilities maintained by the Commission at Room 1204, Judiciary
Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 and certain of its regional
offices, and copies of such materials can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C. 20549.
OTHER BUSINESS
Management of World Wide Income knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not known
at the time of the solicitation may come before the Meeting, the proxy as
solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such matters.
By Order of the Board of Trustees
Barry Fink,
Secretary
December , 2000
22
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
26th day of October, 2000, by and between MORGAN STANLEY DEAN WITTER DIVERSIFIED
INCOME TRUST, a Massachusetts business trust ("Diversified Income") and MORGAN
STANLEY DEAN WITTER WORLD WIDE INCOME TRUST, a Massachusetts business trust
("World Wide Income").
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization ("Reorganization") will consist of the
transfer to Diversified Income of substantially all of the assets of World Wide
Income in exchange for the assumption by Diversified Income of all stated
liabilities of World Wide Income and the issuance by Diversified Income of
shares of common stock, par value $0.01 per share (the "Diversified Income
Shares"), to be distributed, after the Closing Date hereinafter referred to, to
the shareholders of World Wide Income in liquidation of World Wide Income as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF WORLD WIDE INCOME
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, World Wide Income agrees
to assign, deliver and otherwise transfer the World Wide Income Assets (as
defined in paragraph 1.2) to Diversified Income and Diversified Income agrees in
exchange therefor to assume all of World Wide Income's stated liabilities on the
Closing Date as set forth in paragraph 1.3(a) and to deliver to World Wide
Income the number of Diversified Income Shares, including fractional Diversified
Income Shares, determined in the manner set forth in paragraph 2.3. Such
transactions shall take place at the closing provided for in paragraph 3.1
("Closing").
1.2 (a) The "World Wide Income Assets" shall consist of all property,
including without limitation, all cash (other than the "Cash Reserve" (as
defined in paragraph 1.3(b)), cash equivalents, securities and dividend and
interest receivables owned by World Wide Income, and any deferred or prepaid
expenses shown as an asset on World Wide Income's books on the Valuation Date.
(b) On or prior to the Valuation Date, World Wide Income will provide
Diversified Income with a list of all of World Wide Income's assets to be
assigned, delivered and otherwise transferred to Diversified Income and of the
stated liabilities to be assumed by Diversified Income pursuant to this
Agreement. World Wide Income reserves the right to sell any of the securities on
such list but will not, without the prior approval of Diversified Income,
acquire any additional securities other than securities of the type in which
Diversified Income is permitted to invest and in amounts agreed to in writing by
Diversified Income. Diversified Income will, within a reasonable time prior to
the Valuation Date, furnish World Wide Income with a statement of Diversified
Income's investment objectives, policies and restrictions and a list of the
securities, if any, on the list referred to in the first sentence of this
paragraph that do not conform to Diversified Income's investment objective,
policies and restrictions. In the event that World Wide Income holds any
investments that Diversified Income is not permitted to hold, World Wide Income
will dispose of such securities on or prior to the Valuation Date. In addition,
if it is determined that the portfolios of World Wide Income and Diversified
Income, when aggregated, would contain investments exceeding certain percentage
limitations imposed upon Diversified Income with respect to such investments,
World Wide Income if requested by Diversified Income will, on or
A-1
<PAGE>
prior to the Valuation Date, dispose of and/or reinvest a sufficient amount of
such investments as may be necessary to avoid violating such limitations as of
the Closing Date (as defined in paragraph 3.1).
1.3 (a) World Wide Income will endeavor to discharge all of its liabilities
and obligations on or prior to the Valuation Date. Diversified Income will
assume all stated liabilities, which includes, without limitation, all expenses,
costs, charges and reserves reflected on an unaudited Statement of Assets and
Liabilities of World Wide Income prepared by the Treasurer of World Wide Income
as of the Valuation Date in accordance with generally accepted accounting
principles consistently applied from the prior audited period.
(b) On the Valuation Date, World Wide Income may establish a cash reserve,
which shall not exceed 5% of World Wide Income's net assets as of the close of
business on the Valuation Date ("Cash Reserve") to be retained by World Wide
Income and used for the payment of its liabilities not discharged prior to the
Valuation Date and for the expenses of dissolution.
1.4 In order for World Wide Income to comply with Section 852(a)(1) of the
Code and to avoid having any investment company taxable income or net capital
gain (as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively)
in the short taxable year ending with its dissolution, World Wide Income will on
or before the Valuation Date (a) declare a dividend in an amount large enough so
that it will have declared dividends of all of its investment company taxable
income and net capital gain, if any, for such taxable year (determined without
regard to any deduction for dividends paid) and (b) distribute such dividend.
1.5 On the Closing Date or as soon as practicable thereafter, World Wide
Income will distribute Diversified Income Shares received by World Wide Income
pursuant to paragraph 1.1 pro rata to its shareholders of record determined as
of the close of business on the Valuation Date ("World Wide Income
Shareholders"). Each World Wide Income Shareholder will receive the class of
shares of Diversified Income that corresponds to the class of shares of World
Wide Income currently held by that World Wide Income Shareholder. Accordingly,
the Diversified Income Shares will be distributed as follows: each of the Class
A, Class B, Class C and Class D shares of Diversified Income will be distributed
to holders of Class A, Class B, Class C and Class D shares of World Wide Income,
respectively. Such distribution will be accomplished by an instruction, signed
by World Wide Income's Secretary, to transfer Diversified Income Shares then
credited to World Wide Income's account on the books of Diversified Income to
open accounts on the books of Diversified Income in the names of the World Wide
Income Shareholders and representing the respective pro rata number of
Diversified Income Shares due such World Wide Income Shareholders. All issued
and outstanding shares of World Wide Income simultaneously will be canceled on
World Wide Income's books; however, share certificates representing interests in
World Wide Income will represent a number of Diversified Income Shares after the
Closing Date as determined in accordance with paragraph 2.3. Diversified Income
will issue certificates representing Diversified Income Shares in connection
with such exchange only upon the written request of a World Wide Income
Shareholder.
1.6 Ownership of Diversified Income Shares will be shown on the books of
Diversified Income's transfer agent. Diversified Income Shares will be issued in
the manner described in Diversified Income's current Prospectus and Statement of
Additional Information.
1.7 Any transfer taxes payable upon issuance of Diversified Income Shares
in a name other than the registered holder of Diversified Income Shares on World
Wide Income's books as of the close of business on the Valuation Date shall, as
a condition of such issuance and transfer, be paid by the person to whom
Diversified Income Shares are to be issued and transferred.
1.8 Any reporting responsibility of World Wide Income is and shall remain
the responsibility of World Wide Income up to and including the date on which
World Wide Income is dissolved and deregistered pursuant to paragraph 1.9.
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1.9 Within one year after the Closing Date, World Wide Income shall pay or
make provision for the payment of all its liabilities and taxes, and distribute
to the shareholders of World Wide Income as of the close of business on the
Valuation Date any remaining amount of the Cash Reserve (as reduced by the
estimated cost of distributing it to shareholders). If and to the extent that
any trust, escrow account, or other similar entity continues after the close of
such one-year period in connection either with making provision for payment of
liabilities or taxes or with distributions to shareholders of World Wide Income,
such entity shall either (i) qualify as a liquidating trust under Section 7701
of the Code (and applicable Treasury Regulations thereunder) or other entity
which does not constitute a continuation of World Wide Income for federal income
tax purposes, or (ii) be subject to a waiver under Section 368(a)(2)(G)(ii) of
the complete distribution requirement of Section 368(a)(2)(G)(i) of the Code.
World Wide Income shall be dissolved as a Massachusetts business trust and
deregistered as an investment company under the Investment Company Act of 1940,
as amended ("1940 Act"), promptly following the making of all distributions
pursuant to paragraph 1.5 (and, in any event, within one year after the Closing
Date).
1.10 Copies of all books and records maintained on behalf of World Wide
Income in connection with its obligations under the 1940 Act, the Code, state
blue sky laws or otherwise in connection with this Agreement will promptly after
the Closing be delivered to officers of Diversified Income or their designee and
Diversified Income or its designee shall comply with applicable record retention
requirements to which World Wide Income is subject under the 1940 Act.
2. VALUATION
2.1 The value of the World Wide Income Assets shall be the value of such
assets computed as of 4:00 p.m. on the New York Stock Exchange on the third
business day following the receipt of the requisite approval by shareholders of
World Wide Income of this Agreement or at such time on such earlier or later
date after such approval as may be mutually agreed upon in writing (such time
and date being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in Diversified Income's then current Prospectus and
Statement of Additional Information.
2.2 The net asset value of a Diversified Income Share shall be the net
asset value per share computed on the Valuation Date, using the valuation
procedures set forth in Diversified Income's then current Prospectus and
Statement of Additional Information.
2.3 The number of Diversified Income Shares (including fractional shares,
if any) to be issued hereunder shall be determined, with respect to each class,
by dividing the aggregate net asset value of each class of World Wide Income
shares (determined in accordance with paragraph 2.1) by the net asset value per
share of the corresponding class of shares of Diversified Income (determined in
accordance with paragraph 2.2). For purposes of this paragraph, the aggregate
net asset value of each class of shares of World Wide Income shall not include
the amount of the Cash Reserve.
2.4 All computations of value shall be made by Morgan Stanley Dean Witter
Services Company Inc. ("MSDW Services") in accordance with its regular practice
in pricing Diversified Income. Diversified Income shall cause MSDW Services to
deliver a copy of its valuation report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing shall take place on the next business day following the
Valuation Date (the "Closing Date"). The Closing shall be held as of 9:00 a.m.
Eastern time, or at such other time as the parties may agree. The Closing shall
be held in a location mutually agreeable to the parties hereto. All acts taking
place at the Closing shall be deemed to take place simultaneously as of 9:00
a.m. Eastern time on the Closing Date unless otherwise provided.
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3.2 Portfolio securities held by World Wide Income and represented by a
certificate or other written instrument shall be presented by it or on its
behalf to The Bank of New York (the "Custodian"), as custodian for Diversified
Income, for examination no later than five business days preceding the Valuation
Date. Such portfolio securities (together with any cash or other assets) shall
be delivered by World Wide Income to the Custodian for the account of
Diversified Income on or before the Closing Date in conformity with applicable
custody provisions under the 1940 Act and duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof in accordance
with the custom of brokers. The portfolio securities shall be accompanied by all
necessary Federal and state stock transfer stamps or a check for the appropriate
purchase price of such stamps. Portfolio securities and instruments deposited
with a securities depository (as defined in Rule 17f-4 under the 1940 Act) shall
be delivered on or before the Closing Date by book-entry in accordance with
customary practices of such depository and the Custodian. The cash delivered
shall be in the form of a Federal Funds wire, payable to the order of "The Bank
of New York, Custodian for Morgan Stanley Dean Witter Diversified Income Trust."
3.3 In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall be
disrupted so that, in the judgment of both Diversified Income and World Wide
Income, accurate appraisal of the value of the net assets of Diversified Income
or the World Wide Income Assets is impracticable, the Valuation Date shall be
postponed until the first business day after the day when trading shall have
been fully resumed without restriction or disruption and reporting shall have
been restored.
3.4 If requested, World Wide Income shall deliver to Diversified Income or
its designee (a) at the Closing, a list, certified by its Secretary, of the
names, addresses and taxpayer identification numbers of the World Wide Income
Shareholders and the number and percentage ownership of outstanding World Wide
Income shares owned by each such World Wide Income Shareholder, all as of the
Valuation Date, and (b) as soon as practicable after the Closing, all original
documentation (including Internal Revenue Service forms, certificates,
certifications and correspondence) relating to the World Wide Income
Shareholders' taxpayer identification numbers and their liability for or
exemption from back-up withholding. Diversified Income shall issue and deliver
to such Secretary a confirmation evidencing delivery of Diversified Income
Shares to be credited on the Closing Date to World Wide Income or provide
evidence satisfactory to World Wide Income that such Diversified Income Shares
have been credited to World Wide Income's account on the books of Diversified
Income. At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. COVENANTS OF DIVERSIFIED INCOME AND WORLD WIDE INCOME
4.1 Except as otherwise expressly provided herein with respect to World
Wide Income, Diversified Income and World Wide Income each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include customary
dividends and other distributions.
4.2 Diversified Income will prepare and file with the Securities and
Exchange Commission ("Commission") a registration statement on Form N-14 under
the Securities Act of 1933, as amended ("1933 Act"), relating to Diversified
Income Shares ("Registration Statement"). World Wide Income will provide
Diversified Income with the Proxy Materials as described in paragraph 4.3 below,
for inclusion in the Registration Statement. World Wide Income will further
provide Diversified Income with such other information and documents relating to
World Wide Income as are reasonably necessary for the preparation of the
Registration Statement.
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4.3 World Wide Income will call a meeting of its shareholders to consider
and act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated herein. World Wide Income will prepare
the notice of meeting, form of proxy and proxy statement (collectively, "Proxy
Materials") to be used in connection with such meeting; provided that
Diversified Income will furnish World Wide Income with its currently effective
prospectus for inclusion in the Proxy Materials and with such other information
relating to Diversified Income as is reasonably necessary for the preparation of
the Proxy Materials.
4.4 World Wide Income will assist Diversified Income in obtaining such
information as Diversified Income reasonably requests concerning the beneficial
ownership of World Wide Income shares.
4.5 Subject to the provisions of this Agreement, Diversified Income and
World Wide Income will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
4.6 World Wide Income shall furnish or cause to be furnished to Diversified
Income within 30 days after the Closing Date a statement of World Wide Income's
assets and liabilities as of the Closing Date, which statement shall be
certified by World Wide Income's Treasurer and shall be in accordance with
generally accepted accounting principles consistently applied. As promptly as
practicable, but in any case within 60 days after the Closing Date, World Wide
Income shall furnish Diversified Income, in such form as is reasonably
satisfactory to Diversified Income, a statement certified by World Wide Income's
Treasurer of World Wide Income's earnings and profits for Federal income tax
purposes that will be carried over to Diversified Income pursuant to Section 381
of the Code.
4.7 As soon after the Closing Date as is reasonably practicable, World Wide
Income (a) shall prepare and file all Federal and other tax returns and reports
of World Wide Income required by law to be filed with respect to all periods
ending on or before the Closing Date but not theretofore filed and (b) shall pay
all Federal and other taxes shown as due thereon and/or all Federal and other
taxes that were unpaid as of the Closing Date, including without limitation, all
taxes for which the provision for payment was made as of the Closing Date (as
represented in paragraph 5.2(k)).
4.8 Diversified Income agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act and the 1940 Act and to
make such filings required by the state Blue Sky and securities laws as it may
deem appropriate in order to continue its operations after the Closing Date.
5. REPRESENTATIONS AND WARRANTIES
5.1 Diversified Income represents and warrants to World Wide Income as
follows:
(a) Diversified Income is a validly existing Massachusetts Business
Trust with full power to carry on its business as presently conducted;
(b) Diversified Income is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of Diversified Income have
been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities
laws. Shares of Diversified Income are registered in all jurisdictions in
which they are required to be registered under state securities laws and
other laws, and said registrations, including any periodic reports or
supplemental filings, are complete and current, all fees required to be
paid have been paid, and Diversified Income is not subject to any stop
order and is fully qualified to sell its shares in each state in which its
shares have been registered;
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(d) The current Prospectus and Statement of Additional Information of
Diversified Income conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(e) Diversified Income is not in, and the execution, delivery and
performance of this Agreement will not result in a, material violation of
any provision of Diversified Income's Declaration of Trust or By-Laws or of
any agreement, indenture, instrument, contract, lease or other undertaking
to which Diversified Income is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against Diversified Income or any of its properties
or assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and
Diversified Income knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely effect, its business or its ability to consummate
the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights for the year
ended October 31, 2000, of Diversified Income certified by Deloitte &
Touche LLP (copies of which have been furnished to World Wide Income),
fairly present, in all material respects, Diversified Income's financial
condition as of such date in accordance with generally accepted accounting
principles, and its results of such operations, changes in its net assets
and financial highlights for such period, and as of such date there were no
known liabilities of Diversified Income (contingent or otherwise) not
disclosed therein that would be required in accordance with generally
accepted accounting principles to be disclosed therein;
(h) All issued and outstanding Diversified Income Shares are, and at
the Closing Date will be, duly and validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the
ownership thereof, except as set forth under the caption "Additional
Information" in Diversified Income's current Prospectus incorporated by
reference in the Registration Statement. Diversified Income does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of its shares;
(i) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of Diversified Income,
and this Agreement constitutes a valid and binding obligation of
Diversified Income enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general equity
principles. No other consents, authorizations or approvals are necessary in
connection with Diversified Income's performance of this Agreement;
(j) Diversified Income Shares to be issued and delivered to World Wide
Income, for the account of the World Wide Income Shareholders, pursuant to
the terms of this Agreement will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly
issued Diversified Income Shares, and will be fully paid and non-assessable
with no personal liability attaching to the ownership thereof, except as
set forth under the caption "Capital Stock and Other Securities" in
Diversified Income's current Statement of Additional Information
incorporated by reference in the Statement of Additional Information to
this Registration Statement;
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(k) All material Federal and other tax returns and reports of
Diversified Income required by law to be filed on or before the Closing
Date have been filed and are correct, and all Federal and other taxes shown
as due or required to be shown as due on said returns and reports have been
paid or provision has been made for the payment thereof, and to the best of
Diversified Income's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to any such return;
(l) For each taxable year since its inception, Diversified Income has
met the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of Diversified Income to continue
to meet the requirements of Subchapter M of the Code;
(m) Since October 31, 2000 there has been no change by Diversified
Income in accounting methods, principles, or practices, including those
required by generally accepted accounting principles;
(n) The information furnished or to be furnished by Diversified Income
for use in registration statements, proxy materials and other documents
which may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects and shall
comply in all material respects with Federal securities and other laws and
regulations applicable thereto; and
(o) The Proxy Materials to be included in the Registration Statement
(only insofar as they relate to Diversified Income) will, on the effective
date of the Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
materially misleading.
5.2 World Wide Income represents and warrants to Diversified Income as
follows:
(a) World Wide Income is a validly existing Massachusetts business
trust with full power to carry on its business as presently conducted;
(b) World Wide Income is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of beneficial interest of
World Wide Income have been offered and sold in compliance in all material
respects with applicable requirements of the 1933 Act and state securities
laws. Shares of World Wide Income are registered in all jurisdictions in
which they are required to be registered and said registrations, including
any periodic reports or supplemental filings, are complete and current, all
fees required to be paid have been paid, and World Wide Income is not
subject to any stop order and is fully qualified to sell its shares in each
state in which its shares have been registered;
(d) The current Prospectus and Statement of Additional Information of
World Wide Income conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(e) World Wide Income is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of
any provision of World Wide Income's Declaration of Trust or By-Laws or of
any agreement, indenture, instrument, contract, lease or other undertaking
to which World Wide Income is a party or by which it is bound;
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(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against World Wide Income or any of its properties or
assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and World
Wide Income knows of no facts that might form the basis for the institution
of such proceedings and is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body which
materially and adversely affects, or is reasonably likely to materially and
adversely effect, its business or its ability to consummate the
transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights of World Wide
Income for the year ended October 31, 2000, certified by Deloitte & Touche
LLP (copies of which have been or will be furnished to Diversified Income)
fairly present, in all material respects, World Wide Income's financial
condition as of such date, and its results of operations, changes in its
net assets and financial highlights for such period in accordance with
generally accepted accounting principles, and as of such date there were no
known liabilities of World Wide Income (contingent or otherwise) not
disclosed therein that would be required in accordance with generally
accepted accounting principles to be disclosed therein;
(h) World Wide Income has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability to it
prior to the Closing Date;
(i) All issued and outstanding shares of World Wide Income are, and at
the Closing Date will be, duly and validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the
ownership thereof, except as set forth under the caption "Capital Stock and
Other Securities" in World Wide Income's current Statement of Additional
Information incorporated by reference in the Statement of Additional
Information to this Registration Statement. World Wide Income does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of its shares, nor is there outstanding any security
convertible to any of its shares. All such shares will, at the time of
Closing, be held by the persons and in the amounts set forth in the list of
shareholders submitted to Diversified Income pursuant to paragraph 3.4;
(j) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on
the part of World Wide Income, and subject to the approval of World Wide
Income's shareholders, this Agreement constitutes a valid and binding
obligation of World Wide Income, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors rights and to
general equity principles. No other consents, authorizations or approvals
are necessary in connection with World Wide Income's performance of this
Agreement;
(k) All material Federal and other tax returns and reports of World
Wide Income required by law to be filed on or before the Closing Date shall
have been filed and are correct and all Federal and other taxes shown as
due or required to be shown as due on said returns and reports have been
paid or provision has been made for the payment thereof, and to the best of
World Wide Income's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to any such return;
(l) For each taxable year since its inception, World Wide Income has
met all the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of World Wide Income to continue to
meet the requirements of Subchapter M of the Code;
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(m) At the Closing Date, World Wide Income will have good and valid
title to the World Wide Income Assets, subject to no liens (other than the
obligation, if any, to pay the purchase price of portfolio securities
purchased by World Wide Income which have not settled prior to the Closing
Date), security interests or other encumbrances, and full right, power and
authority to assign, deliver and otherwise transfer such assets hereunder,
and upon delivery and payment for such assets, Diversified Income will
acquire good and marketable title thereto, subject to no restrictions on
the full transfer thereof, including any restrictions as might arise under
the 1933 Act;
(n) On the effective date of the Registration Statement, at the time of
the meeting of World Wide Income's shareholders and on the Closing Date,
the Proxy Materials (exclusive of the currently effective Diversified
Income Prospectus contained therein) will (i) comply in all material
respects with the provisions of the 1933 Act, the Securities Exchange Act
of 1934, as amended ("1934 Act") and the 1940 Act and the regulations
thereunder and (ii) not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. Any other information furnished
by World Wide Income for use in the Registration Statement or in any other
manner that may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with applicable Federal securities and other laws and
regulations thereunder;
(o) World Wide Income will, on or prior to the Valuation Date, declare
one or more dividends or other distributions to shareholders that, together
with all previous dividends and other distributions to shareholders, shall
have the effect of distributing to the shareholders all of its investment
company taxable income and net capital gain, if any, through the Valuation
Date (computed without regard to any deduction for dividends paid);
(p) World Wide Income has maintained or has caused to be maintained on
its behalf all books and accounts as required of a registered investment
company in compliance with the requirements of Section 31 of the 1940 Act
and the Rules thereunder; and
(q) World Wide Income is not acquiring Diversified Income Shares to be
issued hereunder for the purpose of making any distribution thereof other
than in accordance with the terms of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF WORLD WIDE INCOME
The obligations of World Wide Income to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
Diversified Income of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of Diversified Income contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date;
6.2 Diversified Income shall have delivered to World Wide Income a
certificate of its President and Treasurer, in a form reasonably satisfactory to
World Wide Income and dated as of the Closing Date, to the effect that the
representations and warranties of Diversified Income made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as World Wide Income shall reasonably request;
6.3 World Wide Income shall have received a favorable opinion from Mayer,
Brown & Platt, counsel to Diversified Income, dated as of the Closing Date, to
the effect that:
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(a) Diversified Income is a validly existing Massachusetts Business
Trust, and has the power to own all of its properties and assets and to
carry on its business as presently conducted (Massachusetts counsel may be
relied upon in delivering such opinion); (b) Diversified Income is a duly
registered, open-end, management investment company, and its registration
with the Commission as an investment company under the 1940 Act is in full
force and effect; (c) this Agreement has been duly authorized, executed and
delivered by Diversified Income and, assuming that the Registration
Statement complies with the 1933 Act, the 1934 Act and the 1940 Act and
regulations thereunder and assuming due authorization, execution and
delivery of this Agreement by World Wide Income, is a valid and binding
obligation of Diversified Income enforceable against Diversified Income in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors rights and to general equity principles; (d)
Diversified Income Shares to be issued to World Wide Income Shareholders as
provided by this Agreement are duly authorized and upon such delivery will
be validly issued, fully paid and non-assessable (except as set forth under
the caption "Capital Stock and Other Securities" in Diversified Income's
Statement of Additional Information), and no shareholder of Diversified
Income has any preemptive rights to subscription or purchase in respect
thereof (Massachusetts counsel may be relied upon in delivering such
opinion); (e) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, violate
Diversified Income's Declaration of Trust or By-Laws; and (f) to the
knowledge of such counsel, no consent, approval, authorization or order of
any court or governmental authority of the United States or any state is
required for the consummation by Diversified Income of the transactions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act and such as may be required under state
securities laws; and
6.4 As of the Closing Date, there shall have been no material change in the
investment objective, policies and restrictions nor any increase in the
investment management fees or annual fees pursuant to Diversified Income's 12b-1
plan of distribution from those described in Diversified Income's Prospectus
dated December , 2000 and Statement of Additional Information dated December
, 2000.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF DIVERSIFIED INCOME
The obligations of Diversified Income to complete the transactions provided
for herein shall be subject, at its election, to the performance by World Wide
Income of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of World Wide Income contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date;
7.2 World Wide Income shall have delivered to Diversified Income at the
Closing a certificate of its President and its Treasurer, in form and substance
satisfactory to Diversified Income and dated as of the Closing Date, to the
effect that the representations and warranties of World Wide Income made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as Diversified Income shall reasonably request;
7.3 World Wide Income shall have delivered to Diversified Income a
statement of the World Wide Income Assets and its liabilities, together with a
list of World Wide Income's portfolio securities and other assets showing the
respective adjusted bases and holding periods thereof for income tax purposes,
as of the Closing Date, certified by the Treasurer of World Wide Income;
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7.4 World Wide Income shall have delivered to Diversified Income within
three business days after the Closing a letter from Deloitte & Touche LLP dated
as of the Closing Date stating that (a) such firm has performed a limited review
of the Federal and state income tax returns of World Wide Income for each of the
last three taxable years and, based on such limited review, nothing came to
their attention that caused them to believe that such returns did not properly
reflect, in all material respects, the Federal and state income tax liabilities
of World Wide Income for the periods covered thereby, (b) for the period from
to and including the Closing Date, such firm has
performed a limited review (based on unaudited financial data) to ascertain the
amount of applicable Federal, state and local taxes and has determined that same
either have been paid or reserves have been established for payment of such
taxes, and, based on such limited review, nothing came to their attention that
caused them to believe that the taxes paid or reserves set aside for payment of
such taxes were not adequate in all material respects for the satisfaction of
all Federal, state and local tax liabilities for the period from
to and including the Closing Date and (c) based on such limited reviews,
nothing came to their attention that caused them to believe that World Wide
Income would not qualify as a regulated investment company for Federal income
tax purposes for any such year or period;
7.5 Diversified Income shall have received at the Closing a favorable
opinion from Mayer, Brown & Platt, counsel to World Wide Income, dated as of the
Closing Date to the effect that:
(a) World Wide Income is a validly existing Massachusetts business
trust and has the power to own all of its properties and assets and to
carry on its business as presently conducted (Massachusetts counsel may be
relied upon in delivering such opinion); (b) World Wide Income is a duly
registered, open-end, management investment company under the 1940 Act, and
its registration with the Commission as an investment company under the
1940 Act is in full force and effect; (c) this Agreement has been duly
authorized, executed and delivered by World Wide Income and, assuming that
the Registration Statement complies with the 1933 Act, the 1934 Act and the
1940 Act and the regulations thereunder and assuming due authorization,
execution and delivery of this Agreement by Diversified Income, is a valid
and binding obligation of World Wide Income enforceable against World Wide
Income in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors rights and to general equity principles; (d) the
execution and delivery of this Agreement did not, and the consummation of
the transactions contemplated hereby will not, violate World Wide Income's
Declaration of Trust or By-Laws; and (e) to the knowledge of such counsel,
no consent, approval, authorization or order of any court or governmental
authority of the United States or any state is required for the
consummation by World Wide Income of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the
1940 Act and such as may be required under state securities laws; and
7.6 On the Closing Date, the World Wide Income Assets shall include no
assets that Diversified Income, by reason of limitations of the fund's
Declaration of Trust or otherwise, may not properly acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF DIVERSIFIED INCOME AND WORLD
WIDE INCOME
The obligations of World Wide Income and Diversified Income hereunder are
each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of World
Wide Income in accordance with the provisions of World Wide Income's Declaration
of Trust, and certified copies of the resolutions evidencing such approval shall
have been delivered to Diversified Income;
A-11
<PAGE>
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including
"no-action" positions of and exemptive orders from such Federal and state
authorities) deemed necessary by Diversified Income or World Wide Income to
permit consummation, in all material respects, of the transactions contemplated
herein shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve risk of a material adverse effect on
the assets or properties of Diversified Income or World Wide Income;
8.4 The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.5 World Wide Income shall have declared and paid a dividend or dividends
and/or other distribution or distributions that, together with all previous such
dividends or distributions, shall have the effect of distributing to the World
Wide Income Shareholders all of World Wide Income's investment company taxable
income (computed without regard to any deduction for dividends paid) and all of
its net capital gain (after reduction for any capital loss carry-forward and
computed without regard to any deduction for dividends paid) for all taxable
years ending on or before the Closing Date; and
8.6 The parties shall have received the opinion of the law firm of Mayer,
Brown & Platt (based on such representations as such law firm shall reasonably
request), addressed to Diversified Income and World Wide Income, which opinion
may be relied upon by the shareholders of World Wide Income, substantially to
the effect that, for Federal income tax purposes:
(a) The transfer of World Wide Income's assets in exchange for
Diversified Income Shares and the assumption by Diversified Income of
certain stated liabilities of World Wide Income followed by the
distribution by World Wide Income of Diversified Income Shares to the World
Wide Income Shareholders in exchange for their World Wide Income shares
pursuant to and in accordance with the terms of the Reorganization
Agreement will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code, and World Wide Income and Diversified Income will
each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code;
(b) No gain or loss will be recognized by Diversified Income upon the
receipt of the assets of World Wide Income solely in exchange for
Diversified Income Shares and the assumption by Diversified Income of the
stated liabilities of World Wide Income;
(c) No gain or loss will be recognized by World Wide Income upon the
transfer of the assets of World Wide Income to Diversified Income in
exchange for Diversified Income Shares and the assumption by Diversified
Income of the stated liabilities or upon the distribution of Diversified
Income Shares to the World Wide Income Shareholders in exchange for their
World Wide Income shares;
(d) No gain or loss will be recognized by the World Wide Income
Shareholders upon the exchange of the World Wide Income shares for
Diversified Income Shares;
(e) The aggregate tax basis for Diversified Income Shares received by
each World Wide Income Shareholder pursuant to the reorganization will be
the same as the aggregate tax basis of the World Wide Income Shares held by
each such World Wide Income Shareholder immediately prior to the
Reorganization;
A-12
<PAGE>
(f) The holding period of Diversified Income Shares to be received by
each World Wide Income Shareholder will include the period during which the
World Wide Income Shares surrendered in exchange therefor were held
(provided such World Wide Income Shares were held as capital assets on the
date of the Reorganization);
(g) The tax basis of the assets of World Wide Income acquired by
Diversified Income will be the same as the tax basis of such assets to
World Wide Income immediately prior to the Reorganization; and
(h) The holding period of the assets of World Wide Income in the hands
of Diversified Income will include the period during which those assets
were held by World Wide Income.
Notwithstanding anything herein to the contrary, neither Diversified Income
nor World Wide Income may waive the conditions set forth in this paragraph 8.6.
9. FEES AND EXPENSES
9.1 (a) Diversified Income shall bear its expenses incurred in connection
with the entering into, and carrying out of, the provisions of this Agreement,
including legal, accounting, Commission registration fees and Blue Sky expenses.
World Wide Income shall bear its expenses incurred in connection with the
entering into and carrying out of the provisions of this Agreement, including
legal and accounting fees, printing, filing and proxy solicitation expenses and
portfolio transfer taxes (if any) incurred in connection with the consummation
of the transactions contemplated herein.
(b) In the event the transactions contemplated herein are not consummated
by reason of World Wide Income being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to World
Wide Income's obligations specified in this Agreement), World Wide Income's only
obligation hereunder shall be to reimburse Diversified Income for all reasonable
out-of-pocket fees and expenses incurred by Diversified Income in connection
with those transactions.
(c) In the event the transactions contemplated herein are not consummated
by reason of Diversified Income being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to
Diversified Income's obligations specified in this Agreement), Diversified
Income's only obligation hereunder shall be to reimburse World Wide Income for
all reasonable out-of-pocket fees and expenses incurred by World Wide Income in
connection with those transactions.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein, except
that the representations, warranties and covenants of World Wide Income
hereunder shall not survive the dissolution and complete liquidation of World
Wide Income in accordance with Section 1.9.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of World Wide Income and Diversified
Income;
A-13
<PAGE>
(b) by either Diversified Income or World Wide Income by notice to the
other, without liability to the terminating party on account of such
termination (providing the terminating party is not otherwise in material
default or breach of this Agreement) if the Closing shall not have occurred
on or before September 30, 2001; or
(c) by either Diversified Income or World Wide Income, in writing
without liability to the terminating party on account of such termination
(provided the terminating party is not otherwise in material default or
breach of this Agreement), if (i) the other party shall fail to perform in
any material respect its agreements contained herein required to be
performed on or prior to the Closing Date, (ii) the other party materially
breaches any of its representations, warranties or covenants contained
herein, (iii) the World Wide Income shareholders fail to approve this
Agreement at any meeting called for such purpose at which a quorum was
present or (iv) any other condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably
appears that it will not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1 (a) or
(b) shall terminate all obligations of the parties hereunder and there
shall be no liability for damages on the part of Diversified Income or
World Wide Income, or the trustees or officers of Diversified Income or
World Wide Income, to any other party or its trustees or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1 (c) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of Diversified Income or World Wide
Income, or the trustees or officers of Diversified Income or World Wide
Income, except that any party in breach of this Agreement shall, upon
demand, reimburse the non-breaching party for all reasonable out-of-pocket
fees and expenses incurred in connection with the transactions contemplated
by this Agreement, including legal, accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties.
13. MISCELLANEOUS
13.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
13.5 The obligations and liabilities of Diversified Income hereunder are
solely those of Diversified Income. It is expressly agreed that no shareholder,
nominee, trustee, officer, agent, or employee of Diversified
A-14
<PAGE>
Income shall be personally liable hereunder. The execution and delivery of this
Agreement have been authorized by the trustees of Diversified Income and signed
by authorized officers of Diversified Income acting as such, and neither such
authorization by such trustees nor such execution and delivery by such officers
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally.
13.6 The obligations and liabilities of World Wide Income hereunder are
solely those of World Wide Income. It is expressly agreed that no shareholder,
nominee, trustee, officer, agent, or employee of World Wide Income shall be
personally liable hereunder. The execution and delivery of this Agreement have
been authorized by the trustees of World Wide Income and signed by authorized
officers of World Wide Income acting as such, and neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by a duly authorized officer.
MORGAN STANLEY DEAN WITTER WORLD WIDE
INCOME TRUST
By: /s/ CHARLES A. FIUMEFREDDO
--------------------------------------------
Name: Charles A. Fiumefreddo
Title: Chairman
MORGAN STANLEY DEAN WITTER DIVERSIFIED
INCOME TRUST
By: /s/ BARRY FINK
--------------------------------------------
Name: Barry Fink
Title: Vice President
A-15
<PAGE>
EXHIBIT B
PROSPECTUS OF DIVERSIFIED INCOME,
DATED DECEMBER , 2000
(TO COME)
<PAGE>
ANNUAL REPORT OF DIVERSIFIED INCOME,
DATED OCTOBER 31, 2000
(TO COME)
<PAGE>
ANNUAL REPORT OF WORLD WIDE INCOME,
DATED OCTOBER 31, 2000
(TO COME)
<PAGE>
MORGAN STANLEY DEAN WITTER DIVERSIFIED INCOME TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the shares of Morgan
Stanley Dean Witter Diversified Income Trust ("Diversified Income") to be issued
pursuant to an Agreement and Plan of Reorganization, dated October 26, 2000,
between Diversified Income and Morgan Stanley Dean Witter World Wide Income
Trust ("World Wide Income") in connection with the acquisition by Diversified
Income of substantially all of the assets, subject to stated liabilities, of
World Wide Income. This Statement of Additional Information does not constitute
a prospectus. This Statement of Additional Information does not include all
information that a shareholder should consider before voting on the proposals
contained in the Proxy Statement and Prospectus, and, therefore, should be read
in conjunction with the related Proxy Statement and Prospectus, dated December
, 2000. A copy of the Proxy Statement and Prospectus may be obtained without
charge by mailing a written request to Diversified Income at Two World Trade
Center, New York, New York 10048 or by calling (800) 869-NEWS (TOLL FREE).
Please retain this document for future reference.
The date of this Statement of Additional Information is , 2000.
B-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION ............................................. B-3
ADDITIONAL INFORMATION ABOUT DIVERSIFIED INCOME .......... B-3
FINANCIAL STATEMENTS ..................................... B-4
</TABLE>
B-2
<PAGE>
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in the Proxy Statement and Prospectus dated ,
2000 (the "Proxy Statement and Prospectus"). The Proxy Statement and Prospectus
has been sent to World Wide Income shareholders in connection with the
solicitation of proxies by the Board of Trustees of World Wide Income to be
voted at the Special Meeting of shareholders of World Wide Income to be held on
, 2000. This Statement of Additional Information incorporates by
reference the Statement of Additional Information of Diversified Income dated
, 2000 and the Statement of Additional Information of World Wide
Income dated , 2000.
ADDITIONAL INFORMATION ABOUT DIVERSIFIED INCOME
INVESTMENT OBJECTIVES AND POLICIES
For additional information about Diversified Income's investment objectives
and policies, see "Description of the Fund and Its Investments and Risks" in
Diversified Income's Statement of Additional Information.
MANAGEMENT
For additional information about the Board of Trustees, officers and
management personnel of Diversified Income, see "Management of the Fund" and
"Investment Management and Other Services" in Diversified Income's Statement of
Additional Information.
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information about Diversified Income's investment manager,
see "Investment Management and Other Services" in Diversified Income's Statement
of Additional Information. For additional information about Diversified Income's
independent auditors, see "Investment Management and Other Services" in
Diversified Income's Statement of Additional Information. For additional
information about other services provided to Diversified Income, see "Investment
Management and Other Services" in Diversified Income's Statement of Additional
Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE
For additional information about brokerage allocation practices, see
"Brokerage Allocation and Other Practices" in Diversified Income's Statement of
Additional Information.
DESCRIPTION OF FUND SHARES
For additional information about the voting rights and other
characteristics of the shares of Diversified Income, see "Capital Stock and
Other Securities" in Diversified Income's Statement of Additional Information.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about the purchase and redemption of Diversified
Income's shares and the determination of net asset value, see "Purchase,
Redemption and Pricing of Shares" in Diversified Income's Statement of
Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
For additional information about Diversified Income's policies regarding
dividends and distributions and tax matters affecting Diversified Income and its
shareholders, see "Taxation of the Fund and Shareholders" in Diversified
Income's Statement of Additional Information.
B-3
<PAGE>
DISTRIBUTION OF SHARES
For additional information about Diversified Income's distributor and the
distribution agreement between Diversified Income and its distributor, see
"Investment Management and Other Services" and "Underwriters" in Diversified
Income's Statement of Additional Information.
PERFORMANCE DATA
For additional information about Diversified Income's performance, see
"Calculation of Performance Data" in Diversified Income's Statement of
Additional Information.
FINANCIAL STATEMENTS
Diversified Income's most recent audited financial statements are set forth
in Diversified Income's Annual Report for the fiscal year ended October 31,
2000. A copy of the Annual Report accompanies, and is incorporated by reference
in, the Proxy Statement and Prospectus. World Wide Income's most recent audited
financial statements are set forth in World Wide Income's Annual Report for the
fiscal year ended October 31, 2000, which is incorporated by reference in the
Proxy Statement and Prospectus.
B-4
<PAGE>
MORGAN STANLEY DEAN WITTER DIVERSIFIED INCOME TRUST
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The response to this item is incorporated herein by reference to Exhibits 1
and 2 under Item 16 below and by reference to Item 27 of, Post-Effective
Amendment No. 10 to the Registrant's Registration Statement on Form N-1A, dated
February 3, 2000 which was filed electronically pursuant to Regulation S-T on
January 31, 2000 ("Post-Effective Amendment No. 10") as an amendment to
Registrant's Registration Statement on Form N-1A (File Nos. 811-6515 and
33-44782) (the "Registration Statement").
ITEM 16. EXHIBITS
(1) Declaration of Trust dated December 18, 1991 (the "Declaration")
(incorporated herein by reference to Exhibit 1 of Post-Effective Amendment
No. 4 to the Fund's Registration Statement on Form N-1A filed on January
25, 1996); Amendment to the Declaration Establishing and Designating
Additional Classes of Shares (incorporated herein by reference to Exhibit 1
to Post-Effective Amendment No. 6 filed on July 14, 1997 ("Post Effective
Amendment No. 6")); Amendment to the Declaration of Trust of the Registrant
dated June 22, 1998 (incorporated herein by reference to Exhibit 1 of
Post-Effective Amendment No. 8 filed on December 28, 1998 ("Post-Effective
Amendment No. 8"))
(2) Amended and Restated By-Laws of Registrant dated as of May 1, 1999
(incorporated herein by reference to Exhibit 2 to the Registrant's
Post-Effective Amendment No. 10 filed on January 31, 2000)
(3) Not Applicable
(4) Copy of Agreement and Plan of Reorganization (filed herewith as Exhibit A
to the Proxy Statement and Prospectus)
(5) Not Applicable
(6) (a) Amended Investment Management Agreement dated April 30, 1998
(incorporated herein by reference to Exhibit 4(a) to Registrant's
Post-Effective Amendment No. 8 filed on December 28, 1998
(7) (a) Amended Distribution Agreement between Registrant and Morgan Stanley
Dean Witter Distributors Inc. (incorporated herein by reference to
Exhibit 6(a) to Post-Effective Amendment No. 8) filed on December 28,
1998
(b) Multiple Class Distribution Agreement between Registrant and Morgan
Stanley Dean Witter Distributors, Inc. (incorporated herein by
reference to Exhibit 6(b) of Post-Effective Amendment No. 2.) filed on
December 30, 1993
(c) Form of Selected Dealer Agreement (incorporated herein by reference to
Exhibit 6(c) to Registrant's Post-Effective Amendment No. 8) filed on
December 28, 1998
(8) Not Applicable
(9) (a) Custody Agreement dated November 30, 1995 (incorporated herein by
reference to Exhibit 8 to Post-Effective Amendment No. 4); Amendment
to the Custody Agreement between the Bank of New York and the
Registrant is incorporated by reference to Exhibit 8 of Post-Effective
Amendment No. 5 to the Registration Statement filed on December 24,
1996
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<PAGE>
(b) Amended and Restated Transfer Agency and Services Agreement dated
September 1, 2000, between the Registrant and Morgan Stanley Dean
Witter Trust FSB (incorporated herein by reference to Exhibit 8(a) to
Post-Effective Amendment No. 11) filed on October 27, 2000
(10) (a) Amended and Restated Plan of Distribution pursuant to Rule 12b-1,
dated July 28, 1997 (incorporated herein by reference to Exhibit 15 to
Post-Effective Amendment No. 6) filed on July 14, 1997
(b) Morgan Stanley Dean Witter Funds Multiple Class Plan pursuant to Rule
18f-3 dated August 15, 2000 (incorporated herein by reference to
Exhibit (15) to Post-Effective Amendment No. 11) filed on October 27,
2000
(11) (a) Opinion and consent of Mayer, Brown & Platt
(b) Opinion and consent of Nutter, McClennen & Fish LLP
(12) Opinion and consent of Mayer, Brown & Platt regarding tax matters
(13) Form of Services Agreement between Morgan Stanley Dean Witter Advisors Inc.
and Morgan Stanley Dean Witter Services Company Inc. (incorporated herein
by reference to Exhibit 8(b) to Post-Effective Amendment No. 8) filed on
December 28, 1998
(14) Not Applicable
(15) Not Applicable
(16) Power of Attorney (incorporated herein by reference to Exhibit (Other) to
Post-Effective Amendments No. 3, No. 7 and No. 11,) filed respectively on
December 22, 1994, February 6, 1998 and October 27, 2000
(17) (a) Registrant's Rule 24f-2 Notice pursuant to Rule 24f-2 under the
Investment Company Act of 1940, for its fiscal year ended October 31,
1999 (incorporated herein by reference to Form 24f-2 filed with the
Securities and Exchange Commission on December 14, 1999)
(b) Form of Proxy
(c) Voting Information Card
ITEM 17. UNDERTAKINGS
1. The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of the prospectus which is a part of
this registration statement on Form N-14 by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
2. The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to this
registration statement on Form N-14 and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act of
1933, each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering of them.
C-2
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this registration statement has
been signed on behalf of the registrant, in the City of New York and State of
New York, on the 8th day of November, 2000.
MORGAN STANLEY DEAN WITTER DIVERSIFIED INCOME TRUST
By: /s/ Barry Fink
................................................
Barry Fink
Vice President and Secretary
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
1. Principal Executive Officer
/s/ Charles A. Fiumefreddo President, Chief Executive Officer,
............................ Trustee and Chairman November 8, 2000
2. Principal Financial Officer
/s/ Thomas F. Caloia Treasurer and Principal
............................ Accounting Officer November 8, 2000
3. Majority of Trustees
/s/ Michael Bozic Trustee November 8, 2000
............................
/s/ Edwin J. Garn Trustee November 8, 2000
............................
/s/ Wayne E. Hedien Trustee November 8, 2000
............................
/s/ James F. Higgins Trustee November 8, 2000
............................
/s/ Manuel H. Johnson Trustee November 8, 2000
............................
/s/ Michael E. Nugent Trustee November 8, 2000
............................
/s/ John L. Schroeder Trustee November 8, 2000
............................
/s/ Philip J. Purcell Trustee November 8, 2000
............................
</TABLE>
C-3
