<PAGE>
Dean Witter Natural Resource Development Securities Inc.
Two World Trade Center
New York, New York 10048
Dear Shareholder:
- --------------------------------------------------------------------------------
For the fiscal year ended February 28, 1994, Natural Resource Development
Securities Inc. produced a return of 12.16 percent (see the chart below for
additional performance information). During the year, the Fund distributed
income dividends totaling $0.086 per share, short-term capital gains totaling
$0.475 per share and long-term capital gains totaling $0.317 per share. The
Fund's impressive performance was achieved despite the current low-inflation
environment and the fact that crude oil prices are at their lowest levels since
1988.
ECONOMIC GROWTH IN U.S. FUELS CYCLICAL STOCKS
Over the period under review, the Fund remained diversified in its exposure
to companies sensitive to an economic recovery in the United States. As of
February 28, 1994, 40 percent of the Fund's assets were
invested in economically sensitive issues.
The rising economic activity during the
past 12 months produced positive earnings
and revenue growth in industries such as
forest products and building materials,
chemicals, industrial metals and
machinery. The impact of higher demand for
goods, coupled with the long restructuring
programs in these industries were
reflected in the strong performance in
these groups. The Fund participated in the
growth exhibited by these sectors with
holdings in companies such as Lubrizol
Corp., Millipore Corp., Caterpillar Inc.,
Phelps Dodge Corp. and Louisiana Pacific
Corp.
The energy-related segment of the
Fund, representing approximately 60
percent of assets on February 28, 1994,
performed poorly during the second half of
the year after a strong first half. While
oil prices reached five-year lows, natural
gas prices remained buoyant during the
winter season. The Fund took advantage of
the weakness in oil stocks by adding
selectively to the energy-related
industries. We anticipate that the current
weakness in oil prices will not persist in
the long run since supply is nearly
meeting current demand despite a worldwide
slow-growth environment. Should economic
activity pick up in the industrialized
nations of Europe and in Japan, oil prices
are expected to rise from current levels.
The accompanying chart illustrates the
growth of a $10,000 investment in the Fund
since inception (March 30, 1981) through
the end of the fiscal year on February 28,
1994, versus the performance of a similar
hypothetical investment in the issues that
comprise the Standard & Poor's 500 Index.
<PAGE>
LOOKING AHEAD
The Fund remains committed to its investment strategy of participating in
companies that are likely to benefit from rising commodity prices and worldwide
economic growth. We are confident that the Fund's diversified blend of energy
and economically sensitive holdings will soften the volatility of owning an
individual commodity-- particularly oil--while offering potentially attractive
returns in the event inflation rises. Given this stance, we are encouraged by
the recent strength in commodity prices, as well as our expectation that
inflationary pressure may be on the rise.
We appreciate your support of Dean Witter Natural Resource Development
Securities and look forward to continuing to serve your financial needs and
objectives.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
COMMON STOCKS (98.8%)
BASIC ENERGY (47.7%)
NATURAL GAS (11.0%)
20,000 Anardarko Petroleum Corp............. $ 890,000
60,000 Apache Corp.......................... 1,500,000
43,000 Canadian Natural Resources*.......... 588,867
100,000 Eastex Energy, Inc.*................. 437,500
45,000 Enron Corp........................... 1,434,375
34,000 Noble Affiliates, Inc................ 875,500
34,600 Nuevo Energy Co.*.................... 726,600
47,000 Questar Corp......................... 1,445,250
53,000 Renaissance Energy*.................. 1,078,910
34,000 Seagull Energy Corp.*................ 845,750
35,000 Sonat, Inc........................... 1,063,125
25,000 Talisman Energy*..................... 534,366
21,000 Tenneco, Inc......................... 1,170,750
65,000 TransCanada Pipelines, Ltd........... 958,750
50,000 Trident Ngl Holding, Inc............. 525,000
35,000 United Meridian Corp.*............... 542,500
32,000 Williams Companies, Inc.............. 788,000
---------------
15,405,243
---------------
OIL INTEGRATED - INTERNATIONAL (19.6%)
50,000 British Petroleum PLC (ADR)+......... 3,256,250
34,000 Chevron Corp......................... 2,949,500
79,000 Exxon Corp........................... 5,125,125
35,000 Imperial Oil Ltd. Common 'F'......... 1,211,875
49,000 Mobil Corp........................... 3,852,625
38,000 Royal Dutch Petroleum Co............. 4,061,250
67,500 Societe National Elf Aquitaine
(ADR)+............................. 2,413,125
69,000 Texaco, Inc.......................... 4,476,375
---------------
27,346,125
---------------
OIL PRODUCTION - DOMESTIC (15.9%)
25,800 Amerada Hess Corp.................... 1,196,475
35,000 Amoco Corp........................... 1,828,750
13,000 Atlantic Richfield Co................ 1,309,750
46,000 Kerr McGee Corp...................... 2,064,250
61,000 Louisiana Land & Exploration Co.
(The).............................. 2,272,250
32,000 Murphy Oil Corp...................... 1,272,000
143,000 Occidental Petroleum Corp............ 2,591,875
66,000 Oryx Energy Co....................... 1,188,000
29,700 Parker & Parsley Petroleum Co........ 668,250
18,000 Pennzoil Co.......................... 963,000
56,000 Phillips Petroleum Co................ 1,519,000
50,000 Snyder Oil Corp...................... 918,750
27,000 Triton Energy Corp.*................. 783,000
75,000 Union Texas Petroleum Holdings,
Inc................................ 1,443,750
55,000 USX Delhi-Group...................... 893,750
70,000 USX-Marathon Group................... 1,207,500
---------------
22,120,350
---------------
OIL REFINERIES (1.2%)
50,000 Sun Co............................... 1,706,250
---------------
TOTAL BASIC ENERGY................... 66,577,968
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
ENERGY DEVELOPMENT & TECHNOLOGY (12.1%)
OIL DRILLING (1.7%)
150,000 Energy Service Co., Inc.*............ $ 515,625
70,000 Nabors Industries, Inc.*............. 463,750
130,000 Rowan Cos., Inc.*.................... 942,500
25,000 Sonat Offshore Drilling, Inc......... 434,375
---------------
2,356,250
---------------
OIL EQUIPMENT & SERVICES (10.4%)
53,000 Baker Hughes, Inc.................... 1,007,000
40,000 BJ Services.......................... 770,000
20,000 Camco, Inc........................... 345,000
50,000 Dresser Industries, Inc.............. 1,137,500
29,000 Halliburton Co....................... 909,875
45,000 Hornbeck Offshore Svcs., Inc.*....... 680,625
48,000 McDermott International, Inc......... 1,110,000
50,000 Offshore Logistics, Inc.*............ 718,750
45,000 Offshore Pipelines, Inc.*............ 826,875
50,000 Schlumberger, Ltd.................... 2,843,750
29,000 SEACOR Holdings, Inc.*............... 652,500
125,000 Smith International, Inc.*........... 1,265,625
55,000 Tidewater, Inc....................... 1,223,750
101,500 Weatherford International*........... 1,065,750
---------------
14,557,000
---------------
TOTAL ENERGY DEVELOPMENT &
TECHNOLOGY......................... 16,913,250
---------------
METALS & BASIC MATERIALS (39.0%)
ALUMINUM (2.5%)
47,500 Alcan Aluminium, Ltd................. 1,128,125
40,000 Alumax, Inc.......................... 1,080,000
17,000 Aluminum Co. of America.............. 1,279,250
---------------
3,487,375
---------------
BUILDING MATERIALS (1.0%)
45,000 Crane Co............................. 1,282,500
8,000 Martin Marietta Materials............ 191,000
---------------
1,473,500
---------------
CHEMICALS (14.1%)
35,000 Corning, Inc......................... 1,067,500
18,000 Dow Chemical Co...................... 1,145,250
51,400 DuPont (E.I.) de Nemours & Co........ 2,743,475
37,000 Fuller (H.B.) Company................ 1,341,250
50,000 Georgia Gulf Corp.*.................. 1,425,000
28,000 Grace (W.R.) Co...................... 1,253,000
45,000 Lubrizol Corp........................ 1,693,125
41,000 Minerals Technologies, Inc........... 1,158,250
11,000 Monsanto Co.......................... 842,875
27,000 Nalco Chemical Co.................... 972,000
35,000 OM Group, Inc........................ 796,250
50,000 Pall Corp............................ 900,000
65,000 Praxair, Inc......................... 1,218,750
18,000 Rohm & Haas Co....................... 1,028,250
30,000 Virgoro Corp......................... 975,000
34,000 Witco Corp........................... 1,151,750
---------------
19,711,725
---------------
</TABLE>
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
CONSTRUCTION & MATERIALS HANDLING (4.1%)
17,000 Deere & Co........................... $ 1,434,375
33,000 Fluor Corp........................... 1,464,375
80,400 Indresco, Inc.*...................... 1,105,500
24,000 Ingersoll-Rand Co.................... 921,000
31,000 Morrison Knudsen Company, Inc........ 809,875
---------------
5,735,125
---------------
COPPER (3.8%)
45,000 Cyprus Amax Minerals Co.............. 1,361,250
55,000 Freeport-McMoran, Copper, Inc........ 1,388,750
55,000 Freeport-McMoran, Inc................ 1,065,625
26,000 Phelps Dodge Corp.................... 1,459,250
---------------
5,274,875
---------------
GOLD MINING (3.5%)
35,000 American Barrick Resource Corp....... 883,750
50,000 Homestake Mining Co.................. 1,062,500
62,800 Horsham Corp......................... 871,350
24,000 Newmont Mining Corp.................. 1,302,000
30,000 Placer Dome, Inc..................... 723,750
---------------
4,843,350
---------------
PAPER & FOREST PRODUCTS (4.4%)
35,000 Boise Cascade Corp................... 910,000
55,000 Longview Fibre Co.................... 1,079,375
24,000 Louisiana-Pacific Corp............... 1,032,000
25,000 Potlatch Corp........................ 1,162,500
20,000 Rayonier, Inc.*...................... 665,000
26,000 Weyerhaeuser Co...................... 1,235,000
---------------
6,083,875
---------------
RAILROADS (4.0%)
100,000 Canadian Pacific, Ltd................ 1,725,000
60,000 Santa Fe Pacific Corp................ 1,365,000
70,000 Southern Pacific Rail Corp.*......... 1,470,000
17,000 Union Pacific Corp................... 1,015,750
---------------
5,575,750
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
STEEL (1.6%)
23,000 Huntco, Inc. (Class A)............... $ 626,750
60,000 Northwestern Steel & Wire Co.*....... 667,500
15,000 Nucor Corp........................... 868,125
---------------
2,162,375
---------------
TOTAL METALS & BASIC MATERIALS....... 54,347,950
---------------
TOTAL COMMON STOCKS (IDENTIFIED COST
$124,428,341)...................... 137,839,168
---------------
CONVERTIBLE PREFERRED STOCK (0.9%)
STEEL (0.9%)
22,000 USX Corp. 6.50% (Identified Cost
$1,106,050)........................ 1,234,750
---------------
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS)
- -----------
<C> <S> <C>
SHORT-TERM INVESTMENT (0.9%)
REPURCHASE AGREEMENT (0.9%)
$ 1,238 The Bank of New York 3.375% due
3/1/94 (dated 2/28/94; proceeds
$1,237,963; collateralized by
$803,365 U.S. Treasury Bond 12.50%
due 8/15/14 valued at $1,262,604)
(Identified Cost $1,237,847)...... 1,237,847
-------------
<S> <C> <C>
TOTAL INVESTMENTS (IDENTIFIED
COST $126,772,238)(A).......... 100.6% 140,311,765
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS................... (0.6) (852,843)
---------- -------------
NET ASSETS....................... 100.0% $ 139,458,922
---------- -------------
---------- -------------
<FN>
- ------------------
+ AMERICAN DEPOSITORY RECEIPT.
* NON-INCOME PRODUCING SECURITY.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $126,859,264; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $18,415,733 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $4,963,232, RESULTING IN NET UNREALIZED
APPRECIATION OF $13,452,501.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $126,772,238) (Note
1)...................................... $ 140,311,765
Cash...................................... 665,000
Receivable for:
Investments sold........................ 4,133,306
Dividends............................... 549,989
Capital stock sold...................... 424,105
Foreign withholding taxes reclaimed..... 13,555
Prepaid expenses and other assets......... 25,635
-------------
TOTAL ASSETS...................... 146,123,355
-------------
LIABILITIES:
Payable for:
Investments purchased................... 6,218,815
Capital stock repurchased............... 138,785
Plan of distribution fee (Note 3)....... 103,993
Investment management fee (Note 2)...... 67,645
Accrued expenses and other payables (Note
4)...................................... 135,195
-------------
TOTAL LIABILITIES................. 6,664,433
-------------
NET ASSETS:
Paid-in-capital........................... 120,451,959
Accumulated undistributed net investment
income.................................. 309,709
Accumulated undistributed net realized
gains on investments.................... 5,157,727
Net unrealized appreciation............... 13,539,527
-------------
NET ASSETS........................ $ 139,458,922
-------------
-------------
NET ASSET VALUE PER SHARE, 11,800,251
shares outstanding (500,000,000 shares
authorized of $.01 par value)...........
$11.82
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME
Dividends (net of $45,456 foreign
withholding tax)..................... $ 3,366,442
Interest............................... 89,658
------------
TOTAL INCOME....................... 3,456,100
------------
EXPENSES
Plan of distribution fee (Note 3)...... 1,251,125
Investment management fee (Note 2)..... 819,273
Transfer agent fees and expenses (Note
4)................................... 234,726
Shareholder reports and notices........ 46,670
Registration fees...................... 46,232
Professional fees...................... 36,413
Directors' fees and expenses (Note
4)................................... 35,165
Custodian fees......................... 21,374
Other.................................. 6,494
------------
TOTAL EXPENSES..................... 2,497,472
------------
NET INVESTMENT INCOME............ 958,628
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (Note 1):
Net realized gain on investments....... 11,362,433
Net change in unrealized appreciation
on investments....................... 2,278,548
------------
NET GAIN ON INVESTMENTS............ 13,640,981
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...... $ 14,599,609
------------
------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
FEBRUARY 28, 1994 FEBRUARY 28, 1993
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................. $ 958,628 $ 1,679,924
Net realized gain on investments...................................... 11,362,433 3,692,455
Net change in unrealized appreciation on investments.................. 2,278,548 8,768,245
------------------ ------------------
Net increase in net assets resulting from operations.............. 14,599,609 14,140,624
------------------ ------------------
Dividends and distributions from:
Net investment income................................................. (923,181) (1,929,434)
Net realized gain..................................................... (8,542,530) -0-
------------------ ------------------
(9,465,711) (1,929,434)
------------------ ------------------
Net increase (decrease) from capital stock transactions (Note 5)........ 15,828,824 (6,859,908)
------------------ ------------------
Total increase.................................................... 20,962,722 5,351,282
NET ASSETS:
Beginning of period..................................................... 118,496,200 113,144,918
------------------ ------------------
END OF PERIOD (including undistributed net investment income of $309,709
and $274,262, respectively)............................................ $ 139,458,922 $ 118,496,200
------------------ ------------------
------------------ ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Organization and Accounting Policies--Dean Witter Natural Resource
Development Securities Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company and was incorporated in Maryland on December 22,
1980.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS--(1) an equity portfolio security listed or
traded on the New York or American Stock Exchange is valued at its latest
sale price on that exchange, prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid
price; (2) all other portfolio securities for which over-the-counter market
quotations are readily available are valued at the latest bid price; (3)
when market quotations are not readily available, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Fund's Board of
Directors (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); (4) the value of short-term debt securities
which mature at a date less than sixty days subsequent to the valuation date
are determined on an amortized cost basis; and (5) the value of other assets
will be determined in good faith at fair value under procedures established
by and under the general supervision of the Fund's Directors.
B. ACCOUNTING FOR INVESTMENTS--Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined on the identified cost
method. Dividend income is recorded on the ex-dividend date. Interest income
is accrued daily.
C. FEDERAL INCOME TAX STATUS--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent that these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax purposes
they are reported as distributions of paid-in-capital.
E. REPURCHASE AGREEMENTS--The Fund's custodian takes possession on behalf of
the Fund of the collateral pledged for investments in repurchase agreements.
It is the policy of the Fund to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest,
is at least equal to the repurchase price plus accrued interest. In the event
of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation.
2. Investment Management Agreement--Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc. (the "Investment
Manager"), the Fund pays its Investment Manager a management fee, accrued daily
and payable monthly, by applying the following annual rates to the daily net
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
assets of the Fund determined as of the close of each business day: 0.625% of
the portion of the daily net assets not exceeding $250 million and 0.50% of the
portion of the daily net assets exceeding $250 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all personnel,
including officers of the Fund who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone services, heat, light, power
and other utilities provided to the Fund.
3. Plan of Distribution--Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan"), pursuant to Rule 12b-1
under the Act, pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly, at an annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
implementation of the Plan on July 2, 1984 (not including reinvestments of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's shares redeemed since the Plan's implementation upon
which a contingent deferred sales charge has been imposed or waived; or (b) the
average daily net assets of the Fund attributable to shares issued, net of
related shares redeemed, since implementation of the Plan. Amounts paid under
the Plan are paid to the Distributor to compensate it for the services provided
and the expenses borne by it and others in the distribution of the Fund's
shares, including the payment of commissions for sales of the Fund's shares and
incentive compensation to and expenses of Dean Witter Reynolds Inc.'s, an
affiliate of the Investment Manager, and other account executives who engage in
or support distribution of the Fund's shares or who service shareholder
accounts, including overhead and telephone expenses; printing and distribution
of prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders; and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred
by the Distributor, but not yet recovered, may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from the
Fund's shareholders.
The Distributor has informed the Fund that for the year ended February 28,
1994, it received approximately $143,000 in deferred sales charges from certain
redemptions of the Fund's shares. The Fund's shareholders pay such charges which
are not an expense of the Fund.
4. Security Transactions and Transactions with Affiliates--The cost of
purchases and the proceeds from sales of portfolio securities for the year ended
February 28, 1994, excluding short-term investments, aggregated $97,447,669 and
$88,848,508, respectively. For the same period, the Fund incurred brokerage
commissions of $52,240 with Dean Witter Reynolds Inc. for executing transactions
on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At February 28, 1994, the Fund had transfer agent fees
and expenses payable of approximately $45,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Directors of the Fund who will
have served as an independent Director for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension cost for
the year ended February 28, 1994, included in Directors' fees and
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
expenses in the Statement of Operations amounted to $11,554. At February 28,
1994 the Fund had an accrued pension liability of $40,658 which is included in
accrued expenses in the Statement of Assets and Liabilities.
5. Capital Stock--Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
FEBRUARY 28, 1994 FEBRUARY 28, 1993
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold................................................................ 6,076,972 $ 72,864,840 3,254,176 $ 34,980,137
Reinvestment of dividends and distributions......................... 774,911 8,863,719 168,471 1,764,014
----------- ------------- ----------- -------------
6,851,883 81,728,559 3,422,647 36,744,151
Repurchased......................................................... (5,482,912) (65,899,735) (4,089,373) (43,604,059)
----------- ------------- ----------- -------------
Net increase (decrease)............................................. 1,368,971 $ 15,828,824 (666,726) ($ 6,859,908)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
6. Federal Income Taxes--The Fund had permanent book/tax differences primarily
attributable to dividend redesignations. To reflect cumulative reclassifications
arising from permanent book/tax differences for the year ended February 28,
1993, accumulated undistributed net investment income was credited $266,293,
accumulated net realized gain on investments was charged for $102,221 and
paid-in-capital was charged for $164,072.
1994 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended February 28, 1994, the Fund paid to shareholders
$0.317137 per share from long-term capital gains. For such period, 68.07% of
the income dividend qualified for the dividends received deduction available
to corporations.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data and ratios for a share of capital stock outstanding throughout
each period:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FEBRUARY 28,
-------------------------------------------------------------------------------------------
1994 1993 1992* 1991 1990 1989
---------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46
---------------- ------------ ------------ ------------ ------------ ------------
Net investment income............ 0.09 0.16 0.20 0.25 0.30 0.23
Net realized and unrealized gain
(loss) on investments........... 1.25 1.18 (0.44) 0.02 1.80 0.72
---------------- ------------ ------------ ------------ ------------ ------------
Total from investment operations... 1.34 1.34 (0.24) 0.27 2.10 0.95
---------------- ------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
Dividends from net investment
income.......................... (0.09) (0.18) (0.20) (0.28) (0.32) (0.21)
Distributions from net realized
gains on investments............ (0.79) 0.00 (0.39) (0.29) (0.38) (0.27)
---------------- ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions.................... (0.88) (0.18) (0.59) (0.57) (0.70) (0.48)
---------------- ------------ ------------ ------------ ------------ ------------
Net asset value, end of period..... $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93
---------------- ------------ ------------ ------------ ------------ ------------
---------------- ------------ ------------ ------------ ------------ ------------
TOTAL INVESTMENT RETURN+........... 12.16% 13.31% (1.91)% 2.87% 21.11% 10.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)....................... $ 139,459 $118,496 $113,145 $150,636 $154,741 $136,911
Ratio of expenses to average net
assets........................... 1.91% 1.96% 1.93% 1.80% 1.81% 1.92%
Ratio of net investment income to
average net assets............... 0.73% 1.46% 1.67% 2.28% 2.57% 2.09%
Portfolio turnover rate............ 69 % 52 % 31 % 29 % 22 % 7 %
<CAPTION>
1988* 1987 1986 1985
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 9.10 $ 7.43 $ 7.41 $ 8.06
------------ ------------ ------------ ------------
Net investment income............ 0.20 0.14 0.22 0.23
Net realized and unrealized gain
(loss) on investments........... 0.44 1.75 0.03 (0.62)
------------ ------------ ------------ ------------
Total from investment operations... 0.64 1.89 0.25 (0.39)
------------ ------------ ------------ ------------
Less dividends and distributions:
Dividends from net investment
income.......................... (0.28) (0.22) (0.23) (0.17)
Distributions from net realized
gains on investments............ 0.00 0.00 0.00 (0.09)
------------ ------------ ------------ ------------
Total dividends and
distributions.................... (0.28) (0.22) (0.23) (0.26)
------------ ------------ ------------ ------------
Net asset value, end of period..... $ 9.46 $ 9.10 $ 7.43 $ 7.41
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
TOTAL INVESTMENT RETURN+........... 7.32% 26.21% 3.50% (5.07)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)....................... $171,725 $ 82,985 $ 23,664 $ 24,940
Ratio of expenses to average net
assets........................... 1.81% 1.74% 1.39% 1.28%
Ratio of net investment income to
average net assets............... 2.14% 2.61% 3.07% 2.68%
Portfolio turnover rate............ 26 % 14 % 78 % 124 %(1)
</TABLE>
- -----------------
* YEAR ENDED FEBRUARY 29.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) EXCLUDED LONG-TERM U.S. GOVERNMENT SECURITIES WHICH ARE INCLUDED IN
SUBSEQUENT YEARS.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of Dean Witter Natural Resource
Development Securities Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Natural Resource
Development Securities Inc. (the "Fund") at February 28, 1994, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the ten years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at February 28, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York 10036
April 6, 1994
<PAGE>
BOARD OF DIRECTORS
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire Dean Witter
Dr. John E. Jeuck Natural Resource
Dr. Manuel H. Johnson Development
Paul Kolton Securities
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Diane Lisa Sobin
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general
information of shareholders of the Fund.
For more detailed information about the
Fund, its officers and trustees, fees,
expenses and other pertinent information,
please see the prospectus of the Fund.
This report is not authorized for distribution
to prospective investors in the Fund unless
preceded or accompanied by an effective prospectus.
Annual Report
February 28, 1994
<PAGE>
DEAN WITTER NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
GROWTH OF $10,000
($ IN THOUSANDS)
DATE TOTAL S&P 500
- -------------------------------------------------------
<S> <C> <C>
February 29, 1984 $10,000 $10,000
February 28, 1985 $ 9,493 $12,086
February 28, 1986 $ 9,825 $15,769
February 28, 1987 $12,401 $20,422
February 29, 1988 $13,308 $19,867
February 28, 1989 $14,677 $22,218
February 28, 1990 $17,775 $26,404
February 28, 1991 $18,286 $30,275
February 29, 1992 $17,936 $35,126
February 28, 1993 $20,324 $38,867
February 28, 1994 $22,795(3) $42,092
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
Non-Standard 12.16(1) 9.20(1) 8.59(1)
Standard (-CDSC) 7.16(2) 8.92(2) 8.59(2)
_______ Fund _______ S&P 500 (4)
Past performance is not predictive of future returns.
<FN>
- --------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%,
5 years-2%, 10 years-0%). See the Fund's current prospectus for complete
details on fees and sales charges.
(3) Closing value assuming a complete redemption on February 28, 1994.
(4) The S&P 500 is a broad-based index, the performance of which is based on
the average performance of 500 widely held common stocks. The index does
not include any expenses, fees or charges.
</TABLE>
