<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
For the six-month period ended August 31, 1994, Dean Witter Natural Resource
Development Securities produced a total return of 3.15 percent, compared to 3.29
percent for the Standard and Poor's 500 Composite Stock Price Index.
AN IMPROVING GLOBAL ECONOMY
The economic backdrop for the past six months, both in the U.S. and abroad,
continued to favor companies that are sensitive to accelerating growth.
Commodity prices, particularly chemicals, paper, aluminum, copper and crude oil,
advanced over the period in response to stronger industrial demand both in
Europe and the U.S. Moreover, industrial companies have become "lean and mean"
allowing profits to grow faster in good economic times.
On August 31, 1994, 40 percent of Fund's net assets were invested in those
industries that should benefit from growing economies worldwide. Economic growth
in the U.S. has been evident in increased industrial production and
manufacturing capacity utilization above the 84 percent level. In the chemical
industry, major multinational companies such as Dupont and Dow Chemical have
benefited from rising chemical prices. In the base metal industry, Alcoa and
Phelps Dodge advanced along with rising aluminum and copper prices.
Energy stocks represented 58 percent of the Fund's net assets at the end of
the period under review. Oil and natural gas related holdings took divergent
paths with oil clearly the winner. A major bottom in oil prices of $14 per
barrel was reached in late March. By August, prices had risen to over $20 per
barrel, bolstering the Fund's energy holdings, including Phillips Petroleum,
British Petroleum and Murphy Oil.
LOOKING AHEAD
The Fund's 19 percent weighting in integrated international oils should
continue to provide stability and dividend income during the months ahead. In
addition, chemicals, refining and marketing should accelerate earnings given a
positive demand environment as the global economy gains strength. We believe
that in the current economic environment in which the threat of rising inflation
is present, high-quality resource based-equities will provide a hedge to your
assets.
We appreciate your continued support of Dean Witter Natural Resource
Development Securities and look forward to serving your investment needs and
objectives.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
COMMON STOCKS (95.0%)
BASIC ENERGY (45.7%)
NATURAL GAS - DIVERSIFIED (4.7%)
45,000 ENRON CORP. *........................ $ 1,372,500
47,000 QUESTAR CORP.*....................... 1,451,125
40,000 SONAT, INC........................... 1,220,000
31,000 TENNECO, INC......................... 1,526,750
65,000 TRANSCANADA PIPELINES, LTD........... 877,500
50,000 TRIDENT NGL HOLDING, INC............. 525,000
---------------
6,972,875
---------------
NATURAL GAS - EXPLORATION & PRODUCTION (4.6%)
20,000 ANARDARKO PETROLEUM CORP............. 937,500
50,000 APACHE CORP.......................... 1,262,500
43,000 CANADIAN NATURAL RESOURCES*.......... 584,324
34,000 NOBLE AFFILIATES, INC................ 875,500
24,600 NUEVO ENERGY CO.*.................... 553,500
53,000 RENAISSANCE ENERGY*.................. 1,068,236
20,000 SEAGULL ENERGY CORP.*................ 480,000
25,000 TALISMAN ENERGY, INC.*............... 547,206
35,000 UNITED MERIDIAN CORP.*............... 525,000
---------------
6,833,766
---------------
OIL INTEGRATED - DOMESTIC (6.9%)
20,800 AMERADA HESS CORP.................... 1,042,600
35,000 AMOCO CORP........................... 2,025,625
19,000 ATLANTIC RICHFIELD CO................ 2,035,375
46,000 KERR MCGEE CORP...................... 2,236,750
56,000 PHILLIPS PETROLEUM CO................ 1,855,000
70,000 USX-MARATHON GROUP................... 1,207,500
---------------
10,402,850
---------------
OIL INTERGRATED - INTERNATIONAL (18.8%)
30,000 BRITISH PETROLEUM PLC (ADR).......... 2,280,000
97,000 CHEVRON CORP......................... 4,110,375
64,481 ELF AQUITANE (ADR)................... 2,466,398
94,000 EXXON CORP........................... 5,593,000
45,000 IMPERIAL OIL, LTD. (F SHARES)........ 1,400,625
49,000 MOBIL CORP........................... 4,128,250
38,000 ROYAL DUTCH PETROLEUM CO. (ADR)...... 4,279,750
64,000 TEXACO, INC.......................... 3,952,000
---------------
28,210,398
---------------
OIL INTERNATIONAL - EXPLORATION & PRODUCTION (4.4%)
143,000 OCCIDENTAL PETROLEUM CORP............ 3,181,750
86,000 ORYX ENERGY CO....................... 1,236,250
27,000 TRITON ENERGY CORP.*................. 860,625
75,000 UNION TEXAS PETROLEUM HOLDINGS,
INC................................ 1,340,625
---------------
6,619,250
---------------
OIL PRODUCTION - DOMESTIC (4.4%)
61,000 LOUISIANA LAND & EXPLORATION CO.
(THE).............................. 2,630,625
42,000 MURPHY OIL CORP...................... 1,989,750
39,700 PARKER & PARSLEY PETROLEUM CO........ 1,037,162
50,000 SNYDER OIL CORP...................... 943,750
---------------
6,601,287
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
OIL REFINERIES (1.9%)
60,000 SUN CO............................... $ 1,672,500
40,000 TOSCO CORP........................... 1,200,000
---------------
2,872,500
---------------
TOTAL BASIC ENERGY................... 68,512,926
---------------
ENERGY DEVELOPMENT & TECHNOLOGY (12.0%)
OIL DRILLING (1.4%)
70,000 NABORS INDUSTRIES, INC.*............. 446,250
130,000 ROWAN COS., INC.*.................... 958,750
40,000 SONAT OFFSHORE DRILLING, INC......... 730,000
---------------
2,135,000
---------------
OIL EQUIPMENT & SERVICES (10.6%)
63,000 BAKER HUGHES, INC.................... 1,181,250
40,000 BJ SERVICES CO.*..................... 770,000
25,000 CAMCO INTERNATIONAL, INC............. 493,750
55,000 DRESSER INDUSTRIES, INC.............. 1,106,875
29,000 HALLIBURTON CO....................... 877,250
55,000 HORNBECK OFFSHORE SERVICES, INC...... 673,750
48,000 MCDERMOTT INTERNATIONAL, INC......... 1,254,000
50,000 OFFSHORE LOGISTICS, INC.*............ 687,500
55,000 OFFSHORE PIPELINES, INC.*............ 1,045,000
50,000 PETROLEUM GEO SERVICES (ADR)......... 931,250
50,000 SCHLUMBERGER, LTD.................... 2,850,000
29,000 SEACOR HOLDINGS, INC.*............... 601,750
70,000 SMITH INTERNATIONAL, INC.*........... 1,050,000
45,000 TIDEWATER, INC....................... 1,018,125
71,500 WEATHERFORD INTERNATIONAL*........... 866,938
10,000 WESTERN ATIAS, INC.*................. 443,750
---------------
15,851,188
---------------
TOTAL ENERGY DEVELOPMENT &
TECHNOLOGY......................... 17,986,188
---------------
METALS & BASIC MATERIALS (37.3%)
ALUMINUM (2.3%)
35,000 ALUMAX, INC.*........................ 1,071,875
18,000 ALUMINUM CO. OF AMERICA.............. 1,512,000
17,000 REYNOLDS METALS CO................... 932,875
---------------
3,516,750
---------------
BUILDING MATERIALS (0.7%)
40,000 CRANE CO............................. 1,045,000
---------------
CHEMICALS (8.9%)
20,000 DOW CHEMICAL CO...................... 1,502,500
36,400 DUPONT (E.I.) DE NEMOURS & CO........ 2,202,200
55,000 FERRO CORP........................... 1,464,375
45,000 LUBRIZOL CORP........................ 1,406,250
15,000 MONSATO CO........................... 1,239,375
120,000 NOVA CORP............................ 1,215,000
20,000 OLIN CORP............................ 1,150,000
40,000 OM GROUP, INC........................ 795,000
40,000 POTASH CORP. OF SASKATCHEWAN, INC.... 1,370,000
35,000 VIGORO CORP.......................... 1,019,375
---------------
13,364,075
---------------
</TABLE>
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
CHEMICALS - SPECIALTY (4.4%)
35,000 CORNING, INC......................... $ 1,080,625
90,000 ETHYL CORP........................... 1,057,500
33,000 GRACE (W.R.) CO...................... 1,328,250
41,000 MINERALS TECHNOLOGIES, INC........... 1,230,000
30,000 MORTON INTERNATIONAL, INC............ 888,750
32,000 NALCO CHEMICAL CO.................... 1,084,000
---------------
6,669,125
---------------
CONSTRUCTION & MATERIALS HANDLING (3.4%)
17,000 DEERE & CO........................... 1,262,250
28,000 FLUOR CORP........................... 1,484,000
70,400 INDRESCO, INC.*...................... 932,800
29,000 INGERSOLL-RAND CO.................... 1,105,625
21,000 MORRISON KNUDSEN COMPANY, INC........ 378,000
---------------
5,162,675
---------------
COPPER (3.1%)
45,000 CYPRUS AMAX MINERALS CO.............. 1,462,500
65,687 FREEPORT-MCMORAN COPPER, INC......... 1,519,011
26,000 PHELPS DODGE CORP.................... 1,651,000
---------------
4,632,511
---------------
GOLD MINING (4.9%)
70,000 AMERICAN BARRICK RESOURCE CORP....... 1,592,500
70,000 HOMESTAKE MINING CO.................. 1,321,250
29,954 NEWMONT MINING CORP.................. 1,284,278
50,000 PEGASUS GOLD, INC.................... 800,000
70,000 PLACER DOME, INC..................... 1,592,500
120,000 TVX GOLD, INC.*...................... 750,000
---------------
7,340,528
---------------
PAPER & FOREST PRODUCTS (4.0%)
40,000 BOISE CASCADE CORP................... 1,145,000
55,000 LONGVIEW FIBRE CO.................... 1,010,625
34,000 LOUISIANA-PACIFIC CORP............... 1,207,000
35,000 RAYONIER, INC........................ 1,163,750
31,000 WEYERHAEUSER CO...................... 1,422,125
---------------
5,948,500
---------------
RAILROADS (3.4%)
100,000 CANADIAN PACIFIC, LTD................ 1,762,500
60,000 SANTA FE PACIFIC CORP................ 1,290,000
50,000 SOUTHERN PACIFIC RAIL CORP.*......... 1,012,500
17,000 UNION PACIFIC CORP................... 979,625
---------------
5,044,625
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
STEEL & IRON (0.7%)
30,700 ALLEGHENY LUDLUM..................... $ 656,213
60,000 NORTHWESTERN STEEL & WIRE CO.*....... 427,500
---------------
1,083,713
---------------
WASTE DISPOSAL (1.5%)
110,000 ALLWASTE, INC.*...................... 728,750
50,000 WMX TECHNOLOGIES, INC................ 1,500,000
---------------
2,228,750
---------------
TOTAL METALS & BASIC MATERIALS....... 56,036,252
---------------
TOTAL COMMON STOCKS (IDENTIFIED COST
$127,662,586)...................... 142,535,366
---------------
CONVERTIBLE PREFERRED STOCK(0.8%)
STEEL(0.8%)
22,000 USX CORP 6.50% (IDENTIFIED COST
$1,106,050)........................ 1,182,500
---------------
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS)
- -----------
<C> <S> <C>
SHORT-TERM INVESTMENTS (1.6%)
U.S. GOVERMENT AGENCY (A) (1.3%)
$ 1,685 FEDERAL HOME LOAN MORTGAGE CORP.
4.70% DUE 9/1/94 (AMORTIZED COST
$2,000,000)....................... 2,000,000
---------------
REPURCHASE AGREEMENT (0.3%)
408 THE BANK OF NEW YORK 4.625% DUE
9/1/94 (DATED 8/31/94; PROCEEDS
$408,044; COLLATERALIZED BY
$407,187 U.S. TREASURY NOTE 7.25%
DUE 5/15/04 VALUED AT $416,151)
(IDENTIFIED COST $407,992)........ 407,992
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $2,407,992)...... 2,407,992
---------------
<C>
TOTAL INVESTMENTS (IDENTIFIED
COST $131,176,628)(B).......... 97.4% 146,125,858
OTHER ASSETS IN EXCESS OF
LIABILITIES.................... 2.6 3,911,089
---------- -------------
NET ASSETS....................... 100.0% $ 150,036,947
---------- -------------
---------- -------------
<FN>
- ------------------
(ADR) AMERICAN DEPOSITORY RECEIPT.
* NON-INCOME PRODUCING SECURITY.
(A) U.S. GOVERMENT AGENCY WAS PURCHASED ON A DISCOUNT BASIS. THE RATE SHOWN
HAS BEEN ADJUSTED TO REFLECT A BOND EQIVALENT YIELD.
(B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $131,263,654; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $19,801,241 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $4,939,037, RESULTING IN NET UNREALIZED
APPRECIATION OF $14,862,204.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
INVESTMENTS IN SECURITIES, AT VALUE
(IDENTIFIED COST $131,176,628) (NOTE
1)...................................... $ 146,125,858
RECEIVABLE FOR:
INVESTMENTS SOLD........................ 4,584,884
DIVIDENDS............................... 1,018,022
CAPITAL STOCK SOLD...................... 592,274
FOREIGN WITHHOLDING TAXES RECLAIMED..... 13,555
PREPAID EXPENSES AND OTHER ASSETS......... 22,097
-------------
TOTAL ASSETS...................... 152,356,690
-------------
LIABILITIES:
PAYABLE FOR:
INVESTMENTS PURCHASED................... 1,804,775
CAPITAL STOCK REPURCHASED............... 170,397
PLAN OF DISTRIBUTION FEE (NOTE 3)....... 127,195
INVESTMENT MANAGEMENT FEE (NOTE 2)...... 82,423
ACCRUED EXPENSES AND OTHER PAYABLES (NOTE
4)...................................... 134,951
-------------
TOTAL LIABILITIES................. 2,319,741
-------------
NET ASSETS:
PAID-IN-CAPITAL........................... 131,971,042
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME.................................. 449,567
ACCUMULATED UNDISTRIBUTED NET REALIZED
GAINS ON INVESTMENTS.................... 2,667,110
NET UNREALIZED APPRECIATION ON
INVESTMENTS............................. 14,949,230
-------------
NET ASSETS........................ $ 150,036,949
-------------
-------------
NET ASSET VALUE PER SHARE, 12,799,102
SHARES OUTSTANDING (500,000,000
AUTHORIZED SHARES OF $.01 PAR VALUE)....
$11.72
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 1994 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME
DIVIDENDS (NET OF $49,048 FOREIGN
WITHHOLDING TAX)...................... $ 1,878,304
INTEREST................................ 39,341
-----------
TOTAL INCOME........................ 1,917,645
-----------
EXPENSES
PLAN OF DISTRIBUTION FEE (NOTE 3)....... 690,807
INVESTMENT MANAGEMENT FEE (NOTE 2)...... 448,108
TRANSFER AGENT FEES AND EXPENSES (NOTE
4).................................... 161,182
SHAREHOLDER REPORTS AND NOTICES......... 59,019
PROFESSIONAL FEES....................... 24,644
REGISTRATION FEES....................... 21,446
DIRECTORS' FEES AND EXPENSES (NOTE 4)... 14,257
CUSTODIAN FEES.......................... 4,515
OTHER................................... 3,237
-----------
TOTAL EXPENSES...................... 1,427,215
-----------
NET INVESTMENT INCOME............. 490,430
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 1):
NET REALIZED GAIN ON INVESTMENTS........ 2,754,578
NET CHANGE IN UNREALIZED APPRECIATION ON
INVESTMENTS........................... 1,409,703
-----------
NET GAIN ON INVESTMENTS............. 4,164,281
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... $ 4,654,711
-----------
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
AUGUST 31, 1994 FOR THE YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1994
----------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
NET INVESTMENT INCOME........................................... $ 490,430 $ 958,628
NET REALIZED GAIN ON INVESTMENTS................................ 2,754,578 11,362,433
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS............ 1,409,703 2,278,548
----------------------- ------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ 4,654,711 14,599,609
----------------------- ------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME........................................... (350,572) (923,181)
NET REALIZED GAIN ON INVESTMENTS................................ (5,245,195) (8,542,530)
----------------------- ------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS........................... (5,595,767) (9,465,711)
----------------------- ------------------
NET INCREASE FROM CAPITAL STOCK TRANSACTIONS (NOTE 5)............. 11,519,083 15,828,824
----------------------- ------------------
TOTAL INCREASE.............................................. 10,578,027 20,962,722
NET ASSETS:
BEGINNING OF PERIOD............................................... 139,458,922 118,496,200
----------------------- ------------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$449,567 AND $309,709, RESPECTIVELY)............................. $ 150,036,949 $ 139,458,922
----------------------- ------------------
----------------------- ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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. The Fund was incorporated in Maryland on December
22, 1980.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS--(1) an equity 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 available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
including circumstances under which it is determined by the Investment
Manager that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision
of the 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) short-term debt
securities having a maturity date of more than sixty days are valued on a
mark-to-market basis, that is, at prices based on market quotations for
securities of a similar type, yield, quality and maturity, until sixty days
prior to maturity and thereafter at amortized cost using their value on the
61st day. Short-term debt securities having a maturity date of sixty days or
less at the time of purchase are valued at amortized cost; and (5) all other
securities and other assets are valued at their fair value as determined in
good faith under procedures established by and under the general supervision
of the 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 and includes amortization of discounts of certain
short-term securities.
C. 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.
D. 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.
E. 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 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
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
investment income and net realized capital gains for tax purposes, they are
reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a monthly management fee, calculated and
accrued daily, by applying the following annual rates to the net assets of the
Fund determined at the close of each business day: 0.625% to the portion of
daily net assets not exceeding $250 million and 0.50% to the portion of 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, at its own expense, office space, 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 reinvestment of
dividend or capital gain distributions), less the average daily aggregate net
asset value of the Fund's shares redeemed since the Fund's implementation of the
Plan upon which a contingent deferred sales charge has been imposed or upon
which such charge has been waived; or (b) the Fund's average daily net assets
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 the account executives of Dean Witter Reynolds Inc., an affiliate of
the Investment Manager and Distributor, and other employees or selected dealers
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
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 six months ended August
31, 1994, it received approximately $76,000 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 proceeds from sales of portfolio securities, excluding short-term
investments, for the six months ended August 31, 1994 aggregated $30,415,768 and
$29,923,492, respectively.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
For the six months ended August 31, 1994, $17,840 was paid to Dean Witter
Reynolds Inc. in brokerage commissions for portfolio transactions executed on
behalf of the Fund. At August 31, 1994, the Fund's receivable for investments
sold included unsettled trades with Dean Witter Reynolds Inc. of $2,598,563.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At August 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $60,000.
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 costs for
the six months ended August 31, 1994, included in Directors' fees and expenses
in the Statement of Operations amounted to $4,048. At August 31, 1994, the Fund
had an accrued pension liability of $44,419 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 SIX MONTHS ENDED FOR THE YEAR ENDED
AUGUST 31, 1994 FEBRUARY 28, 1994
------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold.............................................. 4,074,623 $47,395,860 6,076,972 $ 72,864,840
Reinvestment of dividends and distributions....... 456,721 5,211,190 774,911 8,863,719
---------- ----------- ---------- ------------
4,531,344 52,607,050 6,851,883 81,728,559
Repurchased....................................... (3,532,493) (41,087,967) (5,482,912) (65,899,735)
---------- ----------- ---------- ------------
Net increase...................................... 998,851 $11,519,083 1,368,971 $ 15,828,824
---------- ----------- ---------- ------------
---------- ----------- ---------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS--At February 28, 1994, the Fund had permanent
book/tax differences attributable to dividend redesignations.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of capital stock outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
AUGUST 31, FOR THE YEARS ENDED FEBRUARY 28,
1994 ----------------------------------------------------
(UNAUDITED) 1994 1993 1992* 1991 1990
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93
-------------- -------- -------- -------- -------- --------
NET INVESTMENT INCOME.............. 0.04 0.09 0.16 0.20 0.25 0.30
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS............ 0.32 1.25 1.18 (0.44) 0.02 1.80
-------------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS... 0.36 1.34 1.34 (0.24) 0.27 2.10
-------------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS
FROM:
NET INVESTMENT INCOME............ (0.03) (0.09) (0.18) (0.20) (0.28) (0.32)
NET REALIZED GAINS ON
INVESTMENTS..................... (0.43) (0.79) -0- (0.39) (0.29) (0.38)
-------------- -------- -------- -------- -------- --------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.................... (0.46) (0.88) (0.18) (0.59) (0.57) (0.70)
-------------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD..... $ 11.72 $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33
-------------- -------- -------- -------- -------- --------
-------------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN+........... 3.15%(1) 12.16% 13.31% (1.91)% 2.87% 21.11%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN
THOUSANDS)....................... $142,225 $139,459 $118,496 $113,145 $150,636 $154,741
RATIO OF EXPENSES TO AVERAGE NET
ASSETS........................... 1.99%(2) 1.91% 1.96% 1.93% 1.80% 1.81%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS............... 0.68%(2) 0.73% 1.46% 1.67% 2.28% 2.57%
PORTFOLIO TURNOVER RATE............ 21% 69% 52% 31% 29% 22%
<FN>
- ---------------
* YEAR ENDED FEBRUARY 29.
+ DOES NOT REFLECT THE DEDUCTION
OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
See Notes to Financial Statements
<PAGE>
DEAN WITTER
NATURAL RESOURCE
DEVELOPMENT
SECURITIES
[Photo]
SEMIANNUAL REPORT
AUGUST 31, 1994
BOARD OF DIRECTORS
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
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 LLP
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
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
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.
