DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS August 31, 1996
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
For the six-month period ended August 31, 1996, Dean Witter Natural Resource
Development Securities Inc. produced a strong total return of 9.15 percent,
compared to a return of 2.97 percent for the broad-based Standard & Poor's
Composite Stock Index (S&P 500). For the trailing year, the Fund returned
20.98 percent versus 18.72 percent for the S&P 500.
ENERGY PORTFOLIO OVERVIEW
Lower inventories coupled with increased demand boosted performance for the
Fund's energy-related holdings. Crude oil rose to its highest price since the
Gulf War, trading at over $25 a barrel during the period, up from $17 a barrel
one year ago. At the same time, inventories of crude oil and natural gas were
at 25-year lows.
Natural gas exploration and production, offshore drilling and oil equipment &
service companies were strong performers. Integrated oil companies posted
mixed results because of their involvement in a variety of businesses such as
refining, marketing and chemicals. The Fund purchased several new stocks
during the period including Chesapeake Corp., Coastal Corp., FX Energy, Inc.,
Flores & Rucks, Inc., Weatherford Enterra, Inc. and Marine Drilling Company,
Inc. These companies are primarily involved in the natural gas--exploration &
production and oil equipment & services industries.
INDUSTRIAL/COMMODITIES PORTFOLIO OVERVIEW
The Fund's basic industrial investments had mixed results. Miscellaneous
metals were adversely affected by difficulties in the copper industry, whose
losses spilled over to other metals, including gold and aluminum.
Performance for chemicals and forest products & paper was also mixed. Demand
for these commodities slowed as buyers sought to reduce their own
inventories. However, inventories are now low, which should firm demand and
improve prices for both of these industries. The Fund's core
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS August 31, 1996, continued
positions in the chemical industry are Du Pont (E.I.) de Nemours & Co., Inc.,
Monsanto Co. and Cytec Industries, Inc. These companies are very well managed
and are engaged in ongoing restructuring programs to concentrate on their
core businesses.
LOOKING AHEAD
Worldwide economic growth has been erratic and persistently underestimated.
Demand for oil, miscellaneous metals, grains and other commodities has grown,
especially in China and India, while the supply of many of these resources has
fallen. We believe that this growing gap between demand and supply will
eventually result in higher prices. Recent events in the Middle East involving
Iraq have postponed additional supplies of oil indefinitely and should provide
further support for higher oil and natural gas prices. We will continue to
look for companies that will benefit from rising commodity prices and
worldwide economic growth. In our view, the coming year is poised to present a
favorable environment for most natural resources companies.
We appreciate your support of Dean Witter Natural Resource Development
Securities Inc. and look forward to continuing to serve your investment
needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS August 31, 1996 (unaudited)
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS (95.0%)
BASIC ENERGY (39.4%)
Natural Gas -Diversified (6.3%)
40,000 Chesapeake Corp. ................................ $ 980,000
40,000 Coastal Corp. ................................... 1,585,000
20,000 Columbia Gas System, Inc. ....................... 1,125,000
80,000 FX Energy, Inc.* ................................ 650,000
200,000 Morgan Hydrocarbons, Inc.* (Canada) ............. 555,474
35,000 PanEnergy Corp. ................................. 1,159,375
30,100 Rutherford-Moran Oil Corp.* ..................... 729,925
50,000 Seagull Energy Corp.* ........................... 900,000
35,000 Sonat, Inc. ..................................... 1,544,375
35,000 Williams Companies, Inc. ........................ 1,745,625
------------
10,974,774
------------
Natural Gas -Exploration & Production (6.4%)
30,000 Apache Corp. .................................... 881,250
20,000 Barrett Resources Corp.* ........................ 662,500
35,000 Belco Oil & Gas Corp.* .......................... 962,500
60,000 Cairn Energy USA, Inc.* ......................... 600,000
70,000 Enron Oil & Gas Co. ............................. 1,811,250
80,000 Enserch Exploration, Inc.* ...................... 730,000
30,000 Flores & Rucks, Inc.* ........................... 986,250
90,000 HarCor Energy, Inc.* ............................ 393,750
25,000 KN Energy, Inc. ................................. 859,375
40,000 Lomak Petroleum, Inc. ........................... 490,000
25,000 Renaissance Energy Ltd.* (Canada) ............... 703,479
30,000 Triton Energy Ltd.* ............................. 1,376,250
25,000 Union Pacific Resources Group, Inc. ............. 681,250
------------
11,137,854
------------
Oil Integrated -Domestic (7.4%)
60,000 Amerada Hess Corp. .............................. 3,052,500
20,000 Amoco Corp. ..................................... 1,380,000
35,000 Kerr-McGee Corp. ................................ 2,008,125
90,000 Occidental Petroleum Corp. ...................... 2,092,500
25,000 Phillips Petroleum Co. .......................... 1,012,500
70,000 Union Texas Petroleum Holdings, Inc. ............ 1,452,500
85,000 USX-Marathon Group .............................. 1,774,375
------------
12,772,500
------------
Oil Integrated -International (16.4%)
20,000 British Petroleum Co. PLC (ADR) (United Kingdom) 2,355,000
45,000 Chevron Corp. ................................... 2,649,375
45,000 Ente Nazionale Idrocarburi SpA (ADR) (Italy) .... 1,991,250
77,000 Exxon Corp. ..................................... 6,265,875
50,000 Mobil Corp. ..................................... 5,637,500
23,000 Royal Dutch Petroleum Co. (Netherlands) ......... 3,435,625
39,000 Texaco, Inc. .................................... 3,461,250
75,000 Total S.A. (ADR) (France) ....................... 2,784,375
------------
28,580,250
------------
Oil Production -Domestic (1.5%)
25,000 Louisiana Land & Exploration Co. ................ 1,421,875
25,000 Murphy Oil Corp. ................................ 1,093,750
------------
2,515,625
------------
Oil Refineries (1.4%)
55,000 Sun Co., Inc. ................................... 1,299,375
25,000 Tosco Corp. ..................................... 1,200,000
------------
2,499,375
------------
TOTAL BASIC ENERGY .............................. 68,480,378
------------
ENERGY DEVELOPMENT & TECHNOLOGY (14.4%)
Oil Drilling (3.1%)
27,000 Diamond Offshore Drilling, Inc.* ................ 1,377,000
45,000 ENSCO International, Inc.* ...................... 1,316,250
50,000 Marine Drilling Company, Inc.* .................. 425,000
80,000 Parker Drilling Co.* ............................ 560,000
40,000 Reading & Bates Corp.* .......................... 980,000
50,000 Rowan Companies, Inc.* .......................... 768,750
------------
5,427,000
------------
Oil Equipment & Services (11.3%)
50,000 Baker Hughes, Inc. .............................. 1,512,500
20,000 BJ Services Co.* ................................ 752,500
15,000 Camco International, Inc. ....................... 508,125
20,000 Coflexip S.A. (ADR) (France) .................... 395,000
35,000 Cooper Cameron Corp.* ........................... 1,846,250
50,000 Dailey Petroleum Services Corp.* ................ 456,250
55,000 Dresser Industries, Inc. ........................ 1,595,000
25,000 Energy Ventures, Inc.* .......................... 821,875
40,000 Falcon Drilling Company, Inc.* .................. 885,000
35,000 Forasol-Foramer NV* (France) .................... 402,500
25,000 Halliburton Co. ................................. 1,315,625
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS August 31, 1996 (unaudited) continued
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
30,000 Input/Output, Inc.* ............................. $ 1,061,250
30,000 Schlumberger, Ltd. .............................. 2,531,250
25,000 SEACOR Holdings, Inc.* .......................... 1,125,000
30,000 Smith International, Inc.* ...................... 1,042,500
30,000 Varco International, Inc.* ...................... 483,750
50,000 Weatherford Enterra, Inc. ....................... 1,437,500
25,000 Western Atlas, Inc.* ............................ 1,518,750
------------
19,690,625
------------
TOTAL ENERGY DEVELOPMENT & TECHNOLOGY ........... 25,117,625
------------
METALS & BASIC MATERIALS (41.2%)
Aluminum (1.8%)
25,000 Alumax, Inc.* ................................... 825,000
30,000 Aluminum Co. of America ......................... 1,863,750
25,000 Century Aluminum Co. ............................ 400,000
------------
3,088,750
------------
Chemicals -Diversified (11.5%)
70,000 Du Pont (E.I.) de Nemours & Co., Inc. ........... 5,748,750
35,000 Eastman Chemical Co. ............................ 1,955,625
18,000 FMC Corp.* ...................................... 1,152,000
60,000 Georgia Gulf Corp. .............................. 1,890,000
30,000 Grace (W.R.) & Co. .............................. 1,968,750
30,000 Millipore Corp. ................................. 1,147,500
100,000 Monsanto Co. .................................... 3,212,500
45,000 Praxair, Inc. ................................... 1,850,625
25,000 Union Carbide Corp. ............................. 1,081,250
------------
20,007,000
------------
Chemicals -Specialty (5.0%)
40,000 Asia Pacific Resources Ltd.* (Canada) ........... 298,202
60,000 Cabot Corp. ..................................... 1,650,000
30,000 Corning, Inc. ................................... 1,117,500
50,000 Cytec Industries, Inc.* ......................... 1,737,500
25,000 Great Lakes Chemical Corp. ...................... 1,437,500
45,000 Morton International, Inc. ...................... 1,670,625
50,000 Polymer Group, Inc.* ............................ 700,000
------------
8,611,327
------------
Copper (1.3%)
40,687 Freeport-McMoran Copper & Gold, Inc. (Series A) . 1,144,322
20,000 Phelps Dodge Corp. .............................. 1,210,000
------------
2,354,322
------------
Gold Mining (5.0%)
75,000 Agnico-Eagle Mines Ltd. (Canada) ................ 1,312,500
40,000 Barrick Gold Corp. (Canada) ..................... 1,080,000
35,000 Getchell Gold Corp.* ............................ 1,531,250
15,000 Golden Star Resources Ltd.* ..................... 268,125
45,954 Newmont Mining Corp. ............................ 2,429,818
50,000 Santa Fe Pacific Gold Corp. ..................... 650,000
175,000 TVX Gold, Inc.* (Canada) ........................ 1,421,875
------------
8,693,568
------------
Machinery -Construction & Materials (2.3%)
40,000 Deere & Co. ..................................... 1,590,000
45,000 Global Industrial Technologies, Inc.* ........... 866,250
40,000 Timken Co. ...................................... 1,520,000
------------
3,976,250
------------
Metals & Mining (1.1%)
40,000 Allegheny Teledyne, Inc.* ....................... 810,000
50,000 Cyprus Amax Minerals Co. ........................ 1,062,500
------------
1,872,500
------------
Paper & Forest Products (7.0%)
30,000 Boise Cascade Corp. ............................. 1,012,500
40,000 Champion International Corp. .................... 1,720,000
35,000 Chesapeake Energy Corp.* ........................ 1,881,250
40,000 International Paper Co. ......................... 1,600,000
35,000 Longview Fibre Co. .............................. 538,125
75,000 Louisiana-Pacific Corp. ......................... 1,631,250
20,000 Mead Corp. ...................................... 1,145,000
22,000 Temple-Inland, Inc. ............................. 1,086,250
30,000 Union Camp Corp. ................................ 1,455,000
------------
12,069,375
------------
Railroads (3.2%)
55,000 Conrail, Inc. ................................... 3,746,875
30,000 CSX Corp. ....................................... 1,518,750
15,000 Genesee & Wyoming, Inc. (Class A)* .............. 352,500
------------
5,618,125
------------
Steel (1.2%)
30,000 Nucor Corp. ..................................... 1,402,500
50,000 Oregon Steel Mills, Inc. ........................ 756,250
------------
2,158,750
------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS August 31, 1996 (unaudited) continued
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
Waste Disposal (1.8%)
50,000 Allwaste, Inc.* .................................. $ 206,250
25,000 U.S.A. Waste Services, Inc.* ..................... 687,500
70,000 WMX Technologies, Inc. ........................... 2,213,750
------------
3,107,500
------------
TOTAL METALS & BASIC MATERIALS ................... 71,557,467
------------
TOTAL COMMON STOCKS (Identified Cost $146,927,741). 165,155,470
------------
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.6%)
REPURCHASE AGREEMENT
$4,623 The Bank of New York 5.125% due 09/03/96
(dated 08/30/96; proceeds $4,624,335;
collateralized by $4,672,390 Federal
National Mortgage Assoc. 7.08% due
07/23/01 valued at $4,715,479)
(Identified Cost $4,623,019) ..................... 4,623,019
------------
TOTAL INVESTMENTS
(Identified Cost $151,550,760) (a).................... 97.6% 169,778,489
OTHER ASSETS IN EXCESS OF
LIABILITIES .......................................... 2.4 4,130,998
------ ------------
NET ASSETS............................................ 100.0% $173,909,487
====== ============
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation was
$20,849,210 and the aggregate gross unrealized depreciation was
$2,621,481, resulting in net unrealized appreciation of $18,227,729.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996 (UNAUDITED)
ASSETS:
Investments in securities, at value
(identified cost $151,550,760) ................................. $169,778,489
Receivable for:
Investments sold .............................................. 3,335,822
Capital stock sold ............................................ 953,611
Dividends ..................................................... 452,372
Foreign withholding taxes reclaimed ........................... 37,832
Interest ...................................................... 1,316
Prepaid expenses and other assets ............................... 34,173
------------
TOTAL ASSETS .................................................. 174,593,615
------------
LIABILITIES:
Payable for:
Investments purchased ......................................... 280,275
Plan of distribution fee ...................................... 144,499
Investment management fee ..................................... 92,683
Capital stock repurchased ..................................... 51,993
Accrued expenses ................................................ 114,678
------------
TOTAL LIABILITIES ............................................. 684,128
------------
NET ASSETS:
Paid-in-capital ................................................. 133,934,111
Net unrealized appreciation ..................................... 18,227,729
Accumulated undistributed net investment income ................. 271,617
Accumulated undistributed net realized gain ..................... 21,476,030
------------
NET ASSETS .................................................... $173,909,487
============
NET ASSET VALUE PER SHARE,
12,810,347 shares outstanding (500,000,000 shares authorized
of $.01 par value) ............................................. $ 13.58
============
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
NET INVESTMENT INCOME:
INCOME
Dividends (net of $44,885 foreign withholding tax) .......... $ 1,619,878
Interest .................................................... 257,753
-------------
TOTAL INCOME .............................................. 1,877,631
-------------
EXPENSES
Plan of distribution fee .................................... 815,385
Investment management fee ................................... 524,117
Transfer agent fees and expenses ............................ 108,884
Shareholder reports and notices ............................. 31,197
Professional fees ........................................... 25,848
Registration fees ........................................... 22,745
Custodian fees .............................................. 13,996
Directors' fees and expenses ................................ 9,756
Other ....................................................... 2,083
-------------
TOTAL EXPENSES ............................................ 1,554,011
-------------
NET INVESTMENT INCOME ..................................... 323,620
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ......................................... 21,595,096
Net change in unrealized appreciation ..................... (8,258,663)
-------------
NET GAIN .................................................. 13,336,433
-------------
NET INCREASE ................................................ $13,660,053
=============
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED FEBRUARY
AUGUST 31, 1996 29, 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .................................. $ 323,620 $ 743,674
Net realized gain ...................................... 21,595,096 9,657,602
Net change in unrealized appreciation .................. (8,258,663) 20,867,725
--------------- -----------------
NET INCREASE ......................................... 13,660,053 31,269,001
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income .................................. (287,205) (476,340)
Net realized gain ...................................... (3,093,441) (7,165,637)
--------------- -----------------
TOTAL ................................................ (3,380,646) (7,641,977)
--------------- -----------------
Net increase (decrease) from capital stock transactions 10,968,638 (3,777,196)
--------------- -----------------
TOTAL INCREASE ....................................... 21,248,045 19,849,828
NET ASSETS:
Beginning of period .................................... 152,661,442 132,811,614
--------------- -----------------
END OF PERIOD
(Including undistributed net investment income of
$271,617 and $235,202, respectively) ................. $173,909,487 $152,661,442
=============== =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1996 (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's
investment objective is capital growth. The Fund invests primarily in common
stock of companies in the natural resources and related areas. The Fund was
incorporated in Maryland on December 22, 1980.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates. 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); and (4) short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a mark-to-market basis until
sixty days prior to maturity and thereafter at amortized cost based on 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.
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 by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. 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.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1996 (unaudited) continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend 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 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 the Investment Manager a
management fee, accrued daily and payable monthly, 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
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1996 (unaudited) continued
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 the 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. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by the investors upon redemption of
shares, if for any reason the Plan is terminated, the Directors will consider
at that time the manner in which to treat such expenses. The Distributor has
advised the Fund that such excess amounts, included carrying charges, totaled
$5,542,629 at August 31, 1996.
The Distributor has informed the Fund that for the six months ended August 31,
1996, it received approximately $61,000 in contingent 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, 1996
aggregated $118,773,022 and $108,986,239, respectively.
For the six months ended August 31, 1996, the Fund incurred brokerage
commissions of $98,120 with DWR for portfolio transactions executed on behalf
of the Fund. At August 31, 1996, the Fund's receivable for investments sold
included unsettled trades with DWR of $2,234,838.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1996 (unaudited) continued
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At August 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $18,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors/Trustees 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. At August 31, 1996, the Fund had an accrued pension
liability of $49,858 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 FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 1996 FEBRUARY 29, 1996
------------------------------- -------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ....................................... 11,421,058 $ 154,092,720 17,740,630 $ 213,549,836
Reinvestment of dividends and distributions. 19,666 262,337 587,535 7,130,881
-------------- --------------- -------------- ---------------
11,440,724 154,355,057 18,328,165 220,680,717
Repurchased ................................ (10,647,678) (143,386,419) (18,637,754) (224,457,913)
-------------- --------------- -------------- ---------------
Net increase (decrease) .................... 793,046 $ 10,968,638 (309,589) $ (3,777,196)
============== =============== ============== ===============
</TABLE>
<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 FOR THE YEAR ENDED FEBRUARY 28
MONTHS ENDED ----------------------------------------------------------
AUGUST 31, 1996 1996* 1995 1994 1993 1992*
- ---------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $12.70 $10.77 $11.82 $11.36 $10.20 $11.03
--------------- ---------- ---------- ---------- ---------- ----------
Net investment income ................... 0.02 0.06 0.09 0.09 0.16 0.20
Net realized and unrealized gain (loss) 1.13 2.53 (0.24) 1.25 1.18 (0.44)
--------------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ....... 1.15 2.59 (0.15) 1.34 1.34 (0.24)
--------------- ---------- ---------- ---------- ---------- ----------
Less dividends and distributions from:
Net investment income .................. (0.02) (0.04) (0.12) (0.09) (0.18) (0.20)
Net realized gain ...................... (0.25) (0.62) (0.78) (0.79) -- (0.39)
--------------- ---------- ---------- ---------- ---------- ----------
Total dividends and distributions ...... (0.27) (0.66) (0.90) (0.88) (0.18) (0.59)
--------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period .......... $13.58 $12.70 $10.77 $11.82 $11.36 $10.20
=============== ========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN+ ............... 9.15%(1) 24.32% (1.26)% 12.16% 13.31% (1.91)%
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.85%(2) 1.90% 1.90% 1.91% 1.96% 1.93%
Net investment income ................... 0.39%(2) 0.52% 0.77% 0.73% 1.46% 1.67%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $173,909 $152,661 $132,812 $139,459 $118,496 $113,145
Portfolio turnover rate ................. 70%(1) 49% 59% 69% 52% 31%
Average commission rate paid ............ $0.0547 -- -- -- -- --
</TABLE>
- ------------
* Year ended February 29.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
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BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Konrad Krill
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
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 offers and directors
fees, expenses and otherpertinent 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.
DEAN WITTER
NATURAL RESOURCE
DELEVOMENT
SECURITIES
[Graphic Omitted]
SEMIANNUAL REPORT
AUGUST 31, 1996
