<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC. TWO WORLD TRADE
CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS FEBRUARY 29, 1996
DEAR SHAREHOLDER:
The past year was certainly positive for the financial markets. Midway through
1995, the Federal Reserve Board reversed its previously restrictive monetary
policy. As a result, interest rates declined significantly into early 1996.
Inflation remains benign as measured by both the Producer and Consumer Price
Indexes. Both the equity and fixed-income markets were positively impacted by
lower interest rates and strong earnings growth throughout 1995 and early in the
new year.
Gold is responding to growing demand and lower supply. The price of gold broke
out of a tight two-year trading range of $370 to $395 per ounce to trade for up
to $414.70 per ounce in early February before ending the month at $399.90 per
ounce. Other base metal prices (aluminum, copper, nickel) were mixed as global
demand slowed in the second half of 1995 and inventories were liquidated.
PERFORMANCE
For the fiscal year ended February 29, 1996, Dean Witter Natural Resource
Development Securities Inc. produced a total return of 24.32 percent. For the
same period, the Standard & Poor's 500 Composite Stock Price Index (S&P 500)
registered a total return of 34.67 percent. During the period, the Fund
distributed approximately $0.66 per share, including an income dividend of $0.04
per share and long- and short-term capital gains, distributions of $0.46 and
$0.16 per share, respectively. As of February 29, 1996, the Fund had net assets
in excess of $152 million.
The accompanying chart illustrates the growth of a $10,000 investment in the
Fund over the ten-year period ended February 29, 1996, versus the performance of
similar hypothetical investment in the issues that comprise the unmanaged S&P
500. Bear in mind that unlike the Fund, which invests primarily in natural
resource-related industries, the S&P 500 is a broad-based index, of which
natural resource-related issues account for only 18.9 percent of its total
market capitalization.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS FEBRUARY 29, 1996, CONTINUED
ENERGY MARKET OVERVIEW
Oil prices are engaged in a three-way
tug of war between growing demand, lower
inventories and the threat of new supply
coming from Iraq and other non-OPEC
nations. During the fiscal year, spot
oil prices traded in a narrow range of
$17 to $20 per barrel. Many major
integrated oil companies experienced
difficulty as global economies slowed.
In this environment, the Fund continued
to emphasize companies that were working
to cut costs and restructure their
operations, such as Exxon Corp., Mobil
Corp., British Petroleum Co. and Amoco
Corp. The growing influence of
technology has lowered exploration and
production costs to the major integrated
oil companies and has greatly impacted
oil equipment and service companies such
as Schlumberger Ltd., Western Atlas
Inc., Baker Hughes Inc. and
Input/Output, Inc.
NATURAL GAS OVERVIEW
In contrast to oil prices, natural gas
prices trended up during the fiscal
period. Colder than normal temperatures
in both the Northeastern region of the
United States and continental Europe
accelerated the demand for natural gas,
thereby reducing inventories to
unprecedented levels. Low inventory
levels and the replenishing process are
expected to support natural gas prices until next season. As such, drilling
activity has picked up.
INVESTMENT STRATEGY
The Fund's basic industrial investments shifted during the fiscal year to take
advantage of the world's growing economies. According to many analysts,
commodity chemical prices have bottomed and are showing signs of increasing as
demand begins to grow. We believe that the best opportunities in the chemical
industry are with companies that can benefit from higher commodity chemical
prices, such as Dow Chemical Co., Praxair, Inc. and Georgia Gulf Corp.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS FEBRUARY 29, 1996, CONTINUED
In the base metal sector, the situation is somewhat cloudy with aluminum
inventories shrinking, copper inventories rising and additional copper supply
expected later in 1996. On this basis, the Fund's exposure to aluminum and
copper is light at three and two percent, respectively. Gold stocks ended the
fiscal period very strong in response to low real interest rates and growing
demand. On February 29, 1996, gold mining stocks represented six percent of the
Fund's net assets.
IN CONCLUSION
The Fund remains committed to its investment strategy of participating in
companies that look to benefit from rising commodities prices and worldwide
economic growth. Our balanced approach, using a combination of energy and
cyclical stocks, seeks to temper the risk of owning a single commodity, such as
oil or copper, while offering the potential for above-average returns at any
point in the economic cycle.
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,
[SIG]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (92.5%)
BASIC ENERGY (39.2%)
NATURAL GAS - DIVERSIFIED (2.8%)
30,000 Enron Corp.......................... $ 1,098,750
30,000 Sonat, Inc.......................... 1,005,000
25,000 Tenneco Inc......................... 1,396,875
17,000 Williams Companies, Inc............. 807,500
---------------
4,308,125
---------------
NATURAL GAS - EXPLORATION & PRODUCTION (5.1%)
30,000 Anardarko Petroleum Corp............ 1,635,000
55,000 Apache Corp......................... 1,430,000
50,000 Enron Oil & Gas Co.................. 1,250,000
65,000 Enserch Exploration, Inc.*.......... 617,500
20,000 Newfield Exploration Co.*........... 585,000
25,000 Triton Energy Corp. (Canada)*....... 1,240,625
40,000 Union Pacific Resources Group
Inc................................. 1,030,000
---------------
7,788,125
---------------
OIL INTEGRATED - DOMESTIC (7.7%)
30,000 Amerada Hess Corp................... 1,545,000
48,000 Amoco Corp.......................... 3,336,000
30,000 Kerr-McGee Corp..................... 1,788,750
35,000 Phillips Petroleum Co............... 1,225,000
40,000 Unocal Corp......................... 1,200,000
75,000 USX-Marathon Group.................. 1,387,500
60,000 Vintage Petroleum, Inc.............. 1,230,000
---------------
11,712,250
---------------
OIL INTEGRATED - INTERNATIONAL (19.4%)
25,000 British Petroleum Co. PLC (ADR)
(United Kingdom).................... 2,509,375
45,000 Chevron Corp........................ 2,503,125
35,000 Ente Nazionale Idrocarburi SpA (ADR)
Italy*.............................. 1,316,875
85,000 Exxon Corp.......................... 6,757,500
40,000 Imperial Oil Ltd. (F Shares)
(Canada)............................ 1,460,000
50,000 Mobil Corp.......................... 5,481,250
25,000 Royal Dutch Petroleum Co. (ADR)
(Netherlands)....................... 3,443,750
50,000 Texaco, Inc......................... 3,987,500
30,000 Total S.A. (ADR) (France)........... 986,250
60,000 Yacimentos Petroliferos Fiscales
S.A. (ADR) (Argentina).............. 1,162,500
---------------
29,608,125
---------------
OIL INTERNATIONAL - EXPLORATION & PRODUCTION (1.2%)
90,000 Union Texas Petroleum Holdings,
Inc................................. 1,777,500
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
OIL PRODUCTION - DOMESTIC (2.8%)
35,000 Louisiana Land &
Exploration Co...................... $ 1,461,250
40,000 Murphy Oil Corp..................... 1,670,000
30,000 Oryx Energy Co.*.................... 386,250
35,000 Parker & Parsley
Petroleum Co........................ 752,500
---------------
4,270,000
---------------
OIL REFINERIES (0.2%)
10,000 Repsol S.A. (ADR) (Spain)........... 362,500
---------------
TOTAL BASIC ENERGY.................. 59,826,625
---------------
ENERGY DEVELOPMENT & TECHNOLOGY (11.8%)
OIL DRILLING (2.7%)
20,000 Diamond Offshore
Drilling, Inc.*..................... 732,500
35,000 Ensco International Inc.*........... 844,375
25,000 Helmerich & Payne, Inc.............. 837,500
75,000 Rowan Companies, Inc.*.............. 815,625
20,000 Sonat Offshore Drilling, Inc........ 870,000
---------------
4,100,000
---------------
OIL EQUIPMENT & SERVICES (9.1%)
35,000 BJ Services Co.*.................... 966,875
30,000 Baker Hughes Inc.................... 791,250
25,000 Camco International, Inc............ 709,375
25,000 Coflexip S.A. (ADR) (France)........ 437,500
60,000 Core Laboratories NV
(Netherlands)*...................... 600,000
30,000 Dresser Industries, Inc............. 843,750
35,000 Falcon Drilling Company, Inc.*...... 704,375
25,000 Input/Output, Inc.*................. 743,750
35,000 McDermott International, Inc........ 673,750
35,000 Schlumberger Ltd. (Netherlands
Antilles)........................... 2,550,625
25,000 SEACOR Holdings, Inc.*.............. 831,250
25,000 Seitel, Inc.*....................... 646,875
60,000 Smith International, Inc.*.......... 1,222,500
30,000 Weatherford Enterra, Inc............ 918,750
23,000 Western Atlas Inc.*................. 1,210,375
---------------
13,851,000
---------------
TOTAL ENERGY DEVELOPMENT &
TECHNOLOGY.......................... 17,951,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
METALS & BASIC MATERIALS (41.5%)
ALUMINUM (2.8%)
25,000 Alumax Inc.*........................ $ 903,125
40,000 Aluminum Co. of America............. 2,270,000
20,000 Reynolds Metals Co.................. 1,032,500
---------------
4,205,625
---------------
BUILDING MATERIALS (0.8%)
40,000 Masco Corp.......................... 1,140,000
---------------
CHEMICALS - DIVERSIFIED (11.2%)
25,000 Air Products &
Chemicals, Inc...................... 1,331,250
35,000 Dow Chemical Co..................... 2,808,750
65,000 Du Pont (E.I.) de Nemours & Co.,
Inc................................. 4,972,500
25,000 Engelhard Corp...................... 509,375
30,000 First Mississippi Corp.............. 783,750
50,000 Georgia Gulf Corp................... 1,593,750
18,000 Grace (W.R.) & Co................... 1,242,000
22,000 Monsanto Co......................... 2,961,750
25,000 Praxair, Inc........................ 862,500
---------------
17,065,625
---------------
CHEMICALS - SPECIALTY (4.5%)
65,000 Agrium Inc. (Canada)................ 1,002,061
60,000 Calgon Carbon Corp.................. 675,000
40,000 Corning, Inc........................ 1,300,000
15,000 Cytec Industries Inc.*.............. 1,155,000
50,000 Ethyl Corp.......................... 537,500
25,000 IMC Global, Inc..................... 1,031,250
30,000 Morton International, Inc........... 1,136,250
---------------
6,837,061
---------------
COAL (0.6%)
60,000 Hanson PLC (ADR)
(United Kingdom).................... 885,000
---------------
COPPER (1.5%)
40,687 Freeport-McMoran Copper & Gold, Inc.
(Series A).......................... 1,301,984
15,000 Phelps Dodge Corp................... 916,875
---------------
2,218,859
---------------
GOLD MINING (5.9%)
60,000 Barrick Gold Corp. (Canada)......... 1,815,000
45,954 Newmont Mining Corp................. 2,613,634
25,000 Pegasus Gold, Inc.*................. 393,750
60,000 Placer Dome Inc. (Canada)........... 1,695,000
105,000 Santa Fe Pacific Gold Corp.......... 1,640,625
90,000 TVX Gold, Inc. (Canada)*............ 888,750
---------------
9,046,759
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
MACHINERY - CONSTRUCTION & MATERIALS (3.1%)
15,000 Caterpillar, Inc.................... $ 1,003,125
30,000 Deere & Co.......................... 1,173,750
25,000 Fluor Corp.......................... 1,678,125
40,000 Global Industrial
Technologies, Inc.*................. 935,000
---------------
4,790,000
---------------
METALS & MINING (1.2%)
25,000 Inco Ltd. (Canada).................. 796,875
50,000 Stillwater Mining Co.*.............. 1,075,000
---------------
1,871,875
---------------
PAPER & FOREST PRODUCTS (3.8%)
40,000 International Paper Co.............. 1,425,000
50,000 Jefferson Smurfit Corp.*............ 568,750
40,000 Longview Fibre Co................... 650,000
50,000 Louisiana-Pacific Corp.............. 1,156,250
25,000 Temple-Inland Inc................... 1,006,250
25,000 Weyerhaeuser Co..................... 1,059,375
---------------
5,865,625
---------------
RAILROADS (3.6%)
20,000 Burlington Northern Sante Fe
Corp................................ 1,600,000
10,000 Conrail, Inc........................ 721,250
25,000 CSX Corp............................ 1,121,875
30,000 Union Pacific Corp.................. 1,980,000
---------------
5,423,125
---------------
STEEL (0.7%)
10,000 Nucor Corp.......................... 538,750
45,000 Oregon Steel Mills, Inc............. 590,625
---------------
1,129,375
---------------
WASTE DISPOSAL (1.8%)
80,000 Allwaste, Inc.*..................... 350,000
25,000 Browning-Ferris
Industries, Inc..................... 740,625
60,000 WMX Technologies, Inc............... 1,710,000
---------------
2,800,625
---------------
TOTAL METALS & BASIC MATERIALS...... 63,279,554
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $114,540,877)...... 141,057,179
---------------
CONVERTIBLE PREFERRED STOCK (0.6%)
STEEL
20,000 USX Corp. $6.50
(Identified Cost $1,004,910)........ 975,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (2.2%)
REPURCHASE AGREEMENT
$ 3,418 The Bank of New York 5.75% due
03/01/96 (dated 02/29/96; proceeds
$3,418,142; collateralized by
$647,042 Federal Home Loan Mortgage
Corp. 9.50% due 06/01/25 valued at
$678,300, and $2,951,567 Federal
National Mortgage Assoc. 6.36% due
11/01/22 valued at $2,807,648)
(Identified Cost $3,417,596)........ $ 3,417,596
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $118,963,383)
(A)........................... 95.3% 145,449,775
OTHER ASSETS IN EXCESS OF
LIABILITIES................... 4.7 7,211,667
----- ------------
NET ASSETS.................... 100.0% $152,661,442
----- ------------
----- ------------
<FN>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates identified
cost.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $118,963,383)............................ $145,449,775
Receivable for:
Capital stock sold...................................... 6,752,653
Investments sold........................................ 2,471,708
Dividends............................................... 433,387
Foreign withholding taxes reclaimed..................... 22,945
Prepaid expenses............................................ 29,138
------------
TOTAL ASSETS........................................... 155,159,606
------------
LIABILITIES:
Payable for:
Investments purchased................................... 2,095,261
Plan of distribution fee................................ 116,437
Capital stock repurchased............................... 96,912
Investment management fee............................... 74,960
Accrued expenses............................................ 114,594
------------
TOTAL LIABILITIES...................................... 2,498,164
------------
NET ASSETS:
Paid-in-capital............................................. 122,965,473
Net unrealized appreciation................................. 26,486,392
Accumulated undistributed net investment income............. 235,202
Accumulated undistributed net realized gain................. 2,974,375
------------
NET ASSETS............................................. $152,661,442
------------
------------
NET ASSET VALUE PER SHARE,
12,017,301 SHARES OUTSTANDING (500,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$12.70
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 29, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $60,390 foreign withholding tax).......... $ 3,172,448
Interest.................................................... 254,278
-----------
TOTAL INCOME........................................... 3,426,726
-----------
EXPENSES
Plan of distribution fee.................................... 1,369,150
Investment management fee................................... 883,804
Transfer agent fees and expenses............................ 222,760
Shareholder reports and notices............................. 67,979
Professional fees........................................... 43,463
Registration fees........................................... 38,845
Custodian fees.............................................. 28,491
Directors' fees and expenses................................ 22,030
Other....................................................... 6,530
-----------
TOTAL EXPENSES......................................... 2,683,052
-----------
NET INVESTMENT INCOME.................................. 743,674
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 9,657,602
Net change in unrealized appreciation....................... 20,867,725
-----------
NET GAIN............................................... 30,525,327
-----------
NET INCREASE................................................ $31,269,001
-----------
-----------
</TABLE>
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 YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 29, 1996 FEBRUARY 28, 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 743,674 $ 1,091,182
Net realized gain........................................... 9,657,602 4,977,602
Net change in unrealized appreciation....................... 20,867,725 (7,920,860)
----------------- -----------------
NET INCREASE (DECREASE)................................ 31,269,001 (1,852,076)
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (476,340) (1,433,023)
Net realized gain........................................... (7,165,637) (9,652,919)
----------------- -----------------
TOTAL.................................................. (7,641,977) (11,085,942)
----------------- -----------------
Net increase (decrease) from capital stock transactions..... (3,777,196) 6,290,710
----------------- -----------------
TOTAL INCREASE (DECREASE).............................. 19,849,828 (6,647,308)
NET ASSETS:
Beginning of period......................................... 132,811,614 139,458,922
----------------- -----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$235,202 AND DISTRIBUTIONS IN EXCESS OF NET INVESTMENT
INCOME OF $32,132, RESPECTIVELY)........................ $152,661,442 $132,811,614
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996
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.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996, CONTINUED
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 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 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
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996, CONTINUED
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 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 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.
The Distributor has informed the Fund that for the year ended February 29, 1996,
it received approximately $185,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended February 29, 1996 aggregated
$66,474,179 and $87,368,509, respectively.
For the year ended February 29, 1996, the Fund incurred brokerage commissions of
$88,566 with DWR for portfolio transactions executed on behalf of the Fund.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996, CONTINUED
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 29, 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. Aggregate pension costs for the year ended February 29,
1996 included in Directors' fees and expenses in the Statement of Operations
amounted to $5,556. At February 29, 1996, the Fund had an accrued pension
liability of $51,995 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 29, 1996 FEBRUARY 28, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 17,740,630 $ 213,549,836 8,003,288 $ 91,308,700
Reinvestment of dividends and distributions...................... 587,535 7,130,881 943,312 10,339,857
----------- -------------- ----------- ------------
18,328,165 220,680,717 8,946,600 101,648,557
Repurchased...................................................... (18,637,754) (224,457,913) (8,419,961) (95,357,847)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... (309,589) $ (3,777,196) 526,639 $ 6,290,710
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</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 YEAR ENDED FEBRUARY 28
----------------------------------------------------------------------------------------
1996* 1995 1994 1993 1992* 1991 1990 1989 1988* 1987
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 10.77 $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46 $ 9.10 $ 7.43
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment
income.......... 0.06 0.09 0.09 0.16 0.20 0.25 0.30 0.23 0.20 0.14
Net realized and
unrealized gain
(loss).......... 2.53 (0.24) 1.25 1.18 (0.44) 0.02 1.80 0.72 0.44 1.75
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from
investment
operations...... 2.59 (0.15) 1.34 1.34 (0.24) 0.27 2.10 0.95 0.64 1.89
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less dividends
and
distributions
from:
Net investment
income........ (0.04) (0.12) (0.09) (0.18) (0.20) (0.28) (0.32) (0.21) (0.28) (0.22)
Net realized
gain.......... (0.62) (0.78) (0.79) -- (0.39) (0.29) (0.38) (0.27) -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total dividends
and
distributions... (0.66) (0.90) (0.88) (0.18) (0.59) (0.57) (0.70) (0.48) (0.28) (0.22)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value,
end of period... $ 12.70 $ 10.77 $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46 $ 9.10
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT
RETURN+.......... 24.32% (1.26)% 12.16% 13.31% (1.91)% 2.87% 21.11% 10.29% 7.32% 26.21%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.90% 1.90% 1.91% 1.96% 1.93% 1.80% 1.81% 1.92% 1.81% 1.74%
Net investment
income.......... 0.52% 0.77% 0.73% 1.46% 1.67% 2.28% 2.57% 2.09% 2.14% 2.61%
SUPPLEMENTAL DATA:
Net assets, end
of period, in
thousands....... $152,661 $132,812 $139,459 $118,496 $113,145 $150,636 $154,741 $136,911 $171,725 $82,985
Portfolio
turnover rate... 49% 59% 69% 52% 31% 29% 22% 7% 26% 14%
<FN>
- ---------------------
* Year ended February 29.
+ Does not reflect the deduction of sales charge.
</TABLE>
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 29, 1996, 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 29, 1996 by correspondence with the
custodian and brokers, and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
APRIL 12, 1996
- --------------------------------------------------------------------------------
1996 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended February 29, 1996, the Fund paid to its
shareholders $0.46 per share from long-term capital gains. For
such period, 86.38% of the income paid qualified for the dividends
received deduction available to corporations.
<PAGE>
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
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
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and directors,
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.
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES
[Graphic]
ANNUAL REPORT
FEBRUARY 29, 1996
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES
GROWTH OF $10,000
DATE TOTAL S&P 500
February 28, 1986 $10,000 $10,000
February 28, 1987 $12,621 $12,951
February 29, 1988 $13,545 $12,598
February 28, 1989 $14,939 $14,089
February 28, 1990 $18,092 $16,744
February 28, 1991 $18,611 $19,199
February 29, 1992 $18,255 $22,275
February 28, 1993 $20,686 $24,647
February 28, 1994 $23,201 $26,695
February 28, 1995 $22,907 $28,659
February 29, 1996 $28,479(3) $38,594
AVERAGE ANNUAL TOTAL RETURN (FUND)
1 YEAR 5 YEARS 10 YEARS
24.32%(1) 8.88%(1) 11.03%(1)
19.32%(2) 8.59%(2) 11.03%(2)
_______ Fund _______ S&P 500 (4)
Past performance is not predictive of future returns.
- ----------------------------------------
(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 29, 1996.
(4) The Standard & Poor's 500 Composite Stock Price Index (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 performance of the index does not
include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
