<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC. TWO WORLD TRADE
CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS FEBRUARY 28, 1998
DEAR SHAREHOLDER:
During the fiscal year ended February 28, 1998, an unusual combination of
macroeconomic circumstances pushed most commodity prices lower. Currency
problems in Asia impaired demand-growth expectations for the region over the
short term and, while this event by itself might have sufficed to weaken prices,
it coincided with the Pacific weather pattern known as El Nino, which resulted
in milder-than-average winter temperatures in the Northern Hemisphere, thereby
reducing demand for heating fuel. Overall economic news continued to be
disinflationary.
As demand moderated, companies engaged in the production, processing and
marketing of energy, industrial metals, precious metals, paper products,
chemicals and related services operated in an environment of relatively abundant
supply. In November 1997 the Organization of Petroleum Exporting Countries
(OPEC) increased its stated production ceiling. In all likelihood, this decision
was made to legitimize actual production at the time and reflected OPEC's belief
that the new quota could be absorbed. However, the announcement was made just as
the markets were digesting the magnitude of the Asian crisis and was not well
received. Finally, the United Nations entered into an agreement with Iraq to
significantly increase "oil for food" transactions. This combination of events
convinced the markets that supply would exceed demand by nearly 1.5 percent over
the short term.
PERFORMANCE AND PORTFOLIO
In this environment the Fund underperformed the broad market but posted a very
attractive return relative to its Lipper peer group. For the fiscal year ended
February 28, 1998, the Fund's Class B shares posted a total return of 16.93
percent versus 34.98 percent for the Standard & Poor's 500 Composite Stock Price
Index (S&P 500) and 0.92 percent for the Lipper Natural Resources Funds Average.
From their inception on July 28, 1997, through February 28, 1998, the Fund's
Class A, C and D shares had total returns of -0.22 percent, -0.64 percent and
- -0.08 percent, respectively. Performance of the Fund's four classes varies
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS FEBRUARY 28, 1998, CONTINUED
because of differing sales charges and expenses. The accompanying chart compares
the performance of the Fund versus the performances of the S&P 500 and the
Lipper Average.
The Fund remained well diversified and fully invested with approximately 40
percent of net assets invested in diversified basic industries, 57 percent in
energy and related services, and the remaining 3 percent in cash. During the
period, the Fund trimmed its positions in Veritas DGC Inc., Nucor Corp.,
Ashland, Inc. and Tosco Corp. to gain more exposure to companies where we
perceived greater opportunity. The Fund thus increased its positions in Mobil
Corp., Union Pacific Resources Group, Inc., Bethlehem Steel Corp., Parker
Drilling Co., Dow Chemical Co., Precision Drilling Corp., Global Marine, Inc.,
Avery Dennison Corp., Armstrong World Industries, Inc., Sigma-Aldrich Corp. and
Phelps Dodge Corp.
LOOKING AHEAD
We believe that consumption patterns will return to the improving trend in place
over the past decade. Such a resumption, along with a tighter supply-demand
balance, should aid prices, profits and resource-related securities over the
coming year. The Fund is currently well positioned to benefit from such a
scenario.
We appreciate your continued support of Dean Witter Natural Resource Development
Securities Inc. and look forward to continuing to serve your investment needs.
Sincerely,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FUND PERFORMANCE FEBRUARY 28, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH OF $10,000--CLASS B SHARES
($ IN THOUSANDS) FUND S&P 500(4) LIPPER (5)
<S> <C> <C> <C>
February-1988 $10,000 $10,000 $10,000
February-1989 $11,029 $11,183 $11,239
February-1990 $13,357 $13,291 $13,686
February-1991 $13,740 $15,239 $13,473
February-1992 $13,478 $17,681 $13,047
February-1993 $15,272 $19,564 $14,345
February-1994 $17,129 $21,189 $17,015
February-1995 $16,912 $22,748 $16,038
February-1996 $21,026 $30,632 $20,117
February-1997 $25,417 $38,650 $24,524
February-1998 $29,719(3) $52,170 $24,750
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS
A, CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B
SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
- ------------------------------------------------------------------------------------------------------------------
CLASS B SHARES** CLASS A SHARES+
- -------------------------------------------------- ----------------------------------------------------------
PERIOD ENDED 2/28/98 PERIOD ENDED 2/28/98
- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1 Year 16.93%(1) 11.93%(2) Since Inception (7/28/97) (0.22)%(1) (5.46)%(2)
5 Years 14.24(1) 14.01(2)
10 Years 11.51(1) 11.51(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES++
- -------------------------------------------------------- -------------------------------------------------------------
PERIOD ENDED 2/28/98 PERIOD ENDED 2/28/98
- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
Since Inception (7/28/97) (0.64)%(1) (1.60)%(2) Since Inception (7/28/97) (0.08)%(1)
</TABLE>
- ------------------------
(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 sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on February 28, 1998.
(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.
(5) The Lipper Natural Resources Funds Average tracks the performance of all
funds which invest more than 65% of their equity commitment in natural
resource stocks, as reported by Lipper Analytical Services, Inc.
* For periods of less than one year, the Fund quotes its total return on a
non-annualized basis.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.00%. The
CDSC declines to 0% after six years.
+ The maximum front-end sales charge for Class A is 5.25%.
++ The maximum contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
++ Class D shares have no sales charge.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (96.7%)
BASIC ENERGY (40.8%)
NATURAL GAS (10.5%)
40,000 Anardarko Petroleum Corp........................................................... $ 2,580,000
80,000 Apache Corp........................................................................ 2,720,000
55,000 Cabot Oil & Gas Corp. (Class A).................................................... 1,155,000
35,000 Devon Energy Corp.................................................................. 1,192,186
47,500 El Paso Natural Gas Co............................................................. 3,152,812
60,000 Enron Corp......................................................................... 2,820,000
100,000 Gulf Canada Resources, Ltd. (Canada)*.............................................. 587,500
5,000 NGC Corp........................................................................... 77,500
10,000 Noble Affiliates, Inc.............................................................. 390,000
22,500 Nuevo Energy Co.*.................................................................. 807,187
57,600 Numac Energy Inc. (Canada)*........................................................ 228,571
40,000 Petro-Canada (Canada).............................................................. 741,677
40,000 Questar Corp....................................................................... 1,700,000
65,000 Sonat, Inc......................................................................... 2,803,125
60,000 Tenneco, Inc....................................................................... 2,467,500
60,000 United Meridian Corp.*............................................................. 1,638,750
160,000 Williams Companies, Inc............................................................ 5,230,000
------------
30,291,808
------------
NATURAL GAS - DISTRIBUTION (0.1%)
42,000 EEX Corp.*......................................................................... 359,625
------------
NATURAL GAS - DIVERSIFIED (0.1%)
17,500 Forcenergy Inc.*................................................................... 390,469
------------
NATURAL GAS - EXPLORATION & PRODUCTION (4.6%)
80,000 Barrett Resources Corp.*........................................................... 2,425,000
70,000 Burlington Resources, Inc.......................................................... 3,132,500
50,000 Chieftain International, Inc.*..................................................... 1,087,500
45,000 KN Energy, Inc..................................................................... 2,337,187
194,831 Ranger Oil Ltd. (Canada)........................................................... 1,254,225
50,000 St. Mary Land & Exploration Co..................................................... 1,812,500
71,500 Swift Energy Co.*.................................................................. 1,282,531
------------
13,331,443
------------
NATURAL GAS - PIPELINES (0.2%)
50,000 Edge Petroleum Co.*................................................................ 518,750
------------
OIL & GAS (1.0%)
50,000 Lomak Petroleum, Inc............................................................... 828,125
40,000 Newfield Exploration Co............................................................ 960,000
55,000 Union Pacific Resources Group, Inc................................................. 1,230,625
------------
3,018,750
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL & GAS - REFINING & MARKETING (0.1%)
10,000 Sun Company, Inc................................................................... $ 399,375
------------
OIL & GAS DRILLING (0.6%)
40,000 Parker Drilling Co.*............................................................... 440,000
20,000 Precision Drilling Corp. (Class A) (Canada)*....................................... 368,750
25,000 Santa Fe International Corp........................................................ 885,937
------------
1,694,687
------------
OIL & GAS PRODUCTS (0.3%)
40,000 Enron Oil & Gas Co................................................................. 855,000
------------
OIL - DOMESTIC (0.3%)
42,500 Union Texas Petroleum Holdings, Inc................................................ 857,969
------------
OIL INTEGRATED - DOMESTIC (7.0%)
65,000 Amerada Hess Corp.................................................................. 3,855,313
105,000 Occidental Petroleum Corp.......................................................... 2,684,063
65,000 Oryx Energy Co.*................................................................... 1,653,438
65,000 Phillips Petroleum Co.............................................................. 3,185,000
25,000 Snyder Oil Corp.................................................................... 465,625
70,000 Unocal Corp........................................................................ 2,638,125
80,000 USX-Marathon Group................................................................. 2,765,000
80,000 Vintage Petroleum, Inc............................................................. 1,605,000
105,000 Wiser Oil Co....................................................................... 1,338,750
------------
20,190,314
------------
OIL INTEGRATED - INTERNATIONAL (15.4%)
35,000 Amoco Corp......................................................................... 2,975,000
66,000 British Petroleum Co. PLC (ADR) (United Kingdom)................................... 5,457,375
45,000 Ente Nazionale Idrocarburi SPA (ADR) (Italy)....................................... 2,643,750
120,000 Exxon Corp......................................................................... 7,665,000
95,000 Mobil Corp......................................................................... 6,881,563
112,000 Royal Dutch Petroleum Co. (ADR) (Netherlands)...................................... 6,083,000
95,000 Texaco, Inc........................................................................ 5,302,188
75,000 Total S.A. (ADR) (France).......................................................... 4,148,438
95,000 Yacimentos Petroliferos Fiscales S.A. (ADR) (Class D) (Argentina).................. 3,004,375
------------
44,160,689
------------
OIL - INTERNATIONAL (0.6%)
20,000 Chevron Corp....................................................................... 1,622,500
------------
TOTAL BASIC ENERGY................................................................. 117,691,379
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY DEVELOPMENT &
TECHNOLOGY (16.3%)
OIL DRILLING (2.0%)
40,000 Marine Drilling Company, Inc.*..................................................... $ 715,000
25,000 Noble Drilling Corp.*.............................................................. 709,375
90,000 Rowan Companies, Inc.*............................................................. 2,536,875
40,000 Transocean Offshore, Inc........................................................... 1,720,000
------------
5,681,250
------------
OIL DRILLING & SERVICES (0.5%)
20,000 ENSCO International, Inc........................................................... 582,500
30,000 Global Marine, Inc.*............................................................... 695,625
20,000 Offshore Logistics, Inc.*.......................................................... 352,500
------------
1,630,625
------------
OIL EQUIPMENT & SERVICES (12.5%)
70,000 American Oilfield Divers, Inc.*.................................................... 822,500
60,000 Baker Hughes, Inc.................................................................. 2,456,250
40,000 Camco International, Inc........................................................... 2,340,000
70,000 Cooper Cameron Corp.*.............................................................. 3,753,750
139,400 Dawson Production Services, Inc.*.................................................. 1,655,375
75,000 Dresser Industries, Inc............................................................ 3,351,563
15,000 Eagle Geophysical, Inc.*........................................................... 202,500
110,000 Global Industries Ltd.*............................................................ 1,870,000
60,000 Halliburton Co..................................................................... 2,790,000
25,000 Lone Star Technologies, Inc.*...................................................... 775,000
65,000 Nabors Industries, Inc............................................................. 1,486,875
10,000 Pride International, Inc.*......................................................... 228,125
88,500 R & B Falcon Corp*................................................................. 2,345,250
46,000 Schlumberger, Ltd.................................................................. 3,467,250
130,000 Varco International, Inc.*......................................................... 3,233,750
65,000 Veritas DGC Inc.*.................................................................. 2,685,313
70,000 Weatherford Enterra, Inc.*......................................................... 2,423,750
------------
35,887,251
------------
TRANSPORTATION (0.5%)
30,000 Teekay Shipping Corp............................................................... 954,375
30,000 Trico Marine Service, Inc.*........................................................ 558,750
------------
1,513,125
------------
UTILITIES - GAS (0.8%)
40,000 Consolidated Natural Gas Co........................................................ 2,300,000
------------
TOTAL ENERGY DEVELOPMENT & TECHNOLOGY.............................................. 47,012,251
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
METALS & BASIC MATERIALS (39.6%)
ALUMINUM (3.7%)
30,000 Alcan Aluminium Ltd. (Canada)...................................................... $ 931,875
100,000 Alumax Inc.*....................................................................... 3,706,250
55,000 Aluminum Co. of America............................................................ 4,035,625
35,000 Reynolds Metals Co................................................................. 2,180,937
------------
10,854,687
------------
BUILDING MATERIALS (1.7%)
40,000 Armstrong World Industries Inc..................................................... 3,140,000
30,000 Southdown, Inc..................................................................... 1,920,000
------------
5,060,000
------------
CHEMICALS (9.0%)
60,000 Avery Dennison Corp................................................................ 3,030,000
30,000 BetzDearborn, Inc.................................................................. 1,925,625
40,000 Dow Chemical Co.................................................................... 3,660,000
50,000 Du Pont (E.I.) De Nemours & Co., Inc............................................... 3,065,625
65,000 Hercules, Inc...................................................................... 3,140,312
25,000 Imperial Chemical Industries PLC (ADR) (United Kingdom)............................ 1,828,125
90,000 Monsanto Co........................................................................ 4,578,750
60,000 Olin Corp.......................................................................... 2,748,750
20,000 Rohm & Haas Co..................................................................... 2,038,750
------------
26,015,937
------------
CHEMICALS - SPECIALTY (6.0%)
75,000 Cabot Corp......................................................................... 2,643,750
73,500 Calgon Carbon Corp................................................................. 955,500
100,000 Cytec Industries, Inc.*............................................................ 4,887,500
35,000 Dexter Corp........................................................................ 1,421,875
70,000 IMC Global, Inc.................................................................... 2,673,125
40,000 Morton International, Inc.......................................................... 1,322,500
45,000 Sigma-Aldrich Corp................................................................. 1,777,500
65,000 Stolt Comex Seaway, S.A. (United Kingdom)*......................................... 1,568,125
------------
17,249,875
------------
CONTAINERS - PAPER (1.0%)
50,000 Union Camp Corp.................................................................... 2,987,500
------------
ELECTRICAL EQUIPMENT (0.6%)
50,000 UCAR International, Inc............................................................ 1,721,875
------------
GOLD (2.0%)
145,000 Barrick Gold Corp. (Canada)........................................................ 2,800,312
60,000 Getchell Gold Corp.*............................................................... 1,117,500
60,954 Newmont Mining Corp................................................................ 1,763,856
------------
5,681,668
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HOME BUILDING (0.8%)
30,000 Centex Corp........................................................................ $ 2,191,875
------------
HOUSEHOLD APPLIANCES (0.8%)
50,000 American Standard Companies, Inc.*................................................. 2,225,000
------------
MACHINERY - CONSTRUCTION & MATERIALS (1.1%)
60,000 Kennametal, Inc.................................................................... 3,157,500
------------
MACHINERY - DIVERSIFIED (2.7%)
30,000 Deere & Co......................................................................... 1,683,750
50,000 EVI, Inc.*......................................................................... 2,453,125
40,000 Ingersoll-Rand Co.................................................................. 1,905,000
40,000 Parker-Hannifin Corp............................................................... 1,865,000
------------
7,906,875
------------
METALS & MINING (0.5%)
20,000 Case Corp.......................................................................... 1,301,250
------------
METALS - MISCELLANEOUS (1.8%)
80,687 Freeport-McMoran Copper & Gold, Inc. (Class A)..................................... 1,159,876
45,000 Phelps Dodge Corp.................................................................. 2,857,500
22,000 Rio Tinto PLC (ADR) (United Kingdom)............................................... 1,215,500
------------
5,232,876
------------
PAPER & FOREST PRODUCTS (5.8%)
50,000 Boise Cascade Corp................................................................. 1,665,625
40,000 Bowater, Inc....................................................................... 1,980,000
100,000 Buckeye Technologies Inc.*......................................................... 2,131,250
50,000 Champion International Corp........................................................ 2,553,125
100,000 Mead Corp.......................................................................... 3,418,750
40,000 Temple-Inland, Inc................................................................. 2,385,000
70,000 Willamette Industries, Inc......................................................... 2,585,625
------------
16,719,375
------------
POLLUTION CONTROL (1.0%)
80,000 Allied Waste Industries, Inc.*..................................................... 1,720,000
35,500 Casella Waste Systems Inc. (Class A)*.............................................. 863,094
------------
2,583,094
------------
STEEL (1.1%)
90,000 Bethlehem Steel Corp.*............................................................. 956,250
30,000 Reliance Steel & Aluminium Co...................................................... 1,057,500
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
60,000 Steel Dynamics, Inc.*.............................................................. $ 1,132,500
------------
3,146,250
------------
TOTAL METALS & BASIC MATERIALS..................................................... 114,035,637
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $239,120,408)..................................................... 278,739,267
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENT (2.7%)
REPURCHASE AGREEMENT
$7,854 The Bank of New York 5.4375% due
03/02/98 (dated 02/27/98;
proceeds $7,857,253) (a)
(IDENTIFIED COST $7,853,694).... 7,853,694
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $246,974,102) (b)........................................................ 99.4 % 286,592,961
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.6 1,697,791
------ -------------
NET ASSETS................................................................................ 100.0 % $ 288,290,752
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $5,527,919 Federal National Mortgage Assoc. 6.54% due
12/09/02 valued at $5,627,082 and $2,308,013 U.S. Treasury Note 5.875% due
08/31/99 valued at $2,383,686.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $50,389,756 and the
aggregate gross unrealized depreciation is $10,770,897, resulting in net
unrealized appreciation of $39,618,859.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $246,974,102).............................................................. $286,592,961
Receivable for:
Capital stock sold........................................................................ 1,906,431
Dividends................................................................................. 524,608
Prepaid expenses and other assets............................................................. 96,368
------------
TOTAL ASSETS............................................................................. 289,120,368
------------
LIABILITIES:
Payable for:
Capital stock repurchased................................................................. 371,923
Plan of distribution fee.................................................................. 215,144
Investment management fee................................................................. 137,444
Accrued expenses.............................................................................. 105,105
------------
TOTAL LIABILITIES........................................................................ 829,616
------------
NET ASSETS............................................................................... $288,290,752
------------
------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $246,736,338
Net unrealized appreciation................................................................... 39,618,855
Net investment loss........................................................................... (49,179)
Accumulated undistributed net realized gain................................................... 1,984,738
------------
NET ASSETS............................................................................... $288,290,752
------------
------------
CLASS A SHARES:
Net Assets.................................................................................... $308,961
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 22,281
NET ASSET VALUE PER SHARE................................................................ $13.87
------------
------------
MAXIMUM OFFERING PRICE
PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)........................................ $14.64
------------
------------
CLASS B SHARES:
Net Assets.................................................................................... $273,332,706
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 19,790,988
NET ASSET VALUE PER SHARE................................................................ $13.81
------------
------------
CLASS C SHARES:
Net Assets.................................................................................... $1,488,183
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 107,779
NET ASSET VALUE PER SHARE................................................................ $13.81
------------
------------
CLASS D SHARES:
Net Assets.................................................................................... $13,160,902
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 947,564
NET ASSET VALUE PER SHARE................................................................ $13.89
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1998*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $114,907 foreign withholding tax)............................................ $ 4,122,333
Interest....................................................................................... 651,978
-----------
TOTAL INCOME.............................................................................. 4,774,311
-----------
EXPENSES
Plan of distribution fee (Class A shares)...................................................... 296
Plan of distribution fee (Class B shares)...................................................... 2,789,293
Plan of distribution fee (Class C shares)...................................................... 3,825
Investment management fee...................................................................... 1,752,565
Transfer agent fees and expenses............................................................... 366,157
Registration fees.............................................................................. 56,061
Shareholder reports and notices................................................................ 51,371
Professional fees.............................................................................. 44,893
Custodian fees................................................................................. 34,102
Directors' fees and expenses................................................................... 20,766
Other.......................................................................................... 6,707
-----------
TOTAL EXPENSES............................................................................ 5,126,036
-----------
NET INVESTMENT LOSS....................................................................... (351,725)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain.............................................................................. 13,069,671
Net change in unrealized appreciation.......................................................... 28,945,843
-----------
NET GAIN.................................................................................. 42,015,514
-----------
NET INCREASE................................................................................... $41,663,789
-----------
-----------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
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 28, FEBRUARY 28,
1998* 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)................................ $ (351,725) $ 102,912
Net realized gain........................................... 13,069,671 49,178,705
Net change in unrealized appreciation....................... 28,945,843 (15,813,380)
-------------- --------------
NET INCREASE........................................... 41,663,789 33,468,237
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class B shares.......................................... (105,075) (287,205)
Net realized gain
Class A shares.......................................... (9,967) --
Class B shares.......................................... (32,041,346) (30,377,434)
Class C shares.......................................... (36,377) --
Class D shares.......................................... (416,177) --
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................... (32,608,942) (30,664,639)
-------------- --------------
Net increase from capital stock transactions................ 31,247,222 92,523,643
-------------- --------------
NET INCREASE........................................... 40,302,069 95,327,241
NET ASSETS:
Beginning of period......................................... 247,988,683 152,661,442
-------------- --------------
END OF PERIOD
(INCLUDING A NET INVESTMENT LOSS OF $49,179 AND
UNDISTRIBUTED NET INVESTMENT INCOME OF $50,909,
RESPECTIVELY)........................................... $ 288,290,752 $ 247,988,683
-------------- --------------
-------------- --------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998
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 and commenced operations on March 30, 1981. On
July 28, 1997, the Fund commenced offering three additional classes of shares,
with the then current shares, other than shares which were purchased prior to
July 2, 1984 (and with respect to such shares, certain shares acquired through
reinvestment of dividends and capital gains distributions (collectively the "Old
Shares")), designated as Class B shares. The Old Shares have been designated
Class D shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
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, American or other domestic or foreign 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 (in
cases where securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Directors); (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 Dean Witter InterCapital Inc. (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
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998, CONTINUED
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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
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 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.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998, CONTINUED
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with 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. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class B
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets of
Class B; and (iii) Class C -- up to 1.0% of the average daily net assets of
Class C. In the case of Class A shares, amounts paid under the Plan are paid to
the Distributor for services provided. In the case of Class B and Class C
shares, amounts paid under the Plan are paid to the Distributor for services
provided and the expenses borne by it and others in the distribution of the
shares of these Classes, including the payment of commissions for sales of these
Classes 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 others who engage in or support distribution of the 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 these shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998, CONTINUED
In addition, the Distributor may utilize fees paid pursuant to the Plan, in the
case of Class B shares, to compensate DWR and other selected broker-dealers for
their opportunity costs in advancing such amounts, which compensation would be
in the form of a carrying charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. 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 investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $6,431,607 at February 28, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to account executives may be reimbursed in the subsequent
calendar year. For the period ended February 28, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended February 28, 1998,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $372,894 and $885, respectively and
received approximately $18,000 in front-end sales charges from sales of the
Fund's Class A shares. The respective 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 year ended February 28, 1998 aggregated
$192,577,973 and $182,627,112, respectively.
For the year ended February 28, 1998, the Fund incurred brokerage commissions of
$129,925 with DWR for portfolio transactions executed on behalf of the Fund.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998, CONTINUED
For the period May 31, 1997 through February 28, 1998, the Fund incurred $4,800
in brokerage commissions with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager since May 31, 1997, for portfolio transactions executed on
behalf of the Fund.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent. At February 28, 1998, the Fund had transfer agent
fees and expenses payable of approximately $2,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors 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 28, 1998
included in Directors' fees and expenses in the Statement of Operations amounted
to $3,423. At February 28, 1998, the Fund had an accrued pension liability of
$49,176 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 FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 1998+ FEBRUARY 28, 1997
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold............................................................. 27,229 $ 407,922 -- --
Reinvestment of distributions.................................... 673 8,808 -- --
Redeemed......................................................... (5,621) (78,162) -- --
----------- -------------- ----------- ------------
Net increase - Class A........................................... 22,281 338,568 -- --
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 17,476,686 251,041,315 24,642,984 $344,947,391
Reinvestment of dividends and distributions...................... 2,235,739 29,908,674 2,080,543 28,455,203
Redeemed......................................................... (17,865,123) (255,937,003) (20,151,281) (280,878,951)
----------- -------------- ----------- ------------
Net increase - Class B........................................... 1,847,302 25,012,986 6,572,246 92,523,643
----------- -------------- ----------- ------------
CLASS C SHARES*
Sold............................................................. 214,875 2,958,438 -- --
Reinvestment of distributions.................................... 2,477 32,320 -- --
Redeemed......................................................... (109,573) (1,457,551)
----------- -------------- ----------- ------------
Net increase - Class C........................................... 107,779 1,533,207 -- --
----------- -------------- ----------- ------------
CLASS D SHARES*
Sold............................................................. 292,553 4,265,324 -- --
Reinvestment of distributions.................................... 30,695 402,418 -- --
Redeemed......................................................... (21,545) (305,281) -- --
----------- -------------- ----------- ------------
Net increase - Class D........................................... 301,703 4,362,461 -- --
----------- -------------- ----------- ------------
Net increase in Fund............................................. 2,279,065 $ 31,247,222 6,572,246 $ 92,523,643
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
- ---------------------
+ On July 28, 1997, 645,861 shares representing $9,326,226 were transferred
to Class D.
* For the period July 28, 1997 (issue date) through February 28, 1998.
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998, CONTINUED
6. FEDERAL INCOME TAX STATUS
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $621,000 during fiscal 1998.
As of February 28, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales and
permanent book/tax differences primarily attributable to a net operating loss.
To reflect reclassifications arising from the permanent differences, accumulated
undistributed net realized gain was charged and net investment loss was credited
$356,712.
<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
----------------------------------------------------------------------------------------
1998*++ 1997 1996** 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $ 13.34 $ 12.70 $ 10.77 $ 11.82 $ 11.36 $ 10.20
------ ------ ------ ------ ------ ------
Net investment income
(loss)....................... (0.02) -- 0.06 0.09 0.09 0.16
Net realized and unrealized
gain (loss).................. 2.18 2.66 2.53 (0.24) 1.25 1.18
------ ------ ------ ------ ------ ------
Total from investment
operations................... 2.16 2.66 2.59 (0.15) 1.34 1.34
------ ------ ------ ------ ------ ------
Less dividends and
distributions from:
Net investment income...... (0.01) (0.02) (0.04) (0.12) (0.09) (0.18)
Net realized gain.......... (1.68) (2.00) (0.62) (0.78) (0.79) --
------ ------ ------ ------ ------ ------
Total dividends and
distributions................ (1.69) (2.02) (0.66) (0.90) (0.88) (0.18)
------ ------ ------ ------ ------ ------
Net asset value, end of
period....................... $ 13.81 $ 13.34 $ 12.70 $ 10.77 $ 11.82 $ 11.36
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN+...... 16.93% 20.88% 24.32% (1.26)% 12.16% 13.31%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 1.80% 1.84% 1.90% 1.90% 1.91% 1.96%
Net investment income
(loss)....................... (0.15)% 0.05% 0.52% 0.77% 0.73% 1.46%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.................... $ 273,333 $ 247,989 $ 152,661 $ 132,812 $ 139,459 $ 118,496
Portfolio turnover rate....... 67% 156% 49% 59% 69% 52%
Average commission rate
paid......................... $ 0.0485 $ 0.0534 -- -- -- --
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 28
----------------------------------------------------------
1992** 1991 1990 1989
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $ 11.03 $ 11.33 $ 9.93 $ 9.46
------ ------ ------ ------
Net investment income
(loss)....................... 0.20 0.25 0.30 0.23
Net realized and unrealized
gain (loss).................. (0.44) 0.02 1.80 0.72
------ ------ ------ ------
Total from investment
operations................... (0.24) 0.27 2.10 0.95
------ ------ ------ ------
Less dividends and
distributions from:
Net investment income...... (0.20) (0.28) (0.32) (0.21)
Net realized gain.......... (0.39) (0.29) (0.38) (0.27)
------ ------ ------ ------
Total dividends and
distributions................ (0.59) (0.57) (0.70) (0.48)
------ ------ ------ ------
Net asset value, end of
period....................... $ 10.20 $ 11.03 $ 11.33 $ 9.93
------ ------ ------ ------
------ ------ ------ ------
TOTAL INVESTMENT RETURN+...... (1.91)% 2.87% 21.11% 10.29%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 1.93% 1.80% 1.81% 1.92%
Net investment income
(loss)....................... 1.67% 2.28% 2.57% 2.09%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.................... $ 113,145 $ 150,636 $ 154,741 $ 136,911
Portfolio turnover rate....... 31% 29% 22% 7%
Average commission rate
paid......................... -- -- -- --
</TABLE>
- ---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares which were purchased
prior to July 2, 1984 (and with respect to such shares, certain shares
acquired through reinvestment of dividends and capital gains distributions
(collectively the "Old Shares")), have been designated Class B shares. The
Old Shares have been designated Class D shares.
** Year ended February 29.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
FEBRUARY 28,
1998++
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 14.44
------
Net investment income................................................. 0.04
Net realized and unrealized gain...................................... (0.10)
------
Total from investment operations...................................... (0.06)
------
Less distributions from net realized gain............................. (0.51)
------
Net asset value, end of period........................................ $ 13.87
------
------
TOTAL INVESTMENT RETURN+.............................................. (0.22)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.11%(2)
Net investment income................................................. 0.45%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $309
Portfolio turnover rate............................................... 67%(1)
Average commission rate paid.......................................... $0.0485
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 14.44
------
Net investment loss................................................... (0.02)
Net realized and unrealized gain...................................... (0.10)
------
Total from investment operations...................................... (0.12)
------
Less distributions from net realized gain............................. (0.51)
------
Net asset value, end of period........................................ $ 13.81
------
------
TOTAL INVESTMENT RETURN+.............................................. (0.64)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.87%(2)
Net investment loss................................................... (0.23)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $1,488
Portfolio turnover rate............................................... 67%(1)
Average commission rate paid.......................................... $0.0485
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
FEBRUARY 28,
1998++
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 14.44
------
Net investment income................................................. 0.07
Net realized and unrealized gain...................................... (0.11)
------
Total from investment operations...................................... (0.04)
------
Less distributions from net realized gain............................. (0.51)
------
Net asset value, end of period........................................ $ 13.89
------
------
TOTAL INVESTMENT RETURN+.............................................. (0.08)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.84%(2)
Net investment income................................................. 0.82%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $13,161
Portfolio turnover rate............................................... 67%(1)
Average commission rate paid.......................................... $0.0485
</TABLE>
- ---------------------
* The date shares were first issued. Shareholders who held shares of the Fund
prior to July 28, 1997 (the date the Fund converted to a multiple class
share structure) should refer to the Financial Highlights of Class B to
obtain the historical per share data and ratio information of their shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Natural Resource
Development Securities Inc. (the "Fund") at February 28, 1998, 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 periods presented, 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 at February 28, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
APRIL 13, 1998
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FEDERAL TAX NOTICE (UNAUDITED)
1998 FEDERAL TAX NOTICE
For the year ended February 28, 1998, the Fund paid to shareholders the
following per share amounts from long-term capital gains. These distributions
are taxable as 28% rate gains or 20% rate gains, as indicated below:
<TABLE>
<CAPTION>
PER SHARE
----------
CLASS A
----------
<S> <C>
Portion of long-term capital gains taxable as:
28% rate gain......................................................................................................... $0.23
20% rate gain......................................................................................................... 0.08
-----
Total................................................................................................................... $0.31
-----
-----
<CAPTION>
CLASS B
----------
<S> <C>
Portion of long-term capital gains taxable as:
28% rate gain......................................................................................................... $0.83
20% rate gain......................................................................................................... 0.08
-----
Total................................................................................................................... $0.91
-----
-----
<CAPTION>
CLASS C
----------
Portion of long-term capital gains taxable as:
28% rate gain......................................................................................................... $0.23
20% rate gain......................................................................................................... 0.08
-----
Total................................................................................................................... $0.31
-----
-----
<CAPTION>
CLASS D
----------
Portion of long-term capital gains taxable as:
28% rate gain......................................................................................................... $0.23
20% rate gain......................................................................................................... 0.08
-----
Total................................................................................................................... $0.31
-----
-----
</TABLE>
For the year ended February 28, 1998, 23.42% of the income dividends qualified
for the dividends received deduction available to corporations.
<PAGE>
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
David F. Myers
Vice President
Catherine Maniscalco
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust FSB
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 28, 1998
