<PAGE>
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE TWO WORLD TRADE CENTER,
DEVELOPMENT SECURITIES INC. NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS AUGUST 31, 1999
</TABLE>
DEAR SHAREHOLDER:
During the six-month period ended August 31, 1999, financial markets around the
world continued to experience volatility. After a peak in the domestic markets
in mid-July, stock prices pulled back toward the end of the period amid concerns
that the domestic economy was growing too fast. This concern was manifested in
the two moves by the Federal Reserve Board in June and August that raised
interest rates a total of 50 basis points while inflation remained low and the
economy continued to grow.
NATURAL RESOURCES SECTOR OVERVIEW
Thus far in calendar year 1999 the natural resources sector has undergone
dramatic changes. At the end of 1998 and into early 1999, disinflationary
fundamentals prevailed, and the prospect of continued lower demand for basic
commodities and energy left most share prices languishing. At the end of March,
however, the world's major oil producers reached an agreement to curtail
production. Oil prices responded by rising immediately and at period end had
doubled from a low of $10.73 per barrel. Share prices were quick to follow in
most cases, with drilling and oil services companies posting the greatest
returns, partially reversing a record as 1998's worst-performing industries.
Base-metal companies also fared well. Refiners have been the exception this
year, because their share prices have remained more or less flat. Major
consolidation activity continued as British Petroleum/ Amoco bid for Atlantic
Richfield, Repsol for YPF, Devon for Pennzoil and Weyerhaueser for
MacMillan-Bloedel.
Behind the rise in commodity prices is a recovery in demand driven by improving
economic conditions across most of Asia, a region significant not only because
of the potential size of its markets but because of its relatively high rates of
growth prior to August 1997 and the expectation that some of this growth is back
on track.
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS AUGUST 31, 1999, CONTINUED
PERFORMANCE AND PORTFOLIO STRATEGY
For the six-month period ended August 31, 1999, Morgan Stanley Dean Witter
Natural Resource Development Securities' Class B shares produced a total return
of 33.40 percent, compared to 7.32 percent for the S&P 500 Composite Stock Price
Index (S&P 500) and 42.95 percent for the Lipper Natural Resources Funds
Average. For the same period, the Fund's Class A, C and D shares returned 33.89
percent, 33.33 percent and 34.05 percent, respectively. The performance of the
Fund's four share classes varies because of differing expenses. (Total return
figures shown assume the reinvestment of all distributions and do not reflect
the deduction of any applicable sales charges.)
The Fund's underperformance relative to its Lipper peer group can be attributed
to its strategy of diversifying its portfolio across a wide-range of
natural-resource-related industries. During the period under review, the
performance of the Lipper Average was dominated by funds focusing on the energy
sector, which outperformed the broader natural resources sector. On August 31,
1999, the Fund's portfolio was diversified across a wide range of related
industries, including metals, paper, natural gas transmission, integrated oil,
chemicals and oil services.
LOOKING AHEAD
We interpret the Federal Reserve Board's recent rate increases in part as an
acknowledgment of the recovery noted above. They may also signal the end of the
disinflation of energy and commodity prices that has prevailed over the past two
years. The Fund is positioned to continue to benefit from improvements in demand
trends as markets worldwide proceed along what we believe to be a vigorous and
synchronous pattern of growth.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is the President and Chief Operating Officer of Asset
Management for Morgan Stanley Dean Witter & Co. and President, Chief Executive
Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the Fund's
investment manager. He also serves as Chairman, Chief Executive Officer and
Director of the Fund's distributor and transfer agent.
2
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS AUGUST 31, 1999, CONTINUED
We appreciate your ongoing support of Morgan Stanley Dean Witter Natural
Resource Development Securities Inc. and look forward to continuing to serve
your investment objectives.
Very truly yours,
<TABLE>
<S> <C>
[CHARLES A. FIUMEFREDDO] [MITCHELL M. MERIN]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE
DEVELOPMENT SECURITIES INC.
FUND PERFORMANCE AUGUST 31, 1999
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------------------------------------------------------------------------
CLASS A SHARES* CLASS B SHARES+
------------------------------------------------------- -------------------------------------------------------
PERIOD ENDED 8/31/99 PERIOD ENDED 8/31/99
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 42.15%(1) 34.69%(2) 1 Year 41.14%(1) 36.41%(2)
Since Inception (7/28/97) (0.57) (1) (3.11) (2) 5 Years 10.50 (1) 10.23 (2)
10 Years 8.10 (1) 8.10 (2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES#
------------------------------------------------------- -------------------------------------------------------
PERIOD ENDED 8/31/99 PERIOD ENDED 8/31/99
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 40.93%(1) 39.93%(2) 1 Year 42.44%(1)
Since Inception (7/28/97) (1.37) (1) (1.37) (2) Since Inception (7/28/97) (0.33) (1)
</TABLE>
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 sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
* The maximum front-end sales charge for Class A is 5.25%.
+ The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The
CDSC declines to 0% after six years.
++ 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.
4
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1999 (UNAUDITED)
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (88.4%)
BASIC ENERGY (41.5%)
CANADIAN OIL & GAS (1.3%)
300,000 Gulf Canada Resources, Ltd. (Canada)*.................................................. $ 1,200,000
40,000 Petro-Canada (Canada).................................................................. 601,393
50,000 Petro-Canada (ADR) (Canada)............................................................ 750,000
174,831 Ranger Oil Ltd. (Canada)............................................................... 808,593
------------
3,359,986
------------
INTEGRATED OIL COMPANIES (22.5%)
50,000 Atlantic Richfield Co.................................................................. 4,396,875
45,000 BP Amoco PLC (ADR) (United Kingdom).................................................... 5,045,625
55,000 Chevron Corp........................................................................... 5,073,750
117,131 Conoco, Inc. (Class B)................................................................. 3,147,899
60,000 Ente Nazionale Idrocarburi SpA (ADR) (Italy)........................................... 3,630,000
115,000 Exxon Corp............................................................................. 9,070,625
95,000 Mobil Corp............................................................................. 9,725,625
132,000 Royal Dutch Petroleum Co. (ADR) (Netherlands).......................................... 8,167,500
90,000 Texaco, Inc............................................................................ 5,715,000
70,000 Unocal Corp............................................................................ 2,931,250
------------
56,904,149
------------
NATURAL GAS (0.6%)
70,000 KN Energy, Inc......................................................................... 1,426,250
------------
OIL & GAS PRODUCTION (7.1%)
50,000 Anadarko Petroleum Corp................................................................ 1,700,000
80,000 Apache Corp............................................................................ 3,640,000
70,000 Burlington Resources, Inc.............................................................. 2,926,875
55,000 Cabot Oil & Gas Corp. (Class A)........................................................ 1,048,437
25,000 Devon Energy Corp...................................................................... 965,625
40,000 Enron Oil & Gas Co..................................................................... 955,000
10,000 Noble Affiliates, Inc.................................................................. 310,000
22,500 Nuevo Energy Co.*...................................................................... 393,750
80,000 Occidental Petroleum Corp.............................................................. 1,735,000
51,250 Santa Fe Snyder Corp................................................................... 499,688
55,000 St. Mary Land & Exploration Co......................................................... 1,457,500
71,500 Swift Energy Co.*...................................................................... 902,688
100,000 Vintage Petroleum, Inc................................................................. 1,431,250
------------
17,965,813
------------
OIL REFINING/MARKETING (4.3%)
35,000 Pennzoil-Quaker State Co............................................................... 485,625
60,000 Repsol S.A. (ADR) (Spain).............................................................. 1,252,500
75,000 Sunoco, Inc............................................................................ 2,442,188
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
75,000 Total S.A. (ADR) (France).............................................................. $ 4,879,688
60,000 USX-Marathon Group..................................................................... 1,867,500
------------
10,927,501
------------
OIL/GAS TRANSMISSION (5.7%)
25,000 Columbia Energy Group.................................................................. 1,476,563
70,000 El Paso Energy Corp.................................................................... 2,559,375
110,000 Enron Corp............................................................................. 4,606,250
135,000 Williams Companies, Inc................................................................ 5,568,750
------------
14,210,938
------------
TOTAL BASIC ENERGY..................................................................... 104,794,637
------------
ENERGY DEVELOPMENT & TECHNOLOGY (18.6%)
CONTRACT DRILLING (4.7%)
35,000 Diamond Offshore Drilling, Inc......................................................... 1,338,750
75,000 ENSCO International Inc................................................................ 1,598,437
30,000 Global Marine, Inc.*................................................................... 532,500
100,000 Marine Drilling Company, Inc.*......................................................... 1,587,500
65,000 Nabors Industries, Inc................................................................. 1,767,187
35,000 Noble Drilling Corp.*.................................................................. 861,875
20,000 Patterson Energy, Inc.*................................................................ 267,500
25,000 Precision Drilling Corp. (Class A) (Canada)*........................................... 568,750
88,500 R & B Falcon Corp.*.................................................................... 1,139,437
25,000 Santa Fe International Corp............................................................ 659,375
50,000 Transocean Offshore, Inc............................................................... 1,700,000
------------
12,021,311
------------
DIVERSIFIED MANUFACTURING (2.3%)
95,000 Allegheny Teledyne Inc................................................................. 1,775,312
65,000 AlliedSignal, Inc...................................................................... 3,981,250
------------
5,756,562
------------
ELECTRIC UTILITIES (0.4%)
30,000 Illinova Corp.......................................................................... 956,250
------------
OILFIELD SERVICES/EQUIPMENT (11.2%)
50,000 Baker Hughes Inc....................................................................... 1,700,000
25,000 BJ Services Co.*....................................................................... 856,250
60,000 Cooper Cameron Corp.*.................................................................. 2,497,500
110,000 Global Industries Ltd.*................................................................ 1,223,750
125,000 Halliburton Co......................................................................... 5,796,875
5,000 National-Oilwell, Inc.*................................................................ 85,000
30,000 Petroleum Geo - Services ASA (ADR) (Norway)*........................................... 613,125
83,200 Schlumberger, Ltd...................................................................... 5,553,600
170,000 Seitel Inc............................................................................. 1,657,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1999 (UNAUDITED) CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
30,000 Smith International, Inc.*............................................................. $ 1,400,625
70,000 Stolt Comex Seaway, S.A. (United Kingdom)*............................................. 879,375
30,000 Trico Marine Service, Inc.*............................................................ 238,125
90,000 Varco International, Inc.*............................................................. 1,113,750
35,000 Veritas DGC Inc.*...................................................................... 625,625
116,500 Weatherford International, Inc.*....................................................... 4,150,313
------------
28,391,413
------------
TOTAL ENERGY DEVELOPMENT & TECHNOLOGY.................................................. 47,125,536
------------
METALS AND BASIC MATERIALS (28.3%)
AGRICULTURAL CHEMICALS (0.8%)
130,000 IMC Global, Inc........................................................................ 2,071,875
------------
ALUMINUM (2.3%)
90,000 Alcoa, Inc............................................................................. 5,810,625
------------
CONSTRUCTION/AGRICULTURAL EQUIPMENT/TRUCKS (0.7%)
45,000 Deere & Co............................................................................. 1,749,375
------------
CONTAINERS/PACKAGING (1.8%)
37,000 Sealed Air Corp.*...................................................................... 2,173,750
40,000 Temple-Inland, Inc..................................................................... 2,480,000
------------
4,653,750
------------
FOREST PRODUCTS (0.6%)
35,000 Georgia-Pacific Group.................................................................. 1,448,125
------------
INDUSTRIAL MACHINERY/COMPONENTS (0.9%)
34,200 Ingersoll-Rand Co...................................................................... 2,175,975
------------
MAJOR CHEMICALS (3.4%)
25,000 Dow Chemical Co........................................................................ 2,840,625
43,769 Du Pont (E.I.) de Nemours & Co., Inc................................................... 2,773,860
70,000 Monsanto Co............................................................................ 2,874,375
------------
8,488,860
------------
METALS FABRICATIONS (0.5%)
40,000 Reliance Steel & Aluminum Co........................................................... 1,325,000
------------
MULTI-SECTOR COMPANIES (1.9%)
100,000 Broken Hill Proprietary Co., Ltd. (ADR) (Australia).................................... 2,162,500
120,000 McDermott International, Inc........................................................... 2,707,500
------------
4,870,000
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OFFICE EQUIPMENT/SUPPLIES (1.3%)
60,000 Avery Dennison Corp.................................................................... $ 3,292,500
------------
OTHER METALS/MINERALS (0.8%)
40,000 Cyprus Amax Minerals Co................................................................ 677,500
70,000 Inco Ltd. (Canada)..................................................................... 1,435,000
------------
2,112,500
------------
PAINTS/COATINGS (0.7%)
30,000 PPG Industries, Inc.................................................................... 1,801,875
------------
PAPER (6.1%)
50,000 Bowater, Inc........................................................................... 2,681,250
50,000 Champion International Corp............................................................ 2,750,000
59,408 International Paper Co................................................................. 2,795,889
80,000 Mead Corp.............................................................................. 2,985,000
80,000 Westvaco Corp.......................................................................... 2,095,000
50,000 Willamette Industries, Inc............................................................. 1,981,250
------------
15,288,389
------------
PRECIOUS METALS (1.6%)
100,000 Barrick Gold Corp. (Canada)............................................................ 1,937,500
92,950 Stillwater Mining Co.*................................................................. 2,050,709
------------
3,988,209
------------
SPECIALTY CHEMICALS (1.5%)
100,000 Engelhard Corp......................................................................... 1,993,750
135,000 Olin Corp.............................................................................. 1,915,313
------------
3,909,063
------------
STEEL/IRON ORE (3.4%)
80,000 AK Steel Holding Corp.................................................................. 1,680,000
200,000 Bethlehem Steel Corp................................................................... 1,537,500
90,000 British Steel PLC (ADR) (United Kingdom)............................................... 2,334,375
45,000 Lone Star Technologies, Inc.*.......................................................... 900,000
80,000 USX-U.S. Steel Group................................................................... 2,160,000
------------
8,611,875
------------
TOTAL METALS & BASIC MATERIALS......................................................... 71,597,996
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $184,694,954)......................................................... 223,518,169
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1999 (UNAUDITED) CONTINUED
<TABLE>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.7%)
U.S. GOVERNMENT AGENCIES (a) (4.9%)
$ 4,300 Federal Home Loan Banks 5.12% due 09/01/99.............................................. $ 4,300,000
8,000 Federal National Mortgage Assoc. 5.20% due 09/07/99..................................... 7,993,067
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $12,293,067)........................................................... 12,293,067
-----------
REPURCHASE AGREEMENT (1.8%)
4,518 The Bank of New York 5.50% due 09/01/99 (dated 08/31/99; proceeds $4,518,908) (b)
(IDENTIFIED COST $4,518,218).......................................................... 4,518,218
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $16,811,285)........................................................... 16,811,285
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $201,506,239) (C)........................................................ 95.1% 240,329,454
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 4.9 12,481,561
----- -------------
NET ASSETS................................................................................ 100.0% $ 252,811,015
----- -------------
----- -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $1,216,351 U.S. Treasury Bond 10.75% due 05/15/03 valued
at $1,441,170 and $2,238,091 U.S. Treasury Bond 10.625% due 08/15/15 valued
at $3,167,413.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $49,676,855 and the
aggregate gross unrealized depreciation is $10,853,640, resulting in net
unrealized appreciation of $38,823,215.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $201,506,239)......................... $240,329,454
Cash..................................................... 6,817,599
Receivable for:
Capital stock sold................................... 3,635,274
Investments sold..................................... 2,250,598
Dividends............................................ 651,126
Foreign withholding taxes reclaimed.................. 64,156
Prepaid expenses and other assets........................ 96,623
------------
TOTAL ASSETS........................................ 253,844,830
------------
LIABILITIES:
Payable for:
Investments purchased................................ 502,350
Plan of distribution fee............................. 177,004
Investment management fee............................ 132,037
Capital stock repurchased............................ 88,511
Accrued expenses and other payables...................... 133,913
------------
TOTAL LIABILITIES................................... 1,033,815
------------
NET ASSETS.......................................... $252,811,015
============
COMPOSITION OF NET ASSETS:
Paid-in-capital.......................................... $225,776,429
Net unrealized appreciation.............................. 38,823,215
Accumulated undistributed net investment income.......... 244,314
Accumulated net realized loss............................ (12,032,943)
------------
NET ASSETS.......................................... $252,811,015
============
CLASS A SHARES:
Net Assets............................................... $1,055,694
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR
VALUE)................................................. 77,665
NET ASSET VALUE PER SHARE........................... $13.59
============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET
ASSET VALUE)...................................... $14.34
============
CLASS B SHARES:
Net Assets............................................... $195,825,479
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR
VALUE)................................................. 14,640,893
NET ASSET VALUE PER SHARE........................... $13.38
============
CLASS C SHARES:
Net Assets............................................... $2,639,857
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR
VALUE)................................................. 197,606
NET ASSET VALUE PER SHARE........................... $13.36
============
CLASS D SHARES:
Net Assets............................................... $53,289,985
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR
VALUE)................................................. 3,900,560
NET ASSET VALUE PER SHARE........................... $13.66
============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $92,720 foreign withholding tax)......... $ 2,001,208
Interest................................................... 245,562
-----------
TOTAL INCOME.......................................... 2,246,770
-----------
EXPENSES
Plan of distribution fee (Class A shares).................. 1,268
Plan of distribution fee (Class B shares).................. 946,744
Plan of distribution fee (Class C shares).................. 11,122
Investment management fee.................................. 678,911
Transfer agent fees and expenses........................... 159,948
Registration fees.......................................... 45,792
Shareholder reports and notices............................ 44,302
Professional fees.......................................... 36,128
Directors' fees and expenses............................... 11,111
Custodian fees............................................. 11,059
Other...................................................... 3,662
-----------
TOTAL EXPENSES........................................ 1,950,047
-----------
NET INVESTMENT INCOME................................. 296,723
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss.......................................... (378,298)
Net change in unrealized depreciation...................... 55,633,379
-----------
NET GAIN.............................................. 55,255,081
-----------
NET INCREASE............................................... $55,551,804
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, FEBRUARY 28,
1999 1999
- --------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)..................... $ 296,723 $ (318,999)
Net realized loss................................ (378,298) (10,954,030)
Net change in unrealized
appreciation/depreciation...................... 55,633,379 (56,429,019)
------------ ------------
NET INCREASE (DECREASE)..................... 55,551,804 (67,702,048)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares................................... -- (5,526)
Class B shares................................... -- (2,604,507)
Class C shares................................... -- (14,135)
Class D shares................................... -- (114,256)
------------ ------------
TOTAL DISTRIBUTIONS......................... -- (2,738,424)
------------ ------------
Net increase (decrease) from capital stock
transactions................................... 32,308,890 (52,899,959)
------------ ------------
NET INCREASE (DECREASE)..................... 87,860,694 (123,340,431)
NET ASSETS:
Beginning of period.............................. 164,950,321 288,290,752
------------ ------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $244,314 AND A NET INVESTMENT LOSS
OF $52,409, RESPECTIVELY).................... $252,811,015 $164,950,321
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1999 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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 converted to a multiple class share
structure.
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 and 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 Morgan Stanley Dean Witter Advisors 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 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
10
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1999 (UNAUDITED) CONTINUED
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.
11
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1999 (UNAUDITED) 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 Morgan Stanley 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
(1) 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, Morgan Stanley Dean Witter Financial Advisors and others who engage
in or support distribution of the shares or who service shareholder accounts,
including overhead and telephone expenses; (2) printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and (3) preparation, printing and
12
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1999 (UNAUDITED) CONTINUED
distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan, in the case of Class B
shares, to compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor 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 $5,531,328 at August 31, 1999.
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 Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representative may be reimbursed in the subsequent
calendar year. For the six months ended August 31, 1999, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.24%
and 1.0%, respectively.
The Distributor has informed the Fund that for the six months ended August 31,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $10, $153,664
and $1,170, respectively and received $5,085 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 six months ended August 31, 1999 aggregated
$42,855,697 and $36,092,196, respectively.
13
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1999 (UNAUDITED) CONTINUED
For the six months ended August 31, 1999, the Fund incurred brokerage
commissions of $12,990 with DWR for portfolio transactions executed on behalf of
the Fund. At August 31, 1999, the Fund's receivable for investments sold
included unsettled trades with DWR of $603,230.
For the six months ended August 31, 1999, the Fund incurred $6,260 in brokerage
commissions with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At August 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $5,600.
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. Aggregated pension costs for the six months ended August 31, 1999
included in Director's fees and expenses in the Statement of Operations amounted
to $4,365. At August 31, 1999, the Fund had an accrued pension liability of
$54,628 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
At February 28, 1999, the Fund had a net capital loss carryover of approximately
$6,384,000 which will be available through February 28, 2007 to offset future
capital gains to the extent provided by regulations.
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 $5,226,000 during fiscal 1999.
As of February 28, 1999, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales.
14
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1999 (UNAUDITED) CONTINUED
6. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
-------------------------- ---------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold................................................. 383,763 $ 4,562,581 87,666 $ 1,046,452
Reinvestment of distributions........................ -- -- 383 5,103
Redeemed............................................. (374,189) (4,488,772) (42,239) (490,436)
---------- ------------- ----------- -------------
Net increase - Class A............................... 9,574 73,809 45,810 561,119
---------- ------------- ----------- -------------
CLASS B SHARES
Sold................................................. 7,844,732 100,588,116 10,150,338 129,276,569
Reinvestment of distributions........................ -- -- 184,797 2,441,170
Redeemed............................................. (7,912,453) (102,264,897) (15,417,509) (191,663,575)
---------- ------------- ----------- -------------
Net decrease - Class B............................... (67,721) (1,676,781) (5,082,374) (59,945,836)
---------- ------------- ----------- -------------
CLASS C SHARES
Sold................................................. 419,669 5,316,901 448,875 5,948,277
Reinvestment of distributions........................ -- -- 1,001 13,228
Redeemed............................................. (349,543) (4,517,430) (430,175) (5,757,346)
---------- ------------- ----------- -------------
Net increase - Class C............................... 70,126 799,471 19,701 204,159
---------- ------------- ----------- -------------
CLASS D SHARES
Sold................................................. 3,086,103 42,529,711 1,402,605 15,983,255
Reinvestment of distributions........................ -- -- 8,305 110,702
Redeemed............................................. (701,924) (9,417,320) (842,093) (9,813,358)
---------- ------------- ----------- -------------
Net increase - Class D............................... 2,384,179 33,112,391 568,817 6,280,599
---------- ------------- ----------- -------------
Net increase (decrease) in Fund...................... 2,396,158 $ 32,308,890 (4,448,046) $ (52,899,959)
========== ============= =========== =============
</TABLE>
7. ACQUISITION OF MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
On July 29, 1999, the Trustees of the Fund and of Morgan Stanley Dean Witter
Precious Metals and Minerals Trust ("Precious Metals") approved a reorganization
plan ("the Plan") whereby Precious Metals would be merged into the Fund. The
Plan is subject to the consent of Precious Metals' shareholders. If approved,
the assets of Precious Metals would be combined with the assets of the Fund and
shareholders of Precious Metals would become shareholders of the Fund, receiving
shares of the corresponding class of the Fund equal to the value of their
holdings in Precious Metals.
15
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of capital stock outstanding
throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
AUGUST 31, 1999 FEBRUARY 28, 1999 FEBRUARY 28, 1998
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $10.15 1$3.87 1$4.44
------ ---- ----
Income (loss) from investment operations:
Net investment income.................................... 0.06 0.03 0.04
Net realized and unrealized gain (loss).................. 3.38 (3.61) (0.10)
------ ---- ----
Total income (loss) from investment operations.............. 3.44 (3.58) (0.06)
------ ---- ----
Less distributions from net realized gain................... -- (0.14) (0.51)
------ ---- ----
Net asset value, end of period.............................. $13.59 1$0.15 1$3.87
====== ==== ====
TOTAL RETURN+............................................... 33.89%(1) (26.04)% (0.22)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.15%(2)(3) 1.14 %(3) 1.11 %(2)
Net investment income....................................... 0.91%(2)(3) 0.56 %(3) 0.45 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,056 $691 $309
Portfolio turnover rate..................................... 18%(1) 26 % 67 %(1)
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED FEBRUARY 28
MONTHS ENDED -----------------------------------------------------
AUGUST 31, 1999++ 1999++ 1998*++ 1997 1996** 1995
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period................. $ 10.03 $ 13.81 $ 13.34 $ 12.70 $ 10.77 $ 11.82
-------- --------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income (loss)...................... 0.01 (0.04) (0.02) -- 0.06 0.09
Net realized and unrealized gain (loss)........... 3.34 (3.60) 2.18 2.66 2.53 (0.24)
-------- --------- -------- -------- -------- --------
Total income (loss) from investment operations....... 3.35 (3.64) 2.16 2.66 2.59 (0.15)
-------- --------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income............................. -- -- (0.01) (0.02) (0.04) (0.12)
Net realized gain................................. -- (0.14) (1.68) (2.00) (0.62) (0.78)
-------- --------- -------- -------- -------- --------
Total dividends and distributions.................... -- (0.14) (1.69) (2.02) (0.66) (0.90)
-------- --------- -------- -------- -------- --------
Net asset value, end of period....................... $ 13.38 $ 10.03 $ 13.81 $ 13.34 $ 12.70 $ 10.77
======== ========= ======== ======== ======== ========
TOTAL RETURN+........................................ 33.40%(1) (26.60)% 16.93 % 20.88% 24.32% (1.26)%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................. 1.91%(2)(3) 1.90 %(3) 1.80 % 1.84% 1.90% 1.90 %
Net investment income (loss)......................... 0.15%(2)(3) (0.20)%(3) (0.15)% 0.05% 0.52% 0.77 %
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.............. $195,825 $147,527 $273,333 $247,989 $152,661 $132,812
Portfolio turnover rate.............................. 18%(1) 26 % 67 % 156% 49% 59 %
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
AUGUST 31, 1999 FEBRUARY 28, 1999 FEBRUARY 28, 1998
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $10.02 $13.81 $14.44
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)............................. 0.01 (0.02) (0.02)
Net realized and unrealized gain (loss).................. 3.33 (3.63) (0.10)
------ ------ ------
Total income (loss) from investment operations.............. 3.34 (3.65) (0.12)
------ ------ ------
Less distributions from net realized gain................... -- (0.14) (0.51)
------ ------ ------
Net asset value, end of period.............................. $13.36 $10.02 $13.81
====== ====== ======
TOTAL RETURN+............................................... 33.33%(1) (26.67)% (0.64)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.91%(2)(3) 1.90 %(3) 1.87 %(2)
Net investment income (loss)................................ 0.15%(2)(3) (0.20)%(3) (0.23)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $2,640 $1,278 $1,488
Portfolio turnover rate..................................... 18%(1) 26 % 67 %(1)
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
AUGUST 31, 1999 FEBRUARY 28, 1999 FEBRUARY 28, 1998
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 10.19 $ 13.89 $ 14.44
------- ------- -------
Income (loss) from investment operations:
Net investment income.................................... 0.08 0.05 0.07
Net realized and unrealized gain (loss).................. 3.39 (3.61) (0.11)
------- ------- -------
Total income (loss) from investment operations.............. 3.47 (3.56) (0.04)
------- ------- -------
Less distributions from net realized gain................... -- (0.14) (0.51)
------- ------- -------
Net asset value, end of period.............................. $ 13.66 $ 10.19 $ 13.89
======= ======= =======
TOTAL RETURN+............................................... 34.05%(1) (25.86)% (0.08)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.91%(2)(3) 0.90 %(3) 0.84 %(2)
Net investment income....................................... 1.15%(2)(3) 0.80 %(3) 0.82 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $53,290 $15,454 $13,161
Portfolio turnover rate..................................... 18%(1) 26 % 67 %(1)
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
David F. Myers
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and 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. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
NATURAL RESOURCE
DEVELOPMENT
SECURITIES
[GRAPHIC]
SEMIANNUAL REPORT
AUGUST 31, 1999
