<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL TWO WORLD TRADE CENTER,
RESOURCE DEVELOPMENT SECURITIES INC. NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS AUGUST 31,
2000
DEAR SHAREHOLDER:
During the six-month period ended August 31, 2000, inflation moderated while
growth in the economy continued to be robust. A confluence of events in March
and April raised concerns about a possible slowdown in the deployment of new
technology, which in turn led to a sharp correction in the Nasdaq and
new-economy stocks. First, the Department of Justice moved to split up Microsoft
to prevent it from using its monopoly power to restrain competition. Second,
President Clinton spoke of potential controls on the patenting of intellectual
property in the genomics area. The Federal Reserve Board raised the federal
funds rate a total of 75 basis points during the first half of the period,
prompted by continued evidence that the economy was on the verge of overheating.
NATURAL RESOURCES OVERVIEW
The economic trends that have thus far characterized 2000 have had markedly
different effects on the various industries within the natural resources sector.
The prices of most industrial metals -- namely aluminum, copper, nickel and the
platinum group -- have reflected the U.S. economy's strong performance. However,
gold has been an exception to this trend, as European banks have reduced their
gold reserves, though industrial and jewelry-fabrication demand for gold exceeds
its actual production by about a thousand metric tons annually. Share prices of
related companies, notably in the steel industry, generally lagged during the
period, with valuations at the low end of their trading ranges. The same can be
said of chemical companies. Both natural gas and crude oil have experienced
historically strong pricing over the past year, though the fundamentals of each
industry are somewhat different. Growth in demand for electricity has become an
important investment theme in our increasingly wired economy, with
second-quarter economic data from Japan and China indicating that demand is
rising in those regions.
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS AUGUST 31, 2000, CONTINUED
PERFORMANCE AND PORTFOLIO
For the six-month period ended August 31, 2000, Morgan Stanley Dean Witter
Natural Resource Development Securities' Class B shares posted a total return of
17.84 percent, compared to 11.72 percent for the Standard and Poor's 500 Index
(S&P 500).(1) Over the same period, the Fund's Class A, C and D shares returned
18.21 percent, 17.81 percent and 18.44 percent, respectively. The performance of
the Fund's four share classes varies because each class has different expenses.
The total return figures given assume the reinvestment of all distributions but
do not reflect the deduction of any applicable sales charges.
The Fund remained diversified across resource-related industries, with an
overweighting in energy. Holdings trimmed or sold during the period included
Global Industries, Occidental Petroleum, Patterson Energy, Olin Corp., Bemis
Corp., Kinder Morgan, Inc., Champion International, Enron, Avista, Goodrich,
Pharmacia and Columbia Energy. Positions initiated or added to included British
Petroleum, General Electric, Royal Dutch, AK Steel, Repsol, ATI Corp., Anadarko,
ENI, Varco, E.I. DuPont, Solutia, McDermott International, Kerr-McGee, CMS
Energy, Honeywell, Inco, PPG Corp. and Montana Power.
LOOKING AHEAD
The U.S. Federal Reserve Board has acknowledged that increased technology
spending has apparently raised the domestic economy's "speed limit" (meaning the
highest level of noninflationary growth) by improving productivity. This has led
to speculation that the Fed may leave interest rates unchanged for the next
several months. Indeed, the Fed's members have taken the position that, while
inconvenient, recent high energy prices don't pose the kind of inflationary
potential in the United States that they might have 25 years ago. While recent
rate increases combined with higher gasoline pump prices may have curbed
consumer spending somewhat, leading economic measures seem to indicate an
economy in balance. We would not be surprised to see crude oil prices ease
gradually as additional supplies make their way through the shipping, refining
and marketing system. We believe that many companies within the major oil,
refining, chemical and metals industries represent good value today. As
companies in these industries focus less on volume growth and more on returns on
invested capital, we expect that they will begin trading at long-term valuations
more in line with the rest of the S&P 500.
----------------
(1) The Standard & Poor's 500 Index (S&P 500-Registered Trademark-) is a
broad-based index, the performance of which is based on the performance of
500 widely held common stocks chosen for market size, liquidity and industry
group representation. The Index does not include any expenses, fees or
charges. The Index is unmanaged and should not be considered an investment.
2
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS AUGUST 31, 2000, CONTINUED
We appreciate your ongoing support of Morgan Stanley Dean Witter Natural
Resource Development Securities and look forward to continuing to serve your
investment needs.
Very truly yours,
[/S/ CHARLES A. FIUMEFREDDO] [/S/ MITCHELL M. MERIN]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT
3
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FUND PERFORMANCE AUGUST 31, 2000
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------------------------------------------------
CLASS A SHARES* CLASS B SHARES**
-------------------------------------------- ---------------------------------------------
PERIOD ENDED 8/31/2000 PERIOD ENDED 8/31/2000
------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 12.56%(1) 6.65%(2) 1 Year 11.58%(1) 6.58%(2)
Since Inception (7/28/97) 3.49%(1) 1.70%(2) 5 Years 11.35%(1) 11.09%(2)
10 Years 9.38%(1) 9.38%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+ CLASS D SHARES++
--------------------------------------------- ---------------------------------------------
PERIOD ENDED 8/31/2000 PERIOD ENDED 8/31/2000
------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 11.64%(1) 10.64%(2) 1 Year 12.80%(1)
Since Inception (7/28/97) 2.66%(1) 2.66%(2) Since Inception (7/28/97) 3.74%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
LESS THAN THEIR ORIGINAL COST.
------------------------
(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, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (95.9%)
BASIC ENERGY (37.8%)
INTEGRATED OIL (21.1%)
211,600 BP Amoco PLC (ADR) (United Kingdom)................................... $ 11,690,900
65,000 Chevron Corp.......................................................... 5,492,500
112,131 Conoco, Inc. (Class B)................................................ 2,929,422
55,000 Ente Nazionale Idrocarburi SpA (ADR) (Italy).......................... 3,214,063
240,414 Exxon Mobil Corp...................................................... 19,623,793
137,000 Royal Dutch Petroleum Co. (ADR) (Netherlands)......................... 8,382,688
------------
51,333,366
------------
OIL & GAS PIPELINES (6.2%)
75,000 El Paso Energy Corp................................................... 4,368,750
60,000 Enron Corp............................................................ 5,092,500
120,000 Williams Companies, Inc............................................... 5,527,500
------------
14,988,750
------------
OIL & GAS PRODUCTION (5.4%)
60,000 Anardarko Petroleum Corp.............................................. 3,946,200
50,000 Apache Corp........................................................... 3,150,000
25,000 Barrett Resources Corp.*.............................................. 865,625
100,000 EOG Resources, Inc.................................................... 3,825,000
20,000 Kerr-McGee Corp....................................................... 1,263,750
------------
13,050,575
------------
OIL REFINING/MARKETING (5.1%)
120,000 Repsol S.A. (ADR) (Spain)............................................. 2,377,500
100,000 Sunoco, Inc........................................................... 2,718,750
70,000 Total S.A. (ADR) (France)............................................. 5,215,000
80,000 USX-Marathon Group.................................................... 2,195,000
------------
12,506,250
------------
TOTAL BASIC ENERGY.................................................... 91,878,941
------------
ENERGY DEVELOPMENT & TECHNOLOGY (29.8%)
AEROSPACE & DEFENSE (0.1%)
15,000 Teledyne Technologies Inc.*........................................... 301,875
------------
CONTRACT DRILLING (8.9%)
75,000 ENSCO International Inc............................................... 2,990,625
60,000 Global Marine, Inc.*.................................................. 1,938,750
100,000 Marine Drilling Companies, Inc.*...................................... 2,718,750
65,000 Nabors Industries, Inc.*.............................................. 3,091,562
35,000 Noble Drilling Corp.*................................................. 1,697,500
<CAPTION>
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------------------------------
<C> <S> <C>
35,000 Precision Drilling Corp. (Class A)* (Canada).......................... $ 1,190,000
88,500 R&B Falcon Corp.*..................................................... 2,522,250
55,000 Santa Fe International Corp........................................... 2,162,187
56,107 Transocean Sedco Forex Inc............................................ 3,352,393
------------
21,664,017
------------
ELECTRIC UTILITIES (1.5%)
80,000 CMS Energy Corp....................................................... 2,090,000
45,000 Montana Power Co...................................................... 1,622,812
------------
3,712,812
------------
ELECTRICAL PRODUCTS (1.1%)
40,000 Emerson Electric Co................................................... 2,647,500
------------
INDUSTRIAL CONGLOMERATES (3.2%)
50,000 General Electric Co................................................... 2,934,375
65,000 Honeywell International, Inc.......................................... 2,506,562
40,000 Tyco International Ltd. (Bermuda)..................................... 2,280,000
------------
7,720,937
------------
OILFIELD SERVICES/EQUIPMENT (15.0%)
55,000 Baker Hughes Inc...................................................... 2,010,938
55,000 Cooper Cameron Corp.*................................................. 4,279,688
116,500 Grant Prideco, Inc.*.................................................. 2,737,750
100,000 Halliburton Co........................................................ 5,300,000
80,000 National-Oilwell, Inc.*............................................... 2,775,000
78,200 Schlumberger Ltd. (Netherlands)....................................... 6,671,438
120,000 Seitel, Inc.*......................................................... 1,882,500
30,000 Smith International, Inc.*............................................ 2,385,000
70,000 Stolt Comex Seaway, S.A.* (United Kingdom)............................ 971,250
99,750 Varco International, Inc.*............................................ 2,013,703
116,500 Weatherford International, Inc.*...................................... 5,468,219
------------
36,495,486
------------
TOTAL ENERGY DEVELOPMENT & TECHNOLOGY................................. 72,542,627
------------
METALS & BASIC MATERIALS (28.3%)
ALUMINUM (2.1%)
150,000 Alcoa, Inc............................................................ 4,987,500
------------
CHEMICALS: AGRICULTURAL (0.9%)
150,000 IMC Global Inc........................................................ 2,203,125
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------------------------------
<C> <S> <C>
CHEMICALS: MAJOR DIVERSIFIED (2.3%)
73,769 Du Pont (E.I.) de Nemours & Co., Inc.................................. $ 3,310,384
155,000 Solutia, Inc.......................................................... 2,334,687
------------
5,645,071
------------
CHEMICALS: SPECIALTY (4.0%)
60,000 Air Products & Chemicals, Inc......................................... 2,178,750
45,000 Crompton Corp......................................................... 405,000
120,000 Engelhard Corp........................................................ 2,250,000
40,000 FMC Corp.*............................................................ 2,712,500
135,000 Olin Corp............................................................. 2,227,500
------------
9,773,750
------------
CONTAINERS/PACKAGING (1.3%)
30,000 Sealed Air Corp.*..................................................... 1,539,375
40,000 Temple-Inland, Inc.................................................... 1,697,500
------------
3,236,875
------------
INDUSTRIAL MACHINERY (1.2%)
34,200 Ingersoll-Rand Co..................................................... 1,558,237
190,000 McDermott International, Inc.......................................... 1,460,625
------------
3,018,862
------------
INDUSTRIAL SPECIALTIES (0.7%)
40,000 PPG Industries, Inc................................................... 1,620,000
------------
OTHER METALS/MINERALS (3.2%)
72,500 Allegheny Technologies Inc............................................ 1,576,875
30,000 Anglo American PLC (ADR) (United Kingdom)............................. 1,702,500
100,000 Broken Hill Proprietary Co., Ltd. (ADR) (Australia)................... 2,200,000
110,000 Inco Ltd.* (Canada)................................................... 1,966,250
86,600 Namibian Minerals Corp. (Canada)...................................... 259,800
------------
7,705,425
------------
<CAPTION>
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------------------------------
<C> <S> <C>
PRECIOUS METALS (7.6%)
31,500 Anglogold Ltd. (South Africa)......................................... $ 1,200,568
125,000 Barrick Gold Corp. (Canada)........................................... 1,990,212
100,000 Compania de Minas Buenaventura S.A. (ADR) (Peru)...................... 1,650,000
125,000 Franco Nevada Mining Corp. Ltd. (Canada).............................. 1,315,521
25,000 Freeport-McMoran Copper & Gold, Inc.*................................. 237,500
300,000 Meridian Gold Inc.* (Canada).......................................... 1,987,500
80,000 Newmont Mining Corp................................................... 1,485,000
215,000 Placer Dome Inc. (Canada)............................................. 1,908,125
192,950 Stillwater Mining Co.*................................................ 6,560,300
------------
18,334,726
------------
PULP & PAPER (3.2%)
45,000 Bowater, Inc.......................................................... 2,311,875
75,000 Georgia-Pacific Corp.................................................. 2,006,250
59,408 International Paper Co................................................ 1,893,630
50,000 Willamette Industries, Inc............................................ 1,525,000
------------
7,736,755
------------
STEEL (1.8%)
130,000 AK Steel Holding Corp................................................. 1,413,750
125,000 Bethlehem Steel Corp.*................................................ 437,500
60,000 Reliance Steel & Aluminum Co.......................................... 1,237,500
80,000 USX-U.S. Steel Group.................................................. 1,390,000
------------
4,478,750
------------
TOTAL METALS & BASIC MATERIALS........................................ 68,740,839
------------
TOTAL COMMON STOCKS
(COST $173,233,255)................................................... 233,162,407
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000 (UNAUDITED) CONTINUED
<TABLE>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (4.0%)
REPURCHASE AGREEMENT
$ 9,751 The Bank of New York 6.438% due 09/01/00 (dated 08/31/00; proceeds $9,752,990) (a)
(COST $9,751,246).................................................................... $ 9,751,246
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(COST $182,984,501) (B)................................................................... 99.9% 242,913,653
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.1 130,855
----- -------------
NET ASSETS................................................................................ 100.0% $ 243,044,508
----- -------------
----- -------------
</TABLE>
---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $9,885,142 Federal National Mortgage Assoc. 8.00% due
08/01/28 valued at $9,948,145.
(b) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $72,901,711 and the aggregate gross unrealized depreciation
is $12,972,559, resulting in net unrealized appreciation of $59,929,152.
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, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $182,984,501)....................................... $242,913,653
Receivable for:
Dividends................................................................................. 608,220
Capital stock sold........................................................................ 307,787
Foreign withholding taxes reclaimed....................................................... 36,993
Investments sold.......................................................................... 16,037
Prepaid expenses and other assets............................................................. 60,949
------------
TOTAL ASSETS............................................................................. 243,943,639
------------
LIABILITIES:
Payable for:
Capital stock repurchased................................................................. 493,671
Plan of distribution fee.................................................................. 175,458
Investment management fee................................................................. 126,785
Accrued expenses and other payables........................................................... 103,217
------------
TOTAL LIABILITIES........................................................................ 899,131
------------
NET ASSETS............................................................................... $243,044,508
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $221,686,800
Net unrealized appreciation................................................................... 59,928,617
Accumulated undistributed net investment income............................................... 85,583
Accumulated net realized loss................................................................. (38,656,492)
------------
NET ASSETS............................................................................... $243,044,508
============
CLASS A SHARES:
Net Assets.................................................................................... $2,595,224
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 170,825
NET ASSET VALUE PER SHARE................................................................ $15.19
============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)........................................ $16.03
============
CLASS B SHARES:
Net Assets.................................................................................... $204,859,441
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 13,718,780
NET ASSET VALUE PER SHARE................................................................ $14.93
============
CLASS C SHARES:
Net Assets.................................................................................... $3,640,293
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 244,399
NET ASSET VALUE PER SHARE................................................................ $14.89
============
CLASS D SHARES:
Net Assets.................................................................................... $31,949,550
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 2,090,932
NET ASSET VALUE PER SHARE................................................................ $15.28
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 2000 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME
INCOME
Dividends (net of $104,381 foreign withholding tax)............................................ $ 2,029,612
Interest....................................................................................... 182,587
-----------
TOTAL INCOME.............................................................................. 2,212,199
-----------
EXPENSES
Plan of distribution fee (Class A shares)...................................................... 2,074
Plan of distribution fee (Class B shares)...................................................... 1,007,463
Plan of distribution fee (Class C shares)...................................................... 17,068
Investment management fee...................................................................... 749,850
Transfer agent fees and expenses............................................................... 160,188
Registration fees.............................................................................. 52,997
Shareholder reports and notices................................................................ 30,458
Professional fees.............................................................................. 27,756
Custodian fees................................................................................. 12,193
Directors' fees and expenses................................................................... 8,962
Other.......................................................................................... 2,775
-----------
TOTAL EXPENSES............................................................................ 2,071,784
-----------
NET INVESTMENT INCOME..................................................................... 140,415
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain/loss on:
Investments................................................................................ 8,508,160
Foreign exchange transactions.............................................................. (2,550)
-----------
NET GAIN.................................................................................. 8,505,610
-----------
Net change in unrealized appreciation on:
Investments................................................................................ 29,547,585
Translation of forward foreign currency contracts, other assets and liabilities denominated
in foreign currencies.................................................................... (503)
-----------
NET APPRECIATION.......................................................................... 29,547,082
-----------
NET GAIN.................................................................................. 38,052,692
-----------
NET INCREASE................................................................................... $38,193,107
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 2000 FEBRUARY 29, 2000
--------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................... $ 140,415 $ 284,639
Net realized gain (loss).................................................. 8,505,610 (2,899,093)
Net change in unrealized appreciation..................................... 29,547,082 44,575,453
------------ ------------
NET INCREASE......................................................... 38,193,107 41,960,999
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares............................................................ (11,845) --
Class C shares............................................................ (5,758) --
Class D shares............................................................ (269,459) --
------------ ------------
TOTAL DIVIDENDS...................................................... (287,062) --
------------ ------------
Net increase (decrease) from capital stock transactions................... (20,792,287) 19,019,430
------------ ------------
NET INCREASE......................................................... 17,113,758 60,980,429
NET ASSETS:
Beginning of period....................................................... 225,930,750 164,950,321
------------ ------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $85,583 AND
$232,230, RESPECTIVELY)............................................... $243,044,508 $225,930,750
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000 (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 portfolio security listed or traded
on the New York or American Stock Exchange, NASDAQ, or other exchange is valued
at its latest sale price, 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; (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 than sixty days at
11
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000 (UNAUDITED) CONTINUED
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 tax purposes are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays an investment 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.
12
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000 (UNAUDITED) CONTINUED
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 Plan on July 2, 1984 (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 Plan's inception upon which
a contingent deferred sales charge has been imposed or waived; or (b) the
average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since the Plan's inception; and (iii) Class C -- up to
1.0% of the average daily net assets of Class C.
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 totaled $9,635,068
at August 31, 2000.
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, 2000, 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 six months ended August 31,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C
13
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000 (UNAUDITED) CONTINUED
shares of $188,265 and $1,436, respectively and received $6,629 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, 2000 aggregated
$17,779,825 and $42,465,964, respectively.
For the six months ended August 31, 2000, the Fund incurred brokerage
commissions of $32,450 with Dean Witter Reynolds Inc., an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund.
For the six months ended August 31, 2000, the Fund incurred $1,350 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, 2000, the Fund had
transfer agent fees and expenses payable of approximately $7,000.
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. Aggregated pension costs for the six months ended August 31, 2000
included in Director's fees and expenses in the Statement of Operations amounted
to $2,938. At August 31, 2000, the Fund had an accrued pension liability of
$55,265 which is included in accrued expenses in the Statement of Assets and
Liabilities.
14
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000 (UNAUDITED) CONTINUED
5. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 2000 FEBRUARY 29, 2000
--------------------------- --------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 120,206 $ 1,784,181 501,579 $ 6,207,930
Reinvestment of dividends........................................ 754 10,825 -- --
Acquisition of Morgan Stanley Dean Witter Precious Metals and
Minerals Trust.................................................. -- -- 14,831 193,655
Redeemed......................................................... (45,493) (661,668) (489,143) (6,086,989)
---------- ------------- ----------- -------------
Net increase - Class A........................................... 75,467 1,133,338 27,267 314,596
---------- ------------- ----------- -------------
CLASS B SHARES
Sold............................................................. 3,544,436 50,177,329 10,273,562 132,548,979
Acquisition of Morgan Stanley Dean Witter Precious Metals and
Minerals Trust.................................................. -- -- 1,741,135 22,294,623
Redeemed......................................................... (4,753,283) (66,622,466) (11,795,684) (152,931,865)
---------- ------------- ----------- -------------
Net increase (decrease) - Class B................................ (1,208,847) (16,445,137) 219,013 1,911,737
---------- ------------- ----------- -------------
CLASS C SHARES
Sold............................................................. 133,823 1,880,841 570,664 7,262,044
Reinvestment of dividends........................................ 386 5,439 -- --
Acquisition of Morgan Stanley Dean Witter Precious Metals and
Minerals Trust.................................................. -- -- 87,974 1,125,516
Redeemed......................................................... (139,431) (1,941,875) (536,497) (6,936,145)
---------- ------------- ----------- -------------
Net increase (decrease) - Class C................................ (5,222) (55,595) 122,141 1,451,415
---------- ------------- ----------- -------------
CLASS D SHARES
Sold............................................................. 753,564 11,113,807 4,002,845 54,945,407
Reinvestment of dividends........................................ 11,055 159,527 -- --
Acquisition of Morgan Stanley Dean Witter Precious Metals and
Minerals Trust.................................................. -- -- 5,344 70,218
Redeemed......................................................... (1,160,561) (16,698,227) (3,037,696) (39,673,943)
---------- ------------- ----------- -------------
Net increase (decrease) - Class D................................ (395,942) (5,424,893) 970,493 15,341,682
---------- ------------- ----------- -------------
Net increase (decrease) in Fund.................................. (1,534,544) $ (20,792,287) 1,338,914 $ 19,019,430
========== ============= =========== =============
</TABLE>
15
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000 (UNAUDITED) CONTINUED
6. FEDERAL INCOME TAX STATUS
At February 29, 2000, the Fund had a net capital loss carryover of approximately
$44,073,000 which may be used to offset future capital gains to the extent
provided by regulations, which is available through February 28 in the following
years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
---------------------------------------------------
2004 2005 2006 2007 2008
------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$10,240 $9,871 $11,653 $6,811 $5,498
======= ====== ======= ====== ======
</TABLE>
As part of the Fund's acquisition of the assets of Morgan Stanley Dean Witter
Precious Metals and Minerals Trust ("Precious Metals"), the Fund obtained a net
capital loss carryover of approximately $32,191,000 from Precious Metals.
Utilization of this carryover is subject to limitations imposed by the Internal
Revenue Code and Treasury Regulations, significantly reducing the total
carryover available.
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 $2,670,000 during fiscal 2000.
As of February 29, 2000, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales.
7. ACQUISITION OF MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
On January 31, 2000, the Fund acquired all the net assets of Precious Metals
based on the respective valuations as of the close of business on January 28,
2000, pursuant to a plan of reorganization approved by the shareholders of
Precious Metals on December 21, 1999. The acquisition was accomplished by a
tax-free exchange of 14,831 Class A shares of the Fund at a net asset value of
$13.06 per share for 41,211 Class A shares of Precious Metals; 1,741,135
Class B shares of the Fund at a net asset value of $12.80 per share for
4,844,898 Class B shares of Precious Metals; 87,974 Class C shares of the Fund
at a net asset value of $12.79 per share for 244,606 Class C shares of Precious
Metals; and 5,344 Class D shares of the Fund at a net asset value of $13.13 per
share for 15,024 Class D shares of Precious Metals. The net assets of the Fund
and Precious Metals immediately before the acquisition were $207,641,293 and
$23,684,012, respectively, including unrealized appreciation of $2,616,246 for
Precious Metals. Immediately after the acquisition, the combined assets of the
Fund amounted to $231,325,305.
16
<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 each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
AUGUST 31, 2000 FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 28, 1998
---------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CLASS A SHARES ++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $ 12.94 $ 10.15 $ 13.87 $ 14.44
------- ------- ------- -------
Income (loss) from investment operations:
Net investment income.......................... 0.05 0.10 0.03 0.04
Net realized and unrealized gain (loss)........ 2.30 2.69 (3.61) (0.10)
------- ------- ------- -------
Total income (loss) from investment operations.... 2.35 2.79 (3.58) (0.06)
------- ------- ------- -------
Less dividends and distributions from:
Net investment income.......................... (0.10) -- -- --
Net realized gain.............................. -- -- (0.14) (0.51)
------- ------- ------- -------
Total dividends and distributions................. (0.10) -- (0.14) (0.51)
------- ------- ------- -------
Net asset value, end of period.................... $ 15.19 $ 12.94 $ 10.15 $ 13.87
======= ======= ======= =======
TOTAL RETURN+..................................... 18.21%(1) 27.49% (26.04)% (0.22)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.12%(2)(3) 1.12%(3) 1.14%(3) 1.11%(2)
Net investment income............................. 0.72%(2)(3) 0.75%(3) 0.56%(3) 0.45%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $2,595 $1,233 $691 $309
Portfolio turnover rate........................... 8%(1) 39% 26% 67%
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<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, 2000++ 2000**++ 1999++ 1998*++ 1997 1996**
-----------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $12.67 $10.03 $13.81 $13.34 $12.70 $10.77
------ ----- ----- ----- ----- ------
Income (loss) from investment operations:
Net investment income (loss)................... -- -- (0.04) (0.02) -- 0.06
Net realized and unrealized gain (loss)........ 2.26 2.64 (3.60) 2.18 2.66 2.53
------ ----- ----- ----- ----- ------
Total income (loss) from investment operations.... 2.26 2.64 (3.64) 2.16 2.66 2.59
------ ----- ----- ----- ----- ------
Less dividends and distributions from:
Net investment income.......................... -- -- -- (0.01) (0.02) (0.04)
Net realized gain.............................. -- -- (0.14) (1.68) (2.00) (0.62)
------ ----- ----- ----- ----- ------
Total dividends and distributions................. -- -- (0.14) (1.69) (2.02) (0.66)
------ ----- ----- ----- ----- ------
Net asset value, end of period.................... $14.93 $12.67 $10.03 $13.81 $13.34 $12.70
====== ===== ===== ===== ===== ======
TOTAL RETURN+..................................... 17.84%(1) 26.32% (26.60)% 16.93% 20.88% 24.32%
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.87%(2)(3) 1.89%(3) 1.90%(3) 1.80% 1.84% 1.90%
Net investment income (loss)...................... (0.03)%(2)(3) (0.02)%(3) (0.20)%(3) (0.15)% 0.05% 0.52%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $204,859 $189,180 $147,527 $273,333 $247,989 $152,661
Portfolio turnover rate........................... 8%(1) 39% 26% 67% 156% 49%
</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.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
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 FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
AUGUST 31, 2000 FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 28, 1998
---------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CLASS C SHARES ++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $ 12.66 $ 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)........ 2.25 2.63 (3.63) (0.10)
------- ------- ------- -------
Total income (loss) from investment operations.... 2.25 2.64 (3.65) (0.12)
------- ------- ------- -------
Less dividends and distributions from:
Net investment income.......................... (0.02) -- -- --
Net realized gain.............................. -- -- (0.14) (0.51)
------- ------- ------- -------
Total dividends and distributions................. (0.02) -- (0.14) (0.51)
------- ------- ------- -------
Net asset value, end of period.................... $ 14.89 $ 12.66 $ 10.02 $ 13.81
======= ======= ======= =======
TOTAL RETURN+..................................... 17.81%(1) 26.35% (26.67)% (0.64)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.87%(2)(3) 1.89%(3) 1.90%(3) 1.87%(2)
Net investment loss............................... (0.03)%(2)(3) (0.02)%(3) (0.20)%(3) (0.23)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $3,640 $3,161 $1,278 $1,488
Portfolio turnover rate........................... 8%(1) 39% 26% 67%
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
AUGUST 31, 2000 FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 28, 1998
---------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CLASS D SHARES ++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $13.01 $10.19 $13.89 $14.44
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.......................... 0.07 0.12 0.05 0.07
Net realized and unrealized gain (loss)........ 2.32 2.70 (3.61) (0.11)
------ ------ ------ ------
Total income (loss) from investment operations.... 2.39 2.82 (3.56) (0.04)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income.......................... (0.12) -- -- --
Net realized gain.............................. -- -- (0.14) (0.51)
------ ------ ------ ------
Total dividends and distributions................. (0.12) -- (0.14) (0.51)
------ ------ ------ ------
Net asset value, end of period.................... $15.28 $13.01 $10.19 $13.89
====== ====== ====== ======
TOTAL RETURN+..................................... 18.44%(1) 27.67% (25.86)% (0.08)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 0.87%(2)(3) 0.89%(3) 0.90%(3) 0.84%(2)
Net investment income............................. 0.97%(2)(3) 0.98%(3) 0.80%(3) 0.82%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $31,950 $32,356 $15,454 $13,161
Portfolio turnover rate........................... 8%(1) 39% 26% 67%
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES
INC.
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Fund, with the approval of its Board of Directors and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
21
<PAGE>
DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
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
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
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 Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
NATURAL RESOURCE
DEVELOPMENT
SECURITIES
[PHOTO]
SEMIANNUAL REPORT
AUGUST 31, 2000
