<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE TWO WORLD TRADE CENTER,
DEVELOPMENT SECURITIES INC. NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS FEBRUARY 29, 2000
DEAR SHAREHOLDER:
The twelve-month period ended February 29, 2000, witnessed a reversal in the
disinflationary fundamentals that contributed to downward pressure on
commodities in 1998. Throughout the period, commodity and energy prices
generally maintained the upward bias that began when crude oil production was
trimmed (for the third time) at the March 23, 1999, OPEC meeting. Recovery in
most of the Asian economies further supported commodity prices (though gold
remains soft) as many of the region's countries experienced improvements in
industrial production.
Inventories of crude oil and refined products, which had outpaced demand during
1999, ended the period at levels low enough to induce a tripling of crude prices
and provoke strident calls for production increases. Any near-term decision to
alter production targets would be announced at the OPEC meeting scheduled for
March 27, 2000.
PERFORMANCE AND PORTFOLIO
For the twelve-month period ended February 29, 2000, Morgan Stanley Dean Witter
Natural Resource Development Securities' Class B shares produced a total return
of 26.32 percent, compared to 11.73 percent for the S&P 500 Composite Stock
Price Index (S&P 500). For the same period, the Fund's Class A, C and D shares
returned 27.49 percent, 26.35 percent and 27.67 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses. The total return figures given assume the reinvestment of all
distributions and do not reflect the deduction of any applicable sales charges.
The accompanying chart compares the Fund's performance to that of the S&P 500.
The Fund has remained diversified across resource-related industries. Holdings
trimmed or sold during the period included Avery Dennison, Dow Chemical,
Pennzoil, Petroleum GeoServices, Texaco and WaterPik. Positions initiated or
added to included AK Steel, Bemis, BPAmoco, Enron Oil & Gas, Global Marine and
Schlumberger.
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
LETTER TO THE SHAREHOLDERS FEBRUARY 29, 2000, CONTINUED
LOOKING AHEAD
In 1999 we expected a global easing of interest rates to translate into a
gradual reflation of economic activity and hence, higher commodity prices over
time. In fact, the recovery has been robust enough to induce the Federal Reserve
Board to raise rates four times since June, and a consensus now would expect
further tightening in response to concerns over the inflationary risks
associated with rapid GDP growth.
Demand growth, capacity constraints and favorable forward earnings comparisons
make paper, metals, energy and related equities look attractive. We are
especially encouraged by consolidation activity in several of these industries,
which should result in more rational decision making with respect to capital
spending and thus to better returns on invested capital. Internet initiatives,
particularly in procurement but in other areas as well, may prove to be another
avenue of cost savings. We thus believe that the sector represents very good
relative value.
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
2
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE
DEVELOPMENT SECURITIES INC.
FUND PERFORMANCE FEBRUARY 29, 2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH OF $10,000 -- CLASS B
($ IN THOUSANDS) FUND S&P 500(4)
<S> <C> <C>
February 1990 $10,000 $10,000
February 1991 $10,287 $11,466
February 1992 $10,091 $13,303
February 1993 $11,434 $14,720
February 1994 $12,824 $15,942
February 1995 $12,662 $17,115
February 1996 $15,742 $23,048
February 1997 $19,029 $29,078
February 1998 $22,250 $39,252
February 1999 $16,333 $46,999
February 2000 $20,631(3) $52,512
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS
A, CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B
SHARES SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------------------------------------------------
CLASS B SHARES* CLASS A SHARES**
-------------------------------------------- ---------------------------------------------
PERIOD ENDED 2/29/00 PERIOD ENDED 2/29/00
------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 26.32%(1) 21.32%(2) 1 Year 27.49 %(1) 20.79 %(2)
5 Year 10.26%(1) 9.99%(2) Since Inception (7/28/97) (2.33)%(1) (4.34)%(2)
10 Year 7.51%(1) 7.51%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+ CLASS D SHARES#
-------------------------------------------- ---------------------------------------------
PERIOD ENDED 2/29/00 PERIOD ENDED 2/29/00
------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 26.35 %(1) 25.35 %(2) 1 Year 27.67 %(1)
Since Inception (7/28/97) (3.14)%(1) (3.14)%(2) Since Inception (7/28/97) (2.13)%(1)
</TABLE>
- ------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on February 29, 2000.
(4) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The performance of the Index
does not include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
* The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%.
The CDSC declines to 0% after six years.
** The maximum front-end sales charge for Class A is 5.25%.
+ The maximum contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
# Class D shares have no sales charge.
3
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (97.3%)
BASIC ENERGY (35.6%)
INTEGRATED OIL COMPANIES (19.4%)
65,000 Atlantic Richfield Co................................................. $ 4,615,000
95,000 BP Amoco PLC (ADR) (United Kingdom)................................... 4,465,000
65,000 Chevron Corp.......................................................... 4,854,687
117,131 Conoco, Inc. (Class B)................................................ 2,306,017
55,000 Ente Nazionale Idrocarburi SpA (ADR) (Italy).......................... 2,609,062
240,414 Exxon Mobil Corp...................................................... 18,106,179
132,000 Royal Dutch Petroleum Co. (ADR) (Netherlands)......................... 6,930,000
------------
43,885,945
------------
NATURAL GAS (0.9%)
70,000 Kinder Morgan, Inc.................................................... 1,951,250
------------
OIL & GAS PRODUCTION (2.5%)
80,000 Apache Corp........................................................... 2,920,000
100,000 EOG Resources, Inc.................................................... 1,525,000
80,000 Occidental Petroleum Corp............................................. 1,285,000
------------
5,730,000
------------
OIL REFINING/MARKETING (5.0%)
110,000 Repsol S.A. (ADR) (Spain)............................................. 2,103,750
100,000 Sunoco, Inc........................................................... 2,468,750
75,000 Total S.A. (ADR) (France)............................................. 5,034,375
80,000 USX-Marathon Group.................................................... 1,730,000
------------
11,336,875
------------
OIL/GAS TRANSMISSION (7.8%)
25,000 Columbia Energy Group................................................. 1,475,000
75,000 El Paso Energy Corp................................................... 2,779,687
110,000 Enron Corp............................................................ 7,590,000
135,000 Williams Companies, Inc............................................... 5,644,688
------------
17,489,375
------------
TOTAL BASIC ENERGY.................................................... 80,393,445
------------
ENERGY DEVELOPMENT & TECHNOLOGY (24.6%)
AEROSPACE (0.9%)
80,000 Goodrich (B.F.) Co. (The)............................................. 1,915,000
15,000 Teledyne Technologies Inc.*........................................... 130,312
------------
2,045,312
------------
CONTRACT DRILLING (6.9%)
75,000 ENSCO International Inc............................................... 2,268,750
60,000 Global Marine, Inc.*.................................................. 1,346,250
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------
<C> <S> <C>
100,000 Marine Drilling Company, Inc.*........................................ $ 2,281,250
65,000 Nabors Industries, Inc.*.............................................. 2,331,875
35,000 Noble Drilling Corp.*................................................. 1,260,000
20,000 Patterson Energy, Inc.*............................................... 452,500
25,000 Precision Drilling Corp.* (Canada).................................... 715,625
88,500 R & B Falcon Corp.*................................................... 1,366,219
50,000 Santa Fe International Corp........................................... 1,434,375
56,107 Transocean Sedco Forex Inc............................................ 2,212,720
------------
15,669,564
------------
DIVERSIFIED MANUFACTURING (2.2%)
70,000 Honeywell International, Inc.......................................... 3,368,750
40,000 Tyco International Ltd. (Bermuda)..................................... 1,517,500
------------
4,886,250
------------
ELECTRIC UTILITIES (0.6%)
35,000 Montana Power Co...................................................... 1,378,125
------------
ELECTRICAL PRODUCTS (0.8%)
40,000 Emerson Electric Co................................................... 1,822,500
------------
OILFIELD SERVICES/EQUIPMENT (13.2%)
55,000 Baker Hughes Inc...................................................... 1,423,125
60,000 Cooper Cameron Corp.*................................................. 3,315,000
110,000 Global Industries Ltd.*............................................... 1,120,625
125,000 Halliburton Co........................................................ 4,773,438
80,000 National-Oilwell, Inc.*............................................... 1,940,000
88,200 Schlumberger Ltd. (Netherlands)....................................... 6,515,775
180,000 Seitel, Inc........................................................... 1,473,750
30,000 Smith International, Inc.*............................................ 1,880,625
70,000 Stolt Comex Seaway, S.A.* (United Kingdom)............................ 905,625
30,000 Trico Marine Service, Inc.*........................................... 175,313
90,000 Varco International, Inc.*............................................ 995,625
116,500 Weatherford International, Inc.*...................................... 5,242,500
------------
29,761,401
------------
TOTAL ENERGY DEVELOPMENT & TECHNOLOGY................................. 55,563,152
------------
METALS & BASIC MATERIALS (37.1%)
AGRICULTURAL CHEMICALS (0.9%)
150,000 IMC Global Inc........................................................ 2,025,000
------------
ALUMINUM (2.7%)
90,000 Alcoa, Inc............................................................ 6,165,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------
<C> <S> <C>
CONSTRUCTION/AGRICULTURAL EQUIPMENT/TRUCKS (0.6%)
35,000 Deere & Co............................................................ $ 1,251,250
------------
CONTAINERS/PACKAGING (2.4%)
50,000 Bemis Company, Inc.................................................... 1,487,500
37,000 Sealed Air Corp.*..................................................... 1,838,437
40,000 Temple-Inland, Inc.................................................... 2,045,000
------------
5,370,937
------------
FOREST PRODUCTS (0.9%)
60,000 Georgia-Pacific Corp.................................................. 2,081,250
------------
INDUSTRIAL
MACHINERY/COMPONENTS (0.6%)
34,200 Ingersoll-Rand Co..................................................... 1,310,287
------------
MAJOR CHEMICALS (3.4%)
53,769 Du Pont (E.I.) de Nemours & Co., Inc.................................. 2,715,334
50,000 Hercules Inc.......................................................... 825,000
70,000 Monsanto Co........................................................... 2,716,875
100,000 Solutia, Inc.......................................................... 1,381,250
------------
7,638,459
------------
METALS FABRICATIONS (0.5%)
60,000 Reliance Steel & Aluminum Co.......................................... 1,162,500
------------
MULTI-SECTOR COMPANIES (1.5%)
100,000 Broken Hill Proprietary Co., Ltd. (ADR) (Australia)................... 2,000,000
150,000 McDermott International, Inc.......................................... 1,406,250
------------
3,406,250
------------
OTHER METALS/MINERALS (2.2%)
52,500 Allegheny Technologies Inc............................................ 889,219
30,000 Anglo American PLC (ADR) (United Kingdom)............................. 1,380,000
70,000 Inco Ltd.* (Canada)................................................... 1,225,000
250,000 Namibian Minerals Corp. (Canada)...................................... 1,562,500
------------
5,056,719
------------
PAINTS/COATINGS (0.7%)
30,000 PPG Industries, Inc................................................... 1,481,250
------------
PAPER (4.9%)
50,000 Bowater, Inc.......................................................... 2,459,375
50,000 Champion International Corp........................................... 2,587,500
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------
<C> <S> <C>
59,408 International Paper Co................................................ $ 2,186,957
80,000 Westavaco Corp........................................................ 2,205,000
50,000 Willamette Industries, Inc............................................ 1,696,875
------------
11,135,707
------------
PRECIOUS METALS (10.6%)
250,000 Agnico-Eagle Mines, Ltd. (Canada)..................................... 1,740,659
31,500 Anglogold Ltd. (South Africa)......................................... 1,617,068
85,000 Barrick Gold Corp. (Canada)........................................... 1,386,563
40,000 Barrick Gold Corp. (Canada)........................................... 652,144
100,000 Compania de Minas Buenaventura S.A. (ADR) (Peru)...................... 1,743,750
800,000 Delta Gold N.L. (Australia)........................................... 1,078,664
125,000 Franco Nevada Mining Corp. Ltd. (Canada).............................. 1,447,677
25,000 Freeport-McMoran Copper & Gold, Inc................................... 320,313
300,000 Meridian Gold Inc.* (Canada).......................................... 1,837,500
500,000 Newcrest Mining Ltd.* (Australia)..................................... 1,345,238
80,000 Newmont Mining Corp................................................... 1,770,000
215,000 Placer Dome Inc. (Canada)............................................. 1,881,250
192,950 Stillwater Mining Co.*................................................ 7,163,269
------------
23,984,095
------------
SPECIALTY CHEMICALS (3.6%)
60,000 Air Products & Chemicals, Inc......................................... 1,545,000
45,000 CK Witco Corp......................................................... 478,125
100,000 Engelhard Corp........................................................ 1,362,500
50,000 FMC Corp.*............................................................ 2,415,625
145,000 Olin Corp............................................................. 2,247,500
------------
8,048,750
------------
STEEL/IRON ORE (1.6%)
100,000 AK Steel Holding Corp................................................. 831,250
200,000 Bethlehem Steel Corp.................................................. 1,137,500
80,000 USX-U.S. Steel Group.................................................. 1,750,000
------------
3,718,750
------------
TOTAL METALS & BASIC MATERIALS........................................ 83,836,204
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $189,411,234)........................................ 219,792,801
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 2000, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (2.3%)
REPURCHASE AGREEMENT
$ 5,139 The Bank of New York 5.688% due 03/01/00 (dated 02/29/00; proceeds
$5,139,453) (a)
(IDENTIFIED COST $5,138,641)........................................ $ 5,138,641
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $194,549,875) (b)........................................................ 99.6% 224,931,442
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.4 999,308
----- -------------
NET ASSETS................................................................................ 100.0% $ 225,930,750
----- -------------
----- -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $5,240,892 U.S. Treasury Note 5.75% due 06/30/01 valued
at $5,241,432.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $49,483,257 and the
aggregate gross unrealized depreciation is $19,101,690, resulting in net
unrealized appreciation of $30,381,567.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $194,549,875).............................................................. $224,931,442
Receivable for:
Investments sold.......................................................................... 982,235
Dividends................................................................................. 510,792
Capital stock sold........................................................................ 211,609
Foreign withholding taxes reclaimed....................................................... 37,046
Prepaid expenses and other assets............................................................. 51,893
------------
TOTAL ASSETS............................................................................. 226,725,017
------------
LIABILITIES:
Payable for:
Investments purchased..................................................................... 218,063
Capital stock repurchased................................................................. 173,499
Plan of distribution fee.................................................................. 155,360
Investment management fee................................................................. 113,317
Accrued expenses and other payables........................................................... 134,028
------------
TOTAL LIABILITIES........................................................................ 794,267
------------
NET ASSETS............................................................................... $225,930,750
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $242,479,087
Net unrealized appreciation................................................................... 30,381,535
Accumulated undistributed net investment income............................................... 232,230
Accumulated net realized loss................................................................. (47,162,102)
------------
NET ASSETS............................................................................... $225,930,750
============
CLASS A SHARES:
Net Assets.................................................................................... $1,233,491
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 95,358
NET ASSET VALUE PER SHARE................................................................ $12.94
============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE).......................................... $13.66
============
CLASS B SHARES:
Net Assets.................................................................................... $189,180,143
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 14,927,627
NET ASSET VALUE PER SHARE................................................................ $12.67
============
CLASS C SHARES:
Net Assets.................................................................................... $3,160,661
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 249,621
NET ASSET VALUE PER SHARE................................................................ $12.66
============
CLASS D SHARES:
Net Assets.................................................................................... $32,356,455
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................... 2,486,874
NET ASSET VALUE PER SHARE................................................................ $13.01
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 29, 2000
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $94,835 foreign withholding tax)............................................. $ 3,650,810
Interest....................................................................................... 492,105
-----------
TOTAL INCOME.............................................................................. 4,142,915
-----------
EXPENSES
Plan of distribution fee (Class A shares)...................................................... 2,449
Plan of distribution fee (Class B shares)...................................................... 1,862,014
Plan of distribution fee (Class C shares)...................................................... 23,762
Investment management fee...................................................................... 1,379,017
Transfer agent fees and expenses............................................................... 307,411
Registration fees.............................................................................. 106,777
Professional fees.............................................................................. 72,695
Shareholder reports and notices................................................................ 62,936
Directors' fees and expenses................................................................... 19,676
Custodian fees................................................................................. 15,368
Other.......................................................................................... 6,171
-----------
TOTAL EXPENSES............................................................................ 3,858,276
-----------
NET INVESTMENT INCOME..................................................................... 284,639
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss.............................................................................. (2,899,093)
Net change in unrealized appreciation.......................................................... 44,575,453
-----------
NET GAIN.................................................................................. 41,676,360
-----------
NET INCREASE................................................................................... $41,960,999
===========
</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>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 29, 2000 FEBRUARY 28, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss).......................................... $ 284,639 $ (318,999)
Net realized loss..................................................... (2,899,093) (10,954,030)
Net change in unrealized appreciation/depreciation.................... 44,575,453 (56,429,019)
------------ -------------
NET INCREASE (DECREASE).......................................... 41,960,999 (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............... 19,019,430 (52,899,959)
------------ -------------
NET INCREASE (DECREASE).......................................... 60,980,429 (123,340,431)
NET ASSETS:
Beginning of period................................................... 164,950,321 288,290,752
------------ -------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $232,230 AND A
NET INVESTMENT LOSS OF $52,409, RESPECTIVELY)..................... $225,930,750 $ 164,950,321
============ =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2000
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 than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to
10
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2000, CONTINUED
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.
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
11
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2000, CONTINUED
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 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 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 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
12
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2000, CONTINUED
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 $5,250,413 at February 29, 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 representatives may be reimbursed in the subsequent
calendar year. For the year ended February 29, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.23% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended February 29, 2000,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $309,102 and $3,310, respectively
and received $7,038 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense of
the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended February 29, 2000 aggregated
$94,254,289 and $80,253,712, respectively.
For the year ended February 29, 2000, the Fund incurred brokerage commissions of
$33,578 with DWR for portfolio transactions executed on behalf of the Fund. At
February 29, 2000, the Fund's receivable for investments sold and payable for
investments purchased included unsettled trades with DWR of $490,597 and
$218,063, respectively.
13
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2000, CONTINUED
For the year ended February 29, 2000, the Fund incurred $7,260 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 February 29, 2000, the Fund had
transfer agent fees and expenses payable of approximately $400.
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 year ended February 29, 2000
included in Director's fees and expenses in the Statement of Operations amounted
to $7,271. At February 29, 2000, the Fund had an accrued pension liability of
$54,828 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. 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 of the following
years:
<TABLE>
<CAPTION>
AMOUNTS 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.
14
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2000, CONTINUED
6. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 29, 2000 FEBRUARY 28, 1999
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold................................................ 501,579 $ 6,207,930 87,666 $ 1,046,452
Reinvestment of distributions....................... -- -- 383 5,103
Acquisition of Morgan Stanley Dean Witter Precious
Metals and Minerals Trust.......................... 14,831 193,655 -- --
Redeemed............................................ (489,143) (6,086,989) (42,239) (490,436)
----------- ------------- ----------- -------------
Net increase - Class A.............................. 27,267 314,596 45,810 561,119
----------- ------------- ----------- -------------
CLASS B SHARES
Sold................................................ 10,273,562 132,548,979 10,150,338 129,276,569
Reinvestment of distributions....................... -- -- 184,797 2,441,170
Acquisition of Morgan Stanley Dean Witter Precious
Metals and Minerals Trust.......................... 1,741,135 22,294,623 -- --
Redeemed............................................ (11,795,684) (152,931,865) (15,417,509) (191,663,575)
----------- ------------- ----------- -------------
Net increase (decrease) - Class B................... 219,013 1,911,737 (5,082,374) (59,945,836)
----------- ------------- ----------- -------------
CLASS C SHARES
Sold................................................ 570,664 7,262,044 448,875 5,948,277
Reinvestment of distributions....................... -- -- 1,001 13,228
Acquisition of Morgan Stanley Dean Witter Precious
Metals and Minerals Trust.......................... 87,974 1,125,516 -- --
Redeemed............................................ (536,497) (6,936,145) (430,175) (5,757,346)
----------- ------------- ----------- -------------
Net increase - Class C.............................. 122,141 1,451,415 19,701 204,159
----------- ------------- ----------- -------------
CLASS D SHARES
Sold................................................ 4,002,845 54,945,407 1,402,605 15,983,255
Reinvestment of distributions....................... -- -- 8,305 110,702
Acquisition of Morgan Stanley Dean Witter Precious
Metals and Minerals Trust.......................... 5,344 70,218 -- --
Redeemed............................................ (3,037,696) (39,673,943) (842,093) (9,813,358)
----------- ------------- ----------- -------------
Net increase - Class D.............................. 970,493 15,341,682 568,817 6,280,599
----------- ------------- ----------- -------------
Net increase (decrease) in Fund..................... 1,338,914 $ 19,019,430 (4,448,046) $ (52,899,959)
=========== ============= =========== =============
</TABLE>
7. ACQUISITION OF MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
On January 31, 2000, the Fund acquired all the net assets of Morgan Stanley Dean
Witter Precious Metals and Minerals Trust ("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
15
<PAGE>
MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2000, CONTINUED
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 the period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 28, 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................................. $10.15 $13.87 $14.44
------ ------ ------
Income (loss) from investment operations:
Net investment income.............................................. 0.10 0.03 0.04
Net realized and unrealized gain (loss)............................ 2.69 (3.61) (0.10)
------ ------ ------
Total income (loss) from investment operations........................ 2.79 (3.58) (0.06)
------ ------ ------
Less distributions from net realized gain............................. -- (0.14) (0.51)
------ ------ ------
Net asset value, end of period........................................ $12.94 $10.15 $13.87
====== ====== ======
TOTAL RETURN+......................................................... 27.49% (26.04)% (0.22)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.12%(3) 1.14 %(3) 1.11 %(2)
Net investment income................................................. 0.75%(3) 0.56 %(3) 0.45 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $1,233 $691 $309
Portfolio turnover rate............................................... 39% 26 % 67 %(1)
</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 YEAR ENDED FEBRUARY 28
--------------------------------------------------------------------
2000**++ 1999++ 1998*++ 1997 1996**
- -----------------------------------------------------------------------------------------------------------
<S> <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
-------- -------- -------- -------- --------
Income (loss) from investment
operations:
Net investment income (loss)...... -- (0.04) (0.02) -- 0.06
Net realized and unrealized gain
(loss)............................ 2.64 (3.60) 2.18 2.66 2.53
-------- -------- -------- -------- --------
Total income (loss) from investment
operations.......................... 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....... $ 12.67 $ 10.03 $ 13.81 $ 13.34 $ 12.70
======== ======== ======== ======== ========
TOTAL RETURN+........................ 26.32 % (26.60)% 16.93 % 20.88% 24.32%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 1.89 %(1) 1.90 %(1) 1.80 % 1.84% 1.90%
Net investment income (loss)......... (0.02)%(1) (0.20)%(1) (0.15)% 0.05% 0.52%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands........................... $189,180 $147,527 $273,333 $247,989 $152,661
Portfolio turnover rate.............. 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) 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 YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 28, 1998
- -------------------------------------------------------------------------------------------------------------------------------
<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)............................ 2.63 (3.63) (0.10)
------ ------ ------
Total income (loss) from investment operations........................ 2.64 (3.65) (0.12)
------ ------ ------
Less distributions from net realized gain............................. -- (0.14) (0.51)
------ ------ ------
Net asset value, end of period........................................ $12.66 $10.02 $13.81
====== ====== ======
TOTAL RETURN+......................................................... 26.35 % (26.67)% (0.64)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.89 %(3) 1.90 %(3) 1.87 %(2)
Net investment loss................................................... (0.02)%(3) (0.20)%(3) (0.23)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $3,161 $1,278 $1,488
Portfolio turnover rate............................................... 39 % 26 % 67 %(1)
</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 YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 28, 1998
- -------------------------------------------------------------------------------------------------------------------------------
<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.............................................. 0.12 0.05 0.07
Net realized and unrealized gain (loss)............................ 2.70 (3.61) (0.11)
------- ------- -------
Total income (loss) from investment operations........................ 2.82 (3.56) (0.04)
------- ------- -------
Less distributions from net realized gain............................. -- (0.14) (0.51)
------- ------- -------
Net asset value, end of period........................................ $ 13.01 $ 10.19 $ 13.89
======= ======= =======
TOTAL RETURN+......................................................... 27.67% (25.86)% (0.08)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.89%(3) 0.90 %(3) 0.84 %(2)
Net investment income................................................. 0.98%(3) 0.80 %(3) 0.82 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $32,356 $15,454 $13,161
Portfolio turnover rate............................................... 39% 26 % 67 %(1)
</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.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF MORGAN STANLEY DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Natural
Resource Development Securities Inc. (the "Fund") at February 29, 2000, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
February 29, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
APRIL 14, 2000
21
<PAGE>
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<PAGE>
(This page has been left blank intentionally.)
<PAGE>
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
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
[PHOTO]
ANNUAL REPORT
FEBRUARY 29, 2000
