The Thermo Opportunity Fund, Inc.
Thermo Opportunity Fund is a non-diversified, closed-end management investment
company that invests primarily in securities issued by subsidiaries of Thermo
Electron Corporation (Thermo Electron or TMO). The Fund's investment objective
is to seek long-term capital appreciation.
Stock
ASE Symbol TMF
Market Price
as of 11/30/97 $9.50
Net Asset Value
as of 11/30/97 $12.02
Shares Outstanding 1,760,417
PORTFOLIO SECTORS
Pie Chart:
Common Stocks: TMO Subsidiaries 80.7%
Common Stocks: Non-TMO Subsidiaries 7.1%
Private Placements 10.9%
Cash 1.3%
<PAGE>
LETTER TO SHAREHOLDERS JANUARY 21, 1998
DEAR FELLOW SHAREHOLDERS:
Looking back at 1997, it was a year of both disappointment and promise. With
common stocks once more delivering good returns, the disappointment was clearly
in the lagging performance of your Fund and the companies in the Thermo Electron
Universe. In contrast, the promise of 1997 was that, from an operating
standpoint, many companies in the Thermo Electron family, especially the
instrument companies, performed well. In addition, we were able to expand the
number of private placements held in the Fund, enhancing in our view the
prospects for future performance.
FUND OBJECTIVE
As a reminder, your Fund seeks to achieve its investment objective of long-term
growth by investing primarily in securities issued by direct and indirect
subsidiaries (the Subsidiaries) of Thermo Electron Corporation (Thermo
Electron). These companies provide products and services in six industry
segments: Instruments, Alternative Energy Systems, Process Equipment,
Bio-Medical Products, Environmental Services and Advanced Technologies.
Over the past 15 years, Thermo Electron has engaged in a strategy of selling to
the public minority interests in operating divisions. This equity "spin-out"
strategy has permitted the Subsidiaries to raise low-cost capital and is
designed to foster a strong entrepreneurial culture, with management owning
stock in their own businesses. Thermo Electron currently has 22 publicly traded
and 8 privately held spin-offs for a total of 30 Subsidiaries, 9 more than at
the end of fiscal 1996. Thermo Opportunity Fund's strategy is to invest 75% or
more of its total assets in securities issued by Thermo Electron Subsidiaries
including common stock, private placements and securities convertible into
common stock, as well as warrants to purchase such securities. The Fund will not
invest in common stock of Thermo Electron.
The Fund may also invest in securities issued by companies not affiliated with
Thermo Electron which either (i) engage in the same or related industries as
Thermo Electron or one or more of the Subsidiaries, or (ii) practice a spin-out
strategy similar to that practiced by Thermo Electron.
LOOKING BACK
In retrospect, three separate forces combined to depress returns in your Fund:
continued worry in the market about the pace and scope of the Thermo Electron
spin-out strategy, delayed approval by the Food and Drug Administration (the
FDA) of Thermo Cardiosystems' new heart-assist device and a widening discount in
the price of the Fund's shares to the net asset value (NAV) of the Fund. While
all three are legitimate issues, we believe they will prove to be transitory.
Given the complexity of the Thermo Electron strategy and the number of its
public Subsidiaries, investors' enthusiasm for these companies has in the past
ebbed and flowed independent of the performance of the underlying companies. The
current decline in confidence of investors can be traced back to the flurry of
newly public subsidiaries in 1996 and early 1997, which created considerable
confusion and even some disillusionment in the market place. Fortunately, the
second half of 1997 saw only one small initial public offering (IPO) and Thermo
Electron has indicated that the pace of the spin-outs in 1996 will not be
duplicated in 1998. Furthermore, through a combination of a stepped up
acquisition pace and an aggressive share repurchase program, Thermo Electron and
its Subsidiaries are accelerating earnings growth and productively investing
their large cash hoard.
<PAGE>
Meanwhile, where poor stock price performance occurred in Subsidiaries with
strong growth in revenues and earnings per share, last year's disappointment
could, in our view, be this year's opportunity. Thermo Optek and Metrika
Systems, the first and fourth largest holdings in the Fund, as of the date of
this report, are examples. Underlying results in both companies have been good
and, as a result, both now sell at a modest 15 times estimated 1998 earnings per
share. This multiple is 25% below the price/earnings multiple for the S&P 500,
despite both companies having earnings growth in the neighborhood of 30%, or
four times the market's growth rate. In these and other instances, and for
"micro-cap stocks" as a whole, it is our view that disappointing performance may
have little relevance to future potential, and indeed may lead to outsized gains
looking forward.
Turning to Thermo Cardiosystems, this continues to be one of your Fund's largest
holdings and an investment in which we have high hopes. We have been students of
this company and its technology for more than ten years, from the days long
prior to the use of its products in humans, to today, where approval for an
implantable heart-assist device is currently pending at the FDA. While the
timing or even the eventuality of approval cannot be known, the company's
ongoing efforts and its thirty years of research leave us confident that the
company's technology will continue to have a growing commercial application and
that patience in this investment will be amply rewarded.
Finally, regarding the discount to net asset value at which your shares have
sold over the last quarter of 1997, the Fund's history since inception in
August, 1996 has indicated that this too may prove transitory. Since August of
1996, the differential between the share price and NAV has ranged from a 12%
premium to a 20% discount. The most significant discount occurred after the end
of 1997, related, we believe, to tax-loss selling, while as recently as August
of 1997, the Fund has sold at a premium to NAV. We believe that as confidence in
the Thermo Electron family is restored and as the market starts to understand
the value of your Fund's private placement portfolio, the difference between the
Fund's share price and NAV will more accurately reflect the unique strategy of
your Fund.
LOOKING FORWARD
One of the most promising components of your Fund continues to be its portfolio
of privately held Thermo Electron Subsidiaries. As of the writing of this
report, the Fund held stakes in six different non-public Subsidiaries accounting
for approximately 13% of the total portfolio. While no guarantee of future
results, in the past private placements of Subsidiaries have rewarded investors,
and the Fund's ability to invest in these early stage companies for our
shareholders is a significant opportunity. Whether it's Trex Communications and
its revolutionary laser-based wireless communications technology or Onix
Systems, the newest instrument company, or any of the other companies, these
investments offer excellent long-term potential.
<PAGE>
Developments in other large holdings in your Fund have also been positive. Trex
Medical, the Fund's third largest holding, filed its application with the FDA on
December 1, 1997 to offer its digital X-ray technology for mammography. It also
recently acquired a large dental X-ray company based in France. Thermo Ecotek,
the Fund's fifth largest holding, completed a private placement of its Thermo
Trilogy division (biopesticides) while production started at a clean coal
facility jointly owned with KFX, Inc.--also held in your Fund. In all, we
continue to believe that the promise of both the public and private companies
held in your Fund's portfolio will, in the long run, be fulfilled, and we would
like to thank you for your support over the last year.
Sincerely,
/s/ Gregory E. Ratte
Gregory E. Ratte,
Chairman of the Board
THERMO OPPORTUNITY FUND INDUSTRY GROUPS
NOVEMBER 30, 1997
Pie Chart:
Instruments 34.2%
Alternative Energy Systems 14.9%
Process Equipment 4.7%
Bio-Medical Products 22.2%
Cash 1.3%
Advanced Technologies 11.8%
Private Placements 10.9%
<PAGE>
<TABLE>
THE THERMO OPPORTUNITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<CAPTION>
<S> <C>
ASSETS
Investments in securities:
At amortized cost (original cost $23,293,997)..................................................... $ 23,293,997
===============
At market value (Note 1).......................................................................... $ 20,871,817
Investments in repurchase agreements (Note 1)........................................................ 216,000
Cash ................................................................................................ 864
Interest receivable.................................................................................. 91
Organization expenses, net (Note 1).................................................................. 134,744
Other assets......................................................................................... 15,534
---------------
TOTAL ASSETS...................................................................................... 21,239,050
---------------
LIABILITIES
Payable for securities purchased..................................................................... 68,984
Other accrued expenses and liabilities............................................................... 11,800
---------------
TOTAL LIABILITIES................................................................................. 80,784
---------------
NET ASSETS .......................................................................................... $ 21,158,266
===============
Net assets consist of:
Common stock - par value $0.001 per share
Authorized 16,000,000 shares, Outstanding 1,760,417 shares ....................................... $ 1,760
Additional paid-in capital........................................................................... 24,384,927
Accumulated net realized losses from security transactions........................................... ( 806,241)
Net unrealized depreciation on investments........................................................... ( 2,422,180)
---------------
Net assets .......................................................................................... $ 21,158,266
===============
Net asset value per share (Note 1)................................................................... $ 12.02
===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
THE THERMO OPPORTUNITY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest.......................................................................................... $ 72,066
---------------
TOTAL INVESTMENT INCOME......................................................................... 72,066
---------------
EXPENSES
Investment advisory fees (Note 3)................................................................. 174,988
Administrative services fees (Note 3)............................................................. 53,587
Amortization of organization expenses (Note 1).................................................... 36,150
Professional fees................................................................................. 33,169
Directors' fees and expenses...................................................................... 30,212
Transfer agent fees............................................................................... 21,510
Insurance expense................................................................................. 18,412
Reports to shareholders........................................................................... 11,687
Custodian fees.................................................................................... 5,363
Postage and supplies.............................................................................. 4,101
Exchange listing fees............................................................................. 2,673
Other expenses.................................................................................... 3,722
---------------
TOTAL EXPENSES.................................................................................. 395,574
Fees waived by the Adviser (Note 3)............................................................... (27,721)
Fees waived by the Administrator (Note 3)......................................................... (5,000)
---------------
NET EXPENSES.................................................................................... 362,853
---------------
NET INVESTMENT LOSS ................................................................................. (290,787)
---------------
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses from security transactions.................................................... (798,741)
Net change in unrealized appreciation/depreciation on investments................................. (1,694,880)
---------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS ................................................... ( 2,493,621)
---------------
NET DECREASE IN NET ASSETS FROM OPERATIONS .......................................................... $ (2,784,408)
===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
THE THERMO OPPORTUNITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED NOVEMBER 30, 1997 AND 1996
<CAPTION>
YEAR PERIOD
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996 (A)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss)........................................................ $ ( 290,787) $ 120,068
Net realized losses from security transactions...................................... ( 798,741) ( 7,500)
Net change in unrealized appreciation/depreciation on investments................... ( 1,694,880) ( 727,300)
-------------- ---------------
Net decrease in net assets from operations............................................. ( 2,784,408) ( 614,732)
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.......................................................... ( 105,625) --
-------------- ---------------
Decrease in net assets from distributions to shareholders.............................. ( 105,625) --
-------------- ---------------
INCREASE IN NET ASSETS FROM NET PROCEEDS OF
COMMON STOCK ISSUED ................................................................ -- 24,827,875
-------------- ---------------
DECREASE IN NET ASSETS RELATED TO OFFERING COSTS (NOTE 1) ............................. -- ( 164,844)
-------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS ................................................. ( 2,890,033) 24,048,299
NET ASSETS:
Beginning of period................................................................. 24,048,299 --
-------------- ---------------
End of period....................................................................... $ 21,158,266 $ 24,048,299
============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME .................................................. $ -- $ 120,068
============== ===============
<FN>
(A) Represents the period from the initial public offering of shares (August 6,
1996) through November 30, 1996.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
THE THERMO OPPORTUNITY FUND, INC.
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
YEAR PERIOD
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period................................................. $ 13.66 $ 14.10
-------------- ---------------
Income from investment operations:
Net investment income (loss)........................................................ ( 0.17) 0.07
Net realized and unrealized losses on investments................................... ( 1.41) ( 0.42)
-------------- ---------------
Total from investment operations....................................................... ( 1.58) ( 0.35)
-------------- ---------------
Less distributions:
Dividends from net investment income................................................ ( 0.06) --
-------------- ---------------
Total distributions.................................................................... ( 0.06) --
-------------- ---------------
Effect of initial public offering costs................................................ -- ( 0.09)
-------------- ---------------
Net asset value at end of period....................................................... $ 12.02 $ 13.66
============== ===============
Market value at end of period.......................................................... $ 9.50 $ 13.75
============== ===============
Total investment return based on net asset value....................................... ( 11.59%) ( 3.12%)
============== ===============
Total investment return based on market value.......................................... ( 30.56%) ( 2.48%)
============== ===============
Net assets at end of period (000's).................................................... $ 21,158 $ 24,048
============== ===============
Ratio of expenses to average net assets(B) ............................................ 1.66% 1.53%(C)
Ratio of net investment income (loss) to average net assets............................ ( 1.33%) 1.62%(C)
Portfolio turnover rate................................................................ 47% 12%(C)
Average commission rate on investment transactions..................................... $ .0483 $ .0509
<FN>
(A) Represents the period from the initial public offering of shares (August 6,
1996) through November 30, 1996. No income was earned or expenses incurred
from the commencement of operations through the date of initial public
offering.
(B) Absent fee waivers, the ratio of expenses to average net assets would have
been 1.81% and 1.56%(C) for the periods ended November 30, 1997 and 1996,
respectively (Note 3).
(C) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
THERMO OPPORTUNITY FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<CAPTION>
MARKET
SHARES COMMON STOCKS -- 97.3% VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INSTRUMENTS -- 34.2%
116,666 Metrika Systems Corp.*.................................................................. $ 1,720,824
35,200 Thermo Bioanalysis Corp.*............................................................... 607,200
157,100 Thermo Optek Corp.*..................................................................... 2,690,337
136,750 Thermo Voltek Corp.*.................................................................... 854,688
39,500 ThermoQuest Corp.*...................................................................... 669,031
74,300 ThermoSpectra Corp.*.................................................................... 696,562
--------------
$ 7,238,642
--------------
BIO-MEDICAL PRODUCTS -- 22.2%
39,600 Thermedics, Inc.*....................................................................... $ 628,650
110,400 Thermo Cardiosystems, Inc.*............................................................. 2,139,000
137,900 Trex Medical Corp.*..................................................................... 1,930,600
--------------
$ 4,698,250
--------------
ALTERNATIVE ENERGY SYSTEMS -- 14.9%
321,600 KFX, Inc.*.............................................................................. $ 1,005,000
90,050 Thermo Ecotek Corp.*.................................................................... 1,226,931
101,700 Thermo Power Corp.*..................................................................... 928,013
--------------
$ 3,159,944
--------------
ADVANCED TECHNOLOGIES -- 11.8%
3,000 OAO Technology Solutions, Inc.*......................................................... $ 28,688
15,000 Safeguard Scientifics, Inc.*............................................................ 473,437
47,800 Thermedics Detection, Inc.*............................................................. 483,975
36,015 ThermoLase Corp.*....................................................................... 495,206
41,300 ThermoTrex Corp.*....................................................................... 1,001,525
--------------
$ 2,482,831
--------------
PRIVATE PLACEMENTS -- 9.5%
50,000 Onix Systems, Inc.* (Instruments)....................................................... $ 475,000
100,000 Thermo Eurotech N.V.* (Environmental Services).......................................... 425,000
50,000 Thermo Information Solutions* (Advanced Technologies)................................... 500,000
150,000 Trex Communications, Inc.* (Advanced Technologies)...................................... 599,400
--------------
$ 1,999,400
--------------
PROCESS EQUIPMENT -- 4.7%
104,500 Thermo Fibergen, Inc.*.................................................................. $ 992,750
--------------
TOTAL COMMON STOCK (COST $22,993,997) ................................................. $ 20,571,817
--------------
<PAGE>
<CAPTION>
THE THERMO OPPORTUNITY FUND, INC. (CONTINUED)
MARKET
SHARES LIMITED LIABILITY COMPANIES -- 1.4% VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
100,000 Cosmetic Laser Services L.L.C.*......................................................... $ 100,000
200,000 Cosmetic Laser Services II L.L.C.*...................................................... 200,000
--------------
TOTAL LIMITED LIABILITY COMPANIES (COST $300,000) ...................................... $ 300,000
--------------
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(1)-- 1.0% VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
$ 216,000 Fifth Third Bank, 5.08%, dated 11/28/97, due 12/1/97, repurchase proceeds $216,091...... $ 216,000
-------------- --------------
$ 216,000 TOTAL REPURCHASE AGREEMENTS ............................................................ $ 216,000
-------------- --------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.7% ........................... $ 21,087,817
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.3% ........................................... 70,449
--------------
NET ASSETS-- 100.0% .................................................................... $ 21,158,266
==============
<FN>
* Non-income producing securities.
(1) Repurchase agreements are fully collateralized by U.S.
Government obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
THE THERMO OPPORTUNITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
The Thermo Opportunity Fund, Inc. (the Fund) was organized under Maryland law on
May 16, 1996 as a non-diversified, closed-end investment company. The Fund
commenced operations on June 19, 1996, when Brundage, Story and Rose, LLC (the
Adviser), purchased 6,667 shares at $15.00 per share to provide the Fund with
its initial $100,000 of capital. The Fund commenced the public offering of
shares on August 6, 1996. The Fund is listed on the American Stock Exchange with
a symbol of "TMF."
The Fund's investment objective is to seek long-term capital appreciation. The
Fund seeks to achieve its investment objective by investing primarily in
securities issued by direct and indirect subsidiaries of Thermo Electron
Corporation (Thermo Electron). The Fund may also invest in securities issued by
companies not affiliated with Thermo Electron which either (i) engage in the
same or related industries as Thermo Electron or one or more of its subsidiaries
or (ii) practice a spin-out strategy similar to that practiced by Thermo
Electron.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued weekly (each
Friday) and on the last business day of each month as of the close of the
regular session of trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time). Portfolio securities listed on stock exchanges and securities
traded in the over-the-counter market are valued at the last sale price as of
the close of business on the day the securities are being valued. Securities not
traded on a particular day, or for which the last sale price is not readily
available, are valued at the closing bid price quoted by brokers that make
markets in the securities. Corporate bonds are valued at their most recent bid
price as obtained from one or more of the major market makers for such
securities or are valued at an estimated fair value obtained from an independent
pricing service based upon such factors as maturity, coupon, issuer and type of
security. If market quotations are not readily available, securities will be
valued at fair value as determined in good faith by the Adviser consistent with
procedures approved by the Board of Directors.
Repurchase agreements -- Repurchase agreements, which are collateralized by U.S.
Government obligations, are valued at cost which, together with accrued
interest, approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's custodian at the Federal
Reserve Bank. At the time the Fund enters into a repurchase agreement, the
seller agrees that the value of the underlying securities, including accrued
interest, will be equal to or exceed the face amount of the repurchase
agreement. The Fund enters into repurchase agreements only with institutions
deemed to be creditworthy by the Adviser, including the Fund's custodian, banks
having assets in excess of $10 billion and primary U.S. Government securities
dealers.
Share valuation -- The net asset value of the Fund is calculated weekly (each
Friday) and on the last business day of each month by dividing the total value
of the Fund's assets, less liabilities, by the number of shares outstanding.
Investment income -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date. Discounts and premiums on securities purchased
are accreted/amortized in accordance with income tax regulations which
approximate generally accepted accounting principles.
<PAGE>
Distributions to shareholders -- Dividends arising from net investment income
are declared and paid annually. Net realized short-term capital gains, if any,
may be distributed throughout the year and net realized long-term capital gains,
if any, are distributed at least once each year. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Organization expenses and offering costs -- Expenses of organization, net of
certain expenses paid by the Adviser, have been capitalized and are being
amortized on a straight-line basis over five years. Expenses related to the
offering of shares have been charged against capital.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
fiscal year ended November 30) plus undistributed amounts from prior years.
The following information is based upon federal income tax cost of portfolio
investments (excluding repurchase agreements) as of November 30, 1997:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Gross unrealized appreciation................................ $ 1,639,633
Gross unrealized depreciation................................ ( 4,126,662)
---------------
Net unrealized depreciation.................................. $ ( 2,487,029)
===============
Federal income tax cost...................................... $ 23,358,846
===============
- --------------------------------------------------------------------------------
</TABLE>
The difference between the federal income tax cost of portfolio investments and
the financial statement cost is due to certain timing differences in the
recognition of capital losses under generally accepted accounting principles and
income tax regulations.
As of November 30, 1997, the Fund had capital loss carryforwards for federal
income tax purposes of $741,392, none of which expire prior to November 30,
2004. These capital loss carryforwards may be utilized in future years to offset
net realized capital gains prior to distributing such gains to shareholders.
<PAGE>
Reclassification of capital accounts -- As of November 30, 1997, the Fund had an
accumulated net investment loss of $276,344 which has been reclassified to
additional paid-in capital on the Statement of Assets and Liabilities. The
reclassification, a result of permanent differences between financial statement
and income tax reporting requirements, has no effect on the Fund's net assets or
net asset value per share.
2. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment securities, other
than short-term investments, amounted to $13,842,889 and $9,687,239,
respectively, during the year ended November 30, 1997.
3. TRANSACTIONS WITH AFFILIATES
Certain Directors and officers of the Fund are principals at Brundage, Story and
Rose, LLC (the Adviser). Certain officers of the Fund are officers of
Countrywide Fund Services, Inc. (CFS), the administrative services agent for the
Fund.
ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. Under the Advisory Agreement, the Fund pays the Adviser a
fee, computed and accrued daily and paid monthly, at an annual rate of 0.80% of
its average daily net assets.
In order to reduce the operating expenses of the Fund, the Adviser voluntarily
waived $27,721 of its investment advisory fees during the year ended November
30, 1997.
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of the Administrative Services Agreement between the Fund and
CFS, CFS supplies non-investment related statistical and research data, internal
regulatory compliance services and executive and administrative services for the
Fund. CFS calculates the weekly and month end net asset value per share and
maintains the financial books and records of the Fund, supervises the
preparation of tax returns, reports to shareholders of the Fund, reports to and
filings with the Securities and Exchange Commission, and materials for meetings
of the Board of Directors. For the performance of these administrative services,
CFS receives a monthly fee based on the Fund's average daily net assets, subject
to a monthly minimum. During the year ended November 30, 1997, CFS voluntarily
waived $5,000 of its administrative services fees.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP [LOGO]
To the Shareholders and Board of Directors
of The Thermo Opportunity Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Thermo Opportunity Fund, Inc., including the portfolio of investments, as of
November 30, 1997, the related statement of operations for the year then ended,
and the statements of changes in net assets and the financial highlights for the
periods indicated thereon. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Thermo Opportunity Fund, Inc. as of November 30, 1997, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the periods indicated thereon, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
December 31, 1997
<PAGE>
THERMO OPPORTUNITY FUND, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
BOARD OF DIRECTORS
Francis S. Branin, Jr.
Blair M. Brewster
Henson L. Jones, Jr.
Hollis S. McLoughlin
Gregory E. Ratte
INVESTMENT ADVISER
Brundage, Story and Rose, LLC
One Broadway
New York, New York 10004
TRANSFER AGENT
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
SHAREHOLDER SERVICES
Nationwide: (Toll Free) 888-254-6872
[LOGO] THERMO
OPPORTUNITY
FUND
Thermo Opportunity Fund, inc.
Annual Report
November 30, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001014743
<NAME> THE THERMO OPPORTUNITY FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
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