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THERMO
[LOGO] OPPORTUNITY
FUND
THE THERMO OPPORTUNITY FUND, INC.
ANNUAL REPORT
NOVEMBER 30, 1998
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<PAGE>
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THE THERMO OPPORTUNITY FUND, INC.
The 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
Ticker Symbol TMF
(American Stock Exchange)
Market Price
as of 11/30/98 $7.25
Net Asset Value
as of 11/30/98 $8.94
Shares Outstanding 1,760,417
PORTFOLIO SECTORS
Common Stocks: Non-TMO Subsidiaries 4.3%
Cash 4.7%
Private Placements 14.2%
Common Stocks: TMO Subsidiaries 72.7%
Convertible Bonds 4.1%
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THERMO OPPORTUNITY FUND
1
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LETTER TO SHAREHOLDERS JANUARY 8, 1999
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DEAR FELLOW SHAREHOLDERS:
1998 was perhaps the most eventful year for Thermo Electron Corporation and its
publicly traded Subsidiaries since the birth of its spin-out strategy in 1981.
Underperforming Subsidiaries have been earmarked to be taken private. A number
of non-core businesses have been, and more are expected to be, divested.
Management depth has been strengthened and the overall management structure
rationalized. Moreover, the pace of the spin-out strategy, as well as the
criteria for a company going public, have been completely redefined by Thermo
Electron.
Nonetheless, in spite of these positive developments, 1998 was also a year of
disappointments. Many of the issues that we have discussed in past letters,
including the capital heavy nature of the Thermo Electron Subsidiaries' balance
sheets and large number of equity offerings, came home to roost. With more
capital than they could productively employ, a number of the Subsidiaries were
unable to live up to inflated expectations on Wall Street and disappointing
earnings lead to a flight of investors from the Thermo Electron family of
companies. In addition, a number of external events, including the slowdown in
the semiconductor industry and the long delayed approval of the Thermo
Cardiosystems' left ventricle assist device simultaneous with that of its only
competitor, Baxter International, combined to further erode individual company
results and investors' confidence.
How then do we propose to manage your portfolio over the next year in a way that
will recoup and then enhance your original investment? Furthermore, given the
real and substantive changes in the Thermo Electron spinout strategy, what is
the long term future for these companies, and how will it affect The Thermo
Opportunity Fund?
THERMO ELECTRON RESTRUCTURING
On August 12, 1998, and then with minor revisions on December 10th, Thermo
Electron announced a significant restructuring plan. The goal of this
restructuring was to reduce the number of public companies involved in similar
businesses, take private those companies which upon reflection did not meet a
more strictly defined criteria for being public, and acknowledge the lack of
success of some of the Subsidiaries. In terms of specifics, Thermedics
Detection, Thermo Sentron, ThermoSpectra and Thermo Power will all be taken
private by Thermo Electron for cash, at a price to be determined by the outside
Directors of these companies in consultation with independent counsel. Including
Thermedics' announced tender offer for Thermo Voltek at $7 per share, which is
expected to close in early 1999, this makes five public Subsidiaries that will
be taken private.
In addition to these cash buyouts, Thermo Electron will also "roll up" its
Thermo TerraTech Subsidiaries -- Thermoretec, the Randers Group and Thermo
EuroTech -- offering stock in Thermo TerraTech for the publicly traded shares of
these Subsidiaries.
2
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In terms of how this affects The Thermo Opportunity Fund, at the end of November
just under 12% of the Fund's assets were in Subsidiaries for which the Fund
expects to receive a cash tender offer from Thermo Electron during 1999. While
we will not know the actual tender prices that may be offered until they are
formally submitted, the currently attractive valuations of these Subsidiaries
and the premium prices at which Thermo has repurchased them in the open market
over the last twelve months leave us optimistic that the Fund will receive good
value for these holdings. Given this situation, we expect to maintain, or in
some instances increase, our investment in these companies.
More important than this immediate opportunity to accrue value to your Fund
through this restructuring process, are the long term benefits to shareholders
from the philosophical and strategic changes that are behind this restructuring.
In particular, senior management at Thermo Electron has stated that the pace of
the spin-out strategy will be significantly reduced and that existing companies
will not engage in dilutive equity offerings. We expect that this will allow the
remaining public Subsidiaries to concentrate on their operations and draw
investors' attention to the successes of their operations. Also, we would note
that part of this restructuring has been the willingness of Thermo Electron to
implement significant share buybacks. The result of these repurchases has been a
substantial decrease in excess cash on the companies' balance sheets, enhancing
returns to shareholders.
CURRENT STRATEGY
As detailed in the attached financial statements and tables, our current
strategy for the Fund is to leverage the restructuring process, concentrate our
investments in those companies with strong operating fundamentals, primarily the
Instruments companies, and complement these holdings with positions in selective
fast growth, high technology Subsidiaries.
The result of this approach has been that despite the impact of a slowing global
economy and recession in the semiconductor industry, the companies in your Fund
are still growing substantially faster than the market as a whole, while they
are valued at a discount to the market.
Turning to investment results, while certainly disappointing in an absolute
sense, performance of your Fund during fiscal 1998 was significantly better than
either Thermo Electron Corp. or an unmanaged portfolio of its Subsidiaries. This
holds true both for the share price, and for the change in net asset value. As
we look into fiscal 1999, we believe our strategy of mining the opportunities
inherent in the restructuring plan, while continuing to focus on those companies
that in terms of earnings growth and cash generation are most attractive in an
economic sense, should again be to your benefit.
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THERMO OPPORTUNITY FUND
3
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PORTFOLIO CHARACTERISTICS
S&P Small
TMF S&P 500 Cap.
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Change in Revenues ('97 vs. '96)* 31.0% 4.0% n/a
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Change in Earnings ('97 vs. '96) 34.0% 9.0% 20.0%
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Change in Earnings ('98E vs. '97) 13.0% 1.0% -1.0%
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Price/Earnings Ratio (1998) 16.8X 25.5X 21.4X
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Price/Earnings Ratio Relative to S&P 500 0.7X 1.0X 0.8X
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*Source: Baseline. Historical results not adjusted for pooling of interest
mergers.
In sum, we expect the next year to be yet another eventful one for the Thermo
Electron Subsidiaries and for your Fund, driven by the restructing of the Thermo
Electron Subsidiaries now being implemented. In the short run the Fund expects
to be receiving cash for a number of its small illiquid holdings, at what we
hope will be meaningful premiums to their current valuations. Looking out
further, once the decks have been cleared by this rationalization of the
Subsidiary universe, we would expect the market to value the remaining
businesses more in line with their individual successes and long term prospects.
Please visit us online at "www.thermofund.com" for weekly updates on the changes
in net asset value and the ten largest holdings in your Fund.
I look forward to updating you again in May.
Sincerely,
/s/ Gregory E. Ratte'
Gregory E. Ratte',
Chairman of the Board
4
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THERMO OPPORTUNITY FUND INTERIM PERFORMANCE UPDATE
FROM 11/28/97 TO 11/27/98
[GRAPHIC OMITTED]
THERMO OPPORTUNITY FUND INDUSTRY GROUPS
NOVEMBER 30, 1998
Cash 4.7%
Advanced Technologies 5.3%
Process Equipment 6.7%
Alternative Energy Systems 11.4%
Private Placements 14.2%
Bio-Medical Products 14.3%
Instruments 43.4%
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THERMO OPPORTUNITY FUND
5
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THE THERMO OPPORTUNITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
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ASSETS
Investment securities:
At amortized cost (Original cost $21,119,861) .............. $ 21,121,261
============
At market value (Note 1) ................................... $ 14,990,039
Investments in repurchase agreements (Note 1) ................. 557,000
Cash .......................................................... 5,809
Interest receivable ........................................... 4,496
Receivable for securities sold ................................ 76,377
Organization expenses, net (Note 1) ........................... 98,744
Other assets .................................................. 16,816
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TOTAL ASSETS ............................................... 15,749,281
------------
LIABILITIES
Payable for securities purchased .............................. 1,275
Other accrued expenses and liabilities ........................ 12,651
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TOTAL LIABILITIES .......................................... 13,926
------------
NET ASSETS .................................................... $ 15,735,355
============
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 .................................... 24,049,739
Accumulated net realized losses from security transactions .... (2,184,922)
Net unrealized depreciation on investments .................... (6,131,222)
------------
Net assets .................................................... $ 15,735,355
============
Net asset value per share (Note 1) ............................ $ 8.94
============
See accompanying notes to financial statements.
6
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THE THERMO OPPORTUNITY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998
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INVESTMENT INCOME
Interest ................................................. $ 23,695
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EXPENSES
Investment advisory fees (Note 3) ........................ 161,204
Administrative services fees (Note 3) .................... 60,000
Amortization of organization expenses (Note 1) ........... 36,000
Directors' fees and expenses ............................. 35,800
Professional fees ........................................ 32,591
Insurance expense ........................................ 18,640
Reports to shareholders .................................. 14,370
Exchange listing fees .................................... 8,495
Postage and supplies ..................................... 7,332
Transfer agent fees ...................................... 6,582
Custodian fees ........................................... 2,751
Other expenses ........................................... 363
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TOTAL EXPENSES ........................................ 384,128
Fees waived by the Adviser (Note 3) ...................... (20,245)
Fees waived by the Administrator (Note 3) ................ (5,000)
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NET EXPENSES .......................................... 358,883
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NET INVESTMENT LOSS ......................................... (335,188)
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REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses from security transactions ........... (1,378,681)
Net change in unrealized appreciation/
depreciation on investments ........................... (3,709,042)
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NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS ........... (5,087,723)
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NET DECREASE IN NET ASSETS FROM OPERATIONS .................. $(5,422,911)
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See accompanying notes to financial statements.
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THERMO OPPORTUNITY FUND
7
<PAGE>
<TABLE>
<CAPTION>
THE THERMO OPPORTUNITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997
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Year Year
Ended Ended
November 30, November 30,
1998 1997
- -------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C>
Net investment loss ............................. $ (335,188) $ (290,787)
Net realized losses from security transactions .. (1,378,681) (798,741)
Net change in unrealized appreciation/
depreciation on investments .................. (3,709,042) (1,694,880)
------------ ------------
Net decrease in net assets from operations ......... (5,422,911) (2,784,408)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................. -- (105,625)
------------ ------------
NET DECREASE IN NET ASSETS ......................... (5,422,911) (2,890,033)
NET ASSETS:
Beginning of year ............................... 21,158,266 24,048,299
------------ ------------
End of year ..................................... $ 15,735,355 $ 21,158,266
============ ============
</TABLE>
See accompanying notes to financial statements.
8
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<TABLE>
<CAPTION>
THE THERMO OPPORTUNITY FUND, INC.
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
=========================================================================================================
Year Year Period
Ended Ended Ended
November 30, November 30, November 30,
1998 1997 1996(A)
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<S> <C> <C> <C>
Net asset value at beginning of period ....................... $ 12.02 $ 13.66 $ 14.10
--------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss) .............................. (0.19) (0.17) 0.07
Net realized and unrealized losses on investments ......... (2.89) (1.41) (0.42)
--------- --------- ---------
Total from investment operations ............................. (3.08) (1.58) (0.35)
--------- --------- ---------
Less distributions:
Dividends from net investment income ...................... -- (0.06) --
--------- --------- ---------
Effect of initial public offering costs ...................... -- -- (0.09)
--------- --------- ---------
Net asset value at end of period ............................. $ 8.94 $ 12.02 $ 13.66
========= ========= =========
Market value at end of period ................................ $ 7.25 $ 9.50 $ 13.75
========= ========= =========
Total investment return based on net asset value ............. (25.62%) (11.59%) (3.12%)
========= ========= =========
Total investment return based on market value ................ (23.68%) (30.56%) (2.48%)
========= ========= =========
Net assets at end of period (000's) .......................... $ 15,735 $ 21,158 $ 24,048
========= ========= =========
Ratio of net expenses to average net assets(B) ............... 1.78% 1.66% 1.53%(C)
Ratio of net investment income (loss) to average net assets .. (1.66%) (1.33%) 1.62%(C)
Portfolio turnover rate ...................................... 37% 47% 12%(C)
</TABLE>
(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 1.91%, 1.81% and 1.56%(C) for the periods ended November 30, 1998,
1997 and 1996, respectively (Note 3).
(C) Annualized.
See accompanying notes to financial statements.
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THERMO OPPORTUNITY FUND
9
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THE THERMO OPPORTUNITY FUND, INC.
PORTFOLIO OF INVESTMENTs
NOVEMBER 30, 1998
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Market
Shares COMMON STOCKS -- 89.3% Value
- --------------------------------------------------------------------------------
INSTRUMENTS -- 43.4%
115,066 Metrika Systems Corp.* ...................... $ 992,444
58,333 ONIX Systems, Inc.* ......................... 306,248
65,500 Thermo BioAnalysis Corp.* ................... 691,844
246,600 Thermo Optek Corp.* ......................... 2,681,775
71,650 Thermo Voltek Corp.* ........................ 483,638
60,600 ThermoQuest Corp.* .......................... 617,362
39,900 ThermoSpectra Corp.* ........................ 448,875
236,194 Thermo Vision Corp.* ........................ 605,247
------------
6,827,433
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BIO-MEDICAL PRODUCTS -- 14.3%
9,000 Photoelectron Corp.* ........................ 43,875
130,400 Thermo Cardiosystems, Inc.* ................. 1,515,900
68,900 Trex Medical Corp.* ......................... 684,694
------------
2,244,469
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PRIVATE PLACEMENTS(1) -- 12.3%
100,000 Thermo EuroTech N.V.* (Environmental Services) 425,000
50,000 Thermo Information Solutions*
(Advanced Technologies) ..................... 500,000
50,000 Thermo Trilogy Corp.* (Environmental Services) 412,500
150,000 Trex Communications, Inc.*
(Advanced Technologies) ..................... 600,000
------------
1,937,500
------------
ALTERNATIVE ENERGY SYSTEMS -- 7.3%
346,900 KFX, Inc.* .................................. 607,075
61,700 Thermo Power Corp.* ......................... 547,588
------------
1,154,663
------------
PROCESS EQUIPMENT -- 6.7%
125,000 Thermo Fibergen, Inc.* ...................... 1,054,688
500 Thermo Fibertek, Inc.* ...................... 2,812
------------
1,057,500
------------
ADVANCED TECHNOLOGIES -- 5.3%
2,000 DocuCorp International, Inc.* ............... 10,375
3,000 OAO Technology Solutions, Inc.* ............. 10,500
44,400 Thermedics Detection, Inc.* ................. 344,100
43,900 ThermoTrex Corp.* ........................... 460,950
------------
825,925
------------
TOTAL COMMON STOCKS (Cost $20,163,111) ...... $ 14,047,490
------------
10
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THE THERMO OPPORTUNITY FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
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Market
Shares LIMITED LIABILITY COMPANIES(1) -- 1.9% Value
- --------------------------------------------------------------------------------
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
------------
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Par Market
Value CONVERTIBLE BONDS -- 4.1% Value
- -------------------------------------------------------------------------------
$ 710,000 Thermo Ecotek Corp., 4.875%, 4/15/04
(Cost $658,150) ............................. $ 642,549
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TOTAL INVESTMENT SECURITIES -- 95.3%
(Cost $21,121,261) .......................... $ 14,990,039
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Face Market
Amount REPURCHASE AGREEMENTS(2) -- 3.5% Value
- --------------------------------------------------------------------------------
$ 557,000 Fifth Third Bank, 4.75%, dated 11/30/98, due
12/01/98, repurchase proceeds $557,073 ...... $ 557,000
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TOTAL INVESTMENT SECURITIES AND
REPURCHASE AGREEMENTS-- 98.8% ............... $ 15,547,039
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.2% 188,316
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NET ASSETS-- 100.0% ......................... $ 15,735,355
============
* Non-income producing security.
(1) Valued at fair value as determined in good faith by the Adviser consistent
with procedures approved by the Board of Directors.
(2) Repurchase agreements are fully collateralized by U.S. Government
obligations.
See accompanying notes to financial statements.
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THERMO OPPORTUNITY FUND
11
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THE THERMO OPPORTUNITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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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 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.
12
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Distributions to shareholders -- Dividends arising from net investment income,
if any, 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, 1998:
- --------------------------------------------------------------------------------
Gross unrealized appreciation ......................... $ 424,740
Gross unrealized depreciation ......................... (6,719,419)
------------
Net unrealized depreciation ........................... $ (6,294,679)
============
Federal income tax cost ............................... $ 21,284,718
============
- --------------------------------------------------------------------------------
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, 1998, the Fund had capital loss carryforwards for federal
income tax purposes of $2,021,465, none of which expire prior to November 30,
2004. These capital loss carryforwards may be utilized in the current and future
years to offset net realized capital gains prior to distributing such gains to
shareholders.
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THERMO OPPORTUNITY FUND
13
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2. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales and maturities of investment
securities, other than short-term investments, amounted to $7,374,760 and
$8,170,214, respectively, during the year ended November 30, 1998.
3. TRANSACTIONS WITH AFFILIATES
Certain Directors and officers of the Fund are principals of 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 $20,245 of its investment advisory fees during the year ended November
30, 1998.
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 $5,000 monthly minimum. During the year ended November 30, 1998, CFS
voluntarily waived $5,000 of its administrative services fees.
14
<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, 1998, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, 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, 1998, 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, 1998, the results of its
operations for the year then ended, and the changes in its net assets for each
of the two years in the period then ended and the financial highlights for the
periods indicated thereon, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
December 30, 1998
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THERMO OPPORTUNITY FUND
15
<PAGE>
THE 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
WEBSITE
www.thermofund.com
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001014743
<NAME> THE THERMO OPPORTUNITY FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
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