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THE THERMO OPPORTUNITY FUND, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
[LOGO]
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 THE THERMO OPPORTUNITY FUND, INC.
Nationwide: (Toll Free) 888-254-6872 ANNUAL REPORT
NOVEMBER 30, 1999
WEBSITE
www.thermofund.com
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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 11/30/99 $7.4375
Net Asset Value
as of 11/30/99 $8.97
Shares Outstanding 1,755,417
PORTFOLIO SECTORS
NOVEMBER 30, 1999
Cash 2.7%
Convertible Bonds 2.7%
Private Placements 2.6%
Common Stocks: Non-TMO Subsidiaries 1.4%
Common Stocks: TMO Subsidiaries 90.6%
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THERMO OPPORTUNITY FUND
1
<PAGE>
LETTER TO SHAREHOLDERS JULY 12, 1999
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DEAR FELLOW SHAREHOLDERS:
As many of you know, the Board of Directors of the Thermo Opportunity Fund
announced in November, 1999 that in light of Thermo Electron's ongoing
restructuring plans, the Board was going to recommend to shareholders that the
Fund be liquidated and the assets distributed to shareholders. The rationale
behind this decision was that in view of the shrinking of the universe of Thermo
Electron Subsidiaries, it was becoming impossible to effectively manage your
Fund along its stated investment criteria. Given this fact, our choices were to
recommend changing the investment objectives of the Fund, merging the Fund into
another diversified mutual fund, converting the Fund into an open-ended mutual
fund or liquidating the Fund.
After an exhaustive six-month review of the options, the Board of Directors of
Thermo Opportunity Fund concluded that the long-term interest of our
shareholders would be best served by liquidation of the Fund and distribution of
the Fund's assets. In particular, by recommending a timely and orderly
liquidation, we would allow the shareholders to capture the discount to Net
Asset Value at which your Fund has traded, and yet also provide the flexibility
to take advantage of the ongoing reorganization at Thermo Electron to enhance
the Net Asset Value as much as possible during this liquidation process. While
we are disappointed to have come to this conclusion, we do believe it is in the
interest of the Thermo Opportunity Fund shareholders and we urge you to review
the proxy material outlining this proposal when you receive it.
For the 1999 calendar year, performance for the Thermo Opportunity Fund was
reasonably good. We once again handily outperformed both Thermo Electron and a
weighted portfolio of its Subsidiaries and, despite the shares of Thermo
Electron being down for the full year, the market value return of the Fund was
up a respectable 20% for the same period. Also of note, we saw the discount to
Net Asset Value at which your Fund has consistently traded begin to decline over
the course of the year. Furthermore, and as we have outlined below, we have
positioned the Fund in such a way that it has benefited from a subsequent round
of restructuring at Thermo Electron. In this regard, more than half of your Fund
is concentrated in the Thermo Instrument family of Subsidiaries.
Subsequent to the end of our fiscal year, Thermo Electron dramatically expanded
its restructuring, announcing that it will take private all of its remaining
subsidiaries but three, one of which, Thermo Fibertek, will be spun off directly
to Thermo Electron shareholders and two of which, Trex Medical and Thermo
Cardiosystems, will be sold outright. While this announcement represents the
final repudiation of the spin-out model, from the stand point of the Fund, it
should provide a good environment in which to implement the plan of liquidation
if and when it has been approved by shareholders. Our goal over the next few
months is to sell off the Fund's holdings in an orderly fashion and distribute
the Fund's assets to shareholders as soon as practicable following the
shareholders' meeting scheduled for April 11, 2000.
Sincerely yours,
/s/ Gregory E. Ratte'
Gregory E. Ratte',
Chairman of the Board
2
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THERMO OPPORTUNITY FUND INTERIM PERFORMANCE UPDATE
FROM NOVEMBER 30, 1998 TO NOVEMBER 1999
[GRAPHIC OMITTED]
11/30/99
--------
TMF Share Price
TMF Net Asset Value
Thermo Electron Corporation
Thermo Electron Subsidiaries
THERMO OPPORTUNITY FUND INDUSTRY GROUPS
NOVEMBER 30, 1998
Cash 2.7%
Alternative Energy Systems 2.8%
Private Placements 5.3%
Bio-Medical Products 13.7%
Advanced Technologies 25.0%
Process Equipment 0.1%
Environmental Services 0.1%
Instruments 50.3%
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THERMO OPPORTUNITY FUND
3
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THE THERMO OPPORTUNITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
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ASSETS
Investment securities:
At amortized cost (Original cost $20,890,648) ............ $ 20,930,095
============
At market value (Note 1) ................................. $ 15,321,021
Cash .......................................................... 367,894
Interest receivable ........................................... 11,884
Organization expenses, net (Note 1) ........................... 62,744
Receivable from Adviser (Note 3) .............................. 12,391
------------
TOTAL ASSETS ............................................. 15,775,934
------------
LIABILITIES
Other accrued expenses and liabilities ........................ 30,000
------------
TOTAL LIABILITIES ........................................ 30,000
------------
NET ASSETS .................................................... $ 15,745,934
============
Net assets consist of:
Common stock - par value $0.001 per share
Authorized 16,000,000 shares, Outstanding 1,755,417 shares $ 1,755
Additional paid-in capital .................................... 23,811,421
Accumulated net realized losses from security transactions .... (2,458,168)
Net unrealized depreciation on investments .................... (5,609,074)
------------
Net assets .................................................... $ 15,745,934
============
Net asset value per share (Note 1) ............................ $ 8.97
============
See accompanying notes to financial statements.
4
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THE THERMO OPPORTUNITY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1999
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INVESTMENT INCOME
Interest ................................................... $ 114,727
Dividends .................................................. 600
---------
TOTAL INVESTMENT INCOME ............................... 115,327
---------
EXPENSES
Investment advisory fees (Note 3) .......................... 127,243
Administrative services fees (Note 3) ...................... 60,000
Amortization of organization expenses (Note 1) ............. 36,000
Directors' fees and expenses ............................... 33,309
Legal fees ................................................. 29,839
Audit fees ................................................. 17,389
Insurance expense .......................................... 15,534
Reports to shareholders .................................... 12,282
Transfer agent fees ........................................ 9,729
Custodian fees ............................................. 5,756
Postage and supplies ....................................... 4,904
Exchange listing fees ...................................... 3,176
Other expenses ............................................. 1,129
---------
TOTAL EXPENSES ........................................ 356,290
Fees waived by the Adviser (Note 3) ........................ (33,184)
Fees waived by the Administrator (Note 3) .................. (5,000)
---------
NET EXPENSES .......................................... 318,106
---------
NET INVESTMENT LOSS ............................................. (202,779)
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions ............. (273,246)
Net change in unrealized appreciation/
depreciation on investments ........................... 522,148
---------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ................ 248,902
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 46,123
=========
See accompanying notes to financial statements.
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THERMO OPPORTUNITY FUND
5
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<TABLE>
<CAPTION>
THE THERMO OPPORTUNITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the YEARS Ended NOVEMBER 30, 1999 and 1998
============================================================================================
Year Year
Ended Ended
November 30, November 30,
1999 1998
- --------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C>
Net investment loss ................................ $ (202,779) $ (335,188)
Net realized losses from security transactions ..... (273,246) (1,378,681)
Net change in unrealized appreciation/
depreciation on investments ................... 522,148 (3,709,042)
------------ ------------
Net increase (decrease) in net assets from operations ... 46,123 (5,422,911)
------------ ------------
FROM COMMON STOCK TRANSACTIONS:
Payments for the repurchase of common stock (Note 4) (35,544) --
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ................... 10,579 (5,422,911)
NET ASSETS:
Beginning of year .................................. 15,735,355 21,158,266
------------ ------------
End of year ........................................ $ 15,745,934 $ 15,735,355
============ ============
</TABLE>
See accompanying notes to financial statements.
6
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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 Year Period
Ended Ended Ended Ended
November 30, November 30, November 30, November 30,
1999 1998 1997 1996(A)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ......... $ 8.94 $ 12.02 $ 13.66 $ 14.10
---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) .............. (0.12) (0.19) (0.17) 0.07
Net realized and unrealized gains (losses)
on investments ....................... 0.15 (2.89) (1.41) (0.42)
---------- ---------- ---------- ----------
Total from investment operations ............... 0.03 (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 ............... $ 8.97 $ 8.94 $ 12.02 $ 13.66
========== ========== ========== ==========
Market value at end of period .................. $ 7.44 $ 7.25 $ 9.50 $ 13.75
========== ========== ========== ==========
Total investment return based on net asset value 0.34% (25.62%) (11.59%) (3.12%)
========== ========== ========== ==========
Total investment return based on market value .. 2.59% (23.68%) (30.56%) (2.48%)
========== ========== ========== ==========
Net assets at end of period (000's) ............ $ 15,746 $ 15,735 $ 21,158 $ 24,048
========== ========== ========== ==========
Ratio of net expenses to average net assets(B) . 2.00% 1.78% 1.66% 1.53%(C)
Ratio of net investment income (loss)
to average net assets ..................... (1.27%) (1.66%) (1.33%) 1.62%(C)
Portfolio turnover rate ........................ 56% 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 2.24%, 1.91%, 1.81% and 1.56%(C) for the periods ended November 30,
1999, 1998, 1997 and 1996, respectively (Note 3).
(C) Annualized.
See accompanying notes to financial statements.
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THERMO OPPORTUNITY FUND
7
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THE THERMO OPPORTUNITY FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1999
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Market
Shares COMMON STOCKS -- 93.2% Value
- --------------------------------------------------------------------------------
INSTRUMENTS-- 50.3%
198,466 Metrika Systems Corp.* ........................... $ 1,190,796
149,733 ONIX Systems, Inc.* .............................. 879,681
65,500 Thermo BioAnalysis Corp.* ........................ 1,154,438
25,000 Thermo Instrument Systems, Inc.* ................. 295,313
361,500 Thermo Optek Corp.* .............................. 3,637,594
74,100 ThermoQuest Corp.* ............................... 764,156
------------
7,921,978
------------
ADVANCED TECHNOLOGIES-- 25.0%
104,000 Thermedics Detection, Inc.* ...................... 975,000
364,500 ThermoTrex Corp.* ................................ 2,961,563
------------
3,936,563
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BIO-MEDICAL PRODUCTS-- 13.7%
83,900 Thermedics, Inc.* ................................ 477,181
215,400 Thermo Cardiosystems, Inc.* ...................... 1,494,337
68,400 Trex Medical Corp.* .............................. 188,100
------------
2,159,618
------------
PRIVATE PLACEMENTS(A)-- 2.6%
50,000 Thermo Trilogy Corp.* (Environmental Services) ... 412,500
------------
ALTERNATIVE ENERGY SYSTEMS-- 1.4%
206,900 KFX, Inc.* ....................................... 219,831
------------
ENVIRONMENTAL SERVICES-- 0.1%
4,000 Randers Killam Group, Inc.* ...................... 17,000
------------
PROCESS EQUIPMENT-- 0.1%
500 Thermo Fibertek, Inc.* ........................... 3,531
------------
TOTAL COMMON STOCKS (Cost $20,110,649) ........... $ 14,671,021
------------
8
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THE THERMO OPPORTUNITY FUND, INC.
PORTFOLIO OF INVESTMENTS
(CONTINUED)
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Par Market
Value CONVERTIBLE BONDS -- 4.1% Value
- --------------------------------------------------------------------------------
$425,000 Thermo EuroTech N.V., 2.50%, 8/31/01(A) .......... $ 425,000
500,000 KFX, Inc., 6.00%, 7/23/02 ........................ 225,000
- -------- ------------
$925,000 TOTAL CONVERTIBLE BONDS (Cost $819,446) .......... $ 650,000
------------
TOTAL INVESTMENT SECURITIES -- 97.3%
(Cost $20,930,095) ............................... $ 15,321,021
TOTAL ASSETS IN EXCESS OF LIABILITIES -- 2.7% .... 424,913
------------
NET ASSETS -- 100.0% ............................. $ 15,745,934
============
* Non-income producing security.
(A) Valued at fair value as determined in good faith by the Adviser consistent
with procedures approved by the Board of Directors.
See accompanying notes to financial statements.
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THERMO OPPORTUNITY FUND
9
<PAGE>
THE THERMO OPPORTUNITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
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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 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 (normally 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.
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.
10
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THE THERMO OPPORTUNITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are accounted for on a specific identification basis.
Organization expenses -- 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.
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 as of November 30, 1999:
- --------------------------------------------------------------------------------
Gross unrealized appreciation ....................... $ 703,024
Gross unrealized depreciation ....................... (6,582,236)
------------
Net unrealized depreciation ......................... $ (5,879,212)
============
Federal income tax cost ............................. $ 21,200,233
============
- --------------------------------------------------------------------------------
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, 1999, the Fund had capital loss carryforwards for federal
income tax purposes of $2,188,029, none of which expire prior to November 30,
2005. These capital loss carryforwards may be utilized in the future years to
offset net realized capital gains prior to distributing such gains to
shareholders. The Fund's net investment loss of $202,779 for the year ended
November 30, 1999 has been reclassified to 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, had no effect
on the Fund's net assets or net asset value per share.
2. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales and maturities of investment
securities, other than short-term investments, amounted to $8,680,549 and
$8,641,349, respectively, during the year ended November 30, 1999.
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THERMO OPPORTUNITY FUND
11
<PAGE>
THE THERMO OPPORTUNITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
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 $33,184 of its investment advisory fees during the year ended November
30, 1999.
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, 1999, CFS
voluntarily waived $5,000 of its administrative services fees.
4. STOCK REPURCHASE PROGRAM
On April 20, 1999, the Board of Directors authorized the Fund to purchase, from
time to time, up to 25% of its common stock in the open market. As of November
30, 1999, 5,000 shares had been repurchased under the stock repurchase program.
12
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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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, 1999, the related statement of operations for the year then ended,
and 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, 1999, by correspondence with the custodian. 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, 1999, 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 29, 1999
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THERMO OPPORTUNITY FUND
13
