BULLFINCH FUND, INC.
HONOEYE FALLS, NY 14472
716-624-1758
PROSPECTUS July 24, 1997
Unrestricted Series
Bullfinch Fund, Inc. (the "Fund") is an open-end non-diversified management in-
vestment company that offers separate series, each a separate investment
portfolio having its own investment objective and policies. This Prospectus
relates to the Unrestricted Series (the "Series"). The investment objective of
the Unrestricted Series is to seek conservative long term growth in capital.
Carosa & Stanton Asset Management, LLC (the "Adviser"), seeks to achieve this
objective by using an asset mix consisting primarily of exchange listed and
over-the-counter common stocks as well as U.S. government securities maturing
within five years. Criteria used by the Adviser will be based on the Business
Economics, Management Quality, Financial Condition and Stock Price of each
business. The Adviser seeks to be conservative by investing in securities which
it believes possess a lower potential for downside price volatility.
Unrestricted Series Share Purchase
Capital shares of the Series may only be purchased directly from the Fund at
net asset value of the Series as next determined after receipt of order. The
Board of Directors has established $2,500 as the minimum initial purchase
($1,000 for IRAs) and $250 for subsequent purchases ($50 for IRAs).
Additional Information
This Prospectus, which should be held for future reference, is designed to set
forth concisely the information that you should know before you invest. A
"Statement of Additional Information" containing more information about the Fund
has been filed with the Securities and Exchange Commission. Such Statement is
dated July 24, 1997 and has been incorporated by reference into the Prospectus.
A copy of the Statement may be obtained without charge, by writing to the Fund
or by calling the telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-1-
<PAGE>
UNRESTRICTED SERIES EXPENSES
The following illustrates all expenses and fees that a shareholder of the
Unrestricted Series will incur. The expenses and fees set forth below are
anticipated for the 1997 fiscal year.
Shareholder Transaction Expenses:
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Redemption Fees None
Exchange Fees None
Annual Unrestricted Series Operating Expenses (as a percentage of net assets):
Management Fees 1.25%
12b-1 Fees None
Other Expenses 0.75%
Total Operating Expenses 2.00%
You would pay the following expenses on a $1,000 investment assuming
a) 5% annual rate of return and b) redemption at the end of each time period.
Example 1 Year 3 Years
$21 $66
The purpose of the table above is to assist the investor in understanding the
various costs and expenses associated with investing in the Unrestricted
Series. For a more complete description of the various costs and expenses
illustrated above, please refer to the Management section of this Prospectus.
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
-2-
<PAGE>
THE FUND
The Fund is an open-end management investment company incorporated under
the laws of the State of Maryland on January 29, 1997. The Fund offers
separate series of units of beneficial interest ("shares"). This Pros-
pectus relates to the Unrestricted Series. The Fund's business office
is in Honeoye Falls, NY: mail may be addressed to 2 Lantern Lane,
Honeoye Falls, NY 14472.
OBJECTIVE, POLICES AND RISK FACTORS
Objective & Policies: The investment objective of the Unrestricted Series is
to seek conservative long term growth in capital. The Series invests primarily
in exchange listed and over-the-counter common stocks, and U.S. government obli-
gations maturing within five years. As such, the Series has no current intent-
ion to invest in illiquid securities. To the extent feasible, the Adviser will
endeavor to emphasize fundamental corporate considerations related to the
prospects of the issuer and its industry. Depending on its view of their relat-
ive attractiveness in light of market and economic conditions, the Adviser will
vary the proportions invested among common stocks (see Equity Selection Criteria
below) and U.S. government securities maturing within five years. Assets in the
series may be invested in money market funds for temporary investment.
Risk Factors: Risks associated with the Series' performance will be those due
to broad market declines and the decline in the price of particular companies
held in the Series' portfolio. Because the Series' investments fluctuate in
value, the Series' shares will fluctuate in value. The Adviser seeks to reduce
the risk of negative returns while seeking to obtain long term capital growth
when it believes valuations and market conditions are favorable. It must be
realized, as is true of almost all securities, there can be no assurance that
the Series will attain its objective.
The Series' investment objective is not fundamental and may be changed by the
Board of Directors without shareholder approval; however, it is the Board of
Directors' policy to notify shareholders prior to any material change in the
Series' objective.
Equity Selection Criteria: Criteria used by the Adviser to classify equities
includes balance sheet and income statement data, historical pricing valuations
and the stock's current dividend policy.
Portfolio Turnover Policy: The Series does not purchase securities for short
term trading in the ordinary course of operations. Accordingly, it is expected
that the annual turnover rate will not exceed 50%, wherein turnover is com-
puted by dividing the lesser of the Series' total purchases or sales of securi-
ties within the period by the average monthly portfolio value of the Series'
during such period. There may be times when management deems it advisable to
substantially alter the composition of the portfolio, in which event, the port-
folio turnover rate might substantially exceed 50%; this would only result
from special circumstances and not from the Series' normal operations.
Non-diversification Policy: The Series is classified as being non-diversified
which means that it may invest a relatively high percentage of its assets in the
securities of a limited number of issuers. The Series, therefore, may be more
susceptible than a diversified fund to any single economic, political, or regul-
atory occurrence. The policy of the Series, in the hope of achieving its object-
ive as stated above, is, therefore, one of selective investments rather than di-
versification. The Series seeks only the required diversification necessary to
maintain its federal non-taxable status under Sub-Chapter M of the Internal Rev-
enue Code (see next paragraph).
-3-
<PAGE>
TAX STATUS
Under provisions of Sub-Chapter M of the Internal Revenue Code of 1986 as amend-
ed, the Fund, by paying out substantially all of its investment income and rea-
lized capital gains, and by satisfying certain other requirements, will be
relieved of federal income tax on the amounts distributed to shareholders.
Distribution of any net long term capital gains realized by the Series in 1997
will be taxable to the shareholder as long term capital gains, regardless of the
length of time Series shares have been held by the investor. All income realized
by the Series, including short term capital gains, will be taxable to the share-
holder as ordinary income. Dividends from net income will be made annually or
more frequently at the discretion of the Fund's Board of Directors. Dividends
received shortly after purchase of shares by an investor will have the effect of
reducing the per share net asset value of his shares by the amount of such divi-
dends or distributions and, although in effect a return of capital, are subject
to federal income taxes.
The Series is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains, distributions and redemptions) paid
to shareholders who have not complied with IRS regulations. In order to avoid
this withholding requirement, you must certify on a W-9 tax form supplied by
the Fund that your Social Security or Taxpayer Identification Number provided is
correct and that you are not currently subject to back-up withholding, or that
you are exempt from back-up withholding.
INVESTMENT RESTRICTIONS
By-laws of the Fund provide the following fundamental investment restrictions;
The Fund may not, except by the approval of a majority of the outstanding
shares; i.e. a) 67% or more of the voting securities present at a duly called
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, or b) of more than 50% of the outstanding
voting securities, whichever is less:
(a) Act as underwriter for securities of other issuers except insofar as the
Fund may be deemed an underwriter in selling its own portfolio securities.
(b) Borrow money or purchase securities on margin, but may obtain such short
term credit as may be necessary for clearance of purchases and sales of se-
curities for temporary or emergency purposes in an amount not exceeding 5%
of the value of its total assets.
(c) Sell securities short.
(d) Invest in securities of other investment companies (other than money market
funds for temporary investment) except as part of a merger, consolidation,
or purchase of assets approved by the Fund's shareholders or by purchases
with no more than 10% of the Fund's assets in the open market involving
only customary brokers commissions.
(e) Invest 25% or more of its Total assets at the time of purchase in any one
industry (other than U.S. Government Securities).
(f) Make investments in commodities, commodity contracts or real estate although
the Fund may purchase and sell securities of companies which deal in real
estate or interests therein.
(g) Make loans. The purchase of a portion of a readily marketable issue of pub-
licly distributed bonds, debentures or other debt securities will not be
considered the making of a loan.
(h) Acquire more than 10% of the securities of any class of another issuer,
(other than securities issued or guaranteed by the United States Govern-
ment, its agencies or its instrumentalities) treating all preferred secur-
ities of an issuer as a single class and all debt securities as a single
class, or acquire more than 10% of the voting securities of another issuer.
-4-
<PAGE>
(i) Invest in companies for the purpose of acquiring control.
(j) The Fund may not purchase or retain securities of any issuer if those offi-
cers and directors of the Fund or its Investment Adviser owning individual-
ly more than 1/2 of 1% of any class of security or collectively own more
than 5% of such class of securities of such issuer.
(k) Pledge, mortgage or hypothecate any of its assets.
(l) Invest in securities which may be subject to registration under the Securi-
ties Act of 1933 prior to sale to the public or which are not at the time of
purchase readily salable.
(m) Invest more than 5% of the total Fund assets, taken at market value at the
time of purchase, in securities of companies with less than three years'
continuous operation, including the operations of any predecessor.
(n) Issue senior securities
INVESTMENT ADVISER
Carosa & Stanton Asset Management, LLC is a New York Limited Liability Company
that acts as an Investment Adviser to the Fund. Carosa & Stanton Asset Manage-
ment, LLC began accepting private portfolio management clients in February of
1997 and currently manages five portfolios and has nearly one million dollars
under management as of May 1997. Christopher Carosa and Gordon R. Stanton esta-
blished Carosa & Stanton Asset Management, LLC in late 1996 as the principal
members & officers and are, respectively, are the president and vice-president
of the Fund.
Mr. Carosa has direct responsibility for day to day management of the Series'
portfolio. He has a B.S. (Intensive) in Physics and Astronomy from Yale Uni-
versity and an MBA in Finance and Marketing from the University of Rochester's
William E. Simon Graduate School of Business. He began his career in 1982 with
Manning & Napier Advisors, Inc. When he left Manning & Napier in the summer of
1996 to begin writing finance books, he was a Managing Director and member of
the Funds Group as well as Executive Vice President and Senior Trust Officer
for Exeter Trust Company, an affiliate of Manning & Napier. At the time of his
departure, Mr. Carosa was responsible for custody and trust operations for more
than 700 accounts with assets approaching $1 billion and he was a member of the
Trust and Investment Committee.
Mr. Stanton has a B.A. in Architecture from Yale University and an MBA in
Finance, Economics and Management for the Stern School of Business. Mr.
Stanton's most recent experience has been as owner of a company which produced
laser light shows. He also has extensive experience working for non-profit
organizations. Mr. Carosa & Mr. Stanton have been the members of the management
committee of a private investment partnership formed in July of 1987. In order
to permit other investors to participate in the investment objective of this
partnership, in early 1997 the partners voted to convert that partnership into
a public no-load mutual fund and formalize Mr. Carosa's and Mr. Stanton's duties
by selecting their firm to be investment adviser.
The board of directors include former partners of the private investment part-
nership. The Partnership and the Series have a substantially similar or the
same investment objective. On February 1, 1997 shareholders of the Series re-
viewed an Investment Management Agreement with Carosa & Stanton Asset Manage-
ment, LLC, which was unanimously approved by the Board of Directors February
1, 1997. This Agreement will continue on a year to year basis, as amended,
provided that approval is voted at least annually by specific approval of the
Board of Directors of the Fund or by vote of the holders of a majority of the
outstanding voting securities of the Series, but, in either event, it must
also be approved by a majority of the directors of the Fund who are neither
parties to the agreement nor interested persons as defined in the Investment
Company Act of 1940 at a meeting called for the purpose of voting on such
approval. Under the Agreement, Carosa & Stanton Asset Management, LLC will
furnish investment advice to the Fund on the basis of a continuous review of
the portfolio and recommend when and to what extent securities should be pur-
chased or disposed. The Agreement may be terminated at any time, without
-5-
<PAGE>
the payment of any penalty, by the Board of Directors or by vote of a majority
of the outstanding voting securities of the Series on at least 60 days'
written notice to Carosa & Stanton Asset Management, LLC. In the event of its
assignment, the Agreement will terminate automatically. Ultimate decisions as
to the investment objective and policies are made by the Fund's directors. For
these services the Fund has agreed to pay to the Adviser a fee of 1.25% per year
on the first million dollars of net assets of the Series and 1.0% per year on
the remaining portion of net assets of the Series. All fees are computed on the
average daily closing net asset value of the Series and are payable monthly in
arrears. The Adviser will forgo sufficient fees to hold the total expenses of
the Series to 2.0% or less of the first $10 million in assets and 1.5% of the
next $20 million. These ratios were selected by the Board of Directors because
they are believed to meet the most restrictive state requirements. There is a
risk factor associated with the Adviser's lack of experience in managing mutual
funds.
Pursuant to its contract with the Fund, the Investment Adviser is required to
render research, statistical, and Advisory services to the Fund; to make specif-
ic recommendations based on the Series' investment requirements; and to pay the
salaries of those of the Series' employees who may be officers or directors or
employees of the Investment Adviser. The Fund is responsible for the operat-
ing expenses of the Series, including: (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of its
Directors other than those affiliated with the Adviser; (v)legal and audit ex-
penses; (vi) fees and expenses of the Series' Custodian, and Accounting Servic-
es Agent, if obtained for the Series from an entity other than the Adviser;
(vii) expenses incidental to the issuance of its shares, including iss-
uance on the payment of, or reinvestment of, dividends and capital gain distrib-
utions; (viii) fees and expenses incidental to the registration under federal
or state securities laws of the Series or its shares;(ix) expenses of preparing,
printing and mailing reports and notices and proxy material to shareholders
of the Series; (x) all other expenses incidental to holding meetings of the
Series' shareholders; (xi) dues or assessments of or contributions to the In-
vestment Company Institute or any successor; and (xii) such non-recurring ex-
penses as may arise, including litigation affecting the Series and the legal
obligations with respect to which the Series may have to indemnify its Officers
and Directors.
The Adviser may use its own resources to engage in activities that promote
the sale of the Series, including payments to third-parties who provide share-
holder support servicing and distribution assistance. Investors may be charged
a fee if they effect transactions through a broker or agent.
CAPITALIZATION
Description of Common Stock: The authorized capitalization of the Fund consists
of 10,000,000 shares of common stock of $0.01 par value per share. Each share
has equal dividend, distribution and liquidation rights. There are no conver-
sion or pre-emptive rights applicable to any shares of the Fund. All shares
issued are fully paid and non-accessible.
Voting Rights: Each holder of common stock has one vote for each share held
and fractional shares will have an equivalent fractional vote. Voting rights
are non-cumulative.
PURCHASE OF SHARES -REINVESTMENTS
The offering price of the shares offered by the Series is at the net asset value
per share next determined after receipt of the purchase order by the Fund and
is computed in the manner described under the caption "PRICING OF SHARES" in
this Prospectus. The Series reserves the right at its sole discretion to termin-
ate the offering of its shares made by this Prospectus at any time and to reject
purchase applications when, in the judgment of management such termination or
rejection is in the best interests of the Series.
-6-
<PAGE>
Payment may be made by check or readily available funds. A purchase
order will be effective as of the day the check is received by the Fund
if the Fund receives the check before the close of regular trading on
the New York Stock Exchange, normally 4:00 p.m., Eastern time. If payment is
received by wire, the purchase order will be effective the day payment is
received by the Fund's custodian. The purchase price of shares of the
Fund is the net asset value determined on the day the purchase order
is effective.
The shares of the Series may be purchased in exchange for securities to
be included in the Series, subject to the Adviser's determination that these
securities are acceptable. Securities accepted in an exchange will be valued
using the same valuation method the Series uses to value portfolio securities.
All accrued interest and purchase or other rights which are reflected in the
market price of accepted securities at the time of valuation become the prop-
erty of the Series and must be delivered by the shareholder to the Series upon
receipt from the issuer. Shares issued in exchanged for securities will be
priced at the net asset value calculated on the day of exchange.
The Adviser will not accept securities in exchange for shares of the Series
unless (1) such securities would normally qualify for purchase by the Series
at the time of the exchange; (2) the shareholder represents and agrees that
all securities offered to the Series are not subject to any restrictions upon
their sale by the Series under the Securities Act of 1933, or otherwise; and
(3) the Series is able to value the securities in a manner consistent with the
valuation method the Series uses to value portfolio securities.
Initial Investments: Initial purchase of shares of the Series may be made on-
ly by application submitted to the Fund. For the convenience of investors, a
Share Purchase Application form is provided with this Prospectus. The minimum
initial purchase of shares is $2,500 ($1,000 for IRAs). Less may be accepted
under special circumstances.
Subsequent Purchases: Subsequent purchases may be made by check or readily
available funds and may be made in writing (including an electronic trans-
mission) or by telephone. Shareholders wishing to make subsequent purchases
by telephone must first elect the privilege by writing to the Fund. The
minimum subsequent purchase is $250 ($50 for IRAs), but less may be accepted
under special circumstances.
Re-Investments: The Fund will automatically retain and reinvest dividends
and capital gains distributions in fractional shares and use same for the pur-
chase of additional shares for the shareholder at net asset value as of the
close of business on the distribution date. A shareholder may at any time by
letter or forms supplied by the Fund direct the Fund to pay dividend and/
or capital gains distributions, if any, to such shareholder in cash.
Fractional Shares: Fractional shares may be purchased. The Fund will
maintain an account for each shareholder of shares for which no certificates
have been issued.
RETIREMENT PLANS
Individual Retirement Account: Persons who earn compensation and are not active
participants (and who do not have a spouse who is an active participant) in an
employee maintained retirement plan may establish Individual Retirement Accounts
(IRA) using Fund shares. Annual contributions, limited to the lesser of $2,000
or 100% of compensation, are tax deductible from gross income. This IRA deduc-
tion is also retained for individual taxpayers and married couples with adjusted
gross incomes within certain specified limits. All individuals may make nonde-
ductible IRA contributions to separate accounts to the extent that they are not
eligible for a deductible contribution.
Earnings under the IRA are reinvested and are tax-deferred until withdrawals be-
gin. The maximum annual contribution may be increased to $2,250 if you have a
spouse who earns no compensation during the taxable year. A separate and inde-
pendent Spousal IRA must be maintained.
-7-
<PAGE>
You may begin to make non-penalty withdrawals as early as age 59 1/2 or as late
as age 70 1/2. In the event of death or disability, withdrawals may be made be-
fore age 59 1/2 without penalty.
A Disclosure Statement is required by U.S. Treasury Regulations. This Statement
describes the general provisions of the IRA and is forwarded to all prospective
IRA accounts. There is no charge to open and maintain a Bullfinch Fund IRA.
This policy may be changed by the Board of Directors if they deem it to be
in the best interests of all shareholders. All IRA's may be revoked within 7
days of their establishment with no penalty.
PRICING OF SHARES
The net asset value of the Series' shares is determined as of the close of busi-
ness of the New York Stock Exchange (the "Exchange") on each business day of
which that Exchange is open. The Exchange annually announces the days on which
it will not be open for trading; the most recent announcement indicates that
it will not be open on: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The price
is determined by dividing the value of its securities, plus any cash and other
assets less all liabilities, excluding capital surplus, by the number of shares
outstanding.
Securities traded on national securities exchanges or the NASDAQ National Market
System are valued at the closing prices of the securities on these exchanges and
securities traded on over-the-counter markets are valued daily at the closing
bid prices.
Short term paper (debt obligations that mature in less than 60 days) is valued
at amortized cost which approximates market value. Other assets are valued at
fair value as determined in good faith by the Board of Directors.
REDEMPTION OF SHARES
The Series will redeem all or any part of the shares of any shareholder who
sends a letter requesting redemption to the Fund at its address as it
appears on this Prospectus (if certificates have not been issued) or certifi-
cates with respect to shares for which certificates have been issued. In either
case, proper endorsements guaranteed either by a national bank or a member firm
of the New York Stock Exchange will be required. The Fund will waive the sig-
nature guarantee requirement should the shareholder personally deliver the
letter requesting redemption to the Fund at its address as it appears on this
Prospectus and provides two valid forms of identification including a valid
drivers license or a major credit card. The redemption price is the net asset
value per share next determined after the order is received by the Series for
redemption of shares. The proceeds received by the shareholder may be more or
less than his cost of such shares, depending upon the net asset value per
share at the time of redemption and the difference should be treated by the
shareholder as a capital gain or loss for federal income tax purposes.
Payment by the Series will ordinarily be made within three business days after
tender of a valid redemption request. The Series may suspend the right of
redemption or postpone the date of payment for more than seven days if: The New
York Stock Exchange is closed for other than customary weekend or holiday clos-
ings, or when trading on the New York Stock Exchange is restricted as determined
by the Securities and Exchange Commission or when the Securities and Exchange
Commission has determined that an emergency exists, making disposal of fund
securities or valuation of net assets not reasonably practicable. The Series
intends to make payments in cash, however, the Series reserves the right to make
payments in kind.
BROKERAGE
The Investment Management Agreement states that in connection with its duties to
arrange for the purchase and the sale of securities held in the portfolio of
the Series by placing purchase and sale orders for the Series, the Adviser shall
select such broker-dealers ("brokers") as shall, in the Adviser's judgment,
-8-
<PAGE>
implement the policy of the Series to achieve "best execution", i.e., prompt
and efficient execution at the most favorable securities price. In making such
selection, the Adviser is authorized in the Agreement to consider the
reliability, integrity and financial condition of the broker, the size and
difficulty in executing the order and the value of the expected contribution of
the broker to the investment performance of the Series on a continuing basis.
The Adviser is also authorized to consider whether a broker provides brokerage
and/or research services to the Series and/or other accounts of the Adviser.
Information or services may include economic studies, industry studies, stat-
istical analyses, corporate reports, or other forms of assistance to the Series
or its Adviser. No effort will be made to determine the value of these
services or the amount they may reduce expenses of the Adviser or the Series.
The Board of Directors will evaluate and review the reasonableness of
brokerage commissions paid on a monthly basis initially and after the first
year of operation at least semiannually.
MANAGEMENT OF THE FUND
The Fund does not expect to hold annual meetings of shareholders but special
meetings of shareholders may be held under certain circumstances. Shareholders
of the Fund retain the right, under certain circumstances, to request that a
meeting of shareholders be held for the purpose of considering the removal of a
Director from office, and if such a request is made, the Fund will assist with
shareholder communications in connection with the meeting. The overall business
and affairs of the Fund is managed by the Fund's Board of Directors. The Board
approves all significant agreements between the Fund and persons or companies
furnishing services to the Fund, including the Fund's agreements with its
Investment Adviser and Custodian. The day-to-day operations of the Fund are
delegated to the Fund's officers and to Carosa & Stanton Asset Management, LLC
(the "Adviser"), 2 Lantern Lane, Honeoye Falls, NY 14472. Christopher Carosa,
President of the Fund and President of the Series' Investment Adviser, will be
primarily responsible for the day-to-day management of the Series' portfolio.
The Board meets regularly four times a year to review Fund progress and status.
The Board may convene a special meeting under certain circumstances. In addi-
tion, the Board may ask a non-interested Director to perform an independent
audit as requested by the Board.
CUSTODIAN & TRANSFER AGENT
The Fund acts as its own transfer agent. Pursuant to an agreement unanimously
approved by the Board of Directors on February 1, 1997, the custodian for the
Unrestricted Series is Charles Schwab & Co., Inc., The Schwab Building, 101
Montgomery Building, San Francisco, CA 94104. Charles Schwab & Co., Inc. may,
at its own expense, employ a sub-custodian, provided that Charles Schwab & Co.,
Inc. shall remain liable for all its duties as custodian.
REPORTS TO SHAREHOLDERS
The Fund sends all shareholders annual reports containing audited financial
statements and other periodic reports, at least semiannually, containing unau-
dited financial statements.
AUDITORS
Bonadio & Co., LLP, Certified Public Accountants, Rochester, NY have been
selected as the independent auditor of the Series. Bonadio & Co., LLP has no
direct or indirect financial interest in the Fund or the Adviser.
ADDITIONAL INFORMATION
This Prospectus omits certain information contained in the registration state-
ment on file with the Securities & Exchange Commission. The registration state-
ment may be inspected without charge at the principal office of the Commission
in Washington, D.C. and copies of all or part thereof may be obtained upon pay-
ment of the fee prescribed by the Commission. Shareholders may also direct in-
quiries to the Fund by phone or at the address given on pg 1 of this Prospectus.
-9-
<PAGE>
SHARE PURCHASE APPLICATION
A) Please fill out one of the following four types of accounts:
1) Individual Accounts
______________________ __ ____________________ ______________________
First Name MI Last Name Social Security Number
2) Joint Accounts
______________________ __ ____________________ ______________________
First Name MI Last Name Social Security Number
______________________ __ _____________________ _______________________
First Name MI Last Name Social Security Number
3) Custodial Accounts
______________________ __ ____________________
Custodian's First Name MI Custodian's Last Name
______________________ __ ____________________ ______________________
Minor's First Name MI Minor's Last Name Minor's
Social Security Number
4) All Other Accounts
___________________________________________ __________________________
Name of account. Tax Identification Number
___________________________________________
(Use this second line if you need it)
B) Biographical and other information about the new account:
Full Address:
Number & Street ___________________________________________________
City__________________________ St____ Zip________________________
Citizen of____________________ Home Phone_____________ Bus Phone______________
Dividend Direction: Reinvest all distributions_________ Pay in Cash__________
Signature of Owner, Trustee or Custodian: ___________________________________
Signature of Joint Owner (if joint account): ___________________________________
Please make check payable to: BULLFINCH FUND, INC. For Office Use Only:
2 Lantern Lane Accepted by:
Honeoye Falls, NY 14472
Amount of Investment Attached $______________ (Minimum initial purchase $2,500)
All applications are accepted in New York and under New York laws.
-10-
<PAGE>
FORM W-9
(March 1994)
Department of Treasury
Internal Revenue Service
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER
Name as shown on account (if joint account, give name corresponding to TIN)
_________________________________________________
Street Address
_________________________________________________
City, State & Zip Code
_________________________________________________
Part 1.- Taxpayer Identification Number Part 2. - Backup Withholding
Social Security Number ______________________ Check if you are NOT subject
to backup withholding under
or the provisions of section
3406(a) (1) (C) of the In-
Employer ID Number ______________________ ternal Revenue Code ________
Certification - Under the penalty of perjury, I certify that the information
provided on this form is true, correct and complete.
Signature ___________________________________ Date _______________________
-11-
<PAGE>
INVESTMENT ADVISER PROSPECTUS
CAROSA & STANTON ASSET MANAGEMENT, LLC BULLFINCH FUND, INC.
UNRESTRICTED SERIES
8 East Street, Suite 200 2 Lantern Lane
Honeoye Falls, NY 14472 Honeoye Falls, NY 14472
716-234-2080 716-624-1758
July 24, 1997
TABLE OF CONTENTS
Unrestricted Series Expenses ..... 2 The Series seeks conservative, long
Condensed Financial Information .. 2 term growth of capital. The Adviser
The Fund ......................... 3 seeks to achieve this objective by
Objective, Policies & Risk Factors using an asset mix consisting primar-
Objective and Policies ......... 3 ily of exchange listed and over-the-
Risk Factors ................... 3 counter common stocks as well as U.S.
Portfolio Turnover Policy ...... 3 Government securities maturing within
Nondiversification Policy ...... 3 five years. The Adviser seeks to be
Tax Status ....................... 3 conservative by investing in securi-
Investment Restrictions .......... 4 ties which it believes possess a
Investment Adviser ............... 5 lower potential for downside price
Capitalization volatility.
Description of Common Stock .... 6
Voting Rights .................. 6
Purchase of Shares - Reinvestment. 6
Initial Investments ............ 7
Subsequent Purchases ........... 7
Reinvestments .................. 7
Whole Shares ................... 7
Retirement Plans
IRA ............................ 7
Pricing of Shares ................ 8
Redemption of Shares ............. 8
Brokerage ........................ 8
Management of the Fund ........... 9
Custodian & Transfer Agent ....... 9
Reports to Shareholders .......... 9
Auditors ......................... 9
Additional Information ........... 9
Share Purchase Application ...... 10
-12-
<PAGE>
BULLFINCH FUND, INC.
UNRESTRICTED SERIES
2 Lantern Lane
Honeoye Falls, NY 14472
716-624-1758
Part B
STATEMENT OF ADDITIONAL INFORMATION
July 24, 1997
This Statement is not a prospectus, but should be read in conjunction with the
Series' current prospectus dated July 24, 1997. To obtain the Prospectus,
please write the Fund or call the either of the telephone number that are shown
above and on the prior page.
TABLE OF CONTENTS
Objective, Policies & Risk Factors
Objective and Policies ..............1
Tax Status ............................1
Officers and Directors of the Fund ....3
Calculation of Performance Data .......4
Auditor's Report ......................5
Statement of Assets and Liabilities ...6
Statement of Operations ...............8
Notes to Financial Statement ..........9
OBJECTIVE, POLICES AND RISK FACTORS
Objective & Policies: From time to time the Series may hold warrants, preferred
stock or convertible debt it may have received as a result of a corporate action
related to one of its then current holdings. The Series has no intention of
investing more than 5% in any of these types of securities.
TAX STATUS
Under provisions of Sub-Chapter M of the Internal Revenue Code of 1986 as amend-
ed, the Series, by paying out substantially all of its investment income and
realized capital gains, and by satisfying certain other requirements has been
and intends to continue to be relieved of federal income tax on the amounts di-
stributed to shareholders.
Distribution of any net long term capital gains realized by the Series in 1997
will be taxable to the shareholder as long term capital gains, regardless of the
length of time Series shares have been held by the investor. All income realized
by the Series, including short term capital gains, will be taxable to the share-
holder as ordinary income. Dividends from net income will be made annually or
more frequently at the discretion of the Fund's Board of Directors. Dividends
received shortly after purchase of shares by an investor will have the effect of
reducing the per share net asset value of his shares by the amount of such divi-
dends or distributions and, although in effect a return of capital, are subject
to federal income taxes.
The Series is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains, distributions and redemptions) paid
to shareholders who have not complied with IRS regulations. In order to avoid
this withholding requirement, you must certify on a W-9 tax form supplied by
the Fund that your Social Security or Taxpayer Identification Number provided is
correct and that you are not currently subject to back-up withholding, or that
you are exempt from back-up withholding.
- 2 -
<PAGE>
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional tax considerations
generally affecting the Series and its shareholders that are not described in
the Series' Prospectus. No attempt is made to present a detailed explanation
of the tax treatment of the Series or its shareholders, and the discussion here
and in the Series' Prospectus is not intended as a substitute for careful tax
planning.
The following discussion of federal income tax consequences is based on
the Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated
herein.
Qualification as Regulated Investment Company
As a regulated investment company ("RIC") under Subchapter M of the Code,
the Series is exempt from federal income tax on its net investment income and
capital gains which it distributes to shareholders, provided that it
distributes at least 90% of its investment company taxable income (generally,
net investment income and the excess of net short-term capital gain over net
long-term capital loss) for the year (the "Distribution Requirement") and
satisfies certain other requirements of the Code that are described below.
Distributions of investment company taxable income made during the taxable
year will satisfy the Distribution Requirement.
In addition to satisfaction of the Distribution Requirement each Series
must derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans and gains from the sale or other
disposition of stocks, securities or foreign currencies, or from other income
(including but not limited to gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies ("Qualifying Income") and derive less than 30% of its
gross income from the sale or other disposition of stocks, securities and
certain other investments held for less than three months including foreign
currencies (or options, futures or forward contracts on foreign currencies)
but only if such currencies (or options, futures or forward contracts) are not
directly related to the Series' principal business of investing in stock or
securities or options and futures with respect to stocks or securities (the
so-called "Short-Short Gain Rule"). Moreover, at the close of each quarter
of its taxable year, at least 50% of the value of the Series' assets must
consist of cash and cash items, Government securities, securities of other
RICs, and securities of other issuers (as to which the Series has not
invested more than 5% of the value of its total assets in any one issuer and
as to which the Series does not hold more than 10% of the outstanding voting
securities of any one issuer), and no more than 25% of the value of its total
assets may be invested in the securities of any one issuer (other than
Government securities and securities of other RICs), or in two or more issuers
which the Series controls and which are engaged in the same, similar or related
trades or businesses (the "Asset Diversification Test").
- 2 -
<PAGE>
OFFICERS AND DIRECTORS OF THE FUND
Officers and Directors of the Fund, together with their addresses, principal
occupations during the past five years are:
Name and Address Age Position Principal Occupation Past Five Years
Christopher Carosa* 37 President, President
2 Lantern Lane Treasurer, Carosa & Stanton Asset Management, LLC
Honeoye Falls, Chairman of the NY Honeoye Falls, NY
the Board/
Director Managing Director
Manning & Napier Advisers, Inc.
Executive VP & Senior Trust Officer
Exeter Trust Company
Rochester NY
Gordon R. Stanton* 38 Vice-President, Vice-President
230 E. 73rd St. #4C Director Carosa & Stanton Asset Management, LLC
New York, NY Honeoye Falls, NY
President
Laser Reflections, Inc.
(Producer of Laser Light Shows)
New York, NY
William E.J. Martin 37 Director Construction Project Manager/Estimator
4410 Woodlawn Ave N ECI General Contractors, Inc.
Seattle, WA Seattle, WA
Thomas Midney 36 Director Director of Production Planning
13 Burr Road The Goss & DeLeeuw Machine Company
Bloomfield, CT Kensington, CT
Michael J. Morris 36 Director Director of Pricing
334 Robbins Ave United HealthCare
Newington, CT Hartford, CT
Betsy K. Carosa 37 Secretary Secretary
2 Lantern Lane (Wife of the Bullfinch Fund, Inc.
Honeoye Falls, NY President) Honeoye Falls, NY
- 3 -
<PAGE>
COMPENSATION TABLE
Aggregate Pension or Estimated Total
Name, Position Compens Retirement Annual Compensation
ation From Benefits Benefits Upon From Registrant
Registrant Accrued As Retirement And Fund Complex
Part of Fund Paid to
Expenses Directors
Christopher $ 0 N/A N/A $ 0
Carosa*, Director
Gordon R. $ 0 N/A N/A $ 0
Stanton*, Director
William E.J. $ 400 N/A N/A $ 400
Martin, Director
Thomas $ 400 N/A N/A $ 400
Midney, Director
Michael J. $ 400 N/A N/A $ 400
Morris, Director
* Director of the Fund who would be considered "interested persons" as defined
by the Investment Company Act of 1940.
A total of $0 has been paid in 1997 to officers and directors of the Fund to co-
mpensate for travel expenses associated with their Fund duties. Beginning in its
fiscal year 1998, the Fund will compensate non-interested directors at a rate of
$100 per directors meeting attended. The Fund does not compensate its officers
and directors that are affiliated with the Investment Adviser except as they may
benefit through payment of the Advisory fee (see pg. 5 of the Prospectus).
CALCULATION OF PERFORMANCE DATA
YIELD AND TOTAL RETURN
From time-to-time the Series may advertise its total return. Both
yield and total return figures are based on historical earnings and are not
intended to indicate future performance. The "total return" of a Series
refers to the average annual compounded rates of return over one-, five-, and
ten-year periods or for the life of the Series (as stated in the
advertisement) that would equate an initial amount invested at the beginning
of a stated period to the ending redeemable value of the investment, assuming
the reinvestment of all dividend and capital gains distributions.
The "30-day yield" of a Series is calculated by dividing the net investment
income per share earned during a 30-day period by the net asset value per
share on the last day of the period. Net investment income includes interest
and all recurring and nonrecurring charges that have been applied to all
shareholder accounts. The yield calculation assumes that net investment
income earned over 30 days is compounded monthly for six months and then
annualized. Methods used to calculate advertised yields are standardized for
all stock and bond mutual funds. However, these methods differ from the
accounting methods used by a Series to maintain its books and records, and so
the advertised 30-day yield may not fully reflect the income paid to your own
account or the yield reported in a Series' reports to shareholders.
-4-
<PAGE>
BONADIO & CO, LLP
Certified Public Accountants
1850 South Winton Road
Rochester, NY 14628
716-244-2000
Fax 716-244-5611
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of Bullfinch Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Bull-
finch Fund, Inc., including the schedule of investments in securities, as of
March 31, 1997. This financial statement is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material misstate-
ment. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above pre-
sents fairly, in all material respects, the financial position of Bullfinch
Fund, Inc. as of March 31, 1997 in conformity with generally accepted accounting
principles.
BONADIO & CO., LLP
Rochester, New York
April 7, 1997
-5-
<PAGE>
BULLFINCH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
ASSETS
Investments in securities, at value, identified cost $51,021 $ 50,413
Cash 56,345
Receivable from initial sale of common stock 5,150
Other 492
Organization expenses, net of accumulated amortization of $217 6,283
--------------
Total assets 118,683
--------------
LIABILITIES
Accrued organization costs 6,500
--------------
NET ASSETS
Net assets (equivalent to $9.97 per share based on
11,247.184 shares of common stock outstanding) $ 112,813
==============
COMPOSITION OF NET ASSETS
Shares of common stock $ 112,471
Accumulated net investment income 156
Net unrealized depreciation on investments (444)
--------------
Net assets at March 31, 1997 $ 112,183
==============
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
BULLFINCH FUND, INC.
INVESTMENTS IN SECURITIES
MARCH 31, 1997
Historical
Common Stocks - 100% Shares Cost Value
Computer software - 34.4%
Oracle Corporation 450 $ 17,494 $ 17,353
Retail - 19.1%
Dollar General Corporation 156 3,875 4,875
Toys R Us, Inc. Holding Company 100 2,500 2,800
Pier One Imports, Inc. 110 2,035 1,939
--------- --------
8,410 9,614
Beverage - 12.9%
Pepsico Incorporated 200 6,975 6,475
Utilities - 10.6%
Texas Utilities Company 110 4,455 3,768
Nevada Power Company 110 1,620 1,590
--------- --------
6,075 5,358
Automotive Parts - 5.2%
Standard Motor Products, Inc. 200 2,800 2,625
Medical Supplies - 4.5%
Vital Signs, Inc. 100 2,363 2,250
Pre-Fab Housing - 4.3%
Skyline Corporation 100 2,337 2,187
Telecommunications - 4.2%
Vertex Communications Corp. 100 2,125 2,125
Hotel and Gaming - 2.5%
Jackpot Enterprises, Inc. 126 1,276 1,260
Entertainment - 2.3%
Walt Disney Holding Co. 16 1,166 1,166
--------- ---------
TOTAL COMMON STOCK $ 51,021 $ 50,413
========= =========
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
BULLFINCH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 1, 1997) TO
MARCH 31, 1997
INVESTMENT INCOME:
Dividends $ 529
EXPENSES:
Amortization (217)
----------
Investment income - net 312
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Realized loss from securities transaction (156)
Unrealized depreciation during the period (444)
----------
Net loss on investments (600)
==========
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (288)
==========
The accompanying notes are an integral part of these statements.
BULLFINCH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 1, 1997) TO
MARCH 31, 1997
DECREASE IN NET ASSETS FROM OPERATIONS:
Investment income - net $ 312
Net realized loss from securities transaction (156)
Net change in unrealized depreciation of investments (444)
----------
Net decrease in net assets from operations (288)
CAPITAL SHARE TRANSACTIONS (11,247.184 shares) 112,471
----------
Net increase in net assets 112,183
NET ASSETS:
Beginning of period -
----------
End of period (including undistributed
investment income of $312) $ 112,183
==========
The accompanying notes are an integral part of these statements.
-8-
<PAGE>
BULLFINCH FUND, INC.
NOTES TO FINANCIAL STATEMENT
MARCH 31, 1997
(1) The Organization
Bullfinch Fund, Inc. (the "Fund") was organized as a corporation in Mary-
land on January 29, 1997 and commenced operations on February 1, 1997.
The Fund had no operations prior to the commencement of operations other
than matters relating to its organization and registration as an open-end,
non-diversified management investment company under the Investment Comp-
any Act of 1940, and its registration of securities under the Securities
Act of 1933. On February 1, 1997, the Fund sold 11,247.184 shares of
common stock ("initial shares") to its initial, joint tenant investors.
A majority of the Fund's owners are also the sole members of Carosa &
Stanton Asset Management, LLC, (Carosa & Stanton) the Fund's investment
advisor.
(2) Significant Accounting Policies
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those est-
imates.
The following is a summary of significant accounting policies of the
Fund, which are in accordance with generally accepted accounting princ-
iples in the investment company industry:
Cash -
Cash consists of amounts deposited in money market accounts and is not
federally insured. The Fund has not experienced any losses on such
amounts and believes it is not exposed to any significant credit risk on
cash.
Security Valuation -
Securities traded on national securities exchanges or the NASDAQ National
Market System are valued daily at the closing prices of the securities on
these exchanges and securities traded on over-the-counter markets are
valued daily at the closing bid prices. Short-term and money market sec-
urities are valued at amortized cost which approximates market value.
Federal Income Taxes -
For federal income tax purposes, the Fund is expected to qualify as a
regulated investment company under the provisions of the Internal Revenue
Code by distributing substantially all of its taxable net income (both
ordinary and capital gain) to its shareholders and complying with other
requirements for regulated investment companies. Therefore, no provision
for income taxes is required.
-9-
<PAGE>
Organization Expenses -
The Fund expects to incur approximately $6,500 in organization costs.
These costs are being amortized over a 60-month period beginning with the
commencement of Fund operations.
The Fund's initial shareholders have agreed that if any of the initial
shares are redeemed during the first 60 months of the Fund's operations
by any holder thereof, the proceeds of the redemption will be reduced by
the pro rata share of the unamortized organization expenses as of the date
of the redemption. The pro rata share by which the redemption proceeds
shall be reduced shall be derived by dividing the number of original
shares redeemed by the total number of original shares outstanding at the
time of the redemption.
Distributions to Shareholders -
The Fund intends to distribute to shareholders substantially all of its net
investment income, if any, and net realized capital gains, if any, at
year end.
Other -
The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determin-
ing gains or losses for financial statement and income tax purposes.
Dividend income is recorded on the ex-dividend date and interest income
is recorded on the accrual basis.
(3) Investments
For the period ended March 31, 1997, there were no purchases of invest-
ment securities and sales of common stocks other than short-term invest-
ments totalled $256.
At March 31, 1997, the gross unrealized appreciation for all securities
totaled $1,300 and the gross unrealized depreciation for all securities
totaled $1,908, or a net unrealized depreciation of $608. The aggregate
cost of securities for federal income tax purposes at March 31, 1997 was
$51,021.
See Note 5 for additional information or unrealized appreciation.
(4) Investment Advisory Agreement
Carosa & Stanton serves as investment advisor to the Fund pursuant to an
investment advisory agreement which was approved by the Fund's board of
directors. Carosa & Stanton is a registered investment adviser under the
Investment Advisers Act of 1940. The investment advisory agreement prov-
ides that Carosa & Stanton, subject to the supervision and approval of
the Fund's board of directors, is responsible for the day-to-day manage-
ment of the Fund's portfolio which include selecting the investments and
handling its business affairs.
As compensation for its services to the Fund, the investment advisor re-
ceives monthly compensation at an annual rate of 1.25% on the first $1
million of daily average net assets and 1% on that portion of the daily
average net assets in excess of $1 million. These fees will be reduced
by any sub-transfer agent fees incurred by the Fund.
Carosa & Stanton have agreed to forego sufficient investment advisory fees
to limit total expenses of the Fund to 2% of the first $10 million in av-
erage assets and 1.5% of the next $20 million in average assets.
-10-
<PAGE>
(5) Capital Stock
The Fund has authorized 10,000,000 shares of common stock at $0.01 par
value per share. Each share has equal dividend, distribution and liquid-
ation rights. At March 31, 1997, 11,274.184 shares of common stock were
outstanding.
At March 31, 1997, $5,150 was receivable from the initial sale of common
stock. Subsequent to March 31, 1997, the Fund received equity securities
in payment of this amount.
At March 31, 1997, $5,150 was receivable from the initial sale of common
stock. Subsequent to March 31, 1997, the Fund received equity securities
in payment of this amount. These securities had appreciated $164 since
the initial sale. This amount is reflected as unrealized appreciation in
the statement of operations.
BULLFINCH FUND, INC.
FINANCIAL HIGHLIGHTS AND RELATED RATIOS/
SUPPLEMENTAL DATA FOR A SHARE OUTSTANDING
FOR THE PERIOD FROM INCEPTION (FEBRUARY 1, 1997) TO
MARCH 31, 1997
NET ASSET VALUE, beginning of period $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income .02
Net losses on securities both realized and unrealized (.05)
-------------
NET ASSET VALUE, end of period $ 9.97
=============
NET ASSETS, end of period $ 112,183
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.2% *
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.6% *
PORTFOLIO TURNOVER RATE 1.4% *
* Annualized
The accompanying notes are an integral part of these statements.
-11-
<PAGE>
-12-
<PAGE>
