485BPOS 1 b20021030-485bpos14.txt N1-A ANNUAL UPDATE UNITED STATES Securities and Exchange Commission Washington, DC. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X Post-Effective Amendment No. 14 X and THE INVESTMENT COMPANY ACT OF 1940 X Amendment No. 14 X Bullfinch Fund, Inc. (Exact Name of Registrant as Specified in Charter) 1370 Pittsford-Mendon Road, Mendon, NY 14506 (Address of Principal Executive Offices) 585-624-3150 (Registrant's Telephone Number) Christopher Carosa 1370 Pittsford-Mendon Road, Mendon, NY 14506 (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this registration. ------------------------------------------------------------------------------- It is proposed that this filing will become effective (check appropriate box) [x] immediately upon filing pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a) [ ] on (date) pursuant to paragraph (a) of rule 485 Calculation of Registration Fees (i) Aggregate sale price of securities sold during the fiscal year in reliance on rule 24f-2 (from Item 10): $877,510 (ii) Aggregate price of shares issued in connection with dividend reinvestment plans (from Item 11, if applicable): + 0 (iii) Aggregate price of shares redeemed or repurchased during the fiscal year (if applicable) - 122,308 (iv) Aggregate price of shares redeemed or repurchased and previously applied as a reduction to filing fees pursuant to rule 24e-2 (if applicable): + 0 (v) Net aggregate price of securities sold and issued during the fiscal year in reliance on rule 24f-2[ line (i), plus line (ii), less line (iii), plus line (iv)] (if applicable) 755,202 (vi) Multiplier prescribed by Section 6(b) of the Securities Act of 1933 or other applicable law or regulation (see Instruction C.6): x 0.000092 (vii) Fee due [line (i) or line (v) multiplied by line (vii)]: $69 -1- Cross Reference Sheet INFORMATION REQUIRED LOCATIONS IN PROSECTUS Part A: IN A PROSPECTUS Item 1. Cover Page and Back Cover Page and Back Page Item 2. Risk/Return Summary: THE FUND AND ITS INVESTMENT Investments, Risks and Performance OBJECTIVE Item 3. Risk/Return Summary: Fees Table FUND EXPENSES Item 4. Investment Objectives, Principal ADDITIONAL INFORMATION ABOUT Investment Strategies, and Related Risks INVESTMENT STRATEGIES Item 5. Management Discussion of the Fund's SEE PART B Performance Item 6. Management, Organization, and MANAGEMENT Capital Structure Item 7. Shareholder Information PRICING OF SHARES Item 8. Distribution Arrangements NOT APPLICABLE Item 9. Financial Highlights Information FINANCIAL HIGHLIGHTS Part B: STATEMENT OF ADDITIONAL INFORMATION Item 10. Cover Page and Table of Contents Item 11. Fund History Item 12. Description of the Fund and its Investments and Its Risks Item 13. Management of the Fund Item 14. Control Persons and Principal Holders of Securities Item 15. Investment Advisory and Other Services Item 16. Brokerage Allocation and Other Practices Item 17. Capital Stock & Other Securities Item 18. Purchase, Redemption & Pricing of Shares Item 19. Taxation of the Fund Item 20. Underwriters Not Applicable Item 21. Calculation of Performance Data Item 22. Financial Statements Part C: OTHER INFORMATION Item 23. Exhibits Item 24. Persons Controlled by/or Under Common Control with the Fund Item 25. Indemnification Item 26. Business & Other Connections of the Investment Adviser Item 27. Principal Underwriters Item 28. Location of Accounts & Records Item 29. Management Services Not Applicable Item 30. Undertakings Not Applicable -2- BULLFINCH FUND, INC. 1370 PITTSFORD-MENDON ROAD, MENDON, NY 14506 1-888-BULLFINCH (1-888-285-5346) 585-624-3150 PROSPECTUS October 30, 2002 The Bullfinch Family of Mutual Funds The Bullfinch Fund, Inc. (the "Fund") is an open-end non-diversified manage- ment investment company that offers separate series - the Unrestricted Series and the Western New York Series - (individually and collectively known as the "Series"), each a separate investment portfolio having its own investment objective and policies. Unrestricted Series The Unrestricted Series seeks conservative long-term growth in capital through a mix of investments consisting primarily of exchange listed and over-the- counter common stocks. Western New York Series The Western New York Series seeks capital appreciation through a mix of investments consisting primarily of exchange-listed and over-the-counter common stocks of companies with an important economic presence in the Greater Western New York Region. It is important to note that the Fund's shares are not guaranteed or insured by the FDIC or any other agency of the U.S. government. As with any investment in common stocks, which are subject to wide fluctuations in market value, you could lose money by investing in the Fund. 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. -3- THE FUND AND ITS INVESTMENT OBJECTIVE UNRESTRICTED SERIES - The Unrestricted Series seeks conservative long-term growth in capital through a mix of investments consisting primarily of exchange listed and over-the- counter common stocks. WESTERN NEW YORK SERIES The Western New York Series seeks capital appreciation through a mix of investments consisting primarily of exchange-listed and over-the-counter common stocks of companies with an important economic presence in the Greater Western New York Region. THE FUND'S INVESTMENT STRATEGY Each Series uses a Value approach in its securities selection process. The Adviser emphasizes fundamental corporate considerations related to the prospects of the issuer and its industry. Depending on its view of their relative attractiveness in light of market and economic conditions, the Adviser will vary the proportions invested among common stocks and U.S. government securities maturing within five years. Assets in the Unrestricted Series may be invested in money market funds for temporary investment. Each Series is willing to invest in the securities of companies with small, medium and large capitalization. The Adviser classifies and compares potential investments using the following criteria: - Balance Sheet (emphasizing low debt and sufficient working capital) - Income Statement Data (emphasizing at least modest earnings growth) - The Company's Current Dividend Policy (emphasizing growth) - Stock Price (looking for historically low valuations) The Adviser believes each Series will make the most money by investing in companies with strong financials whose stocks sell at historically low prices. The Adviser uses the above criteria in order to, over long periods of time, increase potential returns and reduce the risk of price declines of the investments of each Series. The Adviser may purchase a particular company's stock with up to 25% of each Series' assets. Each Series' willingness to place a large percentage of its assets in a single stock does distinguish it from most other funds. Each 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 any Series' objective. SPECIAL NOTE FOR INVESTORS IN THE WESTERN NEW YORK SERIES: Under normal conditions, the Adviser invests at least 80% of the Fund's total assets in securities of companies with an important economic presence in the Greater Western New York Region of New York. In addition to the equity selection criteria described above, the Adviser may also consider industry diversification, liquidity, and market capitalization. To be eligible for inclusion in the Western New York Series' portfolio, a stock currently must meet the following criteria: - The stock must be issued either by a company that employs at least fifty persons in the Greater Western New York Region; or - The stock must be issued by a Company that has a capital investment (including annual payroll) in the Greater Western New York Region of greater than $1,000,000; or, - The stock must be of a Company that maintains its corporate headquarters in the Greater Western New York Region. The Greater Western New York Region includes the following New York State Counties: - Allegany - Chautauqua - Cattaraugus - Erie - Genesee - Livingston - Monroe - Niagara - Ontario - Orleans - Steuben - Wayne - Wyoming - Yates RISKS OF THE FUND Each Series' return, as stock prices generally, may fluctuate within a wide range, so that an investor could lose money. Because each Series is "non- diversified," it invests a higher percentage of assets in fewer holdings than the average stock fund does, each Series is subject to the risk of a price decline or loss due to a change in value of one, or a few of its stockholdings. An additional risk will be from each Series' investments in small and medium capitalization (cap) stocks. Generally, these stocks have higher risks of business failure, lesser liquidity and greater volatility in market price. Due to these factors small and medium cap stocks have greater possibility of price decline or loss as compared to large cap stocks. Since the Fund may hold small, medium and large cap stocks it is riskier than a fund which holds only large cap stocks. SPECIAL NOTE FOR INVESTORS IN THE WESTERN NEW YORK SERIES: Changes and developments in the economic environment of Western New York State may have a disproportionate effect on the Western New York Series' portfolio. WHO SHOULD INVEST? Investors who are seeking potential long-term appreciation and are willing to own stocks, in a portfolio, selected and managed by the Fund's investment adviser. Long-term, as determined by management and the investment adviser, is at least five years. WHO SHOULD NOT INVEST? Investors not willing to accept the risks of owning stocks in a managed portfolio. The Series are not for investors seeking to trade the stock market for short-term fluctuations. BAR CHART AND PERFORMANCE TABLE The bar chart and table shown below provide an indication of the risks of investing in the Unrestricted Series of the Western New York Series by showing changes in each Series' performance from year to year over a 3-year period and by showing how each Series' average annual returns for one and three years compare to those of a broad-based securities market index. How each Series has performed in the past is not necessarily an indication of how each Series will perform in the future. 20% 19% 18% 17.69% XX 17% 16.73% XX XX XX 16% XX XX XX XX 15% XX XX XX XX 14% XX XX XX XX 13% XX XX XX XX 12% XX XX XX XX 11% XX XX XX XX 10% XX XX XX XX 9% XX XX 8.25% XX XX 8% XX XX XX XX XX XX 7% XX XX XX XX XX XX 6% XX XX XX XX XX XX 5% XX XX XX XX XX XX 4% XX 3.46% XX XX XX 3.06% XX XX XX 3% XX XX XX XX XX XX XX XX XX XX 2% XX XX XX XX XX XX XX XX XX XX 1% XX XX XX XX 0.44% XX XX XX XX XX XX XX 0%-------------------------------------------------- XX XX -1% XX XX XX XX -2% XX XX XX XX -3% XX -2.65% XX -4% XX XX -5% XX XX -6% XX XX -7% XX XX -8% XX XX -9% XX XX -10% XX XX -10.33% 1998 1999 2000 2001 1998 1999 2000 2001 Unrestricted Series Western New York Series For the third quarter of the year 2002 (ending September 30,2002) the year-to- date return of the Unrestricted Series was -20.18% and for the Western New York Series it was -24.95%. For the Unrestricted Series since inception, the highest return for a quarter was 22.50% while the worst return for a quarter was -14.74%. These returns occurred in quarters ending December 31, 1998 and September 30, 1998, respectively. For the Western New York Series since inception the highest return for a quarter was 18.09% while the worst return for a quarter was -15.98%. These returns occurred in quarters ending December 31, 2001 and September 30, 1998, respectively. Average Annual Total Returns for Year Ending December 31, 2001 Since Inception One Year (July 24, 1997) (December 30, 1997) Return Before Taxes Unrestricted Series 16.73% 6.17% Western New York Series 17.69% 0.74% Return After Taxes on Distributions Unrestricted Series 16.73% 5.70% Western New York Series 17.69% 0.73% Return After Taxes on Distributions and Sale of Fund Shares Unrestricted Series 10.19% 4.98% Western New York Series 10.77% 0.59% Value Line Geometric Index* -6.08% -3.75% -4.91% (reflects no deductions for fees, expenses or taxes) CALCULATION METHOD FOR AFTER-TAX RETURNS The after-tax returns shown in the preceding tables depict past performance information and were calculated in accordance with the Securities and Exchange Commission rules using the following assumptions: - After-tax returns are calculated using the highest historical individual federal income marginal tax rates for each taxable component of the distribution. - Distributions were reinvested after deducting the taxes due on those distributions. - Holding periods were determined based on the actual purchase and distribution dates. - "Return After Taxes on Distributions" assumes you continue to hold your shares at the end of the period. - "Return After Taxes on Distributions and Sale of Fund Shares" assumes you sell your shares at the end of the period and pay applicable federal taxes. - The calculations do not include state or local taxes, the effects of phase-outs of certain exemptions, deductions, and credits at various income levels, and the effects of alternative minimum tax. As a result, actual after-tax returns depend on an investor's tax situation and may differ from those shown. - After-tax returns are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. *The Value Line Geometric Index (VLG) is an unmanaged index of between 1,600 and 1,700 stocks. Value states "The VLG was intended to provide a rough approximation of how the median stock in the Value Line Universe performed. The VLG also has appeal to institutional investors as a proxy for the so-called 'multi-cap' market because it includes large cap, mid cap and small cap stocks alike." FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Shareholder Fees (fees paid directly from your investment) Unrestricted Western New York Series Series Maximum Sales Charge (Load) imposed on Purchases None None Maximum Deferred Sales Charge (Load) None None Maximum Sales Charge (Load) imposed on Reinvested Dividends None None Redemption Fee (as a percentage of amount redeemed, if applicable) None None Exchange Fee None None IRA Trustee Fees** None None Annual Fund Operating Expenses (expenses that are deducted from fund assets) Unrestricted Western New York Series Series Management Fees (before fee waiver)* 1.15% 1.25% Distribution [and/or Service](12b-1) Fees None None Other Expenses* 0.68% 1.31% Total Annual Fund Operating Expenses (before fee waiver)* 1.83% 2.56% * Each Series has an expense reimbursement in effect which caps the actual expense ratio for each Series at 2.00% and this expense reimbursement will continue. To cap the ratio of each Series at 2.00%, the Manager, per its contract, reimbursed the the Western New York Series a total of $1,741. ** Each IRA with account value of $10,000 or more will not be charged IRA Trustee Fees. IRA's with less than $10,000 may be charged $45 annually for IRA Trustee Fees on the discretion of the Fund's Management or Directors. Example This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in each Series for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assures you that your investment has a 5% return each year and that Each Series' operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: Unrestricted Series 1 year 3 years 5 years 10 years $ 183 $ 577 $1,011 $2,302 Western New York Series 1 year*** 3 years*** 5 years*** 10 years*** $ 256 $ 807 $1,415 $3,220 *** Because the Adviser is contractually obligated to reimburse each Series so to cap the expense ratio at 2%, the actual total cost of the Western New York Series for 1 year would be $200; for 3 years the cost would be $631; for 5 years the cost would be $1,105; and for 10 years the cost would be $2,516 Management's Discussion of Fund Performance Dear Fellow Shareholders: We are very proud to present the June 2002 Annual Financials of the Bullfinch Fund, Inc. This report contains the audited financials for both the Unrestricted Series and the Western New York Series. This has been a roller coaster year for the market. Thanks to our ability to maintain defensive positions in both our portfolios, they have been able to stave off the worst of the market decline. Indeed, for our fiscal year just ended, (the 12 months ending June 30, 2002), while the Value Line Geometric Index (our benchmark index) - as well as the popular S&P 500 - were both down nearly 19%, both our portfolios were down just over 9%. As always, past performance can never predict future performance. Still, we like to point these numbers out as a way of explaining our management style. We try to build our portfolios in a manner to reduce downside risk. And our success in this goal has not gone unrecognized. During the year 2001, the Unrestricted Series was up 16.73% and the Western New York Series was up an even higher amount - 17.69%. Indeed, the Unrestricted Series was ranked fourth in the nation by the Wall Street Journal's Annual Mutual Fund Rankings. (Keep in mind, last year, popular indices like the S&P500 and NASDAQ fell 13% and 21% respectively.) Of course, given the historically poor market in 2002, we should not expect a repeat of those results this year. Yet, despite the fact that we were (like many other professionals) misled by WorldCom, through June 30, 2002, both our funds are recognized by Lipper as among the best in their categories (for more information, go to www.lipperleaders.com). As conservative long-term investors, we see today's markets as a tremendous opportunity. We believe three things drive markets: earnings, interest rates and psychology. Corporate earnings appear to be heading towards more favorable reporting comparisons and the interest rate environment continues to be positive. That leaves psychology. We believe just as an irrationally exuberant psychology pushed the markets up to unsustainable heights a few years ago, an equally irrational gloom of despair clouds today's markets. While no one could exactly predict when the market top would occur, it eventually did peak and the market came crashing down. Our shareholders profited handsomely during that turnaround. Similarly, while no one could exactly predict when this market bottom will occur, no one doubts that the market will eventually recover. We're constantly updating our portfolios so, once again, our shareholders can benefit from that anticipated turnaround. We wish to thank our shareholders for expressing their confidence in us and wish them continued good fortune in the coming year. Best Regards, Bullfinch Fund, Inc. Christopher Carosa President Performance Summary of the Unrestricted Series The graph below represents the changes in value for a $10,000.00 investment in the Unrestricted Series from its inception, July 24,1997, to years ending June 30th for 1998, 1999, 2000, 2001 and 2002. These changes are then compared to a $10,000.00 investment in the Value Line Geometric Index, which is an index comprising of between 1,600 and 1,700 stocks, for the same period. Inception Year Ended Year Ended Year Ended Year Ended Year Ended 7/24/97 6/30/98 6/30/99 6/30/00 6/30/01 6/30/02 Unrestricted Series $10,000.00 $10,034.55 $10,388.99 $11,375.26 $13,224.24 $11,968.14 Value Line Index $10,000.00 $10,886.56 $10,636.95 $ 9,314.41 $ 9,131.93 $ 7,407.91
--------------------------------------------------------------------------- Unrestricted Series 13,400 - . . . . . . - 13,200 - . . . . (*) . - 13,000 - . . . . . . - 12,800 - . . . . . . - 12,400 - . . . . . . - 12,200 - . . . . . . - 12,000 - . . . . . (*) - 11,800 - . . . . . . - 11,600 - . . . . . . - 11,400 - . . . (*) . . - 11,200 - . . . . . . - 11,000 - . . . . . . - [*] 10,800 - . . . . . . - [*] V 10,600 - . . . . . . - a 10,400 - . . (*) . . . - l 10,200 - . . . . . . - (*) u 10,000 - (*)[*] . . . . . - e 9,800 - . . . . . . - 9,600 - . . . . . . - [*] 9,400 - . . . . . . - 9,200 - . . . . . . - [*] 9,000 - . . . . . . - 8,800 - . . . . . . - 8,600 - . . . . . . - 8,400 - . . . . . . - 8,200 - . . . . . . - 7,000 - . . . . . . - 7,800 - . . . . . . - 7,600 - . . . . . . - 7,400 - . . . . . [*] - 7,200 - . . . . . . - 7,000 - . . . . . . ---------------------------------------------------------------- 7/24/97 6/30/98 6/30/99 6/30/00 6/30/01 6/30/02 Key: (*)Unrestricted Series [*]Value Line Index ---------------------------------------------------------------------------- 342 days 1 year 1 year 1 year 1 year Average 6/30/98 6/30/99 6/30/00 6/30/01 6/30/02 Annual Rate ------- ------- ------- ------- ------- ----------- Unrestricted Series 0.35% 3.53% 9.49% 16.25% -9.50% 3.71% Value Line Index 8.87% -2.29% -12.43% -1.96% -18.88% -5.90%
Performance Summary of the Western New York Series The graph below represents the changes in value for a $10,000.00 investment in the Unrestricted Series from its inception, December 30,1997, to years ending June 30th for 1998, 1999, 2000, 2001 and 2002. These changes are then compared to a $10,000.00 investment in the Value Line Geometric Index, which is an index comprising of between 1,600 and 1,700 stocks, for the same period. Inception Year Ended Year Ended Year Ended Year Ended Year Ended 12/30/97 6/30/98 6/30/99 6/30/00 6/30/01 6/30/02 Western New York Series $10,000.00 $10,367.69 $ 9,177.14 $ 9,732.73 $10,040.29 $ 9,117.62 Value Line Index $10,000.00 $10,542.74 $10,301.01 $ 9,020.24 $ 8,843.53 $ 7,173.95
--------------------------------------------------------------------------- Western New York Series. 13,400 - . . . . . . - 13,200 - . . . . . . - 13,000 - . . . . . . - 12,800 - . . . . . . - 12,400 - . . . . . . - 12,200 - . . . . . . - 12,000 - . . . . . . - 11,800 - . . . . . . - 11,600 - . . . . . . - 11,400 - . . . . . . - 11,200 - . . . . . . - 11,000 - . . . . . . - 10,800 - . . . . . . - V 10,600 - . . . . . . - [*] a 10,400 - . . . . . . - (*) [*] l 10,200 - . . . . . . - u 10,000 - (*)[*] . . . (*) . - e 9,800 - . . . . . . - (*) 9,600 - . . . . . . - 9,400 - . . . . . . - 9,200 - . . . . . . - (*) (*) 9,000 - . . . [*] . . - 8,800 - . . . . [*] . - 8,600 - . . . . . . - 8,400 - . . . . . . - 8,200 - . . . . . . - 7,000 - . . . . . . - 7,800 - . . . . . . - 7,600 - . . . . . . - 7,400 - . . . . . . - 7,200 - . . . . . [*] - 7,000 - . . . . . . ---------------------------------------------------------------- 7/24/97 6/30/98 6/30/99 6/30/00 6/30/01 Key: (*)Western New York Series [*]Value Line Index ---------------------------------------------------------------------------- 183 days 1 year 1 year 1 year 1 Year Average 6/30/98 6/30/99 6/30/00 6/30/01 6/30/02 Annual Rate -------- ------- ------- ------- ------- ----------- Western New York Series 3.68% -11.48% 6.05% 3.16% -9.19% -2.03 Value Line Index 5.43% -2.29% -12.43% -1.96% -18.88% -7.11%
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISK CONSIDERATIONS There is no guarantee that the adviser's valuations are accurate. Even when a stock is purchased below its perceived fair value, there may be unforeseen changes in the business which may lead to a decline in value for the stock. Portfolio Turnover Policy: Neither Series purchases securities for short term trading in the ordinary course of operations. Accordingly, it is expected that the annual turnover rate for each individual Series will not exceed 50%, wherein turnover is computed by dividing the lesser of each individual Series' total purchases or sales of securities within the period by the average monthly portfolio value of each individual 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 portfolio turnover rate might substant- ially exceed 50%; this would only result from special circumstances and not from the normal operations of either Series. Non-diversification Policy: Each 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. Each Series, therefore, may be more susceptible than a diversified fund to any single economic, political, or regulatory occurrence. The policy of each Series, in the intention of achieving their objective, is, therefore, one of selective investments rather than diversification. Each Series seeks only the required diversification necessary to maintain its federal non-taxable status under Sub-Chapter M of the Internal Revenue Code (see the Tax Status Section of this prospectus). UNRESTRICTED SERIES Objective & Policies: The investment objective of the Unrestricted Series is to seek conservative long term growth in capital. The Unrestricted Series in- vests primarily in exchange listed and over-the-counter common stocks. As such, the Unrestricted Series has no current intention to invest in illiquid securities. To the extent feasible, the Fund will endeavor to emphasize fundamental corporate considerations related to the prospects of the issuer and its industry. Depending on its view of their relative attractiveness in light of market and economic conditions, the Fund may, from time to time, take temporary defensive positions by varying the proportions invested among common stocks (see Equity Selection Criteria below) and U.S. government securities maturing within five years. Assets in the Unrestricted Series may be invested in money market funds for temporary investment. When the Fund is in a temporary defensive position, it may not achieve its investment objective. Risk Factors: Risks associated with the Unrestricted Series' performance will be those due to broad market declines and the decline in the price of partic- ular companies held in the Unrestricted Series' portfolio. Because the Unre- stricted Series' investments fluctuate in value, the Unrestricted Series' shares will fluctuate in value. The Adviser seeks to reduce the risk of nega- tive 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 Unrestricted Series will attain its objective. The Unrestricted 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 Unrestricted 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. WESTERN NEW YORK SERIES Objective & Policies: The investment objective of the Western New York Series is to seek capital appreciation through investment in the common stock of companies with an important economic presence in the Greater Western New York Region of New York State. Under normal conditions, the Fund invests at least 80% of the Fund's total assets in securities of companies with an important economic presence in the Greater Western New York Region of New York (see Equity Selection Criteria below). The Western New York Series invests primarily in exchange listed and over-the-counter common stocks. As such, the Western New York Series has no current intention to invest in illiquid securities. To the Extent feasible, the Fund will endeavor to emphasize fundamental corporate considerations related to the prospects of the issuer and its industry. Depending on its view of their relative attractiveness in light of market and economic conditions, the Fund may, from time to time, take temporary defensive positions by varying the proportions invested among common stocks (see Equity Selection Criteria below) and U.S. government securities maturing within five years. Assets in the Unrestricted Series may be invested in money market funds for temporary investment. When the Fund is in a temporary defensive position, it may not achieve its investment objective. Risk Factors: Risks associated with the Western New York Series' performance will be those due to broad market declines and the decline in the price of particular companies held in the Western New York Series' portfolio. Changes and developments in the economic environment of Western New York State may have a disproportionate effect on the Western New York Series' portfolio. Because the Western New York Series' investments fluctuate in value, the Western New York Series' shares will fluctuate in value. The Adviser seeks to reduce the risk of negative returns while seeking to obtain capital apprecia- tion when it believes valuations and market conditions are favorable. It must be realized, as is true of almost all securities, there can be no assur- ance that the Western New York Series will attain its objective. The Western New York 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 Western New York 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. The Adviser may also consider industry diversification, liquidity, and market capitalization. To be eligible for inclu- sion in the Western New York Series' portfolio, a stock currently must meet the following criteria: the stock must be issued either by a company that employs at least fifty persons in the Greater Western New York Region, or issued by a Comp- any which has a capital investment (including annual payroll) in the Greater Western New York Region of greater than $1,000,000, or by a Company that main- tains its corporate headquarters in the Greater Western New York Region. The Greater Western New York Region includes the following New York State Counties: Erie, Niagara, Chautauqua, Cattaraugus, Orleans, Genesee, Wyoming, Allegany, Monroe, Livingston, Steuben, Wayne, Ontario, Yates. ADDITIONAL 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. (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 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 & DePaolo Asset Management, LLC (the "Adviser"), 1370 Pittsford Mendon Road, Mendon, New York 14506. Christopher Carosa, President of the Fund and President of the Fund's Investment Adviser, will be primarily responsible for the day-to- day management of the Series' portfolios. The Board meets regularly four times a year to review Fund progress and status. The Board may convene a special meeting under certain circumstances. Carosa, Stanton & DePaolo Asset Management, LLC is a New York Limited Liability Company that acts as an Investment Adviser to the Fund. Carosa, Stanton & DePaolo Asset Management, LLC, began accepting private portfolio management clients in February of 1997 and currently manages twenty-three portfolios and has nearly fifteen million dollars under management as of October 2002. Christopher Carosa and Gordon R. Stanton established the firm in late 1996 as the principal members & officers and are, respectively, are the President and Vice- President of the Fund. In July 1998, Bradford L. McAdam joined the firm and is a Vice-President of the Fund. Mr. Carosa has direct responsibility for day to day management of the Series' portfolios. 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. Carosa is the author of "Due Diligence: The Individual Trustee's Guide to Selecting and Monitoring a Professional Investment Adviser. He is a well-respected speaker and has written numerous articles Discussing Post-Modern Portfolio Theory. 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, a sales rep at Brown Harris Stevens Residential, has extensive experience working for non-profit organizations. Mr. Carosa & Mr. Stanton had been the members of the management committee of a private investment partner- ship 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. Mr. McAdam holds an MBA in Public Accounting and Management Systemns as well as a B.A. in Economics from Cornell University. He is also a Certified Public Accountant and a Chartered Financial Analyst. Mr. McAdams most recent exper- ience has been as Director of Research for Steven Charles, a registered invest- ment adviser. Before that, he served as a Senior Securities Analyst for Manning & Napier Advisors, Inc. The Board of Directors include former partners of the private investment part- nership. The Partnership and the Unrestricted Series have a substantially similar or the same investment objective. On September 24, 1997 the Board of Directors of Fund reviewed an Investment Management Agreement with Carosa, Stanton & DePaolo Asset Management, LLC, which was unanimously approved by the Board of Directors. 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 & DePaolo Asset Manage- ment, 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 purchased or disposed. The Agreement may be terminated at any time, without 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 & DePaolo 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 each Ser- ies and 1.0% per year on the remaining portion of net assets of each Series. All fees are computed on the average daily closing net asset value of each Ser- ies and are payable monthly in arrears. The Adviser will forgo sufficient fees to hold the total expenses of each Series to less than 2.0% of the first $10 million in assets and 1.5% of the next $20 million. For the fiscal year ending June 30, 2002, the Unrestricted Series paid the Adviser a fee of $20,086 or 1.15% of the average net assets of the Series. For the fiscal year ending June 30, 2002, the Western New York Series paid the Adviser a fee of $4,020 and the Adviser reimbursed the Series $1,741 for a total aggregate fee of $2,279) or 0.71% of the average net assets of the Series. 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 each Series' investment requirements; and to pay the salaries of those of the Fund's employees who may be officers or directors or employees of the Investment Adviser. The Fund is responsible for the operat- ing expenses of each Series, including: - interest and taxes; - brokerage commissions; - insurance premiums - compensation and expenses of its Directors other than those affiliated with the Adviser; - legal and audit expenses; - fees and expenses of each Series' Custodian, and Accounting Services Agent, if obtained for any Series from an entity other than the Adviser; - expenses incidental to the issuance of its shares, including issuance on the payment of, or reinvestment of, dividends and capital gain distributions; - fees and expenses incidental to the registration under federal or state securities laws of the Fund and each Series or its shares; - expenses of preparing, printing and mailing reports and notices and proxy material to shareholders of any Series; - all other expenses incidental to holding meetings of the shareholders; - dues or assessments of or contributions to the Investment Company Institute or any successor; and - such non-recurring expenses as may arise, including litigation affecting the Fund and the legal obligations with respect to which the Fund may have to indemnify its Officers and Directors. 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 each Series by placing purchase and sale orders for each Series, the Adviser shall select such broker-dealers ("brokers") as shall, in the Adviser's judgment, implement the policy of each 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 each Series on a continuing basis. The Adviser is also authorized to consider whether a broker provides brokerage and/or research services to each 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 each 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 each 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. 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. LEGAL PROCEEDINGS As of the date of this prospectus, there was no pending or threatened litigation involving the Fund in any capacity whatsoever. 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. 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, Martin Luther King's Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The price is determined by dividing the val- ue of its securities, plus any cash and other assets less all liabilities, ex- cluding 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. PURCHASE OF SHARES AND REINVESTMENTS The offering price of the shares offered by the Fund for any 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 dis- cretion to terminate 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 Fund. Payment may be made by wire. 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 made by wire, the purchase order will be effective the day payment is received by the Series' custodian. The purchase price of shares of any Series is the net asset value determined on the day the purchase order is effective. 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 ($500 for IRAs). 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 only in the case of corporate retirement plans that regularly contribute to their account via salary deferrals. Exchanges Between Series: To purchase shares by exchanging from another Series, please call the Bullfinch Fund shareholder services at 1-888-BULLFINCH (1-888- 285-5346) for instructions. Your exchange will be based on the closing net asset value per share next determined after your purchase order is effective. There is no charge for exchanges between Series. Generally, an exchange between Series is a taxable event. The Fund reserves the right to temporarily or permanently terminate the exchange privilege for any shareholder who makes an excessive number of exchanges between Series. Anything greater than 3 exchanges within six months will be considered excessive. You will receive advance written notice that the Fund intends to limit your use of the exchange privilege. The Fund also reserves the right to terminate or modify the exchange privilege at any time upon 30 days advance written notice or to refuse any exchange request. 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. INDIVIDUAL RETIREMENT ACCOUNTS You may purchase shares for an individual retirement accounts ("IRA") including Roth IRA's, SEP's, and Simple IRA's. IRA investments are available for the following: - Regular contributions - Rollover of certain employer sponsored pension and profit-sharing plan distributions. - Transfers from other IRA's All assets are automatically invested in Fund shares, including all dividends and distributions paid on Fund shares within an IRA. There is an annual fee of $45.00 charged by the IRA Trustee, Delaware Charter Guarantee and Trust Co. The Fund will pay the annual fee for accounts with a value of at least $10,000. Accounts below $5,000 in market value may be charged the $45.00 fee. This will be decided on an annual basis by the Fund's President or Directors. When the Fund pays the annual fees it will be a Fund operating expense. If the fees are charged to the IRA owners then the owner will have the option of paying the fee directly or have the fee charged to their IRA. PENSION, PROFIT SHARING AND 401-K PLANS Purchases of Fund shares through a business' retirement plans are available to the owners, officers and employees who participate in the retirement plans. The accounts will be registered under the name and tax identification of the pension, profit sharing and/or 401K plans. REDEMPTION OF SHARES The Fund 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, unless the shareholder is known to management, the Fund will require proper endorsements guaranteed either an Eligible Guarantor Institution as defined by the Securities Exchange Act of 1934. Eligible Guarantor Institution means: - Banks - Broker/Dealers - Credit unions - National securities exchanges - Registered securities associations - Clearing agencies - Savings associations It shall be the standard procedure for the Fund to automatically accept any signature guarantee unless: - the Fund has material evidence to suggest the guaranteeing institution is not an Eligible Guarantor Institution; or, - because the person acting on behalf of the guarantor institution is not authorized by that institution to act on its behalf, but only if the Fund maintains a list of people authorized to act on behalf of that guarantor institution. Please note that you cannot get a signature guarantee from a notary public. The Fund will waive the signature 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 driver's 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 Fund 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 Fund will ordinarily be made within three business days after tender of a valid redemption request. The Fund 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 closings, - Trading on the New York Stock Exchange is restricted as determined by the Securities and Exchange Commission - The Securities and Exchange Commission has determined that an emergency exists, making disposal of fund securities or valuation of net assets not reasonably practicable. - Other extraordinary events which may restrict the Fund from selling its securities or distributing its liquid assets. The Fund intends to make payments in cash, however, the Fund reserves the right to make payments in kind. 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 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 Fund 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. Portfolio Turnover Policy: Neither Series purchases securities for short term trading in the ordinary course of operations. Accordingly, it is expected that the annual turnover rate for each individual Series will not exceed 50%, wherein turnover is computed by dividing the lesser of each individual Series' total purchases or sales of securities within the period by the average monthly portfolio value of each individual 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 portfolio turnover rate might substant- ially exceed 50%; this would only result from special circumstances and not from the normal operations of either Series. FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Series' financial performance for the past 5 years (including that portion of the year ending June 30, 1998 when each Series was in operation). Certain information results for a single Series share. The total returns in the table represent the rate that an investor would have earned [or lost] on an investment in each Series (assuming reinvestment of all dividends & distributions). This information has been audited by Bonn, Shortsleeve & Gray, LLP, whose report, along with the Fund's financial statements, are included in the SAI or annual report, which is available upon request. Unrestricted Series For the years ending: 6/30/02 6/30/01 6/30/00 6/30/99 6/30/98* Net asset value, beginning of period* $ 13.16 11.32 11.35 10.99 11.00 Income from investment operations Net investment income (loss) $ (0.06) (0.03) 0.03 (0.01) 0.00 Net gains or (losses) on securities both realized and unrealized $ (1.19) 1.87 1.07 0.40 0.04 ------------------------------------------- Total from investment operations $ 11.91 13.16 12.45 11.38 11.04 Less distributions Dividends (from net investment income) $ 0.00 0.00 (0.03) (0.00) (0.05) Distributions (from capital gains) $ 0.00 0.00 (1.10) (0.03) (0.00) ------------------------------------------- Net asset value, end of period $ 11.91 13.16 11.32 11.35 10.99 =========================================== Total return -9.50% 16.25% 9.49% 3.53% 0.39%** Net assets, end of period $1,995,698 $1,515,723 1,087,653 914,048 750,819 Ratio of expenses to average net assets*** 1.83% 2.00% 2.00% 2.00% 2.00% Ratio of net income to average assets (0.30)% (0.30)% 0.30% (0.20)% 0.00%** Portfolio turnover rate 25.1% 25.6% 47.3% 40.7% 0.0% Average commission per share $ 0.04 0.03 0.04 0.04 0.57 * The Inception Date for the Unrestricted Series was July 24,1997. ** Annualized From Inception for the Series. *** After Adviser reimbursement. Had the Adviser not reimbursed the Series, the gross expense ratio would have been 2.02% in 2000, 2.30% in 1999 and 2.60% in 1998. Western New York Series For the years ending: 6/30/02 6/30/01 6/30/00 6/30/99 6/30/98* Net asset value, beginning of period* $ 10.12 9.81 9.25 10.45 10.12 Income from investment operations Net investment income (loss) $ (0.34) 0.00 0.00 (0.05) 0.02 Net gains or (losses) on securities both realized and unrealized $ (0.59) 0.31 0.56 (1.15) 0.32 ------------------------------------------- Total from investment operations $ 9.19 10.12 9.81 9.25 10.46 Less distributions Dividends (from net investment income) $ 0.00 0.00 0.00 (0.00) (0.01) Distributions (from capital gains) $ 0.00 0.00 0.00 (0.00) (0.00) ------------------------------------------- Net asset value, end of period $ 9.19 10.12 9.81 9.25 10.45 =========================================== Total return -9.19% 3.16% 6.05% (11.48)% 6.74%** Net assets, end of period $342,086 $298,891 254,598 242,204 176,230 Ratio of expenses to average net assets*** 2.00% 2.00% 2.00% 2.00% 2.00% Ratio of net income to average assets (1.40)% (0.00)% (0.00)% (0.40)% 0.04%** Portfolio turnover rate 28.0% 8.7% 23.5% 13.9% 0.0% Average commission per share $ 0.05 0.04 0.09 0.09 0.20 * The Inception Date for the Western New York Series was December 30, 1997. ** Annualized From Inception for the Series. *** After Adviser reimbursement. Had the Adviser not reimbursed the Series, the gross expense ratio would have been 2.56% in 2001, 2.78% in 2001, 4.26% in 2000, 5.40% in 1999 and 4.40% in 1998. The Example above should not be considered a representation of past or future Expenses. Actual expenses may be greater or lesser than those shown. -14- BULLFINCH FUND 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_______________________ Home Phone_____________ Bus Phone_____________ Date of Birth: ________________ Citizen of____________________ In order to comply with the US Patriot Act, we are required to have a copy of a photo identification as part of your initial Shareholder Application. Please attach a copy of your driver's license, pistol permit or some other form of photo identification. WARNING: Under Federal law, failure to provide a copy of photo identification may cause us to delay opening your account. Dividend Direction (check one): 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. 1370 Pittsford Mendon Road, Mendon, NY 14506 Amount of Investment Attached: Unrestricted Series $______________ (Minimum initial purchase $2,500) Western New York Series $______________ (Minimum initial purchase $2,500) All applications are accepted in New York and under New York laws. -15- FORM W-9 (December 2000) Department of Treasury Internal Revenue Service Request for Taxpayer Identification Number and Certification Name as shown on account (if joint account, give name corresponding to TIN) _________________________________________________ Business name, if different from above _________________________________________________ Check appropriate box: ___ Individual/Sole proprietor ___ Corporation ___ Partnership ___ Other (specify:_________________________________________________) Address (number, street and apt. or suite no.) _________________________________________________ City, State & ZIP Code _________________________________________________ Requester's name and address (optional): _________________________________________________ _________________________________________________ _________________________________________________ List account number(s) here (optional): _________________________________________________ _________________________________________________ Part 1.- Taxpayer Identification Number Part 2. - For U.S. Payees Exempt from Backup Withholding Social Security Number ______________________ Write "Exempt" below and sign and date the form or ______________________________ Employer ID Number ______________________ Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and 3. I am a U.S. person (including a U.S. resident alien). Certification instructions: You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding be- cause you have failed to report all interest and dividends on your tax return. Signature of U.S. Person __________________________________ Date ______________ ANNUAL AND SPECIAL MEETINGS 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. REPORTS TO SHAREHOLDERS The Fund sends all shareholders an Annual Report (which has been audited by the independent auditor) and a Semi-Annual Report (unaudited). The Fund will also send account statements to each shareholder at least quarterly. TRANSFER AGENT The Fund acts as its own transfer agent. CUSTODIAN Charles Schwab & Co., Inc. The Schwab Building 101 Montgomery Building, San Francisco, CA 94104 IRA TRUSTEE Delaware Charter Guarantee & Trust Co. P.O. Box 8963 Wilmington, DE 19899 INDEPENDENT AUDITORS Bonn, Shortsleeve & Gray, LLP Certified Public Accountants 300 Linden Oaks Office Park Rochester, NY 14625 -16- PROSPECTUS BULLFINCH FUND, INC. 1370 Pittsford Mendon Road Mendon, NY 14506 1-888-BULLFINCH (1-888-285-5346) October 30, 2002 Unrestricted Series Western New York Series TABLE OF CONTENTS PAGE The Fund and its investment objective 2 The Fund's investment strategy 2 Risks of the Fund 2 Who should invest? 3 Who should not invest? 3 Yearly returns 3 Fees and Fund expenses 3 Additional information about investment strategies and risk considerations 3 Non-diversification policy 4 Additional investment restrictions 5 Management 6 Investment adviser 6 Officers and directors of the Fund 7 Legal proceedings 7 Capitalization 8 Voting rights 8 Pricing of shares 8 Purchase of shares and reinvestment 8 Initial investment 8 Subsequent purchase 8 Reinvestment 8 Fractional shares 9 Individual Retirement Accounts IRA's 9 Pension, Profit-Sharing, 401-k plans 9 Redemption of shares 9 Tax status 10 Portfolio turnover policy 10 Financial highlights 10 Annual and special meetings 11 Reports to shareholders 11 Transfer Agent 11 Custodian 11 IRA trustee 11 Independent auditors 11 Application 11 Form W-9 12 PROSPECTUS BULLFINCH FUND, INC. 1370 Pittsford Mendon Road Mendon, NY 14506 1-888-BULLFINCH (1-888-285-5346) October 30, 2002 Why You Should Read This Prospectus and How to Obtain Additional Information? This Prospectus should be held for future reference. It is provided in order to help you decide if the Fund is the proper investment for you. The risks, objectives and strategies of each Series of the Bullfinch Fund are explained within this prospectus. Additional information about the Fund's investments is available in the Fund's annual and semi-annual reports to shareholders. In the Fund's annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. The SAI and the Fund's annual and semi-annual reports are available, without charge, upon request, or to make shareholder inquiries, by calling the following number or writing the following address: Bullfinch Fund, Inc. 1370 Pittsford Mendon Road Mendon, NY 14506 1-888-BULLFINCH (1-888-285-5346) Additional information about the Fund (including the Statement of Additional Information) can be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the public reference room may be obtained by calling the Commission at 1-800-SEC-6009. Reports and other information about the Fund are available on the Commission's Internet site at http://www.sec.gov and copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the Commission, Washington D.C. 20549-6009. INVESTMENT ADVISER CAROSA, STANTON & DEPAOLO ASSET MANAGEMENT, LLC 1370 Pittsford Mendon Road Mendon, NY 14506 (585) 624-3150 SEC File Number For the Bullfinch Fund is 811-08191. -17- BULLFINCH FUND, INC. 1370 Pittsford Mendon Road Mendon, NY 14506 (585) 624-3150 Part B STATEMENT OF ADDITIONAL INFORMATION October 30, 2002 This Statement of Additional Information is not a prospectus, but should be read in conjunction with the Fund's current prospectus dated October 30, 2001. 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 TABLE OF CONTENTS Fund History.........................................................2 How It All Began....................................................2 How We Got Our Name.................................................2 The Story of the Western New York Series............................2 Description of the Fund and Its Investments and Risks................2 Objective...........................................................2 Security Selection Criteria.........................................2 More on Risks of Specific Strategies of the Fund.....................2 (a)U.S. Government and Agency Bonds.................................2 (b)Special Situations...............................................3 (c)Foreign Securities...............................................3 General Risks of the Fund............................................3 Portfolio Turnover Policy...........................................4 Non-diversification Policy..........................................4 Additional Fund Policies.............................................4 Management of the Fund...............................................5 Compensation of Directors and Officers..............................5 Principal Holders of Shares..........................................6 Major Shareholders..................................................6 Management Ownership................................................6 Investment Adviser...................................................6 Advisory Fees.......................................................7 Brokerage............................................................7 Capitalization.......................................................8 Voting Rights.......................................................8 Purchase of Shares and Reinvestment..................................8 Initial Investment..................................................8 Subsequent Purchases................................................9 Reinvestment........................................................9 Fractional Shares...................................................9 Pricing of Shares....................................................9 Tax Status...........................................................9 IRA................................................................10 SEP IRA............................................................10 Roth IRA...........................................................10 Calculation of Performance Data.....................................10 Financial Statements................................................11 -1- FUND HISTORY The Bullfinch Fund (also referred to as the "Fund") was 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 and the Western New York Series. The Fund's business office is in Honeoye Falls, NY: mail may be addressed to 2 Lantern Lane, Honeoye Falls, NY 14472. HOW IT ALL BEGAN In the placid summer of 1987, during their annual 4th of July party, several Yale classmates agreed to begin an investment partnership. Over the course of ten years, the partners were pleased with their investment results, but unable to determine how to become comfortable allowing new partners in. After the two managing partners (Christopher Carosa and Gordon Stanton) established their investment advisory firm in 1996, the remaining partners agreed to dissolve the partnership and provide the seed money for what would become the Unrestricted Series of the Bullfinch Family of No-Load Mutual Funds. The seed money was collected in February 1997 and the Fund became effective on July 24, 1997. HOW WE GOT OUR NAME The most common question we get is "How did we get our name?" When we initially filed our application with the SEC, we used the working name "Bulldog Fund." While this allowed us to state our investment style as being "Bullish on Dog stocks," the name can be more accurately attributed to Yale's mascot. It was a good working name but too sophomoric for our tastes (although we did like its contrarian connotations.) Sticking with the key phrase "Bull," the directors hit the dictionary and eventually came upon the word "Bullfinch." The word is the name of a type of bird common in Europe but also in North America. It had the right air about it and we decided to use it. Months later, when searching the internet for references to the word, we discovered there Tokyo had an annual Bullfinch Festival. According to Japanese legend, the bullfinch was a mythological creature that turned bad things into good. A bit more convoluted than saying "We're bullish on dog stocks," but it retains the same idea. THE STORY OF THE WESTERN NEW YORK SERIES Mr. Carosa is a native of Buffalo, NY, a fact his classmates thought somehow could be used to make fun of him (usually by referring to the play of the city's professional football team). It also irked him that the national media continually refers to his hometown as part of the rust belt. (Ironically, when the New York Times wrote a story about the Western New York Series shortly after its inception, it couldn't help but mention rusting steel mill, dilapidated grain elevators and chicken wings. Oh yea, it ended the piece - which was in the Sunday Business Section - with the tongue-in-cheek "Go Bills." Mr. Carosa long felt the best way to silence these critics was to create a mutual fund that would shed a more positive light on the region. Originally, Fund management wished to get the Unrestricted Series up and running first and then provide seed capital for a new Western New York Series. As fate would have it, Anthony DePaolo, whom Mr. Carosa had met through his previous employer, had collected what would become the seed capital for the Western New York Series. The Western New York Series became effective on December 30, 1997. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS Objective: The Bullfinch Fund, Inc. (the "Fund") is an open-end non-diversified management investment company that offers separate series - the Unrestricted Series and the Western New York Series - (individually and collectively known as the "Series"), each a separate investment portfolio having its own investment objective and policies. Unrestricted Series The Unrestricted Series seeks conservative long-term growth in capital through a mix of investments consisting primarily of exchange listed and over-the- counter common stocks as well as U.S. government securities maturing within five years. Western New York Series The Western New York Series seeks capital appreciation through a mix of investments consisting primarily of exchange-listed and over-the-counter common stocks of companies with an important economic presence in the Greater Western New York Region as well as U.S. government securities maturing within five years. 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. The Adviser may also consider industry diversification, liquidity, and market capitalization. To be eligible for inclu- sion in the Western New York Series' portfolio, a stock currently must meet the following criteria: the stock must be issued either by a company that employs at least fifty persons in the Greater Western New York Region, or issued by a Comp- any which has a capital investment (including annual payroll) in the Greater Western New York Region of greater than $1,000,000, or by a Company that main- tains its corporate headquarters in the Greater Western New York Region. The Greater Western New York Region includes the following New York State Counties: Erie, Niagara, Chautauqua, Cattaraugus, Orleans, Genesee, Wyoming, Allegany, Monroe, Livingston, Steuben, Wayne, Ontario, Yates. MORE ON RISKS OF SPECIFIC STRATEGIES OF THE FUND: Objective & Policies: From time to time any 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. No Series has any intention of exceeding 5% in any of these types of securities. TRADING COSTS Carosa, Stanton & DePaolo seeks brokers from which it feels it can achieve the best price and execution for each individual transaction for all its clients. Should more than one broker be capable of providing best price and execution, other factors may be considered in the selection of the broker. These factors can include commission, research and operational expediency. There may be an increased cost on OTC trades if the adviser chooses to execute such trades on any agency basis (i.e., not to trade through a market-maker in any particular security). These costs include the mark-ups by the market-maker on the OTC securities, which are in addition to the commissions paid to the agent broker- dealer. A market-maker may mark-up (down) a security for which it makes a market, which is a cost that will be incurred in addition to the agency commissions assessed by the executing broker. GENERAL RISKS OF THE FUND: Each Series' return, as stock prices generally, may fluctuate within a wide range, so that an investor could lose money over a period of time. Since each Series invests a higher percentage of assets in fewer holdings than the average stock fund does, each Series is subject to the risk of underperformance, due to weakness in one or a few of its stocks. Risks associated with each Series' performance will be those due to broad market declines and business risks from difficulties which occur to particular companies while in each Series' portfolio. It must be realized, as is true of almost all securities, there can be no assurance that either Series will obtain its ongoing objective of capital appreciation. Portfolio Turnover Policy: Neither Series purchases securities for short term trading in the ordinary course of operations. Accordingly, it is expected that the annual turnover rate for each individual Series will not exceed 50%, wherein turnover is computed by dividing the lesser of each individual Series' total purchases or sales of securities within the period by the average monthly portfolio value of each individual 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 portfolio turnover rate might substant- ially exceed 50%; this would only result from special circumstances and not from the normal operations of either Series. Non-diversification Policy: Each 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. Each Series, therefore, may be more susceptible than a diversified fund to any single economic, political, or regulatory occurrence. The policy of each Series, in the intention of achieving their objective, is, therefore, one of selective investments rather than diversification. Each Series seeks only the required diversification necessary to maintain its federal non-taxable status under Sub-Chapter M of the Internal Revenue Code (see the Tax Status Section of this prospectus). ADDITIONAL FUND POLICIES 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. (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. MANAGEMENT OF THE FUND The overall business and affairs of the Fund are 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 advisor and custodian. The day-to-day operations of the Fund are delegated to the Fund's officers and to the Advisor. OFFICERS AND DIRECTORS OF THE FUND The directors of the Fund are: The directors of the Fund are:
NAME, POSITON(S) TERM OF OFFICE PRINCIPLE NUIMBER OF OTHER ADDRESS HELD WITH AND LENGTH OF OCCUPATION(S) PORTFOLIOS DIRECTORSHIPS AND AGE FUND TIME SERVED DURING PAST IN FUND HELD BY 5 YEARS COMPLEX DIRECTOR OVERSEEN BY DIRECTOR ----------------------------------------------------------------------------------------------------- INTERESTED PERSONS* Christopher Carosa President; Term of Office: President, Founder 2 N/A 2 Lantern Lane Director; N/A Carosa, Stanton & Honeoye Falls, Chairman of Length of Time DePaolo Asset New York 14472 Board Served: Management, LLC; Age: 42 Since 1997 President, Director and Chairman of the Board, Bullfinch Fund, Inc. Gordon Stanton Vice-President; Term of Office: President, Founder 2 N/A 17 East 96 St. Director; N/A Carosa, Stanton & Apt 7C Length of Time DePaolo Asset New York, Served: Management, LLC; New York, 10128 Since 1997 Vice-President, Age: 43 and Director, Bullfinch Fund, Inc.; Associate, Brown Harris Stevens Residential Bradford L. McAdam Vice-Present Term of Office: Vice-President 2 N/A 2 Lantern Lane Compliance N/A Carosa, Stanton & Honeoye Falls, Officer Length of Time DePaolo Asset New York 14472 Served: Management, LLC; Age: 42 Since 1998 Vice-President, Bullfinch Fund, Inc. Betsy Kay Carosa Corporate Term of Office: Office Manager 2 N/A 2 Lantern Lane N/A Carosa, Stanton & Honeoye Falls, Length of Time DePaolo Asset New York 14472 Served: Management, LLC; Age: 42 Since 1997 Corporate Secretary, Bullfinch Fund, Inc.
INDEPENDENT DIRECTORS Jan Dombrowski, MD Director; Term of Office: President 2 N/A 925 Cheese Factory Rd Audit N/A MD Oncology PLLC Honeoye Falls, Committee Length of Time New York 14472 Member Served: Age: 42 Since 2002 William E.J. Martin Director Term of Office: Senior Project Manager 2 N/A 4410 Woodlawn Ave. N N/A Mego Construction; Seattle, Length of Time Estimator/Project Mgr Washington 98103 Served: ECI General Contractors, Inc. Age: 42 Since 1997 Thomas Midney Director Term of Office: Director of Operations 2 N/A 13 Burr Road N/A Electrocal, Inc.; Bloomfield, Length of Time Director of Product Connecticut 06002 Served: Planning, Goss & Deleeuw Age: 42 Since 1997 Michael J. Morris Director Term of Office: Actuary 2 N/A 334 Robbins Avenue Audit N/A United Healthcare Newington, Committee Length of Time Connecticut 06111 Member Served: Age: 42 Since 1997 Michael W. Reynolds Director Term of Office: Vice-President 2 N/A 105 Dorchester Road Audit N/A Quinlan & Company Buffalo, Committee Length of Time New York 14213 Member Served: Age: 42 Since 2000
OWNERSHIP OF FUND SHARES BY DIRECTORS The following table provides the range of ownership of the Funds' Board of Directors of shares of Bullfinch Fund, Inc. as of December 31, 2001.
NAME OF DIRECTOR DOLLAR RANGE OF SECURITIES IN AGGREGATE DOLLAR RANGE BULLFINCH FUND, INC. OF EQUITY SECURITIES IN ALL FUNDS OVERSEEN BY DIRECTOR ----------------------------------------------------------------------------------------- INTERESTED DIRECTORS* Christopher Carosa Unrestricted Series: $50,001-$100,000 $50,001-$100,000 Western New York Series: $1-10,000 Gordon R. Stanton Unrestricted Series: over $100,000 over $100,000 Western New York Series: none
INDEPENDENT DIRECTORS Jan Dombrowski Unrestricted Series: none none Western New York Series: none William E.J. Martin Unrestricted Series: $1-10,000 $1-10,000 Western New York Series: none Thomas Midney Unrestricted Series: $10,001-50,000 $10,001-50,000 Western New York Series: none Michael J. Morris Unrestricted Series: $10,001-50,000 $10,001-50,000 Western New York Series: none William E.J. Martin Unrestricted Series: none $1-10,000 Western New York Series: $1-10,000
COMPENSATION TABLE FOR FISCAL YEAR ENDING JUNE 30, 2002 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 Jan Dombrowksi, $ 50 N/A N/A $ 50 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 Michael W. $ 400 N/A N/A $ 400 Reynolds, Director * Director of the Fund who would be considered "interested persons" as defined by the Investment Company Act of 1940. COMPENSATION OF DIRECTORS AND OFFICERS Each unaffiliated director was paid $400 in 2002, except for Mr. Dombrowski, who, being only recently added in the last quarter of the year, received a pro- rata portion of this annual fee (i.e., $50). A total of $0 has been paid in 2001 to officers and directors of the Fund to compensate for travel expenses associated with their Fund duties. 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. OTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS The only Committee of the Fund is an Audit Committee whose members are Jan Dombrowski, Michael J. Morris, and Michael W. Reynolds. The Audit Committee meets on an annual basis. The Audit Committee reviews the financial reporting process, the system of internal control, the audit process, and the Fund's process for monitoring compliance with investment restrictions and applicable laws and regulations. FACTORS CONSIDERED BY THE BOARD OF DIRECTORS IN RENEWING THE MANAGEMENT AND INVESTMENT ADVISORY CONTRACTS WITH CAROSA, STANTON & DEPAOLO ASSET MANAGEMENT, LLC In determining whether to renew the Management and Investment Advisory Agree- ments between the Fund and Carosa, Stanton & DePaolo Asset Management, LLC, (the Adviser), the Board of Directors requested, and the Adviser provided information relevant to the Board's consideration. Among the factors the Board considered was the overall performance of the Funds relative to the performance of other funds in the Funds' peer group. In addition, the Board compared expenses of each Fund to the expenses of its peers. The Board also considered the fact that Adviser has implemented breakpoints in the Funds' advisory fee schedule and the Board agreed that this type of fee structure remained reasonable and fair to shareholders. They noted the range of invest- ment advisory and administrative services provided by the Adviser to the Fund. They also took note of the fact that the Fund is not subject to sales charges or Rule 12b-1 fees. The Board also reviewed financial inform- ation concerning the Adviser's brokerage practices, including soft dollar arrangements, and noted that these were reasonable. Based upon their review and consideration of these factors and other matters deemed relevant, the Board concluded that the terms of the Investment Management Agreements are fair and reasonable and the Board voted to renew the Agreements. PRINCIPAL HOLDERS OF SECURITIES Major Shareholders: As of October 29, 2002, shareholders on record who own 5% or more of the outstanding shares of the Fund are as follows: Unrestricted Series Name Address Percentage ownership Ceiling Pro of WNY Hamburg, New York 6.11% I. Burke Rochester, New York 9.22% J. Hartney Clarence, New York 5.40% A. Ryan-Sammons Rochester, New York 6.07% Western New York Series Name Address Percentage ownership J. Hartney Hamburg, New York 54.71% A. DePaolo Clarence, New York 5.75% M. Edelstein Rochester, New York 9.33% L. Pusateri P/S East Amherst, New York 9.81% Management Ownership: Officers and directors of the Fund and their ownership of the Fund, as of October 29, 2002, are as follows: Unrestricted Series Western New York Series Name Shares Percentage Shares Percentage Christopher Carosa* 5,483.429** 3.02% 484.068** 1.30% (Chairman, Director) Gordon Stanton* 8,160.663 4.49% 0.000 0.00% (Director) William E.J. Martin 632.318 0.35% 0.000 0.00% (Director) Thomas Midney 1,689.415 0.93% 0.000 0.00% (Director) Michael J. Morris 4,234.620 2.33% 0.000 0.00% (Director) Michael W. Reynolds 228.311 0.13% 265.675 0.71% (Director) Bradford L. McAdam 7,095.916 3.91% 0.000 0.00% (Vice-President) Betsy K. Carosa** 5,482.429*** 3.02% 484.068*** 1.30% (Secretary) * Director of the Fund who would be considered "interested persons" as defined by the Investment Company Act of 1940. ** Betsy K. Carosa is the wife of Christopher Carosa *** Christopher and Betsy K. Carosa own 3,770.626 shares jointly in the Unre- stricted Series, 484.068 jointly in the Western New York Series, and 1,712.803 in the Unrestricted Series in Betsy's IRA. INVESTMENT ADVISER Carosa, Stanton & DePaolo Asset Management, LLC 1370 Pittsford Mendon Road Mendon, NY 14506 Carosa, Stanton & DePaolo Asset Management, LLC is a New York Limited Liability Company that acts as an Investment Adviser to the Fund. Carosa, Stanton & DePaolo Asset Management, LLC, began accepting private portfolio management clients in February of 1997 and currently manages twenty-three portfolios and has nearly fifteen million dollars under management as of October 2002. Christopher Carosa and Gordon R. Stanton established the firm in late 1996 as the principal members & officers and are, respectively, are the President and Vice-President of the Fund. In July 1998, Bradford L. McAdam joined the firm and is a Vice-President of the Fund. On September 24, 1997 the Board of Directors of Fund reviewed an Investment Management Agreement with Carosa, Stanton & DePaolo Asset Management, LLC, which was unanimously approved by the Board of Directors. 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 & DePaolo Asset Manage- ment, 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 purchased or disposed. The Agreement may be terminated at any time, without 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 & DePaolo 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 each Ser- ies and 1.0% per year on the remaining portion of net assets of each Series. All fees are computed on the average daily closing net asset value of each Ser- ies and are payable monthly in arrears. The Adviser will forgo sufficient fees to hold the total expenses of each Series to less than 2.0% of the first $10 million in assets and 1.5% of the next $20 million. 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 each Series' investment requirements; and to pay the salaries of those of the Fund's employees who may be officers or directors or employees of the Investment Adviser. The Fund is responsible for the operat- ing expenses of each Series, including: - interest and taxes; - brokerage commissions; - insurance premiums - compensation and expenses of its Directors other than those affiliated with the Adviser; - legal and audit expenses; - fees and expenses of each Series' Custodian, and Accounting Services Agent, if obtained for any Series from an entity other than the Adviser; - expenses incidental to the issuance of its shares, including issuance on the payment of, or reinvestment of, dividends and capital gain distributions; - fees and expenses incidental to the registration under federal or state securities laws of the Fund and each Series or its shares; - expenses of preparing, printing and mailing reports and notices and proxy material to shareholders of any Series; - all other expenses incidental to holding meetings of the shareholders; - dues or assessments of or contributions to the Investment Company Institute or any successor; and - such non-recurring expenses as may arise, including litigation affecting the Fund and the legal obligations with respect to which the Fund may have to indemnify its Officers and Directors. Advisory Fees: The advisory fees to the current adviser, for the last three fiscal years, are as follows: UNRESTRICTED SERIES WESTERN NEW YORK SERIES ADVISORY AMOUNT NET ADVISORY AMOUNT NET YEAR FEE WAIVED ADVISORY FEE FEE WAIVED ADVISORY FEE 2000 $12,199 $ 233 $11,966 $ 2,983 $ 5,332 ($ 2,349) 2001 $15,099 $ 0 $15,099 $ 3,364 $ 2,123 $ 1,241 2002 $20,086 $ 0 $20,086 $ 4,020 $ 1,741 $ 2,279 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 each Series by placing purchase and sale orders for each Series, the Adviser shall select such broker-dealers ("brokers") as shall, in the Adviser's judgment, implement the policy of each 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 each Series on a continuing basis. The Adviser is also authorized to consider whether a broker provides brokerage and/or research services to each 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 each 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 each 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. 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 AND REINVESTMENTS The offering price of the shares offered by the Fund for any 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 dis- cretion to terminate 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 Fund. Payment may be made by wire. 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 made by wire, the purchase order will be effective the day payment is received by the Series' custodian. The purchase price of shares of any Series is the net asset value determined on the day the purchase order is effective. 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 ($500 for IRAs). 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 only in the case of corporate retirement plans that regularly contribute to their account via salary deferrals. Exchanges Between Series: To purchase shares by exchanging from another Series, please call the Bullfinch Fund shareholder services at 1-888-BULLFINCH (1-888- 285-5346) for instructions. Your exchange will be based on the closing net asset value per share next determined after your purchase order is effective. There is no charge for exchanges between Series. Generally, an exchange between Series is a taxable event. The Fund reserves the right to temporarily or permanently terminate the exchange privilege for any shareholder who makes an excessive number of exchanges between Series. Anything greater than 3 exchanges within six months will be considered excessive. You will receive advance written notice that the Fund intends to limit your use of the exchange privilege. The Fund also reserves the right to terminate or modify the exchange privilege at any time upon 30 days advance written notice or to refuse any exchange request. 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. 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, Martin Luther King's Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The price is determined by dividing the val- ue of its securities, plus any cash and other assets less all liabilities, ex- cluding 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. 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 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 Fund 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. 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"). 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 employer 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 deduction is also retained for individual taxpayers and married couples with adjusted gross incomes within certain specified limits. All individuals may make nondeductible IRA contributions to separate accounts to the extent that they are not eligible for a deductible contribution. Earnings within the IRA are reinvested and are tax-deferred until withdrawals begin. The maximum annual contribution may be increased to $4,000 if you have a spouse who earns no compensation during the taxable year. A separate and independent Spousal IRA must be maintained. 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 before age 59 1/2 without penalty. Simplified Employee Pension: Employers may use the Fund to establish Simplified Employee Pension (SEP) IRA's for each qualifying employee. Deductible contributions may be made by the employer through a SEP IRA, which meets the requirements of section 408(k) of the code. An employer may contribute up to the lesser of 15% of your calendar year compensation or $22,500. Roth IRA: Individuals may use the Fund for contributions to a Roth IRA. Contributions to a Roth IRA are not deductible and are limited to the same amounts allowable for regular IRA's. In addition there are income limitations that must be met in order to contribute to a Roth IRA. However, all withdrawals from a Roth IRA are not included in income if it is a "qualified distribution". Qualified distributions are to be made no sooner than the fifth tax year after the year the Roth IRA contribution is made, and the individual must be age 59.5, or for the events of death, disability or first home purchase (maximum $10,000). U.S. Treasury Regulations require a Disclosure Statement. This Statement describes the general provisions of the IRA and is forwarded to all prospective IRA's. The Fund will pay the setup fees charged by the trustee. There is an annual fee of $45.00 charged by the IRA Trustee, Delaware Charter Guarantee and Trust Co. The Fund will pay the annual fee for accounts with a value of at least $10,000. Accounts below $10,000 in market value may be charged the $45.00 fee. This will be decided on an annual basis by the Fund's President or Directors. When the Fund pays the annual fees it will be a Fund operating expense of the Fund. If the fees are charged to the IRA owners then the owner will have the option of paying the fee directly or have the fee charged to their IRA. All IRA's may be revoked within seven days of their establishment with no penalty. CALCULATION OF PERFORMANCE DATA The Fund's average annual total returns are calculated using the following formula: n P(1+T) =ERV WHERE: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10- year periods (or fractional portion). BULLFINCH FUND, INC. 1370 PITTSFORD MENDON ROAD MENDON, NEW YORK 14506 (585) 624- 3150 1-888-BULLFINCH (1-888-285-5346) Annual Report June 30, 2002 Management's Discussion of Fund Performance August 15, 2002 Dear Fellow Shareholders: We are very proud to present the June 2002 Annual Report of the Bullfinch Fund, Inc. This report contains the audited financial statements for both the Unrestricted Series and the Western New York Series. This has been a roller coaster year for the market. Thanks to our ability to maintain defensive positions in both our portfolios, they have been able to stave off the worst of the market decline. Indeed, for the 12 months ending June 30, 2002, while the Value Line Geometric Index (our benchmark index) - as well as the popular S&P 500 - were both down nearly 19%, both our portfolios were down just over 9%. As always, past performance can never predict future performance. Still, we like to point these numbers out as a way of explaining our management style. We try to build our portfolios in a manner to reduce downside risk. And our success in this goal has not gone unrecognized. During the year 2001, the Unrestricted Series was up 16.73% and the Western New York Series was up an even higher amount - 17.69%. Indeed, the Unrestricted Series was ranked fourth in the nation by the Wall Street Journal's Annual Mutual Fund Rankings. (Keep in mind, last year, popular indices like the S&P500 and NASDAQ fell 13% and 21% respectively.) Of course, given the historically poor market in 2002, we should not expect a repeat of those results this year. Yet, despite the fact that we were (like many other professionals) misled by WorldCom, through June 30, 2002, both our funds are recognized by Lipper as among the best in their categories (for more information, go to www.lipperleaders.com). As conservative long-term investors, we see today's markets as a tremendous opportunity. We believe three things drive markets: earnings, interest rates and psychology. Corporate earnings appear to be heading towards more favorable reporting comparisons and the interest rate environment continues to be positive. That leaves psychology. We believe just as an irrationally exuberant psychology pushed the markets up to unsustainable heights a few years ago, an equally irrational gloom of despair clouds today's markets. While no one could exactly predict when the market top would occur, it eventually did peak and the market came crashing down. Our shareholders profited handsomely during that turnaround. Similarly, while no one could exactly predict when this market bottom will occur, no one doubts that the market will eventually recover. We're constantly updating our portfolios so, once again, our shareholders can benefit from that anticipated turnaround. We wish to thank our shareholders for expressing their confidence in us and wish them continued good fortune in the coming year. Best Regards, Bullfinch Fund, Inc. Christopher Carosa, CTFA President UNRESTRICTED SERIES (A Series Within Bullfinch Fund, Inc.) FINANCIAL STATEMENTS AS OF JUNE 30, 2002 TOGETHER WITH INDEPENDENT AUDITORS' REPORT BONN, SHORTSLEEVE & GRAY, LLP Certified Public Accountants 300 Linden Oaks Office Park Rochester, NY 14625 Tel 585-381-9660 Fax 585-248-0603 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 the of the Unrestricted Series (a series within Bullfinch Fund, Inc.), including the schedules of investments in securities, as of June 30, 2002 and 2001, and the related statements of operations, changes in net assets and the financial highlights for the years ended. 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. The financial statements and financial highlights of the Bullfinch Fund, Inc. as of June 30, 1999, were audited by other auditors whose report dated August 4, 2000, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing stand -ards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial high- lights 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 June 30, 2002 and 2001 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 Unrestricted Series (a series within the Bullfinch Fund, Inc.) as of June 30, 2002 and 2001, and the results of its operations, the change in its net assets and the financial highlights for the years ended in conformity with generally accepted accounting principles. BONN, SHORTSLEEVE & GRAY, LLP Rochester, New York August 15, 2002 UNRESTRICTED SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2002 ASSETS Investments in securities, at fair value, identified cost $1,387,048 $ 1,466,913 Cash 534,195 Accrued interest and dividends 2,797 Prepaid expenses 1,261 --------------- Total assets 2,005,166 =============== LIABILITIES Accounts payable 9,468 --------------- NET ASSETS Net assets (equivalent to $ 11.91 based on 167,573.326 shares of stock outstanding) $ 1,995,698 =============== COMPOSITION OF NET ASSETS Shares of common stock $ 1,961,004 Accumulated net investment loss (45,171) Net unrealized appreciation of investments 79,865 --------------- Net assets at June 30, 2002 $ 1,995,698 =============== The accompanying notes are an integral part of these statements. UNRESTRICTED SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) SCHEDULE OF INVESTMENTS IN SECURITIES JUNE 30, 2002 Historical Common Stocks - 100% Shares Cost Value Computer software - 12.5% Microsoft Corp. 1,000 55,519 54,700 Oracle 5,500 72,365 52,085 Synopsis, Inc. 1,400 60,178 76,734 --------- -------- 188,062 183,519 Utilities - 12.0% Chesapeake Utilities Corp. 2,800 51,615 53,228 Empire District Electric Co. 1,250 21,665 25,625 Hawaiian Electric 1,250 41,040 53,188 Northwestern Corp. 2,600 59,748 44,070 --------- -------- 174,068 176,110 Banking and Finance - 11.2% First American Corp. 3,000 55,075 69,000 Fiserv, Inc. 1,500 21,566 55,065 National City Corp. 1,200 28,461 39,900 -------- -------- 105,102 163,965 Retail - General - 8.6% Dollar General Corporation 3,052 42,397 58,080 Family Dollar Stores, Inc. 1,950 31,662 68,738 -------- -------- 74,059 126,818 Semiconductor - 8.0% Intel, Inc. 4,050 97,800 73,993 Motorola, Inc. 3,000 46,380 43,260 -------- -------- 144,180 117,253 Leisure and Recreational - 7.8% Hasbro, Inc. 1,400 16,142 18,984 Mattel, Inc. 4,550 52,852 95,914 -------- -------- 68,994 114,898 Computers - Hardware - 5.8% Dell Computer Corp. 3,250 80,811 84,955 Tobacco Products - 5.5% Phillip Morris 1,850 40,459 80,808 Foods and Beverages - 4.7% Conagra Foods, Inc. 2,500 55,527 69,125 Pharmaceuticals - 4.7% Mylan Laboratories, Inc. 2,200 58,654 68,970 Telecommunications Equipment - 4.6% Cisco Systems 2,200 59,279 30,690 Corning, Inc. 10,400 98,443 36,920 -------- -------- 157,722 67,610 Office Equipment - 4.2% Diebold, Inc. 1,650 41,068 61,446 Medical Products and Supplies - 3.2% Impath, Inc. 2,600 56,238 46,670 Instruments - 3.0% Checkpoint Systems, Inc. 3,700 32,717 43,290 Commercial Services - 2.1% Paychex, Inc. 1,000 27,637 31,290 Shoes and Leather - 1.1% Wolverine World Wide 900 8,477 15,705 Telecommunications Services - 0.9% AT&T Corporation 1,000 18,480 10,700 AT&T Wireless 321 7,380 1,878 Worldcom, Group 4,150 46,247 996 -------- -------- 72,107 13,574 Entertainment - 0.1% Walt Disney Holding Co. 48 1,166 907 -------- -------- TOTAL COMMON STOCKS $ 1,387,048 $ 1,466,913 ======== ======== The accompanying notes are an integral part of these statements. UNRESTRICTED SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000 2002 2001 2000 INVESTMENT INCOME: Dividends $28,180 $21,239 $22,196 EXPENSES: Management Fees 20,086 15,099 12,199 Reimbursement of Management Fees - - (258) Legal and Professional 6,375 6,063 4,000 Directors' Fee 850 800 600 Amortization 337 581 581 Fidelity Bond 863 491 491 Taxes 550 150 350 Registration Fees 1,080 1,029 960 Bank Service Charges 1,422 1,000 535 Dues and Subscriptions 750 83 88 ---------------------------------- Total expenses 32,313 25,295 19,546 ---------------------------------- Net investment income(loss) (4,133) (4,056) 2,650 ---------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from securities transactions (1,324) (463) 95,873 Unrealized appreciation (depreciation) during the period (191,148) 216,095 (10,427) ---------------------------------- Net gain (loss) on investments (192,472) 215,632 85,446 ---------------------------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(196,605) $ 211,576 $ 88,096 ================================== The accompanying notes are an integral part of these statements. UNRESTRICTED SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000 2002 2001 2000 INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income (loss) $ (4,133) $ (4,056) $ 2,650 Net realized gains (loss) from securities transactions (1,324) (463) 95,873 Net change in unrealized appreciation of investments (191,148) 216,095 (10,427) --------------------------------- Increase (decrease) in net assets from operations (196,605) 211,576 88,096 CAPITAL SHARE TRANSACTIONS: Sales (62,800.889; 22,285.066; and 11,736.574 shares) 796,385 254,526 140,586 Redemptions (10,370.596; 3,214.621; and 4,763.031 shares) (119,805) (38,032) (55,077) --------------------------------- Total capital share transactions 676,580 216,494 85,509 --------------------------------- Increase in net assets 479,975 428,070 173,605 NET ASSETS: Beginning of period 1,515,723 1,087,653 914,048 --------------------------------- End of period $1,995,698 $1,515,723 $1,087,653 ================================= The accompanying notes are an integral part of these statements. UNRESTRICTED SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 (1) The Organization The Unrestricted Series (the "Series") is a series of the Bullfinch Fund, Inc. (the "Fund"), which was organized as a Maryland corporation registered under the Investment Company Act of 1940 as an open-end non-diversified management investment Company. The investment objective of the Series is to seek conservative long-term growth in capital. The Adviser seeks to achieve this objective by using an asset mix consisting primarily of exchange listed securities and over- the-counter common stocks as well as U.S. Government securities maturing within five years. (2) Summary of Significant Accounting Policies Cash - Cash consists of amounts deposited in money market accounts and is not federally insured. The Series has not experienced any losses on such amounts and believes it is not exposed to any significant credit risk on cash. Security Valuation - The Series records its investments at fair value. Securities traded on national securities exchanges or the NASDAQ National Market System are valued daily at the closing prices of the securities on those 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 - It is the policy of the Fund to comply with the requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies to distribute all of its taxable income to its shareholders. In addition, the Fund intends to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code. Therefore, no provision for federal income taxes or excise taxes has been made. Organization Expenses - Organization expenses are being amortized over a 60-month period. Distributions to Shareholders - The Series made a distribution of its net investment income and net realized capital gains to its shareholders on June 28, 2000, in the form of stock dividends equal to 8,561.674 shares of stock. Other - The Series 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. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (3) Investments For the year ended June 30, 2002, the Series purchased $681,874 of common stock. During the same period, the Series sold $439,446 of common stock For the year ended June 30, 2001, the Series purchased $456,897 of common stock. During the same period, the Series sold $322,569 of common stock. For the year ended June 30, 2000, the Series purchased $745,095 of common stock. During the same period, the Series sold $462,049 of common stock. At June 30, 2002, the gross unrealized appreciation for all securities totaled $302,040 and the gross unrealized depreciation for all securities totaled $222,175, or a net unrealized appreciation of $79,865. The aggre- gate cost of securities for federal income tax purposes at June 30, 2002 was $1,387,048. At June 30, 2001, the gross unrealized appreciation for all securities totaled $383,335 and the gross unrealized depreciation for all securities totaled $124,990, or a net unrealized appreciation of $258,345. The aggregate cost of securities for federal income tax purposes at June 30, 2001 was $1,153,324. At June 30, 2000, the gross unrealized appreciation for all securities totaled $149,794 and the gross unrealized depreciation for all securities totaled $107,544, or a net unrealized appreciation of $42,250. The aggregate cost of securities for federal income tax purposes at June 30, 2000 was $1,019,460. (4) Investment Advisory Agreement Carosa, Stanton & DePaolo Asset Management, LLC 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 & DePaolo Asset Management, LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940. The Investment advisory agreement provides that Carosa, Stanton & DePaolo Asset Management, LLC,subject to the supervision and approval of the Fund's board of directors, is res- ponsible for the day-to-day management of the Series' portfolio which includes 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 & DePaolo Asset Management, LLC has agreed to forego sufficient investment advisory fees to limit total expenses of the Fund to 2% of the first $10 million in average assets and 1.5% of the next $20 million in average assets. (5) Capital Share Transactions 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. Transactions in capital stock of the Series were as follows: Shares Amount Balance at 7/1/99 80,537.371 877,803 ----------- --------- Shares sold during 2000 11,736.574 140,586 Shares redeemed during 2000 ( 4,763.031) ( 51,456) Reinvestment of Distributions 6/30/00 8,561.674 98,887 ----------- --------- Balance at 7/1/00 96,072.588 1,065,820 ----------- --------- Shares sold during 2001 22,285.066 254,526 Shares redeemed during 2001 ( 3,214.621) ( 35,922) ----------- --------- Balance at 7/1/01 115,143.033 1,284,424 ----------- --------- Shares sold during 2002 62,800.889 796,385 Shares redeemed during 2002 (10,370.596) (119,805) ----------- --------- Balance at 7/1/02 167,573.326 $ 1,961,004 =========== ========= UNRESTRICTED SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) FINANCIAL HIGHLIGHTS (SUPPLEMENTAL DATA FOR A SHARE OUTSTANDING) FOR THE YEARS ENDED JUNE 30, 2002 2001, AND 2000 2002 2001 2000 NET ASSET VALUE, beginning of period $13.16 $11.32 $11.35 ---------------------------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (.06) (.03) .03 Net gain (loss) on securities both realized and unrealized (1.19) 1.87 1.07 ---------------------------- Total from investment operations (1.25) 1.84 1.10 ---------------------------- DISTRIBUTIONS Dividends - - (1.13) ---------------------------- NET ASSET VALUE, end of period $11.91 $13.16 $11.32 ============================ NET ASSETS, end of period $1,995,698 $1,515,723 $1,087,653 ============================ Actual Actual Actual RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.8% 2.0% 2.0% RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (0.3%) (0.3%) 0.3% PORTFOLIO TURNOVER RATE 25.1% 25.6% 47.3% The accompanying notes are an integral part of these statements. WESTERN NEW YORK SERIES (A Series Within Bullfinch Fund, Inc.) FINANCIAL STATEMENTS AS OF JUNE 30, 2002 TOGETHER WITH INDEPENDENT AUDITORS' REPORT BONN, SHORTSLEEVE & GRAY, LLP Certified Public Accountants 300 Linden Oaks Office Park Rochester, NY 14625 Tel 585-381-9660 Fax 585-248-0603 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 the of the Western New York Series (a series within Bullfinch Fund, Inc.), including the schedules of investments in securities, as of June 30, 2002 and 2001, and the related statements of operations, changes in net assets and the financial highlights for the years ended. 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. The financial statements and financial highlights of the Bullfinch Fund, Inc. as of June 30, 1999, were audited by other auditors whose report dated August 4, 2000, expressed an unqualified opinion on those statements. We conducted our audits 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 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 June 30, 2002 and 2001 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 Western New York Series (a series within the Bullfinch Fund, Inc.) as of June 30, 2002 and 2001, and the results of its operations, the change in its net assets and the financial highlights for the years ended in conformity with generally accepted accounting principles. BONN, SHORTSLEEVE & GRAY, LLP Rochester, New York August 15, 2002 . WESTERN NEW YORK SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2002 ASSETS Investments in securities, at fair value, identified cost $ 321,346 $ 300,210 Cash 44,068 Accrued interest and dividends 491 Prepaid expenses 551 Due from investment adviser 241 Organization expenses, net of accumulated amortization of $3,321 17 ---------- Total assets 345,578 ========== LIABILITIES Accounts payable 3,492 NET ASSETS Net assets (equivalent to $9.19 per share based on 37,239.478 shares of stock outstanding) $ 342,086 ========== COMPOSITION OF NET ASSETS Shares of common stock $ 364,694 Accumulated net investment loss (1,472) Net unrealized (depreciation) on investments (21,136) ----------- Net assets at June 30, 2002 $ 342,086 =========== The accompanying notes are an integral part of these statements. WESTERN NEW YORK SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) SCHEDULE OF INVESTMENTS IN SECURITIES JUNE 30, 2002 Historical Common Stocks - 100% Shares Cost Value Railroads - 11.3% Genessee & Wyoming, Inc. 1,500 8,519 33,840 Electronic Components - 7.4% Astronics Corporation 1,205 10,487 9,640 Astronics Corp., Class A 226 0 1,808 Ultralife Batteries, Inc. 3,100 12,421 10,847 -------- -------- 22,908 22,295 Leisure & Recreational - 7.0% Mattel, Inc. 1,000 14,245 21,080 Aerospace and Defense - 6.3% Moog, Inc. (A) 150 2,930 6,432 Northrop Grumman Corp. 100 2,536 12,500 -------- -------- 5,466 18,932 Commercial Services - 5.8% Paychex, Inc. 225 4,413 7,040 Harris Interactive, Inc. 3,100 10,633 10,447 -------- -------- 15,046 17,487 Real Estate and Related - 5.4% Sovran Self Storage 250 6,892 8,543 Home Properties of NY 200 5,623 7,588 -------- -------- 12,515 16,131 Computer Hardware - 4.8% Dell Computer Corp. 350 10,734 9,149 Performance Technologies, Inc. 800 8,632 5,304 -------- -------- 19,366 14,453 Food & Beverages - 4.3% Constellation Brands, Inc. 400 5,018 12,800 Photographic Materials - 3.9% Eastman Kodak 400 11,746 11,668 Natural Gas - 3.7% National Fuel Gas 500 11,250 11,255 Steel - 3.7% Gibraltar Steel Corporation 500 8,975 11,095 Telecommunications Equipment - 3.7% Corning, Inc. 3,100 28,213 11,005 Auto Parts - 3.5% Delphi Corporation 800 10,262 10,560 Airlines - 3.2% Southwest Airlines Co. 600 11,658 9,696 Computer Software - 3.1% Oracle 900 12,070 8,523 Veramark Tech, Inc. 1,500 9,782 795 -------- -------- 21,852 9,318 Metal Fabrication and Hardware - 3.1% Graham Corp. 1,000 8,828 9,200 Tobacco Products - 2.9% Phillip Morris, Inc. 200 4,892 8,736 Computer Distributors - 2.7% Ingram Micro, Inc. 600 10,909 8,250 Semiconductor - 2.6% Motorola, Inc. 550 11,544 7,931 Chemical - 2.6% CPAC, Inc. 1,200 7,236 7,776 Telecommunications Services - 2.3% AT&T Corporation 250 6,430 2,675 AT&T Wireless 80 1,850 468 Choice One Communications 4,000 8,840 3,560 Worldcom, Group 850 8,900 204 -------- -------- 26,020 6,907 Furniture - 2.0% Bush Industries, Inc. 500 9,473 6,000 Industrial Services - 1.9% American Locker Group, Inc. 400 2,544 5,600 Office Equipment - 1.0% Xerox Corporation 450 12,059 3,137 Industrial Materials - 0.9% Servotronics, Inc. 600 5,624 2,640 Computer Services - 0.5% Computer Task Group, Inc. 300 7,064 1,491 Machinery - 0.3% Columbus McKinnon Corp. 100 2,344 864 Broadcasting - 0.0% Adelphia Communications Corp 400 5,770 64 -------- -------- TOTAL COMMON STOCK $ 321,346 $ 300,210 ======== ======== WESTERN NEW YORK SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2002, 2001, AND 2000 2002 2001 2000 INVESTMENT INCOME: Dividends $ 4,698 $ 4,814 $ 4,848 EXPENSES: Management Fees 4,020 3,364 2,980 Reimbursement of Management Fees (1,741) (2,123) (5,306) Legal and Professional 1,290 1,062 4,000 Directors' Fee 850 800 600 Amortization 666 778 778 Fidelity Bond 216 490 490 Taxes 350 150 472 Registration Fees 200 369 462 Bank Service Charges 405 475 340 Dues and Subscriptions 250 31 96 ------------------------------ Total expenses 6,506 5,396 4,912 ------------------------------ Net investment income (loss) (1,808) (582) (64) ------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain (loss) from securities transactions (1,242) (160) (359) Unrealized appreciation (depreciation) during the period (32,377) 10,535 15,314 ------------------------------ Net gain (loss) on investments (33,619) 10,375 14,955 ------------------------------ INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(35,427) $ 9,793 $14,891 ============================== The accompanying notes are an integral part of these statements. WESTERN NEW YORK SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2002, 2001, AND 2000 2002 2001 2000 DECREASE IN NET ASSETS FROM OPERATIONS: Net investment income (loss) $ (1,808) $ (582) $ (64) Net realized (loss) from securities transactions (1,242) (160) (359) Net change in unrealized appreciation (depreciation) of investments (32,377) 10,535 15,314 ------------------------------- Increase (decrease) in net assets from operations (35,427) 9,793 14,891 CAPITAL SHARE TRANSACTIONS : Sales (7,943.301; 3,596.766; and 225.479 shares) 81,125 34,500 2,000 Redemptions (242.034; 0; and 470.420 shares) (2,503) - (4,497) ------------------------------- Total capital share transactions 78,622 34,500 (2,497) ------------------------------- Increase in net assets 43,195 44,293 12,394 NET ASSETS: Beginning of period 298,891 254,598 242,204 ------------------------------- End of period $342,086 $298,891 $254,598 =============================== The accompanying notes are an integral part of these statements. WESTERN NEW YORK SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 (1) The Organization The Western New York Series (the "Series") is a series of the Bullfinch Fund, Inc. (the "Fund") which was organized as a Maryland corporation registered under the Investment Company Act of 1940 as an open-ended non-diversified management investment company. The investment objective of the Series is to seek capital appreciation through the investment in common stock of companies with an important economic presence in the Greater Western New York Region. The Adviser of seeks to achieve this objective by using an asset mix consisting primarily exchange listed securities and over-the-counter common stocks as well as U.S. Government securities maturing within five years. (2) Summary of Significant Accounting Policies Cash - Cash consists of amounts deposited in money market accounts and is not federally insured. The Series has not experienced any losses on such amounts and believes it is not exposed to any significant credit risk on cash. Security Valuation - The Series records its investments at fair value. Securities traded on national securities exchanges or the NASDAQ National Market System are valued daily at the closing prices of the securities on those 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 - It is the policy of the Fund to comply with the requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute all of its taxable income to its share- holders. In addition, the Fund intends to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code. Therefore, no provision for federal income taxes or excise taxes has been made. Organization Expenses - Organization expenses are being amortized over a 60-month period. Other - The Series 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. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (3) Investments For the year ended June 30, 2002, the Series purchased $134,659 of common stock. During the same period, the Series sold $90,260 of common stock. For the year ended June 30, 2001, the Series purchased $51,980 of common stock. During the same period, the Series sold $23,513 of common stock. For the year ended June 30, 2000, the Series purchased $122,072 of common stock. During the same period, the Series sold $56,388 of common stock. At June 30, 2002, the gross unrealized appreciation for all securities totaled $71,689 and the gross unrealized depreciation for all securities totaled $92,825, or a net unrealized depreciation of $21,136. The aggre- gate cost of securities for federal income tax purposes at June 30, 2002 was $321,346. At June 30, 2001, the gross unrealized appreciation for all securities totaled $74,731 and the gross unrealized depreciation for all securities totaled $64,306, or a net unrealized appreciation of $10,425. The aggre- gate cost of securities for federal income tax purposes at June 30, 2001 was $280,038. At June 30, 2000, the gross unrealized appreciation for all securities totaled $32,853 and the gross unrealized depreciation for all securities totaled $32,964, or a net unrealized depreciation of $111. The aggre- gate cost of securities for federal income tax purposes at June 30, 2000 was $251,757. (4) Investment Advisory Agreement Carosa, Stanton & DePaolo Asset Management, LLC 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 & DePaolo Asset Management, LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940. The Investment advisory agreement provides that Carosa, Stanton & DePaolo Asset Management, LLC, subject to the supervision and approval of the Fund's board of directors, is responsible for the day-to-day management of the Fund's portfolio which includes selecting 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 & DePaolo Asset Management, LLC has agreed to forego sufficient investment advisory fees to limit total expenses of the Fund to 2% of the first $10 million in average assets and 1.5% of the next $20 million in average assets. (5) Capital Share Transactions 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. Transactions in capital stock of the Series were as follows: Shares Amount Balance at 7/1/99 26,186.386 $ 254,577 ---------- --------- Shares sold during 2000 225.479 2,000 Shares redeemed during 2000 (470.420) (5,005) ---------- --------- Balance at 7/1/00 25,941.445 251,572 ---------- --------- Shares sold during 2001 3,596.766 34,500 Shares redeemed during 2001 - - ---------- --------- Balance at 7/1/01 29,538.211 286,072 ---------- --------- Shares sold during 2002 7,943.301 81,125 Shares redeemed during 2002 (242.034) (2,503) ---------- --------- Balance at 7/1/02 37,239.478 $ 364,694 ========== ========= WESTERN NEW YORK SERIES (A SERIES WITHIN BULLFINCH FUND, INC.) FINANCIAL HIGHLIGHTS (SUPPLEMENTAL DATA FOR A SHARE OUTSTANDING) FOR THE YEARS ENDED JUNE 30, 2002, 2001, AND 2000 2002 2001 2000 NET ASSET VALUE, beginning of period $10.12 $ 9.81 $ 9.25 ------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS Net investment income (loss) (0.34) - - Net gain (loss) on securities both realized and unrealized (0.59) 0.31 0.56 ------------------------------ Total from investment operations (0.93) 0.31 0.56 ------------------------------ NET ASSET VALUE, end of period $ 9.19 $10.12 $ 9.81 ============================== NET ASSETS, end of period $ 342,086 $ 298,891 $ 254,598 ============================== Actual Actual Actual RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.0% 2.0% 2.0% RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (1.4%) (0.1%) (0.0%) PORTFOLIO TURNOVER RATE 28.0% 8.7% 23.5% The accompanying notes are an integral part of these statements. FORM N-1A PART C - OTHER INFORMATION Contents Page # Item 23. Financial Statements & Exhibits 1 Item 24. Persons Controlled by or Under Common Control 9 Item 25. Indemnification 9 Item 26. Business and Other Connections of Investment Adviser 9 Item 27. Principal Underwriters 9 Item 28. Location of Accounts & Records 9 Item 29. Management Services 10 Item 30. Undertakings 10 Signatures 11 Exhibits 12 -i- Item 23. Financial Statements and Exhibits (a) (1) Articles of Incorporation - Articles of Incorporation as filed with the State of Maryland on January 29, 1997 (incorporated by reference to Bullfinch Fund, Inc.; 333-26321; 811-08191; Form N-1A filed on June 29, 1998 with Accession Number 0001038199-98-000004). (2) Articles of Amendment - none (b) By-laws - (incorporated by reference to Bullfinch Fund, Inc.; 333-26321; 811-08191; Form N-1A filed on June 29, 1998 with Accession Number 0001038199-98-000004). (c) Instruments Defining Rights of Security Holders - None (d) Investment Advisory Contracts - (incorporated by reference to Bullfinch Fund, Inc.; 333-26321; 811-08191; Form N-1A filed on June 29, 1998 with Accession Number 0001038199-98-000004). (e) Underwriting Contracts - None (f) Bonus or Profit Sharing Contracts - None (g) Custodian Contracts - (incorporated by reference to Bullfinch Fund, Inc.; 333-26321; 811-08191; Form N-1A filed on June 29, 1998 with Accession Number 0001038199-98-000004). (h) Other Material Contracts - None (i) Legal Opinion - (incorporated by reference to Bullfinch Fund, Inc.; 333-26321; 811-08191; Form N-1A filed on June 29, 1998 with Accession Number 0001038199-98-000004). (j) Other Opinions (k) Omitted Financial Statements - None (l) Initial Capital Agreements - None (m) Rule 12b-1 Plan - None (n) Rule 18f-3 Plan - None (o) Code of Ethics - Adopted by Board resolution on April 17, 1999: Bullfinch Fund, Inc. Code of Ethics Every employee is responsible for protecting the firm's reputation. The following guidance is provided for the conduct of your personal and professional activities. Prohibition Against Legal Violations (Investment Advisers Act of 1940, Section 206 and Section 208) (AIMR, Standards of Professional Conduct, Standard II and III.) An employee shall no engage, assist, or participate in any violation of the law (including rules and regulations) governing his or her personal and profession- al activities. If an employee is aware of an illegal act, every employee has an affirmative duty to report their knowledge to the firm's Supervisor (Christopher Carosa, President) and appropriate law enforcement body. An employee will not misrepresent (1) the firm's services; (2) an individual's qualifications; (3) the firm's investment performance; or, (4) the expected outcome of any transaction. An employee will not make any statement which can be construed as a guarantee. An employee will disclose a referral arrangement to prospects when appropriate. An employee will not accept gifts from a client, prospect, supplier or another employee without the consent of the Supervisor. Likewise, gifts may not be given to clients, prospects, suppliers or another employee without the prior knowledge and consent of the Supervisor. Prohibition Against Use of Confidential or Material Nonpublic Information (Investment Advisers Act of 1940, Section 204A) (AIMR, Standards of Professional Conduct, Standard II.) An employee shall not disseminate confidential or material nonpublic informa- tion. Confidential information is that concerning the firm (and its employees), clients (former, present and prospective), and suppliers which is or could be considered proprietary or personal and which, if disclosed, could be damaging to the firm, individual or supplier. Material nonpublic information, a.k.a., "material inside information," is in- formation about a company or its securities which is not public and which, if disclosed, would (probably) impact the market value of the company's securities. An employee has an affirmative obligation to not use or disclose confidential or material nonpublic information. Use and/or communication of material nonpub- lic information may result in civil and criminal liability. An investment pro- fessional's responsibilities are outlined in the Association for Investment Management and Research's Standards of Practice Handbook. A Supervisor's Responsibilities (Investment Advisers Act of 1940, Section 203(e)(5) and (e)(7)(C)) (AIMR, Standards of Professional Conduct, Standard II.) A supervisor shall follow established procedures and systems in order to pre- vent and detect any legal or ethical violations on the part of a subordinate. Conflicts of Interest (AIMR, Standards of Professional Conduct, Standards III, IV, V, VI and VII.) An employee may not engage in any outside business activity without the ex- plicit permission of the Supervisor. An employee has a duty of loyalty to the firm and his or her efforts should be devoted to the firm's business. This does not preclude civic, charitable and religious activities so long as those activities do not interfere with your responsibilities as an employee, reflect adversely on the firm or create a conflict of interest. Investments (CFR 275.204-2(12)-(13)) (AIMR, Standards of Professional Conduct, Standards IV and V.) An employee shall not make an investment in a security owned on behalf of the firm's clients, a public company which employs the firm to manage its assets or those of an employee benefit plan, or a security of a supplier to the firm without the express approval of the Supervisor. This prohibition extends to members of the employee's immediate family. An employee will disclose any potential conflicts or actual conflicts of in- terest that arise, particularly those which might impair an employee's object- ivity. Examples include (1) the firm recommends securities owned by an em- ployee, (2) an employee's spouse is an employee of a public firm and owns shares in the company, (3) an employee is offered an opportunity to participate in a "hot" initial public offering because they're employed by the firm. All employees must report, within 10 days after the end of each quarter, all personal security transactions (including those of their immediate family). An Investment Professional's Responsibilities (AIMR, Standards of Professional Conduct) All members of the Association for Investment Management and Research must sign and return the Annual Conduct Questionnaire. If an item is disclosed to AIMR, it should also be disclosed in writing to the firm's Supervisor. Item 24. Persons Controlled by or Under Common Control - See Major Shareholders Part B. Item 25. Indemnification - Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being regist- ered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be gov- erned by the final adjudication of such issue. Item 26. Business and Other Connections of Investment Adviser - the activity of Carosa, Stanton & DePaolo Asset Management, LLC at the present time is performance under the terms of the Investment Management Agreement currently effective between Carosa, Stanton & DePaolo Asset Management, LLC and the BULLFINCH FUND, Inc. Mr. Christopher Carosa, Mr. Gordon R. Stanton, and Mr. Bradford L. McAdam are the sole mem- bers of the Investment Adviser. Mr. Carosa is also Executive Direct- or of CTO Research Associates, a research and consulting firm. Mr. Stanton is also a sales rep with Brown Harris Stevens Residential. Item 27. Principal Underwriters - the Fund acts as its own underwriter. Item 28. Location of Accounts & Records - all Fund records, including all accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the Rules promulgated thereunder, are held in corporate headquarters - 1370 Pittsford Mendon Road Mendon, New York 14472. All assets and securities of the Series are in account at Charles Schwab & Co. Inc, The Schwab Building, 101 Montgomery Building, San Francisco, CA 94104. Item 29. Management Services - Not applicable Item 30. Undertakings - Not applicable BONN, SHORTSLEEVE & GRAY, LLP Certified Public Accountants 300 Linden Oaks Office Park Rochester, NY 14625 716-381-9660 Fax 716-248-0603 CONSENT OF INDEPENDENT AUDITOR We consent to the use of our reports, dated August 15, 2002, on the annual financial statements of the Unrestricted Series (a series within Bullfinch Fund, Inc.),and the Western New York Series (a series within Bullfinch Fund, Inc.), which are included in the Registration Statement under the Securities Act of 1933. We also consent to the reference to our firm in such Registration Statement. BONN, SHORTSLEEVE & GRAY, LLP Rochester, New York August 15, 2002 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the BULLFINCH FUND, Inc. certifies that it meets all of the requirements for effectiveness of this registration statement under rule 485(b) under the Securities Act and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Mendon and State of New York, on the 30th day of August 2002. BULLFINCH FUND, INC. /s/ Christopher Carosa, President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following person in the capacities and on the date indicated. /s/ Christopher Carosa President, Treasurer and Director 10-30-02 /s/ Gordon R. Stanton Vice President and Director 10-30-02 /s/ Jan Dombrowski Director 10-30-02 /s/ William E. J. Martin Director 10-30-02 /s/ Thomas Midney Director 10-30-02 /s/ Michael J. Morris Director 10-30-02 /s/ Michael W. Reynolds Director 10-30-02 /s/ Betsy K. Carosa Secretary 10-30-02 -11-