GUINNESS FLIGHT INVESTMENT FUNDS, 485APOS, 1997-08-20

GUINNESS FLIGHT INVESTMENT FUNDS
485APOS, 1997-08-20

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Reg. ICA No. 811-8360
File No. 33-75340

AS FILED VIA EDGAR WITH THE SECURITIES AND EXCHANGE COMMISSION ON
AUGUST 20, 1997

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 9 [x]

and

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [x]

Amendment No. 9

GUINNESS FLIGHT INVESTMENT FUNDS
(Exact Name of Registrant as Specified in Charter)

225 South Lake Avenue, Suite 777
Pasadena, California 91101
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code: (818) 795-0039

Susan Penry-Williams, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
(Name and Address of Agent for Service)

Copy to:

Mr. James Atkinson
Guinness Flight Investment Funds
225 South Lake Avenue, Suite 777
Pasadena, California 91101

It is proposed that this filing will become effective:

[_] Immediately upon filing pursuant to [_] on ( ) pursuant
paragraph (b) to paragraph (b)
[_] 60 days after filing pursuant to [_] on ( ) pursuant to
paragraph (a)(1) paragraph (a)(1)
[_] 75 days after filing pursuant to [X] on November 3, 1997 pursuant
paragraph (a)(2) to paragraph (a)(2), of rule
485.
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has registered an indefinite number of Shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940 and
its Rule 24f-2 Notice for its December 31, 1996 fiscal year end was filed on
February 28, 1997.

<PAGE>

CROSS-REFERENCE SHEET

(Pursuant to Rule 404 showing location in each form of
Prospectus of the responses to the Items in Part A and location in each form of
Prospectus and the Statement of Additional Information of the responses to the
Items in Part B of Form N-1A).

GUINNESS FLIGHT MAINLAND CHINA FUND

Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
------ ------------------ -------------------

1 Front Cover Page *

2(a) Summary of Fund Expenses *

(b) Summary *

3(a) Financial Highlights *

(b) Not Applicable *

(d) Financial Highlights *

4(a) About the Fund; Investment *
Objectives, Programs and
Limitations

5(a) The Fund's Management *

(b) The Fund's Management - *
Investment Adviser; Fees and
Expenses

(d) The Fund's Management - The *
Administrator, Distributor

(e) How to Purchase Shares; How *
to Redeem Shares; Dividends,
Distributions and Tax Matters

(f) The Fund's Management - Fees *
and Expenses, Administrator

(g) Not Applicable *

6(a) About the Funds *

(b) Not Applicable *

<PAGE>

(d) Not Applicable *

(e) Cover Page; General *
Information

(f) Dividends, Distributions and *
Tax Matters - Dividends and
Distributions

(g) Dividends, Distributions and Tax Matters - Dividends
Tax Matters - Tax Matters and Distributions

(a) How to Purchase Shares *

(b) How to Purchase Shares; *
Determination of Net Asset
Value

(d) How to Purchase Shares - *
Opening an Account,
Additional Investments

(e) Not Applicable *

(f) The Funds' Management -
Distribution Plan

8(a) How to Redeem Shares *

(b) How to Redeem Shares *

(d) Not Applicable *

9 Not Applicable *

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<PAGE>

GUINNESS FLIGHT MAINLAND CHINA FUND

Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
------ ------------------ -------------------

10 * Front Cover Page

11 * Front Cover Page

12 * Not Applicable

13 Investment Objective, Programs Investment Objective and Policies;
and Limitations Investment Strategies and Risks;
Investment Restrictions and Policies

14 * Management of the Fund

15(a) * Not Applicable

(b) * Shareholder Reports

16(a) The Fund's Management - The Investment Adviser and
Investment Adviser Advisory Agreements

(b) The Fund's Management The Investment Adviser and
Advisory Agreements

(d) The Fund's Management - Distribution Agreement and
Administrator Distribution Plan

(e) * Not Applicable

(f) The Fund's Management - Distribution Agreement and
Distribution Plan Distribution Plan

(g) * Not Applicable

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<PAGE>

Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
------ ------------------ -------------------

(h) General Information - Transfer *
Agent, Custodian, Independent
Accountants

(i) * Not Applicable

17 Investment Objectives, Programs Portfolio Transactions
and Limitations

18 Description of the Fund

19(a) How to Purchase Shares; *
How to Redeem Shares

(b) Determination of Net Asset Value Computation of Net Asset Value

20 Dividends, Distributions and Tax Matters
Tax Matters

21(a) * Distribution Agreement and
Distribution Plan

(b) * Distribution Agreement and
Distribution Plan

22 * Performance Information

23 * *

Part C

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.

<PAGE>

GUINNESS FLIGHT
PROSPECTUS __________, 1997

MAINLAND CHINA FUND

Please read this prospectus before investing. It is designed to provide you with
information and to help you decide if the goals of the Guinness Flight Mainland
China Fund match your own. It should be retained for future reference. A
Statement of Additional Information, dated ____________, 1997 has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The Statement of Additional Information is available without charge
upon request by calling Guinness Flight Investment Funds at 1-800-915-6565.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

Summary..................................................................
Summary of The Fund's Expenses...........................................
Investment Objectives, Programs and Limitations..........................
Investment Strategies, Policies and Risks................................
Risk Considerations......................................................
Performance..............................................................
The Fund's Management....................................................
How to Purchase Shares...................................................
How to Redeem Shares.....................................................
Shareholder Services.....................................................
Determination of Net Asset Value.........................................
Dividends, Distributions and Tax Matters.................................
About the Fund...........................................................
General Information......................................................

<PAGE>

GUINNESS FLIGHT MAINLAND CHINA FUND

(The "Mainland China Fund's") investment objective is long-term capital
appreciation through investments in equity securities of companies which are
established in China and in companies established outside China which have a
significant part of their interests in China. In pursuit of its investment
objective, the Fund as a non-fundamental policy intends to invest 65% to 100% of
its total assets in a portfolio of equity securities of companies which have "B"
shares listed in Shanghai or Shenzhen, "H" shares and "Red Chips" listed in Hong
Kong, and "N" shares listed in New York (collectively, "Mainland China
Companies"). The Fund does not intend to make equity investments in companies
other than Mainland China Companies. See "Investment Objectives, Programs and
Limitations," for a more detailed discussion.

SUMMARY

THE FUND. Guinness Flight Investment Funds (the "Guinness Flight Funds") is a
Delaware business trust organized as an open-end, series, management investment
company. Currently, the Guinness Flight Funds offers five separate series
portfolios: Guinness Flight Asia Blue Chip Fund, Guinness Flight Asia Small Cap
Fund, Guinness Flight China & Hong Kong Fund, Guinness Flight Global Government
Bond Fund and Guinness Flight Mainland China Fund, each of which pursues unique
investment strategies. For purposes of this prospectus, references to the "Fund"
are to the Mainland China Fund.

RISK CONSIDERATIONS. An investor should be aware that there are risks associated
with certain investment techniques and strategies employed by the Fund,
including those relating to investments in foreign securities. Such risks
include, among others, currency fluctuations, expropriation, confiscation,
diplomatic developments, and social instability. The Fund's net asset value per
share can be expected to fluctuate. Accordingly, investors should consider an
investment in the Fund as a supplement to an overall investment program and
should invest only if they are willing to undertake the risks involved. See
"Investment Strategies, Policies and Risks" and "Other Risk Considerations."

THE INVESTMENT ADVISER. Guinness Flight Investment Management Limited ("Guinness
Flight") serves as the Fund's investment adviser pursuant to an investment
advisory agreement (the "Advisory Agreement"). Under the terms of the Advisory
Agreement, Guinness Flight supervises all aspects of the Fund's operations and
provides investment advisory services to the Fund. As compensation for these
services, Guinness Flight receives a fee based on the Fund's average daily net
assets. See "The Fund's Management."

PURCHASING SHARES. Shares of the Fund are offered by this prospectus at net
asset value. Through November 30, 1997, shares of the Fund will be offered
exclusively to shareholders of the existing Guinness Flight Funds who owned such
shares as of November 3, 1997. Beginning December 1, 1997, the Fund will offer
its shares to the general public. Shares of the Fund will cease being offered on
or after December 1, 1997 to new investors when the net asset value of the Fund
exceeds $50 million. Existing Mainland China Fund investors, however, may
continue to purchase shares of the Fund on or after such date. The minimum
investment in the Fund is as follows:

MINIMUM
TYPE OF ACCOUNT INVESTMENT

Regular-new investor $2,500
Regular-shareholder purchasing another Guinness Flight Fund $1,000
Retirement $1,000
Gift $ 250
Pre-authorized investment plan (Initial and monthly investments) $ 100
Additional investment $ 250

The Fund may reduce or waive the minimum investment under certain conditions.
See "How to Purchase Shares."

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<PAGE>

EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of any other
Guinness Flight Fund, or for shares of the SSgA Money Market Fund, in the manner
and subject to the policies set forth herein. See "Shareholder Services --
Exchange Privilege."

REDEEMING SHARES. Shareholders may redeem all or a portion of their shares at
net asset value. A redemption fee of 1.00% will be charged to any shareholder of
the Fund who redeems shares purchased less than 30 days prior to redemption. See
"How to Redeem Shares" and "Redemption Fee."

DISTRIBUTIONS. The Fund declares and pays dividends from net investment income,
if any, on a semi-annual basis. In addition, the Fund makes distributions of
realized capital gains, if any, on a semi-annual basis. Dividends and
distributions of the Fund may be paid directly to you by check, or reinvested in
additional shares of the Fund, including, subject to certain conditions, in
shares of a Guinness Flight Fund other than the Fund making the distribution.
See "Dividends, Distributions and Tax Matters."

SUMMARY OF THE FUNDS' EXPENSES

A. SHAREHOLDER TRANSACTION EXPENSES

Sales Charge Imposed on Purchases none
Sales Charge Imposed on Reinvested Dividends none
Deferred Sales Charge Imposed on Redemptions none
Redemption Fee on shares held 30 days or less
(as a % of redemption amount) +
Exchange Fee none

+ A 1.00% redemption fee applies to investors who redeem shares
purchased less than 30 days prior to redemption. Exchanges
into other Guinness Flight Funds or the SSgA Money Market Fund
are considered redemptions for purposes of the redemption fee.
See "How to Redeem Shares -- Redemption Fee."

B. ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net
assets)

Advisory Fee 1.00%
Rule 12b-1 Fee .00%
Other Expenses .85%
Total Fund Operating Expenses 1.85%++
++ Guinness Flight has voluntarily undertaken to waive and/or
reimburse expenses during the current fiscal year so that
Total Fund Operating Expenses do not exceed 1.98%. The Fund
will notify its shareholders in writing at least 30 days prior
to any adjustments to the cap on its Total Fund Operating
Expenses.

C. EXAMPLE: YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT IN
A FUND, ASSUMING (1) A 5% ANNUAL RETURN AND (2) FULL REDEMPTION AT THE
END OF EACH TIME PERIOD:

One Year Three Year Five Year Ten Year

$19 $58 $100 $217

EXPLANATION OF TABLE: The purpose of the table is to assist you in understanding
the various costs and expenses that an investor in the Fund would bear directly
or indirectly. See "The Fund's Management" for a more complete discussion of the
annual operating expenses of the Fund. The foregoing example is based upon
estimated expenses for the current fiscal year.

A. SHAREHOLDER TRANSACTION EXPENSES represent charges paid when you purchase,
redeem or exchange shares of the Fund. See "How to Purchase Shares," "How to
Redeem Shares" and "Redemption Fee."

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<PAGE>

B. ANNUAL FUND OPERATING EXPENSES are based on the Fund's estimated operating
expenses for the current fiscal year. The Fund incurs "other expenses" for
maintaining shareholder records, furnishing shareholder statements and reports,
and other services. Guinness Flight or the Fund's administrator may, from time
to time, voluntarily agree to defer or waive fees or absorb some or all of the
expenses of the Fund. To the extent that they should do so, either may seek
repayment of such deferred fees or absorbed expenses after this practice is
discontinued. However, no repayment will be made if the expense ratio of the
Fund would exceed 1.98%. See "The Fund's Management."

C. EXAMPLE OF EXPENSES. The hypothetical example illustrates the expenses
associated with a $1,000 investment in the Fund over periods of one, three, five
and ten years based on the estimated expenses in the above table and an assumed
annual rate of return of 5%. THE 5% RETURN AND EXPENSES SHOULD NOT BE CONSIDERED
INDICATIONS OF ACTUAL OR EXPECTED FUND PERFORMANCE OR EXPENSES, BOTH OF WHICH
MAY VARY.

INVESTMENT OBJECTIVES, PROGRAMS AND LIMITATIONS

The Fund's investment objective is long-term capital appreciation through
investments in equity securities of companies which are established in China and
in companies established outside China which have a significant part of their
interests in China. In pursuit of its investment objective, the Fund as a
non-fundamental policy intends to invest 65% to 100% of its total assets in a
portfolio of equity securities of companies which have "B" shares listed in
Shanghai or Shenzhen, "H" shares and "Red Chips" listed in Hong Kong, and "N"
shares listed in New York (collectively, "Mainland China Companies"). The Fund
does not intend to make equity investments in companies other than Mainland
China Companies.

"B" shares listed in Shanghai or Shenzhen are shares in Chinese companies issued
in China under Chinese laws. Shares that trade on the Shanghai Stock Exchange
are denominated in U.S. dollars, while shares are traded in H.K. dollars on the
Shenzhen Stock Exchange. "H" shares listed in Hong Kong are shares in Chinese
companies issued in China under Chinese law. They are subject to its stringent
listing and disclosure requirements. The shares are denominated in H.K. dollars
and trade like any other shares listed on the Hong Kong Exchange. "N" shares are
similar to H shares, but listed on the New York Stock Exchange, rather than the
Hong Kong Stock Exchange. Red Chips are Hong Kong listed companies that are
controlled by Chinese corporations. Through a process known as "back-door
listing" a Chinese firm acquires a Hong Kong corporation and subsequently
invests in it. In this way, a Chinese company can get a foreign listing (and
access to foreign exchange) without going through the bureacratic, drawn-out
official process necessary inside China. Red Chips have a varying mix of
mainland and Hong Kong assets and revenue.

Equity securities, for purposes of the 65% policy, will be limited to common and
preferred stocks; convertible preferred stocks; and convertible investment grade
instruments. In addition, the Fund may invest up to 5% of its net assets in
options on equity securities and up to 5% of its net assets in warrants,
including options and warrants traded in over-the-counter markets.

Notwithstanding the above information, the Fund reserves the right to invest up
to 100% of its assets in cash, cash equivalents, or high quality short-term
money market instruments for temporary defensive purposes during periods that
Guinness Flight considers to be unsuitable for the Fund's normal investment
strategy. The Fund may also purchase and sell stock index futures to hedge
against equity markets on a temporary basis.

INVESTMENT STRATEGIES, POLICIES AND RISKS

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may purchase or sell
forward foreign currency exchange contracts ("forward contracts") as part of its
portfolio investment strategy. A forward contract is an obligation to purchase
or sell a specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and their
customers. The Fund may enter into a forward contract, for example, for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security ("transaction hedge").

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<PAGE>

Additionally, when the Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward sale
contract by selling an amount of that foreign currency and approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. If the Fund believes that the U.S. dollar may suffer a
substantial decline against the foreign currency, it may enter into a forward
purchase contract to buy that foreign currency for a fixed dollar amount
("position hedge"). In this situation, the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio securities
of the Fund are denominated ("cross-hedge"). Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such contracts. Forward contracts may be considered to be
"derivative securities" which are described further in the "Investment
Strategies and Risks" section of the Statement of Additional Information.

FORWARD COMMITMENTS. The Fund may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors, such as the Fund, on that basis. Forward commitments involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. Although the Fund will enter into such contracts with the
intention of acquiring the securities, the Fund may dispose of a commitment
prior to a settlement date if Guinness Flight deems it appropriate to do so. The
Fund may realize short-term profits or losses upon the sale of forward
commitments. Forward contracts may be considered to be "derivative securities,"
which are described further in the "Investment Strategies and Risks" section of
the Statement of Additional Information.

COVERED CALL OPTIONS. Call options may also be used to anticipate a price
increase of a security on a more limited basis than would be possible if the
security itself were purchased. The Fund may write only covered call options.
Since it can be expected that a call option will be exercised if the market
value of the underlying security increases to a level greater than the exercise
price, this strategy will generally be used when Guinness Flight believes that
the call premium received by the Fund plus anticipated appreciation in the price
of the underlying security up to the exercise price of the call, will be greater
than the appreciation in the price of the security.

By writing a call option, the Fund limits its opportunity to profit from any
increase in the market value of the underlying security above the exercise price
of the option. The Fund will not write any put options. Covered call options may
be considered to be "derivative securities" which are described further in the
"Investment Strategies and Risks" section of the Statement of Additional
Information.

PURCHASE AND SALE OF OPTIONS AND FUTURES ON STOCK INDICES. The Fund may purchase
and sell options and futures on stock indices. If Guinness Flight expects
general stock market prices to rise, it might purchase a call option on a stock
index or a futures contract on that index as a hedge against an increase in
prices of particular equity securities they ultimately want to buy. If in fact
the stock index does rise, the prices of the particular equity securities
intended to be purchased may also increase, but that increase would be offset in
part by the increase in the value of the Fund's index option or futures contract
resulting from the increase in the index.

If, on the other hand, Guinness Flight expects general stock market prices to
decline, it might purchase a put option or sell a futures contract on the index.
If that index does in fact decline, the value of some or all of the equity
securities in the Fund's portfolio may also be expected to decline, but that
decrease would be offset in part by the increase in the value of the Fund's
position in such put option or futures contract. Risks in the use of options and
futures on stock indices result from the possibility that changes in the stock
indices may differ substantially from the changes anticipated by the Fund when
the hedged positions were established. Options and futures on stock indices may
be considered to be "derivative securities" which are described further in the
"Investment Strategies and Risks" section of the Statement of Additional
Information.

ILLIQUID SECURITIES. The Fund will not invest more than 15% of its net assets in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.

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<PAGE>

RESTRICTED SECURITIES. The Fund may invest in securities that are subject to
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"). These securities are
sometimes referred to as private placements. Although securities which may be
resold only to "qualified institutional buyers" in accordance with the
provisions of Rule 144A under the 1933 Act are technically considered
"restricted securities," the Fund may purchase Rule 144A securities without
regard to the limitation on investments in illiquid securities described above
in the "Illiquid Securities" section, provided that a determination is made that
such securities have a readily available trading market. Guinness Flight will
determine the liquidity of Rule 144A securities under the supervision of the
Guinness Flight Funds' Board of Trustees. The liquidity of Rule 144A securities
will be monitored by Guinness Flight, and if as a result of changed conditions,
it is determined that a Rule 144A security is no longer liquid, the Fund's
holdings of illiquid securities will be reviewed to determine what, if any,
action is required to assure that the Fund does not exceed its applicable
percentage limitation for investments in illiquid securities.

PORTFOLIO TURNOVER. Any particular security will be sold, and the proceeds
reinvested, whenever such action is deemed prudent from the viewpoint of the
Fund's investment objective, regardless of the holding period of that security.
A higher rate of portfolio turnover may result in higher transaction costs,
including brokerage commissions. To the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to the Fund, the portion
of the Fund's distributions constituting taxable capital gains may increase. See
"Dividends, Distributions and Tax Matters." Guinness Flight anticipates that the
annual portfolio turnover rate will not exceed [100%] for the Fund.

For further discussion with regard to the Fund's investment strategies, policies
and risks, see "Investment Strategies and Risks" in the Fund's Statement of
Additional Information.

RISK CONSIDERATIONS

GENERAL POLITICAL RISKS. With respect to any foreign country, there is the
possibility of nationalization, expropriation or confiscatory taxation,
political changes, governmental regulations, social instability or diplomatic
developments (including war) which could affect adversely the economies of such
countries or the Funds' investments in those countries. In addition, it may be
difficult to obtain a judgment in a court outside of the United States.

CHINA POLITICAL RISKS. The Chinese economy previously operated as a Socialist
economic system, relying heavily upon government planning from 1949, the year in
which the Communists seized power, to 1978, the year Deng Xiaoping instituted
his first economic reforms.

Economic reforms in China are transforming its economy into a market system that
has stimulated significant economic growth. As a result of such reform, the
living standards of the 800 million rural workers have improved. Farm reform led
to the doubling of China's farmers' incomes over the 1980's. The next stage of
reform gave rise to small scale entrepreneurs and stimulated light and medium
industry. In addition, a cheap and abundant supply of labor has attracted
foreign investment in China. Special Economic Zones, five originally and over
thirty today, were set up, providing tax advantages to foreign investors.
Further, the Shenzhen and Shanghai Stock Exchanges have recently opened. Class
"A" and Class "B" shares are traded on both exchanges. While only resident
Chinese can purchase Class "A" shares, foreign investors (such as the Fund) can
purchase Class "B" shares. Over the period 1978 to 1995, China's gross domestic
product grew at approximately 10% per annum. By 1995, China had become one of
the world's major trading nations. The World Bank forecasts that China will have
the world's largest economy by 2003.

In 1984 China and Britain signed the Joint Declaration which allowed for the
termination of British rule in Hong Kong on June 30, 1997, but which maintains
the previously existing capitalist economic and social system of Hong Kong for
50 years beyond that date.

Article 5 of the Sino-British Declaration 26.9.84 provides:

The current social and economic systems in Hong Kong will remain
unchanged and so will the lifestyle. Rights and freedoms, including
those of the person, of speech, of the press, of assembly, of
association, of travel, of movement, of correspondence, of choice, of
occupation, of academic research and of religious

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<PAGE>

belief, will be ensured by law in the Hong Kong Special Administrative
Region. Private property, ownership of enterprises, legitimate right
of inheritance and foreign investment will be protected by law.

Obviously there are risks arising from Hong Kong's return to China under the
"one country two systems" proposal. However, Hong Kong and China are
interdependent; 70% of foreign investment in China is from Hong Kong and China
has large shareholdings in Hong Kong companies. Guinness Flight believes that
China is unlikely to damage the Hong Kong economy and destroy the value of their
investments. Today, Hong Kong's stock market is one of the largest in the world
and is highly liquid and extensively regulated.

Notwithstanding the beliefs of Guinness Flight, investors should realize that
there are significant risks to investing in China and Hong Kong. The risks
include:

(1) that the transition to a successor to Deng Xiaoping may result in
an open feud amongst China's leaders leading to political
instability;

(2) that hard line Marxist Leninists might regain the political
initiative;

(3) that social tensions caused by widely differing levels of
economic prosperity within Chinese society might create
unrest, as they did in the tragic events of 1989, culminating
in the Tiananmen Square incident; and

(4) that the threat of armed conflict exists over the unresolved
situation concerning Taiwan.

Investors should further realize that the central government of China is
Communist and, while a liberal attitude towards foreign investment and
capitalism prevails at present, a return to hard line communism and a reaction
against capitalism and the introduction of restrictions on foreign investment is
a possibility. There can be no assurance that the Chinese government will
continue to pursue its economic reform policies or, if it does, that those
policies will be successful. The issue of "B" shares, "H" shares and "N" shares
by Chinese companies and ability to obtain a "back-door listing" through Red
Chips is still regarded by the Chinese authorities as an experiment in economic
reform. The reformist elements which now dominate Chinese policies remain
ideologically communist and political factors may, at any time, outweigh
economic policies and the encouragement of foreign investment. The Fund will be
highly sensitive to any significant change in political, social or economic
policy in China. Such sensitivity may, for the reasons specified above,
adversely affect the capital growth and thus the performance of the Fund.
Guinness Flight, however, believes that the process of reform has now gone too
far to be easily reversed.

SECURITIES MARKETS. Both the Shanghai and the Shenzhen securities markets are in
their infancy and are undergoing a period of development and change. This may
lead to trading volatility, difficulty in the settlement and recording of
transactions and difficulty in interpreting and applying the relevant
regulations. In addition the choice of investments available to the Fund will be
severely limited as compared with the choice available in other markets due to
the small but increasing number of "B" share, "H" share, "N" share and Red Chip
issues currently available. There is a low level of liquidity in the Chinese
securities markets, which are relatively small in terms of both combined total
market value and the number of "B" shares, "H" shares, "N" shares and Red Chips
which are available for investment. Shareholders are warned that this could lead
to severe price volatility.

In general, trading volume on foreign stock exchanges is substantially less than
that on the New York Stock Exchange. Further, securities of some foreign
companies are less liquid and more volatile than securities of comparable United
States companies. Securities without a readily available market will be treated
as illiquid securities for purposes of the Fund's limitation on such purchases.
Fixed commissions on foreign markets are generally higher than negotiated
commissions on United States exchanges, although the Fund will endeavor to
achieve the most favorable net results on their portfolio transactions and may
be able to purchase the securities in which the Fund may invest on other stock
exchanges where commissions are negotiable.

FOREIGN CURRENCY CONSIDERATIONS. Although the Fund's investments generally will
be denominated in foreign currencies and most income paid by such investments
will be in foreign currencies, the Fund will compute and

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distribute its income in dollars. The computation of income will be made on the
date of its receipt by the Fund at the foreign exchange rate in effect on that
date. Therefore, if the value of the foreign currencies in which the Fund
receives its income falls relative to the dollar between the receipt of the
income and the making of Fund distributions, the Fund will be required to
liquidate securities in order to make distributions if the Fund has insufficient
cash in dollars to meet distribution requirements.

The value of the assets of the Fund as measured in dollars also may be affected
favorably or unfavorably by fluctuations in currency rates and exchange control
regulations. Further, the Fund may incur costs in connection with conversions
between various currencies.

For further discussion with regard to the Fund's other risk considerations, see
"Other Risk Factors and Special Considerations" in the Funds' Statement of
Additional Information.

ACCOUNTING STANDARDS AND LEGAL FRAMEWORK. Many foreign companies are not
generally subject to uniform accounting, auditing, and financial reporting
standards practices and disclosure requirements comparable to those applicable
to United States companies. Consequently, there may be less publicly available
information about such companies than about United States companies. Further,
there is generally less governmental supervision and regulation of foreign stock
exchanges, brokers and listed companies than in the United States.

With regard to China, the national regulatory and legal framework for capital
markets and joint stock companies in China is not well developed when compared
with those of western countries. Certain matters of concern to foreign
shareholders are not adequately dealt with or are only covered in a number of
national and local laws and regulations. As the efficacy of such laws and
regulations is as yet uncertain, there can be no assurance as to the extent to
which rights of foreign shareholders will be protected.

Further, Chinese companies are not required to follow international accounting
standards. There are a number of differences between international accounting
standards and accounting practice in China, including the valuation of property
and other assets (in particular inventory and investments and provisions against
debtors), accounting for depreciation, consolidation, deferred taxation and
contingencies and the treatment of exchange differences. There may, therefore,
be significant differences in the preparation of financial statements by
accountants following Chinese accounting standards and practice when compared
with those prepared in accordance with international accounting standards. All
issuers of "B" shares, "H" shares, "N" shares and Red Chips are, however,
required to produce accounts which are prepared in accordance with international
accounting standards.

INVESTMENT AND REPATRIATION RESTRICTIONS. Some foreign countries have laws and
regulations which currently preclude direct foreign investment in the securities
of their companies. However, indirect foreign investment in the securities
listed and traded on the stock exchanges in these countries is permitted by
certain foreign countries through investment funds which have been specially
authorized. See "Tax Matters" in the Statement of Additional Information for an
additional discussion concerning such investment funds. The Fund may invest in
these investment funds subject to the provisions of the 1940 Act. If the Fund
invests in such investment funds, the Fund's shareholders will bear not only
their proportionate share of the expenses of the Fund, but also will bear
indirectly similar expenses of the underlying investment funds. Guinness Flight
has agreed to waive its management fees with respect to the portion of the
Fund's assets invested in shares of other open-end investment companies. The
Fund would continue to pay its own management fees and other expenses with
respect to its investments in shares of closed-end investment companies.

In addition to the foregoing investment restrictions, prior governmental
approval for foreign investments may be required under certain circumstances in
some foreign countries, and the extent of foreign investment in foreign
companies may be subject to limitation. Foreign ownership limitations also may
be imposed by the characters of individual companies to prevent, among other
concerns, violation of foreign investment limitations.

Repatriation of investment income, capital and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some foreign
countries. The Fund could be adversely affected by delays in or a refusal to
grant any required governmental approval for such repatriation.

- 8 -

<PAGE>

INVESTMENT IN CHINA AT PRESENT INVOLVES ABOVE AVERAGE RISK DUE TO A NUMBER OF
SPECIAL FACTORS AS MENTIONED ABOVE. INVESTMENT IN THE FUND SHOULD BE REGARDED AS
LONG TERM IN NATURE. THE FUND IS SUITABLE ONLY FOR THOSE INVESTORS WHO CAN
AFFORD THE RISKS INVOLVED AND SHOULD CONSTITUTE ONLY A LIMITED PART OF AN
INVESTOR'S PORTFOLIO. THE PRICE OF THE FUND MAY EXPERIENCE SIGNIFICANT
FLUCTUATIONS.

PERFORMANCE

The Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. Average annual total return figures are annualized and,
therefore, represent the average annual percentage change over the period in
question. To illustrate the components of overall performance, the Fund may
separate their cumulative and average annual returns into income results and
capital gains or losses.

The performance of the Fund will vary from time to time and past results are not
necessarily representative of future results. The Fund's performance is a
function of its portfolio management in selecting the type and quality of
portfolio securities, and is affected by operating expenses of the Fund as well
as by general market conditions.

THE FUND'S MANAGEMENT

The overall management of the business and affairs of the Fund is vested in the
Guinness Flight Funds' Board of Trustees. The Board of Trustees approves all
significant agreements between the Guinness Flight Funds, on behalf of the Fund,
and persons or companies furnishing services to the Fund. The day-to-day
operations of the Fund are delegated to the officers of the Guinness Flight
Funds and to Guinness Flight, subject always to the investment objective and
policies of the Fund and to the general supervision of the Guinness Flight
Funds' Board of Trustees. Information concerning the Board of Trustees may be
found in the Statement of Additional Information.

INVESTMENT ADVISER. Guinness Flight is headquartered in London, England, at
Lighterman's Court, 5 Gainsford Street, Tower Bridge SE1 2NE, has a U.S. office
at 225 South Lake Avenue, Suite 777, Pasadena, California 91101, and a Hong Kong
office at [Upper Ground Floor, Far East Center, 16 Harcourt Road, Admiralty,
Hong Kong]. Guinness Flight serves as the investment adviser to the Fund
pursuant to an investment advisory agreement dated as of ____________, 1997.
Under the terms of the Advisory Agreement, Guinness Flight supervises all
aspects of the Fund's operations and provides investment advisory services to
the Fund. Guinness Flight was organized in 1985 and is registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940, as
amended. Guinness Flight is a wholly owned subsidiary of Guinness Flight Hambro
Asset Management Limited.

The Fund is managed by a team of portfolio managers. The following are
biographies of key personnel who are responsible for ultimate investment
decisions.

RICHARD FARRELL -- Mr. Farrell joined Guinness Mahon, a predecessor
entity of Guinness Flight, in 1978. He specializes in Far Eastern
markets and currently is the investment adviser to the Guinness Flight
Global Strategy Fund's Japan Fund, Japan & Pacific Fund, and Japan
Smaller Companies Fund. These funds are currently available only to
overseas investors. As the head of Guinness Flight's Asia Equity Desk,
Mr. Farrell has strategic input on all of Guinness Flight's Asia Equity
Funds. In addition, Mr. Farrell serves as the Manager of the Asia Blue
Chip Fund and co-manager of the China & Hong Kong Fund.

LYNDA JOHNSTONE -- Ms. Johnstone joined Guinness Mahon's Investment
Department in 1986 as a member of the Equity Team. Currently, she is
responsible for running the Guinness Flight Global Strategy Fund's Hong
Kong Fund and ASEAN Fund. These funds are currently available only to
overseas investors. Ms. Johnstone is primarily responsible for the
day-to-day management of the China & Hong Kong Fund.

NERISSA LEE -- Ms. Lee joined Guinness Flight's Hong Kong office in
1995 and specializes in Far Eastern markets. She has a degree in
economics from Hong Kong University and 20 years of experience in
Asian

- 9 -

<PAGE>

markets. She started in the research department of the Hong Kong Stock
Exchange and has been managing funds for 8 years. Currently, Ms. Lee,
Chief Investment Officer of Guinness Flight Hambro Asia Ltd., manages
the Guinness Flight Global Strategy Fund's Asian Smaller Companies Fund
and the Guinness Flight Select China Fund. These funds are offered only
to offshore investors. Ms. Lee serves as the Manager of the Asia Small
Cap Fund and the Mainland China Fund.

Guinness Flight's legal counsel believes that Guinness Flight may provide
services described in its Investment Advisory Agreement to the Fund without
violating the federal banking law commonly known as the Glass-Steagall Act (the
"Act"). The Act generally bars banks or investment advisers deemed to be
controlled by banks from publicly underwriting or distributing certain
securities. Because of stock ownership by a subsidiary of a foreign bank in
Guinness Flight's parent, Guinness Flight Hambro Asset Management Limited, such
restrictions may be deemed to apply.

The U.S. Supreme Court in its 1981 decision in Board of Governors of the Federal
Reserve System v. Investment Company Institute determined that, consistent with
the requirements of the Act, a bank may serve as an investment adviser to a
registered, closed-end investment company. Other decisions of banking regulators
have supported the position that a bank may act as investment adviser to a
registered, open-end investment company. Based on the advice of its counsel,
Guinness Flight believes that the Court's decision, and these other decisions of
banking regulators, permit it to serve as investment adviser to a registered,
open-end investment company.

Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent Guinness Flight
from continuing to perform investment advisory services for the Fund. If that
occurred, the Board of Trustees of Guinness Flight Funds promptly would seek to
obtain the services of another qualified adviser, as necessary. The Trustees
would then consider what action would be in the best interest of the Funds'
shareholders.

For a discussion of Guinness Flight's brokerage allocation policies and
practices, see "Portfolio Transactions" in the Statement of Additional
Information. In accordance with policies established by the Board of Trustees,
Guinness Flight may take into account sales of shares of each Fund advised by
Guinness Flight in selecting broker-dealers to effect portfolio transactions on
behalf of the Fund.

FEES AND EXPENSES. Pursuant to the Advisory Agreement, Guinness Flight is paid a
monthly fee from the Fund at an annual rate of 1.00% of the Fund's average daily
net assets. This fee is higher than that charged by many investment companies.
However, the Board of Trustees believes that such fee is appropriate because of
the complexity of managing a fund that invests in global markets. Guinness
Flight or Investment Company Administration Corporation, the administrator, may,
from time to time, voluntarily agree to defer or waive fees or absorb some or
all of the expenses of the Fund. To the extent that they should do so, they may
seek repayment of such deferred fees and absorbed expenses after this practice
is discontinued. However, no repayment will be made if it would result in the
Fund's expense ratio exceeding 1.98%.

ADMINISTRATOR. Pursuant to an Administration Agreement, Investment Company
Administration Corporation ("ICAC") serves as administrator of the Fund. As the
administrator, ICAC provides certain administrative services, including, among
other responsibilities, coordinating relationships with independent contractors
and agents, preparing for signature by officers and filing of certain documents
required for compliance with applicable laws and regulations, preparing
financial statements, and arranging for the maintenance of books and records.
[ICAC receives a monthly fee equal to, on an annual basis, the greater of
$20,000 or .25% of average daily net assets on the Fund.]

DISTRIBUTOR. The Guinness Flight Funds has entered into a Distribution Agreement
(the "Distribution Agreement") with First Fund Distributors, Inc. ("First
Fund"), a registered broker-dealer, to act as the principal distributor of the
shares of the Fund. The Distribution Agreement provides First Fund with the
right to distribute shares of the Fund through affiliated broker-dealers and
through other broker-dealers or financial institutions with whom First Fund has
entered into selected dealer agreements.

- 10 -

<PAGE>

DISTRIBUTION PLAN. The Fund has adopted a Distribution Plan (the "Plan") under
Rule 12b-1 under the 1940 Act. No separate payments are authorized to be made by
the Fund under the Plan. Rather, the Plan recognizes that Guinness Flight or
ICAC may use fee revenues, or other resources to pay expenses associated with
shareholder servicing and recordkeeping functions. The Plan also provides that
Guinness Flight or ICAC may make payments from these sources to third parties,
including affiliates, such as banks or broker-dealers, that provide such
services. See "The Funds' Management -- Fees and Expenses."

For additional information concerning the operation of the Plan, see
"Distribution Agreements and Distribution Plans" in the Statement of Additional
Information.

SHAREHOLDER SERVICING. The Fund may enter into Shareholder Servicing Agreements
whereby the Adviser or Administrator pays a shareholder servicing agent for
shareholder services and account maintenance, including responding to
shareholder inquiries, direct shareholder communications, account balance,
maintenance and dividend posting.

PRIOR PERFORMANCE OF GUINNESS FLIGHT

The following table sets forth composite performance data relating to
the Fund that is substantially similar to the Fund based on an account managed
by Guinness Flight Hambro Asset Managment Limited which wholly owns Guinness
Flight. Mr. Farrell, Ms. Johnstone and Ms. Lee are employed by both Guinness
Flight and Guinness Flight Hambro Asset Management Limited. The data is provided
to illustrate the past performance of Guinness Flight and its affiliates in
managing a substantially similar account, as measured against specified market
indices. Investors should not consider this performance data as an indication of
future performance of the Fund.

All information in the tables relies on data supplied by Guinness
Flight or from statistical services, reports or other sources believed by
Guinness Flight to be reliable. Such information has not been independently
verified by the Fund. Guinness Flight has indicated that such results are net of
the investment advisory fees paid to such accounts and give effect to
transaction costs as well as reinvestment of income and gains.

Set forth below are certain performance data of Guinness Flight Select
Funds PLC-China Fund which is a non U.S. fund. Guinness Flight has advised the
Fund that the Guinness Flight Select Funds PLC-China Fund is managed under the
similar investment objectives, policies and strategies as those of the Fund.

Total Returns for the Period Ending

================================================================================================================================
Guinness Flight
Select Funds PLC
Guinness Flight - China Fund Credit Lyonnais
Select Funds PLC Adjusted Micropal China China World
- China Fund (1) Performance (2) Equity Index (3) Index (4)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1996 64.05% (5)
- --------------------------------------------------------------------------------------------------------------------------------
March 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------
June 30, 1997 111.75% (6)
- --------------------------------------------------------------------------------------------------------------------------------
September 30, 1997
================================================================================================================================

</TABLE>

- -------------
(1) Guinness Flight Select Funds PLC-China Fund performance figures
provided by Guinness Flight Investment Management Limited.

- 11 -
<PAGE>

(2) The Guinness Flight Select Funds PLC-China Fund performance figures
have been restated in this column to show what such performance figures
would have been for the individual years indicated if the projected
expenses of the Fund had been applicable.
(3) Source:
(4) Source:
(5) The Fund began operations on January 9, 1996. Thus, the Fund's
performance figure for the One Year Period Ended December 31, 1996 does
not reflect the entire period.
(6) For the nine-month period ending September 30, 1997.

HOW TO PURCHASE SHARES

GENERAL INFORMATION. Through November 30, 1997, shares of the Fund will be
offered exclusively to shareholders of the existing Guinness Flight Funds who
owned such shares as of November 3, 1997. Beginning December 1, 1997, the Fund
will offer its shares to the general public. Shares of the Fund will cease being
offered on or after December 1, 1997 to new investors when the net asset value
of the Fund exceeds $50 million. Existing Mainland China Fund investors,
however, may continue to purchase shares of the Fund on or after such date.

Investors may purchase shares of the Fund from the Fund's transfer agent or from
other selected securities brokers or dealers. A buyer whose purchase order is
received by the transfer agent before the close of trading on the New York Stock
Exchange, currently 4:00 p.m. Eastern time, will acquire shares at the net asset
value as of that day. A buyer whose purchase order is received by the transfer
agent after the close of trading on the New York Stock Exchange will acquire
shares at the net asset value as of the next trading day on the New York Stock
Exchange. A broker may charge a transaction fee for the purchase. The
Distributor may, from time to time, provide promotional incentives to certain
brokers or dealers whose representatives have sold or are expected to sell
significant amounts of the Fund's shares. The Fund reserves the right to reject
any purchase order.

You may also purchase shares of the SSgA Money Market Fund which is advised by
State Street Bank & Trust Co., 225 Franklin Street, Boston, MA 02110, and is not
affiliated with the Guinness Flight Funds or Guinness Flight, if such shares are
offered in your state of residence. You should carefully read the prospectus and
complete the application for the SSgA Money Market Fund. For additional
information, please call shareholder services at 800- 915-6566.

Shares of the Fund are available for purchase by any retirement plan, including
401(k) plans, profit sharing plans, 403(b) plans and individual retirement
accounts.

OPENING AN ACCOUNT -- INVESTMENT MINIMUMS. The minimum initial investments are
as follows:

Minimum
Type of Account Investment

Regular (new investor) $2,500
Regular (shareholder purchasing another Guinness Flight Fund) $1,000
Retirement $1,000
Gift $ 250
Pre-authorized investment plan (Initial and monthly investments) $ 100

The Fund may further reduce or waive the minimum for certain retirement and
other employee benefit plans; for Guinness Flight's employees, clients and their
affiliates; for advisers or financial institutions offering investors a program
of services; or any other person or organization deemed appropriate by the Fund.

ADDITIONAL INVESTMENTS -- MINIMUM SUBSEQUENT INVESTMENT. The minimum
"subsequent" investment is $250 for regular accounts as well as tax-qualified
retirement plans. The amount of the minimum subsequent investment, like the
minimum "initial" investment, may be reduced or waived by the Fund. See waiver
discussion under "Opening an Account-Investment Minimums." Investments may be
made either by check or by wire.

- 12 -

<PAGE>

PRE-AUTHORIZED INVESTMENT PLAN. You may establish a pre-authorized investment
plan whereby your personal bank account is automatically debited and your Fund
account is automatically credited with additional full and fractional shares.
Through the pre-authorized investment plan, the minimum initial investment is
$100 and the subsequent minimum monthly investments is $100 per an investment.

PURCHASING BY MAIL. State Street Bank and Trust Company (the "Transfer Agent")
acts as transfer and shareholder service agent for the Fund. An investor may
purchase shares by sending a check payable to Guinness Flight Investment Funds,
together with an Account Application form, to the Transfer Agent at the
following address:

Guinness Flight Investment Funds
P.O. Box 9288
Boston, MA 02205-8559

Overnight courier deliveries should be sent to:

Boston Financial Data Services
ATTN: Guinness Flight Investment Funds
Two Heritage Drive
3rd Floor
North Quincy, MA 02171

If the purchase is a subsequent investment, the shareholder should either
include the stub from a confirmation form previously sent by the Transfer Agent
or include a letter giving the shareholder's name and account number.

All purchases made by check should be in U.S. dollars and made payable to
"Guinness Flight Investment Funds" or in the case of a retirement account, the
custodian or trustee. Third party checks will not be accepted. When purchases
are made by check or periodic account investment, redemptions will not be
allowed until the investment being redeemed has been in the account for 15
calendar days.

PURCHASING BY WIRE. For an initial purchase of shares of the Fund by wire,
shareholders should first telephone the Transfer Agent at (800) 915-6566 between
the hours of 8:00 a.m. and 4:00 p.m. (Eastern time) on a day when the New York
Stock Exchange is open for normal trading to receive an account number. The
following information will be requested: your name, address, tax identification
number, dividend distribution election, amount being wired and wiring bank. In
addition, a buyer will be required to provide the Transfer Agent a signature
application within 10 business days of an initial purchase. You should then give
instructions to your bank to transfer funds by wire to the Transfer Agent at the
following address:

State Street Bank and Trust Company
ABA # 0110 00028
Shareholder and Custody Services
DDA # 99050171
ATTN: (Fund Name)
(Fund Account Number)

In making a subsequent purchase order by wire, you should wire funds to the
Transfer Agent in the manner described above, making sure that the wire
specifies the name of the Fund, your name and the account number. However, it is
not necessary to call the Transfer Agent to make subsequent purchase orders
using federal funds.

If you arrange for receipt by the Transfer Agent of federal funds prior to the
close of trading (currently 4:00 p.m., Eastern time) of the New York Stock
Exchange on a day the Exchange is open for normal trading, you may purchase
shares of the Fund as of that day. Your bank may charge a fee for wiring money
on your behalf.

- 13 -

<PAGE>

HOW TO REDEEM SHARES

GENERAL INFORMATION. Investors may redeem shares of the Fund through the
Transfer Agent or from other selected securities brokers or dealers. A
shareholder whose redemption order is received by the Transfer Agent before the
close of trading on the New York Stock Exchange, currently 4:00 p.m. Eastern
time, will redeem shares at the net asset value set as of that day. A
shareholder whose redemption order is received by the Transfer Agent after the
close of trading on the New York Stock Exchange will redeem shares at the net
asset value set as of the next trading day on the New York Stock Exchange. A
broker may charge a transaction fee for the redemption. Under certain
circumstances, the Fund may temporarily borrow cash pursuant to a credit
agreement with Deutsche Bank AG to satisfy redemption requests.

REDEMPTIONS BY TELEPHONE. Shareholders may establish telephone redemption
privileges if so elected on the account application. Shares of the Fund may then
be redeemed by telephoning the Transfer Agent at (800) 915-6566, between the
hours of 8:00 a.m. and 4:00 p.m. Eastern time on a day when the New York Stock
Exchange is open for normal trading.

SPECIAL FACTORS REGARDING TELEPHONE REDEMPTIONS. In order to protect itself and
shareholders from liability for unauthorized or fraudulent telephone
transactions, the Guinness Flight Funds will use reasonable procedures in an
attempt to verify the identity of a person making a telephone redemption
request. The Guinness Flight Funds reserves the right to refuse a telephone
redemption request if it believes that the person making the request is not the
record owner of the shares being redeemed, or is not authorized by the
shareholder to request the redemption. Shareholders will be promptly notified of
any refused request for a telephone redemption. As long as these reasonable
procedures are followed, neither the Guinness Flight Funds nor its agents will
be liable for any loss, liability or cost which results from acting upon
instructions of a person believed to be a shareholder with respect to the
telephone redemption privilege. However, if the Guinness Flight Funds or its
agents fail to follow such reasonable procedures, then the Guinness Flight Funds
or its agents may be liable for any losses due to unauthorized or fraudulent
instructions.

REDEMPTIONS BY MAIL. Shareholders may redeem shares of the Fund by writing to
the Transfer Agent at the following address:

Guinness Flight Investment Funds
P.O. Box 9288
Boston, MA 02205-8559

Overnight courier deliveries should be sent to:

Boston Financial Data Services
ATTN: Guinness Flight Investment Funds
Two Heritage Drive
3rd Floor
North Quincy, MA 02171

Please specify the name of the Fund, the number of shares or dollar amount to be
redeemed, and your name and account number.

The signature on a redemption request must be exactly as the names appear on the
Fund's account records, and the request must be signed by the minimum number of
persons designated on the account application that are required to effect a
redemption. Requests by participants of qualified retirement plans must include
all other signatures required by the plan and applicable federal law.

SIGNATURE GUARANTEE. If a redemption is requested by a corporation, partnership,
trust or fiduciary, written evidence of authority acceptable to the Transfer
Agent must be submitted before such request will be accepted. If the proceeds of
the redemption exceed $50,000, or are to be paid to a person other than the
record owner, or are to be sent to an

- 14 -

<PAGE>

address other than the address on the Transfer Agent's records, or are to be
paid to a corporation, partnership, trust or fiduciary, the signature(s) on the
redemption request and on the certificates, if any, or stock powers must be
guaranteed by an "eligible guarantor," which includes certain banks, brokers,
dealers, credit unions, securities exchanges, clearing agencies and savings
associations. A signature guarantee is not the same as notarization and an
acknowledgment by a notary public is not acceptable as a substitute for a
signature guarantee.

REDEMPTIONS BY WIRE. Redemption proceeds are generally paid to shareholders by
check. However, redemptions proceeds of $500 or more may be wired by the
Transfer Agent to a shareholder's bank account. Requests for redemption by wire
should include the name, location and ABA or bank routing number (if known) of
the designated bank and account number. Payment will be made within three days
after receipt by the Transfer Agent of the written or telephone redemption
request and any share certificates, except as indicated below. Such payment may
be postponed, or the right of redemption suspended at times when (a) the New
York Stock Exchange is closed for other than customary weekends and holidays;
(b) trading on such exchange is restricted; (c) an emergency exists, the result
of which disposal of Fund securities or determination of the value of the Fund's
net assets are not reasonably practicable; or (d) during any other period when
the Securities and Exchange Commission, by order, so permits. The Transfer Agent
will deduct a fee equal to $10.00 from the amount wired.

REDEMPTION OF SMALL ACCOUNTS. In order to reduce expenses, the Fund may redeem
shares in any account, other than retirement plan or Uniform Gift to Minors Act
accounts, if at any time, due to redemptions, the total value of a shareholder's
account does not equal at least $500. Shareholders will be given 30 days' prior
written notice in which to purchase sufficient additional shares to avoid such a
redemption.

SYSTEMATIC WITHDRAWAL PLAN. You may elect to have regular monthly or quarterly
payments in any fixed amount in excess of $100 made to you, your personal bank
accounts, or a properly designated third party, as long as your Fund account has
a value at the current price of at least $1,000. During the withdrawal period,
you may purchase additional shares for deposit to your account if the additional
purchases are equal to at least one year's scheduled withdrawals. The number of
full and fractional shares equal in value to the amount of the payment made will
be redeemed at net asset value as determined on the day of withdrawal. As shares
of the Fund are redeemed, you may recognize a capital gain or loss to be
reported for income tax purposes.

REDEMPTION FEE. On redemptions of shares purchased less than 30 days prior to
redemption, a fee, equal to 1.00% of the value of the shares being redeemed,
shall be charged to any shareholder who redeems his interest in the Fund, such
proceeds to be payable to the Fund. Such redemption fee will not be charged on
shares purchased 30 or more days prior to redemption or acquired through the
reinvestment of distributions of investment income and capital gains.
Redemptions will be assumed to have been made through the liquidation of shares
in a shareholder's account on a first-in, first-out basis. Exchanges into other
Guinness Flight Funds or the SSgA Money Market Fund are considered redemptions
for purposes of the redemption fee.

ADDITIONAL REDEMPTION INFORMATION. Payment for redemption of recently purchased
shares will be delayed until the Transfer Agent has been advised that the
purchase check has been honored, up to 12 calendar days from the time of receipt
of the purchase check by the Transfer Agent. If the purchase check does not
clear, the investor, and not the Fund, will be responsible for any resulting
loss. Such delay may be avoided by purchasing shares by wire or by certified or
official bank checks.

SHAREHOLDER SERVICES

EXCHANGE PRIVILEGE. You may exchange shares of the Fund for shares of the other
Guinness Flight Funds by mailing or delivering written instructions to the
Transfer Agent at the following address:

Guinness Flight Investment Funds
P.O. Box 9288

- 15 -

<PAGE>

Boston, MA 02205-8559

Please specify the name of the applicable Fund, the number of shares or dollar
amount to be exchanged and your name and account number. You may also exchange
shares by telephoning the Transfer Agent at (800) 915-6566 between the hours of
8:00 a.m. and 4:00 p.m. (Eastern time) on a day when the New York Stock Exchange
is open for normal trading.

In periods of severe market or economic conditions, telephone exchanges may be
difficult to implement, in which case you should mail or send by overnight
delivery a written exchange request to the Transfer Agent. Overnight deliveries
should be sent to the Transfer Agent at the address on Page __.

All exchanges will be made on the basis of the relative net asset values of the
Fund next determined after a completed request is received. Requests for
telephone exchanges received before 4:00 p.m. (Eastern time) on a day when the
New York Stock Exchange is open for normal trading will be processed that day.
Otherwise, processing will occur on the next business day.

You may also exchange shares of the Fund for shares of the SSgA Money Market
Fund, a money market mutual fund advised by State Street Bank & Trust Co., 225
Franklin Street, Boston, MA 02110 and not affiliated with the Guinness Flight
Funds or Guinness Flight, if such shares are offered in your state of residence.
Prior to making such an exchange, you should obtain and carefully read the
prospectus for the SSgA Money Market Fund. The exchange privilege does not
constitute an offering or recommendation on the part of the Fund or Guinness
Flight of an investment in the SSgA Money Market Fund.

The SSgA Money Market Fund's fundamental investment objective is to maximize
current income, to the extent consistent with the preservation of capital and
liquidity and the maintenance of a stable $1.00 per share net asset value, by
investing in dollar denominated securities with remaining maturities of one year
or less. Investments in the SSgA Funds are neither insured nor guaranteed by the
U.S. Government. There is no assurance that the SSgA Money Market Fund will
maintain a stable net asset value of $1.00 per share.

EXCHANGE PRIVILEGE ANNUAL LIMITS. The Fund reserves the right to limit the
number of exchanges a shareholder may make in any year to four (4) to avoid
excessive Fund expenses.

DETERMINATION OF NET ASSET VALUE

The net asset value per share (or share price) of the Fund is determined as of
4:15 p.m. Eastern Time on each business day. The net asset value per share is
calculated by subtracting the Fund's liabilities from its assets and dividing
the result by the total number of Fund shares outstanding. The determination of
the Fund's net asset value per share is made in accordance with generally
accepted accounting principles. Among other items, the Fund's liabilities
include accrued expenses and dividends payable, and its total assets include
portfolio securities valued at their market value, as well as income accrued but
not yet received. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
supervision of the Fund's officers and in accordance with methods which are
specifically authorized by its governing Board of Trustees. Short-term
obligations with maturities of 60 days or less are valued at amortized cost as
reflecting fair value.

DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS

DIVIDENDS AND DISTRIBUTIONS. Income dividends of the Fund are declared and paid
semiannually, normally in June and December. The Fund distributes all or
substantially all of its net investment income and net capital gains (if any)

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<PAGE>

to shareholders each year. Any net capital gains earned by the Fund normally are
distributed in June and December to the extent necessary to avoid federal income
and excise taxes.

In determining the amount of capital gains, if any, available for distribution,
net capital gains are offset against available net capital losses, if any,
carried forward from previous fiscal periods.

All dividends and distributions of the Fund are automatically reinvested on the
ex-dividend date in full and fractional shares of the Fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions will be reinvested at the net asset value per share
determined on the ex-dividend date. Shareholders may elect, by written notice to
the Transfer Agent, to receive such distributions, or the dividend portion
thereof, in cash, or to invest such dividends and distributions in additional
shares, including, subject to certain conditions, in shares of the Fund other
than the Fund making the distribution. Investors who have not previously
selected such a reinvestment option on the account application form may contact
the Transfer Agent at any time to obtain a form to authorize such reinvestments
in a Fund other than the Fund making the distribution. Such reinvestments into a
Fund are automatically credited to the account of the shareholder.

Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.

Any dividend or distribution paid by the Fund has the effect of reducing the net
asset value per share on the ex-dividend date by the amount of the dividend or
distribution. Therefore, a dividend or distribution declared shortly after a
purchase of shares by an investor would represent, in substance, a return of
capital to the shareholder with respect to such shares even though it would be
subject to income taxes, as discussed below.

TAX MATTERS. The Fund intends to qualify as a regulated investment company for
federal income tax purposes by satisfying the requirements under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), including the
requirements with respect to diversification of assets, distribution of income
and sources of income. It is the Fund's policy to distribute to shareholders all
of their investment income (net of expenses) and any capital gains (net of
capital losses) in accordance with the timing requirements imposed by the Code,
so that the Fund will satisfy the distribution requirement of Subchapter M and
not be subject to Federal income taxes or the 4% excise tax.

If the Fund fails to satisfy any of the Code requirements for qualification as a
regulated investment company, it will be taxed at regular corporate tax rates on
all its taxable income (including capital gains) without any deduction for
distributions to shareholders, and distributions to shareholders will be taxable
as ordinary dividends (even if derived
from the Fund's net long-term capital gains) to the extent of the Fund's current
and accumulated earnings and profits.

Distributions by the Fund of its net investment income (including foreign
currency gains and losses) and the excess, if any, of its net short-term capital
gain over its net long-term capital loss are taxable to shareholders as ordinary
income.

Distributions by the Fund of the excess, if any, of its net long-term capital
gain over its net short-term capital loss are designated as capital gain
dividends and are taxable to shareholders as long-term capital gains, regardless
of the length of time shareholders have held their shares.

Distributions by the Fund which are taxable to shareholders as ordinary income
are treated as dividends for Federal income tax purposes, but in any year only a
portion thereof (which cannot exceed the aggregate amount of qualifying
dividends from domestic corporations received by the Fund during the year) may
qualify for the 70% dividends-received deduction for corporate shareholders.
Because the investment income of the Fund will consist primarily of dividends
from foreign corporations and the Fund may have interest income and short-term
capital gains, it is not expected that a significant portion of the ordinary
income dividends paid by the Fund may qualify for the dividends-received
deduction. Portions of the Fund's investment income may be subject to foreign
income taxes

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<PAGE>

withheld at the source. If the Fund meets certain requirements, it may elect to
"pass-through" to shareholders any such foreign taxes, which may enable
shareholders to claim a foreign tax credit or a deduction with respect to their
share thereof.

Distributions to shareholders will be treated in the same manner for Federal
income tax purposes whether shareholders elect to receive them in cash or
reinvest them in additional shares. In general, shareholders take distributions
into account in the year in which they are made. However, shareholders are
required to treat certain distributions made during January as having been paid
by the Fund and received by shareholders on December 31 of the preceding year. A
statement setting forth the Federal income tax status of all distributions made
(or deemed made) during the year, and any foreign taxes "passed-through" to
shareholders, will be sent to shareholders promptly after the end of each year.

Investors should carefully consider the tax implications of purchasing shares
just prior to the record date of any ordinary income dividend or capital gain
dividend. Those investors purchasing shares just prior to an ordinary income or
capital gain dividend will be taxed on the entire amount of the dividend
received, even though the net asset value per share on the date of such purchase
reflected the amount of such dividend and such dividend economically constitutes
a return of capital to such investors.

A shareholder will recognize gain or loss upon the sale or redemption of shares
of the Fund in an amount equal to the difference between the proceeds of the
sale or redemption and the shareholder's adjusted tax basis in the shares. Any
loss realized upon a taxable disposition of shares within six months from the
date of their purchase will be treated as a long-term capital loss to the extent
of any capital gain dividends received on such shares. All or a portion of any
loss realized upon a taxable disposition of shares of the Fund may be disallowed
if other shares of the Fund are purchased within 30 days before or after such
disposition.

If a shareholder is a non-resident alien or foreign entity shareholder, ordinary
income dividends paid to such shareholder generally will be subject to United
States withholding tax at a rate of 30% (or lower rate under an applicable
treaty). We urge non-United States shareholders to consult their own tax adviser
concerning the applicability of the United States withholding tax.

Under the back-up withholding rules of the Code, shareholders may be subject to
31% withholding of federal income tax on ordinary income dividends, capital gain
dividends and redemption payments made by the Fund. In order to avoid back-up
withholding, shareholders must provide the appropriate Fund with a correct
taxpayer identification number (which for an individual is usually his Social
Security number) and certify that the shareholder is a corporation or otherwise
exempt from or not subject to back-up withholding.

The foregoing discussion of federal income tax consequences is based on tax laws
and regulations in effect on the date of this Prospectus, and is subject to
change by legislative or administrative action. As the foregoing discussion is
for general information only, shareholders should also review the more detailed
discussion of federal income tax considerations relevant to the Fund that is
contained in the Statement of Additional Information. In addition, shareholders
should consult with their own tax adviser as to the tax consequences of
investments in the Fund, including the application of state and local taxes
which may differ from the federal income tax consequences described above.

ABOUT THE FUND

The Fund is a separate series of shares of the Guinness Flight Funds, which is
registered under the 1940 Act as an open-end management investment company.
Guinness Flight Funds was formed as a Maryland corporation on January 7, 1994
and converted to a Delaware business trust on April 28, 1997. The Fund has its
own investment objective and policies designed to meet specific investment
goals, operates as a non-diversified open-end management investment company and
expects to be treated as a regulated investment company for federal income tax
purposes.

The Fund invests in securities of different issuers and industry classifications
in an attempt to spread and reduce the risks inherent in all investing. The Fund
continuously offers new shares for sale to the public, and stands ready to

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<PAGE>

redeem its outstanding shares for cash at their net asset value. Guinness Flight
continuously reviews and, from time to time, changes the portfolio holdings of
the Fund in pursuit of the Fund's investment objective.

Shares of the Fund entitle the holders to one vote per share. The shares have no
preemptive or conversion rights. When issued, shares are fully paid and
nonassessable. The shareholders have certain rights, as set forth in the Bylaws,
to call a meeting for any purpose. See "Description of the Fund -- Voting
Rights" in the Statement of Additional Information.

GENERAL INFORMATION

INVESTMENT ADVISER. Guinness Flight Investment Management Limited, 225 South
Lake Avenue, Suite 777, Pasadena, California 91101, serves as investment adviser
for the Fund.

ADMINISTRATOR. Investment Company Administration Corporation, 2025 East
Financial Way, Glendora, California 91741, serves as administrator of the Fund.

CUSTODIAN. Investors Bank and Trust Company, 200 Clarendon Street, 16th Floor,
Mailcode ADM27, Boston, Massachusetts 02116, serves as the custodian of the
Fund. Generally, the custodian holds the securities, cash and other assets of
the Fund.

TRANSFER AGENT. State Street Bank and Trust Company, P.O. Box 1912, Boston,
Massachusetts 02105, serves as transfer agent of the Fund. Generally the
transfer agent provides recordkeeping services for the Fund and its
shareholders.

LEGAL COUNSEL. Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York,
New York 10022 serves as counsel to the Guinness Flight Funds.

INDEPENDENT ACCOUNTANTS. Ernst & Young LLP, 515 South Flower Street, Los
Angeles, CA 90071 serves as the independent accountants to the Fund. Generally,
the independent accountants will audit the financial statement and the financial
highlights of the Fund, as well as provide reports to the Trustees.

DISTRIBUTOR. First Fund Distributors, Inc., 4455 East Camelback Road, Suite
261E, Phoenix, Arizona 85018, serves as distributor for the Fund.

OTHER INFORMATION. This prospectus sets forth basic information that investors
should know about the Fund prior to investing. A Statement of Additional
Information has been filed with the Securities and Exchange Commission and is
available upon request and without charge, by writing or calling the Fund at
1-800-915-6565. This prospectus omits certain information contained in the
registration statement filed with the Securities and Exchange Commission. Copies
of the registration statement, including items omitted from this prospectus, may
be obtained from the Securities and Exchange Commission by paying the charges
prescribed under its rules and regulations.

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

GUINNESS FLIGHT INVESTMENT FUNDS
225 South Lake Avenue, Suite 777
Pasadena, California 91101

GUINNESS FLIGHT MAINLAND CHINA FUND

This Statement is not a prospectus but should be read in conjunction with the
current prospectus dated ________, 1997 (the "Prospectus"), pursuant to which
the Guinness Flight Mainland China Fund is offered. Please retain this document
for future reference.

For a free copy of the Prospectus, please call the Fund at 1-800-915-6565

GENERAL INFORMATION AND HISTORY ........................................... 2

INVESTMENT OBJECTIVE AND POLICIES ......................................... 2

INVESTMENT STRATEGIES AND RISKS ........................................... 3

OTHER RISK FACTORS AND SPECIAL CONSIDERATIONS ............................. 13

INVESTMENT RESTRICTIONS AND POLICIES ...................................... 14

PORTFOLIO TRANSACTIONS .................................................... 15

COMPUTATION OF NET ASSET VALUE ............................................ 16

PERFORMANCE INFORMATION ................................................... 16

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ............................ 18

TAX MATTERS ............................................................... 18

MANAGEMENT OF THE FUND .................................................... 23

THE INVESTMENT ADVISER AND ADVISORY AGREEMENT ............................. 25

DISTRIBUTION AGREEMENT AND DISTRIBUTION PLAN .............................. 26

DESCRIPTION OF THE FUND ................................................... 27

SHAREHOLDER REPORTS ....................................................... 28

Dated: __________, 1997

<PAGE>

GENERAL INFORMATION AND HISTORY

As described in the Prospectus, Guinness Flight Investment Funds
("Guinness Flight Funds") is a Delaware business trust organized as an open-end,
series, management investment company. Currently, Guinness Flight Funds offers
five separate series portfolios: Guinness Flight Asia Blue Chip Fund, Guinness
Flight Asia Small Cap Fund, Guinness Flight China & Hong Kong Fund, Guinness
Flight Global Government Bond Fund and Guinness Flight Mainland China Fund, each
of which has unique investment objectives and strategies. For purposes of this
statement of additional information ("Statement of Additional Information"),
references to the "Fund" are to the Guinness Flight Mainland China Fund.

INVESTMENT OBJECTIVE AND POLICIES

GENERAL INFORMATION ABOUT THE FUND

The Fund's investment objective is long-term capital appreciation
through investments in equity securities of companies which are established in
China and in companies established outside China which have a significant part
of their interests in China. In pursuit of its investment objective, the Fund
intends to invest 65% to 100% of its total assets in a portfolio of equity
securities of companies which are established in China and which have "B" shares
listed in Shanghai or Shenzhen or shares listed elsewhere such as "H" shares in
Hong Kong, and in companies established outside China which have a significant
part of their interests in China and are listed in Hong Kong or any other
Recognized Exchange (as defined in the Prospectus). The investment objective of
the Fund is a fundamental policy and may not be changed except by a majority
vote of shareholders. The investment objective of the Fund is a fundamental
policy and may not be changed except by a majority vote of shareholders.

The Fund does not intend to employ leveraging techniques. Accordingly,
the Fund will not borrow if amounts borrowed exceed 5% of its total assets at
the time the loan is made.

When the Fund determines that adverse market conditions exist, the Fund
may adopt a temporary defensive posture and invest its entire portfolio in Money
Market Instruments. In addition, the Fund may invest in Money Market Instruments
in anticipation of investing cash positions. "Money Market Instruments" are
short-term (less than twelve months to maturity) investments in (a) obligations
of the United States or foreign governments, their respective agencies or
instrumentalities; (b) bank deposits and bank obligations (including
certificates of deposit, time deposits and bankers' acceptances) of United
States or foreign banks denominated in any currency; (c) floating rate
securities and other instruments denominated in any currency issued by
international development agencies; (d) finance company and corporate commercial
paper and other short-term corporate debt obligations of United States and
foreign corporations meeting the credit quality standards set by Guinness Flight
Funds' Board of Trustees; and (e) repurchase agreements with banks and
broker-dealers with respect to such securities. While the Fund does not intend
to limit the amount of its assets invested in Money Market Instruments, except
to the extent believed necessary to achieve its investment objective, the Fund
does not expect under normal market conditions to have a substantial portion of
its assets invested in Money Market Instruments. To the extent the Fund is
invested in Money Market Instruments for defensive purposes or in anticipation
of investing cash positions, the Fund's investment objective may not be
achieved.

Guinness Flight does not intend to invest in any security in a country
where the currency is not freely convertible to United States dollars, unless it
has obtained the necessary governmental licensing to convert such currency or
other appropriately licensed or sanctioned contractual guarantee to protect such
investment against loss of that currency's external value, or Guinness Flight
has a reasonable expectation at the time the investment is made that such
governmental licensing or other appropriately licensed or sanctioned guarantee
would be obtained or that the currency in which the security is quoted would be
freely convertible at the time of any proposed sale of the security by the Fund.

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<PAGE>

The Fund may invest indirectly in issuers through sponsored or
unsponsored American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs"), Global Depository Receipts ("GDRs"), Global Depository Shares ("GDSs")
and other types of depository receipts (which, together with ADRs, EDRs, GDRs,
and GDSs, are hereinafter referred to as "Depository Receipts"). Depository
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored Depository Receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the Depository
Receipts. ADRs are Depository Receipts typically issued by a United States bank
or trust company which evidence ownership of underlying securities issued by a
foreign corporation. GDRs and other types of Depository Receipts are typically
issued by foreign banks or trust companies, although they also may be issued by
either a foreign or a United States corporation. Generally, Depository Receipts
in registered form are designed for use in the United States securities markets
and Depository Receipts in bearer form are designed for use in securities
markets outside the United States. For purposes of the Fund's investment
policies, investments in ADRs, GDRs and other types of Depository Receipts will
be deemed to be investments in the underlying securities. Depository Receipts
other than those denominated in United States dollars will be subject to foreign
currency exchange rate risk. Certain Depository Receipts may not be listed on an
exchange and therefore may be illiquid securities.

Securities in which the Fund may invest include those that are neither
listed on a stock exchange nor traded over-the-counter. As a result of the
absence of a public trading market for these securities, they may be less liquid
than publicly traded securities. Although these securities may be resold in
privately negotiated transactions, the prices realized from these sales could be
less than those originally paid by the Fund or less than what may be considered
the fair value of such securities. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements which may be applicable if their securities were
publicly traded. If such securities are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Fund may
be required to bear the expenses of registration. To the extent that such
securities are illiquid by virtue of the absence of a readily available market,
or legal or contractual restrictions on resale, they will be subject to the
Fund's investment restriction on illiquid securities, discussed below.

The Fund, together with any of its "affiliated persons," as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), may only
purchase up to 3% of the total outstanding securities of any underlying
investment company. Accordingly, when the Fund or such "affiliated persons" hold
shares of an underlying investment company, the Fund's ability to invest fully
in shares of those investment companies is restricted, and Guinness Flight must
then, in some instances, select alternative investments that would not have been
its first preference.

There can be no assurance that appropriate investment companies will be
available for investment. The Fund does not intend to invest in such investment
companies unless, in the judgment of Guinness Flight, the potential benefits of
such investment justify the payment of any applicable premium or sales charge.

INVESTMENT STRATEGIES AND RISKS

OPTIONS AND FUTURES STRATEGIES

Through the writing of call options and the purchase of options and the
purchase and sale of stock index futures contracts, interest rate futures
contracts, foreign currency futures contracts and related options on such
futures contracts, Guinness Flight may at times seek to hedge against a decline
in the value of securities included in the Fund's portfolio or an increase in
the price of securities which it plans to purchase for the Fund or to reduce
risk or volatility while seeking to enhance investment performance. Expenses and
losses incurred as a result of such hedging strategies will reduce the Fund's
current return.

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<PAGE>

The ability of the Fund to engage in the options and futures strategies
described below will depend on the availability of liquid markets in such
instruments. Although the Fund will not enter into an option or futures position
unless a liquid secondary market for such option or futures contract is believed
by Guinness Flight to exist, there is no assurance that the Fund will be able to
effect closing transactions at any particular time or at an acceptable price.
Reasons for the absence of a liquid secondary market include the following: (i)
there may be insufficient trading interest in certain options; (ii) restrictions
may be imposed by a securities exchange (an "Exchange") on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an Exchange; (v) the facilities of an Exchange or
the Options Clearing Corporation ("OCC") may not at all times be adequate to
handle current trading volume; or (vi) one or more Exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market thereon would cease to exist, although outstanding options
on that Exchange that had been issued by the OCC as a result of trades on that
Exchange would continue to be exercisable in accordance with their terms.

Low initial margin deposits made upon the opening of a futures position
and the writing of an option involve substantial leverage. As a result,
relatively small movements in the price of a contract can result in substantial
unrealized gains or losses. However, to the extent the Fund purchases or sells
futures contracts and options on futures contracts and purchases and writes
options on securities and securities indexes for hedging purposes, any losses
incurred in connection therewith should, if the hedging strategy is successful,
be offset, in whole or in part, by increases in the value of securities held by
the Fund or decreases in the prices of securities the Fund intends to acquire.
It is impossible to predict the amount of trading interest that may exist in
various types of options or futures. Therefore, no assurance can be given that
the Fund will be able to utilize these instruments effectively for the purposes
stated below. Furthermore, the Fund's ability to engage in options and futures
transactions may be limited by tax considerations. Although the Fund will only
engage in options and futures transactions for limited purposes, such
transactions involve certain risks. The Fund will not engage in options and
futures transactions for leveraging purposes.

Upon purchasing futures contracts of the type described above, the Fund
will maintain in a segregated account with its custodian cash or liquid high
grade debt obligations with a value, marked-to-market daily, at least equal to
the dollar amount of the Funds' purchase obligation, reduced by any amount
maintained as margin. Similarly, upon writing a call option, the Fund will
maintain in a segregated account with its custodian, liquid or high grade debt
instruments with a value, marked-to-market daily, at least equal to the market
value of the underlying contract (but not less than the strike price of the call
option) reduced by any amounts maintained as margin.

WRITING COVERED CALL OPTIONS ON SECURITIES

The Fund may write covered call options on optionable securities
(stocks, bonds, foreign exchange related futures, options and options on
futures) of the types in which it is permitted to invest in seeking to attain
its objective. Call options written by the Fund give the holder the right to buy
the underlying securities from the Fund at a stated exercise price. As the
writer of the call option, the Fund is obligated to own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges).

The Fund will receive a premium from writing a call option, which
increases the writer's return in the event the option expires unexercised or is
closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option and the volatility of the
market price of the underlying security. By writing a call option, the Fund
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option.

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<PAGE>

The Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Fund will realize a
profit or loss from such transaction if the cost of such transaction is less or
more, respectively, than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by unrealized appreciation of the underlying security owned by the Fund.

Options written by the Fund will normally have expiration dates not
more than one year from the date written. The exercise price of the options may
be below ("in-the-money"), equal to ("at-the-money") or above
("out-of-the-money") the current market price of the underlying securities at
the times the options are written. The Fund may engage in buy-and-write
transactions in which the Fund simultaneously purchases a security and writes a
call option thereon. Where a call option is written against a security
subsequent to the purchase of that security, the resulting combined position is
also referred to as a covered call option. Buy-and-write transactions using
in-the-money call options may be utilized when it is expected that the price of
the underlying security will remain flat or decline moderately during the option
period. In such a transaction, the Fund's maximum gain will be the premium
received from writing the option reduced by any excess of the price paid by the
Fund for the underlying security over the exercise price. Buy-and-write
transactions using at-the-money call options may be utilized when it is expected
that the price of the underlying security will remain flat or advance moderately
during the option period. In such a transaction, the Fund's gain will be limited
to the premiums received from writing the option. Buy-and-write transactions
using out-of-the-money call options may be utilized when it is expected that the
premiums received from writing the call option plus the appreciation in market
price of the underlying security up to the exercise price will be greater than
the appreciation in the price of the underlying security alone. In any of the
foregoing situations, if the market price of the underlying security declines,
the amount of such decline will be offset wholly or in part by the premium
received and the Fund may or may not realize a loss.

To the extent that a secondary market is available on any Exchanges,
the covered call option writer may liquidate his position prior to the
assignment of an exercise notice by entering a closing purchase transaction for
an option of the same series as the option previously written. The cost of such
a closing purchase, plus transaction costs, may be greater than the premium
received upon writing the original option, in which event the writer will have
incurred a loss in the transaction.

PURCHASING PUT AND CALL OPTIONS ON SECURITIES

The Fund may purchase put options to protect its portfolio holdings in
an underlying security against a decline in market value. Such hedge protection
is provided during the life of the put option since the Fund, as holder of the
put option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. In order
for a put option to be profitable, the market price of the underlying security
must decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, the Fund will reduce any
profit they might otherwise have realized in the underlying security by the
premium paid for the put option and by transaction costs.

The Fund may also purchase call options to hedge against an increase in
prices of securities that it wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. By using call options in this manner, the Fund will reduce
any profit they might have realized had they bought the underlying security at
the time they purchased the call option by the premium paid for the call option
and by transaction costs.

PURCHASE AND SALE OF OPTIONS AND FUTURES ON STOCK INDICES

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<PAGE>

The Fund may purchase and sell options on stock indices and stock index
futures as a hedge against movements in the equity markets.

Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars multiplied by a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike options on specific securities, all settlements
of options on stock indices are in cash and gain or loss depends on general
movements in the stocks included in the index rather than on price movements in
particular stocks. Currently, index options traded include the S&P 100 Index,
the S&P 500 Index, the NYSE Composite Index, the AMEX Market Value Index, the
National Over-the-Counter Index and other standard broadly based stock market
indices.

A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount multiplied by the difference between the value of a specific stock index
at the close of the last trading day of the contract and the price at which the
agreement is made. For example, the Fund may invest in Hang-Seng Index Futures.
No physical delivery of securities is made.

If Guinness Flight expects general stock market prices to rise, it
might purchase a call option on a stock index or a futures contract on that
index as a hedge against an increase in prices of particular equity securities
they want ultimately to buy. If in fact the stock index does rise, the price of
the particular equity securities intended to be purchased may also increase, but
that increase would be offset in part by the increase in the value of the Fund's
index option or futures contract resulting from the increase in the index. If,
on the other hand, Guinness Flight expects general stock market prices to
decline, it might purchase a put option or sell a futures contract on the index.
If that index does in fact decline, the value of some or all of the equity
securities in the Fund's portfolio may also be expected to decline, but that
decrease would be offset in part by the increase in the value of the Fund's
position in such put option or futures contract.

PURCHASE AND SALE OF INTEREST RATE FUTURES

The Fund may purchase and sell U.S. dollar interest rate futures
contracts on U.S. Treasury bills, notes and bonds and non-U.S. dollar interest
rate futures contracts on foreign bonds for the purpose of hedging fixed income
and interest sensitive securities against the adverse effects of anticipated
movements in interest rates.

The Fund may purchase futures contracts in anticipation of a decline in
interest rates when it is not fully invested in a particular market in which it
intends to make investments to gain market exposure that may in part or entirely
offset an increase in the cost of securities it intends to purchase. The Fund
does not consider purchases of futures contracts to be a speculative practice
under these circumstances. In a substantial majority of these transactions, the
Fund will purchase securities upon termination of the futures contract.

The Fund may sell U.S. dollar and non-U.S. dollar interest rate futures
contracts in anticipation of an increase in the general level of interest rates.
Generally, as interest rates rise, the market value of the fixed income
securities held by the Fund will fall, thus reducing the net asset value of the
holder. This interest rate risk can be reduced without employing futures as a
hedge by selling long-term fixed income securities and either reinvesting the
proceeds in securities with shorter maturities or by holding assets in cash.
This strategy, however, entails increased transaction costs to the Fund in the
form of dealer spreads and brokerage commissions.

The sale of U.S. dollar and non-U.S. dollar interest rate futures
contracts provides an alternative means of hedging against rising interest
rates. As rates increase, the value of the Fund's short

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position in the futures contracts will also tend to increase, thus offsetting
all or a portion of the depreciation in the market value of the Fund's
investments which are being hedged. While the Fund will incur commission
expenses in entering and closing out futures positions (which is done by taking
an opposite position from the one originally entered into, which operates to
terminate the position in the futures contract), commissions on futures
transactions are lower than transaction costs incurred in the purchase and sale
of portfolio securities.

OPTIONS ON STOCK INDEX FUTURES CONTRACTS AND INTEREST RATE FUTURES CONTRACTS

The Fund may write call options and purchase call and put options on
stock index and interest rate futures contracts. The Fund may use such options
on futures contracts in connection with their hedging strategies in lieu of
purchasing and writing options directly on the underlying securities or stock
indices or purchasing and selling the underlying futures. For example, the Fund
may purchase put options or write call options on stock index futures or
interest rate futures, rather than selling futures contracts, in anticipation of
a decline in general stock market prices or rise in interest rates,
respectively, or purchase call options on stock index or interest rate futures,
rather than purchasing such futures, to hedge against possible increases in the
price of equity securities or debt securities, respectively, which the Fund
intends to purchase.

PURCHASE AND SALE OF CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS

In order to hedge its portfolio and to protect it against possible
variations in foreign exchange rates pending the settlement of securities
transactions, the Fund may buy or sell foreign currencies or may deal in forward
currency contracts. The Fund may also invest in currency futures contracts and
related options. If a fall in exchange rates for a particular currency is
anticipated, the Fund may sell a currency futures contract or a call option
thereon or purchase a put option on such futures contract as a hedge. If it is
anticipated that exchange rates will rise, the Fund may purchase a currency
futures contract or a call option thereon or sell (write) a put option to
protect against an increase in the price of securities denominated in a
particular currency the Fund intends to purchase. These futures contracts and
related options thereon will be used only as a hedge against anticipated
currency rate changes, and all options on currency futures written by the Fund
will be covered.

A currency futures contract sale creates an obligation by the Fund, as
seller, to deliver the amount of currency called for in the contract at a
specified future time for a specified price. A currency futures contract
purchase creates an obligation by the Fund, as purchaser, to take delivery of an
amount of currency at a specified future time at a specified price. Although the
terms of currency futures contracts specify actual delivery or receipt, in most
instances the contracts are closed out before the settlement date without the
making or taking of delivery of the currency. Closing out of a currency futures
contract is effected by entering into an offsetting purchase or sale
transaction. Unlike a currency futures contract, which requires the parties to
buy and sell currency on a set date, an option on a currency futures contract
entitles its holder to decide on or before a future date whether to enter into
such a contract or let the option expire.

The Fund will write (sell) only covered call options on currency
futures. This means that the Fund will provide for their obligations upon
exercise of the option by segregating sufficient cash or short-term obligations
or by holding an offsetting position in the option or underlying currency
future, or a combination of the foregoing. The Fund will, so long as they are
obligated as the writer of a call option on currency futures, own on a
contract-for-contract basis an equal long position in currency futures with the
same delivery date or a call option on stock index futures with the difference,
if any, between the market value of the call written and the market value of the
call or long currency futures purchased maintained by the Fund in cash, cash
equivalents or other liquid securities in a segregated account with its
custodian. If at the close of business on any day the market value of the call
purchased by the Fund falls below 100% of the market value of the call written
by the Fund, the Fund will so segregate an amount of cash, cash equivalents or
other liquid securities equal in value to the difference. Alternatively, the
Fund may cover the call option through segregating with the custodian an amount
of the particular foreign currency equal to the amount of foreign currency per
futures contract option times the number of options written by the Fund.

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<PAGE>

If other methods of providing appropriate cover are developed, the Fund
reserves the right to employ them to the extent consistent with applicable
regulatory and exchange requirements.

In connection with transactions in stock index options, stock index
futures, interest rate futures, foreign currency futures and related options on
such futures, the Fund will be required to deposit as "initial margin" an amount
of cash and short-term U.S. Government securities generally equal to from 5% to
10% of the contract amount. Thereafter, subsequent payments (referred to as
"variation margin") are made to and from the broker to reflect changes in the
value of the futures contract.

OPTIONS ON FOREIGN CURRENCIES

The Fund may write call options and purchase call and put options on
foreign currencies to enhance investment performance and for hedging purposes in
a manner similar to that in which futures contracts on foreign currencies, or
forward contracts, will be utilized as described above. For example, a decline
in the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Fund may purchase put
options on the foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount in dollars and
will thereby offset, in whole or in part, the adverse effect on its portfolio
which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Fund could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.

Also, where the Fund anticipates a decline in the dollar value of
foreign currency denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised, and the diminution in value of portfolio securities will be
offset by the amount of the premium received. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund would be required to sell the underlying currency at a loss which may not
be offset by the amount of the premium. Through the writing of options on
foreign currencies, the Fund also may be required to forego all or a portion of
the benefits which might otherwise have been obtained from favorable movements
in exchange rates.

The Fund intends to write only covered call options on foreign
currencies. A call option written on a foreign currency by the Fund is "covered"
if the Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by its custodian, which acts as the Fund's custodian, or by a designated
sub-custodian) upon conversion or exchange of other foreign currency held in its
portfolio. A call option is also covered if the Fund has a call on the same
foreign currency and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
or the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, U.S. Government
Securities and other high-grade liquid debt securities in a segregated account
with its custodian or with a designated sub-custodian.

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<PAGE>

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Fund may purchase or sell forward foreign currency exchange
contracts ("forward contracts") to attempt to minimize the risk to the Fund from
variations in foreign exchange rates. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers. The Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). Additionally, for example, when the Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency, or when the Fund believes that the U.S.
dollar may suffer a substantial decline against foreign currency, it may enter
into a forward purchase contract to buy that foreign currency for a fixed dollar
amount ("position hedge"). In this situation, the Fund may, in the alternative,
enter into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where it believes that the U.S. dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio securities
of the sector are denominated ("cross-hedge"). If the Fund enters into a
position hedging transaction, cash not available for investment or U.S.
Government Securities or other high quality debt securities will be placed in a
segregated account in an amount sufficient to cover the Fund's net liability
under such hedging transactions. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account so that the value of the account will equal the amount of the Fund's
commitment with respect to its position hedging transactions. As an alternative
to maintaining all or part of the separate account, the Fund may purchase a call
option permitting it to purchase the amount of foreign currency being hedged by
a forward sale contract at a price no higher than the forward contract price or
the Fund may purchase a put option permitting it to sell the amount of foreign
currency subject to a forward purchase contract at a price as high or higher
than the forward contract price. Unanticipated changes in currency prices would
result in lower overall performance for the Fund than if it had not entered into
such contracts.

Generally, the Fund will not enter into a forward foreign currency
exchange contract with a term of greater than one year. At the maturity of the
contract, the Fund may either sell the portfolio security and make delivery of
the foreign currency, or may retain the security and terminate the obligation to
deliver the foreign currency by purchasing an "offsetting" forward contract with
the same currency trader obligating the Fund to purchase, on the same maturity
date, the same amount of foreign currency.

It is impossible to forecast with absolute precision the market value
of portfolio securities at the expiration of the contract. Accordingly, it may
be necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Fund is obligated to
deliver.

If the Fund retains the portfolio security and engages in an offsetting
transaction, it will incur a gain or a loss (as described below) to the extent
that there has been movement in forward contract prices. If the Fund engages in
an offsetting transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline during the period
between entering into a forward contract for the sale of a foreign currency and
the date the Fund enters into an offsetting contract for the purchase of the
foreign currency, the Fund will realize a gain to the extent the price of the
currency the Fund has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency the Fund has agreed to purchase exceeds
the price of the currency the Fund has agreed to sell.

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<PAGE>

The Fund's dealing in forward foreign currency exchange contracts will
be limited to the transactions described above. Of course, the Fund is not
required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
Guinness Flight. It also should be realized that this method of protecting the
value of the Fund's portfolio securities against the decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange which one can achieve at
some future point in time. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time they tend to limit any potential gain which might result should
the value of such currency increase.

ADDITIONAL RISKS OF FUTURES CONTRACTS AND RELATED OPTIONS, FORWARD FOREIGN
CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES

The market prices of futures contracts may be affected by certain
factors. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the securities
and futures markets. Second, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may also cause temporary price distortions.

In addition, futures contracts in which the Fund may invest may be
subject to commodity exchange imposed limitations on fluctuations in futures
contract prices during a single day. Such regulations are referred to as "daily
price fluctuation limits" or "daily limits." During a single trading day no
trades may be executed at prices beyond the daily limit. Once the price of a
futures contract has increased or decreased by an amount equal to the daily
limit, positions in those futures cannot be taken or liquidated unless both a
buyer and seller are willing to effect trades at or within the limit. Daily
limits, or regulatory intervention in the commodity markets, could prevent the
Fund from promptly liquidating unfavorable positions and adversely affect
operations and profitability.

Options on foreign currencies and forward foreign currency exchange
contracts ("forward contracts") are not traded on contract markets regulated by
the Commodity Futures Trading Commission ("CFTC") and are not regulated by the
Securities and Exchange Commission ("SEC"). Rather, forward currency contracts
are traded through financial institutions acting as market-makers. Foreign
currency options are traded on certain national securities exchanges, such as
the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject
to SEC regulation. In the forward currency market, there are no daily price
fluctuation limits, and adverse market movements could therefore continue to an
unlimited extent over a period of time. Moreover, a trader of forward contracts
could lose amounts substantially in excess of its initial investments, due to
the collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the OCC, thereby reducing the risk of
counterparty default. Further, a liquid secondary market in options traded on a
national securities exchange may exist, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options,
however, are subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exercise and settlement of such
options must be made exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a result, the
OCC may, if it

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<PAGE>

determines that foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would result in
undue burdens on the OCC or its clearing member, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of delivery
of currency, the fixing of dollar settlement prices or prohibitions on exercise.

In addition, futures contracts and related options and forward
contracts and options on foreign currencies may be traded on foreign exchanges,
to the extent permitted by the CFTC. Such transactions are subject to the risk
of governmental actions affecting trading in or the prices of foreign currencies
or securities. The value of such positions also could be adversely affected by
(a) other complex foreign political and economic factors, (b) lesser
availability than in the United States of data on which to make trading
decisions, (c) delays in the Fund's ability to act upon economic events
occurring in foreign markets during nonbusiness hours in the United States and
the United Kingdom, (d) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States, and (e)
lesser trading volume.

REGULATORY MATTERS

The staff of the SEC has taken the position that the purchase and sale
of futures contracts and the writing of related options may involve senior
securities for the purposes of the restrictions contained in Section 18 of the
1940 Act on investment companies issuing senior securities. However, the SEC
staff has issued letters declaring that it will not recommend enforcement action
under Section 18 if an investment company:

(i) sells futures contracts on an index of
securities that correlate with its
portfolio securities to offset expected
declines in the value of its portfolio
securities;

(ii) writes call options on futures contracts,
stock indexes or other securities, provided
that such options are covered by the
investment company's holding of a
corresponding long futures position, by its
ownership of portfolio securities which
correlate with the underlying stock index,
or otherwise;

(iii) purchases futures contracts, provided the
investment company establishes a segregated
account ("cash segregated account")
consisting of cash or cash equivalents in an
amount equal to the total market value of
such futures contracts less the initial
margin deposited therefor; and

(iv) writes put options on futures contracts,
stock indices or other securities, provided
that such options are covered by the
investment company's holding of a
corresponding short futures position, by
establishing a cash segregated account in an
amount equal to the value of its obligation
under the option, or otherwise.

In connection with its proposed futures and options transactions, the
Fund will file with the CFTC a notice of eligibility for exemption from the
definition of (and therefore from CFTC regulation as) a "commodity pool
operator" under the Commodity Exchange Act. The Fund is eligible for, and is
claiming, exclusion from the definition of the term commodity pool operator in
connection with the operations of the Fund, in accordance with subparagraph (1)
of paragraph (a) of CFTC Rule 4.5, because the Fund operates in a manner such
that:

(i) the Fund uses commodity futures or commodity
options contracts solely for bona fide hedging purposes within
the meaning and intent of CFTC Rule 1.3(z)(1); provided,
however, that in the alternative, with respect to each long
position in a commodity future or commodity option contract
which is used as part of a portfolio management strategy and
which is incidental to the Fund's activities in the underlying
cash market but would not come within

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the meaning and intent of Rule 1.3(z)(1), as a substitute for
compliance with this paragraph (i), the underlying commodity
value of such contract at all times does not exceed the sum
of:

(A) Cash set aside in an identifiable manner, or
short-term United States debt obligations or other United
States dollar-denominated high quality short-term money market
instruments so set aside, plus any funds deposited as margin
on such contract;

(B) Cash proceeds from existing investments due in
30 days; and

(ii) the Fund does not enter into commodity futures
and commodity options contracts for which the aggregate
initial margin and premiums exceed five (5) percent of the
fair market value of the Fund's assets, after taking into
account unrealized profits and unrealized losses on any such
contracts it has entered into; provided, however, that in the
case of an option that is in-the-money at the time of
purchase, the in-the-money amount as defined in CFTC Rule
190.01(x) may be excluded in computing such five (5) percent;

The Fund will conduct their purchases and sales of futures contracts
and writing of related options transactions in accordance with the foregoing.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements. Under a repurchase
agreement, the Fund acquires a debt instrument for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price in that it reflects an
agreed-upon market interest rate effective for the period of time during which
the Fund's money is invested. The Fund's risk is limited to the ability of the
seller to pay the agreed-upon sum upon the delivery date. When the Fund enters
into a repurchase agreement, it obtains collateral having a value at least equal
to the amount of the purchase price. Repurchase agreements can be considered
loans as defined by the 1940 Act, collateralized by the underlying securities.
The return on the collateral may be more or less than that from the repurchase
agreement. The securities underlying a repurchase agreement will be marked to
market every business day so that the value of the collateral is at least equal
to the value of the loan, including the accrued interest earned. In evaluating
whether to enter into a repurchase agreement, Guinness Flight will carefully
consider the creditworthiness of the seller. If the seller defaults and the
value of the collateral securing the repurchase agreement declines, the Fund may
incur a loss.

ILLIQUID AND RESTRICTED SECURITIES

The Fund has adopted the following investment policy, which may be
changed by the vote of the Board of Trustees. The Fund will not invest in
illiquid securities if immediately after such investment more than 15% of the
Fund's net assets (taken at market value) would be invested in such securities.
For this purpose, illiquid securities include (a) securities that are illiquid
by virtue of the absence of a readily available market or legal or contractual
restrictions on resale, (b) participation interests in loans that are not
subject to puts, (c) covered call options on portfolio securities written by the
Fund over-the-counter and the cover for such options, and (d) repurchase
agreements not terminable within seven days.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered for sale to the public, securities that are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within

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<PAGE>

seven days. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.

In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act of 1933,
as amended (the "Securities Act"), including repurchase agreements, commercial
paper, foreign securities, municipal securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment. The fact that there are contractual or legal restrictions
on resale to the general public or to certain institutions may not be indicative
of the liquidity of such investments.

The SEC has adopted Rule 144A, which allows a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act applicable to resales of certain securities
to qualified institutional buyers. Guinness Flight anticipates that the market
for certain restricted securities such as institutional commercial paper will
expand further as a result of this new regulation and the development of
automated systems for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers, Inc. (the "NASD").

Guinness Flight will monitor the liquidity of restricted securities in
the Fund's portfolio under the supervision of the Fund's Board of Trustees. In
reaching liquidity decision, Guinness Flight will consider, among other things,
the following factors: (1) the frequency of trades and quotes for the security;
(2) the number of dealers wishing to purchase or sell security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
security; and (4) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).

OTHER RISK FACTORS AND SPECIAL CONSIDERATIONS

Investors should recognize that investing in securities of companies in
emerging countries, involves certain special considerations and risk factors
which are not typically associated with investing in securities of U.S.
companies. The following disclosure augments the information provided in the
prospectus under the heading "Other Risk Considerations."

ADDITIONAL FOREIGN CURRENCY CONSIDERATIONS

The Fund's assets will be invested principally in securities of
entities in foreign markets and substantially all of the income received by the
Fund will be in foreign currencies. If the value of the foreign currencies in
which the Fund receives its income falls relative to the U.S. dollar between the
earning of the income and the time at which the Fund converts the foreign
currencies to U.S. dollars, the Fund will be required to liquidate securities in
order to make distributions if the Fund has insufficient cash in U.S. dollars to
meet distribution requirements. The liquidation of investments, if required, may
have an adverse impact on the Fund's performance.

Changes in foreign currency exchange rates also will affect the value
of securities in the Fund's portfolio and the unrealized appreciation or
depreciation of investments. Further, the Fund may incur costs in connection
with conversions between various currencies. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire immediately to resell that currency to the dealer. The
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the

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<PAGE>

foreign currency exchange market, or through entering into forward, futures or
options contracts to purchase or sell foreign currencies.

The Fund may enter into forward currency exchange contracts and
currency futures contracts and options on such futures contracts, as well as
purchase put or call options on currencies, in U.S. or foreign markets to
protect the value of some portion or all of its portfolio holdings against
currency risks by engaging in hedging transactions. There can be no guarantee
that instruments suitable for hedging currency or market shifts will be
available at the time when the Fund wishes to use them. Moreover, investors
should be aware that in most emerging countries, such as China, the markets for
certain of these hedging instruments are not highly developed and that in many
emerging countries no such markets currently exist.

INVESTMENT RESTRICTIONS AND POLICIES

Investment restrictions are fundamental policies and cannot be changed
without approval of the holders of a majority (as defined in the 1940 Act) of
the outstanding shares of the Fund. As used in the Prospectus and this Statement
of Additional Information, the term "majority of the outstanding shares" of the
Fund means the vote of the lesser of (i) 67% or more of the shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund. The following are the Fund's investment
restrictions set forth in their entirety.

INVESTMENT RESTRICTIONS

The Fund may not:

1. Issue senior securities, except that the Fund may borrow up to 33
1/3% of the value of its total assets from a bank (i) to increase its holdings
of portfolio securities, (ii) to meet redemption requests, or (iii) for such
short-term credits as may be necessary for the clearance or settlement of the
transactions. The Fund may pledge its assets to secure such borrowings.

2. Invest 25% or more of the total value of its assets in a particular
industry, except that this restriction shall not apply to U.S. Government
Securities.

3. Buy or sell commodities or commodity contracts or real estate or
interests in real estate (including real estate limited partnerships), except
that it may purchase and sell futures contracts on stock indices, interest rate
instruments, foreign currencies, securities which are secured by real estate or
commodities, and securities of companies which invest or deal in real estate or
commodities.

4. Make loans, except through repurchase agreements to the extent
permitted under applicable law.

5. Act as an underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under applicable securities laws.

Investment policies are not fundamental and may be changed by the Board
of Trustees without shareholder approval. The following are the Fund's
investment policies set forth in their entirety.

INVESTMENT POLICIES

The Fund may not:

1. Purchase securities on margin, except such short-term credits as may
be necessary for clearance of transactions and the maintenance of margin with
respect to futures contracts.

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<PAGE>

2. Make short sales of securities or maintain a short position (except
that the Fund may maintain short positions in foreign currency contracts,
options and futures contracts).

3. Purchase or otherwise acquire the securities of any open-end
investment company (except in connection with a merger, consolidation,
acquisition of substantially all of the assets or reorganization of another
investment company) if, as a result, the Fund and all of its affiliates would
own more than 3% of the total outstanding stock of that company.

Percentage restrictions apply at the time of acquisition and any
subsequent change in percentages due to changes in market value of portfolio
securities or other changes in total assets will not be considered a violation
of such restrictions.

PORTFOLIO TRANSACTIONS

All orders for the purchase or sale of portfolio securities are placed
on behalf of the Fund by Guinness Flight subject to the supervision of the
Guinness Flight Funds and the Board of Trustees and pursuant to authority
contained in the investment advisory agreement (the "Advisory Agreement")
between the Fund and Guinness Flight. In selecting such brokers or dealers,
Guinness Flight will consider various relevant factors, including, but not
limited to the best net price available, the size and type of the transaction,
the nature and character of the markets for the security to be purchased or
sold, the execution efficiency, settlement capability, financial condition of
the broker-dealer firm, the broker-dealer's execution services rendered on a
continuing basis and the reasonableness of any commissions.

In addition to meeting the primary requirements of execution and price,
brokers or dealers may be selected who provide research services, or statistical
material or other services to the Fund or to Guinness Flight for the Fund's use,
which in the opinion of the Board of Trustees, are reasonable and necessary to
the Fund's normal operations. Those services may include economic studies,
industry studies, security analysis or reports, sales literature and statistical
services furnished either directly to the Fund or to Guinness Flight. Such
allocation shall be in such amounts as Guinness Flight Funds shall determine and
Guinness Flight shall report regularly to Guinness Flight Funds who will in turn
report to the Board of Trustees on the allocation of brokerage for such
services.

The receipt of research from broker-dealers may be useful to Guinness
Flight in rendering investment management services to its other clients, and
conversely, such information provided by brokers or dealers who have executed
orders on behalf of Guinness Flight's other clients may be useful to Guinness
Flight in carrying out its obligations to the Fund. The receipt of such research
may not reduce Guinness Flight's normal independent research activities.

Guinness Flight is authorized, subject to best price and execution, to
place portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the Fund and is authorized to use First Fund
Distributors, Inc. (the "Distributor") on an agency basis, to effect a
substantial amount of the portfolio transactions which are executed on the New
York or American Stock Exchanges, regional exchanges and foreign exchanges where
relevant, or which are traded in the over-the-counter market.

Brokers or dealers who execute portfolio transactions on behalf of the
Fund may receive commissions which are in excess of the amount of commissions
which other brokers or dealers would have charged for effecting such
transactions; provided, Guinness Flight Funds determines in good faith that such
commissions are reasonable in relation to the value of the brokerage and/or
research services provided by such executing brokers or dealers viewed in terms
of a particular transaction or Guinness Flight Fund's overall responsibilities
to the Fund.

It may happen that the same security will be held by other clients of
Guinness Flight. When the other clients are simultaneously engaged in the
purchase or sale of the same security, the prices and amounts will be allocated
in accordance with a formula considered by Guinness Flight to be equitable to
each, taking into

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consideration such factors as size of account, concentration of holdings,
investment objectives, tax status, cash availability, purchase cost, holding
period and other pertinent factors relative to each account. In some cases this
system could have a detrimental effect on the price or volume of the security as
far as the Fund is concerned. In other cases, however, the ability of the Fund
to participate in volume transactions will produce better executions for the
Fund.

COMPUTATION OF NET ASSET VALUE

The net asset value of the Fund is determined at 4:15 p.m. New York
time, on each day that the New York Stock Exchange is open for business and on
such other days as there is sufficient trading in the Fund's securities to
affect materially the net asset value per share of the Fund. The Fund will be
closed on New Years Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

The Fund will invest in foreign securities, and as a result, the
calculation of the Fund's net asset value may not take place contemporaneously
with the determination of the prices of certain of the portfolio securities used
in the calculation. Occasionally, events which affect the values of such
securities and such exchange rates may occur between the times at which they are
determined and the close of the New York Stock Exchange and will therefore not
be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
under procedures established by and under the supervision of the Board of
Trustees. Portfolio securities of the Fund which are traded both on an exchange
and in the over-the-counter market, will be valued according to the broadest and
most representative market. All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. Dollar values at the mean
between the bid and offered quotations of the currencies against U.S. Dollars as
last quoted by any recognized dealer. When portfolio securities are traded, the
valuation will be the last reported sale price on the day of valuation. (For
securities traded on the New York Stock Exchange, the valuation will be the last
reported sales price as of the close of the Exchange's regular trading session,
currently 4:00 p.m. New York time.) If there is no such reported sale or the
valuation is based on the over-the-counter market, the securities will be valued
at the last available bid price or at the mean between the bid and asked prices,
as determined by the Board of Trustees. As of the date of this Statement of
Additional Information, such securities will be valued by the latter method.
Securities for which reliable quotations are not readily available and all other
assets will be valued at their respective fair market value as determined in
good faith by, or under procedures established by, the Board of Trustees of the
Fund.

Money market instruments with less than sixty days remaining to
maturity when acquired by the Fund will be valued on an amortized cost basis by
the Fund, excluding unrealized gains or losses thereon from the valuation. This
is accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If the Fund acquires a
money market instrument with more than sixty days remaining to its maturity, it
will be valued at current market value until the 60th day prior to maturity, and
will then be valued on an amortized cost basis based upon the value on such date
unless the Board of Trustees determines during such 60-day period that this
amortized cost value does not represent fair market value.

All liabilities incurred or accrued are deducted from the Fund's total
assets. The resulting net assets are divided by the number of shares of the Fund
outstanding at the time of the valuation and the result (adjusted to the nearest
cent) is the net asset value per share.

PERFORMANCE INFORMATION

For purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to stock or other relevant indices in
advertisements or in reports to shareholders, performance will be stated both in
terms of total return and in terms of yield. The total return basis combines
principal and dividend income changes for the periods shown. Principal changes
are based on the difference between the beginning and

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closing net asset values for the period and assume reinvestment of dividends and
distributions paid by the Fund. Dividends and distributions are comprised of net
investment income and net realized capital gains. Under the rules of the SEC,
mutual funds which advertise performance must include total return quotes
calculated according to the following formula:

P(1 + T)^n = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 5 or 10 year period or at the end of the
1, 5 or 10 year period (or fractional
portion thereof)

In calculating the ending redeemable value, all dividends and
distributions by the Fund are assumed to have been reinvested at net asset value
as described in the prospectus on the reinvestment dates during the period.
Total return, or "T" in the formula above, is computed by finding the average
annual compounded rates of return over the 1, 5 and 10 year periods (or
fractional portion thereof) that would equate the initial amount invested to the
ending redeemable value.

The Fund may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Analytical Services, Inc. or similar independent services or
financial publications, the Fund calculates its aggregate total return for the
specified periods of time by assuming the reinvestment of each dividend or other
distribution at net asset value on the reinvestment date. Percentage increases
are determined by subtracting the initial net asset value of the investment from
the ending net asset value and by dividing the remainder by the beginning net
asset value. Such alternative total return information will be given no greater
prominence in such advertising than the information prescribed under the SEC's
rules.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Fund has elected to be governed by Rule 18f-1 of the 1940 Act,
under which the Fund is obligated to redeem the shares of any shareholder solely
in cash up to the lesser of 1% of the net asset value of the Fund or $250,000
during any 90-day period. Should any shareholder's redemption exceed this
limitation, the Fund can, at its sole option, redeem the excess in cash or in
readily marketable portfolio securities. Such securities would be selected
solely by the Fund and valued as in computing net asset value. In these
circumstances a shareholder selling such securities would probably incur a
brokerage charge and there can be no assurance that the price realized by a
shareholder upon the sale of such securities will not be less than the value
used in computing net asset value for the purpose of such redemption.

TAX MATTERS

The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.

Qualification as a Regulated Investment Company

The Fund has elected to be taxed as a regulated investment company for
federal income tax purposes under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As a regulated investment company, the Fund is
not subject to federal income tax on the portion of its net investment income
(i.e., taxable interest, dividends and other taxable ordinary income, net of
expenses) and capital gain net income

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(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and will therefore satisfy the Distribution Requirement.

In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
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 (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from such sale or other disposition of securities for this purpose.

In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code Section 1256 (unless the Fund
elects otherwise), will generally be treated as ordinary income or loss.

In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (as applicable,
depending on the type of the Fund) (1) the asset is used to close a "short sale"
(which includes for certain purposes the acquisition of a put option) or is
substantially identical to another asset so used, or (2) the asset is otherwise
held by the Fund as part of a "straddle" (which term generally excludes a
situation where the asset is stock and the Fund grants a qualified covered call
option (which, among other things, must not be deep-in-the-money) with respect
thereto), or (3) the asset is stock and the Fund grants an in-the-money
qualified covered call option with respect thereto. However, for purposes of the
Short-Short Gain Test, the holding period of the asset disposed of may be
reduced only in the case of clause (1) above. In addition, the Fund may be
required to defer the recognition of a loss on the disposition of an asset held
as part of a straddle to the extent of any unrecognized gain on the offsetting
position.

Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital

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<PAGE>

gain or loss. For purposes of the Short-Short Gain Test, the holding period of
an option written by the Fund will commence on the date it is written and end on
the date it lapses or the date a closing transaction is entered into.
Accordingly, the Fund may be limited in its ability to write options which
expire within three months and to enter into closing transactions at a gain
within three months of the writing of options.

Certain transactions that may be engaged in by the Fund (such as
regulated futures contracts, certain foreign currency contracts, and options on
stock indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
the taxable year together with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. Any capital gain or loss for the taxable year with respect to Section 1256
contracts (including any capital gain or loss arising as a consequence of the
year-end deemed sale of such contracts) is generally treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. The Fund, however,
may elect not to have this special tax treatment apply to Section 1256 contracts
that are part of a "mixed straddle" with other investments of the Fund that are
not Section 1256 contracts. Under Treasury Regulations, deemed gains arising
from Section 1256 contracts will be treated for purposes of the Short-Short Gain
Test as being derived from securities held for not less than three months.

The Fund may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the Fund invests in a PFIC, it may elect to
treat the PFIC as a qualified electing fund (a "QEF"), in which event the Fund
will each year have ordinary income equal to its pro rata share of the PFIC's
ordinary earnings for the year and long-term capital gain equal to its pro rata
share of the PFIC's net capital gain for the year, regardless of whether the
Fund receives distributions of any such ordinary earning or capital gain from
the PFIC. If the Fund does not elect to treat the PFIC as a QEF, then, in
general, (1) any gain recognized by the Fund upon sale or other disposition of
its interest in the PFIC or any excess distribution received by the Fund from
the PFIC will be allocated ratably over the Fund's holding period of its
interest in the PFIC, (2) the portion of such gain or excess distribution so
allocated to the year in which the gain is recognized or the excess distribution
is received shall be included in the Fund's gross income for such year as
ordinary income (and the distribution of such portion by the Fund to
shareholders will be taxable as an ordinary income dividend, but such portion
will not be subject to tax at the Fund level), (3) the Fund shall be liable for
tax on the portions of such gain or excess distribution so allocated to prior
years in an amount equal to, for each such prior year, the sum of (i) the amount
of gain or excess distribution allocated to such prior year multiplied by the
highest tax rate (individual or corporate) in effect for such prior year and
(ii) interest on the amount determined under clause (i) for the period from the
due date for filing a return for such prior year until the date for filing a
return for the year in which the gain is recognized or the excess distribution
is received at the rates and methods applicable to underpayments of tax for such
period, and (4) the distribution by the Fund to shareholders of the portions of
such gain or excess distribution so allocated to prior years (net of the tax
payable by the Fund thereon) will again be taxable to the shareholders as an
ordinary income dividend.

Under proposed Treasury Regulations, a fund holding PFIC stock can
elect to recognize as gain the excess, as of the last day of its taxable year,
of the fair market value of each share of PFIC stock over the fund's adjusted
tax basis in that share ("mark to market gain"). Such mark to market gain will
constitute ordinary income and will not be subject to the Short-Short Gain Test,
and the Fund's holding period with respect to such PFIC stock will commence on
the first day of the next taxable year. If the Fund makes such election in the
first taxable year it holds PFIC stock, it will not incur the tax described in
the preceding paragraph.

Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as

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discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss incurred after October
31 as if it had been incurred in the succeeding year.

In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to each of which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and does not hold more than 10% of the outstanding
voting securities of such 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
U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option.

If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.

Excise Tax on Regulated Investment Companies

A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.

For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).

The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.

Fund Distributions

The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they generally should not qualify for the 70%
dividends-received deduction for corporate shareholders.

The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. Net capital gain that is distributed and designated as a capital
gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the

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length of time the shareholder has held his shares or whether such gain was
recognized by the Fund prior to the date on which the shareholder acquired his
shares.

Conversely, if the Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.

Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
may entitle the Fund to a reduced rate of, or exemption from, taxes on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested in various
countries is not known. If more than 50% of the value of the Fund's total assets
at the close of its taxable year consist of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign taxes paid by the Fund. If the Fund so elects, each
shareholder would be required to include in gross income, even though not
actually received, his pro rata share of the foreign taxes paid by the Fund, but
would be treated as having paid his pro rata share of such foreign taxes and
would therefore be allowed to either deduct such amount in computing taxable
income or use such amount (subject to various Code limitations) as a foreign tax
credit against federal income tax (but not both). For purposes of the foreign
tax credit limitation rules of the Code, each shareholder would treat as foreign
source income his pro rata share of such foreign taxes plus the portion of
dividends received from the Fund representing income derived from foreign
sources. No deduction for foreign taxes could be claimed by an individual
shareholder who does not itemize deductions. Each shareholder should consult his
own tax adviser regarding the potential application of foreign tax credits.

Distributions by the Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.

Distributions by the Fund will be treated in the manner described above
regardless of whether they are paid in cash or reinvested in additional shares
of the Fund (or of another fund). Shareholders receiving a distribution in the
form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date. In addition, if the net asset value at the time a
shareholder purchases shares of the Fund reflects undistributed net investment
income or recognized capital gain net income, or unrealized appreciation in the
value of the assets of the Fund, distributions of such amounts will be taxable
to the shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.

Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.

The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Fund that it is not subject to backup withholding or that it is an "exempt
recipient" (such as a corporation).

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Sale or Redemption of Shares

A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in determining the holding period of
shares. Long-term capital gains of noncorporate taxpayers are currently taxed at
a maximum rate 11.6% lower than the maximum rate applicable to ordinary income.
Capital losses in any year are deductible only to the extent of capital gains
plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.

Foreign Shareholders

Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.

If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Furthermore, such a foreign shareholder may be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) on the gross income resulting from the
Fund's election to treat any foreign taxes paid by it as paid by its
shareholders, but may not be allowed a deduction against this gross income or a
credit against this U.S. withholding tax for the foreign shareholder's pro rata
share of such foreign taxes which it is treated as having paid. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Fund, capital gain dividends and amounts
retained by the Fund that are designated as undistributed capital gains.

If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.

In the case of foreign noncorporate shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.

The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.

Effect of Future Legislation; Local Tax Considerations

The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the

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conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.

Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.

MANAGEMENT OF THE FUND

The Board of Trustees and executive officers of the Fund and their
principal occupations for the past five years are listed below. The address of
each Trustee is 225 South Lake Avenue, Suite 777, Pasadena, California, 91101.

James I. Fordwood* -- Trustee. Mr. Fordwood is President of
Balmacara Production Inc., an investment
holding and management services company
that he founded in 1987. Currently,
Balmacara generally is responsible for the
general accounts and banking functions
for United States companies specializing
in oil and gas operations.

Dr. Gunter Dufey*-- Trustee. Dr. Dufey has been a member of the
faculty of the Graduate School of Business
Administration at the University of Michigan
since 1969. His academic interests center
on International Money and Capital Markets
as well as on Financial Policy of
Multinational Corporations. Outside of
academia, he has been a member of the Board
of Directors of GMAC Auto Receivables
Corporation since 1992.

Dr. Bret A. Herscher* - Trustee. Dr. Herscher is President of Pacific
Consultants, a technical and technology
management consulting company serving the
Electronic industry and venture capital
community, which he co-founded in 1988.
Additionally, Dr. Herscher has been a Director of
Strawberry Tree Incorporated, a manufacturer of
computer based Data Acquisition and Control products
for factory and laboratory use, since 1989.

J. Brooks Reece, Jr.* -- Trustee. Mr. Reece has been a Vice-President of
Adcole Corporation, a manufacturer of precision
measuring machines and sun angle sensors for space
satellites, since 1993. Prior to becoming a
Vice-President, he was the Manager of sales and
marketing. In addition, Mr. Reece is the
Vice-President and Director of Adcole Far East,
Ltd., a subsidiary that manages Adcole sales and
service throughout Asia. He has held this position
since 1986.

Robert H. Wadsworth -- President/Assistant Treasurer. 4455 East Camelback
Road, Suite 261E, Phoenix, Arizona 85018.
President, Robert H. Wadsworth and Associates, Inc.
(consultants) and Investment Company Administration
Corporation. President and Treasurer, First Fund
Distributors, Inc.

- --------
* Not an "interested person," as that term is defined by the 1940 Act.

-23-

<PAGE>

Eric M. Banhazl -- Treasurer. 2025 East Financial Way, Suite 101,
Glendora, California 91741. Senior Vice President,
Robert H. Wadsworth & Associates, Inc. (consultants)
and Investment Company Administration Corporation
since March 1990; Formerly Vice President,
Huntington Advisors, Inc. (investment advisor).

Steven J. Paggioli -- Secretary. 479 West 22nd Street, New York, New York
10011. Executive Vice President, Robert H.
Wadsworth & Associates, Inc. (consultant) and
Investment Company Administration Corporation.
Vice President and Secretary, First Fund
Distributors, Inc.

Rita Dam-- Assistant Treasurer. 2025 East Financial Way,
Suite 101, Glendora, California 91741.
Vice President, Investment Company Administration
Corporation since 1994. Member of the Financial
Services Audit Group at Coopers & Lybrand, LLP from
1989-1994.

Robin Berger -- Assistant Secretary. 479 West 22nd Street,
New York, New York, 10011. Vice President,
Robert H. Wadsworth and Associates, Inc. since
June 1993; Formerly Regulatory and compliance
Coordinator, Equitable Capital Management, Inc.
(1991-93), and Legal Product Manager, Mitchell
Hutchins Asset Management (1988-91).

The table below illustrates the compensation paid to each
Trustee for the Guinness Flight Fund's most recently completed fiscal year:

<TABLE>
<CAPTION>
Total Compen-
Aggregate Pension or sation from
Compensation Retirement Benefits Estimated Annual Guinness Flight
Name of Person, from Guinness Accrued as Part of Benefits Upon Funds Paid to
Position Flight Funds Fund Expenses Retirement Trustees
------------ ------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Dr. Gunter Dufey $5,000 $0 $0 $5,000

James I. Fordwood $5,000 $0 $0 $5,000

Dr. Bret Herscher $5,000 $0 $0 $5,000

J. Brooks Reece, Jr $5,000 $0 $0 $5,000
</TABLE>

Effective January 1, 1997, each Trustee who is not an "interested
person" of the Guinness Flight Funds receives an annual fee of $7,500 (with the
exception of the Chairman, who receives $8,500) allocated equally among all the
Guinness Flight Funds, plus expenses incurred by the Trustees in connection with
attendance at meetings of the Board of Trustees and their Committees. As of the
date of this Statement of Additional Information, to the best of the knowledge
of the Guinness Flight Funds, the Board of Trustees and officers of the Guinness
Flight Funds, as a group, owned of record less than 1% of the Fund's outstanding
shares.

THE INVESTMENT ADVISER AND ADVISORY AGREEMENTS

Guinness Flight furnishes investment advisory services to the Fund.
Under the Advisory Agreement, Guinness Flight directs the investments of the
Fund in accordance with the investment objective, policies, and limitations
provided in the Fund's Prospectus or other governing instruments, the 1940 Act,
and

-24-

<PAGE>

rules thereunder, and such other limitations as the Fund may impose by notice in
writing to Guinness Flight. Guinness Flight also furnishes all necessary office
facilities, equipment and personnel for servicing the investments of the Fund;
pays the salaries and fees of all officers of the Guinness Flight Funds other
than those whose salaries and fees are paid by Guinness Flight Fund's
administrator or distributor; and pays the salaries and fees of all Trustees of
Guinness Flight Funds who are "interested persons" of Guinness Flight Funds or
of Guinness Flight and of all personnel of Guinness Flight Funds or of Guinness
Flight performing services relating to research, statistical and investment
activities. Guinness Flight is authorized, in its discretion and without prior
consultation with the Fund, to buy, sell, lend and otherwise trade, consistent
with the Fund's then current investment objective, policies and restrictions in
any bonds and other securities and investment instruments on behalf of the Fund.
The investment policies and all other actions of the Fund are at all times
subject to the control and direction of Guinness Flight Fund's Board of
Trustees.

Guinness Flight performs (or arranges for the performance of) the
following management and administrative services necessary for the operation of
Guinness Flight Funds: (i) with respect to the Guinness Flight Funds,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys, underwriters,
brokers and dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (ii) investigating the development of and developing and
implementing, if appropriate, management and shareholder services designed to
enhance the value or convenience of the Guinness Flight Funds as an investment
vehicle; and (iii) providing administrative services other than those provided
by Guinness Flight Fund's administrator.

Guinness Flight also furnishes such reports, evaluations, information
or analyses to Guinness Flight Funds as Guinness Flight Fund's Board of Trustees
may request from time to time or as Guinness Flight may deem to be desirable.
Guinness Flight makes recommendations to Guinness Flight Fund's Board of
Trustees with respect to Guinness Flight Fund's policies, and carries out such
policies as are adopted by the Trustees. Guinness Flight, subject to review by
the Board of Trustees, furnishes such other services as it determines to be
necessary or useful to perform its obligations under the Advisory Agreement.

All other costs and expenses not expressly assumed by Guinness Flight
under the Advisory Agreement or by the Fund's administrator under the
administration agreement between it and the Guinness Flight Funds on behalf of
the Fund shall be paid by the Fund from the assets of the Fund, including, but
not limited to fees paid to Guinness Flight and the Fund's administrator,
interest and taxes, brokerage commissions, insurance premiums, compensation and
expenses of the Trustees other than those affiliated with Guinness Flight or the
administrator, legal, accounting and audit expenses, fees and expenses of any
transfer agent, distributor, registrar, dividend disbursing agent or shareholder
servicing agent of the Fund, expenses, including clerical expenses, incident to
the issuance, redemption or repurchase of shares of the Fund, including issuance
on the payment of, or reinvestment of, dividends, fees and expenses incident to
the registration under Federal or state securities laws of the Fund or their
shares, expenses of preparing, setting in type, printing and mailing
prospectuses, statements of additional information, reports and notices and
proxy material to shareholders of the Fund, all other expenses incidental to
holding meetings of the Fund's shareholders, expenses connected with the
execution, recording and settlement of portfolio securities transactions, fees
and expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and accounts,
expenses of calculating net asset value of the shares of the Fund, industry
membership fees allocable to the Fund, and such extraordinary expenses as may
arise, including litigation affecting the Fund and the legal obligations which
the Fund may have to indemnify the officers and Trustees with respect thereto.

Expenses which are attributable to the Fund are charged against the
income of the Fund in determining net income for dividend purposes. Guinness
Flight, from time to time, may voluntarily waive all or a portion of its fees
payable under the Agreement.

The Advisory Agreement was approved by the Board of Trustees on
_________, 1997 and by the shareholders of the Fund on ___________, 1997 at a
shareholder meeting called for that purpose. The Advisory Agreement will remain
in effect for two years from the date of execution and shall continue from year
to year thereafter if it is specifically approved at least annually by the Board
of Trustees and the affirmative vote

-25-

<PAGE>

of a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any such party by votes cast in person at a meeting
called for such purpose. The Trustees or Guinness Flight may terminate the
Advisory Agreement on 60 days written notice without penalty. The Advisory
Agreement terminates automatically in the event of its "assignment," as defined
in the 1940 Act.

As compensation for all services rendered under the Agreement, Guinness
Flight will receive an annual fee, payable monthly, of 1.00% of the Fund's
average daily net assets.

DISTRIBUTION AGREEMENT AND DISTRIBUTION PLAN

Guinness Flight Funds has entered into separate administration and
distribution agreements (the "Administration Agreement" and "Distribution
Agreement") with respect to the Fund with Investment Company Administration
Corporation ("Administrator") and First Fund Distributors, Inc., the
Distributor, respectively. Under the Distribution Agreement, the Distributor
uses all reasonable efforts, consistent with its other business, to secure
purchases for the Fund's shares and pays the expenses of printing and
distributing any prospectuses, reports and other literature used by the
Distributor, advertising, and other promotional activities in connection with
the offering of shares of the Fund for sale to the public. It is understood that
the Administrator may reimburse the Distributor for these expenses from any
source available to it, including the administration fee paid to the
Administrator by the Fund.

The Fund will not make separate payments as a result of the
Distribution Plan to Guinness Flight, the Administrator, Distributor or any
other party, it being recognized that the Fund presently pays, and will continue
to pay, an investment advisory fee to Guinness Flight and an administration fee
to the Administrator. To the extent that any payments made by the Fund to
Guinness Flight or the Administrator, including payment of fees under the
Advisory Agreement or the Administration Agreement, respectively, should be
deemed to be indirect financing of any activity primarily intended to result in
the sale of shares of the Fund within the context of Rule 12b-1 under the 1940
Act, then such payments shall be deemed to be authorized by this Plan.

The Distribution Plan and related agreements were approved by the Board
of Trustees including all of the "Qualified Trustees" (Trustees who are not
"interested" persons of the Fund, as defined in the 1940 Act, and who have no
direct or indirect financial interest in the Distribution Plan or any related
agreement). In approving the Distribution Plan, in accordance with the
requirements of Rule 12b-1 under the 1940 Act, the Board of Trustees (including
the Qualified Trustees) considered various factors and determined that there is
a reasonable likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan may not be amended to increase materially
the amount to be spent by the Fund under the Distribution Plan without
shareholder approval, and all material amendments to the provisions of the
Distribution Plan must be approved by a vote of the Board of Trustees and of the
Qualified Trustees, cast in person at a meeting called for the purpose of such
vote. During the continuance of the Distribution Plan, Guinness Flight will
report in writing to the Board of Trustees quarterly the amounts and purposes of
such payments for services rendered to shareholders pursuant to the Distribution
Plan. Further, during the term of the Distribution Plan, the selection and
nomination of those Trustees who are not "interested" persons of the Fund must
be committed to the discretion of the Qualified Trustees. The Distribution Plan
will continue in effect from year to year provided that such continuance is
specifically approved annually (a) by the vote of a majority of the Fund's
outstanding voting shares or by the Fund's Trustees and (b) by the vote of a
majority of the Qualified Trustees.

DESCRIPTION OF THE FUND

Shareholder and Trustees Liability. The Fund is a series of Guinness
Flight Funds, a Delaware business trust.

The Delaware Trust Instrument provides that the Trustees shall not be
liable for any act or omission as Trustee, but nothing protects a Trustee
against liability to Guinness Flight Funds or to its

-26-

<PAGE>

shareholders to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office. Furthermore, a Trustee is entitled
to indemnification against liability and to all reasonable expenses, under
certain conditions, to be paid from the assets of Guinness Flight Funds;
provided that no indemnification shall be provided to any Trustee who has been
adjudicated by a court to be liable to Guinness Flight Funds or the shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or not to have
acted in good faith in the reasonable belief that his action was in the best
interest of Guinness Flight Funds. Guinness Flight Funds may advance money for
expenses, provided that the Trustee undertakes to repay Guinness Flight Funds if
his or her conduct is later determined to preclude indemnification, and one of
the following conditions are met: (i) the Trustee provides security for the
undertaking; (ii) Guinness Flight Funds is insured against losses stemming from
any such advance; or (iii) there is a determination by a majority of the
Guinness Flight Fund's independent non-party Trustees, or by independent legal
counsel, that there is reason to believe that the Trustee ultimately will be
entitled to indemnification.

Voting Rights. Shares of the Fund entitle the holders to one vote per
share. The shares have no preemptive or conversion rights. The dividend rights
and the right of redemption are described in the Prospectus. When issued, shares
are fully paid and nonassessable. The shareholders have certain rights, as set
forth in the Bylaws, to call a meeting for any purpose, including the purpose of
voting on removal of one or more Trustees.

SHAREHOLDER REPORTS

Shareholders will receive reports semi-annually showing the investments
of the Fund and other information. In addition, shareholders will receive annual
financial statements audited by the Fund's independent accountants.

-27-

<PAGE>
PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial statements.

In Part A:

None

In Part B:

None

In Part C:

Unaudited financial statements for the period ended
June 30, 1997 are filed herewith as Exhibit 99.B12.

(b) Exhibits

EX-99.B1(a) Certificate of Trust. (2)

EX-99.B1(b) Trust Instrument. (2)

EX-99.B2 By-laws. (2)

EX-99.B3 None.

EX-99.B4 None.

EX-99.B5 Investment Advisory Agreement between Registrant and
Guinness Flight Investment Management Limited. (3)

EX-99.B6 General Distribution Agreement between Registrant
and First Fund Distributors, Inc. (3)

EX-99.B7 None.

EX-99.B8 Amended Custodian Agreement between Registrant and
Investors Bank & Trust Company. (3)

EX-99.B9 (a) Amended Transfer Agency and Service Agreement
between Registrant and State Street Bank and Trust
Company. (3)

(b) Amended Administration Agreement between Registrant
and Investment Company Administration Corporation. (3)

EX-99.B10 (a) Opinion of Kramer, Levin, Naftalis & Frankel as
to legality of securities being registered. (3)

(b) Opinion of Morris, Nichols, Arsht & Tunnell . (3)

EX-99.B11 (a) Consent of Kramer, Levin, Naftalis & Frankel,
Counsel for the Registrant. (4)

(b) Consent of Ernst & Young LLP, Independent
Auditors for the Registrant. (4)

C-1

<PAGE>

EX-99.B12 Unaudited financial statements for the period ended June
30, 1997.

EX-99.B13 Investment Letters. (3)

EX-99.B14 None.

EX-99.B15 Rule 12b-1 Distribution Plan. (3)

EX-99.B16 Schedule for Computation of each Performance Quotation. (1)

EX-27 Financial Data Schedules. (4)

- -------------------
(1) Filed as an Exhibit to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A filed
electronically on February 14, 1996, accession number
0000922423-96-000062 and incorporated herein by reference.

(2) Filed as an Exhibit to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A filed
electronically on March 20, 1997, accession number
0000922423-96-000220 and incorporated herein by reference.

(3) Filed as an Exhibit to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A filed
electronically on April 25, 1997, accession number
0000922423-97-000401 and incorporated herein by reference.

(4) Filed herewith.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

Title of Class; Shares Number of Record Holders
as of July 31, 1997
--------------------

China & Hong Kong Fund 16,795

Global Government Bond Fund 230

Asia Blue Chip Fund 990

Asia Small Cap Fund 12,246

ITEM 27. INDEMNIFICATION

Article X, Section 10.02 of the Registrant's Delaware Trust
Instrument, incorporated herein by reference to Exhibit 1(b) to
Post-Effective Amendment No. 7 to Registrant's Registration Statement
on Form N-1A filed electronically on March 20, 1997, provides for the
indemnification of Registrant's Trustees and officers, as follows:

"SECTION 10.02 INDEMNIFICATION.

(a) Subject to the exceptions and limitations contained in
Subsection 10.02(b):

(i) every person who is, or has been, a Trustee or officer
of the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or
paid by him in connection

C-2

<PAGE>

with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having
been a Trustee or officer and against amounts paid or incurred by
him in the settlement thereof;

(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.

(b) No indemnification shall be provided hereunder to a
Covered Person:

(i) who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or

(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or
other body approving the settlement; (B) by at least a majority of
those Trustees who are neither Interested Persons of the Trust nor
are parties to the matter based upon a review of readily available
facts (as opposed to a full trial-type inquiry); or (C) by written
opinion of independent legal counsel based upon a review of readily
available facts (as opposed to a full trial-type inquiry).

(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not be exclusive of or affect any other rights to which any
Covered Person may now or hereafter be entitled, shall continue as to
a person who has ceased to be a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification
to which Trust personnel, other than Covered Persons, and other
persons may be entitled by contract or otherwise under law.

(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in Subsection (a) of this Section 10.02 may be paid by the
Trust or Series from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the Trust or Series if
it is ultimately determined that he is not entitled to
indemnification under this Section 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate
security for such undertaking, (ii) the Trust is insured against
losses arising out of any such advance payments or (iii) either a
majority of the Trustees who are neither Interested Persons of the
Trust nor parties to the matter, or independent legal counsel in a
written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Section
10.02."

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling
persons or Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Investment Company Act of 1940, as
amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, 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 of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.

C-3
<PAGE>

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Guinness Flight Investment Management Limited provides management
services to the Registrant and its series. To the best of the Registrant's
knowledge, the directors and officers have not held at any time during the past
two fiscal years or been engaged for his own account or in the capacity of
director, officer, employee, partner or trustee in any other business,
profession, vocation or employment of a substantial nature.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) First Fund Distributors, Inc., the Registrant's principal
underwriter, also acts as the principal underwriter for the following investment
companies:

(1) Jurika & Voyles Fund Group;
(2) RNC Mutual Fund Group, Inc.;
(3) PIC Investment Trust; (4) Hotchkis & Wiley Funds;
(5) Masters' Select Equity Fund;
(6) O'Shaughnessy Funds Inc.;
(7) Professionally Managed Portfolios;
- Avondale Total Return Fund
- Osterweis Fund
- Perkins Opportunity Fund
- Pro Conscience Women's Equity Mutual Fund
- Academy Value Fund
- Trent Equity Fund
- Leonetti Balanced Fund
- Lighthouse Growth Fund
- U.S. Global Leaders Growth Fund
- Boston Managed Growth Fund
- Harris Bretall & Sullivan & Smith Growth Fund
- Pzena Growth Fund
- Titan Investment Trust
(8) Rainier Investment Management Mutual Funds;
(9) Kayne Anderson Mutual Funds
(10) The Purisima Total Return Fund;
(11) Advisor's Series Trust;
- American Trust Allegiance Fund
- Information Tech 100 Mutual Fund
- Kaminski Poland Fund
- Ridgeway Helms Millenium Fund

(b) The following information is furnished with respect to the
officers and directors of First Fund Distributors, Inc., Registrant's principal
underwriter:

Name and Principal Position and Offices with Position and Offices
Business Address Principal Underwriter with Registrant
- ---------------- --------------------- --------------------

Robert H. Wadsworth President/Treasurer President/Asst.
4455 East Camelback Road Treasurer
Suite 261E
Phoenix, AZ 85014

Steven J. Paggioli Vice President/Secretary Secretary
479 West 22nd Street
New York, NY 10011

C-4
<PAGE>

Eric M. Banhazl Vice President Treasurer
2025 East Financial Way
Suite 101
Glendora, CA 91741

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The accounts, books or other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder are
maintained by Investment Company Administration Corporation, 2025 East Financial
Way, Suite 101, Glendora, CA 91741, except for those maintained by the Funds'
Custodian.

ITEM 31. MANAGEMENT SERVICES

Not applicable.

ITEM 32. UNDERTAKINGS

(1) Registrant undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Fund's latest annual report to
shareholders which will include the information required by Item 5A, upon
request and without charge.

(2) Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or trustees if
requested to do so by the holders of at least 10% of the Registrant's
outstanding voting securities, and to assist in communications with other
shareholders as required by Section 16(c) of the 1940 Act.

(3) Registrant undertakes to file, on behalf of the Mainland China
Fund, a post-effective amendment, using financial statements which need not be
certified, within four to six months from the effective date of this
Registration Statement or the commencement of the public offering under the
Securities Act of 1933.

C-5

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to its Registration Statement on Form N-1A to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, and the State of New York on this 19th day of August, 1997.

GUINNESS FLIGHT INVESTMENT FUNDS

By: /s/ Robert H. Wadsworth
-----------------------
Robert H. Wadsworth
President

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Eric M. Banhazl Treasurer August 19, 1997
- ------------------------------- -----------------------
Eric M. Banhazl

/s/ Dr. Gunter Dufey Trustee August 19, 1997
- ------------------------------- -----------------------
Dr. Gunter Dufey

/s/ J. I. Fordwood Trustee August 19, 1997
- ------------------------------- -----------------------
J. I. Fordwood

/s/ Bret A. Herscher Trustee August 19, 1997
- ------------------------------- -----------------------
Bret A. Herscher

/s/ J. Brooks Reece, Jr. Trustee August 19, 1997
- ------------------------------- -----------------------
J. Brooks Reece, Jr.

*By:
--------------------------
Attorney-in-Fact

C-6

<PAGE>

EXHIBIT INDEX

EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel, Counsel for the
Registrant.

EX-99.B11(b) Consent of Ernst & Young LLP, Independent Accountants for
the Registrant

EX-99.12 Unaudited financial statements for the period ended June 30, 1997.

EX-27 Financial Data Schedules

Kramer, Levin, Naftalis & Frankel
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
(212) 715 - 9100

Arthur H. Aufses III Monica C. Lord Sherwin Kamin
Thomas D. Balliett Richard Marlin Arthur B. Kramer
Jay G. Baris Thomas E. Molner Maurice N. Nessen
Philip Bentley Thomas H. Moreland Founding Partners
Saul E. Burian Ellen R. Nadler Counsel
Barry Michael Cass Gary P. Naftalis _____
Thomas E. Constance Michael J. Nassau
Michael J. Dell Michael S. Nelson Martin Balsam
Kenneth H. Eckstein Jay A. Neveloff Joshua M. Berman
Charlotte M. Fischman Michael S. Oberman Jules Buchwald
David S. Frankel Paul S. Pearlman Rudolph de Winter
Marvin E. Frankel Susan J. Penry-Williams Meyer Eisenberg
Alan R. Friedman Bruce Rabb Arthur D. Emil
Carl Frischling Allan E. Reznick Maria T. Jones
Mark J. Headley Scott S. Rosenblum Maxwell M. Rabb
Robert M. Heller Michele D. Ross James Schreiber
Philip S. Kaufman Howard J. Rothman Counsel
Peter S. Kolevzon Max J. Schwartz _____
Kenneth P. Kopelman Mark B. Segall
Michael Paul Korotkin Judith Singer M. Frances Buchinsky
Shari K. Krouner Howard A. Sobel Abbe L. Dienstag
Kevin B. Leblang Jeffrey S. Trachtman Ronald S. Greenberg
David P. Levin Jonathan M. Wagner Debora K. Grobman
Ezra G. Levin Harold P. Weinberger Christian S. Herzeca
Larry M. Loeb E. Lisk Wyckoff, Jr. Jane Lee
Pinchas Mendelson
Lynn R. Saidenberg
Special Counsel
-----

FAX
(212) 715-8000
---
WRITER'S DIRECT NUMBER
(212)715-9100
-------------

August 19, 1997

Guinness Flight Investment Funds
225 South Lake Avenue
Suite 777
Pasadena, California 91101

Re: Guinness Flight Investment Funds
Registration Statement on Form N-1A
(ICA No. 811-8360; File No. 33-75340
------------------------------------

Gentlemen:

We hereby consent to the reference of our firm as Counsel in this
Registration Statement on Form N-1A.

Very truly yours,

/s/ Kramer, Levin, Naftalis & Frankel
-------------------------------------

[ERNST & YOUNG LLP LETTERHEAD]

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Independent
Accountants", in Post-Effective Amendment No. 9 to the Registration Statement
(Form N-1A) and related Statement of Additional Information of Guinness Flight
Investment Funds.

/s/ERNST & YOUNG LLP

Los Angeles, California
August 19, 1997

UNAUDITED FINANCIAL STATEMENTS FOR THE
PERIOD ENDED JUNE 30, 1997.

Guinness Flight Asia Blue Chip Fund
Guinness Flight Asia Small Cap Fund
Guinness Flight China & Hong Kong Fund
Guinness Flight Global Government Bond Fund

July 23, 1997

Dear Guinness Flight Shareholder:
During the first half of 1997, when the world thought of Asia, it thought of the
Hong Kong handover. Meanwhile, there have been many other political and economic
stories affecting this vast and divergent continent. This year, we have been
investing selectively, stock by stock, as certain markets in the region have
been quite volatile. This strategy has proven satisfactory resulting in
favorable performance for the Guinness Flight Investment Funds.
The total returns for the four funds for the six-month period ended June 30 were
as follows: Guinness Flight Asia Blue Chip Fund, up 0.26%; Guinness Flight Asia
Small Cap Fund, up 18.55%; Guinness Flight China & Hong Kong Fund, up 14.38%;
and Guinness Flight Global Government Bond Fund, down slightly to -1.23%. Inside
this report, you will find market comments written by the fund manager(s) of
each fund. These comments, which outline the main economic events of the last
six months as well as our thoughts for what's ahead, precede the financial and
portfolio details for each fund.
We continue to increase our commitment to Asia investing in both our London and
Hong Kong offices. Following our April shareholder meeting, Hambros Fund
Management was merged into Guinness Flight, a combination that doubled from 7 to
14 the number of fund managers dedicated to Asian markets. Our additional
resources and staff in this area mean added value for you, our shareholders.
Undoubtedly, the dominating event in Asia this year was the return of Hong Kong
to Chinese sovereignty on July 1. In the aftermath, the world continues to watch
closely as China and the Hong Kong Special Administrative Region (SAR) sort out
how the vast mainland with its communist government will work along side and in
harmony with the world's most capitalist city.

<PAGE>

Guinness Flight Asia Blue Chip Fund
Guinness Flight Asia Small Cap Fund
Guinness Flight China & Hong Kong Fund
Guinness Flight Global Government Bond Fund

We continue to believe that Asia represents one of today's best long-term
investment opportunities. Despite our bullishness, we always caution investors
to expect volatility in these markets. Asia, with all of its potential, is not a
place to invest short-term. We thank each of you for your commitment and
dedication to Guinness Flight and no-load Asia investing and look forward to our
continued relationship.

Sincerely,

/s/ Timothy Guinness /s/ Howard Flight
- ------------------------ -----------------------
Timothy Guinness Howard Flight

2
<PAGE>

Guinness Flight Asia Blue Chip Fund
Two significant events dominated the Asian investment scene during the
last six months. First, the reversion of Hong Kong to China was highly
publicized, but, as anticipated, proceeded without giving the market any
anxiety. And second, the strength of the U.S. Dollar, to which most Southeast
Asian currencies are at least somewhat aligned, made the most significant
impact.

The Dollar's relentless advance resulted in a loss of competitive strength
at a point of particular vulnerability for many economies, which had enjoyed
several years of strong, and in some cases, unsustainable growth. The Malaysian
stock market was down 12.9% over the six-month period and the markets in both
Singapore and the Philippines were 11.4%, all having been touched by this factor
to a greater or lesser extent. Thailand, which added a property bubble and a
banking crisis to the problems of currency overvaluation, fell by 37.2%. On the
other hand, Indonesia gained 10.4% over the six-month period. The Hong Kong
market justified our faith in it with a 12.8% rise. Given the weak fundamentals
in the region and varying market performances, we believe that the fund's
slightly positive year-to-date return was satisfactory. The fund slightly
underperformed its benchmark, the MSCI AC Asia Free ex-Japan Index: the fund's
total return for the six months was 0.26% while that of the MSCI AC Asia Free
ex-Japan Index was 2.62%.

Over the last six months, the fund's exposure to Hong Kong, Malaysia and
Thailand was decreased in the portfolio, while exposure to Indonesia and India
was increased. I have a long-standing enthusiasm for the economic potential of
Hong Kong and southern China and believed that the return of the Colony to China
would be achieved without upsetting the prosperity of Hong Kong. In my opinion,
this is now well on the way to being achieved. The Hong Kong market deserves,
and will in time achieve, a higher rating.

I continue to be bullish on the long-term potential of the Hong Kong
market and see further potential in the short-term as well. Yet at some stage in
the future, there may well be a difficult period

3
<PAGE>

Guinness Flight Asia Blue Chip Fund (Continued)

when action is taken in response to the new administration's concerns about the
expensive nature of Hong Kong's property. Although official reaction to the
problem will move prices lower, the process may not be without anxiety. In any
case, we should welcome moves to address the problem as it is not in Hong Kong's
best long-term interest to have some of the most expensive property in the
world.

Although I believe that Indonesia offers attractive potential to the
investor and good value is emerging in Singapore and Malaysia, particularly as a
result of recent weakness, it will take some considerable time for Thailand to
work through its economic problems. It is from misfortunes like this that future
opportunities spring. The fund's exposure to Indonesia may be increased slightly
while positions in Singapore and Malaysia will be maintained at about their
current levels. The fund's exposure to Thailand has been at minimal levels for
some time, with no current plan to change this.

Richard Farrell -- London, July 31, 1997.

Guinness Morgan Stanley
Measurement Period Flight Asia AC Asia Free
(Fiscal Year Covered) Blue Chip Ex- Japan

4/29/96 10000 10000
6/30/96 9904 9706
9/30/96 9640 9372
12/31/96 10384 9584
3/31/97 9880 9247
6/30/97 10411 9215

4
<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

Shares COMMON STOCKS: 90.33% Value
- --------------------------------------------------------------------------------

CHINA: 2.51%
6,000 Huaneng Power International Inc. ADR............ $ 153,000
----------
HONG KONG: 38.14%
60,000 Amoy Properties Ltd. ........................... 66,217
200,000 CDL Hotel International......................... 81,319
13,000 Cheung Kong..................................... 128,368
40,000 Cosco Pacific Ltd. ............................. 92,677
12,000 Dah Sing Financial Holdings..................... 66,449
100,000 First Pacific Co. .............................. 127,786
9,200 HSBC Holdings Plc............................... 276,690
9,500 Hang Seng Bank.................................. 135,499
68,000 Hong Kong & China Gas........................... 136,047
20,000 Hong Kong Electric.............................. 80,544
631 Hong Kong & Shanghai Hotels Wts. ............... 147
50,000 Hong Kong Land Holdings Ltd. ................... 133,000
54,800 Hong Kong Telecom............................... 130,858
25,000 Hutchison Whampoa............................... 216,204
19,000 New World Development........................... 113,304
30,000 Shangri-La Asia Ltd. ........................... 36,014
12,000 Sun Hung Kai Properties Ltd. ................... 144,437
20,000 Swire Pacific Ltd. A............................ 180,063
40,000 Television Broadcasts Ltd. ..................... 179,676
----------
Total Hong Kong................................. 2,325,299
----------
INDIA: 5.95%
3,400 Hindalco Industries Ltd. ADR.................... 92,883
5,000 State Bank of India GDR......................... 129,750
10,000 Tata Engineering & Locomotive Ltd. GDR.......... 140,150
----------
Total India..................................... 362,783
----------
INDONESIA: 9.84%
179,683 Bank International Indonesia-For Reg............ 155,154
15,972 Bank International Indonesia-For Reg............ 6,420
160,000 PT Bank Dagang Nasional......................... 103,662
60,000 Pt Indofood Sukses Makmur-F..................... 138,158
30,000 Pt Indocement Tunggal Prakarsa.................. 46,567
5,000 Pt Indonesia Satellite ADR...................... 149,688
----------
Total Indonesia................................. 599,649
----------

5
<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY
JUNE 30, 1997 (UNAUDITED) CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- --------------------------------------------------------------------------------

MALAYSIA: 12.38%
20,000 DCB Holdings Berhad............................. $ 63,391
6,000 Edaran Otomobil Nasional Berhad................. 51,109
50,000 Hicom Holdings Berhad........................... 94,692
75,000 IOI Corporation Berhad.......................... 85,578
100,000 Kumpulan Guthrie Berhad......................... 158,479
14,000 Malayan Banking Berhad.......................... 146,989
15,000 Petronas Gas Berhad............................. 54,675
9,000 Systems Telekom Malaysia........................ 42,076
8,000 United Engineers................................ 57,686
----------
Total Malaysia.................................. 754,675
----------
PHILIPPINES: 5.05%
75,000 Ayala Corp. Class B............................. 54,026
15,600 Manila Electric................................. 76,888
300,000 Metro Pacific Corp.............................. 64,832
89 Metropolitan Bank & Trust....................... 1,890
180,000 Petron Corp..................................... 45,723
1,000 Philippine Long Distance Telephone ADR.......... 64,250
----------
Total Philippines............................... 307,609
----------
SINGAPORE: 9.24%
10,000 Asia Pulp & Paper ADR........................... 151,250
13,750 Keppel Corp. Ltd................................ 61,071
12,120 Overseas Chinese Banking Corp. For Reg.......... 125,464
6,000 Singapore Airlines Ltd-For Reg.................. 53,718
50,000 Singapore Telecom Ltd........................... 92,327
24,000 Want Want Holdings.............................. 79,680
----------
Total Singapore................................. 563,510
----------
SOUTH KOREA: 3.24%
10,000 Cho Hung Bank Co. ADR........................... 66,750
6,000 Dong-Ah Construction EDR........................ 53,100
800 Samsung Electronics GDS......................... 21,600
3,000 Korea Electric Power Corp. ADR.................. 56,063
----------
Total South Korea............................... 197,513
----------

6
<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY
JUNE 30, 1997 (UNAUDITED) CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- --------------------------------------------------------------------------------

TAIWAN: 2.75%
6,000 China Steel Corp. GDS........................... $ 126,750
2,200 President Enterprise GDS........................ 40,700
----------
Total Taiwan.................................... 167,450
----------
THAILAND: 1.23%
1,600 Siam Cement Co Ltd. For. Reg.................... 28,782
10,000 Total Access Communication...................... 46,400
----------
Total Thailand.................................. 75,182
----------
Total Common Stocks: (Identified cost
$5,286,882) 90.33%.............................. $5,506,670
----------

- ------------------------------------------------------------------------
Par Value CORPORATE BONDS: 4.67% Value
- ------------------------------------------------------------------------

$100,000 Formosa Chemical & Fiber
1.75% due 07/19/01............................. $ 112,500
100,000 Nan Ya Plastics Convertible Bond 1.75% due
07/19/01....................................... 141,500
30,000 Ssangyong Oil Refining 3.75% due 12/31/08...... 30,750
----------
Total Corporate Bonds: 4.67%
(Identified cost $267,358)..................... 284,750
----------
Total Investments in Securities
(cost $5,554,240+): 95.00%..................... $5,791,420
----------
Other Assets Less Liabilities: 5.00%........... 305,030
----------
NET ASSETS: 100.00%............................ $6,096,450
==========

+ Cost for federal income tax purposes is the same:

Net unrealized appreciation consists of:
Gross unrealized appreciation........................ $ 241,932
Gross unrealized depreciation........................ (4,752)
----------
Net Unrealized Appreciation.......................... $ 237,180
==========

See accompanying notes to financial statements.

7
<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------

% OF
INDUSTRY NET ASSETS
- --------------------------------------------------------------------------

Automobile.................................................. 0.84%
Banking..................................................... 18.84
Chemical.................................................... 1.85
Construction................................................ 4.71
Diversified Operations...................................... 9.90
Electric Utilities.......................................... 6.01
Electronics................................................. 0.35
Finance..................................................... 2.64
Food and Beverage........................................... 4.24
Gas......................................................... 3.13
Hotels...................................................... 1.93
Industrial.................................................. 7.32
Iron and Steel.............................................. 2.08
Media....................................................... 2.95
Oil/Petroleum Refining...................................... 1.25
Real-Estate................................................. 9.60
Technology.................................................. 0.95
Telecommunications.......................................... 8.62
Transportation.............................................. 3.18
Wholesalers................................................. 4.61
------
TOTAL INVESTMENTS IN SECURITIES............................. 95.00
OTHER ASSETS LESS LIABILITIES............................... 5.00
------
NET ASSETS.................................................. 100.00%
======

8
<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

ASSETS
Investments in securities, at value (cost $5,554,240)..... $5,791,420
Cash...................................................... 279,172
Receivables:
Fund shares sold..................................... 18,500
Dividends and interests.............................. 11,775
Due from affiliates (Note 3).............................. 13,758
Prepaid expenses.......................................... 7,280
Deferred organization costs, net.......................... 6,694
----------
Total Assets......................................... $6,128,599
----------
LIABILITIES
Payables:
Unrealized loss on forward currency contracts open
(Note 6)........................................... 4
Dividends to shareholders............................ 6,567
Fund shares redeemed................................. 16,094
Other Accrued expenses.................................... 9,484
----------
Total Liabilities.................................... 32,149
----------
Net Assets................................................ $6,096,450
==========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($6,096,450/469,055 shares outstanding; unlimited
number of shares authorized without par value)....... $13.00
=======
SOURCE OF NET ASSETS
Paid-in capital...................................... $5,931,542
Overdistributed net investment income................ (282)
Accumulated net realized loss on investments......... (71,959)
Net unrealized appreciation on investments and
foreign currency................................... 237,149
----------
NET ASSETS...................................... $6,096,450
==========

See accompanying notes to financial statements.

9
<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------

For the six months
ended
June 30, 1997
- --------------------------------------------------------------------------------

INVESTMENT INCOME
INCOME
Dividends (net of foreign taxes withheld $2,216)....... $ 43,440
Interest............................................... 11,908
----------------
Total Investment Income........................... 55,348
EXPENSES
Advisory fees (Note 3)................................. 26,402
Administration fee (Note 3)............................ 6,617
Custodian.............................................. 16,280
Accounting............................................. 16,876
Transfer agent fees.................................... 14,578
Audit fees............................................. 7,935
Legal fees............................................. 4,959
Trustees' fees......................................... 6,639
Registration fees...................................... 10,413
Reports to shareholders................................ 2,236
Deferred organization costs amortization............... 867
Miscellaneous.......................................... 1,488
--------
Total expenses.................................... 115,290
Less: Expenses reimbursed (Note 3)................ (63,982)
----------------
Net expenses...................................... 51,308
----------------
NET INVESTMENT INCOME........................ $ 4,040
----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments..................... (70,925)
Net realized loss from foreign currency................ (1,367)
Net change in unrealized appreciation on investments
and foreign currency................................. 70,068
----------------
Net Realized and Unrealized Loss on Investments... (2,224)
----------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... $ 1,816
========

See accompanying notes to financial statements.

10
<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

For the six
months ended April 29, 1996*
June 30, 1997 through
(Unaudited) December 31, 1996
- --------------------------------------------------------------------------------

INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income............... $ 4,040 $ 838
Net realized (loss) gain from
investments....................... (70,925) 2,695
Net realized loss on foreign
currency.......................... (1,367) (955)
Net change in unrealized
appreciation on investments and
foreign currency.................. 70,068 167,082
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.... 1,816 169,660
----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment
income............................ (5,160) --
Distributions from taxable realized
gains............................. (1,407) --
----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS................. (6,567) --
----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold........... 4,225,137 3,961,160
Cost of shares redeemed............. (1,811,101) (843,655)
----------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS................. 2,414,036 3,117,505
----------
TOTAL INCREASE IN NET ASSETS... 2,409,285 3,287,165
NET ASSETS
Beginning of period................. 3,687,165 400,000
----------
End of period (including
(overdistributed) and
undistributed net investment
income of ($282) and $838,
respectively)).................... $ 6,096,450 $ 3,687,165
==========
CHANGES IN SHARES
Shares sold......................... 328,539 320,248
Shares redeemed..................... (143,552) (68,180)
--------------- ---------------
NET INCREASE................... 184,987 252,068
==========

*Commencement of operations.

See accompanying notes to financial statements.

11
<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the six months
ended April 29, 1996*
June 30, 1997 through
(Unaudited) December 31, 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period............ $ 12.98 $ 12.50
---------- ----------
Income from investment operations:
Net investment income......................... 0.02 0.00
Net realized and unrealized gain on
investments................................. 0.02 0.48
---------- ----------
Total from investment operations................ 0.04 0.48
---------- ----------
Less Distributions:
Dividends from net investment income.......... (0.01) --
Distributions from taxable net capital
gains....................................... (0.01) --
---------- ----------
(0.02) --
---------- ----------
Net asset value, end of period.................. $ 13.00 $ 12.98
========== ==========
Total return.................................... 0.26%++ 3.84%++
Ratios/supplemental data:
Net assets, end of period (thousands)........... $ 6,096 $ 3,687
Ratio of expenses to average net assets:+
Before expense reimbursement.................. 4.38% 9.14%
After expense reimbursement................... 1.98% 1.98%
Ratio of net investment income to average net
assets:+
Before expense reimbursement.................. (2.28)% (7.10)%
After expense reimbursement................... 0.12% 0.06%
Portfolio turnover rate......................... 14.64% 10.97%
Average Commission Rate Paid.................... $ 0.0119 $ 0.0190
BANK LOANS
Amount outstanding at end of period (000)....... $ 0 --
Average amount of bank loans outstanding during
the period (monthly average) (000)............ $ 8 --
Average number of shares outstanding during the
period (monthly average) (000)................ 422 --
Average amount of debt per share during the
period........................................ $ 0.019 --

</TABLE>

* Inception date.

+ Annualized

++ Not Annualized

See accompanying notes to financial statements.

12
<PAGE>

Guinness Flight Asia Small Cap Fund
For the six months ended June 30, the Asia Small Cap Fund returned 18.55%,
outperforming by far the 2.87% return for the HSBC James Capel Southeast Asia
Smaller Companies Index. The fund's strong performance can be attributed to its
overweight position in Hong Kong, China and Indonesia. Stock markets in
Singapore, Malaysia, the Philippines and Thailand performed poorly as weakness
in their domestic economy made them particularly susceptible to sell-offs
triggered by Thailand's worsening financial condition.

Excitement leading up to the June handover of Hong Kong drove up shares in
Hong Kong, particularly those with China exposure, to record-breaking levels
during the first half of the year. This boded well for the fund given its
overweight position in red chips, which offered the best exposure to the China
growth story, due to their political connections and capacity for growth through
asset injections. In the "B" share markets, domestic speculation during the
first quarter had reached such feverish levels that the fund took profits - a
strategy that was well-rewarded as Chinese authorities in May undertook a series
of actions to curb market speculation.

Despite the new regulations governing the activities of overseas
Chinese-controlled companies, I believe red chips will continue to be in vogue.
They have proven to be an effective and efficient fund-raising vehicle for
China. Uncertainty over further regulations and timing of potential asset
injections will undoubtedly lead to increased volatility. However, as an asset
class, red chips still offer far superior investment return to either "B" or "H"
shares.

Among other Asian markets, fundamentals have been weak, creating
relatively few investment opportunities, with the exception of Indonesia.
Besides suffering a slower-than expected recovery in export growth, most
countries came under heavy selling pressure as concerns over currency risk
spilled over from Thailand. The fund benefited from its overweight position in
Indonesia.

13
<PAGE>

Guinness Flight Asia Small Cap Fund (Continued)

A general turnaround in the region's economic outlook is not expected
until there are clear signs of a recovery in export growth, on which many of
these economies are still heavily dependent for growth. Furthermore, with
Thailand likely to unveil more financial woes in the months ahead, I foresee
that market sentiment toward most Southeast Asian stock markets will undoubtedly
be negative.

In this environment, stock selection remains the key to investing in the
region. I continue to look for value investments in more defensive and laggard
plays that have been overlooked. I also expect increased investment
opportunities in initial public offerings, given the Chinese authorities'
commitment to curb speculation through an increased supply of shares. While the
region is experiencing volatile times, performance of small-cap companies is
expected to remain strong as quality companies in the banking and consumer-
related sectors continue to trade at undemanding market multiples.

Nerissa Lee -- Hong Kong, July 31, 1997.

HSBC James
Measurement Period Asia Small Cap Capel SASC
(Fiscal Year Covered) Fund Index

4/29/96* 10000 10000
6/30/96 10461 9622
9/30/96 10397 9467
12/31/96 11308 9710
3/31/97 12048 10336
6/30/97 13406 9999

14
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

Shares COMMON STOCKS: 77.80% Value
- --------------------------------------------------------------------------------

CHINA: 13.24%
6,059,000 Anhui Expressway Co Ltd - H................ $ 1,165,298
3,724,000 Beijing Datang Power - H................... 1,718,444
1,410,000 Bengang Steel Plates - B................... 433,157
1,174,190 Changchai Co. Ltd. - B..................... 1,066,991
1,000,000 China First Pencil - B..................... 400,000
550,000 China Southern Glass Co. - B............... 287,520
2,397,979 Dazhong Taxi - B........................... 2,129,405
1,000,000 Eastern Communications - B................. 1,476,000
1,098,000 First Tractor Co. - H...................... 722,807
2,900,000 Guandong Kelon Elec Hld - H................ 2,769,997
1,425,000 Guangdong Provincial Expr - B.............. 901,282
1,661,600 Heilongjiang Electric Power Co. ........... 1,329,280
30,000 Huaneng Power International Inc. - N....... 765,000
2,544,000 Huangshan Tourism DVLP Co - B.............. 2,335,392
2,712,000 Inner Mongolia Erdos Cashmere.............. 2,278,080
3,000,000 Nanjing Panda Electronics - H.............. 627,315
1,470,645 Shanghai Dajiang Group - B................. 454,429
646,000 Shanghai Diesel Engineering - B............ 219,640
1,296,600 Shanghai Kaikai Industrial Co. ............ 518,640
157,917 Shanghai Lujiazui Finance & Trade.......... 225,821
1,417,000 Shanghai Refrigerator Comp - B ADR......... 680,160
2,598,870 Shanghai Tyre and Rubber - B............... 1,273,446
3,255,660 Shenzhen Fangda Co Ltd - B................. 4,727,605
400,000 Wuxi Little Swan - B....................... 671,202
1,700,000 Zhenhai Refining & Chem Co. - H............ 614,408
------------
Total China................................ 29,791,319
------------
HONG KONG: 40.07%
368,000 ASM Pacific Technology..................... 256,502
2,400,000 Allied Properties.......................... 390,330
250,000 Anex International Holdings Ltd. .......... 19,362
407,000 CIG Wh Intl Holdings Ltd. ................. 127,396
8,350,000 CNPC Hong Kong Limited..................... 1,853,807
510,000 China Elegance Intl Fashion................ 276,483
3,520,000 China Everbright - Ihd................... 10,518,245
1,500,000 China Merchants Hai Hong Holdings.......... 4,666,142
2,470,000 China Resources Beijing Land............... 1,833,219
1,336,000 Companion Building Material................ 98,295

15
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY
JUNE 30, 1997 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- ------------------------------------------------------------------------

HONG KONG: (CONTINUED)
1,765,160 Concord Land Dev Co Ltd. .................. $ 1,948,049
7,752,000 Continental Mariner Investment............. 7,404,489
160,000 Dah Sing Financial Holdings................ 885,986
18,220,000 Denway Investment Ltd. .................... 2,892,699
135,000 Dickson Concept Intl - New................. 491,397
4,008,000 Espirit Holdings Limited................... 2,845,378
7,000,000 First Sign International Holdings Ltd. .... 1,355,311
4,182,000 Four Seas Mercantile Hldg. ................ 2,456,094
500,000 GZI Transportation Ltd. ................... 200,070
5,563,000 Glorious Sun Enterprises Ltd. ............. 2,638,858
4,800,000 Gold Lion Holdings Ltd. ................... 2,679,643
5,000,000 Guang Nan Holdings Ltd. ................... 7,809,172
331,714 Guangnan Ltd. Wts. ........................ 196,957
1,400,000 Guangzhou Investment....................... 772,527
548,000 High Fashion International................. 73,564
4,624,000 Innovative Intl Holdings Ltd. ............. 2,417,255
8,682,000 Interform Ceramics......................... 1,546,495
1,366,000 Kingboard Chemicals Holdings............... 436,391
530,000 Kwong On Bank Ltd. ........................ 752,520
169,800 Lai Sun Development........................ 190,681
34,079 Lai Sun Hotel Internatioal Wts. ........... 2,991
4,800,000 Leading Spirit Holding Co. ................ 1,065,662
253,750 Midlands Realty Holdings Ltd. ............. 130,195
2,564,000 Min Xin Holdings........................... 1,820,247
2,500,000 Mingly Corporation......................... 847,069
2,664,000 NG Fung Hong Ltd. ......................... 3,988,796
40,000 Nanyang Holdings Ltd. ..................... 63,248
538,000 Northeast Electric - H..................... 89,582
4,758,000 Pacific Concord Holdings................... 2,656,196
1,068,000 QPL Intl Holdings Limited.................. 902,947
6,000,000 Qingling Motors Company Ltd. - H........... 3,097,853
830,000 Ryoden Developments Ltd. .................. 219,625
555,000 SASA International Holdings Ltd. .......... 180,886
790,000 Semi - Tech Ltd. .......................... 1,289,934
85,000 Shanghai Industrial Holding Ltd............ 528,829
9,000,000 Silver Grant Intl Ltd. .................... 4,704,865
942,000 Sinocan Holdings Ltd. ..................... 465,085
1,200,000 Stelux Holdings International Ltd. ........ 232,339

16
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY
JUNE 30, 1997 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- --------------------------------------------------------------------------------

HONG KONG: (CONTINUED)
240,000 Stelux Holdings International Ltd. Wts. ... $ 8,054
118,000 Ta Fu International Ltd. .................. 23,608
4,000,000 Texwinca Holdings Ltd. .................... 2,581,545
1,500,000 Theme International Holdings Ltd. ......... 842,229
1,639,000 Tysan Holdings Limited..................... 401,959
2,490,000 USI Holdings Ltd. ......................... 723,155
794,000 Vanda Systems & Communications............. 368,954
800,000 Varitronix International Ltd. ............. 1,357,892
1,000,000 Wongs International........................ 387,232
931,000 YGM Trading................................ 1,129,606
------------
Total Hong Kong............................ 90,143,900
------------
INDONESIA: 3.27%
951,000 Kalbe Farma................................ 1,270,868
100,000 Lautan Laus................................ 121,299
197,000 Pt Alumindo Light Metal Industrial......... 91,129
2,432,000 Pt Bank Dagang Nasional - For Reg.......... 1,575,648
125,000 Pt Bank Dagang Nasional - Wts.............. 37,150
447,500 Pt Bank Tiara Asia - For Reg............... 533,614
971,000 Pt Komatsu Indonesia - For Reg............. 1,517,188
392,000 Pt Semen Cibinong.......................... 1,156,497
895,000 Pt Steady Safe - For Reg................... 1,048,828
------------
Total Indonesia............................ 7,352,221
------------
MALAYSIA: 8.53%
6,000 Arab Malaysian Fin (Alien)................. 12,837
1,212,000 Berjaya Capital Berhad..................... 1,728,685
349,000 Brisdale Holdings Berhad................... 417,583
249,000 Cement Sarawak Berhad...................... 2,032,250
99,600 Cement Sarawak Berhad Wts.................. 98,653
675,000 Hap Seng Consolidated Berhad............... 1,684,826
509,000 Hock Hua Bank Berhad - For Reg............. 2,016,640
230,000 IJM Corp Berhad - A........................ 482,964
824,000 MBM Resources Berhad....................... 1,681,300
45,000 MNI Holdings Berhad........................ 212,163
500,000 Malakoff Berhad............................ 2,179,081
240,000 Road Builder............................... 1,131,537

17
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY
JUNE 30, 1997 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- --------------------------------------------------------------------------------

MALAYSIA: (CONTINUED)
551,000 Sunway Building Technology Berhad.......... $ 1,855,586
780,000 Tractors Malaysia Hldgs Berhad............. 1,304,120
1,693,000 United Merchant Group Berhad............... 2,347,662
------------
Total Malaysia............................. 19,185,887
------------
PHILIPPINES: 0.56%
2,724,000 Alaska Milk Corporation.................... 263,353
180,000 CN Solid Group Inc......................... 29,345
890,465 Davao Union Cement Corp. - B............... 104,657
8,000,000 Universal Rightfield Property.............. 834,092
80,000 Universal Robina Corp...................... 29,117
------------
Total Philippines.......................... 1,260,564
------------
SINGAPORE: 7.03%
240,000 Amtek Engineering.......................... 421,347
585,000 Avimo Group Ltd............................ 769,252
18,000 Clipsal Industries Ltd..................... 63,720
80,000 Comfort Group Ltd.......................... 63,230
500,000 Datacraft Asia Limited..................... 1,590,000
1,200,000 Delifrance Asia Limited.................... 1,342,939
900,000 Elec & Eltek Int Co Ltd.................... 5,040,000
200,000 First Capital Corp. - Singapore............ 520,389
870,000 Malayan Credit Limited..................... 1,320,487
96,000 Osprey Maritime Ltd........................ 125,565
600,000 Roly International Holdings................ 282,000
280,000 Singapore Tech Automotive For Reg.......... 701,126
2,046,000 Teledata Ltd............................... 1,144,856
306,900 Teledata Ltd. Wts.......................... 33,272
1,750,000 Uraco Holdings Ltd......................... 869,063
262,500 Uraco Holdings Ltd. Wts.................... 67,016
400,000 Venture Manufacturing...................... 1,303,770
100,000 Wong's Circuits Hldgs Ltd.................. 168,000
------------
Total Singapore............................ 15,826,032
------------
THAILAND: 5.10%
352,000 Central Pattana............................ 508,916
120,000 Eastern Water Resources.................... 144,578

18
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY
JUNE 30, 1997 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- ------------------------------------------------------------------------

THAILAND: (CONTINUED)
825,870 First Bangkok City Bank.................... $ 646,766
63,000 Jasmine Intl PLC Foreign................... 60,723
378,200 Kce Electronics............................ 1,199,912
70,000 Lam Soon (Thailand) - Foreign.............. 38,655
1,754,600 Mah Boon Krong Properties.................. 1,409,317
785,000 Phatra Thanakit Co. - Foreign.............. 1,008,835
100,000 Pizza Co. Ltd.............................. 534,137
86,900 Pizza Co. Ltd. - Foreign................... 406,580
808,000 Robinson Department Store.................. 298,538
471,700 Siam City Cement........................... 1,989,096
50,000 Thai Rung Union Car - Foreign.............. 187,751
373,000 Tipco Asphalt.............................. 2,022,289
1,349,300 Tuntex (Thailand) Co Ltd. ................. 1,002,492
------------
Total Thailand............................. 11,458,585
------------
Total Investments in Securities:
(Indentified cost $149,512,637+) 77.80%.... $175,018,508
Other Assets Less Liabilities: 22.20%...... 49,951,006
------------
NET ASSETS: 100.00%........................ $224,969,514
============
+ Cost for federal income tax purposes is the same.
Net Unrealized Appreciation consists of:
Gross unrealized appreciation....................... $ 37,443,802
Gross unrealized depreciation....................... (11,937,931)
------------
Net Unrealized Appreciation......................... $ 25,505,871
============

See accompanying notes to financial statements.

19
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

% OF
INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------

Agriculture................................................. 0.82%
Automobile.................................................. 6.47
Chemical.................................................... 0.27
Construction................................................ 7.99
Consumer-Related............................................ 14.83
Energy...................................................... 3.19
Finance..................................................... 11.99
Food........................................................ 1.75
Manufacturing............................................... 2.06
Pharmaceutical.............................................. 0.57
Real-Estate................................................. 6.65
Retail...................................................... 10.42
Technology.................................................. 7.17
Telecommunications.......................................... 0.89
Transportation.............................................. 2.73
------
TOTAL INVESTMENTS IN SECURITIES............................. 77.80
OTHER ASSETS LESS LIABILITIES............................... 22.20
------
NET ASSETS.................................................. 100.00%
======

20
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

ASSETS
Investments in securities, at value (cost
$149,512,637)........................................ $175,018,508
Cash................................................... 51,130,911
Receivables:
Fund shares sold.................................. 403,799
Dividends and interests........................... 644,137
Prepaid expenses....................................... 61,428
Deferred organization costs, net....................... 6,694
------------
Total Assets...................................... $227,265,477
------------
LIABILITIES
Payables:
Securities purchased.............................. 1,185,284
Unrealized loss on forward currency contracts open
(Note 6)........................................ 25
Fund shares redeemed.............................. 26,524
Dividends to shareholders......................... 742,514
Due to affiliates (Note 3)............................. 194,320
Accrued expenses....................................... 147,296
------------
Total Liabilities................................. 2,295,963
------------
Net Assets............................................. $224,969,514
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($224,969,514/13,501,690 shares outstanding;
unlimited number of shares authorized without par
value)............................................ $16.66
=======
SOURCE OF NET ASSETS
Paid-in capital................................... $199,615,600
Undistributed net investment income............... 11,605
Accumulated net realized loss on investments...... (142,079)
Net unrealized appreciation (depreciation) on:
Investments.................................. 25,505,871
Foreign currency............................. (21,483)
------------
NET ASSETS................................... $224,969,514
============

See accompanying notes to financial statements.

21
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------

For the six months
ended
June 30, 1997
- -----------------------------------------------------------------------------

INVESTMENT INCOME
INCOME
Dividends (net of foreign taxes withheld of $61,495)... $ 1,361,911
Interest............................................... 745,982
------------------
Total Investment Income........................... 2,107,893
EXPENSES
Advisory fees (Note 3)................................. 757,766
Administration fee (Note 3)............................ 190,634
Custodian.............................................. 147,674
Accounting............................................. 25,876
Transfer agent fees.................................... 106,129
Audit fees............................................. 15,813
Legal fees............................................. 37,714
Trustees' fees......................................... 6,639
Registration fees...................................... 10,413
Reports to shareholders................................ 11,133
Deferred organization costs amortization............... 867
Miscellaneous.......................................... 10,211
------------------
Total expenses.................................... 1,320,869
Expenses recouped (Note 3)........................ 71,583
------------------
Net expenses...................................... 1,392,452
------------------
NET INVESTMENT INCOME........................ $ 715,441
------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investments..................... 589,918
Net realized loss from foreign currency................ (715,367)
Net change in unrealized appreciation on investments... 23,620,810
Net change in unrealized loss on foreign currency...... (17,600)
------------------
Net Realized and Unrealized Gain on Investments... 23,477,761
------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... $24,193,202
==================

See accompanying notes to financial statements.

22
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the six
months ended April 29, 1996*
June 30, 1997 through
(Unaudited) December 31, 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income.................. $ 715,441 $ 23,001
Net realized gain from investments..... 589,918 73,470
Net realized loss on foreign
currency............................. (715,367) (7,229)
Net change in unrealized appreciation
on investments....................... 23,620,810 1,885,061
Net change in unrealized loss on
foreign currency..................... (17,600) (3,883)
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... $ 24,193,202 $ 1,970,420
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment
income............................... (688,596) (38,241)
Distributions from taxable realized
gains................................ (54,034) (28,837)
----------- -----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS.................... (742,630) (67,078)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.............. 176,372,634 49,952,419
Net asset value of shares issued on
reinvestment of distributions........ -- 60,299
Cost of shares redeemed................ (25,721,976) (1,447,776)
----------- -----------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS.................... 150,650,658 48,564,942
----------- -----------
TOTAL INCREASE IN NET ASSETS...... 174,101,230 50,468,284
NET ASSETS
Beginning of period.................... 50,868,284 400,000
----------- -----------
End of period [including undistributed
(overdistributed) net investment
income of $11,605 and ($15,240),
respectively]........................ $ 224,969,514 $50,868,284
=========== ===========
CHANGES IN SHARES
Shares sold............................ 11,567,317 3,681,439
Shares reinvested from distributions... -- 4,288
Shares redeemed........................ (1,674,350) (109,004)
----------- -----------
NET INCREASE...................... 9,892,967 3,576,723
=========== ===========
</TABLE>

*Inception date.

See accompanying notes to financials statements.

23
<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND

FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------

For the six
months ended April 29, 1996*
June 30, 1997 through
(Unaudited) December 31, 1996
- -------------------------------------------------------------------------------

Net asset value, beginning of period...... $ 14.10 $ 12.50
--------
------------
Income from investment operations:
Net investment income................... 0.04 0.02
Net realized and unrealized gain on
investments.......................... 2.58 1.61
--------
------------
Total from investment operations.......... 2.62 1.63
--------
------------
Less Distributions:
Dividends from net investment income.... (0.05) (0.02)
Distributions from taxable net capital
gains................................ (0.01) (0.01)
--------
------------
Total Distributions....................... (0.06) (0.03)
--------
------------
Net asset value, end of period............ $ 16.66 $ 14.10
======== =======
Total return.............................. 18.55%++ 13.08%++
Ratios/supplemental data:
Net assets, end of period (thousands)..... $ 224,970 $50,868
Ratio of expenses to average net assets:+
Before expense reimbursement/
recoupment........................... 1.84% 3.09%
After expense reimbursement/
recoupment........................... 1.84% 1.98%
Ratio of net investment income to average
net assets:+
Before expense reimbursement/
recoupment........................... 1.04% (0.76)%
After expense reimbursement/
recoupment........................... 0.94% 0.36%
Portfolio turnover rate................... 17.03% 21.91%
Average Commission Rate Paid.............. $ 0.0028 $0.0029

* Inception date.

+ Annualized.

++ Not Annualized.

See accompanying notes to financial statements.

24
<PAGE>

Guinness Flight China & Hong Kong Fund

In the first half of this year, the Hong Kong market has been quite
volatile and has seen some exceptional returns from China-related stocks. The
overall strong performance of the Hang Seng Index was driven by the finance
sector, which rose 31.9%, largely attributable to HSBC, and the utilities
sector, which rose 36.1%, attributed to Hong Kong Telecom and China Light and
Power. Property stocks reversed sharply from their highs last year, dropping
5.7%, while the commercial and industrial sector was up 4.1%. Nevertheless, the
fund, with a six-month return of 14.38%, outperformed its benchmark, the Hang
Seng Index, which rose 12.8% over the same period.

Hong Kong's domestic economy is now firmly on a recovery path with real
economic growth in the first quarter of 1997 up 6%, putting the economy on track
for 5.5% growth this year, compared to 4.7% in 1996. Both consumption and
investment have performed well, with retail sales rising 1.9% in the first
quarter. Investment in the form of fixed capital formation grew 12.1% in 1996.
Trade numbers are still subdued with total exports up only 2.2% in the first
quarter, but these numbers have been mitigated by China's exceptionally strong
export recovery.

Inflation in Hong Kong has remained low and was 5.8% in May year over
year. This is mainly the result of lower food prices from China following a
bumper harvest last year. Excluding food, which accounts for 40% of the Consumer
Price Index, core inflation is rising at just below 8%, consistent with an
economic recovery. The buoyant economy and expanded liquidity is underpinned by
the recovery in the Chinese economy. CPI inflation in China fell to 2.8% in May
and company inventories are still high. For these reasons, it is expected that
authorities will ease policy further to stimulate the economy. However, it is
clear that the excess liquidity already created in China is finding its way into
the Hong Kong stock market, which has contributed to the volatility and the boom
in the China-related companies known as "red chips."

25
<PAGE>

Guinness Flight China & Hong Kong Fund (Continued)

High residential property values have been a primary concern for the
Hong Kong administration and continue to be so under the new government. Prices
rose 40% on average in 1996 and are estimated to have risen 15% so far this year
in spite of a 0.25% rise in U.S. interest rates and measures to increase land
supply. The outgoing administration announced that land supply would be
increased by 46% over the next five years and imposed measures to ensure the new
developments should be sold in large enough chunks to reduce the speculative
element.

C.H. Tung, the new chief executive, has since announced a 10-year
housing program designed to bring on average 85,000 new units to the market per
year over that period. Mr. Tung has set a goal of reducing house prices to more
affordable levels and to bring home ownership up to 70% from the current 50%
level. As a consequence, we expect that a steady stream of news will keep the
share prices of residential property development companies weak.

In anticipation of weaker property prices, the fund reduced its
exposure to the sector and instead raised exposure to banks and the consumer
sector. The utilities weighting was raised because of the expected rise in
interest rates. China Light and Power and Hong Kong Telecom were both boosted by
news of China-related transactions. Hong Kong Telecom in particular surged on
the back of Cable & Wireless' decision to sell a 5.5% stake to China
Telecommunications Corp. Exposure to red chip stocks, such as China Resources
Enterprise, Cosco Pacific and Guangnan, has also been increased. As we are
writing these comments, red chips represent approximately 10% of our portfolio.

In the coming months, investors will be watching the new government and
monitoring the extent to which China honors its promises to the new Special
Administrative Region (SAR). Both C.H. Tung and the Chinese president Jiang
Zemin have been at pains to reassure both local residents and foreigners that
the rights and privileges of the people in Hong Kong will be protected. New
elections for the legislature have been promised in May 1998. The overall
success of the transition will largely depend on the new

26
<PAGE>

Guinness Flight China & Hong Kong Fund (Continued)

government's ability to resist interference from mainland China and to ensure
the continuation of Hong Kong's sound governance and legal system. Only time
will tell, but local and international observers have been greatly reassured by
statements made by the two leaders.

Our outlook for the Hong Kong market is still positive given the
expectations of a stable transition and a sound economic backdrop. Earnings for
Hong Kong companies are forecast to grow 15% a year for the next two years. The
risks to the market in the near term center on the interest rate policy of the
U.S. Federal Reserve and on the possible regulatory moves prompted by further
stock market volatility and ballooning residential property prices. But with
strong earnings momentum and a benign economic environment, we believe the
market has long-term fundamental support.

Richard Farrell and Lynda Johnstone -- London, July 31, 1997.

Measurement Period China & Hong Hang Seng
(Fiscal Year Covered) Kong Fund Index

6/30/94 10000 10000
9/30/94 10616 10871
12/31/94 9226 9352
3/31/95 9274 9805
6/30/95 10040 10512
9/30/95 10680 11014
12/30/95 11112 11501
3/31/96 12066 12510
6/30/96 12254 12582
9/30/96 13054 13589
12/31/96 14933 15356
3/31/97 13828 18469
6/30/97 17080 22397

27
<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

Shares COMMON STOCKS: (97.60%) Value
- -------------------------------------------------------------------------

AIR TRANSPORT & AIR COURIER SERVICES: 0.01%
88,000 GZI Transportation Ltd. ..................... $ 35,212
17,600 GZI Transportation Ltd. Wts. ................ 1,817
------------
Total Air Transport & Air Courier Services... 37,029
------------
AUTOMOTIVE MANUFACTURER: 0.88%
5,826,000 Qingling Motors Company Ltd. ................ 3,008,015
------------
BANKS: 22.78%
1,284,500 Dao Heng Bank Group Ltd. .................... 7,029,907
1,501,500 Hang Seng Bank............................... 21,415,945
1,331,600 HSBC Holding Plc............................. 40,047,862
604,000 Liu Chong Hing Investment Ltd................ 880,978
731,000 Union Bank of Hong Kong...................... 2,113,562
955,200 Wing Hang Bank Limited....................... 5,770,186
------------
Total Banks.................................. 77,258,440
------------
BOOT & SHOE CUT STOCK & BINDING: 0.39%
646,800 Yue Yuen Industrial Holdings................. 1,339,969
------------
CONGLOMERATES & DIVERSIFIED OPERATIONS: 25.38%
1,472,000 China Resources Enterprises.................. 7,220,064
2,031,000 Citic Pacific Ltd. .......................... 12,688,343
3,535,000 First Pacific Co. ........................... 4,517,251
5,583,000 Guangdong Investment Ltd. ................... 8,395,435
558,300 Guangdong Investment Ltd. Wts. .............. 263,033
193,800 Guangdong Tannery............................ 75,045
3,665,000 Hutchison Whampoa............................ 31,695,558
1,268,500 Swire Pacific Ltd. A......................... 11,420,480
2,264,000 Wharf (Holdings) Ltd. ....................... 9,818,956
------------
Total Conglomerates & Diversified
Operations................................. 86,094,165
------------
CONSUMER GOODS: 0.50%
280,000 Dickson Concept International................ 1,019,194
1,326,000 Shanghai Refrigerator Comp - B............... 636,480
------------
Total Consumer Goods......................... 1,655,674
------------

28
<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY
JUNE 30, 1997 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- --------------------------------------------------------------------------------

ELECTRICAL CONSUMER GOODS: 0.54%
942,000 Guangdong Kelon Electric..................... $ 899,772
1,446,000 Gold Peak Industrial......................... 933,228
------------
Total Electrical Consumer Goods.............. 1,833,000
------------
ELECTRIC POWER: 6.32%
1,878,000 Beijing Datang Power......................... 866,605
1,886,500 China Light & Power Co. ..................... 10,689,834
2,156,000 Hong Kong Electric........................... 8,682,664
60,000 Huaneng Power International Inc. ADR......... 1,530,000
------------
Total Electric Power......................... 21,769,103
------------
ENGINEERING & INFRASTRUCTURE: 1.49%
1,413,733 New World Infrastructure..................... 3,996,328
3,860,000 Shenzen Expressway........................... 1,058,756
------------
Total Engineering & Infrastructure........... 5,055,084
------------
FINANCE: 2.21%
3,028,000 China Overseas Land & Investment............. 2,442,787
907,200 Dah Sing Financial Holdings.................. 5,023,541
35,000 Peregrine Investment Holdings Wts............ 15,360
------------
Total Finance................................ 7,481,688
------------
FINANCIAL SERVICES: 0.93%
2,000,000 QPL International Holdings................... 1,690,912
238,000 Shanghai Industrial Holding Ltd.............. 1,480,722
------------
Total Financial Services..................... 3,171,634
------------
FOOD & BEVERAGE: 0.18%
1,002,000 Four Seas Mercantile Holdings................ 588,476
320,400 Four Seas Mercantile Holdings Wts............ 41,356
------------
Total Food & Beverage........................ 629,832
------------
GAS PRODUCTION & DISTRIBUTION: 3.10%
5,260,176 Hong Kong & China Gas........................ 10,524,018
------------

29
<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY
JUNE 30, 1997 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- --------------------------------------------------------------------------------

HOTELS, TOURIST COURTS & MOTELS: 0.45%
1,284,000 Shangri - La Asia Ltd........................ $ 1,541,337
------------
HOUSEHOLD APPLIANCE STORES: 0.60%
800,000 Guang Nan Holdings Ltd....................... 1,249,468
480,000 Wuxi Little Swan............................. 805,442
------------
Total Household Appliance Stores............. 2,054,910
------------
INSURANCE: 0.47%
1,440,000 National Mutual Ltd.......................... 1,598,492
------------
MEDIA: 1.58%
2,084,000 South China Morning Post..................... 2,044,377
737,000 Television Broadcasts Ltd.................... 3,310,521
------------
Total Media.................................. 5,354,898
------------
PETROLEUM REFINING : 0.57%
5,390,000 Zhenhai Refining & Chemical Co............... 1,948,034
------------
REAL ESTATE: 20.60%
1,882,000 Amoy Properties Ltd. Ord. ................... 2,076,995
2,117,000 Cheung Kong.................................. 20,904,121
949,600 HKR International Ltd. ...................... 1,317,646
984,000 Henderson Land Company....................... 8,732,074
921,000 Hysan Development Company.................... 2,716,411
38,850 Hysan Development Wts - 98................... 15,044
1,747,000 New World Development........................ 10,418,004
724,000 Sino Land Company............................ 784,996
1,904,000 Sun Hung Kai Properties Ltd. ................ 22,917,403
------------
Total Real Estate............................ 69,882,694
------------
RETAILERS: 0.85%
4,050,000 Esprit Asia Holdings Ltd..................... 2,875,195
------------
TELECOMMUNICATIONS: 4.67%
6,634,000 Hong Kong Telecom............................ 15,841,519
------------

30
<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY
JUNE 30, 1997 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------

Shares Value
- --------------------------------------------------------------------------------

TRANSPORTATION: 2.81%
4,101,000 Cosco Pacific Ltd. .......................... $ 9,501,755
------------
WHOLESALE TRADE - MISC. WHOLESALERS: 0.29%
868,000 Li & Fung Ltd. .............................. 974,740
------------
Total Investments in Securities
(Identified cost $264,826,609+): 97.60%...... $331,431,225
------------
Other Assets Less Liabilities: 2.40%......... 8,134,425
------------
NET ASSETS: 100.00%.......................... $339,565,650
============
+ Cost for federal income tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation................ $ 68,237,564
Gross unrealized depreciation................ (1,632,948)
------------
Net Unrealized Appreciation.................. $ 66,604,616
============

See accompanying notes to financial statements.

31
<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

ASSETS
Investments in securities, at value (cost
$264,826,609)........................................ $331,431,225
Cash................................................... 10,053,075
Receivables:
Securities sold................................... 998,995
Fund shares sold.................................. 1,172,473
Dividends and interests........................... 753,217
Prepaid expenses....................................... 109,402
Deferred organizational costs, net..................... 23,642
------------
Total Assets...................................... $344,542,029
------------
LIABILITIES
Payables:
Securities purchased.............................. 1,683,882
Dividends to shareholders......................... 2,635,619
Fund shares redeemed.............................. 151,305
Due to affiliates (Note 3)............................. 286,908
Other accrued expenses................................. 218,665
------------
Total Liabilities................................. 4,976,379
------------
Net Assets............................................. $339,565,650
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($339,565,650/16,894,989 shares outstanding;
unlimited number of shares authorized without par
value)............................................ $20.10
=======
SOURCE OF NET ASSETS
Paid-in capital................................... $256,254,686
Overdistributed net investment income............. (70,509)
Undistributed net realized gain on investments.... 16,777,990
Net unrealized appreciation on:
Investments.................................. 66,604,616
Foreign currency............................. (1,133)
------------
NET ASSETS................................... $339,565,650
============

See accompanying notes to financial statements.

32
<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------

For the Six
Months
Ended
June 30, 1997
- --------------------------------------------------------------------------------

INVESTMENT INCOME
INCOME
Dividends.............................................. $ 4,140,940
Interests.............................................. 135,383
----------------
Total Investment Income........................... 4,276,323
EXPENSES
Advisory fees (Note 3)................................. 1,412,723
Administration fee (Note 3)............................ 353,181
Custodian.............................................. 206,286
Accounting............................................. 25,014
Transfer agent fees.................................... 201,059
Audit fees............................................. 19,517
Legal fees............................................. 57,232
Trustees' fees......................................... 6,639
Registration fees...................................... 14,259
Reports to shareholders................................ 19,480
Deferred organization costs amortization............... 5,778
Miscellaneous.......................................... 22,689
----------------
Total expenses before interests................... 2,343,857
Interest on loans (Note 5)........................ 22,136
----------------
Total expenses.................................... 2,365,993
----------------
NET INVESTMENT INCOME........................ 1,910,330
----------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain from investments..................... 16,856,980
Net realized loss from foreign currency................ (26,398)
Net change in unrealized appreciation on investments
and foreign currency................................. 19,164,509
----------------
Net Realized and Unrealized Gain on
Investments................................ 35,995,091
----------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................. $37,905,421
================

See accompanying notes to financial statements.

33
<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

For the six
months ended For the Year
June 30, 1997 Ended
(Unaudited) December 31, 1996
- --------------------------------------------------------------------------------

INCREASE IN NET ASSETS FROM
OPERATIONS:
Net investment income................. $ 1,910,330 $ 2,473,451
Net realized gain from investments.... 16,856,980 5,591,892
Net realized loss on foreign
currency............................ (26,398) (54,179)
Net unrealized appreciation on
investments and foreign currency.... 19,164,509 43,833,578
------------ -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...... $ 37,905,421 $ 51,844,742
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment
income.............................. (2,027,399) (2,426,162)
Distributions from taxable realized
gains............................... (608,220) (4,883,242)
------------ -----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS................... (2,635,619) (7,309,404)
------------ -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold............. 164,704,154 344,443,893
Net asset value of shares issued on
reinvestment of distributions....... -- 6,537,646
Cost of shares redeemed............... (171,929,168) (139,736,255)
------------ -----------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS..... (7,225,014) 211,245,284
------------ -----------
TOTAL INCREASE IN NET ASSETS..... 28,044,788 255,780,622
NET ASSETS
Beginning of period................... 311,520,862 55,740,240
------------ -----------
End of period [including
(overdistributed) undistributed net
investment income of $(70,509) and
$46,560, respectively].............. $339,565,650 $311,520,862
============ ===========
CHANGES IN SHARES
Shares sold........................... 9,172,712 22,049,194
Shares reinvested from
distributions....................... -- 453,347
Shares redeemed....................... (9,867,102) (8,999,261)
------------ -----------
NET INCREASE (DECREASE).......... (694,390) 13,503,280
============ ===========

See accompanying notes to financial statements.

34
<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------

For the Six For the Years Ended From June 30,*
Months Ended December 31, through
June 30, 1997 -------------------- December 31,
(Unaudited) 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 17.71 $ 13.64 $ 11.47 $ 12.50
--------- ------ ----- ----------
Income from investment operations:
Net investment income................ 0.12 0.19 0.14 0.04
Net realized and unrealized gain
(loss) on investments.............. 2.43 4.43 2.20 (0.96)
--------- ------ ----- ----------
Total from investment operations...... 2.55 4.62 2.34 (0.92)
--------- ------ ----- ----------
Less distributions:
Dividends from net investment
income............................. (0.12) (0.19) (0.14) (0.04)
Distributions from taxable net
capital gains...................... (0.04) (0.36) (0.03) (0.07)
--------- ------ ----- ----------
Total distributions................... (0.16) (0.55) (0.17) (0.11)
--------- ------ ----- ----------
Net asset value, end of period........ $ 20.10 $ 17.71 $ 13.64 $ 11.47
========= ====== ===== ==========
Total return.......................... 14.38%++ 34.38% 20.45% (7.74)%++
Ratios/supplemental data:
Net assets, end of period
(thousands).......................... $ 339,566 $311,521 $55,740 $ 2,287
Ratio of expenses to average net
assets:+
Before expense reimbursement
(recoupement)...................... 1.69% 1.78% 3.02%** 19.92%
After expense reimbursement
(recoupement)...................... 1.69% 1.96% 1.98% 2.00%
Ratio of net investment income to
average net assets:+
Before expense reimbursement
(recoupement)...................... 1.36% 1.57% 0.49% (17.15)%
After expense reimbursement
(recoupement)...................... 1.36% 1.39% 1.52% 0.78%
Portfolio turnover rate............... 30.26% 30.40% 10.89% 27.25%
Average Commission Rate Paid#......... $ 0.0056 $ 0.0070 -- --
BANK LOANS
Amount outstanding at end of period
(000)................................ $ 0 -- -- --
Average amount of bank loans
outstanding during the period
(monthly average) (000).............. $ 4,098 $ 1,413 -- --
Average number of shares outstanding
during the period (monthly average)
(000)................................ 16,129 11,419 -- --
Average amount of debt per share
during the period.................... $ 0.25 $ 0.12 -- --
</TABLE>

* Inception date.

+ Annualized.

++ Not annualized.

** Includes indirectly paid expenses. Excluding indirectly paid expenses for the
year ended December 31, 1995, the ratio of expenses to average net assets
before "expense reimbursement" would have been 3.04%

# For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commissions rate per share for security trades on
which commissions are charged.

See accompanying notes to financial statements.

35
<PAGE>

Guinness Flight Global Government Bond Fund
The divergence of economic management and policies among the major
economies has held over in 1997 from last year. Loose monetary policies in
Continental Europe and Japan (offsetting a tight fiscal stance) contrasted with
a tightening of monetary policies in the Anglo-Saxon economies of the U.S., U.K.
and Canada. The performance of the major bond markets responded in the
traditional manner. The Anglo-Saxon bond markets generally underperformed while
European markets did well, with the peripheral markets performing best.

The tight monetary policies in the U.S. and the U.K. provided support
for the Dollar and Sterling while the European Monetary Union (EMU) uncertainty
once again undermined the Exchange Rate Mechanism (ERM) currencies. In this
regard, the fund was well positioned with initially overweight Dollar positions,
but a build-up of the Deutsche Mark position in May proved too early. For the
six- month period, the fund's total return of -1.23% slightly underperformed its
benchmark, the Salomon World Government Bond Index, which ended the six months
with a return of -0.69%.

There are early signs that the previous economic and market trends may
be coming to an end so we have gradually been altering our investment strategy.

The fragile economic recoveries in Europe and Japan are gaining
momentum as the year progresses. While the U.K. and the U.S. economies will
maintain their recent strength for the next few months, we believe they will
likely trail off towards the end of the year. Interest rates are close to a peak
in both countries, although the U.K.'s consumer boom may need some harsher
medicine.

During the next three months, the market's attention will focus on the
brighter prospects for both Europe and Japan in 1998. With the French election
of May behind us, there is no longer a mandate for further fiscal austerity. In
the meantime, the weakness of the Deutsche Mark and the other ERM currencies
continues to provide

36
<PAGE>

Guinness Flight Global Government Bond Fund (Continued)

support for the export sector. The fear of a soft monetary union is increasingly
becoming a reality but also less of a threat. The European authorities are
unlikely to be raising rates but the combination of a looser fiscal stance in
1998, together with a pickup in the domestic economy, should remind the markets
that European rates can go up as well as down.

This changing economic outlook has affected our investment strategy in
two ways. First, the high European bond exposure has been cut back in favor of
the U.S. and U.K. markets. Second, the currency profile has been simplified and
spread more evenly among the Dollar, Yen and Deutsche Mark.

We will continue to increase overall bond exposure in the portfolio as
the threat of rising U.S. interest rate subsides. Recent events in Asia suggest
that global synchronization of growth remains a dream and therefore global
inflationary pressures are likely to be subdued.

Michael Daley and John Stopford -- London, July 31, 1997.

Global Salomon Bros.
Measurement Period Government World Govt
(Fiscal Year Covered) Bond Fund Bond Index

6/30/94 10000 10000
9/30/94 9754 10117
12/31/94 9787 10166
3/31/95 10093 11278
6/30/95 10638 11879
9/30/95 10609 11755
12/30/95 11183 12102
3/31/96 11083 11875
6/30/96 11197 11923
9/30/96 11376 12248
12/31/96 11877 12540
3/31/97 11485 13752
6/30/97 11732 14309

37
<PAGE>

GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

PORTFOLIO OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

Par Value GOVERNMENT BONDS: 67.23% Market Value US$
- --------------------------------------------------------------------------------

BRITISH POUND: 20.41%
$ 40,000 Italy Sterling NCL
10.500% 04/28/14.......................... $ 84,001
495,000 United Kingdom Gilts
7.500% 12/07/06........................... 845,657
280,000 United Kingdom Gilts
8.000% 06/07/21........................... 513,021
----------
Total British Pound......................... 1,442,679
----------
DANISH KRONER: 2.04%
970,000 Kingdom of Denmark 7.000% 11/10/24.......... 144,071
----------
IRISH PUNT: 4.81%
220,000 Irish Gilts 6.500%
10/18/01.................................. 340,110
----------
UNITED STATES DOLLAR: 39.97%
320,000 Canada-Global Bond
6.750% 08/28/06........................... 319,776
360,000 Tokyo Metro
6.125% 03/27/06........................... 343,620
890,000 U.S. Treasury Note
6.625% 03/31/02........................... 898,344
537,000 U.S. Treasury Bond
7.875% 11/15/04........................... 579,456
700,000 U.S. Treasury Note
6.250% 02/15/07........................... 684,906
----------
Total United States Dollar.................. 2,826,102
----------
Total Government Bonds (Identified cost
$4,699,236*).............................. $ 4,752,962
----------
Total Investments in Securities: (Identified
cost $4,699,236*) 67.23%.................. $ 4,752,962
Other Assets Less Liabilities: 32.77%....... 2,316,695
----------
NET ASSETS: 100.00%......................... $ 7,069,657
==========
*Cost for federal income tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation....................... $ 87,820
Gross unrealized depreciation....................... (34,094)
----------
NET UNREALIZED APPRECIATION............... $ 53,726
==========

See accompanying notes to financial statements.

38
<PAGE>

GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

ASSETS
Investments in securities, at value (cost $4,699,236)..... $4,752,962
Cash...................................................... 2,360,960
Receivables:
Fund shares sold..................................... 2,500
Interests............................................ 89,564
Due from affiliates (Note 3).............................. 11,634
Prepaid expenses.......................................... 135
Deferred organizational costs, net........................ 23,642
----------
Total Assets......................................... $7,241,397
----------
LIABILITIES
Payables:
Unrealized loss on forward currency contracts open
(Note 6)........................................... 54,901
Dividends to shareholders............................ 85,575
Accrued expenses.......................................... 31,264
----------
Total Liabilities.................................... 171,740
----------
Net Assets................................................ $7,069,657
==========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($7,069,657/582,144 shares outstanding; unlimited
number of shares authorized without par value)....... $12.14
=======
SOURCE OF NET ASSETS
Paid-in capital...................................... $7,270,440
Undistributed net investment income (including
equalization credits of $5,394).................... 28,044
Accumulated net realized loss on investments......... (227,904)
Net unrealized appreciation (depreciation) on:
Investments..................................... 53,726
Foreign currency................................ (54,649)
----------
NET ASSETS...................................... $7,069,657
==========

See accompanying notes to financial statements.

39
<PAGE>

GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------

For the Six Months
Ended
June 30, 1997
- --------------------------------------------------------------------------------

INVESTMENT INCOME
INCOME
Interests............................................. $ 205,017
----------------
EXPENSES
Advisory fees (Note 3)................................ 25,633
Administration fee (Note 3)........................... 8,924
Custodian............................................. 9,331
Accounting............................................ 18,579
Transfer agent fees................................... 16,726
Auditing fees......................................... 18,863
Legal fees............................................ 5,481
Trustees' fees........................................ 6,639
Registration fees..................................... 9,095
Reports to shareholders............................... 1,352
Deferred organization costs amortization.............. 5,778
Miscellaneous......................................... 3,388
----------------
Total expenses................................... 129,789
Less: Expenses reimbursed (Note 3)............... (104,156)
----------------
Net expenses..................................... 25,633
----------------
NET INVESTMENT INCOME....................... $ 179,384
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments.................... (191,772)
Net realized loss from foreign currency............... (18,568)
Net change in unrealized depreciation on
investments......................................... (1,213)
Net change in unrealized loss on foreign currency..... (38,564)
----------------
Net Realized and Unrealized Loss on
Investments.................................... (250,117)
----------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $ (70,733)
================

See accompanying notes to financial statements.

40
<PAGE>

GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

For the Six Months
Ended For the Year
June 30, 1997 Ended
(Unaudited) December 31, 1996
-------------------- -------------------

INCREASE (DECREASE) IN NET ASSETS
FROM:
OPERATIONS
Net investment income................. $ 179,384 $ 131,457
Net realized (loss) gain from
investments......................... (191,772) 75,867
Net realized (loss) gain on foreign
currency............................ (18,568) 575
Net change in unrealized
(depreciation) appreciation on
investments......................... (1,213) 21,387
Net change in unrealized depreciation
on foreign currency................. (38,564) (16,057)
----------------- -----------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS..................... (70,733) 213,229
----------------- -----------------
NET EQUALIZATION CREDITS.............. 5,394 44,071
----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment
income.............................. (178,532) (162,397)
Distributions from net capital
gains............................... (61,125) (22,795)
----------------- -----------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS................... (239,657) (185,192)
----------------- -----------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold............. 1,495,579 6,348,475
Net asset value of shares issued on
reinvestment of distributions....... 144,940 175,240
Cost of shares redeemed............... (830,156) (1,184,883)
----------------- -----------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS................... 810,363 5,338,832
----------------- -----------------
TOTAL INCREASE IN NET ASSETS..... 505,367 5,410,940
NET ASSETS
Beginning of period................... 6,564,290 1,153,350
----------------- -----------------
End of period (including undistributed
net investment income of $28,044 and
$21,798, respectively).............. $7,069,657 $ 6,564,290
========== ===========
CHANGES IN SHARES
Shares sold........................... 122,035 507,485
Shares issued from dividend
distributions....................... 11,920 13,939
Shares redeemed....................... (67,848) (95,726)
----------------- -----------------
NET INCREASE..................... 66,107 425,698
========== ===========

See accompanying notes to financial statements.

41
<PAGE>

GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------

For the Six Months For the Year Ended
Ended December 31, From June 30,*
June 30, 1997 ------------------ through
(Unaudited) 1996 1995 December 31, 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period...................... $ 12.72 $ 12.77 $ 12.00 $ 12.50
------ ------- ------- -------
Income from investment
operations:
Net investment income.......... 0.33 0.63 0.69 0.29
Net realized and unrealized
gain (loss) on investments... (0.48) 0.13 1.01 (0.58)
------ ------- ------- -------
Total from investment
operations..................... (0.15) 0.76 1.70 (0.29)
------ ------- ------- -------
Less distributions:
Dividends from net investment
income....................... (0.32) (0.69) (0.65) (0.21)
Distributions from net capital
gains........................ (0.11) (0.12) (0.28) --
------ ------- ------- -------
Total distributions.......... (0.43) (0.81) (0.93) (0.21)
------ ------- ------- -------
Net asset value, end of period... $ 12.14 $ 12.72 $ 12.77 $ 12.00
====== ======= ======= =======
Total return..................... (1.23)%++ 6.21% 14.49% (2.33)%++
Ratios/supplemental data:
Net assets, end of period
(thousands).................... $ 7,070 $ 6,564 $ 1,153 $ 751
Ratio of expenses to average net
assets:+
Before expense reimbursement... 3.83% 8.21% 21.52%# 40.78%
After expense reimbursement.... 0.75% 1.31% 1.73% 1.75%
Ratio of net investment income to
average net assets:+
Before expense reimbursement... 2.22% (1.76)% (14.26)% (34.18)%
After expense reimbursement.... 5.29% 5.14% 5.53% 4.86%
Portfolio turnover rate.......... 87.43% 296.51% 202.54% 46.15%
</TABLE>

* Inception date.

+ Annualized

++ Not annualized

# Includes indirectly paid expenses. Excluding indirectly paid expenses for the
year ended December 31, 1995, the ratio of expenses to average net assets
before expense reimbursement would have been 21.68%

See accompanying notes to financial statements.

42
<PAGE>

Guinness Flight Asia Blue Chip Fund
Guinness Flight Asia Small Cap Fund
Guinness Flight China & Hong Kong Fund
Guinness Flight Global Government Bond Fund

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION

The Guinness Flight Investment Funds is a Delaware business trust was organized
on April 28, 1997 and registered under the Investment Company Act of 1940 (the
"1940 Act") as a non-diversified, open-end management investment company.
Currently, the Guinness Flight Investment Funds offer four separate series
portfolios: Guinness Flight Asia Blue Chip Fund whose objective is long-term
capital appreciation, Guinness Flight Asia Small Cap Fund whose objective is
long-term capital appreciation, Guinness Flight China & Hong Kong Fund whose
objective is long-term capital appreciation, and Guinness Flight Global
Government Bond Fund whose objective is to provide current income and capital
appreciation (collectively, the "Funds"). The China & Hong Kong Fund and the
Global Government Bond Fund began operations on June 30, 1994 and the Asia Blue
Chip Fund and the Asia Small Cap Fund began operations on April 29, 1996.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.

A. Security Valuation. Investments in securities traded on a primary
exchange are valued at the last reported sale price at the close of regular
trading on the last business day of the period; securities traded on an exchange
for which there has been no sale are valued at the last reported bid price.
Securities for which quotations are not readily available are valued at their
respective fair values as determined in good faith by the Board of Trustees.
Short-term investments are stated at cost, which when combined with accrued
interest, approximates market value.

U.S. Government securities with less than 60 days remaining to maturity
when acquired by the Fund are valued on an amortized cost basis. U.S. Government
securities with more than 60 days remaining to maturity are valued at the
current market value (using the mean between the bid and asked price) until the
60th day prior to maturity, and are then valued at amortized cost based upon the
value on such date unless the Board determines during such 60 day period that
this amortized cost basis does not represent fair value.

Foreign securities are recorded in the financial statements after
translation to U.S. dollars based on the applicable exchange rate at the end of
the period. The Funds do not isolate that portion of the results of operations
arising as a result of changes in the currency exchange rate from the
fluctuations arising as a result of changes in the market prices of investments
during the period.

43
<PAGE>

Guinness Flight Asia Blue Chip Fund
Guinness Flight Asia Small Cap Fund
Guinness Flight China & Hong Kong Fund
Guinness Flight Global Government Bond Fund

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Interest income is translated at the exchange rates which existed at
the dates the income was accrued. Exchange gains and losses related to interest
income are included in interest income on the accompanying Statements of
Operations.

B. Forward Foreign Currency Exchange Contracts. The Funds may utilize
forward foreign currency exchange contracts ("forward contracts") under which it
is obligated to exchange currencies at specific future dates and at specified
rates, and is subject to the risks of foreign exchange fluctuations. All
commitments are "marked-to-market" daily and any resulting unrealized gains or
losses are included as unrealized appreciation (depreciation) on foreign
currency denominated assets and liabilities. The Funds record realized gains or
losses at the time the forward contract is settled. Counter parties to these
forward contracts are major U.S. financial institutions.

C. Security Transactions, Dividends and Distributions. As is common in
the industry, security transactions are accounted for on the trade date.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.

D. Federal Income Taxes. The Funds intend to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of their taxable income to its shareholders.
Therefore, no federal income tax provision is required.

E. Equalization. The Global Government Bond Fund follows the accounting
practice known as equalization, by which a portion of the proceeds from sales
and costs of redemptions of capital shares, equivalent on a per share basis to
the amount of undistributed net investment income on the date of the
transaction, is credited or charged to undistributed net investment income. As a
result, undistributed net investment income per share is unaffected by sales or
redemptions of the Fund's shares.

F. Deferred Organization Costs. The China & Hong Kong Fund and the
Global Government Bond Fund have each incurred expenses of $58,785 in connection
with their organization. The Asia Blue Chip Fund and the Asia Small Cap Fund
have each incurred expenses of $8,745 in connection with their organization.
These costs have been deferred and are being amortized on a straight line basis
over a period of sixty months from the date the Funds commenced investment
operations. In the event that any of the initial shares of either Fund are
redeemed by the holder during the period of amortization of the Funds'
organization costs, the redemption proceeds will be reduced by any such
unamortized organization costs in the same proportion as the number of initial
shares being redeemed bears to the number of those shares outstanding at the
time of redemption.

G. Concentration of Risk. The Asia Blue Chip Fund and Asia Small Cap
Fund invests substantially all of its assets in Asian continent. The China &
Hong

44
<PAGE>

Guinness Flight Asia Blue Chip Fund
Guinness Flight Asia Small Cap Fund
Guinness Flight China & Hong Kong Fund
Guinness Flight Global Government Bond Fund

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Kong Fund invests substantially all of its assets in securities that are traded
in China or Hong Kong or that are issued by companies that do a substantial part
of their business in China. The Global Government Bond Fund invests
substantially in bonds issued by various European governments. The consequences
of political, social or economic changes in the countries in which the
securities are offered or the issuers conduct their operations may affect the
market prices of the Funds' investments and any income generated, as well as the
Funds' ability to repatriate such amounts.

H. Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

I. Other. Under terms of the Custodial Agreement, the Funds may earn
credits, based on custody cash balances, to applied to custodian fees. For the
six months ended June 30, 1997, there were no such credits.

NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER
TRANSACTIONS WITH AFFILIATES

Guinness Funds, on behalf of the Funds, entered into an Investment Advisory
Agreement with Guinness Flight Investment Management Limited (the "Advisor"), to
provide the Funds with investment management services. The Advisor furnished all
investment advice, office space and certain administrative services, and
provides certain personnel needed by the Funds. As compensation for its
services, the Advisor was entitled to a monthly fee equal to the following
annual percentages of daily average net assets:

Asia Blue Chip Fund 1.00%
Asia Small Cap Fund 1.00%
China & Hong Kong Fund 1.00%
Global Government Bond Fund 0.75%

The Funds are responsible for their own operating expenses. The Advisor and
Administrator have agreed to reimburse each Fund to the extent necessary so that
its ratio of operating expenses to average daily net assets will not exceed the

45
<PAGE>

Guinness Flight Asia Blue Chip Fund
Guinness Flight Asia Small Cap Fund
Guinness Flight China & Hong Kong Fund
Guinness Flight Global Government Bond Fund

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

following levels. Expenses reimbursed from the Adviser for the six months ended
June 30, 1997 are stated in the Funds' Statement of Operations:

Asia Blue Chip Fund 1.98%
Asia Small Cap Fund 1.98%
China & Hong Kong Fund 1.98%
Global Government Bond Fund 0.75%

Investment Company Administration Corporation (the "Administrator") acts as the
Funds' Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, prepares reports and
materials to be supplied to the Trustees; monitors the activities of the Funds'
custodian, transfer agent and accountants; coordinates the preparation and
payment of Fund expenses and reviews the Funds' expense accruals. For its
services, the Administrator receives an annual fee equal to the greater of 0.25
of 1% of the Funds' average daily net assets, subject to a $40,000 annual
minimum for the China & Hong Kong Fund and $60,000 allocated based on average
daily net assets of the Asia Blue Chip Fund, Asia Small Cap Fund and Global
Government Bond Fund.

The Funds will reimburse the Advisor and Administrator in subsequent years when
operating expenses (before reimbursements) are less than the applicable
percentage limitation in effect at that time for each of the Funds.

First Fund Distributors, Inc. (the "Distributor") acts as the Funds' principal
underwriter in a continuous public offering of the Funds' shares. The
Distributor is an affiliate of the Administrator.

Certain officers of the Guinness Flight Investment Funds are also officers
and/or Directors of the Administrator and Distributor.

NOTE 4 - PURCHASES AND SALES OF SECURITIES

The cost of purchases and the proceeds from sales of securities, excluding U.S.
Government obligations and short-term investments, for the six months ended June
30, 1997 were:

FUND PURCHASES SALES
------------------------------------ ----------- ----------

Asia Blue Chip Fund $ 63,678 $ 76,988
Asia Small Cap Fund $ 2,026,445 $4,345,381
China & Hong Kong Fund $21,232,542 $8,567,932
Global Government Bond Fund $ 178,717 $1,310,396

46
<PAGE>

Guinness Flight Asia Blue Chip Fund
Guinness Flight Asia Small Cap Fund
Guinness Flight China & Hong Kong Fund
Guinness Flight Global Government Bond Fund

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Purchases and sales of U.S. Government obligations by the Global Government Fund
were $901,890 and $110,172, respectively.

NOTE 5 - LINE OF CREDIT

The Funds have a $20 million unsecured line of credit with a bank that expires
on June 18, 1998. The interest rate on the line of credit is the bank's base
rate, as revised from time to time.

NOTE 6 - FORWARD FOREIGN CURRENCY CONTRACTS

At June 30, 1997 the Funds had entered into forward foreign currency contracts
which obligated the Funds to exchange currencies at specified future dates. At
the maturity of a forward contract, the Funds may either make delivery of the
foreign currency from currency held, if any, or from the proceeds of the
portfolio securities sold, or it may terminate its obligation to deliver the
foreign currency at any time by purchasing an offsetting contract. The forward
value of amounts due to netted against the forward value of the currency to be
delivered by the Funds and the remaining amount is shown as receivable (payable)
for forward currency contracts in the financial statements. Open forward foreign
currency exchange contracts outstanding at June 30, 1997 were as follows:

GUINNESS FLIGHT ASIA BLUE CHIP FUND

Delivery Unrealized
Currency Receivable Currency Deliverable Date Gain/(Loss)
- ----------------------------------------------------------------------------

British Pound Sterling
US $3,458 4,080......................... 07/01/97 $ (4)
-----------
Total Forward Contracts $ (4)
=========

GUINNESS FLIGHT ASIA SMALL CAP FUND

Delivery Unrealized
Currency Receivable Currency Deliverable Date Gain/(Loss)
- ----------------------------------------------------------------------------

US $5,058 Hong Kong Dollar 39,200....... 07/03/97 $ (2)
US $9,032 Hong Kong Dollar 70,000....... 07/03/97 (3)
US $47,046 Hong Kong Dollar 364,634...... 07/03/97 (18)
US $6,451 Singapore Dollar 50,000....... 07/03/97 (2)
-----------
Total Forward Contracts $ (25)
=========

47
<PAGE>

Guinness Flight Asia Blue Chip Fund
Guinness Flight Asia Small Cap Fund
Guinness Flight China & Hong Kong Fund
Guinness Flight Global Government Bond Fund

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

Currency Delivery Unrealized
Receivable Currency Deliverable Date Gain/(Loss)
- --------------------------------------------------------------------------------

US $842,558 Australian Dollar 1,090,600.... 07/31/97 $ 18,654
US $1,769,150 Canadian Dollar 2,443,868...... 07/31/97 13,278
US $2,621,719 Swiss Franc 2,443,818.......... 07/31/97 (26,409)
US $4,326,325 Deutsche Mark 7,175,876........ 07/31/97 (26,806)
US $137,864 Danish Krone 889,638........... 07/31/97 3,612
US $1,291,621 Spanish Peseta 18,829,278...... 07/31/97 5,737
British Pound Sterling
US $3,114,597 1,932,675...................... 07/31/97 (10,085)
US $1,296,118 Irish Pound 832,128............ 07/31/97 (4,025)
US $2,610,762 Japanese Yen 319,236,211....... 07/31/97 (2,121)
US $608,647 Norwegian Krone 4,141,322...... 07/31/97 (42,280)
European Currency Unit
US $938,141 818,324........................ 07/31/97 1,529
US $850,882 Australian Dollar 1,116,424.... 11/20/97 (5,903)
US $706,447 Canadian Dollar 966,000........ 11/20/97 5,473
US $1,213,275 Deutsche Mark 2,053,849........ 11/20/97 (23,067)
US $691,092 Spanish Peseta 100,288,481..... 11/20/97 265
British Pound Sterling
US $509,699 309,500........................ 11/20/97 (3,281)
US $352,267 Irish Pound 232,981............ 11/20/97 (95)
US $2,083,468 Japanese Yen 239,199,250....... 11/20/97 40,623
-----------
Total Forward Contracts $ (54,901)
=========

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