GUINNESS FLIGHT INVESTMENT FUNDS INC
497, 1997-05-02
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                                                                     Rule 497(c)
                                                       Registration No. 33-75340
GUINNESS FLIGHT
PROSPECTUS APRIL 28, 1997


                                                     ASIA BLUE CHIP FUND
                                                     ASIA SMALL CAP FUND
                                                     CHINA & HONG KONG FUND
                                                     GLOBAL GOVERNMENT BOND 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 Asia Blue
Chip Fund,  Guinness  Flight Asia Small Cap Fund,  Guinness  Flight China & Hong
Kong Fund, or the Guinness Flight Global Government Bond Fund match your own. It
should be retained for future reference. A Statement of Additional  Information,
dated April 28, 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 the 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...........................................................            3
Summary of The Funds' Expenses....................................            5
Financial Highlights..............................................            7
Investment Objectives, Programs and Limitations...................           11
Investment Strategies, Policies and Risks.........................           15
Risk Considerations...............................................           17
Performance.......................................................           21
The Funds' Management.............................................           21
How to Purchase Shares............................................           25
How to Redeem Shares..............................................           27
Shareholder Services..............................................           30
Determination of Net Asset Value..................................           31
Dividends, Distributions and Tax Matters..........................           32
About the Funds...................................................           35
General Information...............................................           36


                                        1

<PAGE>

GUINNESS FLIGHT ASIA BLUE CHIP FUND

The  "Asia  Blue  Chip  Fund's"   investment   objective  is  long-term  capital
appreciation  through  investments in equity  securities of well established and
sizable companies  located in the Asian continent.  In pursuit of its investment
objective,  the Asia Blue Chip Fund  intends  to invest 65% to 100% of its total
assets in a portfolio of "blue chip" companies  traded  primarily on the markets
of the Asian  continent.  For the purposes of this Fund, the Investment  Adviser
has  defined  a  "blue  chip"  company  to  be  a  company  that  has  a  market
capitalization  of at least $1 billion  and a  reputation  for  quality and wide
acceptance  of its  products  or  services,  as  well  as a  strong  history  of
profitability.



Generally, the Asian continent includes the relatively more developed markets of
Hong Kong,  Singapore,  Malaysia,  and Thailand,  as well as the relatively less
developed and emerging  markets of Korea and Taiwan in North Asia; of China;  of
Indonesia,  the  Philippines,  and  Vietnam in the ASEAN  region;  and of India,
Pakistan,   Sri  Lanka,  and  Bangladesh  in  East  Asia.  Under  normal  market
conditions,  the Asia Blue Chip Fund will invest in a minimum of four countries.
An  investment  in this Fund may be more  volatile  than an investment in a fund
which invests only in U.S. "blue chip"  companies.  See "Investment  Objectives,
Programs and Limitations," for a more detailed discussion.







GUINNESS FLIGHT ASIA SMALL CAP FUND



The  "Asia  Small  Cap  Fund's"   investment   objective  is  long-term  capital
appreciation through investments in equity securities of smaller  capitalization
issuers located in the Asian continent.  In pursuit of its investment objective,
the Asia Small Cap Fund  intends to invest 65% to 100% of its total  assets in a
portfolio of equity  securities of companies  traded primarily on the markets of
the  Asian  continent  that  have a  market  capitalization  of no more  than $1
billion.



Generally, the Asian continent includes the relatively more developed markets of
Hong Kong,  Singapore,  Malaysia,  and Thailand,  as well as the relatively less
developed and emerging  markets of Korea and Taiwan in North Asia; of China;  of
Indonesia,  the  Philippines,  and  Vietnam in the ASEAN  region;  and of India,
Pakistan, Sri Lanka and Bangladesh in East Asia. Under normal market conditions,
the Asia  Small  Cap Fund  will  invest  in a  minimum  of four  countries.  See
"Investment   Objectives,   Programs  and  Limitations,"  for  a  more  detailed
discussion.


                                        2

<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

The "China & Hong Kong Fund" seeks to provide  investors with long-term  capital
growth through  investments  in securities of China and Hong Kong.  Under normal
conditions,  85% to 100% of the China & Hong Kong  Fund's  total  assets will be
invested in equity securities  primarily traded in the markets of China and Hong
Kong or in equity  securities of companies that derive a substantial  portion of
their revenues from business  activities  with or in China and/or Hong Kong, but
which  are  listed  on  major  exchanges  elsewhere  (e.g.,  London,  New  York,
Singapore,  and  Australia).  To date, a majority of the securities  held by the
China  & Hong  Kong  Fund  have  been  listed  in  Hong  Kong.  See  "Investment
Objectives, Programs and Limitations," for a more detailed discussion.





GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

The "Global Government Bond Fund" intends to provide investors with both current
income and capital appreciation.  The Global Government Bond Fund will invest in
the debt  instruments  of  governments  throughout  the world.  See  "Investment
Objectives, Programs and Limitations," for a more detailed discussion.





SUMMARY

THE FUNDS.  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  offer four  separate  series
portfolios:  Guinness  Flight  Asia  Blue  Chip Fund  ("Asia  Blue Chip  Fund"),
Guinness  Flight Asia Small Cap Fund ("Asia  Small Cap Fund"),  Guinness  Flight
China & Hong Kong  Fund (the  "China & Hong Kong  Fund"),  and  Guinness  Flight
Global  Government Bond Fund (the "Global  Government Bond  Fund")(collectively,
the "Funds"), each of which pursues unique investment strategies.



RISK CONSIDERATIONS. An investor should be aware that there are risks associated
with  certain  investment  techniques  and  strategies  employed  by the  Funds,
including  those  relating  to  investments  in foreign  securities.  Such risks
include,  among  others,  currency  fluctuations,  expropriation,  confiscation,
diplomatic developments, and social instability. Each Fund's net asset value per
share can be expected to fluctuate.  Accordingly,  investors  should consider an
investment in a 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 Funds'  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 Funds' operations and
provides  investment  advisory  services to the Funds. As compensation for these
services, Guinness Flight receives a fee based on the Funds'


                                        3

<PAGE>

average daily net assets. See "The Funds' Management."



PURCHASING  SHARES.  Shares of the Funds are offered by this  Prospectus  at net
asset value. The minimum investment in the Funds is as follows:

<TABLE>
<CAPTION>
                                                                                     Minimum
    Type of Account                                                               Investment
<S>                                                                                   <C>   
    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
</TABLE>



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



EXCHANGE  PRIVILEGE.  Shares of a Fund may be exchanged  for shares of any other
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. Under certain circumstances,  a redemption fee of 1.00% will be
charged to any  shareholder  of the Asia Blue Chip Fund,  Asia Small Cap Fund or
China & Hong Kong Fund who redeems  shares  purchased less than 30 days prior to
redemption. See "How to Redeem Shares" and "Redemption Fee."



DISTRIBUTIONS.  The Asia Blue Chip  Fund,  Asia  Small Cap Fund and China & Hong
Kong Fund declare and pay dividends  from net  investment  income,  if any, on a
semi-annual  basis. The Global  Government Bond Fund declares and pays dividends
monthly. In addition, the Funds make distributions of realized capital gains, if
any, on a semi-annual  basis.  Dividends and  distributions  of the Funds may be
paid directly to you by check, or reinvested in additional  shares of the Funds,
including,  subject  to certain  conditions,  in shares of a Fund other than the
Fund making the distribution. See "Dividends, Distributions and Tax Matters."


                                        4

<PAGE>

SUMMARY OF THE FUNDS' EXPENSES

A. SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>

                                                                    Asia     Asia     China  Global
                                                                    Blue    Small    & Hong   Gov't
                                                                    Chip      Cap      Kong    Bond
                                                                    ----      ---      ----    ----
<S>                                                                 <C>      <C>       <C>     <C>
  Sales Charge Imposed on Purchases                                 none     none      none    none
  Sales Charge Imposed on Reinvested Dividends                      none     none      none    none
  Deferred Sales Charge Imposed on Redemptions                      none     none      none    none
  Redemption Fee                                                       +        +         +    none
  Exchange Fee                                                      none     none      none    none
</TABLE>

+    Under certain  circumstances,  a 1.00%  redemption fee applies to investors
     who redeem shares purchased less than 30 days prior to redemption. See "How
     to Redeem Shares -- Redemption Fee."



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

                                                           Asia      Asia    China     Global
                                                           Blue     Small   & Hong      Gov't
                                                           Chip       Cap     Kong       Bond
                                                           ----       ---     ----       ----
<S>                                                       <C>       <C>      <C>         <C> 
  Advisory Fee                                            1.00%     1.00%    1.00%       .75%
  Rule 12b-1 Fee                                           .00%      .00%     .00%       .00%
  Other Expenses (after expense reimbursement)             .98%      .98%     .78%       .00%
                                                           ----      ----     ----       ----
  Total Fund Operating Expenses
(after expense reimbursement)                             1.98%     1.98%    1.78%       .75%++
</TABLE>

++ Guinness  Flight has undertaken to cap Total Fund Operating  Expenses at .75%
for the  Global  Government  Bond Fund by  reimbursing  the Fund for all  "Other
Expenses."  The Global  Government  Bond 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:

<TABLE>
<CAPTION>

                                                          Asia      Asia    China     Global
                                                          Blue     Small   & Hong      Gov't
                                                          Chip       Cap     Kong       Bond
                                                          ----       ---     ----       ----
<S>                                                        <C>       <C>      <C>         <C>
  One Year                                                 $20       $20      $18         $8
  Three Year                                              $62        $62      $56        $24
  Five Year                                               $107      $107      $96        $42
  Ten Year                                                $231      $231     $209        $93
</TABLE>


EXPLANATION OF TABLE: The purpose of the table is to assist you in understanding
the various costs and expenses that an investor in a Fund would bear directly or
indirectly.



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


                                        5

<PAGE>

"Redemption Fee."

B. ANNUAL FUND OPERATING  EXPENSES are based on a Fund's operating  expenses for
the current  fiscal  year.  The Funds incur  "other  expenses"  for  maintaining
shareholder records,  furnishing  shareholder  statements and reports, and other
services.  Guinness  Flight  or  the  Administrator  may,  from  time  to  time,
voluntarily  agree to defer or waive fees or absorb some or all of the  expenses
of the Funds. 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 Asia Blue Chip
Fund, Asia Small Cap Fund, China & Hong Kong Fund or the Global  Government Bond
Fund would exceed 1.98%, 1.98%, 1.78% and 0.75%,  respectively.  For the current
year,  the China & Hong Kong Fund  repaid  Guinness  Flight  for  amounts it had
absorbed during prior fiscal periods. Including such repayment, "other expenses"
were .96% and "total fund operating  expenses" were 1.96%.  For the prior fiscal
year,  Guinness Flight absorbed some of the expenses of each of the funds except
the China & Hong Kong Fund. If Guinness  Flight had not absorbed such  expenses,
"other  expenses" for the Asia Blue Chip,  Asia Small Cap and Global  Government
Bond Fund would have been 8.14%,  2.09% and 7.46%,  respectively and "total fund
operating  expenses" would have been 9.14%, 3.09% and 8.21%,  respectively.  See
"The Funds' Management."



C.  EXAMPLE OF  EXPENSES.  The  hypothetical  example  illustrates  the expenses
associated with a $1,000  investment in a 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.


                                        6

<PAGE>

FINANCIAL HIGHLIGHTS

The tables below set forth certain financial information with respect to a share
outstanding  for each of the  Funds for the  periods  indicated.  The  following
information  has been  audited  by the  Guinness  Flight  Fund's  auditors.  The
unqualified  report of Ernst & Young  LLP,  covering  the fiscal  period  ending
December 31, 1996 is  incorporated by reference into the Statement of Additional
Information,  which may be  obtained  by  calling  800-915-6565.  The  financial
highlights  should be read in  conjunction  with each Fund's  audited  financial
statements for the periods indicated.



GUINNESS FLIGHT ASIA BLUE CHIP FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>

                                                                                            April 29, 1996*
                                                                                                 through
                                                                                            December 31, 1996
<S>                                                                                                <C> 
Net asset value, beginning of period                                                                $12.50
                                                                                                    ------
Income from investment operations:
  Net investment income                                                                               0.00
  Net realized and unrealized gain on investments and foreign currency                                0.48
                                                                                                    ------
Total from investment operations                                                                      0.48
                                                                                                    ------
Net asset value, end of period                                                                      $12.98
                                                                                                    ======
Total return                                                                                          3.84%+
Ratios/supplemental data:
  Net assets, end of period (thousands)                                                             $3,687
Ratio of expenses to average net assets:**+
  Before expense reimbursement                                                                        9.14%
  After expense reimbursement                                                                         1.98%
Ratio of net investment income (loss) to average net assets:**+
  Before expense reimbursement                                                                      (7.10)%
  After expense reimbursement                                                                         0.06%
Portfolio turnover rate                                                                              10.97%
Average Commission Rate Paid+                                                                      $0.0190

</TABLE>

*    Commencement of operations.
**   Annualized.
+    Not Annualized.
++   A fund is required to disclose  its average  commission  rate per share for
security  trades on which  commissions  are  charged.  This amount may vary from
period to period and fund to fund  depending  on the mix of trades  executed  in
various  markets where trading  practices and  commission  rate  structures  may
differ.


                                        7

<PAGE>

GUINNESS FLIGHT ASIA SMALL CAP FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>

                                                                                             April 29, 1996*
                                                                                                 through
                                                                                            December 31, 1996
<S>                                                                                                <C>
Net asset value, beginning of period                                                               $12.50
                                                                                                   ------
Income from investment operations:
  Net investment income                                                                              0.02
  Net realized and unrealized gain on investments                                                    1.61
                                                                                                   ------
Total from investment operations                                                                     1.63
                                                                                                   ------
Less distributions:
  Dividends from net investment income                                                              (0.02)
  Distributions from taxable net capital gains                                                      (0.01)
                                                                                                   ------
                                                                                                    (0.03)
                                                                                                   ------
Net asset value, end of period                                                                     $14.10
                                                                                                   ======
Total return                                                                                        13.08%+
Ratios/supplemental data:
  Net assets, end of period (thousands)                                                           $50,868
Ratio of expenses to average net assets:**
  Before expense reimbursement                                                                       3.09%
  After expense reimbursement                                                                        1.98%
Ratio of net investment income to average net assets:**
  Before expense reimbursement                                                                      (0.76)%
  After expense reimbursement                                                                         0.36%
Portfolio turnover rate                                                                              21.91%
Average Commission Rate Paid+                                                                      $0.0029

*    Commencement of operations.
**   Annualized.
+    Not Annualized.
++   A fund is  required to disclose its average  commission  rate per share for
security  trades on which  commissions  are  charged.  This amount may vary from
period to period and fund to fund  depending  on the mix of trades  executed  in
various  markets where trading  practices and  commission  rate  structures  may
differ.

</TABLE>


                                        8

<PAGE>

GUINNESS FLIGHT CHINA & HONG KONG FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>

                                                         For the Year            For the Year        June 30, 1994*
                                                             Ended                  Ended              through
                                                      December 31, 1996      December 31, 1995     December 31, 1994
<S>                                                           <C>                   <C>                   <C>   
Net asset value, beginning of period                          $13.64                $11.47                $12.50
Income from investment operations:
  Net investment income                                         0.19                  0.14                  0.04
  Net realized and unrealized gain
  (loss) on investments                                         4.43                  2.20                 (0.96)
                                                              ------                ------                ------
Total from investment operations                                4.62                  2.34                 (0.92)
                                                              ------                ------                ------
Less distributions:
  Dividends from net investment income                         (0.19)                (0.14)                (0.04)
  Distributions from taxable net capital gains                 (0.36)                (0.03)                (0.07)
                                                              ------                ------                ------
Total distributions                                            (0.55)                (0.17)                (0.11)
                                                              ------                ------                ------
Net asset value, end of period                                $17.71                $13.64                $11.47
                                                              ======                ======                ======
Total return                                                   34.38%                20.45%                (7.74)%+
Ratios/supplemental data:
  Net assets, end of period (thousands)                     $311,521               $55,740                $2,287
Ratio of expenses to average net assets:
  Before expense reimbursement (recoupment)                     1.78%                 3.02%**              19.92%+
  After expense reimbursement (recoupment)                      1.96%                 1.98%                 2.00%+
Ratio of net investment income to average net assets:
  Before expense reimbursement (recoupment)                     1.57%                 0.49%            (17.15)%+
  After expense reimbursement (recoupment)                      1.39%                 1.52%                 0.78%+
Portfolio turnover rate                                        30.04%                10.89%                27.25%
Average Commission Rate Paid#                                $0.0070                    --                     --
BANK LOANS
Amount outstanding at end of period (000)                         --                    --                     --
Average amount of bank loans outstanding during
  the period (monthly average) (000)                          $1,413                    --                     --
Average number of shares outstanding
  during the period (monthly average) (000)                   11,419                    --                     --
Average amount of debt per share
  during the period                                            $0.12                    --                     --

</TABLE>

*   Commencement of operations.
**  Includes directly paid expenses. Excluding indirectly  paid expenses for the
year ended December 31, 1996, the ratio of expenses to average net assets before
"expense reimbursement" would have been 3.04%.
+   Annualized.
++  Not Annualized.
#   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.  This amount may vary from period to period and fund to
fund  depending on the mix of trades  executed in various  markets where trading
practices and commission rate structures may differ.


                                        9

<PAGE>

GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD


<TABLE>
<CAPTION>

                                                         For the Year            For the Year        June 30, 1994*

                                                             Ended                  Ended              through
 
                                                      December 31, 1996       December 31, 1995    December 31, 1994



<S>                                                           <C>                      <C>                  <C>   
Net asset value, beginning of period                          $12.77                   $12.00               $12.50
                                                              ------                   ------               ------

Income from investment operations:

    Net investment income                                       0.63                     0.69                 0.29

    Net realized and unrealized gain
    (loss) on investments                                       0.13                     1.01                (0.58)
                                                              ------                   ------               ------
Total from investment operations                                0.76                     1.70                (0.29)
                                                              ------                   ------               ------
Less distributions:
    Dividends from net investment income                       (0.69)                   (0.65)               (0.21)
    Distributions from net capital gains                       (0.12)                   (0.28)                  --
                                                              ------                   ------              -------
Total distributions                                            (0.81)                   (0.93)               (0.21)
                                                              ------                   ------               ------
Net asset value, end of period                                $12.72                   $12.77               $12.00
                                                              ======                   ======               ======
Total return                                                    6.21%                   14.49%               (2.33)%+
Ratios/supplemental data:
    Net assets, end of period (thousands)                     $6,564                   $1,153                 $751
Ratio of expenses to average net assets:
    Before expense reimbursement                                8.21%                   21.52%**             40.78%+
    After expense reimbursement                                 1.31%                    1.73%                1.75%+
Ratio of net investment income to average net assets:
    Before expense reimbursement                               (1.76)%                 (14.26)%             (34.18)%+
    After expense reimbursement                                 5.14%                    5.53%                4.86%+
Portfolio turnover rate                                       296.51%                  202.54%               46.15%

</TABLE>

+    Annualized.
++   Not Annualized.
*    Commencement of operations.
**   Includes indirectly  paid expenses.  Excluding indirectly paid expenses for
the year ended December 31, 1996,  the ratio of  expenses  to average net assets
 before expense reimbursement would have been 21.68%.


                                       10

<PAGE>

INVESTMENT OBJECTIVES, PROGRAMS AND LIMITATIONS

THE ASIA BLUE CHIP  FUND.  The Asia Blue Chip  Fund's  investment  objective  is
long-term capital  appreciation through investments in equity securities of well
established and sizable companies located in the Asian continent.  In pursuit of
its investment objective,  the Asia Blue Chip Fund intends to invest 65% to 100%
of its total assets in a portfolio of "blue chip" companies  traded primarily on
the markets of the Asian  continent.  For purposes of this Fund,  the Investment
Adviser  has  defined a "blue  chip"  company to be a company  that has a market
capitalization  of at least $1 billion  and a  reputation  for  quality and wide
acceptance  of its  products  or  services,  as  well  as a  strong  history  of
profitability. An investment in this Fund, however, may be more volatile than an
investment in a fund which invests only in U.S "blue chip"companies.



Generally, the Asian continent includes the relatively more developed markets of
Hong Kong,  Singapore,  Malaysia,  and Thailand,  as well as the relatively less
developed and emerging  markets of Korea and Taiwan in North Asia; of China;  of
Indonesia,  the  Philippines,  and  Vietnam in the ASEAN  region;  and of India,
Pakistan, Sri Lanka and Bangladesh in East Asia. Under normal market conditions,
the Asia Blue Chip Fund will invest in a minimum of four countries.  As a matter
of fundamental  policy, the Asia Blue Chip Fund will not invest more than 25% of
its assets in the securities (other than U.S. Government  securities) of issuers
in any one  industry,  as defined by the Current  Directory of Companies  Filing
Annual Reports with the Securities and Exchange Commission.



Equity securities, for purposes of the 65% policy, will be limited to common and
preferred stocks; special classes of shares available only to foreign persons in
markets that restrict the ownership of certain classes of equity to nationals or
residents  of  the  country;   convertible  preferred  stocks;  and  convertible
investment grade instruments. In addition, the Asia Blue Chip 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 Asia Blue Chip 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 Asia Blue Chip Fund may also purchase and sell
stock index futures to hedge against equity markets on a temporary basis.



THE ASIA  SMALL CAP FUND.  The Asia  Small Cap Fund's  investment  objective  is
long-term  capital  appreciation  through  investments  in equity  securities of
smaller capitalization issuers located in the Asian continent. In pursuit of its
investment  objective,  the Asia Small Cap Fund intends to invest 65% to 100% of
its total  assets  in a  portfolio  of equity  securities  of  companies  traded
primarily   on  the  markets  of  the  Asian   continent   that  have  a  market
capitalization  of no more  than $1  billion.  Generally,  the  Asian  continent
includes  the  relatively  more  developed  markets  of  Hong  Kong,  Singapore,
Malaysia, and Thailand, as well


                                       11

<PAGE>

as the  relatively  less  developed and emerging  markets of Korea and Taiwan in
North Asia; of China; of Indonesia,  the  Philippines,  and Vietnam in the ASEAN
region;  and of India,  Pakistan,  Sri Lanka and Bangladesh in East Asia.  Under
normal  market  conditions,  the Asia Small Cap Fund will invest in a minimum of
four countries.  As a matter of fundamental policy, the Asia Small Cap Fund will
not  invest  more than 25% of its  assets  in the  securities  (other  than U.S.
Government securities) of issuers in any one industry, as defined by the Current
Directory of Companies  Filing Annual  Reports with the  Securities and Exchange
Commission.



Equity securities, for purposes of the 65% policy, will be limited to common and
preferred stocks; special classes of shares available only to foreign persons in
markets that restrict the ownership of certain classes of equity to nationals or
residents  of  the  country;   convertible  preferred  stocks;  and  convertible
investment grade instruments. In addition, the Asia Small Cap 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 Asia Small Cap 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 Asia Small Cap Fund may also purchase and sell
stock index futures to hedge against equity markets on a temporary basis.



THE  CHINA & HONG  KONG  FUND.  The  China & Hong  Kong  Fund  seeks to  provide
investors with long-term capital growth. Under normal market conditions,  85% to
100% of the China & Hong Kong  Fund's  total  assets  will be invested in equity
securities  primarily  traded in the markets of China and Hong Kong or in equity
securities of companies that derive a substantial portion of their revenues from
business  activities  with or in China and/or Hong Kong, but which are listed on
major exchanges elsewhere (e.g., London, New York, Singapore and Australia).  To
date, a majority of the securities  held by the China & Hong Kong Fund have been
listed in Hong  Kong.  The  principal  offices of these  issuers  may be located
outside  China and Hong Kong.  The China & Hong Kong Fund will not  invest  more
than 15% of its total assets in any equity  securities  other than those of such
issuers.  As a matter of fundamental policy, the China & Hong Kong Fund will not
invest  more than 25% of its total  assets in the  securities  (other  than U.S.
Government securities) of issuers in any one industry, as defined by the Current
Directory of Companies  Filing Annual  Reports with the  Securities and Exchange
Commission.



Equity securities, for purposes of the 85% policy, will be limited to common and
preferred stocks; special classes of shares available only to foreign persons in
markets that restrict the ownership of certain classes of equity to nationals or
residents  of  the  country;   convertible  preferred  stocks;  and  convertible
investment grade instruments. In addition, the China & Hong Kong 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.


                                       12

<PAGE>

Notwithstanding  the above information,  the China & Hong Kong 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.
The China & Hong Kong Fund may also  purchase  and sell stock  index  futures to
hedge against equity markets on a temporary basis.



THE GLOBAL  GOVERNMENT  BOND FUND.  The Global  Government  Bond Fund intends to
provide  investors with current income while seeking  opportunities  for capital
appreciation.



The Global  Government  Bond Fund's  portfolio is managed in  accordance  with a
global investment  strategy,  which means that the Global Government Bond Fund's
investments will be allocated among securities  denominated in the United States
dollar and the currencies of a number of foreign countries. Fundamental economic
strength,  credit  quality and interest  rate trends are the  principal  factors
considered by Guinness Flight in determining whether to increase or decrease the
emphasis placed upon a particular type of security in the Global Government Bond
Fund's  portfolio.  Guinness Flight may further  evaluate  foreign yield curves,
regulatory and political factors,  including the fiscal and monetary policies of
the countries in which the Global Government Bond Fund may invest.  Although the
Global  Government Bond Fund intends to invest  substantially  all of its assets
directly in the debt of  governments  (or any of their  political  subdivisions,
authorities,  agencies  or  instrumentalities),  or of  supranational  entities,
throughout the world, the Global Government Bond Fund may also invest in certain
futures, options, foreign currency contracts,  repurchase agreements,  and other
investments described below.



Under normal market  conditions,  the Global Government Bond Fund will invest at
least 65% of its total  assets in bonds  issued by the  governments  of at least
three  different  countries.  For the purpose of this  policy,  a bond is a debt
instrument. The Global Government Bond Fund will neither invest more than 25% of
its net  assets in  securities  issued  by a single  foreign  government,  or in
supranational entities as a group, nor invest more than 25% of its net assets in
securities  denominated in a single currency other than the U.S. Dollar, British
Pound Sterling, Canadian Dollar, French Franc, German Mark and Japanese Yen. The
Global  Government  Bond Fund will invest in the entire range of maturities  and
may adjust the average  maturity of the  investments  held in the portfolio from
time to time,  depending upon its assessment of relative yields of securities of
different maturities and its expectations of future changes in interest rates.



The Global  Government Bond Fund presently  expects to invest in both dollar and
non-dollar  denominated  securities  of  issuers  in the  United  States and the
industrialized  Western European countries;  in Canada, Japan, Australia and New
Zealand;  and in Latin America. The Global Government Bond Fund may invest up to
15% of its assets in the fixed income  securities of issuers in emerging  market
countries.  An emerging market is any country that the World Bank has determined
to have a low or middle  income  economy  and may include  every  country in the
world except the United States,  Australia,  Canada, Japan, New Zealand and most
countries located in Western Europe such as Belgium,  Denmark,  France, Germany,
Great Britain, Italy, the Netherlands, Norway, Spain, Sweden and Switzerland.


                                       13

<PAGE>

Debt  instruments of emerging market  countries may be below  investment  grade,
commonly  referred to as "junk bonds."  "Investment  grade" securities are those
rated within the four highest quality grades as determined by Moody's  Investors
Service,  Inc.  ("Moody's")  or  Standard  &  Poor's  Corporation  ("Standard  &
Poor's").  Securities  rated Aaa by  Moody's  and AAA by  Standard  & Poor's are
judged  to be of the  best  quality  and  carry  the  smallest  degree  of risk.
Securities  rated Baa by Moody's and BBB by Standard & Poor's lack high  quality
investment  characteristics  and, in fact, have speculative  characteristics  as
well.  Debt  instruments  that are deemed to be below  investment  grade  entail
greater risks of untimely interest and principal  payments,  default,  and price
volatility  than  investment  grade  securities,  and may  present  problems  of
liquidity  and  valuation.  See  Appendix  A  of  the  Statement  of  Additional
Information for a further description of investment grade debt ratings.



In order to protect and enhance the capital value of the Global  Government Bond
Fund,  Guinness  Flight  employs  an  investment  technique  known as  "Currency
Overlay"  which allows  Guinness  Flight to manage the currency  exposure of the
underlying bond portfolio.  Using Currency Overlay, Guinness Flight constructs a
portfolio  of bonds  denominated  in a variety  of  currencies  and then,  using
forwards,  options and futures  contracts,  reconstructs the currency portion of
the bond portfolio.  The use of this technique  allows Guinness Flight to invest
in the bond  markets  that it believes  offer the best  opportunities  for total
return  regardless  of the prospects for the  currencies  involved,  and then to
invest in the currencies that believes offer the best  opportunities  to protect
and enhance capital.



Guinness Flight intends to place the Fund in the major  currencies  perceived to
be in, or about to enter, a strengthening  phase and to avoid those in, or about
to enter, a phase of relative weakness.  In making currency decisions,  a wholly
international  stance is pursued by Guinness  Flight.  Consideration is given to
both  fundamental  economic and financial data such as relative GNP growth,  the
Balance  of  Payments  position,  inflation  and  interest  rates,  as  well  as
short-term  factors such as political events and market sentiment.  The Currency
Overlay  is  employed  on a medium to  long-term  basis and not on a  day-to-day
trading approach.



Not more than 5% of the Global  Government Bond Fund's assets may be invested in
initial  margins or premiums for the futures and options needed to construct the
Currency Overlay.  Where Guinness Flight  misperceives  certain economic trends,
the Global Government Bond Fund's net asset value may be adversely affected as a
result of this investment technique.



Notwithstanding the above, the Global Government Bond Fund reserves the right to
invest  up to 100%  of its  assets  in  cash,  cash  equivalents,  high  quality
short-term money market instruments,  and in bills, notes or bonds issued by the
United  States  Treasury  Department  or by other  agencies of the United States
Government for temporary defensive purposes. The Global Government Bond Fund may
also  purchase  and sell  index  futures  to hedge  against  maturity  risk on a
temporary basis.


                                       14

<PAGE>

INVESTMENT STRATEGIES, POLICIES AND RISKS

FORWARD  FOREIGN  CURRENCY  EXCHANGE  CONTRACTS.  The Funds may purchase or sell
forward foreign currency  exchange  contracts  ("forward  contracts") as part of
their  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.  A 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").



Additionally,  when a 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 a 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 Funds 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 Funds, 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 Funds will enter into such  contracts  with the
intention of  acquiring  the  securities,  the Funds may dispose of a commitment
prior to a settlement  date if Guinness  Flight deems it appropriate to do so. A
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 Funds 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


                                       15

<PAGE>

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,  a 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 Funds 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 Asia Blue Chip
Fund,  Asia  Small Cap Fund and China & Hong  Kong  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 a 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 a 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 Funds 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 Funds will not invest more than 15% of their net assets
in illiquid  securities,  including  repurchase  agreements  with  maturities in
excess of seven days.



RESTRICTED  SECURITIES.  The Funds 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 Funds 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


                                       16

<PAGE>

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,  a 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 a
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 a 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 Asia Blue Chip Fund,
the Asia Small Cap Fund and the China & Hong Kong Fund,  and 200% for the Global
Government Bond Fund.



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



RISK CONSIDERATIONS

THE ASIA BLUE CHIP FUND,  ASIA SMALL CAP FUND AND CHINA & HONG KONG FUND -- RISK
CONSIDERATIONS.  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 (SEZ), five originally and
over thirty today,  were set up, providing tax advantages to foreign  investors.
Further,  two stock  exchanges have recently  opened in China - the Shenzhen and
the Shanghai. 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 China & Hong Kong 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  would
maintain the existing  capitalist economic and social system of Hong Kong for 50
years beyond that date.


                                       17

<PAGE>

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 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 is a risk after June 30,  1997 when Hong Kong  returns 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 Hong Kong and China, both before and
after the June 30, 1997 transition. 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.



Nonetheless,  Guinness  Flight  believes that the process of reform has now gone
too far to be easily  reversed and that China will not  deliberately  damage the
Hong Kong economy in which it has become a substantial  investor and on which so
much of its industry depends.

THE GLOBAL  GOVERNMENT  BOND FUND -- RISK  CONSIDERATIONS.  The  obligations  of
foreign government entities, including supranational issuers, have various kinds
of government support.  Although  obligations of foreign  governmental  entities
include obligations issued or guaranteed by national, provincial, state or other
government with taxing power, or by their agencies, these obligations may or may
not be supported by the full faith and credit of a foreign government.

GENERAL  ECONOMIC AND POLITICAL  RISKS.  The economies of foreign  countries may
differ  unfavorably from the United States economy in such respects as growth of
domestic   product,   rate  of   inflation,   capital   reinvestment,   resource
self-sufficiency  and balance of payments  positions.  Further,  such  economies
generally are heavily dependent upon international trade


                                       18

<PAGE>

and,  accordingly,  have  been and may  continue  to be  adversely  affected  by
economic conditions in countries in which they trade, as well as trade barriers,
managed adjustments in relative currency values and other protectionist measures
imposed or negotiated by such countries.

With   respect  to  any   foreign   country,   there  is  the   possibility   of
nationalization,  expropriation  or confiscatory  taxation,  political  changes,
government 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 more difficult to obtain
a judgement in a court outside of the United States.



OTHER RISK CONSIDERATIONS -- ASIA SMALL CAP FUND

SMALL  CAPITALIZATION  ISSUERS.  An investor should be aware that investments in
small  capitalization  issuers  carry  more risk  than in  issuers  with  market
capitalizations  greater than  $1_billion.  Generally,  small  companies rely on
limited product lines,  financial  resources,  and business activities that make
them more susceptible to setbacks or downturns.  In addition,  the stock of such
companies  may be more thinly  traded.  Accordingly,  the  performance  of small
capitalization issuers may be more volatile.

INTEREST RATE FLUCTUATIONS. Generally, the value of fixed income securities will
change as interest rates  fluctuate.  During periods of falling  interest rates,
the values of outstanding long-term debt obligations generally rise. Conversely,
during periods of rising interest rates, the value of such securities  generally
decline.  The  magnitude  of these  fluctuations  generally  will be greater for
securities with longer maturities.

SECURITIES  MARKETS.  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 Funds'
limitation on such  purchases.  Similarly,  volume and liquidity in most foreign
bond  markets  can  be  substantially  less  than  in  the  United  States,  and
consequently,  volatility  of price can be greater  than in the  United  States.
Fixed  commissions  on foreign  markets are  generally  higher  than  negotiated
commissions  on United  States  exchanges,  although the Funds will  endeavor to
achieve the most favorable net results on their portfolio  transactions  and may
be able to purchase the  securities in which the Funds may invest on other stock
exchanges where commissions are negotiable.

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 regulations of foreign stock exchanges, brokers and
listed companies than in the United States.

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 Funds may


                                       19

<PAGE>

invest in these investment funds subject to the provisions of the 1940 Act. If a
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 a Fund's
assets invested in shares of other open-end investment  companies.  A 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  charters 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. A Fund could be adversely affected by delays in or a refusal to grant
any required governmental approval for such repatriation.

FOREIGN CURRENCY CONSIDERATIONS.  Although the Funds' investments generally will
be  denominated in foreign  currencies and most income paid by such  investments
will be in foreign  currencies,  the Funds will  compute  and  distribute  their
income in  dollars.  The  computation  of income will be made on the date of its
receipt  by a Fund  at the  foreign  exchange  rate  in  effect  on  that  date.
Therefore,  if the value of the foreign  currencies in which a 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 a Fund as  measured  in dollars  also may be affected
favorably or unfavorably by fluctuations in currency rates and exchange  control
regulations.  Further,  a Fund may incur costs in  connection  with  conversions
between various currencies.



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



PERFORMANCE

A 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 a 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 Funds may
separate  their  cumulative  and average  annual returns into income results and
capital gains or losses.


                                       20

<PAGE>

Yield is computed in accordance  with a  standardized  formula  described in the
Statement of Additional  Information  and can be expected to fluctuate from time
to time. It is not necessarily  indicative of future results.  Accordingly,  the
yield  information may not provide a basis for comparison with investments which
pay a fixed rate of interest for a stated period of time. Yield is a function of
the type and quality of a Fund's  investments,  maturity and  operating  expense
ratio. A shareholder's investment in a Fund is not insured or guaranteed.



The  performance  of the Funds will vary from time to time and past  results are
not  necessarily  representative  of future results.  A 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 FUNDS' MANAGEMENT

The overall management of the business and affairs of the Funds 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 a Fund,
and  persons  or  companies  furnishing  services  to  a  Fund.  The  day-to-day
operations  of each Fund are  delegated to the  officers of the Guinness  Flight
Funds and to Guinness  Flight,  subject always to the  investment  objective and
policies  of each 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 each of the Funds
pursuant to an Investment  Advisory  Agreement dated as of April 28, 1997. Under
the terms of the Advisory  Agreement,  Guinness Flight supervises all aspects of
the Funds'  operations and provides  investment  advisory services to the Funds.
Guinness  Flight was organized in 1985 and is registered with the Securities and
Exchange Commission under the Investment Advisers Act of 1940, as amended.



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



      MICHAEL  DALEY -- Mr.  Daley joined  Guinness  Flight as a Director of the
      Fixed  Income Team in 1994.  Prior to joining  Guinness  Flight,  he was a
      founding  member  in 1986 of  Morgan  Stanley  Asset  Management's  London
      operation  where he served as Director,  Vice  President and Head of Fixed
      Income.  In 1991, he established his own firm,  Strategic Value Management
      Limited.  Mr. Daley serves as  Co-Manager  of the Global  Government  Bond
      Fund.


                                       21

<PAGE>

      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.



      HOWARD FLIGHT -- Mr. Flight has been involved in asset management for over
      25 years  throughout  the  world.  He joined  Guinness  Mahon in 1979 as a
      director of the investment  department.  In 1987, he became Joint Managing
      Director of Guinness  Flight.  Presently,  he is responsible  for Guinness
      Flight's currency and fixed income policies as Investment Director.  Until
      its  dissolution,  he was a  member  of  H.M.  Treasury  Tax  Consultative
      Committee.  In 1997, he became Chief  Executive of Guinness  Flight Hambro
      Asset Management Limited.



      TIMOTHY GUINNESS -- Mr. Guinness  originally joined Guinness Mahon in 1977
      in  the  Corporate  Finance  Department,  and  later  transferred  to  the
      Investment  Department,  becoming Senior  Investment  Director in 1982. He
      served as Fund Manager of both the Guinness  Flight Global Equity Fund and
      United  Kingdom Equity Fund.  These funds are currently  available only to
      overseas  investors.  He has been Joint  Managing  Director since 1987 and
      leads the Global  Equity Team as Investment  Director.  In 1997, he became
      Chief Executive of Guinness Flight Hambro Asset Management Limited.



      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  markets.  She
      started in the research department of the Hong Kong Stock Exchange and has
      been managing funds for 8 years.  Currently,  Ms. Lee 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.



      PHILIP  SAUNDERS -- Mr.  Saunders joined Guinness Mahon in 1980. He gained
      experience in all principal  operating areas before joining the investment
      department  on a  permanent  basis as a member of the  Currency  and Fixed
      Interest team. He assumed  responsibility for the day to day management of
      the Guinness Flight managed currency,  international and global bond funds
      and  portfolios  in  1984  and  assumed  responsibility  as  Fixed  Income
      Investment  Director in 1987. These funds are currently  available only to
      overseas investors.



      JOHN STOPFORD -- Mr. Stopford  joined Guinness Flight in 1993.  Currently,
      he is a member


                                       22

<PAGE>

      of the Fixed Income Team,  specializing  in "core"  European bond markets.
      Prior to joining  Guinness  Flight,  he was responsible for European fixed
      income fund  management at Mitsui Trust Asset  Management  (U.K.) Ltd. Mr.
      Stopford serves as the Co-Manager of the Global Government Bond Fund.



Guinness  Flight's  legal  counsel  believes  that  Guinness  Flight may provide
services  described in its  Investment  Advisory  Agreement to the Funds without
violating the federal banking law commonly known as the Glass-Steagall  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 Funds. 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 Funds.



FEES AND EXPENSES. Pursuant to the Advisory Agreement, Guinness Flight is paid a
monthly  fee from the Asia Blue Chip Fund,  Asia Small Cap Fund and China & Hong
Kong Fund at an annual  rate of 1.00% of each Fund's  average  daily net assets,
and a monthly fee from the Global  Government  Bond Fund calculated at an annual
rate of .75% of its average  daily net assets.  These fees are higher than those
charged by most investment  companies.  However,  the Board of Trustees believes
that such fees are appropriate  because of the complexity of managing funds that
invest in global markets. Guinness Flight or Investment Company Administration


                                       23

<PAGE>

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 Funds.  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 Asia Blue Chip  Fund's or Asia Small Cap
Fund's expense ratio exceeding 1.98%, the China & Hong Kong Fund's expense ratio
exceeding  1.78% or the Global  Government  Bond Fund's expense ratio  exceeding
 .75%.



ADMINISTRATOR.  Pursuant  to an  Administration  Agreement,  Investment  Company
Administration Corporation ("ICAC") serves as administrator of the Funds. 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 $40,000
or .25% of average daily net assets on the China & Hong Kong Fund and $20,000 or
0.25% of average daily net assets on each of the Asia Blue Chip Fund, Asia Small
Cap Fund and the Global Government Bond Fund.



DISTRIBUTOR.  The  Guinness  Flight  Funds  have  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 Funds. The Distribution  Agreement provides First Fund with
the right to distribute  shares of the Funds through  affiliated  broker-dealers
and through other broker-dealers or financial  institutions with whom First Fund
has entered into selected dealer agreements.



DISTRIBUTION PLAN. The Funds have adopted a Distribution Plan (the "Plan") under
Rule 12b-1 under the 1940 Act. No separate payments are authorized to be made by
a 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 Funds 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.


                                       24

<PAGE>

HOW TO PURCHASE SHARES

GENERAL  INFORMATION.  Investors  may purchase  shares of a 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 Funds' shares. The Funds
reserve 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 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.



Share of the Funds 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:

<TABLE>
<CAPTION>

                                                                                Minimum
  Type of Account                                                            Investment
<S>                                                                              <C>   
  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

</TABLE>


The Funds may further  reduce or waive the minimum  for certain  retirement  and
other employee  benefit plans;  for the Adviser'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
Funds.



ADDITIONAL   INVESTMENTS   --  MINIMUM   SUBSEQUENT   INVESTMENT.   The  minimum
"subsequent" investment


                                       25

<PAGE>

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 Funds. See waiver  discussion under
"Opening  an  Account-Investment  Minimums."  Investments  may be made either by
check or by wire.



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 Funds.  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 a 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


                                       26

<PAGE>

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 a Fund as of that day.  Your bank may charge a fee for wiring money on
your behalf.







HOW TO REDEEM SHARES

GENERAL INFORMATION.  Investors may redeem shares of a 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 Funds 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 a 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.


                                       27

<PAGE>

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 any 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 a
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


                                       28

<PAGE>

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 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 a 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 Funds 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  WITHDRAWL  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 withdrawl  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 withdrawl.  As shares
of a 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 China & Hong
Kong Fund,  Asia Blue Chip Fund,  or Asia Small Cap Fund,  such  proceeds  to be
payable to the Fund. Such redemption fee will not


                                       29

<PAGE>

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.



Any redemption  fee payable to the Asia Blue Chip Fund,  Asia Small Cap Fund, or
China & Hong Kong Fund, will be waived if such fee is equal to or less than .10%
of the total value of the shares,  including  shares purchased more than 30 days
prior  to  redemption  and  shares   acquired   through  the   reinvestment   of
distributions of investment income and capital gains, being redeemed.



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 Funds,  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 a Fund for shares of the other
Funds by mailing or delivering written instructions to the Transfer Agent at the
following address:



                         Guinness Flight Investment Funds
                         P.O. Box 9288
                         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 26.


                                       30

<PAGE>

All exchanges  will be made on the basis of the relative net asset values of the
Funds 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 a 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 Funds 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 Funds  reserve  the right to limit the
number  of  exchanges  a  shareholder  may make in any year to four (4) to avoid
excessive Fund expenses.



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 are $100 per an investment.





DETERMINATION OF NET ASSET VALUE

The net asset value per share (or share price) of the Funds is  determined as of
4:15 p.m.  Eastern Time on each  business  day. The net asset value per share is
calculated by subtracting a Fund's  liabilities from its assets and dividing the
result by the total number of Fund shares  outstanding.  The  determination of a
Fund's net asset value per share is made in accordance  with generally  accepted
accounting  principles.  Among other items, a 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


                                       31

<PAGE>

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 Asia Blue Chip Fund, Asia
Small Cap Fund and China & Hong Kong Fund are  declared  and paid  semiannually,
normally in June and December. The Global Government Bond Fund declares and pays
dividends  monthly.  The Funds distribute all or substantially  all of their net
investment  income and net capital gains (if any) to shareholders each year. Any
net capital gains earned by a 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 a Fund are  automatically  reinvested on the
ex-dividend  date  in full  and  fractional  shares  of such  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 a 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 a 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.


                                       32

<PAGE>

TAX MATTERS.  Each 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 Funds' 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 each Fund will satisfy the distribution  requirement of Subchapter M and
not be subject to Federal income taxes or the 4% excise tax.



If a 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 a 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 a 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 a 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 Asia Blue Chip Fund,  Asia Small Cap Fund
and China & Hong Kong Fund will  consist  primarily  of  dividends  from foreign
corporations  and the Funds may have  interest  income  and  short-term  capital
gains,  it is not expected  that a  significant  portion of the ordinary  income
dividends paid by these Funds may qualify for the dividends-received  deduction.
Because the Global  Government  Bond Fund's  investment  income will  consist of
interest,  ordinary  income  dividends paid by the Fund will not qualify for the
dividends-received  deduction.  Portions of each Fund's investment income may be
subject to foreign income taxes withheld at the source.  If a 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


                                       33

<PAGE>

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 Funds 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 a 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 Funds.  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 Funds that is
contained in the Statement of Additional Information. In addition,  shareholders
should consult with their own tax adviser as to the


                                       34

<PAGE>

tax  consequences  of investments in a Fund,  including the application of state
and local  taxes  which may differ  from the  federal  income  tax  consequences
described above.



ABOUT THE FUNDS

Each 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. Each Fund has its
own  investment  objective  and policies  designed to meet  specific  investment
goals,  operates as an open-end management  investment company and expects to be
treated as a regulated  investment company for federal income tax purposes.  The
Asia Blue Chip  Fund,  Asia  Small Cap Fund,  China & Hong Kong Fund and  Global
Government Bond Fund are non-diversified.  The investment objectives of the Asia
Blue Chip Fund and Asia Small Cap Fund are fundamental.





Each  Fund   invests  in   securities   of   different   issuers  and   industry
classifications  in an attempt to spread  and reduce the risks  inherent  in all
investing.  The Funds  continuously offer new shares for sale to the public, and
stand  ready to  redeem  their  outstanding  shares  for cash at their net asset
value.  Guinness  Flight,  the  investment  adviser for the Funds,  continuously
reviews and, from time to time,  changes the portfolio  holdings of the Funds in
pursuit of each Fund's investment objective.



Shares of each 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
By-laws,  to call a meeting for any purpose.  See  "Description  of the Funds --
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 Funds.



ADMINISTRATOR.   Investment  Company  Administration   Corporation,   4455  East
Camelback Road, Suite 261E,  Phoenix,  Arizona 85018, serves as Administrator of
the Funds.



CUSTODIAN.  Investors  Bank and Trust Company,  89 South Street,  P.O. Box 1537,
Boston,

                                              35

<PAGE>


Massachusetts  02205,  serves as the  custodian  of the  Funds.  Generally,  the
Custodian holds the securities, cash and other assets of the Funds.



TRANSFER  AGENT.  State Street Bank and Trust  Company,  P.O. Box 1912,  Boston,
Massachusetts  02105,  serves as  Transfer  Agent of the  Funds.  Generally  the
Transfer  Agent  provides   recordkeeping  services  for  the  Funds  and  their
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.  Generally,  the  Independent  Accountants  will  audit the
financial  statement  and the  financial  highlights  of the  Funds,  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 Funds.



OTHER  INFORMATION.  This prospectus sets forth basic information that investors
should  know about the Funds  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 Funds 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.


                                       36


<PAGE>
                                                                    Rule 497(c)
                                                       Registration No. 33-75340

                       STATEMENT OF ADDITIONAL INFORMATION

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

                     GUINNESS FLIGHT CHINA & HONG KONG FUND

                       GUINNESS FLIGHT ASIA BLUE CHIP FUND

                       GUINNESS FLIGHT ASIA SMALL CAP FUND

                   GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

This Statement is not a prospectus  but should be read in  conjunction  with the
current  prospectus dated April 28, 1997 (the  "Prospectus"),  pursuant to which
the  Guinness  Flight  China & Hong Kong Fund  (the  "China & Hong Kong  Fund"),
Guinness  Flight Asia Blue Chip Fund ("Asia Blue Chip  Fund"),  Guinness  Flight
Asia  Small Cap Fund  ("Asia  Small  Cap  Fund"),  and  Guinness  Flight  Global
Government  Bond Fund (the "Global  Government  Bond Fund")  (collectively,  the
"Funds") are offered. Please retain this document for future reference.

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


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

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

 INVESTMENT STRATEGIES AND RISKS.............................................  5

 OTHER RISK FACTORS AND SPECIAL CONSIDERATIONS............................... 14

 INVESTMENT RESTRICTIONS AND POLICIES........................................ 15

 PORTFOLIO TRANSACTIONS...................................................... 16

 COMPUTATION OF NET ASSET VALUE.............................................. 17

 PERFORMANCE INFORMATION..................................................... 18

 ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................. 19

 TAX MATTERS................................................................. 19

 MANAGEMENT OF THE FUNDS..................................................... 25

 THE INVESTMENT ADVISER AND ADVISORY AGREEMENTS.............................. 26

 DISTRIBUTION AGREEMENT AND DISTRIBUTION PLAN................................ 28

 DESCRIPTION OF THE FUNDS.................................................... 28

 SHAREHOLDER REPORTS......................................................... 29

 FINANCIAL STATEMENTS........................................................ 29

 APPENDIX A................................................................. A-1
                                                          Dated:  April 28, 1997


<PAGE>


                         GENERAL INFORMATION AND HISTORY

         As described in the Funds' 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
four separate series portfolios:  the China & Hong Kong Fund, the Asia Blue Chip
Fund,  the Asia Small Cap Fund,  and the Global  Government  Bond Fund,  each of
which has unique investment objectives and strategies.

                        INVESTMENT OBJECTIVE AND POLICIES

GENERAL INFORMATION ABOUT THE FUNDS.

         The China & Hong Kong Fund  seeks to provide  investors  with long term
capital growth by generally investing in equity securities,  that should benefit
from the growth in the Chinese economy,  traded in the markets of China and Hong
Kong.  The Asia Blue Chip  Fund's  investment  objective  is  long-term  capital
appreciation  through  investments in equity  securities of well established and
sizable  companies  located  in the Asian  continent.  The Asia Small Cap Fund's
investment  objective is long-term capital  appreciation  through investments in
equity  securities  of  smaller  capitalization  issuers  located  in the  Asian
continent.  The Global  Government  Bond Fund intends to provide  investors with
both current income and capital appreciation from a debt portfolio of government
securities  issued  throughout  the  world.  The  objective  of  each  Fund is a
fundamental  policy  and  may  not be  changed  except  by a  majority  vote  of
shareholders.

         The Funds do not intend to employ leveraging  techniques.  Accordingly,
each Fund will not purchase new securities if amounts  borrowed exceed 5% of its
total assets at the time the loan is made.

         When the Funds  determine that adverse  market  conditions  exist,  the
Funds may adopt a temporary  defensive posture and invest their entire portfolio
in Money Market Instruments.  In addition,  the Funds 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 Funds do not intend to
limit the amount of their assets invested in Money Market Instruments, except to
the extent believed necessary to achieve their investment  objective,  the Funds
do not expect under normal market  conditions  to have a substantial  portion of
their assets invested in Money Market  Instruments.  To the extent the Funds are
invested in Money Market  Instruments for defensive  purposes or in anticipation
of  investing  cash  positions,  the  Funds'  investment  objective  may  not be
achieved.

         The following information  concerning the Funds augments the disclosure
provided in the prospectus under the heading  "Investment  Objectives,  Programs
and Limitations":

THE CHINA AND HONG KONG FUND,  ASIA BLUE CHIP FUND, AND ASIA SMALL CAP FUND (THE
"EQUITY FUNDS").

         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 an Equity
Fund.


                                       -2-


<PAGE>

         An Equity 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 Equity Funds' 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 an Equity 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 Equity 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 Equity 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 such  Equity  Fund's  investment  restriction  on  illiquid
securities, discussed below.

         An Equity  Fund,  together  with any of its  "affiliated  persons,"  as
defined  in the  Investment  Company  Act of 1940  (the  "1940  Act"),  may only
purchase  up to  3% of  the  total  outstanding  securities  of  any  underlying
investment  company.  Accordingly,  when  the  Equity  Fund or such  "affiliated
persons" hold shares of any of the underlying investment companies,  such 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  Equity  Funds do 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.

GLOBAL GOVERNMENT BOND FUND

         Global  Government  Bond Fund  assets  invested  in foreign  government
securities  will  be  invested  in  debt  obligations  and  other  fixed  income
securities, in each case denominated in U.S. currencies,  non-U.S. currencies or
composite currencies including:

        (1)     debt  obligations  issued or  guaranteed  by  foreign  national,
                provincial,  state,  municipal or other  governments with taxing
                authority or by their agencies or instrumentalities;

        (2)     debt obligations of supranational  entities  (described  below);
                and

        (3)     debt  obligations  of the  United  States  Government  issued in
                non-dollar securities.


                                       -3-


<PAGE>

         In making international fixed income securities  investments,  Guinness
Flight may consider, among other things, the relative growth and inflation rates
of different  countries.  Guinness Flight may also consider  expected changes in
foreign  currency  exchange  rates,  including  the  prospects  for central bank
intervention,  in determining the anticipated returns of securities  denominated
in foreign currencies. Guinness Flight may further evaluate, among other things,
foreign yield curves and regulatory and political factors,  including the fiscal
and monetary policies of such countries.

         The   obligations   of   foreign   governmental   entities,   including
supranational issuers, have various kinds of government support.  Obligations of
foreign  governmental  entities  include  obligations  issued or  guaranteed  by
national,  provincial,  state or other governments with taxing power or by their
agencies.  These  obligations  may or may not be supported by the full faith and
credit of a foreign government.

         Supranational entities include international  organizations  designated
or supported by  governmental  entities to promote  economic  reconstruction  or
development  and  international  banking  institutions  and  related  government
agencies.  Examples  include  the  International  Bank  for  Reconstruction  and
Development (the World Bank),  the European Steel and Coal Community,  the Asian
Development  Bank and the  Inter-American  Development  Bank.  The  governmental
agencies,  or "stockholders,"  usually make initial capital contributions to the
supranational  entity and in many cases are committed to make additional capital
contributions  if the  supranational  entity is unable to repay its  borrowings.
Each  supranational  entity's lending  activities are limited to a percentage of
its total capital (including  "callable  capital"  contributed by members at the
entity's call), reserves and net income.

         The Global  Government Bond Fund may invest in United States Government
Securities and in options,  futures  contracts and repurchase  transactions with
respect to such  securities.  The term  "United  States  Government  Securities"
refers to debt  securities  denominated  in  United  States  dollars,  issued or
guaranteed by the United States  Government,  by various of its agencies,  or by
various  instrumentalities   established  or  sponsored  by  the  United  States
Government. Certain of these obligations,  including: (1) United States Treasury
bills, notes, and bonds; (2) mortgage participation  certificates  guaranteed by
the Government National Mortgage Association  ("GNMA");  and (3) Federal Housing
Administration  debentures,  are  supported  by the full faith and credit of the
United States. Other United States Government Securities issued or guaranteed by
Federal  agencies or government  sponsored  enterprises are not supported by the
full faith and credit of the United States. These securities include obligations
supported by the right of the issuer to borrow from the United States  Treasury,
such as obligations of Federal Home Loan Banks,  and obligations  supported only
by  the  credit  of the  instrumentality,  such  as  Federal  National  Mortgage
Association Bonds.

         When purchasing  United States Government  Securities,  Guinness Flight
may take full advantage of the entire range of maturities of such securities and
may adjust the average  maturity of the  investments  held in the portfolio from
time to time,  depending upon its assessment of relative yields of securities of
different  maturities and its  expectations of future changes in interest rates.
To the  extent  that the Global  Government  Bond Fund  invests in the  mortgage
market,  Guinness  Flight  usually will evaluate,  among other things,  relevant
economic data,  environmental  and security  specific  variables such as housing
starts,  coupon and age trends.  To  determine  relative  value  among  markets,
Guinness  Flight  may  use  tools  such  as  yield/duration  curves,  break-even
prepayment rate analysis and holding-period-return scenario testing.

         The Global Government Bond Fund may seek to increase its current income
by writing covered call options with respect to some or all of the United States
Government Securities held in its portfolio.  In addition, the Global Government
Bond Fund may at  times,  through  the  purchase  of  options  on United  States
Government  Securities,  and the  purchase  and sale of  futures  contracts  and
related  options with respect to United States  Government  Securities,  seek to
reduce fluctuations in net asset value by hedging against a decline in the value
of the United States  Government  Securities owned by the Global Government Bond
Fund or an increase in the price of such securities which the Global  Government
Bond Fund plans to purchase,  although it is not the general  practice to do so.
Significant  option writing  opportunities  generally exist only with respect to
longer  term  United  States  Government  Securities.  Options on United  States
Government  Securities and futures and related options are not considered United
States Government  Securities;  accordingly,  they have a different set of risks
and features.


                                       -4-


<PAGE>

                         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 a Fund's portfolio or an increase in the
price of  securities  which it plans to purchase for a 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 a Fund's  current
return.

         The ability of a Fund to engage in the  options and futures  strategies
described  below  will  depend on the  availability  of liquid  markets  in such
instruments.  Although  the  Funds  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 a 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 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  the  contract  can  result  in
substantial unrealized gains or losses.  However, to the extent a 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 a Fund will be able to utilize these  instruments  effectively
for the  purposes  stated  below.  Furthermore,  a Fund's  ability  to engage in
options and futures transactions may be limited by tax considerations.  Although
the Funds will only  engage in options  and  futures  transactions  for  limited
purposes,  such transactions involve certain risks. The Funds will not engage in
options and futures transactions for leveraging purposes.

         Upon  purchasing  futures  contracts of the type described  above,  the
Funds will maintain in a segregated  account with their 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 Funds
will maintain in a segregated account with their 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

         A 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 a 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


                                       -5-


<PAGE>

securities subject to the option (or comparable  securities satisfying the cover
requirements of securities exchanges).

         The Funds 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, a Fund limits
its  opportunity  to  profit  from  any  increase  in the  market  value  of the
underlying security above the exercise price of the option.

         A 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 Funds 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 a Fund.

         Options  written by the Funds 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.  A  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 buy-and-write. 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,  a  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,  a 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 a Fund may or may not realize a loss.

         To the extent that a secondary  market is available  on the  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

         A 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 Funds 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.

         A 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


                                       -6-


<PAGE>

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 Funds
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

         The Equity Funds 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  China & Hong  Kong  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 Equity
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  Equity  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 China & Hong Kong Fund's position in such put option or futures contract.

PURCHASE AND SALE OF INTEREST RATE FUTURES

         A 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.

         A 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 Funds
do not consider  purchases of futures  contracts  to be a  speculative  practice
under these circumstances.  In a substantial majority of these transactions, the
Funds will purchase securities upon termination of the futures contract.

         A 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


                                       -7-


<PAGE>

income securities held by the Funds 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 Funds 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 a Fund's short 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 Funds 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

         A Fund may write call  options  and  purchase  call and put  options on
stock index and interest rate futures contracts.  The Funds 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,  a 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,  a Fund may buy or sell foreign  currencies or may deal in forward
currency  contracts.  A Fund may also invest in currency  futures  contracts and
related  options.  If a fall in  exchange  rates for a  particular  currency  is
anticipated,  a 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,  a 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 Funds
will be covered.

         A currency  futures  contract  sale creates an obligation by a 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 a 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 Funds will write  (sell)  only  covered  call  options on  currency
futures.  This means  that the Funds 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 Funds 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 Funds in cash, cash
equivalents,  or  other  liquid  securities  in a  segregated  account  with its
custodian. If at the close of business


                                       -8-


<PAGE>

on any day the market value of the call  purchased by a 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,  a 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.

         If other  methods of providing  appropriate  cover are  developed,  the
Funds reserve 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 Funds 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

         A 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,  a Fund may  purchase  put
options on the foreign currency.  If the value of the currency does decline, the
Funds 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,  a 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 a 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,  a 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 a 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,  a 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  Funds  intend  to write  only  covered  call  options  on  foreign
currencies.  A call option written on a foreign  currency by a 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


                                       -9-


<PAGE>

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.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

         A 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. A 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 a 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 a 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 a 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,  a 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
a 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 a Fund than if it had not entered into
such contracts.

         Generally,  the Funds  will not enter into a forward  foreign  currency
exchange  contract  with a term of greater than one year. At the maturity of the
contract, a 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 a 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 a 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 a 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.


                                      -10-


<PAGE>

         The Funds' dealing in forward foreign currency exchange  contracts will
be  limited  to the  transactions  described  above.  Of  course,  a 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 a 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 a 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 a
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
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  a 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 determines that foreign governmental  restrictions or taxes would
prevent the orderly settlement of foreign


                                      -11-


<PAGE>

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 a 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

         In connection with its proposed futures and options transactions,  each
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 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 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 addition,  the Funds are eligible for, and are  claiming,  exclusion
from the definition of the term  Commodity Pool Operator in connection  with the
operations of the Funds, in accordance with subparagraph (1) of paragraph (a) of
CFTC Rule 4.5, because the Funds operate in a manner such that:

                        (i) the Funds use 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 a Fund's  activities in the underlying  cash market but would
                not come within 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:


                                      -12-


<PAGE>

                        (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

                        (C) Accrued profits on such contract held at the futures
                commission merchant.

                        (ii) the Funds do 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 a 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 Funds will conduct their  purchases and sales of futures  contracts
and writing of related options transactions in accordance with the foregoing.

REPURCHASE AGREEMENTS

         A Fund  may  enter  into  repurchase  agreements.  Under  a  repurchase
agreement,  a 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.  A Fund's  risk is limited to the ability of the
seller to pay the  agreed-upon  sum upon the delivery  date.  When a 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 Funds have adopted the following  investment  policy,  which may be
changed  by the vote of the  Board of  Trustees.  The Funds  will not  invest in
illiquid  securities if  immediately  after such  investment  more than 15% of a
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 a
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  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.


                                      -13-


<PAGE>

         In recent years,  however, a large  institutional  market has developed
for  certain  securities  that  are not  registered  under  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  Commission   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 Funds' portfolios under the supervision of the Funds' 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  Funds'  assets  will be  invested  principally  in  securities  of
entities in foreign markets and  substantially all of the income received by the
Funds will be in foreign  currencies.  If the value of the foreign currencies in
which a 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 a Fund's performance.

         Changes in foreign  currency  exchange rates also will affect the value
of  securities  in the Funds'  portfolios  and the  unrealized  appreciation  or
depreciation of investments.  Further, a 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 a Fund at one rate,  while offering a lesser rate of exchange should
the Fund desire  immediately  to resell that  currency to the dealer.  The Funds
will conduct  their  foreign  currency  exchange  transactions  either on a spot
(i.e.,  cash) basis at the spot rate prevailing in the foreign currency exchange
market,  or through  entering  into  forward,  futures or options  contracts  to
purchase or sell foreign currencies.

         A 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


                                      -14-


<PAGE>

will  be  available  at the  time  when a 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 a Fund. As used in the Prospectus and the Statement of
Additional Information,  the term "majority of the outstanding shares" of a Fund
means, respectively,  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 Funds'
investment restrictions set forth in their entirety. Investment policies are not
fundamental  and may be changed  by the Board of  Trustees  without  shareholder
approval.

INVESTMENT RESTRICTIONS

         Each Fund may not:

         1. Issue senior securities, except that a 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. A 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 and 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

         Each 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.

         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.

         4.  Purchase or retain  securities of any issuer (other than the shares
of the Fund) if to the Fund's knowledge, those officers and Trustees of the Fund
and the officers and directors of Guinness Flight,


                                      -15-


<PAGE>

who  individually  own  beneficially  more  than  1/2 of 1% of  the  outstanding
securities  of such  issuer,  together  own  beneficially  more  than 5% of such
outstanding securities.

         5.  Invest  directly  in  oil,  gas or  other  mineral  exploration  or
development programs or leases;  provided,  however, that if consistent with the
objective  of the  Fund,  the Fund may  purchase  securities  of  issuers  whose
principal business activities fall within such areas.

         In order to permit  the sale of shares of a Fund in certain  states,  a
Fund may make  commitments  more  restrictive  than the  restrictions  described
above. Should a Fund determine that any such commitment is no longer in the best
interests  of the Fund and its  shareholders  it will revoke the  commitment  by
terminating sales of its shares in the state(s) involved.

         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 Funds by  Guinness  Flight  subject to the  supervision  of the
Guinness  Flight  Funds and the Board of  Trustees  and  pursuant  to  authority
contained in the Management  Agreement between the Funds 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 a 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 a 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  Funds.  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  Funds  and is  authorized  to use  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 a
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  Fund's overall  responsibilities  to a
Fund.


                                      -16-


<PAGE>

         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 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 a Fund is concerned. In other cases, however, the ability
of a Fund to participate in volume  transactions  will produce better executions
for the Fund.

         For the period June 30, 1994  (commencement  of operations) to December
31, 1994 and the fiscal years ended December 31, 1995 and 1996, the China & Hong
Kong Fund paid brokerage  commissions  equal to $13,875,  $258,319 and $736,492,
respectively   and  the  Global   Government  Bond  Fund  paid  no  commissions,
respectively.  For the period April 29, 1996  (commencement  of  operations)  to
December 31, 1996, the Asia Blue Chip Fund paid brokerage  commissions  equal to
$23,303 and the Asia Small Cap Fund paid $204,067 .


                         COMPUTATION OF NET ASSET VALUE

         The net asset value of the Funds 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 a Fund's securities to affect
materially  the net asset value per share of the Fund.  The Funds will be closed
on New Years Day, Presidents' Day, Good Friday,  Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.

         The Funds  will  invest in  foreign  securities,  and as a result,  the
calculation  of the Funds' 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 a  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 a 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
Funds.

         Money  market  instruments  with  less than  sixty  days  remaining  to
maturity when acquired by the Funds will be valued on an amortized cost basis by
the Funds, 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 a 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.


                                      -17-


<PAGE>

         All  liabilities  incurred or accrued are deducted  from a 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 a 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 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 Commission,  funds  advertising
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 periods or at the end of the
                          1,  5 or  10  year  periods  (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.

         A 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 a 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 Commission's rules.

         In addition to the total return quotations  discussed above, a Fund may
advertise its yield based on a 30-day (or one month) period ended on the date of
the most recent balance sheet included in the Fund's Post-Effective Amendment to
its Registration  Statement,  computed by dividing the net investment income per
share earned  during the period by the maximum  offering  price per share on the
last day of the period, according to the following formula:

                                         a-b
                          YIELD =   2[( ----- +1)6-1]
                                         cd

     Where:           a = dividends and interest earned during the period.
                      b = expenses accrued for the period (net of 
                          reimbursements).
                      c = the average daily number of shares outstanding during
                          the period that were entitled to receive dividends.
                      d = the maximum offering price per share on the last day 
                          of the period.


                                      -18-


<PAGE>

         Under this formula, interest earned on debt obligations for purposes of
"a"  above,  is  calculated  by (1)  computing  the  yield to  maturity  of each
obligation  held  by the  Fund  based  on the  market  value  of the  obligation
(including  actual accrued interest) at the close of business on the last day of
each month,  or, with respect to  obligations  purchased  during the month,  the
purchase price (plus actual accrued  interest),  (2) dividing that figure by 360
and  multiplying  the quotient by the market value of the obligation  (including
actual accrued  interest as referred to above) to determine the interest  income
on the obligation for each day of the subsequent month that the obligation is in
the Fund's  portfolio  (assuming a month of 30 days) and (3) computing the total
of the interest earned on all debt obligations and all dividends  accrued on all
equity securities during the 30-day or one month period. In computing  dividends
accrued,  dividend income is recognized by accruing 1/360 of the stated dividend
rate of a security  each day that the security is in the Fund's  portfolio.  For
purposes of "b" above,  Rule 12b-1  expenses  are  included  among the  expenses
accrued for the period.  Undeclared  earned income,  computed in accordance with
generally  accepted  accounting  principles,  may be subtracted from the maximum
offering price calculation required pursuant to "d" above.

         Any quotation of performance  stated in terms of yield will be given no
greater  prominence  than the information  prescribed  under the SEC's rules. In
addition,  all  advertisements  containing  performance  data of any  kind  will
include  a  legend   disclosing  that  such  performance  data  represents  past
performance and that the investment  return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.

         The annual  compounded  rate of total  return  for the one year  period
ended December 31, 1996 and the average annual  compounded  rate of total return
from June 30, 1994  (inception)  to December  31, 1996 for the China & Hong Kong
Fund was 34.38% and 17.35%,  respectively,  and for the Global  Government  Bond
Fund was 6.21% and  7.10%,  respectively.  The annual  compounded  rate of total
return for the period from April 29, 1996  (inception)  to December 31, 1996 for
the Asia Blue Chip  Fund was 3.84% and for the Asia  Small Cap Fund was  13.08%.
For the 30 day period ended December 31, 1996, the Global Government Bond Fund's
yield was 5.42%.

                 ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

         The Funds have  elected to be  governed  by Rule 18f-1 of the 1940 Act,
under which a 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,  a 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 each 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 each  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

         Each 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, a 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  (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


                                      -19-


<PAGE>

requirements of the Code that are described below.  Distributions by a 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, a 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 a 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 a 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 a 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 a 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 a 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 a 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,  a 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 a Fund on the  lapse  of,  or any gain or loss
recognized  by a Fund  from a closing  transaction  with  respect  to, an option
written by the Fund will be treated as a short-term  capital  gain or loss.  For
purposes of the  Short-Short  Gain Test, the holding period of an option written
by a 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,  a 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.


                                      -20-


<PAGE>

         Certain  transactions  that  may  be  engaged  in by a  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. A 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.

         Each Fund may purchase  securities of certain foreign  investment funds
or trusts which constitute  passive foreign investment  companies  ("PFICs") for
federal income tax purposes.  If a 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, (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
contribute  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 a 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  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, a Fund must
satisfy  an  asset  diversification  test in  order to  qualify  as a  regulated
investment company. Under this test, at the close of each


                                      -21-


<PAGE>

quarter of a 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 a  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).

         Each  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 a Fund may in certain  circumstances  be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.

Fund Distributions

         Each 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.

         A Fund may either retain or distribute to shareholders  its net capital
gain for each taxable year.  Each Fund currently  intends to distribute any such
amounts.  Net capital gain that is distributed  and designated as a capital gain
dividend,  it will  be  taxable  to  shareholders  as  long-term  capital  gain,
regardless of the length of time the  shareholder has held his shares or whether
such gain was  recognized  by a Fund prior to the date on which the  shareholder
acquired his shares.

         Conversely,  if a 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 a 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


                                      -22-


<PAGE>

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 a 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  a 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 each  Fund's  assets to be  invested  in  various
countries  is not known.  If more than 50% of the value of a Fund's total assets
at the close of its taxable year consist of the stock or  securities  of foreign
corporations,  a Fund may elect to "pass through" to the Fund's shareholders the
amount of foreign taxes paid by the Fund. If a 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 a 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  a  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 a 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 a 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 a 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 a 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.

         Each 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).

Sale or Redemption of Shares

         A shareholder  will recognize gain or loss on the sale or redemption of
shares of a 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 a 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 a Fund will be considered capital


                                      -23-


<PAGE>

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
a Fund is "effectively  connected"  with a U.S. trade or business  carried on by
such shareholder.

         If the  income  from a 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 a
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 a Fund,  capital  gain  dividends  and amounts
retained by the Fund that are designated as undistributed capital gains.

         If the income from a 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,  a  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 a 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 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 a Fund.


                                      -24-


<PAGE>

                             MANAGEMENT OF THE FUNDS

         The Board of  Trustees  and  executive  officers of the Funds 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.

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.  

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


                                      -25-


<PAGE>

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 Funds' 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 Funds receives an annual fee of $7,500 (with the exception of the
Chairman,  who receives  $8,500)  allocated  equally  among all the 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 Funds,  as a group,  owned of
record less than 1% of the Funds' outstanding shares.

                 THE INVESTMENT ADVISER AND ADVISORY AGREEMENTS

         Guinness Flight furnishes  investment  advisory  services to the Funds.
Under the Investment  Advisory  Agreement  (the  "Agreement"),  Guinness  Flight
directs  the  investments  of  the  Funds  in  accordance  with  the  investment
objectives, policies, and limitations provided in the Funds' Prospectus or other
governing  instruments,  the 1940 Act,  and  rules  thereunder,  and such  other
limitations  as the Funds 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 Funds; pays the salaries and fees
of all  officers of Guinness  Flight  Funds other than those whose  salaries and
fees are paid by Guinness Flight Funds'  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 Funds, 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 Funds.  The investment
policies  and all other  actions  of the Funds are at all times  subject  to the
control and direction of Guinness Flight Funds' 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 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 Funds as


                                      -26-


<PAGE>

an investment vehicle;  and (iii) providing  administrative  services other than
those provided by Guinness Flight Funds' administrator.

         Guinness Flight also furnishes such reports,  evaluations,  information
or analyses to Guinness Flight Funds as Guinness Flight Funds' 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  Funds'  Board of
Trustees with respect to Guinness Flight Funds'  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 Agreements.

         All other costs and expenses not expressly assumed by the Adviser under
the  Agreements  or by the  Administrator  under  the  administration  agreement
between it and the Funds on behalf of the Funds  shall be paid by the Funds from
the assets of the Funds, including,  but not limited to fees paid to the Adviser
and the  Administrator,  interest and taxes,  brokerage  commissions,  insurance
premiums,  compensation and expenses of the Trustees other than those affiliated
with the adviser 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  Funds,  expenses,
including clerical expenses, incident to the issuance,  redemption or repurchase
of shares of the Funds,  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 Funds 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
Funds,  all  other  expenses  incidental  to  holding  meetings  of  the  Funds'
shareholders, expenses connected with the execution, recording and settlement of
portfolio securities transactions, fees and expenses of the Funds' custodian for
all services to the Funds,  including  safekeeping  of funds and  securities and
maintaining required books and accounts, expenses of calculating net asset value
of the shares of the Funds, industry membership fees allocable to the Funds, and
such extraordinary  expenses as may arise,  including  litigation  affecting the
Funds and the legal  obligations  which  the  Funds  may have to  indemnify  the
officers and Trustees with respect thereto.

         Expenses which are  attributable  to the Funds are charged  against the
income of the Funds 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  Agreement  was  approved by the Board of Trustees on March 9, 1997
and by the shareholders of the Funds on April 25, 1997 at a shareholder  meeting
called for that purpose.  The 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 of a  majority  of the  Trustees  who are not  parties  to the
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  Agreement  on 60  days'  written  notice  without  penalty.  The  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 China and
Hong Kong Fund's,  Asia Blue Chip Fund's and Asia Small Cap Fund's average daily
net assets and .75% of the  Global  Government  Bond  Fund's  average  daily net
assets.  For the period  commencing  June 30, 1994 to December  31, 1994 and the
periods  ended  December  31,  1995 and 1996,  the China and Hong Kong Fund paid
Guinness Flight $6,134,  $197,173 and $1,772,174,  respectively,  and the Global
Government   Bond  Fund  paid  Guinness   Flight  $2,141,   $7,425  and  $19,110
respectively. For the period commencing April 29, 1996 to December 31, 1996, the
Asia Blue Chip Fund and Asia Small Cap Fund paid  Guinness  Flight  $12,860  and
$62,680, respectively.

                  DISTRIBUTION AGREEMENT AND DISTRIBUTION PLAN

         Guinness  Flight Funds has entered  into  separate  Administration  and
Distribution  Agreements  with  respect  to the Funds  with  Investment  Company
Administration Corporation  ("Administrator") and First Fund Distributors,  Inc.
("Distributor"), respectively. Under the Distribution Agreement, the Distributor
uses all


                                      -27-


<PAGE>

reasonable efforts,  consistent with its other business, to secure purchases for
the  Funds'  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 Funds 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 Funds.

         The  Funds  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 Funds presently pay, and will continue
to pay, an investment  advisory fee to the Guinness Flight and an administration
fee to the  Administrator.  To the extent that any payments made by the Funds to
Guinness  Flight  or the  Administrator,  including  payment  of fees  under the
Investment  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 Funds within the context of rule 12b-1 under
the 1940 Act, then such payments shall be deemed to be authorized by this Plan.

         The Plan and related agreements were approved with respect to the China
Fund and Global Government Bond Fund on May 6, 1994 and with respect to the Asia
Blue  Chip  Fund and Asia  Small  Cap Fund on  April  12,  1996 by the  Board of
Trustees  including  all of the  "Qualified  Trustees"  (Trustees  who  are  not
"interested"  persons of the Funds,  as defined in the 1940 Act, and who have no
direct or indirect financial interest in the Plan or any related agreement).  In
approving the 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
Plan will benefit the Funds and their shareholders.  The Plan may not be amended
to  increase  materially  the  amount  to be spent by the  Funds  under the Plan
without shareholder  approval,  and all material amendments to the provisions of
the  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 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 Plan. Further, during the term
of the  Plan,  the  selection  and  nomination  of  those  Trustees  who are not
"interested"  persons of the Funds must be  committed to the  discretion  of the
Qualified Trustees.  The 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 Funds'  outstanding  voting shares or by the Funds' Trustees and
(b) by the vote of a majority of the Qualified Trustees.


                            DESCRIPTION OF THE FUNDS

         Shareholder  and  Trustees  Liability.  The  Funds are each 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 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  Funds'  independent
non-party  Trustees,  or by independent  legal counsel,  that there is reason to
believe that the Trustee ultimately will be entitled to indemnification.


                                      -28-


<PAGE>

         Voting Rights.  Shares of each 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 Funds and other  information.  In  addition,  shareholders  will  receive
annual financial statements audited by the Funds' independent accountants.

         Principal Holders.  As of April 4, 1997, Charles Schwab & Co. Inc. (101
Montgomery St., San Francisco  94104-4122)  owned, for the exclusive  benefit of
its accounts: 5,547,498.127 (38.36 %) of the outstanding shares of the China and
Hong Kong Fund;  150,207.519  (25.59 %) of the outstanding  shares of the Global
Government Fund;  4,283,841.187  (39.67 %) of the outstanding shares of the Asia
Small Cap Fund; and 96,872.937  (22.08 %) of the outstanding  shares of the Asia
Blue Chip Fund.  As of April 21, 1997,  Pigeon & Co. (c/o Frost  National  Bank,
P.O.  Box 2479,  San  Antonio,  Texas  78298-2479  owned,  of the  record of its
accounts:  306,750.846  (52.27  %) of  the  outstanding  shares  of  the  Global
Government Bond Fund.

                              FINANCIAL STATEMENTS

         The audited  statement of assets and liabilities and report thereon for
the Funds for the year ended  December 31, 1996 are  incorporated  by reference.
The opinion of Ernst & Young LLP, independent  accountants,  with respect to the
audited financial statements, is incorporated herein in its entirety in reliance
upon  such  report  of Ernst & Young  LLP and on the  authority  of such firm as
experts in auditing  and  accounting.  Shareholders  will  receive a copy of the
audited  and  unaudited  financial  statements  at  no  additional  charge  when
requesting a copy of the Statement of Additional Information.


                                      -29-


<PAGE>

                                   APPENDIX A

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
BOND RATINGS:

Investment  grade debt  securities are those rating  categories  indicated by an
asterisk (*).

         *AAA: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest  degree of investment  risk and are generally  referred to as
"gilt-edge".  Interest  payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change,  such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

         *AA:  Bonds which are rated Aa are judged to be of high  quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds.  They are rated lower than the best bonds  because  margins of
protection  may  not  be as  large  as in  Aaa  securities  or  fluctuations  of
protective  elements may be of greater  amplitude or there may be other elements
present  which make the  long-term  risks  appear  somewhat  larger  than in Aaa
securities.

         *A: Bond which are rated A possess many favorable investment attributes
and are to be  considered  as upper medium  grade  obligations.  Factors  giving
security to principal and interest are considered adequate,  but elements may be
present which suggest a susceptibility to impairment sometime in the future.

         *BAA:  Bonds  which  are  rated  Baa are  considered  as  medium  grade
obligations,  i.e.,  they are  neither  highly  protected  nor  poorly  secured.
Interest  payments and principal  security appear adequate for the present,  but
certain  protective  elements  may  be  lacking  or  may  be  characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

         NOTE: Moody's applies numerical  modifiers,  1, 2 and 3 in each generic
rating  classification from Aa through B in its bond rating system. The modifier
1 indicates  that the  security  ranks in the higher end of its  generic  rating
category,  the  modifier 2  indicates a mid-range  ranking,  and the  modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:

         Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually  promissory  obligations not having an original  maturity in
excess of nine months.

         Issuers rated PRIME-1 or P-1 (or related supporting  institutions) have
a superior capacity for repayment of short-term promissory obligations.  Prime-1
or  P-1  repayment   capacity  will  normally  be  evidenced  by  the  following
characteristics:

        -       Leading market positions in well-established industries.

        -       High rates of return on funds employed.

        -       Conservative capitalization structures with moderate reliance on
                debt and ample asset protection.

        -       Broad margins in earnings  coverage of fixed  financial  charges
                and high internal cash generation.


                                       A-1


<PAGE>

        -       Well-established  access  to a range of  financial  markets  and
                assured sources of alternate liquidity.

         Issuers rated PRIME-2 or P-2 (or related supporting  institutions) have
a strong capacity for repayment of short-term promissory obligations.  This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree.  Earnings trends and coverage ratios,  while sound, will be more subject
to variation.  Capitalization  characteristics,  while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S
BOND RATINGS:

Investment  grade debt  securities are those rating  categories  indicated by an
asterisk (*).

         *AAA:  Debt rated AAA have the highest rating assigned by S&P to a debt
obligation. capacity to pay interest and repay principal is extremely strong.

         *AA:  Debt rated AA have a very strong  capacity to pay  interest;  and
repay principal and differ from the higher rated issues only in small degree.

         *A:  Debt  rated A have a strong  capacity  to pay  interest  and repay
principal  although they are somewhat more susceptible to the adverse effects of
changes in  circumstances  and  economic  conditions  than bonds in higher rated
categories.

         *BBB: Debt rated BBB are regarded as having an adequate capacity to pay
interest and repay principal.  Whereas they normally exhibit adequate protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to a weakened  capacity to pay interest and repay  principal  for
bonds in this category than for bonds in higher rated categories.

         PLUS (+) OR MINUS (-):  The  ratings  from AA to CCC may be modified by
the addition of a plus or minus sign to show relative  standing within the major
rating categories.

         NR:  Bonds may lack a S&P  rating  because  no public  rating  has been
requested,  because there is insufficient information on which to base a rating,
or because  S&P does not rate a  particular  type of  obligation  as a matter of
policy.

DESCRIPTION OF S&P'S COMMERCIAL PAPER RATINGS:

         S&P's  commercial   paper  ratings  are  current   assessments  of  the
likelihood  of timely  payment of debts  having an original  maturity of no more
than 365 days.

         A:  Issues  assigned  this  highest  rating are  regarded as having the
greatest  capacity for timely  payment.  Issues in this category are  delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.

         A-1: This  designation  indicates  that the degree of safety  regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess  overwhelming  safety  characteristics  are denoted with a plus (+) sign
designation.

         A-2:  Capacity for timely  payment on issues with this  designation  is
strong.  However,  the  relative  degree of safety is not as high as for  issues
designated "A-1".


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