<PAGE> 1
Rule 497(c)
Registration No. 33-75340
GUINNESS FLIGHT
PROSPECTUS OCTOBER 3, 1996
AS REVISED ON FEBRUARY 18, 1997
ASIA BLUE CHIP FUND
ASIA SMALL CAP FUND
CHINA & HONG KONG FUND
GLOBAL GOVERNMENT BOND FUND
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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 October 3, 1996, 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 OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS PAGE 1
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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.
Summary ........................... 2
Summary of The
Funds' Expenses .................. 4
Financial Highlights ............. 6
Investment Objectives,
Programs and Limitations ......... 10
Investment Strategies,
Policies and Risks ............... 14
Other Risk Considerations ........ 16
Performance ...................... 20
The Funds' Management ............ 20
How to Purchase Shares ........... 24
How to Redeem Shares ............. 26
Shareholder Services ............. 28
Determination of
Net Asset Value .................. 29
Dividends, Distributions
and Tax Matters .................. 30
About the Funds .................. 33
General Information .............. 34
PROSPECTUS PAGE 2
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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.)
GUINNESS FLIGHT CHINA & HONG KONG FUND
(The "China Fund") seeks to provide investors with long term capital growth
through investments in the securities of China and Hong Kong. Under normal
conditions, 85% to 100% of the China 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 Fund are
listed in Hong Kong. (See "Investment Objectives, Programs and Limitations," for
a more detailed discussion.)
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND
(The "Global Government Fund") intends to provide investors with both current
income and capital appreciation. The Global Government 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, Inc. (the "Guinness Funds") is a
Maryland corporation organized as an open-end, series, management investment
company. Currently, the Guinness 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 Fund"), and Guinness Flight Global Government Bond Fund (the
"Global Government 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."
PROSPECTUS PAGE 3
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THE INVESTMENT ADVISER. Guinness Flight Investment Management Limited ("Guinness
Flight") serves as the Funds' investment adviser pursuant to Investment Advisory
Agreements (the "Advisory Agreements"). Under the terms of the Advisory
Agreements, 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' average daily net
assets. See "Management of the Funds."
PURCHASING SHARES. Shares of the Funds are offered by this Prospectus at net
asset value. The minimum investment in the Funds is $2,500 or $1,000 for
investments through tax-qualified retirement plans. Current shareholders of any
Fund may make an initial purchase of shares of another Fund in the family for a
minimum of $1,000. The minimum investment in the Funds for gift accounts is
$250. Additional investments must be at least $250. 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 at any time. 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 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 Fund
declare and pay dividends from net investment income, if any, on a semi-annual
basis. The Global Government 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."
SUMMARY OF THE FUNDS' EXPENSES
A. SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Asia Asia
Blue Small Global
Chip Cap China Gov't
<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 redemption fee of 1.00% applies to investors
who redeem shares purchased less than 30 days prior to redemption. See "How to
Redeem Shares -- Redemption Fee."
PROSPECTUS PAGE 4
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B. ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Asia Asia
Blue Small Global
Chip Cap China Gov't
<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% .98% .00%
---- --- ---- ----
Total Fund Operating Expenses
(after expense reimbursement) 1.98% 1.98% 1.98% .75%*
</TABLE>
* Guinness Flight has undertaken to cap Total Fund Operating Expenses at .75%
for the Global Government Fund by reimbursing the Fund for all "Other Expenses."
The Global Government 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>
<S> <C> <C> <C> <C>
One Year $20 $20 $20 $8
Three Year $62 $62 $62 $24
Five Year $107 $107 $107 $42
Ten Year $231 $231 $231 $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 "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. For the Asia Blue Chip Fund and Asia Small Cap Fund, "other expenses"
is based on estimated amounts for the current fiscal year. 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 Fund
or the Global Government Fund would exceed 1.98%, 1.98%, 1.98% and 0.75%,
respectively. For the prior fiscal year, Guinness Flight absorbed some of the
expenses of the China Fund and Global Government Fund. If Guinness Flight had
not absorbed such expenses, "other expenses" for the China Fund and Global
Government Fund would have been 2.02% and 20.77%, respectively and "total fund
operating expenses" would have been 3.02% and 21.52%, respectively. Guinness
Flight anticipates absorbing some of the expenses of the Asia Blue Chip Fund and
Asia Small Cap Fund. Absent such expense reimbursements, "total fund operating
expenses" for the Asia Blue Chip and Asia Small Cap Fund are estimated to equal
approximately 3.00% and 3.00%, respectively. See "The Funds' Management."
PROSPECTUS PAGE 5
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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.
FINANCIAL HIGHLIGHTS
The following information for the China Fund and Global Government Fund has been
audited by Coopers & Lybrand for the fiscal period from June 30, 1994
(commencement of operations) to December 31, 1994, and Ernst & Young LLP,
independent accountants to the Funds, whose unqualified report covering the
fiscal period ending December 31, 1995 is included in the Statement of
Additional Information which may be obtained by calling the telephone number on
the Prospectus cover page.
GUINNESS FLIGHT ASIA BLUE CHIP FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD (UNAUDITED)
<TABLE>
<CAPTION>
April 29, 1996*
through
June 30, 1996
<S> <C>
Net asset value, beginning of period $ 12.50
--------
Income from investment operations:
Net investment loss (0.01)
--------
Net realized and unrealized loss on investments (0.11)
--------
Total from investment operations (0.12)
--------
Net asset value, end of period $ 12.38
========
Total return (0.96)%
Ratios/supplemental data:
Net assets, end of period (thousands) $1,018
Ratio of expenses to average net assets:+
Before expense reimbursement 24.55%
After expense reimbursement 1.98%
Ratio of net investment loss to average net assets:+
Before expense reimbursement (23.07)%
After expense reimbursement (0.50)%
Portfolio turnover rate 0.00%
Average Commission Rate Paid ++ $ 0.0190
</TABLE>
* Commencement of operations.
+ 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.
PROSPECTUS PAGE 6
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GUINNESS FLIGHT ASIA SMALL CAP FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD (UNAUDITED)
<TABLE>
<CAPTION>
April 29, 1996*
through
June 30, 1996
<S> <C>
Net asset value, beginning of period $ 12.50
-----------
Income from investment operations:
Net investment income 0.03
Net realized and unrealized gain on investments 0.55
-----------
Total from investment operations 0.58
-----------
Less distributions from net investment income (0.02)
-----------
Net asset value, end of period $ 13.06
===========
Total return 4.61%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 1,790
Ratio of expenses to average net assets:+
Before expense reimbursement 17.60%
After expense reimbursement 1.98%
Ratio of net investment income to average net assets:+
Before expense reimbursement (13.56)%
After expense reimbursement 2.06%
Portfolio turnover rate 2.91%
Average Commission Rate Paid ++ $ 0.0029
</TABLE>
* Commencement of operations.
+ 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.
PROSPECTUS PAGE 7
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GUINNESS FLIGHT CHINA & HONG KONG FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended For the Year June 30, 1994*
June 30, 1996 Ended through
(Unaudited) 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 .14 .14 .04
Net realized and unrealized gain
(loss) on investments 1.26 2.20 (.96)
----------- ------ -----------
Total from investment operations 1.40 2.34 (.92)
----------- ------ -----------
Less distributions:
Dividends from net investment income (.14) (.14) (.04)
Distributions from net capital gains (.20) (.03) (.07)
----------- ------ -----------
Total distributions (.34) (.17) (.11)
----------- ------ -----------
Net asset value, end of period $ 14.70 $13.64 $ 11.47
=========== ====== ===========
Total return 10.27% 20.45% (7.74)%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 165,601 $ 55,740 $ 2,287
Ratio of expenses to average net assets:
Before expense reimbursement 1.70% 3.02%++ 19.92%+
After expense reimbursement 1.98% 1.98% 2.00%+
Ratio of net investment income to average net assets:
Before expense reimbursement 2.44% 0.49% (17.15)%+
After expense reimbursement 2.17% 1.52% 0.78%+
Portfolio turnover rate 17.90% 10.89% 27.25%
Average commission rate $0.0080 -- --
BANK LOANS
Amount outstanding at end of period $(000) -- -- --
Average amount of loans outstanding during
the period (monthly average) (000) $ 1,413 -- --
Average number of shares outstanding
during the period (monthly average) (000) 10,128 -- --
Average amount of debt per share
during the period $ 0.14 -- --
</TABLE>
* Commencement of operations.
+ Annualized.
++ Includes indirectly paid expenses. Excluding indirectly paid expenses for the
year ended December 31, 1995, the "ratio of expenses to average net assets
before expense reimbursement" would have been 3.04%.
+++ For the fiscal years beginning on or after September 1, 1995, 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.
PROSPECTUS PAGE 8
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GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended For the Year June 30, 1994*
June 30, 1996 Ended through
(Unaudited) 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 .31 .69 .29
Net realized and unrealized gain
(loss) on investments .01 1.01 (.58)
------ ------ ---------
Total from investment operations .32 1.70 (.29)
------ ------ ---------
Less distributions:
Dividends from net investment income (.05) (.65) (.21)
Distributions from net capital gains (.10) (.28) -0-
------ ------ ---------
Total distributions (.15) (.93) (.21)
------ ------ ---------
Net asset value, end of period $12.95 $12.77 $ 12.00
====== ====== =========
Total return .13% 14.49% (2.33)%
Ratios/supplemental data:
Net assets, end of period (thousands) $1,565 $1,153 $ 751
Ratio of expenses to average net assets:
Before expense reimbursement 14.75% 21.52%++ 40.78%+
After expense reimbursement 1.73% 1.73% 1.75%+
Ratio of net investment income to average net assets:
Before expense reimbursement (8.09)% (14.26) (34.18)%+
After expense reimbursement 5.04% 5.53% 4.86%+
Portfolio turnover rate 127.15% 202.54% 46.15%
</TABLE>
* Commencement of operations.
+ Annualized.
++ Includes indirectly paid expenses. Excluding indirectly paid expenses for the
year ended December 31, 1995, the "ratio of expenses to average net assets
before expense reimbursement" would have been 21.68%.
See accompanying notes to financial statements.
PROSPECTUS PAGE 9
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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 county; 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
PROSPECTUS PAGE 10
<PAGE> 12
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. 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 county; 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 FUND. The China Fund seeks to provide investors with long-term capital
growth. Under normal market conditions, 85% to 100% of the China 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 Fund are listed in Hong Kong. The principal offices
of these issuers may be located outside China and Hong Kong. The China 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 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 Fund may invest up to 5% of
its net assets in options on equity
PROSPECTUS PAGE 11
<PAGE> 13
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 China 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 China Fund may also purchase and sell stock index
futures to hedge against equity markets on a temporary basis.
The Global Government Fund. The Global Government Fund intends to provide
investors with current income while seeking opportunities for capital
appreciation.
The Global Government Fund's portfolio is managed in accordance with a global
investment strategy, which means that the Global Government 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 Fund's
portfolio. Guinness Flight may further evaluate among other things, foreign
yield curves and regulatory and political factors, including the fiscal and
monetary policies of the countries in which the Global Government Fund may
invest. Although the Global Government Fund intends to invest substantially all
of its total 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 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 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 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 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 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 Fund may invest up to 15%
of its assets in the fixed income securities of issuers in emerging market
countries. An emerging market is
PROSPECTUS PAGE 12
<PAGE> 14
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.
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 additional information concerning investment grade debt ratings.
In order to protect and enhance the capital value of the Global Government 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 the 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 offers the best opportunities for total
return regardless of the prospects for the currencies involved, and then to
invest in the currencies that Guinness Flight 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 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 Fund's net asset value may be adversely affected as a result of this
investment technique.
Notwithstanding the above, the Global Government 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
PROSPECTUS PAGE 13
<PAGE> 15
defensive purposes during periods that Guinness Flight considers to be
unsuitable for the Fund's normal investment strategy. The Global Government Fund
may also purchase and sell index futures to hedge against maturity risk on a
temporary basis.
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, 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 portfolio
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 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." See "Investment Strategies and Risks"
in 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."
See "Investment Strategies and Risks" in the Statement of Additional
Information.
COVERED CALL OPTIONS. Call options may also be used as a means of participating
in an anticipated 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
PROSPECTUS PAGE 14
<PAGE> 16
can be expected that a call option will be exercised if the market value of the
underlying security increases to a level greater than the exercise price, this
strategy will generally be used when Guinness Flight believes that the call
premium received by the Fund plus anticipated appreciation in the price of the
underlying security up to the exercise price of the call, will be greater than
the appreciation in the price of the security. By writing a call option, 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." See "Investment Strategies and Risks" in 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 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." See "Investment Strategies and
Risks" in 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 supervision of the
Guinness Funds' Board of Directors. 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
PROSPECTUS PAGE 15
<PAGE> 17
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,
100% for the Asia Small Cap Fund, 100% for the China Fund, and 200% for the
Global Government 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.
OTHER RISK CONSIDERATIONS
THE ASIA BLUE CHIP FUND, ASIA SMALL CAP FUND AND CHINA 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.
Deng Xiaoping's economic reforms are transforming China's economy into a market
system that has stimulated significant economic growth. Deng Xiaoping's reform
began by improving the living standards of the 800 million rural workers. 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 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 in July 1997, but which would maintain
the existing capitalist economic and social system of Hong Kong for 50 years
beyond that date.
PROSPECTUS PAGE 16
<PAGE> 18
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 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 1997, including:
(1) that the transition from Deng Xiaoping to a successor 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,
either at the time of Deng Xiaoping's demise or at a subsequent
occasion;
(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 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.
PROSPECTUS PAGE 17
<PAGE> 19
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 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.
SMALL CAPITALIZATION ISSUERS. An investor should be aware that investment in
small capitalization issuers carry more risk than 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.
PROSPECTUS PAGE 18
<PAGE> 20
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 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.
PROSPECTUS PAGE 19
<PAGE> 21
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.
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 Funds' Board of Directors. The Board of Directors approves all
significant agreements between the Guinness 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 Funds and to Guinness
Flight, subject always to the investment objective and policies of each Fund and
to the general supervision of the Guinness Funds' Board of Directors.
Information concerning the Board of Directors 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, and has a U.S.
office at 225 South Lake Avenue, Suite 777, Pasadena, California 91101 and at
Upper Ground Floor, Far East Center, 16 Harcourt Road, Admiralty, Hong Kong.
Guinness Flight serves as the investment adviser to the China Fund and Global
Government Fund pursuant to Investment Advisory Agreements dated as of May 6,
1994, and to the Asia Blue Chip Fund and Asia Small Cap Fund pursuant to
Investment Advisory Agreements dated April 29, 1996 (the "Advisory Agreements").
Under the terms of the Advisory Agreements, 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.
PROSPECTUS PAGE 20
<PAGE> 22
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 Fund.
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.
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 interest operations as Investment Director.
Until its dissolution, he was a member of H.M. Treasury Tax Consultative
Committee.
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. In 1987, he became Joint Managing Director and leads
the Global Equity Team as Investment Director.
LYNDA JOHNSTONE -- Ms. Johnstone joined Guinness Mahon in 1986 in the
Investment Department 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 Fund.
NERISSA LEE -- Ms. Lee joined Guinness Flight in 1995 in Guinness Flight's
Hong Kong office 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 Fund's China Fund. These funds are
offered only to offshore investors. Ms. Lee serves as the Manager of the
Asia Small Cap Fund.
PROSPECTUS PAGE 21
<PAGE> 23
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 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
Fund.
Guinness Flight's legal counsel believes that Guinness Flight may provide
services described in its Investment Advisory Agreements 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 Global 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-ended 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 Directors of Guinness Funds promptly would seek to obtain
the services of another qualified adviser, as necessary. The Directors 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 Directors,
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.
PROSPECTUS PAGE 22
<PAGE> 24
FEES AND EXPENSES. Pursuant to the Advisory Agreements, Guinness Flight is paid
a monthly fee from the Asia Blue Chip Fund, Asia Small Cap Fund and China Fund
at an annual rate of 1.00% of each Fund's average daily net assets, and a
monthly fee from the Global Government 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 Directors believes that such
fees are appropriate because of the complexity of managing funds that invest in
global markets. Guinness Flight or Investment Company Administration Corporation
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, Asia Small Cap Fund's and China Fund's expense
ratio exceeding 1.98%, or if it would result in the Global Government 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 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 Fund.
DISTRIBUTOR. The Guinness 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.
PROSPECTUS PAGE 23
<PAGE> 25
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.
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 set 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 set 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.
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 investment in
each Fund is $2,500 or $1,000 for investments through tax-qualified retirement
plans. Current shareholders of any Fund may make an initial purchase of shares
of another Fund in the family for $1,000. The minimum investment in the Funds
for gift accounts is $250. 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 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." Cash investments may
be made either by check or by wire.
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, Inc.
P.O. Box 9288
Boston, MA 02205-8559
PROSPECTUS PAGE 24
<PAGE> 26
Overnight courier deliveries should be sent to:
Boston Financial Data Services
ATTN: Guinness Flight Investment Funds, Inc.
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, Inc.," 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 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 # 0011 000 028
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.
PROSPECTUS PAGE 25
<PAGE> 27
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 MAIL. Shareholders may redeem shares of any Fund by writing to
the Transfer Agent at the following address:
Guinness Flight Investment Funds, Inc.
P.O. Box 9288
Boston, MA 02205-8559
Overnight courier deliveries should be sent to:
Boston Financial Data Services
ATTN: Guinness Flight Investment Funds, Inc.
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. You should also enclose any
certificated shares that you wish to redeem.
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 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
PROSPECTUS PAGE 26
<PAGE> 28
"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 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.
SPECIAL FACTORS REGARDING TELEPHONE REDEMPTIONS. In order to protect itself and
shareholders from liability for unauthorized or fraudulent telephone
transactions, the Guinness Funds will use reasonable procedures in an attempt to
verify the identity of a person making a telephone redemption request. The
Guinness Funds reserve 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 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 Funds or its agents fail to follow such reasonable procedures, then the
Guinness Funds or its agents may be liable for any losses due to unauthorized or
fraudulent instructions.
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.
PROSPECTUS PAGE 27
<PAGE> 29
REDEMPTION FEE. On redemptions of shares purchased less than 30 days prior to
redemption, a redemption fee, equal to 1% of the value of the shares being
redeemed, shall be charged to any shareholder who redeems his interest in the
China Fund, Asia Blue Chip Fund, or Asia Small Cap Fund, such proceeds to be
payable to the Fund. Such redemption fee will not be charged on shares purchased
30 or more days prior to redemption or acquired through the reinvestment of
distributions of investment income and capital gains. Redemptions will be
assumed to have been made through the liquidation of shares in a shareholder's
account on a first-in, first-out basis.
Any redemption fee payable to the Asia Blue Chip Fund, Asia Small Cap Fund, or
China 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, Inc.
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 24.
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
PROSPECTUS PAGE 28
<PAGE> 30
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 either 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 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.
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 is $100 per an investment.
SYSTEMATIC WITHDRAWAL PLAN. You may elect to have regular monthly or quarterly
payments in any fixed amount in excess of $100 made to you, your personal bank
account, or a properly designated third party, as long as your Fund account has
a value at the current price of at least $1,000. During the withdrawal period,
you may purchase additional shares for deposit to your account if the additional
purchases are equal to at least one year's scheduled withdrawals. The number of
full and fractional shares equal in value to the amount of the payment made will
be redeemed at net asset value as determined on the day of withdrawal. As shares
of a Fund are redeemed, you may recognize a capital gain or loss to be reported
for income tax purposes.
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 accordance with methods which are specifically
authorized by its
PROSPECTUS PAGE 29
<PAGE> 31
governing Board of Directors. 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 Fund are declared and paid semiannually, normally in
June and December. The Global Government 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.
TAX MATTERS. Each Fund intends to qualify as a regulated investment company by
satisfying the requirements under Subchapter M of the Internal Revenue Code of
1986,
PROSPECTUS PAGE 30
<PAGE> 32
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 its 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 Fund will consist primarily of dividends from foreign corporations and
the Fund may have interest income and short-term capital gains, it is not
expected that a significant portion of the ordinary income dividends paid by the
China Fund may qualify for the dividends-received deduction. Because the Global
Government Bond Fund's investment income will consist of interest from debt,
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 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
PROSPECTUS PAGE 31
<PAGE> 33
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 be careful to 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.
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 the Funds may be
disallowed if other shares of the "redeemed" 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 this
back-up withholding, shareholders must provide the Fund with a correct taxpayer
identification number (which for an individual is usually his Social Security
number) and certify that the shareholder is a corporation or otherwise exempt
from or not subject to back-up withholding.
The foregoing discussion of Federal income tax consequences is based on tax laws
and regulations in effect on the date of this Prospectus, and is subject to
change by legislative or administrative action. As the foregoing discussion is
for general information only, shareholders should also review the more detailed
discussion of Federal income tax considerations relevant to the Fund that is
contained in the Statement of Additional Information. In addition, shareholders
should consult with their own tax adviser as to the tax consequences of
investments in a Fund, including the application of state and local taxes which
may differ from the Federal income tax consequences described above.
PROSPECTUS PAGE 32
<PAGE> 34
ABOUT THE FUNDS
Each Fund is a separate series of shares of the Guinness Funds, a Maryland
Corporation incorporated on January 7, 1994 and registered under the 1940 Act,
as an open-end management investment company. 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 Fund and Global Government Fund are
non-diversified. The investment objective of the Asia Blue Chip Fund and Asia
Small Cap Fund is 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.
PROSPECTUS PAGE 33
<PAGE> 35
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, 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 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 Directors.
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.
PROSPECTUS PAGE 34
