GUINNESS FLIGHT INVESTMENT FUNDS, N-30D, 1999-03-03

GUINNESS FLIGHT INVESTMENT FUNDS
N-30D, 1999-03-03

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<PAGE>

ANNUAL REPORT DECEMBER 31, 1998

NO-LOAD GLOBAL INVESTING

ASIA BLUE CHIP FUND

ASIA SMALL CAP FUND

CHINA & HONG KONG FUND

MAINLAND CHINA FUND

NEW EUROPE FUND

WIRED -REGISTERED TRADEMARK- INDEX FUND

GLOBAL GOVERNMENT BOND FUND

GUINNESS FLIGHT

GLOBAL ASSET MANAGEMENT

<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

Dear Guinness Flight Shareholder:

We are pleased to provide this annual report for the Guinness Flight
Investment Funds for the year ending December 31, 1998. In many ways, this was a
year of transition and change for the Funds as well as for Guinness Flight.

The economies of Asia, which continued to suffer during the first half of
the year, began to show signs of recovery in the second half. This incipient
recovery began to have a positive effect on our Asian-oriented funds
particularly in the fourth quarter. As the year ended the Asian economies
continued to transition from recession to recovery. As you will see in the
accompanying letters for each of these Funds, we are optimistic about the
prospects for continued recovery in the region and in these markets.

The Global Government Bond Fund enjoyed an exceptional year. For the period,
this Fund quietly produced a 12-month return of 17.89%, placing it in the 97th
percentile for total return in its Morningstar category for the same period.(1)

In 1998, we added to the Guinness Flight fund family with the launch of the
New Europe Fund and the Wired-Registered Trademark- Index Fund in the fourth
quarter. These two additions not only broaden our range of Funds, they also
increase opportunities for you to participate in the future.

Longtime shareholders are familiar with our belief that Asia, particularly
China, is transforming itself as it moves to compete in a hyper-competitive
global economy. The same need to compete is causing companies, countries and, in
the case Europe, an entire European continent to reinvent itself. The recent
additions to the Guinness Flight Fund range provide you with more opportunities
to participate in long-term trends and meaningful economic shifts that are
shaping a dramatically different future.

The New Europe Fund offers investors a way to participate in the reinvention
of Europe as this continent transforms itself from old to new. European
countries are joining together, laying the groundwork to compete as a major
force in an increasingly competitive global economy.

- ------------------------------

(1)The Fund finished 6th out of 202 funds in Morningstar's International Bond
Fund Category, based on total return for the one-year period ended December 31,
1998.
<PAGE>
The Wired-Registered Trademark- Index Fund, which embodies the New Economy,
provides an opportunity to capitalize on the transition from an industrial
economy to an information economy by investing in companies that take to heart
core new economy concepts such as the use of technology, networks, communication
and innovation.

Internally, the Guinness Flight organization also underwent a transition in
1998. Guinness Flight Investment Management Limited is now part of a much larger
global organization. In the fall, we underwent a merger that combined Guinness
Flight with Investec Asset Management and resulted in Investec Guinness Flight,
a global investment manager with offices in London, South Africa, Hong Kong and
the U.S. Your investment adviser, Guinness Flight Investment Management Ltd., is
a subsidiary of Investec Guinness Flight, which has nearly $20 billion in assets
under management around the globe. For you, this transaction means more breadth
and depth to the portfolio manager lineup and more resources to help us service
you the way you deserve.

We know that in today's fast-paced world keeping up to speed with your
investments can be difficult; that's why we provide frequent updates, market
commentaries, and fund allocations at gffunds.com. If you have not been to the
site lately, please take a moment to visit WWW.GFFUNDS.COM. We are busy shaping
it into an exciting, informative and interactive resource for our shareholders.

Inside this report, you will find commentary about each Fund from the
portfolio managers as well as detailed portfolio breakdowns and financial
information for each Fund.

As always, we appreciate your long-term commitment to and participation with
the Guinness Flight Funds. We invite you to contact us if we can answer any
questions.

Sincerely,

[SIGNATURE]

James J. Atkinson, Jr.
President

PAST PERFORMANCE THAT IS PROVIDED THROUGHOUT THIS REPORT IS NOT INDICATIVE OF
FUTURE RETURNS. SHARE PRICE AND RETURNS FLUCTUATE AND YOU MAY HAVE A GAIN OR
LOSS WHEN SHARES ARE REDEEMED. FIRST FUND DISTRIBUTORS, INC. OF PHOENIX, ARIZONA
85018, DISTRIBUTES THE GUINNESS FLIGHT INVESTMENT FUNDS.

WIRED-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK, AND WIRED INDEX-TM- A
SERVICE MARK, OF ADVANCE MAGAZINE PUBLISHERS INC., AND ARE USED WITH PERMISSION
OF ADVANCE MAGAZINE PUBLISHERS, INC. ADVANCE MAGAZINE PUBLISHERS, INC. MAKES NO
WARRANTY, EXPRESS OR IMPLIED, INCLUDING NO WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE, TO ANY PERSON OR ENTITY AS TO THE
RESULTS TO BE OBTAINED FROM OR ANY DATA INCLUDED IN, OR ANY OTHER MATTERS
CONCERNING, THE WIRED INDEX OR THE TRADEMARKS.

2
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

THE BACKDROP

1998 was a year of extreme economic crisis for Asia with conditions in
financial markets as bad as at any time since World War II. The crisis had
started the previous spring with the devaluation of the Thai Baht and the
subsequent banking/property crisis. Causes of the crisis, which by the start of
1998 had spread to most of the region, included overvalued currencies,
widespread borrowing by Asian corporates in unhedged U.S. Dollars from
undercapitalized banks, cronyism and a general lack of concern about shareholder
value. After a brief respite in the spring, partly in relief that a Korean
default had been avoided, the crisis resumed.

At its height, the crisis brought down the Suharto government in Indonesia
amid widespread civil unrest and resulted in the Malaysian authorities
introducing currency controls. An important contributory factor has been the
continuing failure of the Japanese economy to respond to repeated but
half-hearted measures to stimulate demand. In autumn, fears that severe
deflationary conditions in Asia might infect the world economy prompted the U.S.
Federal Reserve to cut interest rates. This proved to be a turning point and
soon interest rates in Asia were falling sharply. This in turn generated a
strong recovery in equity prices with banks, properties and other
interest-rate-sensitive stocks leading the rally.

THE FUND

As the year progressed and the extent of the crisis and its attendant risks
became evident, we reduced the Asia Blue Chip Fund's exposure to the banking and
property sectors, which were at the heart of the crisis in all markets. Exposure
to these sectors was not eliminated entirely though. For instance, we held
United Overseas Bank in Singapore, which correctly anticipated the coming crisis
and was positioned well when it broke. Its limited exposure was recognized by
the market and rewarded by a strong share price performance. During the crisis,
we maintained a defensive portfolio with overweighted positions in utilities
such as CLP and Hong Kong Electric, Manila Electric and Hong Kong and China Gas.
We also favored telecom stocks such as Singapore Telecom, Hong Kong Telecom,
Philippine Long Distance Telephone and China Telecom. As interest rates fell in
the last quarter of the year, we partially reversed this policy by modestly
increasing the interest-rate-sensitive element in the portfolio, although at
year-end the Fund was still relatively conservatively positioned. Through the
end of the year, the markets in which this Fund invests, as measured by the
Morgan Stanley Asia Free ex-Japan Index, were collectively down by 10.28%. The
performance of the Fund was closely in line with this with a total return of
- -11.78% for the year.

THE OUTLOOK

We believe that Asian markets are well supported at present levels by the
current low interest rate environment. Any pick up in economic growth should
lead to further market strength in selected markets as earnings expectations
improve. However, realistically one

3
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND (CONTINUED)

must recognize the dangers that remain. In particular it is vital that both the
U.S. economy and its stock market remain in their present robust condition.
Structural reform across Asia is critical, and in some cases (reform of the
foreclosure/bankruptcy laws in Thailand for instance) progress remains
agonizingly slow. Also, the fragile state of the Japanese economy represents a
source of potential grief for Asia, as indeed it does for the rest of the world.
We remain convinced though that for the genuine long-term investor Asia
continues to offer as rewarding a future as ever.

- -- Richard Farrell, Robert Conlon & Agnes Chow

4
<PAGE>
ASIA BLUE CHIP FUND
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY PORTFOLIO STATISTICS
AS OF 12/31/98

<TABLE>
<S> <C>
# of Holdings in the
Portfolio: 42
Portfolio Turnover: 77.62%
% of Stocks in Top 10: 44.04%
</TABLE>

FUND MANAGERS:
Richard Farrell,
Robert Conlon, Agnes Chow

<TABLE>
<CAPTION>
TOP 10 HOLDINGS (%)
---------------------------------------
<S> <C>
United Overseas Bank 9.82%
Cheung Kong 5.50%
Hutchison Whampoa 4.50%
Mahanagar Tele Nigam 4.47%
Singapore Airlines Ltd. 4.20%
Hang Seng Bank 3.36%
Johnson Electric Hldgs. 3.27%
Manila Electric 3.07%
Dairy Farm Intl. Hldgs. 2.93%
Singapore Telecom 2.92%
TOP 5 SECTORS (%)
---------------------------------------
Banking 19.78%
Telecom. 15.28%
Electronics 9.92%
Real Estate 8.35%
Wholesale 7.43%
TOP 5 COUNTRIES (%)
---------------------------------------
Hong Kong 36.38%
Singapore 26.11%
Taiwan 9.12%
Philippines 7.44%
Malaysia 6.90%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
ASIA BLUE CHIP FUND AND THE MSCI ASIA FREE EX-JAPAN INDEX

Guinnness Flight Asia
<S> <C>
Blue Chip Fund
4/29/96* $10,000
6/30/96 $9,904
9/30/96 $9,840
12/31/96 $10,384
3/31/97 $9,880
6/30/97 $10,411
9/30/97 $8,697
12/31/97 $6,471
3/31/98 $6,759
6/30/98 $4,951
9/30/98 $4,661
12/31/98 $5,709
* Inception date.
Average Annual Total Return
One Year Since Inception
- -11.78% -18.91%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
ASIA BLUE CHIP FUND AND THE MSCI ASIA FREE EX-JAPAN INDEX
MSCI Asia Free
<S> <C>
Ex-Japan Index
4/29/96* $10,000
6/30/96 $9,706
9/30/96 $9,372
12/31/96 $9,564
3/31/97 $9,247
6/30/97 $9,815
9/30/97 $8,064
12/31/97 $5,591
3/31/98 $6,065
6/30/98 $4,126
9/30/98 $3,753
12/31/98 $5,017
* Inception date.
Average Annual Total Return
One Year
- -11.78%
Past performance is not predictive of future performance
</TABLE>

5
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------

SHARES COMMON STOCKS: 93.03% VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
HONG KONG: 36.38%
350,000 CDL Hotel International................................... $ 89,899
60,000 Cheung Kong............................................... 431,747
101,000 China Telecom............................................. 174,686
40,000 CLP Holdings Ltd.......................................... 199,288
29,500 Hang Seng Bank............................................ 263,678
83,000 Hong Kong & China Gas..................................... 105,523
7,500 Hong Kong & China Gas Rts................................. 494
75,000 Hong Kong Electric........................................ 227,490
6,800 HSBC Holdings Plc......................................... 169,394
50,000 Hutchison Whampoa......................................... 353,335
150,000 Hysan Development Company................................. 223,618
100,000 Johnson Electric Holdings................................. 256,854
64,500 Smartone Telecommunications............................... 178,991
70,000 Television Broadcasts Ltd................................. 180,701
------------
Total Hong Kong........................................... 2,855,698
------------
INDIA: 4.47%
30,000 Mahanagar Tele Nigam GDR.................................. 351,000
------------
INDONESIA: 0.01%
1,837 Bank International Indonesia Wts.......................... 15
------------
MALAYSIA: 6.90%
100,000 Golden Hope Plantations Berhad............................ 92,760
120,000 Kumpulan Guthrie Berhad................................... 66,516
80,000 Malaysian International Shipping Corp..................... 90,498
80,000 Petronas Gas Berhad....................................... 155,656
1,000 RHB Sakura Merchant Bankers............................... 403
60,000 Systems Telekom Malaysia.................................. 135,747
------------
Total Malaysia............................................ 541,580
------------
PHILIPPINES: 7.44%
100,000 Bank of Philippine Islands................................ 212,082
75,000 Manila Electric Class B................................... 241,002
127 Metropolitan Bank & Trust................................. 914
5,000 Philippine Long Distance Telephone ADR.................... 129,688
------------
Total Philippines......................................... 583,686
------------
</TABLE>

6
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------

SHARES VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
SINGAPORE: 26.11%
200,000 Dairy Farm International Holdings......................... $ 230,000
15,000 Development Bank of Singapore - Foreign................... 135,373
71,750 Keppel Corp. Ltd.......................................... 192,087
45,000 Singapore Airlines Ltd - Foreign.......................... 329,800
15,000 Singapore Press Holdings.................................. 163,537
150,000 Singapore Telecom Ltd..................................... 228,952
120,000 United Overseas Bank - Foreign............................ 770,442
------------
Total Singapore........................................... 2,050,191
------------
SOUTH KOREA: 1.70%
3,447 Samsung Electronics GDR................................... 133,571
------------
TAIWAN: 9.12%
8,882 China Steel Corp. GDR..................................... 108,360
17,600 Fubon Insurance Co. GDR................................... 184,360
7,968 President Enterprise GDR.................................. 70,716
13,600 Siliconware Precision GDR................................. 147,220
14,500 Taiwan Semiconductor ADR.................................. 205,719
------------
Total Taiwan.............................................. 716,375
------------
THAILAND: 0.90%
10,000 PTT Exploration & Production - Foreign.................... 70,425
------------
TOTAL COMMON STOCKS: 93.03%
(Identified Cost $6,957,786)............................ 7,302,541
------------
</TABLE>

7
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------

PAR VALUE CORPORATE BONDS: 2.79% VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
$ 100,000 Formosa Chemical & Fiber $ 111,750
1.75% due 07/19/01......................................
100,000 Nan Ya Plastics 106,687
1.75% due 07/19/01......................................
------------
TOTAL CORPORATE BONDS
(Identified Cost $248,706): 2.79%....................... 218,437
------------
TOTAL INVESTMENTS IN SECURITIES: 95.82%
(Identified Cost $7,206,492+)........................... 7,520,978
------------
OTHER ASSETS LESS LIABILITIES: 4.18%...................... 328,450
------------
NET ASSETS: 100.00%....................................... $ 7,849,428
------------
------------
</TABLE>

<TABLE>
<S> <C>
* Non-income producing security.
+ Cost for federal tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation.................. $ 733,480
Gross unrealized depreciation.................. (418,994)
-----------
$ 314,486
-----------
-----------
</TABLE>

See accompanying notes to financial statements.

8
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY (UNAUDITED)

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------

% OF
INDUSTRY NET ASSETS
- -------------------------------------------------------------------------------------
<S> <C>

Agriculture............................................................. 1.17%
Airline................................................................. 4.20
Banking................................................................. 19.78
Chemical................................................................ 2.78
Diversified Operations.................................................. 3.39
Electronics............................................................. 9.92
Electric Power.......................................................... 5.52
Food & Beverage......................................................... 0.90
Hotels.................................................................. 1.15
Insurance............................................................... 2.35
Manufacturing........................................................... 3.83
Media................................................................... 4.39
Oil/Petroleum Refining.................................................. 0.90
Real Estate............................................................. 8.35
Telecommunications...................................................... 15.28
Transportation.......................................................... 1.15
Utilities............................................................... 3.33
Wholesale............................................................... 7.43
-----------
TOTAL INVESTMENTS IN SECURITIES......................................... 95.82
OTHER ASSETS LESS LIABILITIES........................................... 4.18
-----------
NET ASSETS.............................................................. 100.00%
-----------
-----------
</TABLE>

See accompanying notes to financial statements.

9
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $7,206,492)................. $ 7,520,978
Cash.................................................................. 370,328
Receivables:
Fund shares sold.................................................. 17,231
Dividends and interest............................................ 6,356
Deferred organization costs, net...................................... 4,065
------------
Total assets...................................................... 7,918,958
------------

LIABILITIES
Payables for fund shares redeemed..................................... 14,268
Due to Advisor (Note 3)............................................... 26,994
Accrued expenses...................................................... 28,268
------------
Total liabilities................................................. 69,530
------------
NET ASSETS $ 7,849,428
------------
------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($7,849,428/1,108,198 shares outstanding; unlimited
number of shares authorized without par value).................... $7.08
-----
-----
SOURCE OF NET ASSETS
Paid-in capital................................................... $ 11,396,548
Undistributed net investment income............................... 26,747
Cumulative undistributed net realized loss on investments......... (3,888,358)
Net unrealized appreciation on:
Investments................................................... 314,486
Foreign Currency.............................................. 5
------------
NET ASSETS................................................ $ 7,849,428
------------
------------
</TABLE>

See accompanying notes to financial statements.

10
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
FOR THE YEAR
ENDED
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends (net of foreign taxes withheld $14,833)............... $ 172,659
Interest........................................................ 30,706
------------------
Total investment income..................................... 203,365
------------------

EXPENSES
Advisory fees (Note 3).......................................... 72,318
Administration fees (Note 3).................................... 18,079
Custodian....................................................... 26,781
Accounting...................................................... 48,929
Transfer agent fees............................................. 35,107
Audit fees...................................................... 24,588
Legal fees...................................................... 6,732
Insurance....................................................... 914
Trustees' fees.................................................. 15,468
Registration fees............................................... 21,001
Reports to shareholders......................................... 4,444
Deferred organization costs amortization........................ 1,748
Miscellaneous................................................... 653
------------------
Total expenses.............................................. 276,762
Interest on loans........................................... 279
Commitment fee on credit line............................... 1,150
Less: Expenses reimbursed (Note 3).......................... (140,722)
------------------
Net expenses................................................ 137,469
------------------
NET INVESTMENT INCOME................................... 65,896
------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments.............................. (3,308,917)
Net realized loss from foreign currency......................... (19,626)
Net change in unrealized (depreciation) appreciation on:
Investments................................................. 1,956,562
Foreign currency............................................ (179)
------------------
Net Realized and Unrealized Loss on Investments............. (1,372,160)
------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $ (1,306,264)
------------------
------------------
</TABLE>

See accompanying notes to financial statements.

11
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

STATEMENTS OF CHANGES IN NET ASSETS

DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income.. (49,669) (5,180)
Dividends paid from realized gains......... -- (1,407)
------------------ ------------------
TOTAL DISTRIBUTIONS.................... (49,669) (6,587)
------------------ ------------------

CAPITAL SHARE TRANSACTIONS.................
Proceeds from shares sold.................. 10,665,544 10,083,304
Net asset value of shares issued on
reinvestment of distributions............ 41,743 6,157
Cost of shares redeemed.................... (8,419,362) (4,498,343)
------------------ ------------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS............................. 2,287,925 5,591,118
------------------ ------------------
TOTAL INCREASE IN NET ASSETS........... 931,992 3,230,271
------------------ ------------------

NET ASSETS
Beginning of period........................ 6,917,436 3,687,165
------------------ ------------------
End of period (including undistributed net
investment income of $26,747 and $10,520,
respectively)............................ $ 7,849,428 $ 6,917,436
------------------ ------------------
------------------ ------------------

CHANGES IN SHARES
Shares sold................................ 1,543,963 982,882
Shares reinvested from distributions....... 6,798 474
Shares redeemed............................ (1,298,746) (411,241)
------------------ ------------------
Net Increase........................... $ 252,015 $ 572,115
------------------ ------------------
------------------ ------------------
</TABLE>

See accompanying notes to financial statements.

12
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND

FINANCIAL HIGHLIGHTS

FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
APRIL 29,
FOR THE YEAR FOR THE YEAR 1996*
ENDED ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.................... $ 8.08 $ 12.98 $ 12.50
-------- -------- --------
Income from investment operations:
Net investment income................................. 0.05 0.02 --
Net realized and unrealized gain (loss) on
investments......................................... (1.01) (4.91) 0.48
-------- -------- --------
Total from investment operations........................ (0.96) (4.89) 0.48
-------- -------- --------

Less distributions:
Dividends from net investment income.................. (0.04) (0.01) --
Distributions from taxable net realized gains......... -- -- --
-------- -------- --------
Total distributions..................................... (0.04) (0.01) --
-------- -------- --------
Net asset value, end of period.......................... $ 7.08 $ 8.08 $ 12.98
-------- -------- --------
-------- -------- --------
Total return............................................ (11.78)% (37.68)% 3.84 %++
Ratios/supplemental data:
Net assets, end of period (in thousands)................ $ 7,849 $ 6,917 $ 3,687
Ratio of expenses to average net assets:
Before expense reimbursement.......................... 3.85 % 4.41 % 9.14 %+
After expense reimbursement........................... 1.98 % 1.98 % 1.98 %+
Ratio of net investment income to average net assets:
Before expense reimbursement.......................... (1.03)% (2.16)% (7.10)%+
After expense reimbursement........................... 0.91 % 0.28 % 0.06 %+
Portfolio turnover rate................................. 77.62 % 34.69 % 10.97 %

BANK LOANS
Amount outstanding at end of period (in thousands)...... -- -- n/a
Average amount of bank loans outstanding during the
period (monthly average) (in thousands)................ -- $ 121 n/a
Average number of shares outstanding during the period
(monthly average) (in thousands)....................... -- 479 n/a
Average amount of debt per share during the period...... -- $ 0.25 n/a
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
+ Annualized
++ Not Annualized
</TABLE>

See accompanying notes to financial statements.

13
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

THE BACKDROP

The share prices of Asian smaller companies were significant laggards over
the year, even as the region's stock markets started to recover. The primary
catalyst behind the general turnaround was sharply lower Asian interest rates,
which resulted in attention being paid to the two most obvious beneficiaries of
lower interest rates: the property and banking sectors. Unfortunately for the
Asia Small Cap Fund, the property and banking industries tend to be dominated by
large companies. Hence the large capitalization indices rose sharply while
interest in smaller companies was limited.

THE FUND

The Asia Small Cap Fund invested in economically strong smaller companies;
yet some of these went unrecognized by the markets in general due to the nature
of small cap securities during a recession. In Singapore the small electronics
stocks, which had outperformed during the summer months, significantly
underperformed in the latter part of the year, despite the fact that utilization
rates were much higher. The same story is true in Thailand where healthy small
companies significantly underperformed the strong upward moves in Thai banks.

Malaysia was the best performing of the ASEAN (Association of Southeast
Asian Nations) markets in local currency terms over the fourth quarter, but the
Fund's weighting to Malaysia has remained small because of the capital controls
announced there on September 1. The Mainland China component of the Fund has
continued to hinder the Fund's performance. The small cap banks in Hong Kong,
which were added to the portfolio at the beginning of the fourth quarter, did
particularly well although the overall Hong Kong component struggled against
large company indices. The Taiwanese authorities have approved the Fund to
invest in the Taiwanese market; but as interest has focused on the potential for
an economic recovery in the ASEAN markets, the weighting in Taiwan has been kept
deliberately low.

THE OUTLOOK

Asian smaller companies have struggled against their blue-chip counterparts
during the last few months. Investor interest has focused on increasing exposure
to Asia through buying the very liquid blue-chip issues. However, the improving
backdrop for Asian equities is positive for smaller companies, and we believe
that eventually investor interest will return.

- -- Robert Conlon & Agnes Chow

14
<PAGE>
ASIA SMALL CAP FUND
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY PORTFOLIO STATISTICS
AS OF 12/31/98

<TABLE>
<S> <C>
# of Holdings in the
Portfolio: 59
Portfolio Turnover: 48.95%
% of Stocks in Top 10: 36.03%
</TABLE>

FUND MANAGERS:
Robert Conlon &
Agnes Chow

<TABLE>
<CAPTION>
TOP 10 HOLDINGS (%)
- ---------------------------------------
<S> <C>
Wing Hang Bank 4.79%
Dah Sing Financial 4.59%
Natsteel Electronics Ltd. 4.04%
Elec & Eltek Intl. Ltd 3.88%
HKR International 3.46%
NG Fung Hong Ltd. 3.20%
Moulin Intl. Holding 3.07%
Varitronix Intl. Ltd. 3.03%
Venture Manufacturing 2.90%
Datacraft Asia Ltd. 2.87%
TOP 5 SECTORS (%)
- ---------------------------------------
Electronics 15.05%
Manufacturing 10.74%
Banking 10.44%
Food & Beverage 9.58%
Consumer Related 8.98%
TOP 5 COUNTRIES (%)
- ---------------------------------------
Hong Kong 42.93%
Singapore 21.28%
China 14.74%
Thailand 11.98%
Malaysia 5.28%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
ASIA SMALL CAP FUND AND THE HSBC JAMES CAPEL SOUTHEAST ASIA SMALLER
COMPANIES INDEX (HSBC JAMES CAPEL SASC INDEX)
<S> <C>

Guiness Flight Asia
Small Cap Fund
4/29/96* $10,000
6/30/96 10,461
9/30/96 10,397
12/31/96 11,308
3/31/97 12,046
6/30/97 13,406
9/30/97 12,504
12/31/97 7,829
3/31/98 7,684
6/30/98 5,005
9/30/98 4,530
12/31/98 5,415
* Inception date.
Average Annual Total Return
One Year Since Inception
- -30.83% -20.50%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
ASIA SMALL CAP FUND AND THE HSBC JAMES CAPEL SOUTHEAST ASIA SMALLER
COMPANIES INDEX (HSBC JAMES CAPEL SASC INDEX)
<S> <C>
HSBC James
Capel SASC
Index
4/29/96* $10,000
6/30/96 9,530
9/30/96 9,467
12/31/96 9,720
3/31/97 10,336
6/30/97 9,999
9/30/97 7,820
12/31/97 4,464
3/31/98 5,116
6/30/98 3,280
9/30/98 2,921
12/31/98 3,822
* Inception date.
Average Annual Total Return
One Year
- -30.83%
Past performance is not predictive of future performance
</TABLE>

15
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES COMMON STOCKS: 99.55% VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
CHINA: 14.74%
6,759,000 Anhui Expressway Co. Ltd - H......................... $ 793,883
2,650,000 Beijing Datang Power................................. 795,246
820,000 Dazhong Taxi*........................................ 346,040
750,000 First Tractor Co. - H................................ 171,343
1,366,000 Guangdong Kelon Elec Holdings - H.................... 1,216,557
2,292,400 Heilongjiang Electric Power Co....................... 733,568
2,566,000 Qingling Motors Company Ltd. - H..................... 450,431
1,527,540 Shangdong Chenming Paper Ind. - B.................... 471,220
1,500,000 Shanghai Zhenhua Port Mach. - B...................... 531,000
4,000,000 Shenzhen Expressway.................................. 929,320
883,300 Shenzhen Fangda Co. Ltd - B.......................... 430,957
1,980,000 Zhejiang Southeast Electric - B...................... 415,800
--------------
Total China.......................................... 7,285,365
--------------
HONG KONG: 42.93%
828,000 ASM Pacific Technology............................... 360,692
4,158,000 Cafe De Coral Holdings Ltd........................... 1,301,455
925,000 Dah Sing Financial Holdings.......................... 2,268,444
2,528,000 Esprit Holdings Ltd.................................. 1,093,087
3,682,000 Four Seas Mercantile Holdings........................ 1,283,159
5,000,000 Glorious Sun Enterprises Ltd......................... 890,598
2,800,000 HKR International Ltd................................ 1,707,626
1,700,000 Hung Hing Print Group................................ 663,754
2,306,000 Jiangsu Expressway Co................................ 503,013
240,000 Li & Fung Ltd........................................ 497,186
1,400,000 Lung Kee (Bermuda) Holdings.......................... 162,631
12,500,000 Moulin International Holdings........................ 1,516,599
1,764,000 NG Fung Hong Ltd..................................... 1,582,400
3,392,000 Quality Healthcare Asia Ltd.......................... 306,469
800,000 Road King Infrastructure............................. 588,569
650,000 Shui on Construction................................. 574,694
7,508,000 Texwinca Holdings Ltd................................ 562,063
799,000 Varitronix International Ltd......................... 1,495,366
2,562,500 Vitasoy International Holdings Ltd................... 934,362
950,000 Wing Hang Bank....................................... 2,366,539
200,000 Wongs International Warrants......................... 671
</TABLE>

16
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
HONG KONG: (CONTINUED)
2,730,000 Zhejiang Expressway.................................. $ 553,217
--------------
Total Hong Kong...................................... 21,212,594
--------------
MALAYSIA: 5.28%
2,000,000 Hap Seng Consolidated Berhad......................... 1,108,597
500,000 Malakoff Berhad...................................... 1,006,787
750,000 PPB Oil Palms Berhad................................. 493,778
--------------
Total Malaysia....................................... 2,609,162
--------------
PHILIPPINES: 2.47%
7,400,000 Cosmos Bottling Corp................................. 694,344
350,000 Equitable Banking Corp............................... 526,350
--------------
Total Philipines..................................... 1,220,694
--------------
SINGAPORE: 21.28%
585,000 Avimo Group Ltd...................................... 917,717
138,000 Clipsal Industries Ltd............................... 138,000
800,000 Datacraft Asia Ltd................................... 1,416,000
355,000 Elec & Eltek Intl. Co. Ltd........................... 1,917,000
1,200,000 Flextech Holdings Ltd................................ 541,490
400,000 GP Batteries......................................... 852,816
2,437,000 GPE Industries Ltd................................... 609,250
784,000 Natsteel Electronics Ltd............................. 1,994,428
524,449 Singapore Tech Engineering........................... 489,189
375,000 Venture Manufacturing................................ 1,430,951
259,000 Wong's Circuits Holdings Ltd......................... 207,200
--------------
Total Singapore...................................... 10,514,041
--------------
TAIWAN: 0.87%
184,000 D-Link Corp.......................................... 431,161
--------------
THAILAND: 11.98%
1,450,000 Co-Generation Public*................................ 1,116,919
373,000 CTCI Corp............................................ 534,842
524,000 Eastern Water Resources.............................. 526,162
370,000 KCE Electronics*..................................... 814,305
1,718,264 Mah Boon Krong Properties............................ 992,670
2,690,000 National Finance & Securities*....................... 851,032
</TABLE>

17
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
THAILAND: (CONTINUED)
199,900 Pizza Co. Ltd. - Foreign............................. $ 670,916
95,000 Thai Union Frozen Products........................... 415,543
--------------
Total Thailand....................................... 5,922,389
--------------
TOTAL INVESTMENTS IN SECURITIES
(Identified Cost $59,671,029+): 99.55%............. 49,195,406
--------------
OTHER ASSETS LESS LIABILITIES: 0.45%................. 221,470
--------------
NET ASSETS: 100.00%.................................. $ 49,416,876
--------------
--------------
</TABLE>

<TABLE>
<S> <C>
* Non-income producing security.
+ Cost for federal tax purposes is the same.
Net unrealized depreciation consists of:
Gross unrealized appreciation.................................. $ 4,589,960
Gross unrealized depreciation.................................. (15,065,583)
-----------
$(10,475,623)
-----------
-----------
</TABLE>

See accompaying notes to financial statements.

18
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY (UNAUDITED)

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------

% OF
INDUSTRY NET ASSETS
- -------------------------------------------------------------------------------------
<S> <C>

Agriculture............................................................. 3.04%
Automobile.............................................................. 1.61
Banking................................................................. 10.44
Construction............................................................ 5.00
Consumer Related........................................................ 8.98
Electronics............................................................. 15.05
Electric Power.......................................................... 2.33
Electric Utilities...................................................... 3.87
Food and Beverage....................................................... 9.58
Manufacturing........................................................... 10.74
Materials............................................................... 2.30
Medical Products........................................................ 0.62
Real Estate............................................................. 5.46
Retail.................................................................. 6.21
Technology.............................................................. 1.86
Telecommunications...................................................... 2.87
Transportation.......................................................... 4.93
Utilities............................................................... 1.06
Wholesale............................................................... 3.60
-----------
TOTAL INVESTMENTS IN SECURITIES......................................... 99.55
OTHER ASSETS LESS LIABILITIES........................................... 0.45
-----------
NET ASSETS.............................................................. 100.00%
-----------
-----------
</TABLE>

See accompanying notes to financial statements.

19
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $59,671,029)............... $ 49,195,406
Cash................................................................. 15,847
Receivables:
Securities sold.................................................. 913,588
Dividends and interest........................................... 28,513
Fund shares sold................................................. 376,847
Prepaid expenses..................................................... 103,530
Deferred organization costs, net..................................... 4,065
-------------
Total assets..................................................... 50,637,796
-------------

LIABILITIES
Payables:
Fund shares redeemed............................................. 282,260
Unrealized loss on forward foreign currency contracts (Note 6)... 4,836
Bank loans (Note 5).................................................. 809,667
Due to Advisor (Note 3).............................................. 46,805
Accrued expenses..................................................... 77,352
-------------
Total liabilities................................................ 1,220,920
-------------
NET ASSETS........................................................... $ 49,416,876
-------------
-------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($49,416,876/7,348,159 shares outstanding; unlimited number of
shares authorized without par value)............................. $6.73
-----
-----
SOURCE OF NET ASSETS
Paid-in capital.................................................. $ 141,592,298
Undistributed net investment income.............................. -
Cumlative undistributed net realized loss on investments......... (81,698,522)
Net unrealized depreciation on:
Investments.................................................. (10,475,623)
Foreign currency............................................. (1,277)
-------------
NET ASSETS............................................... $ 49,416,876
-------------
-------------
</TABLE>

See accompanying notes to financial statements.

20
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
FOR THE YEAR
ENDED
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends (net of foreign taxes withheld of $39,923)............ $ 1,396,340
Interest........................................................ 155,226
------------------
Total Investment Income..................................... 1,551,566
------------------

EXPENSES
Advisory fees (Note 3).......................................... 549,616
Administration fees (Note 3).................................... 137,404
Custodian....................................................... 144,517
Accounting...................................................... 49,999
Transfer agent fees............................................. 212,169
Audit fees...................................................... 24,349
Legal fees...................................................... 39,503
Insurance....................................................... 16,000
Trustees' fees.................................................. 15,429
Registration fees............................................... 20,998
Reports to shareholders......................................... 41,214
Deferred organization costs amortization........................ 1,748
Miscellaneous................................................... 1,466
------------------
Total expenses.............................................. 1,254,412
Interest expense............................................ 3,106
Commitment fee on credit line............................... 8,654
Less: Expenses reimbursed (Note 3).......................... (181,002)
------------------
Net expenses................................................ 1,085,170
------------------
NET INVESTMENT INCOME................................... 466,396
------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments.............................. (61,850,706)
Net realized loss from foreign currency......................... (811,432)
Net change in unrealized depreciation on investments............ 32,975,940
Net change in unrealized loss on foreign currency............... 543,994
------------------
Net realized and unrealized loss on investments............. (29,142,204)
------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $ (28,675,808)
------------------
------------------
</TABLE>

See accompanying notes to financial statements.

21
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

STATEMENTS OF CHANGES IN NET ASSETS

DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income.. -- --
Distributions from taxable realized
gains.................................... -- (23,059)
Return of Capital.......................... -- (719,699)
------------------ ------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.... -- (742,758)
------------------ ------------------

CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.................. 43,055,704 247,467,409
Net asset value of shares issued on
reinvestment of distributions............ -- 683,578
Cost of shares redeemed.................... (73,441,121) (124,267,665)
------------------ ------------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE
TRANSACTIONS............................. (30,385,417) 123,883,322
------------------ ------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................... (59,061,225) 57,609,817
------------------ ------------------

NET ASSETS
Beginning of period........................ 108,478,101 50,868,284
------------------ ------------------
End of period [including undistributed
(overdistributed) net investment income
of $0 and ($617,246) respectively]....... $ 49,416,876 $ 108,478,101
------------------ ------------------
------------------ ------------------

CHANGES IN SHARES
Shares sold................................ 6,060,579 16,468,454
Shares reinvested from distributions....... -- 41,030
Shares redeemed............................ (9,867,240) (8,963,387)
------------------ ------------------

Net Increase (Decrease)................ $ (3,806,661) $ 7,546,097
------------------ ------------------
------------------ ------------------
</TABLE>

See accompanying notes to financial statements.

22
<PAGE>
GUINNESS FLIGHT ASIA SMALL CAP FUND

FINANCIAL HIGHLIGHTS

FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR APRIL 29, 1996
ENDED ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.73 $ 14.10 $ 12.50
-------- ----------------- --------
Income from investment operations:
Net investment income........................... 0.06 0.07 0.02
Net realized and unrealized gain (loss) on
investments................................... (3.06) (4.38) 1.61
-------- ----------------- --------
Total from investment operations.................. (3.00) (4.31) 1.63
-------- ----------------- --------
Less Distributions:
Dividends from net investment income............ -- -- (0.02)
Distributions from taxable net realized gains... -- (0.01) (0.01)
Return of capital............................... -- (0.05) --
-------- ----------------- --------
Total Distributions............................... -- (0.06) (0.03)
-------- ----------------- --------
Net asset value, end of period.................... $ 6.73 $ 9.73 $ 14.10
-------- ----------------- --------
-------- ----------------- --------
Total return...................................... (30.83)% (30.77)% 13.08 %++
Ratios/supplemental data:
Net assets, end of period (thousands)............. $ 49,417 $ 108,478 $ 50,868
Ratio of expenses to average net assets:
Before expense reimbursement/ recoupment........ 2.31 % 1.76 % 3.09 %+
After expense reimbursement/ recoupment......... 1.98 % 1.80 % 1.98 %+
Ratio of net investment income to average net
assets:
Before expense reimbursement/ recoupment........ 0.52 % 0.53 % (0.76)%+
After expense reimbursement/ recoupment......... 0.85 % 0.49 % 0.36 %+
Portfolio turnover rate........................... 48.95 % 52.33 % 21.91 %
BANK LOANS
Amount outstanding at end of period (in
thousands)....................................... $ 810 n/a n/a
Average amount of bank loans outstanding during
the period (monthly average) (in thousands)...... $ 67 n/a n/a
Average number of shares outstanding during the
period (monthly average) (in thousands).......... 6,566 n/a n/a
Average amount of debt per share during the
period........................................... $ 0.01 n/a n/a
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
+ Annualized
++ Not Annualized
</TABLE>

See accompanying notes to financial statements.

23
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

THE BACKDROP

Within Asia, Hong Kong was one of the stronger markets in 1998. While the
market was negative for the year, it began showing promise and the ability to
recover in the fourth quarter. In the fall, the focus in Hong Kong shifted from
poor economic data to the twin factors of declining interest rates and
stabilizing residential property prices.

On the back of cuts in U.S. interest rates, interbank rates in Hong Kong
fell from a high of 15% during the third quarter to 6% by year end. The falling
rates have allowed the residential real estate market to stabilize. Recent
launches of new property developments have attracted strong interest from buyers
who now see limited downside in capital values and a steady downward trend in
interest rates. (It should be remembered that mortgages are floating rate and
priced at Prime plus.) At current levels the best value mortgages put
affordability levels at 50%, that is 50% of monthly income going toward mortgage
repayment, or 1989 levels. Developers are now showing no signs of wishing to
discount prices, and when the government resumes land sales in March they will
seek to replenish their stock of land for development. Expectations of higher
housing prices and increasing reserves of undeveloped land support expectations
of upward revisions in companies' net asset values.

THE FUND

For the year, the China & Hong Kong Fund slightly under-performed the
benchmark Hang Seng Index. The speed of the rebound late in the year made this
somewhat inevitable. A timely switch, however, from non-interest-rate-sensitive
categories into real estate stocks and domestic banks provided a good foundation
to take advantage of the upward movement of Hong Kong blue chips during the last
quarter of 1998.

THE OUTLOOK

We see the recovery process in Hong Kong, and the rest of Asia, happening
over three phases. We are currently in phase one, which is marked by declining
interest rates. The main beneficiaries are banks and property stocks, which
suffered most going into the crisis, as well as those companies with a high debt
burden for which lower rates will provide relief. While we are still working
through the first phase, attention is now beginning to be paid to the second.

We expect the second phase to be marked by a return to profitability based
upon a leaner cost base. Those companies able to control costs, reduce debt and
close down excess capacity or shed excess inventory will be the best performers
during this stage. The focus is on market leaders that are able to take
advantage of cheap assets and the misfortune of others. For example, the big
developers are able to sell off existing inventory at depressed prices to reduce
gearing and free up cash flow in order to replenish their stock of land for
development at lower cost. The third phase should be marked by a pickup in
volume and, hopefully to a lesser extent, pricing. This phase is still some way
off and for Hong Kong is unlikely to become prominent until 2000.

24
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND (CONTINUED)

Going forward, we will be heavily emphasizing stock selection to choose
those companies that have the flexibility and the muscle to build market share
over the next 12 to 18 months. We believe that the worst is behind us, that Hong
Kong banks are well capitalized and that the Hong Kong Dollar, given the changes
made to the operation of the interbank market in August, will be much more
resilient.

The first six months of this year will be difficult, as firm evidence of a
recovery is likely to remain elusive until the second half of the year at the
earliest. Even so, we are increasingly seeing signs that tell us real recovery
is ahead.

- -- Edmund Harriss & Adrian Fu

25
<PAGE>
CHINA & HONG KONG FUND
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY PORTFOLIO STATISTICS
AS OF 12/31/98

<TABLE>
<S> <C>
# of Holdings in the
Portfolio: 47
Portfolio Turnover: 86.59%
% of Stocks in Top 10: 66.75%
</TABLE>

FUND MANAGERS:
Edmund Harriss,
Adrian Fu

<TABLE>
<CAPTION>
TOP 10 HOLDINGS (%)
---------------------------------------
<S> <C>
HSBC Holdings 16.76%
Hutchison Whampoa 10.29%
Sun Hung Kai Properties 7.95%
Cheung Kong Hldgs. Ltd. 7.46%
China Telecom 5.90%
CLP Holdings Ltd. 4.80%
Hang Seng Bank Ltd. 4.67%
Henderson Land Dev. 3.62%
Dao Heng Bank Group 2.83%
New World Development 2.47%
TOP 5 SECTORS (%)
---------------------------------------
Real Estate 23.00%
Foreign Banks 16.76%
Holding Offices 12.32%
Commercial Banks 10.25%
Electric Services 8.86%
TOP COUNTRIES (%)
---------------------------------------
Hong Kong 98.37%
China 1.31%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE GUINNESS FLIGHT CHINA & HONG KONG FUND AND HANG SENG INDEX
<S> <C>

Guinness Flight China & Hong Kong
Fund
6/30/94* $10,000
9/30/94 $10,616
12/31/94 $9,226
3/31/95 $9,274
6/30/95 $10,040
9/30/95 $10,680
12/30/95 $11,112
3/31/96 $12,066
6/30/96 $12,254
9/30/96 $13,054
12/31/96 $14,933
3/31/97 $13,828
6/30/97 $17,080
9/30/97 $16,595
12/31/97 $11,896
3/31/98 $11,803
6/30/98 $8,634
9/30/98 $7,990
12/31/98 $10,079
* Inception date.
Average Annual Total Return
One Year Three Years
- -15.27% -3.20%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE GUINNESS FLIGHT CHINA & HONG KONG FUND AND HANG SENG INDEX
<S> <C>
Hang Seng
Index
6/30/94* $10,000
9/30/94 $10,871
12/31/94 $9,352
3/31/95 $9,805
6/30/95 $10,512
9/30/95 $11,014
12/30/95 $11,501
3/31/96 $12,510
6/30/96 $12,582
9/30/96 $13,589
12/31/96 $15,358
3/31/97 $14,311
6/30/97 $17,351
9/30/97 $17,183
12/31/97 $12,243
3/31/98 $13,151
6/30/98 $9,754
9/30/98 $8,987
12/31/98 $11,455
* Inception date.
Average Annual Total Return
One Year Since Inception
- -15.27% 0.18%
Past performance is not predictive of future performance
</TABLE>

26
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES COMMON STOCKS: 99.68% VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE MANUFACTURER: 0.35%
2,888,000 Qingling Motors Company Ltd............................ $ 506,954
-------------
COAL MINING: 0.24%
2,088,000 Yanzhou Coal Mining Co................................. 350,354
-------------
COMMERCIAL BANKS: 10.25%
840,000 Dah Sing Financial Holding............................. 2,059,993
1,342,500 Dao Heng Bank Group Ltd................................ 4,150,043
766,500 Hang Seng Bank......................................... 6,851,170
800,000 Wing Hang Bank Ltd..................................... 1,992,875
-------------
Total Commercial Banks................................. 15,054,081
-------------
COMMUNICATION SERVICES: 8.15%
5,004,000 China Telecom.......................................... 8,654,758
1,194,500 Smartone Telecommuncations............................. 3,314,801
-------------
Total Communication Services........................... 11,969,559
-------------
ELECTRIC SERVICES: 8.86%
1,415,500 CLP Holdings Ltd....................................... 7,052,287
1,012,000 Hong Kong Electric..................................... 3,069,596
44,000 Huaneng Power International Inc. ADR................... 638,000
1,197,000 Varitronix International Ltd........................... 2,240,242
-------------
Total Electric Services................................ 13,000,125
-------------
ELECTRICAL COMPONENTS AND ACCESSORIES: 0.27%
289,200 Gold Peak Industries Warrants.......................... 18,477
1,348,000 Gold Peak Industrial................................... 378,427
-------------
Total Electrical Components and Accessories............ 396,904
-------------
ELECTRICAL INDUSTRIAL APPARATUS: 2.03%
1,160,000 Johnson Electric Holdings.............................. 2,979,503
-------------
FAMILY CLOTHING STORES: 0.80%
2,700,000 Esprit Holdings Ltd.................................... 1,167,458
-------------
FOOD & KINDRED PRODUCTS: 0.46%
750,000 NG Fung Hong Ltd....................................... 672,789
-------------
FOREIGN BANKS: 16.76%
987,508 HSBC Holding PLC....................................... 24,599,753
-------------
GAS PRODUCTION & DISTRIBUTION: 2.26%
2,596,793 Hong Kong & China Gas.................................. 3,301,463
</TABLE>

27
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
GAS PRODUCTION & DISTRIBUTION: (CONTINUED)
266,308 Hong Kong & China Gas Warrants......................... $ 17,530
-------------
Total Gas Production & Distribution.................... 3,318,993
-------------
GENERAL INDUSTRIAL MACHINERY: 0.33%
112,000 Vtech Holdings Ltd..................................... 488,616
-------------
GROCERIES AND RELATED PRODUCTS: 0.24%
1,002,000 Four Seas Mercantile Holdings.......................... 349,192
-------------
GROCERY STORES: 1.98%
2,535,000 Dairy Farm International Holdings...................... 2,915,250
-------------
HEAVY CONSTRUCTION: 3.26%
1,392,000 Cheung Kong Infrastructure............................. 3,108,266
1,149,733 New World Infrastructure............................... 1,684,324
-------------
Total Heavy Construction............................... 4,792,590
-------------
HIGHWAY AND STREET CONSTRUCTION: 0.48%
17,600 GZI Transportation Ltd. Warrants....................... 23
1,568,000 Jiangsu Expressway..................................... 342,031
1,814,000 Zhejiang Expressway.................................... 367,595
-------------
Total Highway and Street Construction.................. 709,649
-------------
HOLDING OFFICES: 12.32%
1,165,000 Citic Pacific Ltd...................................... 2,511,165
2,137,000 Hutchison Whampoa...................................... 15,101,548
236,000 Shanghai Industrial Holding Ltd........................ 476,715
-------------
Total Holding Offices.................................. 18,089,428
-------------
HOUSEHOLD APPLIANCES: 0.57%
934,000 Guangdong Kelon Electric............................... 831,819
-------------
MISCELLANEOUS TRANSPORTATION EQUIPMENT: 0.67%
2,373,000 Cosco Pacific Ltd...................................... 987,780
-------------
RADIO AND TELEVISION BROADCASTING: 0.44%
253,000 Television Broadcasts Ltd.............................. 653,105
-------------
REAL ESTATE: 23.00%
1,523,000 Cheung Kong............................................ 10,959,168
1,500,000 Hang Lung Development.................................. 1,606,949
1,027,000 Henderson Land Development............................. 5,315,543
949,600 HKR International Ltd.................................. 579,129
</TABLE>

28
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE: (CONTINUED)
1,443,000 New World Development.................................. $ 3,631,899
1,600,000 Sun Hung Kai Properties Ltd............................ 11,668,129
-------------
Total Real Estate...................................... 33,760,817
-------------
REAL ESTATE OPERATORS AND LESSORS: 3.60%
1,199,000 Hysan Development Company.............................. 1,787,450
84,300 Hysan Development Warrants-98.......................... 1,763
613,000 Swire Pacific Ltd. A................................... 2,745,508
506,000 Wharf Holding Ltd...................................... 738,009
42,500 Wharf Holding Warrants................................. 3,511
-------------
Total Real Estate Operators and Lessors................ 5,276,241
-------------
TELECOMMUNICATIONS: 1.03%
866,200 Hong Kong Telecom...................................... 1,514,922
-------------
WHOLESALE TRADE - NON-DURABLE GOODS: 1.33%
940,000 Li & Fung Ltd.......................................... 1,947,313
-------------
TOTAL INVESTMENTS IN SECURITIES
(Identified Cost $147,475,929+): 99.68%.............. 146,333,195
-------------
OTHER ASSETS LESS LIABILITIES: 0.32%................... 476,623
-------------
NET ASSETS: 100.00%.................................... $ 146,809,818
-------------
-------------
</TABLE>

<TABLE>
<S> <C>
* Non-income producing security.
+ Cost of federal income tax purposes is the same.
Net unrealized depreciation consists of:
Gross unrealized appreciation.............................. $ 8,526,695
Gross unrealized depreciation.............................. (9,669,429)
------------
$ (1,142,734)
------------
------------
</TABLE>

See accompanying notes to financial statements.

29
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $147,475,929).............. $ 146,333,195
Cash................................................................. 43,156
Receivables:
Securities sold.................................................. 5,367,717
Fund shares sold................................................. 204,886
Dividends and interest........................................... 85,473
Prepaid expenses..................................................... 85,820
Deferred organizational costs, net................................... 6,118
-------------
Total assets..................................................... 152,126,365
-------------

LIABILITIES
Payables:
Dividends to shareholders........................................ 28,943
Fund shares redeemed............................................. 704,034
Unrealized loss on forward foreign currency contract (Note 6).... 703
Bank loans (Note 5).................................................. 4,273,908
Due to Advisor (Note3)............................................... 147,274
Other accrued expenses............................................... 161,685
-------------
Total liabilities................................................ 5,316,547
-------------
NET ASSETS........................................................... $ 146,809,818
-------------
-------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($146,809,818/13,632,135 shares outstanding; unlimited
number of shares authorized without par value)................... $10.77
------
------
SOURCE OF NET ASSETS
Paid-in capital.................................................. $ 234,935,463
Undistributed net investment income.............................. 51,696
Cumulative undistributed net realized loss on investments........ (87,034,027)
Net unrealized depreciation on:
Investments.................................................. (1,142,734)
Foreign currency............................................. (580)
-------------
NET ASSETS............................................... $ 146,809,818
-------------
-------------
</TABLE>

See accompanying notes to financial statements.

30
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
FOR THE YEAR
ENDED
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends....................................................... $ 6,625,710
Interest........................................................ 278,529
------------------
Total investment income..................................... 6,904,239
------------------

EXPENSES
Advisory fees (Note 3).......................................... 1,986,087
Administration fees (Note 3).................................... 496,522
Custodian....................................................... 221,529
Accounting...................................................... 50,443
Transfer agent fees............................................. 497,621
Audit fees...................................................... 37,610
Legal fees...................................................... 142,825
Insurance fees.................................................. 21,175
Trustees' fees.................................................. 15,545
Registration fees............................................... 41,755
Reports to shareholders......................................... 101,343
Deferred organization costs amortization........................ 11,651
Miscellaneous................................................... 1,598
------------------
Total expenses.............................................. 3,625,704
Interest on loans........................................... 75,957
Commitment fee on credit line............................... 31,261
------------------
Net expenses................................................ 3,732,922
------------------
NET INVESTMENT INCOME................................... 3,171,317
------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments.............................. (80,217,023)
Net realized loss from futures contracts (Note 7)............... (1,315,976)
Net realized loss from foreign currency......................... (40,096)
Net change in unrealized appreciation (depreciation) on:
Investments................................................. 33,981,087
Foreign currency............................................ (630)
------------------
Net realized and unrealized loss on investments............. (47,592,638)
------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $ (44,421,321)
------------------
------------------
</TABLE>

See accompanying notes to financial statements.

31
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

STATEMENTS OF CHANGES IN NET ASSETS

DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income.. (3,140,006) (3,513,166)
Dividends from taxable realized gains...... -- (19,375,592)
------------------ ------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.... (3,140,006) (22,888,758)
------------------ ------------------

CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.................. 280,201,719 344,146,466
Net asset value of shares issued on
reinvestment of distributions............ 2,903,219 21,519,617
Cost of shares redeemed.................... (330,541,963) (346,773,295)
------------------ ------------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE
TRANSACTIONS............................. (47,437,025) 18,892,788
------------------ ------------------
TOTAL DECREASE IN NET ASSETS........... (94,998,352) (69,712,692)
------------------ ------------------

NET ASSETS
Beginning of period........................ 241,808,170 311,520,862
------------------ ------------------
End of period (including undistributed net
investment income of $51,696 and $20,385,
respectively)............................ $ 146,809,818 $ 241,808,170
------------------ ------------------
------------------ ------------------

CHANGES IN SHARES
Shares sold................................ 27,046,226 20,126,852
Shares reinvested from distributions....... 308,245 1,537,579
Shares redeemed............................ (32,456,034) (20,520,112)
------------------ ------------------

Net Increase (Decrease)................ $ (5,101,563) $ 1,144,319
------------------ ------------------
------------------ ------------------
</TABLE>

See accompanying notes to financial statements.

32
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

FINANCIAL HIGHLIGHTS

FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FROM JUNE 30, 1994*
------------------------------------------------ THROUGH
1998 1997 1996 1995 DEC. 31, 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 12.91 $ 17.71 $ 13.64 $ 11.47 $ 12.50
---------- ---------- ---------- --------- -------------------
Income from investment operations:
Net investment income........................... 0.15 0.20 0.19 0.14 0.04
Net realized and unrealized gain (loss) on
investments................................... (2.14) (3.71) 4.43 2.20 (0.96)
---------- ---------- ---------- --------- -------------------
Total from investment operations.................. (1.99) (3.51) 4.62 2.34 (0.92)
---------- ---------- ---------- --------- -------------------

Less distributions:
Dividends from net investment income............ (0.15) (0.20) (0.19) (0.14) (0.04)
Distributions from taxable net realized gains... -- (1.09) (0.36) (0.03) (0.07)
---------- ---------- ---------- --------- -------------------
Total distributions............................... (0.15) (1.29) (0.55) (0.17) (0.11)
---------- ---------- ---------- --------- -------------------
Net asset value, end of period.................... $ 10.77 $ 12.91 $ 17.71 $ 13.64 $ 11.47
---------- ---------- ---------- --------- -------------------
---------- ---------- ---------- --------- -------------------
Total return...................................... (15.27)% (20.34)% 34.38% 20.45% (7.74)%**

Ratios/supplemental data:
Net assets, end of period (thousands)............. $146,810 $241,808 $311,521 $55,740 $ 2,287
Ratio of expenses to average net assets:
Before expense reimbursement (recoupment)....... 1.89% 1.70% 1.78% 3.02%++ 19.92%+
After expense reimbursement (recoupment)........ 1.89% 1.70% 1.96% 1.98% 2.00%+
Ratio of net investment income to average net
assets:
Before expense reimbursement (recoupment)....... 1.60% 1.18% 1.57% 0.49% (17.15)%+
After expense reimbursement (recoupment)........ 1.60% 1.18% 1.39% 1.52% 0.78%+
Portfolio turnover rate......................... 86.59% 53.62% 30.40% 10.89% 27.25%
</TABLE>

33
<PAGE>
GUINNESS FLIGHT CHINA & HONG KONG FUND

FINANCIAL HIGHLIGHTS

FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FROM JUNE 30, 1994*
------------------------------------------------ THROUGH
1998 1997 1996 1995 DEC. 31, 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BANK LOANS
Amount outstanding at end of
period (in thousands)........................... $ 4,274 -- -- n/a n/a
Average amount of bank loans outstanding during
the period (monthly average) (in thousands)..... $ 8,765 $ 2,305 $ 1,413 n/a n/a
Average number of shares outstanding during the
period (monthly average) (in thousands)......... 18,533 16,944 11,419 n/a n/a
Average amount of debt per share during the
period.......................................... $ 0.47 $ 0.14 $ 0.12 n/a n/a
</TABLE>

- ----------------------------------

<TABLE>
<S> <C>
* Commencement of operations.
** Not annualized.
+ 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%.
</TABLE>

See accompanying notes to financial statements.

34
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND

THE BACKDROP

Recent economic figures confirm that the fiscal stimulus is gradually
working its way through China's economic system. Industrial output has been
robust on the back of infrastructure spending. Furthermore, the build-up in
inventories has been slowing as the industrial sales/output ratio has continued
to improve.

THE FUND

The Mainland China Fund outperformed its benchmark index over the year. The
H share and Red Chip indices did well over the last quarter of 1998 as they were
boosted by infrastructure stocks. Such companies performed strongly as evidence
indicated that the massive infrastructure-spending program proposed earlier in
the year was starting to feed through to the underlying economy.

Local Chinese stocks have generally been weak performers partly as a
consequence of the poor operating environment where domestic consumption is
almost non-existent. The other concern has been the lack of clarity over
government policy toward commercial enterprises. There have been moves to
separate the operations of government from those of business and as a
consequence those companies that benefited from close links to government have
had or will have those links severed. The impact of this is impossible to gauge
although the stock market has reacted negatively.

THE OUTLOOK

Fiscal stimulus through public infrastructure investment will remain the
main economic driver in 1999. Moreover, Beijing will increase the importance of
private consumption, especially rural consumption, to boost domestic demand. The
rural population accounts for 70% of China's total population, but only 50% of
private consumption. Beijing has realized that encouraging growth in the laggard
rural areas is the best way to create new consumer demand. Beijing will also
focus on reform of the power and housing sectors in order to increase demand.
State owned enterprise reform is now back on the agenda after a 12-month hiatus
due to the Asian financial crisis halting reform. Within the state owned sector,
the separation of government from commercial activities has been stressed. The
other area of government policy is financial sector reform. The top priority of
the Central Bank is to curb financial risk as highlighted by the bankruptcy of
Gitic. China does not want to see its sovereign risk downgraded, as there are
plans to issue more bonds next year that are intended to finance infrastructure
spending.

Both exports and imports have remained weak. We do not expect economic
growth to come from the external account in the near term. However, recent data
from the domestic economy has indicated that the economic recovery appears to be
on track. State sector fixed asset investment continued to accelerate during the
last half of 1998. The RMB100 billion

35
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND (CONTINUED)

bond issued by China in September 1998 will provide funds for further fixed
asset investment, especially in rural infrastructure. The issuance of a U.S.$1
billion sovereign bond at 2.8% over U.S. Treasuries in December has set a
benchmark for more bond issues next year. Money supply growth has also improved
due to the three cuts in interest rates totaling 2.25% during 1998. As a result,
industrial output has been robust on the back of infrastructure spending.
Furthermore, the build-up in inventories has been slowing as the industrial
sales/ output ratio has continued to improve. However, retail sales have
remained weak and inflation is still negative.

With the robust growth in fixed asset investment, we believe that the listed
toll road companies offer the most promising investment returns, especially as
they provide earnings growth and are trading at attractive discounts to their
net asset values. With the reform of the power sector, the reduction in
electricity charges to end-users should improve affordability and induce
consumption. Electricity consumption has been picking up along with the strength
in industrial production. As a result, shares of electricity producers should
respond positively.

The other investment theme will be rural consumption. In an effort to
improve the incomes of the rural population, Beijing has announced the reform of
the grain distribution system. This is designed to assure farmers of a fixed
price for their products, and thereby improve wealth. Further, the boost in
infrastructure development, such as toll roads and electricity transmission,
should make goods more accessible to the rural population. Selective stocks in
the consumer sector will benefit. Longer term, the consumer sector should be
boosted by housing reform, which will encourage private home ownership and the
consumption of household goods.

Although we believe that structural reform in China and the resulting
increase in unemployment will dampen consumption and reflect negatively on many
Chinese shares in the short-term, the pick-up in fixed asset investment has set
the framework for an increase in consumption going forward.

- -- Robert Conlon & Adrian Fu

36
<PAGE>
MAINLAND CHINA FUND
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY PORTFOLIO STATISTICS
AS OF 12/31/98

<TABLE>
<S> <C>
# of Holdings in the
Portfolio: 43
Portfolio Turnover: 82.00%
% of Stocks in Top 10: 40.24%
</TABLE>

FUND MANAGERS:
Robert Conlon,
Adrian Fu

<TABLE>
<CAPTION>
TOP 10 HOLDINGS (%)
---------------------------------------
<S> <C>
Zhejiang Southeast Electricity 5.07%
Cheung Kong Infrastructure 4.71%
NG Fung Hong Limited 4.18%
Hutchison Whampoa 4.10%
New World Infrastructure 4.04%
Zhejiang Expressway Hldg. 3.92%
China Merchants Hai Hong 3.67%
Shenzen Expressway 3.62%
China Telecom 3.54%
Guangdong Kelon Electric 3.39%
TOP 5 SECTORS (%)
---------------------------------------
Engineering/Infrastructure 24.94%
Diversified Operations 19.57%
Electric Power 14.26%
Food & Beverage 5.85%
Electronics 5.83%
TOP SHARE TYPES
---------------------------------------
Red Chips 28.97%
'H' Shares 26.54%
Hong Kong Shares 23.18%
Shanghai 'B' Shares 8.05%
Shenzen 'B' Shares 7.99%
China Plays 4.70%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
MAINLAND CHINA FUND AND THE M.S.C.I. CHINA FREE INDEX
<S> <C> <C>

11/3/97
12/31/97
3/31/98
6/30/98
9/30/98
12/31/98
*Inception date
Average Annual Total Return
One Year Since Inception
- -24.96% 25.67%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
MAINLAND CHINA FUND AND THE M.S.C.I. CHINA FREE INDEX
<S> <C> <C>
Guinness Flight Mainland
China Fund
11/3/97 $10,000
12/31/97 9,450
3/31/98 10,267
6/30/98 7,230
9/30/98 6,728
12/31/98 7,091
*Inception date
Average Annual Total Return
One Year
- -24.96%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
MAINLAND CHINA FUND AND THE M.S.C.I. CHINA FREE INDEX
M.S.C.I. China
Free Index
11/3/97 $10,000
12/31/97 7,947
3/31/98 7,806
6/30/98 5,055
9/30/98 4,289
12/31/98 4,464
*Inception date
Average Annual Total Return
One Year
- -24.96%
Past performance is not predictive of future performance
</TABLE>

37
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES COMMON STOCKS: 98.17% VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE MANUFACTURER: 3.27%
29,800 Brilliance China Automotive............................ $ 216,050
700,000 Qingling Motors Company Ltd............................ 122,877
-------------
Total Automotive Manufacturer.......................... 338,927
-------------
DIVERSIFIED OPERATIONS: 19.57%
100,000 Beijing Enterprises.................................... 142,625
588,000 China Merchants Hai Hong Holdings...................... 379,472
150,000 China Resources Enterprises............................ 234,266
80,000 Citic Pacific Ltd...................................... 172,441
2,278,000 Harbin Power........................................... 167,595
60,000 Hutchison Whampoa...................................... 424,002
86,000 Shanghai Industrial Holdings Ltd....................... 173,718
494,000 Tianjin Development Holdings........................... 331,561
-------------
Total Diversified Operations........................... 2,025,680
-------------
ELECTRIC POWER: 14.26%
1,070,000 Beijing Datang Power................................... 321,099
344,500 Guangdong Electric Power............................... 93,822
750,000 Heilongjiang Electric Power Co......................... 240,000
834,000 Huaneng Power International............................ 296,027
2,500,000 Zhejiang Southeast Electricity......................... 525,000
-------------
Total Electric Power................................... 1,475,948
-------------
ELECTRONICS: 5.83%
434,000 Guang Nan Holdings..................................... 99,711
394,000 Guangdong Kelon Electric............................... 350,896
373,133 Wuxi Little Swan....................................... 153,152
-------------
Total Electronics...................................... 603,759
-------------
ENGINEERING & INFRASTRUCTURE: 24.94%
2,432,000 Anhui Expressway Co.................................... 285,652
218,000 Cheung Kong Infrastructure............................. 486,783
1,600,000 Jiangsu Expressway..................................... 349,011
285,000 New World Infrastructure............................... 417,516
358,000 Road King Infrastructure............................... 263,385
1,614,000 Shenzhen Expressway.................................... 374,981
</TABLE>

38
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
ENGINEERING & INFRASTRUCTURE: (CONTINUED)
2,000,000 Zhejiang Expressway Holdings........................... $ 405,287
-------------
Total Engineering & Infrastructure..................... 2,582,615
-------------
FOOD & BEVERAGE: 5.85%
470,000 China Foods Holdings Ltd............................... 109,802
482,000 NG Fung Hong Ltd....................................... 432,379
180,000 Yantai Changyu Pioneer Wine Co.*....................... 63,891
-------------
Total Food & Beverage.................................. 606,072
-------------
MANUFACTURERS/MACHINERY: 2.66%
638,000 Shanghai Zhenhua Port Machinery Co..................... 225,852
415,000 Shanghai Diesel Engineering - B........................ 49,800
-------------
Total Manufacturers/Machinery.......................... 275,652
-------------
MATERIALS: 3.01%
384,952 China International Marine Containers.................. 181,853
420,000 Shandong Chenming Paper................................ 129,563
-------------
Total Materials........................................ 311,416
-------------
OIL REFINING: 1.02%
686,000 Zhenhai Refining & Chemical Co......................... 105,367
-------------
PHARMACEUTICALS: 2.91%
1,500,000 China Pharmaceutical Enterprises....................... 170,375
1,236,000 Guangzhou Pharmaceutical............................... 130,817
-------------
Total Pharmaceuticals.................................. 301,192
-------------
REAL ESTATE: 3.45%
786,000 China Resources Beijing Land........................... 195,800
668,000 Shum Yip Investment Ltd................................ 161,232
-------------
Total Real Estate...................................... 357,032
-------------
STEEL MANUFACTURER: 1.98%
420,100 Shenzhen Fangda Co. Ltd................................ 204,964
-------------
TELECOMMUNICATIONS: 4.10%
212,000 China Telecom*......................................... 366,668
134,000 Eastern Communications................................. 57,620
-------------
Total Telecommunications............................... 424,288
-------------
</TABLE>

39
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY
DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------

SHARES VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
TRANSPORT: 5.32%
697,000 Cosco Pacific Ltd...................................... $ 290,132
616,933 Dazhong Taxi*.......................................... 260,346
-------------
Total Transport........................................ 550,478
-------------
TOTAL COMMON STOCKS: 98.17%
(Identified Cost $12,506,841)........................ 10,163,390
-------------

<CAPTION>
- -----------------------------------------------------------------------------------

PAR VALUE CORPORATE BONDS: 1.26% VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
$ 150,000 New World Infrastructure 130,605
5.00% due 07/15/01...................................
-------------
TOTAL CORPORATE BONDS: 1.26%
(Identified Cost $157,500)........................... 130,605
-------------
TOTAL INVESTMENTS IN SECURITIES: 99.43%
(Identified Cost $12,664,341+)....................... 10,293,995
-------------
OTHER ASSETS LESS LIABILITIES: 0.57%................... 59,124
-------------
NET ASSETS: 100.00%.................................... $ 10,353,119
-------------
-------------
</TABLE>

<TABLE>
<S> <C>
* Non-income producing security.
+ Cost for federal income tax purposes is the same.
Net unrealized depreciation consists of:
Gross unrealized appreciation.................. $ 243,702
Gross unrealized depreciation.................. (2,614,048)
-----------
$(2,370,346)
-----------
-----------
</TABLE>

See accompanying notes to financial statements.

40
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND

STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (cost $12,664,341)................ $ 10,293,995
Receivables:
Fund shares sold.................................................. 20,264
Dividends and interest............................................ 4,194
Securities sold................................................... 117,394
Due from Advisor (Note 3)......................................... 31,677
Prepaid expenses...................................................... 20,426
Deferred organizational costs, net.................................... 18,506
------------
Total assets...................................................... 10,506,456
------------

LIABILITIES
Payables:
Distributions to shareholders..................................... 1,215
Fund shares redeemed.............................................. 22,399
Unrealized loss on forward foreign currency contracts (Note 6).... 26
Bank loans (Note 5)................................................... 114,655
Accrued expenses...................................................... 15,042
------------
Total liabilities................................................. 153,337
------------
NET ASSETS............................................................ $ 10,353,119
------------
------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($10,353,119/1,184,123 shares outstanding; unlimited
number of shares authorized without par value).................... $8.74
-----
-----
SOURCE OF NET ASSETS
Paid-in capital................................................... $ 15,239,075
Undistributed net investment income............................... 1,503
Cumulative undistributed net realized loss on investments......... (2,517,092)
Net unrealized depreciation on:
Investments................................................... (2,370,346)
Foreign currency.............................................. (21)
------------
NET ASSETS................................................ $ 10,353,119
------------
------------
</TABLE>

See accompanying notes to financial statements.

41
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
FOR THE YEAR
ENDED
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends....................................................... $ 304,983
Interest........................................................ 128,216
------------------
Total investment income..................................... 433,199
------------------

EXPENSES
Advisory fees (Note 3).......................................... 140,740
Administration fees (Note 3).................................... 35,185
Custodian....................................................... 47,919
Accounting...................................................... 29,999
Transfer agent fees............................................. 95,874
Audit fees...................................................... 17,456
Legal fees...................................................... 10,001
Insurance....................................................... 1,111
Trustees' fees.................................................. 15,468
Registration fees............................................... 20,748
Reports to shareholders......................................... 17,000
Deferred organization costs amortization........................ 4,832
Miscellaneous................................................... 875
------------------
Total expenses.............................................. 437,208
Interest on loans........................................... 80
Commitment fee on credit line............................... 2,258
Less: Expenses reimbursed (Note 3).......................... (160,801)
------------------
Net expenses................................................ 278,745
------------------
NET INVESTMENT INCOME................................... 154,454
------------------

REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investments.............................. (2,515,925)
Net realized loss from foreign currency......................... (1,488)
Net change in unrealized depreciation on:.......................
Investments................................................. (2,313,644)
Foreign currency............................................ (44)
------------------
Net realized and unrealized loss on investments............. (4,831,101)
------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $ (4,676,647)
------------------
------------------
</TABLE>

See accompanying notes to financial statements.

42
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
FOR THE YEAR NOVEMBER 3, 1997*
ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
DECREASE IN NET ASSETS FROM OPERATIONS:
Net investment income...................... $ 154,454 $ 30,408
Net realized loss from investments......... (2,515,925) --
Net realized gain (loss) on foreign
currency................................. (1,488) 321
Net unrealized depreciation on:
Investments............................ (2,313,644) (56,702)
Foreign currency....................... (44) 23
------------------ ------------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... (4,676,647) (25,950)
------------------ ------------------

DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income.. (152,968) (30,391)
------------------ ------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.... (152,968) (30,391)
------------------ ------------------

CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.................. 7,893,569 16,693,563
Net asset value of shares issued on
reinvestment of distributions............ 144,254 28,708
Cost of shares redeemed.................... (9,256,759) (314,260)
------------------ ------------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS............................. (1,218,936) 16,408,011
------------------ ------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................... (6,048,551) 16,351,670

NET ASSETS
Beginning of period........................ 16,401,670 50,000
------------------ ------------------
End of period (including undistributed net
investment income of $1,503 and $17,
respectively)............................ $ 10,353,119 $ 16,401,670
------------------ ------------------
------------------ ------------------

CHANGES IN SHARES
Shares sold................................ 743,724 1,411,291
Shares issued on reinvestment of dividend
distributions............................ 16,203 2,435
Shares redeemed............................ (967,054) (26,476)
------------------ ------------------

Net Increase (Decrease)................ $ (207,127) $ 1,387,250
------------------ ------------------
------------------ ------------------
</TABLE>

*Commencement of operations.

See accompanying notes to financial statements.

43
<PAGE>
GUINNESS FLIGHT MAINLAND CHINA FUND

FINANCIAL HIGHLIGHTS

FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
FOR THE YEAR NOVEMBER 3, 1997*
ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period....... $ 11.79 $ 12.50
-------- --------
Income from investment operations:
Net investment income.................... 0.11 0.02
Net realized and unrealized loss on
investments............................ (3.05) (0.71)
-------- --------
Total from investment operations (2.94) (0.69)
-------- --------

Less distributions:
Dividends from net investment income..... (0.11) (0.02)
-------- --------
Total distributions........................ (0.11) (0.02)
-------- --------
Net asset value, end of period............. $ 8.74 $ 11.79
-------- --------
-------- --------
Total return............................... (24.96)% (5.50)%**
Ratios/supplemental data:
Net assets, end of period (thousands)...... $ 10,353 $ 16,402
Ratio of expenses to average net assets:
Before expense reimbursement............. 3.13% 2.69%+
After expense reimbursement.............. 1.98% 1.98%+
Ratio of net investment income to average
net assets:
Before expense reimbursement............. (0.05)% 1.17%+
After expense reimbursement.............. 1.10% 1.88%+
Portfolio turnover rate.................... 82.00% 0.00%

BANK LOANS
Amount outstanding at end of period (in
thousands)............................... $ 115 n/a
Average amount of bank loans outstanding
during the period (monthly average) (in
thousands)............................... $ 10 n/a
Average number of shares outstanding during
the period (monthly average) (in
thousands)............................... 1,403 n/a
Average amount of debt per share during the
period................................... $ 0.01 n/a
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
** Not Annualized.
+ Annualized.
</TABLE>

See accompanying notes to financial statements.

44
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND

THE BACKDROP

European markets performed positively in 1998. The favorable economic
environment in Europe is no doubt partly attributed to the introduction of the
Euro, but it also reflects the cut in interest rates that was undertaken in
December as a response to still lower inflation rates and lower demand from
overseas. Interest rates are now just 3% in all 11 participating countries in
economic and monetary union, and despite cautious comments by the President of
the European Central Bank, there is every possibility that monetary policy could
be eased further. This should be well received by equity markets. The
introduction of the single currency has caused the launch of many new funds on
the Continent that are able to invest in the markets of the so-called EMU-11,
and this will add to the already considerable demand that exists for European
equities.

THE FUND

The New Europe Fund is being actively managed to capture the economic value
that will be created through the structural change occurring across the European
continent. The companies that we have chosen for the Fund represent those that
will likely play a profitable role in shaping Europe's future, and we believe
these stocks should enable investors to realize excellent capital gains over the
medium and longer term.

The Fund has performed well since its launch on November 23, 1998. In this
short period under review, the Fund has made 21 investments allocated over all
four investment themes, namely the beneficiaries of Economic and Monetary Union
(EMU); smaller companies; privatization; and emerging Eastern Europe. All four
themes are represented within the New Europe Fund.

It is difficult to conventionally portray the asset allocation of the Fund
in terms of discrete investment themes. This difficulty results from the fact
that many companies can exhibit the characteristics of more than one theme. For
example Banque Nationale de Paris is both a beneficiary of EMU and a privatized
company. Nevertheless, in anticipation of the introduction of the Euro, there
has been a bias towards larger capitalized companies during this initial period,
which accounts in part for the strong performance of the Fund.

THE OUTLOOK

The launch of the Euro has focused the eyes of international investors once
again on Europe; the attractions of investing in this region are becoming
increasingly apparent. There is every prospect that the Euro will appreciate
against other major currencies of the world, albeit not to such an extent that
the competitiveness of European industry is significantly undermined. Guinness
Flight expects an appreciation of the Euro by less than 10% in 1999.

This is, however, a time when the outlook for world trade is not
exceptionally positive and the trend in expectations for rates of world economic
growth is still downwards. Europe is not immune to such forces, and currently we
expect the region to grow at around 2% in

45
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND (CONTINUED)

1999 after a stronger year of growth in 1998. Concurrently, inflation rates have
fallen to below 1% in many European countries. Against such a backdrop, our
expectation is for a further cut in interest rates before the summer to between
2.5% and 2.75%. Therefore, while the prospect of a general improvement in the
trading environment for European companies is set to remain low, the earnings
outlook for many European corporations is not necessarily negatively impacted.
Not only will the cost of capital likely be lowered once more, but also the
focus on improving returns on capital through restructuring and mergers and
acquisitions should be sharpened. Some companies already have the scale of
operations to make significant advances over the coming years. Others have
sufficiently strong balance sheets to achieve the increased scale and focus
necessary to deliver superior returns. Many such companies are privatized
companies, but this is by no means exclusive to such a subset of the universe of
stocks in which this Fund can invest. The prospect of continued low nominal
interest rates should also in itself continue the shift in savings patterns
being witnessed across the Continent in favor of equities over other asset
classes and stimulate the further out-performance of the financial sector in
general.

During the next few months, we expect Continental investors to continue to
alter their portfolios to adjust to the situation whereby the currency risk of
investing in markets outside their national boundaries has been removed by the
introduction of the Euro. Such portfolio managers have as a consequence a new
benchmark against which to invest. Many of these investors will have a lower
acquaintance with such new opportunities and are likely to focus on the larger,
more recognizable companies especially if they are common to many European
indices. This is likely to lead in the shorter term to the out-performance of
such companies compared with other stocks. The New Europe Fund will therefore
initially adopt an investment stance that is biased towards such blue chip
performance.

This, however, should not be interpreted as a longer-term aversion to either
smaller companies or opportunities in Eastern Europe. Indeed the benefits of
investing in dynamic smaller companies have already been demonstrated within the
New Europe Fund. Many smaller companies are by their nature more capable of
thriving in these conditions of rapid, profound and structural change. Emerging
Eastern European markets have demonstrated their ability to develop with little
regard to events in Russia. The continued convergence of the Greek and
Portuguese economies with the rest of the European Union has led to significant
structural change and high investment returns. Over the next five years,
investments made in the markets of Poland, Hungary and the Czech Republic could
well deliver similarly handsome returns.

While European economies in general may see some slowing in 1999, we believe
the investment arena will continue to offer attractive equities, especially in
the areas which are associated with the fundamental structural change taking
place across the European continent. In short, we view an investment in this
Fund as a means to participate in Europe's bright future.

- -- David Potts, Jeremy Podger, Maureen Taylor & Camilla Reeves

46
<PAGE>
NEW EUROPE FUND
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY PORTFOLIO STATISTICS
AS OF 12/31/98

<TABLE>
<S> <C>
# of Holdings in the
Portfolio: 26
Portfolio Turnover: 0.00%
% of Stocks in Top 10: 46.48%
</TABLE>

FUND MANAGERS:
David Potts, Jeremy Podger
Maureen Taylor, Camilla Reeves

<TABLE>
<CAPTION>
TOP 10 HOLDINGS (%)
---------------------------------------
<S> <C>
Novartis AG 5.76%
CGU PLC 5.69%
National Power PLC 5.47%
Shell Transport & Trading 5.25%
Rolls Royce PLC 4.74%
Nokia OYJ 4.37%
Heineken 4.27%
Ceske Radiokomunikace 4.20%
AXA Company 4.07%
Tele Danmark 3.96%
TOP 5 SECTORS (%)
---------------------------------------
Insurance 13.72%
Telecom 10.37%
Utility 8.83%
Oil Gas Refining 7.21%
Food/Beverage 6.40%
TOP 5 COUNTRIES (%)
---------------------------------------
U.K. 21.15%
Germany 9.37%
France 9.10%
Italy 8.54%
Finland 8.00%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
<S> <C>
NEW EUROPE FUND AND THE FT/S&P ACTUARIES WORLD INDEX
Guinness Flight New Europe Fund
11/23/1998*
11/30/98
12/31/98
*Inception date
Total Return
Since Inception
7.12%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
<S> <C>
NEW EUROPE FUND AND THE FT/S&P ACTUARIES WORLD INDEX
11/23/1998* $10,000
11/30/98 $10,088
12/31/98 $10,712
*Inception date
Total Return
Since Inception
7.12%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
NEW EUROPE FUND AND THE FT/S&P ACTUARIES WORLD INDEX
FT/S&P Actuaries World Index,
Europe
11/23/1998* $10,000
11/30/98 $9,977
12/31/98 $10,062
*Inception date
Total Return
Since Inception
7.12%
Past performance is not predictive of future performance
</TABLE>

47
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------

SHARES COMMON STOCKS: 83.18% VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
AUSTRIA: 2.34%
125 Austria Tabak................................................... $ 9,580
---------
CZECH REPUBLIC: 4.20%
533 Ceske Radiokomunikace - GDR*.................................... 17,189
---------
DENMARK: 3.96%
120 Tele Danmark 'B'................................................ 16,197
---------
FINLAND: 8.00%
1,179 Fortum*......................................................... 8,040
147 Nokia OYJ - K shares............................................ 17,874
153 Tieto Corp...................................................... 6,811
---------
Total Finland................................................... 32,725
---------
FRANCE: 9.10%
43 Alcatel......................................................... 5,261
115 AXA Company..................................................... 16,661
71 Banque National De Paris........................................ 5,844
13 Promodes........................................................ 9,449
---------
Total France.................................................... 37,215
---------
GERMANY: 9.37%
140 DaimlerChrysler AG.............................................. 13,811
135 Kamps AG*....................................................... 8,744
124 Metro AG........................................................ 9,890
75 Sixt AG......................................................... 5,892
---------
Total Germany................................................... 38,337
---------
ITALY: 8.54%
387 Assicurazioni Generali SPA...................................... 16,174
360 Rolo Banca SPA.................................................. 9,749
1,058 Telecom Italia SPA.............................................. 9,016
---------
Total Italy..................................................... 34,939
---------
NETHERLANDS: 4.27%
290 Heineken........................................................ 17,443
---------
SPAIN: 6.49%
388 Corp Financiera Reunida......................................... 5,638
520 Endesa SA....................................................... 13,757
</TABLE>

48
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------

SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
SPAIN: (CONTINUED)
400 Funespana SA.................................................... $ 7,107
---------
Total Spain..................................................... 26,502
---------
SWITZERLAND: 5.76%
12 Novartis AG..................................................... 23,577
---------
UNITED KINGDOM: 21.15%
1,490 CGU PLC......................................................... 23,288
2,600 National Power PLC.............................................. 22,370
4,685 Rolls Royce PLC................................................. 19,376
3,500 Shell Transport & Trading....................................... 21,466
---------
Total United Kingdom............................................ 86,500
---------
TOTAL INVESTMENTS IN SECURITIES
(Identified Cost $324,202+): 83.18%........................... 340,204
---------
OTHER ASSETS LESS LIABILITIES: 16.82%........................... 68,769
---------
NET ASSETS: 100.00%............................................. $ 408,973
---------
---------
</TABLE>

<TABLE>
<C><S> <C>
* Non-income producing security.
+ Cost for federal tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation.................... $ 17,090
Gross unrealized depreciation.................... (1,088)
-----------
$ 16,002
-----------
-----------
</TABLE>

See accompanying notes to financial statements.

49
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY (UNAUDITED)

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------

% OF
INDUSTRY NET ASSETS
- -------------------------------------------------------------------------------------
<S> <C>

Automotive.............................................................. 3.38%
Banking................................................................. 5.19
Computer Software....................................................... 1.67
Food/Beverage........................................................... 6.40
Insurance............................................................... 13.72
Manufacturers........................................................... 4.74
Medical - Drugs......................................................... 5.76
Oil/Petroleum Refining.................................................. 7.21
Real Estate............................................................. 1.74
Retail.................................................................. 6.17
Telecommunications...................................................... 10.37
Telecommunications Equipment............................................ 5.66
Tobacco................................................................. 2.34
Utility................................................................. 8.83
-----------
TOTAL INVESTMENTS IN SECURITIES......................................... 83.18
OTHER ASSETS LESS LIABILITIES........................................... 16.82
-----------
NET ASSETS.............................................................. 100.00%
-----------
-----------
</TABLE>

See accompanying notes to financial statements.

50
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $324,202)...................... $ 340,204
Cash..................................................................... 163,687
Receivables:
Fund shares sold..................................................... 25,732
Dividends and interest............................................... 299
Due from Advisor (Note 3)............................................ 1,480
---------
Total assets......................................................... 531,402
---------

LIABILITIES
Payables:
Securities purchased................................................. 121,548
Unrealized loss on forward foreign currency contracts (Note 6)....... 128
Accrued expenses......................................................... 753
---------
Total liabilities.................................................... 122,429
---------
NET ASSETS........................................................... $ 408,973
---------
---------

NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($408,973/30,534 shares outstanding; unlimited number of shares
authorized without par value)........................................ $13.39
------
------
SOURCE OF NET ASSETS
Paid-in capital...................................................... $ 392,598
Undistributed net investment income.................................. --
Undistributed net realized gain on investments....................... 87
Net unrealized appreciation on:
Investments...................................................... 16,002
Foreign Currency................................................. 286
---------
NET ASSETS................................................... $ 408,973
---------
---------
</TABLE>

See accompanying notes to financial statements.

51
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
NOVEMBER 23, 1998*
THROUGH
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Interest....................................................... $ 312
--------
Total investment income.................................... 312
--------

EXPENSES
Advisory fees (Note 3)......................................... 207
Custodian...................................................... 200
Accounting..................................................... 1,244
Transfer agent fees............................................ 200
Insurance...................................................... 13
Registration fees.............................................. 353
--------
Total expenses............................................. 2,217
Commitment fee on credit line.............................. 6
Less: Expenses reimbursed (Note 3)......................... (1,814)
--------
Net expenses............................................... 409
--------
NET INVESTMENT LOSS.................................... (97)
--------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS....................
Net realized gain from foreign currency........................ 87
Net change in unrealized appreciation on:
Investments................................................ 16,002
Foreign currency........................................... 286
--------
Net realized and unrealized gain on investments............ 16,375
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ 16,278
--------
--------
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
</TABLE>

See accompanying notes to financial statements.

52
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------

NOVEMBER 23, 1998*
THROUGH
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment loss............................................ $ (97)
Net realized gain on foreign currency.......................... 87
Net change in unrealized appreciation on:
Investments................................................ 16,002
Foreign currency........................................... 286
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... 16,278
----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold...................................... 292,695
Net asset value of shares issued on reinvestment of
distributions................................................ --
Cost of shares redeemed........................................ --
----------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS................... 292,695
----------
TOTAL INCREASE IN NET ASSETS............................... 308,973
----------
NET ASSETS
Beginning of period............................................ 100,000
----------
End of period (including undistributed net investment income
of $0)....................................................... $ 408,973
----------
----------
CHANGES IN SHARES
Shares sold.................................................... 22,534
Shares reinvested from distributions........................... --
Shares redeemed................................................ --
----------
Net Increase............................................... $ 22,534
----------
----------
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
</TABLE>

See accompanying notes to financial statements.

53
<PAGE>
GUINNESS FLIGHT NEW EUROPE FUND

FINANCIAL HIGHLIGHTS

FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
NOVEMBER 23, 1998*
THROUGH
DECEMBER 31, 1998
- --------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................... $ 12.50
-------
Income from investment operations:
Net realized and unrealized gain on investments.............. 0.89
-------
Total from investment operations............................... 0.89
-------
Net asset value, end of period................................. $ 13.39
-------
-------
Total return................................................... 7.12 %++

Ratios/supplemental data:
Net assets, end of period (thousands).......................... $ 409
Ratio of expenses to average net assets:
Before expense reimbursement................................. 10.48 %+
After expense reimbursement.................................. 1.98 %+
Ratio of net investment income to average net assets:
Before expense reimbursement................................. (9.01)%+
After expense reimbursement.................................. (0.46)%+
Portfolio turnover rate........................................ 0.00 %
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
+ Annualized
++ Not Annualized
</TABLE>

See accompanying notes to financial statements.

54
<PAGE>
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND

THE BACKDROP

It was a busy and exciting "year" for the Wired-Registered Trademark- Index
Fund, albeit a year for the Fund that was only two weeks long. Since the Fund's
launch on December 15, the excitement generated by the idea has been
exceptional. We wish to welcome all of our new shareholders and we look forward
to watching this Fund grow with you.

THE FUND

The significant cash flows into the Fund beginning with the Fund's launch
caused some tracking error. This problem, by its nature, is self-correcting, as
the Fund gains in size. While this cash infusion-induced tracking error is now
minimal, it does largely account for the Fund's under-performance relative to
the Wired Index-TM- during those first two weeks of its existence. The Fund was
up 11.60% from launch through year-end while the Wired Index-TM- was up 14.11%
over the same time period.

Under the Wired Index construction rules, the Index is rebalanced annually.
This rebalancing, which is done just after the financial markets are closed for
the year, causes all of the constituent stocks to be weighted by market
capitalization. This market capitalization policy is subject to a ceiling of $10
billion, which is designed to keep a few component issues from dominating the
Index. As it turns out, 30 of the 40 stocks in the Index are at or above the $10
billion ceiling, causing them to be equally weighted. The weightings for the
remaining 10 stocks are calculated using their actual market capitalization.

Because this report illustrates the portfolio before rebalancing, the
current weightings of the 40 stocks in the portfolio are markedly different from
the positions contained in this report. You will note that America Online was
the largest holding at year-end with a 10.66% weighting. Due to the rebalancing
feature, this position started the year at 3.0375%. All 30 stocks with a market
cap of $10 billion or greater started the year with this weighting. As a result,
the top 30 stocks equal 91.125% of the rebalanced index.

THE OUTLOOK

The change that is brought about by the shift from an industrial economy to
an information economy is revolutionary. Despite the high profile accorded to
the Internet, there is much more to the new economy. WIRED magazine has done an
excellent job of articulating this vision within the pages of their magazine and
with the creation of this Index. We are excited about the prospects for the
Wired-Registered Trademark- Index Fund and about the opportunity it provides for
you to participate in the New Economy.

- -- Doug Blatch

55
<PAGE>
WIRED-REGISTERED TRADEMARK- INDEX FUND
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY PORTFOLIO STATISTICS
AS OF 12/31/98

<TABLE>
<S> <C>
# of Holdings in the
Portfolio: 40
Portfolio Turnover: 0.11%
% of Stocks in Top 10: 49.63%
</TABLE>

FUND MANAGERS:
Doug Blatch,
Domenico Ferrini

<TABLE>
<CAPTION>
TOP 10 HOLDINGS (%)
---------------------------------------
<S> <C>
America Online 10.68%
Dell Computer Corp. 5.65%
Nokia Corp. 5.62%
EMC Corp. 5.02%
Lucent Technologies 4.46%
Cisco Systems 4.05%
MCI Worldcom 3.84%
Sun Microsystems 3.48%
Microsoft Corp. 3.48%
Wal-Mart Stores Inc. 3.35%
TOP 5 SECTORS (%)
---------------------------------------
Telecom. 12.18%
Internet/New Media 13.99%
Computer Manufact. 5.65%
Wireless Comm. Equipment 5.62%
Software 5.03%
TOP 5 COUNTRIES (%)
---------------------------------------
United States 83.12%
Finland 5.62%
Germany 2.55%
Australia 1.92%
United Kingdom 1.34%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
WIRED -REGISTERED TRADEMARK- INDEX FUND AND WIRED INDEX-TM-
AND NASDAQ COMPOSITE INDEX
<S> <C> <C>

12/15/1998*
12/31/98
*Inception date
Total Return
Since Inception
11.60%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
WIRED -REGISTERED TRADEMARK- INDEX FUND AND WIRED INDEX-TM-
AND NASDAQ COMPOSITE INDEX
<S> <C>
Guinness Flight
Wired-Registered Trademark-
Index Fund
12/15/1998* $10,000
12/31/98 $11,160
*Inception date
Total Return
Since Inception
11.60%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
WIRED -REGISTERED TRADEMARK- INDEX FUND AND WIRED INDEX-TM-
AND NASDAQ COMPOSITE INDEX
Wired
Index-TM-
12/15/1998* $10,000
12/31/98 $11,411
*Inception date
Total Return
Since Inception
11.60%
Past performance is not predictive of future performance

<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE GUINNESS FLIGHT
WIRED -REGISTERED TRADEMARK- INDEX FUND AND WIRED INDEX-TM-
AND NASDAQ COMPOSITE INDEX
Nasdaq Composite Index
12/15/1998* $10,000
12/31/98 $10,898
*Inception date
Total Return
Since Inception
11.60%
Past performance is not predictive of future performance
</TABLE>

56
<PAGE>
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------

SHARES COMMON STOCKS: 95.49% VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
AGRI-CHEMICALS: 1.83%
3,640 Monsanto Co................................................... $ 172,900
-----------
AIR TRANSPORT: 1.50%
2,380 AMR Corp...................................................... 141,313
-----------
AUTOMOBILE: 2.55%
2,507 DaimlerChrysler AG*........................................... 240,829
-----------
BANKING: 1.81%
2,459 State Street Corp............................................. 171,054
-----------
BIOLOGICAL RESEARCH: 0.24%
349 Affymetrix Inc.*.............................................. 8,507
367 Incyte Pharmaceuticals Inc.*.................................. 13,717
-----------
Total Biological Research..................................... 22,224
-----------
COMPUTER COMMUNICATION EQUIPMENT: 4.05%
4,114 Cisco Systems Inc.*........................................... 381,831
-----------
COMPUTER MANUFACTURING: 5.65%
7,281 Dell Computer Corp.*.......................................... 532,878
-----------
COMPUTER PROCESSING & DATA PREPARATION: 0.26%
797 Acxiom Corp.*................................................. 24,707
-----------
COMPUTER STORAGE DEVICES: 5.02%
5,573 EMC Corp./Mass*............................................... 473,705
-----------
COMPUTERS: 3.48%
3,835 Sun Microsystems Inc.*........................................ 328,372
-----------
CONSUMER ELECTRONICS: 1.28%
1,685 Sony Corp..................................................... 120,899
-----------
ENERGY/PETROLEUM: 2.23%
3,679 Enron Corp.................................................... 209,933
-----------
ENTERTAINMENT: 1.47%
4,631 Walt Disney Co................................................ 138,930
-----------
FINANCIAL SERVICES: 5.02%
5,469 Charles Schwab & Co. Inc...................................... 307,289
</TABLE>

57
<PAGE>
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------

SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES: (CONTINUED)
5,228 First Data Corp............................................... $ 165,662
-----------
Total Financial Services...................................... 472,951
-----------
HOTEL MANAGEMENT: 2.40%
7,818 Marriott International........................................ 226,722
-----------
INDUSTRY MACHINERY: 2.30%
5,076 Applied Materials*............................................ 216,682
-----------
INSURANCE: 2.16%
2,109 American International Group.................................. 203,782
-----------
INTERNET/NEW MEDIA: 13.99%
1,318 Yahoo! Inc.*.................................................. 312,284
6,294 America Online Inc.*.......................................... 1,007,040
-----------
Total Internet/New Media...................................... 1,319,324
-----------
MEASURING & CONTROLLING DEVICES: 0.42%
2,314 Thermo Electron Corp.*........................................ 39,193
-----------
MEDIA: 3.27%
6,853 News Corp. Cayman ADR......................................... 181,176
2,000 Reuters Group PLC-Spons ADR................................... 126,750
-----------
Total Media................................................... 307,926
-----------
OIL, GAS SERVICES: 0.93%
1,899 Schlumberger Ltd.............................................. 87,591
-----------
PHARMACEUTICALS: 2.20%
2,983 Smithkline Beecham PLC........................................ 207,319
-----------
RETAIL: 3.34%
3,877 Wal-Mart Stores Inc........................................... 315,732
-----------
SATELLITE TELECOMMUNICATION: 0.27%
1,253 Globalstar Telecommunication*................................. 25,217
-----------
SEMI-CONDUCTORS: 2.73%
2,176 Intel Corp.................................................... 257,992
-----------
SOFTWARE: 5.02%
2,366 Microsoft Corp.*.............................................. 328,135
3,895 Parametric Technology Corp.*.................................. 63,294
</TABLE>

58
<PAGE>
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND

PORTFOLIO OF INVESTMENTS BY INDUSTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------

SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
SOFTWARE: (CONTINUED)
3,394 Peoplesoft Inc.*.............................................. $ 64,274
397 Wind River Systems*........................................... 18,659
-----------
Total Software................................................ 474,362
-----------
SPECIALTY STEEL: 0.61%
1,344 Nucor Corp.................................................... 58,127
-----------
TELECOMMUNICATIONS: 12.18%
5,624 Cable & Wireless PLC*......................................... 205,979
3,829 Lucent Technologies........................................... 421,190
5,055 MCI Worldcom Inc.*............................................ 362,696
3,176 Qwest Communications*......................................... 158,800
-----------
Total Telecommunications...................................... 1,148,665
-----------
TRANSPORT: 1.66%
1,759 FDX Corp.*.................................................... 156,551
-----------
WIRELESS COMMUNICATION EQUIPMENT: 5.62%
4,400 Nokia Corp.................................................... 529,925
-----------
TOTAL INVESTMENTS IN SECURITIES
(Identified Cost 8,595,650+): 95.49%........................ 9,007,636
-----------
OTHER ASSETS LESS LIABILITIES: 4.51%.......................... 425,661
-----------
NET ASSETS: 100.00%........................................... $ 9,433,297
-----------
-----------
</TABLE>

<TABLE>
<C> <S> <C>
* Non-income producing security.
+ Cost for federal tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation................................................ $ 425,395
Gross unrealized depreciation................................................ (13,409)
---------
$ 411,986
---------
---------
</TABLE>

See accompanying notes to financial statements.

59
<PAGE>
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $8,595,650)................. $ 9,007,636
Cash.................................................................. 2,185,303
Receivables:
Securities sold................................................... 9,970
Fund shares sold.................................................. 891,786
Dividends and interest............................................ 4,163
------------
Total assets...................................................... 12,098,858
------------

LIABILITIES
Payables:
Securities purchased.............................................. 2,660,568
Fund shares redeemed.............................................. 2,674
Due to Advisor (Note 3)............................................... 558
Accrued expenses...................................................... 1,761
------------
Total liabilities................................................. 2,665,561
------------

NET ASSETS............................................................ $ 9,433,297
------------
------------

NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($9,433,297/676,105 shares outstanding; unlimited number of shares
authorized without par value)..................................... $13.95
------
------
SOURCE OF NET ASSETS
Paid-in capital................................................... $ 9,019,025
Undistributed net investment income............................... 1,255
Undistributed net realized gain on investments.................... 1,031
Net unrealized appreciation on investments........................ 411,986
------------
NET ASSETS................................................ $ 9,433,297
------------
------------
</TABLE>

See accompanying notes to financial statements.

60
<PAGE>
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
DECEMBER 15, 1998*
THROUGH
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends...................................................... $ 951
Interest....................................................... 3,211
----------
Total investment income.................................... 4,162
----------

EXPENSES
Advisory fees (Note 3)......................................... 1,771
Custodian...................................................... 530
Accounting..................................................... 625
Transfer agent fees............................................ 200
Registration fees.............................................. 723
Miscellaneous.................................................. 131
----------
Total expenses............................................. 3,980
Commitment fee on credit line.............................. 141
Less: Expenses reimbursed (Note 3)......................... (1,214)
----------
Net expenses............................................... 2,907
----------
NET INVESTMENT INCOME.................................. 1,255
----------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investments............................. 1,031
Net change in unrealized appreciation on investments........... 411,986
----------
Net realized and unrealized gain on investments................ 413,017
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ 414,272
----------
----------
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
</TABLE>

See accompanying notes to financial statements.

61
<PAGE>
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------

DECEMBER 15, 1998*
THROUGH
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income.......................................... $ 1,255
Net realized gain from investments............................. 1,031
Net change in unrealized appreciation on investments........... 411,986
-------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... 414,272
-------------------

CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold...................................... 9,038,161
Net asset value of shares issued on reinvestment of
distributions................................................ --
Cost of shares redeemed........................................ (569,136)
-------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS................... 8,469,025
-------------------
TOTAL INCREASE IN NET ASSETS............................... 8,883,297
-------------------

NET ASSETS
Beginning of period............................................ 550,000
-------------------
End of period (including undistributed net investment income
of $1,255)................................................... $ 9,433,297
-------------------
-------------------

CHANGES IN SHARES
Shares sold.................................................... 677,474
Shares reinvested from distributions........................... --
Shares redeemed................................................ (45,369)
-------------------
Net Increase............................................... $ 632,105
-------------------
-------------------
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
</TABLE>

See accompanying notes to financial statements.

62
<PAGE>
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND

FINANCIAL HIGHLIGHTS

FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
DECEMBER 15, 1998*
THROUGH
DECEMBER 31, 1998
- ----------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $ $12.50
-------
Income from investment operations:
Net realized and unrealized gain on investments................ 1.45
-------
Total from investment operations................................. 1.45
-------
Net asset value, end of period................................... $ $13.95
-------
-------
Total return..................................................... 11.60 %++

Ratios/supplemental data:
Net assets, end of period (thousands)............................ $ $9,433
Ratio of expenses to average net assets:
Before expense reimbursement................................... 1.97 %+
After expense reimbursement.................................... 1.35 %+
Ratio of net investment income to average net assets:
Before expense reimbursement................................... 0.02 %+
After expense reimbursement.................................... 0.60 %+
Portfolio turnover rate.......................................... 0.11 %
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations.
+ Annualized
++ Not Annualized
</TABLE>

See accompanying notes to financial statements.

63
<PAGE>
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

THE BACKDROP

The continuation of global disinflation, expectations of slower world growth
and the relaxation of monetary policy, particularly in the U.S. made 1998 a good
year for the global bond markets and for the Global Government Bond Fund.

The markets finally seem to be accepting our long-held premise that growth
in the global economy does not necessarily translate to higher inflation. This,
coupled with Japan and Asia holding back economic growth, has allowed inflation
risk premia to virtually disappear in the pricing of fixed income securities.
The globalization of the world economy has applied a considerable downside
influence on inflation; indeed globalization both spurs growth while
simultaneously increasing competition. The introduction of the Euro is an
example of global competition resulting in improved efficiencies. The Euro is by
any measure a historic development. Its introduction is confirmation that
companies, countries, and in this case an entire continent, are being forced to
wring inefficiencies from their economies. These competitive forces are applying
pressure on a global scale and account for the concert between disinflation and
growth.

Despite all of the good news from the U.S. economy, the U.S. continues to
run a very large and growing current account deficit with the rest of the world.
This is largely a result of the strong U.S. economy and, despite some recent
weakness, the sustained strength of the U.S. Dollar. Part of this strength in
the U.S. Dollar is due to the continued strength of the U.S. financial markets.
At some point the U.S. current account deficit will need to move into a more
balanced position. A weakening U.S. Dollar is a natural market force to correct
this problem.

THE FUND

For the year ended December 31, 1998, the Fund had an average annual total
return of 17.89%, compared with a 15.29% performance over the same period for
the Fund's benchmark index, the Salomon Brother's World Government Bond Index.
For the three years ended December 31, 1998, the Fund had an average annual
total return of 8.80%. We are pleased that this performance has earned the Fund
a four-star rating from Morningstar(1) among 211 funds in its International Bond
Fund category.

- ------------------------------

(1)Morningstar proprietary ratings reflect historical risk-adjusted return as of
12/31/98 and are subject to change every month. Morningstar ratings are
calculated from the Fund's 3-year average annual return in excess of 90-day
Treasury-bill returns with appropriate fee adjustments and a risk factor that
reflects fund performance below 90-day T-bill returns. The top 10 percent of the
funds in an investment category receive 5 stars; the next 22.5 percent receive 4
stars.

64
<PAGE>
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND (CONTINUED)

THE OUTLOOK

The world's Central Banks are hoping that U.S. economic growth does not
stall before the rest of the world has had time to recover from the global
market volatility. With commodity prices so low and export competition as
intense as ever, even a modest recession could tip the balance from disinflation
to deflation. However, all the signs indicate that this threat will likely not
materialize as Central Banks have proven to be vigilant. Nevertheless, a period
of consolidation by the U.S. consumer should be expected. The manufacturing side
of the U.S. economy will take time to recover, as it is burdened by high wage
costs, the inability to raise margins and stiff overseas competition.
Consolidation, cost cutting and reduced investment plans should remain the trend
through the first half of 1999. We expect the second half of 1999 to look
brighter for major markets as low interest rates, together with a modest fiscal
stimulus ahead of next year's election in the U.S., should enable a gradual
global economic recovery.

As the year progresses, we anticipate another bond rally, as the rate of
growth disappoints. A final flight to quality should be forthcoming, driving
U.S. Treasury yields back to their lows. Commodity prices should trough very
early in the year and start to rise through 1999 in anticipation of a global
recovery. A combination of stronger growth, rising commodities and fiscal
relaxation should cause a temporary halt to the long-term rally in bonds.

On the currency side, we expect the U.S. Dollar to likely weaken versus the
Euro, as U.S. rates should fall further than current consensus expectations. The
Euro will benefit from a large current account surplus, prospective fiscal
relaxation and growing use as a reserve currency. Sterling should remain closely
correlated with the U.S. Dollar, and we expect the Japanese Yen to trade in its
present range until economic recovery there is on a sound footing.

- -- Michael J. W. Daley

65
<PAGE>
GLOBAL GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY PORTFOLIO STATISTICS
AS OF 12/31/98

<TABLE>
<S> <C>
# of Holdings in Portfolio: 15
Portfolio Turnover: 166.72%
% of Stocks in Top 5: 50.02%
</TABLE>

FUND MANAGER:
Michael Daley

<TABLE>
<CAPTION>
TOP 5 HOLDINGS (%)
---------------------------------------
<S> <C>
U.S. Treasury Note 6.250%
02/15/2007 17.07%
U.S. Treasury Note 5.500%
02/15/2008 11.26%
Deutschland Republic 5.250%
01/04/2008 9.59%
Deutschland Republic 5.625%
01/04/2028 7.14%
U.S. Treasury
Note 4.750% 11/15/2008 4.96%
CURRENCY ALLOCATION
---------------------------------------
Deutsche Mark 39.06%
U.S. Dollar 32.96%
Japanese Yen 17.45%
U.K. Sterling 5.04%
ECU 2.42%
TOP 5 COUNTRIES (%)
---------------------------------------
United States 43.16%
Germany 16.72%
United Kingdom 9.89%
Japan 5.17%
Belgium 4.81%
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND AND
THE SALOMON BROTHERS' WORLD GOVERNMENT BOND INDEX
<S> <C> <C>

Guinness Flight Salomon Brothers'
Global Government World Government
Bond Fund Bond Index
6/30/94* $10,000 $10,000
9/30/94 $9,754 $10,117
12/31/94 $9,767 $10,166
3/31/95 $10,093 $11,278
6/30/95 $10,638 $11,879
9/30/95 $10,809 $11,755
12/30/95 $11,183 $12,102
3/31/96 $11,083 $11,875
6/30/96 $11,197 $11,923
9/30/96 $11,378 $12,248
12/31/96 $11,877 $12,540
3/31/97 $11,485 $12,021
6/30/97 $11,732 $12,386
9/30/97 $12,055 $12,543
12/31/97 $12,218 $12,569
3/31/98 $12,298 $12,668
6/30/98 $12,672 $12,919
9/30/98 $14,059 $13,994
12/31/98 $14,404 $14,491
* Inception date.
Average Annual Total Return
One Year Three Years Since Inception
17.89% 8.80% 8.43%
Past performance is not predictive of future performance
</TABLE>

66
<PAGE>
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------

PRINCIPAL AMOUNT GOVERNMENT BONDS: 88.84% VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
BELGIUM: 4.81%
BEF 16,509,000 Belgium Government $ 538,489
5.750% 03/28/2008...............................
-----------
UNITED KINGDOM: 9.89%
L 292,000 United Kingdom Gilts 553,625
8.000% 06/10/2003...............................
L 297,000 United Kingdom Gilts 553,978
6.750% 11/26/2004...............................
-----------
Total United Kingdom.............................. 1,107,603
-----------
FRANCE: 2.05%
FF 1,164,000 French OAT 229,531
5.250% 04/25/2008...............................
-----------
GERMANY: 16.72%
DM 1,622,000 Deutschland Republic 1,074,362
5.250% 01/04/2008...............................
DM 1,182,000 Deutschland Republic 799,223
5.625% 01/04/2028...............................
-----------
Total Germany..................................... 1,873,585
-----------
JAPAN: 5.17%
US$ 210,000 International Finance Corp. 212,835
5.500% 02/18/2003...............................
US$ 355,000 Tokyo Metro 366,538
6.125% 03/27/2006...............................
-----------
Total Japan....................................... 579,373
-----------
NETHERLANDS: 4.81%
NLG 919,000 Netherlands Government 538,574
5.250% 07/15/2008...............................
-----------
SPAIN: 2.23%
ESP 200,000 Spanish Government 249,359
5.150% 07/30/2009...............................
-----------
UNITED STATES: 43.16%
US$ 531,000 U.S. Treasury Note 552,572
5.750% 04/30/2003...............................
</TABLE>

67
<PAGE>
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

PORTFOLIO OF INVESTMENTS BY COUNTRY

DECEMBER 31, 1998 CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------

PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES: (CONTINUED)
US$ 492,000 U.S. Treasury Note 553,500
6.625% 05/15/2007...............................
US$ 1,189,000 U.S. Treasury Note $ 1,260,712
5.500% 02/15/2008...............................
US$ 1,743,000 U.S. Treasury Note 1,912,399
6.250% 02/15/2007...............................
US$ 551,000 U.S. Treasury Note 555,476
4.750% 11/15/2008...............................
-----------
Total United States............................... 4,834,659
-----------
TOTAL GOVERNMENT BONDS
(Identified Cost $9,592,758+): 88.84%........... 9,951,173
-----------
OTHER ASSETS LESS LIABILITIES: 11.16%............. 1,249,579
-----------
NET ASSETS: 100.00%............................... $11,200,752
-----------
-----------
</TABLE>

<TABLE>
<S> <C>
+ Cost for federal income tax purposes is the same.
Net unrealized depreciation consists of:
Gross unrealized appreciation.................. $ 365,890
Gross unrealized depreciation.................. (7,475)
-----------
$ 358,415
-----------
-----------
</TABLE>

See accompaying notes to financial statements.

68
<PAGE>
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998
- ------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $9,592,758)................. $ 9,951,173
Cash.................................................................. 2,138,259
Receivables:
Interests......................................................... 246,541
Fund shares sold.................................................. 16,725
Unrealized gain on forward foreign currency contracts (Note 6).... 166,205
Deferred organizational costs, net.................................... 6,118
------------
Total assets...................................................... 12,525,021
------------

LIABILITIES
Payables:
Securities purchased.............................................. 1,220,764
Distributions to shareholders..................................... 31,190
Due to advisor (Note 3)............................................... 39,792
Accrued expenses...................................................... 32,523
------------
Total liabilities................................................. 1,324,269
------------
NET ASSETS............................................................ $ 11,200,752
------------
------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($11,200,752/826,769 shares outstanding; unlimited
number of shares authorized without par value).................... $13.55
------
------
SOURCE OF NET ASSETS
Paid-in capital................................................... $ 10,492,794
Undistributed net investment income............................... --
Undistributed net realized gain on investments.................... 177,754
Net unrealized appreciation on:
Investments................................................... 358,415
Foreign currency.............................................. 171,789
------------
NET ASSETS................................................ $ 11,200,752
------------
------------
</TABLE>

See accompanying notes to financial statements.

69
<PAGE>
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

STATEMENT OF OPERATIONS

EXPENSES
Advisory fees (Note 3).......................................... 71,106
Administration fees (Note 3).................................... 23,702
Custodian....................................................... 13,279
Accounting...................................................... 39,482
Transfer agent fees............................................. 33,606
Audit fees...................................................... 20,728
Legal fees...................................................... 5,466
Insurance fees.................................................. 973
Trustee's fees.................................................. 15,433
Registration fees............................................... 18,341
Reports to shareholders......................................... 4,077
Deferred organization costs amortization........................ 11,651
Miscellaneous................................................... 875
------------------
Total expenses.............................................. 258,719
Interest on loans........................................... 1,298
Commitment fee on credit line............................... 1,473
Less: Expenses reimbursed (Note 3).......................... (191,086)
------------------
Net expenses................................................ 70,404
------------------
NET INVESTMENT INCOME................................... 422,877
------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investments.............................. 626,392
Net realized loss from foreign currency......................... (126,803)
Net change in unrealized appreciation on investments............ 270,419
Net change in unrealized appreciation on foreign currency....... 197,272
------------------
Net realized and unrealized gain on investments............. 967,280
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $ 1,390,157
------------------
------------------
</TABLE>

See accompanying notes to financial statements.

70
<PAGE>
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income...................... $ 422,877 $ 392,624
Net realized gain from investments......... 626,392 14,042
Net realized loss on foreign currency...... (126,803) (173,367)
Net change in unrealized appreciation on
investments.............................. 270,419 33,057
Net change in unrealized appreciation
(depreciation) on foreign currency....... 197,272 (9,398)
------------------ ------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... 1,390,157 256,958
------------------ ------------------
NET EQUALIZATION CREDITS................... (7,556) 17,583
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income.. (417,826) (287,093)
Dividends paid from net taxable gains...... (318,313) (61,125)
Return of Capital.......................... -- (73,796)
------------------ ------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.... (736,139) (422,014)
------------------ ------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.................. 6,879,372 5,720,641
Net asset value of shares issued on
reinvestment of distributions............ 686,191 401,038
Cost of shares redeemed.................... (7,027,191) (2,522,578)
------------------ ------------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS............................. 538,372 3,599,101
------------------ ------------------
TOTAL INCREASE IN NET ASSETS........... 1,184,834 3,451,628
------------------ ------------------
NET ASSETS
Beginning of period........................ 10,015,918 6,564,290
------------------ ------------------
End of period [including undistributed
(overdistributed), net investment income
of $0 and $(28,455), respectively]....... $ 11,200,752 $ 10,015,918
------------------ ------------------
------------------ ------------------
CHANGES IN SHARES
Shares sold................................ 516,058 467,488
Shares issued from dividend
distributions............................ 52,307 32,950
Shares redeemed............................ (551,277) (206,794)
------------------ ------------------
Net increase (decrease)................ $ 17,088 $ 293,644
------------------ ------------------
------------------ ------------------
</TABLE>

See accompanying notes to financial statements.

71
<PAGE>
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

FINANCIAL HIGHLIGHTS

FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FROM JUNE 30,
FOR THE YEARS ENDED 1994*
DECEMBER 31, THROUGH
---------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.37 $ 12.72 $ 12.77 $ 12.00 $ 12.50
------------- -------- -------- -------- --------------
Income from investment operations:
Net investment income 0.58 0.63 0.63 0.69 0.29
Net realized and unrealized gain (loss) on
investments................................... 1.58 (0.29) 0.13 1.01 (0.58)
------------- -------- -------- -------- --------------
Total from investment operations.................. 2.16 0.34 0.76 1.70 (0.29)
------------- -------- -------- -------- --------------

Less distributions:
Dividends paid from net investment income....... (0.58) (0.49) (0.69) (0.65) (0.21)
Dividends paid from taxable net realized
gains......................................... (0.40) (0.11) (0.12) (0.28) --
Return of capital............................... -- (0.09) -- -- --
------------- -------- -------- -------- --------------
Total distributions............................... (0.98) (0.69) (0.81) (0.93) (0.21)
------------- -------- -------- -------- --------------
Net asset value, end of period.................... $13.55 $ 12.37 $ 12.72 $ 12.77 $ 12.00
------------- -------- -------- -------- --------------
------------- -------- -------- -------- --------------
Total return...................................... 17.89% 2.87% 6.21% 14.49% (2.33)%+

Ratios/supplemental data:
Net assets, end of period (thousands)............. $11,201 $10,016 $ 6,564 $ 1,153 $ 751
Ratio of expenses to average net assets:
Before expense reimbursement.................... 2.76% 3.15% 8.21% 21.52%*** 40.78%**
After expense reimbursement..................... 0.75% 0.75% 1.31% 1.73% 1.75%**
Ratio of net investment income to average net
assets:
Before expense reimbursement.................... 2.44% 2.67% (1.76)% (14.26)% (34.18)%**
After expense reimbursement..................... 4.46% 5.07% 5.14% 5.53% 4.86%**
Portfolio turnover rate........................... 166.72% 185.55% 296.51% 202.54% 46.15%
</TABLE>

<TABLE>
<S> <C>
* Commencement of operations
+ Not annualized
** 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%
</TABLE>

See accompanying notes to financial statements.

72
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

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

NOTE 1 - ORGANIZATION

Guinness Flight Investment Funds (the "Funds"), a Delaware business trust, was
organized on April 28, 1997 and registered under the Investment Company Act of
1940 as a non-diversified, open-end management investment company. Currently,
the Funds offer seven separate series portfolios: Guinness Flight Asia Blue Chip
Fund (the "Asia Blue Chip Fund") whose objective is long-term capital
appreciation, Guinness Flight Asia Small Cap Fund (the "Asia Small Cap Fund")
whose objective is long-term capital appreciation, Guinness Flight China & Hong
Kong Fund (the "China & Hong Kong Fund") whose objective is long-term capital
appreciation, Guinness Flight Mainland China Fund ("Mainland China Fund") whose
objective is long-term capital appreciation, Guinness Flight New Europe Fund
("New Europe Fund") whose objective is long-term capital appreciation, Guinness
Flight Wired-Registered Trademark- Index Fund ("Wired-Registered Trademark-
Index Fund") whose objective is long-term capital appreciation, and the Guinness
Flight Global Government Bond Fund (the "Global Government Bond Fund") whose
objective is to provide current income and capital appreciation (collectively,
the "Funds"). The China & Hong Kong and Global Government Bond Funds began
operations on June 30, 1994, the Asia Blue Chip and Asia Small Cap Funds began
operations on April 29, 1996, the Mainland China Fund began operations on
November 3, 1997, the New Europe Fund began operations on November 23, 1998 and
the Wired-Registered Trademark- Index Fund began operations on December 15,
1998.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

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

A. SECURITY VALUATION. Investments in securities traded on a primary
exchange are valued at the last reported sale price at the close of regular
trading on the last business day of the period; securities traded on an exchange
for which there has been no sale are valued at the last reported bid price.
Securities for which quotations are not readily available are valued at their
respective fair values as determined in good faith by the Board of Trustees. Due
to the inherent uncertainty of valuation, those estimated values of not readily
marketable securities may differ significantly from the values that would have
been used had a ready market for the

73
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
securities existed, and the differences could be material. Short-term
investments are stated at cost, which when combined with accrued interest,
approximates market value. Realized gains and losses from securities
transactions are calculated using the identified cost method.

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

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

Interest income is translated at the exchange rates that existed on the
dates the income was accrued. Exchange gains and losses related to interest
income are included in "realized gain (loss) from foreign currency" on the
accompanying Statements of Operations.

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

C. SECURITY TRANSACTIONS, DIVIDENDS AND DISTRIBUTIONS. As is common in the
industry, security transactions are accounted for on the trade date. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.

74
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

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

D. FEDERAL INCOME TAXES. The Funds intend to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to their shareholders. Therefore, no
federal income tax provisions are required.

As of December 31, 1998 for Federal income tax purposes, the following funds
have capital loss carryforwards available to offset future realized capital
gains: the Asia Blue Chip Fund has capital loss carryforward of $3,689,792, of
which $532,335 expires in year 2005 and $3,157,457 expires in year 2006, the
Asia Small Cap Fund has capital loss carryforward of $80,850,770, of which
$17,996,189 expires in year 2005 and $62,854,581 expires in year 2006, the China
& Hong Kong Fund has capital loss carryforward of $70,290,227 expiring in year
2006 and the Mainland China Fund has capital loss carryforward of $2,515,925
expiring in year 2006. To the extent that such carryforwards are used, no
capital gains distributions will be made.

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

F. DEFERRED ORGANIZATION COSTS. The China & Hong Kong Fund and the Global
Government Bond Fund have each incurred expenses of $58,785 in connection with
their organization. The Asia Blue Chip Fund and the Asia Small Cap Fund have
each incurred expenses of $8,745 in connection with their organization. The
Mainland China Fund has incurred an expense of $23,338 in connection with its
organization. These costs have been deferred and are being amortized on a
straight line basis over a period of sixty months from the date the Funds
commenced investment operations. In the event that any of the initial shares of
the Funds are redeemed by their holders during the period of amortization of the
Funds' organization costs, the redemption proceeds will be reduced by any such
unamortized organization costs in the same proportion as the number of initial
shares being redeemed bears to the number of those shares outstanding at the
time of redemption.

75
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

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

G. CONCENTRATION OF RISK. The Asia Blue Chip Fund and Asia Small Cap Fund
invest substantially all of their assets in the Asian continent. The China &
Hong Kong Fund and Mainland China Fund invest substantially all of their assets
in securities that are traded in China or Hong Kong or that are issued by
companies that do a substantial part of their business in China. The New Europe
Fund invests substantially all of its assets in companies located in Europe or
that conduct the majority of their business activities in Europe. The
consequences of political, social or economic changes in the countries in which
the securities are offered or the issuers conduct their operations may affect
the market prices of the Funds' investments and any income generated, as well as
the Funds' ability to repatriate such amounts. The Wired-Registered Trademark-
Index Fund invests substantially all of its assets in securities of companies
that comprise the Wired-Registered Trademark- Index.

In 1998, Malaysian government implemented certain foreign exchange control
measures which included the requirement for portfolio capital to be in Malaysia
for at least 12 months prior to repatriation. These restrictions affected the
liquidity and valuation of Malaysian securities. On December 31, 1998, the Asia
Blue Chip Fund and Asia Small Cap Fund held $541,580 and $2,609,162 in
investments of Malaysian securities, respectively. These investments were valued
at their fair values as determined in good faith by the Board of Trustees of the
Funds. On February 4, 1999, the 12 month holding rule was replaced with a
graduated levy on the repatriation of capital invested.

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

I. RECLASSIFICATION OF CAPITAL ACCOUNTS. The Funds account for and report
distributions to shareholders in accordance with the American Institute of
Certified Public Accountant's Statement of Position 93-2: DETERMINATION,
DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN AND
RETURN OF CAPITAL DISTRIBUTION BY INVESTMENT COMPANIES. Distributions of net
investment income and realized gains are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are due to differing treatments for items such as wash sales,
net operating losses, capital loss carryforwards and net realized loss on
foreign currency transactions. In the event that

76
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
distributions exceed the aggregate amount of undistributed net investment income
and net realized gains, the excess distribution is reclassified as a reduction
of paid-in capital, thus reducing the tax basis of shareholders' interests in
the Funds. For the year ended December 31, 1998, reclassification among the
components of net assets are as follows:

<TABLE>
<CAPTION>
UNDISTRIBUTED NET PAID-IN
INVESTMENT INCOME CAPITAL
----------------- --------------
<S> <C> <C>
Asia Small Cap Fund $ 150,850 $ (150,850)
New Europe Fund $ 97 $ (97)
Global Government Bond Fund $ 30,960 $ (30,960)
</TABLE>

NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<S> <C>
Asia Blue Chip Fund 1.00%
Asia Small Cap Fund 1.00%
China & Hong Kong Fund 1.00%
Mainland China Fund 1.00%
New Europe Fund 1.00%
Wired-Registered Trademark- Index 0.90% on the 1st $100 million
Fund 0.75% on the next $100-$500
million and 0.60% on assets
greater than $500 million
Global Government Bond Fund 0.75%
</TABLE>

The Funds are responsible for their own operating expenses. The Advisor and
Administrator have agreed to reimburse each Fund to the extent necessary so that
its ratio of

77
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
operating expenses to average daily net assets will not exceed the following
levels. Expenses reimbursed from the Advisor for the year ended December 31,
1998 are stated in the Funds' Statement of Operations:

<TABLE>
<S> <C>
Asia Blue Chip Fund 1.98%
Asia Small Cap Fund 1.98%
China & Hong Kong Fund 1.98%
Mainland China Fund 1.98%
New Europe Fund 1.98%
Wired-Registered Trademark- Index
Fund 1.35%
Global Government Bond Fund 0.75%
</TABLE>

The cumulative unreimbursed amounts paid by the Advisor on behalf of the
Funds from their inception to December 31, 1998, are as follows:

<TABLE>
<S> <C>
Asia Blue Chip Fund $ 364,310
Asia Small Cap Fund $ 181,002
Mainland China Fund $ 172,288
New Europe Fund $ 1,814
Wired-Registered Trademark- Index Fund $ 1,214
Global Government Bond Fund $ 862,600
</TABLE>

Effective December 31, 1997, the Advisor agreed to amend the expense
reimbursement agreement to limit the period within which the Advisor may recoup
the above amounts from the Funds to no later than December 31, 2002, and subject
to the Funds' ability to effect such reimbursement and remain in compliance with
applicable expense limitations. In addition, the possible recoupment period of
any expense reimbursements in each year subsequent to 1997 will be limited to
five years from the year of the reimbursement, and subject to the Funds' ability
to effect such reimbursement and remain in compliance with applicable expense
limitations.

Investment Company Administration, L.L.C. (the "Administrator") acts as the
Funds' Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, prepares reports and
materials to be supplied to the Trustees; monitors the activities of the Funds'
custodian, transfer agent and accountants; coordinates the preparation and
payment of Fund expenses and reviews the Funds' expense

78
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
accruals. For its services, the Administrator receives an annual fee equal to
0.25% of the Funds' average daily net assets, subject to a $40,000 annual
minimum for the China & Hong Kong Fund, and $100,000 allocated on average daily
net assets of the Asia Blue Chip Fund, Asia Small Cap Fund, Mainland China Fund,
New Europe Fund, and the Global Government Bond Fund. The Wired Index Fund pays
an annual fee equal to 0.05% of the Fund's average daily net assets, subject to
a $20,000 annual minimum.

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

Certain officers of the Funds are also officers and/or Directors of the
Advisor, Administrator and Distributor.

NOTE 4 - PURCHASES AND SALES OF SECURITIES

The cost of purchases and the proceeds from sales of securities, excluding U.S.
Government obligations and short-term investments, for the year ended December
31, 1998 were:

<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ----------------------------------------------------- ------------- -------------
<S> <C> <C>
Asia Blue Chip Fund $ 7,924,333 $ 5,349,934
Asia Small Cap Fund $ 26,253,881 $ 51,992,242
China & Hong Kong Fund $ 165,773,478 $ 204,948,901
Mainland China Fund $ 18,448,851 $ 9,245,636
New Europe Fund $ 324,202 --
Wired-Registered Trademark- Index Fund $ 8,604,587 $ 9,970
Global Government Bond Fund $ 9,533,198 $ 9,666,935
</TABLE>

Purchases and sales of U.S. Government obligations by the Global Government
Bond Fund were $5,911,550 and $5,046,394, respectively.

NOTE 5 - LINE OF CREDIT

The Funds have a $50 million committed line of credit with a bank that expires
on June 15, 1999. The interest rate on the line of credit is the bank's base
rate, as revised from time to time, 6.25% at December 31, 1998.

NOTE 6 - FORWARD FOREIGN CURRENCY CONTRACTS

79
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

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

At December 31, 1998 the Funds had entered into forward foreign currency
contracts which obligated the Funds to exchange currencies at specified future
dates. At the maturity of a forward contract, the Funds may either make delivery
of the foreign currency from currency held, if any, or from the proceeds of the
portfolio securities sold, or it may terminate its obligation to deliver the
foreign currency at any time by purchasing an offsetting contract. The forward
value of amounts due are netted against the forward value of the currency to be
delivered by the Funds and the net amount is shown as a receivable or payable in
the financial statements. Open forward foreign currency exchange contracts at
December 31, 1998 were as follows:

80
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

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

GUINNESS FLIGHT ASIA SMALL CAP FUND

<TABLE>
<CAPTION>
UNREALIZED
DELIVERY GAIN/
CURRENCY RECEIVABLE CURRENCY DELIVERABLE DATE (LOSS)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US$ 64,349 Hong Kong Dollar 498,658 01/04/99 $ (13)
US$ 852,078 Singapore Dollar 1,413,853 01/06/99 (4,823)
-----------
Total Forward Contracts $ (4,836)
-----------
-----------
</TABLE>

GUINNESS FLIGHT CHINA & HONG KONG FUND

<TABLE>
<CAPTION>
UNREALIZED
DELIVERY GAIN/
CURRENCY RECEIVABLE CURRENCY DELIVERABLE DATE (LOSS)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US$ 3,143,154 Hong Kong Dollar 24,357,873 01/05/99 $ (703)
-----------
Total Forward Contracts $ (703)
-----------
-----------
</TABLE>

GUINNESS FLIGHT MAINLAND CHINA FUND

<TABLE>
<CAPTION>
UNREALIZED
DELIVERY GAIN/
CURRENCY RECEIVABLE CURRENCY DELIVERABLE DATE (LOSS)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US$ 3,563 Hong Kong Dollar 27,609 01/04/99 $ (1)
US$ 113,803 Hong Kong Dollar 881,915 01/05/99 (25)
-----------
Total Forward Contracts $ (26)
-----------
-----------
</TABLE>

GUINNESS FLIGHT NEW EUROPE FUND

<TABLE>
<CAPTION>
UNREALIZED
DELIVERY GAIN/
CURRENCY RECEIVABLE CURRENCY DELIVERABLE DATE (LOSS)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US$ 13,723 British Pound Sterling 8,186 01/05/99 $ (128)
-----------
Total Forward Contracts $ (128)
-----------
-----------
</TABLE>

81
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

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

GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

<TABLE>
<CAPTION>
UNREALIZED
DELIVERY GAIN/
CURRENCY RECEIVABLE CURRENCY DELIVERABLE DATE (LOSS)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US$ 4,820,362 Deutsche Mark 8,047,506 03/04/99 $ 75,889
US$ 428,595 Belgian Franc 14,929,952 03/04/99 (4,801)
US$ 221,325 Spanish Peseta 31,820,765 03/04/99 (3,286)
US$ 430,280 French Franc 2,359,336 03/04/99 6,985
US$ 900,872 British Pound Sterling 543,665 03/04/99 (356)
US$ 4,055,175 Japanese Yen 498,754,019 03/04/99 98,689
US$ 428,835 Netherlands Guilder 815,983 03/04/99 (6,840)
US$ 185,000 European Currency Unit 158,268 03/04/99 1,221
US$ 299,925 French Franc 1,651,178 05/12/99 (2,470)
US$ 553,243 British Pound Sterling 333,000 05/12/99 (1,795)
US$ 282,000 Japanese Yen 32,119,800 05/12/99 6,992
US$ 22,454 Netherlands Guilder 42,123 05/12/99 (117)
US$ 343,393 European Currency Unit 287,280 05/12/99 2,809
US$ 23,695 Belgian Franc 812,755 05/12/99 33
US$ 1,918,732 Deutsche Mark 3,178,282 05/12/99 (3,844)
US$ 242,477 Spanish Peseta 33,817,800 05/12/99 (2,904)
-----------
Total Forward Contracts $ 166,205
-----------
-----------
</TABLE>

NOTE 7 - FUTURES CONTRACTS

Each Fund may enter into futures contracts to the extent permitted by its
investment policies and objectives. Upon entering into a futures contract, a
Fund is required to make a deposit of an initial margin with its custodian in a
segregated account. Subsequent payments (daily variation margin), which are
dependent on the daily fluctuations in the value of the underlying instrument,
are made or received by a Fund each day (daily variation margin) and are
recorded as unrealized gains or losses until the contracts are closed. When the
contract is closed, a Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and a
Fund's basis in the contract. Risks of entering into futures contracts include
the possibility that a change in the value of the contract may

82
<PAGE>
GUINNESS FLIGHT ASIA BLUE CHIP FUND
GUINNESS FLIGHT ASIA SMALL CAP FUND
GUINNESS FLIGHT CHINA & HONG KONG FUND
GUINNESS FLIGHT MAINLAND CHINA FUND
GUINNESS FLIGHT NEW EUROPE FUND
GUINNESS FLIGHT WIRED-REGISTERED TRADEMARK- INDEX FUND
GUINNESS FLIGHT GLOBAL GOVERNMENT BOND FUND

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
not correlate with the changes in the value of the underlying instruments.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures contract
involves the risk that a Fund could lose more than the original margin deposit
required to initiate the futures transaction. During the period ended June 1998
the China & Hong Kong Fund entered into futures contracts which resulted in net
realized losses of $1,315,976. There was no other futures trading activity
during the year. At December 31, 1998, there were no open futures contracts.

NOTE 8 - YEAR 2000 ISSUE (Unaudited)

Like other mutual funds, financial and business organizations and individuals
around the world, the Funds could be adversely affected if the computer systems
used by the advisor/ administrator and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 issue." The advisor and
administrator are taking steps that it believes are reasonably designed to
address the Year 2000 issue with respect to computer systems that it uses and to
obtain reasonable assurances that comparable steps are being taken by each
Fund's other major service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
funds. For the year ended December 31, 1998, the Funds incurred no significant
year 2000 related expenses and do not expect to incur significant year 2000
expenses in the future.

83
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------

TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
GUINNESS FLIGHT INVESTMENT FUNDS

We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Guinness Flight Investment Funds,
comprising respectively, the Guinness Flight Asia Blue Chip Fund, Guinness
Flight Asia Small Cap Fund, Guinness Flight China & Hong Kong Fund, Guinness
Flight Mainland China Fund, Guinness Flight New Europe Fund, Guinness Flight
Wired-Registered Trademark- Index Fund and Guinness Flight Global Government
Bond Fund (collectively, the "Funds"), as of December 31, 1998, the related
statements of operations for the fiscal year then ended, the statements of
changes in net assets for each of the two fiscal years in the period then ended,
and the financial highlights for each of the four fiscal years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights of Guinness Flight China & Hong Kong Fund and
Guinness Flight Global Government Bond Fund for the period from June 30, 1994
(commencement of operations) through December 31, 1994, were audited by other
auditors whose report dated February 8, 1995 expressed an unqualified opinion on
those financial highlights.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds constituting Guinness Flight Investment Funds as of
December 31, 1998, the results of their operations for the fiscal year then
ended, the changes in their net assets for each of the two fiscal years in the
period then ended, and the financial highlights for each of the four fiscal
years in the period then ended in conformity with generally accepted accounting
principles.

[ERNST & YOUNG SIGNATURE]

Los Angeles, California
February 10, 1999

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GUINNESS FLIGHT CONTACT INFORMATION

Shareholder Service Line 800-915-6566
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Web Site www.gffunds.com

MC40 102 123198