<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 1996.
SECURITIES ACT FILE NO
INVESTMENT COMPANY ACT FILE NO. 81-8608
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
------------------------------------
Form N-2
Registration Statement Under the Securities Act of 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
and/or
Registration Statement Under the Investment Company Act of 1940 /X/
Amendment No. 5 /X/
(check appropriate box or boxes)
------------------------------------
FIDELITY ADVISOR KOREA FUND, INC.
(Exact Name of Registrant as Specified in Charter)
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
(Address of Principal Executive Offices in United States)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-426-5528
------------------------------------
ARTHUR S. LORING
SECRETARY
FIDELITY ADVISOR KOREA FUND, INC.
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
(Name and Address of Agent for Service)
------------------------------------
With copies to:
<TABLE>
<S> <C>
LAURENCE E. CRANCH, ESQ. THOMAS A. HALE, ESQ.
LEONARD B. MACKEY, JR., ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM
ROGERS & WELLS 333 WEST WACKER DRIVE
200 PARK AVENUE SUITE 2100
NEW YORK, NEW YORK 10166 CHICAGO, ILLINOIS 60606
</TABLE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this registration statement. If any securities being
registered on this form will be offered on a delayed or continuous basis in
reliance on Rule 415 under the Securities Act of 1933, other than securities
offered in connection with a dividend reinvestment plan, check the following
box. / /
------------------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
$.001 Par Value...... 100,000 Shares $10.375 $1,037,500 $315
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933. Based on the
average of the high and low sales price reported on the New York Stock
Exchange on October 4, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
FIDELITY ADVISOR KOREA FUND, INC.
FORM N-2
CROSS-REFERENCE SHEET
PARTS A AND B OF THE PROSPECTUS
<TABLE>
<CAPTION>
ITEMS IN PART A OF FORM N-2 LOCATION IN PROSPECTUS
- --------------------------------------------- -----------------------------------------------
<S> <C> <C>
1. Outside Front Cover..................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Page.................................. Inside Front and Outside Back Cover Page of
Prospectus
3. Fee Table and Synopsis.................. Fee Table
4. Financial Highlights.................... Financial Highlights
5. Plan of Distribution.................... Outside Front Cover Page of Prospectus; The
Offer; Distribution Arrangements
6. Selling Shareholders.................... Not Applicable
7. Use of Proceeds......................... Use of Proceeds
8. General Description of the Registrant... Outside Front Cover Page of Prospectus; The
Fund; Investment Objective and Policies; Risk
Factors and Special Considerations; Common
Stock
9. Management.............................. Management of the Fund; Common Stock;
10. Capital Stock, Long-Term Debt, and Other
Securities............................ Common Stock; Dividends and Distributions;
Dividend Reinvestment and Cash Purchase Plan;
Taxation
11. Defaults and Arrears on Senior
Securities............................ Not Applicable
12. Legal Proceedings....................... Not Applicable
13. Table of Contents of the Statement of
Additional Information................ Table of Contents of Statement of Additional
Information
</TABLE>
<TABLE>
<CAPTION>
ITEMS IN PART B OF FORM N-2 LOCATION IN STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------- -----------------------------------------------
<S> <C> <C>
14. Cover Page.............................. Front Cover Page
15. Table of Contents....................... Table of Contents
16. General Information and History......... The Fund in the Prospectus
17. Investment Objective and Policies....... Investment Objective and Policies; Investment
Limitations
18. Management.............................. Management of the Fund
19. Control Persons and Principal Holders of
Securities............................ Management of the Fund; Custodian, Transfer
Agent, Dividend Paying Agent and Registrar;
Experts in the Prospectus
20. Investment Advisory and Other
Services.............................. Management of the Fund; Custodian, Transfer
Agent, Dividend Paying Agent and Registrar;
Experts in the Prospectus
21. Brokerage Allocation and Other
Practices............................. Portfolio Transactions
22. Tax Status.............................. Taxation
23. Financial Statements.................... Financial Statements
</TABLE>
Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C to this Registration Statement.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 11, 1996
PROSPECTUS
NOVEMBER , 1996
FIDELITY ADVISOR KOREA FUND, INC.
100,000 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF
[LOGO] RIGHTS TO SUBSCRIBE FOR SUCH SHARES
------------------------
Fidelity Advisor Korea Fund, Inc. (the "Fund") is issuing to its
shareholders of record ("Record Date Shareholders") as of the close of business
on November , 1996 (the "Record Date") non-transferable rights ("Rights")
entitling the holders thereof to subscribe for an aggregate of shares
(the "Shares") of the Fund's Common Stock, par value $.001 per share (the
"Common Stock"), at the rate of one share of Common Stock for every
Rights held (the "Offer"). Record Date Shareholders will receive one Right for
each whole share of Common Stock held on the Record Date, and shareholders who
fully exercise their Rights will be entitled to subscribe for additional shares
of Common Stock pursuant to the Over-Subscription Privilege described herein.
The Fund may increase the number of Shares of Common Stock subject to
subscription by up to 25% of the Shares, or up to an additional shares
of Common Stock, for an aggregate total of Shares. Fractional shares
will not be issued upon the exercise of Rights. The Rights are non-transferable
and, therefore, may not be purchased or sold. The Rights will not be admitted
for trading on the New York Stock Exchange (the "NYSE") or any other exchange.
See "The Offer." THE SUBSCRIPTION PRICE PER SHARE (THE "SUBSCRIPTION PRICE")
WILL BE % OF THE LOWER OF (i) THE AVERAGE OF THE LAST REPORTED SALES PRICE OF
A SHARE OF THE FUND'S COMMON STOCK ON THE NYSE ON THE DATE OF THE EXPIRATION OF
THE OFFER (THE "PRICING DATE") AND ON THE FOUR PRECEDING BUSINESS DAYS AND (ii)
THE NET ASSET VALUE PER SHARE AS OF THE PRICING DATE.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER , 1996
UNLESS EXTENDED AS DESCRIBED HEREIN (THE "EXPIRATION DATE").
The Fund announced the Offer after the close of trading on the NYSE on
October 11, 1996. Shares of the Fund's Common Stock trade on the NYSE under the
symbol "FAK." The additional shares of Common Stock issued pursuant to the Offer
will be listed for trading on the NYSE, subject to notice of issuance. The net
asset value per share of the Fund's Common Stock at the close of business on
October , 1996 (the last trading date on which the Fund calculated its net
asset value prior to the announcement) and on November , 1996 (the last
trading date on which the Fund calculated its net asset value prior to the
Record Date) was $ and $ , respectively, and the last reported
sales price of a share of the Fund's Common Stock on the NYSE on those dates was
$ and $ , respectively.
Upon completion of the Offer, shareholders who do not fully exercise their
Rights will own a smaller proportional interest in the Fund than they owned
prior to the Offer. In addition, because the Subscription Price per Share will
be less than the net asset value per share on the Pricing Date, completion of
the Offer will result in an immediate dilution of net asset value per share for
all shareholders. Such dilution will disproportionately affect non-exercising
shareholders. Such dilution is not currently determinable because it is not
known what the net asset value per Share will be on the Pricing Date, what
proportion of the Shares will be subscribed for or what the Subscription Price
will be. If the Subscription Price per Share is substantially less than the net
asset value per share on the Pricing Date, such dilution could be substantial.
See "Risk Factors and Special Considerations--Dilution" and "The Offer--Terms of
the Offer." EXCEPT AS DESCRIBED HEREIN, SHAREHOLDERS WILL HAVE NO RIGHT TO
RESCIND THEIR SUBSCRIPTIONS AFTER RECEIPT OF THEIR PAYMENT FOR SHARES BY THE
SUBSCRIPTION AGENT.
The Fund is a non-diversified, closed-end management investment company. The
Fund's investment objective is long-term capital appreciation. The Fund seeks to
achieve its objective by investing primarily in equity and debt securities of
Korean Issuers (as defined in this Prospectus). See "Investment Objective and
Policies." INVESTMENT IN THE KOREAN SECURITIES INVOLVES RISKS THAT ARE NOT
NORMALLY INVOLVED IN INVESTMENTS IN SECURITIES OF U.S. COMPANIES. IN ADDITION,
ALTHOUGH THE FUND CURRENTLY INTENDS TO CONTINUE INVESTING PRINCIPALLY IN EQUITY
SECURITIES, IT MAY INVEST WITHOUT LIMITATION IN HIGH RISK, HIGH YIELD DEBT
INSTRUMENTS THAT ARE LOW RATED OR UNRATED AND ARE PREDOMINATELY SPECULATIVE.
INVESTMENT IN THE FUND SHOULD BE CONSIDERED SPECULATIVE. SEE "INVESTMENT
OBJECTIVE AND POLICIES" AND "RISK FACTORS AND SPECIAL CONSIDERATIONS."
(Continued on the following page)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Estimated Estimated Estimated
Subscription Sales Load(2) Proceeds to
Price(1) Fund(3)(4)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................... $ $ $
- ----------------------------------------------------------------------------------------------------------------
Total Maximum(5)............................. $ $ $
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(Footnotes on the following page)
------------------------
PAINEWEBBER INCORPORATED
------------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1996.
<PAGE> 4
(Continued from the previous page)
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing in the Fund. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated November , 1996 (the "SAI"),
containing additional information about the Fund, has been filed with the U.S.
Securities and Exchange Commission (the "Commission"), and is incorporated by
reference in its entirety into this Prospectus. A copy of the SAI, the table of
contents of which appears on page of this Prospectus, may be obtained
without charge by calling the Fund's Information Agent, D.F. King & Co., Inc.,
at (800) .
The Fund's investment manager is Fidelity Management & Research Corporation
(the "Investment Manager"). The Fund's investment adviser is Fidelity
International Investment Advisors (the "Investment Adviser"). The Fund's
investment sub-adviser is Fidelity Investments Japan Limited (the
"Sub-Adviser"). The Investment Manager, the Investment Adviser and Sub-Adviser,
as well as Fidelity Service Co., the Fund's Administrator, will benefit from the
Offer because their fees are based on the average net assets of the Fund. See
"Management of the Fund." The address of the Fund is 82 Devonshire Street,
Boston, Massachusetts 02109. The Fund's telephone number is (800) 426-5523.
[LOGO] is a registered trademark of FMR Corp.
------------------------
(Footnotes from the previous page)
(1) Estimated on the basis of [ % of the average of the last reported sales
price of a share of the Fund's Common Stock on the NYSE on November ,
1996 and the four preceding business days].
(2) In connection with the Offer, the Fund has agreed to pay PaineWebber
Incorporated (the "Dealer Manager"), and other broker-dealers soliciting
the exercise of Rights, solicitation fees equal to % of the
Subscription Price per Share for each Share issued pursuant to the exercise
of such Rights and the Over-Subscription Privilege. The Fund has also
agreed to pay the Dealer Manager a fee for financial advisory and marketing
services in connection with the Offer equal to % of the aggregate
Subscription Price for the Shares issued pursuant to the exercise of such
Rights and the Over-Subscription Privilege. The Fund and the Investment
Manager have agreed to indemnify the Dealer Manager and each Soliciting
Dealer against certain liabilities under the Securities Act of 1933, as
amended.
(3) Before deduction of offering expenses incurred by the Fund, estimated at
$ , including up to an aggregate of $ to be paid to the
Dealer Manager as partial reimbursement for its expenses relating to the
Offer.
(4) The funds received by check prior to the final due date of this Offer will
be deposited into a segregated interest-bearing account (which interest
will be paid to the Fund) pending proration and distribution of Shares.
(5) Assumes all Shares are purchased at the Estimated Subscription
Price. Pursuant to the Over-Subscription Privilege, the Fund may at the
discretion of the Board of Directors increase the number of Shares subject
to subscription by up to 25% of the Shares offered hereby. If the Fund
increases the number of Shares subject to subscription by 25%, the total
maximum Estimated Subscription Price, Estimated Sales Load and Estimated
Proceeds to Fund will be $ , $ and $ ,
respectively.
------------------------
Unless otherwise specified, references in this Prospectus to "dollars,"
"U.S.$," or "$" are to U.S. dollars and references to "Won" or "W" are to Korean
Won. On November , 1996, the market average exchange rate of the Won to the
U.S. dollar, as published by the Korea Financial Telecommunications and
Clearings Institute (the "Market Average Exchange Rate"), was W =
$1.00. Unless otherwise indicated, the U.S. dollar equivalent of information in
Korean Won as of a date or for a period is as of such date or for the
2
<PAGE> 5
end of such period and is based on The Bank of Korea concentration base rate, if
pre-March 1990, or the Market Average Exchange Rate, from March 1990. No
representation is made that the Won or U.S. dollar amounts in this Prospectus
could have been or could be converted into Won or U.S. dollars, as the case may
be, at any particular rate or at all. See "Risk Factors--Exchange Rate
Fluctuations" [and "The Republic of Korea--Foreign Exchange"] for additional
information on the historical rate of exchange between the U.S. dollar and Won.
Certain numbers in this Prospectus have been rounded for ease of
presentation, and, as a result, may not total precisely.
3
<PAGE> 6
FEE TABLE
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of the Subscription Price per Share)(1)....... %
ANNUAL EXPENSES (as a percentage of net assets attributable to common
shares)(2)
Management Fees(3)........................................................ 1.00%
Other Expenses(2)......................................................... %
Administration Fees(3).................................................. 0.20%
Other Operating Expenses................................................ %
Total Annual Expenses..................................................... %
</TABLE>
- ---------------
(1) The Fund has agreed to pay the Dealer Manager and the other broker-dealers
soliciting the exercise of Rights solicitation fees equal to % of
the Subscription Price per Share for each Share issued pursuant to the
exercise of the Rights and pursuant to the Over-Subscription Privilege. The
Fund has also agreed to pay the Dealer Manager a fee for financial advisory
and marketing services in connection with the Offer equal to % of
the aggregate Subscription Price for Shares issued pursuant to the exercise
of the Rights and pursuant to the Over-Subscription Privilege and to
reimburse the Dealer Manager for its out-of-pocket expenses up to an
aggregate of $ . In addition, the Fund has agreed to pay fees to
the Subscription Agent (as defined herein) and the Information Agent (as
defined herein), estimated to be $ and $ , respectively,
for their services related to the Offer and to reimburse them for their
out-of-pocket expenses. These fees will be borne by all of the Fund's
shareholders, including those shareholders who do not exercise their
Rights.
(2) Amounts are based on the Fund's most recently completed [fiscal year ended
September 30, 1996,] except that "Other Expenses" are based on estimated
amounts for the Fund's current fiscal year and assume that (i) all of the
Rights are exercised and (ii) the Fund does not increase the number of
Shares subject to subscription pursuant to the Over-Subscription Privilege.
(3) See "Management of the Fund" herein and in the SAI.
THE FOREGOING FEE TABLE IS INTENDED TO ASSIST INVESTORS IN UNDERSTANDING
THE VARIOUS COSTS AND EXPENSES THAT AN INVESTOR IN THE FUND WILL BEAR DIRECTLY
OR INDIRECTLY.
EXAMPLE
The following example demonstrates the projected U.S. dollar amount of
total cumulative expenses that would be incurred over various periods with
respect to a hypothetical investment in the Fund. These amounts are based upon
payment by an investor of a % sales load and payment by the Fund of
operating expenses at the levels set forth in the table above.
An investor would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) reinvestment of all dividends and
distributions at net asset value:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C>
$ $ $ $
</TABLE>
THIS EXAMPLE AS WELL AS THE INFORMATION SET FORTH IN THE TABLE ABOVE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF THE FUTURE EXPENSES OF THE FUND, AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while the
example assumes a 5% annual return, the Fund's performance will vary and may
result in a return greater or less than 5%. In addition, while the example
assumes reinvestment of all dividends and distributions at net asset value, this
may not be the case for participants in the Plan (as defined herein). See
"Dividends and Distributions; Dividend Reinvestment and Cash Purchase Plan."
4
<PAGE> 7
FINANCIAL HIGHLIGHTS
Set forth below is selected financial information, including ratios, for a
share of Common Stock outstanding throughout the periods indicated. Unless
otherwise indicated, the information set forth below has been audited by
, the Fund's independent accountants. Their report is included in the
financial statements and financial highlights of the Fund appearing in the SAI.
All of the information set forth below should be read in conjunction with the
financial statements and financial highlights of the Fund included in the SAI.
<TABLE>
<CAPTION>
OCTOBER 31, 1994
SIX MONTHS (COMMENCEMENT OF
ENDED MARCH OPERATIONS) TO
31, 1996 SEPTEMBER 30, 1995
----------- ------------------
(UNAUDITED)
<S> <C> <C>
SELECTED PER SHARE DATA
Net asset value, beginning of period..................... $ 12.62 $ 14.10
----------- ----------
Income from investment operations
Net investment income (loss)........................... .03(G) (.02) (G)
Net realized and unrealized gain (loss) on
investments......................................... (.73) (1.30)
----------- ----------
Total from investment operations......................... (.70) (1.32)
----------- ----------
Less distributions
From net investment income.............................
In excess of net investment income.....................
From net realized gain.................................
----------- ----------
Total distributions......................................
----------- ----------
Offering expenses........................................ -- (.16)
----------- ----------
Net asset value, end of period........................... $ 11.92 $ 12.62
========= ==============
Market value, end of period.............................. $11.375 $ 11.125
========= ==============
TOTAL RETURN(B)
Market value(F).......................................... 2.25% (25.83)%(C)
Net asset value(D)....................................... (5.55)% (9.47)%(E)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted).................. $52,547 $ 55,603
Ratio of expenses to average net assets.................. 1.83% (A) 1.88% (A)
Ratio of net investment income (loss) to average net
assets................................................. .51% (A) (.19)%(A)
Portfolio turnover rate.................................. 30% (A) 25% (A)
Average commission rate paid(H).......................... $ .1564 $ --
</TABLE>
- ---------------
(A) Annualized.
(B) Total returns for periods of less than one year are not annualized.
(C) Total market value return includes the one time sales load of 6.0% paid in
connection with the initial public offering.
(D) Total return based on net asset value reflects the effect of changes in the
net asset value on the performance of the fund, and assumes dividends and
capital gains distributions, if any, were reinvested. This percentage is
not an indication of the performance of a shareholder's investment in the
fund based on market value due to differences between the market price of
the stock and the net asset value of the fund.
(E) Total net asset value return does not include the effect of the offering
expenses or the one time sales load.
5
<PAGE> 8
(F) Total return based on market value reflects the effect of changes in the
fund's market value and assumes dividends and capital gains distributions,
if any, were reinvested.
(G) Net investment income per share has been calculated based on average shares
outstanding during the period.
(H) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
6
<PAGE> 9
MARKET AND NET ASSET VALUE INFORMATION
The Fund's currently outstanding shares of Common Stock are, and the Shares
offered by this Prospectus will be, listed on the NYSE. Shares of the Fund's
Common Stock commenced trading on the NYSE on October 26, 1994.
In the past, the Fund's shares have traded both at a premium and at a
discount in relation to net asset value. Although the Fund's shares recently
have traded at a premium above net asset value, there can be no assurance that
this premium will continue or that the shares will not trade at a discount.
Shares of closed-end investment companies frequently trade at a discount from
net asset value. See "Risk Factors and Special Considerations."
The following table shows for each of the periods indicated the high and
low market prices for shares of the Fund on the NYSE, high and low net asset
values per share and the premium or discount to net asset value per share at
which the Fund's shares were trading. Net asset value is calculated each day at
the close of the NYSE. See "Net Asset Value" in the SAI for information as to
the determination of the Fund's net asset value.
MARKET PRICE, NET ASSET VALUE PER SHARE AND PREMIUM/(DISCOUNT) OF FUND SHARES
<TABLE>
<CAPTION>
PREMIUM/(DISCOUNT)
TO NET ASSET
MARKET PRICE NET ASSET VALUE VALUE
------------------ ---------------- ----------------
FISCAL QUARTER ENDED HIGH LOW HIGH(1) LOW(1) HIGH(2) LOW(2)
- --------------------------------------- ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994...................... $ 15.125 $ 14.00 $13.76 $12.82 9.92% 9.20%
March 31, 1995......................... 14.50 10.25 12.74 12.04 13.81 (14.87)
June 30, 1995.......................... 10.875 9.75 11.64 11.27 (6.57) (13.49)
September 30, 1995..................... 11.375 9.875 12.91 11.43 (11.89) (13.60)
December 31, 1995...................... 11.750 10.625 13.02 11.86 (9.75) (10.41)
March 31, 1996......................... 11.625 10.875 12.15 11.58 (4.32) (6.09)
June 30, 1996.......................... 12.50 11.125 13.66 12.06 (8.49) (7.75)
September 30, 1996..................... 12.25 10.50 11.90 10.81 2.94 (2.87)
</TABLE>
- ---------------
Source: Bloomberg Financial and Fund Accounting Records.
(1) Based on the net asset value calculated at the close of business on the NYSE
trading day for which market price high and low information is provided.
(2) Calculated based on the information presented.
The last reported sales price, net asset value per share and percentage
[premium/discount] to net asset value per share of the Common Stock on November
, 1996 were $ , $ and %, respectively. As of November
, 1996, the Fund had shares of Common Stock outstanding and the net
assets of the Fund were $ .
7
<PAGE> 10
THE OFFER
PURPOSE OF THE OFFER
The Board of Directors of the Fund has determined that the Offer (as) is in
the best interest of the Fund and its shareholders because it represents an
opportunity to increase the assets of the Fund available for investment, thereby
enabling the Fund to take advantage more fully of existing and future investment
opportunities that may be available, consistent with the Fund's investment
objective of long-term capital appreciation through investment primarily in
equity and debt securities of Korean Issuers. The Fund's Board of Directors has
voted to approve the Offer.
In reaching its decision, the Board of Directors considered, among other
matters, advice by the Investment Manager that new funds would permit the Fund
to take advantage of available investment opportunities without having to sell
portfolio securities that the Investment Manager, the Investment Adviser and the
Sub-Adviser (collectively, "Fidelity") believe should be held. Fidelity believes
the Fund could take advantage of what it considers to be attractive investment
valuations in the Korean securities market. The Offer provides existing
shareholders the exclusive opportunity to purchase Shares at a discount to both
the market price and net asset value per share. The Board of Directors also
considered that increasing the size of the Fund through the Offer may result in
certain economies of scale which could in turn marginally lower the Fund's
expenses as a percentage of average net assets, although no assurance can be
given that this result will be achieved. The Board of Directors believes that
any resulting reduced expense ratio would be of long-term benefit to the Fund,
and that a well-subscribed rights offering could increase liquidity on the NYSE
where shares of the Fund's Common Stock are listed and traded. See "Management
of the Fund" herein.
The Fund's Investment Manager, Investment Adviser and Sub-Adviser, as well
as the Administrator, will benefit from the Offer because their fees are based
on the average net assets of the Fund. The Fund may, in the future and at its
discretion, choose to make additional rights offerings from time to time for a
number of shares and on terms which may or may not be similar to this Offer. Any
such future rights offering will be made in accordance with the requirements of
the Investment Company Act of 1940, as amended (the "1940 Act").
TERMS OF THE OFFER
The Fund is issuing to its shareholders of record ("Record Date
Shareholders") as of the close of business on November , 1996 (the "Record
Date") non-transferable rights ("Rights") entitling the holders thereof to
subscribe for an aggregate of shares (the "Shares") of the Fund's
Common Stock, par value $.001 per Share (the "Common Stock") ( Shares
if the Fund increases the number of shares available by up to 25% in connection
with the Over-Subscription Privilege). Each shareholder is being issued one
Right for each whole share of Common Stock owned on the Record Date. The Rights
entitle the holders thereof to subscribe for one Share for every
Rights held (1 for ). Fractional shares will not be issued upon the
exercise of Rights. Accordingly, Shares may be purchased in the Primary
Subscription only pursuant to the exercise of Rights in integral multiples of
. Record Date Shareholders may request additional Shares pursuant to
the Over-Subscription Privilege as described below. Rights may be exercised at
any time during the Subscription Period, which commences on November , 1996
and ends at 5:00 P.M., New York City time, on December , 1996 (referred to
herein as the "Expiration Date"), unless extended by the Fund until 5:00 P.M.,
New York City time, to a date not later than December , 1996. A
shareholder's right to acquire Shares during the Subscription Period at the
Subscription Price of one additional Share for every Rights held is
hereinafter referred to as the "Primary Subscription." The Rights are evidenced
by Subscription Certificates ("Subscription Certificates") that will be mailed
to Record Date Shareholders, except as discussed below under "Foreign
Restrictions."
Shares not subscribed for in the Primary Subscription will be offered, by
means of the Over-Subscription Privilege, to shareholders who have exercised all
Rights issued to them and who wish to acquire more than the number of Shares
they are entitled to purchase pursuant to their Rights. Shares acquired pursuant
to the Over-Subscription Privilege are subject to allotment and may be subject
to increase, as more fully discussed below under "Over-Subscription Privilege."
For purposes of determining the maximum number of Shares a
8
<PAGE> 11
shareholder may acquire pursuant to the Offer, shareholders whose shares are
held of record by Cede & Co. ("Cede"), as nominee for The Depository Trust
Company ("DTC"), or by any other depository or nominee will be deemed to be the
holders of the Rights that are issued to Cede or such other depository or
nominee on their behalf.
Since fractional Shares will not be issued, shareholders who receive or
have remaining fewer than Rights will be unable to purchase Shares
upon the exercise of such Rights and will not be entitled to receive any cash in
lieu thereof, although such shareholders may subscribe for Shares pursuant to
the Over-Subscription Privilege.
OVER-SUBSCRIPTION PRIVILEGE
To the extent shareholders do not exercise all the Rights issued to them,
any underlying Shares represented by such Rights will be offered by means of the
Over-Subscription Privilege to the shareholders who have exercised all the
Rights issued to them and who wish to over-subscribe for additional Shares. Only
shareholders who exercise all the Rights issued to them may indicate on the
Subscription Certificate, which they submit with respect to the exercise of the
Rights issued to them, how many Shares they desire to purchase pursuant to the
Over-Subscription Privilege. If sufficient Shares remain after completion of the
Primary Subscription, all over-subscription requests will be honored in full. If
sufficient Shares are not available after completion of the Primary Subscription
to honor all over-subscription requests, the Fund may, at the discretion of the
Board of Directors, issue shares of Common Stock up to an additional 25% of the
Shares available pursuant to the Offer (up to an additional Shares) in
order to cover such over-subscription requests. Regardless of whether the Fund
issues such additional Shares, and to the extent Shares are not available to
honor all over-subscription requests, the available Shares will be allocated
among those who over-subscribe so that the number of Shares issued to such
shareholders will generally be in proportion to the number of shares of Fund
Common Stock owned by such shareholders on the Record Date. The allocation
process may involve a series of allocations in order to assure that the total
number of Shares available for over-subscription is distributed on a pro rata
basis.
Banks, brokers, trustees and other nominee holders of Rights will be
required to certify to the Subscription Agent, before any Over-Subscription
Privilege may be exercised as to any particular beneficial owner, as to the
aggregate number of Rights exercised pursuant to the Primary Subscription and
the number of Shares subscribed for pursuant to the Over-Subscription Privilege
by such beneficial owner and that such beneficial owner's Primary Subscription
was exercised in full. Nominee Holder Over-Subscription Forms and Beneficial
Owner Certification Forms will be distributed with the Subscription
Certificates.
The Fund will not offer or sell in connection with the Offer any Shares
that are not subscribed for pursuant to the Primary Subscription or the
Over-Subscription Privilege.
SUBSCRIPTION PRICE
The Subscription Price for the Shares to be issued pursuant to the Offer
will be % of the lower of (i) the average of the last reported sales price of
a share of the Fund's Common Stock on the NYSE on the date of the expiration of
the Offer (the "Pricing Date") and on the four preceding business days and (ii)
the net asset value per share as of the close of business on the Pricing Date.
For example, if the average of the last reported sales price of a share of the
Fund's Common Stock on the NYSE on the Pricing Date and on the four preceding
business days is $ , and the net asset value per share on the Pricing Date
is $ , the Subscription Price will be $ ( % of $ ). If, however,
the average of the last reported sales price on the NYSE on the Pricing Date and
on the four preceding business days is $ , and the net asset value per share
on the Pricing Date is $ , the Subscription Price will be $ ( % of
$ ). See "Market and Net Asset Value Information."
The Fund announced the Offer after the close of trading on the NYSE on
October 11, 1996. The net asset value per share of Common Stock at the close of
business on October 4, 1996 (the last trading date on which the Fund calculated
its net asset value prior to the announcement) and on November , 1996 (the
last trading date on which the Fund calculated its net asset value prior to the
Record Date) was $10.58 and
9
<PAGE> 12
$ , respectively, and the last reported sales price of a share of the
Fund's Common Stock on the NYSE on those dates was $ and $ ,
respectively.
NON-TRANSFERABILITY OF RIGHTS
The Rights are non-transferable and, therefore, may not be purchased or
sold. The Rights will not be listed for trading on the NYSE or any other
securities exchange. However, the additional shares of Common Stock to be issued
pursuant to the Offer will be listed for trading on the NYSE, subject to notice
of official issuance.
EXPIRATION OF THE OFFER
The Offer will expire at 5:00 P.M., New York City time, on December ,
1996, unless extended by the Fund until 5:00 P.M., New York City time, to a date
not later than December , 1996. The Rights will expire on the Expiration Date
and thereafter may not be exercised. Since the Expiration Date and the Pricing
Date will be the same date, shareholders who decide to acquire Shares in the
Primary Subscription or pursuant to the Over-Subscription Privilege will not
know the purchase price of the Shares when they make their decision. Any
extension of the Offer will be followed as promptly as practicable by
announcement thereof. Such announcement will be issued no later than 9:00 A.M.,
New York City time, on the next business day following the previously scheduled
Expiration Date. Without limiting the manner in which the Fund may choose to
make such announcement, the Fund will not, unless otherwise required by law,
have any obligation to publish, advertise or otherwise communicate any such
announcement other than by making a release to the Dow Jones News Service or
such other means of announcement as the Fund deems appropriate.
SUBSCRIPTION AGENT
The Subscription Agent is State Street Bank and Trust Company. The
Subscription Agent will receive for its administrative, processing, invoicing
and other services as subscription agent, a fee estimated to be approximately
$ , as well as reimbursement for all out-of-pocket expenses related to
the Offer. The Subscription Agent is also the Fund's transfer agent,
dividend-paying agent and registrar. Questions regarding the Subscription
Certificates should be directed to State Street Bank and Trust Company, Two
Heritage Drive, North Quincy, Massachusetts 02171 U.S.A. (800) 426-5523 (toll
free); shareholders may also consult their brokers or nominees. Signed
Subscription Certificates should be sent together with proper payment of the
Estimated Subscription Price (as defined below) for all Shares subscribed in the
Primary Subscription and the Over-Subscription Privilege to State Street Bank
and Trust Company by one of the methods described below. Notices of Guaranteed
Delivery may be sent by facsimile to (617) 774-4519, to be received by the
Subscription Agent prior to 5:00 P.M., New York City time, on the Expiration
Date. Facsimiles should be confirmed by telephone to (617) 774-4511. The Fund
will accept only properly completed and executed Subscription Certificates
actually received at any of the addresses listed below, prior to 5:00 P.M., New
York City time, on the Expiration Date or by the close of business on the third
business day after the Expiration Date following timely receipt of a Notice of
Guaranteed Delivery.
(1) BY FIRST CLASS MAIL OR EXPRESS MAIL:
State Street Bank and Trust Company
Corporate Reorganization
P.O. Box 9061
Boston, Massachusetts 02205-8686
U.S.A.
(2) BY EXPRESS MAIL OR OVERNIGHT COURIER:
State Street Bank and Trust Company
Corporate Reorganization
Two Heritage Drive
North Quincy, Massachusetts 02171
U.S.A.
10
<PAGE> 13
(3) BY HAND:
State Street Bank and Trust Company
Corporate Reorganization
225 Franklin Street--Concourse Level
Boston, Massachusetts 02110
U.S.A.
or
Bank Boston
c/o Boston EquiServe
Corporate Reorganization
55 Broadway -- 3rd Floor
New York, New York 10006
DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES LISTED ABOVE WILL NOT
CONSTITUTE VALID DELIVERY.
METHOD OF EXERCISE OF RIGHTS
Rights are evidenced by Subscription Certificates ("Subscription
Certificates") that, except as described below under "Foreign Restrictions,"
will be mailed to shareholders or, if a shareholder's shares of Common Stock are
held by Cede or any other depository or nominee on their behalf, to Cede or such
depository or nominee. Rights may be exercised by completing and signing the
Subscription Certificate that accompanies this Prospectus and mailing it in the
envelope provided, or otherwise delivering the completed and signed Subscription
Certificate to the Subscription Agent, together with payment in full for the
Shares at the estimated Subscription Price (the "Estimated Subscription Price")
as described below under "Payment for Shares." Rights may also be exercised by
contacting your broker, banker or trust company, which can arrange, on your
behalf, to guarantee delivery of payment and delivery of a properly completed
and executed Subscription Certificate pursuant to a Notice of Guaranteed
Delivery ("Notice of Guaranteed Delivery"). A fee may be charged for this
service. Fractional Shares will not be issued and shareholders who receive or
who have remaining fewer than Rights will not be able to purchase
Shares upon the exercise of such Rights (although such shareholders may
subscribe for Shares pursuant to the Over-Subscription Privilege). Completed
Subscription Certificates must be received by the Subscription Agent prior to
5:00 P.M., New York City time, on the Expiration Date (unless the guaranteed
delivery procedures are complied with as described below under "Payment for
Shares") at the office of the Subscription Agent at one of the addresses set
forth above.
Shareholders Who Are Record Owners. Shareholders who are record owners can
choose between either option set forth under "Payment for Shares" below. If time
is of the essence, option (2) under "Payment for Shares" below will permit
delivery of the Subscription Certificate and payment after the Expiration Date.
Shareholders Whose Shares Are Held by a Nominee. Shareholders whose shares
are held by a nominee, such as a broker or trustee, must contact that nominee to
exercise their Rights. In that case, the nominee will complete the Subscription
Certificate on behalf of the investor and arrange for proper payment by one of
the methods set forth under "Payment for Shares" below.
Nominees. Nominees who hold shares of Common Stock for the account of
others should notify the beneficial owners of such shares as soon as possible to
ascertain such beneficial owners' intentions and to obtain instructions with
respect to the Rights. If the beneficial owner so instructs, the nominee should
complete the Subscription Certificate and submit it to the Subscription Agent
with the proper payment described under "Payment for Shares" below.
FOREIGN RESTRICTIONS
Subscription Certificates will not be mailed to shareholders whose record
addresses are outside the United States. For these purposes, the United States
includes its territories and possessions and the District of Columbia. Such
shareholders of record will receive written notice of the Offer. The Rights to
which those
11
<PAGE> 14
Subscription Certificates relate will be held by the Subscription Agent for such
foreign shareholders' accounts until instructions are received to exercise the
Rights. If no instructions are received by the Expiration Date, such Rights will
expire.
INFORMATION AGENT
Any questions or requests for assistance may be directed to D.F. King &
Co., Inc. (the "Information Agent") at the telephone number and address listed
below:
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York
10005
Toll Free: (800)
or
Call Collect:
Shareholders may also contact their brokers or nominees for information
with respect to the Offer.
The Information Agent will receive an estimated fee of approximately
$ as well as reimbursement for all out-of-pocket expenses related to
the Offer which are estimated to be $ .
PAYMENT FOR SHARES
Shareholders who wish to acquire Shares in the Primary Subscription and
pursuant to the Over-Subscription Privilege may choose between the following
methods of payment:
(1) A shareholder can send the Subscription Certificate together with
payment for the Shares acquired in the Primary Subscription and for additional
Shares subscribed for pursuant to the Over-Subscription Privilege to the
Subscription Agent. Payment should be calculated on the basis of the Estimated
Subscription Price of $ per Share for all Shares subscribed. To be
accepted, such payment, together with the properly completed and executed
Subscription Certificate, must be received by the Subscription Agent at the
Subscription Agent's office at the address set forth above prior to 5:00 P.M.,
New York City time, on the Expiration Date. The Subscription Agent will deposit
all checks and money orders received by it prior to the final payment date into
a segregated interest-bearing account (which interest will be paid to the Fund)
pending proration and distribution of Shares. A PAYMENT PURSUANT TO THIS METHOD
MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK OR
BRANCH LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO FIDELITY ADVISOR KOREA
FUND, INC. AND MUST ACCOMPANY A PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION
CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO BE ACCEPTED. BECAUSE
UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR,
SHAREHOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF A
CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
(2) Alternatively, a subscription will be accepted by the Subscription
Agent if, prior to 5:00 P.M., New York City time, on the Expiration Date, the
Subscription Agent has received a Notice of Guaranteed Delivery by facsimile
(telecopy) or otherwise from a bank, a trust company, or a NYSE member
guaranteeing delivery of (i) payment of the Estimated Subscription Price of
$ per Share for the Shares subscribed for in the Primary Subscription
and for any additional Shares requested pursuant to the Over-Subscription
Privilege, and (ii) a properly completed and executed Subscription Certificate.
The Subscription Agent will not honor a Notice of Guaranteed Delivery unless a
properly completed and executed Subscription Certificate together with full
payment is received by the Subscription Agent by the close of business on the
third business day after the Expiration Date (December , 1996, unless the
Offer is extended) (the "Protect Period").
12
<PAGE> 15
Within eight business days following the Protect Period (December ,
1996, unless the Offer is extended) (the "Confirmation Date"), a confirmation
will be sent by the Subscription Agent to each subscribing shareholder (or, if
the shareholder's shares of Common Stock are held by Cede or any other
depository or nominee on such shareholder's behalf, to Cede or such depository
or nominee), showing (i) the number of Shares acquired pursuant to the Primary
Subscription, (ii) the number of Shares, if any, acquired pursuant to the
OverSubscription Privilege, (iii) the per Share and total purchase price of the
Shares, and (iv) any additional amount payable by such shareholder to the Fund
or any excess to be refunded by the Fund to such shareholder, in each case based
on the Subscription Price as determined on the Pricing Date. If any shareholder
exercises his right to acquire Shares pursuant to the Over-Subscription
Privilege, any such excess payment which would otherwise be refunded to the
shareholder will be applied by the Fund toward payment for Shares acquired
pursuant to exercise of the Over-Subscription Privilege. Any additional payment
required from a shareholder must be received by the Subscription Agent within
ten business days after the Confirmation Date (December , 1996, unless the
Offer is extended). Any excess payment to be refunded by the Fund to a
shareholder will be mailed by the Subscription Agent to such shareholder as
promptly as possible. All payments by a shareholder must be in United-States
Dollars by money order or check drawn on a bank or branch located in the United
States of America and payable to FIDELITY ADVISOR KOREA FUND, INC.
The Subscription Agent will deposit all checks received by it prior to the
final payment date into a segregated interest-bearing account (which interest
will accrue to the benefit of the Fund) pending distribution of the Shares.
Whichever of the two methods described above is used, issuance and delivery
of certificates for the Shares purchased are subject to collection of checks and
actual payment pursuant to any Notice of Guaranteed Delivery.
SHAREHOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR SUBSCRIPTION AFTER RECEIPT
OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT, EXCEPT AS PROVIDED BELOW
UNDER "NOTICE OF NET ASSET VALUE DECLINE."
If a shareholder who acquires Shares pursuant to the Primary Subscription
or Over-Subscription Privilege does not make payment of any additional amounts
due by the tenth business day after the Confirmation Date, the Fund reserves the
right to take any or all of the following actions: (i) sell such subscribed and
unpaid-for Shares to other shareholders, (ii) apply any payment actually
received by it toward the purchase of the greatest whole number of Shares which
could be acquired by such holder upon exercise of the Primary Subscription
and/or Over-Subscription Privilege, and/or (iii) exercise any and all other
rights or remedies to which it may be entitled.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE FUND WILL BE AT THE ELECTION AND RISK OF THE RIGHTS
HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND
PAYMENT BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS
TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF
CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Fund, whose determinations will
be final and binding. The Fund in its sole discretion may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Fund determines
in its sole discretion. The Fund will not be under any duty to give notification
of any defect or irregularity in connection with the submission of Subscription
Certificates or incur any liability for failure to give such notification.
13
<PAGE> 16
NOTICE OF NET ASSET VALUE DECLINE
The Fund has, pursuant to the regulatory requirements of the U.S.
Securities and Exchange Commission (the "'Commission"), undertaken to suspend
the Offer until it amends this Prospectus if, subsequent to November , 1996
(the effective date of the Fund's Registration Statement), the Fund's net asset
value declines more than 10% from its net asset value as of that date.
Accordingly, the Fund will notify shareholders of any such decline and permit
shareholders to cancel their exercise of Rights prior to the expiration of the
Offer.
DELIVERY OF SHARE CERTIFICATES
Certificates representing Shares acquired in the Primary Subscription will
be mailed promptly after the expiration of the Offer and full payment for the
Shares subscribed for has been received and cleared. Certificates representing
Shares acquired pursuant to the Over-Subscription Privilege will be mailed as
soon as practicable after full payment has been received and cleared and all
allocations have been effected. Participants in the Fund's Dividend Reinvestment
and Cash Purchase Plan (the "Plan") will have any Shares acquired in the Primary
Subscription and pursuant to the Over-Subscription Privilege credited to their
shareholder dividend reinvestment accounts in the Plan. Participants in the Plan
wishing to exercise Rights for the shares of Common Stock held in their accounts
in the Plan must exercise them in accordance with the procedures set forth
above. Shareholders whose Shares are held of record by Cede or by any other
depository or nominee on their behalf or their broker-dealer's behalf will have
any Shares acquired in the Primary Subscription credited to the account of Cede
or such other depository or nominee. Shares acquired pursuant to the
Over-Subscription Privilege will be certificated and stock certificates
representing such Shares will be sent directly to Cede or such other depository
or nominee. Stock certificates will not be issued for Shares credited to Plan
accounts.
FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
For U.S. federal income tax purposes, neither the receipt nor the exercise
of the Rights by shareholders will result in taxable income to holders of Common
Stock, and no loss will be realized if the Rights expire without exercise.
A shareholder's holding period for a Share acquired upon exercise of a
Right begins with the date of exercise. The basis of a Right will be (a) to a
shareholder who exercises the Right (i) if the fair market value of the Right on
such date of distribution is less than 15% of the fair market value of the
Common Stock with regard to which it is issued, zero unless the holder elects,
by filing a statement with such investor's timely filed federal income tax
return for the year in which the Right is received, to allocate the basis of the
Common Stock between the Right and the Common Stock based on their respective
fair market values on such date of distribution and (ii) if the fair market
value of the Right on such date of distribution is 15% or more of the fair
market value of the Common Stock with regard to which it is distributed, a
portion of the basis in the Common Stock based upon the respective fair market
values of the Common Stock and the Right on such date of distribution and (b) to
a shareholder who allows the Right to expire, zero. A shareholder's basis for
determining gain or loss upon the sale of a Share acquired upon the exercise of
a Right will be equal to the sum of the shareholder's basis in the Right, if
any, and the Subscription Price per Share. A shareholder's gain or loss
recognized upon a sale of a Share acquired upon the exercise of a Right will be
capital gain or loss if the Share was held at the time of sale as a capital
asset and will be long-term capital gain or loss if the Share is held for more
than one year.
The foregoing is a general summary of the material U.S. federal income tax
consequences of the Offer under the provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), and Treasury regulations presently in effect
that are generally applicable to shareholders that are citizens or residents of
the United States, U.S. Corporations, trusts, estates and any other person who
would be subject to U.S. federal income tax upon the sale or exchange of the
Common Stock acquired upon the exercise of the Rights, and does not cover
foreign, state or local taxes. The Code and such regulations are subject to
change by legislative or administrative action, which may be retroactive.
Shareholders should consult their tax advisers regarding specific questions as
to foreign, federal, state or local taxes. See "Taxation--U.S. Federal Income
Taxes" herein and in the SAI.
14
<PAGE> 17
EMPLOYEE PLAN CONSIDERATIONS
Shareholders that are employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (including
corporate savings and 401(k) plans), Keogh or H.R. 10 plans of self-employed
individuals and Individual Retirement Accounts ("IRAs") (collectively, "Benefit
Plans") should be aware that additional contributions of cash to the Benefit
Plan (other than rollover contributions or trustee-to-trustee transfers from
other Benefit Plans) in order to exercise Rights would be treated as Benefit
Plan contributions and, when taken together with contributions previously made,
may subject a Benefit Plan, among other things, to excise taxes for excess or
nondeductible contributions. In the case of Benefit Plans qualified under
Section 401(a) of the Code, additional cash contributions could cause the
maximum contribution limitations of Section 415 of the Code or other
qualification rules to be violated.
Benefit Plans and other tax exempt entities, including governmental plans,
should also be aware that if they borrow in order to finance their exercise of
Rights, they may become subject to the tax on unrelated business taxable income
("UBTI") under Section 511 of the Code. If any portion of an IRA is used as
security for a loan, the portion so used is also treated as distributed to the
IRA depositor.
ERISA contains fiduciary responsibility requirements, and ERISA and the
Code contain prohibited transaction rules, that may impact the exercise of
Rights. Due to the complexity of these rules and the penalties for
noncompliance, Benefit Plans should consult with their counsel regarding the
consequences of their exercise of Rights under ERISA and the Code.
DILUTION
Upon the completion of the Offer, shareholders who do not exercise their
Rights fully will own a smaller proportional interest in the Fund than would be
the case if the Offer had not been made. In addition, because the Subscription
Price of each Share will be less than the net asset value per share of the
Fund's Common Stock as of the Pricing Date, the completion of the Offer will
result in a dilution of net asset value per share for all shareholders, which
will disproportionately affect shareholders who do not exercise their Rights in
full. Although it is not possible to state precisely the amount of such decrease
in net asset value per share because it is not known at this time what the net
asset value per share will be on the Expiration Date or what proportion of the
Shares will be subscribed for, or what the Subscription Price will be, such
dilution could be substantial. For example, assuming all of the Shares are sold
at the Estimated Subscription Price and after deducting all expenses related to
the issuance of the Shares, the Fund's net asset value per share on November
, 1996 would be reduced by approximately $ or % (or, in the event
that all of the Rights are exercised and the Fund increases the number of Shares
subject to subscription by 25% pursuant to the Over-Subscription Privilege, by
approximately $ or %). See "Risk Factors and Special
Considerations--Dilution."
IMPORTANT DATES TO REMEMBER
<TABLE>
<CAPTION>
EVENT DATE
- ---------------------------------------------------------------------- -------------------
<S> <C>
Record Date........................................................... November , 1996
Subscription Period................................................... November , 1996-
December , 1996*
Expiration Date and Pricing Date...................................... December , 1996*
Subscription Certificates and Payment for Shares Due+................. December , 1996*
Notice of Guaranteed Delivery Due+.................................... December , 1996*
Payment for Guarantees of Delivery Due................................ December , 1996*
Confirmation to Participants.......................................... December , 1996*
Final Payment for Shares.............................................. December , 1996*
</TABLE>
- ---------------
* Unless the Offer is extended to a date not later than December , 1996.
+ A shareholder exercising Rights must deliver either (i) a Subscription
Certificate and Payment for Shares or (ii) a Notice of Guaranteed Delivery by
December , 1996.
15
<PAGE> 18
THE FUND
The Fund, incorporated in Maryland, on May 25, 1994, is a non-diversified,
closed-end management investment company registered under the 1940 Act. The
Fund's investment objective is long-term capital appreciation. The Fund seeks to
achieve its objective by investing primarily in equity and debt securities of
Korean Issuers.
The Fund commenced operations on October 31, 1994 following an initial
public offering of 4,400,000 shares of its Common Stock. Since inception, the
Fund has paid or declared dividends and capital gains distributions aggregating
approximately $ . As of November , 1996, the value of the Fund's net
assets was approximately $ . As of November , 1996, in excess of %
of the Fund's net assets were invested in securities of Korean Issuers.
USE OF PROCEEDS
If Shares are sold at the Estimated Subscription Price of
$ per Share, net proceeds of the Offer to the Fund would be
approximately $ , after deducting offering expenses payable by the
Fund, including the fees and expenses of the Dealer Manager named on the cover
page hereof and other offering expenses estimated to total $ . If the
Fund increases the number of Shares subject to subscription by up to 25%, or
Shares, in order to satisfy oversubscription requests, the additional
net proceeds will be approximately $ . Fidelity has advised the Fund
that it will invest the net proceeds of the Offer in accordance with the Fund's
investment objective and the policies set forth under "Investment Objective and
Policies" within six months of the Expiration Date, depending on market
conditions and the availability of appropriate securities. Pending such
investment, the proceeds will be invested in Temporary Investments (as defined
below). See "Investment Objective and Policies--Temporary Investments."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital appreciation. The Fund
seeks to achieve its objective through investment primarily in equity and debt
securities of Korean Issuers. As a matter of fundamental policy and under normal
market conditions, the Fund will invest at least 65% of its total assets in
equity and debt securities of Korean Issuers. As of September 30, 1996,
approximately % of the Fund's net assets were invested in equity securities,
and Fidelity currently anticipates that at least % of the proceeds of the
Offer will be invested in equity securities of Korean Issuers. As used herein,
"Korean Issuers" are entities that, as determined by Fidelity, (i) are organized
under the laws of Korea, (ii) regardless of where organized derive at least 50%
of their revenues or profits from goods produced or sold, investments made or
services performed or have at least 50% of their assets located in Korea, (iii)
have the primary trading market for their securities in Korea or (iv) are the
government, or its agencies or instrumentalities or other political
subdivisions, of Korea. The Fund invests in companies that, in the opinion of
Fidelity, possess the potential for growth. The Fund does not consider dividend
income as a primary factor in choosing securities, unless Fidelity believes the
income will contribute to or is an indicator of the securities' growth
potential.
Currently, foreign investors, including the Fund, are permitted to invest
in the following equity securities: (i) common and preferred stock listed on the
Korea Stock Exchange (the "KSE"); (ii) non-guaranteed convertible bonds listed
on the KSE of small and medium-sized companies, shares of which are listed on
the KSE, with foreign investors in the aggregate and a single foreign investor
being allowed to invest in up to 30% and 5%, respectively, of the listed value
of each class of such bonds; (iii) certain government or public bonds with low
interest rates comparable to international interest rates acquired in the
primary market; (iv) warrants representing the right to subscribe for shares of
a listed company; (v) certain Won-denominated bonds issued by foreign
corporations and sold outside of Korea; (vi) global or other types of depositary
receipts representing rights in shares of a Korean Issuer which are issued
outside Korea; (vii) convertible bonds denominated in non-Won currency and
issued outside Korea; and (viii) equity warrants issued together with bonds
denominated in non-Won currency outside Korea. Although the Fund is authorized
to engage in various strategies to hedge its portfolio against adverse changes
in the relationship between the U.S. dollar and the
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<PAGE> 19
Won, it is not currently permitted to do so in Korea under Korean laws or
regulations, except as described below, and there can be no assurance that such
strategies will become permissible and available in Korea in the future.
Currently, under Korean law, the Fund may enter into forward transactions
between the Won and foreign currency with a foreign exchange bank in Korea up to
the amount of Won which the Fund holds in connection with its investment in
Korean shares plus the value of Korean shares which it has purchased and holds
in its portfolio. The Fund does not presently intend to engage in these
strategies outside of Korea but reserves the right to do so in the future.
The Fund's investment objective and policy of investing at least 65% of its
total assets in equity and debt securities of Korean Issuers is fundamental and
cannot be changed without the approval of a majority of the Fund's outstanding
voting securities, which, as used herein, means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are present in person or represented by proxy or (ii) more than 50% of the
outstanding shares. The Fund's investment policies that are not designated
fundamental policies may be changed by the Fund without shareholder approval.
The Fund is designed primarily for long-term investment, and investors should
not consider it a short-term trading vehicle. As with all investment companies,
there can be no assurance that the Fund's investment objective will be achieved.
Equity securities include common stocks, preferred stocks, American, global
or other types of depositary receipts, rights or warrants to purchase common or
preferred stock, equity interests in trusts, partnerships, joint ventures or
similar enterprises and debt securities convertible into common or preferred
stock.
Korean law currently permits foreign investors such as the Fund to acquire
debt securities denominated in Won to a very limited extent. At the present
time, however, foreign investors are permitted to invest in debt securities
issued by Korean companies outside of Korea and denominated in currencies other
than the Won (including, for example, bonds (which may have attached warrants),
convertible bonds, floating rate notes and commercial paper). If, in the future,
additional Won-denominated debt securities become permissible investments for
foreign investors, the Fund may invest in such securities.
Debt securities may be unrated or be rated below instrument grade. The
Investment Adviser will make independent evaluations as to the creditworthiness
of issuers of debt securities that may differ from those of internationally
recognized credit rating agency organizations, such as Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P"). The
Fund's success in attaining its investment objective with respect to investments
in debt securities will depend largely on the Investment Adviser's evaluation of
the current and future creditworthiness of issuers, and of interest rate trends.
Sustained periods of deteriorating economic conditions or rising interest rates
are more likely to lead to a weakening in the issuer's capacity to pay interest
and repay principal than in the case of higher-rated securities.
Most of the securities purchased by the Fund are traded on a stock exchange
or in an over-the-counter market. Subject to applicable laws and regulations,
the Fund, however, may invest up to 35% of its total assets in illiquid
securities, that is, equity or debt securities for which there is no readily
available market or no market at all. The Fund may therefore not be able to sell
readily such securities. Such securities are unlike securities that are traded
in the open market and which can be expected to be sold immediately. The sale
price of securities that are not readily marketable may be lower or higher than
the Fund's most recent estimate of their fair value. Generally, less public
information is available with respect to the issuers of these securities than
with respect to companies whose securities are traded on an exchange. Securities
not readily marketable are more likely to be issued by start-up, small or family
businesses and therefore subject to greater economic, business and market risks
than the listed securities of more well-established companies. Adverse
conditions in the public securities markets may at certain times preclude a
public offering of an issuer's securities. While Korean law requires
registration with a government agency of public offerings of securities, that
law does not contain restrictions like those contained in the U.S. Securities
Act of 1933, as amended (the "Securities Act") regarding the length of time the
securities must be held or manner of resale. There may also be contractual
restrictions on the resale of securities.
Up to 35% of the Fund's total assets may be invested in equity or debt
securities of Asian Issuers, if warranted, in Fidelity's judgment, by economic
or political conditions in Korea or by regulatory restrictions or
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<PAGE> 20
overvaluation in the Korean securities markets. Asian Issuers are issuers (other
than issuers meeting the definition of Korean Issuers as defined above), that,
as determined by Fidelity, (i) are organized under the laws of Hong Kong, Japan
or Taiwan, (ii) regardless of where organized derive at least 50% of their
revenues or profits from goods produced or sold, investments made, or services
performed in Hong Kong, Japan or Taiwan, (iii) have the primary trading market
for their securities in Hong Kong, Japan or Taiwan or (iv) are governments, or
their agencies, instrumentalities or other political sub-divisions, of Hong
Kong, Japan or Taiwan. The Fund may also hold other instruments described below
and under "Appendix A--General Characteristics and Risks of Derivatives" in the
SAI.
The Fund may invest its assets in a broad spectrum of industries. In
selecting industries and companies for investment, Fidelity may consider overall
growth prospects, financial condition, earnings, valuations, competitive
position, technology, research and development, productivity, labor costs, raw
material costs and sources, profit margins, return on investment, structural
changes in local economies, capital resources, the degree of government
regulation or deregulation, management and other factors.
Fidelity normally will invest the Fund's assets according to its investment
strategy. For temporary defensive purposes, the Fund may invest without
limitation in Temporary Investments (as defined below) and investment grade debt
instruments, including unrated securities of equivalent credit quality as
determined by Fidelity, short-term indebtedness or cash equivalents denominated
in U.S. dollars or, if it becomes permissible for the Fund to so invest,
denominated in Won. The Fund may also at any time, with respect to up to 35% of
its total assets, invest funds in U.S. dollar-denominated money market
instruments as reserves for dividends and other distributions to shareholders.
TEMPORARY INVESTMENTS
The Fund may hold and/or invest its assets without limitation in cash
and/or Temporary Investments pending initial investment in accordance with the
Fund's investment objective and policies and for temporary defensive purposes.
To the extent that the Fund invests in Temporary Investments, it may not achieve
its investment objective. In addition, for cash management purposes, the Fund
may invest its assets in cash and/or rated or unrated short-term debt securities
of any quality.
Temporary Investments include high grade debt securities (rated A or above
by S&P or A or above by Moody's or with an equivalent rating by any other
nationally recognized securities rating organization) or unrated securities
judged by Fidelity to be of equivalent quality, denominated in U.S. dollars or
in another freely convertible currency including: (1) short-term (less than 12
months to maturity) and medium-term (not more than five years to maturity)
obligations issued or guaranteed by (a) the U.S. government, its agencies or
instrumentalities or (b) international organizations designated or supported by
multiple foreign governmental entities to promote economic reconstruction or
development ("supranational entities"); (2) U.S. finance company obligations,
corporate commercial paper and other short-term commercial obligations; (3)
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances) of banks; and (4) repurchase agreements with respect
to securities in which the Fund may invest.
Repurchase agreements are contracts pursuant to which the seller of a
security agrees at the time of sale to repurchase the security at an agreed upon
price and date. When the Fund enters into a repurchase agreement, the seller
will be required to maintain the value of the securities subject to the
repurchase agreement, at not less than their repurchase price. Repurchase
agreements may involve risks in the event of insolvency or other default by the
seller, including possible delays or restrictions upon the Fund's ability to
dispose of the underlying securities. While it does not appear possible to
eliminate all risks from these transactions, it will be the Fund's policy to
limit repurchase agreement transactions to those parties whose creditworthiness
has been reviewed and found satisfactory by Fidelity.
OTHER INVESTMENTS
Illiquid Securities. The Fund may invest up to 35% of its total assets,
valued at the time of purchase, in illiquid securities, that is, securities for
which there is no readily available market, or no market at all.
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<PAGE> 21
The Fund may be unable to dispose of its holdings in illiquid securities at
market prices and may have to dispose of such securities over extended periods
of time. See "Risk Factors and Special Considerations-- Market Characteristics
and--Thinly Traded Markets and Illiquid Investments." In many cases, illiquid
securities will be subject to contractual or legal restrictions on transfer. In
addition, issuers whose securities are not publicly traded may not be subject to
the disclosure and other investor protection requirements that may be applicable
if their securities were publicly traded.
Although not all the securities held by the Fund will be illiquid, the Fund
anticipates that all or most of its portfolio securities generally will be less
liquid than those traded in U.S. securities markets.
Depositary Receipts. The Fund may invest in securities of Korean Issuers
through sponsored or unsponsored American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), and other types of Depositary Receipts (which,
together with ADRs and GDRs, are hereinafter referred to as "Depositary
Receipts"). Depositary Receipts may not necessarily be denominated in the same
currency as the underlying securities into which they may be converted. In
addition, the issuers of the stock of unsponsored Depositary Receipts are not
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
the Depositary Receipts. ADRs are Depositary Receipts typically issued by a U.S.
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. GDRs and other types of Depositary Receipts are
typically issued by foreign banks or trust companies, although they also may be
issued by U.S. banks or trust companies, and evidence ownership of underlying
securities issued by either a foreign or a U.S. corporation. Generally,
Depositary Receipts in registered form are designed for use in the U.S.
securities markets and Depositary Receipts in bearer form are designed for use
in securities markets outside the United States. For purposes of the Fund's
investment policies, the Fund's investments in ADRs, GDRs and other types of
Depositary Receipts will be deemed to be investments in the underlying
securities.
Shares of Other Investment Funds. The Fund may invest in investment funds
which invest principally in securities in which the Fund is authorized to
invest. The Fund does not intend to invest in such investment funds unless, in
the judgment of Fidelity, the potential benefits of such investment justify the
payment of any applicable premium, sales load and expenses. From time to time,
such investment funds may be the sole means by which the Fund may invest in
securities of certain Korean Issuers. See "Risk Factors and Special
Considerations--Investment Restrictions and Foreign Exchange Controls." Under
the 1940 Act, the Fund may invest a maximum of 10% of its total assets in the
securities of other investment companies. In addition, under the 1940 Act, not
more than 5% of the Fund's total assets may be invested in the securities of any
one investment company provided that the investment does not represent more than
3% of the voting stock of the related acquired investment company. To the extent
the Fund invests in other investment funds, the Fund's shareholders will
indirectly incur certain duplicative fees and expenses, including investment
advisory fees and sales loads paid for transactions in shares of such funds. For
a discussion of possible consequences under U.S. federal income tax laws of the
Fund's investment in foreign investment funds, see "Taxation-- U.S. Federal
Income Taxes."
Rule 144A Securities. The Fund may purchase certain restricted securities
("Rule 144A securities") for which there is a secondary market of qualified
institutional buyers, as contemplated by Rule 144A under the Securities Act.
Rule 144A provides an exemption from the registration requirements of the
Securities Act for the resale of certain restricted securities to qualified
institutional buyers. One effect of Rule 144A is that certain Rule 144A
securities may be liquid, though there is no assurance that a liquid market for
any particular Rule 144A security will develop or be maintained. In promulgating
Rule 144A, the Commission stated that the ultimate responsibility for liquidity
determinations is that of an investment company's board of directors. However,
the Commission stated that the board may delegate the day-to-day function for
determining liquidity to a fund's investment adviser, provided that the board
retains sufficient oversight. The Board of Directors has adopted policies and
procedures for the purpose of determining whether securities that are eligible
for resale under Rule 144A are liquid or illiquid securities. Pursuant to those
policies and procedures, the Board of Directors delegated to the Investment
Manager and the Investment Adviser the determination as to whether a particular
security is liquid or illiquid. For the purpose of determining whether the Fund
can
19
<PAGE> 22
invest in additional illiquid securities, if any Rule 144A security previously
determined to be liquid is later determined to be illiquid, such security will
be considered illiquid.
Convertible Securities. The Fund may invest in convertible securities
including securities that are unrated or rated below investment grade. See "Risk
Factors and Special Considerations--Debt Securities-- High Yield, High Risk
Securities."
A convertible security might be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Fund is called for redemption,
the Fund may be required to permit the issuer to redeem the security, convert it
into the underlying common or preferred stock or sell it to a third party.
Warrants. The Fund may invest in warrants, which are securities
permitting, but not obligating, their holder to subscribe for other securities.
Warrants do not carry the right to dividends or voting rights with respect to
their underlying securities, and they do not represent any rights in the assets
of the issuer. An investment in warrants may be considered speculative. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date. Currently, foreign investors, including
the Fund, are not permitted to invest in rights or warrants to purchase equity
securities issued in Korea.
Equity-Linked Debt Securities. The Fund may invest in equity-linked debt
securities. The amount of interest and/or principal payments which the issuer of
equity-linked debt securities is obligated to make is linked to the performance
of a specified index of equity securities and may be significantly greater or
less than payment obligations in respect of other types of debt securities. As a
result, equity-linked debt securities are more volatile than other types of debt
securities and an investment in equity-linked debt securities may be considered
speculative.
Loans and Other Direct Debt Instruments. The Fund may invest in loans and
other direct debt instruments. Loans and other direct debt instruments are
interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other parties. Direct debt instruments involve the
risk of loss in case of default or insolvency of the borrower and may offer less
legal protection to the Fund in the event of fraud or misrepresentation. In
addition, loan participations involve a risk of insolvency of the lending bank
or other financial intermediary. Direct debt instruments may also include
standby financing commitments that obligate the Fund to supply additional cash
to the borrower on demand. Loans and other direct debt instruments are generally
illiquid and transfers are normally possible only through individually
negotiated private transactions. See "Risk Factors and Special
Considerations--Loans and Other Direct Debt Instruments."
Borrowings. The Fund may borrow for temporary or emergency purposes and to
finance tender offers and share repurchases. Borrowings by the Fund create an
opportunity for greater total return but, at the same time increase exposure to
capital risk. In addition, borrowed funds are subject to interest costs which
may offset or exceed the return earned on investment of such funds, and which,
if the borrowed funds are used to pay dividends or finance share repurchases or
tender offers, will reduce the Fund's net income. Although the Fund is permitted
to borrow, as indicated above, the Fund has no present intention of engaging in
leveraging by borrowing.
Reverse Repurchase Agreements. In a reverse repurchase agreement, the Fund
sells a portfolio instrument to another party, such as a bank or broker-dealer,
in return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, the Fund will
maintain appropriate assets in a segregated custodial account to cover its
obligation under the agreement, which will consist only of liquid assets, such
as cash, U.S. government securities or other liquid high grade debt securities
("liquid assets"). The Fund will enter into reverse repurchase agreements only
with parties whose creditworthiness has been found satisfactory by Fidelity.
Such transactions may increase fluctuations in the market value of the Fund's
assets and may be viewed as a form of leverage.
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<PAGE> 23
Real Estate-Related Instruments. The Fund may invest in real
estate-related instruments, including real estate investment trusts, commercial
and residential mortgage-backed securities, and real estate financings. Real
estate-related instruments are sensitive to factors such as changes in real
estate values and property taxes, interest rates, cash flow of underlying real
estate assets, overbuilding, and the management skill and creditworthiness of
the issuer. Real estate-related instruments may also be affected by tax and
regulatory requirements, such as those relating to the environment.
ADDITIONAL INVESTMENT PRACTICES
HEDGING AND DERIVATIVES
Certain investment practices in which the Fund is authorized to engage to
hedge market risk, such as certain currency hedging techniques, including
currency options and futures, options on such futures and forward foreign
currency transactions, and certain investment techniques, such as the lending of
portfolio securities, forward commitments, standby commitment agreements and the
purchase or sale of put and call options, are not currently permitted under
Korean laws or regulations. The Fund may engage in these hedging or investment
practices to the extent the practices become available in the future or with
respect to instruments outside Korea. See "Appendix A--General Characteristics
and Risks of Derivatives" in the SAI for a further discussion of currency
hedging techniques. The Fund is also authorized to manage the effective maturity
or duration of debt instruments held by the Fund, or to seek to increase the
Fund's income or gain. Although these strategies are regularly used by some
investment companies and other institutional investors, few of these strategies
can practicably be used to a significant extent by the Fund at the present time
and may not become available for extensive use in the future. Over time,
techniques and instruments may change as new instruments and strategies are
developed or regulatory changes occur.
Subject to the constraints described above, the Fund may purchase and sell
interest rate, currency or stock index futures contracts and enter into currency
forward contracts and currency swaps; it may purchase and sell (or write)
exchange listed and over-the-counter put and call options on debt and equity
securities, currencies, futures contracts, fixed income and stock indices and
other financial instruments and it may enter into interest rate transactions,
equity swaps and related transactions and other similar transactions which may
be developed to the extent Fidelity determines that they are consistent with the
Fund's investment objective and policies and applicable regulatory requirements
(collectively, these transactions are referred to herein as "Derivatives." See
"Appendix A--General Characteristics and Risks of Derivatives") in the SAI. The
Fund may enter into futures contracts or options thereon for purposes other than
bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open contracts and options would not exceed 5% of
the liquidation value of the Fund's portfolio; provided, that in the case of an
option that is in-the-money at the time of the purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. The Fund's interest rate
transactions may take the form of swaps, caps, floors and collars, currency
forward contracts, currency futures contracts, currency swaps and options on
currency or currency futures contracts.
Derivatives may be used to attempt to protect against possible changes in
the market value of securities held in or to be purchased for the Fund's
portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of those securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
or to establish a position in the derivatives markets as a substitute for
purchasing or selling particular debt or equity securities. The ability of the
Fund to utilize Derivatives successfully will depend on the Investment Adviser's
ability to predict pertinent market movements, which cannot be assured. These
skills are different from those needed to select portfolio securities. The use
of Derivatives in certain circumstances will require that the Fund segregate
cash, liquid high grade debt obligations or other assets to the extent the
Fund's obligations are not otherwise "covered" through ownership of the
underlying security, financial instrument or currency.
A detailed discussion of Derivatives, including applicable requirements of
the U.S. Commodity Futures Trading Commission and the U.S. Securities and
Exchange Commission, the requirement to segregate assets
21
<PAGE> 24
with respect to these transactions and special risks associated with such
strategies, appears in Appendix A in the SAI. See also "Risk Factors and Special
Considerations--Investment Practices."
The degree of the Fund's use of Derivatives may be limited by certain
provisions of the Code. See "Taxation."
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase securities on a when-issued or delayed delivery
basis. Securities purchased on a when-issued or delayed delivery basis are
purchased for delivery beyond the normal settlement date at a stated price. No
income accrues to the purchaser of a security on a when-issued or delayed
delivery basis prior to delivery. Such securities are recorded as an asset and
are subject to changes in value based upon changes in market prices. Purchasing
a security on a when-issued or delayed delivery basis can involve a risk that
the market price at the time of delivery may be lower than the agreed-upon
purchase price, in which case there could be an unrealized loss at the time of
delivery. The Fund generally will establish a segregated account in which it
will maintain liquid assets in an amount at least equal in value to the Fund's
commitments to purchase securities on a when-issued or delayed delivery basis.
If the value of these assets declines, the Fund will place additional liquid
assets in the account on a daily basis so that the value of the assets in the
account is equal to the amount of such commitments. As an alternative, the Fund
may elect to treat when-issued or delayed delivery securities as senior
securities representing indebtedness, which are subject to asset coverage
requirements under the 1940 Act.
PURCHASE OF SECURITIES ON MARGIN
The Fund does not currently intend to purchase securities on margin, except
that the Fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts will not constitute
purchasing securities on margin. Current Korean laws and regulations do not
allow foreign investors such as the Fund to purchase Korean securities on
margin.
SHORT SALES "AGAINST THE BOX"
The Fund may from time to time sell securities short "against the box." If
the Fund enters into a short sale against the box, it will be required to set
aside securities equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities at no added cost)
and will be required to hold such securities while the short sale is
outstanding. The Fund will incur transaction costs, including interest expense,
in connection with opening, maintaining, and closing short sales against the
box. If the Fund engages in any short sales against the box it will incur the
risk that the security sold short will appreciate in value after the sale, with
the result that the Fund will lose the benefit of any such appreciation.
The Fund may enter into short sales with respect to stocks underlying its
convertible security holdings. For example, if the Investment Adviser
anticipates a decline in the price of the stock underlying a convertible
security the Fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value of the
convertible security.
The Fund's obligation to replace the securities borrowed in connection with
a short sale will be secured by collateral deposited with the broker that
consists of cash, U.S. government securities or other liquid high grade debt
obligations. In addition, the Fund will place in a segregated account with its
custodian, or designated sub-custodian, an amount of cash, U.S. government
securities or other liquid high grade debt obligations equal to the difference,
if any, between (1) the market value of the securities sold at the time they
were sold short and (2) any cash, U.S. government securities or other liquid
high grade debt obligations deposited as collateral with the broker in
connection with the short sale (not including the proceeds of the short sale).
Until it replaces the borrowed securities, the Fund will maintain the segregated
account daily at a level so that (1) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds from the short
sale) will equal the current market value of the securities sold short [and
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<PAGE> 25
(2) the amount deposited in the account plus the amount deposited with the
broker (not including the proceeds from the short sale) will not be less than
the market value of the securities at the time they were sold short.] A lesser
amount of assets may be set aside by the Fund if it owns certain types of
instruments, such as a call option on the security sold short, that effectively
"cover" the short sale.
Short sales by the Fund involve certain risks and special considerations.
Possible losses from short sales differ from losses that could be incurred from
a purchase of a security, because losses from short sales may be unlimited,
whereas losses from purchases can equal only the total amount invested. The Fund
is not currently permitted under Korean laws and regulations to engage in short
sales of Korean securities.
RISK FACTORS AND SPECIAL CONSIDERATIONS
DILUTION
An immediate dilution of the net asset value per share of Common Stock will
be experienced as a result of the Offer because the Subscription Price will be
less than the Fund's then net asset value per share (and the Fund will incur
expenses in connection with the Offer), and the number of shares outstanding
after the Offer will increase in a greater percentage than the increase in the
size of the Fund's assets. In addition, Record Date shareholders who do not
fully exercise their Rights should expect that they will, at the completion of
the Offer, own a smaller proportional interest in the Fund than would otherwise
be the case. Although it is not possible to state precisely the amount of such a
decrease in net asset value per share because it is not known at this time what
the net asset value per share will be on the Expiration Date or what proportion
of the Shares will be subscribed for or what the Subscription Price will be,
such dilution could be substantial. For example, assuming all of the Shares are
sold at the Estimated Subscription Price and after deducting all expenses
related to the issuance of the Shares, the Fund's current net asset value per
share would be reduced by approximately $ or % (or, in the event that
all of the rights are executed and the Fund increases the number of Shares
subject to subscription by 25% pursuant to the Over-Subscription Privilege, by
approximately $ or %).
RISK OF INVESTING IN KOREAN AND OTHER ASIAN ISSUERS
Investors should recognize that investing in securities of Korean Issuers
and other Asian Issuers involves certain risks and special considerations
including those set forth below, which are not typically associated with
investing in U.S. securities. These include: (i) certain restrictions on foreign
investment in the Korean securities markets which will preclude investment in
certain securities by the Fund and limit investment opportunities for the Fund;
(ii) currency devaluations and fluctuations in the rate of exchange between the
U.S. dollar and the Won with the resultant fluctuations in the net asset value
of the Fund (which is expressed in U.S. dollars); (iii) substantial government
involvement in, and influence on, the Korean economy and the private sector;
(iv) political, economic and social instability, including the potential for
increased militarization in North Korea; (v) the substantially smaller size and
lower trading volume of the securities markets for Korean equity securities
compared to the U.S. securities markets, resulting in a potential lack of
liquidity and increased price volatility; (vi) the risk that large Korean
institutional investors may adversely impact the market value of securities in
the Fund's portfolio; (vii) the risk that less information with respect to
Korean companies may be available due to the fact that Korean accounting,
auditing and financial reporting standards are not equivalent to those
applicable to U.S. companies; (viii) the heavy concentration of market
capitalization and trading volume in a small number of issuers, which results in
potentially fewer investment opportunities for the Fund; (ix) fluctuations in
the prices and premium valuations of securities held by the Fund that are traded
over the counter among foreign investors; (x) controls on foreign investment and
limitations on repatriation of invested capital and on the Fund's ability to
exchange Wons for U.S. dollars; (xi) the risk of nationalization or
expropriation of assets or confiscatory taxation; (xii) higher rates of
inflation; (xiii) less government supervision and regulation of Korean
securities markets and participants in those markets; (xiv) settlement delays;
(xv) the risk that tax or dividends will be withheld at the source; (xvi) the
unavailability of currency hedging techniques in the Korean markets; (xvii) the
fact that companies in Korea may be smaller, less seasoned and newly organized;
(xviii) the risk that it may be more difficult to obtain
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<PAGE> 26
and/or enforce a judgment in a court outside the United States; and (xix) the
risk of taxation of the Fund, its investments and its income by Korea.
INVESTMENT RESTRICTIONS AND FOREIGN EXCHANGE CONTROLS
Investment in securities of Korean companies by foreign investors is
subject to significant restrictions and controls. As a result, the Fund may be
limited in its investments or precluded from investing in certain Korean
companies, which may adversely affect the performance of the Fund. Conversion of
Won into U.S. dollars or other foreign exchange, transfer of funds from Korea to
foreign countries and repatriation of foreign capital invested in Korea are
subject to certain regulatory requirements pursuant to foreign exchange control
laws and regulations. See "The Securities Markets of Korea--Regulation of
Foreign Investment." Under the Foreign Exchange Management Act, if the Minister
of Finance and Economy of Korea deems that an event of emergency is likely to
occur, he may impose any necessary restrictions such as requiring foreign
investors, including the Fund, to obtain approval for the acquisition of Korean
equity shares or for the remittance overseas of the sale proceeds thereof.
Foreign investors are allowed to directly purchase and sell equity
securities listed on the KSE subject to certain investment ceiling and
procedural requirements. As of October 1, 1996, the limit on the percentages of
a company's outstanding equity shares that may be held by foreign investors as a
group was raised to 20%. Foreign investors such as the Fund are unable to effect
share purchase transactions on the KSE in a security that has reached or
exceeded the maximum aggregate foreign ownership limit (or the limit less
odd-lot shares). As of June 30, 1996, of the 30 largest KSE-listed companies (as
measured by total market capitalization), which accounted for approximately
50.5% of the aggregate market capitalization of the KSE, nearly all had reached
or exceeded the applicable maximum aggregate foreign ownership limit. As of
September 24, 1996, 85 companies of the 724 companies listed on the KSE had
reached or exceeded the applicable maximum aggregate foreign ownership limit
(11.7% of all companies listed on the KSE). As of June 30, 1996, 13.4% and 11.2%
of the permitted foreign holding amount were invested by foreign investors in
terms of KSE market capitalization and the number of shares, respectively.
During 1994 and 1995, U.S.$18.7 billion was invested in Korea by foreign
investors for stock investment, of which U.S.$14.5 billion in stock investments
was sold and repatriated outside Korea. As of June 30, 1996, foreign investors
held 808.7 million shares, which amounted to 11.2% of the total number of listed
shares and 13.4% of total KSE market capitalization at that time. During the
first six months in 1996, aggregate inflow of foreign stock investments totaled
U.S.$7.1 billion by foreign investors and aggregate sales and repatriation of
foreign stock investments equaled U.S.$4.1 billion. The Korean government has
implemented a system to monitor foreign investment limits and transactions,
including the issuance of an investment registration card to each foreign
investor for stock investment and a separate card for bond investment. The Fund
has obtained the stock investment registration card and the bond investment
registration card.
The Securities and Exchange Commission of Korea ("the KSEC") has authority
to increase or decrease foreign investment limits and from time to time has
exercised such authority. The Korean government has announced its intention to
gradually raise the aggregate foreign investment limit by 3% in each of 1997,
1998 and 1999, and to consider in 2000 whether it will abolish such limit. If,
and when, the aggregate foreign investment limit is raised, the Fund may have
more flexibility in selecting investments for its portfolio. There can be no
assurance that the aggregate foreign investment limit will be raised. As of
, 1996, foreign investors are allowed (i) to invest in
non-guaranteed convertible bonds listed on the KSE which are issued by small and
medium-sized companies the shares of which are listed on the KSE, with foreign
investors in the aggregate and a single foreign investor being allowed to invest
in up to 30% and 5% of the listed value of each class of such bonds,
respectively; (ii) to participate in new issues of certain low interest rate
government or public bonds to be designated from time to time and up to the
limit determined from time to time by the KSEC; (iii) to purchase warrants
representing the right to subscribe for shares of a listed company; and (iv) to
purchase certain Won-denominated bonds issued by foreign corporations and sold
outside of Korea, each denominated in Won and in each case subject to certain
procedural requirements.
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<PAGE> 27
Securities acquired by foreign investors must be traded on the KSE, with
certain exceptions as described below. For transactions on the KSE, a foreign
investor must open a Won account for securities transactions with a securities
company for stock investment and a separate account for bond investment and at
that time must present its investment registration card to the securities
company.
A foreign investor which intends to acquire shares must designate a foreign
exchange bank in Korea at which it must open a foreign currency account and a
Won account ("Foreign Currency Account" and "Won Account," respectively)
exclusively for stock investments and a separate set of such accounts for bond
investments. No approval is required for remittance into Korea and deposit of
foreign currency funds in the Foreign Currency Account. Upon confirmation by the
designated foreign exchange bank, foreign currency funds may be transferred from
the Foreign Currency Account at the time required to place a deposit for, or to
settle the purchase price of, a stock purchase transaction to a Won account
opened at a securities company. Funds in the Foreign Currency Account may be
remitted abroad without any governmental approval.
Dividends on shares, or interest on bonds, of Korean companies are paid in
Won. No governmental approval is required for foreign investors to receive
dividends or interest on, or the Won proceeds of the sale of, any such shares or
bonds to be paid, received and retained in Korea. Dividends paid on, and the Won
proceeds of the sale of, any such shares or bonds held by a non-resident of
Korea must be deposited either in a Won account with the investor's securities
company or its Won Account according to the type of investment (i.e., monies
relating to stock investment must be deposited at the stock account and monies
relating to bond investment must be placed in the bond account). Funds in the
investor's Won Account may be transferred to its Foreign Currency Account or
withdrawn for local living expenses (subject to a certain limitations), in each
case report to the investor's designated foreign exchange bank. In addition,
funds in the Won Account may be used for future investment in stocks or bonds or
for payment of the subscription price of new shares obtained through the
exercise of pre-emptive rights. In 1995, certain designated securities companies
were allowed to open foreign currency accounts and Won accounts with foreign
exchange banks exclusively for accommodating foreign investors' stock
investments in Korea.
The repatriation of capital invested by foreign investors may be restricted
by the Korean government in its discretion in certain emergency circumstances
including, but not limited to, sudden fluctuations in interest rates or exchange
rates, extreme difficulty in stabilizing the balance of payments or a
substantial disturbance in the Korean financial or capital markets. It is
impossible to predict the extent to which foreign investment will continue to
increase in Korea or the Fund's ability to participate in such increased foreign
investment in light of the foreign holding limitations or governmental
restrictions that may be imposed in the future.
Foreign investors may trade securities of Korean companies only through the
KSE except in certain limited circumstances, which include odd-lot trading of
securities, acquisition of shares by exercise of warrant, conversion rights
under convertible bonds or withdrawal rights under depositary receipts issued
outside of Korea by a Korean company, acquisition of shares as a result of
exercising applicable conversion rights attached to certain eligible domestic
convertible bonds issued by listed small and medium-sized companies, acquisition
of shares as a result of inheritance, donation, bequeathal or exercise of
shareholders' rights (preemptive rights or rights to participate in free
distributions and receive dividends), and direct transactions between foreigners
involving the transfer of a class of shares for which the ceiling on acquisition
by foreigners in total (as explained above) has been reached or exceeded
("foreign OTC transactions"). Odd-lot trading of shares outside the KSE must
involve a licensed securities company in Korea as the second party. For direct
transfers of shares outside the KSE between foreigners, a securities company
licensed in Korea must act as an intermediary. However, foreign investors such
as the Fund are not permitted to enter into such foreign OTC transactions with
branches and subsidiaries of foreign banks, securities companies and insurance
companies. Foreign OTC transactions typically occur at a premium over prices on
the KSE. The Fund may invest in shares of KSE-listed companies through such
foreign OTC transactions, and thus pay a premium over the share prices quoted on
the KSE. There can be no assurance that the Fund will be able to realize such
premium if it sells the shares to another foreign investor. Such premium may be
affected by changes in regulation and otherwise, including any change in the
percentage of foreign stock ownership permitted in KSE-listed companies. Foreign
investors are prohibited from engaging in margin transactions.
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<PAGE> 28
EXCHANGE RATE FLUCTUATIONS
Fidelity currently anticipates that, once the proceeds of the Offer are
fully invested, at least 80% of the Fund's total assets will be invested in
equity securities of Korean Issuers. As a result, most of the income received by
the Fund, and assets held by the Fund will be denominated in Won. The
computation of net asset value and the distribution of income by the Fund,
however, will be made in U.S. dollars. Therefore, the Fund's reported net asset
value and its computation and distribution of income in U.S. dollars will be
affected adversely by reductions in the value of the Won relative to the U.S.
dollar. The Fund also will incur costs of conversion between currencies. In
addition, the computation of income and capital gains will be made on the date
of its accrual by the Fund at the foreign exchange rate in effect on that date,
and thus, if the value of the Won falls relative to the U.S. dollar between
recognition of the income and the making of Fund distributions, the Fund may be
required to liquidate investments in order to make distributions if the Fund has
insufficient cash in U.S. dollars to meet distribution requirements under the
Code. Such liquidation of investments, if required, may have adverse effects on
the Fund's performance. In addition, if the liquidated investments include
securities that have been held less than three months, such sales may jeopardize
the Fund's status as a regulated investment company under the Code. See
"Taxation."
Prior to 1980, the value of the Won was fixed against the U.S. dollar. In
January 1980, the Korean government devalued the Won against the U.S. dollar by
16.6%, in part to enhance the competitiveness of Korean exports. Since June 1,
1996, the permitted daily range of fluctuation was increased to plus or minus
2.25%. See ["The Securities Markets of Korea--Recent Market and Economic
Developments--Financial Liberalization and Market Opening Plan" and "The
Republic of Korea--Foreign Exchange."] The Won appreciated in value an aggregate
of 23.74% relative to the U.S. dollar between December 1985 and December 1989,
depreciated by 18.9% in value relative to the U.S. dollar between December 1989
and December 1993, and appreciated again by 4.13% in value relative to the U.S.
dollar between December 1993 and December 1995. See ["The Republic of Korea."]
The Fund is permitted to engage in a variety of currency hedging
transactions, which may involve certain risks, although such transactions, with
certain exceptions, are not currently permitted under Korean law or regulations.
See "Investment Objective and Policies--Other Investments," "Additional
Investment Activities" and "Appendix A--General Characteristics and Risks of
Derivatives" in the SAI.
POLITICAL AND ECONOMIC FACTORS
The value of the Fund's assets may be adversely affected by political,
economic or social instability in Korea. Following World War II, the Korean
peninsula was partitioned. The demilitarized zone at the boundary between Korea
and North Korea was established after the Korean War of 1950-1953 and is
supervised by United Nations forces. The United States maintains a military
force in Korea to help deter the ongoing military threat from North Korean
forces. The situation remains a source of tension, although negotiations to ease
tensions and resolve the political division of the Korean peninsula have been
carried on from time to time. There also have been efforts from time to time to
increase economic, cultural and humanitarian contacts between North Korea and
Korea. There can be no assurance that such negotiations or efforts will continue
to occur or will result in an easing of tensions between North Korea and the
Republic. Tension between the two Koreas rose following the announcement in
March 1993 by North Korea of its intention to withdraw from the Nuclear
Non-Proliferation Treaty. Subsequent events involving, among other things, North
Korea's refusal to comply with the Nuclear Non-Proliferation Treaty and the
death on July 8, 1994 of North Korea's President, Kim Il-Sung, have caused the
level of tension between the two Koreas to fluctuate. Recently, tension between
Korea and North Korea was increased following the discovery of a North Korean
submarine off the coast of Korea on September 1996 and the ensuing manhunt for
the submarine's crew members and North Korean commandos. No assurance can be
given that the level of tension with North Korea will not increase or change
abruptly as a result of future events, including political developments in North
Korea following developments in the dispute concerning North Korea's nuclear
program (such as any moves to impose trade sanctions against North Korea,
further increasing political tensions and the risk of military conflict) or
developments related to proposed meetings between Korea and North Korea. See
"The Republic of Korea."
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<PAGE> 29
The heightened tensions between Korea and North Korea have depressed new
foreign investment in Korea from time to time and the availability of foreign
financing for Korean companies, and the uncertainty surrounding the situation
may adversely affect the economic climate in Korea. The tensions between North
Korea and Korea also may adversely affect both the prices of the Fund's
portfolio securities and the Fund's share price.
In addition, there have been reports of increased militarization in North
Korea, accompanied by a general economic decline in that country. Military
action or the risk of military action or the economic collapse of North Korea
could have a material adverse effect on Korea, and consequently, on the ability
of the Fund to achieve its investment objective.
The domestic political situation in Korea has undergone significant change
in recent years. Following the 1979 assassination of President Park Chung Hee,
General Chun Doo Hwan became President under an authoritarian regime which
emphasized social and political order, while encouraging renewed economic
growth. Following public demonstrations, Roh Tae Woo was democratically elected
as President in December 1987. In December 1992, the Korean people elected Kim
Young Sam as President. Kim Young Sam is the first popularly elected President
of Korea since 1960 not affiliated with the military.
With its lack of natural resources and with exports constituting a large
proportion of GNP, the Korean economy is significantly affected by changes in
commodity prices (particularly oil), changes in protectionist sentiment among
its trading partners and exchange rate movements. The rapid economic development
of Korea has in the past led to large foreign borrowings.
Korean companies tend to be substantially more leveraged than U.S. and
European companies. The high degree of leverage increases the risk of business
failures should adverse business conditions develop. In addition, Korean
accounting, auditing and financial reporting standards and practices are not
equivalent to those in the United States. Therefore, certain material
disclosures (including disclosures as to off-balance sheet financing loan
guaranties) may not be made, and less information may be available with respect
to investments in Korea than with respect to those in the United States.
MARKET CHARACTERISTICS
Differences Between the U.S. and Korean Markets. The Korean securities
markets have substantially less volume than the NYSE, and equity and debt
securities of most Korean companies are less liquid and more volatile than
equity and debt securities of U.S. companies of comparable size. Many companies
traded on Korean securities markets are smaller, newer and less seasoned than
companies whose securities are traded on securities markets in the United
States. Investments in smaller companies involve greater risk than is
customarily associated with investing in larger companies. Smaller companies may
have limited product lines, markets or financial or managerial resources and may
be more susceptible to losses and risks of bankruptcy. Additionally, market
making and arbitrage activities are generally less extensive in such markets,
which may contribute to increased volatility and reduced liquidity of such
markets. Accordingly, the Korean securities markets may be subject to greater
influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the United
States. To the extent that Korea experiences rapid increases in its money supply
and investment in equity securities for speculative purposes, the equity
securities traded in Korea may trade at price-earnings multiples higher than
those of comparable companies trading on securities markets in the United
States, which may not be sustainable. Korean securities markets may also be
subject to substantial governmental control, which may cause sudden or prolonged
disruptions in market prices unrelated to supply and demand considerations. This
may also be true of currency markets. The development of the Korean securities
markets may be attributed to, among other things, the Korean government's
extensive involvement in the private sector, including the securities markets.
The aggregate market capitalization of domestic equity securities listed on the
KSE was approximately W134 trillion (approximately U.S.$165 billion) at June 30,
1996, as compared to approximately U.S.$6.47 trillion on the NYSE. As discussed
above in "Investment Restrictions and Foreign Exchange Controls," however, only
a small portion of the equity securities that compose this market capitalization
may be purchased by foreign investors.
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The Korean government has from time to time taken measures to minimize
excessive price volatility on the KSE, including the imposition of limitations
on daily price movements of securities and varying margin requirements. Such
actions by the Korean government have had and in the future could have a
significant effect on the market prices and dividend yields of Korean equity
securities. In particular, during 1990, the Korea Securities Stabilization Fund
(the "Stabilization Fund"), a partnership operated by its contributors which
include substantially all KSE-listed companies, Korean securities companies and
certain institutional investors, was formed to stabilize the market through the
purchase and sale of securities. On April 30, 1996, the contributors to the
Stabilization Fund adopted a resolution to liquidate the Stabilization Fund on
May 3, 1996. Such resolution provided that upon the liquidation of the
Stabilization Fund, its cash and liquid assets, amounting to approximately Won
1.3 trillion, would be distributed to its members by August 1996, while the
listed shares held by the Stabilization Fund, with an aggregate market value of
Won 4.1 trillion, will be deposited with the Korea Securities Depositary and
thereafter distributed to its members at the rate of 20% per annum beginning in
May 1998. This schedule for distribution of listed shares is subject to
amendment in accordance with market conditions.
Government Supervision of Korean Securities Markets; Legal System. There
is less government supervision and regulation of securities exchanges, listed
companies and brokers in Korea than exists in the United States. Less
information, therefore, may be available to the Fund than in respect of
investments in the United States. Further, in Korea, less information may be
available to the Fund than to local market participants. Brokers in Korea may
not be as well capitalized as those in the United States, so that they are more
susceptible to financial failure in times of market, political, or economic
stress. In addition, existing laws and regulations are often inconsistently
applied. As legal systems in Korea develop, foreign investors may be adversely
affected by new laws and regulations, changes to existing laws and regulations
and preemption of local laws and regulations by national laws. In circumstances
where adequate laws exist, it may not be possible to obtain swift and equitable
enforcement of the law. Currently a mixture of legal and structural restrictions
affect the Korean securities markets.
Financial Information and Standards. Korean accounting, auditing and
financial standards and requirements differ, in some cases significantly, from
those applicable to U.S. issuers. In particular, the assets and profits
appearing on the financial statements of a Korean issuer may not reflect its
financial position or results of operations in accordance with U.S. generally
accepted accounting principles. In addition, for an issuer that keeps accounting
records in local currency, inflation accounting rules may require, for both tax
and accounting purposes, that certain assets and liabilities be restated on the
issuer's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits. Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the real condition of
those issuers and securities markets. Moreover, substantially less information
may be publicly available about issuers in Korea than is available about U.S.
issuers.
SUBSTANTIAL GOVERNMENT INFLUENCE ON THE PRIVATE SECTOR
The Korean government has historically exercised and continues to exercise
substantial influence over many aspects of the private sector. The Korean
government from time to time has informally influenced the payment of dividends
and the prices of certain products, encouraged companies to invest or to
concentrate in particular industries, induced mergers between companies in
industries suffering from excess capacity and induced private companies to
publicly offer their securities. In addition, the government has sought to
minimize excessive price volatility on the KSE through various steps, including
the imposition of limitations on daily price movements of securities. Such
actions by the government in the future could have a significant effect on the
market prices and dividend yields of equity securities, including those in the
Fund's portfolio.
THINLY TRADED MARKETS AND ILLIQUID INVESTMENTS
Compared to securities traded in the United States, generally all
securities of Korean Issuers may be considered to be thinly traded. Even
relatively widely held securities in Korea may not be able to absorb trades of a
size customarily transacted by institutional investors, without price
disruptions. Accordingly, the Fund's ability to reposition itself will be more
constrained than would be the case for a mutual fund that invests in the
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<PAGE> 31
U.S. equity market. The Fund, in addition, may invest up to 35% of its total
assets in illiquid equity or debt securities, that is, securities for which
there is no readily available market, or no market at all. Investment of the
Fund's assets in relatively illiquid securities may restrict the ability of the
Fund to dispose of its investments in a timely fashion and for a fair price as
well as its ability to take advantage of market opportunities. The risks
associated with illiquidity are particularly acute in situations in which the
Fund's operations require cash, such as when the Fund repurchases shares,
commences a tender offer, or pays dividends or distributions, and could result
in the Fund borrowing to meet short-term cash requirements or incurring capital
losses on the sale of illiquid investments. Further, companies whose securities
are not publicly traded are not subject to the disclosure and other investor
protection requirements which would be applicable if their securities were
publicly traded.
Illiquid investments are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they are
valued because of the absence of a market for such investments. Under the
supervision of the Board of Directors, the Investment Manager and the Investment
Adviser determine the liquidity of the Fund's investments and, through reports
from the Investment Manager, the Board monitors investments in illiquid
instruments. In determining the liquidity of the Fund's investments, the
Investment Manager and the Investment Adviser may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of dealers
and prospective purchasers in the marketplace, (3) dealer undertakings to make a
market, (4) the nature of the security (including any demand or tender
features), and (5) the nature of the marketplace for trades (including the
ability to assign or offset the Fund's rights and obligations relating to the
investment). In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed by the
Board of Directors. If through a change in values, assets, or other
circumstances, the Fund were in a position where more than 35% of its total
assets were invested in illiquid securities, the Fund would seek to take
appropriate steps to protect liquidity.
SETTLEMENT PROCEDURES AND DELAYS
Settlement procedures in Korea are somewhat less developed and reliable
than those in the United States and in other developed securities markets, and
the Fund may experience settlement delays or other material difficulties.
Accordingly, the Fund may be subject to significant delays or limitations on the
volume of trading during any particular period as a result of these factors. The
foregoing factors could impede the ability of the Fund to effect portfolio
transactions on a timely basis and could have an adverse impact on the net asset
value of the shares of the Fund's Common Stock and the price at which the shares
trade.
INVESTMENTS IN ASIAN ISSUERS
Up to 35% of the Fund's total assets may be invested in equity and debt
securities of Asian Issuers, if warranted, in Fidelity's judgment, by economic,
political or regulatory conditions in Korea or valuations in the Korean
securities markets relative to such conditions. Asian Issuers are issuers (other
than issuers meeting the definition of Korean Issuers as defined below), that
(i) are organized under the laws of Hong Kong, Japan or Taiwan, (ii) regardless
of where organized, and as determined by Fidelity, derive at least 50% of their
revenues or profits from goods produced or sold, investments made, or services
performed in Hong Kong, Japan or Taiwan, (iii) have the primary trading market
for their securities in Hong Kong, Japan or Taiwan or (iv) are governments, or
their agencies, instrumentalities or other political sub-divisions of Hong Kong,
Japan or Taiwan.
The risk factors identified herein with respect to Korean Issuers generally
also apply to investments the Fund may make in Asian Issuers, although the
specific nature of such risks may vary according to the country in which
investments are made. In addition, Korea, Hong Kong, Japan and Taiwan may be
subject to greater degrees of economic, political and social instability than is
the case in the United States and Western European countries. Such instability
may result from, among other things, the following: (i) authoritarian
governments or military involvement in political and economic decision-making,
including changes in government through extra--constitutional means; (ii)
popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring
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<PAGE> 32
countries; and (v) ethnic, religious and racial disaffection. Such social,
political and economic instability could disrupt the principal financial markets
in which the Fund invests and cause losses to the Fund.
Hong Kong. In Hong Kong, British proposals to extend limited democracy
have caused a political rift with the Peoples Republic of China (the "PRC"),
which is scheduled to assume sovereignty over the colony in 1997. Although the
PRC has committed by treaty to preserve the economic and social freedoms enjoyed
in Hong Kong for 50 years after regaining control of Hong Kong, the continuance
of the current form of economic system in Hong Kong after the reversion will
depend on the actions of the government of the PRC. The PRC and the United
Kingdom have also yet to resolve their differences on certain issues relating to
the reversion of sovereignty, such as the nationality status of certain ethnic
minorities in Hong Kong, the construction of a new international airport and
most recently, electoral reforms. In addition, such reversion has increased
sensitivity in Hong Kong to political developments and statements by public
figures in the PRC. Business confidence in Hong Kong, therefore, can be
significantly affected by such developments and statements, which in turn can
affect markets and business performance.
The Hong Kong stock market can be volatile and is sensitive both to
developments in the PRC and to the strength of other world markets. As an
example, in 1989, the Hang Seng Index of the Hong Kong stock market rose to
3,310 in May from its previous year-end level of 2,687, but fell to 2,094 in
early June following the events at Tiananmen Square. The Hang Seng Index
gradually climbed in subsequent months, but fell by 181 points on October 16,
1989 (approximately 6.5%) following a substantial fall in the U.S. stock market,
and at the year end closed at a level of 2,837.
Japan. Japan currently has the second-largest GDP in the world. The
Japanese economy has grown substantially over the last three decades. Its growth
rate averaged over 5% in the 1970s and 1980s. However, in 1992, the growth rate
in Japan slowed to 0.6% and the budget showed a deficit of 1.5% percent of GDP.
Despite small rallies and market gains, Japan has been plagued with economic
sluggishness. Economic conditions have weakened considerably in Japan since
October 1992. The boom in Japan's equity and property markets during the
expansion of the late 1980s supported high rates of investment and consumer
spending on durable goods, but both of these components of demand have now
retreated sharply following the decline in asset prices. Profits have fallen
sharply, the previously tight labor market conditions have eased considerably,
and consumer confidence is low. The banking sector has experienced a sharp rise
in non-performing loans, and strains in the financial system are likely to
continue. The decline in interest rates and two large fiscal stimulus packages
should help to contain the recessionary forces, but substantial uncertainties
remain. The general government position has deteriorated as a result of
weakening economic growth, as well as stimulative measures taken recently to
support economic activity and to restore financial stability. Although Japan's
economic growth has declined significantly since 1990, Fidelity believes many
Japanese companies seem capable of rebounding due to increased investments,
smaller borrowings, increased product development and continued government
support.
Taiwan. As Taiwan's domestic labor costs have risen, Taiwanese
manufacturers have been aggressively relocating production facilities to the
southern PRC provinces of Guangdong and Fujian. In addition, as costs in the
southern PRC have increased, Taiwanese manufacturers are developing facilities
further north, utilizing their historic ties to the region surrounding Shanghai.
If official relations between the PRC and Taiwan improve, Taiwan may eventually
replace Hong Kong as the PRC's largest regional trading partner.
In addition, in Hong Kong and Taiwan, there are restrictions on the percent
of permitted foreign investment in shares of certain companies, mainly those in
highly regulated industries, although in Taiwan there are limitations on foreign
ownership of shares of any listed company. Investment in Taiwan requires an
investment permit. [The Investment Manager intends to apply for a permit on
behalf of the Fund and certain other funds managed by the Investment Manager.]
The Fund may not be permitted to invest in Taiwan until such permit is issued.
Taiwan imposes a waiting period on the repatriation of investment capital for
certain foreign investors. These restrictions may in the future make it
undesirable to invest in Taiwan.
With respect to investments in Taiwan, it should be noted that Taiwan lacks
formal diplomatic relations with many nations, although it conducts trade and
financial relations with most major economic powers. Both the government of the
PRC and the government of the Republic of China in Taiwan claim sovereignty over
all
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<PAGE> 33
of China. Although relations between Taiwan and the PRC are currently peaceful,
renewed frictions or hostility could interrupt operations of Taiwanese companies
in which the Fund invests and create uncertainty that could adversely affect the
value and marketability of its Taiwanese investments. Tension also exists over
the PRC's possession of nuclear capabilities and its proximity to Taiwan.
DEBT SECURITIES--HIGH YIELD, HIGH RISK SECURITIES
The Fund's investment policies do not limit the percentage of the Fund's
debt securities investments which may be invested in debt securities that are
unrated or rated below investment grade. Under current Korean laws and
regulations, the Fund is prohibited from investing in debt securities
denominated in Won except to a very limited extent as explained above. The
market value of debt securities generally varies in response to changes in
interest rates and the financial conditions of each issuer. During periods of
declining interest rates, the value of debt securities generally increases.
Conversely, during periods of rising interest rates, the value of such
securities generally declines. These changes in market value will be reflected
in the Fund's net asset value.
The Fund's investments in debt securities of Korean Issuers or of Asian
Issuers may generally be considered to have credit quality below investment
grade as determined by internationally recognized credit rating agency
organizations. Debt securities rated below investment grade (commonly referred
to as "junk bonds" when issued in the United States) are considered to be
speculative. Investment in low rated securities typically involves risks not
associated with higher rated securities, including, among others, overall
greater risk of timely and ultimate payment of interest and principal,
potentially greater sensitivity to general economic conditions, greater market
price volatility and less liquid secondary market trading. Certain of the Fund's
investments may be considered to have extremely poor prospects of ever attaining
any real investment standing, to have a current identifiable vulnerability to
default, to be unlikely to have the capacity to pay interest and repay principal
when due in the event of adverse business, financial or economic conditions, or
to be in default or not current in the payment of interest or principal.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in low rated debt securities prices because the
advent of a recession could lessen the ability of a highly leveraged company to
make principal and interest payments on its debt securities. If the issuer of
low rated debt securities defaults, the Fund may incur additional expenses in
seeking recovery. See "Appendix B--Debt Ratings" in the SAI for a description of
ratings of debt instruments.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and total return could be adversely
affected. Loans that are fully secured offer the Fund more protections than an
unsecured loan in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor involves
substantially greater risks, and may be highly speculative. Borrowers that are
in bankruptcy or restructuring may never pay off their indebtedness, or may pay
only a small fraction of the amount owed. Direct indebtedness of Korea will also
involve a risk that the governmental entities responsible for the repayment of
the debt may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the
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collateral. In addition, it is conceivable that under emerging legal theories of
lender liability, the Fund could be held liable as a co-lender. Direct debt
instruments may also involve a risk of insolvency of the lending bank or other
intermediary. Direct debt instruments that are not in the form of securities may
offer less legal protection to the Fund in the event of fraud or
misrepresentation. In the absence of definitive regulatory guidance, the Fund
relies on Fidelity's research in an attempt to avoid situations where fraud or
misrepresentation could adversely affect the Fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan, as
specified in the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. The Fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
potential obligations under standby financing commitments.
The Fund limits the amount of total assets that it will invest in any one
issuer. For purposes of these limitations, the Fund generally will treat the
borrower as the "issuer" of indebtedness held by the Fund. In the case of loan
participations where a bank or other lending institution serves as financial
intermediary between the Fund and the borrower, if the participation does not
shift to the Fund the direct debtor-creditor relationship with the borrower, the
Commission's interpretations require the Fund, in appropriate circumstances, to
treat both the lending bank or other lending institution and the borrower as
"issuers" for these purposes. Treating a financial intermediary as an issuer of
indebtedness may restrict the Fund's ability to invest in indebtedness related
to a single financial intermediary, even if the underlying borrowers represent
many different companies.
SWAP AGREEMENTS
Swap agreements can be individually negotiated and structured to include
exposure to a variety of different types of investments or market factors.
Depending on their structure, swap agreements may increase or decrease the
Fund's exposure to long- or short-term interest rates (in the United States or
abroad), foreign currency values, mortgage securities, corporate borrowing
rates, or other factors such as security prices or inflation rates. Swap
agreements can take many different forms and are known by a variety of names.
The Fund is not limited to any particular form of swap agreement if Fidelity
determines it is consistent with the Fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift the Fund's investment exposure from one
type of investment to another. For example, if the Fund agreed to exchange
payments in U.S. dollars for payments in foreign currency, the swap agreement
would tend to decrease the Fund's exposure to U.S. interest rates and increase
its exposure to foreign currency and interest rates. Caps and floors have an
effect similar to buying or writing options. Depending on how they are used,
swap agreements may increase or decrease the overall volatility of the Fund's
investments and its share price and yield.
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The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that determine
the amounts of payments due to and from the Fund. If a swap agreement calls for
payments by the Fund, the Fund must be prepared to make such payments when due.
In addition, if the counterparty's creditworthiness declined, the value of a
swap agreement would be likely to decline, potentially resulting in losses. The
Fund expects to be able to eliminate its exposure under swap agreements either
by assignment or other disposition, or by entering into an offsetting swap
agreement with the same party or a similarly creditworthy party.
The Fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the Fund
enters into a swap agreement on a net basis, it will segregate assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value equal
to the full amount of the Fund's accrued obligations under the agreement.
INDEXED SECURITIES
The Fund may purchase securities whose prices are indexed to the prices of
other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic.
Gold-indexed securities, for example, typically provide for a maturity value
that depends on the price of gold, resulting in a security whose price tends to
rise and fall together with gold prices. Currency-indexed securities typically
are short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed securities
may be positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a security
that performs similarly to a foreign currency-denominated instrument, or their
maturity value may decline when foreign currencies increase, resulting in a
security whose price characteristics are similar to a put on the underlying
currency. Currency-indexed securities may also have prices that depend on the
values of a number of different foreign currencies relative to each other.
To the extent that the Fund invests in indexed securities, it will be
subject to the risks associated with changes in the particular indices, which
may include reduced or eliminated interest payments and losses of invested
principal. Certain indexed securities may have the effect of providing a degree
of investment leverage, because they may increase or decrease in value at a rate
that is a multiple of the changes in applicable indices. As a result, the market
value of such securities will generally be more volatile than the market values
of fixed-rate securities.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the United
States and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates. Recent
issuers of indexed securities have included banks, corporations, and certain
U.S. government agencies. Indexed securities may be more volatile than the
underlying instruments.
INVESTMENT PRACTICES
Certain risks and special considerations of certain of the investment
practices in which the Fund may engage are described above under "Investment
Objective and Policies" and "Additional Investment Activities." In addition, the
Fund's ability to engage in these investment practices may be limited by certain
rules and regulations in Korea. Derivatives (as defined below) involve special
risks, including possible default by the other party to the transaction,
illiquidity and, to the extent Fidelity's view as to certain market movements is
incorrect, the risk that the use of a Derivative could result in greater losses
than if it had not been used. Use of put and call options could result in losses
to the Fund, force the purchase or sale of portfolio securities at
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<PAGE> 36
inopportune times or for prices higher or lower than current market values, or
cause the Fund to hold a security it might otherwise sell. The use of currency
transactions could result in the Fund incurring losses as a result of the
imposition of exchange controls, suspension of settlements, or the inability to
deliver or receive a specified currency in addition to exchange rate
fluctuations. The use of options and futures transactions entails certain
special risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Fund could create the possibility that losses on the derivative
instrument will be greater than gains in the value of the Fund's position. In
addition, futures and options markets could be illiquid in some circumstances
and certain over-the-counter options could have no markets. The Fund might not
be able to close out certain positions without incurring substantial losses. To
the extent the Fund utilizes futures and options transactions for hedging, such
transactions should tend to minimize the risk of loss due to a decline in the
value of the hedged position and, at the same time, limit any potential gain to
the Fund that might result from an increase in value of the position. Finally,
the daily variation margin requirements for futures contracts create a greater
ongoing potential financial risk than would purchases of options, in which case
the exposure is limited to the cost of the initial premium and transaction
costs. Losses resulting from the use of Derivatives will reduce the Fund's net
asset value, and possibly income, and the losses may be greater than if
Derivatives had not been used. Additional information regarding the risks and
special considerations associated with Derivatives appears in "Appendix
A--General Characteristics and Risks of Derivatives" in the SAI.
NON-DIVERSIFICATION
The Fund is classified as a non-diversified investment company under the
1940 Act, which means that the Fund is not limited by the 1940 Act in the
proportion of its assets that may be invested in the obligations of a single
issuer. Thus, the Fund may invest a greater proportion of its assets in the
securities of a smaller number of issuers and, as a result, could be subject to
greater risk of loss. The Fund, however, intends to continue to comply with the
diversification requirements imposed by the Code for qualification as a
regulated investment company, which generally limits investments in any one
issuer to 25% of the Fund's total assets. See "Taxation--U.S. Federal Income
Taxes" and "Investment Restrictions."
WITHHOLDING AND OTHER TAXES
The Fund may be subject to certain taxes, including withholding or other
taxes on income and capital gains, that are or may be imposed by Korea or other
foreign governments, which will reduce the return to the Fund. The Fund does not
intend to engage in activities that will create a permanent establishment in
Korea within the meaning of the Korea-U.S. Tax Treaty. Therefore, the Fund
generally will not be subject to any Korean income taxes other than Korean
withholding taxes. Exemptions or reductions in these taxes apply if the
Korea-U.S. Tax Treaty applies to the Fund. If the treaty provisions are not, or
cease to be, applicable to the Fund, significant additional withholding taxes
would apply. Korean counsel to the Fund, Shin & Kim, have given their opinion
that the treaty presently applies to the Fund if and so long as the Fund
operates as described herein. The Fund has received written confirmation from
the Ministry of Finance and Economy of Korea (the "MOFE") that, so long as all
of the issued shares of the Fund are listed on one or more publicly acknowledged
stock exchanges in the United States only and they are traded on such exchanges
by the general public, the Fund will be entitled to the benefits of the Treaty.
See "Taxation--Korean Taxes." The imposition of such taxes and the rates imposed
are subject to change. The Fund may elect, when eligible, to "pass-through" to
the Fund's shareholders such taxes that are treated as income taxes for U.S.
Federal income tax purposes. If the Fund makes such election, shareholders will
be required to include in income their proportionate shares of the amount of
non-U.S. income taxes paid by the Fund and may be entitled to claim either a
credit or deduction for all or a portion of such taxes. See "Taxation--U.S.
Federal Income Taxes" below for a discussion of the rules and limitations
applicable to the treatment of non-U.S. income taxes under the U.S. Federal
income tax laws. Certain shareholders, including some non-U.S. shareholders,
will not be entitled to the benefit of a deduction or credit with respect to
non-U.S. income taxes paid by the Fund. If a shareholder is eligible and elects
to credit foreign taxes, such credit is subject to limitations. Other foreign
taxes, such as transfer taxes, may be imposed on the Fund, but would not be
eligible to be passed through to shareholders as a credit or deduction. Also,
additional U.S. Federal income taxes and charges may be incurred
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<PAGE> 37
as a result of any investment made in "passive foreign investment companies."
See "Taxation--U.S. Federal Income Taxes" and "--Other Taxation."
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
The Fund's Articles of Incorporation include provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Directors. Such
provisions could have the effect of depriving shareholders of an opportunity to
sell their shares of Common Stock at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the Fund. See
"Description of Capital Stock--Special Voting Provisions."
NET ASSET VALUE DISCOUNT
Shares of closed-end investment companies frequently trade at a discount
from net asset value. This characteristic of shares of a closed-end fund is a
risk separate and distinct from the risk that the Fund's net asset value will
decrease. Among the factors that may be expected to affect whether shares of the
Fund trade above or below net asset value are portfolio investment results, the
general performance of the Korean economy and Korean securities, supply and
demand for shares of the Fund and the development of alternatives to the Fund as
a vehicle through which United States and other foreign investors may invest in
Korean securities. The Fund cannot predict whether its shares will trade at,
below or above net asset value. The risk of purchasing shares of a closed-end
fund that might trade at a discount is more pronounced for investors who wish to
sell their shares in a relatively short period of time because, for those
investors, realization of gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.
FOREIGN SUBCUSTODIANS AND SECURITIES DEPOSITORIES
Rules adopted under the 1940 Act permit the Fund to maintain its foreign
securities and cash in the custody of certain eligible non-U.S. banks and
securities depositories. Certain banks in foreign countries may not be eligible
sub-custodians for the Fund under such rules, in which event the Fund may be
precluded from purchasing securities in which it would otherwise invest, and
other banks that are eligible foreign sub-custodians may be recently organized
or otherwise lack extensive operating experience. In addition, in certain
countries, such as Korea, there may be legal restrictions or limitations on the
ability of the Fund to recover assets held in custody by foreign sub-custodians
in the event of the bankruptcy of the sub-custodian. The Fund also may
experience settlement delays or other material difficulties. See "Risk Factors
and Special Considerations--Settlement Procedures and Delays."
EXPENSES
The operating expense ratio of the Fund is higher than that of a fund
investing primarily in the securities of U.S. issuers since the expenses of the
Fund (such as custodial, currency exchange and communication costs) are higher.
See "Fee Table." Brokerage commissions and transaction costs for transactions
both on and off the KSE are generally higher than in the United States. It is
expected, however, that the Fund's investment advisory fee, as well as its
overall expense ratio, will be comparable to those of many closed-end management
investment companies of comparable size that invest primarily in securities of
issuers in a single foreign country.
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MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The management of the Fund, including general supervision duties performed
by the Investment Manager under the Management Agreement, is the responsibility
of the Board of Directors. For certain information regarding the Directors and
officers of the Fund, see "Management of the Fund--Directors and Officers" in
the SAI.
Certain directors of the Fund reside outside the United States and
substantially all of the assets of such persons are located outside the United
States. None of the Directors of the Fund who reside outside the United States
have appointed an agent for service of process in the United States. It may not
be possible, therefore, for investors to effect service of process within the
United States upon such persons or to enforce against them, in the U.S. courts
or foreign courts, judgments obtained in U.S. courts predicated upon the civil
liability provisions of the Federal securities laws of the United States. In
addition, it is not certain that a foreign court would enforce, in original
actions, liabilities against such persons predicated solely upon the U.S.
securities laws.
INVESTMENT MANAGER, INVESTMENT ADVISER AND SUB-ADVISER
The Investment Manager is Fidelity Management & Research Company. Pursuant
to a management agreement (the "Management Agreement") between the Fund and the
Investment Manager, the Investment Manager supervises the Fund's investment
program. The Investment Manager consults with the Investment Adviser and the
Sub-Adviser on a regular basis regarding the Investment Adviser's and the
SubAdviser's decisions concerning the purchase, sale or holding of particular
securities. In addition to the foregoing, the Investment Manager monitors the
performance of the Fund's service providers, including the Fund's administrator,
transfer agent and custodian. The Investment Manager pays the reasonable
salaries and expenses of such of the Fund's officers and employees and any fees
and expenses of such of the Fund's directors who are directors, officers or
employees of the Investment Manager, except that the Fund may bear travel
expenses or an appropriate portion thereof of directors and officers of the Fund
who are directors, officers or employees of the Investment Manager to the extent
that such expenses relate to attendance at meetings of the Board of Directors or
any committees thereof.
Pursuant to an investment advisory agreement (the "Advisory Agreement")
among the Investment Manager, the Investment Adviser and the Fund, the
Investment Adviser is responsible on a day-to-day basis for investing the Fund's
portfolio in accordance with its investment objective, policies and limitations.
The Investment Adviser has discretion over investment decisions for the Fund
and, in that connection, places purchase and sale orders for the Fund's
portfolio securities. The Advisory Agreement authorizes the delegation of these
responsibilities to the Sub-Adviser. Pursuant to the Sub-Advisory Agreement (the
"Sub-Advisory Agreement"), the Investment Adviser has delegate certain of its
responsibilities for the day-to-day management of the Fund to the SubAdviser
which manages the Fund's portfolio through its Tokyo office. Hokeun Chung is
primarily responsible for the day-to-day management of the Fund's portfolio. Mr.
Chung has served as the Fund's portfolio manager since 1996 after acting as
co-portfolio manager since 1995. Mr. Chung joined Fidelity Investments as an
Analyst in 1991. Prior to joining Fidelity, Mr. Chung worked as a Senior Analyst
at W.I. Carr in Seoul. In addition, the Investment Adviser provides research and
statistical data to the Fund. The Investment Adviser and the Sub-Adviser will
pay the reasonable salaries and expenses of such of the Fund's officers and
employees and any fees and expenses of such of the Fund's directors who are
directors, officers or employees of the Investment Adviser, except that the Fund
may bear travel expenses or an appropriate portion thereof of directors and
officers of the Fund who are directors, officers or employees of the Investment
Adviser or the Sub-Adviser to the extent that such expenses relate to attendance
at meetings of the Board of Directors or any committees thereof.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions. For example, all personal trades
require pre-clearance, and participation in initial public offerings are
prohibited. In addition, restrictions
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on the timing of personal investing relative to trades by Fidelity funds and on
short-term trading have been adopted. Personal investing is monitored to protect
shareholders' interests.
Investment Manager. Fidelity Management & Research Company acts as
Investment Manager of the Fund. The Fidelity investment management organization
was established in 1946. Today, the Fidelity organization is the largest mutual
fund company in the United States, and is known as an innovative provider of
high quality financial services to individuals and institutions. In addition to
its mutual fund business, the Fidelity organization operates one of the leading
discount brokerage firms in the United States, Fidelity Brokerage Services, Inc.
As of August 31, 1996, the Investment Manager, the Investment Adviser, the
SubAdviser and their affiliates had over $425 billion under management, of which
more than $76 billion was invested in non-U.S. securities (including over $18
billion in Asian securities, over $550 million in Korean securities and over $11
billion managed from Asian offices). The Fidelity organization employs over
investment professionals worldwide. The Investment Manager is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"). The Investment Manager also manages the Fidelity
Advisor Emerging Asia Fund, Inc., a closed-end investment company.
The Investment Manager, together with the Investment Adviser, the
Sub-Adviser and its other affiliates, has extensive research capabilities both
worldwide, with over 300 investment professionals, as of August 31, 1994 and
within the Asian region, and maintains offices in Hong Kong, Singapore, Taiwan
and Tokyo which were staffed by 35 investment professionals.
All of the stock of the Investment Manager is owned by FMR Corp., its
parent company organized in 1972. The voting common stock of FMR Corp. is
divided into two classes. Class B is held predominantly by members of the Edward
C. Johnson 3d family and is entitled to 49% of the vote on any matter acted upon
by the voting common stock. Class T is held predominantly by non-Johnson family
member employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which all
Class B shares will be voted in accordance with the majority vote of Class B
shares. Under the 1940 Act, control of a company is presumed where one
individual or group of individuals owns more than 25% of the voting stock of
that company. Therefore, through their ownership of voting common stock and the
execution of the shareholders' voting agreement, members of the Johnson family
may be deemed, under the 1940 Act, to form a controlling group with respect to
FMR Corp.
The Investment Manager's main offices are located at 82 Devonshire Street,
Boston, Massachusetts 02109.
Investment Adviser. Fidelity International Investment Advisors Limited,
the Fund's Investment Adviser and an affiliate of the Investment Manager, has
delegated certain of its responsibilities for providing discretionary portfolio
management services to the Sub-Adviser. The Investment Adviser may, however,
elect to manage the portfolios directly through the Investment Adviser's office
in Hong Kong. The Investment Adviser is an investment adviser registered under
the Advisers Act and was organized in 1983 under the laws of Bermuda. The
Investment Adviser primarily provides investment advisory services to U.S.
investment companies investing throughout the world. The Investment Adviser is a
wholly-owned subsidiary of Fidelity International Limited ("FIL"). The
Investment Adviser's and FIL's main offices are located at Pembroke Hall, 42
Crow Lane, Pembroke, Bermuda.
FIL is a Bermuda company formed in 1968 which primarily provides investment
advisory services to non-U.S. investment companies and institutional investors
investing in securities of issuers throughout the world. More than 25% of the
voting stock of FIL is owned directly or indirectly by Edward C. Johnson 3d and
trusts for the benefits of Johnson family members.
Sub-Adviser. Fidelity Investments Japan Limited ("FIJ"), the Sub-Adviser,
upon delegation by the Investment Adviser, provides advisory services concerning
the Fund's assets invested in Japanese and other securities and is primarily
responsible for the day-to-day management of the Fund's portfolio. The Sub-
Adviser is an affiliate of the Investment Manager. The Investment Adviser and is
registered as an investment adviser under the Advisers Act. The Sub-Adviser was
formed on November 17, 1986 under the laws of Japan
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and its main offices are located at 19th Floor, Shiroyama JT Mori Building,
4-3-1 Toranomon, Minato-ku, Tokyo 105, Japan. It is a wholly-owned subsidiary of
FIL.
COMPENSATION AND EXPENSES
As compensation for its services, the Investment Manager receives from the
Fund a monthly fee at an annual rate of 1.00% of the Fund's average daily net
assets. The Investment Adviser receives from the Investment Manager 60% of the
fees paid by the Fund to the Investment Manager. The Sub-Adviser receives from
the Investment Adviser a fee equal to 50% of the fee paid to the Investment
Adviser with respect to any assets managed by the Sub-Adviser on a discretionary
basis and 30% of the fee paid to the Investment Adviser with respect to any
assets managed by the Sub-Adviser on a non-discretionary basis. For the period
from October 31, 1994 to September 30, 1995 and for the fiscal year ended
September 30, 1996, the Investment Manager received aggregate compensation of
$487,825 and $536,280, respectively, of which the Investment Manager paid the
Investment Adviser aggregate compensation of $ and $ ,
respectively, and of which the Investment Adviser paid the Sub-Adviser aggregate
compensation of $ and $ , respectively.
Except for the expenses borne by the Investment Manager, the Investment
Adviser or the Sub-Adviser pursuant to the Management Agreement, the Advisory
Agreement and Sub-Advisory Agreement, the Fund pays or causes to be paid all of
its expenses including, among other things: organizational and offering expenses
(which will include out-of-pocket expenses, but not overhead or employee costs,
of the Investment Manager, the Investment Adviser and the Sub-Adviser); expenses
for legal, accounting and auditing services; taxes and governmental fees; dues
and expenses incurred in connection with membership in investment company
organizations; fees and expenses incurred in connection with listing the Fund's
shares on any stock exchange; costs of printing and distributing shareholder
reports, proxy materials, prospectuses, offering circulars, stock certificates
and distributions of dividends; charges of the Fund's custodians,
sub-custodians, registrars, transfer agents, dividend disbursing agents and
dividend reinvestment plan agents; payment for portfolio pricing services to a
pricing agent, if any; registration and filing fees of the Commission; expenses
of registering or qualifying securities of the Fund for sale in the various
states; freight and other charges in connection with the shipment of the Fund's
portfolio securities; fees and expenses of non-interested directors; costs of
shareholders' meetings; insurance; interest; brokerage costs; and litigation and
other extraordinary or nonrecurring expenses. The Fund will also reimburse the
Dealer Manager for certain of its expenses up to $ . See "Distribution
Arrangements."
DURATION AND TERMINATION; NON-EXCLUSIVE SERVICES
Unless earlier terminated as described below, each of the Management
Agreement and the Advisory Agreement will remain in effect until October 25,
1997, and the Sub-Advisory Agreement will remain in effect until October 25,
1997, and from year to year thereafter if approved annually (i) by a majority of
the non-interested directors of the Fund and (ii) by the Board of Directors of
the Fund or by a majority of the outstanding voting securities of the Fund. The
Management Agreement may be terminated upon 60 days' written notice without
penalty by the Fund's Board of Directors or by vote of a majority of the
outstanding voting securities of the Fund or by the Investment Manager and will
terminate in the event it is assigned (as defined in the 1940 Act). The Advisory
Agreement may be terminated upon 60 days' written notice without penalty by the
Fund's Board of Directors or by vote of a majority of the outstanding voting
securities of the Fund or by the Investment Manager and will terminate in the
event it is assigned (as defined in the 1940 Act). The Sub-Advisory Agreement
may be terminated upon 60 days' written notice without penalty by the Fund's
Board of Directors or by vote of a majority of the outstanding voting securities
of the Fund or by the Investment Adviser or the Sub-Adviser and will terminate
in the event it is assigned (as defined in the 1940 Act).
The services of the Investment Manager, the Investment Adviser and the
Sub-Adviser are not deemed to be exclusive, and nothing in the relevant service
agreements will prevent any of them or their affiliates from providing similar
services to other investment companies and other clients (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities.
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ADMINISTRATION
Fidelity Service Co. ("Service"), a division of FMR Corp., serves as the
Fund's administrator pursuant to an agreement with the Fund (the "Administration
Agreement"). As compensation for its services, Service receives from the Fund
monthly fees at an annual rate of .20% of the Fund's average daily net assets.
Service is located at 82 Devonshire Street, Boston, MA 02109.
Service performs various administrative services, including providing the
Fund with the services of persons to perform administrative and clerical
functions, maintenance of the Fund's books and records, pricing and securities
lending services, preparation of various filings, reports, statements and
returns filed with government authorities, and preparation of financial
information for the Fund's proxy statements and semiannual and annual reports to
shareholders.
THE REPUBLIC OF KOREA
[To Be Included By Amendment]
THE SECURITIES MARKETS OF KOREA
[To Be Included By Amendment]
DISTRIBUTION ARRANGEMENTS
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York,
a broker-dealer and member of the National Association of Securities Dealers,
Inc., will act as the Dealer Manager for the Offer. Under the terms and subject
to the conditions contained in the Dealer Manager Agreement dated the date
hereof, the Dealer Manager will provide financial advisory and marketing
services in connection with the Offer and will solicit the exercise of Rights
and participation in the Over-Subscription Privilege by Record Date
Shareholders. The Offer is not contingent upon any number of Rights being
exercised. The Fund has agreed to pay the Dealer Manager a fee for financial
advisory and marketing services equal to % of the aggregate
Subscription Price for Shares issued pursuant to the exercise of such Rights and
pursuant to the Over-Subscription Privilege and to pay broker-dealers, including
the Dealer Manager, fees for their solicitation efforts (the "Solicitation
Fees") of % of the Subscription Price per Share for each Share issued
pursuant to the exercise of such Rights and pursuant to the Over-Subscription
Privilege as a result of their soliciting efforts. Solicitation Fees will be
paid to the broker-dealer designated on the applicable portion of the
Subscription Certificates or in the absence of such designation, to the Dealer
Manager.
In addition, the Fund has agreed to reimburse the Dealer Manager up to an
aggregate of $ for its reasonable expenses incurred in connection with
the Offer. The Fund and the Investment Manager have each agreed to indemnify the
Dealer Manager or contribute to losses arising out of certain liabilities
including liabilities under the Securities Act. The Dealer Manager Agreement
also provides that the Dealer Manager will not be subject to any liability to
the Fund in rendering the services contemplated by such Agreement except for any
act of bad faith, willful misconduct, or gross negligence of the Dealer Manager
or reckless disregard by the Dealer Manager of its obligations and duties under
such Agreement.
The Fund has agreed not to offer or sell, or enter into any agreement to
sell, any equity or equity related securities of the Fund or securities
convertible into such securities for a period of 180 days after the date of the
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Dealer Manager Agreement, except for the Shares and Common Stock issued in
reinvestment of dividends or distributions.
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND
REINVESTMENT AND CASH PURCHASE PLAN
The Fund intends to distribute annually to shareholders substantially all
of its net investment income, and to distribute any net realized capital gains
at least annually. Net investment income for this purpose is income other than
net realized long- and short-term capital gains net of expenses.
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
shareholders whose shares of Common Stock are registered in their own names may
elect to have all distributions automatically reinvested by State Street Bank
and Trust Company (the "Plan Agent") in Fund shares pursuant to the Plan.
Shareholders who do not elect to participate in the Plan will receive
distributions in cash paid by check in U.S. dollars mailed directly to the
shareholder by State Street Bank and Trust Company, as dividend paying agent. In
the case of shareholders, such as banks, brokers or nominees, that hold shares
for others who are beneficial owners, the Plan Agent will administer the Plan on
the basis of the number of shares certified from time to time by the
shareholders as representing the total amount registered in such shareholders'
names and held for the account of beneficial owners that have not elected to
receive distributions in cash. Investors that own shares registered in the name
of a bank, broker or other nominee should consult with such nominee as to
participation in the Plan through such nominee, and may be required to have
their shares registered in their own names in order to participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the
Plan. If the directors of the Fund declare an income dividend or a capital gains
distribution payable either in the Fund's Common Stock or in cash,
nonparticipants in the Plan will receive cash and participants in the Plan will
receive Common Stock, to be issued by the Fund or purchased by the Plan Agent in
the open market, as provided below. If the market price per share on the
valuation date equals or exceeds net asset value per share on that date, the
Fund will issue new shares to participants at net asset value; provided,
however, if the net asset value is less than 95% of the market price on the
valuation date, then such shares will be issued at 95% of the market price. The
valuation date will be the dividend or distribution payment date or, if that
date is not a New York Stock Exchange trading day, the next preceding trading
day. If net asset value exceeds the market price of Fund shares at such time, or
if the Fund should declare an income dividend or capital gains distribution
payable only in cash, the Plan Agent will, as agent for the participants, buy
Fund shares in the open market, on the New York Stock Exchange or elsewhere, for
the participants' accounts on, or shortly after, the payment date. If, before
the Plan Agent has completed its purchases, the market price exceeds the net
asset value of a Fund share, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if the distribution had been paid in shares
issued by the Fund on the dividend payment date. Because of the foregoing
difficulty with respect to open-market purchases, the Plan provides that if the
Plan Agent is unable to invest the full dividend amount in open-market purchases
during the purchase period or if the market discount shifts to a market premium
during the purchase period, the Plan Agent will cease making open-market
purchases and will receive the uninvested portion of the dividend amount in
newly issued shares at the close of business on the last purchase date.
Participants have the option of making additional cash payments to the Plan
Agent, annually, in any amount from $100 to $3,000, for investment in the Fund's
Common Stock. the Plan Agent will use all such funds received from participants
to purchase Fund shares in the open market on or about February 15. Any
voluntary cash payment received more than 30 days prior to this date will be
returned by the Plan Agent, and interest will not be paid on any invested cash
payment. To avoid unnecessary cash accumulations, and also to allow ample time
for receipt and processing by the Plan Agent, it is suggested that participants
send in voluntary cash payments to be received by the Plan Agent approximately
ten days before an applicable purchase date specified above. A participant may
withdraw a voluntary cash payment by written notice, if the notice is received
by the Plan Agent not less than 48 hours before such payment is to be invested.
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The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in an account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
There is no charge to participants for reinvesting dividends or capital
gains distributions or voluntary cash payments. The Plan Agent's fees for the
reinvestment of dividends and capital gains distributions and voluntary cash
payments will be paid by the Fund. There will be no brokerage charges with
respect to shares issued directly by the Fund as a result of dividends or
capital gains distributions payable either in stock or in cash. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and capital gains distributions and voluntary cash
payments made by the participant. Brokerage charges for purchasing small amounts
of stock for individual accounts through the Plan are expected to be less than
the usual brokerage charges for such transactions, because the Plan Agent will
be purchasing stock for all participants in blocks and prorating the lower
commission thus attainable.
The receipt of dividends and distributions under the Plan will not relieve
participants of any income tax which may be payable on such dividends or
distributions. See "Taxation."
Experience under the Plan may indicate that changes in the Plan are
desirable. Accordingly, the Fund and the Plan Agent reserve the right to
terminate the Plan as applied to any voluntary cash payments made and any
dividend or distribution paid subsequent to notice of the termination sent to
members of the Plan at least 30 days before the record date for such dividend or
distribution. The Plan also may be amended by the Fund or the Plan Agent, but
(except when necessary or appropriate to comply with applicable law, rules or
policies of a regulatory authority) only by at least 30 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Plan Agent at Two Heritage Drive, Quincy, Massachusetts 02171.
TAXATION
U.S. FEDERAL INCOME TAXES
The Fund intends to continue to qualify, and elect to be treated, as a
regulated investment company for each taxable year under the Code. The Fund
intends to distribute substantially all its net investment income and net
capital gains each year (thereby avoiding the imposition of Federal income and
excise taxes on such distributed income and gain in the Fund). Such
distributions will be taxable as ordinary income and long-term capital gains,
respectively, to shareholders of the Fund who are subject to tax whether
received in shares or in cash. Distributions in excess of the Fund's earnings
and profits will first reduce the adjusted tax basis of a holder's shares and,
after such adjusted tax basis is reduced to zero, will constitute capital gains
to such holder (assuming such shares are held as a capital asset).
Notwithstanding the above, the Fund may decide to retain all or part of any net
capital gains for reinvestment. If the Fund retains for reinvestment or
otherwise an amount of such net long-term capital gains, it will be subject to a
tax of 35% of the amount retained. The Board of Directors of the Fund will
determine at least once a year whether to distribute any net long-term capital
gains in excess of net short-term capital losses and capital loss carryovers
from prior years. The Fund expects to designate amounts retained as
undistributed capital gains in a notice to its shareholders who, if subject to
U.S. federal income taxation on long-term capital gains, (a) will be required to
include in income for U.S. federal income tax purposes, as long-term capital
gains, their proportionate shares of the undistributed amount, and (b) will be
entitled to credit against their U.S. federal income tax liabilities their
proportionate shares of the tax paid by the Fund on the undistributed amount and
to claim refunds to the extent that their credits exceed their liabilities. For
U.S. federal income tax purposes, the basis of shares owned by a shareholder of
the Fund will be increased by an amount equal to 65% of the amount of
undistributed capital gains included in the shareholder's income.
The Fund may be subject to certain taxes, including withholding taxes,
imposed by Korea and possibly other foreign countries with respect to its income
and capital gains. If the Fund qualifies as a regulated
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investment company, if certain distribution requirements are satisfied and if
more than 50% of the value of the Fund's total assets at the close of any
taxable year consists of stock or securities of foreign corporations, which for
this purpose may include obligations of foreign governmental issuers, the Fund
may elect, for U.S. federal income tax purposes, to treat any foreign country's
income or withholding taxes paid by the Fund that can be treated as income taxes
under the U.S. income tax principles, as paid by its shareholders. The Fund
expects to qualify for and make this election. For any year that the Fund makes
such an election, each shareholder will be required to include in its income an
amount equal to its allocable share of such income taxes paid by the Fund to a
foreign country's government and shareholders will be entitled, subject to
certain limitations, to credit their portions of these amounts against their
U.S. federal income tax due, if any, or to deduct their portions from their U.S.
taxable income, if any. No deductions for foreign taxes paid by the Fund may be
claimed, however, by non-corporate shareholders (including certain foreign
shareholders described below) who do not itemize deductions. Shareholders that
are exempt from tax under Section 501(a) of the Code, such as pension plans,
generally will derive no benefit from the Fund's election. However, such
shareholders should not be disadvantaged either because the amount of additional
income they are deemed to receive equal to their allocable share of such foreign
countries' income taxes paid by the Fund generally will not be subject to U.S.
federal income tax. The amount of foreign taxes that may be credited against a
shareholder's U.S. federal income tax liability generally will be limited,
however, to an amount equal to the shareholder's U.S. federal income tax rate
multiplied by its foreign source taxable income. For this purpose, the Fund
generally expects that the capital gains it distributes, whether as dividends or
capital gains distributions, will not be treated as foreign source taxable
income. In addition, this limitation must be applied separately to certain
categories of foreign source income, one of which is foreign source "passive
income." For this purpose, foreign source "passive income" includes dividends,
interest, capital gains and certain foreign currency gains. As a consequence,
certain shareholders may not be able to claim a foreign tax credit for the full
amount of their proportionate share of foreign taxes paid by the Fund. Each
shareholder will be notified within 60 days after the close of the Fund's
taxable year whether, pursuant to the election described above, the foreign
taxes paid by the Fund will be treated as paid by its shareholders for that year
and, if so, such notification will designate (i) such shareholder's portion of
the foreign taxes and (ii) the portion of the Fund's dividends and distributions
that represents income derived from foreign sources.
After the end of each taxable year, the Fund will notify shareholders of
the Federal income tax status of any distributions, or deemed distributions,
made by the Fund during such year. For a further discussion of certain income
tax consequences to the Fund and to shareholders of the Fund, see
"Taxation -- U.S. Federal Income Taxes" in the SAI.
KOREAN TAXES
Under current Korean law, payments to non-residents of Korea (such as the
Fund) by Korean corporations in respect of income are subject to Korean
withholding tax and capital gains derived by non-residents of Korea (such as the
Fund) with respect to stock and securities of Korean corporations are subject to
withholding tax, unless exempted by relevant laws or tax treaties. More
specifically, dividends and interest will be subject to withholding tax at the
rate of 27.5% until December 31, 1998 and 26.875% thereafter and capital gains
(without deduction for capital losses) will be subject to withholding tax equal
to the lower of (i) 11% until December 31, 1998 and 10.75% thereafter of the
gross sales proceeds, or (ii) if satisfactory evidence of acquisition cost is
produced, 27.5% until December 31, 1998 and 26.875% thereafter of the difference
between the gross sales proceeds and the acquisition cost of the stock or
security sold (excluding any transaction charges, commissions, fees or taxes
paid at the time of acquisition).
The applicable withholding tax rate under the U.S.-Korea Income Tax Treaty
presently in effect (the "Treaty"), is generally 15% (plus a resident tax of 11%
until December 31, 1998 and 7.5% thereafter of such amount, or a total of 16.5%
until December 31, 1998 and 16.125% thereafter) on dividends paid to the Fund by
Korean corporations, and generally 12% (plus a resident tax of 10% until
December 31, 1998 and 7.5% thereafter of such amount, or a total of 13.2% until
December 31, 1998 and 12.9% thereafter) on interest paid to the Fund by Korean
corporations. Under the Treaty, no withholding tax will be applicable to capital
gains realized by the Fund.
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The reduced tax rate and exemption under the provisions of the Treaty will
not apply to the dividend, interest and capital gain income derived by the Fund
from Korean corporations if both (i) the Fund is, by reason of the existence of
special measures under U.S. federal income tax law with respect to those types
of income, subject to U.S. federal income tax in an amount substantially less
than the U.S. federal income tax generally imposed on corporate profits (Article
17(a) of the Treaty), and (ii) at least 25% of the Fund's outstanding shares are
held of record or otherwise determined to be owned, directly or indirectly, by
one or more persons who are not individual residents of the United States
(Article 17(b) of the Treaty).
Questions have recently been raised as to whether the U.S. regulated
investment company provisions contained in the Code constitute "special
measures" for purposes of Article 17(a) of the Treaty. Regardless of the
resolution of these questions, under Article 17(b) of the Treaty, the Fund will
qualify for the benefits of the Treaty so long as less than 25% of the Fund's
outstanding shares are determined to be held other than by individual residents
of the United States.
Shin & Kim, Korean counsel to the Fund, have given their opinion that the
Treaty presently applies to the Fund if and so long as the Fund operates as
described herein. The Fund has received written confirmation from the MOFE that,
so long as all of the issued shares of the Fund are listed on one or more
publicly acknowledged stock exchanges in the United States only and they are
traded on such exchanges by the general public, the Fund will be entitled to the
benefits of the Treaty because Article 17(b) of the Treaty will not apply. The
Fund's Common Stock has been approved for listing on the New York Stock Exchange
upon notice of issuance. In order to qualify for the benefits of the Treaty, the
Fund will not apply to list the Fund's shares on any stock exchange outside the
United States.
Notwithstanding the foregoing, the Tax Exemption and Reduction Control Law
(the "TERCL") exempts interest on bonds denominated in a non-Korean currency
from Korean income and corporation taxes. The residents' tax referred to above
is therefore eliminated with respect to such investments. The TERCL tax
exemptions expire on December 31, 1998.
Under present Korean law, the Korean Inheritance and Gift Tax will not
apply to any testate, intestate or inter-vivos transfer of shares of the Fund to
the extent the deceased or the donee, as the case may be, is not domiciled in
Korea. Korean stamp duty will not apply to transfers of Korean securities, nor
to the Fund's portfolio securities transactions.
A securities transaction tax is payable on the transfer by the Fund of
shares and certain other equities (throughout this paragraph, collectively,
"shares") issued by a Korean company at the rate of 0.15% of the sale price of
the shares (except in certain circumstances in which case no tax is charged, and
where the shares are traded outside the KSE, in which case the tax is payable at
the rate of 0.5% of the sale price or where the shares are traded through
licensed broker-dealers on the over-the-counter market, in which case the tax is
payable at the rate of 0.3% of the sale price) unless (i) the shares are listed
on a foreign stock exchange and the sales are executed on such exchange; or (ii)
those sales are executed between non-residents without a permanent establishment
in Korea, the non-resident transferor did not own 10% or more of the total
issued and outstanding shares of the issuer of such shares at any time during
the five years before the year within which the transfer occurs, and the
non-resident transferor does not sell such shares through a securities company
in Korea (which latter condition cannot be fulfilled under current KSEC
regulations which require all sales of Korean securities off the KSE to be
through a Korean securities company). Effective from July 1, 1994, the Korean
government introduced an additional agricultural and fishery special tax on
securities transactions on the KSE which is equal to 0.15% of the sale price of
the shares and which will remain effective for a period of ten years thereafter.
The transferor of the shares pays the securities transaction tax. When the
transfer is made through a securities company only, such securities company will
make the withholding. Where the transfer is effected by a non-resident
individual or a non-resident corporation without a permanent establishment in
Korea otherwise than through the Korea Securities Depository or a securities
company, the transferee is required to withhold the securities transaction tax.
This tax treatment could change in the event of changes in Korean or U.S.
tax laws, changes in the terms of, or the MOFE's interpretation of, the Treaty,
or changes in relevant facts.
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DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The authorized capital stock of the Fund is 100,000,000 shares of Common
Stock ($.001 par value). All shares of Common Stock are equal as to dividends,
distributions and voting privileges. There are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of Common
Stock is entitled to its proportion of the Fund's assets after payment of all
debts and expenses and any preferential liquidating distributions to holders of
any preferred stock issued by the Fund. There are no cumulative voting rights
for the election of directors.
The Fund's Board of Directors has the authority to classify and reclassify
any authorized but unissued shares of capital stock and to establish the rights
and preferences of such unclassified shares. The Fund has no present intention
of offering additional shares of its Common Stock except in connection with the
Offer, any future rights offering and the Plan. See "Dividends and
Distributions: Dividend Reinvestment and Cash Purchase Plan." Other offerings of
its Common Stock, if made, will require approval of the Fund's Board of
Directors. Any additional offering will be subject to the requirements of the
1940 Act that shares of Common Stock may not be sold at a price below the then
current net asset value (exclusive of underwriting discounts and commissions)
except in connection with an offering to existing shareholders or with the
consent of a majority of the Fund's outstanding Common Stock.
SPECIAL VOTING PROVISIONS
The Fund presently has provisions in its Articles of Incorporation and
By-Laws which may have the effect of limiting the ability of other entities or
persons to acquire control of the Fund, to cause it to engage in certain
transactions, or to modify its structure.
Under these provisions, a director may be removed from office only for
cause by vote of at least 75% of the shares of capital stock entitled to be
voted on the matter. Also conversion of the Fund from a closed-end to an openend
investment company requires approval of 75% of the entire Board of Directors and
the affirmative vote of holders of at least 75% of the Common Stock outstanding
unless it is approved by a vote of 75% of the Continuing Directors (as defined
below), in which event such conversion requires the approval of the holders of a
majority of the outstanding Common Stock. A "Continuing Director" is any member
of the Board of Directors of the Fund who is not a person or affiliate of a
person who enters or proposes to enter into a Business Combination (as defined
below) with the Fund (an "Interested Party") and who has been a member of the
Board of Directors for a period of at least 12 months, or is a successor of a
Continuing Director who is unaffiliated with an Interested Party and is
recommended to succeed a Continuing Director by a majority of the Continuing
Directors then on the Board of Directors of the Fund.
The Board of Directors is classified into three classes, each with a term
of three years with only one class of directors standing for election in any
year. Commencing on the date of the annual meeting of stockholders in the year
2000, the Board of Directors will no longer be divided into classes and each
director will stand for election at such meeting and at each annual meeting of
stockholders held thereafter. Such classification may prevent replacement of a
majority of the directors for up to a two-year period while the classification
is in effect.
Additionally, the affirmative vote of 75% of the entire Board of Directors
and the holders of at least (i) 75% of the Common Stock and (ii) in the case of
a Business Combination (as defined below), 66% of the Common Stock other than
Common Stock held by an Interested Party who is (or whose affiliate is) a party
to a Business Combination (as defined below) or an affiliate or associate of the
Interested Party, are required to authorize any of the following transactions:
(i) merger, consolidation or statutory share exchange of the Fund with
or into any other person;
(ii) issuance or transfer by the Fund (in one or a series of
transactions in any 12 month period) of any securities of the Fund to any
person or entity for cash, securities or other property (or combination
thereof) having an aggregate fair market value of $1,000,000 or more,
excluding issuances or transfers of
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debt securities of the Fund, sales of securities of the Fund in connection
with a public offering, issuances of securities of the Fund pursuant to a
dividend reinvestment plan adopted by the Fund and issuances of securities
of the Fund upon the exercise of any stock subscription rights distributed
by the Fund and portfolio transactions effected by the Fund in the ordinary
course of its business;
(iii) sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Fund (in one or a series of transactions in any 12 month
period) to or with any person or entity of any assets of the Fund having an
aggregate fair market value of $1,000,000 or more except for portfolio
transactions (including pledges of portfolio securities in connection with
borrowings) effected by the Fund in the ordinary course of its business
(transactions within clauses (i), (ii) and (iii) above being known
individually as a "Business Combination");
(iv) the voluntary liquidation or dissolution of the Fund, or an
amendment to the Fund's Articles of Incorporation, to terminate the Fund's
existence; or
(v) unless the 1940 Act or federal law requires a lesser vote, any
stockholder proposal as to specific investment decisions made or to be made
with respect to the Fund's assets as to which stockholder approval is
required under federal or Maryland law.
However, the stockholder vote described above will not be required with
respect to the foregoing transactions (other than those set forth in (v) above)
if they are approved by a vote of 75% of the Continuing Directors. In that case,
if Maryland law requires stockholder approval, the affirmative vote of a
majority of the votes entitled to be cast thereon shall be required.
Reference is made to the Articles of Incorporation and By-Laws of the Fund,
on file with the Commission, for the full text of these provisions. See "Further
Information."
ANNUAL TENDER OFFERS AND SHARE REPURCHASES
In recognition of the possibility that the Fund's Shares might trade at a
discount to net asset value, the Board of Directors of the Fund has determined
that it would be in the best interests of the shareholders of the Fund to take
action to attempt to reduce or eliminate a market value discount from net asset
value. To that end, the Board of Directors of the Fund has determined that
annual tender offers for shares of its Common Stock may help reduce any market
discount that may develop. In this connection, during the first calendar quarter
of each calendar year commencing in 1998, the Board of Directors of the Fund has
committed to conduct a tender offer for shares of its Common Stock on an annual
basis under certain circumstances. During the fourth quarter of the previous
calendar year, the Board of Directors will fix in advance a period of 12
consecutive calendar weeks beginning during such fourth calendar quarter and
ending in the immediately following first quarter for the purpose of calculating
the average trading price of the Fund's Common Stock. In the event that the
average of the closing prices of the Common Stock of the Fund for the last
trading day in each week during such 12-week period, on the principal securities
exchange where listed, is below the initial offering price of $15.00 per share
and represents a discount of 10% or more from the average net asset value of the
Fund as determined on the same days in the same period, a tender offer for up to
10% of the then outstanding shares of Common Stock of the Fund will be conducted
during such first calendar quarter, subject to certain conditions described
below. In addition, the Board of Directors may consider from time to time open
market repurchases of the Fund's Common Stock or converting the Fund into an
open-end investment company.
Subject to the Fund's investment restrictions with respect to borrowings,
the Fund may incur debt to finance tender offers and/or repurchases. See
"Investment Restrictions" in the SAI. Interest on any such borrowings will
reduce the Fund's net investment income, and any such borrowings are subject to
special considerations.
No assurance can be given that annual tender offers or repurchases of
shares of its Common Stock will reduce or eliminate any market discount from net
asset value of the Fund's Common Stock. The Fund anticipates that the market
price of its Common Stock will from time to time vary from its net asset value.
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The market price of the Fund's Common Stock will, among other things, be
determined by the relative demand for and supply of shares of its Common Stock
in the market, the Fund's investment performance, the Fund's dividends and yield
and investor perception of the Fund's overall attractiveness as an investment as
compared with other investment alternatives. Nevertheless, the fact that the
Fund's Common Stock may be subject to tender offers at net asset value from time
to time may reduce the spread between market price and net asset value that
might otherwise exist. In the opinion of the Investment Manager, sellers may be
less inclined to accept a significant discount if they have a reasonable
expectation of being able to recover net asset value in conjunction with an
annual tender offer.
Although the Board of Directors believes that tender offers and repurchases
of shares of Common Stock generally would have a favorable effect on the market
price of the Fund's Common Stock, the repurchase of shares of Common Stock by
the Fund will decrease the total assets of the Fund and, therefore, have the
effect of increasing the Fund's expense ratio. Because of the nature of the
Fund's investment objective and policies and the Fund's portfolio, the
Investment Manager does not anticipate that tender offers and repurchases should
have a materially adverse effect on the Fund's investment performance and does
not anticipate any material difficulty in disposing of sufficient portfolio
securities in order to consummate tender offers and repurchases.
Although the Board of Directors has committed to annual tender offers under
the circumstances set forth above, it is the Board of Directors' announced
policy, which may be changed by the Board of Directors, that the Fund cannot
accept tenders or effect repurchases if (1) such transactions, if consummated,
would (a) result in the delisting of the Fund's Common Stock from the NYSE (the
NYSE having advised the Fund that it would consider delisting if the aggregate
market value of the Fund's outstanding shares is less than $5,000,000, the
number of publicly held shares of Common Stock falls below 600,000 or the number
of round-lot holders falls below 1,200) or (b) impair the Fund's status as a
regulated investment company under the Code (which would make the Fund subject
to U.S. federal income taxes on all of its income and gains in addition to the
taxation of shareholders who receive distributions from the Fund); (2) the
amount of shares of Common Stock tendered would require liquidation of such a
substantial portion of the Fund's securities that the Fund would not be able to
liquidate portfolio securities in an orderly manner in light of the existing
market conditions and such liquidation would have an adverse effect on the net
asset value of the Fund to the detriment of non-tendering shareholders; (3)
there is any (a) in the Board of Directors' judgment, material legal action or
proceeding instituted or threatened challenging such transactions or otherwise
materially adversely affecting the Fund, (b) suspension of or limitation on
prices for trading securities generally on the NYSE or other national securities
exchange(s), or the NASDAQ National Market System, (c) declaration of a banking
moratorium by Federal or state authorities or any suspension of payment by banks
in the United States or New York State, (d) limitation affecting the Fund or the
issuers of its portfolio securities imposed by federal or state authorities on
the extension of credit by lending institutions, (e) commencement of war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States, or (f) in the Board of Directors' judgment, other
event or condition which would have a material adverse effect on the Fund or its
shareholders if Shares were repurchased; or (4) the Board of Directors
determines that effecting any such transaction would constitute a breach of
their fiduciary duty owed to the Fund or its shareholders. The Board of
Directors may modify these conditions in light of experience.
Any tender offer made by the Fund for its shares of Common Stock will be at
a price equal to the net asset value of the Common Stock on a date subsequent to
the Fund's receipt of all tenders. During the pendency of any tender offer by
the Fund, the Fund will calculate daily the net asset value of the Common Stock
and will establish procedures which will be specified in the tender offer
documents, to enable shareholders to ascertain readily such net asset value.
Each offer will be made and shareholders notified in accordance with the
requirements of the Securities Exchange Act of 1934 and the 1940 Act, either by
publication or mailing or both. Each offering document will contain such
information as is prescribed by such laws and the rules and regulations
promulgated thereunder, including information for shareholders to consider in
deciding whether to tender shares of Common Stock and detailed instructions on
how to tender such shares of Common Stock. When a tender offer is authorized to
be made by the Fund's Board of Directors, a shareholder wishing to accept the
offer will be required to tender all (but not less than all) of the shares of
46
<PAGE> 49
Common Stock owned by such shareholder (or attributed to him for U.S. federal
income tax purposes under Section 318 of the Code) unless the Fund has received
a ruling from the Internal Revenue Service, or an opinion satisfactory to it,
that a tender of less than all of a shareholder's shares of Common Stock will
not cause certain adverse tax consequences with respect to non-tendering
shareholders. There can be no assurance that the Fund will receive such a ruling
or opinion.
A shareholder who sells all of his shares of Common Stock (including shares
attributed to him for U.S. Federal income tax purposes under Section 318 of the
Code) pursuant to a tender offer or open-market repurchase by the Fund will
realize a taxable gain or loss, treated as described in "Taxation--U.S. Federal
Income Taxes." A shareholder who sells less than all of his shares of Common
Stock (including shares so attributed) may be treated as receiving a dividend
from the Fund in the amount of some or all of the proceeds of sale; in that
event, the amount of proceeds not treated as a dividend would be a return of
capital, reducing the shareholder's basis in his shares of Common Stock
(including the shares sold pursuant to the tender offer or repurchase) and a
gain (treated as a capital gain for a shareholder owning the shares as a capital
asset) to the extent of any amount in excess of such basis. Also, in the case of
open-market repurchases, it is possible that shareholders who do not have their
shares of Common Stock repurchased would be treated as having received a
dividend distribution as a result of their proportionate increase in the
ownership of the Fund.
The Fund will not specify a record date for the tender offer which will not
permit a shareholder of record on the effective date of the tender offer to
tender its shares of Common Stock. The Fund will purchase all shares of Common
Stock tendered in accordance with the terms of the offer unless it determines to
accept none of them (based upon one of the conditions set forth above), or
unless more shares are tendered than the Fund is required to purchase, in which
case the Fund will purchase the shares tendered on a pro rata basis. Each person
tendering shares of Common Stock will pay to the Fund a reasonable service
charge, currently anticipated to be $25.00, but subject to change, to help
defray certain costs, including the processing of tender forms, effecting
payment, postage and handling. It is the position of the staff of the Commission
that such service charge may not be deducted from the proceeds of the purchase.
The Fund's transfer agent will receive the fee as an offset to these costs. The
Fund expects that the cost to the Fund of effecting a tender offer will exceed
the aggregate of all service charges received from those who tender their shares
of Common Stock. Such excess costs associated with the tender will be charged
against capital. Tendered shares of Common Stock that have been accepted and
purchased by the Fund will be recorded and reported as an offset to
shareholders' equity and accordingly will reduce the Fund's total assets.
In order to finance share repurchases, the Fund currently anticipates that
it will liquidate a portion of its investments. Although the Fund has no current
intention to incur debt in order to finance share repurchases, it is permitted
to borrow to finance such repurchases. If the Fund does borrow to finance share
repurchases, this would have the effect of leveraging on the Fund.
If the Fund must liquidate portfolio securities in order to purchase shares
of Common Stock tendered, the Fund may realize gains and losses. Such gains may
be realized on securities held for less than three months. Because the Fund, as
a regulated investment company under the Code, may not derive 30% or more of its
gross income from the sale or disposition of stocks and securities held less
than three months, such gains would reduce the ability of the Fund to sell other
securities held for less than three months that the Fund may wish to sell in the
ordinary course of its portfolio management, which may adversely affect the
Fund's return. See "Taxation--U.S. Federal Income Taxes." The portfolio turnover
rate of the Fund may or may not be affected by the Fund's repurchases of Shares
pursuant to a tender offer.
CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017-2070,
acts as custodian for the Fund's assets. The Hong Kong and Shanghai Banking
Corporation, Seoul Branch will serve as the Fund's sub-custodian for its assets
held in Korea. State Street Bank and Trust Company acts as the transfer agent,
dividend paying agent and registrar for the Fund's Common Stock.
47
<PAGE> 50
EXPERTS
The financial statements of the Fund included herein and in the SAI have
been so included in reliance on the report of , the
Fund's independent accountants, given on the authority of said firm as experts
in auditing and accounting.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed on for the Fund by
Rogers & Wells, New York, New York and certain legal matters will be passed upon
for the Dealer Manager by Skadden, Arps, Slate, Meagher & Flom. Counsel for the
Fund and the Dealer Manager will rely, as to matters of Maryland law, on Piper &
Marbury L.L.P., Baltimore, Maryland. With respect to all matters of Korean law,
counsel for the Fund and counsel for the Dealer Manager will rely on Shin & Kim,
Seoul, Korea.
FURTHER INFORMATION
The Fund has filed with the U.S. Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the U.S. Securities Act
of 1933, as amended, with respect to the Common Stock offered hereby. Further
information concerning the Shares and the Fund may be found in the Registration
Statement, of which this Prospectus constitutes a part. The Registration
Statement may be inspected without charge at the Commission's office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of the fees prescribed by the Commission. The
Commission maintains a Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants,
including the Fund, that file electronically with the Commission.
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Investment Objective and Policies................................................... 2
Investment Restrictions............................................................. 2
Management of the Fund.............................................................. 4
Estimated Expenses.................................................................. 7
Portfolio Transactions.............................................................. 8
Net Asset Value..................................................................... 10
Taxation............................................................................ 11
Index to Financial Statements....................................................... F-1
Appendix A--General Characteristics and Risks of Derivatives........................ A-1
Appendix B--Debt Ratings............................................................ B-1
</TABLE>
48
<PAGE> 51
- ---------------------------------------------------------
- ---------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND,
THE FUND'S INVESTMENT MANAGER, INVESTMENT ADVISER OR SUB-ADVISER OR THE DEALER
MANAGER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE FUND SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. HOWEVER, IF
ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE
DELIVERED, THIS PROSPECTUS WILL BE SUPPLEMENTED OR AMENDED ACCORDINGLY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED THEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Fee Table................................ 4
Financial Highlights..................... 5
Market and Net Asset Value Information... 7
The Offer................................ 8
The Fund................................. 16
Use of Proceeds.......................... 16
Investment Objective and Policies........ 16
Additional Investment Practices.......... 21
Risk Factors and Special
Considerations......................... 23
Management of the Fund................... 36
The Republic of Korea.................... 39
The Securities Markets of Korea.......... 39
Distribution Arrangements................ 39
Dividends and Distributions; Dividend
Reinvestment and Cash Purchase Plan.... 40
Taxation................................. 41
Description of Capital Stock............. 44
Annual Tender Offers and Share
Repurchases............................ 45
Custodian, Transfer Agent, Dividend
Paying Agent and Registrar............. 47
Experts.................................. 48
Legal Matters............................ 48
Further Information...................... 48
Table of Contents of Statement of
Additional Information................. 48
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
100,000 Shares of Common Stock
Issuable Upon Exercised
Rights to Subscribe for
Such Shares
LOGO
FIDELITY ADVISOR
KOREA FUND, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
PAINEWEBBER INCORPORATED
------------------------
NOVEMBER , 1996
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 52
FIDELITY ADVISOR KOREA FUND, INC.
------------------------
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus, dated November , 1996 (the
"Prospectus"). This SAI does not include all information that a prospective
investor should consider before purchasing shares of Fidelity Advisor Korea
Fund, Inc. (the "Fund") and investors should obtain and read the Prospectus
prior to purchasing shares. A copy of the Prospectus may be obtained without
charge by calling the Fund's Information Agent, at (800) .
This SAI incorporates by reference the entire Prospectus. Defined terms used
herein shall have the same meaning as provided in the Prospectus. The date of
this SAI is November , 1996.
------------------------
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Investment Objective and Policies................................................... 2
Investment Restrictions............................................................. 2
Management of the Fund.............................................................. 4
Estimated Expenses.................................................................. 7
Portfolio Transactions.............................................................. 8
Net Asset Value..................................................................... 10
Taxation............................................................................ 11
Index to Financial Statements....................................................... F-1
Appendix A--General Characteristics and Risks of Derivatives........................ A-1
Appendix B--Debt Ratings............................................................ B-1
</TABLE>
<PAGE> 53
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital appreciation. The
Fund seeks to achieve its objective through investment primarily in equity and
debt securities of Korean Issuers. There can be no assurance that the Fund's
investment objective will be achieved. See "Investment Objective and Polices" in
the Prospectus.
INVESTMENT RESTRICTIONS
The Fund's only fundamental policies, that is, policies that cannot be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities, are (i) its investment objective, (ii) its policy
that under normal market conditions, at least 65% of the Fund's total assets
will be invested in equity and debt securities of Korean Issuers, and (iii) the
following seven restrictions. As used herein, a "majority of the Fund's
outstanding voting securities" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares. The other policies
and investment restrictions referred to herein are not fundamental policies of
the Fund and may be changed by the Fund's Board of Directors without shareholder
approval. Unless otherwise noted, whenever an investment policy or limitation
states a maximum percentage of the Fund's assets that may be invested in any
security or other asset, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the Fund's acquisition of such security or other asset.
Accordingly, any subsequent change in values, assets, or other circumstances
will not be considered when determining whether the investment complies with the
Fund's investment policies and limitations. Under its fundamental policies, the
Fund may not:
(1) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities), if, as a result, more than 25% of the Fund's total
assets would be invested in companies whose principal business activities
are in the same industry;
(2) issue senior securities, except as permitted under the 1940 Act;
(3) borrow money, except that the Fund may borrow money for temporary
or emergency purposes or to finance tender offers and/or share repurchases
in an amount not exceeding 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than borrowings); any borrowings
that come to exceed this amount will be reduced promptly in accordance with
reasonable investment practice to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the Fund may be considered an underwriter within the meaning of the
Securities Act in the disposition of restricted securities;
(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this will not prevent the
Fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this will not prevent
the Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by or indexed to, or
representing interests in, physical commodities or investing or trading in
derivative investments); or
(7) make any loan if, as a result, more than 33 1/3% of its total
assets would be lent to other parties, but this limitation does not apply
to purchases of debt securities or to repurchase agreements.
As a matter of non-fundamental policy, the Fund will not purchase any
portfolio securities while borrowings representing more than 5% of its total
assets are outstanding. To meet federal tax requirements for qualification as a
"regulated investment company," the Fund intends to limit its investments so
that at the close of each quarter of its taxable year: (a) with regard to at
least 50% of total assets, no more than 5% of total assets are invested in the
securities of a single issuer and the Fund will not hold more than 10% of the
outstanding voting securities of that issuer; and (b) no more than 25% of total
assets are invested in the
2
<PAGE> 54
securities of a single issuer. Limitations (a) and (b) do not apply to
"Government securities" as defined for federal tax purposes.
AFFILIATED FINANCIAL INSTITUTION TRANSACTIONS
The Fund may engage in transactions with financial institutions that are,
or may be considered to be, "affiliated persons" of the Fund under the 1940 Act.
These transactions may include, for example, repurchase agreements with
custodian banks; purchase of short-term obligations of, and repurchase
agreements with, the 50 largest U.S. banks (measured by deposits); municipal
securities; U.S. government securities with affiliated financial institutions
that are primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued by the
Commission, the Board of Directors will establish and periodically review
procedures applicable to transactions involving affiliated financial
institutions.
FUND'S RIGHTS AS A SHAREHOLDER
The Fund does not intend to direct or administer the day-to-day operations
of any company. The Fund, however, may exercise its rights as a shareholder and
may communicate its views on important matters of policy to management, the
Board of Directors, and shareholders of a company when the Investment Manager or
the Investment Adviser determines that such matters could have a significant
effect on the value of the Fund's investment in the company. The activities that
the Fund may engage in, either individually or in conjunction with others, may
include, among others, supporting or opposing proposed changes in a company's
corporate structure or business activities; seeking changes in a company's
directors or management; seeking changes in a company's direction or policies;
seeking the sale or reorganization of the company or a portion of its assets; or
supporting or opposing third party takeover efforts. This area of corporate
activity is increasingly prone to litigation and it is possible that the Fund
could be involved in lawsuits related to such activities. The Investment Manager
or the Investment Adviser will monitor such activities with a view to
mitigating, to the extent possible, the risk of litigation against the Fund, and
the risk of actual liability if the Fund is involved in litigation. No guarantee
can be made, however, that litigation against the Fund will not be undertaken or
liabilities incurred.
3
<PAGE> 55
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The names of the directors and principal officers of the Fund are set forth
below, together with their positions and their principal occupations during the
past five years and, in the case of the directors, their positions with certain
other international organizations and publicly held companies.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND OTHER
NAME AND ADDRESS POSITION WITH FUND AFFILIATIONS
- ------------------------------ ------------------ --------------------------------------
<S> <C> <C>
Edward C. Johnson 3d*......... Director and Chief Executive Officer, Chairman and
Fidelity Investments President a Director of FMR Corp.; Chairman of
82 Devonshire Street Fidelity Investments Limited; Director
Boston, MA 02109 and Chairman of the Board and of the
Executive Committee of FMR; Chairman
and a Director of FMR Texas Inc.,
Fidelity Management & Research (U.K.)
Inc., and Fidelity Management &
Research (Far East) Inc.; Director or
Trustee and President of all Fidelity
U.S.-registered management investment
companies managed by FMR; Chairman of
each of the funds in the Fidelity
Group of International Funds and of
Fidelity Advisor World Funds.
J. Gary Burkhead*............. Director and President of FMR; and President and a
Fidelity Investments Senior Vice Director of FMR Texas Inc., Fidelity
82 Devonshire Street President Management & Research (U.K.) Inc. and
Boston, MA 02109 Fidelity Management & Research (Far
East) Inc.; Director or Trustee and
Senior Vice President of all
U.S.-registered management investment
companies managed by FMR and of
Fidelity Advisor World Funds.
Helmert Frans van den Hoven... Director Former Member, Supervisory Board,
Marevista 35 Royal Dutch Petroleum Company; former
2202 BX Noordwijk Aan Zee Chairman, Supervisory Board ABN/Amro
The Netherlands Bank (1992-1994) and of Unilever N.V.
(1975-1984); Member, Supervisory
Boards, Hunter Douglass and Vendex
International; Director of a number of
other funds in the Fidelity Group of
International Funds and of Fidelity
Advisor World Funds.
Bertram High Witham, Jr....... Director Chairman and Director, Preferred
89 Fox Hill Road Lodging System; Director, Bill Glass
Stamford, CT 06903 Ministries; Trustee, Fidelity North
Carolina Capital Management Fund;
former Treasurer, IBM Co. (1973-1978);
Director of Fidelity Advisor Emerging
Asia Fund, Inc. and of Fidelity
Advisor World Funds.
</TABLE>
4
<PAGE> 56
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND OTHER
NAME AND ADDRESS POSITION WITH FUND AFFILIATIONS
- ------------------------------ ------------------ --------------------------------------
<S> <C> <C>
David L. Yunich............... Director Former Consultant, W.R. Grace &
26 Cooper Road Company (1977-1995); former Director
Scarsdale, New York W.R. Grace & Company (1977-1995);
former Director, New York Racing
Association (1977-1995); former
Director, Prudential Insurance Company
of America (1955-1991); Director,
River Bank America (1964-present);
former Director, NYNEX Corporation
(1970-1990); Trustee, Saratoga
Performing Arts Center, Boy Scouts of
America, and Carnegie Hall; former
President, Vice Chairman and Director,
R.H. Macy & Company (1955-1978);
Trustee, Fidelity Investments
Charitable Gift Fund (1992); Director,
Fidelity Investments Charitable Gift
Fund Inc. (1994); Director, Fidelity
Advisor Emerging Asia Fund, Inc.;
Director, Fidelity Advisor World
Funds.
William Ebsworth.............. Vice President Chief Investment Officer, Fidelity
Fidelity Investments and Fund Investments (Hong Kong); Director,
Management (H.K.) Ltd. Co-Manager Fidelity Investments Management (Hong
16th Floor Kong) Ltd.; Research Director,
Citibank Tower Fidelity Investments (Tokyo and Hong
3 Garden Road Kong) (1990-1991); Fund Manager and
Central, Hong Kong Analyst, Fidelity Investments (Boston
and Tokyo) (1986-1990); Vice President
of Fidelity Advisor Emerging Asia
Fund, Inc.
Billy W. Wilder............... Vice President President, Fidelity Investments
Fidelity Management & Research (Japan) Limited (1995); Director of
(Far East) Research, Fidelity Management &
Shiroyama JT Mori Building Research (Far East) (1992); Director
19th Floor of Research and General Manager,
4-3-1 Toranomon, Minato-ku Schroder Securities (Japan), Ltd.
Tokyo 105 Japan (1988-1992); Senior Analyst, Schroder
Securities (Japan), Ltd. (1986-1988);
Manager, Impedance Analysis Equipment
Marketing, Yokogawa-Hewlett-Packard,
Ltd. (1979-1986).
Arthur S. Loring.............. Secretary Senior Vice President and General
Fidelity Investments Counsel of FMR; Vice President--Legal
82 Devonshire Street of FMR Corp.; Vice President and Clerk
Boston, MA 02109 of Fidelity Distributors Corporation;
Secretary of all other registered
management investment companies
managed by FMR.
Kenneth A. Rathgeber.......... Treasurer Treasurer of all other registered
Fidelity Investments management investment companies
82 Devonshire Street managed by FMR and an employee of FMR;
Boston, MA 02109 Vice President, Goldman Sachs & Co.
(1978-1995), including Vice President
of Proprietary Accounting (1988-1992),
Global Co-Controller (1992-1994) and
Chief Operations Officer of Goldman
Sachs (Asia) LLC (1994-1995).
Stuart E. Fross............... Assistant An employee of FMR Corp.
Fidelity Investments Secretary (1990-present); Assistant Secretary of
82 Devonshire Street Fidelity Advisor Emerging Asia Fund,
Boston, MA 02109 Inc.
</TABLE>
5
<PAGE> 57
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND OTHER
NAME AND ADDRESS POSITION WITH FUND AFFILIATIONS
- ------------------------------ ------------------ --------------------------------------
<S> <C> <C>
John H. Costello.............. Assistant Assistant Treasurer of all other
Fidelity Investments Treasurer registered management investment
82 Devonshire Street companies managed by FMR and an
Boston, MA 02109 employee of FMR Co.
Pradip Darooka................ Assistant Vice President of FMR Co. (1996);
Fidelity Investments Treasurer Principal (1995-1996), Vice President
82 Devonshire Street (1993-1995), Morgan Stanley Group,
Boston, MA 02109 Inc.; Senior Manager (1990-1992),
Price Waterhouse LLP.
</TABLE>
- ---------------
*Director who is an "interested person" of the Fund within the meaning of the
1940 Act.
Directors who are not "interested persons" (as defined in the 1940 Act) of
the Investment Manager or the Investment Adviser will be paid a fee of $7,000
per year, plus up to $1,500 for every meeting of the Board attended and $1,000
as an annual committee meeting fee. All directors will be reimbursed for travel
and out-of-pocket expenses incurred in connection with meetings of the Board of
Directors. For the fiscal year ended September 30, 1996, such fees and expenses
aggregated $ .
The following table sets forth the aggregate compensation paid by the Fund
paid to each director during the fiscal year ended September 30, 1996, as well
as the total compensation paid to each director by the Fund and other investment
companies advised by the Investment Manager or its affiliates (collectively, the
Fund Complex).
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
AGGREGATE BENEFITS UPON TOTAL
COMPENSATION PENSION OR RETIREMENT RETIREMENT FROM COMPENSATION
FROM THE BENEFITS ACCRUED FROM THE FUND FROM THE
NAME OF DIRECTOR FUND* THE FUND COMPLEX** COMPLEX** FUND COMPLEX**
- ------------------------- ------------- ------------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Edward C. Johnson
3d***.................. $ 0 $0 $0 $ 0
J. Gary Burkhead***...... 0 0 0 0
H.F. Van den Hoven....... 12,000 0 0 24,000
Bertram H. Witham, Jr.... 12,000 0 0 55,350
David L. Yunich.......... 12,000 0 0 24,000
</TABLE>
- ---------------
* Includes compensation paid to Directors by the Fund. The Fund's Directors do
not receive any pension or retirement benefits from the Fund as compensation
for their services as Directors of the Fund.
** Including the Fund, as of September 30, 1996, there were 235 investment
companies in the Fund Complex. Messrs. Johnson and Burkhead are both
Directors or Trustees of 233 investment companies in the Fund Complex.
Messrs. van den Hoven and Yunich are Directors of two investment companies
in the Fund Complex, including the Fund. Mr. Witham is a Director or Trustee
of four investment companies in the Fund Complex, including the Fund. Under
a retirement program adopted in July 1988 by the open-end investment
companies in the Fund Complex (the "Open-End Funds"), Messrs. Witham and
Yunich, upon reaching age 72, became eligible to participate in a retirement
program under which they receive payments during their lifetime from a fund
based upon their basic trustees fees and length of service as trustee for
the Open-End Funds. During the year ended September 30, 1996, they each
received $50,000 in payments under that retirement program. The obligation
of the Open-End Funds to make such payments is not secured or funded.
*** Messrs. Johnson and Burkhead, who are "interested persons" of the Fund, do
not receive any compensation from the Fund or other investment companies in
the Fund Complex for their services as Directors or Trustees, and are
compensated by FMR.
The officers of the Fund conduct and supervise the daily business
operations of the Fund, while the directors review such actions and decide on
general policy.
The Fund also has an Audit Committee composed currently of Messrs. van den
Hoven, Witham and Yunich.
In addition, at the Fund's first annual stockholders meeting, the Board of
Directors were classified into three classes, each with a term of three years
with only one class of directors standing for election in any year. Such
classification may prevent replacement of a majority of the directors for up to
a two-year period while
6
<PAGE> 58
the classification is in effect. Commencing on the date of the annual meeting of
stockholders in the year 2000, the Board of Directors will no longer be divided
into classes and each director will stand for election at such meeting and at
each annual meeting of stockholders held thereafter.
The Articles of Incorporation and By-Laws of the Fund provide that the Fund
will indemnify its directors and officers and will indemnify employees or agents
of the Fund against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the Fund
to the fullest extent permitted by law. Under Maryland law, a corporation may
indemnify any director or officer made a party to any proceeding by reason of
service in that capacity unless it is established that (1) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (A) was committed in bad faith or (B) was the result of active
and deliberate dishonesty; (2) the director or officer actually received an
improper personal benefit in money, property or services; or (3) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. In addition, the Fund's Articles of
Incorporation provide that the Fund's directors and officers will not be liable
to shareholders for money damages, except in limited instances. Under Maryland
law, a corporation may restrict or limit the liability of directors or officers
to the corporation or its stockholders for money damages, except to the extent
that (1) it is proved that the person actually received an improper benefit or
profit in money, property, or services, or (2) a judgment or other final
adjudication adverse to the person is entered in a proceeding based on a finding
in the proceeding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. However, nothing in the Articles of
Incorporation, or By-Laws of the Fund protects or indemnifies a director,
officer, employee or agent against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
The Fund's Articles of Incorporation and By-Laws provide that the Fund's
Board of Directors has the sole power to adopt, alter or repeal the Fund's
By-Laws.
ESTIMATED EXPENSES
On the basis of the anticipated size of the Fund immediately following the
Offer and the actual expenses of the Fund since the commencement of operations
in October 1994, the Investment Manager estimates that the Fund's normal
operating expenses (exclusive of expenses related to the Offer and not including
the 25% over-allotment) for its fiscal year ending September 30, 1997 will be
approximately $ . While the foregoing estimate has been made in good
faith on the basis of information as to current prices available to the
Investment Manager, including estimates furnished by the Fund's agents, there
can be no assurance, given the nature of the Fund, that actual operating
expenses for fiscal 1997 will not be substantially more or less than such
estimate. For the period from October 31, 1994 to September 30, 1995 and for the
fiscal year ended September 30, 1996 the operating expenses of the Fund,
exclusive of amortization of organizational expenses, amounted to $889,248 and
$929,568, respectively.
The Fund's estimated annual operating expenses are higher than the annual
normal operating expenses of most other U.S. investment companies of comparable
size investing in the securities of U.S. issuers. This results from the fact
that (i) the advisory fees (reflecting the specialized nature of the Fund, the
nature of the advisory effort involved and the need for outside research
services) are higher than advisory fees paid by a number of other investment
companies, (ii) many other registered U.S. investment companies do not pay fees
to administrators in addition to fees paid to investment advisers, and (iii) the
fees charged by certain of the Fund's agents are higher (reflecting
communications and other costs associated with an investment company investing
in Korea, rather than in the United States) than fees charged by such agents for
services to a more typical investment company investing in the United States.
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PORTFOLIO TRANSACTIONS
The Fund has no obligation to deal with any brokers or dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Fund's Board of Directors, the Investment Adviser has
delegated to the Sub-Adviser primary responsible for the Fund's portfolio
decisions and the placing of the Fund's portfolio transactions.
In accordance with the policies described below, all orders for the
purchase or sale of portfolio securities will be placed on behalf of the Fund by
the Sub-Adviser pursuant to authority contained in the Sub-Advisory Agreement or
by the Investment Adviser pursuant to the Investment Advisory Agreement. The
Investment Adviser and the Sub-Adviser also will be responsible for the
placement of transaction orders for other investment companies and accounts for
which either of them or their affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal securities
laws, the Investment Adviser and the Sub-Adviser will consider various relevant
factors, including, but not limited to the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the execution efficiency, settlement capability, and financial condition of the
broker-dealer firm; the broker-dealer's execution services rendered on a
continuing basis; the reasonableness of any commissions and arrangements for
payment of Fund expenses. The Fund anticipates that its portfolio transactions
involving securities of companies domiciled in Korea will be conducted primarily
on the KSE and in foreign OTC transactions. Commissions for securities traded on
the KSE will generally be higher than for U.S. securities and may not be subject
to negotiation.
The Fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the Fund or other accounts over which the
Investment Adviser, the Sub-Adviser or their affiliates exercise investment
discretion. Such services may include advice concerning the value of securities;
the advisability of investing in, purchasing, or selling securities; and the
availability of securities or the purchasers or sellers of securities. In
addition, such broker-dealers may furnish analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio
strategy, and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). The
selection of such broker-dealers generally is made by the Investment Adviser or
the Sub-Adviser (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by the Investment Adviser's or the Sub-Adviser's investment staff
(for equity funds) based upon its assessment of the quality of research and
execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the Fund may be useful to the Investment Adviser or the Sub-Adviser in
rendering investment management services to the Fund or their other clients, and
conversely, such information provided by broker-dealers who have executed
transaction orders on behalf of other Investment Adviser or Sub-Adviser clients
may be useful to the Investment Adviser or the Sub-Adviser in carrying out their
obligations to the Fund. The receipt of such research has not reduced the
Investment Adviser's or the Sub-Adviser's normal independent research
activities; however, it enables the Investment Adviser and the Sub-Adviser to
avoid the additional expenses that could be incurred if the Investment Adviser
and the Sub-Adviser tried to develop comparable information through their own
efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the Fund
to pay such higher commissions, the Investment Adviser or the Sub-Adviser must
determine in good faith that such commissions are reasonable in relation to the
value of the brokerage and research services provided by such executing
broker-dealers, viewed in terms of a particular transaction or the Investment
Adviser's or the Sub-Adviser's overall responsibilities to the Fund and its
other clients. In reaching this determination, the Investment Adviser and the
Sub-Adviser will not attempt to place a specific U.S. dollar value on the
brokerage and research services provided, or to determine what portion of the
compensation should be related to those services.
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The Investment Adviser and the Sub-Adviser are authorized to use research
services provided by and to place portfolio transactions with brokerage firms
that have provided assistance in the distribution of shares of the Fund or
shares of other Fidelity funds to the extent permitted by law. The Investment
Adviser and the Sub-Adviser may use research services provided by and place
agency transactions with Fidelity Brokerage Services, Inc. ("FBSI") and Fidelity
Brokerage Services ("FBS"), subsidiaries of FMR Corp., if the commissions are
fair, reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. From September 1992 through
December 1994, FBS operated under the name Fidelity Brokerage Services, Limited
("FBSL"). As of January 1995, FBSL was converted to an unlimited liability
company and assumed the name FBS.
The Investment Adviser and the Sub-Adviser may allocate brokerage
transactions to the Fund's custodians, acting as a broker-dealer, or the other
broker-dealers who have entered into arrangements with the Investment Manager,
the Investment Adviser or the Sub-Adviser under which the broker-dealer
allocates a portion of the commissions paid by the Fund toward payment of the
Fund's expenses, such as transfer agency fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for accounts
which they or their affiliates manage, unless certain requirements are
satisfied. Pursuant to such requirements, the Board of Directors has authorized
FBSI to effect Fund portfolio transactions on national securities exchanges in
accordance with approved procedures and applicable Commission rules.
The Board of Directors periodically reviews the Investment Adviser's and
the Sub-Adviser's performance of their responsibilities in connection with the
placement of portfolio transactions on behalf of the Fund and reviews the
commissions paid by the Fund over representative periods of time to determine if
they are reasonable in relation to the benefits to the Fund.
The Fund's portfolio turnover rates during the period from October 31, 1994
to September 30, 1995 and for the fiscal year ended September 30, 1996 were 25%
(annualized) and 28%, respectively. Because a high turnover rate increases
transaction costs and may increase taxable gains, the Investment Adviser and the
Sub-Adviser each carefully weighs the anticipated benefits of short-term
investing against these consequences. An increased turnover rate may be due to
short-term interest rate volatility or other special market conditions.
Brokerage commissions paid by the Fund during the period from October 31,
1994 to September 30, 1995 and for the fiscal year ended September 30, 1996,
were $376,929 and $142,449, respectively. No brokerage commissions were paid to
FBSI or FBS (formerly FBSL). For the fiscal year ended September 30, 1996, the
Fund paid $142,449 in brokerage commissions to firms providing research. The
approximate dollar amount of transactions on which brokerage commissions were
paid for the fiscal year ended September 30, 1996 was $29,083,249. The Fund pays
both commissions and spreads in connection with the placement of portfolio
transactions.
From time to time the Board of Directors reviews whether the recapture for
the benefit of the Fund of some portion of the brokerage commissions or similar
fees paid by the Fund on portfolio transactions is legally permissible and
advisable. The Fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture arrangements
are in effect. The Board of Directors intends to continue to review whether
recapture opportunities are available and are legally permissible and, if so, to
determine in the exercise of their business judgment, whether it would be
advisable for the Fund to seek such recapture.
Investment decisions for the Fund are made independently from those for
other funds and accounts advised or managed by Fidelity. A particular security
may be held by one or more funds or accounts. Simultaneous transactions are
inevitable when several funds and accounts are managed by the same investment
adviser, particularly when the same security is suitable for the investment
objective of more than one fund or account.
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When two or more funds or accounts managed by Fidelity are simultaneously
engaged in the purchase or sale of the same security, the prices and amounts are
allocated in accordance with a formula considered by Fidelity to be equitable
for each fund. In some cases this system could have a detrimental effect on the
price or value of a security as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions and prices for the Fund. It is the current opinion of
the Board of Directors that the desirability of retaining FIIA and FIJ as
Investment Adviser and Sub-Adviser to the Fund outweighs any disadvantages that
may be said to exist from exposure to simultaneous transactions.
NET ASSET VALUE
Net asset value will be determined daily by dividing the value of the net
assets of the Fund (the value of its assets less its liabilities including
borrowings, exclusive of capital stock and surplus) by the total number of
shares of Common Stock outstanding. Portfolio securities will be valued by
various methods depending on the primary market or exchange on which they trade.
Most equity securities for which the primary market is the United States will be
valued at the last sale price or, if no sale has occurred, at the closing bid
price. Equity securities for which the primary market is outside the United
States will be valued using the official closing price or the last sale price in
the principal market where they are traded. If the last sale price (on the local
exchange) is unavailable, the last evaluated quote or last bid price normally
will be used. Shares listed on the KSE which are traded by foreign investors in
foreign OTC transactions may be valued at prices at which it is expected such
shares may be sold, as determined by or under the direction of a committee
appointed by the Board of Directors, provided that the committee determines that
such valuations are accurate; otherwise such KSE shares will be valued using the
procedures for listed securities. Short-term securities will be valued either at
amortized cost or at original cost plus accrued interest, both of which
approximate current value. Convertible securities and fixed-income securities
will be valued primarily by a pricing service that uses a vendor security
valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. This two-fold approach is believed to
more accurately reflect fair value because it takes into account appropriate
factors such as institutional trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics, and
other market data, without exclusive reliance upon quoted, exchange, or
over-the-counter prices. Use of pricing services has been approved by the Board
of Directors.
Securities and other assets for which there is no readily available market
will be valued in good faith by a committee appointed by the Board of Directors.
The procedures set forth above need not be used to determine the value of the
securities owned by the Fund if, in the opinion of a committee appointed by the
Board of Directors, some other method (e.g., closing over-the-counter bid prices
in the case of debt instruments traded on an exchange) would more accurately
reflect the fair market value of such securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments, and
repurchase agreements, will be substantially completed each day at the close of
the NYSE. The values of any such securities held by the Fund are determined as
of such time for the purpose of computing the Fund's net asset value. Foreign
security prices are furnished by independent brokers or quotation services which
express the value of securities in their local currency. Fidelity Service
Company gathers all exchange rates daily at the close of the NYSE using the last
quoted price on the local currency and then translates the value of foreign
securities from their local currency into U.S. dollars. Any changes in the value
of forward contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of net asset value. If an extraordinary event that
is expected to materially affect the value of a portfolio security occurs after
the close of an exchange on which that security is traded, then the security
will be valued as determined in good faith by a committee appointed by the Board
of Directors.
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TAXATION
U.S. FEDERAL INCOME TAXES
The Fund intends to continue to qualify, and elect to be treated, as a
regulated investment company for each taxable year under the Code. To so qualify
the Fund must, among other things: (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities and gains from the sale or
other disposition of foreign currencies, or other income (including gains from
options, futures contracts and forward contracts) derived with respect to the
Fund's business of investing in stocks, securities or currencies; (b) derive
less than 30% of its gross income from the sale or other disposition of the
following assets held for less than three months--(i) stock and securities, (ii)
options, futures and forward contracts (other than options, futures and forward
contracts on foreign currencies), and (iii) foreign currencies (and options,
futures and forward contracts on foreign currencies) which are not directly
related to the Fund's principal business of investing in stocks and securities
(or options and futures with respect to stock or securities); and (c) diversify
its holdings so that, at the end of each quarter, (i) at least 50% of the value
of the Fund's total assets is represented by cash and cash items, U.S.
Government securities, securities of other regulated investment companies, and
other securities, with such other securities limited in respect of any one
issuer to an amount not greater in value than 5% of the Fund's total assets and
to not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's total assets is invested in
the securities (other than U.S. Government securities or securities of other
regulated investment companies) of any one issuer or of any two or more issuers
that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses.
As a regulated investment company, the Fund will not be subject to U.S.
federal income tax on its investment company taxable income that it distributes
to its shareholders, provided that at least 90% of its investment company
taxable income for the taxable year is distributed to its shareholders; however,
the Fund will be subject to tax on its income and gains to the extent that it
does not distribute to its shareholders an amount equal to such income and
gains. See also "Passive Foreign Investment Companies" below. Investment company
taxable income includes dividends, interest and net short-term capital gains in
excess of net long-term capital losses, but does not include net long-term
capital gains in excess of net short-term capital losses. The Fund intends to
distribute annually to its shareholders substantially all of its investment
company taxable income. If necessary, the Fund may borrow money temporarily or
liquidate assets to make such distributions. Dividend distributions of
investment company taxable income (including distributions from short-term
capital gains) are taxable to a shareholders as ordinary income to the extent of
the Fund's current and accumulated earnings and profits, whether paid in cash or
in shares. Since the Fund will not invest in the stock of domestic corporations,
distributions to corporate shareholders of the Fund will not be entitled to the
deduction for dividends received by corporations. If the Fund fails to satisfy
the 90% distribution requirement or fails to qualify as a regulated investment
company in any taxable year, it will be subject to tax in such year on all of
its taxable income, whether or not the Fund makes any distributions to its
shareholders.
As a regulated investment company, the Fund also will not be subject to
U.S. federal income tax on its net long-term capital gains, if any, that it
distributes to its shareholders. If the Fund retains for reinvestment or
otherwise an amount of such net long-term capital gains, it will be subject to a
tax of up to 35% of the amount retained. The Board of Directors of the Fund will
determine at least once a year whether to distribute any net long-term capital
gains in excess of net short-term capital losses and capital loss carryovers
from prior years. The Fund expects to designate amounts retained as
undistributed capital gains in a notice to its shareholders who, if subject to
U.S. federal income taxation on long-term capital gains, (a) will be required to
include in income for U.S. federal income tax purposes, as long-term capital
gains, their proportionate shares of the undistributed amount, and (b) will be
entitled to credit against their U.S. federal income tax liabilities their
proportionate shares of the tax paid by the Fund on the undistributed amount and
to claim refunds to the extent that their credits exceed their liabilities. For
U.S. federal income tax purposes, the basis of shares owned by a shareholder of
the Fund will be increased by an amount equal to 65% of the amount of
undistributed capital gains included in the shareholder's income. Distributions
of net long-term capital gains, if any, by the Fund are taxable to its
shareholders as long-term capital gains whether paid in cash or in shares
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and regardless of how long the shareholder has held the Fund's shares. Such
distributions of net long-term capital gains are not eligible for the dividends
received deduction. Under the Code, net long-term capital gains will be taxed at
a rate no greater than 28% for individuals and 35% for corporations.
Shareholders will be notified annually as to the U.S. federal income tax status
of their dividends and distributions.
Shareholders receiving dividends or distributions in the form of additional
shares pursuant to the Plan should be treated for U.S. federal income tax
purposes as receiving a distribution in an amount equal to the amount of money
that the shareholders receiving cash dividends or distributions will receive,
and should have a cost basis in the shares equal to such amount.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by the Fund, the distribution will be taxable even if
it, in effect, represents a return of invested capital. Investors considering
buying shares just prior to a dividend or capital gain distribution payment date
should be aware that, although the price of shares purchased at that time may
reflect the amount of the forthcoming distribution, those who purchase just
prior to the record date for a distribution will receive a distribution which
will be taxable to them. The amount of capital gains realized and distributed
(which from an investment standpoint may represent a partial return of capital
rather than income) in any given year will be the result of investment
performance, among other things, and can be expected to vary from year to year.
If the Fund is the holder of record of any stock on the record date for any
dividends payable with respect to such stock, such dividends are included in the
Fund's gross income not as of the date received but as of the later of (a) the
date such stock became ex-dividend with respect to such dividends (i.e., the
date on which a buyer of the stock would not be entitled to receive the
declared, but unpaid, dividends) or (b) the date the Fund acquired such stock.
Accordingly, in order to satisfy its income distribution requirements, the Fund
may be required to pay dividends based on anticipated earnings, and shareholders
may receive dividends in an earlier year than would otherwise be the case.
Under the Code, the Fund may be subject to a 4% excise tax on a portion of
its undistributed income. To avoid the tax, the Fund must distribute annually at
least 98% of its ordinary income (not taking into account any capital gains or
losses) for the calendar year and at least 98% of its capital gain net income
for the 12-month period ending, as a general rule, on October 31 of the calendar
year. For this purpose, any income or gain retained by the Fund that is subject
to corporate income tax will be treated as having been distributed at year-end.
In addition, the minimum amounts that must be distributed in any year to avoid
the excise tax will be increased or decreased to reflect any under-distribution
or over-distribution, as the case may be, in the previous year. For a
distribution to qualify under the foregoing test, the distribution generally
must be declared and paid during the year. Any dividend declared by the Fund in
October, November or December of any year and payable to shareholders of record
on a specified date in such a month shall be deemed to have been received by
each shareholder on December 31 of such year and to have been paid by the Fund
not later than December 31 of such year, provided that such dividend is actually
paid by the Fund during January of the following year.
The Fund will maintain accounts and calculate income by reference to the
U.S. dollar for U.S. federal income tax purposes. If the Fund's dividends exceed
its taxable income in any year, which is sometimes the result of currency
related losses, all or a portion of the Fund's dividends may be a return of
capital to shareholders for tax purposes. Furthermore, exchange control
regulations may restrict the ability of the Fund to repatriate investment income
or the proceeds of sales of securities. These restrictions and limitations may
limit the Fund's ability to make sufficient distributions to satisfy the 90%
distribution requirement and avoid the 4% excise tax.
The Fund's transactions in foreign currencies, forward contracts, options
and futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the Fund (i.e.,
may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund, defer Fund losses, and affect the
determination of whether capital gains and losses are characterized as long-term
or short-term capital gains or losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also may require the Fund to mark-to-market certain types of the positions in
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its portfolio (i.e., treat them as if they were sold and repurchased for fair
market value at the close of the taxable year) which may cause the Fund to
recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the 90% and 98% distribution requirements for
avoiding income and excise taxes.
The Fund may make investments that accrue income that is not matched by a
current receipt of cash by the Fund, such as investments in certain obligations
having original issue discount (i.e., an amount equal to the excess of the
stated redemption price of the security at maturity over its issue price), or
market discount (i.e., an amount equal to the excess of the stated redemption
price of the security at maturity over its basis immediately after it was
acquired) if the Fund elects to accrue market discount on a current basis. In
addition, income may continue to accrue for federal income tax purposes with
respect to a non-performing investment. Any of the foregoing income would be
treated as income earned by the Fund and therefore would be subject to the
distribution requirements of the Code. Because such income may not be matched by
a concurrent receipt of cash to the Fund, the Fund may be required to dispose of
other securities to be able to make distributions to its investors. See the
discussion of distribution requirements above. The extent to which the Fund may
liquidate securities at a gain may be limited by the 30% limitation discussed
above.
Upon the sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending upon the amount realized and the shareholder's
basis in the shares. Such gain or loss will be treated as a capital gain or loss
if the shares are capital assets in the shareholder's hands, and will be
long-term if the shareholder's holding period for the shares is more than 12
months and otherwise will be short-term. Any loss realized on a sale or exchange
will be disallowed to the extent that the shares disposed of are replaced
(including replacement through the reinvesting of dividends and capital gains
distributions in the Fund) within a period of 61 days beginning 30 days before
and ending 30 days after the disposition of the shares. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of Fund shares held by the
shareholder for six months or less will be treated for federal income tax
purposes as a long-term capital loss to the extent of any distributions of
long-term capital gains received by the shareholder with respect to such shares.
An amount received by a shareholder from the Fund in exchange for shares of
the Fund (pursuant to a repurchase of shares in a tender offer or otherwise)
generally will be treated as a payment in exchange for the shares tendered,
which may result in taxable gain or loss as described above. However, if the
amount received by a shareholder exceeds the fair market value of the shares
tendered, or if a shareholder does not tender all of the shares of the Fund
owned or deemed to be owned by the shareholder, all or a portion of the amount
received may be treated as a dividend taxable as ordinary income or as a return
of capital. In addition, if a tender offer is made, shareholders who do not
tender their shares could be deemed, under certain circumstances, to have
received a taxable distribution as a result of their increased proportionate
interest in the Fund.
BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to
non-corporate shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to furnish the Fund with the shareholder's correct taxpayer
identification number (ii) the IRS notifies the Fund that the shareholder has
failed to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (iii) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above. Backup withholding is not an additional
tax. Any amounts withheld under the backup withholding rules from payments made
to a shareholder may be credited against such shareholder's federal income tax
liability.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund intends to make investments which may, for federal income tax
purposes, constitute investments in shares of foreign corporations. If the Fund
purchases shares in certain foreign passive
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investment entities described in the Code as passive foreign investment
companies ("PFICs"), the Fund will be subject to U.S. federal income tax on a
portion of any "excess distribution" (the Fund's ratable share of distributions
in any year that exceeds 125% of the average annual distribution received by the
Fund in the three preceding years or the Fund's holding period, if shorter, and
any gain from the disposition of such shares), even if such income is
distributed as a taxable dividend by the Fund to its shareholders. Additional
charges in the nature of interest may be imposed on the Fund in respect of
deferred taxes arising from such "excess distributions." If the Fund were to
invest in a PFIC and elect to treat the PFIC as a "qualified electing fund"
under the Code (and if the PFIC were to comply with certain reporting
requirements), in lieu of the foregoing requirements the Fund would be required
to include in income each year its pro rata share of the PFIC's ordinary
earnings and net realized capital gains, whether or not such amounts were
actually distributed to the Fund.
Legislation has been proposed in the U.S. Congress which would, in the case
of a PFIC having "marketable stock," permit U.S. stockholders, such as the Fund,
to elect to mark-to-market the PFIC stock annually. Otherwise, U.S. stockholders
would be treated substantially the same as under current law. Special rules
applicable to mutual funds would classify as "marketable stock" all stock in
PFICs held by the Fund. It is unclear if or when the proposed legislation will
become law and if it is enacted the form it will take. On March 31, 1992, the
U.S. Internal Revenue Service released proposed regulations providing a
mark-to-market election for regulated investment companies that would have
effects similar to the proposed legislation. These regulations would be
effective for taxable years ending after promulgation of the regulations as
final regulations. Whether, and to what extent, final regulations may be applied
retroactively by the Fund is unclear.
FOREIGN TAX CREDITS
The Fund may be subject to certain taxes, including withholding taxes,
imposed by Korea and possibly other foreign countries with respect to its income
and capital gains. If the Fund qualifies as a regulated investment company, if
certain distribution requirements are satisfied and if more than 50% of the
value of the Fund's total assets at the close of any taxable year consists of
stock or securities of foreign corporations, which for this purpose may include
obligations of foreign governmental issuers, the Fund may elect, for U.S.
federal income tax purposes, to treat any foreign country's income or
withholding taxes paid by the Fund that can be treated as income taxes under the
U.S. income tax principles, as paid by its shareholders. The Fund expects to
qualify for and make this election. For any year that the Fund makes such an
election, each shareholder will be required to include in its income an amount
equal to its allocable share of such income taxes paid by the Fund to a foreign
country's government and shareholders will be entitled, subject to certain
limitations, to credit their portions of these amounts against their U.S.
federal income tax due, if any, or to deduct their portions from their U.S.
taxable income, if any. No deductions for foreign taxes paid by the Fund may be
claimed, however, by non-corporate shareholders (including certain foreign
shareholders described below) who do not itemize deductions. Shareholders that
are exempt from tax under Section 501(a) of the Code, such as pension plans,
generally will derive no benefit from the Fund's election. However, such
shareholders should not be disadvantaged either because the amount of additional
income they are deemed to receive equal to their allocable share of such foreign
countries' income taxes paid by the Fund generally will not be subject to U.S.
federal income tax.
The amount of foreign taxes that may be credited against a shareholder's
U.S. federal income tax liability generally will be limited, however, to an
amount equal to the shareholder's U.S. federal income tax rate multiplied by its
foreign source taxable income. For this purpose, the Fund generally expects that
the capital gains it distributes, whether as dividends or capital gains
distributions, will not be treated as foreign source taxable income. In
addition, this limitation must be applied separately to certain categories of
foreign source income, one of which is foreign source "passive income." For this
purpose, foreign source "passive income" includes dividends, interest, capital
gains and certain foreign currency gains. As a consequence, certain shareholders
may not be able to claim a foreign tax credit for the full amount of their
proportionate share of foreign taxes paid by the Fund. Each shareholder will be
notified within 60 days after the close of the Fund's taxable year whether,
pursuant to the election described above, the foreign taxes paid by the Fund
will be treated as paid by its shareholders for that year and, if so, such
notification will designate (i) such
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shareholder's portion of the foreign taxes and (ii) the portion of the Fund's
dividends and distributions that represents income derived from foreign sources.
FOREIGN SHAREHOLDERS
U.S. taxation of a shareholder who, as to the United States, is a foreign
investor depends, in part, on whether the shareholder's income from the Fund is
"effectively connected" with a U.S. trade or business carried on by the
shareholder.
If the foreign investor is not a resident alien and the income from the
Fund is not effectively connected with a United States trade or business carried
on by the foreign investor, distributions of net investment income and net
realized short-term capital gains will be subject to a 30% (or lower treaty
rate) U.S. withholding tax. Furthermore, such foreign investors may be subject
to an increased U.S. tax on their income resulting from the Fund's election
(described above) to "pass-through" amounts of foreign taxes paid by the Fund,
but will not be able to claim a credit or deduction in the United States with
respect to the foreign taxes treated as having been paid by them. Distributions
of net realized long-term capital gains, amounts retained by the Fund which are
designated as undistributed capital gains, and gains realized upon the sale of
shares of the Fund will not be subject to U.S. tax unless a foreign investor who
is a nonresident alien individual is physically present in the United States for
more than 182 days during the taxable year and, in the case of a gain realized
upon the sale of Fund shares, unless (i) such gain is attributable to an office
or fixed place of business in the United States or (ii) such nonresident alien
individual has a tax home in the United States and such gain is not attributable
to an office or fixed place of business located outside the United States. A
determination by the Fund not to distribute long-term capital gains may reduce a
foreign investor's overall return from an investment in the Fund, since the Fund
will incur a U.S. federal tax liability with respect to retained long-term
capital gains, thereby reducing the amount of cash held by the Fund that is
available for distribution, and the foreign investor may not be able to claim a
credit or deduction with respect to such taxes. In the case of a foreign
investor who is a nonresident alien individual, the Fund may be required to
withhold U.S. federal income tax at a rate of 31%, unless the foreign investor
files an appropriate form certifying under penalty of perjury as to his
nonresident alien status.
If a foreign investor is a resident alien or if dividends or distributions
from the Fund are effectively connected with a U.S. trade or business carried on
by the foreign investor, dividends of net investment income, distributions of
net short-term and long-term capital gains, amounts retained by the Fund that
are designated as undistributed capital gains and any gains realized upon the
sale of shares of the Fund will be subject to U.S. income tax at the rates
applicable to U.S. citizens or domestic corporations. If the income from the
Fund is effectively connected with a U.S. trade or business carried on by a
foreign investor that is a corporation, then such foreign investor also may be
subject to the 30% branch profits tax.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Shareholders may be required to provide appropriate documentation
to establish their entitlement to the benefits of such a treaty. Foreign
investors are advised to consult their own tax advisers with respect to (a)
whether their income from the Fund is or is not effectively connected with a
U.S. trade or business carried on by them (b) whether they may claim the
benefits of an applicable tax treaty and (c) any other tax consequences to them
of an investment in the Fund.
OTHER TAXATION
Distributions also may be subject to state, local and foreign taxes
depending on each shareholder's particular position.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY
INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY. IN VIEW OF THE INDIVIDUAL NATURE
OF TAX CONSEQUENCES, EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OWN TAX ADVISER
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO HIM OF PARTICIPATION IN THE
FUND, INCLUDING THE EFFECT AND APPLICABILITY OF
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STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
FEDERAL OR OTHER TAX LAWS.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
KOREAN TAXES
The following description of certain Korean tax matters relating to the
Fund and its shareholders represents the opinion of Shin & Kim, Korean counsel
to the Fund.
Under current Korean law, payments to non-residents of Korea (such as the
Fund) by Korean corporations in respect of income are subject to Korean
withholding tax and capital gains derived by non-residents of Korea (such as the
Fund) with respect to stock and securities of Korean corporations are subject to
withholding tax, unless exempted by relevant laws or tax treaties. More
specifically, dividends and interest will be subject to withholding tax at the
rate of 27.5% until December 31, 1998 and 26.875% thereafter and capital gains
(without deduction for capital losses) will be subject to withholding tax equal
to the lower of (i) 11% until December 31, 1998 and 10.75% thereafter of the
gross sales proceeds, or (ii) if satisfactory evidence of acquisition cost is
produced, 27.5% until December 31, 1998 and 26.875% thereafter of the difference
between the gross sales proceeds and the acquisition cost of the stock or
security sold (excluding any transaction charges, commissions, fees or taxes
paid at the time of acquisition).
The applicable withholding tax rate under the U.S.-Korea Income Tax Treaty
presently in effect (the "Treaty"), is generally 15% (plus a resident tax of 11%
until December 31, 1998 and 7.5% thereafter of such amount, or a total of 16.5%
until December 31, 1998 and 16.125% thereafter) on dividends paid to the Fund by
Korean corporations, and generally 12% (plus a resident tax of 10% until
December 31, 1998 and 7.5% thereafter of such amount, or a total of 13.2% until
December 31, 1998 and 12.9% thereafter) on interest paid to the Fund by Korean
corporations. Under the Treaty, no withholding tax will be applicable to capital
gains realized by the Fund.
The reduced tax rate and exemption under the provisions of the Treaty will
not apply to the dividend, interest and capital gain income derived by the Fund
from Korean corporations if both (i) the Fund is, by reason of the existence of
special measures under U.S. federal income tax law with respect to those types
of income, subject to U.S. federal income tax in an amount substantially less
than the U.S. federal income tax generally imposed on corporate profits (Article
17(a) of the Treaty), and (ii) at least 25% of the Fund's outstanding shares are
held of record or otherwise determined to be owned, directly or indirectly, by
one or more persons who are not individual residents of the United States
(Article 17(b) of the Treaty).
Questions have recently been raised as to whether the U.S. regulated
investment company provisions contained in the Code constitute "special
measures" for purposes of Article 17(a) of the Treaty. Regardless of the
resolution of these questions, under Article 17(b) of the Treaty, the Fund will
qualify for the benefits of the Treaty so long as less than 25% of the Fund's
outstanding shares are determined to be held other than by individual residents
of the United States.
Shin & Kim have given their opinion that the Treaty presently applies to
the Fund if and so long as the Fund operates as described herein. The Fund has
received written confirmation from the MOFE that, so long as all of the issued
shares of the Fund are listed on one or more publicly acknowledged stock
exchanges in the United States only and they are traded on such exchanges by the
general public, the Fund will be entitled to the benefits of the Treaty because
Article 17(b) of the Treaty will not apply. The Fund's Common Stock has been
approved for listing on the New York Stock Exchange upon notice of issuance. In
order to qualify for the benefits of the Treaty, the Fund will not apply to list
the Fund's shares on any stock exchange outside the United States.
Notwithstanding the foregoing, the Tax Exemption and Reduction Control Law
(the "TERCL") exempts interest on bonds denominated in a non-Korean currency
from Korean income and corporation taxes. The residents' tax referred to above
is therefore eliminated with respect to such investments. The TERCL tax
exemptions expire on December 31, 1998.
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Under present Korean law, the Korean Inheritance and Gift Tax will not
apply to any testate, intestate or inter-vivos transfer of shares of the Fund to
the extent the deceased or the donee, as the case may be, is not domiciled in
Korea. Korean stamp duty will not apply to transfers of Korean securities, nor
to the Fund's portfolio securities transactions.
A securities transaction tax is payable on the transfer by the Fund of
shares and certain other equities (throughout this paragraph, collectively,
"shares") issued by a Korean company at the rate of 0.15% of the sale price of
the shares (except in certain circumstances in which case no tax is charged, and
where the shares are traded outside the KSE, in which case the tax is payable at
the rate of 0.5% of the sale price or where the shares are traded through
licensed broker-dealers in the over-the-counter market, in which case the tax is
payable at the rate of 0.3% of the sale price) unless (i) the shares are listed
on a foreign stock exchange and the sales are executed on such exchange; or (ii)
those sales are executed between non-residents without a permanent establishment
in Korea, the non-resident transferor did not own 10% or more of the total
issued and outstanding shares of the issuer of such shares at any time during
the five years before the year within which the transfer occurs, and the
non-resident transferor does not sell such shares through a securities company
in Korea (which latter condition cannot be fulfilled under current KSEC
regulations which require all sales of Korean securities off the KSE to be
through a Korean securities company). Effective from July 1, 1994, the Korean
government introduced an additional agricultural and fishery special tax on
securities transactions on the KSE which is equal to 0.15% of the sale price of
the shares and which will remain effective for a period of ten years thereafter.
The transferor of the shares pays the securities transaction tax. When the
transfer is made through a securities company only, such securities company will
make the withholding. Where the transfer is effected by a non-resident
individual or a non-resident corporation without a permanent establishment in
Korea otherwise than through the Korea Securities Depository or a securities
company, the transferee is required to withhold the securities transaction tax.
This tax treatment could change in the event of changes in Korean or U.S.
tax laws, changes in the terms of, or the MOFE's interpretation of, the Treaty,
or changes in relevant facts.
NOTICES
Shareholders will be notified annually by the Fund of the dividends,
distributions and deemed distributions made by the Fund to its shareholders.
Furthermore, shareholders will be sent, if appropriate, various written notices
after the close of the Fund's taxable year regarding certain dividends,
distributions and deemed distributions that were paid (or that were treated as
having been paid) by the Fund to its shareholders during the preceding taxable
year.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS
CONCERNING FOREIGN, FEDERAL, STATE AND LOCAL TAX MATTERS, AND WITH RESPECT TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE FUND.
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INDEX TO FINANCIAL STATEMENTS
[To Be Included By Amendment]
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APPENDIX A
GENERAL CHARACTERISTICS AND RISKS OF DERIVATIVES
The following investment practices in which the Fund is authorized to
engage are generally not currently permitted under Korean laws or regulations.
A detailed discussion of Derivatives (as defined below) that may be used by
the Investment Adviser or the Sub-Adviser on behalf of the Fund follows below.
The Fund will not be obligated, however, to use any Derivatives and makes no
representation as to the availability of these techniques at this time or at any
time in the future. "Derivatives," as used in this Appendix A, refers to
interest rate, currency or stock index futures contracts, currency forward
contracts and currency swaps, the purchase and sale (or writing) of exchange
listed and over-the-counter ("OTC") put and call options on debt and equity
securities, currencies, interest rate, currency or stock index futures and fixed
income and stock indices and other financial instruments, entering into various
interest rate transactions such as swaps, caps, floors, collars, entering into
equity swaps, caps, floors or trading in other types of derivatives.
The Fund's ability to pursue certain of these strategies may be limited by
the U.S. Commodity Exchange Act, as amended, applicable regulations of the
Commodity Futures Trading Commission ("CFTC") thereunder and the federal income
tax requirements applicable to regulated investment companies which are not
operated as commodity pools.
PUT AND CALL OPTIONS ON SECURITIES AND INDICES
The Fund may purchase and sell put and call options on debt and equity
securities and indices based upon the prices of debt or equity securities or
other market or economic factors that may affect securities in which the Fund
may invest, such as commodity price levels or rates of inflation. A put option
on a security gives the purchaser of the option the right to sell and the writer
the obligation to buy the underlying security at the exercise price during the
option period. The Fund may also purchase and sell options on indices based upon
the prices of debt or equity securities ("index options"). Index options are
similar to options on securities except that, rather than taking or making
delivery of securities underlying the option at a specified price upon exercise,
an index option gives the holder the right to receive cash upon exercise of the
option if the level of the index upon which the option is based is greater, in
the case of a call, or less in the case of a put, than the exercise price of the
option. The purchase of a put option on a security would be designed to protect
against a substantial decline in the market value of a security held by the
Fund. A call option on a security gives the purchaser of the option the right to
buy and the writer the obligation to sell the underlying security at the
exercise price during the option period. The purchase of a call option on a
security would be intended to protect the Fund against an increase in the price
of a security that it intended to purchase in the future. In the case of either
put or call options that it has purchased, if the option expires without being
sold or exercised, the Fund will experience a loss in the amount of the option
premium plus any related commissions. When the Fund sells put and call options,
it receives a premium as the seller of the option. The premium that the Fund
receives for writing the option will serve as a partial hedge, in the amount of
the option premium, against changes in value of the securities in its portfolio.
During the term of the option, however, a covered call seller has, in return for
the premium on the option, given up the opportunity for capital appreciation
above the exercise price of the option if the value of the underlying security
increases, but has retained the risk of loss should the price of the underlying
security decline. Conversely, a secured put seller retains the risk of loss
should the market value of the underlying security decline below the exercise
price of the option, less the premium received on the sale of the option. The
Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC Options") which are privately negotiated with the
counterparty to such contract. U.S. listed options are issued by the Options
Clearing Corporation ("OCC"), which guarantees the performance of the
obligations of the parties to such options.
All such call options sold (written) by the Fund will be "covered" as long
as the call is outstanding (i.e., the Fund will own the instrument subject to
the call or other securities or assets acceptable under applicable segregation
and coverage rules). All such put options sold (written) by the Fund will be
secured by
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segregated assets consisting of cash or liquid high grade debt securities having
a value not less than the exercise price.
The Fund's ability to close out its position as a purchaser or seller of an
exchange listed put or call option is dependent upon the existence of a liquid
secondary market. Among the possible reasons for the absence of a liquid
secondary market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities; (iv)
interruption of the normal operations on an exchange; (v) inadequacy of the
facilities of an exchange or the OCC to handle current trading volume; or (vi) a
decision by one or more exchanges to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options on that exchange that had been listed by the OCC as
a result of trades on that exchange would generally continue to be exercisable
in accordance with their terms. OTC Options are purchased from or sold to
dealers, financial institutions or other counterparties which have entered into
direct agreements with the Fund. With OTC Options, such variables as expiration
date, exercise price and premium will be agreed upon between the Fund and the
counterparty, without the intermediation of a third party such as the OCC. If
the counterparty fails to make or take delivery of the securities underlying an
option it has written, or otherwise settle the transaction in accordance with
the terms of that option as written, the Fund would lose the premium paid for
the option as well as any anticipated benefit of the transaction. The Fund must
rely on the credit quality of the counterparty rather than the guarantee of the
OCC. OTC Options with foreign brokers in Korea subject the Fund to the credit of
such brokers which may be weak, making such options speculative.
The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the option
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Characteristics. The Fund may purchase and sell futures contracts on
interest rates and indices of debt and equity securities or other financial
indicators and purchase and sell (write) put and call options on such futures
contracts traded on recognized domestic exchanges as a hedge against anticipated
interest rate changes or movements in equity markets. The sale of a futures
contract creates an obligation by the Fund, as seller, to deliver the specific
type of financial instrument called for in the contract at a specified future
time for a specified price. Options on futures contracts are similar to options
on securities except that an option on a futures contract gives the purchaser
the right in return for the premium paid to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put).
Margin Requirements. At the time a futures contract is purchased or sold,
the Fund must allocate cash or securities as a deposit payment ("initial
margin"). It is expected that the initial margin that the Fund will pay may
range from approximately 1% to approximately 5% of the value of the instruments
underlying the contract. In certain circumstances, however, such as during
periods of high volatility, the Fund may be required by an exchange to increase
the level of its initial margin payment. Additionally, initial margin
requirements may be increased in the future pursuant to regulatory action. An
outstanding futures contract is valued daily and the payment in cash of
"variation margin" may be required, a process known as "marking to the market."
Transactions in listed options and futures are usually settled by entering into
an offsetting transaction, and are subject to the risk that the position may not
be able to be closed if no offsetting transaction can be arranged.
Limitations on Use of Futures Contracts and Options on Futures
Contracts. The Fund's use of futures contracts and options on futures contracts
will in all cases be consistent with applicable regulatory requirements and in
particular, the rules and regulations of the CFTC.
The Fund may enter into futures contracts or options thereon for purposes
other than bona fide hedging if, immediately thereafter, the sum of the amount
of its initial margin and premiums on open contracts and
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options would not exceed 5% of the liquidation value of the Fund's portfolio;
provided, further, that in the case of an option that is in-the-money at the
time of the purchase, the in-the-money amount may be excluded in calculating the
5% limitation. Also, when required, a segregated account of cash or cash
equivalents will be maintained and marked to market in an amount equal to the
market value of the contract. The Investment Adviser and the Sub-Adviser may be
required to comply with such different standards as may be established from time
to time by CFTC (or Korean regulators) rules and regulations with respect to the
purchase and sale of futures contracts and options thereon.
CURRENCY TRANSACTIONS
The Fund may deal in forward currency contracts and other currency
transactions such as futures contracts, options, options on futures contracts
and swaps for any purpose consistent with its investment objective and policies.
Currency transactions include currency forward contracts, exchange listed
currency futures contracts, exchange listed and OTC options on currencies and
currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional difference among two or more currencies and operates similarly to an
interest rate swap, which is described below. The Fund may enter into currency
transactions with counterparties that are determined to be creditworthy by
Fidelity.
The following discussion summarizes some, but not all, of the possible
currency management strategies involving forward contracts, options on
currencies and futures on currencies that could be used by the Fund. Transaction
hedging is entering into a currency transaction with respect to specific assets
or liabilities of the Fund, which will generally arise in connection with the
purchase or sale of the Fund's portfolio securities or the receipt of income
from them. Position hedging is entering into a currency transaction with respect
to portfolio security positions denominated or generally quoted in that
currency.
The Fund may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the fund expects
to have portfolio exposure. To reduce the effect of currency fluctuations on the
value of existing or anticipated holdings of portfolio securities, the Fund may
also engage in proxy hedging. Proxy hedging is often used when the currency to
which the Fund's portfolio is exposed is difficult to hedge or to hedge against
the U.S. dollar. Proxy hedging entails entering into a forward contract to sell
a currency whose changes in value are generally considered to be well correlated
with a currency or currencies in which some or all of the Fund's portfolio
securities are or are expected to be denominated, and to buy U.S. dollars.
Currency transactions can result in losses to the Fund if the currency being
hedged fluctuates in value to a degree or in a direction that is not
anticipated. Further, the risk exists that the perceived linkage between various
currencies may not be present or may not be present during the particular time
that the Fund is engaging in proxy hedging. If the Fund enters into a currency
hedging transaction, the Fund will comply with the asset segregation
requirements described below. The Fund may enter into forward contracts to shift
its investment exposure from one currency into another currency that is expected
to perform better relative to the U.S. dollar. For example, if the Fund held
investments denominated in or otherwise exposed to the Japanese Yen, the Fund
could enter into forward contracts to sell Japanese Yen and purchase Hong Kong
Dollars. This type of strategy, sometimes known as a "cross-hedge," will tend to
reduce or eliminate exposure to the currency that is sold, and increase exposure
to the currency that is purchased, much as if the Fund had sold a security
denominated in one currency and purchased an equivalent security denominated in
another. Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause the Fund to assume the risk of fluctuations in
the value of the currency it purchases.
Successful use of forward currency contracts will depend on the Investment
Adviser and the Sub-Adviser's skill in analyzing and predicting currency values.
Forward contracts may substantially change the Fund's investment exposure to
changes in currency exchange rates, and could result in losses to the Fund if
currencies do not perform as the Sub-Adviser anticipates. For example, if a
currency's value rose at a time when the Investment Adviser and the Sub-Adviser
had hedged the Fund by selling that currency in exchange
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for U.S. dollars, the Fund would be unable to participate in the currency's
appreciation. If the Investment Adviser or the Sub-Adviser hedges currency
exposure through proxy hedges, the Fund could realize currency losses from the
hedge and the security position at the same time if the two currencies do not
move in tandem. Similarly, if the Investment Adviser or the Sub-Adviser
increases the Fund's exposure to a foreign currency, and that currency's value
declines, the Fund will realize a loss. There is no assurance that the
Investment Adviser's or the Sub-Adviser's use of forward currency contracts will
be advantageous to the Fund, or that they will hedge at an appropriate time.
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be adversely affected by
government exchange controls, limitations or restrictions on repatriation of
currency, and manipulations or exchange restrictions imposed by governments.
These forms of governmental actions can result in losses to the Fund if it is
unable to deliver or receive currency or monies in settlement of obligations and
could also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as incurring transaction costs. Buyers and
sellers of currency futures are subject to the same risks that apply to the use
of futures generally. Further, settlement of a currency futures contract for the
purchase of most currencies must occur at a bank based in the issuing nation.
Trading options on currency futures is relatively new, and the ability to
establish and close out positions on these options is subject to the maintenance
of a liquid market that may not always be available. Currency exchange rates may
fluctuate based on factors extrinsic to that country's economy.
INTEREST RATE TRANSACTIONS
The Fund may enter into interest rate swaps and may purchase or sell
interest rate caps and floors. The Fund would enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio, to manage the duration of its portfolio or to protect against
any increase in the price of the securities the Fund anticipates purchasing at a
later date or for any other purpose consistent with its objective.
The Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or liabilities, and will usually enter into interest rate swaps on a net
basis, i.e., the two payments are netted out, with the Fund receiving or paying,
as the case may be, only the net amount of the two payments on the payment date.
If there is a default by the other party to such a transaction, the Fund will
have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps and floors are more recent
innovations for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps.
EQUITY SWAPS AND RELATED TRANSACTIONS
The Fund may enter into equity swaps and may purchase or sell equity caps
and floors. The Fund would enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of its portfolio, or to
protect against any increase in the price of the securities the Fund anticipates
purchasing at a later date or for any other purpose consistent with its
objective.
The Fund may enter into equity swaps, caps and floors on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or liabilities, and will usually enter in equity swaps on a net basis,
i.e., the two payment streams are netted out, with the Fund receiving or paying,
as the case may be, only the net amount of the two payments on the payment date.
If there is a default by the other party to such a transaction, the Fund will
have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps and floors are more recent
innovations for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps. Equity swaps, caps and floors
generally will be considered illiquid. In such instances, investment in such
equity swaps, caps and floors will be governed by the Fund's policy on
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investment in illiquid securities and such securities will be included in the
35% limit on investment in illiquid securities by the Fund. The staff of the
Securities and Exchange Commission has taken the position that equity swaps,
caps and floors are illiquid securities. See "Risk Factors and Special
Considerations--Thinly Traded Markets and Illiquid Investments" and "Investment
Objective and Policies--Other Investments."
RISKS OF DERIVATIVES
The use of Derivatives involves special risks, including possible default
by the other party to the transaction, illiquidity and, to the extent the
Investment Adviser's or the Sub-Adviser's view as to certain market movements is
incorrect, the risk that the use of Derivatives could result in losses greater
than if such investment strategies had not been used. The use of currency
transactions could result in the Fund's incurring losses as a result of the
imposition of exchange controls, suspension of settlements, or the inability to
deliver or receive a specified currency. The use of options and futures
transactions entails certain special risks. In particular, the variable degree
of correlation between price movements in the related portfolio position of the
Fund could create the possibility that losses on the hedging instrument are
greater than gains in the value of the Fund's position. In addition, futures and
options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. As a result, in certain markets,
the Fund might not be able to close out a position without incurring substantial
losses. Although the Fund's use of futures and options transactions for hedging
purposes should tend to minimize the risk of loss due to a decline in the value
of the hedged position at the same time it will tend to limit any potential gain
to the Fund that might result from an increase in value of the position.
Finally, the daily variation margin requirements for futures contracts create a
greater ongoing potential financial risk than would purchases of options, in
which case the exposure is united to the cost of the initial premium and
transaction costs. Losses resulting from Derivatives will reduce the Fund's net
asset value, and possibly income, and the losses can be greater than if the
Derivatives had not been used.
When conducted outside the United States, the use of Derivatives may not be
regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and will be subject to the risk of
governmental actions affecting trading in, or the prices of, foreign securities,
currencies and other instruments. The value of positions taken as part of
non-U.S. Hedging also could be adversely affected by: (1) other complex foreign
political, legal and economic factors; (2) lesser availability of data on which
to make trading decisions in the United States; (3) delays in the Fund's ability
to act upon economic events occurring in foreign markets during non-business
hours in the United States; (4) the imposition of different exercise and
settlement terms and procedures and margin requirements than in the United
States; and (5) lower trading volume and liquidity.
SEGREGATION AND COVER REQUIREMENTS
Many of the Derivatives which may be used by the Fund are subject to
segregation and coverage requirements established by either the CFTC or the
Commission, with the result that, if the Fund does not hold the instrument
underlying the futures contract or option or another offsetting position, the
Fund may be required to segregate on an ongoing basis with its custodian, cash,
U.S. government securities, or other liquid high grade debt obligations in an
amount at least equal to the Fund's obligations with respect to such
instruments. Such amounts will fluctuate as the market value of the obligations
increases or decreases. The segregation requirement can result in the Fund
maintaining positions it would otherwise liquidate and consequently segregating
assets with respect thereto at a time when it might be disadvantageous to do so.
In addition, with respect to futures contracts purchased by the Fund, the Fund
will also be subject to the segregation requirements with respect to the value
of the instruments underlying the futures contract. In general, those
Derivatives in which the Fund may invest which involve the possibility of
leverage are subject to segregation and coverage requirements that do not
require offsetting positions and are not subject to such requirements.
OTHER LIMITATIONS
The degree of the Fund's use of Derivatives may be limited by certain
provisions of the Code. See "Taxation" herein and in the Prospectus.
A-5
<PAGE> 75
APPENDIX B
DEBT RATINGS
A description of the rating policies of Moody's and S&P with respect to
bonds and debentures appears below.
MOODY'S INVESTORS SERVICE'S CORPORATE BOND RATINGS
Aaa -- Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment qualities
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
midrange ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and pay
interest.
B-1
<PAGE> 76
AA -- Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and differs from AAA
issues only in small degree.
A -- Bonds rated A have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for higher rated categories.
BB-B-CCC-CC-C -- Bonds rated BB, B, CCC and CC, and C are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI -- Bonds rated CI are income bonds on which no interest is being paid.
D -- Bonds rated D are in default. The D category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such payments
will be made during such grace period. The D rating is also used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
MOODY'S INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS
Prime-1 -- Issuers (or related supporting institutions) rated Prime-1 have
a superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2 -- Issuers (or related supporting institutions) rated Prime-2 have
a strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
Prime-3 -- Issuers (or related supporting institutions) rated Prime-3 have
an acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Not Prime -- Issuers rated Not Prime do not fall within any of the Prime
rating categories.
B-2
<PAGE> 77
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3 -- Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B -- Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C -- This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D -- Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
B-3
<PAGE> 78
PART C--OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements
[INSERT]
(2) Exhibits
<TABLE>
<S> <C> <C> <C>
(a) -- Articles of Incorporation+
(b) -- By-Laws, as amended+
(c) -- Not applicable
(d) (1) -- Specimen certificate for Common Stock, par value $.001 per share+
(2) -- Form of Subscription Certificate*
(3) -- Form of Beneficial Owner Listing Certification*
(4) -- Form of Nominee Holder Over-Subscription Form/
Form of DTC Participant Over-Subscription Form*
(5) -- Form of Notice of Guaranteed Delivery*
(6) -- Form of Subscription Agent Agreement**
(7) -- Form of Information Agent Agreement**
(e) -- Dividend Reinvestment and Cash Purchase Plan+
(f) -- Not applicable
(g) (1) -- Investment Management Agreement dated October 25, 1994, between
Fidelity Advisor Korea Fund, Inc. and Fidelity Management & Research
Company+
(2) -- Investment Advisory Agreement dated October 25, 1994, among Fidelity
International Investment Advisory and Fidelity Management & Research
Company and Fidelity Advisory Korea Fund, Inc.+
(3) -- Sub-Investment Advisory Agreement among Fidelity International
Investment Advisors and Fidelity Investments Japan Limited and
Fidelity Advisor Korea Fund, Inc.+
(h) (1) -- Form of Dealer Manager Agreement**
(2) -- Form of Soliciting Dealer Agreement**
(i) -- Not applicable
(j) -- Custodian Agreement, dated as of May 31, 1995, between Fidelity
Advisor Korea Fund, Inc. and The Chase Manhattan Bank, N.A.+
(k) (1) -- Transfer Agency and Service Agreement, dated as of October 25, 1994,
between Fidelity Advisor Korea Fund, Inc. and State Street Bank and
Trust Company+
(2) -- Administration Agreement, dated as of October 25, 1994, between
Fidelity Advisor Korea Fund, Inc. and Fidelity Service Co.+
(l) (1) -- Opinion and Consent of Rogers & Wells**
(2) -- Opinion and Consent of Piper & Marbury L.L.P.**
(3) -- Opinion and Consent of Shin & Kim**
(m) -- Not applicable
(n) -- Consent of Independent Accountants**
(o) -- Not applicable
(p) -- Not applicable
(q) -- Not applicable
</TABLE>
- ---------------
* Filed herewith.
**To be filed by Amendment.
+ Filed herewith pursuant to the EDGAR (Electronic Data Gathering, Analysis and
Retrieval) phase-in requirements.
C-1
<PAGE> 79
ITEM 25. MARKETING ARRANGEMENTS
See Exhibit 2(h) to this Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement.
<TABLE>
<S> <C>
U.S. Securities and Exchange Commission registration fees............... $
New York Stock Exchange listing fee.....................................
Printing (other than stock certificates)................................ *
Engraving and printing stock certificates............................... *
Fees and expenses of qualification under state securities laws
(including fees of counsel)........................................... *
Auditing and accounting fees............................................ *
Dealer Managers' expenses allowance..................................... *
Subscription Agent fee and expenses..................................... *
Information Agent fee and expenses...................................... *
Legal fees and expenses................................................. *
NASD fee................................................................ *
Miscellaneous........................................................... *
--------
Total.............................................................. $ *
========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
As of the effective date of the Registration Statement:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
--------------------------------------------------------------------- --------------
<S> <C>
Common Stock, $.001 par value........................................
</TABLE>
ITEM 29. INDEMNIFICATION
Section 2-418 of the General Corporation Law of the State of Maryland,
Article SEVENTH of the Fund's Articles of Incorporation, Article VII of the
Fund's By-Laws, the Dealer Manager Agreement and the Administration Agreement
provide for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Fund, pursuant to the foregoing provisions or
otherwise, the Fund has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Fund of
expenses incurred or paid by a director, officer or controlling person of the
Fund in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Fund will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C-2
<PAGE> 80
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER AND INVESTMENT
ADVISER
The description of the business of Fidelity Management & Research Company
("FMR") and Fidelity International Investment Advisors ("FIIA") is set forth
under the caption "Management of the Fund" in the Prospectus forming part of
this Registration Statement.
The information as to the directors and officers of FMR and FIIA is set
forth in their respective Form ADVs filed with the Securities and Exchange
Commission (File No. 801-7884) and (File No. 801-21347), each as amended as of
the date hereof is incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
Fidelity Advisor Korea Fund, Inc.
82 Devonshire Street, Boston, Massachusetts 02109
(Fund's Articles of Incorporation and By-Laws)
Fidelity Management & Research Company
82 Devonshire Street, Boston, Massachusetts 02109
(with respect to its services as Investment Manager)
Fidelity International Investment Advisors Limited
Pembroke Hall, 42 Crow Lane, Pembroke, Bermuda
(with respect to its service as Investment Adviser)
Fidelity Investments Japan Limited
19th Floor, Shiroyama JT Mori Building, 4-3-1 Toranamon,
Minato-ku, Tokyo 105, Japan
(with respect to its service as Sub-Adviser)
Fidelity Service Co.
82 Devonshire Street, Boston, Massachusetts 02109
(with respect to its services as Administrator)
The Chase Manhattan Bank
270 Park Avenue,
New York, New York 10017-2070
(with respect to its services as Custodian for the Fund's U.S. assets)
State Street Bank and Trust Company
Two Heritage Drive, Quincy, Massachusetts 02171
(with respect to its services as Transfer Agent)
ITEM 32. MANAGEMENT SERVICES
Not applicable
ITEM 33. UNDERTAKINGS
(a) The Fund undertakes to suspend offering its shares until it amends its
prospectus contained herein if (1) subsequent to the effective date of its
registration statement, the net asset value per share declines more than 10
percent from its net asset value per share as of the effective date of this
registration statement or (2) the net asset value increases to an amount greater
than its net proceeds as stated in the prospectus.
C-3
<PAGE> 81
(b) The Fund hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Fund under Rule 497(h) under
the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective;
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof; and
(3) To send by first class mail or other means designated to ensure
equally prompt delivery, within two business days of receipt of written
oral request, any Statement of Additional Information.
C-4
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Hong Kong on the 10th day of October, 1996.
FIDELITY ADVISOR KOREA FUND, INC.
By: /s/ EDWARD C. JOHNSON 3D
-------------------------------
Edward C. Johnson 3d, President
Chairman of the Board
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Laurence E. Cranch and Leonard B. Mackey, Jr.,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all Amendments (including
pre-effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- -------------------------------------- -----------------
<C> <S> <C>
/s/ EDWARD C. JOHNSON 3D Director and President October 10, 1996
- -------------------------------------
Edward C. Johnson 3d
/s/ J. GARY BURKHEAD Director and Senior Vice President October 10, 1996
- ------------------------------------- (Principal Executive Officer)
J. Gary Burkhead
/s/ KENNETH A. RATHGEBER Treasurer (Principal Financial and October 10, 1996
- ------------------------------------- Accounting Officer)
Kenneth A. Rathgeber
/s/ H.F. VAN DEN HOVEN Director October 10, 1996
- -------------------------------------
H.F. Van den Hoven
/s/ BERTRAM H. WITHAM, JR. Director October 10, 1996
- -------------------------------------
Bertram H. Witham, Jr.
/s/ DAVID L. YUNICH Director October 10, 1996
- -------------------------------------
David L. Yunich
</TABLE>
C-5
<PAGE> 1
ARTICLES OF INCORPORATION
OF
FIDELITY ADVISOR KOREA FUND, INC.
THE UNDERSIGNED, Larry P. Medvinsky, whose post office address is c/o
Rogers & Wells, 200 Park Avenue, New York, New York 10166, being at least
eighteen years of age, does hereby act as an incorporator, under and by virtue
of the general laws of the State of Maryland authorizing the formation of
corporations and with the intent of forming a corporation.
FIRST: The name of the corporation (hereinafter called the "Corporation") is
Fidelity Advisor Korea Fund, Inc.
SECOND: The Corporation was formed for the following purposes:
1. To act as a closed-end investment company of the management type
registered as such with the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940, as amended.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold all or part of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts and on
such terms and conditions and for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(4) To enter into management, supervisory, advisory, administrative,
custody, underwriting and other contracts and otherwise do business with other
corporations, and subsidiaries or affiliates thereof, or any other firm or
organization, notwithstanding that the Board of Directors of the Corporation may
be composed in part of officers, directors or employees of such corporation,
firm or organization and, in the absence of fraud, the Corporation and such
corporation, firm or organization may deal freely with each other and neither
such management, supervisory, advisory, administrative or underwriting contract
nor any other contract or transaction between the Corporation and such
corporation, firm or organization shall be invalidated or in any way affected
thereby.
(5) To do any and all additional acts and exercise any and all additional
powers or rights as may be necessary, incidental, appropriate or desirable for
the accomplishment of all or any of the foregoing purposes.
The Corporation shall be authorized to exercise and generally to enjoy all
of the powers, rights and privileges granted to, or conferred upon, corporations
by the General Laws of the State of Maryland now or hereafter in force.
THIRD: The post office address of the place at which the principal office of the
Corporation in the State of Maryland is located is c/o P&M Agent Corp., 36 South
Charles Street, Baltimore, Maryland 21201.
The name of the Corporation's resident agent is P&M Agent Corp., and its
post office address is P&M Agent Corp., 36 South Charles Street, Baltimore,
Maryland 21201. Said resident agent is a corporation of the State of Maryland.
FOURTH: SECTION 1. (1) The total number of shares of capital stock that the
Corporation has authority to issue is 100,000,000 shares of capital stock of the
par value of $.001 each, having an aggregate par value of $100,000, all of which
100,000,000 shares are initially classified as "Common Stock."
(2) The following is a description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the Common Stock of the Corporation:
(a) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class of stock hereafter classified or
reclassified, the exclusive voting power for all purposes shall be vested
in the holders of the Common Stock.
(b) Subject to the provisions of law and any preferences of any class
of stock hereafter classified or reclassified, dividends, including
dividends payable in shares of another class of the Corporation's stock,
<PAGE> 2
may be paid on the Common Stock of the Corporation at such time and in such
amounts as the Board of Directors may deem advisable.
(c) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common
Stock shall be entitled, after payment or provision for payment of the
debts and other liabilities of the Corporation and the amount to which the
holders of any class of stock hereafter classified or reclassified having a
preference on distributions in the liquidation, dissolution or winding up
of the Corporation shall be entitled, together with the holders of any
other class of stock hereafter classified or reclassified not having a
preference on distributions in the liquidation, dissolution or winding up
of the Corporation, to share ratably in the remaining net assets of the
Corporation.
SECTION 2. (1) Without the assent or vote of the stockholders, the Board of
Directors shall have the authority by resolution to classify and reclassify any
authorized but unissued shares of capital stock from time to time by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of the capital stock.
(2) The foregoing powers of the Board of Directors to classify and
reclassify any of the shares of capital stock shall include, without limitation,
subject to the provisions of the Charter, authority to classify or reclassify
any unissued shares of such stock into a class or classes of preferred stock,
preference stock, special stock or other stock, and to divide and classify
shares of any class into one or more series of such class, by determining,
fixing, or altering one or more of the following:
(a) The distinctive designation of such class or series and the number
of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such or any other class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any classification or reclassification of
unissued shares and the number of shares of such class or series may be
increased by the Board of Directors in connection with any such
classification or reclassification, and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become part of
the authorized capital stock and be subject to classification and
reclassification as provided in this subparagraph;
(b) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of
such class or series, whether any such dividends shall rank senior or
junior to or on a parity with the dividends payable on any other class or
series of stock, and the status of any such dividends as cumulative,
cumulative to a limited extent or non-cumulative and as participating or
non-participating;
(c) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights;
(d) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions
thereof, including provisions for adjustment of the conversion or exchange
rate in such events or at such times as the Board of Directors shall
determine;
(e) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates; and
whether or not there shall be any sinking fund or purchase account in
respect thereof, and if so, the terms thereof;
(f) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates,
and whether such rights shall rank senior or junior to or on a parity with
such rights of any other class or series of stock;
2
<PAGE> 3
(g) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of
dividends or making of distributions on, or the acquisition of, or the use
of moneys for purchase or redemption of, any stock of the Corporation, or
upon any other action of the Corporation, including action under this
subparagraph, and, if so, the terms and conditions thereof; and
(h) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class
or series, not inconsistent with law and the Charter of the Corporation.
(3) For the purposes hereof and of any articles supplementary to the
Charter providing for the classification or reclassification of any shares of
capital stock or of any other charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
stock of the Corporation shall be deemed to rank:
(a) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to
the receipt of dividends or of amounts distributable on liquidation,
dissolution or winding up, as the case may be, in preference or priority to
holders of such other class or series;
(b) on a parity with another class or series either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation price per share thereof be different from
those of such others, if the holders of such class or series of stock shall
be entitled to receipt of dividends or amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion
to their respective dividend rates or redemption or liquidation prices,
without preference or priority over the holders of such other class or
series; and
(c) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the receipt of dividends or the amounts distributable
upon liquidation, dissolution or winding up, as the case may be.
(4) The provisions of Section 2 of this Article Fourth may not be amended,
altered or repealed except by vote of three-fourths of the shares of capital
stock of the Corporation outstanding and entitled to vote thereupon.
SECTION 3. The presence in person or by proxy of the holders of record of a
majority of the aggregate number of shares of capital stock issued and
outstanding and entitled to vote thereat shall constitute a quorum for the
transaction of any business at all meetings of the stockholders except as
otherwise provided by law or in these Articles of Incorporation.
SECTION 4. Notwithstanding any provision of the General Laws of the State
of Maryland requiring action to be taken or authorized by the affirmative vote
of the holders of a designated proportion greater than a majority of the shares
of capital stock of the Corporation outstanding and entitled to vote thereupon,
such action shall, except as otherwise provided in these Articles of
Incorporation, be valid and effective if taken or authorized by the affirmative
vote of the holders of a majority of the total number of shares of capital stock
of the Corporation outstanding and entitled to vote thereupon voting together as
a single class.
SECTION 5. No holder of shares of capital stock of the Corporation shall,
as such holder, have any preemptive right to purchase or subscribe for any part
of any new or additional issue of stock of any class, or of rights or options to
purchase any stock, or of securities convertible into, or carrying rights or
options to purchase, stock of any class, whether now or hereafter authorized or
whether issued for money, for a consideration other than money or by way of a
dividend or otherwise, and all such rights are hereby waived by each holder of
capital stock and of any other class of stock or securities which may hereafter
be created.
SECTION 6. All persons who shall acquire capital stock in the Corporation
shall acquire the same subject to the provisions of these Articles of
Incorporation.
SECTION 7. (1) In addition to the affirmative vote of three-fourths of the
entire Board of Directors, the affirmative vote of at least (i) three-fourths of
the shares of capital stock of the Corporation outstanding and
3
<PAGE> 4
entitled to vote thereupon voting together as a single class and (ii) in the
case of a Business Combination (as defined below), 66 2/3% of the shares of
capital stock of the Corporation outstanding and entitled to vote thereupon
voting together as a single class other than votes entitled to be cast thereon
by an Interested Party (as defined below) who is, or whose Affiliate (as defined
below), is a party to a Business Combination (as defined below) or an Affiliate
or associate of the Interested Party, shall be required to advise, approve,
adopt or authorize any of the following:
(i) a merger, consolidation or statutory share exchange of the
Corporation with or into another person;
(ii) issuance or transfer by the Corporation (in one or a series of
transactions in any 12 month period) of any securities of the Corporation
to any person or entity for cash, securities or other property (or
combination thereof) having an aggregate fair market value of $1,000,000 or
more, excluding issuances or transfers of debt securities of the
Corporation, sales of securities of the Corporation in connection with a
public offering, issuances of securities of the Corporation pursuant to a
dividend reinvestment plan adopted by the Corporation, issuances of
securities of the Corporation upon the exercise of any stock subscription
rights distributed by the Corporation and portfolio transactions effected
by the Corporation in the ordinary course of business;
(iii) sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Corporation (in one or a series of transactions in any
12 month period) to or with any person or entity of any assets of the
Corporation having an aggregate fair market value of $1,000,000 or more
except for portfolio transactions (including pledges of portfolio
securities in connection with borrowings) effected by the Corporation in
the ordinary course of its business (transactions within clauses (i), (ii)
and (iii) above being known individually as a "Business Combination");
(iv) the voluntary liquidation or dissolution of the Corporation, or
an amendment to these Articles of Incorporation to terminate the
Corporation's existence; or
(v) unless the 1940 Act or federal law requires a lesser vote, any
shareholder proposal as to specific investment decisions made or to be made
with respect to the Corporation's assets as to which stockholder approval
is required under Federal or Maryland law.
However, a three-fourths shareholder vote will not be required with respect
to the foregoing transactions (other than those set forth in (v) above) if they
are approved by a vote of three-fourths of the Continuing Directors (as defined
below). In that case, if Maryland law requires shareholder approval, the
affirmative vote of a majority of the shares of capital stock of the Corporation
outstanding and entitled to vote thereupon voting together as a single class
shall be required.
For purposes of this Article Fourth the following terms shall have the
meanings prescribed thereto:
(i) "Continuing Director" means any member of the Board of Directors
of the Corporation who is not an Interested Party or an Affiliate of an
Interested Party and has been a member of the Board of Directors for a
period of at least 12 months, or has been a member of the Board of
Directors since April 1, 1994, or is a successor of a Continuing Director
who is unaffiliated with an Interested Party and is recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on the
Board of Directors.
(ii) "Interested Party" shall mean any person, other than an
investment company advised by the Corporation's initial investment manager
or any of its Affiliates, which enters, or proposes to enter, into a
Business Combination with the Corporation.
(iii) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
(2) Notwithstanding any other provisions of these Articles of
Incorporation, the affirmative vote of three-fourths of the entire Board of
Directors shall be required to advise, approve, adopt or authorize the
conversion of the Corporation from a closed-end company to an open-end company,
and any amendments
4
<PAGE> 5
necessary to effect the conversion. Such conversion or any such amendment shall
also require the approval of the holders of three-fourths of the shares of
capital stock of the Corporation outstanding and entitled to vote thereupon
voting together as a single class unless approved by a vote of three-fourths of
the Continuing Directors, in which event such conversion shall require the
approval of the holders of a majority of the votes entitled to be cast thereon
by stockholders of the Corporation.
(3) The provisions of this Section 7 of this Article Fourth may not be
amended, altered or repealed except by the approval of at least three-fourths of
the shares of capital stock of the Corporation outstanding and entitled to vote
thereupon voting together as a single class.
FIFTH: The initial number of directors of the Corporation is three (3), and the
name of the directors who shall act as such until the first annual meeting or
until their successor or successors are duly elected and qualify are Edward C.
Johnson 3d, J. Gary Burkhead and Gary L. French. The By-Laws of the Corporation
may fix the number of directors at a number other than three and may authorize
the Board of Directors, by the vote of a majority of the entire Board of
Directors, to increase or decrease the number of directors within a limit
specified in the By-Laws, provided that in no case shall the number of directors
be less than the number prescribed by law, and to fill the vacancies created by
any such increase in the number of directors. Unless otherwise provided by the
By-Laws of the Corporation, the directors of the Corporation need not be
stockholders.
A director may be removed only with cause, and any such removal may be made
only by the vote of three-fourths of the shares of capital stock of the
Corporation outstanding and entitled to vote thereupon.
The provisions of this Article Fifth may not be amended, altered or
repealed except by a vote of three-fourths of the shares of capital stock of the
Corporation outstanding and entitled to vote thereupon voting together as a
single class.
SIXTH SECTION 1. All corporate powers and authority of the Corporation (except
as at the time otherwise provided by statute, by these Articles of Incorporation
or by the By-Laws) shall be vested in and exercised by the Board of Directors.
SECTION 2. The Board of Directors shall have the sole power to adopt, alter
or repeal the By-Laws of the Corporation except to the extent that the By-Laws
otherwise provide. The provisions of this Section 2 of this Article Sixth may
not be amended, altered or repealed except by vote of three-fourths of the
shares of capital stock of the Corporation outstanding and entitled to vote
thereupon voting together as a single class.
SECTION 3. The Board of Directors shall have the power from time to time to
determine whether and to what extent, and at what times and places and under
what conditions and regulations, the accounts and books of the Corporation
(other than the stock ledger) or any of them shall be open to the inspection of
stockholders; and no stockholder shall have any right to inspect any account,
book or document of the Corporation except to the extent permitted by statute or
the By-Laws.
SECTION 4. The Board of Directors shall have the power to determine, as
provided herein, or if a provision is not made herein, in accordance with
generally accepted accounting principles, what constitutes net income, total
assets and the net asset value of the shares of capital stock of the
Corporation.
SECTION 5. The Board of Directors shall have the power to distribute
dividends from the funds legally available therefor in such amounts, if any, and
in such manner to the stockholders of record as of a date, as the Board of
Directors may determine.
SECTION 6. Without the assent or vote of the stockholders, the Board of
Directors shall have the power to authorize the issuance from time to time of
shares of the capital stock of any class of the Corporation, whether now or
hereafter authorized, and securities convertible into shares of capital stock of
the Corporation of any class or classes, whether now or hereafter authorized,
for such consideration as the Board of Directors may deem advisable.
SECTION 7. Without the assent or vote of the stockholders, the Board of
Directors shall have the power to authorize and issue obligations of the
Corporation, secured or unsecured, as the Board of Directors may
5
<PAGE> 6
determine, and to authorize and cause to be executed mortgages and liens upon
the real or personal property of the Corporation.
SECTION 8. The provisions of Sections 6 and 7 of this Article Sixth may not
be amended, altered or repealed except by vote of three-fourths of the shares of
capital stock of the Corporation outstanding and entitled to vote thereupon
voting together as a single class.
SEVENTH: SECTION 1. To the fullest extent permitted by Maryland statutory or
decisional law, subject to the requirements of the Investment Company Act of
1940, as amended, no director or officer of the Corporation shall be personally
liable to the Corporation or its security holders for money damages. This
limitation on liability applies to events occurring at the time a person serves
as a director or officer of the Corporation whether or not such person is a
director or officer at the time of any proceeding in which such liability is
asserted. No amendment of these Articles of Incorporation or repeal of any
provision hereof shall limit or eliminate the benefits provided to directors and
officers under this provision in connection with any act or omission that
occurred prior to such amendment or repeal.
SECTION 2. The Corporation shall indemnify, to the fullest extent permitted
by law (including the Investment Company Act of 1940) as currently in effect or
as the same may hereafter be amended, any person made or threatened to be made a
party to any action, suit or proceeding, whether criminal, civil, administrative
or investigative, by reason of the fact that such person or such person's
testator or intestate is or was a director or officer of the Corporation or
serves or served at the request of the Corporation as a director or officer of
any other enterprise. To the fullest extent permitted by law (including the
Investment Company Act of 1940) as currently in effect or as the same may
hereafter be amended, expenses incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the Corporation
promptly upon receipt by it of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not entitled
to be indemnified by the Corporation. The rights provided to any person by this
Section 2 of this Article Seventh shall be enforceable against the Corporation
by such person who shall be presumed to have relied upon it in serving or
continuing to serve as a director or officer as provided above. No amendment of
this Section 2 of this Article Seventh shall impair the rights of any person
arising at any time with respect to events occurring prior to such amendment.
For purposes of this Section 2 of this Article Seventh, the term "Corporation"
shall include any predecessor of the Corporation and any constituent corporation
(including any constituent of a constituent) absorbed by the Corporation in a
consolidation or merger; the term "other enterprise" shall include any
corporation, partnership, joint venture, trust or employee benefit plan; service
"at the request of the Corporation" shall include service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to any other enterprise, its participants
or beneficiaries; any excise taxes assessed on a person with respect to an
employee benefit plan shall be deemed to be indemnifiable expenses; and action
by a person with respect to any employee benefit plan which such person
reasonably believes to be in the interest of the participants and beneficiaries
of such plan shall be deemed to be action not opposed to the best interests of
the Corporation. The provisions of this Section 2 of this Article Seventh shall
be in addition to the other provisions of this Article Seventh.
SECTION 3. Nothing in this Article Seventh protects or purports to protect
any director or officer against any liability to the Corporation or its security
holders to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
SECTION 4. Each section or portion thereof of this Article Seventh shall be
deemed severable from the remainder, and the invalidity of any such section or
portion shall not affect the validity of the remainder of this Article.
EIGHTH: The duration of the Corporation shall be perpetual.
NINTH: From time to time, any of the provisions of these Articles of
Incorporation may be amended, altered or repealed (including any amendment that
changes the terms of any of the outstanding stock by classification,
reclassification or otherwise), and other provisions that may, under the
statutes of the State of
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<PAGE> 7
Maryland at the time in force, be lawfully contained in articles of
incorporation may be added or inserted, upon the vote of the holders of a
majority of the shares of capital stock of the Corporation outstanding and
entitled to vote thereupon. If these Articles of Incorporation specifically so
provide, however, any such amendment, alteration, repeal, addition or insertion
may be affected only upon the vote of three-fourths of the shares of capital
stock of the Corporation outstanding and entitled to vote thereupon. The
provisions of the prior sentence may not be amended, altered or repealed except
by vote of three-fourths of the shares of capital stock of the corporation
outstanding and entitled to vote thereupon. All rights at any time conferred
upon the stockholders of the Corporation by these Articles of Amendment and
Restatement are subject to the provisions of this Article Ninth.
IN WITNESS WHEREOF, I have executed these Articles of Incorporation
acknowledging the same to be my act, on May 24, 1994.
/s/ LARRY P. MEDVINSKY
--------------------------------------
Larry P. Medvinsky,
Incorporator
Witness:
/s/ JOSEPH C. BENEDETTI
- -------------------------------------
Joseph C. Benedetti
7
<PAGE> 1
- --------------------------------------------------------------------------------
FIDELITY ADVISOR KOREA FUND, INC.
A MARYLAND CORPORATION
BY-LAWS,
AS AMENDED
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I Stockholders.................................................................. 1
Section 1.1. Place of Meeting................................................... 1
Section 1.2. Annual Meetings.................................................... 1
Section 1.3. Special Meetings................................................... 1
Section 1.4. Notice of Meetings of Stockholders................................. 1
Section 1.5. Record Dates....................................................... 1
Section 1.6. Quorum; Adjournment of Meetings.................................... 1
Section 1.7. Voting and Inspectors.............................................. 2
Section 1.8. Conduct of Stockholders' Meetings.................................. 2
Section 1.9. Concerning Validity of Proxies, Ballots, etc....................... 2
Section 1.10. Action Without Meeting............................................. 2
ARTICLE II Board of Directors........................................................... 2
Section 2.1. Function of Directors.............................................. 2
Section 2.2. Number of Directors................................................ 3
Section 2.3. Classes of Directors............................................... 3
Section 2.4. Vacancies.......................................................... 3
Section 2.5. Increase or Decrease in Number of Directors........................ 3
Section 2.6. Place of Meeting................................................... 3
Section 2.7. Regular Meetings................................................... 3
Section 2.8. Special Meetings................................................... 3
Section 2.9. Notices............................................................ 3
Section 2.10. Quorum............................................................. 3
Section 2.11. Executive Committee................................................ 4
Section 2.12. Other Committees................................................... 4
Section 2.13. Telephone Meetings................................................. 4
Section 2.14. Action Without a Meeting........................................... 4
Section 2.15. Compensation of Directors.......................................... 4
ARTICLE III Officers.................................................................... 4
Section 3.1. Executive Officers................................................. 4
Section 3.2. Term of Office..................................................... 5
Section 3.3. Powers and Duties.................................................. 5
Section 3.4. Surety Bonds....................................................... 5
ARTICLE IV Capital Stock................................................................ 5
Section 4.1. Certificates for Shares............................................ 5
Section 4.2. Transfer of Shares................................................. 5
Section 4.3. Stock Ledgers...................................................... 5
Section 4.4. Transfer Agents and Registrars..................................... 5
Section 4.5. Lost, Stolen or Destroyed Certificates............................. 5
</TABLE>
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<TABLE>
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PAGE
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ARTICLE V Corporate Seal; Location of Offices; Books; Net Asset Value................... 6
Section 5.1. Corporate Seal..................................................... 6
Section 5.2. Location of Offices................................................ 6
Section 5.3. Books and Records.................................................. 6
Section 5.4. Annual Statement of Affairs........................................ 6
Section 5.5. Net Asset Value.................................................... 6
ARTICLE VI Fiscal Year and Accountant................................................... 6
Section 6.1. Fiscal Year........................................................ 6
Section 6.2. Accountant......................................................... 6
ARTICLE VII Indemnification and Insurance............................................... 6
Section 7.1. General............................................................ 6
Section 7.2. Indemnification of Directors and Officers.......................... 6
Section 7.3. Insurance.......................................................... 7
ARTICLE VIII Custodian.................................................................. 7
ARTICLE IX............................................................................... 7
ARTICLE X Amendment of By-Laws.......................................................... 8
</TABLE>
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FIDELITY ADVISOR KOREA FUND, INC.
BY-LAWS, AS AMENDED
ARTICLE I
STOCKHOLDERS
SECTION 1.1. PLACE OF MEETING. All meetings of the stockholders should be
held at the principal office of the Corporation in the State of Maryland or at
such other place within the United States as may from time to time be designated
by the Board of Directors and stated in the notice of such meeting.
SECTION 1.2. ANNUAL MEETINGS. The annual meeting of the stockholders of the
Corporation shall be held during the month of June of each year on such date and
at such hour as may from time to time be designated by the Board of Directors
and stated in the notice of such meeting, for the purpose of electing directors
for the ensuing year and for the transaction of such other business as may
properly be brought before the meeting.
SECTION 1.3. SPECIAL MEETINGS. Special meetings of the stockholders for any
purpose or purposes may be called by the Chairman of the Board, the President,
or a majority of the Board of Directors. Special meetings of stockholders shall
also be called by the Secretary upon receipt of the request in writing signed by
stockholders holding not less than 25% of the votes entitled to be cast thereat.
Such request shall state the purpose or purposes of the proposed meeting and the
matters proposed to be acted on at such proposed meeting. The Secretary shall
inform such stockholders of the reasonably estimated costs of preparing and
mailing such notice of meeting and upon payment to the Corporation of such
costs, the Secretary shall give notice as required in this Article to all
stockholders entitled to notice of such meeting. No special meeting of
stockholders need be called upon the request of the holders of common stock
entitled to cast less than a majority of all votes entitled to be cast at such
meeting to consider any matter which is substantially the same as a matter voted
upon at any special meeting of stockholders held during the preceding twelve
months.
SECTION 1.4. NOTICE OF MEETINGS OF STOCKHOLDERS. Not less than ten days'
and not more than ninety days' written or printed notice of every meeting of
stockholders, stating the time and place thereof (and the purpose of any special
meeting), shall be given to each stockholder entitled to vote thereat and to
each other stockholder entitled to notice of the meeting by leaving the same
with such stockholder or at such stockholder's residence or usual place of
business or by mailing it, postage prepaid, and addressed to such stockholder at
such stockholder's address as it appears upon the books of the Corporation. If
mailed, notice shall be deemed to be given when deposited in the mail addressed
to the stockholder as aforesaid.
No notice of the time, place or purpose of any meeting of stockholders need
be given to any stockholder who attends in person or by proxy or to any
stockholder who, in writing executed and filed with the records of the meeting,
either before or after the holding thereof, waives such notice.
SECTION 1.5. RECORD DATES. The Board of Directors may fix, in advance, a
record date for the determination of stockholders entitled to notice of or to
vote at any stockholders meeting or to receive a dividend or be allotted rights
or for the purpose of any other proper determination with respect to
stockholders and only stockholders of record on such date shall be entitled to
notice of and to vote at such meeting or to receive such dividends or rights or
otherwise, as the case may be; provided, however, that such record date shall
not be prior to ninety days preceding the date of any such meeting of
stockholders, dividend payment date, date for the allotment of rights or other
such action requiring the determination of a record date; and further provided
that such record date shall not be prior to the close of business on the day the
record date is fixed, that the transfer books shall not be closed for a period
longer than 20 days, and that in the case of a meeting of stockholders, the
record date or the closing of the transfer books shall not be less than ten days
prior to the date fixed for such meeting.
SECTION 1.6. QUORUM; ADJOURNMENT OF MEETINGS. The presence in person or by
proxy of stockholders entitled to cast a majority of the votes entitled to be
cast thereat shall constitute a quorum at all meetings of
<PAGE> 5
the stockholders, except as otherwise provided in the Articles of Incorporation.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, the holders of a majority of the stock present in person or by
proxy shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until the requisite amount of stock
entitled to vote at such meeting shall be present, to a date not more than 120
days after the original record date. At such adjourned meeting at which the
requisite amount of stock entitled to vote thereat shall be represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Any meeting of stockholders, annual or special, may adjourn from time to
time to reconvene at the same or some other place, and notice need not be given
of any such adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting.
SECTION 1.7. VOTING AND INSPECTORS. At all meetings, stockholders of record
entitled to vote thereat shall have one vote for each share of common stock
standing in his name on the books of the Corporation (and such stockholders of
record holding fractional shares, if any, shall have proportionate voting
rights) on the date for the determination of stockholders entitled to vote at
such meeting, either in person or by proxy appointed by instrument in writing
subscribed by such stockholder or his duly authorized attorney.
All elections shall be had and all questions decided by a majority of the
votes cast at a duly constituted meeting, except as otherwise provided by
statute or by the Articles of Incorporation or by these By-Laws.
At any election of Directors, the Chairman of the meeting may, and upon the
request of the holders of ten percent (10%) of the stock entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of Director shall be appointed such
Inspector.
SECTION 1.8. CONDUCT OF STOCKHOLDERS' MEETINGS. The meetings of the
stockholders shall be presided over by the Chairman of the Board, or if he is
not present, by the President, or if he is not present, by a Vice-President, or
if none of them is present, by a Chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as a Secretary of such
meetings, or if he is not present, an Assistant Secretary shall so act; if
neither the Secretary nor the Assistant Secretary is present, then the meeting
shall elect its Secretary.
SECTION 1.9. CONCERNING VALIDITY OF PROXIES, BALLOTS, ETC. At every meeting
of the stockholders, all proxies shall be received and taken in charge of and
all ballots shall be received and canvassed by the Secretary of the meeting, who
shall decide all questions touching the qualification of voters, the validity of
the proxies and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed by the Chairman of the meeting, in which
event such inspectors of election shall decide all such questions. Unless a
proxy provides otherwise, it is not valid for more than eleven months after its
date.
SECTION 1.10. ACTION WITHOUT MEETING. Any action to be taken by
stockholders may be taken without a meeting if (1) all stockholders entitled to
vote on the matter consent to the action in writing, (2) all stockholders
entitled to notice of the meeting but not entitled to vote at it sign a written
waiver of any right to dissent and (3) said consents and waivers are filed with
the records of the meetings of stockholders. Such consent shall be treated for
all purposes as a vote at the meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1. FUNCTION OF DIRECTORS. The business and affairs of the
Corporation shall be conducted and managed under the direction of its Board of
Directors. All powers of the Corporation shall be exercised by or under
authority of the Board of Directors except as conferred on or reserved to the
stockholders by statute.
2
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SECTION 2.2. NUMBER OF DIRECTORS. The Board of Directors shall consist of
not more than twelve (12) Directors nor less than such number of Directors as
may be permitted under Maryland law, as may be determined from time to time by
vote of a majority of the Directors then in office. Directors need not be
stockholders.
SECTION 2.3. CLASSES OF DIRECTORS. The Directors shall be divided into
three classes, designated Class I, Class II and Class III. All classes shall be
as nearly equal in number as possible. The Directors as initially classified
shall hold office for terms as follows: the Class I Directors shall hold office
until the date of the annual meeting of stockholders in 1995 or until their
successors shall be elected and qualified; the Class II Directors shall hold
office until the date of the annual meeting of stockholders in 1996 or until
their successors shall be elected and qualified; and the Class III Directors
shall hold office until the date of the annual meeting of stockholders in 1997
or until their successors shall be elected and qualified. Upon expiration of the
term of office of each class as set forth above, the Directors in each class
shall be elected for a term of three years to succeed the Directors whose terms
of office expire, except that the Directors elected in 1998 and 1999 shall be
elected for a term of two years and one year, respectively, to succeed the
Directors whose terms of office expire. Commencing on the date of the annual
meeting of stockholders in 2000, the Directors will no longer be divided into
classes and will each stand for election at such meeting and on each annual
meeting of stockholders held thereafter. Each Director shall hold office until
the expiration of his term and until his successor shall have been elected and
qualified.
SECTION 2.4. VACANCIES. In case of any vacancy in the Board of Directors
through death, resignation or other cause, other than an increase in the number
of Directors, subject to the provisions of law, a majority of the remaining
Directors, although a majority is less than a quorum, by an affirmative vote,
may elect a successor to hold office until the next annual meeting of
stockholders or until his successor is chosen and qualified.
SECTION 2.5. INCREASE OR DECREASE IN NUMBER OF DIRECTORS. The Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of Directors and may elect Directors to fill the vacancies created by any
such increase in the number of Directors until the next annual meeting of
stockholders or until their successors are duly chosen and qualified. The Board
of Directors, by the vote of a majority of the entire Board, may likewise
decrease the number of Directors to a number not less than that permitted by
law.
SECTION 2.6. PLACE OF MEETING. The Directors may hold their meetings within
or outside the State of Maryland, at any office or offices of the Corporation or
at any other place as they may from time to time determine.
SECTION 2.7. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such time and on such notice as the Directors may from time to
time determine.
The annual meeting of the Board of Directors shall be held as soon as
practicable after the annual meeting of the stockholders for the election of
Directors.
SECTION 2.8. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be held from time to time upon call of the Chairman of the Board, the
President, the Secretary or two or more of the Directors, by oral or telegraphic
or written notice duly served on or sent or mailed to each Director not less
than one day before such meeting.
SECTION 2.9. NOTICES. Unless required by statute or otherwise determined by
resolution of the Board of Directors in accordance with these By-laws, notices
to Directors need not be in writing and need not state the business to be
transacted at or the purpose of any meeting, and no notice need be given to any
Director who is present in person or to any Director who, in writing executed
and filed with the records of the meeting either before or after the holding
thereof, waives such notice. Waivers of notice need not state the purpose or
purposes of such meeting.
SECTION 2.10. QUORUM. One-third of the Directors then in office shall
constitute a quorum for the transaction of business, provided that if there is
more than one Director, a quorum shall in no case be less than
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two Directors. If at any meeting of the Board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum shall have been obtained. The act of the majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Directors, except as may be otherwise specifically provided by statute or by
the Articles of Incorporation or by these By-Laws.
SECTION 2.11. EXECUTIVE COMMITTEE. The Board of Directors may appoint from
the Directors an Executive Committee to consist of such number of Directors (not
less than two) as the Board may from time to time determine. The Chairman of the
Committee shall be elected by the Board of Directors. The Board of Directors
shall have power at any time to change the members of such Committee and may
fill vacancies in the Committee by election from the Directors. When the Board
of Directors is not in session, to the extent permitted by law, the Executive
Committee shall have and may exercise any or all of the powers of the Board of
Directors in the management and conduct of the business and affairs of the
Corporation. The Executive Committee may fix its own rules of procedure, and may
meet when and as provided by such rules or by resolution of the Board of
Directors, but in every case the presence of a majority shall be necessary to
constitute a quorum. During the absence of a member of the Executive Committee,
the remaining members may appoint a member of the Board of Directors to act in
his place.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint from
the Directors other committees which shall in each case consist of such number
of Directors (not less than two) and shall have and may exercise such powers as
the Board may determine in the resolution appointing them. A majority of all the
members of any such committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
The Board of Directors shall have power at any time to change the members and
powers of any such committee, to fill vacancies and to discharge any such
committee.
SECTION 2.13. TELEPHONE MEETINGS. Members of the Board of Directors or a
committee of the Board of Directors may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means, subject to the provisions of the Investment Company
Act of 1940, as amended, constitutes presence in person at the meeting.
SECTION 2.14. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the Board or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Board or
such committee.
SECTION 2.15. COMPENSATION OF DIRECTORS. No Director shall receive any
stated salary or fees from the Corporation for his services as such if such
Director is, otherwise than by reason of being such Director, an interested
person (as such term is defined by the Investment Company Act of 1940, as
amended) of the Corporation or of its investment manager or principal
underwriter. Except as provided in the preceding sentence, Directors shall be
entitled to receive such compensation from the Corporation for their services as
may from time to time be voted by the Board of Directors.
ARTICLE III
OFFICERS
SECTION 3.1. EXECUTIVE OFFICERS. The executive officers of the Corporation
shall be chosen by the Board of Directors. These may include a Chairman of the
Board of Directors (who shall be a Director) and shall include a President, a
Secretary and a Treasurer. The Board of Directors or the Executive Committee may
also in its discretion appoint one or more Vice-Presidents, Assistant
Secretaries, Assistant Treasurers and other officers, agents and employees, who
shall have such authority and perform such duties as the Board of Directors or
the Executive Committee may determine. The Board of Directors may fill any
vacancy which may occur in any office. Any two offices, except those of
President and Vice-President, may be held by the
4
<PAGE> 8
same person, but no officer shall execute, acknowledge or verify any instrument
in more than one capacity, if such instrument is required by law or these
By-Laws to be executed, acknowledged or verified by two or more officers.
SECTION 3.2. TERM OF OFFICE. The term of office of all officers shall be
one year and until their respective successors are chosen and qualified. Any
officer may be removed from office at any time with or without cause by the vote
of a majority of the whole Board of Directors. Any officer may resign his office
at any time by delivering a written resignation to the Corporation and, unless
otherwise specified therein, such resignation shall take effect upon delivery.
SECTION 3.3. POWERS AND DUTIES. The officers of the Corporation shall have
such powers and duties as shall be stated in a resolution of the Board of
Directors, or the Executive Committee and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board of Directors and the Executive Committee.
SECTION 3.4. SURETY BONDS. The Board of Directors may require any officer
or agent of the Corporation to execute a bond (including, without limitation,
any bond required by the Investment Company Act of 1940, as amended, and the
rules and regulations of the Securities and Exchange Commission) to the
Corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his duties
to the Corporation, including responsibility for negligence and for the
accounting of any of the Corporation's property, funds or securities that may
come into his hands.
ARTICLE IV
CAPITAL STOCK
SECTION 4.1. CERTIFICATES FOR SHARES. Each stockholder of the Corporation
shall be entitled to a certificate or certificates for the full number of shares
of stock of the Corporation owned by him in such form as the Board may from time
to time prescribe.
SECTION 4.2. TRANSFER OF SHARES. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by his duly authorized attorney or legal representative, upon surrender and
cancellation of certificates, if any, for the same number of shares, duly
endorsed or accompanied by proper instruments of assignment and transfer, with
such proof of the authenticity of the signature as the Corporation or its agents
may reasonably require; in the case of shares not represented by certificates,
the same or similar requirements may be imposed by the Board of Directors.
SECTION 4.3. STOCK LEDGERS. The stock ledgers of the Corporation,
containing the names and addresses of the stockholders and the number of shares
held by them respectively, shall be kept at the principal offices of the
Corporation or, if the Corporation employs a Transfer Agent, at the offices of
the Transfer Agent of the Corporation.
SECTION 4.4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made, all certificates representing shares of capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
SECTION 4.5. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors
or the Executive Committee or any officer or agent authorized by the Board of
Directors or Executive Committee may determine the conditions upon which a new
certificate of stock of the Corporation of any class may be issued in place of a
certificate which is alleged to have been lost, stolen or destroyed; and may, in
its discretion, require the owner of such certificate or such owner's legal
representative to give bond, with sufficient surety, to the Corporation and each
Transfer Agent, if any, to indemnify it and each such Transfer Agent against any
and all loss or
5
<PAGE> 9
claims which may arise by reason of the issue of a new certificate in the place
of the one so lost, stolen or destroyed.
ARTICLE V
CORPORATE SEAL; LOCATION OF OFFICES; BOOKS; NET ASSET VALUE
SECTION 5.1. CORPORATE SEAL. The Board of Directors may provide for a
suitable corporate seal, in such form and bearing such inscriptions as it may
determine. Any officer or director shall have the authority to affix the
corporate seal. If the Corporation is required to place its corporate seal to a
document, it shall be sufficient to place the word "(seal)" adjacent to the
signature of the authorized officer of the Corporation signing the document.
SECTION 5.2. LOCATION OF OFFICES. The Corporation shall have a principal
office in the State of Maryland. The Corporation may, in addition, establish and
maintain such other offices as the Board of Directors or any officer may, from
time to time, determine.
SECTION 5.3. BOOKS AND RECORDS. The books and records of the Corporation
shall be kept at the places, within or without the State of Maryland, as the
directors or any officer may determine; provided, however, that the original or
a certified copy of the by-laws, including any amendments to them, shall be kept
at the Corporation's principal executive office.
SECTION 5.4. ANNUAL STATEMENT OF AFFAIRS. The President or any other
executive officer of the Corporation shall prepare annually a full and correct
statement of the affairs of the Corporation, to include a balance sheet and a
financial statement of operations for the preceding fiscal year. The statement
of affairs should be submitted at the annual meeting of stockholders and, within
20 days of the meeting, placed on file at the Corporation's principal office.
SECTION 5.5. NET ASSET VALUE. The value of the Corporation's net assets
shall be determined at such times and by such method as shall be established
from time to time by the Board of Directors.
ARTICLE VI
FISCAL YEAR AND ACCOUNTANT
SECTION 6.1. FISCAL YEAR. The fiscal year of the Corporation, unless
otherwise fixed by resolution of the Board of Directors, shall begin on the 1st
day of October and shall end on the 30th day of September in each year.
SECTION 6.2. ACCOUNTANT. The Corporation shall employ an independent public
accountant or a firm of independent public accountants as its Accountant to
examine the accounts of the Corporation and to sign and certify financial
statements filed by the Corporation. The employment of the Accountant shall be
conditioned upon the right of the Corporation to terminate the employment
forthwith without any penalty by vote of a majority of the outstanding voting
securities at any stockholders' meeting called for that purpose.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
SECTION 7.1. GENERAL. The Corporation shall indemnify directors, officers,
employees and agents of the Corporation against judgments, fines, settlements
and expenses to the fullest extent authorized and in the manner permitted, by
applicable federal and state law.
SECTION 7.2. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation
shall indemnify to the fullest extent permitted by law (including the Investment
Company Act of 1940, as amended) as currently in effect or as the same may
hereafter be amended, any person made or threatened to be made a party to any
action,
6
<PAGE> 10
suit or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or such person's testator or intestate is or
was a director or officer of the Corporation or serves or served at the request
of the Corporation any other enterprise as a director or officer. To the fullest
extent permitted by law (including the Investment Company Act of 1940, as
amended) as currently in effect or as the same may hereafter be amended,
expenses incurred by any such person in defending any such action, suit or
proceeding shall be paid or reimbursed by the Corporation promptly upon receipt
by it of an undertaking of such person to repay such expenses if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Corporation. The rights provided to any person by this Article VII shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon it in serving or continuing to serve as a director or officer as
provided above. No amendment of this Article VII shall impair the rights of any
person arising at any time with respect to events occurring prior to such
amendment. For purposes of this Article VII, the term "Corporation" shall
include any predecessor of the Corporation and any constituent corporation
(including any constituent of a constituent) absorbed by the Corporation in a
consolidation or merger; the term "other enterprises" shall include any
corporation, partnership, joint venture, trust or employee benefit plan; service
"at the request of the Corporation" shall include service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be indemnifiable
expenses; and action by a person with respect to any employee benefit plan which
such person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation.
SECTION 7.3. INSURANCE. Subject to the provisions of the Investment
Company Act of 1940, as amended, the Corporation, directly, through third
parties or through affiliates of the Corporation, may purchase, or provide
through a trust fund, letter of credit or surety bond insurance on behalf of any
person who is or was a Director, officer, employee or agent of the Corporation,
or who, while a Director, officer, employee or agent of the Corporation, is or
was serving at the request of the Corporation as a Director, officer, employee,
partner, trustee or agent of another foreign or domestic corporation,
partnership joint venture, trust or other enterprise against any liability
asserted against and incurred by such person in any such capacity or arising out
of such person's position, whether or not the Corporation would have the power
to indemnify such person against such liability.
ARTICLE VIII
CUSTODIAN
The Corporation shall have as custodian or custodians one or more trust
companies or banks of good standing, foreign or domestic, as may be designated
by the Board of Directors, subject to the provisions of the Investment Company
Act of 1940, as amended, and other applicable laws and regulations; and the
funds and securities held by the Corporation shall be kept in the custody of one
or more such custodians, provided such custodian or custodians can be found
ready and willing to act, and further provided that the Corporation and/or the
Custodians may employ such subcustodians as the Board of Directors may approve
and as shall be permitted by law.
ARTICLE IX
Nothing in these By-Laws protects or purports to protect any director or
officer against any liability to the Corporation or its security holders to
which he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
7
<PAGE> 11
ARTICLE X
AMENDMENT OF BY-LAWS
The By-Laws of the Corporation may be altered, amended, added to or
repealed only by majority vote of the entire Board of Directors.
8
<PAGE> 1
EXHIBIT 2(D)(1)
<TABLE>
<S> <C>
COMMON STOCK COMMON STOCK
PAR VALUE PAR VALUE
$0.001 $0.001
</TABLE>
FIDELITY ADVISOR KOREA FUND, INC.
CUSIP 315804104
SEE REVERSE FOR CERTAIN
DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
This Certificate is transferable in Boston, Massachusetts or in New York, New
York
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON ASSESSABLE SHARES OF COMMON STOCK OF
Fidelity Advisor Korea Fund, Inc. (hereinafter called the "Corporation"),
transferable on the books of the Corporation by the registered holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar or its designated agent.
In Witness Whereof, the Corporation has caused the facsimile signatures
of its duly authorized officers and its facsimile seal to be affixed hereto.
Dated:
Secretary Senior Vice President
COUNTERSIGNED AND REGISTERED:
STATE STREET BANK AND TRUST COMPANY
(Boston, Massachusetts)
Transfer Agent and Registrar
AUTHORIZED SIGNATURE
9
<PAGE> 2
FIDELITY ADVISOR KOREA FUND, INC.
A FULL STATEMENT OR SUMMARY OF THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION
AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS,
QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS
WHICH THE CORPORATION IS AUTHORIZED TO ISSUE AND THE AUTHORITY OF THE BOARD OF
DIRECTORS TO SET THE RELATIVE RIGHTS AND PREFERENCES OF ANY SERIES OF CAPITAL
STOCK, WILL BE FURNISHED TO ANY SHAREHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE
SECRETARY OF THE CORPORATION AT THE CORPORATION'S PRINCIPAL OFFICE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
------------ ------------
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN -- as joint tenants with right of ---------------------------------
survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said shares on the books of the within-named Corporation with
full power of substitution in the premises.
Dated:
------------------------
Signature(s)
-----------------------------------------
NOTICE: The signature(s) to this
assignment must correspond with the name
as written upon the face of the
Certificate, in every particular,
without alteration or enlargement, or any
change whatever.
Signature Guaranteed By:
- ---------------------------------------------------
10
<PAGE> 1
2-D-2
THE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER , 1996*
FIDELITY ADVISOR KOREA FUND, INC.
SUBSCRIPTION RIGHTS FOR COMMON STOCK
SUBSCRIPTION CERTIFICATE
Dear Shareholder:
You are entitled to exercise the Rights issued to you as of November ,
1996, the Record Date for the Fund's rights offering, to subscribe for the
number of Shares of Common Stock of Fidelity Advisor Korea Fund, Inc. shown on
this Subscription Certificate pursuant to the Primary Subscription upon the
terms and conditions specified in the Fund's Prospectus dated November , 1996
(the "Prospectus"). The terms and conditions of the rights offering (the
"Offer") set forth in the Prospectus are incorporated herein by reference.
Capitalized terms not defined herein have the meanings attributed to them in the
Prospectus. In accordance with the Over-Subscription Privilege, as a Record Date
Shareholder, you are also entitled to subscribe for additional Shares if Shares
remaining after exercise of Rights pursuant to the Primary Subscription are
available and if you have fully exercised all Rights issued to you. If
sufficient Shares remain after completion of the Primary Subscription, all
over-subscriptions will be honored in full. If sufficient Shares are not
available after completion of the Primary Subscription to honor all
over-subscriptions, the Fund may, at the discretion of the Board of Directors,
issue shares of Common Stock up to an additional 25% of the Shares available
pursuant to the Offer (up to an additional Shares) in order to cover
such over-subscription requests. To the extent the Fund determines not to issue
additional Shares to honor all over-subscriptions or if the aggregate number of
Shares requested pursuant to the Over-Subscription Privilege exceeds the number
of additional Shares, the available Shares will be allocated among those who
over-subscribe based on the number of Rights originally issued to them by the
Fund, so that the number of Shares issued to shareholders who subscribe pursuant
to the Over-Subscription Privilege will generally be in proportion to the number
of Shares owned by them on the Record Date. The Fund will not offer or sell any
Shares which are not subscribed for pursuant to the Primary Subscription or the
Over-Subscription Privilege.
SAMPLE CALCULATION
FULL PRIMARY SUBSCRIPTION ENTITLEMENT
(one Share for each Rights)
<TABLE>
<S> <C>
No. of shares owned on the Record Date _____________________________ / _____ = _______________ new Shares
(equals no. of Rights issued) (ignore fractions)
</TABLE>
SUBSCRIPTION PRICE
The Subscription Price will be % of the lower of (i) the average of the
last reported sales price on the NYSE on the expiration date of the Offer (the
"Pricing Date") and on the four preceding business days, and (ii) the net asset
value per share on the Pricing Date.
METHOD OF EXERCISE OF RIGHTS
IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST EITHER (I) COMPLETE AND SIGN THIS
SUBSCRIPTION CERTIFICATE ON THE BACK AND RETURN IT TOGETHER WITH PAYMENT AT THE
ESTIMATED SUBSCRIPTION PRICE FOR THE SHARES, OR (II) PRESENT A PROPERLY
COMPLETED NOTICE OF GUARANTEED DELIVERY, IN EITHER CASE TO THE SUBSCRIPTION
AGENT, STATE STREET BANK AND TRUST COMPANY, BEFORE 5:00 P.M., NEW YORK CITY
TIME, ON DECEMBER , 1996* (THE "EXPIRATION DATE").
<TABLE>
<S> <C> <C>
BY FIRST CLASS MAIL OR EXPRESS MAIL: BY EXPRESS MAIL OR OVERNIGHT COURIER: BY HAND:
State Street Bank and Trust State Street Bank and Trust Company State Street Bank and Trust Company
Company Corporate Reorganization Corporate Reorganization
Corporate Reorganization Two Heritage Drive 225 Franklin Street -- Concourse
P.O. Box 9061 North Quincy, Massachusetts 02171 Level
Boston, Massachusetts 02205-8686 U.S.A. Boston, Massachusetts 02110
U.S.A. U.S.A.
or
Bank Boston
c/o Boston EquiServe
Corporate Reorganization
55 Broadway -- 3rd Floor
New York, New York 10006
U.S.A.
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES LISTED ABOVE WILL NOT
CONSTITUTE VALID DELIVERY.
FULL PAYMENT OF THE ESTIMATED SUBSCRIPTION PRICE PER SHARE FOR ALL SHARES
SUBSCRIBED FOR PURSUANT TO BOTH THE PRIMARY SUBSCRIPTION AND OVER-SUBSCRIPTION
PRIVILEGE MUST ACCOMPANY THIS SUBSCRIPTION CERTIFICATE AND MUST BE MADE PAYABLE
IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE
UNITED STATES PAYABLE TO FIDELITY ADVISOR KOREA FUND, INC. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY
URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK
OR MONEY ORDER. ALTERNATIVELY, IF A NOTICE OF GUARANTEED DELIVERY IS USED, A
PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION CERTIFICATE, AND FULL PAYMENT, AS
DESCRIBED IN SUCH NOTICE, MUST BE RECEIVED BY THE SUBSCRIPTION AGENT NO LATER
THAN THE CLOSE OF BUSINESS ON THE THIRD BUSINESS DAY AFTER THE EXPIRATION DATE.
FOR ADDITIONAL INFORMATION, SEE THE PROSPECTUS.
Certificates for the Shares acquired on Primary Subscription will be mailed
promptly after the expiration of the Offer and full payment for the shares
subscribed for has been received and cleared. Certificates representing Shares
acquired pursuant to the Over-Subscription Privilege will be mailed as soon as
practicable after full payment has been received and cleared and all allocations
have been effected. Any excess payment to be refunded by the Fund to a
shareholder will be mailed by the Subscription Agent to such shareholder as
promptly as possible.
THESE SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE
- ------------------------------
* Unless the Offer is extended.
Any questions regarding this Subscription Certificate and the Offer may be
directed to the Information Agent, D.F. King & Co. Inc., toll-free at (800)
<PAGE> 2
Account #: Control #:
Number of Primary Subscription Rights:
Number of Shares Entitled in Primary Subscription:
PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY
SECTION 1: DETAILS OF SUBSCRIPTION
IF YOU WISH TO SUBSCRIBE FOR YOUR FULL ENTITLEMENT:
A: I apply for ALL of my entitlement of new
Shares pursuant to the Primary Subscription.
x $ + = $
----------------- --- ----------
(no. of new Shares)
B: I apply for new Shares pursuant to the
Over-Subscription
Privilege* x $ + = $
---------------------- --- ----------
(no. of additional Shares)
AMOUNT ENCLOSED $
--------------------
* You can only over-subscribe if you have fully exercised your Primary
Subscription Rights.
IF YOU DO NOT WISH TO APPLY FOR YOUR FULL ENTITLEMENT:
C: I apply for x $ + = $
------------- ---- ------------------------
(no. of new Shares) (AMOUNT ENCLOSED)
SECTION 2: TO SUBSCRIBE
I acknowledge that I have received the Prospectus for this Offer and I
hereby irrevocably subscribe for the number of Shares indicated above as a total
of A and B, on the terms and conditions specified in the Prospectus relating to
the Primary Subscription and the Over-Subscription Privilege. I understand and
agree that I will be obligated to pay any additional amount to the Fund if the
Subscription Price as determined on the Pricing Date is in excess of the
$ Estimated Subscription Price per Share.
I hereby agree that if I fail to pay in full for the Shares for which I
have subscribed, the Fund may exercise any of the remedies set forth for in the
Prospectus.
Signature of subscriber(s)
------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone number (including area code) ( )
----------------------------------
If you wish to have your shares and refund check (if any) delivered to an
address other than that listed on this Subscription Certificate you must have
your signature guaranteed by a member of the New York Stock Exchange or a bank
or trust company. Please provide the delivery address below and note if it is a
permanent change.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
------------------------------------------------------------------------
SECTION 3: DESIGNATION OF BROKER-DEALER
The following broker-dealer is hereby designated as having been
instrumental in the exercise of the Rights hereby exercised:
FIRM:
-----------------------------------------------------------
REPRESENTATIVE NAME:
--------------------------------------------
REPRESENTATIVE NUMBER:
------------------------------------------
+ NOTE: $ per Share is an estimated price only. The Subscription Price will
be determined on December , 1996, the Pricing Date (which is the same as the
Expiration Date unless extended), and could be higher or lower depending on the
changes in the net asset value and share price of the Common Stock.
<PAGE> 1
2-D-3
BENEFICIAL OWNER LISTING CERTIFICATION
The undersigned, a bank, broker or other nominee holder of Rights
("Rights") to purchase shares of Common Stock, $0.001 par value ("Common
Stock"), of Fidelity Advisor Korea Fund, Inc. (the "Fund") pursuant to the
Rights Offering (the "Offer") described and provided for in the Fund's
Prospectus dated November , 1996 (the "Prospectus"), hereby certifies to the
Fund and to State Street Bank and Trust Company, as Subscription Agent for such
Offer, that for each numbered line filled in below, the undersigned has
exercised, on behalf of the beneficial owner thereof (which may be the
undersigned), the number of Rights specified on such line pursuant to the
Primary Subscription (as defined in the Prospectus) and such beneficial owner
wishes to subscribe for the purchase of additional shares of Common Stock
pursuant to the Over-Subscription Privilege (as defined in the Prospectus), in
the amount set forth in the third column of such line.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF RECORD DATE NUMBER OF RIGHTS EXERCISED REQUESTED PURSUANT TO THE
SHARES OWNED PURSUANT TO PRIMARY SUBSCRIPTION OVER-SUBSCRIPTION PRIVILEGE
--------------------- -------------------------------- ---------------------------
<S> <C> <C> <C>
1) _____________________ ________________________________
2) _____________________ ________________________________
3) _____________________ ________________________________
4) _____________________ ________________________________
5) _____________________ ________________________________
6) _____________________ ________________________________
7) _____________________ ________________________________
8) _____________________ ________________________________
9) _____________________ ________________________________
10) _____________________ ________________________________
</TABLE>
- -----------------------------
Name of Nominee Holder
By:
- --------------------------------------
Name:
----------------------------------
Title:
----------------------------------
Dated:
- --------------------------------------, 1996
Provide the following information, if applicable:
<TABLE>
<S> <C>
Name of Broker:
- -----------------------------------------------
Depository Trust Corporation ("DTC") Participant Number
Address:
- -----------------------------------------------
DTC Primary Subscription Confirmation Number(s)
</TABLE>
<PAGE> 1
2-D-4
FIDELITY ADVISOR KOREA FUND, INC.
RIGHTS OFFERING
DTC PARTICIPANT OVER-SUBSCRIPTION EXERCISE FORM
NOMINEE HOLDER OVER-SUBSCRIPTION EXERCISE FORM
THIS FORM IS TO BE USED ONLY BY NOMINEE HOLDERS OR BY THE DEPOSITORY TRUST
COMPANY ("DTC") PARTICIPANTS TO EXERCISE THE OVER-SUBSCRIPTION PRIVILEGE IN
RESPECT OF RIGHTS WITH RESPECT TO WHICH THE PRIMARY SUBSCRIPTION PRIVILEGE WAS
EXERCISED IN FULL AND DELIVERED THROUGH THE FACILITIES OF A COMMON DEPOSITORY OR
DTC. ALL OTHER EXERCISES OF OVERSUBSCRIPTION PRIVILEGES MUST BE EFFECTED BY THE
DELIVERY OF THE SUBSCRIPTION CERTIFICATE.
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE FUND'S
PROSPECTUS DATED NOVEMBER , 1996 (THE "PROSPECTUS") AND ARE INCORPORATED
HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM
THE INFORMATION AGENT.
PLEASE COMPLETE ALL APPLICABLE INFORMATION
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL OR WITH
A PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY BEFORE 5:00 P.M., NEW YORK
CITY TIME, ON DECEMBER , 1996 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE
FUND.
<TABLE>
<CAPTION>
BY FACSIMILE: BY FIRST CLASS MAIL OR
(TELECOPIES) EXPRESS MAIL: BY HAND:
<S> <C> <C>
(617) 774-4519 State Street Bank and Trust Company State Street Bank and Trust Company
Confirm by telephone to: Corporate Reorganization Corporate Reorganization
(617) 774-4511 Two Heritage Drive 225 Franklin Street -- Concourse Level
BY FIRST CLASS MAIL OR North Quincy, Massachusetts 02171 Boston, Massachusetts 02110
EXPRESS MAIL: U.S.A. U.S.A.
State Street Bank and Trust Company or
Corporate Reorganization Bank Boston
P.O. Box 9061 c/o Boston EquiServe
Boston, Massachusetts 02285-8686 Corporate Reorganization
U.S.A. 55 Broadway -- 3rd Floor
New York, New York 10006
U.S.A.
</TABLE>
1. The undersigned hereby certifies to the Subscription Agent that it is a
participant in [Name of Depository] (the "Depository") and that it
has either (i) exercised the Primary Subscription in respect of the Rights and
delivered such exercised Rights to the Subscription Agent by means of transfer
to the Depository Account of the Fund or (ii) delivered to the Subscription
Agent a Notice of Guaranteed Delivery in respect of the exercise of the Primary
Subscription Privilege and will deliver the Rights called for in such Notice of
Guaranteed Delivery to the Subscription Agent by means of transfer to such
Depository Account of the Fund.
2. The undersigned hereby exercises the Over-Subscription Privilege to
purchase, to the extent available, shares of Common Stock and
certifies to the Subscription Agent that such Over-Subscription Privilege is
being exercised for the account or accounts of persons (which may include the
undersigned) on whose behalf all Primary Subscription Rights have been
exercised.
3. The undersigned understands that payment of the Estimated Subscription
Price of $ per Share for each Share of Common Stock subscribed for pursuant
to the Over-Subscription Privilege must be received by the Subscription Agent
before 5:00 p.m., New York City time, on the Expiration Date, unless a Notice of
Guaranteed Delivery is used, in which case, payment in full must be received by
the Subscription Agent not later than the close of business on the third
business day after the Expiration Date. The undersigned represents that such
payment, in the aggregate amount of $ , either
(continued on other side)
<PAGE> 2
(check appropriate box):
/ / has been or is being delivered to the Subscription Agent pursuant to the
Notice of Guaranteed Delivery referred to above
or
/ / is being delivered to the Subscription Agent herewith
or
/ / has been delivered separately to the Subscription Agent;
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
Primary Subscription Confirmation Number Name of Nominee Holder
- --------------------------------------------- ---------------------------------------------
Depository Participant Number Address
Contact Name
--------------------------------
---------------------------------------------
City State Zip Code
Phone Number
-------------------------------- By:
------------------------------------------
Dated:_________________________________, 1996 Name:
----------------------------------------
Title:
---------------------------------------
</TABLE>
PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION OF
RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF
OVER-SUBSCRIPTION SHARES, IF APPLICABLE, REQUESTED BY EACH SUCH OWNER.
PLEASE NOTE: THIS FORM WILL NOT BE ACCEPTED AS VALID UNLESS THE FOLLOWING
INFORMATION IS PROVIDED FOR THE ALLOCATION OF OVER-SUBSCRIPTION SHARES.
The positions below pertain to those persons on whose behalf the
Over-Subscription is being exercised:
<TABLE>
<S> <C>
- ------------------------------------ Total number of record dateshares
- ------------------------------------ Total number of primaryrights exercised
</TABLE>
2
<PAGE> 1
2-D-5
NOTICE OF GUARANTEED DELIVERY FOR SHARES OF
COMMON STOCK OF FIDELITY ADVISOR KOREA FUND, INC.
SUBSCRIBED FOR PURSUANT TO THE PRIMARY SUBSCRIPTION
AND THE OVER-SUBSCRIPTION PRIVILEGE
FIDELITY ADVISOR KOREA FUND, INC. RIGHTS OFFERING
As set forth in the Fund's Prospectus dated November , 1996 (the
"Prospectus") under "The Offer -- Payment for Shares," this form or one
substantially equivalent hereto may be used as a means of effecting subscription
and payment for all shares of Fidelity Advisor Korea Fund, Inc. Common Stock
subscribed for by exercise of Rights pursuant to the Primary Subscription and
the Over-Subscription Privilege. Such form may be delivered by hand or sent by
facsimile transmission, overnight courier or mail to the Subscription Agent and
must be received prior to 5:00 p.m. New York City time on December , 1996 (the
"Expiration Date").* The terms and conditions of the Offer set forth in the
Prospectus are incorporated by reference herein. Capitalized terms not defined
herein have the meanings attributed to them in the Prospectus.
THE SUBSCRIPTION AGENT IS:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<CAPTION>
BY FACSIMILE: BY EXPRESS MAIL OR OVERNIGHT
(TELECOPIES) COURIER: BY HAND:
<S> <C> <C>
(617) 774-4519 State Street Bank and Trust Company State Street Bank and Trust Company
Confirm by telephone to: Corporate Reorganization Corporate Reorganization
(617) 774-4511 Two Heritage Drive, MB2 225 Franklin Street -- Concourse Level
BY FIRST CLASS MAIL OR North Quincy, Massachusetts 02171 Boston, Massachusetts 02110
EXPRESS MAIL: U.S.A. U.S.A.
State Street Bank and Trust Company or
Corporate Reorganization Bank Boston
P.O. Box 9061 c/o Boston EquiServe
Boston, Massachusetts 02285-8686 Corporate Reorganization
U.S.A. 55 Broadway -- 3rd Floor
New York, New York 10006
U.S.A.
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A TELECOPY OR FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE,
DOES NOT CONSTITUTE A VALID DELIVERY.
The New York Stock Exchange member firm or bank or trust company which
completes this form must communicate the guarantee and the number of shares
subscribed for under both the Primary Subscription and the Over-Subscription
Privilege to the Subscription Agent and must deliver this Notice of Guaranteed
Delivery guaranteeing delivery of (i) payment in full for all subscribed shares
and (ii) a properly completed and executed Subscription Certificate to the
Subscription Agent prior to 5:00 p.m., New York City time, on the Expiration
Date.* The Subscription Certificate and full payment must then be delivered by
the close of business on the third business day after the Expiration Date* to
the Subscription Agent. Failure to do so will result in a forfeiture of the
Rights.
(continued on other side)
- ---------------
* Unless extended by the Fund.
<PAGE> 2
GUARANTEE
The undersigned, a member firm of the New York Stock Exchange or a bank or
trust company guarantees delivery of payment to the Subscription Agent by the
close of business (5:00 p.m., New York City time) on the third business day
(December , 1996) after the Expiration Date (December , 1996, unless
extended) of (i) a properly completed and executed Subscription Certificate and
(ii) payment of the full Subscription Price for shares subscribed for on Primary
Subscription and pursuant to the Over-Subscription Privilege, if applicable, as
subscription for such shares is indicated herein or in the Subscription
Certificate.
<TABLE>
<C> <S> <C> <C> <C>
1. Primary Number of Rights to be Number of Primary Payment to be made in
Subscription exercised Shares requested for connection with Primary
Rights which you are Shares
guaranteeing delivery $
of Rights and Payment
Shares
(Rights X by )
2. Over-Subscription Number of Over- Payment to be made in
Subscription Shares connection with Over-
requested for which you Subscription Shares
are guaranteeing
payment
Shares $
----------------
3. Totals Total Number of Rights $
to be Delivered ----------------
Rights ----------------
Total Payment
</TABLE>
Method of Delivery of Rights (circle one) A. Through The Depository Trust
Company ("DTC")*
B. Direct to the Subscription Agent
Please note that if you are guaranteeing for Over-Subscription Shares and
are a DTC participant, you must also execute and forward to State Street Bank
and Trust Company a Nominee Holder Over-Subscription Certification.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
Name of Firm Authorized Signature
- --------------------------------------------- ---------------------------------------------
Address Title
- --------------------------------------------- ---------------------------------------------
Zip Code Name (Please Type or Print)
- ---------------------------------------------
Name of Registered Holder (If Applicable)
- --------------------------------------------- ---------------------------------------------
Telephone Number Date
</TABLE>
* IF THE RIGHTS ARE TO BE DELIVERED THROUGH DTC, CALL THE SUBSCRIPTION AGENT TO
OBTAIN A PROTECT IDENTIFICATION NUMBER, WHICH NEEDS TO BE COMMUNICATED BY YOU
TO DTC.
2
<PAGE> 1
FIDELITY ADVISOR KOREA FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
TERMS AND CONDITIONS
1. The shareholder ("Shareholder") holding shares of common stock of
Fidelity Advisor Korea Fund, Inc. (the "Fund") elects, by written instruction to
State Street Bank and Trust Company (the "Plan Agent"), to be a participant in
the Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") and to have
all distributions automatically reinvested by the Plan Agent in Fund shares
pursuant to the Plan. A Shareholder who does not wish to participate in the Plan
will receive all distributions in cash, net of any applicable U.S. withholding
tax, and will be paid by check in U.S. dollars mailed directly to such
Shareholder by the State Street Bank and Trust Company, as dividend disbursing
agent. The Plan Agent will act as agent for individual Shareholders in
administering the Plan and will open an account for each Shareholder under the
Plan in the same name as her or his shares of common stock are registered.
2. Whenever the directors of the Fund declare an income dividend or capital
gains distribution payable either in shares of common stock or in cash,
non-participating Shareholders will receive cash, and participating Shareholders
will take such dividend or distribution entirely in shares of common stock to be
issued by the Fund or to be purchased on the open market by the Plan Agent, and
the Plan Agent shall automatically receive such shares of common stock,
including fractions, for the Shareholder's account. Whenever the market price
per share of common stock equals or exceeds the net asset value per share at the
time the shares of common stock are valued for the purpose of determining the
number of shares of common stock equivalent to the dividend or distribution (the
"Valuation Date"), the Fund will issue new shares to participants at net asset
value, or, if the net asset value is less than 95% of the market price on the
Valuation Date, then participants will be issued shares valued at 95% of the
market price. If net asset value per share on the Valuation Date exceeds the
market price per share on that date, the Plan Agent, as agent for the
participants, will buy shares of the Fund's common stock on the open market, on
the New York Stock Exchange or elsewhere in the United States, for the
participants' accounts. If, before the Plan Agent has completed such purchases,
the market price exceeds the net asset value per share, the average per share
purchase price paid by the Plan Agent may exceed the net asset value per share,
resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund at net asset value.
Additionally, if the market price exceeds the net asset value per share before
the Plan Agent has completed its purchases, the Plan Agent is permitted to cease
purchasing shares and the Fund may issue the remaining shares at a price equal
to the greater of (a) net asset value or (b) 95% of the then current market
price. In a case where the Plan Agent has terminated open market purchases and
the Fund has issued the remaining shares, the number of shares received by each
participant in respect of the dividend or distribution will be based on the
weighted average of prices paid for shares purchased in the open market and the
price at which the Fund issues the remaining shares. The Valuation Date shall be
the dividend or distribution payment date or, if that date is not a New York
Stock Exchange trading day, the next preceding trading day.
3. Whenever the directors of the Fund declare an income dividend or capital
gains distribution payable only in cash, the Plan Agent, as agent for the
participants, will buy shares of the Fund's common stock on the open market, on
the New York Stock Exchange or elsewhere in the United States, with the cash in
respect of such dividend or distribution for the participants' accounts, on, or
shortly after, the payment date. To the extent the market price exceeds the net
asset value of the common stock when the Plan Agent makes such purchases,
participants may receive fewer shares of common stock than if the dividend or
distribution had been payable in common stock issued by the Fund.
4. Participants in the Plan have the option of making additional cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in shares of common stock of the Fund. The Plan Agent will use all
funds received from participants (as well as any dividends or distributions
received in cash) to purchase Fund shares of common stock on the open market, on
or about the 15th of February. To avoid unnecessary cash accumulations, and also
to allow ample time for receipt and processing by the Plan Agent, participants
should send in voluntary cash payments to be received by the Plan Agent
approximately ten days
<PAGE> 2
before the 15th of February. Any voluntary cash payments received more than
thirty days prior to that date will be returned by the Plan Agent, and interest
will not be paid on any such uninvested cash payment amounts. A participant may
withdraw a voluntary cash payment by written notice, if the notice is received
by the Plan Agent not less than forty-eight hours before such payment is to be
invested.
All voluntary cash payments should be made by check drawn on a U.S.(Signed)
bank, (or a non-U.S. bank, if the U.S. currency is imprinted on the check)
payable in U.S.(Signed) dollars, and should be mailed to the Plan Agent, along
with a properly executed cash remittance form (copies of which will be provided
by the Plan Agent to participants), at State Street Bank and Trust Company, Two
Heritage Drive, Quincy, Massachusetts, 02171. If any check is returned unpaid
for any reason, the Plan Agent will be entitled to sell any number of shares
from the participant's account required to recoup any funds expended to purchase
shares for such participant's account.
5. The Plan Agent will apply all cash received as a dividend or
distribution or as a voluntary cash payment to purchase shares of common stock
on the open market as soon as practicable after the payment date of the dividend
or distribution, but in no event later than 30 days after such payment date,
except where necessary to comply with applicable provisions of the federal
securities laws. No participant will have any authority to direct the time or
price at which the Plan Agent may purchase shares of the Fund's common stock on
such participant's behalf.
6. For all purposes of the Plan: (a) the market price of shares of common
stock of the Fund on a particular date shall be the last sales price on the New
York Stock Exchange at the close of the previous trading day or, if there is no
sale on the New York Stock Exchange on that date, then the mean between the
closing bid and asked quotations for such stock on the New York Stock Exchange
on such date, (b) each Valuation Date shall be the dividend or distribution
payment date or, if that date is not a New York Stock Exchange trading day, the
next preceding trading day, and (c) the net asset value per share of common
stock on a particular date shall be as determined by or on behalf of the Fund.
7. The open-market purchases provided for above may be made on any
securities exchange in the United States where the shares of common stock of the
Fund are traded, in the over-the-counter market or in negotiated transactions,
and may be on such terms as to price, delivery and otherwise as the Plan Agent
shall determine. Funds held by the Plan Agent will not bear interest. In
addition, it is understood that the Plan Agent shall have no liability (other
than as provided in paragraph 15 hereof) in connection with any inability to
purchase shares of common stock within 30 days after the payment date of any
dividend or distribution as herein provided or with the timing of any purchases
effected. The Plan Agent shall have no responsibility as to the value of the
shares of common stock of the Fund acquired for any Shareholder's account.
8. The Plan Agent will hold shares of common stock acquired pursuant to the
Plan in non-certificated form in the name of the Shareholder for whom such
shares are being held, and each Shareholder's proxy will include those shares of
common stock held pursuant to the Plan. The Plan Agent will forward to each
Shareholder participating in the Plan any proxy solicitation material received
by it. In the case of Shareholders, such as banks, brokers or nominees, that
hold shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by such Shareholders as representing the total amount registered in the
names of such Shareholders and held for the account of beneficial owners who
participate in the Plan. Upon a Shareholder's written request, the Plan Agent
will deliver to her or him, without charge and within ten days, a certificate or
certificates representing all full shares of common stock held by the Plan Agent
pursuant to the Plan for the benefit of such Shareholder.
9. The Plan Agent will confirm, in writing, each acquisition made for the
account of a Shareholder as soon as practicable, but in any event not later than
60 days after the date thereof. Such confirmation will indicate the number of
shares purchased and the price per share paid, and will include any applicable
tax information pertaining to such Shareholder's account. It is understood that
the reinvestment of dividends and distributions does not relieve the participant
of any income tax which may be payable on such dividends and distributions. Any
Shareholder who is subject to U.S. backup withholding tax, or who is a foreign
Shareholder subject to U.S. income tax withholding, will have the applicable tax
withheld from all dividends and
2
<PAGE> 3
distributions received and only the net amount will be reinvested in shares of
the Fund's common stock. Although a Shareholder may from time to time have an
undivided fractional interest (computed to three decimal places) in a share of
common stock of the Fund, no certificates for fractional shares will be issued.
However, distributions and dividends on fractional shares of common stock will
be credited to each Shareholder's account. In the event of termination of a
Shareholder's account under the Plan, the Plan Agent will adjust for any such
undivided fractional interest in cash at the current market value of the shares
of common stock at the time of termination.
10. Any stock dividends or split shares distributed by the Fund on shares
of common stock held by the Plan Agent for a Shareholder will be credited to the
Shareholder's account. In the event that the Fund makes available to
Shareholders rights to purchase additional shares of common stock or other
securities, the Plan Agent will forward to each Shareholder participating in the
Plan any materials received by it relating to such rights.
11. There is no charge to Shareholders for reinvesting dividends or capital
gains distributions. The Plan Agent's fees for the handling of the reinvestment
of dividends and distributions will be paid by the Fund. However, each
Shareholder will be charged a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends or distributions. A Shareholder will also pay
brokerage commissions incurred in connection with purchases from voluntary cash
payments made by the Shareholder. Brokerage charges for purchasing small amounts
of stock for individual accounts through the Plan are expected to be less than
the usual brokerage charges for such transactions because the Plan Agent will be
purchasing stock for all participants in large blocks and prorating the lower
commission thus attainable.
12. A Shareholder may terminate her or his participation in the Plan by
notifying the Plan Agent. Such notifications should be made in writing on a
properly executed withdrawal/termination form (copies of which will be provided
by the Plan Agent to participants) mailed to the Plan Agent at State Street Bank
and Trust Company, Two Heritage Drive, Quincy, Massachusetts, 02171. Such
termination will be effective immediately if notice is received by the Plan
Agent prior to any dividend or distribution record date; otherwise such
termination will be effective, with respect to any subsequent dividend or
distribution, on the first trading day after the dividend or distribution paid
for such record date shall have been credited to such Shareholder's account. The
Plan may be terminated by the Plan Agent or the Fund with respect to any
voluntary cash payments made or any dividends or distributions paid subsequent
to the notice of termination in writing mailed to the Shareholders at least 30
days prior to the monthly contribution date, in the case of voluntary cash
payments, or the record date for the payment of any dividend or distribution by
the Fund. Upon any termination, the Plan Agent will cause a certificate or
certificates for the full shares held for a Shareholder under the Plan, and cash
adjustment for any fractional shares to be delivered to her or him or, upon the
request of such Shareholder, will sell all of the shares held for the
Shareholder under the Plan, within ten days of receiving the Shareholder's
instructions, and will deliver the proceeds less any brokerage commissions to
the Shareholder.
13. If any Shareholder has withdrawn shares from the Plan, or acquires
shares which have been withdrawn from the Plan, and wishes to have such shares
held through and subject to the Plan, such Shareholder may resubmit such shares
by notifying the Plan Agent at State Street Bank and Trust Company, Two Heritage
Drive, Quincy, Massachusetts, 02171.
14. These terms and conditions may be amended or supplemented by the Plan
Agent or the Fund at any time or times but, except when necessary or appropriate
to comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to the
Shareholders appropriate written notice at least 30 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by the
Shareholders unless, prior to the effective date thereof, the Plan Agent
receives written notice of the termination of a Shareholder's account under the
Plan. Any such amendment may include an appointment by the Plan Agent in its
place and stead of a successor Plan Agent under these terms and conditions, with
full power and authority to perform all or any of the acts to be performed by
the Plan Agent under these terms and conditions. Upon any such appointment of a
successor
3
<PAGE> 4
Plan Agent for the purpose of receiving dividends and distributions, the Fund
will be authorized to pay to such successor Plan Agent, for the Shareholders'
accounts, all dividends and distributions payable on the shares of common stock
held in the Shareholders' name or under the Plan for retention or application by
such successor Plan Agent as provided in these terms and conditions.
15. The Plan Agent shall at all times act in good faith and agree to use
its best efforts within reasonable limits to ensure the accuracy of all services
performed under this Plan and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by its negligence, bad faith or willful misconduct or that
of its employees.
4
<PAGE> 1
2(G)(1)
INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
FIDELITY ADVISOR KOREA FUND, INC.
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 25th day of October, 1994, by and between Fidelity
Advisor Korea Fund, Inc. a Maryland corporation (hereinafter called the "Fund"),
and Fidelity Management & Research Company, a Massachusetts corporation
(hereinafter called the "Manager").
1. (a) Investment Advisory Services. The Manager undertakes to act as
investment manager of the Fund and shall, subject to the supervision of the
Fund's Board of Directors, direct the investments of the Fund in accordance with
the investment objective, policies and limitations as provided in the Fund's
Prospectus or other governing instruments, as amended from time to time, the
Investment Company Act of 1940 and rules thereunder, as amended from time to
time (the "1940 Act"), and such other limitations as the Fund may impose by
notice in writing to the Manager. To the extent that an investment adviser is
appointed by the Manager and by the Board of Directors of the Fund (the
"Investment Adviser"), the Manager may delegate any of its management services
and responsibilities hereunder at its sole expense, and the Manager shall
supervise the performance by the Investment Adviser of such services and
responsibilities and further shall provide the Investment Adviser with such
investment advice and research as they shall mutually agree upon. The Manager
shall also furnish for the use of the Fund office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Fund;
and shall pay the salaries and fees of all officers of the Fund, of all
Directors of the Fund who are "interested persons" of the Fund or of the Manager
and of all personnel of the Fund or the Manager performing services relating to
research, statistical and investment activities. The Manager is authorized, in
its discretion and without prior consultation with the Fund, to buy, sell, lend
and otherwise trade in any stocks, bonds and other securities and investment
instruments on behalf of the Fund. The investment policies and all other actions
of the Fund are and shall at all times be subject to the control and direction
of the Fund's Board of Directors.
(b) Management Services. The Manager shall perform (or arrange for the
performance by its affiliates of) the management services necessary for the
operation of the Fund. The Manager shall, subject to the supervision of the
Board of Directors, perform various services for the Fund, including but not
limited to: (1) providing investment research and recommendations; (2) providing
investment and tax compliance services; (3) supervising any Investment Adviser
appointed under paragraph 1(a); (4) providing internal legal services; (5)
providing the Fund with office space, equipment and facilities (which may be its
own) for maintaining its organization; (6) on behalf of the Fund, supervising
relations with, and monitoring the performance of, custodians, depositories,
transfer and pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable; (7) preparing all general shareholder communications, including
shareholder reports; (8) conducting shareholder relations; (9) maintaining the
Fund's existence and its records; (10) during such times as shares are publicly
offered, maintaining the registration and qualification of the Fund's shares
under federal and state law; and (11) investigating the development of and
developing and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Fund as an investment
vehicle.
The Manager shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Directors may request from time to
time or as the Manager may deem to be desirable. The Manager shall make
recommendations to the Fund's Board of Directors with respect to Fund policies,
and shall carry out such policies as are adopted by the Directors. The Manager
shall, subject to review by the Board of Directors, furnish such other services
as the Manager shall from time to time determine to be necessary or useful to
perform its obligations under this Contract.
(c) Unless an Investment Adviser has been appointed pursuant to paragraph
1(a), the Manager shall place all orders for the purchase and sale of portfolio
securities for the Fund's account with brokers or dealers
<PAGE> 2
selected by the Manager, which may include brokers or dealers affiliated with
the Manager. The Manager shall use its best efforts to seek to execute portfolio
transactions at prices which are advantageous to the Fund and at commission
rates which are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transactions, brokers or
dealers may be selected who also provide brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
to the Fund and/or the other accounts over which the Manager or its affiliates
exercise investment discretion. The Manager is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Fund which is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction if the Manager determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities
which the Manager and its affiliates have with respect to accounts over which
they exercise investment discretion. The Directors of the Fund shall
periodically review the commissions paid by the Fund to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits to the Fund.
The Manager shall, in acting hereunder, be an independent contractor. The
Manager shall not be an agent of the Fund.
2. It is understood that the Directors, officers and shareholders of the
Fund are may be or become interested in the Manager as directors, officers or
otherwise and that directors, officers and stockholders of the Manager are or
may be or become similarly interested in the Fund, and that the Manager may be
or become interested in the Fund as a shareholder or otherwise.
3. The Manager will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Manager shall receive a monthly
management fee, payable monthly as soon as practicable after the last day of
each month. The Fee will be computed as follows:
(a) Fee Rate: The Annual Fee Rate shall be 1.00%.
(b) Fee. One-twelfth of the Fee Rate shall be applied to the average of the
net assets of the Fund (computed in the manner set forth in the Fund's Articles
of Incorporation, other organizational document or prospectus) determined as of
the close of business on each business day throughout the month. The resulting
dollar amount comprises the Fee.
(c) In the case of termination of this Contract during any month, the fee
for that month shall be reduced proportionately on the basis of the number of
weeks during which it is in effect for that month. The Fee Rate will be computed
on the basis of and applied to net assets averaged over that month ending on the
last business day on which this Contract is in effect.
4. It is understood that the Fund will pay all its expenses other than
those expressly stated to be payable by the Manager hereunder, which expenses
payable by the Fund shall include, without limitation, (i) interest and taxes;
(ii) brokerage commissions and other costs in connection with the purchase or
sale of securities and other investment instruments; (iii) fees and expenses of
the Fund's Directors other than those who are "interested persons" of the Fund
or the Manager; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Fund and the Fund's shares for
distribution under state and federal securities laws; (vii) expenses of printing
and mailing reports and notices and proxy material to shareholders of the Fund;
(viii) all other expenses incidental to holding meetings of the Fund's
shareholders, including proxy solicitations therefor; (ix) 50% of insurance
premiums for Fidelity and other coverage; (x) its proportionate share of
association membership dues; (xi) expenses of typesetting for printing
Prospectuses and supplements thereto; (xii) expenses of printing and mailing
Prospectuses and supplements; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or proceedings
to which the Fund is a party and the legal obligation which the Fund may have to
indemnify the Fund's Directors and officers with respect thereto.
5. The services of the Manager to the Fund are not to be deemed exclusive,
the Manager being free to render services to others and engage in other
activities, provided, however, that such other services and
2
<PAGE> 3
activities do not, during the term of this Contract, interfere, in a material
manner, with the Manager's ability to meet all of its obligations with respect
to rendering services to the Fund hereunder. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Manager, the Manager shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security or
other investment instrument.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until , 1996,
and indefinitely thereafter, but only so long as the continuance after such date
shall be specifically approved at least annually by vote of the Directors of the
Fund or by vote of a majority of the outstanding voting securities of the Fund.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Fund.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract must
have been approved by the vote of a majority of those Directors of the Fund who
are not parties to the Contract or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any penalty, by
action of its Board of Directors or with respect to the Fund by vote of a
majority of the outstanding voting securities of the Fund. This Contract shall
terminate automatically in the event of its assignment.
7. This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities."
"assignment", "investment adviser" and "interested persons," when used herein,
shall have the respective meanings specified in the 1940 Act, as now in effect
or as hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
8. The Manager consents and grants to the Fund a non-exclusive license for
the use by the Fund of the word "Fidelity" in the name of the Fund. Such consent
is subject to revocation by the Manager in its discretion, and the Manager may
require the Fund to cease using the word "Fidelity" in its name, if the Manager
or an affiliate is not employed as an investment adviser to the Fund. The Fund
acknowledges that as between it and the Manager, the Manager controls the use of
the name of the Fund insofar as it contains the identifying word "Fidelity" and
the Manager and its affiliates may use the identifying word "Fidelity" in any
other connection and for any purpose, without limitation.
3
<PAGE> 4
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and their
respective seals to be hereunto affixed, all as of the date written above.
FIDELITY ADVISOR KOREA FUND, INC.
By: /s/ GARY L. FRENCH
-----------------------------------
Gary L. French
FIDELITY MANAGEMENT & RESEARCH COMPANY
By: /s/ GARY L. FRENCH
-----------------------------------
Gary L. French
4
<PAGE> 1
2(G)(2)
INVESTMENT ADVISORY AGREEMENT
AMONG
FIDELITY INTERNATIONAL INVESTMENT ADVISORS
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY ADVISORY KOREA FUND, INC.
AGREEMENT made this 25th day of October, 1994 by and among Fidelity
Management & Research Company, a Massachusetts corporation with principal
offices at 82 Devonshire Street, Boston, Massachusetts (hereinafter called the
"Manager"); Fidelity International Investment Advisors, a Bermuda company with
principal offices at Pembroke Hall, Pembroke, Bermuda (hereinafter called the
"Advisor"); and Fidelity Advisor Korea Fund, Inc., a Maryland corporation which
may issue one or more series of shares (hereinafter called the "Fund").
WHEREAS the Fund and the Manager have entered into an Investment Management
Agreement on behalf of the Fund, pursuant to which the Manager is to act as
investment manager of the Fund; and
WHEREAS the Advisor and its subsidiaries and other affiliated persons have
personnel in various locations throughout the world and have been formed in part
for the purpose of researching and compiling information and recommendations
with respect to the economies of various countries, and securities of issuers
located in such countries, and providing investment advisory services in
connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Fund, the Manager and the Advisor agree as follows:
1. DUTIES: The Manager hereby appoints the Advisor to perform the following
services with respect to all of the investment of the Fund. The Advisor shall
pay the salaries and fees of all personnel of the Advisor performing services
for the Fund relating to research, statistical and investment activities.
(A) INVESTMENT DISCRETION: The Advisor shall, subject to the
supervision of the Manager, manage the investment of the Fund in accordance
with the investment objective, policies and limitations provided in the
Fund's Prospectus or other governing instruments, as amended from time to
time, the Investment Company Act of 1940 (the "1940 Act") and rules
thereunder, as amended from time to time, and such other limitations as the
Directors or the Manager may impose with respect to the Fund by notice to
the Advisor. The Advisor is authorized to make investment decisions on
behalf of the Fund by notice to the Advisor. The Advisor is authorized to
make investment decisions on behalf of the Fund with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities or other instruments through such
broker-dealers as the Advisor may select. The Advisor is also authorized to
provide additional investment management services to the Fund, including
but not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money, or lending securities on behalf of the Fund. All investment
management and any other activities of the Advisor shall at all times be
subject to the control and direction of the Manager and the Fund's Board of
Directors.
SUBSIDIARIES AND AFFILIATES: The Advisor may perform any or all of the
services contemplated by this Agreement directly or through such of its
subsidiaries or other affiliated persons as the Advisor shall determine;
provided, however, that performance of such services through such
subsidiaries or other affiliated persons shall have been approved by the
Fund to the extent required pursuant to the 1940 Act and rules thereunder.
2. INFORMATION TO BE PROVIDED TO THE FUND AND THE MANAGER: The Advisor
shall furnish such reports, evaluations, information or analyses to the Fund and
the Manager as the Fund's Board of Directors or the Manager may reasonably
request from time to time, or as the Advisor may deem to be desirable.
<PAGE> 2
3. BROKERAGE: In connection with the services provided under paragraph 1(a)
of this Agreement, the Advisor shall place all orders for the purchase and sale
of Fund securities for the Fund's account with brokers or dealers selected by
the Advisor, which may include brokers or dealers affiliated with the Manager or
Advisor. The Advisor shall use its best efforts to seek to execute Fund
transactions at prices which are advantageous to the Fund and at commission
rates which are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
to the Fund and/or to the other accounts over which the Advisor or Manager
exercise investment discretion. The Advisor is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a Fund transaction for the Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities
which the Advisor has with respect to accounts over which it exercises
investment discretion. The Directors of the Fund shall periodically review the
commissions paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits to
the Fund.
4. COMPENSATION: The Manager shall compensate the Advisor on the following
basis for the services to be furnished hereunder. For services provided under
this Agreement, the Manager agrees to pay the Advisor a monthly Investment
Advisory Fee. The Investment Advisory Fee shall be equal to 60% of the monthly
management fee rate (including performance adjustments, if any) that the Fund is
obligated to pay the Manager under its Investment Management Agreement with the
Manager. If in any fiscal year the aggregate expenses of the Fund exceed any
applicable expense limitation imposed by any state or federal securities laws or
regulations, and the Manager waives all or a portion of its management fee or
reimburses the Fund for expenses to the extent required to satisfy such
limitation, the Investment Advisory Fee paid to the Advisor will be reduced by
60% of the amount of such waivers or reimbursements multiplied by the fraction
equal to the net assets of the Fund as to which the Advisor shall have provided
the investment management services divided by the net assets of the Fund for
that month. If the Advisor reduces its fees to reflect such waivers or
reimbursements and the Manager subsequently recovers all or any portion of such
waivers and reimbursements, then the Advisor shall be entitled to receive from
the Manager a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Manager required by such limitations are in
excess of the Manager's management fee, the Investment Advisory Fee paid to the
Advisor will be reduced to zero for that month, but in no event shall the
Advisor be required to reimburse the Manager for all or a portion of such excess
reimbursements.
5. EXPENSES: It is understood that the Fund will pay all of its expenses
other than those expressly stated to be payable by the Advisor hereunder or by
the Manager under the Investment Management Agreement with the Fund, which
expenses payable by the Fund shall include, without limitation, (i) interest and
taxes; (ii) brokerage commissions and other costs in connection with the
purchase or sale of securities and other investment instruments; (iii) fees and
expenses of the Fund's Directors other than those who are "interested persons"
of the Fund, the Manager or the Advisor; (iv) legal and audit expenses; (v)
custodian, registrar and transfer agent fees and expenses; (vi) fees and
expenses related to the registration and qualification of the Fund and the
Fund's shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy material to
shareholders of the Fund; (viii) all other expenses incidental to holding
meetings of the Fund's shareholders, including proxy solicitations therefor;
(ix) 50% of insurance premiums for fidelity and other coverage; (x) its
association membership dues; (xi) expenses of typesetting for printing
Prospectuses and supplements thereto; (xii) expenses of printing and mailing
Prospectuses and supplements thereto; and (xiii) such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Fund is a party and the legal obligation which the
Fund may have to indemnify the Fund's Directors and officers with respect
thereto.
6. INTERESTED PERSONS: It is understood that Directors, officers, and
shareholders of the Fund are or may be or become interested in the Manager or
the Advisor as directors, officers or otherwise and that directors,
2
<PAGE> 3
officers and stockholders of the Manager or the Advisor are or may be or become
similarly interested in the Fund, and that the Manager or the Advisor may be or
become interested in the Fund as a shareholder or otherwise.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS: The services of the Advisor to
the Manager are not to be deemed to be exclusive, the Advisor being free to
render services to others and engage in other activities, provided, however,
that such other services and activities do not, during the term of this
Agreement, interfere, in a material manner, with the Advisor's ability to meet
all of its obligations hereunder. The Advisor shall for all purposes be an
independent contractor and not an agent or employee of the Manager or the Fund.
8. STANDARD OF CARE: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Advisor, the Advisor shall not be subject to liability to the
Manager, the Fund or to any shareholder of the Fund for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security or other
investment instrument.
9. DURATION AND TERMINATION OF AGREEMENT; AMENDMENTS:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until October 25,
1996 and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Fund's Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund.
(b) This Agreement may be modified by mutual consent of the Manager,
the Advisor and the Fund, such consent on the part of the Fund to be
authorized by vote of a majority of the outstanding voting securities of
the Fund.
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Directors of the Fund who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either the Manager, the Advisor or the Fund may, at any time on
sixty (60) days' prior written notice to the other parties, terminate this
Agreement, without payment of any penalty, by action of its Board of
Directors, or with respect to the Fund by vote of a majority of its
outstanding voting securities. This Agreement shall terminate automatically
in the event of its assignment.
10. GOVERNING LAW: This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons," when
used herein, shall have the respective meanings specified in the 1940 Act as now
in effect or as hereafter amended.
3
<PAGE> 4
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly authorized,
and their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY INTERNATIONAL INVESTMENT
ADVISORS
BY: /s/ DAVID J. SAUL
-----------------------------
Title
FIDELITY MANAGEMENT & RESEARCH
COMPANY
BY: /s/ GARY L. FRENCH
-----------------------------
Title
FIDELITY ADVISOR KOREA FUND, INC.
BY: /s/ GARY L. FRENCH
-----------------------------
Title
4
<PAGE> 1
2(G)(3)
SUB-INVESTMENT ADVISORY AGREEMENT
AMONG
FIDELITY INTERNATIONAL INVESTMENT ADVISORS
AND
FIDELITY INVESTMENT JAPAN LIMITED
AND
FIDELITY ADVISOR KOREA FUND, INC.
AGREEMENT made this 25th day of October, 1994 by and among Fidelity
International Investment Advisors, a Bermuda company with principal offices at
Pembroke Hall, Pembroke, Bermuda (hereinafter called "Advisor"). Fidelity
Investments Japan Limited, a corporation organized under the laws of Japan with
principal offices at 19th Floor, Shiroyama JT Mori Building. 4-3-11.C.
Toranomon, Minato, Tokyo 105. Japan, (hereinafter called the "Sub-Advisor") and
Fidelity Advisor Korea Fund. Inc., a Maryland corporation (the "Fund").
WHEREAS the Fund and the Advisor have entered into an Investment Advisory
Agreement pursuant to which the Advisor is to act as the investment adviser of
the Fund; and
WHEREAS the Sub-Advisor has personnel in Japan and has been formed in part
for the purpose of researching and compiling information and recommendations
with respect to the economies of various countries, including Japan, and
securities of issuers located in such countries and providing investment
advisory services in connection therewith;
NOW. THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Fund, the Advisor and The Sub-Advisor agree as
follows:
1. DUTIES: The Advisor may, in its discretion, appoint the Sub-Advisor to
perform one or more of the following services with respect to all or a portion
of the investments of the Fund. The services and the portion of the investments
of the Fund to be advised or managed by the Sub-Advisor shall be as agreed upon
from time to time by the Advisor and The Sub-Advisor, provided, however, that
until further notice from the Advisor to the Sub-Advisor, the Advisor hereby
appoints the Sub-Advisor, and the Sub-Advisor hereby accepts appointment, to
manage all the investments of the Fund in accordance with subparagraph 1(b) of
this Agreement. The Sub-Advisor shall pay the salaries and fees of all personnel
of the Sub-Advisor performing services for the Fund relating to research,
statistical and investment activities.
(A) INVESTMENT ADVICE: If and to the extent requested by the Advisor,
the Sub-Advisor shall provide investment advice to the Fund and the Advisor
with respect to all or a portion of the investments of the Fund, and in
connection with such advice shall furnish the Fund and the Advisor such
factual information, research reports and investment recommendations as the
Advisor may reasonably require. Such information may include written and
oral reports and analyses.
(B) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the Advisor,
manage all or a portion of the investments of the Fund in accordance with
the investment objective, policies and limitations provided in the Fund's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder as
amended from time to time, and such other limitations as the Fund or
Advisor may impose by notice to the Sub-Advisor. With respect to the
portion of the investments of the Fund under its management, the
Sub-Advisor is authorized to make investment decisions on behalf of the
Fund with regard to any stock, bond, other security or investment
instruments, and to place order for the purchase and sale of such
securities or investment instrument through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor is also authorized to provide
additional investment management services to the Fund, including but not
limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money, or lending
<PAGE> 2
securities on behalf of the Fund. All investment management and any other
activities of the Sub-Advisor shall at all times be subject to the control
and direction of the Advisor and the Fund's Board of Directors.
(C) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or
all of the services contemplated by this Agreement directly or through such
of its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Fund to the extent required pursuant to the 1940 Act and rules
thereunder.
2. INFORMATION TO BE PROVIDED TO THE FUND AND THE ADVISOR: The Sub-Advisor
shall furnish such reports, evaluations, information or analyses to the Fund and
the Advisor as the Fund's Board of Directors or the Advisor may reasonably
request from time to time, or as the Sub-Advisor may deem to be desirable.
3. BROKERAGE: In connection with the services provided under paragraph (b)
of paragraph 1 of this Agreement, the Sub-Advisor shall place all orders for the
purchase and sale of portfolio securities for the Fund's account with brokers or
dealers selected by the Sub-Advisor, which may include brokers or dealers
affiliated with the Advisor or Sub-Advisor. The Sub-Advisor shall use its best
efforts to seek to execute portfolio transactions at prices which are
advantageous to the Fund and at commission rates which are reasonable in
relation to the benefits received. In selecting brokers or dealers qualified to
execute a particular transaction, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Fund and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment discretion.
The Sub-Advisor is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction in the
Sub-Advisor determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer. This determination may be viewed in terms of
either that particular transaction or the overall responsibilities, which the
Sub-Advisor has with respect to accounts over which it exercises investment
discretion. The Directors of the Fund shall periodically review the commissions
paid by the Fund to determine if the commissions paid over representative
periods of time were reasonable in relation to the benefits to the Fund.
4. COMPENSATION: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(A) INVESTMENT ADVISORY FEE: For services provided under subparagraph
(a) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal
to: (i) 30% of the monthly management fee rate (including performance
adjustments, if any) that the Advisor receives under its Investment
Advisory Agreement, multiplied by (ii) the fraction equal to the net assets
of the Fund as to which the Sub-Advisor shall have provided investment
advice divided by the net assets of the Fund for that month.
(B) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees to
pay the Sub-Advisor a monthly Investment Management Fee. The Investment
Management Fee shall be equal to: (1) 50% of the monthly management fee
rate (including performance adjustments, if any) that the Advisor receives
under its Investment Advisory Agreement with the Fidelity Management &
Research Company and the Fund, multiplied by: (ii) the fraction equal to
the net assets of the Fund as to which the Sub-Advisor shall have provided
investment management Services divided by the net assets of the Fund for
that month. If in any fiscal year the aggregate expenses of the Fund exceed
any applicable expense limitation imposed by any state or federal
securities laws or regulations, and the Advisor waives all or a portion of
its management fee or reimburses the Fund for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers and
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered.
2
<PAGE> 3
To the extent that waivers and reimbursements by the Advisor required by
such limitations are in excess of the Advisor's management fee, the
Investment Management Fee paid to the Sub-Advisor will be reduced to zero
for that month, but in no event shall the Sub-Advisor be required to
reimburse the Advisor for all or a portion of such exceed reimbursements.
(C) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1 for
the same portion of the investments of the Fund for the same period, the
fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. EXPENSES: It is understood that the Fund will pay all of its expenses
other than those expressly stated to be payable by the Sub-Advisor hereunder or
by the Advisor under the Investment Advisory Agreement, or by the Fund's
Investment Manager under the Investment Management Agreement with the Fund,
which expenses payable by the Fund shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in connection
with the purchase or sale of securities and other investment instruments; (iii)
fees and expenses of the Fund's Directors other than those who are "interested
persons" of the Fund, the Sub-Advisor or the Advisor; (iv) legal and audit
expenses; (v) custodian, registrar and transfer agent fees and expenses; (vi)
fees and expenses related to the registration and qualification of the Fund's
shares for distribution under state and federal securities laws; (vii) expenses
of printing and mailing reports and notices and proxy material to shareholders
of the Fund; (viii) all other expenses incidental to holding meetings of the
Fund's shareholders, including proxy solicitations therefor; (ix) 50% of
insurance premiums for fidelity and other coverage; (x) its proportionate share
of association membership dues; (xi) expenses of typesetting for printing
Prospectuses and supplements thereto; (xii) expenses of printing and mailing
Prospectuses and supplements thereto; and (xiii) such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Fund is a party and the legal obligations which the
Fund may have to indemnify its Directors and officers with respect thereto.
6. INTERESTED PERSONS: It is understood that Directors, officers, and
shareholders of the Fund are or may be or become interested in the Advisor or
the Sub-Advisor as directors, officers or otherwise and that directors, officers
and stockholders of the Advisor or the Sub-Advisor are or may be or become
similarly interested in the Fund, and that the Advisor or the Sub-Advisor may be
or become interested in the Fund as a shareholder or otherwise.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS: The services of the Sub-Advisor
to the Advisor are not to be deemed to be exclusive, the Sub-Advisor being free
to render services to others and engage in other activities, provided, however,
that such other services and activities do not, during the term of this
Agreement, interfere, in a material manner, with the Sub-Advisor's ability to
meet all of its obligations hereunder. The Sub-Advisor shall for all purposes be
an independent contractor and not an agent or employee of the Advisor or the
Fund.
8. STANDARD OF CARE: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Advisor, the Sub-Advisor shall not be subject to liability to
the Advisor, the Fund or to any shareholder for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security or other
investment instrument.
9. DURATION AND TERMINATION OF AGREEMENT; AMENDMENTS:
(a) Subject to prior termination as provided in subparagraph (d) of
this paragraph 9, this Agreement shall continue in force until ,
1996 and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Fund's Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund.
(b) This Agreement may be modified by mutual consent of the Advisor,
the Sub-Advisor and the Fund, such consent on the part of the Fund to be
authorized by vote of a majority of the outstanding voting securities of
the Fund.
3
<PAGE> 4
(c) In addition to the requirements of subparagraphs (a) and (b) of
this paragraph 9, the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Directors of the Fund who are not parties to this Agreement or interested
persons or any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor or the Fund may, at any time
on sixty (60) days prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Directors, or with respect to the Fund by vote of a majority of its
outstanding voting securities. This Agreement shall terminate automatically
in the event of its assignment.
10. GOVERNING LAW: This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," "investment advisor," and
"interested persons," when used herein, shall have the respective meanings
specified in the 1940 Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly authorized,
and their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY INTERNATIONAL INVESTMENT
ADVISORS
BY: /s/ DAVID J. SAUL
----------------------------------
Title
FIDELITY INVESTMENTS JAPAN LIMITED
BY: /s/
----------------------------------
Title
FIDELITY ADVISOR KOREA FUND, INC.
BY: /s/ GARY L. FRENCH
----------------------------------
Title
4
<PAGE> 1
CUSTODIAN AGREEMENT
Dated as of: May 31, 1995
Between
Fidelity Advisor Korea Fund, Inc.
and
The Chase Manhattan Bank, N.A.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
ARTICLE Page
- ------- ----
<S> <C>
I. APPOINTMENT OF CUSTODIAN 1
II. POWERS AND DUTIES OF CUSTODIAN 1
2.01 Safekeeping.................................................................. 1
2.02 Manner of Holding Securities................................................. 1
2.03 Security Purchases........................................................... 2
2.04 Exchanges of Securities...................................................... 2
2.05 Sales of Securities.......................................................... 2
2.06 Depositary Receipts.......................................................... 3
2.07 Exercise of Rights; Tender Offers............................................ 3
2.08 Stock Dividends, Rights, Etc................................................. 3
2.09 Options...................................................................... 4
2.10 Futures Contracts............................................................ 4
2.11 Borrowing.................................................................... 4
2.12 Interest Bearing Deposits.................................................... 4
2.13 Foreign Exchange Transactions................................................ 5
2.14 Securities Loans............................................................. 5
2.15 Collections.................................................................. 6
2.16 Dividends, Distributions and Redemptions..................................... 6
2.17 Proceeds from Shares Sold.................................................... 6
2.18 Proxies, Notices, Etc........................................................ 6
2.19 Bills and Other Disbursements................................................ 7
2.20 Nondiscretionary Functions................................................... 7
2.21 Bank Accounts................................................................ 7
2.22 Deposit of Fund Assets in Securities Systems................................. 8
2.23 Other Transfers.............................................................. 9
2.24 Establishment of Segregated Account.......................................... 9
2.25 Custodian's Books and Records................................................ 9
2.26 Opinion of Fund's Independent Certified Public
Accountants......................................................... 10
2.27 Reports of Independent Certified Public Accountants.......................... 10
2.28 Overdraft Facility........................................................... 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
III. PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS 11
3.01 Proper Instructions and Special Instructions.................................11
3.02 Authorized Persons...........................................................11
3.03 Persons Having Access to Assets of the Fund.................................11
3.04 Actions of the Custodian Based on Proper Instructions and
Special Instructions......................................................12
IV. SUBCUSTODIANS 12
4.01 Domestic Subcustodians.......................................................12
4.02 Foreign Subcustodians and Interim Subcustodians..............................12
4.03 Special Subcustodians........................................................13
4.04 Termination of a Subcustodian................................................14
4.05 Certification Regarding Foreign Subcustodians................................14
V. STANDARD OF CARE; INDEMNIFICATION 14
5.01 Standard of Care.............................................................14
5.02 Liability of Custodian for Actions of Other Persons..........................15
5.03 Indemnification..............................................................16
5.04 Investment Limitations.......................................................17
5.05 Fund's Right to Proceed......................................................17
VI. COMPENSATION 17
VII. TERMINATION 17
7.01 Termination of Agreement.....................................................17
VIII. DEFINED TERMS 18
IX. MISCELLANEOUS 19
9.01 Execution of Documents, Etc..................................................19
9.02 Representative Capacity; Nonrecourse Obligations.............................19
9.03 Several Obligations of the Fund..............................................19
9.04 Representations and Warranties...............................................20
9.05 Entire Agreement.............................................................20
9.06 Waivers and Amendments.......................................................20
9.07 Interpretation...............................................................20
9.08 Captions.....................................................................21
9.09 Governing Law................................................................21
9.10 Notices......................................................................21
9.11 Assignment...................................................................21
9.12 Counterparts.................................................................21
9.13 Confidentiality; Survival of Obligations.....................................21
</TABLE>
<PAGE> 4
APPENDICES
Appendix "A" - List of Foreign Subcustodians
and Special Subcustodians
Appendix "B" - Procedures Relating to
Custodian's Security Interest
<PAGE> 5
CUSTODIAN AGREEMENT
AGREEMENT made as of the 31st day of May, 1995 between Fidelity Advisor
Korea Fund, Inc. (the "Fund") and The Chase Manhattan Bank, N.A. (the
"Custodian").
W I T N E S S E T H
WHEREAS, the Fund desires to appoint the Custodian as custodian in
accordance with the provisions of the Investment Company Act of 1940 (the "1940
Act") and the rules and regulations thereunder, under the terms and conditions
set forth in this Agreement, and the Custodian has agreed so to act as
custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
The Fund hereby employs and appoints the Custodian as a custodian, subject
to the terms and provisions of this Agreement. The Fund shall deliver to the
Custodian, or shall cause to be delivered to the Custodian, cash, securities
and other assets owned by the Fund from time to time during the term of this
Agreement.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties
set forth in this Article II. Pursuant to and in accordance with Article IV
hereof, the Custodian may appoint one or more Subcustodians (as hereinafter
defined) to exercise the powers and perform the duties of the Custodian set
forth in this Article II and references to the Custodian in this Article II
shall include any Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall keep safely all cash,
securities and other assets of the Fund delivered to the Custodian, and the
Custodian shall, from time to time, accept delivery of cash, securities and
other assets for safekeeping.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of the Fund either:
(i) by physical possession of the share certificates or other instruments
representing such securities in registered or bearer form; or (ii) in
book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of Section 2.22 below.
(b) The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund or a nominee of either of them,
unless specifically directed by Proper Instructions to hold such registered
securities in so-called street name; provided that, in any event, all such
securities and other assets shall be held in an account of the Custodian
containing only assets of the Fund, or only assets held by Custodian as a
fiduciary or custodian for customers; and provided further, that the records of
the Custodian shall indicate at all times the Fund or other customer for which
such securities and other assets are held in such account and the respective
interests therein.
Section 2.03. Security Purchases. Upon receipt of Proper Instructions
(as hereinafter defined), the Custodian shall pay for and receive securities
purchased for the account of the Fund, provided that payment shall be made by
the Custodian only upon receipt of the securities: (a) by the Custodian; (b)
by a clearing corporation of a national securities exchange of which the
Custodian is a member; or (c) by a Securities System. Notwithstanding the
foregoing, upon receipt of Proper Instructions: (i) in the case of a
repurchase agreement, the Custodian may release funds to a Securities System
prior to the
<PAGE> 6
receipt of advice from the Securities System that the securities underlying such
repurchase agreement have been transferred by book-entry into the Account (as
hereinafter defined) maintained with such Securities System by the Custodian,
provided that the Custodian's instructions to the Securities system require that
the Securities System may make payment of such funds to the other party to the
repurchase agreement only upon transfer by book-entry of the securities
underlying the repurchase agreement into the Account; (ii) in the case of time
deposits, call account deposits, currency deposits, and other deposits, foreign
exchange transactions, futures contracts or options, pursuant to Sections 2.09,
2.10, 2.12 and 2.13 hereof, the Custodian may make payment therefor before
receipt of an advice or confirmation evidencing said deposit or entry into such
transaction; (iii) in the case of the purchase of securities, the settlement of
which occurs outside of the United States of America, the Custodian may make
payment therefor and receive delivery of such securities in accordance with
local custom and practice generally accepted by Institutional Clients (as
hereinafter defined) in the country in which the settlement occurs, but in all
events subject to the standard of care set forth in Article V hereof; and (iv)
in the case of the purchase of securities in which, in accordance with standard
industry custom and practice generally accepted by Institutional Clients with
respect to such securities, the receipt of such securities and the payment
therefor take place in different countries, the Custodian may receive delivery
of such securities and make payment therefor in accordance with standard
industry custom and practice for such securities generally accepted by
Institutional Clients, but in all events subject to the standard of care set
forth in Article V hereof. For purposes of this Agreement, an "Institutional
Client" shall mean a major commercial bank, corporation, insurance company, or
substantially similar institution, which, as a substantial part of its business
operations, purchases or sells securities and makes use of custodial services.
Section 2.04. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the
account of the Fund for other securities in connection with any reorganization,
recapitalization, split-up of shares, change of par value, conversion or other
event relating to the securities or the issuer of such securities, and shall
deposit any such securities in accordance with the terms of any reorganization
or protective plan. The Custodian shall, without receiving Proper
Instructions: surrender securities in temporary form for definitive
securities; surrender securities for transfer into the name of the Custodian,
the Fund or a nominee of either of them, as permitted by Section 2.02(b); and
surrender securities for a different number of certificates or instruments
representing the same number of shares or same principal amount of
indebtedness, provided that the securities to be issued will be delivered to
the Custodian or a nominee of the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions,
the Custodian shall make delivery of securities which have been sold for the
account of the Fund, but only against payment therefor in the form of: (a)
cash, certified check, bank cashier's check, bank credit, or bank wire
transfer; (b) credit to the account of the custodian with a clearing
corporation of a national securities exchange of which the Custodian is a
member; or (c) credit to the Account of the Custodian with a Securities System,
in accordance with the provisions of Section 2.22 hereof. Notwithstanding the
foregoing: (i) in the case of the sale of securities, the settlement of which
occurs outside of the United States of America, such securities shall be
delivered and paid for in accordance with local custom and practice generally
accepted by Institutional Clients in the country in which the settlement
occurs, but in all events subject to the standard of care set forth in Article
V hereof; (ii) in the case of the sale of securities in which, in accordance
with standard industry custom and practice generally accepted by Institutional
Clients with respect to such securities, the delivery of such securities and
receipt of payment therefor take place in different countries, the Custodian
may deliver such securities and receive payment therefor in accordance with
standard industry custom and practice for such securities generally accepted by
Institutional Clients, but in all events subject to the standard of care set
forth in Article V hereof; and (iii) in the case of securities held in physical
form, such securities shall be delivered and paid for in accordance with
"street delivery custom" to a broker or its clearing agent, against delivery to
the Custodian of a receipt for such securities, provided that the Custodian
shall have taken reasonable steps to ensure prompt collection of the payment
for, or the return of, such securities by the broker or its clearing agent, and
provided further that the Custodian shall not be responsible for the selection
of or the failure or inability to perform of such broker or its clearing agent.
2
<PAGE> 7
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions,
the Custodian shall surrender securities to the depositary used for such
securities by an issuer of American Depositary Receipts or Global Depositary
Receipts (hereinafter referred to, collectively, as "ADRs"), against a written
receipt therefor adequately describing such securities and written evidence
satisfactory to the Custodian that the depositary has acknowledged receipt of
instructions to issue ADRs with respect to such securities in the name of the
Custodian or a nominee of the Custodian, for delivery to the Custodian at such
place as the Custodian may from time to time designate. Upon receipt of Proper
Instructions, the Custodian shall surrender ADRs to the issuer thereof, against
a written receipt therefor adequately describing the ADRs surrendered and
written evidence satisfactory to the Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall: (a) deliver warrants, puts, calls, rights
or similar securities to the issuer or trustee thereof, or to the agent of such
issuer or trustee, for the purpose of exercise or sale, provided that the new
securities, cash or other assets, if any, acquired as a result of such actions
are to be delivered to the Custodian; and (b) deposit securities upon
invitations for tenders thereof, provided that the consideration for such
securities is to be paid or delivered to the Custodian, or the tendered
securities are to be returned to the Custodian. Notwithstanding any provision
of this Agreement to the contrary, the Custodian shall take all necessary
action, unless otherwise directed to the contrary in Proper Instructions, to
comply with the terms of all mandatory or compulsory exchanges, calls, tenders,
redemptions, or similar rights of security ownership, and shall promptly notify
the Fund of such action in writing by facsimile transmission or in such other
manner as the Fund and Custodian may agree in writing.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive
and collect all stock dividends, rights and other items of like nature and,
upon receipt of Proper Instructions, take action with respect to the same as
directed in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian, any
registered broker-dealer and, if necessary, the Fund relating to compliance
with the rules of the Options Clearing Corporation or of any registered
national securities exchange or similar organization(s), the Custodian shall:
(a) receive and retain confirmations or other documents, if any, evidencing the
purchase or writing of an option on a security or securities index by the Fund;
(b) deposit and maintain in a segregated account, securities (either physically
or by book-entry in a Securities System), cash or other assets; and (c) pay,
release and/or transfer such securities, cash or other assets in accordance
with notices or other communications evidencing the expiration, termination or
exercise of such options furnished by the Options Clearing Corporation, the
securities or options exchange on which such options are traded, or such other
organization as may be responsible for handling such option transactions. The
Fund and the broker-dealer shall be responsible for the sufficiency of assets
held in any segregated account established in compliance with applicable margin
maintenance requirements and the performance of other terms of any option
contract.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions, or
pursuant to the provisions of any futures margin procedural agreement among the
Fund, the Custodian and any futures commission merchant (a "Procedural
Agreement"), the Custodian shall: (a) receive and retain confirmations, if
any, evidencing the purchase or sale of a futures contract or an option on a
futures contract by the Fund; (b) deposit and maintain in a segregated account,
cash, securities and other assets designated as initial, maintenance or
variation "margin" deposits intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold or any options on
futures contracts written by the Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the rules of the Commodity Futures
Trading Commission and/or any commodity exchange or contract market (such as
the Chicago Board of Trade), or any similar organization(s), regarding such
margin deposits; and (c) release assets from and/or transfer assets into such
margin accounts only in accordance with any such Procedural Agreements. The
Fund and such futures commission merchant shall be responsible for the
sufficiency of assets held in the segregated account in
3
<PAGE> 8
compliance with applicable margin maintenance requirements and the performance
of any futures contract or option on a futures contract in accordance with its
terms.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of the Fund to lenders or their agents, or
otherwise establish a segregated account as agreed to by the Fund and the
Custodian, as collateral for borrowings effected by the Fund, provided that
such borrowed money is payable by the lender (a) to or upon the Custodian's
order, as Custodian for the Fund, and (b) concurrently with delivery of such
securities.
Section 2.12. Interest Bearing Deposits.
Upon receipt of Proper Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to
collectively, as "Interest Bearing Deposits") for the account of the Fund, the
Custodian shall purchase such Interest Bearing Deposits in the name of the Fund
with such banks or trust companies (including the Custodian, any Subcustodian or
any subsidiary or affiliate of the Custodian) (hereinafter referred to as
"Banking Institutions") and in such amounts as the Fund may direct pursuant to
Proper Instructions. Such Interest Bearing Deposits may be denominated in U.S.
Dollars or other currencies, as the Fund may determine and direct pursuant to
Proper Instructions. The Custodian shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount and currency of
each such Interest Bearing Bank Deposit, the accepting Banking Institution and
all other appropriate details, and shall retain such forms of advice or receipt
evidencing such account, if any, as may be forwarded to the Custodian by the
Banking Institution. The responsibilities of the Custodian to the Fund for
Interest Bearing Deposits accepted on the Custodian's books in the United States
shall be that of a U.S. bank for a similar deposit. With respect to Interest
Bearing Deposits other than those accepted on the Custodian's books, (a) the
Custodian shall be responsible for the collection of income as set forth in
Section 2.15 and the transmission of cash and instructions to and from such
accounts; and (b) the Custodian shall have no duty with respect to the selection
of the Banking Institution or, so long as the Custodian acts in accordance with
Proper Instructions, for the failure of such Banking Institution to pay upon
demand. Upon receipt of Proper Instructions, the Custodian shall take such
reasonable actions as the Fund deems necessary or appropriate to cause each such
Interest Bearing Deposit Account to be insured to the maximum extent possible by
all applicable deposit insurers including, without limitation, the Federal
Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions
(a) Foreign Exchange Transactions Other than as Principal. Upon
receipt of Proper Instructions, the Custodian shall settle foreign exchange
contracts or options to purchase and sell foreign currencies for spot and future
delivery on behalf of and for the account of the Fund with such currency brokers
or Banking Institutions as the Fund may determine and direct pursuant to Proper
Instructions. The Custodian shall be responsible for the transmission of cash
and instructions to and from the currency broker or Banking Institution with
which the contract or option is made, the safekeeping of all certificates and
other documents and agreements evidencing or relating to such foreign exchange
transactions and the maintenance of proper records as set forth in Section
2.25. The Custodian shall have no duty with respect to the selection of the
currency brokers or Banking Institutions with which the Fund deals or, so long
as the Custodian acts in accordance with Proper Instructions, for the failure
of such brokers or Banking Institutions to comply with the terms of any
contract or option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall
not be obligated to enter into foreign exchange transactions as principal.
However, if the Custodian has made available to the Fund its services as a
principal in foreign exchange transactions, upon receipt of Proper Instructions,
the Custodian shall enter into foreign exchange contracts or options to purchase
and sell foreign currencies for spot and future delivery on behalf of and for
the account of the Fund with the Custodian as principal. The Custodian shall be
responsible for the selection of the currency brokers or Banking Institutions
and the failure of such currency brokers or Banking Institutions to comply with
the terms of any contract or option.
4
<PAGE> 9
(c) Payments. Notwithstanding anything to the contrary contained
herein, upon receipt of Proper Instructions the Custodian may, in connection
with a foreign exchange contract, make free outgoing payments of cash in the
form of U.S. Dollars or foreign currency prior to receipt of confirmation of
such foreign exchange contract or confirmation that the countervalue currency
completing such contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions, the
Custodian shall, in connection with loans of securities by the Fund, deliver
securities of the Fund to the borrower thereof prior to receipt of the
collateral, if any, for such borrowing; provided that, in cases of loans of
securities secured by cash collateral, the Custodian's instructions to the
Securities System shall require that the Securities System deliver the
securities of the Fund to the borrower thereof only upon receipt of the
collateral for such borrowing.
Section 2.15. Collections. The Custodian shall, and shall cause any
Subcustodian to: (a) collect amounts due and payable to the Fund with respect
to portfolio securities and other assets of the Fund; (b) promptly credit to
the account of the Fund all income and other payments relating to portfolio
securities and other assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and the Fund; (c) promptly endorse and deliver any instruments
required to effect such collections; (d) promptly execute ownership and other
certificates and affidavits for all federal, state and foreign tax purposes in
connection with receipt of income, capital gains or other payments with respect
to portfolio securities and other assets of the Fund, or in connection with the
purchase, sale or transfer of such securities or other assets; and (e) promptly
file any certificates or other affidavits for the refund or reclaim of foreign
taxes paid, and promptly notify the Fund of any changes to law, interpretative
rulings or procedures regarding such reclaims, and otherwise use all available
measures customarily used to minimize the imposition of foreign taxes at
source, and promptly inform the Fund of alternative means of minimizing such
taxes of which the Custodian shall become aware (or with the exercise of
reasonable care should have become aware); provided, however, that with respect
to Fund securities registered in so-called street name, the Custodian shall use
its best efforts to collect amounts due and payable to the Fund. The Custodian
shall promptly notify the Fund in writing by facsimile transmission or in such
other manner as the Fund and Custodian may agree in writing if any amount
payable with respect to portfolio securities or other assets of the Fund is not
received by the Custodian when due. The Custodian shall not be responsible for
the collection of amounts due and payable with respect to portfolio securities
or other assets that are in default.
Section 2.16. Dividends, Distributions and Redemptions. The Custodian
shall promptly release funds or securities: (a) upon receipt of Proper
Instructions, to one or more Distribution Accounts designated by the Fund in
such Proper Instructions; or (b) upon receipt of Special Instructions, as
otherwise directed by the Fund, for the purpose of the payment of dividends or
other distributions to shareholders of the Fund, and payment to shareholders
who have requested repurchase or redemption of their shares of the Fund
(collectively, the "Shares"). For purposes of this Agreement, a "Distribution
Account" shall mean an account established at a Banking Institution designated
by the Fund in Special Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive
funds representing cash payments received for Shares issued or sold from time to
time by the Fund, and shall promptly credit such funds to the account(s) of the
applicable Fund). The Custodian shall promptly notify the Fund of Custodian's
receipt of cash in payment for Shares issued by the Fund by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing. Upon receipt of Proper Instructions, the Custodian shall: (a) deliver
all federal funds received by the Custodian in payment for Shares in payment for
such investments as may be set forth in such Proper Instructions and at a time
agreed upon between the Custodian and the Fund; and (b) make federal funds
available to the Fund as of specified times agreed upon from time to time by the
Fund and the Custodian, in the amount of checks received in payment for Shares
which are deposited to the accounts of the Fund.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to the
Fund, in the most expeditious manner practicable, all forms of proxies, all
notices of meetings, and any other notices or announcements affecting or
relating to securities owned by the Fund that are received by the Custodian,
5
<PAGE> 10
any Subcustodian, or any nominee of either of them, and, upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Proper
Instructions, neither the Custodian nor any Subcustodian or nominee shall vote
upon any such securities, or execute any proxy to vote thereon, or give any
consent or take any other action with respect thereto.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of the Fund.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend to
all nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with securities or other
assets of the Fund held by the Custodian, except as otherwise directed from
time to time pursuant to Proper Instructions.
Section 2.21. Bank Accounts
(a) Accounts with the Custodian and any Subcustodians. The Custodian shall
open and operate a bank account or accounts (hereinafter referred to
collectively, as "Bank Accounts") on the books of the Custodian or any
Subcustodian provided that such account(s) shall be in the name of the
Custodian or a nominee of the Custodian, for the account of the Fund, and shall
be subject only to the draft or order of the Custodian; provided however, that
such Bank Accounts in countries other than the United States may be held in an
account of the Custodian containing only assets held by the Custodian as a
fiduciary or custodian for customers, and provided further, that the records of
the Custodian shall indicate at all times the Fund or other customer for which
such securities and other assets are held in such account and the respective
interests therein. Such Bank Accounts may be denominated in either U.S.
Dollars or other currencies. The responsibilities of the Custodian to the Fund
for deposits accepted on the Custodian's books in the United States shall be
that of a U.S. bank for a similar deposit. The responsibilities of the
Custodian to the Fund for deposits accepted on any Subcustodian's books shall
be governed by the provisions of Section 5.02.
(b) Accounts With Other Banking Institutions. The Custodian may open and
operate Bank Accounts on behalf of the Fund, in the name of the Custodian or a
nominee of the Custodian, at a Banking Institution other than the Custodian or
any Subcustodian, provided that such account(s) shall be in the name of the
Custodian or a nominee of the Custodian, for the account of the Fund, and shall
be subject only to the draft or order of the Custodian; provided however, that
such Bank Accounts may be held in an account of the Custodian containing only
assets held by the Custodian as a fiduciary or custodian for customers, and
provided further, that the records of the Custodian shall indicate at all times
the Fund or other customer for which such securities and other assets are held
in such account and the respective interests therein. Such Bank Accounts may be
denominated in either U.S. Dollars or other currencies. Subject to the
provisions of Section 5.01(a), the Custodian shall be responsible for the
selection of the Banking Institution and for the failure of such Banking
Institution to pay according to the terms of the deposit.
(c) Deposit Insurance. Upon receipt of Proper Instructions, the Custodian
shall take such reasonable actions as the Fund deems necessary or appropriate
to cause each deposit account established by the Custodian pursuant to this
Section 2.21 to be insured to the maximum extent possible by all applicable
deposit insurers including, without limitation, the Federal Deposit Insurance
Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by the Fund in:
(a) The Depository Trust Company; (b) the Participants Trust Company; (c) any
book-entry system as provided in (i) Subpart O of Treasury Circular No. 300, 31
CFR 306.115, (ii) Subpart B of Treasury Circular Public Debt Series No. 27-76,
31 CFR 350.2, or (iii) the book-entry regulations of federal agencies
substantially in the form of 31 CFR 306.115; or (d) any other domestic clearing
agency registered with the Securities and Exchange Commission ("SEC") under
Section 17A of the Securities Exchange Act of 1934 (or as may otherwise be
authorized by the Securities and Exchange Commission to serve in the capacity
of depository or
6
<PAGE> 11
clearing agent for the securities or other assets of investment companies) which
acts as a securities depository and the use of which the Fund has previously
approved by Special Instructions (as hereinafter defined) (each of the foregoing
being referred to in this Agreement as a "Securities System"). Use of a
Securities System shall be in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following provisions:
(A) The Custodian may deposit and/or maintain securities held hereunder in
a Securities System, provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System which Account
shall not contain any assets of the Custodian other than assets held as a
fiduciary, custodian, or otherwise for customers and shall be so designated on
the books and records of the Securities System.
(B) The Securities System shall be obligated to comply with the
Custodian's directions with respect to the securities held in such Account and
shall not be entitled to a lien against the assets in such Account for
extensions of credit to the Custodian other than for payment of the purchase
price of such assets.
(C) The Fund hereby designates the Custodian as the party in whose name
any securities deposited by the Custodian in the account are to be registered.
(D) The books and records of the Custodian shall at all times identify
those securities belonging to the Fund which are maintained in a Securities
System.
(E) The Custodian shall pay for securities purchased for the account of
the Fund only upon (w) receipt of advice from the Securities System that such
securities have been transferred to the Account of the Custodian, and (x) the
making of an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund only upon (y) receipt of advice from the
Securities System that payment for such securities has been transferred to the
Account of the Custodian, and (z) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System relating to transfers of
securities for the account of the Fund shall identify the Fund and shall be
maintained for the Fund by the Custodian. The Custodian shall deliver to the
Fund on the next succeeding business day daily transaction reports which shall
include each day's transactions in the Securities System for the account of the
Fund. Such transaction reports shall be delivered to the Fund or any agent
designated by the Fund pursuant to Proper Instructions, by computer or in such
other manner as the Fund and Custodian may agree in writing.
(F) The Custodian shall, if requested by the Fund pursuant to Proper
Instructions, provide the Fund with all reports obtained by the Custodian or
any Subcustodian with respect to a Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Securities System.
(G) Upon receipt of Special Instructions, the Custodian shall terminate
the use of any Securities System (except the federal book-entry system) on
behalf of any Fund as promptly as practicable and shall take all actions
reasonably practicable to safeguard the securities of the Fund maintained with
such Securities System.
Section 2.23. Other Transfers.
(a) Upon receipt of Proper Instructions, the Custodian shall transfer to
or receive from a third party that has been appointed to serve as an additional
custodian of the Fund (an "Additional Custodian") securities, cash and other
assets of the Fund in accordance with such Proper Instructions. Each
Additional Custodian shall be identified as such on Appendix A, as the same may
be amended from time to time in accordance with the provisions of Section
9.06(a).
(b) Upon receipt of Special Instructions, the Custodian shall make such
other dispositions of securities, funds or other property of the Fund in a
manner or for purposes other than as expressly set forth in this Agreement,
provided that the Special Instructions relating to such disposition shall
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<PAGE> 12
include a statement of the purpose for which the delivery is to be made, the
amount of funds and/or securities to be delivered, and the name of the person
or persons to whom delivery is to be made, and shall otherwise comply with the
provisions of Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its books a
segregated account or accounts for and on behalf of the Fund, into which
account or accounts may be transferred cash and/or securities or other assets
of the Fund, including securities maintained by the Custodian in a Securities
System pursuant to Section 2.22 hereof, said account or accounts to be
maintained: (a) for the purposes set forth in Sections 2.09, 2.10 and 2.11
hereof; (b) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any subsequent release
or releases of the SEC relating to the maintenance of segregated accounts by
registered investment companies; or (c) for such other purposes as set forth,
from time to time, in Special Instructions.
Section 2.25. Custodian's Books and Records. The Custodian shall provide
any assistance reasonably requested by the Fund in the preparation of reports to
Fund shareholders and others, audits of accounts, and other ministerial matters
of like nature. The Custodian shall maintain complete and accurate records with
respect to securities and other assets held for the accounts of the Fund as
required by the rules and regulations of the SEC applicable to investment
companies registered under the 1940 Act, including: (a) journals or other
records of original entry containing a detailed and itemized daily record of all
receipts and deliveries of securities (including certificate and transaction
identification numbers, if any), and all receipts and disbursements of cash; (b)
ledgers or other records reflecting (i) securities in transfer, (ii) securities
in physical possession, (iii) securities borrowed, loaned or collateralizing
obligations of the Fund, (iv) monies borrowed and monies loaned (together with a
record of the collateral therefor and substitutions of such collateral), (v)
dividends and interest received, (vi) the amount of tax withheld by any person
in respect of any collection made by the Custodian or any Subcustodian, and
(vii) the amount of reclaims or refunds for foreign taxes paid; and (c) canceled
checks and bank records related thereto. The Custodian shall keep such other
books and records of the Fund as the Fund shall reasonably request. All such
books and records maintained by the Custodian shall be maintained in a form
acceptable to the Fund and in compliance with the rules and regulations of the
SEC, including, but not limited to, books and records required to be maintained
by Section 31(a) of the 1940 Act and the rules and regulations from time to time
adopted thereunder. All books and records maintained by the Custodian pursuant
to this Agreement shall at all times be the property of the Fund and shall be
available during normal business hours for inspection and use by the Fund and
its agents, including, without limitation, its independent certified public
accountants. Notwithstanding the preceding sentence, the Fund shall not take any
actions or cause the Custodian to take any actions which would cause, either
directly or indirectly, the Custodian to violate any applicable laws,
regulations or orders.
Section 2.26. Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as the Fund may request to
obtain from year to year favorable opinions from the Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder in connection with the preparation of the Fund's Form N-2 and the
Fund's Form N-SAR or other periodic reports to the SEC and with respect to any
other requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At
the request of the Fund, the Custodian shall deliver to the Fund a written
report prepared by the Custodian's independent certified public accountants
with respect to the services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system, internal
accounting control and procedures for safeguarding cash, securities and other
assets, including cash, securities and other assets deposited and/or maintained
in a Securities System or with a Subcustodian. Such report shall be of
sufficient scope and in sufficient detail as may reasonably be required by the
Fund and as may reasonably be obtained by the Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds on
behalf of the Fund for which there would be, at the close of business on the
date of such payment or transfer, insufficient funds held by the Custodian on
behalf of the Fund, the Custodian may, in its discretion, provide an
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overdraft (an "Overdraft") to the Fund on behalf of the Fund, in an amount
sufficient to allow the completion of such payment. Any Overdraft provided
hereunder: (a) shall be payable on the next Business Day, unless otherwise
agreed by the Fund and the Custodian; and (b) shall accrue interest from the
date of the Overdraft to the date of payment in full by the Fund on behalf of
the Fund at a rate agreed upon in writing, from time to time, by the Custodian
and the Fund. The Custodian and the Fund acknowledge that the purpose of such
Overdrafts is to temporarily finance the purchase or sale of securities for
prompt delivery in accordance with the terms hereof, or to meet emergency
expenses not reasonably foreseeable by the Fund. The Custodian shall promptly
notify the Fund in writing (an "Overdraft Notice") of any Overdraft by facsimile
transmission or in such other manner as the Fund and the Custodian may agree in
writing. At the request of the Custodian, the Fund, shall pledge,
assign and grant to the Custodian a security interest in certain specified
securities of the Fund, as security for Overdrafts provided to the Fund, under
the terms and conditions set forth in Appendix "B" attached hereto.
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<PAGE> 14
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions"
shall mean: (i) a tested telex, a written (including, without limitation,
facsimile transmission) request, direction, instruction or certification signed
or initialed by or on behalf of the Fund by one or more Authorized Persons (as
hereinafter defined); (ii) a telephonic or other oral communication by one or
more Authorized Persons; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) by or on behalf of the Fund by one or more Authorized
Persons; provided, however, that communications of the types described in
clauses (ii) and (iii) above purporting to be given by an Authorized Person
shall be considered Proper Instructions only if the Custodian reasonably
believes such communications to have been given by an Authorized Person with
respect to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the Fund by tested telex or in writing in
the manner set forth in clause (i) above, but the lack of such confirmation
shall in no way affect any action taken by the Custodian in reliance upon such
oral instructions prior to the Custodian's receipt of such confirmation. The
Fund and the Custodian are hereby authorized to record any and all telephonic
or other oral instructions communicated to the Custodian. Proper Instructions
may relate to specific transactions or to types or classes of transactions, and
may be in the form of standing instructions.
(b) Special Instructions. As used herein, the term "Special Instructions"
shall mean Proper Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the Fund or any other person designated
by the Treasurer of the Fund in writing, which countersignature or confirmation
shall be (i) included on the same instrument containing the Proper Instructions
or on a separate instrument relating thereto, and (ii) delivered by hand, by
facsimile transmission, or in such other manner as the Fund and the Custodian
agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian at
the address and/or telephone, telecopy or telex number agreed upon from time to
time by the Custodian and the Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the Fund shall
deliver to the Custodian, duly certified as appropriate by a Treasurer or
Assistant Treasurer of the Fund, a certificate setting forth: (a) the names,
titles, signatures and scope of authority of all persons authorized to give
Proper Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Fund (collectively, the "Authorized
Persons" and individually, an "Authorized Person"); and (b) the names, titles
and signatures of those persons authorized to issue Special Instructions. Such
certificate may be accepted and relied upon by the Custodian as conclusive
evidence of the facts set forth therein and shall be considered to be in full
force and effect until delivery to the Custodian of a similar certificate to
the contrary. Upon delivery of a certificate which deletes the name(s) of a
person previously authorized to give Proper Instructions or to issue Special
Instructions, such persons shall no longer be considered an Authorized Person
or authorized to issue Special Instructions.
Section 3.03. Persons Having Access to Assets of the Fund .
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Trustee, officer, employee or agent of the Fund shall have
physical access to the assets of the Fund held by the Custodian nor shall the
Custodian deliver any assets of the Fund for delivery to an account of such
person; provided, however, that nothing in this Section 3.03 shall prohibit (a)
any Authorized Person from giving Proper Instructions, or any person authorized
to issue Special Instructions from issuing Special Instructions, so long as
such action does not result in delivery of or access to assets of any Fund
prohibited by this Section 3.03; or (b) the Fund's independent certified public
accountants from examining or reviewing the assets of the Fund held by the
Custodian. The Fund shall deliver to the Custodian a written certificate
identifying such Authorized Persons, Trustees, officers, employees and agents
of the Fund.
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Section 3.04. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts in
accordance with (a) Proper Instructions or Special Instructions, as the case
may be, and (b) the terms of this Agreement, the Custodian shall not be
responsible for the title, validity or genuineness of any property, or evidence
of title thereof, received by it or delivered by it pursuant to this Agreement.
ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Interim Subcustodians and Special Subcustodians to act
on behalf of the Fund. (For purposes of this Agreement, all duly appointed
Domestic Subcustodians, Foreign Subcustodians, Interim Subcustodians, and
Special Subcustodians are hereinafter referred to collectively, as
"Subcustodians.")
Section 4.01. Domestic Subcustodians. The Custodian may, at any time and
from time to time, appoint any bank as defined in Section 2(a)(5) of the 1940
Act meeting the requirements of a custodian under Section 17(f) of the 1940 Act
and the rules and regulations thereunder, to act as a subcustodian for purposes
of holding cash, securities and other assets of the Fund and performing other
functions of the Custodian within the United States (a "Domestic
Subcustodian"); provided, that, the Custodian shall notify the Fund in writing
of the identity and qualifications of any proposed Domestic Subcustodian at
least thirty (30) days prior to appointment of such Domestic Subcustodian, and
the Fund may, in its sole discretion, by written notice to the Custodian
executed by an Authorized Person disapprove of the appointment of such Domestic
Subcustodian. If following notice by the Custodian to the Fund regarding
appointment of a Domestic Subcustodian and the expiration of thirty (30) days
after the date of such notice, the Fund shall have failed to notify the
Custodian of its disapproval thereof, the Custodian may, in its discretion,
appoint such proposed Domestic Subcustodian as its subcustodian.
Section 4.02. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from time
to time, appoint: (i) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the 1940
Act and the rules and regulations thereunder or by order of the Securities and
Exchange Commission exempted therefrom, or (ii) any bank as defined in Section
2(a)(5) of the 1940 Act meeting the requirements of a custodian under Section
17(f) of the 1940 Act and the rules and regulations thereunder to act on behalf
of the Fund as a subcustodian for purposes of holding cash, securities and other
assets of the Fund and performing other functions of the Custodian in countries
other than the United States of America (a "Foreign Subcustodian"); provided,
that, prior to the appointment of any Foreign Subcustodian, the Custodian shall
have obtained written confirmation of the approval of the Board of Directors or
other governing body or entity of the Fund (which approval may be withheld in
the sole discretion of such Board of Directors or other governing body or
entity) with respect to (i) the identity and qualifications of any proposed
Foreign Subcustodian, (ii) the country or countries in which, and the securities
depositories or clearing agencies, if any, through which, any proposed Foreign
Subcustodian is authorized to hold securities and other assets of the Fund, and
(iii) the form and terms of the subcustodian agreement to be entered into
between such proposed Foreign Subcustodian and the Custodian. Each such duly
approved Foreign Subcustodian and the countries where and the securities
depositories and clearing agencies through which they may hold securities and
other assets of the Fund shall be listed on Appendix "A" attached hereto, as it
may be amended, from time to time, in accordance with the provisions of Section
9.06(a) hereof. The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be held in a
country in which no Foreign Subcustodian is authorized to act, in order that
there shall be sufficient time for the Custodian to effect the appropriate
arrangements with a proposed foreign subcustodian, including obtaining approval
as provided in this Section 4.02(a). The Custodian shall not amend any
subcustodian agreement entered into with a Foreign Subcustodian, or agree to
change or permit any changes thereunder, or waive any rights under such
agreement, which materially affect the Fund's rights or the Foreign
Subcustodian's obligations or duties to the Fund under such agreement, except
upon prior approval pursuant to Special Instructions.
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(b) Interim Subcustodians. Notwithstanding the foregoing, in the event
that the Fund shall invest in a security or other asset to be held in a country
in which no Foreign Subcustodian is authorized to act, the Custodian shall
promptly notify the Fund in writing by facsimile transmission or in such other
manner as the Fund and Custodian shall agree in writing of the unavailability
of an approved Foreign Subcustodian in such country; and the Custodian shall,
upon receipt of Special Instructions, appoint any Person designated by the Fund
in such Special Instructions to hold such security or other asset. (Any Person
appointed as a subcustodian pursuant to this Section 4.02(b) is hereinafter
referred to as an "Interim Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of the Fund, appoint one or more
banks, trust companies or other entities designated in such Special Instructions
to act as a subcustodian for purposes of: (i) effecting third-party repurchase
transactions with banks, brokers, dealers or other entities through the use of a
common custodian or subcustodian; (ii) establishing a joint trading account for
the Fund and other registered management investment companies for which Fidelity
Management & Research Company serves as investment adviser, through which the
Fund and such other investment companies shall collectively participate in
certain repurchase transactions; (iii) providing depository and clearing agency
services with respect to certain variable rate demand note securities; and (iv)
effecting any other transactions designated by the Fund in Special
Instructions. (Each such designated subcustodian is hereinafter referred to as a
"Special Subcustodian.") Each such duly appointed Special Subcustodian shall
be listed on Appendix "A" attached hereto, as it may be amended from time to
time in accordance with the provisions of Section 9.06(a) hereof. In
connection with the appointment of any Special Subcustodian, the Custodian
shall enter into a subcustodian agreement with the Special Subcustodian in form
and substance approved by the Fund, provided that such agreement shall in all
events comply with the provisions of the 1940 Act and the rules and regulations
thereunder and the terms and provisions of this Agreement. The Custodian
shall not amend any subcustodian agreement entered into with a Special
Subcustodian, or agree to change or permit any changes thereunder, or waive
any rights under such agreement, except upon prior approval pursuant to Special
Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i)
cause each Domestic Subcustodian and Foreign Subcustodian to, and (ii) use its
best efforts to cause each Interim Subcustodian and Special Subcustodian to,
perform all of its obligations in accordance with the terms and conditions of
the subcustodian agreement between the Custodian and such Subcustodian. In the
event that the Custodian is unable to cause such Subcustodian to fully perform
its obligations thereunder, the Custodian shall forthwith, upon the receipt of
Special Instructions, terminate such Subcustodian with respect to the Fund and,
if necessary or desirable, appoint a replacement Subcustodian in accordance
with the provisions of Section 4.01 or Section 4.02, as the case may be. In
addition to the foregoing, the Custodian (A) may, at any time in its
discretion, upon written notification to the Fund, terminate any Domestic
Subcustodian, Foreign Subcustodian or Interim Subcustodian, and (B) shall, upon
receipt of Special Instructions, terminate any Subcustodian with respect to the
Fund, in accordance with the termination provisions under the applicable
subcustodian agreement.
Section 4.05. Certification Regarding Foreign Subcustodians. Upon
request of the Fund, the Custodian shall deliver to the Fund a certificate
stating: (i) the identity of each Foreign Subcustodian then acting on behalf
of the Custodian; (ii) the countries in which and the securities depositories
and clearing agents through which each such Foreign Subcustodian is then
holding cash, securities and other assets of any Fund; and (iii) such other
information as may be requested by the Fund to ensure compliance with Rule
17f-5 under the 1940 Act.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations under this
Agreement, and shall be liable to the Fund for all
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<PAGE> 17
loss, damage and expense suffered or incurred by the Fund resulting from the
failure of the Custodian to exercise such reasonable care and diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, securities depository or securities
system utilized by any such Subcustodian, or any nominee of the Custodian or any
Subcustodian (individually, a "Person") is prevented, forbidden or delayed from
performing, or omits to perform, any act or thing which this Agreement provides
shall be performed or omitted to be performed, by reason of: (i) any provision
of any present or future law or regulation or order of the United States of
America, or any state thereof, or of any foreign country, or political
subdivision thereof or of any court of competent jurisdiction; or (ii) any act
of God or war or other similar circumstance beyond the control of the Custodian,
unless, in each case, such delay or nonperformance is caused by (A) the
negligence, misfeasance or misconduct of the applicable Person, or (B) a
malfunction or failure of equipment operated or utilized by the applicable
Person other than a malfunction or failure beyond such Person's control and
which could not reasonably be anticipated and/or prevented by such Person.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to the Fund, (i) the Custodian
shall, (ii) the Custodian shall cause any applicable Domestic Subcustodian or
Foreign Subcustodian to, and (iii) the Custodian shall use its best efforts to
cause any applicable Interim Subcustodian or Special Subcustodian to, use all
commercially reasonable efforts and take all reasonable steps under the
circumstances to mitigate the effects of such event and to avoid continuing
harm to the Fund.
(d) Advice of Counsel. The Custodian shall be entitled to receive and act
upon advice of counsel on all matters. The Custodian shall be without liability
for any action reasonably taken or omitted in good faith pursuant to the advice
of (i) counsel for the Fund, or (ii) at the expense of the Custodian, such
other counsel as the Fund and the Custodian may agree upon; provided, however,
with respect to the performance of any action or omission of any action upon
such advice, the Custodian shall be required to conform to the standard of care
set forth in Section 5.01(a).
(e) Expenses of the Fund. In addition to the liability of the Custodian
under this Article V, the Custodian shall be liable to the Fund for all
reasonable costs and expenses incurred by the Fund in connection with any claim
by the Fund against the Custodian arising from the obligations of the Custodian
hereunder including, without limitation, all reasonable attorneys' fees and
expenses incurred by the Fund in asserting any such claim, and all expenses
incurred by the Fund in connection with any investigations, lawsuits or
proceedings relating to such claim; provided, that the Fund has recovered from
the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by the Fund, insofar as such
loss, damage or expense arises from the performance of the Custodian's duties
hereunder by reason of the Custodian's reliance upon records that were
maintained for the Fund by entities other than the Custodian prior to the
Custodian's employment hereunder.
Section 5.02. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians and Foreign Subcustodians. The Custodian shall
be liable for the actions or omissions of any Domestic Subcustodian or any
Foreign Subcustodian to the same extent as if such action or omission were
performed by the Custodian itself. In the event of any loss, damage or expense
suffered or incurred by the Fund caused by or resulting from the actions or
omissions of any Domestic Subcustodian or Foreign Subcustodian for which the
Custodian would otherwise be liable, the Custodian shall promptly reimburse the
Fund in the amount of any such loss, damage or expense.
(b) Interim Subcustodians. Notwithstanding the provisions of Section 5.01
to the contrary, the Custodian shall not be liable to the Fund for any loss,
damage
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or expense suffered or incurred by the Fund resulting from the actions or
omissions of an Interim Subcustodian unless such loss, damage or expense is
caused by, or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, in the event of any such loss, damage or expense,
the Custodian shall take all reasonable steps to enforce such rights as it may
have against such Interim Subcustodian to protect the interests of the Fund.
(c) Special Subcustodians and Additional Custodians. Notwithstanding the
provisions of Section 5.01 to the contrary and except as otherwise provided in
any subcustodian or custodian agreement to which the Custodian, the Fund and
any Special Subcustodian or Additional Custodian are parties, the Custodian
shall not be liable to the Fund for any loss, damage or expense suffered or
incurred by the Fund resulting from the actions or omissions of a Special
Subcustodian or Additional Custodian, unless such loss, damage or expense is
caused by, or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, that in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such rights
as it may have against any Special Subcustodian or Additional Custodian to
protect the interests of the Fund.
(d) Securities Systems. Notwithstanding the provisions of Section 5.01 to
the contrary, the Custodian shall not be liable to the Fund for any loss,
damage or expense suffered or incurred by the Fund resulting from the use by
the Custodian of a Securities System, unless such loss, damage or expense is
caused by, or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, that in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such rights
as it may have against the Securities System to protect the interests of the
Fund.
(e) Reimbursement of Expenses. The Fund agrees to reimburse the Custodian
for all reasonable out-of-pocket expenses incurred by the Custodian in
connection with the fulfillment of its obligations under this Section 5.02;
provided, however, that such reimbursement shall not apply to expenses
occasioned by or resulting from the negligence, misfeasance or misconduct of
the Custodian.
Section 5.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set forth in
this Agreement, the Fund agrees to indemnify and hold harmless the Custodian
and its nominees from all loss, damage and expense (including reasonable
attorneys' fees) suffered or incurred by the Custodian or its nominee caused by
or arising from actions taken by the Custodian in the performance of its duties
and obligations under this Agreement; provided, however, that such indemnity
shall not apply to loss, damage and expense occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian or its nominee. In
addition, the Fund agrees to indemnify any Person against any liability
incurred by reason of taxes assessed to such Person, or other loss, damage or
expenses incurred by such Person, resulting from the fact that securities and
other property of the Fund are registered in the name of such Person; provided,
however, that in no event shall such indemnification be applicable to income,
franchise or similar taxes which may be imposed or assessed against any Person.
(b) Notice of Litigation, Right to Prosecute, Etc. The Fund shall not be
liable for indemnification under this Section 5.03 unless a Person shall have
promptly notified the Fund in writing of the commencement of any litigation or
proceeding brought against such Person in respect of which indemnity may be
sought under this Section 5.03. With respect to claims in such litigation or
proceedings for which indemnity by the Fund may be sought and subject to
applicable law and the ruling of any court of competent jurisdiction, the Fund
shall be entitled to participate in any such litigation or proceeding and, after
written notice from the Fund to any Person, the Fund may assume the defense of
such litigation or proceeding with counsel of its choice at its own expense in
respect of that portion of the litigation for which the Fund may be subject to
an indemnification obligation; provided, however, a Person shall be entitled to
participate in (but not control) at its own cost and expense, the defense of any
such litigation or proceeding if the Fund has not acknowledged in writing its
obligation to indemnify the Person with respect to such litigation or
proceeding. If the Fund is not permitted to participate or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, such Person shall reasonably prosecute such litigation
or proceeding. A Person shall not consent to the entry of any judgment or enter
into any settlement in any such litigation or proceeding without providing the
Fund with adequate notice of any such settlement or judgment, and
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without the Fund's prior written consent. All Persons shall submit written
evidence to the Fund with respect to any cost or expense for which they are
seeking indemnification in such form and detail as the Fund may reasonably
request.
Section 5.04. Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its
duties generally, and more particularly in connection with the purchase, sale
or exchange of securities made by or for the Fund, the Custodian shall not be
liable to the Fund and the Fund agrees to indemnify the Custodian and its
nominees, for any loss, damage or expense suffered or incurred by the Custodian
and its nominees arising out of any violation of any investment or other
limitation to which the Fund is subject.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, the Fund shall have, at its election upon reasonable
notice to the Custodian, the right to enforce, to the extent permitted by any
applicable agreement and applicable law, the Custodian's rights against any
Subcustodian, Securities System, or other Person for loss, damage or expense
caused the Fund by such Subcustodian, Securities System, or other Person, and
shall be entitled to enforce the rights of the Custodian with respect to any
claim against such Subcustodian, Securities System or other Person, which the
Custodian may have as a consequence of any such loss, damage or expense, if and
to the extent that the Fund has not been made whole for any such loss or
damage. If the Custodian makes the Fund whole for any such loss or damage, the
Custodian shall retain the ability to enforce its rights directly against such
Subcustodian, Securities System or other Person. Upon the Fund's election to
enforce any rights of the Custodian under this Section 5.05, the Fund shall
reasonably prosecute all actions and proceedings directly relating to the
rights of the Custodian in respect of the loss, damage or expense incurred by
the Fund; provided that, so long as the Fund has acknowledged in writing its
obligation to indemnify the Custodian under Section 5.03 hereof with respect to
such claim, the Fund shall retain the right to settle, compromise and/or
terminate any action or proceeding in respect of the loss, damage or expense
incurred by the Fund without the Custodian's consent and provided further, that
if the Fund has not made an acknowledgment of its obligation to indemnify, the
Fund shall not settle, compromise or terminate any such action or proceeding
without the written consent of the Custodian, which consent shall not be
unreasonably withheld or delayed. The Custodian agrees to cooperate with the
Fund and take all actions reasonably requested by the Fund in connection with
the Fund's enforcement of any rights of the Custodian. The Fund agrees to
reimburse the Custodian for all reasonable out-of-pocket expenses incurred by
the Custodian in connection with the fulfillment of its obligations under this
Section 5.05 provided, however, that such reimbursement shall not apply to
expenses occasioned by or resulting from the negligence, misfeasance or
misconduct of the Custodian.
ARTICLE VI
COMPENSATION
The Fund shall compensate the Custodian in an amount, and at such times,
as may be agreed upon in writing, from time to time, by the Custodian and the
Fund.
ARTICLE VII
TERMINATION
Section 7.01. Termination of Agreement. This Agreement shall continue in
full force and effect until the first to occur of: (a) termination by the
Custodian by an instrument in writing delivered or mailed to the Fund, such
termination to take effect not sooner than ninety (90) days after the date of
such delivery; (b) termination by the Fund by an instrument in writing
delivered or mailed to the Custodian, such termination to take effect not
sooner than thirty (30) days after the date of such delivery; or (c)
termination by the Fund by written notice delivered to the Custodian, based
upon the Fund's determination that there is a reasonable basis to conclude that
the Custodian is insolvent or that the financial condition of the Custodian is
deteriorating in any material respect, in which case termination shall take
effect upon the Custodian's receipt of such notice or at such later time as the
Fund shall designate. In the event of termination pursuant to this Section
7.01, the Fund shall make payment of all accrued fees and unreimbursed expenses
within a reasonable time following termination and delivery of a statement to
the Fund setting forth such fees and expenses. The Fund shall identify in any
notice of termination a successor custodian to which the cash, securities and
other assets of the Fund
15
<PAGE> 20
shall, upon termination of this Agreement, be delivered. In the event that no
written notice designating a successor custodian shall have been delivered to
the Custodian on or before the date when termination of this Agreement shall
become effective, the Custodian may deliver to a bank or trust company doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities and other assets held by the
Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Agreement. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Agreement. In the
event that securities and other assets remain in the possession of the Custodian
after the date of termination hereof owing to failure of the Fund to appoint a
successor custodian, the Custodian shall be entitled to compensation for its
services in accordance with the fee schedule most recently in effect, for such
period as the Custodian retains possession of such securities and other assets,
and the provisions of this Agreement relating to the duties and obligations of
the Custodian and the Fund shall remain in full force and effect. In the event
of the appointment of a successor custodian, it is agreed that the cash,
securities and other property owned by the Fund and held by the Custodian, any
Subcustodian or nominee shall be delivered to the successor custodian; and the
Custodian agrees to cooperate with the Fund in the execution of documents and
performance of other actions necessary or desirable in order to substitute the
successor custodian for the Custodian under this Agreement.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Account ..................... 2.22
ADRs ........................ 2.06
Additional Custodian ........ 2.23(a)
Authorized Person(s) ........ 3.02
Banking Institution ......... 2.12(a)
Business Day ................ Appendix "B"
Bank Accounts ............... 2.21
Distribution Account ........ 2.16
Domestic Subcustodian ....... 4.01
Foreign Subcustodian ........ 4.02(a)
Institutional Client ........ 2.03
Interim Subcustodian ........ 4.02(b)
Overdraft ................... 2.28
Overdraft Notice ............ 2.28
Person ...................... 5.01(b)
Procedural Agreement ........ 2.10
Proper Instructions ......... 3.01(a)
SEC ......................... 2.22
Securities System ........... 2.22
Shares ...................... 2.16
Special Instructions ........ 3.01(b)
Special Subcustodian ........ 4.03
Subcustodian ................ Article IV
1940 Act .................... Preamble
</TABLE>
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
16
<PAGE> 21
(a) Actions by the Fund. Upon request, the Fund shall execute and deliver
to the Custodian such proxies, powers of attorney or other instruments as may
be reasonable and necessary or desirable in connection with the performance by
the Custodian or any Subcustodian of their respective obligations under this
Agreement or any applicable subcustodian agreement, provided that the exercise
by the Custodian or any Subcustodian of any such rights shall in all events be
in compliance with the terms of this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to the Fund or to such other parties as the
Fund may designate in such Proper Instructions, all such documents, instruments
or agreements as may be reasonable and necessary or desirable in order to
effectuate any of the transactions contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations. A COPY
OF THE ARTICLES OF INCORPORATION OF THE FUND IS ON FILE WITH THE SECRETARY OF
THE STATE OF THE FUND'S FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS
AGREEMENT IS NOT EXECUTED ON BEHALF OF THE DIRECTORS OF THE FUND AS INDIVIDUALS,
AND THE OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE DIRECTORS,
OFFICERS, SHAREHOLDERS OR PARTNERS OF THE FUND INDIVIDUALLY, BUT ARE BINDING
ONLY UPON THE ASSETS AND PROPERTY OF THE FUND. THE CUSTODIAN AGREES THAT NO
SHAREHOLDER, DIRECTOR, OFFICER OR PARTNER OF THE FUND MAY BE HELD PERSONALLY
LIABLE OR RESPONSIBLE FOR ANY OBLIGATIONS OF THE FUND ARISING OUT OF THIS
AGREEMENT.
Section 9.03. Several Obligations of the Fund. WITH RESPECT TO ANY
OBLIGATIONS OF THE FUND ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, THE OBLIGATIONS ARISING UNDER SECTIONS 2.28, 5.03, 5.05 and ARTICLE
VI HEREOF, THE CUSTODIAN SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY
OBLIGATION SOLELY TO THE ASSETS AND PROPERTY OF THE FUND TO WHICH SUCH
OBLIGATION RELATES AS THOUGH THE FUND HAD SEPARATELY CONTRACTED WITH THE
CUSTODIAN BY SEPARATE WRITTEN INSTRUMENT.
Section 9.04. Representations and Warranties.
(a) Representations and Warranties of the Fund. The Fund hereby
represents and warrants that each of the following shall be true, correct and
complete at all times during the term of this Agreement: (i) the Fund is duly
organized under the laws of its jurisdiction of organization and is registered
as an closed-end management investment company under the 1940 Act; and (ii) the
execution, delivery and performance by the Fund of this Agreement are (w)
within its power, (x) have been duly authorized by all necessary action, and
(y) will not (A) contribute to or result in a breach of or default under or
conflict with any existing law, order, regulation or ruling of any governmental
or regulatory agency or authority, or (B) violate any provision of the Fund's
corporate charter or other organizational document, or bylaws, or any amendment
thereof or any provision of its most recent Prospectus.
(b) Representations and Warranties of the Custodian. The Custodian hereby
represents and warrants that each of the following shall be true, correct and
complete at all times during the term of this Agreement: (i) the Custodian is
duly organized under the laws of its jurisdiction of organization and qualifies
to act as a custodian to closed-end management investment companies under the
provisions of the 1940 Act; and (ii) the execution, delivery and performance by
the Custodian of this Agreement are (w) within its power, (x) have been duly
authorized by all necessary action, and (y) will not (A) contribute to or
result in a breach of or default under or conflict with any existing law,
order, regulation or ruling of any governmental or regulatory agency or
authority, or (B) violate any provision of the Custodian's corporate charter,
or other organizational document, or bylaws, or any amendment thereof.
Section 9.05. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and accordingly, supersedes as of the effective date of this
Agreement any custodian agreement heretofore in effect between the Fund and the
Custodian.
17
<PAGE> 22
Section 9.06. Waivers and Amendments. No provision of this Agreement may
be waived, amended or terminated except by a statement in writing signed by the
party against which enforcement of such waiver, amendment or termination is
sought; provided, however: (a) Appendix "A" listing Foreign Subcustodians,
Special Subcustodians and Additional Custodians approved by the Fund may be
amended from time to time to add or delete one or more Foreign Subcustodians,
Special Subcustodians or Additional Custodians by the Fund's execution and
delivery to the Custodian of an amended Appendix "A", in which case such
amendment shall take effect immediately upon execution by the Custodian; and (b)
Appendix "B" setting forth the procedures relating to the Custodian's security
interest may be amended only by an instrument in writing executed by the Fund
and the Custodian.
Section 9.07. Interpretation. In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to time on
such provisions interpretative of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. No interpretative or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
Section 9.08. Captions. Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the parties
hereto.
Section 9.09. Governing Law. Insofar as any question or dispute may
arise in connection with the custodianship of foreign securities pursuant to an
agreement with a Foreign Subcustodian that is governed by the laws of the State
of New York, the provisions of this Agreement shall be construed in accordance
with and governed by the laws of the State of New York, provided that in all
other instances this Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Massachusetts, in each case without
giving effect to principles of conflicts of law.
Section 9.10. Notices. Except in the case of Proper Instructions or
Special Instructions, notices and other writings contemplated by this Agreement
shall be delivered by hand or by facsimile transmission (provided that in the
case of delivery by facsimile transmission, notice shall also be mailed postage
prepaid to the parties at the following addresses:
(a) If to the Fund:
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: Treasurer of the Fidelity Funds
Telephone: (617) 570-6556
Telefax: (617) 742-1231
(b) If to the Custodian:
Global Securities Services
Financial Institutions Markets
3 Chase MetroTech Center, 6th Floor
Brooklyn, NY 11245
Attn: Bill Feil
Telephone: (718) 242-1951
Telefax: (718) 242-1102
or to such other address as either party may have designated in writing to the
other party hereto.
Section 9.11. Assignment. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that, subject to the
18
<PAGE> 23
provisions of Section 7.01 hereof, neither party hereto may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party.
Section 9.12. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original. This Agreement
shall become effective when one or more counterparts have been signed and
delivered by each of the parties.
Section 9.13. Confidentiality; Survival of Obligations. The parties
hereto agree that each shall treat confidentially the terms and conditions of
this Agreement and all information provided by each party to the other regarding
its business and operations. All confidential information provided by a party
hereto shall be used by any other party hereto solely for the purpose of
rendering services pursuant to this Agreement and, except as may be required in
carrying out this Agreement, shall not be disclosed to any third party without
the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided or
thereafter becomes publicly available other than through a breach of this
Agreement, or that is required to be disclosed by any bank examiner of the
Custodian or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation. The
provisions of this Section 9.12 and Sections 9.01, 9.02, 9.03, 9.07, Section
2.28, Section 3.04, Section 7.01, Article V and Article VI hereof and any other
rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FIDELITY ADVISOR KOREA FUND, INC. THE CHASE MANHATTAN BANK, N.A.
By: By:
------------------------------ -------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
--------------------------- ----------------------------
19
<PAGE> 24
APPENDIX "A"
TO
CUSTODIAN AGREEMENT
BETWEEN
Fidelity Advisor Korea Fund, Inc. and The Chase Manhattan Bank, N.A.
Dated as of May 31, 1995
The following is a list of Special Subcustodians, Foreign
Subcustodians and Additional Custodians under the Custodian Agreement
dated as of May 31, 1995:
A. Special Subcustodians:
SUBCUSTODIAN PURPOSE
The Bank of New York FICASH
B. Foreign Subcustodians:
COUNTRY FOREIGN SUBCUSTODIAN DEPOSITORY
AS PROVIDED FOR IN EXHIBIT I.
C. Additional Custodians:
None.
FIDELITY ADVISOR KOREA FUND, INC. THE CHASE MANHATTAN BANK, N.A.
By:
- ------------------------------- ----------------------------------
Kenneth A. Rathgeber, Treasurer Name:
--------------------------------
Title:
-------------------------------
20
<PAGE> 25
APPENDIX "B" TO THE
CUSTODIAN AGREEMENT BETWEEN
FIDELITY ADVISOR KOREA FUND, INC.
AND THE CHASE MANHATTAN BANK, N.A.
DATED AS OF MAY 31, 1995
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
As security for any Overdrafts (as defined in the Custodian Agreement) of
the Fund, the Fund shall pledge, assign and grant to the Custodian a security
interest in Collateral (as hereinafter defined), under the terms, circumstances
and conditions set forth in this Appendix "B".
Section 1. Defined Terms. As used in this Appendix "B" the following
terms shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which the Custodian is closed for business.
(b) "Collateral" shall mean the securities having a fair market value (as
determined in accordance with the procedures set forth in the prospectus for
the Fund) equal to the aggregate of all Overdraft Obligations of the Fund: (i)
identified in any Pledge Certificate executed on behalf of the Fund; or (ii)
designated by the Custodian for the Fund pursuant to Section 3 of this Appendix
B. Such securities shall consist of marketable securities held by the
Custodian on behalf of the Fund or, if no such marketable securities are held
by the Custodian on behalf of the Fund, such other securities designated by the
Fund in the applicable Pledge Certificate or by the Custodian pursuant to
Section 3 of this Appendix B.
(c) "Overdraft Obligations" shall mean the amount of any outstanding
Overdraft(s) provided by the Custodian to the Fund together with all accrued
interest thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form
attached to this Appendix "B" as Schedule 1 executed by a duly authorized
officer of the Fund and delivered by the Fund to the Custodian by facsimile
transmission or in such other manner as the Fund and the Custodian may agree in
writing.
(e) "Release Certificate" shall mean a Release Certificate in the form
attached to this Appendix "C" as Schedule 2 executed by a duly authorized
officer of the Custodian and delivered by the Custodian to the Fund by
facsimile transmission or in such other manner as the Fund and the Custodian
may agree in writing.
(f) "Written Notice" shall mean a written notice executed by a duly
authorized officer of the party delivering the notice and delivered by
facsimile transmission or in such other manner as the Fund and the Custodian
shall agree in writing.
Section 2. Pledge of Collateral. To the extent that any Overdraft
Obligations of the Fund are not satisfied by the close of business on the first
Business Day following the Business Day on which the Fund receives Written
Notice requesting security for such Overdraft Obligation and stating the amount
of such Overdraft Obligation, the Fund shall pledge, assign and grant to the
Custodian a first priority security interest, by delivering to the Custodian, a
Pledge Certificate executed by the Fund describing the applicable Collateral.
Such Written Notice may, in the discretion of the Custodian, be included within
or accompany the Overdraft Notice relating to the applicable Overdraft
Obligations.
Section 3. Failure to Pledge Collateral. In the event that the Fund
shall fail: (a) to pay the Overdraft Obligation described in such Written
Notice; (b) to deliver to the Custodian a Pledge Certificate pursuant to
Section 2; or (c) to identify substitute securities pursuant to Section 6 upon
the sale or maturity of any securities identified as Collateral, the Custodian
may, by Written Notice to the Fund specify Collateral which shall secure
21
<PAGE> 26
the applicable Overdraft Obligation. The Fund hereby pledges, assigns and
grants to the Custodian a first priority security interest in any and all
Collateral specified in such Written Notice; provided that such pledge,
assignment and grant of security shall be deemed to be effective only upon
receipt by the Fund of such Written Notice.
Section 4. Delivery of Additional Collateral. If at any time the
Custodian shall notify the Fund by Written Notice that the fair market value of
the Collateral securing any Overdraft Obligation is less than the amount of
such Overdraft Obligation, the Fund shall deliver to the Custodian, within one
(1) Business Day following the Fund's receipt of such Written Notice, an
additional Pledge Certificate describing additional Collateral. If the Fund
shall fail to deliver such additional Pledge Certificate, the Custodian may
specify Collateral which shall secure the unsecured amount of the applicable
Overdraft Obligation in accordance with Section 3 of this Appendix B.
Section 5. Release of Collateral. Upon payment by the Fund of any
Overdraft Obligation secured by the pledge of Collateral, the Custodian shall
promptly deliver to the Fund a Release Certificate pursuant to which the
Custodian shall release Collateral from the lien under the applicable Pledge
Certificate or Written Notice pursuant to Section 3 having a fair market value
equal to the amount paid by the Fund on account of such Overdraft Obligation.
In addition, if at any time the Fund shall notify the Custodian by Written
Notice that the Fund desires that specified Collateral be released and: (a)
that the fair market value of the Collateral securing any Overdraft Obligation
shall exceed the amount of such Overdraft Obligation; or (b) that the Fund has
delivered a Pledge Certificate substituting Collateral for such Overdraft
Obligation, the Custodian shall deliver to the Fund, within one (1) Business
Day following the Custodian's receipt of such Written Notice, a Release
Certificate relating to the Collateral specified in such Written Notice.
Section 6. Substitution of Collateral. The Fund may substitute
securities for any securities identified as Collateral by delivery to the
Custodian of a Pledge Certificate executed by the Fund, indicating the
securities pledged as Collateral.
Section 7. Security for Fund Overdraft Obligations. The pledge of
Collateral by the Fund shall secure only the Overdraft Obligations of the Fund.
In no event shall the pledge of Collateral by one Fund be deemed or considered
to be security for the Overdraft Obligations of any other Fund.
Section 8. Custodian's Remedies. Upon (a) the Fund's failure to pay any
Overdraft Obligation of the Fund within thirty (30) days after receipt by the
Fund of a Written Notice demanding security therefore, and (b) one (1) Business
Day's prior Written Notice to the Fund, the Custodian may elect to enforce its
security interest in the Collateral securing such Overdraft Obligation, by
taking title to (at the then prevailing fair market value), or selling in a
commercially reasonable manner, so much of the Collateral as shall be required
to pay such Overdraft Obligation in full. Notwithstanding the provisions of any
applicable law, including, without limitation, the Uniform Commercial Code, the
remedy set forth in the preceding sentence shall be the only right or remedy to
which the Custodian is entitled with respect to the pledge and security interest
granted pursuant to any Pledge Certificate or Section 3, without limiting the
foregoing, the Custodian hereby waives and relinquishes all contractual and
common law rights of set off to which it may now or hereafter be or become
entitled with respect to any obligations of the Fund to the Custodian arising
under this Appendix B to the Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Appendix to be
executed in its name and behalf on the day and year first above written.
FIDELITY ADVISOR KOREA FUND, INC. THE CHASE MANHATTAN BANK, N.A.
By: By:
--------------------------- --------------------------
Name: Name:
------------------------- ------------------------
Title: Title:
------------------------ -----------------------
22
<PAGE> 27
SCHEDULE 1
TO
APPENDIX "B"
PLEDGE CERTIFICATE
This Pledge Certificate is delivered pursuant to the Custodian Agreement
dated as of March 19, 1994 (the "Agreement"), between Fidelity Advisor Korea
Fund, Inc. (the "Fund") and The Chase Manhattan Bank, N.A. (the "Custodian").
Capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Agreement. Pursuant to [Section 2 or Section
4] of Appendix "B" attached to the Agreement, the Fund hereby pledges, assigns
and grants to the Custodian a first priority security interest in the
securities listed on Exhibit "A" attached to this Pledge Certificate
(collectively, the "Pledged Securities"). Upon delivery of this Pledge
Certificate, the Pledged Securities shall constitute Collateral, and shall
secure all Overdraft Obligations of the Fund described in that certain Written
Notice dated__________, 19__, delivered by the Custodian to the Fund. The
pledge, assignment and grant of security in the Pledged Securities hereunder
shall be subject in all respect to the terms and conditions of the Agreement,
including, without limitation, Sections 7 and 8 of Appendix "B" attached
thereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be
executed in its name, on behalf of the Fund this_________day of 19__.
Fidelity Advisor Korea Fund., Inc.
By: _________________________
Name: _______________________
Title:_______________________
23
<PAGE> 28
EXHIBIT "A"
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
------ -------- ----------------- ---------
24
<PAGE> 29
SCHEDULE 2
TO
APPENDIX "B"
RELEASE CERTIFICATE
This Release Certificate is delivered pursuant to the Custodian Agreement
dated as of March 19, 1994 (the "Agreement"), between Fidelity Advisor Korea
Fund, Inc. (the "Fund") and The Chase Manhattan Bank, N.A. (the "Custodian").
Capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Agreement. Pursuant to Section 5 of Appendix
"B" attached to the Agreement, the Custodian hereby releases the securities
listed on Exhibit "A" attached to this Release Certificate from the lien under
the [Pledge Certificate dated , 19 or the Written Notice delivered
pursuant to Section 3 of Appendix "B" dated , 19 ].
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate to
be executed in its name and on its behalf this ________day of 19__.
The Chase Manhattan Bank, N.A.
By: _____________________
Name: _____________________
Title: _____________________
25
<PAGE> 30
EXHIBIT "A"
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
------ -------- ----------------- ---------
26
<PAGE> 1
2(K)(1)
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
FIDELITY ADVISOR KOREA FUND, INC.
AND
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
1. Terms of Appointment; Duties of the Bank........................................... 1
2. Fees and Expenses.................................................................. 2
3. Representations and Warranties of the Bank......................................... 2
4. Representations and Warranties of the Fund......................................... 2
5. Data Access and Proprietary Information............................................ 2
6. Indemnification.................................................................... 3
7. Standard of Care................................................................... 4
8. Covenants of the Fund and the Bank................................................. 4
9. Termination of Agreement........................................................... 5
10. Assignment......................................................................... 5
11. Amendment.......................................................................... 5
12. Massachusetts Law to Apply......................................................... 5
13. Force Majeure...................................................................... 5
14. Consequential Damages.............................................................. 6
15. Merger of Agreement................................................................ 6
16. Counterparts....................................................................... 6
</TABLE>
i
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 25th day of October, 1994, by and between FIDELITY
ADVISOR KOREA FUND, INC., a Maryland corporation, having its principal office
and place of business at 82 Devonshire Street, Boston, Massachusetts 02109, (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints the Bank to act as, and the Bank agrees to act
as its transfer agent for the Fund's authorized and issued shares of its
common stock, ("Shares"), dividend disbursing agent, custodian of certain
retirement plans and agent in connection with any dividend reinvestment
plan as set out in the prospectus of the Fund, corresponding to the date of
this Agreement.
1.2 The Bank agrees that it will perform the following services.
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Issue and record the appropriate number of Shares as authorized
and hold such Shares in the appropriate Shareholder account;
(ii) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(iii) Execute transactions directly with broker-dealers authorized by
the Fund who shall thereby be deemed to be acting on behalf of the
Fund;
(iv) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(v) Act as agent for Shareholders pursuant to the dividend reinvestment
and cash purchase plan as amended from time to time in accordance
with the terms of the agreement to be entered into between the
Shareholders and the Bank.
(vi) Issue replacement certificates for those certificates alleged to
have been lost, stolen or destroyed upon receipt by the Bank of
indemnification satisfactory to the Bank and protecting the Bank
and the Fund, and the Bank at its option, may issue replacement
certificates in place of mutilated stock certificates upon
presentation thereof and without such indemnity;
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform all the customary services of a registrar, transfer agent,
dividend disbursing agent, custodian of certain retirement plans and
agent of the dividend reinvestment and cash purchase plan as described
in Article 1 consistent with those requirements in effect as at the date
of this Agreement. The detailed definition, frequency, limitations and
associated costs (if any) set out in the attached fee schedule, include
but not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, mailing Shareholder reports
to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with respect
to dividends and distributions by federal authorities for all registered
Shareholders.
1
<PAGE> 4
(c) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing between
the Fund and the Bank.
2. FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement, the Fund agrees
to pay the Bank an annual maintenance fee for each Shareholder account as
set out in the initial fee schedule attached hereto. Such fees and
out-of-pocket expenses and advances identified under Section 2.2 below may
be changed from time to time subject to mutual written agreement between
the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees to
reimburse the Bank at such rate as may be agreed to from time to time for
out-of-pocket expenses, including but not limited to confirmation
production, postage, forms, telephone, microfilm, microfiche, tabulating
proxies, records storage, or advances incurred by the Bank for the items
set out in the fee schedule attached hereto. In addition, any other
expenses incurred by the Bank at the request or with the consent of the
Fund, will be reimbursed by the Fund.
3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing under
that laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3 It is registered as a transfer agent under the Securities Exchange Act of
1934, as amended.
3.4 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.5 All requisite corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
3.6 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.1 It is a corporation duly organized and existing and in good standing under
the laws of Maryland.
4.2 It is empowered under applicable laws and by its Articles of Incorporation
and By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Articles of Incorporation and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.4 It is a closed-end, non-diversified investment company registered under the
Investment Company Act of 1940, as amended.
4.5 To the extend required by federal securities laws a registration statement
under the Securities Act of 1933 has been filed with the Securities and
Exchange Commission, and appropriate state securities law filings have been
or will be made with respect to all Shares of the Fund being offered for
sale; information to the contrary will result in immediate notification to
the Bank.
4.6 It shall make all required filings under federal and state securities laws.
5. DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of
2
<PAGE> 5
the Fund's ability to access certain Fund-related data ("Customer Data")
maintained by the Bank on data bases under the control and ownership of the
Bank or other third party ("Data Access Services") constitute copyrighted,
trade secret, or other proprietary information (collectively, "Proprietary
Information") of substantial value to the Bank or other third party. In no
event shall Proprietary Information be deemed Customer Data. The Fund
agrees to treat all Proprietary Information as proprietary to the Bank and
further agrees that it shall not divulge any Proprietary Information to any
person or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its employees and
agents:
(a) to access Customer Data solely from locations as may be designated in
writing by the Bank and solely in accordance with the Bank's applicable
user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform in a timely manner of such fact and dispose of such
information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer facility or
other location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized transactions
agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary Information
at common law, under federal copyright law and under other federal or
state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
Each Data Entry Service shall be approved by the Fund prior to the Bank's
reliance on data provided by such service in the performance of the Bank's
duties hereunder.
5.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible
for the contents of such data and the Fund agrees to make no claim against
the Bank arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS
ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, (such transactions constituting a "COEFI"), then in such
event the Bank shall be entitled to rely on the validity and authenticity
of such instruction without undertaking any further inquiry as long as such
instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall indemnify and hold
the Bank harmless from and against, any and all losses, damages, costs,
charges, reasonable counsel fees, payments, expenses and liability arising
out of or attributable to:
3
<PAGE> 6
(a) All actions of the Bank or its agent or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct which
arise out of the breach of any representation or warranty of the Fund
hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by
the Bank or its agents or subcontractors, and (ii) have been prepared,
maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer
agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any Proper Instructions or requests of the Fund.
Proper Instructions shall mean instructions received from an individual
duly authorized by the Fund in writing, facsimile or in such other
manner as may be agreed to from time to time.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or
in violations of any stop order or other determination or ruling by any
federal agency or any state with respect to the offer or sale of such
Shares in such state.
6.2 At any time the Bank may apply to any officer of the Fund for Proper
Instructions, and may consult with legal counsel approved by the Fund with
respect to any matter arising in connection with the services to be
performed by the Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the Fund for
any action taken or omitted by it in reliance upon such instructions or
upon the opinion of such counsel. The Bank, its agents and subcontractors
shall be protected and indemnified in acting upon any paper or document
furnished by or on behalf of the Fund, reasonably believed to be genuine
and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided by the Bank
or its agents or subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Fund, and shall not be held
to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund.
6.3 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend against
said claim in its own name or in the name of the Bank. The Bank shall in no
case confess any claim or make any compromise in any case in which the Fund
may be required to indemnify the Bank except with the Fund's prior written
consent.
7. STANDARD OF CARE
The Bank shall at all times act in good faith and agrees to use due care in
the performance of its services under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage unless such loss or
damage is caused by its negligence, bad faith, or willful misconduct or that of
its employees.
8. COVENANTS OF THE FUND AND THE BANK
8.1 The fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the Fund and
all amendments thereto.
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<PAGE> 7
8.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms
and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
9. TERMINATION OF AGREEMENT
9.1 This Agreement may be terminated (1) by the Bank upon one hundred twenty
(120) days written notice to the Fund or (2) by the Fund upon sixty (60)
days written notice to the Bank.
9.2 Should the Fund exercise its right to terminate, all reasonable
out-of-pocket expenses associated with the movement of records and material
will be borne by the Fund.
10. ASSIGNMENT
10.1 Except as provided in Section 10.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
10.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc., a
Massachusetts corporation ("BFDS") which is duly registered as a transfer
agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934,
as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as
a transfer agent pursuant to Section 17A(c)(1), (iii) a legally qualified
BFDS affiliate of (iv) an employee of any of the foregoing entities;
provided, however, that the Bank shall be as fully responsible to the Fund
for the acts and omissions of any subcontractor as it is for its own acts
and omissions.
11. AMENDMENT
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Directors of the Fund.
12. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
13. FORCE MAJEURE
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
5
<PAGE> 8
causes reasonably beyond its control, such party shall not be liable for damages
to the other for any damages resulting from such failure to perform or otherwise
from such causes.
14. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
15. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof
whether oral or written.
16. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
FIDELITY ADVISOR KOREA FUND, INC.
By: /s/ GARY L. FRENCH
----------------------------------
ATTEST:
/s/ STUART E. FROSS
----------------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/
----------------------------------
Executive Vice President
ATTEST:
/s/
----------------------------------
6
<PAGE> 1
ADMINISTRATION AGREEMENT
BETWEEN
FIDELITY ADVISOR KOREA FUND, INC.
AND
FIDELITY SERVICE CO.
AGREEMENT dated as of this 25th day of October, 1994 between Fidelity
Advisor Korea Fund, Inc., a Maryland corporation (the "Fund"), and FMR Corp., a
Massachusetts corporation, acting through its Fidelity Service Co. (the
"Administrator") division.
WHEREAS, the Fund wishes to employ the services of the Administrator, with
such assistance from the Administrator's affiliated companies as the latter may
provide; and
WHEREAS, the Administrator wishes to provide such services under the
conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund and the Administrator agree as follows:
1. APPOINTMENT. The Fund hereby appoints and employs the Administrator and
the Administrator accepts the appointment as agent to perform the services
described herein.
2. FUND ADMINISTRATION. Subject to the direction and control of the Board
of Directors of the Fund, the Administrator shall assist in supervising aspects
of the Fund's operation not otherwise supervised by the Fund's investment
manager, investment adviser, sub-investment adviser, transfer agent, custodian,
auditors, counsel or other agents.
To the extent not otherwise the responsibility of, or provided by, the Fund
or other agents of the Fund, the Administrator shall provide: (i) office space,
equipment and facilities (which may be the Administrator's or its affiliates)
for performing administrative services hereunder; (ii) non-investment related
statistical and research data and such other reports, evaluations, and
information as the Fund may request from time to time; (iii) internal clerical
and accounting services; and (iv) stationery and office supplies. The
Administrator shall prepare: (i) to the extent requested by the Fund, the Fund's
Prospectus and Annual and Semi-Annual Reports to Shareholders; (ii) for
execution and filing all federal and state tax returns and required filings with
the Securities and Exchange Commission and state Blue Sky authorities; and (iii)
applications and filings in connection with required fidelity bonds and other
insurances, including directors' and officers' insurance, as requested by the
Fund. The Administrator shall also: (i) keep and maintain the financial accounts
and records of the Fund; and (ii) generally assist as requested from time to
time by the Funds' investment manager, in other aspects of the Fund's
operations, as appropriate, including monitoring performance of the Fund's other
agents.
In compliance with requirements of Rule 31a-3 under the Investment Company
Act of 1940 (the "1940 Act"), the Administrator hereby agrees that all records
which it maintains with respect to the Fund are the property of the Fund, and
further agrees to surrender promptly to the Fund any of such records upon the
Fund's request. Administrator further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records subject to Rule 31a-1
under the 1940 Act that are maintained by the Administrator.
3. FUND ACCOUNTING: SECURITIES LENDING, AND TRADING DESK SERVICES. The
Administrator shall perform the obligations and the services set forth in the
attached schedules upon the terms and conditions hereinafter set forth. The
Administrator shall be responsible for performing as agent, as of the date of
this Agreement, the services described in the following schedules attached
hereto and made a part hereof, as said schedules may be amended from time to
time:
Schedule A: Agent for pricing and bookkeeping.
Schedule B: Agent for securities lending transactions.
Schedule C: Agent for portfolio executions.
<PAGE> 2
Operating procedures and standards to be followed for each function may be
established from time to time by agreement between the Fund and the
Administrator. The above schedules may be amended or deleted, or additional
schedules may be included, as deemed necessary from time to time by agreement
between the Fund and the Administrator. Deletion of any schedule shall be in
accordance with the termination provisions of Paragraph 13 of this Agreement.
Each schedule and any amendments thereto shall be dated and signed by the
parties to this Agreement.
4. AUDITS, INSPECTIONS AND VISITS. The Administrator shall make available
during regular business hours all records and other data created and maintained
hereunder for reasonable audit and inspection by the Fund, any agent or person
designated by the Fund, or any regulatory agency having authority over the Fund.
Upon reasonable notice by the Fund, the Administrator shall make available
during regular business hours its facilities and premises employed in connection
with its performance of this Agreement for reasonable visits by the Fund, any
agent or person designated by the Fund, or any regulatory agency having
authority over the Fund.
5. APPOINTMENT OF AGENTS. The Administrator, at its expense, may at any
time or times in its discretion appoint (and may at any time remove) one or more
other parties as Agent to perform any or all of the services specified hereunder
and to carry out such provisions of this Agreement as the Administrator may from
time to time direct; provided, however, that the appointment of any such Agent
shall not relieve the Administrator of any of its responsibilities or
liabilities hereunder.
6. USE OF THE ADMINISTRATOR'S NAME. The Fund shall not use the name of the
Administrator in any Prospectus, sales literature or other material relating to
the Fund in a manner not consented to prior to use; provided, however, that the
Administrator shall approve all uses of its name which merely refer in accurate
terms to its appointments, duties or fees hereunder or which are required by the
Securities and Exchange Commission or a state securities commission; and further
provided, that in no event shall such approval be unreasonably withheld.
7. USE OF FUND'S NAME. The Administrator shall not use the name of the Fund
or material relating to the Fund on any forms (including any checks, bank drafts
or bank statements) for other than internal use in a manner not consented to
prior to use, provided, however, that the Fund shall approve all uses of its
name which merely refer in accurate terms to the appointment of the
Administrator hereunder or which are required by the Securities and Exchange
Commission or a state securities commission; and further, provided that in no
event shall such approval be unreasonably withheld.
8. SECURITY. The Administrator represents and warrants that, to the best of
its knowledge, the various procedures and systems which the Administrator has
implemented with regard to the safeguarding from loss or damage attributable to
fire, theft or any other cause (including provision for twenty-four hours a day
restricted access) of the Fund's blank checks, certificates, records and other
data and the Administrator's records, data, equipment, facilities and other
property used in the performance of its obligations hereunder are adequate, and
that it will make such changes therein from time to time as in its judgment are
required for the secure performance of its obligations hereunder. The
Administrator shall review such systems and procedures on a periodic basis and
the Fund shall have access to review these systems and procedures.
9. INSURANCE. The Administrator shall maintain or shall arrange for its
agents to maintain insurance of the types and in the amounts deemed by it to be
appropriate and shall notify the Fund should any of its insurance coverage be
changed for any reason. Such notification shall include the date of change and
the reason or reasons therefor. The Administrator shall notify the Fund of any
material claims against the Administrator, whether or not they may be covered by
insurance, and shall notify the Fund from time to time as may be appropriate of
the total outstanding claims made by the Administrator under its insurance
coverage. Nothing in this Agreement shall be construed to relieve an insurer of
any obligation to pay claims to the Fund, the Administrator its agents or other
insured party which would otherwise be a covered claim in the absence of any
provision of this Agreement.
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<PAGE> 3
10. INDEMNIFICATION.
A. The Fund shall indemnify and hold the Administrator harmless
against any losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Fund, including by a shareholder, which names the Administrator
or its agents and/or the Fund as a party and is not based on and does
not result from the Administrator's willful misfeasance, bad faith or
negligence or reckless disregard of duties of the Administrator or its
agents, and arises out of or in connection with the performance
hereunder; or
(2) any claim, demand, action or suit (except to the extent
contributed to by the Administrator's willful misfeasance, bad faith or
negligence or reckless disregard of duties) which results from the
negligence of the Fund, or from the Administrator's acting upon any
instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Fund, or as a result
of the Administrator's acting in reliance upon advice reasonably
believed by the Administrator or its agents to have been given by
counsel for the Fund, or as a result of the Administrator's or its
agents acting in reliance upon any instrument or stock certificate
reasonably believed by it to have been genuine and signed, countersigned
or executed by the proper person.
B. The Administrator shall indemnity and hold the Fund harmless
against any losses, claims, damages, liabilities or expenses (including
reasonable counsels fees and expenses) resulting from any claim, demand,
action or suit brought by any person other than the Administrator, which
names the Fund and/or the Administrator as a party and is based upon and
arises out of the Administrator's willful misfeasance, bad faith or
negligence or reckless disregard of duties in connection with its
performance hereunder.
In the event that either party requests the other to indemnify or hold it
harmless hereunder, the party requesting indemnification (the "Indemnified
Party") shall inform the other party (the "Indemnifying Party") of the relevant
facts known to the Indemnified Party concerning the matter in question. The
Indemnified Party shall use reasonable care to identify and promptly to notify
the Indemnifying Party concerning any matter which presents, or appears likely
to present, a claim for indemnification. The Indemnifying Party shall have the
election of defending the Indemnified Party against any claim which may be the
subject of indemnification or of holding the Indemnified Party harmless
hereunder. In the event the Indemnifying Party so elects, it will so notify the
Indemnified Party and thereupon the Indemnifying Party shall take over defense
of the claim and, if so requested by the Indemnifying Party, the Indemnified
Party shall incur no further legal or other expenses related thereto for which
it shall be entitled to indemnity or to being held harmless hereunder; provided,
however, that nothing herein shall prevent the Indemnified Party from retaining
counsel at its own expense to defend any claim. Except with the Indemnifying
Party's prior written consent, the Indemnified Party shall in no event confess
any claim or make any compromise in any matter in which the Indemnifying Party
will be asked to indemnify or hold the Indemnified Party harmless hereunder.
11. ACTS OF GOD, ETC. The Administrator shall not be liable for delays or
errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication equipment of common carriers or power supply. In the
event of equipment breakdowns beyond its control, the Administrator shall, at no
additional expense to the Fund, take reasonable steps to minimize the service
interruptions and mitigate their effects but shall have no liability with
respect thereto. The Administrator shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment.
12. AMENDMENTS. The Administrator and the Fund shall regularly consult with
each other regarding the Administrator's performance of its obligations and its
compensation hereunder. In connection therewith, the fund shall submit to the
Administrator at a reasonable time in advance of filing with the Securities and
Exchange Commission copies of any amended or supplemented registration
statements (including exhibits) under the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, and, a
3
<PAGE> 4
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or the services offered by the
fund. Any change in such material which would require any change in the
Administrator's obligations hereunder shall be subject to the Administrator's
approval, which shall not be unreasonably withheld. In the event that a change
in such documents or in the procedures contained therein materially increases
the cost to the Administrator of performing its obligations hereunder, the
Administrator shall be entitled to receive reasonable compensation therefor.
13. DURATION, TERMINATION, ETC. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by
written instrument which shall make specific reference to this Agreement and
which shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.
This Agreement shall continue in effect until , 1995 and
indefinitely thereafter so long as such continuance is approved at least
annually by vote of the Fund's Board of Directors; provided, however, that this
Agreement may be terminated at any time by six months' written notice given by
the Administrator to the Fund or six months' written notice given by the Fund to
the Administrator; and provided further that this Agreement may be terminated
immediately at any time for cause either by the Fund or by the Administrator in
the event that such cause remains unremedied for a reasonable period of time not
to exceed ninety days after receipt of written specification of such cause. Any
such termination shall not affect the rights and obligations of the parties
under paragraph 10 hereof.
Upon the termination hereof, the Fund shall pay to the Administrator such
compensation as may be due for the period prior to the date of such termination.
In the event that the Fund designates a successor to any of the Administrator's
obligations hereunder, the Administrator shall, at the expense and direction of
the Fund, transfer to such successor all relevant books, records and other data
established or maintained by the Administrator hereunder. To the extent that the
Administrator incurs expenses related to a transfer of responsibilities to a
successor, the Administrator shall be entitled to be reimbursed for such
expenses, including any out-of-pocket expenses reasonably incurred by the
Administrator in connection with the transfer.
14. FEES. As compensation for the services, facilities and personnel which
the Administrator is to provide or cause to be provided, the Fund shall,
beginning with its commencement of operations, pay to the Administrator an
annual fee, which shall be computed and accrued daily and paid in arrears on the
first business day of every month, at the annual rate of .20% of the average net
assets of the Fund.
For the purpose of determining fees payable to the Administrator, the value
of the net assets of the Fund shall be computed in the manner described in the
Fund's Prospectus. The fee for any partial month under this Agreement shall be
calculated on a proportional basis.
The services of the Administrator provided hereunder are not to be deemed
exclusive and the Administrator shall be free to render similar services to
others and engage in other activities. The Administrator or its affiliates shall
be free to enter other agreements with the Fund for providing additional
services to the Fund which are not covered by this Agreement, and to receive
additional compensation for such services.
15. EXPENSES. The Administrator shall bear all expenses in connection with
its performance of services hereunder. The Fund will pay, or contract with
persons not parties to this Agreement to pay for, all its expenses other than
those expressly stated to be payable by the Administrator hereunder, which
expenses payable by the Fund shall include, without limitation, (i) interest and
taxes; (ii) brokerage commissions and other costs in connection with the
purchase or sale of securities and other investment instruments; (iii) fees and
expenses of the Fund's Directors other than those who are "interested" persons
of the Fund, the Investment Manager, or the Administrator; (iv) legal and audit
expenses (other than services provided by the Administrator); (v) custodian,
pricing and bookkeeping, registrar and transfer agent fees and expenses; (vi)
fees and expenses related to the registration and qualifications of the Fund's
shares for distribution under state and federal securities laws; (vii) expenses
of printing and mailing reports and notices and proxy material to shareholders
of the Fund; (viii) all other expenses incidental to holding meetings of the
Fund's
4
<PAGE> 5
shareholders, including proxy solicitations therefor; (ix) expenses of
typesetting Prospectuses and supplements thereto; (x) expenses of printing and
mailing any notice to existing shareholders; (xi) 50% of the insurance premiums
for fidelity bonds and other coverage to the extent approved by the Board of
Directors; (xii) association membership dues authorized by the Board of
Directors; and (xiii) such nonrecurring or extraordinary expenses as may arise,
including those relating to actions, suits, or proceedings to which the Fund is
a party or to which the Fund's assets are subject and the legal obligation which
the Fund may have to indemnify the Fund's Directors and officers with respect
thereto.
The Administrator has no obligation to reimburse the Fund for (or to have
deducted from its fees) any Fund expense in excess of expense limitations, if
any, imposed by state securities authorities having jurisdiction over the Fund.
16. PROPRIETARY AND CONFIDENTIAL INFORMATION. Administrator agrees on
behalf of itself and its employees to treat confidentially and as proprietary
information of the Fund all records and other information relative to the Fund
and prior, present or potential shareholders, and not to use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Fund, which approval shall not be reasonably withheld and may not be
withheld and will be deemed granted where Administrator may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund. The Fund agrees that any information obtained by the Administrator,
or an affiliate, independently and not from the Fund, shall not be deemed to be
confidential and proprietary.
17. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts, without giving effect
to the choice of laws provisions thereof. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in one or more counterparts, each of
which taken together shall constitute one and the same instrument.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
FIDELITY SERVICE CO., A DIVISION OF
FMR CORP.
By: /s/ FREDERICK S. KNAPP
-----------------------------------
Title:
FIDELITY ADVISOR KOREA FUND, INC.
By: /s/ GARY L. FRENCH
-----------------------------------
Title: Treasurer
6
<PAGE> 7
Dated: October 24, 1994
FIDELITY ADVISOR KOREA FUND, INC. (the "Fund")
SCHEDULE A: AGENT TO PERFORM PORTFOLIO PRICING AND BOOKKEEPING
I. SERVICES TO BE PERFORMED. Fidelity Services Company (the
"Administrator") appoints Fidelity Accounting and Custody Services (FACS) to be
responsible for:
A. Accounting and relating to the Fund and portfolio transactions of the
Fund.
B. The determination of net asset value per share of the outstanding
shares of the Fund and the offering price, if any, at which shares are
to be sold, at the times and in the manner described in the Articles of
Incorporation as it may be amended from time to time, and the Prospectus
of the Fund (pricing).
C. The determination of distributions, if any.
D. The timely communication of information determined in B and C above,
to the person or persons designated by the Fund.
E. Maintaining the books of account of the Fund.
F. In conjunction with the Custodian, receiving information and keeping
records about all corporate actions, including, but not limited to, cash
and stock distributions or dividends, stock splits and reverse stock
splits, taken by companies whose securities are held by the Fund.
G. Monitoring foreign corporate actions and foreign trades and entering
orders to convert foreign currency or establish contracts for future
settlement of foreign currency.
H. Processing and monitoring the settlement of Variable Rate Demand Notes
and GNMA's.
I. Monitoring and accounting for futures and options.
II. COMPENSATION. For the performance of its obligations hereunder, the
Fund Manager shall pay FACS an annual fee based on average daily net assets for
each month. The fee schedule is as follows:
<TABLE>
<CAPTION>
FUND'S AVERAGE DAILY NET ASSETS FEE RATE
----------------------------------------------------------- --------
<S> <C>
$500 million and under..................................... .06%
Over $500 million.......................................... .03%
</TABLE>
7
<PAGE> 8
provided, however, that the minimum total annual fee payable by the
Administrator shall be $45,000 and the maximum total annual fee payable by the
Administrator shall be $750,000. FACS shall be reimbursed by the Administrator
for out-of-pocket expenses for pricing, dividend and interest quotation services
and related communications and telephone charges.
FIDELITY SERVICE COMPANY
A DIVISION OF FMR CORP.
By: /s/ FREDERICK J. KNAPP
-----------------------------------
Name: F.J. Knapp
Title: President
FIDELITY ACCOUNTING AND CUSTODY
SERVICES
By:
-----------------------------------
Name:
Title:
FIDELITY ADVISOR KOREA FUND, INC.
By: /s/ GARY L. FRENCH
-----------------------------------
Name: Gary L. French
Title: Treasurer
8
<PAGE> 9
Dated: October 24, 1994
FIDELITY ADVISOR KOREA FUND, INC.
SCHEDULE B: AGENT FOR SECURITIES LENDING TRANSACTIONS
I. SERVICES TO BE PERFORMED. FACS shall be responsible for administering a
program of securities lending from the Fund's portfolio by:
A. Carrying out security loan transactions between approved borrowers and
the Fund, including assisting the Custodian in receiving and returning
collateral for loans.
B. Marking to market loans outstanding each day.
C. Ensuring that the value of collateral for loans is 100% or more of
loaned securities at market price and issuing demands for additional
collateral should the percentage fall below 100%.
The details of operating standards and procedures to be followed shall be
established from time to time by agreement between the Administrator and the
Fund and shall be expressed in a procedures manual maintained by Service.
II. COMPENSATION. For the performance of its obligations hereunder, the
Administrator shall pay FACS according to the following:
<TABLE>
<S> <C>
Opening a loan............................................... $15
Closing a loan............................................... $15
Daily market to market of collateral......................... $ 5
</TABLE>
FIDELITY SERVICE COMPANY
A DIVISION OF FMR CORP.
By:
-----------------------------------
Treasurer
FIDELITY ACCOUNTING AND CUSTODY
SERVICES
By:
-----------------------------------
FIDELITY ADVISOR KOREA FUND, INC.
By:
-----------------------------------
Treasurer
9
