(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
KOREA FUND, INC.
ANNUAL REPORT
SEPTEMBER 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
FUND TALK 4 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 7 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.
INVESTMENTS 8 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 14 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 18 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 22 THE AUDITORS' OPINION.
ACCOUNTANTS
PROXY VOTING RESULTS 23 SHAREHOLDER PROXY VOTING RESULTS.
DIVIDENDS AND 24 DIVIDEND REINVESTMENT AND CASH
DISTRIBUTIONS PURCHASE PLAN.
OTHER FUND INFORMATION 27 CHANGES AND UPDATES.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE
INVESTMENT COMPANY ACT OF 1940
THAT FROM TIME TO TIME THE FUND MAY PURCHASE AT MARKET PRICES SHARES
OF ITS COMMON STOCK IN THE
OPEN MARKET.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. IT IS NOT A PROSPECTUS,
CIRCULAR OR REPRESENTATION
INTENDED FOR USE IN THE PURCHASE OR SALE OF SHARES OF THE FUND OR OF
ANY SECURITIES MENTIONED
IN THE REPORT.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
The stock and bond markets have performed well through the end of
September 1997, despite experiencing some short-term volatility in the
spring and again in August. The Standard & Poor's 500 Index was up
roughly 30% year-to-date through September, almost three times its
historical annual average. The bond markets - primarily influenced by
positive news on the inflation front - have posted moderate returns
through the first nine months of the year.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Hokeun Chung, Portfolio Manager of Fidelity Advisor
Korea Fund, Inc.
Q. HOW DID THE FUND PERFORM, HOKEUN?
A. For the 12 months that ended September 30, 1997, the fund had a
total return of -28.08%, based on net asset value. For comparison, the
Korea Stock Exchange Composite Price Index (KOSPI) returned -24.83%
over the same period. In terms of the fund's market value return -
which represents gains or losses in the fund's share price - it
returned -31.23% for the period.
Q. CAN YOU OUTLINE THE PRIMARY FACTORS THAT INFLUENCED THE FUND'S
PERFORMANCE?
A. The South Korean economy continued to struggle through much of the
period, with local currency problems and a swarm of corporate
bankruptcies the major culprits. The U.S. dollar appreciated against
the Korean won, hurting many Korean companies with large amounts of
U.S. dollar-denominated debt. Bankruptcies also plagued the country,
proving particularly harmful to several of the fund's bank-related
stocks. The news wasn't all bleak, though. During the latter half of
the period, we began to see signs of gradual economic improvement. The
government revised its original gross domestic product forecast
upward, as Korea's trade deficit began to decline due to higher export
volumes. In addition, dynamic random access memory (DRAM) chips -
integral components of personal computers - enjoyed high worldwide
demand. These chips are Korea's biggest domestically manufactured
product, accounting for nearly 30% of global DRAM production.
Q. WHAT SPURRED THE INCREASED EXPORT VOLUMES?
A. Volume growth blossomed primarily due to high demand for certain
products, and because the Korean economy was improving toward the end
of the period. Global demand for DRAMs, as I mentioned, was very
strong, and Korean exporters such as Samsung Electronics and Lg
Semicon benefited nicely. Korean exports also depend considerably on
petrochemical and steel products, and demand was high in these areas
as well. This demand led to positive gains for the fund's positions in
Lg Chemical and Pohang Iron & Steel.
Q. SINCE DRAMS ARE SO VITAL TO KOREA'S ECONOMIC WELL-BEING, COULD YOU
GIVE A CHRONOLOGY OF THAT MARKET OVER THE PAST YEAR?
A. Six months ago, Korea's DRAM producers were trying to recover from
a number of negative industry trends, most notably lack of worldwide
chip demand, oversupply of inventories and a weak pricing environment.
As a result, Korean DRAM producers cut back on their production
volumes in an effort to boost their pricing ability. This strategy
worked for a while, but when other countries - especially Taiwan and
the U.S. - began to garner more market share, the Korean companies
stepped up their production again. At this point, the increased global
DRAM supply has been easily absorbed by robust PC demand and the
semiconductor industry is doing quite well.
Q. SIX MONTHS AGO, YOUR INTENT WAS TO SEEK OPPORTUNITIES IN THE
BANKING SECTOR AS WELL AS IN CIVIL ENGINEERING AND CONSTRUCTION
STOCKS. HOW DID THESE STRATEGIES PLAY OUT?
A. Unfortunately, not too well. The Korean banking system as a whole
suffered as more and more companies filed for bankruptcy.
Specifically, the fund's positions in Shinhan Bank and Korea Exchange
Bank experienced negative results. In terms of civil engineering and
construction-related stocks, I was under the impression six months ago
that the government would be spending considerably more on
infrastructure improvements. Much to my chagrin, this didn't happen.
As a result, the fund's positions in Hyundai Engineering &
Construction and Dong Ah Construction - the latter of which the fund
no longer owns - were negatively affected.
Q. WERE THERE ANY OTHER AREAS THAT INFLUENCED THE FUND'S PERFORMANCE?
A. Insurance and shipbuilding stocks played key roles, both negatively
and positively. Korean insurance companies - such as the fund's
position in Samsung Fire & Marine - turned in a lackluster performance
due to pricing regulations and high business expenses. The Korean
government is gradually deregulating the insurance industry from a
pricing standpoint, and the price wars that ensued had a negative
effect on several of the fund's holdings. Shipbuilding companies, on
the other hand, typify my strategy of focusing on export-oriented
industries. Demand picked up considerably in this area and the
weakening won helped several of the fund's shipbuilding-related
stocks, particularly Daewoo Heavy Industries.
Q. OVER THE PAST COUPLE OF YEARS, MORE AND MORE FOREIGN INVESTORS HAVE
BEEN PULLING OUT OF KOREA IN FAVOR OF OTHER REGIONAL ALTERNATIVES. HOW
HAS THIS AFFECTED THE KOREAN MARKETS, AND HAS THE GOVERNMENT TAKEN ANY
STEPS TO REGAIN INVESTOR CONFIDENCE?
A. Lack of foreign appeal has had a major impact on Korea's market
and, while the government has continued to deregulate the foreign
stock ownership process, it may take a while to win investors back.
When a foreign investor buys shares of a Korean company, the investor
typically pays a premium. Prior to deregulation and the country's
bankruptcy woes, this premium had reached levels as high as 50%.
However, as troubles set in and foreign investors backed away, this
premium contracted to around 30%. The Korean government has hinted
strongly that it might push the amount of foreign ownership - the
percentage of Korean companies' shares that can be owned by overseas
entities - from its current level of 23% to 26%. While this may entice
more foreign investing, the bottom line is that the economy needs to
continue to improve and we need to see a slowdown in the number of
bankruptcies. These trends won't reverse themselves overnight -
investors need to be patient.
Q. ASIDE FROM THE INDIVIDUAL STOCKS WE'VE MENTIONED, WERE THERE ANY
OTHER POSITIVE OR NEGATIVE CONTRIBUTORS?
A. On the plus side, I'd also point to Hankuk Glass as being
influential. Hankuk benefited from a slowdown in glass imports from
China due to higher tax rates there. On the down side, Sungmi Telecom
Electronics saw its business volumes dwindle and its stock suffered as
a result.
Q. WHAT'S YOUR SHORT-TERM OUTLOOK?
A. From a fund perspective, I'll continue to focus on export-oriented
sectors such as technology. I'll also try to take advantage of the
weak Korean won by de-emphasizing sectors that are heavily reliant on
imports and have high levels of dollar-denominated debt. The wild card
in Korea's ability to recover is whether the country will continue to
experience frequent bankruptcies. I thought the amount of bankruptcies
would subside during the period, but it didn't happen. We'll have to
wait and see.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
HOKEUN CHUNG ON THE
PROBLEMS KOREAN
CORPORATIONS HAVE
ENCOUNTERED:
"WITH KOREA'S ECONOMY IN A
PROTRACTED DOWN CYCLE IN RECENT
YEARS, KOREAN CORPORATIONS HAVE
HAD TO WORK THAT MUCH HARDER TO STAY
AFLOAT. UNFORTUNATELY, MANY HAVE
SUNK, AS EVIDENCED BY THE
DISTURBING STRING OF BANKRUPTCIES
WE'VE SEEN.
"KOREAN COMPANIES AS A WHOLE HAVE
BEEN ABLE TO OPERATE SUCCESSFULLY AS
LONG AS THEY'VE HAD A SOLID SOURCE OF
FUNDING. IN TRYING TO IMPROVE THEIR
STANDING, HOWEVER, KOREAN
COMPANIES OFTEN HAVE THEIR HANDS
TIED. KOREA DOESN'T HAVE THE LUXURY
OF POSSESSING ANY UNIQUE NATURAL
RESOURCES, SO MANY COMPANIES HAVE
HAD TO RESORT TO OVERSEAS BORROWING.
THE PROBLEM HERE, HOWEVER, IS THAT
THE GOVERNMENT MUST ISSUE ITS STAMP
OF APPROVAL ON ANY FOREIGN
BORROWING AGREEMENT. TIGHT
RESTRICTIONS ON FOREIGN BORROWING
- - WHICH HAVE BECOME SOMEWHAT
MORE LENIENT RECENTLY - HAVE SERVED
AS AN IMPEDIMENT FOR MANY OF THESE
COMPANIES. AT THE SAME TIME, SEVERAL
COMPANIES THAT HAVE BORROWED
FREQUENTLY ARE SO SADDLED WITH DEBT
THAT THEY'VE HAD TO DECLARE
BANKRUPTCY.
"LATELY, KOREAN CORPORATIONS HAVE
BEEN BORROWING FOREIGN IDEAS
INSTEAD OF FOREIGN MONEY. WE'VE
SEEN A NUMBER OF
SHAREHOLDER-FRIENDLY MOVES SUCH AS
STOCK BUYBACKS AND RESTRUCTURINGS
- - SIMILAR TO WHAT'S BEEN GOING ON
IN BOTH THE U.S. AND EUROPE - AND
KOREAN COMPANIES ARE STARTING TO
BECOME MORE PROFIT-ORIENTED. IT
COULD TAKE SOME TIME, THOUGH, TO
SEE ANY MAJOR DIFFERENCES."
FUND FACTS
GOAL: TO ACHIEVE LONG-TERM
CAPITAL APPRECIATION THROUGH
INVESTMENTS IN EQUITY AND DEBT
SECURITIES OF KOREAN ISSUERS
TRADING SYMBOL: FAK
START DATE: OCTOBER 31, 1994
SIZE: AS OF SEPTEMBER 30,
1997, MORE THAN $45 MILLION
MANAGER: HOKEUN CHUNG, SINCE
1996; JOINED FIDELITY IN 1994
(CHECKMARK)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF SEPTEMBER 30, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
KOREA ELECTRIC POWER CORP. 10.9 13.9
SAMSUNG ELECTRONICS CO. LTD. (VTG.) 7.1 4.0
LG ELECTRONICS, INC. 4.2 0.0
SAMSUNG FIRE & MARINE INSURANCE 4.1 3.6
POHANG IRON & STEEL CO. LTD. 3.1 1.2
LG SEMICON CO. LTD. 2.5 1.1
S1 CORP. 2.3 2.7
LG CHEMICAL LTD. 1.8 1.0
SUHEUNG CAPSULE CO. LTD. 1.7 2.0
SHIN SUNG ENGINEERING CO. 1.6 1.7
TOP TEN MARKET SECTORS AS OF SEPTEMBER 30, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
TECHNOLOGY 16.4 13.8
FINANCE 16.1 17.4
UTILITIES 13.0 16.8
BASIC INDUSTRIES 10.6 7.2
DURABLES 8.1 6.2
CONSTRUCTION & REAL ESTATE 7.2 9.9
INDUSTRIAL MACHINERY & EQUIPMENT 5.6 2.3
HEALTH 4.8 5.8
RETAIL & WHOLESALE 3.7 3.1
NONDURABLES 3.1 4.4
INVESTMENTS SEPTEMBER 30, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
COMMON STOCKS - 96.3%
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - 10.6%
CHEMICALS & PLASTICS - 5.3%
Korea Chemical 9,000 $ 672,560
Lg Chemical Ltd. 50,000 808,743
Oriental Chemical Industries Co. Ltd. 23,031 480,756
Youl Chon Chemical Co. 10,000 437,158
2,399,217
IRON & STEEL - 3.1%
Pohang Iron & Steel Co. Ltd. 18,245 1,411,983
METALS & MINING - 1.6%
Daesung Cable Co. (a) 8,000 384,699
Young Poong Mining & Construction Corp. 10,000 316,940
701,639
PAPER & FOREST PRODUCTS - 0.6%
Hankuk Paper Manufacturing Co. 10,000 281,967
TOTAL BASIC INDUSTRIES 4,794,806
CONSTRUCTION & REAL ESTATE - 7.2%
BUILDING MATERIALS - 4.3%
Hanil Cement Manufacturing Co. Ltd. 6,000 264,918
Hankuk Glass Industry Co. Ltd. 16,000 428,415
Keumkang Ltd. 10,000 453,552
Kyung Dong Boiler Co. Ltd. 13,000 412,022
Kyungwon Century Co. Ltd. 15,000 373,770
1,932,677
CONSTRUCTION - 1.8%
Lg Construction Ltd. 34,000 449,617
Sam Whan Corp. 30,000 363,934
813,551
ENGINEERING - 1.1%
Hyundai Engineering & Construction Co. Ltd. (a) 27,000 531,147
TOTAL CONSTRUCTION & REAL ESTATE 3,277,375
DURABLES - 8.1%
AUTOS, TIRES, & ACCESSORIES - 2.3%
Hyundai Motor Co. Ltd. 15,000 436,459
Mando Machinery Corp. 17,000 622,404
1,058,863
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 4.2%
Lg Electronics, Inc. 95,000 $ 1,887,541
TEXTILES & APPAREL - 1.6%
BYC Co. Ltd. 3,250 323,224
Youngone Corp. 20,000 380,328
703,552
TOTAL DURABLES 3,649,956
ENERGY - 1.5%
COAL - 0.4%
Samchully Co. 4,000 192,350
OIL & GAS - 1.1%
Daesung Industrial Co. Ltd. 12,000 473,443
TOTAL ENERGY 665,793
FINANCE - 16.1%
BANKS - 8.2%
Cho Hung Bank Co. Ltd. 120,000 567,869
Commercial Bank of Korea Co. 60,000 259,016
Housing & Commercial Bank 30,169 516,203
Housing & Commercial Bank GDR (Reg.) 10,000 195,000
Kookmin Bank 50,000 585,246
Korea Exchange Bank 80,000 430,164
Korea Technology Banking Corp. 20,000 306,011
Kyung Nam Bank 33,000 236,229
Shinhan Bank 73,204 614,433
3,710,171
CREDIT & OTHER FINANCE - 0.7%
Samsung Securities Co. Ltd. 20,000 301,639
INSURANCE - 4.0%
Samsung Fire & Marine Insurance 4,830 1,833,605
SECURITIES INDUSTRY - 3.2%
Daewoo Securities Co. Ltd. (a) 30,000 452,459
Dongwon Securities Co. Ltd. 42,000 441,115
Shin Young Securities Co. 40,000 537,705
1,431,279
TOTAL FINANCE 7,276,694
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - 4.8%
DRUGS & PHARMACEUTICALS - 3.4%
Dong-A Pharmaceutical Co. Ltd. 15,221 $ 332,699
Korea Green Cross Corp. 6,000 419,672
Korea Green Cross Corp. Rights 11/30/97 (a) 384 8,226
Suheung Capsule Co. Ltd. 11,000 754,973
1,515,570
MEDICAL EQUIPMENT & SUPPLIES - 1.4%
Medison Co. Ltd. 7,500 643,443
TOTAL HEALTH 2,159,013
INDUSTRIAL MACHINERY & EQUIPMENT - 5.6%
ELECTRICAL EQUIPMENT - 1.6%
Anam Industrial Co. Ltd. 45,000 718,033
INDUSTRIAL MACHINERY & EQUIPMENT - 4.0%
Daewoo Heavy Industries Ltd. 80,000 636,503
Hyundai Precision Industry Co. Ltd. 38,000 456,831
Lg Industrial Systems Ltd. 20,000 404,372
Rocket Electric 13,000 296,940
1,794,646
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,512,679
MEDIA & LEISURE - 1.5%
LODGING & GAMING - 0.6%
Hotel Shilla 40,000 297,268
PUBLISHING - 0.9%
Woong Jin Publishing Co. Ltd. 8,300 403,661
TOTAL MEDIA & LEISURE 700,929
NONDURABLES - 3.1%
BEVERAGES - 1.3%
Lotte Chilsung Beverage Co. 5,000 595,628
FOODS - 0.8%
Tong Yang Confectionery Co. 15,000 385,246
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 1.0%
Han Kook Cosmetics Industry 20,000 $ 437,158
TOTAL NONDURABLES 1,418,032
RETAIL & WHOLESALE - 3.7%
RETAIL & WHOLESALE, MISCELLANEOUS - 1.1%
Hyosung T & C Co. Ltd. 20,000 496,175
TRADING COMPANIES - 2.6%
Daewoo Corp. 80,000 563,934
Hyundai Housing & Industry Development Co. 15,669 253,444
Hae In Corp. 8,000 349,727
1,167,105
TOTAL RETAIL & WHOLESALE 1,663,280
SERVICES - 2.3%
S1 Corp. 5,480 1,032,396
TECHNOLOGY - 16.4%
COMMUNICATIONS EQUIPMENT - 2.2%
Lg Information & Communications Ltd. 5,000 483,606
Sindo Ricoh Co. 10,300 526,392
1,009,998
ELECTRONIC INSTRUMENTS - 1.0%
Sungmi Telecom Electronics Co. 5,000 442,623
ELECTRONICS - 13.2%
Dae Duck Electronics Co. Ltd. (a) 5,080 371,423
Lg Semicon Co. Ltd. (a) 33,000 1,110,819
Mirae Corp. 3,000 557,377
Samsung Electronics Co. Ltd. (vtg.) 34,176 3,204,140
Shin Sung Engineering Co. 10,758 727,782
5,971,541
TOTAL TECHNOLOGY 7,424,162
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - 2.4%
AIR TRANSPORTATION - 0.5%
Korean Air 16,010 $ 218,716
SHIPPING - 1.1%
Hanjin Shipping Co. Ltd. (a) 15,000 244,262
Global Enterprises 4,450 257,273
501,535
TRUCKING & FREIGHT - 0.8%
Hyundai Merchant Marine Co. Ltd. (a) 20,000 358,470
TOTAL TRANSPORTATION 1,078,721
UTILITIES - 13.0%
CELLULAR - 1.5%
SK Telecom Ltd. (a) 1,100 672,022
ELECTRIC UTILITY - 11.5%
Korea Electric Power Corp. 222,000 4,925,245
Kyung Nam Energy Co. Ltd. 10,000 293,989
5,219,234
TOTAL UTILITIES 5,891,256
TOTAL COMMON STOCKS
(Cost $58,563,841) 43,545,092
CASH EQUIVALENTS - 3.7%
Taxable Central Cash Fund (b)
(Cost $1,659,647) 1,659,647 1,659,647
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $60,223,488) $ 45,204,739
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund
was 5.66%. The yield refers to the income earned by investing in the
fund over the seven-day period, expressed as an annual percentage.
INCOME TAX INFORMATION
At September 30, 1997, the aggregate cost of investment securities for
income tax purposes was $60,546,300. Net unrealized depreciation
aggregated $15,341,561, of which $2,170,789 related to appreciated
investment securities and $17,512,350 related to depreciated
investment securities.
At September 30, 1997, the fund had a capital loss carryforward of
approximately $6,231,000 of which $3,725,000 and $2,506,000 will
expire on September 30, 2004 and 2005, respectively.
The fund intends to elect to defer to its fiscal year ending September
30, 1998 approximately $7,153,000 of losses recognized during the
period November 1, 1996 to September 30, 1997.
For the period, interest and dividends from foreign countries were
$631,187. Taxes accrued or paid to foreign countries were $107,334.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $60,223,488) - $ 45,204,739
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 242,320
INTEREST RECEIVABLE 7,828
DEFERRED ORGANIZATION EXPENSES 65,278
TOTAL ASSETS 45,520,165
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 60,300
ACCRUED MANAGEMENT FEE 40,109
OTHER PAYABLES AND ACCRUED EXPENSES 107,705
TOTAL LIABILITIES 208,114
NET ASSETS $ 45,312,051
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 74,104,864
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (13,774,192)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (15,018,621)
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS, FOR 6,243,381 SHARES OUTSTANDING $ 45,312,051
NET ASSET VALUE PER SHARE ($45,312,051 (DIVIDED BY) 6,243,381 $7.26
SHARES)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1997
INVESTMENT INCOME $ 631,187
DIVIDENDS
INTEREST 95,256
726,443
LESS FOREIGN TAXES WITHHELD (107,334)
TOTAL INCOME 619,109
EXPENSES
MANAGEMENT FEE $ 499,494
TRANSFER AGENT FEES 13,123
ADMINISTRATION FEES AND EXPENSES 99,988
DIRECTORS' COMPENSATION 52,365
CUSTODIAN FEES AND EXPENSES 141,454
AUDIT 53,494
LEGAL 21,508
AMORTIZATION OF ORGANIZATION EXPENSES 31,500
REPORTS TO SHAREHOLDERS 10,054
MISCELLANEOUS 18,349
TOTAL EXPENSES BEFORE REDUCTIONS 941,329
EXPENSE REDUCTIONS (3,790) 937,539
NET INVESTMENT INCOME (LOSS) (318,430)
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES (7,625,426)
FOREIGN CURRENCY TRANSACTIONS (119,473) (7,744,899)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (7,536,087)
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 3,687 (7,532,400)
NET GAIN (LOSS) (15,277,299)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (15,595,729)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ (318,430) $ (365,584)
NET INVESTMENT INCOME (LOSS)
NET REALIZED GAIN (LOSS) (7,744,899) (2,556,498)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (7,532,400) (5,499,790)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (15,595,729) (8,421,872)
FROM OPERATIONS
SHARE TRANSACTIONS 13,726,456 -
COMMON STOCK ISSUED THROUGH RIGHTS OFFERING NET OF
SALES LOAD AND OFFERING EXPENSES
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,869,273) (8,421,872)
NET ASSETS
BEGINNING OF PERIOD 47,181,324 55,603,196
END OF PERIOD $ 45,312,051 $ 47,181,324
OTHER INFORMATION 1,836,288 -
SHARES SOLD
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30, OCTOBER 31, 1994
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30,
1997 1996 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA F
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.71 $ 12.62 $ 14.10
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (.06) (.08) (.02)
NET REALIZED AND UNREALIZED GAIN (LOSS) (3.14) (1.83) (1.30)
TOTAL FROM INVESTMENT OPERATIONS (3.20) (1.91) (1.32)
DILUTION RESULTING FROM COMMON STOCK ISSUED THROUGH (.19) - -
RIGHTS OFFERING
OFFERING EXPENSES (.06) K - (.16)
NET ASSET VALUE, END OF PERIOD $ 7.26 $ 10.71 $ 12.62
MARKET VALUE, END OF PERIOD $ 6.875 $ 10.500 $ 11.125
TOTAL RETURN B, C (31.23)% D (5.62)% (25.83)% D
MARKET VALUE H
NET ASSET VALUE E, G (28.08)% (15.13)% (10.50)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 45,312 $ 47,181 $ 55,603
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.88% 1.80% 1.88% A
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.88% 1.79% I 1.88% A
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE (.64)% (.68)% (.19)% A
NET ASSETS
PORTFOLIO TURNOVER RATE 51% 28% 25% A
AVERAGE COMMISSION RATE J $ .1154 $ .1420
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D TOTAL MARKET VALUE RETURN INCLUDES THE EFFECT OF THE SALES LOAD PAID
IN CONNECTION WITH THE INITIAL PUBLIC OFFERING AND RIGHTS OFFERING.
E 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 DISTRIBUTION, IF ANY, WERE REINVESTED.
THIS PERCENTAGE IS NOT AN INDICATION OF THE PERFORMANCE OF
SHAREHOLDER'S INVESTMENT IN THE FUND BASED ON THE MARKET VALUE DUE TO
DIFFERENCES BETWEEN THE MARKET PRICE OF THE STOCK AND THE NET ASSET
VALUE OF THE FUND.
F NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
G TOTAL NET ASSET VALUE RETURN DOES NOT INCLUDE THE EFFECT OF DILUTION
OR SALES LOAD.
H 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.
I FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
J 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.
K OFFERING EXPENSES PER SHARE HAS BEEN REDUCED BY $.02 DUE TO A
REDUCTION TO OFFERING EXPENSES ACCRUED IN CONNECTION WITH THE INITIAL
ISSUANCE OF SHARES.
NOTES TO FINANCIAL STATEMENTS
For the year ended September 30, 1997
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Korea Fund, Inc. (the fund), a Maryland corporation,
is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as a non-diversified closed-end management investment
company.
There are 100,000,000 shares of $.001 par value common stock
authorized. Commencing in the first calendar quarter of 1998, and in
the first calendar quarter of each year thereafter, the Board of
Directors of the fund may, under certain circumstances, conduct a
tender offer to repurchase a maximum of ten percent of the fund's
outstanding shares of common stock at a price equal to the net asset
value per share at the time of repurchase.
In January 1997, the fund completed a rights offering, including the
exercise of an over-allotment option, resulting in the issuance of an
additional 1,836,288 shares of common stock. Each shareholder was
issued one right for each share of the fund's common stock held as of
November 15, 1996, the record date. For every three rights issued,
shareholders were entitled to purchase one new share of the fund's
common stock at a subscription price of $7.96 per share.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at
the closing bid price in the principal market in which such securities
are normally traded. Securities for which quotations are not readily
available are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Income
receipts and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Purchases and sales of securities are translated into U.S. dollars at
the contractual currency exchange rates established at the time of
each trade.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, and the
difference between the amount of net investment income accrued and the
U.S. dollar amount actually received. The effects of changes in
foreign currency exchange rates on investments in securities are
included with the net realized and unrealized gain or loss on
investment securities.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
U.S. federal income taxes to the extent that it distributes
substantially all of its taxable income for its fiscal year. The fund
may be subject to foreign taxes on income, gains on investments or
currency repatriation which are accrued based upon the fund's
understanding of the tax rules and regulations that exist in the
markets in which it invests. The fund accrues such taxes as
applicable. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income is accrued as earned. Investment
income is recorded net of foreign taxes withheld where recovery of
such taxes is uncertain.
EXPENSES. The fund incurred organization expenses in connection with
its initial issuance of shares. The organization expenses of $157,276
are being amortized on a straight-line basis for a five-year period
beginning at the commencement of operations of the fund. In addition,
the fund incurred offering expenses in connection with its rights
offering of $486,185 which were paid from the proceeds of the offering
and charged to capital.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Certain foreign currency gains (losses) are taxable
as ordinary income and, therefore, increase (decrease) taxable
ordinary income available for distribution.
Pursuant to the fund's Dividend Reinvestment and Cash Purchase Plan
(the Plan), shareholders may elect to have all distributions
automatically reinvested in fund shares. Shareholders who do not
participate in the Plan will receive all distributions in cash paid by
check in U.S. dollars. 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. If the
net asset value is less than 95% of the market price on the valuation
date, then 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 date, the next
preceding trading date. If the net asset value exceeds the market
price of the fund shares at such time, the Plan Agent will purchase
shares of stock valued at market price on the valuation date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for foreign currency transactions, capital loss
carryforwards and losses deferred due to wash sales and excise tax
regulations.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
The fund invests in new securities offered by some foreign companies
by making applications in the public offerings. The full or a portion
of the issue price is paid at the time of the application and recorded
as application money for new issues. Upon allotment, this amount plus
the remaining amount of issue price is recorded as cost of
investments.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission(the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by FMR Texas, an affiliate of FMR. The Cash Fund is
an open-end money market fund available only to investment companies
and other accounts managed by FMR and its affiliates. The Cash Fund
seeks preservation of capital, liquidity, and current income by
investing in U.S. Treasury securities and repurchase agreements for
these securities. Income distributions from the Cash Fund are declared
daily and paid monthly from net interest income. Income distributions
received by the fund are recorded as interest income in the
accompanying financial statements.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $37,090,406 and $24,070,638, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee
that is computed daily at an annual rate of 1.00% of the fund's
average net assets.
ADVISER FEE. FMR and the fund entered into an investment advisory
agreement with Fidelity International Investment Advisors (FIIA), an
affiliate of FMR, pursuant to which FIIA is responsible for the
management of the fund's portfolio in accordance with the fund's
investment policies and for making decisions to buy or sell
securities. FMR pays FIIA a portion of its management fee.
SUB-ADVISER FEE. FIIA, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Japan Limited (FIJ),
an affiliate of FMR, to provide advisory services concerning fund
assets invested in Japanese and other securities. FIIA pays FIJ a
portion of its fee based on the assets managed by FIJ.
ADMINISTRATIVE FEE. Fidelity Service Company, Inc. (FSC), a division
of FMR Corp., has entered into a Fund Management Agreement with the
fund to provide, or arrange to provide, administrative services to the
fund including maintaining the fund's accounting records. As the
fund's administrative manager, FSC receives a monthly fee at an annual
rate of .20% of the fund's average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into an arrangement with its custodian whereby
credits realized as a result of uninvested cash balances were used to
reduce a portion of the fund's expenses. During the period, the fund's
custodian fees were reduced by $3,790 under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the shareholders of Fidelity
Advisor Korea Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Korea Fund, Inc. at September 30, 1997, the results
of its operations for the year then ended, and the changes in its net
assets and the financial highlights for the periods indicated in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Korea Fund, Inc.'s management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at
September 30, 1997, by correspondence with the custodian
and the application of alternative auditing procedures where
securities purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 7, 1997
PROXY VOTING RESULTS
The annual meeting of the fund's shareholders was held on June 19,
1997. The results of votes taken among shareholders on proposals are
listed below.
PROPOSAL 1
To elect two Class III Directors (Messrs. van den Hoven and Malone) to
serve for a term expiring on the date on which the annual meeting of
shareholders is held in 2000, or until their successors are duly
elected and qualified.
# OF % OF
SHARES VOTED SHARES VOTED
HELMERT FRANS VAN DEN HOVEN (CLASS III DIRECTOR)
AFFIRMATIVE 4,416,854 97.15
WITHHELD 129,599 2.85
TOTAL 4,546,453 100.000
EDWARD H. MALONE (CLASS III DIRECTOR)
AFFIRMATIVE 4,417,354 97.16
WITHHELD 129,099 2.84
TOTAL 4,546,453 100.000
PROPOSAL 2
To ratify the selection of Price Waterhouse LLP as independent
accountants of the fund.
# OF % OF
SHARES VOTED SHARES VOTED
AFFIRMATIVE 4,459,320 98.09
AGAINST 42,935 .94
ABSTAIN 44,198 .97
TOTAL 4,546,453 100.000
DIVIDENDS AND DISTRIBUTIONS
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The fund intends to distribute annually to shareholders substantially
all of its net investment income from dividends and interest earnings
and expects to distribute any net realized capital gains at least
annually. Pursuant to the Dividend Reinvestment and Cash Purchase Plan
(the "Plan"), adopted by the fund, shareholders 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
all distributions in cash paid by check in U.S. dollars mailed
directly to the shareholder by the Plan Agent. Shareholders who would
like additional information regarding the Plan or wish to have
distributions automatically reinvested should notify the fund, c/o the
Plan Agent for Fidelity Advisor Korea Fund, Inc., at Two Heritage
Drive, Quincy, Massachusetts 02171.
The Plan Agent will serve 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, as shareholders may have elected,
non-participants 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 or, if the net asset value is less than 95% of the
market price on the valuation date, then new 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, then 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 a 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, with the cash in respect of such dividend or
distribution, for the participant's account on, or shortly after, the
payment date.
Participants in the Plan have the option of making additional 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 of each year. Any voluntary cash
payments received more than thirty days prior to such date will be
returned by the Plan Agent, and interest will not be paid on any
uninvested cash payments. 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 as 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 forty-eight hours before such payment is
to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in the 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 non-certificated form in the name of the
participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan. In the case of shareholders such as
banks, brokers or nominees, which 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 the
shareholder as representing the total amount registered in the
shareholder's name and held for the account of beneficial owners who
are participating in the Plan.
There is no charge to participants for reinvesting dividends or
capital gains distributions. The Plan Agent's fees for the handling of
the reinvestment of dividends and 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's account will be charged a prorata
share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of
dividends or 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 reinvestment of dividends and distributions will not relieve
participants of any income tax which may be payable on such dividends
and distributions.
If your shares are held in your own name and you wish to receive all
dividends and capital gain distributions in cash rather than in
shares, you may withdraw from the Plan without penalty at any time by
contacting the Plan Agent. If your shares are held in nominee name,
you should be able to withdraw from the Plan without penalty at any
time by sending written notice to your nominee. If you withdraw, you
will receive a share certificate for all full shares or, if you wish,
the Plan Agent will sell your shares and send you the proceeds, after
the deduction of brokerage commissions. The Plan Agent will convert
any fractional shares to cash at the then-current market price and
send you a check for the proceeds. Please note that, if you
participate in the Plan through
a brokerage account, you may not be able to continue as a participant
if you transfer those shares to another broker. Contact your broker or
nominee or the Plan Agent to see what is the best arrangement for you
to participate in the Plan.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the fund reserves the right to amend or terminate the
Plan as applied to any voluntary cash payment made and any dividend or
distribution paid subsequent to notice of the change 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 Plan
Agent by at least 30 days' written notice to all participants in the
Plan. All correspondence concerning the Plan should be directed c/o
the Plan Agent for Fidelity Advisor Korea Fund, Inc., at Two Heritage
Drive, Quincy, Massachusetts 02171.
OTHER FUND INFORMATION
All of the stock of FMR is owned by FMR Corp., its parent 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 A 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 Investment Company Act of 1940 (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.
RIGHTS OFFERING. In January 1997, the fund completed a rights offering
to holders of the fund's common stock. The primary rights offering was
oversubscribed and, pursuant to the terms of the offering, the Board
of Directors of the fund determined to exercise the offering's
over-allotment option. Through the primary rights offering and the
exercise of the over-allotment option, a total of 1,836,288 new shares
were acquired by holders of the fund's common stock.
FOREIGN OWNERSHIP LIMIT CHANGE. Korean law restricts foreign ownership
of Korean stocks. On October 1, 1996, the Korean law restriction on
foreign ownership of any issuer was increased from 18% to 20%.
Effective May 1, 1997, the Korean law restriction on foreign ownership
of any issuer was increased to 23%.
CUSTODIAN. The Chase Manhattan Bank, N.A., 1211 Avenue of the
Americas, New York 10036, is custodian of the assets of the fund. The
custodian is responsible for the safekeeping of the fund's assets and
the appointment of the subcustodian banks and clearing agencies. The
custodian takes no part in determining the investment policies of the
fund or in deciding which securities are purchased or sold by the
fund. However, the fund may invest in obligations of the custodian and
may purchase securities from or sell securities to the custodian. The
Bank of New York and The Chase Manhattan Bank, each headquartered in
New York, also may serve as a special purpose custodian of certain
assets of the fund in connection with pooled repurchase agreement
transactions.
ADDRESS
Fidelity Advisor Korea Fund, Inc.
82 Devonshire Street
Boston, MA
1-800-426-5523
INVESTMENT MANAGER
Fidelity Management &
Research Company
Boston, MA
INVESTMENT ADVISER
Fidelity International
Investment Advisors
Pembroke, Bermuda
SUB-ADVISER
Fidelity Investments Japan Limited
Tokyo, Japan
DIRECTORS AND OFFICERS
Edward C. Johnson 3d,
Director and President
Robert C. Pozen, Director and
Senior Vice President
Helmert Frans van den Hoven, Director
Edward H. Malone, Director
Bertram H. Witham, Jr., Director
David L. Yunich, Director
William Ebsworth, Vice President
Billy W. Wilder, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Stuart E. Fross, Assistant Secretary
John H. Costello, Assistant Treasurer
Pradip Darooka, Assistant Treasurer
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
State Street Bank and Trust Company
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
LEGAL COUNSEL
Rogers & Wells
New York, NY
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
Boston, MA
(registered trademark)
