FIDELITY(REGISTERED TRADEMARK) ADVISOR
KOREA FUND, INC.
SEMIANNUAL REPORT
MARCH 31, 2000
(2_FIDELITY_LOGOS)(registered trademark)
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 13 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 17 Notes to the financial
statements.
DIVIDENDS AND DISTRIBUTIONS 21 Dividend reinvestment and
cash purchase plan.
OTHER FUND INFORMATION 23 Changes and updates.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
Concerned about the high valuations of technology stocks, investors
poured money into so-called old economy stocks during March, sparking
a rally in blue chips during which the Dow Jones Industrial Average
gained 499 points in a single day. Treasuries also benefited as a
haven from the technology sector, as the yield of the 10-year note -
which some consider the new bellwether Treasury issue - trended
downward throughout the month.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
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
(photograph of Hokeun Chung)
An interview with Hokeun Chung, Portfolio Manager of Fidelity Advisor
Korea Fund, Inc.
Q. HOW DID THE FUND PERFORM, HOKEUN?
A. The fund performed very well. For the six-month period that ended
March 31, 2000, the fund posted a total return of 24.77%, based on net
asset value, while the Korea Stock Exchange Composite Price Index
(KOSPI) returned 13.67% during the same period. In terms of the fund's
market value return - which represents gains or losses in the fund's
share price - the fund returned 43.38%. For the 12 months that ended
March 31, 2000, the fund returned 79.57% based on net asset value and
89.32% in market value terms. The KOSPI returned 55.40% during the
same period.
Q. WHY DID THE FUND OUTPERFORM THE KOSPI DURING THE SIX-MONTH PERIOD?
A. Early in the period, I added new positions to the fund in selected
technology companies - Haansoft, Serome Technology and Digital Chosun
- - which are listed on the KOSDAQ exchange, a Korean stock exchange
that lists the majority of publicly traded technology and
telecommunications companies. The addition of these companies, which
performed extremely well due to a shift in investor sentiment to
so-called new economy technology stocks, caused the fund to be
overweighted in the sector compared to the KOSPI. This significantly
benefited performance. Additionally, the fund's overweighted exposure
to many telecommunications companies provided a boost to performance
as investors began to view them as Internet-related stocks rather than
pure telecommunications companies. In the latter half of the period,
the broader Korean stock market experienced a pullback, but the fund's
gains in these two sectors early on, coupled with strong stock
selection, helped it outperform the benchmark.
Q. IN LIGHT OF THE MARKET VOLATILITY DURING THE PERIOD, WHAT SPECIFIC
STRATEGIES DID YOU PURSUE?
A. In the fourth quarter of 1999, I took some profits by selling some
of the Internet-related stocks that had performed extremely well and,
in my opinion, had become somewhat overvalued, such as Haansoft, Daou
Technology and Serome. My strategy was to reduce some of the
technology stocks that previously had been evaluated based on
estimated sales and projected revenues, and to shift some of that
money into tech-nology stocks of equipment companies that had current
real earnings and strong growth outlooks. Many of the Internet-related
companies in Korea are not showing positive earnings yet, so I began
focusing on technology companies that had the best potential to grow
with the deployment of the Internet. Some of those companies included:
LG Information & Communication, a company that manufactures wireless
handsets; Trigem Computer, a home computer manufacturer; and Samsung
Electro-Mechanics, a firm that makes internal components for computers
and handsets.
Q. SIX MONTHS AGO, YOU MENTIONED THAT GOVERNMENT INTERVENTION,
RELATIVELY LOW INTEREST RATES AND A NON-INFLATIONARY ENVIRONMENT WERE
FUELING INVESTOR CONFIDENCE IN THE MARKET. DID THIS TREND CONTINUE?
DID THE FUND BENEFIT?
A. The economic conditions that fostered the Korean stock market's
strong growth during the past 18 months remained in place. Korea
continued to experience better-than-expected gross domestic product
(GDP) results, while inflation remained around the 1% level during the
period. Meanwhile, the Korean government, with the cooperation of
banks, continued to force companies to improve their profitability. In
particular, Samsung Electronics, the fund's largest holding, continued
to write off most of its losses in its investment subsidiaries last
year. By the end of the period, the company had paid down a major
portion of its outstanding debt. This restructuring was recognized in
the market and had a great positive impact on the fund. Another
holding, LG Chemical, also reduced its debt by selling some
unprofitable business units. Although the company's performance was a
detractor from the fund's overall performance during the period, I
still feel confident in the company's fundamentals going forward.
Q. WHAT SPECIFIC STOCKS PERFORMED WELL?
A. The fund's top performers were those that represented the new
economy - or those in the telecommunications and technology sectors.
Samsung Electronics, the country's top manufacturer of dynamic random
access memory (DRAM), once again led all outperformers in the
technology sector as demand for DRAM remained brisk. SK Telecom,
Korea's largest provider of wireless communications, was another top
performer due to the increasing appetite of its huge subscriber base
for new wireless data products. Similarly, the performance of Korea
Telecom boosted returns as investors reacted positively to its
diversified business lines - mobile communications, broadband access
and Internet service providers (ISPs).
Q. WHICH STOCKS WERE DISAPPOINTING?
A. Labeled as an old economy stock, Pohang Iron and Steel, one of the
fund's top holdings, underperformed as investors favored companies
with faster growth rates. As the period progressed, I continued to
believe in a strong global steel cycle and held Pohang on the basis of
its very cheap valuation and its past history of being a very
efficient steel company. Korea Electric Power, another very
inexpensive company, didn't participate in the market's gains as
investors reacted unfavorably to a delay in the expected government
approval of the privatization of the firm.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. In terms of valuation, the Korean stock market is still very cheap
compared to its historical valuation and other regional markets.
Further, continued government reforms and corporate restructuring
should prove beneficial in both the short and long term for equities.
I expect the fundamentals of the market to consistently improve and
present many opportunities to add shareholder value. That said, we may
see continued market volatility in the immediate future as investors
question whether the growth of the Korean economy is sustainable
without inflation. In terms of the portfolio itself, I will continue
to focus on growth stocks in the telecommunications and technology
sectors, concentrating on those stocks that exhibit real earnings
growth while being selective on Internet-related companies.
Additionally, I also will continue to maintain the fund's position in
selective industrial stocks that are at historically inexpensive
levels. Finally, with strong GDP growth projected and rising
inflationary fears, the fund will remain underweighted in the
interest-rate sensitive financial sector.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: to achieve long-term
capital appreciation through
investments in equity and
debt securities of Korean
issuers
FUND NUMBER: 603
TRADING SYMBOL: FAK
START DATE: October 31,
1994
SIZE: as of March 31, 2000,
more than $75 million
MANAGER: Hokeun Chung,
since 1995; joined Fidelity
in 1994
NOTE TO SHAREHOLDERS:
On February 10, 2000, the Board
of Directors of Fidelity Advisor
Korea Fund, Inc. announced that
the shareholders of the fund will
be asked to approve a proposal to
convert the fund into an open-end
investment company. The vote is
scheduled to take place at the
fund's annual meeting, which has
been scheduled for June 14, 2000.
Materials providing a detailed
description of the proposed
conversion and voting information
will be sent to shareholders prior to
the meeting. The conversion of the
fund is being proposed because
although there have been times
when the fund's shares have traded
at a premium, the fund's shares have
generally been trading at a discount
to their net asset value since August
of 1998, despite the fund having
repurchased 10% of its outstanding
shares in 1999.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF MARCH
31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Samsung Electronics Co. Ltd. 21.7 15.0
SK Telecom Co. Ltd. 11.1 3.6
Korea Telecom 9.0 7.7
Korea Electric Power Corp. 7.2 9.9
Pohang Iron & Steel Co. Ltd. 4.5 6.8
Samsung Electro-Mechanics Co. 3.5 2.5
Hyundai Electronics 3.2 1.3
Industries Co. Ltd.
Dacom Corp. 2.9 0.0
LG Chemical Ltd. 2.7 2.9
LG Information & 2.2 0.8
Communications Ltd.
68.0 50.5
TOP TEN MARKET SECTORS AS OF
MARCH 31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Utilities 33.7 23.3
Technology 33.6 22.4
Finance 8.3 15.7
Basic Industries 7.7 12.2
Industrial Machinery & 3.5 2.5
Equipment
Durables 3.1 6.2
Nondurables 2.1 3.8
Health 1.9 2.5
Retail & Wholesale 1.7 3.2
Services 1.5 2.9
</TABLE>
INVESTMENTS MARCH 31, 2000 (UNAUDITED)
Showing Percentage of Net Assets
COMMON STOCKS - 98.5%
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - 7.7%
CHEMICALS & PLASTICS - 2.9%
Honam Petrochemical Corp. 12,000 $ 164,488
LG Chemical Ltd. 70,000 2,001,358
2,165,846
IRON & STEEL - 4.5%
Pohang Iron & Steel Co. Ltd. 35,000 3,428,750
PAPER & FOREST PRODUCTS - 0.3%
Hansol Paper Co. Ltd. 30,000 238,860
TOTAL BASIC INDUSTRIES 5,833,456
CONSTRUCTION & REAL ESTATE -
0.4%
BUILDING MATERIALS - 0.4%
Keumkang Ltd. 6,836 299,974
CONSTRUCTION - 0.0%
Daelim Industrial Co. 1,749 9,969
TOTAL CONSTRUCTION & REAL 309,943
ESTATE
DURABLES - 3.1%
AUTOS, TIRES, & ACCESSORIES -
2.3%
Hyundai Motor Co. Ltd. 70,000 848,677
Samsung Corp. 70,000 940,512
1,789,189
CONSUMER ELECTRONICS - 0.8%
LG Electronics, Inc. 20,000 582,674
TOTAL DURABLES 2,371,863
ENERGY - 0.6%
OIL & GAS - 0.6%
Ssangyong Oil Refining 25,000 463,696
FINANCE - 8.3%
BANKS - 6.0%
Hana Bank 100,000 610,722
Housing & Commercial Bank 66,000 1,283,873
Kookmin Bank 120,000 1,216,015
Shinhan Bank 130,000 1,393,803
4,504,413
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 1.0%
Samsung Securities Co. Ltd. 31,890 $ 764,610
INSURANCE - 0.7%
Samsung Fire & Marine 21,200 519,810
Insurance
SECURITIES INDUSTRY - 0.6%
Daewoo Securities Co. Ltd. 7,109 2,444
rights 5/2/00 (a)
Dongwon Securities Co. Ltd. 7,350 110,724
Dongwon Securities Co. Ltd. 2,799 2,659
rights 5/22/00 (a)
Hyundai Securities Co. Ltd. 26,750 341,258
457,085
TOTAL FINANCE 6,245,918
HEALTH - 1.9%
DRUGS & PHARMACEUTICALS - 0.3%
Suheung Capsule Co. Ltd. 20,000 229,812
MEDICAL EQUIPMENT & SUPPLIES
- - 1.6%
Medison Co. Ltd. 93,960 1,219,929
TOTAL HEALTH 1,449,741
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.5%
ELECTRICAL EQUIPMENT - 3.5%
Samsung Electro-Mechanics Co. 37,800 2,640,272
MEDIA & LEISURE - 0.4%
LODGING & GAMING - 0.4%
Hotel Shilla Co. (a) 50,000 300,837
NONDURABLES - 2.1%
AGRICULTURE - 0.6%
Korea Tobacco & Ginseng Co. 20,000 437,005
Ltd.
FOODS - 1.5%
Cheil Jedang Corp. 18,000 1,183,986
TOTAL NONDURABLES 1,620,991
RETAIL & WHOLESALE - 1.7%
GENERAL MERCHANDISE STORES -
1.0%
Shinsegae Department Store 17,660 766,958
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.5%
39Shopping Corp. 5,000 321,194
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
TRADING COMPANIES - 0.2%
Hyundai Industrial 29,266 $ 155,167
Development & Construction
Co.
TOTAL RETAIL & WHOLESALE 1,243,319
SERVICES - 1.5%
ADVERTISING - 1.0%
Cheil Communications, Inc. 6,000 743,723
SERVICES - 0.5%
S1 Corp. 25,002 382,297
TOTAL SERVICES 1,126,020
TECHNOLOGY - 33.6%
COMMUNICATIONS EQUIPMENT - 2.6%
Comtec System Co. Ltd. 20,000 184,574
LG Information & 13,007 1,635,805
Communications Ltd.
Opicom Co. Ltd. (a) 1,810 140,837
1,961,216
COMPUTER SERVICES & SOFTWARE
- - 2.4%
Daou Technology, Inc. (a) 30,000 618,865
Digital Chosun Co. Ltd. (a) 3,000 407,148
Korealink Co. Ltd. (a) 3,730 249,735
Medidas Co. Ltd. 10,000 211,717
Medidas Co. Ltd. rights 1,054 7,352
4/27/00 (a)
SEROME Technology, Inc. 6,774 345,672
1,840,489
COMPUTERS & OFFICE EQUIPMENT
- - 2.6%
Korea Computer, Inc. (a) 35,000 522,506
Trigem Computer, Inc. 18,000 1,392,446
Trigem Computer, Inc. rights 2,256 23,473
4/17/00 (a)
1,938,425
ELECTRONICS - 26.0%
Hyundai Electronics 110,003 2,448,383
Industries Co. Ltd. (a)
Mirae Corp. 80,000 448,767
Samsung Electronics Co. Ltd. 54,000 16,367,347
Samsung SDI Co. Ltd. 10,000 370,957
19,635,454
TOTAL TECHNOLOGY 25,375,584
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
Korean Air 1,500 $ 14,250
UTILITIES - 33.7%
CELLULAR - 11.5%
Hansol M.com Co. Ltd. (a) 8,000 260,213
SK Telecom Co. Ltd. 2,579 8,400,274
8,660,487
ELECTRIC UTILITY - 7.2%
Korea Electric Power Corp. 190,000 5,415,066
TELEPHONE SERVICES - 15.0%
Dacom Corp. 8,000 2,178,693
Haansoft, Inc. (a) 35,000 823,343
Korea Telecom 77,000 6,827,417
Korea Telecom sponsored ADR 35,000 1,531,250
11,360,703
TOTAL UTILITIES 25,436,256
TOTAL COMMON STOCKS 74,432,146
(Cost $38,670,032)
CORPORATE BONDS - 0.0%
MOODY'S RATINGS (UNAUDITED)
FINANCE - 0.0%
BANKS - 0.0%
Shinhan Bank 0% 12/31/48 unit - 6,493 (c) 770
(Cost $49)
CASH EQUIVALENTS - 0.6%
SHARES VALUE (NOTE 1)
Taxable Central Cash Fund, 462,578 $ 462,578
5.85% (b) (Cost $462,578)
TOTAL INVESTMENT PORTFOLIO - 74,895,494
99.1%
(Cost $39,132,659)
NET OTHER ASSETS - 0.9% 677,637
NET ASSETS - 100% $ 75,573,131
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Amount represents units held.
INCOME TAX INFORMATION
At March 31, 2000, the aggregate cost of investment securities for
income tax purposes was $40,324,766. Net unrealized appreciation
aggregated $34,570,728, of which $38,625,056 related to appreciated
investment securities and $4,054,328 related to depreciated investment
securities.
At September 30, 1999, the fund had a capital loss carryforward of
approximately $29,824,000 of which $3,725,000, $2,506,000, $11,446,000
and $12,147,000 will expire on September 30, 2004, 2005, 2006 and
2007, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 74,895,494
value (cost $39,132,659) -
See accompanying schedule
Receivable for investments 258,505
sold
Dividends receivable 589,583
Interest receivable 971
TOTAL ASSETS 75,744,553
LIABILITIES
Accrued management fee $ 64,103
Other payables and accrued 107,319
expenses
TOTAL LIABILITIES 171,422
NET ASSETS $ 75,573,131
Net Assets consist of:
Paid in capital $ 68,802,687
Accumulated net investment (5,389)
(loss)
Accumulated undistributed net (28,998,967)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 35,774,800
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 5,619,043 $ 75,573,131
shares outstanding
NET ASSET VALUE ($75,573,131 $13.45
(divided by) 5,619,043
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31,
2000 (UNAUDITED)
INVESTMENT INCOME $ 748,398
Dividends
Interest 10,014
758,412
Less foreign taxes withheld (122,435)
TOTAL INCOME 635,977
EXPENSES
Management fee $ 382,914
Transfer agent fees 11,098
Administration fees and 76,583
expenses
Director's compensation 36,668
Custodian fees and expenses 66,513
Audit 27,166
Legal 12,210
Amortization of organization 2,278
expenses
Reports to shareholders 25,979
Miscellaneous 7,178
Total expenses before 648,587
reductions
Expense reductions (7,221) 641,366
NET INVESTMENT INCOME (LOSS) (5,389)
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 2,311,642
Foreign currency transactions (35,115) 2,276,527
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 12,702,597
Assets and liabilities in (1,804) 12,700,793
foreign currencies
NET GAIN (LOSS) 14,977,320
NET INCREASE (DECREASE) IN $ 14,971,931
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ (5,389) $ (211,518)
income (loss)
Net realized gain (loss) 2,276,527 7,027,931
Change in net unrealized 12,700,793 35,458,966
appreciation (depreciation)
NET INCREASE (DECREASE) IN 14,971,931 42,275,379
NET ASSETS RESULTING FROM
OPERATIONS
Share Transactions
Common stock repurchased - (4,588,886)
Repurchase offer expenses - (50,478)
Redemption fees added to - 50,478
paid in capital
Cost of shares repurchased - (4,588,886)
TOTAL INCREASE (DECREASE) 14,971,931 37,686,493
IN NET ASSETS
NET ASSETS
Beginning of period 60,601,200 22,914,707
End of period (including $ 75,573,131 $ 60,601,200
accumulated net investment
loss of $5,389 and $0,
respectively)
OTHER INFORMATION - (624,338)
Shares repurchased
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MARCH 31, 2000 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.78 $ 3.67 $ 7.26 $ 10.71 $ 12.62
period
Income from Investment
Operations
Net investment income (loss) (.00) (.04) K (.05) (.06) (.08)
H
Net realized and unrealized 2.67 7.15 (3.54) (3.14) (1.83)
gain (loss)
Total from investment 2.67 7.11 (3.59) (3.20) (1.91)
operations
Dilution resulting from - - - (.19) -
common stock issued through
rights offering
Offering expenses - - - (.06) -
Net asset value, end of $ 13.45 $ 10.78 J $ 3.67 $ 7.26 $ 10.71
period
Market value, end of period $ 12.188 $ 8.500 $ 3.438 $ 6.875 $ 10.500
TOTAL RETURN B Market value E 43.38% 147.27% (50.00)% (31.23) % D (5.62)%
Net asset value C, F, G 24.77% 193.73% (49.45)% (28.08)% (15.13)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 75,573 $ 60,601 $ 22,915 $ 45,312 $ 47,181
(000 omitted)
Ratio of expenses to average 1.69% A 1.75% 2.32% 1.88% 1.80%
net assets
Ratio of expenses to average 1.67% A, I 1.61% I, K 2.30% I 1.88% 1.79% I
net assets after expense
reductions
Ratio of net investment (.01)% A (.42)% (1.22)% (.64)% (.68)%
income (loss) to average net
assets
Portfolio turnover rate 40% A 58% 65% 51% 28%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30,
1995 L
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 14.10
period
Income from Investment
Operations
Net investment income (loss) (.02)
H
Net realized and unrealized (1.30)
gain (loss)
Total from invest- ment (1.32)
operations
Dilution resulting from
common stock issued through -
rights offering
Offering expenses (.16)
Net asset value, end of $ 12.62
period
Market value, end of period $ 11.125
TOTAL RETURN B Market value E (25.83) % D
Net asset value C, F, G (10.50)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 55,603
(000 omitted)
Ratio of expenses to average 1.88% A
net assets
Ratio of expenses to average 1.88% A
net assets after expense
reductions
Ratio of net investment (.19)% A
income (loss) to average net
assets
Portfolio turnover rate 25% A
</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.
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 MARKET VALUE REFLECTS THE EFFECT OF CHANGES IN
THE FUND'S MARKET VALUE AND ASSUMES DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS, IF ANY, WERE REINVESTED.
F 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
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.
G THE TOTAL NET ASSET VALUE RETURN DOES NOT INCLUDE THE EFFECT OF
DILUTION OR SALES LOAD.
H NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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.
J THE FUND INCURRED EXPENSES OF $.01 PER SHARE IN CONNECTION WITH ITS
REPURCHASE OFFER WHICH WERE OFFSET BY REDEMPTION FEES COLLECTED AS
PART OF THE REPURCHASE OFFER.
K INCLUDES REIMBURSEMENT OF $.01 PER SHARE FROM THE CUSTODIAN FOR AN
ADJUSTMENT TO PRIOR PERIODS' FEES.
L FOR THE PERIOD OCTOBER 31, 1994 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1995.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 2000 (Unaudited)
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. During the first calendar quarter of each year, the Board
of Directors of the fund may, under certain circumstances, conduct a
repurchase or 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 March 1999, the fund completed a repurchase offer for ten percent
of the fund's outstanding shares. The repurchase offer resulted in the
repurchase of 624,338 shares of the fund's common stock at a net asset
value of $7.35 per share. Such shares are included as authorized but
unissued shares of the fund.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require 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. If trading or events occurring in other markets
after the close of the principal market in which securities are traded
are expected to materially affect the value of those securities, then
they are valued at their fair value taking this trading or these
events into account. Fair value is determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Securities for which quotations are not readily
available are valued primarily using dealer-supplied valuations or at
their fair value. 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. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent disposition of foreign currencies, the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received, and gains and losses between trade and settlement
date on purchases and sales of securities. 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 which are accrued based upon
the fund's understanding of the tax rules and regulations that exist
in the markets in which it invests. Foreign governments may also
impose taxes on other payments or transactions with respect to foreign
securities. 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
were amortized on a straight-line basis for a five-year period
beginning at the commencement of operations of the fund. The
organization expenses have been fully amortized as of March 31, 2000.
In addition, the fund incurred expenses in connection with its
repurchase offers of approximately $50,478 which were paid by the fund
and charged to paid in capital. These expenses were offset by
redemption fees collected as a part of the repurchase offer and were
accounted for as an addition to paid in capital.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
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 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, net
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
operating losses, capital loss carryforwards and losses deferred due
to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated net investment loss and 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 offering. Either all, 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, Federal Agency,
or other obligations found to be satisfactory by FMR 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 Fidelity Investments Money Management, Inc., 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. Income distributions from the Cash Fund
are declared daily and paid monthly from net interest income. Income
distributions earned 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 $14,871,870 and $15,350,766, 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.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $7,221 under this arrangement.
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 the 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
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
INVESTMENT SUB-ADVISER
Fidelity Investments Japan Limited
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
Keith Ferguson, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
Gregory T. Merz, Assistant Secretary
John H. Costello, Assistant Treasurer
FAK-SANN-0500 100854
1.702313.102
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
Clifford Chance Rogers & Wells LLP
New York, NY
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
Boston, MA
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
