SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
X Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section240.14a-11(c) or
Section 240.14a-12
FIDELITY ADVISOR KOREA FUND, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
_________________________________________________________
FIDELITY ADVISOR KOREA FUND, INC.
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800- 522-7297
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of the Above Fund:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
(Meeting) of Fidelity Advisor Korea Fund, Inc. (Korea Fund) will be
held at the offices of Korea Fund, 27 State Street, 10th Floor,
Boston, Massachusetts 02109, on June 14, 2000, at 10:00 a.m. Eastern
time. The purpose of the Meeting is to consider and act upon the
following proposals, and to transact such other business as may
properly come before the Meeting or any adjournments thereof:
1. To elect a Board of Directors of Korea Fund to serve for a term
expiring on the date on which the annual meeting of stockholders is
held in 2001 or until their successors are duly elected and qualified.
2. To ratify the selection of PricewaterhouseCoopers LLP as
independent accountants of Korea Fund.
3. To approve the reorganization (Reorganization) of Korea Fund as an
open-end investment company pursuant to an Agreement and Plan of
Reorganization (Agreement) between Korea Fund and Fidelity Advisor
Series VIII, a Massachusetts business trust (Trust), providing for the
transfer of all of the assets of Korea Fund to a newly created series
of the Trust (New Fund) in exchange for Class A shares of beneficial
interest of the New Fund and the assumption by the New Fund of the
liabilities of Korea Fund and the distribution of such Class A shares
of the New Fund to stockholders of Korea Fund upon the liquidation and
dissolution of Korea Fund.
4. To make Korea Fund's current fundamental 65% "name test"
investment policy non-fundamental.
5. To amend the fundamental investment limitation concerning industry
concentration to permit Korea Fund to invest up to 35% of its total
assets in certain industries.
The principal purpose of the Reorganization is to convert Korea Fund
from a Maryland corporation to an open-end, multiple-class fund
organized as a newly created series of a Massachusetts business trust.
As a result of the Reorganization, each stockholder of Korea Fund will
be credited with a number of full and fractional Class A shares of the
New Fund equal in value to the aggregate net asset value (NAV) of
shares of Korea Fund held by such stockholder on the date of the
Reorganization. The NAV of each fund will be determined according to
each fund's valuation procedures. There are no material differences
between the way Korea Fund and the New Fund determine their respective
NAVs. The New Fund will operate as an open-end fund with the same
investment objective, and substantially the same policies and
restrictions (other than as amended as described in Proposals 3, 4 and
5 in this Proxy Statement) as currently exist for Korea Fund.
The Board of Directors has fixed the close of business on April 15,
2000, as the record date for the determination of the stockholders of
Korea Fund entitled to notice of, and to vote at, such Meeting and any
adjournments thereof.
By order of the Board of Directors,
ERIC D. ROITER, Secretary
April 28, 2000
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY
STOCKHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN
IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of
assistance to you and help avoid the time and expense involved in
validating your vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy card. For
example:
REGISTRATION VALID SIGNATURE
A. (1) ABC Corp. John Smith, Treasurer
(2) ABC Corp. John Smith, Treasurer
c/o John Smith, Treasurer
B. (1) ABC Corp. Profit Sharing Ann B. Collins, Trustee
(2) ABC Trust Ann B. Collins, Trustee
(3) Ann B. Collins, Trustee Ann B. Collins, Trustee
u/t/d 12/28/78
C. (1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
TABLE OF CONTENTS
Voting Information
Synopsis
The Proposals
Miscellaneous
Exhibit: Agreement and Plan of Reorganization 21
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
FIDELITY ADVISOR KOREA FUND, INC.
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800- 522-7297
TO BE HELD ON JUNE 14, 2000
VOTING INFORMATION
This Proxy Statement (Proxy Statement) is furnished in connection
with a solicitation of proxies made by, and on behalf of, the Board of
Directors (the Board) of Fidelity Advisor Korea Fund, Inc. (Korea
Fund) to be used at the Annual Meeting of Stockholders of Korea Fund
and at any adjournments thereof (Meeting), to be held on June 14, 2000
at 10:00 a.m. at 27 State Street, 10th Floor, Boston, Massachusetts
02109, the office of Korea Fund and Fidelity Management & Research
Company (FMR), the Fund's Investment Manager.
The purpose of the Meeting is set forth in the accompanying Notice.
The solicitation is made primarily by the mailing of this Proxy
Statement and the accompanying proxy card on or about April 28, 2000.
Supplementary solicitations may be made by mail, telephone, facsimile,
electronic means or by personal interview by representatives of Korea
Fund. In addition, D.F. King & Co., Inc. will assist the Korea Fund in
soliciting proxies for the Meeting and will be paid a fee of
approximately $4,000 (or such other fee as determined necessary and
appropriate by the Fund) plus out-of-pocket expenses. The expenses in
connection with preparing this Proxy Statement and its enclosures will
be paid by Korea Fund. The Fund will reimburse brokerage firms and
others for their reasonable expenses in forwarding solicitation
material to the beneficial owners of shares.
If the enclosed proxy card is executed and returned, it may
nevertheless be revoked at any time prior to its use by written
notification received by Korea Fund, by the execution of a later-dated
proxy card, or by attending the Meeting and voting in person.
All proxy cards solicited by the Board of Directors that are properly
executed and received by the Secretary prior to the Meeting, and which
are not revoked, will be voted at the Meeting. Shares represented by
such proxies will be voted in accordance with the instructions
thereon. If no specification is made on a proxy card, it will be voted
FOR the matters specified on the proxy card. Only proxies that are
voted will be counted toward establishing a quorum. Broker non-votes
are not considered voted for this purpose. Stockholders should note
that while votes to ABSTAIN will count toward establishing a quorum,
passage of any proposal being considered at the Meeting will occur
only if a sufficient number of votes are cast FOR the proposal.
Accordingly, votes to ABSTAIN and votes AGAINST will have the same
effect in determining whether the proposal is approved.
If a quorum is not present at the Meeting, or if a quorum is present
at the Meeting but sufficient votes to approve one or more of the
proposed items are not received, or if other matters arise requiring
stockholder attention, the persons named as proxy agents may propose
one or more adjournments of the Meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of
a majority of those shares present at the Meeting or represented by
proxy. When voting on a proposed adjournment, the persons named as
proxy agents will vote FOR the proposed adjournment all shares that
they are entitled to vote with respect to each item, unless directed
to vote AGAINST the item, in which case such shares will be voted
against the proposed adjournment with respect to that item. A
stockholder vote may be taken on one or more of the items in this
Proxy Statement or on any other business properly presented at the
Meeting prior to such adjournment if sufficient votes have been
received and it is otherwise appropriate.
KOREA FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999, TO ANY STOCKHOLDER
REQUESTING THE REPORT. REQUESTS FOR THE ANNUAL REPORT SHOULD BE MADE
IN WRITING TO FIDELITY ADVISOR KOREA FUND, INC., 82 DEVONSHIRE STREET,
BOSTON, MA 02109, OR BY CALLING 1-800-999-0285 .
FMR, with main offices located at 82 Devonshire Street, Boston,
Massachusetts 02109, is Korea Fund's Investment Manager. Fidelity
International Investment Advisors (FIIA), with main offices located at
Pembroke Hall, 42 Crow Lane, Pembroke, Bermuda, and an office located
at Citibank Tower, 16th Floor, Three Garden Road, Central, Hong Kong,
is Korea Fund's Investment Adviser. The Sub-Investment Adviser to the
Fund is Fidelity Investments Japan Limited (FIJ), with main offices
located at Shiroyama JT Mori Building, 4-3-1 Toranomon, Minato-ku,
Tokyo 105, Japan. Fidelity Services Company, Inc., with main offices
located at 82 Devonshire St., Boston, MA 02109, is Korea Fund's
administrator.
On April 15, 2000, there were 5,619,043.57 shares issued and
outstanding for Korea Fund. Stockholders of record of Korea Fund at
the close of business on April 15, 2000 are entitled to vote at
the Meeting with respect to the proposals set forth in the
accompanying notice. Each such stockholder will be entitled to one
vote for each share (and proportionate fractional votes for each
fraction of a share) held on that date.
As of April 15, 2000, the Directors and officers of Korea Fund owned,
in the aggregate, less than 1% of the Fund's total outstanding shares.
As of December 31, 1999, to the knowledge of Korea Fund, the
President & Fellows of Harvard College was the beneficial owner of
324,950 shares of Korea Fund, which at that time constituted 5.8% of
the issued and outstanding shares of Korea Fund. As of February 29,
2000, to the knowledge of Korea Fund, City of London Investment Group
(COLIG) PLC was the beneficial owner of 457,119 shares of Korea Fund,
which at that time constituted 8.14% of the issued and outstanding
shares of Korea Fund. As of April 10, 2000, one of COLIG's
subsidiaries, City of London Investment Management Company Limited,
was the beneficial owner of 199,920 shares of Korea Fund, which at
that time constituted 3.56% of the issued and outstanding shares of
Korea Fund.
As of April 15, 2000, to the knowledge of Korea Fund, no other
stockholder owned beneficially 5% or more of the outstanding shares of
Korea Fund.
VOTES REQUIRED:
A MAJORITY OF ALL VOTES CAST AT THE MEETING IS SUFFICIENT TO APPROVE
PROPOSALS 1 AND 2. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF
CAPITAL STOCK OF KOREA FUND OUTSTANDING AND ENTITLED TO VOTE THEREUPON
IS NECESSARY TO APPROVE PROPOSAL 3. APPROVAL OF PROPOSALS 4 AND 5
REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" OF KOREA FUND, AS DEFINED UNDER THE INVESTMENT COMPANY ACT
OF 1940, AS AMENDED (THE 1940 ACT). UNDER THE 1940 ACT, THE VOTE OF A
"MAJORITY OF THE OUTSTANDING VOTING SECURITIES" MEANS THE AFFIRMATIVE
VOTE OF THE LESSER OF (A) 67% OR MORE OF THE VOTING SECURITIES PRESENT
AT THE MEETING OR REPRESENTED BY PROXY IF THE HOLDERS OF MORE THAN 50%
OF THE OUTSTANDING VOTING SECURITIES ARE PRESENT OR REPRESENTED BY
PROXY OR (B) MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES. FOR
PROPOSALS 3, 4 AND 5, BROKER NON-VOTES WILL HAVE THE EFFECT OF A VOTE
TO DISAPPROVE THESE PROPOSALS.
SYNOPSIS
The following is a summary of certain information contained
elsewhere in this Proxy Statement and in the Agreement. Stockholders
should read the entire Proxy Statement carefully for more complete
information.
Stockholders of Korea Fund will be asked at the upcoming Meeting (i)
to elect a Board of Directors of Korea Fund to serve for a term
expiring on the date on which the annual meeting of stockholders is
held in 2001, or until their successors are duly elected and
qualified, (ii) to ratify the selection of PricewaterhouseCoopers LLP
as independent accountants of Korea Fund, (iii) to vote upon and
approve the reorganization of Korea Fund (Reorganization) as an
open-end fund, as described below, (iv) to make Korea Fund's
fundamental 65% "name test" investment policy non-fundamental, and (v)
to amend the fundamental investment limitation concerning industry
concentration to permit Korea Fund to invest up to 35% of its total
assets in certain industries.
THE PROPOSED REORGANIZATION
Stockholders of Korea Fund are being asked to approve the
Reorganization, the principal purpose of which is to convert Korea
Fund into an open-end fund by reorganizing the Fund as a newly-created
series (New Fund) of Fidelity Advisor Series VIII, a Massachusetts
business trust (Trust). As a closed-end fund, Korea Fund's shares have
often traded at a discount to net asset value (NAV). Converting Korea
Fund into an open-end fund will eliminate the discount and give
shareholders of the New Fund the ability to realize the value of their
shares by redeeming them from the New Fund at NAV (subject to a
redemption fee of 4% for the first 200 days following the
Reorganization, as described in Proposal 3).
The Reorganization will be accomplished pursuant to an Agreement and
Plan of Reorganization (Agreement), which provides for the acquisition
by the New Fund of all of the assets of Korea Fund in exchange for
Class A shares of beneficial interest of the New Fund and the
assumption by the New Fund of the liabilities of Korea Fund. The
Reorganization will occur on such date as the Board of Directors of
Korea Fund and the Trustees of the Trust may determine (Closing Date).
As provided in the Agreement, Korea Fund will then constructively
distribute, as soon as conveniently practical, the Class A shares of
the New Fund to its stockholders in liquidation of Korea Fund.
Accordingly, as a result of the Reorganization, Korea Fund will
dissolve and the former stockholders of Korea Fund will become Class A
shareholders of the New Fund.
The New Fund will continue to have the same investment objective,
and, except as described below, substantially the same investment
policies and restrictions as currently apply to Korea Fund. As
described in Proposal 3, in order to conform Korea Fund's investment
restrictions to those typically associated with Fidelity's open-end
international equity funds, three of Korea Fund's fundamental
investment restrictions will be amended relating to Korea Fund's
ability to borrow, lend and effect transactions in physical
commodities. In addition, the New Fund will adopt a new fundamental
investment policy permitting the New Fund to invest all of its assets
in another open-end investment company managed by FMR or an affiliate
with substantially the same investment objective and policies as the
New Fund and a non-fundamental policy stating that it does not
currently intend to invest all of its assets in the securities of
another open-end investment company. The New Fund will also adopt new
non-fundamental investment policies, including a new limit reducing
the New Fund's ability to invest in illiquid securities. Moreover, as
described in Proposal 4, stockholders will be asked to approve the
adoption of a proposal to make Korea Fund's fundamental 65% "name
test" investment policy non-fundamental. Also, as described in
Proposal 5, stockholders will be asked to approve the amendment of a
fundamental investment limitation to permit Korea Fund to invest up to
35% of its total assets in certain industries.
In connection with the Reorganization, the New Fund will adopt a new
Management Agreement, new Sub-Advisory Agreements and a new
Distribution and Service Plan. Under the New Fund's Management
Agreement, FMR will continue to manage the New Fund, but will reduce
its management fee from 1.00% of Korea Fund's average daily net assets
to a current effective rate of 0.83% of the New Fund's average daily
net assets . FMR has also agreed to voluntarily reimburse the
New Fund to the extent that total operating expenses (excluding
interest, taxes, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) exceed 2.10% of the
average net assets attributable to the Class A shares of the New Fund
for a period of not less than twelve months after the Reorganization.
FMR will voluntarily cap the expense levels for the New Fund's other
share classes at comparable levels. For the twelve months ended
September 30, 1999, Korea Fund's expense ratio was 1.75% (1.61% after
a one-time reduction due to certain adjustments to the Fund's
custodian fees) of average net assets.
Each stockholder of Korea Fund will be credited with a number of full
and fractional Class A shares of the New Fund equal in value to the
aggregate NAV of Korea Fund held by such stockholder on the Closing
Date , or as soon thereafter as conveniently possible . The
NAV of each fund will be determined according to each fund's valuation
procedures. There are no material differences between the way Korea
Fund and the New Fund determine their respective NAVs. Korea Fund
stockholders will not pay any sales load in connection with the
exchange of Korea Fund shares for Class A shares of the New Fund, but
the Class A shares will be subject to a 12b-1 fee calculated as a
percentage of the New Fund's average net assets attributable to Class
A shares at an annual rate of 0.25%. The 12b-1 fee applicable to the
Class A shares will be lower than the 12b-1 fee applicable to any
other share class of the New Fund available to non-institutional
investors.
The Korea Fund and the Trust have received an opinion of Fund
counsel, Clifford Chance Rogers & Wells LLP, that the Reorganization
will not result in any gain or loss for Federal income tax purposes to
Korea Fund, the New Fund, stockholders of Korea Fund or shareholders
of the New Fund.
If approved at the Meeting, it is anticipated that the Reorganization
will occur on or about June 30, 2000, but the Reorganization could be
delayed or cancelled as provided in the Agreement. The Agreement
provides that if either the Board of Directors of Korea Fund or the
Trustees of the Trust determine that consummation of the
Reorganization is impracticable or inadvisable due to adverse market
developments, the parties may determine to delay the Reorganization or
terminate the Agreement in its entirety. See "Proposal 3 - To Approve
the Reorganization."
THE PROPOSALS
1. TO ELECT A BOARD OF DIRECTORS
Persons named in the accompanying form of proxy intend, in the
absence of contrary instructions, to vote all proxies for the election
of the six nominees listed below as Directors of Korea Fund:
Helmert Frans van den Hoven
Edward C. Johnson 3d
Edward H. Malone
Robert C. Pozen
Bertram H. Witham, Jr.
David L. Yunich
to serve for terms expiring on the date of the annual meeting of
stockholders in 2001 or until their successors are duly elected and
qualified. If any nominee should be unable to serve, an event that is
not now anticipated, the proxies will be voted for such person, if
any, as shall be designated by the Board of Directors to replace such
nominee. THESE NOMINEES ARE BEING NOMINATED TO SERVE AS DIRECTORS OF
KOREA FUND UNTIL THE REORGANIZATION, OR, IF THE REORGANIZATION DOES
NOT OCCUR, UNTIL THE DATE ON WHICH AN ANNUAL MEETING OF STOCKHOLDERS
IS HELD IN 2001 OR UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND
QUALIFIED. THE TRUST IS GOVERNED BY A SEPARATE BOARD OF TRUSTEES. FOR
A DESCRIPTION OF THE TRUSTEES, PLEASE SEE "INFORMATION REGARDING THE
TRUST."
The nominees named below are currently Directors of Korea Fund, and
have served in that capacity continuously since originally elected.
The nominees are not related to one another.
In the election of Directors, if the six nominees receive a majority
of the votes cast at the Meeting, and provided that a quorum is
present, they will be elected.
Nominated Directors of the
Fund
Nominees (Age)+ Principal Occupation** Director Since
Helmert Frans van den Hoven Former Member, Supervisory 1994
K.B.E. (76) Board, Royal Dutch Petroleum
Company (1984-1994); former
Chairman, Supervisory Board,
ABN/Amro Bank (1992-1994);
former Chairman, Unilever
N.V. (1975-1984); former
Vice-Chairman, Unilever PLC
(1975-1984); former
Chairman/Member of
supervisory boards of
various Dutch companies;
Member, Supervisory Board,
Hunter Douglass
(1984-present); Director of
a number of other funds in
the Fidelity Group of
International Funds
(1994-present); Director of
Fidelity Advisor Emerging
Asia Fund, Inc. (1994-1999)
and of the Fidelity Advisor
World Funds (1995-present).
*Edward C. Johnson 3d (70) Chairman, Chief Executive 1994
Officer and a Director of
FMR Corp.; Director and
Chairman of the Board and of
the Executive Committee of
FMR; Chairman and a Director
of Fidelity Investments
Money Management, Inc.
(1998-present), Fidelity
Management & Research (U.K.)
Inc., and Fidelity
Management & Research (Far
East) Inc.; Director or
Trustee and President of all
other Fidelity registered
management investment
companies advised by FMR;
Chairman of Fidelity
International Limited;
Chairman of all funds in the
Fidelity Group of
International Funds and of
Fidelity Advisor World Funds
(1995-present).
Edward H. Malone (75) Former Trustee, Fidelity 1997
U.S.-registered open-end
investment companies
(1988-1996); former Trustee,
Rensselaer Polytechnic
Institute (1979-1996) and
Prudential Savings Bank
(1980-1987); former
Director, Allegheny Energy
(1985- 1997), GenRe Corp.
(1985-1997), Mattel Corp.
(1984-1997) and Corporate
Property Investors (1985-
1996); Member of Advisory
Board, Butler Capital Corp.
and Unilever "Progress"
Pension Fund; former Member
of Advisory Board,Warburg
Pincus Partnership Funds
(1984- 1997); former
Chairman, General Electric
Investment Co., and Vice
President, General Electric
Company (1970-1986);
Director of Fidelity Advisor
Emerging Asia Fund, Inc.
(1997-1999) and of the
Fidelity Advisor World Funds
(1997-present).
*Robert C. Pozen (53) Chairman and Director of FMR 1997
(1997-present); President
and Director of Fidelity
Investments Money
Management, Inc.
(1998-present), Fidelity
Management & Research (U.K.)
Inc. (1997-present), and
Fidelity Management &
Research (Far East) Inc.
(1997-present); former
General Counsel, Managing
Director, and Senior Vice
President of FMR Corp.
(1987-1997); Trustee of
other funds advised by FMR
(1997-present); Director of
Fidelity Advisor World Funds
(1997-present).
Bertram H. Witham, Jr. (81) Former Trustee, Fidelity 1994
U.S.-registered open-end
investment companies
(1979-1993); Chairman and
Director, Preferred Lodging
System; Director, Bill Glass
Ministries; Trustee,
Fidelity North Carolina
Capital Management Fund;
former Treasurer, IBM Co.
(1973-1978); Director of
Fidelity Advisor Emerging
Asia Fund, Inc. (1994-1999)
and of Fidelity Advisor
World Funds (1995-present).
David L. Yunich (81) Former Trustee, Fidelity 1994
U.S.-registered open-end
investment companies
(1978-1990); former Director
and consultant, W.R. Grace &
Company (1977-1995); former
Director, New York Racing
Association (1977-1995);
former Director, Prudential
Insurance Company of America
(1955-1991); former
Director, River Bank America
(1964-1997); former
Director, W.R. Grace &
Company (1977-1995); former
Director, NYNEX Corporation
(1970-1990); former Trustee,
Saratoga Performing Arts
Center, Boy Scouts of
America, and Carnegie Hall;
former President, Vice
Chairman and Director, R.H.
Macy & Company (1955-1978);
Trustee, Fidelity
Investments Charitable Gift
Fund (1992-present);
Director of Fidelity Advisor
Emerging Asia Fund, Inc.
(1994-1999) and of the
Fidelity Advisor World Funds
(1995-present).
* An "interested person" of the Fund, as defined by the 1940 Act.
** Except as otherwise indicated, each individual has held the office
shown or other offices in the same company for the last five years.
+ Based on statements furnished to the Fund by the nominees, as of
February 29, 2000, the Directors cumulatively and in the aggregate
beneficially owned less than 1% of the Fund.
If elected, each nominee will hold office in accordance with Korea
Fund's Bylaws and Articles of Incorporation, except that (a) any
Director may resign; and (b) any Director may be removed only with
cause, provided, however, that such removal may be made only by the
vote of three-fourths of the shares of capital stock of Korea Fund
outstanding and entitled to vote thereupon, voting together, as a
single class, at any Annual or Special Meeting of Stockholders. In
case a vacancy for any reason exists, the remaining Directors will
fill such vacancy by appointing another Director, so long as,
immediately after such appointment, at least two-thirds of the
Directors have been elected by stockholders. If, at any time, less
than a majority of the Directors holding office has been elected by
the stockholders, the Directors then in office will promptly call a
stockholders' meeting for the purpose of electing a Board of
Directors.
Korea Fund's Board, which is currently composed of two interested and
four non-interested Directors, met four times during the twelve months
ended September 30, 1999. In general, the Directors meet at least four
times a year at regularly scheduled meetings. Each Director attended
at least 75% of the aggregate number of Board meetings and meetings of
committees on which he served during the twelve months ended September
30, 1999.
Korea Fund's Audit Committee is composed entirely of Directors who
are not "interested persons" of Korea Fund or of FMR or its affiliates
within the meaning of the 1940 Act (Independent Directors) and
normally meets twice a year, or as required, prior to meetings of the
Board of Directors. Currently, Messrs. Edward H. Malone, Helmert Frans
van den Hoven, Bertram H. Witham, Jr. and David L. Yunich are members
of the Audit Committee. The Committee oversees and monitors the
financial reporting process, including recommending to the Board the
independent accountants to be selected for Korea Fund (see Proposal
2), reviewing internal controls and the auditing function (both
internal and external), reviewing the qualifications of key personnel
performing audit work, and overseeing compliance procedures. During
the twelve months ended September 30, 1999, the Audit Committee held
three meetings.
Korea Fund's Nominating Committee is composed entirely of Independent
Directors and meets as required, prior to meetings of the Board of
Directors, to select the I ndependent Directors. Currently,
Messrs. Edward H. Malone, Helmert Frans van den Hoven, Bertram H.
Witham, Jr. and David L. Yunich are members of the Nominating
Committee. The Committee is charged with the duties of periodically
reviewing the composition and compensation of the Board of Directors,
proposing additional Independent Directors, and monitoring the
performance of legal counsel employed by Korea Fund and the
Independent Directors. The Nominating Committee met once during
the fiscal year ended September 30, 1999. The Nominating Committee
will consider nominees recommended by stockholders. Recommendations
should be submitted to the Nominating Committee in care of the
Secretary of Korea Fund.
For the fiscal year ended September 30, 1999, the Independent
Directors of Korea Fund received in their capacity as Directors of the
Fund, aggregate fees and expenses from Korea Fund equal to $51,814.
The following table sets forth information describing the
compensation of each Director of Korea Fund for his services as a
Director for the fiscal year ended September 30, 1999, or calendar
year ended December 31, 1999, as applicable.
<TABLE>
<CAPTION>
Name of Director Aggregate Compensation from Total Compensation from
Korea Fund* Fund Complex**
<S> <C> <C>
Helmert Frans van den Hoven $ 12,000 $ 20,500
Bertram H. Witham, Jr 12,500 98,000
David L. Yunich 12,000 70,500
Edward H. Malone 12,000 20,500
Edward C. Johnson 3d*** 0 0
Robert C. Pozen*** 0 0
</TABLE>
* Includes compensation paid to Directors by the Fund. The Fund's
Directors do not receive any pension or retirement benefits from the
Fund as compensation for their services as Directors of the Fund.
** As defined in Item 22 of Schedule 14A of the Securities Exchange
Act of 1934. Including the Fund, as of December 31, 1999, there were
236 investment companies in the Fund Complex. Mr. Johnson is a
Director or Trustee of 236 of the investment companies in the Fund
Complex, including the Fund. Mr. Pozen is a Director or Trustee of 235
of the investment companies in the Fund Complex, including the Fund.
Mr. Witham is a Director or Trustee of three investment companies in
the Fund Complex, including the Fund. Prior to the reorganization of
another Fidelity closed-end fund as an open-end fund, the Independent
Directors received compensation for their services as directors of the
other fund. Under a retirement program adopted in July 1988 and
modified in November 1995 and November 1996 by the open-end investment
companies in the Fund Complex (Open-End Funds), Messrs. Witham and
Yunich, upon reaching age 72, became eligible to participate in a
retirement program under which they receive payments during their
lifetime from a fund based upon their basic trustees fees and length
of service as trustee for the Open-End Funds. During the year ended
September 30, 1999, Messrs. Witham and Yunich received $50,000 in
payments under that retirement program. Mr. Malone, upon retirement as
a trustee for the Open-End Funds, deferred his accrued retirement
benefits for his service as a trustee for the Open-End Funds under a
deferred compensation plan. The obligation of the Open-End Funds to
make such payments is not secured or funded.
*** Messrs. Johnson and Pozen, who are "interested persons" of the
Fund, are compensated by FMR and do not receive any compensation from
the Fund or other investment companies in the Fund Complex for their
services as Directors or Trustees.
EXECUTIVE OFFICERS OF KOREA FUND
<TABLE>
<CAPTION>
Name (Age)+ Position With Korea Fund Principal Occupation and
(beginning in) Other Affiliations*
<S> <C> <C>
Edward C. Johnson 3d (70) Director and President (1994) See Nominated Directors of
the Fund table.
Robert C. Pozen (53) Director and Senior Vice See Nominated Directors of
President (1994) the Fund table.
Keith Ferguson (37) Vice President (1999) Chief Investment Officer for
Fidelity Investments
Management (Hong Kong) Ltd.
(1999- present); Regional
Investment Director for
Fidelity Investments
Management (Hong Kong) Ltd.,
(1996-1999); Chief Economist
at BZW Asia Ltd., (1993-1996).
Eric D. Roiter (52) Secretary (1998) Senior Vice President and
General Counsel of FMR
(1998-present); Adjunct
Member, Faculty of Law, at
Columbia University Law
School (1996-1997); former
partner, Debevoise &
Plimpton (1981-1997); former
Assistant General Counsel,
U.S. Securities and Exchange
Commission (1979-1981).
Robert A. Dwight (41) Treasurer (2000) Chief Financial Officer and
Treasurer of the Fidelity
Group of Funds (2000);
President of Fidelity Fund
Accounting and Custody
Services (FACS) (1997-2000);
Senior Vice President of
FACS (1995-1997); Senior
Vice President for fund
accounting operations for
the Boston Company
(1986-1994).
Maria Dwyer (41) Deputy Treasurer (2000) Deputy Treasurer of the
Fidelity Funds (2000);
Member of FMR's Investment
Development Group
(1996-2000); Employee of MFS
Mutual Funds (1990-1996).
Matthew Karstetter (38) Deputy Treasurer (1998) Deputy Treasurer of the
Fidelity Funds
(1998-present); former
Treasurer of the IDS funds,
American Express Financial
Advisors (1996-1998); former
Vice President, Mutual Fund
Services, State Street Bank
and Trust Company (1991-1996).
Gregory Merz (41) Assistant Secretary (1998) An employee of FMR Corp.
(1994-present); former
Associate, Debevoise &
Plimpton (1985-1993).
John H. Costello (53) Assistant Treasurer (1994) Assistant Treasurer of all
other registered management
investment companies managed
by FMR and an employee of
FMR (1994-present).
</TABLE>
+ Based on statements furnished to the Fund by the executive officers,
as of February 29, 2000, the executive officers cumulatively and in
the aggregate beneficially owned less than 1% of the Fund.
* Except as otherwise indicated, each individual has held the office
shown or other offices in the same company for the last five years.
2. TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS OF KOREA FUND
By a unanimous vote of Korea Fund's Audit Committee, the firm of
PricewaterhouseCoopers LLP has been selected as independent
accountants for Korea Fund to sign or certify any financial statements
of Korea Fund required by any law or regulation to be certified by an
independent accountant and filed with the Securities and Exchange
Commission (SEC) or any state. Pursuant to the 1940 Act, such
selection requires the ratification of stockholders. In addition, as
required by the 1940 Act, the vote of the Directors is subject to the
right of Korea Fund, by vote of a majority of its outstanding voting
securities at any meeting called for the purpose of voting on such
action, to terminate such employment without penalty.
PricewaterhouseCoopers LLP has advised Korea Fund that to the best
of its knowledge and belief, as of the record date, no
PricewaterhouseCoopers LLP professional had any direct or material
indirect ownership interest in the Fund inconsistent with the
independence standards pertaining to accountants.
The independent accountants examine annual financial statements for
Korea Fund and provide other audit and tax-related services. In
recommending the selection of Korea Fund's accountants, the Audit
Committee reviewed the nature and scope of the services to be provided
(including non-audit services) and whether the performance of such
services would affect the accountants' independence. Representatives
of PricewaterhouseCoopers LLP are not expected to be present at the
Meeting, but have been given the opportunity to make a statement if
they so desire and will be available should any matter arise requiring
their presence.
3. TO APPROVE THE REORGANIZATION
Stockholders of Korea Fund are being asked to vote on and approve the
Reorganization, the principal purpose of which is to convert Korea
Fund into an open-end fund. As a closed-end fund, Korea Fund does not
continuously redeem outstanding shares or sell new shares. Instead,
Korea Fund's shares, which are listed on the New York Stock Exchange
(NYSE), trade on the secondary market. Although there have been times
when the Fund's shares have traded at a premium, Korea Fund's shares
have generally been trading at a discount to NAV since August of 1998.
Converting Korea Fund into an open-end fund will eliminate the
discount and give shareholders the ability to realize the value of
their shares by redeeming them from the New Fund at NAV (subject to a
redemption fee of 4% for the first 200 days following the
Reorganization, as described below).
The Reorganization will be accomplished pursuant to the Agreement
between Korea Fund and the Trust, which provides for the
reorganization of Korea Fund as the New Fund. Pursuant to the
Agreement, the New Fund will acquire all of the assets of Korea Fund
in exchange for Class A shares of beneficial interest of the New Fund
and the assumption by the New Fund of the liabilities of Korea Fund.
As provided in the Agreement, Korea Fund will then distribute the
Class A shares of the New Fund to its stockholders. Each stockholder
will be credited with a number of full and fractional Class A shares
of the New Fund equal in value to the aggregate NAV of the
shares of Korea Fund held by such stockholder on the date of the
Reorganization. Accordingly, as a result of the Reorganization, Korea
Fund will dissolve and the stockholders of Korea Fund will become
shareholders of the New Fund.
The New Fund will continue to have the same investment objective and
substantially the same investment policies and restrictions as
currently exist for Korea Fund (except as amended as described in
Proposals 3, 4 and 5 in this Proxy Statement). As a result of the
Reorganization, Korea Fund's shares will be delisted from the NYSE.
In connection with the Reorganization, the New Fund will adopt (i)
changes to fundamental investment policies of Korea Fund relating to
Korea Fund's ability to borrow, lend, effect transactions in physical
commodities and to invest all of its assets in an open-end investment
company managed by FMR or an affiliate with substantially the same
investment objective and policies as the New Fund, (ii) a new
Investment Management Agreement between the Trust on behalf of the New
Fund and FMR, (iii) new Sub-Advisory Agreements among the Trust on
behalf of the New Fund, FMR and each of (a) FIIA, which in turn will
enter into a Sub-Subadvisory Agreement with Fidelity International
Investment Advisors (U.K.) Limited (FIIA(U.K.) L ), (b) Fidelity
Investments Japan Limited (FIJ), (c) Fidelity Management & Research
(Far East) Inc. (FMR (Far East)), which in turn will enter into a
Research Agreement with FIJ, and (d) Fidelity Management & Research
(U.K.) Inc. (FMR (U.K.)), and (e) FMR Co., Inc. (FMRC), and
(iv) a Distribution and Service Plan with respect to the Class A
shares of the New Fund.
Under the new Management Agreement, FMR will continue to manage the
New Fund, but will reduce its management fee from 1.00% of Korea
Fund's average daily net assets to a current effective fee rate of
0.83% of the New Fund's average daily net assets . For a period
of not less than twelve months after the Reorganization, FMR has also
agreed to voluntarily reimburse the New Fund to the extent that total
operating expenses (excluding interest, taxes, certain securities
lending fees, brokerage commissions and extraordinary expenses, if
any) exceed 2.10% of the average net assets attributable to the Class
A shares of the New Fund. FMR will also voluntarily cap the
expense levels of the New Fund's other share classes at comparable
levels. For the twelve months ended September 30, 1999, Korea Fund's
expense ratio was 1.75% (1.61% after a one-time reduction due to
certain adjustments to the Fund's custodian fees) of average net
assets.
The Board of Directors of Korea Fund, including the Independent
Directors, has unanimously approved the Reorganization and has
determined that the Reorganization is in the best interest of Korea
Fund and that the interests of the existing stockholders of Korea Fund
will not be diluted as a result of the Reorganization. As part of the
Reorganization, the Board has also approved the issuance of Class A
shares of the New Fund to existing stockholders of Korea Fund.
If approved at the Meeting, it is anticipated that the Reorganization
will occur on or about June 30, 2000. However, the Agreement provides
that if either the Board of Directors of Korea Fund or the Trustees of
the Trust determine that consummation of the Reorganization is
impracticable or inadvisable due to adverse market developments, such
as the imposition of currency controls or otherwise, the Board or
Trustees may determine to delay the Reorganization or terminate the
Agreement in its entirety.
REORGANIZATION AS A MASSACHUSETTS BUSINESS TRUST
Stockholders are being asked to approve the Agreement pursuant to
which Korea Fund would reorganize from a Maryland corporation to an
open-end, multiple-class fund organized as a newly-created series of
the Trust. The Trust is an open-end investment company organized as a
Massachusetts business trust by a Declaration of Trust dated September
2 2 , 1983, as amended and restated on October 1, 1986,
supplemented on November 29, 1990, amended on July 15, 1993, and
supplemented on July 17, 1997. The Declaration of Trust authorizes the
issuance of shares in different series and authorizes the Trustees,
without shareholder action, to establish and create additional series
and to designate the rights and preferences thereof. Currently, there
are nine series of the Trust: Fidelity Advisor International Capital
Appreciation Fund, Fidelity Advisor Overseas Fund, Fidelity Advisor
Emerging Markets Income Fund, Fidelity Advisor Emerging Asia Fund,
Fidelity Advisor Diversified International Fund, Fidelity Advisor
Europe Capital Appreciation Fund, Fidelity Advisor Global Equity Fund,
Fidelity Advisor Japan Fund and Fidelity Advisor Latin America Fund.
The Trustees of the Trust have authorized the designation of the New
Fund as an additional series of the Trust. The interests of investors
in the various series of the Trust will be separate and distinct. All
assets and liabilities of a particular series will be allocated to and
belong to that series.
The New Fund will have five classes of shares with differing sales
load and distribution fee structures: Class A, Class B, Class C, Class
T and Institutional Class. The stockholders of Korea Fund will receive
Class A shares of the New Fund in the Reorganization in exchange for
their shares of Korea Fund. No sales load will be payable on the Class
A shares received in this exchange, but the shares will be subject to
a 12b-1 fee calculated as a percentage of the New Fund's average net
assets attributable to Class A shares at an annual rate of 0.25%. The
12b-1 fee applicable to the Class A shares of the New Fund is lower
than the 12b-1 fee applicable to the shares of other classes of the
New Fund available to non-institutional investors. New purchases of
Class A shares of the New Fund will be subject to a maximum front-end
sales load of 5.75% and will also be subject to the 12b-1 fee.
Shareholders of the New Fund will have the ability to purchase shares
of other classes of the New Fund for which they are eligible at a
price based on the NAV of the shares (subject to each Class' maximum
sales charge).
The Class A shares of the New Fund acquired in exchange for shares of
Korea Fund will be subject to a redemption fee of 4% of the NAV
of such shares if such shares are redeemed or exchanged out of
the New Fund during the first 200 days following the Reorganization.
No redemption fee will be imposed on new sales of the New Fund's
shares. The proceeds of the redemption fee will be retained by the New
Fund. The Board of Directors and the Trustees believe that the
redemption fee represents a reasonable approximation of the potential
turnover and other costs to be incurred by the New Fund in connection
with the potentially large redemptions that may occur after the
Reorganization. The New Fund may also incur transaction costs to the
extent that the New Fund must sell securities to finance redemptions,
and the New Fund may realize taxable gains as a result of these sales
that must be distributed as taxable distributions to shareholders
(after the application of any available capital loss carryforwards).
For a discussion of the differences between open-end and closed-end
funds, see "Comparison of Open-End and Closed-End Investment
Companies" below.
INFORMATION REGARDING THE TRUST
Upon the Reorganization, the Board of Directors of Korea Fund
will be replaced by the Trustees of the Trust. The Trustees of the
Trust are listed below. Except as indicated, each individual has held
the office shown or other offices in the same company for the last
five years. All persons named as Trustees also serve in similar
capacities for other funds advised by FMR. The business address of
each Trustee who is an "interested person" (as defined in the 1940
Act) is 82 Devonshire Street, Boston, Massachusetts 02109, which is
also the address of FMR. The business address of all the other
Trustees is Fidelity Investments, P.O. Box 9235, Boston, Massachusetts
02205-9235. Those Trustees who are "interested persons" by virtue of
their affiliation with either the Trust or FMR are indicated by an
asterisk (*).
*EDWARD C. JOHNSON 3d ( 70 ), Trustee ( 1983 ), and
President. He is Chief Executive Officer, Chairman and a
Director of FMR Corp.; a Director and Chairman of the Board and
of the Executive Committee of FMR; Chairman and a Director of
Fidelity Management & Research (U.K.) Inc. and of Fidelity
Management & Research (Far East) Inc.; Chairman (1998) and a Director
(1997) of Fidelity Investments Money Management, Inc.; Chairman and
Representative Director of Fidelity Investments Japan Limited (1997);
and a Director of FDC and of FMR Co., Inc. (2000).
RALPH F. COX (67), Trustee (1991), President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Waste Management
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
and Bonneville Pacific (independent power and petroleum production).
In addition, he is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (68), Trustee (1992), Retired from Avon Products,
Inc. where she held various positions including Senior Vice President
of Corporate Affairs and Group Vice President of U.S. sales,
distribution, and manufacturing. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing), and the TJX Companies, Inc. (retail stores), and
previously served as a Director of Hallmark Cards, Inc., Nabisco
Brands, Inc., and Standard Brands, Inc. In addition, she is a member
of the Board of Directors of the Southampton Hospital in Southampton,
N.Y. (1998).
ROBERT M. GATES (56), Trustee (1997), Consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. ( automotive , space, defense, and
information technology). Mr. Gates previously served as a Director of
LucasVarity PLC (automotive components and diesel engines). He is
currently serving as Dean of the George Bush School of Government and
Public Service at Texas A&M University (1999-2000). Mr. Gates also is
a Trustee of the Forum for International Policy and of the Endowment
Association of the College of William and Mary. In addition, he is a
member of the National Executive Board of the Boy Scouts of America.
DONALD J. KIRK (67), Trustee (1987), Executive-in-Residence (1995) at
Columbia University Graduate School of Business. From 1987 to January
1995, Mr. Kirk was a Professor at Columbia University Graduate School
of Business. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk previously served as a Director
of General Re Corporation (reinsurance, 1987-19 9 8) and as a
Director of Valuation Research Corp. (appraisals and valuations,
1993-1995). He serves as Chairman of the Board of Directors of
National Arts Stabilization Inc., Chairman of the Board of Trustees of
the Greenwich Hospital Association, Director of the Yale-New Haven
Health Services Corp. (1998), Vice Chairman of the Public Oversight
Board of the American Institute of Certified Public Accountants' SEC
Practice Section (1995), and as a Public Governor of the National
Association of Securities Dealers, Inc. (1996).
NED C. LAUTENBACH (56), Trustee (2000), Partner of Clayton, Dubilier
& Rice, Inc. (private equity investment firm) since September 1998.
Mr. Lautenbach was Senior Vice President of IBM Corporation from 1992
until his retirement in July 1998. From 1993 to 1995 he was Chairman
of IBM World Trade Corporation. He also was a member of IBM's
Corporate Executive Committee from 1994 to July 1998. He is a Director
of PPG Industries Inc. (glass, coating and chemical manufacturer),
Dynatech Corporation (global communications equipment), Eaton
Corporation (global manufacturer of highly engineered products) and
ChoicePoint Inc. (data identification, retrieval, storage, and
analysis).
*PETER S. LYNCH (57), Trustee (1990), Vice Chairman and Director of
FMR and a Director of FMR Co., Inc. (2000) . Prior to May 31,
1990, he was a Director of FMR and Executive Vice President of FMR (a
position he held until March 31, 1991); Vice President of Fidelity
Magellan Fund and FMR Growth Group Leader; and Managing Director of
FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments
Corporate Services (1991-1992). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England
Antiquities, and as an Overseer of the Museum of Fine Arts of Boston.
MARVIN L. MANN (66), Trustee (1993), Chairman Emeritus, of Lexmark
International, Inc. (office machines, 1991) where he still remains a
member of the Board. Prior to 1991, he held the positions of Vice
President of International Business Machines Corporation
( " IBM " ) and President and General Manager of various IBM
divisions and subsidiaries. Mr. Mann is a Director of M.A. Hanna
Company (chemicals, 1993), Imation Corp. (imaging and information
storage, 1997). He is a Board member of Dynatech Corporation
(electronics, 1999).
WILLIAM O. MCCOY (66), Trustee (1997), Interim Chancellor for the
University of North Carolina at Chapel Hill. Previously he had served
from 1995 through 1998 as Vice President of Finance for the University
of North Carolina (16-school system). Prior to his retirement in
December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth
Corporation (telecommunications, 1984) and President of BellSouth
Enterprises (1986). He is currently a Director of Liberty Corporation
(holding company, 1984), Duke-Weeks Realty Corporation (real estate,
1994), Carolina Power and Light Company (electric utility, 1996), the
Kenan Transport Company (trucking, 1996), and Dynatech Corporation
(electronics, 1999). Previously, he was a Director of First American
Corporation (bank holding company, 1979-1996). In addition, Mr. McCoy
served as a member of the Board of Visitors for the University of
North Carolina at Chapel Hill (1994-1998) and currently serves on the
Board of Visitors of the Kenan-Flager Business School (University of
North Carolina at Chapel Hill, 1988).
GERALD C. MCDONOUGH (71), Trustee (1989), Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory services). Mr. McDonough is a Director and
Chairman of the Board of York International Corp. (air conditioning
and refrigeration), Commercial Intertech Corp. (hydraulic systems,
building systems, and metal products, 1992), CUNO, Inc. (liquid and
gas filtration products, 1996), and Associated Estates Realty
Corporation (a real estate investment trust, 1993). Mr. McDonough
served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.
*ROBERT C. POZEN (53), Trustee (1997), Senior Vice President, is also
President and a Director of FMR (1997) , Fidelity Management &
Research (U.K.) Inc. (1997), Fidelity Management & Research (Far East)
Inc. (1997), Fidelity Investments Money Management, Inc. (1998), and
FMR Co., Inc. (2000); and a Director of Strategic Advisers, Inc.
(1999). Previously, Mr. Pozen served as General Counsel, Managing
Director, and Senior Vice President of FMR Corp.
THOMAS R. WILLIAMS (71), Trustee (1989), President of The Wales
Group, Inc. (management and financial advisory services). Prior to
retiring in 1987, Mr. Williams served as Chairman of the Board of
First Wachovia Corporation (bank holding company), and Chairman and
Chief Executive Officer of The First National Bank of Atlanta and
First Atlanta Corporation (bank holding company). He is currently a
Director of National Life Insurance Company of Vermont and American
Software, Inc. Mr. Williams was previously a Director of ConAgra, Inc.
(agricultural products), Georgia Power Company (electric utility), and
Avado, Inc. (restaurants).
REASONS FOR THE REORGANIZATION
Although there have been times when Korea Fund's shares have traded
at a premium, the Fund's shares have generally been trading at a
discount from NAV since August of 1998. Converting Korea Fund into an
open-end fund would address this discount by giving stockholders the
opportunity to redeem their shares from the New Fund at NAV, subject
to the redemption fees described above.
At the time Korea Fund was organized, the Fund's Board determined
that it would be in the best interests of stockholders to take action
to attempt to reduce or eliminate any market value discount from NAV
that may develop in the secondary market. To this end, the Board
committed to conduct an annual tender offer for up to 10% of the
Fund's outstanding common stock in the first quarter of each calendar
year commencing in 1998 if (i) over a 12-week measurement period set
by the Board each year, the Fund's shares traded at an average price
of less than their initial offering price and at an average discount
of greater than 10%, and (ii) certain other conditions set forth in
the Fund's prospectus were met. The Fund did not conduct a tender
offer in 1998 (because the Fund's shares were not trading at a
discount at the time), but it did conduct a tender offer in 1999.
Although the tender offer was fully subscribed, it did not succeed in
reducing Korea Fund's discount by any significant amount or for any
appreciable period of time.
In lieu of conducting a tender offer in 2000, the Board is submitting
to shareholders this proposal to reorganize the Fund as an open-end
fund. Although, as described above, the Board committed to conducting
annual tender offers under certain circumstances at the time of the
Fund's inception, the Board also reserved the right to change this
policy in light of experience. In light of its experience with the
Korea Fund and other closed-end funds, the Board has concluded that
continuing to conduct annual tender offers would only deplete the
Fund's assets and adversely affect its long-term prospects without
having any meaningful impact on the Fund's discount. The Board is
therefore proposing to open-end the Korea Fund, because this is the
most effective means of eliminating the discount to NAV at which the
Fund's shares have traded over the last two years.
After consideration of a number of factors, the Board determined at a
meeting it held on February 10 , 2000 that participation in the
Reorganization would be in the best interests of Korea Fund and that
the interests of existing stockholders would not be diluted as a
result of effecting the Reorganization.
In reaching this determination, the Board considered that the New
Fund would be organized as a series of the Trust and would offer five
share classes - Class A, Class B, Class C , Class T and
Institutional Class. The Board was advised that the load and
distribution structure for each share class would be the same as for
other Fidelity Advisor open-end international equity funds. The Board
also considered the fact that existing stockholders of Korea Fund
would become holders of Class A shares in the New Fund. The Board was
advised that no load would be charged on these shares in the
Reorganization, but that they would become subject to the 0.25% 12b-1
fee (as described herein) applicable to Class A shares of all Fidelity
Advisor equity funds. In addition, the Board was advised that new
purchases of shares would be subject to the standard sales loads and
fees associated with the five Fidelity Advisor Fund share classes for
the Fidelity Advisor equity funds. The Board was also advised that
existing shareholders of Korea Fund who receive Class A shares would
be able to exchange their shares for shares of other funds in the
Fidelity Advisor family of funds without the imposition of a sales
load (subject to the 4% redemption fee payable to the New Fund for the
first 200 days after the Reorganization).
The Board also considered that, although the 12b-1 fee would
represent a new charge to the former Korea Fund stockholders, FMR is
proposing a reduction in management fees, as discussed below. The
Board determined that there was a reasonable likelihood that the
proposed fee structure would benefit the New Fund and existing Korea
Fund stockholders by encouraging asset retention and growth. It was
noted that the 0.25% 12b-1 fee applicable to Class A shares was the
lowest 12b-1 fee available to non-institutional investors in the
Fidelity Advisor equity funds .
The Board also considered that the New Fund would have the same
investment objective, and except as described below, substantially the
same investment policies and restrictions. The Board was advised that
FMR anticipated that Hokeun Chung would continue to be the New Fund's
portfolio manager. The Board considered that, as part of the
Reorganization, the New Fund would adopt changes to three of Korea
Fund's fundamental investment policies on borrowing, lending and
investing in physical commodities to conform the restrictions to those
typically associated with Fidelity's open-end international equity
funds. The Board also considered the fact that the New Fund would
adopt a new fundamental policy permitting the New Fund to invest all
of its assets in a pooled fund structure managed by FMR, and that the
New Fund would adopt a non-fundamental policy that it does not
currently intend to invest all of its assets in the securities of such
a structure. The Board also considered that stockholders will be asked
to approve a proposal to make the New Fund's fundamental "name test"
policy non-fundamental. The Board also considered that stockholders
will be asked to approve a more flexible industry concentration policy
permitting the Fund to invest up to 35% of its assets in any industry
that accounts for more than 20% of the Korean market. The Board also
considered that the New Fund will adopt non-fundamental investment
restrictions to conform to the standard non-fundamental investment
restrictions used by Fidelity open-end international equity funds. In
particular, the Board was advised that the percentage of illiquid
securities that the New Fund may hold would be reduced from 35% to
15%.
The Board also considered the fact that the New Fund will impose a 4%
redemption fee on shares issued to existing Korea Fund
stockholders in connection with the Reorganization that are
redeemed during the first 200 days following the
Reorganization. The Board was advised that the redemption fee would be
payable to the New Fund and benefit the non-redeeming shareholders.
The Board was further advised that the fee is intended to compensate
the New Fund for transaction costs resulting from the potentially
large redemptions that the New Fund may experience upon conversion to
an open-end fund. In addition, the Board considered the fact that no
redemption or short-term trading fees would be imposed on new sales of
the New Fund's shares.
The Board also considered the fact that Korea Fund currently pays a
management fee equal to an annual rate of 1.00% of the Fund's average
daily net assets. The Board considered FMR's proposal to reduce the
New Fund's management fee to a current effective rate of 0.83% of the
New Fund's average daily average net assets .
The Board was advised by FMR that it anticipates that Class A shares
of the New Fund, at least initially, will have higher gross expenses
than Korea Fund, as a result of the potential decrease in the Fund's
assets and the increased registration fees, distribution expenses,
transfer agency expenses and custody fees associated with operating an
open-end fund. The Board noted that this increase in gross expenses
would be partly offset by the reduction in FMR's management fee
under the new Investment Management Agreement . The Board also
considered the fact that FMR proposed to voluntarily reimburse ,
under a new Investment Management Agreement, the expenses of Class
A shares (excluding interest, taxes, certain securities lending fees,
brokerage commissions and extraor d inary expenses, if any) in
excess of 2.10% for a period of not less than twelve months following
the Reorganization. The Board was advised that FMR anticipates that
Class B, Class C, Class T and Institutional Class would have
voluntary expense caps of 2.85%, 2.85%, 2.35% and 1.85%,
respectively, reflecting the different 12b-1 fee levels for each
class. The Board was also advised that for the twelve months ended
September 30, 1999, Korea Fund's expense ratio was 1.75% (1.61% after
a one-time reduction due to certain adjustments to the Fund's
custodian fees) of average net assets.
The Board also considered the fact that, in connection with the
Reorganization, the New Fund would adopt standard contractual
arrangements for a Fidelity Advisor Fund. The Board also considered
the Agreement which provides for the transfer of the assets of Korea
Fund to the New Fund and the assumption by the New Fund of Korea
Fund's liabilities, all in exchange for Class A shares of the New
Fund. The Board was advised that the New Fund shares issued to Korea
Fund will have an aggregate value equal to the net value of the assets
and liabilities transferred to the New Fund, and that following the
transfer, each stockholder of Korea Fund will receive Class A shares
of the New Fund in exchange for their shares of Korea Fund equal in
value to the shares owned of Korea Fund.
The Board also considered the fact that FMR would obtain an opinion
of Fund counsel, Clifford Chance Rogers & Wells LLP, that the
Reorganization will qualify as a tax-free reorganization for federal
income tax purposes and accordingly will not result in any gain or
loss for Federal income tax purposes to the Korea Fund, the New Fund,
stockholders of Korea Fund or shareholders of the New Fund.
The Board also considered that, upon the Reorganization, the New Fund
will be governed by a Board of Trustees which is separate and distinct
from the Board of Directors which currently governs Korea Fund. The
Reorganization was approved by the Trustees of the Trust at a meeting
of the Board of Trustees held on February 17, 2000.
CHANGES TO INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT POLICIES
Korea Fund has certain investment restrictions that are fundamental
and are therefore changeable only by the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the
Fund. If the proposed Reorganization is approved, the New Fund will
adopt fundamental investment restrictions that are different
from Korea Fund's fundamental investment restrictions on borrowing,
lending and investments in physical commodities. In addition, the New
Fund will adopt a new fundamental investment policy permitting the
New Fund to invest all of its assets in another open-end
investment company, as described below. Each of these changes
i s necessary to conform the Korea Fund's current investment
restrictions to the standard investment restrictions applicable to
Fidelity's open-end international equity funds.
The fundamental investment restrictions of Korea Fund on borrowing,
lending and investments in physical commodities currently state that
the Fund may not:
(solid bullet) borrow money, except that the Fund may borrow money for
temporary or emergency purposes or to finance tender offers and/or
share repurchases in an amount not exceeding 33 1/3% of its total
assets (including the amount borrowed) less liabilities (other than
borrowings); any borrowings that come to exceed this amount will be
reduced promptly in accordance with reasonable investment practice to
the extent necessary to comply with the 33 1/3% limitation;
(solid bullet) purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments (but this
will not prevent the Fund from purchasing or selling options and
futures contracts or from investing in securities or other instruments
backed by or indexed to, or representing interests in, physical
commodities or investing or trading in derivative investments); and
(solid bullet) make any loan if, as a result, more than 33 1/3% of its
total assets would be lent to other parties, but this limitation does
not apply to purchases of debt securities or to repurchase agreements.
In connection with the Reorganization, the New Fund's fundamental
investment restrictions on borrowing, lending and investments in
physical commodities will state that the New Fund may not:
(solid bullet) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in
an amount not exceeding 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within
three days (not including Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(solid bullet) purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments (but this
shall not prevent the Fund from purchasing or selling options and
futures contracts or from investing in securities or other instruments
backed by physical commodities); and
(solid bullet) lend any security or make any loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties,
but this limitation does not apply to purchases of debt securities or
to repurchase agreements.
The New Fund will also adopt a fundamental investment policy that
would permit the New Fund to invest all of its assets in another
open-end investment company managed by FMR or an affiliate with
substantially the same investment objective and policies as the New
Fund. Adoption of the policy will allow Korea Fund to participate in a
so-called "Master Feeder Fund" organizational format (Master Feeder
Fund Structure).
Participation in a Master Feeder Fund Structure would allow the New
Fund to combine its assets with other funds having substantially the
same investment objective and policies as the New Fund, but differing
distribution or servicing arrangements. By combining its assets in a
central "Master Fund" with other participating "Feeder Funds," each
fund would be able to maintain its unique distribution and servicing
structure while potentially achieving operational efficiencies through
the consolidation of portfolio management.
To allow the New Fund to invest in a Master Fund at a future date,
the New Fund will have the following fundamental policy:
The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company managed
by FMR or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the
fund.
The Board does not anticipate that this new fundamental policy will
have any material effect on the Fund or its investment operations. The
New Fund will adopt a non-fundamental policy stating it does not
currently intend to invest all of its assets in the securities of a
Master Fund.
Each of the above changes will conform the Korea Fund's current
fundamental policies to the standard fundamental policies applicable
to Fidelity's open-end international equity funds. In particular, the
change to Korea Fund's fundamental investment restriction on
borrowing is necessary because, as an open-end fund, the New
Fund will no longer be making tender offers. It is not expected that
any of these changes would have a material impact on the manner in
which the Fund is currently being managed.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
If the Reorganization is approved, the New Fund will also adopt
non-fundamental investment restrictions that conform to the standard
non-fundamental restrictions applicable to Fidelity open-end
international equity funds, including a new limit reducing the New
Fund's ability to invest in illiquid securities. As
non-fundamental investment restrictions, these restrictions may be
changed or adopted by a vote of the Trustees of the New Fund and do
not require stockholder approval.
The non-fundamental investment restrictions of the New Fund will be
as follows:
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(ii) The fund does not currently intend to sell securities short,
unless its owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(iii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)).
(v) The fund does not currently intend to purchase any security if,
as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money , up to
15% of the fund's net assets , to a registered investment
company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) acquiring loans, loan participations, or
other forms of direct debt instruments and, in connection therewith,
assuming any associated unfunded commitments of the sellers. (This
limitation does not apply to purchases of debt securities or to
repurchase agreements.)
(vii) The fund does not currently intend to invest all of its assets
in the securities of a single open-end management investment company
managed by FMR or an affiliate or successor with substantially the
same fundamental investment objective, policies, and limitations as
the fund.
With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For purposes of limitation (i), Subchapter M generally requires
the fund to invest no more than 25% of its total assets in securities
of any one issuer and to invest at least 50% of its total assets so
that no more than 5% of the fund's total assets are invested in
securities of any one issuer. However, Subchapter M allows unlimited
investments in cash, cash items, government securities (as defined in
Subchapter M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
If the Reorganization is approved and adopted, these amended
fundamental and non-fundamental investment restrictions will become
applicable to the New Fund upon the Closing Date.
MANAGEMENT, ADVISORY AND SUB-ADVISORY AGREEMENTS
THE CURRENT INVESTMENT MANAGER, INVESTMENT ADVISER AND SUB-ADVISER
INVESTMENT MANAGER. FMR acts as investment manager of Korea Fund.
FMR, a corporation organized in 1946, serves as investment adviser
to a number of investment companies. Today, the Fidelity
organization is the largest mutual fund company in the United States,
and is known as an innovative provider of high quality financial
services to individuals and institutions. In addition to its mutual
fund business, the Fidelity organization operates one of the leading
discount brokerage firms in the United States, Fidelity Brokerage
Services, Inc.
Under the 1940 Act, control of a company is presumed where one
individual or a group of individuals owns more than 25% of the voting
stock of that company. Edward C. Johnson 3d, members of his family
and trusts for the benefit of members of the Johnson family own
directly or indirectly more than 25% of the voting stock of FMR Corp.,
which owns all of the voting stock of FMR. The following people serve
as the principal executive officers and/or directors of FMR: Edward C.
Johnson 3d, Peter S. Lynch and Robert C. Pozen. For more detailed
descriptions of the principal occupations of Edward C. Johnson 3d,
Peter S. Lynch and Robert C. Pozen, please see "Information Regarding
the Trust" , above.
INVESTMENT ADVISER. FIIA serves as Korea Fund's Investment Adviser.
FIIA is an investment adviser registered under the Investment Advisers
Act of 1940 and was organized in 1983 under the laws of Bermuda. FIIA
primarily provides investment advisory services to non-U.S. and U.S.
investment companies and institutional investors investing in
securities of issuers throughout the world. FIIA is a
wholly - owned subsidiary of Fidelity International
Limited (FIL). FIIA's main offices are located at Pembroke Hall, 42
Crow Lane, Pembroke, Bermuda.
SUB-ADVISER. FIJ serves as Korea Fund's Sub-Adviser. FIJ is
registered as an investment adviser under the Investment Advisers Act
of 1940. FIJ was formed on November 17, 1986 under the laws of Japan
and its main offices are located at 19th floor, Shiroyama JT Mori
Building, 4-3-1 Toranomon Minato-ku, Tokyo 105, Japan. It is a
wholly-owned subsidiary of FIL.
FIL is a Bermuda company formed in 1968 which primarily provides
investment advisory services to non-U.S. investment companies and
institutional investors investing in securities of issuers throughout
the world. Its offices are located at Pembroke Hall, 42 Crow Lane,
Pembroke, Bermuda. More than 25% of the voting stock of FIL is owned
directly or indirectly by Edward C. Johnson 3d, Johnson family
members and trusts for the benefit of Johnson family members.
THE CURRENT MANAGEMENT, ADVISORY AGREEMENTS AND SUB-ADVISORY
AGREEMENTS
Pursuant to a management agreement (Management Agreement), dated
October 25, 1994, between Korea Fund and FMR, FMR supervises the
Fund's investment program. FMR consults with FIIA and FIJ on a regular
basis regarding FIIA's and FIJ's decisions concerning the purchase,
sale or holding of particular securities. In addition, FMR monitors
the performance of Korea Fund's outside service providers, including
the Fund's administrator, transfer agent and custodian. FMR pays the
reasonable salaries and expenses of such of Korea Fund's officers and
employees and any fees and expenses of such of the Fund's directors
who are directors, officers or employees of FMR, except that the Fund
may bear travel expenses or an appropriate portion thereof of
directors and officers of the Fund who are directors, officers or
employees of FMR to the extent that such expenses relate to attendance
at meetings of the Board of Directors or any committees thereof.
Pursuant to an investment advisory agreement (Advisory Agreement)
among FMR, FIIA and Korea Fund, FIIA is responsible on a day-to-day
basis for investing the Fund's portfolio in accordance with its
investment objective, policies and limitations. FIIA has discretion
over investment decisions for Korea Fund and, in that connection,
places purchase and sale orders for the Fund's portfolio
securities. The Advisory Agreement authorizes delegation of these
responsibilities to FIJ. Pursuant to a Sub-Advisory Agreement
(Sub-Advisory Agreement), FIIA has delegated certain of its
responsibilities for the day-to-day management of the Fund to FIJ,
which manages the Fund's portfolio through the Tokyo office.
Hokeun Chung is primarily responsible for the day-to-day management
of the Fund's portfolio. Mr. Chung has served as Korea Fund's
portfolio manager since December of 1995 , after acting as
co-portfolio manager since 1995. Mr. Chung joined Fidelity Investments
as an analyst in 1994. Prior to joining Fidelity, Mr. Chung worked as
an analyst from 1991 to 1992 and as a senior analyst specializing in
Korean equities from 1993 to 1994 at W.I. Carr in Seoul. FIIA and FIJ
makes research and statistical data available to Korea Fund.
FIIA and FIJ pay the reasonable salaries and expenses of such of
Korea Fund's officers and employees and any fees and expenses of such
of the Fund's directors who are directors, officers or employees of
FIIA and FIJ, except that Korea Fund may bear travel expenses or an
appropriate portion thereof of directors and officers of the Fund who
are directors, officers or employees of FIIA to the extent that such
expenses relate to attendance at meetings of the Board of Directors or
any committees thereof.
Pursuant to the Management Agreement, Korea Fund pays FMR a monthly
fee at an annual rate of 1.00% of Korea Fund's average daily net
assets for its services. Korea Fund's total expenses for the fiscal
year ended September 30, 1999, including the management fee were 1.75%
(1.61% after a one-time reduction due to certain adjustments to the
Fund's custodian fees) of the Fund's average net assets.
Pursuant to the Advisory Agreement, FIIA receives from FMR 60% of the
fees paid by Korea Fund to FMR. FIJ receives a sub-advisory fee from
FIIA equal to 50% of the fee paid to FIIA with respect to assets
managed by FIJ on a discretionary basis and 30% of the fee paid to
FIIA with respect to assets managed by FIJ on a non-discretionary
basis.
THE PROPOSED MANAGEMENT AGREEMENT
If the proposed Reorganization is approved, the New Fund will enter
into a new Investment Management Agreement with FMR (Proposed
Management Agreement), as described below.
Pursuant to the Proposed Management Agreement, the Trust on behalf of
the New Fund , will employ FMR to supervise the New Fund's
investment program and to furnish other services to the New Fund.
Under the terms of the Proposed Management Agreement, FMR will act as
investment manager and, subject to the supervision of the Trustees of
the Trust, direct the investments of the New Fund in accordance with
the New Fund's investment objective, policies, and limitations. FMR
will also provide the New Fund with all necessary office facilities
and personnel for servicing the New Fund's investments and compensate
all officers of the New Fund and all Trustees who are "interested
persons" of the Trust or of FMR, and all personnel of the New Fund or
FMR performing services relating to research, statistical, and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Trustees, will continue to provide the management and administrative
services necessary for the operation of the New Fund. These services
include providing facilities for maintaining the New Fund's
organization; supervising relations with custodians, transfer and
pricing agents, accountants, underwriters, and other persons dealing
with the New Fund; preparing all general shareholder communications
and conducting shareholder relations; maintaining the New Fund's
records and registration of the New Fund's shares under federal
securities laws and making necessary filings under state securities
laws; developing management and shareholder services for the New Fund;
and furnishing reports, evaluations, and analyses on various subjects
to the Trustees.
FMR intends to delegate the day-to-day management of the New Fund's
investment portfolio to FIJ pursuant to a Sub-Advisory Agreement, as
discussed below. FMR will continue to consult with FIJ on a regular
basis regarding FIJ's decisions concerning the purchase, sale or
holding of particular securities.
Pursuant to the Proposed Management Agreement, the management fee
will be calculated and paid to FMR every month. The management fee
will be calculated by adding a group fee rate to an individual fund
fee rate, and multiplying the result by the New Fund's average net
assets. The group fee rate is based on the average net assets of all
the mutual funds advised by FMR. This rate cannot rise above 0.52%
and it fluctuates with the level of FMR's assets under management .
As of February 29, 2000, the group fee rate was 0.28%. The
individual fund fee rate for the New Fund will be 0.55%. Therefore, as
of February 29 , 2000, the New Fund's management fee would have
been 0.83%.
The aggregate amount of FMR's management fee from Korea Fund for the
fiscal year ended September 30, 1999, was $498,248 .00 . Had the
Proposed Management Agreement been in effect over the same period, FMR
would have received $414,302 .00 , a reduction of 17%.
In addition to the management fee payable to FMR and the fees payable
to the transfer, dividend disbursing, and shareholder servicing
agent s , pricing and bookkeeping agent s , and the costs
associated with securities lending , as applicable, the New Fund or
each class thereof, as applicable, will pay all of its expenses that
are not assumed by those parties, including (i) typesetting, printing,
and mailing of its proxy materials to shareholders, (ii) legal
expenses, and (iii) the fees of the custodian, auditor and
non-interested Trustees. The Proposed Management Agreement further
provides that the New Fund will pay for typesetting, printing, and
mailing prospectuses, statements of additional information, notices,
and reports to shareholders; however, under the terms of the New
Fund's transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders of the applicable
classes. Other expenses to be paid by the New Fund include interest,
taxes, brokerage commissions, the New Fund's proportionate share of
insurance premiums and Investment Company Institute dues, and the
costs of registering shares under federal securities laws and making
necessary filings under state securities laws. The New Fund is also
liable for such non-recurring expenses as may arise, including costs
of any litigation to which the New Fund may be a party, and any
obligation it may have to indemnify its officers and Trustees with
respect to litigation.
THE PROPOSED SUB-ADVISORY AGREEMENTS
If the proposed Reorganization is approved, the New Fund will enter
into a series of sub-advisory agreements with FMR and (i) FIIA, which
in turn will enter into a sub-subadvisory agreement with
FIIA(U.K.) L , (ii) FIJ, (iii) FMR (Far East), which in turn will
enter into a Research Agreement with FIJ, (iv) FMR (U.K.) and (v)
FMRC (each, a Proposed Sub-Advisory Agreement). Pursuant to the
Proposed Sub-Advisory Agreements, FMR may receive investment advice
and research services relating to the New Fund from the sub-advisers.
Currently, FIIA, FIJ, FMR (Far East), FMR (U.K.), and
FIIA(U.K.) L each focus on issuers in countries other than the
United States, such as those in Europe, Asia, and the Pacific Basin.
Pursuant to a Proposed Sub-Advisory Agreement among FMR, FIJ and the
Trust, FIJ will be responsible on a day-to-day basis for investing the
New Fund's portfolio in accordance with its investment objective,
policies and limitations. FIJ will have discretion over investment
decisions for the New Fund and, in that connection, will place
purchase and sale orders for the New Fund's portfolio securities. It
is anticipated that Hokeun Chung will be the New Fund's
portfolio manager and will work with a team of professionals in Tokyo
in managing the New Fund's portfolio.
FMR (U.K.) and FMR (Far East), which were organized in 1986, are
wholly-owned subsidiaries of FMR. FIJ and FIIA are wholly-owned
subsidiaries of FIL. FIIA(U.K.) L was organized in the United
Kingdom in 1984, and is a direct subsidiary of FIIA and an
indirect subsidiary of FIL. FMR (U.K.), FMR (Far East), FIJ, FIIA and
FIIA(U.K.) L are all registered investment advisers in the
United States. FIJ is a licensed investment manager in Japan.
FIIA(U.K.) L is a registered investment adviser in the United
Kingdom and a member of IMRO.
Beginning January 1, 2001, FMRC will serve as sub-adviser for the
New Fund. FMRC is a wholly-owned subsidiary of FMR. FMRC may provide
investment research and advice and may also provide investment
advisory services for the New Fund.
Under the Proposed Sub-Advisory Agreements, FMR will pay the fees of
FMR (U.K.), FMR (Far East), FIJ, and FIIA. FIIA, in turn, will pay the
fees of FIIA(U.K.) L for research , and FMR (Far East) will pay
the fees of FIJ for research.
For providing discretionary investment management and executing
portfolio transactions, the sub-advisers will be compensated as
follows:
(solid bullet) FMR will pay each of FMR (Far East) and FMR (U.K.) a
fee equal to 50% of its monthly management fee with respect to the New
Fund's average net assets managed by the sub-adviser on a
discretionary basis;
(solid bullet) FMR will pay each of FIIA and FIJ a fee equal to 57% of
its monthly management fee with respect to the New Fund's average net
assets managed by the sub-adviser on a discretionary basis; and
(solid bullet) FIIA will pay FIIA(U.K.) L a fee equal to 110% of
FIIA(U.K.) L 's costs incurred in connection with providing
discretionary investment management services.
For providing non-discretionary investment advice and research
services the sub-advisers will be compensated as follows:
(solid bullet) FMR will pay FIIA and FIJ fees equal to 30% of FMR's
monthly management fee with respect to the average net assets held by
the New Fund for which the sub-adviser has provided FMR with
investment advice and research services;
(solid bullet) FMR will pay FMR (U.K.) and FMR (Far East) fees equal
to 110% and 105%, respectively, of FMR (U.K.)'s and FMR (Far East)'s
costs incurred in connection with providing investment advice and
research services;
(solid bullet) FIIA will pay FIIA(U.K.) L a fee equal to 110% of
FIIA(U.K.) L 's costs incurred in connection with providing
investment advice and research services; and
(solid bullet) FMR (Far East) will pay FIJ a fee equal to 100% of
FIJ's costs incurred in connection with providing investment advice
and research services.
DISTRIBUTION AND SERVICE PLAN
If the Reorganization is approved, the New Fund will adopt a
Distribution and Service Plan (Plan) pursuant to Rule 12b-1 under the
1940 Act (Rule). The Rule provides in substance that a mutual fund may
not engage directly or indirectly in financing any activity that is
primarily intended to result in the sales of shares of a fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plan, as approved by the Trustees, allows the New Fund and FMR to
incur certain expenses that might be considered to constitute direct
or indirect payment by the New Fund of distribution expenses.
The New Fund is composed of five classes of shares: Class A, Class B,
Class C , Class T and Institutional Class. All classes of the
New Fund have a common investment objective and portfolio. Class A and
Class T shares have a front-end sales charge, pay a 12b-1 fee (as
defined herein) and may be subject to a contingent deferred sales
charge (CDSC). Class B and Class C shares do not have a front-end
sales charge, but are subject to a CDSC and pay a 12b-1 fee.
Institutional Class shares have no sales charge and do not pay a 12b-1
fee but are available only to certain types of investors.
Pursuant to the Plan, Fidelity Distributors Corporation (Distributor)
will use all reasonable efforts, consistent with its other business,
to secure purchasers of the New Fund's shares. Such efforts may
include, but neither are required to include nor are limited to, the
following: (i) formulation and implementation of marketing and
promotional activities, such as mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (ii)
preparation, promotion and distribution of sales literature; (iii)
preparation, printing and distribution of prospectuses of the New
Fund; (iv) obtaining such information, analyses and reports with
respect to marketing and promotional activities as the Distributor
may, from time to time, deem advisable; (v) making payments to
securities dealers and others engaged in the sale of shares or who
engage in shareholder support services; and (vi) providing training,
marketing and support to such dealers and others with respect to the
sale of shares.
To the extent they are successful in attracting new investments,
marketing efforts conducted pursuant to the Plan may benefit the
existing shareholders of the New Fund by attracting more assets which
may in turn lower the ongoing expenses per share of the New Fund. The
Board believes that these marketing efforts will also assist in
selling shares of the New Fund to offset redemptions which are
anticipated to occur after the Reorganization. To the extent that the
New Fund is successful in offsetting redemptions with sales of shares,
FMR believes it will be able to manage the New Fund more effectively.
Pursuant to the Plan, the Distributor may be paid a 12b-1 fee at an
annual rate of up to 0.75% of the average net assets attributable to
the Class A shares of the New Fund. Currently, the Trustees of the
Trust have approved a 12b-1 fee for the Class A shares of the New Fund
at an annual rate of 0.25% of its average net assets. This fee rate
may be increased only when, in the opinion of the Trustees, it is in
the best interests of the shareholders of the Class A shares of the
New Fund to do so.
ANNUAL FUND OPERATING EXPENSES
Annual fund operating expenses are paid out of Korea Fund's assets.
Expenses are factored into the Fund's share price or dividends and are
not charged directly to stockholder accounts. The following figures
for Korea Fund are based on historical expenses, adjusted to reflect
current fees, of the Fund and are calculated as a percentage of
average net assets of Korea Fund.
The following table shows the fees and expenses of Korea Fund for the
fiscal year ended September 30, 1999 , and the pro-forma fees
and expenses of the New Fund adjusted to reflect fees and expenses
of such period.
Korea Fund New Fund Class A Shares
Management fees 1.00% 0.83%+
12b-1 Fee None 0.25%
Other expenses 0.75% 1.06%
Total Operating Expenses* 1.75% 2.14%**
* The Korea Fund's expenses were reduced by a portion of the brokerage
commissions that the Fund pays. The Fund's expenses were also reduced
by a one-time reduction due to certain adjustments to the Fund's
custodian fees. Including these reductions, the total operating
expenses would have been 1.61% for Korea Fund and 2.00% for the New
Fund.
** For a period of not less than twelve months after the
Reorganization, FMR has voluntarily agreed to reimburse the New Fund
to the extent that total operating expenses of the New Fund's Class A
shares (excluding interest, taxes, certain securities lending fees,
brokerage commissions and extraordinary expenses, if any) expressed as
a percentage of average net assets, exceed 2.10% of the average net
assets attributable to Class A shares.
+ The Management fees of Class A Shares of the New Fund were
calculated as of February 29, 2000.
In addition to the fund operating expenses, Class A shares of the New
Fund acquired in exchange for shares of Korea Fund will be subject to
a redemption fee of 4% of the NAV of such shares, if such shares are
redeemed out of the New Fund during the first 200 days following the
Reorganization. Furthermore, no sales load will be payable on the
Class A shares received in the Reorganization, but new purchases of
Class A shares of the New Fund will be subject to a maximum front-end
sales load of 5.75%. Shares of Korea Fund are not subject to any
redemption fees or sales loads.
EXAMPLES OF EFFECT OF FUND EXPENSES
The following table illustrates the expenses on a hypothetical
$10,000 investment in Korea Fund and the estimated expenses on a
hypothetical $10,000 investment in the New Fund calculated at the
rates stated above, assuming a 5% annual return.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
After 1 Year After 3 Years After 5 Years After 10 Years
Korea Fund (closed-end) $ 178 $ 551 $ 949 $ 2,062
New Fund Class A Shares $ 780 $ 1,206 $ 1,658 $ 2,905
(open-end) including maximum
sales charge*
</TABLE>
* New Fund Class A Shares (open-end) excluding sales charge: after
1 year, $217; after 3 years, $670; after 5 years, $1,149; and after 10
years, $2,472.
TAXES AND DISTRIBUTIONS
Based upon an opinion of counsel, neither Korea Fund nor its
stockholders will realize any gain or loss for federal income tax
purposes as a result of the Reorganization. However, stockholders will
recognize a gain or loss if they later redeem their shares of the New
Fund or if they sell their shares of Korea Fund prior to the
Reorganization to the extent that the sale proceeds are greater or
less than the respective adjusted tax basis of their shares. Payment
for any such redemption generally will be made within seven days after
receipt of a proper request for redemption. Such payment may be
postponed or the right of redemption suspended under unusual
circumstances that affect the ability to value the securities in New
Fund's portfolio or when an emergency makes it not reasonably
practicable for New Fund to dispose of portfolio securities or fairly
to determine the value of its net assets.
To the extent that the New Fund must dispose of portfolio securities
to pay redemption proceeds, the New Fund may realize net capital gains
that must be distributed to shareholders (after the application of any
capital loss carryforwards). As a result, remaining shareholders may
be subject to additional taxable capital gain or dividend
distributions pursuant to the Reorganization and the Fund's subsequent
status as an open-end registered investment company than they might
have been subject to had Korea Fund remained a closed-end fund.
As of March 15, 2000, Korea Fund has net realized capital gains of
approximately $2.2 million and net unrealized capital gains of
approximately $33.5 million. As of March 15, 2000, Korea Fund has
capital loss carryforwards for federal income tax purposes of
approximately $27.6 million. There is no assurance that the New Fund
will be able to realize sufficient capital gains to use the capital
loss carryforwards before they expire. The capital loss carryforwards
attributable to Korea Fund expire between 2004 and 2007. Additionally,
should the New Fund change its fiscal year-end, the change may result
in a loss of certain capital loss carryforwards.
CONCLUSION
If the Reorganization is approved, the Board will take such other
actions as are necessary to effect the Reorganization. The
Reorganization of Korea Fund from a Maryland corporation to an
open-end, multiple-class fund organized as a series of a Massachusetts
business trust will be accomplished by: (i) filing a Certificate of
Designation designating the New Fund as a series of shares of the
Trust with the Commonwealth of Massachusetts, (ii) transferring all of
the assets of Korea Fund to the New Fund solely in exchange for Class
A shares of beneficial interest of the New Fund and the assumption by
the New Fund of the liabilities of Korea Fund, (iii) filing a
Certificate of Dissolution for Korea Fund with the Secretary of State
of the State of Maryland, (iv) amending and changing a fundamental
investment restrictions applicable to the New Fund, as described
above, (v) having the New Fund enter into a new Management Agreement
with FMR, as described above, (vi) entering into the series of
Sub-Advisory Agreements, as described above, and (vii) having the New
Fund enter into a Plan, as described above.
In the event that the Reorganization is not approved, Korea Fund will
continue to engage in business as a registered closed-end investment
company and the Board may consider other options, including
liquidating the Fund.
4. TO MAKE KOREA FUND'S FUNDAMENTAL 65% "NAME TEST" INVESTMENT POLICY
NON-FUNDAMENTAL
The SEC currently has a policy governing the use of mutual fund names
(Name Test Policy). The Name Test Policy requires, among other things,
that a mutual fund with a name that suggests that the fund focuses its
investments in securities of issuers in a particular region, invest at
least 65% of its assets in securities of issuers in that region.
It is possible that Korea Fund will have to modify its 65% investment
policy to comply with future rules the SEC may adopt that change the
Name Test Policy. The current fundamental 65% investment policy for
Korea Fund is as follows: "Under normal market conditions, the Fund
will invest at least 65% its total assets in equity and debt
securities of Korean Issuers." Since this investment policy is
fundamental, it is changeable only by a majority (as defined in the
1940 Act) of the outstanding voting securities of Korea Fund. A
non-fundamental investment policy may be changed by its Board
without stockholder approval.
The Board of Directors has approved, and recommends that the
stockholders of Korea Fund approve, making the fundamental 65%
investment policy non-fundamental. Approval of the proposal would give
the Board the flexibility to conform the Fund's 65% policy to the
regulatory requirements without the costs and delays of a stockholder
meeting. If this proposal is approved, any future changes to the 65%
policy would require its Board's approval, but would not
require stockholder approval.
If the stockholders approve this proposal, the Board intends to adopt
unchanged Korea Fund's previously fundamental 65% investment policy as
a new non-fundamental policy of Korea Fund. The Board anticipates that
approval of the proposal will have no material effect on Korea Fund or
its investment operations.
If approved, the non-fundamental 65% investment policy will also be
applicable to the New Fund after the Closing Date.
5. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING INDUSTRY
CONCENTRATION TO PERMIT KOREA FUND TO INVEST UP TO 35% OF ITS TOTAL
ASSETS IN CERTAIN INDUSTRIES.
The Board of Directors has approved, and recommends that the
shareholders of Korea Fund approve , a proposal that would
modify the Fund's fundamental policy concerning industry concentration
to permit the Fund to invest, under certain circumstances, up to 35%
of its total assets in the securities of companies whose principal
business activities are in the same industry. Korea Fund's current
fundamental policy concerning concentration provides that the Fund may
not:
purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. government of any of its agencies or
instrumentalities) if, as a result, more than 25% of the Fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry.
If the proposal is approved, Korea Fund would adopt the following
fundamental policy concerning concentration. The Fund may not:
purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities ), if, as a result, more than 25% of the
Fund's total assets would be invested in companies whose principal
business activities are in the same industry, except that the Fund may
purchase the securities of any issuer, if as a result, no more than
35% of the Fund's total assets would be invested in any industry that
accounts for more than 20% of the Korean market as a whole, as
measured by an index determined by FMR to be an appropriate measure of
the Korean market.
The 1940 Act requires funds to state a policy regarding concentration
of investments in a particular industry, and to make the policy
fundamental (changeable only by stockholder vote). The SEC has taken
the position that a fund that invests more than 25% of its total
assets in a particular industry is concentrating its investments.
However, a fund is permitted to retain the freedom of action to invest
more than 25% of its total assets in an industry provided it specifies
the conditions under which it intends to do so.
The proposed policy would permit Korea Fund to invest up to 35% of
its total assets in any industry that made up more than 20% of the
Korean market as represented by an index determined by FMR to be an
appropriate measure of the Korean market. FMR recommended this change
to the Board of Directors in recognition of the fact that the Korean
market tends to be more concentrated in individual industries than the
U.S. market. As a result, it may not be possible for Korea Fund to
keep pace with Korean benchmarks or to overweight specific industries
relative to benchmarks, without investing more than 25% of its total
assets in an industry (or in each of several industries) from time to
time. The amended concentration policy would provide Korea Fund
flexibility to overweight or underweight industries in a region
relative to the local market benchmarks and give Korea Fund greater
flexibility to respond to changing market conditions.
As of January 2000, two industries represented over 20% of the Korean
market. The electrical and communications industries accounted for
approximately 25.3% and 23.4%, respectively, of the market as
represented by the Korea Composite Stock Price Index.
The Korean Composite Stock Price Index is a widely used
capitalization-weighted index of all common stocks listed on the Korea
Stock Exchange. FMR currently believes this index is an appropriate
measure of the Korean market, based on index characteristics including
the percentage of the total market capitalization covered, economic
sector and industry representation, and the types and liquidity of
securities that make up the index. FMR could use different indexes or
additional indexes to represent the local markets in the future, if
those indexes were determined to be appropriate based on these
factors. For any index that is selected, FMR intends to measure the
percentage of the index represented by each industry no less
frequently than once per month. The Korean Composite Stock Price
Index is not affiliated with FMR.
Providing Korea Fund with the ability to invest up to 35% of its
total assets in one or more industries would allow Korea Fund to
respond to changing market conditions by overweighting or
underweighting each industry relative to the local market benchmarks.
The amended policy may expose Korea Fund to greater risk, however, to
the extent that the particular industry or industries in which it
invests is sensitive to adverse changes in economic or political
conditions.
CONCLUSION. The Board has concluded that the proposal will benefit
Korea Fund and its stockholders. The Directors recommend voting FOR
the proposal. Upon shareholder approval, the proposed policy will
become effective immediately. If the proposal is not approved by the
shareholders of Korea Fund, Korea Fund's current policy will remain in
effect.
COMPARISON OF OPEN-END AND CLOSED-END INVESTMENT COMPANIES
GENERAL. Open-end investment companies, commonly referred to as
mutual funds, issue redeemable securities. The holders of redeemable
securities have the right to surrender those securities to the mutual
fund and obtain in return an amount based on their proportionate share
of the value of the mutual fund's net assets. Most mutual funds also
continuously issue new shares to investors at a price based on the
fund's NAV at the time of issuance. Such a fund's NAV per share
is determined by deducting the amount of its liabilities from the
value of its assets and dividing the difference by the number of
shares outstanding.
In contrast, closed-end investment companies such as Korea Fund
generally do not redeem their outstanding shares or engage in the
continuous sale of new securities, and thus operate with a relatively
fixed capitalization. The shares of closed-end investment companies
are normally bought and sold in securities markets. Korea Fund's
shares are currently listed and traded on the NYSE. If the Fund is
converted to an open-end investment company, its shares will be
delisted from the NYSE.
Some of the legal and practical differences between operations of
Korea Fund as a closed-end versus an open-end investment company are
as follows:
ACQUISITION AND DISPOSITION OF SHARES. If Korea Fund is reorganized
into an open-end investment company, the Fund's shares will no longer
be listed on the NYSE. Stockholders desiring to realize the value of
their shares would be able to do so by exercising their right to have
such shares redeemed by the Fund at the next determined current NAV,
less redemption fees (as described above). The Fund's NAV per share is
calculated by dividing (i) the value of its portfolio securities plus
all cash and other assets (including accrued interest and dividends
received but not collected) less all liabilities (including accrued
expenses) by (ii) the number of outstanding shares of the Fund.
Open-end investment companies generally value their assets on each
business day in order to determine the current NAV on the basis of
which their shares may be redeemed by stockholders or purchased by
investors. It is anticipated that the NAV of the New Fund will be
published daily by leading financial publications.
ELIMINATION OF DISCOUNT AND IMPLEMENTATION OF REDEMPTION FEE. The
Reorganization will have the effect of immediately eliminating any
market discount from NAV. If the Reorganization is approved by the
stockholders, the market discount may be reduced or the shares may
trade at a premium prior to the Closing Date to the extent investors
are induced to purchase shares in the open market in anticipation of
such a Reorganization. However, there can be no assurance that this
will be the case. After the Reorganization, stockholders of Korea Fund
will be permitted to redeem their shares, subject to a redemption fee
of 4% for the first 200 days following the Reorganization.
PORTFOLIO MANAGEMENT. Because a closed-end investment company does
not have to redeem its shares, it may keep all of its assets fully
invested and make decisions without having to adjust for cash inflows
and outflows from continuing sales and redemption of its shares. In
contrast, open-end investment companies may be subject to pressure to
sell portfolio securities at disadvantageous times or prices in order
to satisfy such redemption requests. Sales of securities may generate
taxable gains or losses which must be distributed to stockholders.
EXPENSES; COSTS OF POTENTIAL NET REDEMPTIONS. Open-end investment
companies are generally more expensive to operate and administer than
closed-end investment companies , and the expense ratio of the
New Fund after the Reorganization may be higher than Korea Fund's
current expense ratio. However, FMR has voluntarily agreed to
reimburse the New Fund to the extent that total operating expenses
(excluding interest, taxes, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) exceed 2.10% of
the average net assets attributable to the Class A shares of the New
Fund for a period of not less than twelve months after the
Reorganization. Expenses of operation as an open-end fund that are not
currently borne by Korea Fund include higher transfer agency and
custodian expenses. In addition, the Class A shares of the New Fund
will bear , at least initially, a higher proportion of the costs
associated with State and Federal security law compliance than the
other classes of the New Fund because such expenses are allocated
according to the assets of each class of shares. The New Fund's
expense ratio could be adversely affected by significant redemptions.
Additional costs may be incurred by the sale of portfolio securities
if a substantial number of redemption requests are received following
the Reorganization. The New Fund may also be required to sell
portfolio securities or incur borrowing costs in order to meet
redemptions. The New Fund will have a lower management fee than Korea
Fund, but will be subject to a 12b-1 fee on all Classes of
shares except Institutional Class .
SENIOR SECURITIES AND BORROWINGS. The 1940 Act prohibits mutual funds
from issuing "senior securities" representing indebtedness (i.e.,
bonds, debentures, notes and other similar securities), other than
indebtedness to banks where there is an asset coverage of at least
300% for all borrowings. Open-end investment companies generally may
not issue preferred stock. While Korea Fund has not done so,
generally, closed-end investment companies are permitted to issue
"senior securities" representing indebtedness to any lender if the
300% asset coverage test is met and may issue preferred stock (subject
to various limitations).
COMPARISON OF A MARYLAND CORPORATION AND
A MASSACHUSETTS BUSINESS TRUST
Korea Fund is a Maryland corporation and is governed by its Articles
of Incorporation, By-laws and Maryland corporate law. As part of the
Reorganization, Korea Fund will reorganize as the New Fund, a series
of a Massachusetts business trust. As such, the New Fund will be
governed by a Declaration of Trust, By-laws and applicable
Massachusetts law. Certain differences between a Maryland corporation
and a Massachusetts business trust are summarized below.
SHARES OF CAPITAL STOCK. The Declaration of Trust permits the
Trustees to issue an unlimited number of shares of beneficial interest
and to divide such shares into an unlimited number of series or
classes, all without shareholder approval. The Trust currently has
nine series. The authorized capital stock of Korea Fund consists of
100,000,000 shares of Common Stock. The Board of Korea Fund may,
without stockholder approval, increase the number of shares authorized
and may classify and reclassify the shares of Korea Fund into
additional series or classes at a future date.
VOTING REQUIREMENTS. The Declaration of Trust provides that special
meetings of stockholders must be called upon the written request of
holders of at least 10% of the outstanding shares of any series of the
Trust. The By-laws of Korea Fund and the Maryland General Corporation
Law (Maryland Code) provide that a special meeting of stockholders
must be called upon the written request of stockholders representing
25% of the votes entitled to be cast at the meeting.
Stockholder voting rights for Korea Fund are based on the number of
shares owned (share-based voting), while shareholder voting rights for
the New Fund and the Trust will be based on a shareholder's total
dollar investment in the New Fund or the Trust (dollar-based
voting). Thus, on matters affecting the New Fund or the Trust as a
whole, where each class of the New Fund or the Trust is required to
vote on an issue, shareholders of the New Fund or the Trust who own
shares of a class in a fund of the Trust with a lower NAV than other
classes or funds would be giving shareholders of the other classes or
funds more voting "power" than they otherwise would have if voting
rights were share-based. On matters affecting only one class of the
New Fund, only shareholders of that class vote on the issue. In this
instance, all shareholders of the class would have the same voting
rights, since the NAV is the same for all shares in a single class.
After the Reorganization, the voting rights of Korea Fund stockholders
will change to reflect those of the New Fund. The voting rights of
stockholders of the New Fund can only be changed by a shareholder
vote.
No amendments may be made to the Declaration of Trust, other than
amendments necessary to change the nam e of the Trust, to supply any
omission, cure any ambiguity or cure, correct or supplement any
defective or inconsistent provision contained in the Declaration of
Trust, without the affirmative vote of the holders of not less
than a majority of the Trust's outstanding shares or of the affected
series or class, as applicable. Under the Articles of Incorporation of
Korea Fund and the Maryland Code, certain provisions of the Articles
of Incorporation of Korea Fund may be amended upon adoption of a
resolution to that effect by certain Directors of Korea Fund and
approval of such resolution by the holders of a majority of the
outstanding shares of Korea Fund. The amendment of certain other
provisions requires the affirmative vote of up to three-fourths of the
outstanding shares of Korea Fund entitled to vote thereon.
STOCKHOLDER MEETINGS. The Trust is not required to hold annual
meetings of its shareholders. Subsequent to the Reorganization of
Korea Fund into the New Fund, the New Fund will not be required to
hold annual meetings of its shareholders. Korea Fund currently is
required to hold annual stockholders meetings pursuant to the rules of
the NYSE. The initial Board of Trustees of the Trust and the initial
Board of Directors of Korea Fund were elected by the sole stockholder
of the Trust and Korea Fund, respectively, at the time of its
organization and have served and will continue to serve as Trustees or
Directors until they resign, die, or are removed. The Trustees of the
Trust may be removed for cause by a written instrument signed by at
least two-thirds of the remaining Trustees or by vote of shareholders
of the Trust holding not less than two-thirds of the votes then
outstanding, cast in person or by proxy at any meeting called for that
purpose. The By-laws of Korea Fund permit removal of a Director by the
holders of a majority of the outstanding shares of Korea Fund.
STOCKHOLDER LIABILITY. Under Massachusetts law, shareholders of the
Trust may, under certain circumstances, be held personally liable as
partners for the Trust's obligations. However, the risk of a
shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its
obligations. As a Maryland corporation, the stockholders of Korea Fund
have no personal liability to Korea Fund or its creditors with respect
to their stock, except that a stockholder may be liable to the extent
that (1) the subscription price or other agreed consideration for the
stock has not been paid, or (2) liability is imposed under any other
provision of Maryland law.
LIABILITY OF DIRECTORS AND TRUSTEES. Under the Declaration of Trust,
the Trustees are personally liable only for willful misfeasance, bad
faith, gross negligence or reckless disregard of their duties. Under
the Declaration of Trust, Trustees, officers, agents and employees
will be indemnified against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by them in
connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which they may be
involved or with which they may be threatened, while in office or
thereafter, by reason of their being or having been such a Trustee,
officer, employee or agent, except with respect to any matter as to
which they have been adjudicated to have acted in bad faith or with
willful misfeasance, gross negligence or reckless disregard of their
duties, provided, however, that as to any matter disposed of by a
compromise payment, pursuant to a consent decree or otherwise, no
indemnification either for that payment or for any other expenses may
be provided unless the Trust has received a written opinion from
independent legal counsel approved by the Trustees to the effect that
if either the matter of willful misfeasance, gross negligence or
reckless disregard of duty, or the matter of good faith and reasonable
belief as to the best interests of the Trust, had been adjudicated, it
would have been adjudicated in favor of the person seeking
indemnification. The Series may make advance payments in
connection with indemnification, provided that the indemnified person
has given a written undertaking to reimburse the Trust in the event it
is subsequently determined that he or she is not entitled to such
indemnification.
Maryland law provides that in addition to any other liabilities
imposed by law, a Director of Korea Fund may be liable to the Fund for
voting or assenting to the declaration of any dividend or other
distribution of assets to Korea Fund stockholders that is contrary to
Maryland law if it is established that the Director did not act in
good faith, in a manner he or she reasonably believed to be in the
best interest of Korea Fund and with the care that an ordinarily
prudent person in a like position would use under similar
circumstances. In the event of any litigation against the Directors or
officers of Korea Fund, Maryland law permits, and Korea Fund's By-laws
require, Korea Fund to indemnify a Director or officer for certain
expenses and to advance money for such expenses only if he or she
demonstrates that he or she acted in good faith and reasonably
believed that his or her conduct was in, or not opposed to, the best
interest of Korea Fund and, with respect to a criminal proceeding, he
or she had no reasonable cause to believe such conduct was unlawful.
The foregoing is only a summary of certain of the differences between
the Trust's Declaration of Trust and By-laws and Massachusetts law and
Korea Fund's Articles of Incorporation and By-laws and Maryland law.
MISCELLANEOUS
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR
NOMINEES. Please advise D.F. King & Co., Inc., 77 Water St., 20th
Floor, New York, New York, 10005, whether other persons are beneficial
owners of shares for which proxies are being solicited and, if so, the
number of copies of the Proxy Statement you wish to receive in order
to supply copies to the beneficial owners of the respective shares.
OTHER BUSINESS. The Board knows of no other business to be brought
before the Meeting. However, if any other matters properly come before
the Meeting, it is the intention that proxies that do not contain
specific instructions to the contrary will be voted on such matters in
accordance with the judgment of the persons therein designated.
SHAREHOLDER PROPOSALS. If the Reorganization is approved by the
stockholders of Korea Fund, the New Fund does not intend to hold
annual meetings of shareholders in the future. In that event, a
shareholder proposal intended to be presented at any subsequent
meeting of shareholders of the New Fund must be received by the New
Fund a reasonable time before the solicitation by the Board of
Trustees of the New Fund relating to such meeting is to be made in
order to be considered in the New Fund's proxy statement and form of
proxy relating to that meeting. If the Reorganization is not approved,
stockholders of Korea Fund wishing to submit proposals for inclusion
in a proxy statement for a subsequent stockholder meeting should send
their written proposals by December 29, 2000 to Eric D. Roiter ,
Secretary of the Trust, 82 Devonshire Street, Boston, Massachusetts
02109. Furthermore, if the Reorganization is not approved, any
stockholder who desires to bring a proposal at a subsequent
stockholder meeting, without including such proposal in Korea Fund's
proxy statement, should send their written proposal to Eric D.
Roiter, Secretary of the Trust by March 15, 2001.
EXHIBIT
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (Agreement) is made as of
April 15, 2000, by and between (i) Fidelity Advisor Korea Fund, Inc.,
a Maryland corporation duly registered as a closed-end management
investment company under the Investment Company Act of 1940, as
amended (1940 Act), with a principal place of business at 82
Devonshire Street, Boston, Massachusetts 02109 (Korea Fund), and (ii)
Fidelity Advisor Series VIII, a Massachusetts business trust (Trust),
on behalf of the "Fidelity Advisor Korea Fund" a series portfolio of
the Trust (Series). The Trust is a duly organized business trust under
the laws of the Commonwealth of Massachusetts duly registered as an
open-end management company under the 1940 Act with a principal place
of business at 82 Devonshire Street, Boston, Massachusetts 02109. The
Series and Korea Fund may be referred to herein collectively as the
"Funds" or each individually as the "Fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended (Code). The reorganization
will comprise: (a) the transfer of all of the assets of Korea Fund to
the Series solely in exchange for shares of beneficial interest in the
Series (Series Shares) and the assumption by the Series of Korea
Fund's liabilities; and (b) the constructive distribution of such
Series shares by Korea Fund pro rata to its stockholders in complete
liquidation, dissolution and termination of Korea Fund in exchange for
all of Korea Fund's outstanding shares. On the Closing Date (as
defined in Section 6), Korea Fund shall receive a number of full and
fractional shares of the Series having an aggregate net asset value
(NAV) equal to the value of the assets of Korea Fund less the
liabilities of Korea Fund at the Valuation Time (as defined in Section
4), which Korea Fund shall then distribute pro rata to its
stockholders. The foregoing transactions are referred to herein as the
"Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1 . REPRESENTATIONS AND WARRANTIES OF KOREA FUND. Korea Fund
represents and warrants to and agrees with the Series that:
(a) Korea Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland,
and has the power to own all of its properties and assets and to carry
out its obligations under this Agreement. It has or will have prior to
the Closing Date all necessary federal, state, and local
authorizations to carry on its business as now being conducted and to
carry out this Agreement;
( b ) Korea Fund is a closed-end management investment company
duly registered under the 1940 Act, and such registration is in full
force and effect;
(c) The Prospectus of Korea Fund, dated October 25, 1994, as
modified by any information provided to shareholders in a subsequent
annual or semi-annual report of Korea Fund pursuant to Rule 8b-16(b)
of the 1940 Act, copies of which have been furnished to the Series,
did not and do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
( d ) There are no material legal, administrative, or other
proceeding or investigation of, or before any Court or governmental
body, presently pending, to the knowledge of Korea Fund, threatened
against Korea Fund, which assert liability on the part of Korea Fund.
Korea Fund knows of no facts which might form the basis for the
institution of such proceedings;
( e ) Korea Fund is not in, and the execution, delivery, and
performance of this Agreement in accordance with its terms will not
result in, violation of any provision of its Articles of Incorporation
or By-laws, or, to the knowledge of Korea Fund, of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
Korea Fund is a party or by which Korea Fund is bound or result in the
acceleration of any obligation or the imposition of any penalty under
any agreement, judgment or decree to which Korea Fund is a party or is
bound;
( f ) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Korea Fund at or for the year ended September 30, 1999, have been
audited by PricewaterhouseCoopers LLP, independent accountants, and
have been furnished to the Series together with such unaudited
financial statements and schedule of investments (including market
values) at and for the six month period ended March 31, 2000. Said
Statements of Assets and Liabilities and Schedule of Investments
fairly present the Fund's financial position as of such dates and said
Statement of Operations, Statement of Changes in Net Assets, and
Financial Highlights fairly reflect its results of operations, changes
in financial position, and financial highlights for the periods
covered thereby in conformity with generally accepted accounting
principles in the United States consistently applied;
( g ) Korea Fund has no known liabilities of a material
nature, contingent or otherwise, other than those shown as owed by it
on its statement of assets and liabilities as of March 31, 2000, and
those incurred in the ordinary course of Korea Fund's business as an
investment company since March 31, 2000;
( h ) The proxy statement filed with the Securities and Exchange
Commission by Korea Fund relating to the Reorganization (Proxy
Statement) on the date such Proxy Statement is first sent to
stockholders of Korea Fund insofar as it relates to Korea Fund, (i)
complies in all material respects with the provisions of the
Securities Exchange Act of 1934, as amended (1934 Act), the 1940 Act,
and the rules and regulations thereunder, and (ii) does not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and at the time of the stockholders' meeting
referred to in Section 7 and on the Closing Date, the Proxy Statement
insofar as it relates to Korea Fund will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
( i ) All material contracts and commitments of Korea Fund
(other than this Agreement) will be terminated without liability to
Korea Fund on or prior to the Closing Date (other than those made in
connection with redemptions of shares and the purchase and sale of
portfolio securities made in the ordinary course of business);
( j ) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Korea
Fund of the transactions contemplated by this Agreement, except such
as have been obtained under the Securities Act of 1933 (1933 Act), the
1934 Act, the 1940 Act, and state securities or blue sky laws (which
term as used herein shall include the District of Columbia and Puerto
Rico);
( k ) Korea Fund has filed or will file all federal and state
tax returns which, to the knowledge of Korea Fund's officers, are
required to be filed by Korea Fund and has paid or will pay all
federal and state taxes shown to be due on said returns or provision
shall have been made for the payment thereof, and, to the best of
Korea Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
( l ) Korea Fund has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment company
for all of its prior taxable years and intends to meet such
requirements for its current taxable year;
( m ) All of the issued and outstanding shares of Korea Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding and fully paid and nonassessable as a matter of Maryland
law, and have been offered for sale in conformity with all applicable
federal and state securities laws. All of the issued and outstanding
shares of Korea Fund will, at the Closing Date, be held by the persons
and in the amounts set forth in the list of stockholders submitted to
the Series in accordance with this Agreement;
( n ) As of both the Valuation Time (as defined in Section 4)
and the Closing Date, Korea Fund will have the full right, power, and
authority to sell, assign, transfer, and deliver its portfolio
securities and any other assets of Korea Fund to be transferred to the
Series in accordance with the terms of this Agreement. As of the
Closing Date, subject only to the delivery of Korea Fund's portfolio
securities and any such other assets as contemplated by this
Agreement, the Series will acquire Korea Fund's portfolio securities
and any such other assets subject to no encumbrances, liens, or
security interests (except for those that may arise in the ordinary
course or that are disclosed to the Series) and without any
restrictions upon the transfer thereof; and
( o ) The execution, performance, and delivery of this Agreement
will have been duly authorized prior to the Closing Date by all
necessary corporate action on the part of Korea Fund, and this
Agreement constitutes a valid and binding obligation of Korea Fund
enforceable in accordance with its terms, subject to approval of the
stockholders of the Korea Fund.
2 . REPRESENTATIONS AND WARRANTIES OF THE SERIES. The Trust, on
behalf of the Series, represents and warrants to and agrees with Korea
Fund that:
(a) . The Series is a series of Fidelity Advisor Series VIII, a
business trust duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts, and has the power
to own all of its properties and assets and to carry out its
obligations under this Agreement. It has or will have prior to the
Closing Date all necessary federal, state, and local authorizations to
carry on its business as now being conducted and to carry out this
Agreement;
( b ) The Trust is an open-end, management investment
company duly registered under the 1940 Act, and such registration is
in full force and effect, and the Series is a new-organized series
portfolio of the Trust, and, prior to the Closing Date, the Series has
not and shall not have engaged in any business activities other than
such activities as are directly related to organization of the Series
in anticipation of the Reorganization and any other transactions
contemplated hereby;
(c) Prior to the Closing Date, the Trust shall have on file
with the Securities and Exchange Commission an effective Prospectus
and Statement of Additional Information for the Series (the Series
Disclosure Documents) contemplating that the Series shall be managed
as an open-end fund having the same investment objective as the Korea
Fund, as described in the Proxy Statement, and the Series Disclosure
Documents shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
( d ) There are no material legal, administrative, or other
proceedings pending or, to the knowledge of the Trust, threatened
against the Series which assert liability on the part of the Series.
The Trust knows of no facts which might form the basis for the
institution of such proceedings;
( e ) The Trust is not in, and the execution, delivery, and
performance of this Agreement in accordance with its terms will not
result in, violation of any provision of its Amended and Restated
Declaration of Trust (or any Supplement thereto or amendment thereof)
or By-laws, or, to the knowledge of the Trust, of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
the Trust is a party or by which the Trust is bound or result in the
acceleration of any obligation or the imposition of any penalty under
any agreement, judgment, or decree to which the Trust is a party or is
bound;
( f ) The Series has no known liabilities of a material nature,
contingent or otherwise, other than those incurred in the ordinary
course of the Series' business as an investment company;
( g ) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by the
Series of the transactions contemplated by this Agreement, except such
as have been obtained, or as may be contemplated hereby, under the
1933 Act, the 1934 Act, the 1940 Act, and state securities or blue sky
laws (which term as used herein shall include the District of Columbia
and Puerto Rico);
( h ) The Trust has filed or will file all federal and state tax
returns which, to the knowledge of the Trust's officers, are required
to be filed by the Trust and has paid or will pay all federal and
state taxes shown to be due on said returns or provision shall have
been made for the payment thereof, and, to the best of the Trust's
knowledge, no such return is currently under audit and no assessment
has been asserted with respect to such returns;
( i ) The Trust intends for the Series to meet the requirements
of Subchapter M of the Code for qualification and treatment as a
regulated investment company for its taxable year ending on September
30, 2000;
( j ) As of the Closing Date, the shares of beneficial interest
of the Series to be issued to Korea Fund will have been duly
authorized and, when issued and delivered pursuant to this Agreement,
will be legally and validly issued and will be fully paid and
nonassessable as a matter of Massachusetts law, and no shareholder of
the Series will have any preemptive right of subscription or purchase
in respect thereof;
( k ) The execution, performance, and delivery of this Agreement
will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Trust, and this Agreement
constitutes a valid and binding obligation of the Trust enforceable in
accordance with its terms;
( l ) The Proxy Statement on the date such Proxy Statement is
first sent to stockholders of Korea Fund insofar as it relates to the
Trust and the Series, (i) complies in all material respects with the
provisions of the 1933 Act, the 1934 Act, and the 1940 Act, and the
rules and regulations thereunder, and (ii) does not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and at the time of the stockholders' meeting referred to
in Section 7 and on the Closing Date, the Proxy Statement insofar as
it relates to the Trust and the Series does not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
( m ) The issuance of the Series Shares pursuant to this
Agreement will be in compliance with all applicable federal and state
securities laws; and
( n ) All of the issued and outstanding shares of beneficial
interest of the Series have been offered for sale and sold in
conformity with the federal and state securities laws.
3 . REORGANIZATION.
(a) Subject to the requisite approval of the stockholders of
Korea Fund and to the other terms and conditions contained herein,
Korea Fund agrees to assign, sell, convey, transfer, and deliver to
the Series as of the Closing Date all of the assets of Korea Fund of
every kind and nature existing on the Closing Date. The Series agrees
in exchange therefor: (i) to assume all of Korea Fund's liabilities
existing on or after the Closing Date, whether or not determinable on
the Closing Date, and (ii) to issue and deliver to Korea Fund a number
of full and fractional Class A shares of the Series having an
aggregate NAV equal to the value of the assets of Korea Fund
less the liabilities of Korea Fund, determined as provided for under
Section 4.
( b ) The assets of Korea Fund to be acquired by the Series
shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest or dividends receivables),
claims, choses in action, and other property owned by Korea Fund, and
any deferred or prepaid expenses (other than deferred organizational
expenses) shown as an asset on the books of Korea Fund on the Closing
Date. Korea Fund will pay or cause to be paid to the Series any
dividend or interest payments received by it on or after the Closing
Date with respect to the assets transferred to the Series hereunder,
and the Series will retain any dividend or interest payments received
by it after the Valuation Time with respect to the assets transferred
hereunder without regard to the payment date thereof.
(c) The liabilities of Korea Fund to be assumed by the Series
shall include (except as otherwise provided for herein) all of Korea
Fund's liabilities, debts, obligations, and duties, of whatever kind
or nature, whether absolute, accrued, contingent, or otherwise,
whether or not arising in the ordinary course of business, whether or
not determinable on the Closing Date, and whether or not specifically
referred to in this Agreement. Notwithstanding the foregoing, Korea
Fund agrees to use its best efforts to discharge all of its known
liabilities prior to the Closing Date, other than liabilities incurred
in the ordinary course of business.
( d ) Pursuant to this Agreement, as soon after the Closing Date
as is conveniently practicable, Korea Fund will constructively
distribute pro rata to its stockholders of record, determined as of
the Valuation Time on the Closing Date, the Series Shares in exchange
for such stockholders' shares of common stock in Korea Fund and Korea
Fund will be liquidated and dissolved in accordance with the General
Corporation Law of the State of Maryland and Korea Fund's Articles of
Incorporation. Such distribution shall be accomplished by the Series'
transfer agent opening accounts on the Series' share transfer to books
in the names of the Korea Fund stockholders and transferring the
Series Shares thereto. Each Korea Fund stockholder's account shall be
credited with the respective pro rata number of full and fractional
(rounded to the third decimal place) Series Shares due that
stockholder. All outstanding Korea Fund shares, including any
represented by certificates, shall simultaneously be canceled on Korea
Fund's share transfer records. The Series shall not issue certificates
representing the Series Shares in connection with the Reorganization.
( e ) Any reporting responsibility of Korea Fund is and shall
remain its responsibility up to and including the date on which it is
terminated.
( f ) Any transfer taxes payable upon issuance of the Series
Shares in a name other than that of the registered holder on Korea
Fund's books of the Korea Fund shares constructively exchanged for the
Series Shares shall be paid by the person to whom such the Series
Shares are to be issued, as a condition of such transfer.
4 . VALUATION.
(a) . The Valuation Time shall be as of the close of business
of the New York Stock Exchange on the Closing Date, or such other date
as may be mutually agreed upon in writing by the parties hereto
(Valuation Time).
( b ) As of the Closing Date, the Series will deliver to Korea
Fund the number of Series Shares having an aggregate NAV equal to the
value of the assets of Korea Fund transferred hereunder less the
liabilities of Korea Fund, determined as provided in this Section.
(c) The NAV per share of the Series to be delivered to
Korea Fund, the value of the assets of Korea Fund transferred
hereunder, and the value of the liabilities of Korea Fund to be
assumed hereunder, shall, in each case, be determined as of the
Valuation Time.
( d ) All computations pursuant to this Section shall be made by
or under the direction of Fidelity Service Company, Inc., a
wholly-owned subsidiary of FMR Corp., in accordance with its regular
practice as sub-pricing agent for Korea Fund and pricing agent for the
Series.
5 . FEES; EXPENSES.
(a) Korea Fund shall be responsible for all expenses, fees and
other charges in connection with the transactions contemplated by this
Agreement. Any portfolio transaction expenses incurred in the purchase
and sale of securities in connection with the transactions
contemplated by this Agreement which may be attributable to the Series
will be borne by the Series.
( b ) Each of the Series and Korea Fund represents that there is
no person who has dealt with it who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or
commission arising out of the transactions contemplated by this
Agreement.
6 . CLOSING DATE.
(a) The Reorganization, together with related acts necessary
to consummate the same (Closing), unless otherwise provided herein,
shall occur at the principal office of the Fund and the Trust, 82
Devonshire Street, Boston, Massachusetts, as of the Valuation Time on
a date determined by both the Board of Directors of Korea Fund and the
Board of Trustees of the Trust, or at some other time and place agreed
to by Korea Fund and the Trust on behalf of the Series (Closing Date).
( b ) In the event that on the Closing Date: (i) any of the
markets for securities held by the Funds is closed to trading, or (ii)
trading thereon is restricted, or (iii) trading or the reporting of
trading on said market or elsewhere is disrupted, all so that accurate
appraisal of the total net asset value of Korea Fund and the NAV per
share of the Series is impracticable, the Valuation Time and the
Closing Date shall be postponed until the first business day after the
day when such trading shall have been fully resumed and such reporting
shall have been restored, or such other date as the parties may agree.
(c) In the event that, prior to the Closing Date, either the
Board of Directors of Korea Fund or the Trustees of the Trust
determine in their sole discretion that it is either impracticable or
inadvisable to consummate the Reorganization on the Closing Date due
to adverse market developments, such as the imposition of currency
controls or otherwise, the parties may determine to delay the Closing
Date to such time as shall be mutually agreed by the parties hereto or
to terminate this Agreement in its entirety in accordance with the
provisions of Section 12 hereof.
7 . STOCKHOLDERS MEETING AND TERMINATION OF KOREA FUND.
(a) Korea Fund agrees to call a meeting of its stockholders,
to consider transferring its assets to the Series as herein provided,
adopting this Agreement, and authorizing the liquidation of Korea
Fund.
( b ) Korea Fund agrees that as soon as reasonably practicable
after distribution of the Series Shares, Korea Fund shall be
terminated and dissolved pursuant to Maryland General Corporation Law
and its Articles of Incorporation, any further actions shall be taken
in connection therewith as required by applicable law, and on and
after the Closing Date Korea Fund shall not conduct any business
except in connection with its liquidation, dissolution and
termination.
8 . CONDITIONS TO OBLIGATIONS OF THE TRUST.
(a) That Korea Fund furnishes to the Trust a statement, dated
as of the Closing Date, signed by an officer of Korea Fund, certifying
that as of the Valuation Time and the Closing Date all representations
and warranties of Korea Fund made in this Agreement are true and
correct in all material respects and that Korea Fund has complied with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such dates;
( b ) That Korea Fund furnishes the Trust with copies of the
resolutions, certified by an officer of Korea Fund, evidencing the
adoption of this Agreement and the approval of the transactions
contemplated herein by the requisite vote of the holders of the
outstanding shares of common stock of Korea Fund;
(c) That Korea Fund shall deliver to the Trust at the Closing
Date a statement of its assets and liabilities, together with a list
of its portfolio securities showing each such security's adjusted tax
basis and holding period by lot, with values determined as provided in
Section 4 of this Agreement, all as of the Valuation Time, certified
on Korea Fund's behalf by its Treasurer or Assistant Treasurer;
( d ) That Korea Fund's custodian shall deliver to the Trust a
certificate identifying the assets of Korea Fund held by such
custodian as of the Valuation Time on the Closing Date and stating
that as of the Valuation Time: (i) the assets held by the custodian
will be transferred to the Series; (ii) Korea Fund's assets have been
duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof; and (iii) to the best of the
custodian's knowledge, all necessary taxes in conjunction with the
delivery of the assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment
has been made;
( e ) That Korea Fund's transfer agent shall deliver to the
Trust at the Closing a certificate setting forth the number of shares
of Korea Fund outstanding as of the Valuation Time and the name and
address of each holder of record of any such shares and the number of
shares held of record by each such stockholder;
( f ) That Korea Fund calls a meeting of its stockholders to
consider transferring its assets to the Series and authorizing the
liquidation and termination of Korea Fund, all as herein provided;
( g ) That Korea Fund delivers to the Trust a certificate of an
officer of Korea Fund, dated as of the Closing Date, that there has
been no material adverse change in Korea Fund's financial position
since March 31, 2000, other than changes in the market value of its
portfolio securities, or changes due to dividends paid, or losses from
operations; and
( h ) That all of the issued and outstanding shares of common
stock of Korea Fund shall have been offered for sale and sold by Korea
Fund in conformity with all applicable federal and state securities
laws and, to the extent that any audit of the records of Korea Fund or
its transfer agent by the Trust or its agents shall have revealed
otherwise, Korea Fund shall have taken all actions that in the opinion
of the Trust, on behalf of the Series, are necessary to remedy any
prior failure on the part of Korea Fund to have offered for sale and
sold such shares in conformity with such laws.
9 . CONDITIONS TO OBLIGATIONS OF KOREA FUND.
(a) That the Trust, on behalf of the Series, shall have
executed and delivered to Korea Fund an Assumption of Liabilities,
certified by an officer of Fidelity Advisor Series VIII, dated as of
the Closing Date pursuant to which the Trust, on behalf of the Series,
assumes all of the liabilities of Korea Fund existing at the Valuation
Time;
( b ) That the Trust, on behalf of the Series, furnishes to
Korea Fund a statement, dated as of the Closing Date, signed by an
officer of Fidelity Advisor Series VIII, certifying that as of the
Valuation Time and the Closing Date all representations and warranties
of the Trust, on behalf of the Series, made in this Agreement and true
and correct in all material respects, and the Trust, on behalf of the
Series, has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to
such dates; and
(c) That Korea Fund shall have received an opinion of
Kirkpatrick & Lockhart LLP, counsel to the Trust, to the effect that
the Series Shares are duly authorized and upon delivery to Korea Fund
as provided in this Agreement will be validly issued and will be fully
paid and nonassessable as a matter of Massachusetts law and no
shareholder of the Series has any preemptive right of subscription or
purchase in respect thereof.
1 0 . CONDITIONS TO OBLIGATIONS OF THE TRUST AND KOREA FUND.
(a) That the transactions contemplated by this Agreement shall
have been approved by the requisite vote of the holders of the
outstanding shares of common stock of Korea Fund;
( b ) That on or before the Closing Date, the Securities and
Exchange Commission (SEC) shall have declared effective the Series
Disclosure Documents meeting the requirements of Section 2(c) hereof;
(c) That neither the Directors of Korea Fund nor the Trustees
of the Trust shall not have made and not withdrawn a determination
that the Reorganization is either impracticable or inadvisable due to
adverse market developments, as described in Section 6(c) hereof;
( d ) That all consents of other parties and all other consents,
orders, and permits of federal, state, and local regulatory
authorities (including those of the Commission and of state Blue Sky
and securities authorities, which term as used herein shall include
the District of Columbia and Puerto Rico, and including" no action"
positions of such federal or state authorities) deemed necessary by
the Trust, on behalf of the Series, or Korea Fund to permit
consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to
obtain any such consent, order, or permit would not involve a risk of
a material adverse effect on the assets or properties of the Series or
Korea Fund, provided that either party hereto may for itself waive any
of such conditions;
( e ) That all proceedings taken by either Fund in connection
with the transactions contemplated by this Agreement and all documents
incidental thereto shall be satisfactory in form and substance to the
Series and its counsel, Kirkpatrick & Lockhart LLP, and Korea Fund and
its counsel, Clifford Chance Rogers & Wells LLP;
( f ) That there shall not be any material litigation pending
with respect to the matters contemplated by this Agreement; and
( g ) That the Trust, on behalf of the Series, and Korea Fund
shall have received an opinion of Clifford Chance Rogers & Wells LLP
satisfactory to the Trust, on behalf of the Series, and Korea Fund
that for federal income tax purposes:
( i ) The acquisition by the Series of all the assets of
Korea Fund solely in exchange for shares of beneficial interest of the
Series and the assumption by the Series of Korea Fund's liabilities,
followed by the distribution by Korea Fund of the shares of the Series
to the stockholders of Korea Fund pursuant to the complete liquidation
of Korea Fund and in exchange for their Korea Fund shares will
constitute a reorganization within the meaning of Section 368 (a) (1 )
(F) of the Code, and Korea Fund and the Series will each be a "party
to a reorganization" within the meaning of Section 368 (b) of the
Code.
(i i ) No gain or loss will be recognized to Korea Fund upon
the transfer of all of its assets to the Series, in exchange solely
for shares of beneficial interest of the Series and the assumption by
the Series of Korea Fund's liabilities, followed by Korea Fund's
subsequent distribution of those shares to stockholders in liquidation
of Korea Fund.
(i ii ) No gain or loss will be recognized by the Series upon
receipt of the assets of Korea Fund in exchange solely for shares of
beneficial interest of the Series and its assumption of Korea Fund's
liabilities.
( i v) The stockholders of Korea Fund will recognize no gain or
loss upon the exchange of the Korea Fund shares solely for Series
shares.
( v ) The basis of Korea Fund's assets in the hands of the
Series will be the same as the basis of those assets in the hands of
Korea Fund immediately prior to the Reorganization.
( vi ) The basis of Series shares in the hands of Korea Fund
stockholders will be the same as their basis in Korea Fund shares to
be exchanged therefor.
( vii ) The Series' holding period with respect to the assets
received from Korea Fund will include the period for which such assets
were held by Korea Fund.
( vii i) The holding period of Series shares to be received by
Korea Fund stockholders will include the period during which Korea
Fund shares to be surrendered in exchange therefor were held, provided
such Korea Fund shares were held as capital assets by those
stockholders on the date of the Reorganization.
( ix ) The Reorganization will not result in the termination of
Korea Fund's taxable year and Korea Fund's tax attributes enumerated
in Section 381 (c) of the Code will be taken into account by the
Series as if there had been no Reorganization.
( x ) In accordance with Section 7 and after distribution of
the Shares of the Series, Korea Fund will be terminated and will cease
to exist shortly after the Closing Date of the Reorganization. The
termination of the existence of the Korea Fund following the
Closing Date will not prevent Korea Fund from qualifying as a
regulated investment company ("RIC") under Sections 851 through 855 of
the Code for periods preceding the Closing Date, including the portion
of Korea Fund's taxable year from October 1, 1999, through the Closing
Date. The Series will continue Korea Fund's business as a RIC
commencing on the Closing Date. The fact that the Series acquired the
Korea Fund's business in the Reorganization on the Closing Date will
not prevent the Series from qualifying as a RIC for periods following
the Closing Date, including the portion of the Korea Fund's taxable
year from the Closing Date through September 30, 2000 that the Series
will be deemed to continue.
Notwithstanding anything herein to the contrary, neither Korea Fund
nor the Series may waive the conditions set forth in this subsection
10(g).
1 1 . COVENANTS OF THE SERIES AND KOREA FUND.
(a) Korea Fund covenants to operate its business in the
ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the
payment of customary dividends and distributions;
( b ) The Trust, on behalf of the Series, covenants that,
between the date hereof and the Closing Date, the Series shall not
engage in any business activities other than such activities as are
directly related to organization of the Series in anticipation of the
Reorganization and any other transactions contemplated hereby;
(c) Korea Fund covenants that it is not acquiring the Series
Shares for the purpose of making any distribution other than in
accordance with the terms of this Agreement;
( d ) Korea Fund covenants that it will assist the Series in
obtaining such information as the Trust, on behalf of the Series,
reasonably requests concerning the beneficial ownership of Korea
Fund's shares; and
( e ) Korea Fund covenants that its liquidation and termination
will be effected in the manner provided in the Maryland General
Corporation Law and its Articles of Incorporation in accordance with
applicable law and after the Closing Date, Korea Fund will not conduct
any business except in connection with its liquidation, dissolution
and termination.
1 2 . TERMINATION; WAIVER.
The Trust and Korea Fund may terminate this Agreement by mutual
agreement. In addition, either the Trust or Korea Fund may at its
option terminate this Agreement at or prior to the Closing Date
because:
(a) of a material breach by the other of any representation,
warranty, or agreement contained herein to be performed at or prior to
the Closing Date; or
( b ) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Korea Fund or the Trust , or their
respective Directors, Trustees or officers.
1 3 . SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF
WARRANTIES.
(a) This Agreement supersedes all previous correspondence and
oral communications between the parties regarding the subject matter
hereof, constitutes the only understanding with respect to such
subject matter, may not be changed except by a letter of agreement
signed by each party hereto and shall be construed in accordance with
and governed by the laws of the Commonwealth of Massachusetts.
( b ) This Agreement may be amended, modified, or supplemented
in such manner as may be mutually agreed upon in writing by the
respective President, any Vice President, or Treasurer of the Trust,
on behalf of the Series, or Korea Fund; provided, however, that
following the stockholders' meeting called by Korea Fund pursuant to
Section 7 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Series
Shares to be paid to Korea Fund stockholders under this Agreement to
the detriment of such stockholders without their further approval.
(c) Except as expressly provided otherwise herein, either Fund
may waive any condition to its obligations hereunder, provided that
such waiver does not have any material adverse effect on the interests
of such Fund's shareholders.
( d ) The representations, warranties, and covenants contained
in the Agreement, or in any document delivered pursuant hereto or in
connection herewith, shall survive the consummation of the
transactions contemplated hereunder.
1 4 . DECLARATIONS OF TRUST.
A copy of the Trust's Declaration of Trust, as restated and amended,
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Trust as trustees, and not
individually and that the obligations of the Trust under this
instrument are not binding upon any of the Trust's Trustees, officers,
or shareholders, as the case may be, individually but are binding only
upon the assets and property of the Series. Each Fund agrees that its
obligations hereunder apply only to such Fund and not to its
shareholders individually or to the Trustees or Directors of such
Fund.
1 5 . ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment
or transfer of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing
herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation other than the
parties hereto and their respective successors and assigns any rights
or remedies under or by reason of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by an appropriate officer.
SIGNATURE LINES OMITTED
FDAKF-pxs-0400 CUSIP# 315804104/FUND# 603
1.740541.100
FIDELITY ADVISOR KOREA FUND, INC.
PROXY SOLICITED BY THE DIRECTORS
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter and Robert C. Pozen, or any one or more
of them, attorneys, with full power of substitution, to vote all
shares of Fidelity Advisor Korea Fund, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Fund to
be held at the office of the Fund at 27 State Street, 10th Floor,
Boston, Massachusetts 02109, on June 14, 2000 at 10:00 a.m. Eastern
time and at any adjournments thereof. All powers may be exercised by
a majority of said proxy holders or substitutes voting or acting or,
if only one votes and acts, then by that one. This Proxy shall be
voted on the proposals described in the Proxy Statement as specified
on the reverse side. Receipt of the Notice of the Meeting and the
accompanying Proxy Statement is hereby acknowledged.
Please refer to the Proxy Statement discussion of this matter. If no
specification is made, the proxy shall be voted for the proposals
specified on the reverse side. As to any other matter, said attorneys
shall vote in accordance with their best judgment. The Board of
Directors recommends a vote for the following matters set forth on the
reverse side.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as executor, administrator,
trustee, attorney, guardian, etc., please so indicate. Corporate and
partnership proxies should be signed by an authorized person
indicating the person's title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_____________________________ ________________________________________
_____________________________ ________________________________________
_____________________________ ________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
[x] PLEASE MARK VOTES AS IN
THIS EXAMPLE
FIDELITY ADVISOR KOREA FUND, IF NO SPECIFICATION IS MADE,
INC. THE PROXY SHALL BE VOTED FOR
EACH OF THE PROPOSALS.
Please refer to the
Proxy 1. To elect as the Board of [ ] FOR all nominees [ ] WITHHOLD [ ] For All Except
Statement discussion
of each of these Directors the six nominees
matters. specified below:
Vote this proxy card
TODAY! (01) HELMERT FRANS VAN DEN
Your prompt response
will HOVEN
save Fidelity Advisor
Korea (02) EDWARD C. JOHNSON 3D
Fund, Inc., the
expense of (03) EDWARD H. MALONE
additional mailings. (04) ROBERT C. POZEN
Mark box at right if an (05) BERTRAM H. WITHAM, JR.
address change or
comment (06) DAVID L. YUNICH
has been noted on the NOTE: IF YOU DO NOT WISH
reverse side of this
card. [ ] YOUR SHARES VOTED "FOR" A
PARTICULAR NOMINEE, MARK THE
CONTROL NUMBER: "FOR ALL EXCEPT" BOX AND
STRIKE A LINE THROUGH THE
THE NOMINEE'S NAME. YOUR
SHARES WILL BE VOTED FOR THE
REMAINING NOMINEE.
2. To ratify the selection of [ ] FOR [ ] Against [ ] ABSTAIN
PricewaterhouseCoopers LLP
as independent accountants
of Korea Fund.
3. To approve the [ ] FOR [ ] Against [ ] ABSTAIN
Reorganization of Korea Fund
as an open-end investment
company pursuant to the
Agreement and Plan of
Reorganization between Korea
Fund and Fidelity Advisor
Series VIII.
Please be sure to sign and 4. To make Korea Fund's [ ] FOR [ ] Against [ ] ABSTAIN
date this Proxy. current fundamental 65%
"name test" investment
policy non-fundamental.
Date________ Stockholder 5. To amend the fundamental [ ] FOR [ ] Against [ ] ABSTAIN
sign here Co-owner sign
here investment limitation
concerning industry
concentration to permit
Korea Fund to invest up to
35% of its total assets in
certain industries.
RECORD DATE SHARES:
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