-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bv2hoWvbZ9mBG2arngA8k0nAuHrmkdMCl+MHg2wsO3TkHEh+fZPq5Cr1Yi1DMAir S2MDfk+wed5uuHbuvI6SGg== 0000950123-96-005585.txt : 19961016 0000950123-96-005585.hdr.sgml : 19961016 ACCESSION NUMBER: 0000950123-96-005585 CONFORMED SUBMISSION TYPE: N-2 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19961011 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY ADVISOR KOREA FUND INC CENTRAL INDEX KEY: 0000926431 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043238787 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-14049 FILM NUMBER: 96642844 FILING VALUES: FORM TYPE: N-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-08608 FILM NUMBER: 96642845 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAILZONE ZH2 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6175638668 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET CITY: BOSTON STATE: MA ZIP: 02109 N-2 1 FIDELITY ADVISOR KOREA FUND, INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 1996. SECURITIES ACT FILE NO INVESTMENT COMPANY ACT FILE NO. 81-8608 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 ------------------------------------ Form N-2 Registration Statement Under the Securities Act of 1933 /X/ Pre-Effective Amendment No. / / Post-Effective Amendment No. / / and/or Registration Statement Under the Investment Company Act of 1940 /X/ Amendment No. 5 /X/ (check appropriate box or boxes) ------------------------------------ FIDELITY ADVISOR KOREA FUND, INC. (Exact Name of Registrant as Specified in Charter) 82 DEVONSHIRE STREET BOSTON, MASSACHUSETTS 02109 (Address of Principal Executive Offices in United States) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-426-5528 ------------------------------------ ARTHUR S. LORING SECRETARY FIDELITY ADVISOR KOREA FUND, INC. 82 DEVONSHIRE STREET BOSTON, MASSACHUSETTS 02109 (Name and Address of Agent for Service) ------------------------------------ With copies to: LAURENCE E. CRANCH, ESQ. THOMAS A. HALE, ESQ. LEONARD B. MACKEY, JR., ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM ROGERS & WELLS 333 WEST WACKER DRIVE 200 PARK AVENUE SUITE 2100 NEW YORK, NEW YORK 10166 CHICAGO, ILLINOIS 60606
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this registration statement. If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. / / ------------------------------------ CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- ----------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING AMOUNT OF BEING REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------- Common Stock $.001 Par Value...... 100,000 Shares $10.375 $1,037,500 $315 - -----------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933. Based on the average of the high and low sales price reported on the New York Stock Exchange on October 4, 1996. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 FIDELITY ADVISOR KOREA FUND, INC. FORM N-2 CROSS-REFERENCE SHEET PARTS A AND B OF THE PROSPECTUS
ITEMS IN PART A OF FORM N-2 LOCATION IN PROSPECTUS - --------------------------------------------- ----------------------------------------------- 1. Outside Front Cover..................... Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Page.................................. Inside Front and Outside Back Cover Page of Prospectus 3. Fee Table and Synopsis.................. Fee Table 4. Financial Highlights.................... Financial Highlights 5. Plan of Distribution.................... Outside Front Cover Page of Prospectus; The Offer; Distribution Arrangements 6. Selling Shareholders.................... Not Applicable 7. Use of Proceeds......................... Use of Proceeds 8. General Description of the Registrant... Outside Front Cover Page of Prospectus; The Fund; Investment Objective and Policies; Risk Factors and Special Considerations; Common Stock 9. Management.............................. Management of the Fund; Common Stock; 10. Capital Stock, Long-Term Debt, and Other Securities............................ Common Stock; Dividends and Distributions; Dividend Reinvestment and Cash Purchase Plan; Taxation 11. Defaults and Arrears on Senior Securities............................ Not Applicable 12. Legal Proceedings....................... Not Applicable 13. Table of Contents of the Statement of Additional Information................ Table of Contents of Statement of Additional Information
ITEMS IN PART B OF FORM N-2 LOCATION IN STATEMENT OF ADDITIONAL INFORMATION - --------------------------------------------- ----------------------------------------------- 14. Cover Page.............................. Front Cover Page 15. Table of Contents....................... Table of Contents 16. General Information and History......... The Fund in the Prospectus 17. Investment Objective and Policies....... Investment Objective and Policies; Investment Limitations 18. Management.............................. Management of the Fund 19. Control Persons and Principal Holders of Securities............................ Management of the Fund; Custodian, Transfer Agent, Dividend Paying Agent and Registrar; Experts in the Prospectus 20. Investment Advisory and Other Services.............................. Management of the Fund; Custodian, Transfer Agent, Dividend Paying Agent and Registrar; Experts in the Prospectus 21. Brokerage Allocation and Other Practices............................. Portfolio Transactions 22. Tax Status.............................. Taxation 23. Financial Statements.................... Financial Statements
Information required to be included in Part C is set forth under the appropriate item, so numbered in Part C to this Registration Statement. 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED OCTOBER 11, 1996 PROSPECTUS NOVEMBER , 1996 FIDELITY ADVISOR KOREA FUND, INC. 100,000 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF [LOGO] RIGHTS TO SUBSCRIBE FOR SUCH SHARES ------------------------ Fidelity Advisor Korea Fund, Inc. (the "Fund") is issuing to its shareholders of record ("Record Date Shareholders") as of the close of business on November , 1996 (the "Record Date") non-transferable rights ("Rights") entitling the holders thereof to subscribe for an aggregate of shares (the "Shares") of the Fund's Common Stock, par value $.001 per share (the "Common Stock"), at the rate of one share of Common Stock for every Rights held (the "Offer"). Record Date Shareholders will receive one Right for each whole share of Common Stock held on the Record Date, and shareholders who fully exercise their Rights will be entitled to subscribe for additional shares of Common Stock pursuant to the Over-Subscription Privilege described herein. The Fund may increase the number of Shares of Common Stock subject to subscription by up to 25% of the Shares, or up to an additional shares of Common Stock, for an aggregate total of Shares. Fractional shares will not be issued upon the exercise of Rights. The Rights are non-transferable and, therefore, may not be purchased or sold. The Rights will not be admitted for trading on the New York Stock Exchange (the "NYSE") or any other exchange. See "The Offer." THE SUBSCRIPTION PRICE PER SHARE (THE "SUBSCRIPTION PRICE") WILL BE % OF THE LOWER OF (i) THE AVERAGE OF THE LAST REPORTED SALES PRICE OF A SHARE OF THE FUND'S COMMON STOCK ON THE NYSE ON THE DATE OF THE EXPIRATION OF THE OFFER (THE "PRICING DATE") AND ON THE FOUR PRECEDING BUSINESS DAYS AND (ii) THE NET ASSET VALUE PER SHARE AS OF THE PRICING DATE. THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER , 1996 UNLESS EXTENDED AS DESCRIBED HEREIN (THE "EXPIRATION DATE"). The Fund announced the Offer after the close of trading on the NYSE on October 11, 1996. Shares of the Fund's Common Stock trade on the NYSE under the symbol "FAK." The additional shares of Common Stock issued pursuant to the Offer will be listed for trading on the NYSE, subject to notice of issuance. The net asset value per share of the Fund's Common Stock at the close of business on October , 1996 (the last trading date on which the Fund calculated its net asset value prior to the announcement) and on November , 1996 (the last trading date on which the Fund calculated its net asset value prior to the Record Date) was $ and $ , respectively, and the last reported sales price of a share of the Fund's Common Stock on the NYSE on those dates was $ and $ , respectively. Upon completion of the Offer, shareholders who do not fully exercise their Rights will own a smaller proportional interest in the Fund than they owned prior to the Offer. In addition, because the Subscription Price per Share will be less than the net asset value per share on the Pricing Date, completion of the Offer will result in an immediate dilution of net asset value per share for all shareholders. Such dilution will disproportionately affect non-exercising shareholders. Such dilution is not currently determinable because it is not known what the net asset value per Share will be on the Pricing Date, what proportion of the Shares will be subscribed for or what the Subscription Price will be. If the Subscription Price per Share is substantially less than the net asset value per share on the Pricing Date, such dilution could be substantial. See "Risk Factors and Special Considerations--Dilution" and "The Offer--Terms of the Offer." EXCEPT AS DESCRIBED HEREIN, SHAREHOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR SUBSCRIPTIONS AFTER RECEIPT OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT. The Fund is a non-diversified, closed-end management investment company. The Fund's investment objective is long-term capital appreciation. The Fund seeks to achieve its objective by investing primarily in equity and debt securities of Korean Issuers (as defined in this Prospectus). See "Investment Objective and Policies." INVESTMENT IN THE KOREAN SECURITIES INVOLVES RISKS THAT ARE NOT NORMALLY INVOLVED IN INVESTMENTS IN SECURITIES OF U.S. COMPANIES. IN ADDITION, ALTHOUGH THE FUND CURRENTLY INTENDS TO CONTINUE INVESTING PRINCIPALLY IN EQUITY SECURITIES, IT MAY INVEST WITHOUT LIMITATION IN HIGH RISK, HIGH YIELD DEBT INSTRUMENTS THAT ARE LOW RATED OR UNRATED AND ARE PREDOMINATELY SPECULATIVE. INVESTMENT IN THE FUND SHOULD BE CONSIDERED SPECULATIVE. SEE "INVESTMENT OBJECTIVE AND POLICIES" AND "RISK FACTORS AND SPECIAL CONSIDERATIONS." (Continued on the following page) ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- Estimated Estimated Estimated Subscription Sales Load(2) Proceeds to Price(1) Fund(3)(4) - ---------------------------------------------------------------------------------------------------------------- Per Share.................................... $ $ $ - ---------------------------------------------------------------------------------------------------------------- Total Maximum(5)............................. $ $ $ - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
(Footnotes on the following page) ------------------------ PAINEWEBBER INCORPORATED ------------------------ THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1996. 4 (Continued from the previous page) This Prospectus sets forth concisely the information about the Fund that a prospective investor ought to know before investing in the Fund. Investors are advised to read this Prospectus and retain it for future reference. A Statement of Additional Information dated November , 1996 (the "SAI"), containing additional information about the Fund, has been filed with the U.S. Securities and Exchange Commission (the "Commission"), and is incorporated by reference in its entirety into this Prospectus. A copy of the SAI, the table of contents of which appears on page of this Prospectus, may be obtained without charge by calling the Fund's Information Agent, D.F. King & Co., Inc., at (800) . The Fund's investment manager is Fidelity Management & Research Corporation (the "Investment Manager"). The Fund's investment adviser is Fidelity International Investment Advisors (the "Investment Adviser"). The Fund's investment sub-adviser is Fidelity Investments Japan Limited (the "Sub-Adviser"). The Investment Manager, the Investment Adviser and Sub-Adviser, as well as Fidelity Service Co., the Fund's Administrator, will benefit from the Offer because their fees are based on the average net assets of the Fund. See "Management of the Fund." The address of the Fund is 82 Devonshire Street, Boston, Massachusetts 02109. The Fund's telephone number is (800) 426-5523. [LOGO] is a registered trademark of FMR Corp. ------------------------ (Footnotes from the previous page) (1) Estimated on the basis of [ % of the average of the last reported sales price of a share of the Fund's Common Stock on the NYSE on November , 1996 and the four preceding business days]. (2) In connection with the Offer, the Fund has agreed to pay PaineWebber Incorporated (the "Dealer Manager"), and other broker-dealers soliciting the exercise of Rights, solicitation fees equal to % of the Subscription Price per Share for each Share issued pursuant to the exercise of such Rights and the Over-Subscription Privilege. The Fund has also agreed to pay the Dealer Manager a fee for financial advisory and marketing services in connection with the Offer equal to % of the aggregate Subscription Price for the Shares issued pursuant to the exercise of such Rights and the Over-Subscription Privilege. The Fund and the Investment Manager have agreed to indemnify the Dealer Manager and each Soliciting Dealer against certain liabilities under the Securities Act of 1933, as amended. (3) Before deduction of offering expenses incurred by the Fund, estimated at $ , including up to an aggregate of $ to be paid to the Dealer Manager as partial reimbursement for its expenses relating to the Offer. (4) The funds received by check prior to the final due date of this Offer will be deposited into a segregated interest-bearing account (which interest will be paid to the Fund) pending proration and distribution of Shares. (5) Assumes all Shares are purchased at the Estimated Subscription Price. Pursuant to the Over-Subscription Privilege, the Fund may at the discretion of the Board of Directors increase the number of Shares subject to subscription by up to 25% of the Shares offered hereby. If the Fund increases the number of Shares subject to subscription by 25%, the total maximum Estimated Subscription Price, Estimated Sales Load and Estimated Proceeds to Fund will be $ , $ and $ , respectively. ------------------------ Unless otherwise specified, references in this Prospectus to "dollars," "U.S.$," or "$" are to U.S. dollars and references to "Won" or "W" are to Korean Won. On November , 1996, the market average exchange rate of the Won to the U.S. dollar, as published by the Korea Financial Telecommunications and Clearings Institute (the "Market Average Exchange Rate"), was W = $1.00. Unless otherwise indicated, the U.S. dollar equivalent of information in Korean Won as of a date or for a period is as of such date or for the 2 5 end of such period and is based on The Bank of Korea concentration base rate, if pre-March 1990, or the Market Average Exchange Rate, from March 1990. No representation is made that the Won or U.S. dollar amounts in this Prospectus could have been or could be converted into Won or U.S. dollars, as the case may be, at any particular rate or at all. See "Risk Factors--Exchange Rate Fluctuations" [and "The Republic of Korea--Foreign Exchange"] for additional information on the historical rate of exchange between the U.S. dollar and Won. Certain numbers in this Prospectus have been rounded for ease of presentation, and, as a result, may not total precisely. 3 6 FEE TABLE SHAREHOLDER TRANSACTION EXPENSES Sales Load (as a percentage of the Subscription Price per Share)(1)....... % ANNUAL EXPENSES (as a percentage of net assets attributable to common shares)(2) Management Fees(3)........................................................ 1.00% Other Expenses(2)......................................................... % Administration Fees(3).................................................. 0.20% Other Operating Expenses................................................ % Total Annual Expenses..................................................... %
- --------------- (1) The Fund has agreed to pay the Dealer Manager and the other broker-dealers soliciting the exercise of Rights solicitation fees equal to % of the Subscription Price per Share for each Share issued pursuant to the exercise of the Rights and pursuant to the Over-Subscription Privilege. The Fund has also agreed to pay the Dealer Manager a fee for financial advisory and marketing services in connection with the Offer equal to % of the aggregate Subscription Price for Shares issued pursuant to the exercise of the Rights and pursuant to the Over-Subscription Privilege and to reimburse the Dealer Manager for its out-of-pocket expenses up to an aggregate of $ . In addition, the Fund has agreed to pay fees to the Subscription Agent (as defined herein) and the Information Agent (as defined herein), estimated to be $ and $ , respectively, for their services related to the Offer and to reimburse them for their out-of-pocket expenses. These fees will be borne by all of the Fund's shareholders, including those shareholders who do not exercise their Rights. (2) Amounts are based on the Fund's most recently completed [fiscal year ended September 30, 1996,] except that "Other Expenses" are based on estimated amounts for the Fund's current fiscal year and assume that (i) all of the Rights are exercised and (ii) the Fund does not increase the number of Shares subject to subscription pursuant to the Over-Subscription Privilege. (3) See "Management of the Fund" herein and in the SAI. THE FOREGOING FEE TABLE IS INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT AN INVESTOR IN THE FUND WILL BEAR DIRECTLY OR INDIRECTLY. EXAMPLE The following example demonstrates the projected U.S. dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in the Fund. These amounts are based upon payment by an investor of a % sales load and payment by the Fund of operating expenses at the levels set forth in the table above. An investor would pay the following expenses on a $1,000 investment, assuming (1) a 5% annual return and (2) reinvestment of all dividends and distributions at net asset value:
1 YEAR 3 YEARS 5 YEARS 10 YEARS -------- -------- -------- -------- $ $ $ $
THIS EXAMPLE AS WELL AS THE INFORMATION SET FORTH IN THE TABLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF THE FUTURE EXPENSES OF THE FUND, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while the example assumes a 5% annual return, the Fund's performance will vary and may result in a return greater or less than 5%. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, this may not be the case for participants in the Plan (as defined herein). See "Dividends and Distributions; Dividend Reinvestment and Cash Purchase Plan." 4 7 FINANCIAL HIGHLIGHTS Set forth below is selected financial information, including ratios, for a share of Common Stock outstanding throughout the periods indicated. Unless otherwise indicated, the information set forth below has been audited by , the Fund's independent accountants. Their report is included in the financial statements and financial highlights of the Fund appearing in the SAI. All of the information set forth below should be read in conjunction with the financial statements and financial highlights of the Fund included in the SAI.
OCTOBER 31, 1994 SIX MONTHS (COMMENCEMENT OF ENDED MARCH OPERATIONS) TO 31, 1996 SEPTEMBER 30, 1995 ----------- ------------------ (UNAUDITED) SELECTED PER SHARE DATA Net asset value, beginning of period..................... $ 12.62 $ 14.10 ----------- ---------- Income from investment operations Net investment income (loss)........................... .03(G) (.02) (G) Net realized and unrealized gain (loss) on investments......................................... (.73) (1.30) ----------- ---------- Total from investment operations......................... (.70) (1.32) ----------- ---------- Less distributions From net investment income............................. In excess of net investment income..................... From net realized gain................................. ----------- ---------- Total distributions...................................... ----------- ---------- Offering expenses........................................ -- (.16) ----------- ---------- Net asset value, end of period........................... $ 11.92 $ 12.62 ========= ============== Market value, end of period.............................. $11.375 $ 11.125 ========= ============== TOTAL RETURN(B) Market value(F).......................................... 2.25% (25.83)%(C) Net asset value(D)....................................... (5.55)% (9.47)%(E) RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted).................. $52,547 $ 55,603 Ratio of expenses to average net assets.................. 1.83% (A) 1.88% (A) Ratio of net investment income (loss) to average net assets................................................. .51% (A) (.19)%(A) Portfolio turnover rate.................................. 30% (A) 25% (A) Average commission rate paid(H).......................... $ .1564 $ --
- --------------- (A) Annualized. (B) Total returns for periods of less than one year are not annualized. (C) Total market value return includes the one time sales load of 6.0% paid in connection with the initial public offering. (D) Total return based on net asset value reflects the effect of changes in the net asset value on the performance of the fund, and assumes dividends and capital gains distributions, if any, were reinvested. This percentage is not an indication of the performance of a shareholder's investment in the fund based on market value due to differences between the market price of the stock and the net asset value of the fund. (E) Total net asset value return does not include the effect of the offering expenses or the one time sales load. 5 8 (F) Total return based on market value reflects the effect of changes in the fund's market value and assumes dividends and capital gains distributions, if any, were reinvested. (G) Net investment income per share has been calculated based on average shares outstanding during the period. (H) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund depending on the mix of trades executed in various markets where trading practices and commission rate structures may differ. 6 9 MARKET AND NET ASSET VALUE INFORMATION The Fund's currently outstanding shares of Common Stock are, and the Shares offered by this Prospectus will be, listed on the NYSE. Shares of the Fund's Common Stock commenced trading on the NYSE on October 26, 1994. In the past, the Fund's shares have traded both at a premium and at a discount in relation to net asset value. Although the Fund's shares recently have traded at a premium above net asset value, there can be no assurance that this premium will continue or that the shares will not trade at a discount. Shares of closed-end investment companies frequently trade at a discount from net asset value. See "Risk Factors and Special Considerations." The following table shows for each of the periods indicated the high and low market prices for shares of the Fund on the NYSE, high and low net asset values per share and the premium or discount to net asset value per share at which the Fund's shares were trading. Net asset value is calculated each day at the close of the NYSE. See "Net Asset Value" in the SAI for information as to the determination of the Fund's net asset value. MARKET PRICE, NET ASSET VALUE PER SHARE AND PREMIUM/(DISCOUNT) OF FUND SHARES
PREMIUM/(DISCOUNT) TO NET ASSET MARKET PRICE NET ASSET VALUE VALUE ------------------ ---------------- ---------------- FISCAL QUARTER ENDED HIGH LOW HIGH(1) LOW(1) HIGH(2) LOW(2) - --------------------------------------- ------- ------- ------ ------ ------ ------ December 31, 1994...................... $ 15.125 $ 14.00 $13.76 $12.82 9.92% 9.20% March 31, 1995......................... 14.50 10.25 12.74 12.04 13.81 (14.87) June 30, 1995.......................... 10.875 9.75 11.64 11.27 (6.57) (13.49) September 30, 1995..................... 11.375 9.875 12.91 11.43 (11.89) (13.60) December 31, 1995...................... 11.750 10.625 13.02 11.86 (9.75) (10.41) March 31, 1996......................... 11.625 10.875 12.15 11.58 (4.32) (6.09) June 30, 1996.......................... 12.50 11.125 13.66 12.06 (8.49) (7.75) September 30, 1996..................... 12.25 10.50 11.90 10.81 2.94 (2.87)
- --------------- Source: Bloomberg Financial and Fund Accounting Records. (1) Based on the net asset value calculated at the close of business on the NYSE trading day for which market price high and low information is provided. (2) Calculated based on the information presented. The last reported sales price, net asset value per share and percentage [premium/discount] to net asset value per share of the Common Stock on November , 1996 were $ , $ and %, respectively. As of November , 1996, the Fund had shares of Common Stock outstanding and the net assets of the Fund were $ . 7 10 THE OFFER PURPOSE OF THE OFFER The Board of Directors of the Fund has determined that the Offer (as) is in the best interest of the Fund and its shareholders because it represents an opportunity to increase the assets of the Fund available for investment, thereby enabling the Fund to take advantage more fully of existing and future investment opportunities that may be available, consistent with the Fund's investment objective of long-term capital appreciation through investment primarily in equity and debt securities of Korean Issuers. The Fund's Board of Directors has voted to approve the Offer. In reaching its decision, the Board of Directors considered, among other matters, advice by the Investment Manager that new funds would permit the Fund to take advantage of available investment opportunities without having to sell portfolio securities that the Investment Manager, the Investment Adviser and the Sub-Adviser (collectively, "Fidelity") believe should be held. Fidelity believes the Fund could take advantage of what it considers to be attractive investment valuations in the Korean securities market. The Offer provides existing shareholders the exclusive opportunity to purchase Shares at a discount to both the market price and net asset value per share. The Board of Directors also considered that increasing the size of the Fund through the Offer may result in certain economies of scale which could in turn marginally lower the Fund's expenses as a percentage of average net assets, although no assurance can be given that this result will be achieved. The Board of Directors believes that any resulting reduced expense ratio would be of long-term benefit to the Fund, and that a well-subscribed rights offering could increase liquidity on the NYSE where shares of the Fund's Common Stock are listed and traded. See "Management of the Fund" herein. The Fund's Investment Manager, Investment Adviser and Sub-Adviser, as well as the Administrator, will benefit from the Offer because their fees are based on the average net assets of the Fund. The Fund may, in the future and at its discretion, choose to make additional rights offerings from time to time for a number of shares and on terms which may or may not be similar to this Offer. Any such future rights offering will be made in accordance with the requirements of the Investment Company Act of 1940, as amended (the "1940 Act"). TERMS OF THE OFFER The Fund is issuing to its shareholders of record ("Record Date Shareholders") as of the close of business on November , 1996 (the "Record Date") non-transferable rights ("Rights") entitling the holders thereof to subscribe for an aggregate of shares (the "Shares") of the Fund's Common Stock, par value $.001 per Share (the "Common Stock") ( Shares if the Fund increases the number of shares available by up to 25% in connection with the Over-Subscription Privilege). Each shareholder is being issued one Right for each whole share of Common Stock owned on the Record Date. The Rights entitle the holders thereof to subscribe for one Share for every Rights held (1 for ). Fractional shares will not be issued upon the exercise of Rights. Accordingly, Shares may be purchased in the Primary Subscription only pursuant to the exercise of Rights in integral multiples of . Record Date Shareholders may request additional Shares pursuant to the Over-Subscription Privilege as described below. Rights may be exercised at any time during the Subscription Period, which commences on November , 1996 and ends at 5:00 P.M., New York City time, on December , 1996 (referred to herein as the "Expiration Date"), unless extended by the Fund until 5:00 P.M., New York City time, to a date not later than December , 1996. A shareholder's right to acquire Shares during the Subscription Period at the Subscription Price of one additional Share for every Rights held is hereinafter referred to as the "Primary Subscription." The Rights are evidenced by Subscription Certificates ("Subscription Certificates") that will be mailed to Record Date Shareholders, except as discussed below under "Foreign Restrictions." Shares not subscribed for in the Primary Subscription will be offered, by means of the Over-Subscription Privilege, to shareholders who have exercised all Rights issued to them and who wish to acquire more than the number of Shares they are entitled to purchase pursuant to their Rights. Shares acquired pursuant to the Over-Subscription Privilege are subject to allotment and may be subject to increase, as more fully discussed below under "Over-Subscription Privilege." For purposes of determining the maximum number of Shares a 8 11 shareholder may acquire pursuant to the Offer, shareholders whose shares are held of record by Cede & Co. ("Cede"), as nominee for The Depository Trust Company ("DTC"), or by any other depository or nominee will be deemed to be the holders of the Rights that are issued to Cede or such other depository or nominee on their behalf. Since fractional Shares will not be issued, shareholders who receive or have remaining fewer than Rights will be unable to purchase Shares upon the exercise of such Rights and will not be entitled to receive any cash in lieu thereof, although such shareholders may subscribe for Shares pursuant to the Over-Subscription Privilege. OVER-SUBSCRIPTION PRIVILEGE To the extent shareholders do not exercise all the Rights issued to them, any underlying Shares represented by such Rights will be offered by means of the Over-Subscription Privilege to the shareholders who have exercised all the Rights issued to them and who wish to over-subscribe for additional Shares. Only shareholders who exercise all the Rights issued to them may indicate on the Subscription Certificate, which they submit with respect to the exercise of the Rights issued to them, how many Shares they desire to purchase pursuant to the Over-Subscription Privilege. If sufficient Shares remain after completion of the Primary Subscription, all over-subscription requests will be honored in full. If sufficient Shares are not available after completion of the Primary Subscription to honor all over-subscription requests, the Fund may, at the discretion of the Board of Directors, issue shares of Common Stock up to an additional 25% of the Shares available pursuant to the Offer (up to an additional Shares) in order to cover such over-subscription requests. Regardless of whether the Fund issues such additional Shares, and to the extent Shares are not available to honor all over-subscription requests, the available Shares will be allocated among those who over-subscribe so that the number of Shares issued to such shareholders will generally be in proportion to the number of shares of Fund Common Stock owned by such shareholders on the Record Date. The allocation process may involve a series of allocations in order to assure that the total number of Shares available for over-subscription is distributed on a pro rata basis. Banks, brokers, trustees and other nominee holders of Rights will be required to certify to the Subscription Agent, before any Over-Subscription Privilege may be exercised as to any particular beneficial owner, as to the aggregate number of Rights exercised pursuant to the Primary Subscription and the number of Shares subscribed for pursuant to the Over-Subscription Privilege by such beneficial owner and that such beneficial owner's Primary Subscription was exercised in full. Nominee Holder Over-Subscription Forms and Beneficial Owner Certification Forms will be distributed with the Subscription Certificates. The Fund will not offer or sell in connection with the Offer any Shares that are not subscribed for pursuant to the Primary Subscription or the Over-Subscription Privilege. SUBSCRIPTION PRICE The Subscription Price for the Shares to be issued pursuant to the Offer will be % of the lower of (i) the average of the last reported sales price of a share of the Fund's Common Stock on the NYSE on the date of the expiration of the Offer (the "Pricing Date") and on the four preceding business days and (ii) the net asset value per share as of the close of business on the Pricing Date. For example, if the average of the last reported sales price of a share of the Fund's Common Stock on the NYSE on the Pricing Date and on the four preceding business days is $ , and the net asset value per share on the Pricing Date is $ , the Subscription Price will be $ ( % of $ ). If, however, the average of the last reported sales price on the NYSE on the Pricing Date and on the four preceding business days is $ , and the net asset value per share on the Pricing Date is $ , the Subscription Price will be $ ( % of $ ). See "Market and Net Asset Value Information." The Fund announced the Offer after the close of trading on the NYSE on October 11, 1996. The net asset value per share of Common Stock at the close of business on October 4, 1996 (the last trading date on which the Fund calculated its net asset value prior to the announcement) and on November , 1996 (the last trading date on which the Fund calculated its net asset value prior to the Record Date) was $10.58 and 9 12 $ , respectively, and the last reported sales price of a share of the Fund's Common Stock on the NYSE on those dates was $ and $ , respectively. NON-TRANSFERABILITY OF RIGHTS The Rights are non-transferable and, therefore, may not be purchased or sold. The Rights will not be listed for trading on the NYSE or any other securities exchange. However, the additional shares of Common Stock to be issued pursuant to the Offer will be listed for trading on the NYSE, subject to notice of official issuance. EXPIRATION OF THE OFFER The Offer will expire at 5:00 P.M., New York City time, on December , 1996, unless extended by the Fund until 5:00 P.M., New York City time, to a date not later than December , 1996. The Rights will expire on the Expiration Date and thereafter may not be exercised. Since the Expiration Date and the Pricing Date will be the same date, shareholders who decide to acquire Shares in the Primary Subscription or pursuant to the Over-Subscription Privilege will not know the purchase price of the Shares when they make their decision. Any extension of the Offer will be followed as promptly as practicable by announcement thereof. Such announcement will be issued no later than 9:00 A.M., New York City time, on the next business day following the previously scheduled Expiration Date. Without limiting the manner in which the Fund may choose to make such announcement, the Fund will not, unless otherwise required by law, have any obligation to publish, advertise or otherwise communicate any such announcement other than by making a release to the Dow Jones News Service or such other means of announcement as the Fund deems appropriate. SUBSCRIPTION AGENT The Subscription Agent is State Street Bank and Trust Company. The Subscription Agent will receive for its administrative, processing, invoicing and other services as subscription agent, a fee estimated to be approximately $ , as well as reimbursement for all out-of-pocket expenses related to the Offer. The Subscription Agent is also the Fund's transfer agent, dividend-paying agent and registrar. Questions regarding the Subscription Certificates should be directed to State Street Bank and Trust Company, Two Heritage Drive, North Quincy, Massachusetts 02171 U.S.A. (800) 426-5523 (toll free); shareholders may also consult their brokers or nominees. Signed Subscription Certificates should be sent together with proper payment of the Estimated Subscription Price (as defined below) for all Shares subscribed in the Primary Subscription and the Over-Subscription Privilege to State Street Bank and Trust Company by one of the methods described below. Notices of Guaranteed Delivery may be sent by facsimile to (617) 774-4519, to be received by the Subscription Agent prior to 5:00 P.M., New York City time, on the Expiration Date. Facsimiles should be confirmed by telephone to (617) 774-4511. The Fund will accept only properly completed and executed Subscription Certificates actually received at any of the addresses listed below, prior to 5:00 P.M., New York City time, on the Expiration Date or by the close of business on the third business day after the Expiration Date following timely receipt of a Notice of Guaranteed Delivery. (1) BY FIRST CLASS MAIL OR EXPRESS MAIL: State Street Bank and Trust Company Corporate Reorganization P.O. Box 9061 Boston, Massachusetts 02205-8686 U.S.A. (2) BY EXPRESS MAIL OR OVERNIGHT COURIER: State Street Bank and Trust Company Corporate Reorganization Two Heritage Drive North Quincy, Massachusetts 02171 U.S.A. 10 13 (3) BY HAND: State Street Bank and Trust Company Corporate Reorganization 225 Franklin Street--Concourse Level Boston, Massachusetts 02110 U.S.A. or Bank Boston c/o Boston EquiServe Corporate Reorganization 55 Broadway -- 3rd Floor New York, New York 10006 DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES LISTED ABOVE WILL NOT CONSTITUTE VALID DELIVERY. METHOD OF EXERCISE OF RIGHTS Rights are evidenced by Subscription Certificates ("Subscription Certificates") that, except as described below under "Foreign Restrictions," will be mailed to shareholders or, if a shareholder's shares of Common Stock are held by Cede or any other depository or nominee on their behalf, to Cede or such depository or nominee. Rights may be exercised by completing and signing the Subscription Certificate that accompanies this Prospectus and mailing it in the envelope provided, or otherwise delivering the completed and signed Subscription Certificate to the Subscription Agent, together with payment in full for the Shares at the estimated Subscription Price (the "Estimated Subscription Price") as described below under "Payment for Shares." Rights may also be exercised by contacting your broker, banker or trust company, which can arrange, on your behalf, to guarantee delivery of payment and delivery of a properly completed and executed Subscription Certificate pursuant to a Notice of Guaranteed Delivery ("Notice of Guaranteed Delivery"). A fee may be charged for this service. Fractional Shares will not be issued and shareholders who receive or who have remaining fewer than Rights will not be able to purchase Shares upon the exercise of such Rights (although such shareholders may subscribe for Shares pursuant to the Over-Subscription Privilege). Completed Subscription Certificates must be received by the Subscription Agent prior to 5:00 P.M., New York City time, on the Expiration Date (unless the guaranteed delivery procedures are complied with as described below under "Payment for Shares") at the office of the Subscription Agent at one of the addresses set forth above. Shareholders Who Are Record Owners. Shareholders who are record owners can choose between either option set forth under "Payment for Shares" below. If time is of the essence, option (2) under "Payment for Shares" below will permit delivery of the Subscription Certificate and payment after the Expiration Date. Shareholders Whose Shares Are Held by a Nominee. Shareholders whose shares are held by a nominee, such as a broker or trustee, must contact that nominee to exercise their Rights. In that case, the nominee will complete the Subscription Certificate on behalf of the investor and arrange for proper payment by one of the methods set forth under "Payment for Shares" below. Nominees. Nominees who hold shares of Common Stock for the account of others should notify the beneficial owners of such shares as soon as possible to ascertain such beneficial owners' intentions and to obtain instructions with respect to the Rights. If the beneficial owner so instructs, the nominee should complete the Subscription Certificate and submit it to the Subscription Agent with the proper payment described under "Payment for Shares" below. FOREIGN RESTRICTIONS Subscription Certificates will not be mailed to shareholders whose record addresses are outside the United States. For these purposes, the United States includes its territories and possessions and the District of Columbia. Such shareholders of record will receive written notice of the Offer. The Rights to which those 11 14 Subscription Certificates relate will be held by the Subscription Agent for such foreign shareholders' accounts until instructions are received to exercise the Rights. If no instructions are received by the Expiration Date, such Rights will expire. INFORMATION AGENT Any questions or requests for assistance may be directed to D.F. King & Co., Inc. (the "Information Agent") at the telephone number and address listed below: The Information Agent for the Offer is: D.F. King & Co., Inc. 77 Water Street New York, New York 10005 Toll Free: (800) or Call Collect: Shareholders may also contact their brokers or nominees for information with respect to the Offer. The Information Agent will receive an estimated fee of approximately $ as well as reimbursement for all out-of-pocket expenses related to the Offer which are estimated to be $ . PAYMENT FOR SHARES Shareholders who wish to acquire Shares in the Primary Subscription and pursuant to the Over-Subscription Privilege may choose between the following methods of payment: (1) A shareholder can send the Subscription Certificate together with payment for the Shares acquired in the Primary Subscription and for additional Shares subscribed for pursuant to the Over-Subscription Privilege to the Subscription Agent. Payment should be calculated on the basis of the Estimated Subscription Price of $ per Share for all Shares subscribed. To be accepted, such payment, together with the properly completed and executed Subscription Certificate, must be received by the Subscription Agent at the Subscription Agent's office at the address set forth above prior to 5:00 P.M., New York City time, on the Expiration Date. The Subscription Agent will deposit all checks and money orders received by it prior to the final payment date into a segregated interest-bearing account (which interest will be paid to the Fund) pending proration and distribution of Shares. A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK OR BRANCH LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO FIDELITY ADVISOR KOREA FUND, INC. AND MUST ACCOMPANY A PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO BE ACCEPTED. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, SHAREHOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF A CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER. (2) Alternatively, a subscription will be accepted by the Subscription Agent if, prior to 5:00 P.M., New York City time, on the Expiration Date, the Subscription Agent has received a Notice of Guaranteed Delivery by facsimile (telecopy) or otherwise from a bank, a trust company, or a NYSE member guaranteeing delivery of (i) payment of the Estimated Subscription Price of $ per Share for the Shares subscribed for in the Primary Subscription and for any additional Shares requested pursuant to the Over-Subscription Privilege, and (ii) a properly completed and executed Subscription Certificate. The Subscription Agent will not honor a Notice of Guaranteed Delivery unless a properly completed and executed Subscription Certificate together with full payment is received by the Subscription Agent by the close of business on the third business day after the Expiration Date (December , 1996, unless the Offer is extended) (the "Protect Period"). 12 15 Within eight business days following the Protect Period (December , 1996, unless the Offer is extended) (the "Confirmation Date"), a confirmation will be sent by the Subscription Agent to each subscribing shareholder (or, if the shareholder's shares of Common Stock are held by Cede or any other depository or nominee on such shareholder's behalf, to Cede or such depository or nominee), showing (i) the number of Shares acquired pursuant to the Primary Subscription, (ii) the number of Shares, if any, acquired pursuant to the OverSubscription Privilege, (iii) the per Share and total purchase price of the Shares, and (iv) any additional amount payable by such shareholder to the Fund or any excess to be refunded by the Fund to such shareholder, in each case based on the Subscription Price as determined on the Pricing Date. If any shareholder exercises his right to acquire Shares pursuant to the Over-Subscription Privilege, any such excess payment which would otherwise be refunded to the shareholder will be applied by the Fund toward payment for Shares acquired pursuant to exercise of the Over-Subscription Privilege. Any additional payment required from a shareholder must be received by the Subscription Agent within ten business days after the Confirmation Date (December , 1996, unless the Offer is extended). Any excess payment to be refunded by the Fund to a shareholder will be mailed by the Subscription Agent to such shareholder as promptly as possible. All payments by a shareholder must be in United-States Dollars by money order or check drawn on a bank or branch located in the United States of America and payable to FIDELITY ADVISOR KOREA FUND, INC. The Subscription Agent will deposit all checks received by it prior to the final payment date into a segregated interest-bearing account (which interest will accrue to the benefit of the Fund) pending distribution of the Shares. Whichever of the two methods described above is used, issuance and delivery of certificates for the Shares purchased are subject to collection of checks and actual payment pursuant to any Notice of Guaranteed Delivery. SHAREHOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR SUBSCRIPTION AFTER RECEIPT OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT, EXCEPT AS PROVIDED BELOW UNDER "NOTICE OF NET ASSET VALUE DECLINE." If a shareholder who acquires Shares pursuant to the Primary Subscription or Over-Subscription Privilege does not make payment of any additional amounts due by the tenth business day after the Confirmation Date, the Fund reserves the right to take any or all of the following actions: (i) sell such subscribed and unpaid-for Shares to other shareholders, (ii) apply any payment actually received by it toward the purchase of the greatest whole number of Shares which could be acquired by such holder upon exercise of the Primary Subscription and/or Over-Subscription Privilege, and/or (iii) exercise any and all other rights or remedies to which it may be entitled. THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE SUBSCRIPTION PRICE TO THE FUND WILL BE AT THE ELECTION AND RISK OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND PAYMENT BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER. All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Fund, whose determinations will be final and binding. The Fund in its sole discretion may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Fund determines in its sole discretion. The Fund will not be under any duty to give notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability for failure to give such notification. 13 16 NOTICE OF NET ASSET VALUE DECLINE The Fund has, pursuant to the regulatory requirements of the U.S. Securities and Exchange Commission (the "'Commission"), undertaken to suspend the Offer until it amends this Prospectus if, subsequent to November , 1996 (the effective date of the Fund's Registration Statement), the Fund's net asset value declines more than 10% from its net asset value as of that date. Accordingly, the Fund will notify shareholders of any such decline and permit shareholders to cancel their exercise of Rights prior to the expiration of the Offer. DELIVERY OF SHARE CERTIFICATES Certificates representing Shares acquired in the Primary Subscription will be mailed promptly after the expiration of the Offer and full payment for the Shares subscribed for has been received and cleared. Certificates representing Shares acquired pursuant to the Over-Subscription Privilege will be mailed as soon as practicable after full payment has been received and cleared and all allocations have been effected. Participants in the Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") will have any Shares acquired in the Primary Subscription and pursuant to the Over-Subscription Privilege credited to their shareholder dividend reinvestment accounts in the Plan. Participants in the Plan wishing to exercise Rights for the shares of Common Stock held in their accounts in the Plan must exercise them in accordance with the procedures set forth above. Shareholders whose Shares are held of record by Cede or by any other depository or nominee on their behalf or their broker-dealer's behalf will have any Shares acquired in the Primary Subscription credited to the account of Cede or such other depository or nominee. Shares acquired pursuant to the Over-Subscription Privilege will be certificated and stock certificates representing such Shares will be sent directly to Cede or such other depository or nominee. Stock certificates will not be issued for Shares credited to Plan accounts. FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER For U.S. federal income tax purposes, neither the receipt nor the exercise of the Rights by shareholders will result in taxable income to holders of Common Stock, and no loss will be realized if the Rights expire without exercise. A shareholder's holding period for a Share acquired upon exercise of a Right begins with the date of exercise. The basis of a Right will be (a) to a shareholder who exercises the Right (i) if the fair market value of the Right on such date of distribution is less than 15% of the fair market value of the Common Stock with regard to which it is issued, zero unless the holder elects, by filing a statement with such investor's timely filed federal income tax return for the year in which the Right is received, to allocate the basis of the Common Stock between the Right and the Common Stock based on their respective fair market values on such date of distribution and (ii) if the fair market value of the Right on such date of distribution is 15% or more of the fair market value of the Common Stock with regard to which it is distributed, a portion of the basis in the Common Stock based upon the respective fair market values of the Common Stock and the Right on such date of distribution and (b) to a shareholder who allows the Right to expire, zero. A shareholder's basis for determining gain or loss upon the sale of a Share acquired upon the exercise of a Right will be equal to the sum of the shareholder's basis in the Right, if any, and the Subscription Price per Share. A shareholder's gain or loss recognized upon a sale of a Share acquired upon the exercise of a Right will be capital gain or loss if the Share was held at the time of sale as a capital asset and will be long-term capital gain or loss if the Share is held for more than one year. The foregoing is a general summary of the material U.S. federal income tax consequences of the Offer under the provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), and Treasury regulations presently in effect that are generally applicable to shareholders that are citizens or residents of the United States, U.S. Corporations, trusts, estates and any other person who would be subject to U.S. federal income tax upon the sale or exchange of the Common Stock acquired upon the exercise of the Rights, and does not cover foreign, state or local taxes. The Code and such regulations are subject to change by legislative or administrative action, which may be retroactive. Shareholders should consult their tax advisers regarding specific questions as to foreign, federal, state or local taxes. See "Taxation--U.S. Federal Income Taxes" herein and in the SAI. 14 17 EMPLOYEE PLAN CONSIDERATIONS Shareholders that are employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (including corporate savings and 401(k) plans), Keogh or H.R. 10 plans of self-employed individuals and Individual Retirement Accounts ("IRAs") (collectively, "Benefit Plans") should be aware that additional contributions of cash to the Benefit Plan (other than rollover contributions or trustee-to-trustee transfers from other Benefit Plans) in order to exercise Rights would be treated as Benefit Plan contributions and, when taken together with contributions previously made, may subject a Benefit Plan, among other things, to excise taxes for excess or nondeductible contributions. In the case of Benefit Plans qualified under Section 401(a) of the Code, additional cash contributions could cause the maximum contribution limitations of Section 415 of the Code or other qualification rules to be violated. Benefit Plans and other tax exempt entities, including governmental plans, should also be aware that if they borrow in order to finance their exercise of Rights, they may become subject to the tax on unrelated business taxable income ("UBTI") under Section 511 of the Code. If any portion of an IRA is used as security for a loan, the portion so used is also treated as distributed to the IRA depositor. ERISA contains fiduciary responsibility requirements, and ERISA and the Code contain prohibited transaction rules, that may impact the exercise of Rights. Due to the complexity of these rules and the penalties for noncompliance, Benefit Plans should consult with their counsel regarding the consequences of their exercise of Rights under ERISA and the Code. DILUTION Upon the completion of the Offer, shareholders who do not exercise their Rights fully will own a smaller proportional interest in the Fund than would be the case if the Offer had not been made. In addition, because the Subscription Price of each Share will be less than the net asset value per share of the Fund's Common Stock as of the Pricing Date, the completion of the Offer will result in a dilution of net asset value per share for all shareholders, which will disproportionately affect shareholders who do not exercise their Rights in full. Although it is not possible to state precisely the amount of such decrease in net asset value per share because it is not known at this time what the net asset value per share will be on the Expiration Date or what proportion of the Shares will be subscribed for, or what the Subscription Price will be, such dilution could be substantial. For example, assuming all of the Shares are sold at the Estimated Subscription Price and after deducting all expenses related to the issuance of the Shares, the Fund's net asset value per share on November , 1996 would be reduced by approximately $ or % (or, in the event that all of the Rights are exercised and the Fund increases the number of Shares subject to subscription by 25% pursuant to the Over-Subscription Privilege, by approximately $ or %). See "Risk Factors and Special Considerations--Dilution." IMPORTANT DATES TO REMEMBER
EVENT DATE - ---------------------------------------------------------------------- ------------------- Record Date........................................................... November , 1996 Subscription Period................................................... November , 1996- December , 1996* Expiration Date and Pricing Date...................................... December , 1996* Subscription Certificates and Payment for Shares Due+................. December , 1996* Notice of Guaranteed Delivery Due+.................................... December , 1996* Payment for Guarantees of Delivery Due................................ December , 1996* Confirmation to Participants.......................................... December , 1996* Final Payment for Shares.............................................. December , 1996*
- --------------- * Unless the Offer is extended to a date not later than December , 1996. + A shareholder exercising Rights must deliver either (i) a Subscription Certificate and Payment for Shares or (ii) a Notice of Guaranteed Delivery by December , 1996. 15 18 THE FUND The Fund, incorporated in Maryland, on May 25, 1994, is a non-diversified, closed-end management investment company registered under the 1940 Act. The Fund's investment objective is long-term capital appreciation. The Fund seeks to achieve its objective by investing primarily in equity and debt securities of Korean Issuers. The Fund commenced operations on October 31, 1994 following an initial public offering of 4,400,000 shares of its Common Stock. Since inception, the Fund has paid or declared dividends and capital gains distributions aggregating approximately $ . As of November , 1996, the value of the Fund's net assets was approximately $ . As of November , 1996, in excess of % of the Fund's net assets were invested in securities of Korean Issuers. USE OF PROCEEDS If Shares are sold at the Estimated Subscription Price of $ per Share, net proceeds of the Offer to the Fund would be approximately $ , after deducting offering expenses payable by the Fund, including the fees and expenses of the Dealer Manager named on the cover page hereof and other offering expenses estimated to total $ . If the Fund increases the number of Shares subject to subscription by up to 25%, or Shares, in order to satisfy oversubscription requests, the additional net proceeds will be approximately $ . Fidelity has advised the Fund that it will invest the net proceeds of the Offer in accordance with the Fund's investment objective and the policies set forth under "Investment Objective and Policies" within six months of the Expiration Date, depending on market conditions and the availability of appropriate securities. Pending such investment, the proceeds will be invested in Temporary Investments (as defined below). See "Investment Objective and Policies--Temporary Investments." INVESTMENT OBJECTIVE AND POLICIES The Fund's investment objective is long-term capital appreciation. The Fund seeks to achieve its objective through investment primarily in equity and debt securities of Korean Issuers. As a matter of fundamental policy and under normal market conditions, the Fund will invest at least 65% of its total assets in equity and debt securities of Korean Issuers. As of September 30, 1996, approximately % of the Fund's net assets were invested in equity securities, and Fidelity currently anticipates that at least % of the proceeds of the Offer will be invested in equity securities of Korean Issuers. As used herein, "Korean Issuers" are entities that, as determined by Fidelity, (i) are organized under the laws of Korea, (ii) regardless of where organized derive at least 50% of their revenues or profits from goods produced or sold, investments made or services performed or have at least 50% of their assets located in Korea, (iii) have the primary trading market for their securities in Korea or (iv) are the government, or its agencies or instrumentalities or other political subdivisions, of Korea. The Fund invests in companies that, in the opinion of Fidelity, possess the potential for growth. The Fund does not consider dividend income as a primary factor in choosing securities, unless Fidelity believes the income will contribute to or is an indicator of the securities' growth potential. Currently, foreign investors, including the Fund, are permitted to invest in the following equity securities: (i) common and preferred stock listed on the Korea Stock Exchange (the "KSE"); (ii) non-guaranteed convertible bonds listed on the KSE of small and medium-sized companies, shares of which are listed on the KSE, with foreign investors in the aggregate and a single foreign investor being allowed to invest in up to 30% and 5%, respectively, of the listed value of each class of such bonds; (iii) certain government or public bonds with low interest rates comparable to international interest rates acquired in the primary market; (iv) warrants representing the right to subscribe for shares of a listed company; (v) certain Won-denominated bonds issued by foreign corporations and sold outside of Korea; (vi) global or other types of depositary receipts representing rights in shares of a Korean Issuer which are issued outside Korea; (vii) convertible bonds denominated in non-Won currency and issued outside Korea; and (viii) equity warrants issued together with bonds denominated in non-Won currency outside Korea. Although the Fund is authorized to engage in various strategies to hedge its portfolio against adverse changes in the relationship between the U.S. dollar and the 16 19 Won, it is not currently permitted to do so in Korea under Korean laws or regulations, except as described below, and there can be no assurance that such strategies will become permissible and available in Korea in the future. Currently, under Korean law, the Fund may enter into forward transactions between the Won and foreign currency with a foreign exchange bank in Korea up to the amount of Won which the Fund holds in connection with its investment in Korean shares plus the value of Korean shares which it has purchased and holds in its portfolio. The Fund does not presently intend to engage in these strategies outside of Korea but reserves the right to do so in the future. The Fund's investment objective and policy of investing at least 65% of its total assets in equity and debt securities of Korean Issuers is fundamental and cannot be changed without the approval of a majority of the Fund's outstanding voting securities, which, as used herein, means the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are present in person or represented by proxy or (ii) more than 50% of the outstanding shares. The Fund's investment policies that are not designated fundamental policies may be changed by the Fund without shareholder approval. The Fund is designed primarily for long-term investment, and investors should not consider it a short-term trading vehicle. As with all investment companies, there can be no assurance that the Fund's investment objective will be achieved. Equity securities include common stocks, preferred stocks, American, global or other types of depositary receipts, rights or warrants to purchase common or preferred stock, equity interests in trusts, partnerships, joint ventures or similar enterprises and debt securities convertible into common or preferred stock. Korean law currently permits foreign investors such as the Fund to acquire debt securities denominated in Won to a very limited extent. At the present time, however, foreign investors are permitted to invest in debt securities issued by Korean companies outside of Korea and denominated in currencies other than the Won (including, for example, bonds (which may have attached warrants), convertible bonds, floating rate notes and commercial paper). If, in the future, additional Won-denominated debt securities become permissible investments for foreign investors, the Fund may invest in such securities. Debt securities may be unrated or be rated below instrument grade. The Investment Adviser will make independent evaluations as to the creditworthiness of issuers of debt securities that may differ from those of internationally recognized credit rating agency organizations, such as Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P"). The Fund's success in attaining its investment objective with respect to investments in debt securities will depend largely on the Investment Adviser's evaluation of the current and future creditworthiness of issuers, and of interest rate trends. Sustained periods of deteriorating economic conditions or rising interest rates are more likely to lead to a weakening in the issuer's capacity to pay interest and repay principal than in the case of higher-rated securities. Most of the securities purchased by the Fund are traded on a stock exchange or in an over-the-counter market. Subject to applicable laws and regulations, the Fund, however, may invest up to 35% of its total assets in illiquid securities, that is, equity or debt securities for which there is no readily available market or no market at all. The Fund may therefore not be able to sell readily such securities. Such securities are unlike securities that are traded in the open market and which can be expected to be sold immediately. The sale price of securities that are not readily marketable may be lower or higher than the Fund's most recent estimate of their fair value. Generally, less public information is available with respect to the issuers of these securities than with respect to companies whose securities are traded on an exchange. Securities not readily marketable are more likely to be issued by start-up, small or family businesses and therefore subject to greater economic, business and market risks than the listed securities of more well-established companies. Adverse conditions in the public securities markets may at certain times preclude a public offering of an issuer's securities. While Korean law requires registration with a government agency of public offerings of securities, that law does not contain restrictions like those contained in the U.S. Securities Act of 1933, as amended (the "Securities Act") regarding the length of time the securities must be held or manner of resale. There may also be contractual restrictions on the resale of securities. Up to 35% of the Fund's total assets may be invested in equity or debt securities of Asian Issuers, if warranted, in Fidelity's judgment, by economic or political conditions in Korea or by regulatory restrictions or 17 20 overvaluation in the Korean securities markets. Asian Issuers are issuers (other than issuers meeting the definition of Korean Issuers as defined above), that, as determined by Fidelity, (i) are organized under the laws of Hong Kong, Japan or Taiwan, (ii) regardless of where organized derive at least 50% of their revenues or profits from goods produced or sold, investments made, or services performed in Hong Kong, Japan or Taiwan, (iii) have the primary trading market for their securities in Hong Kong, Japan or Taiwan or (iv) are governments, or their agencies, instrumentalities or other political sub-divisions, of Hong Kong, Japan or Taiwan. The Fund may also hold other instruments described below and under "Appendix A--General Characteristics and Risks of Derivatives" in the SAI. The Fund may invest its assets in a broad spectrum of industries. In selecting industries and companies for investment, Fidelity may consider overall growth prospects, financial condition, earnings, valuations, competitive position, technology, research and development, productivity, labor costs, raw material costs and sources, profit margins, return on investment, structural changes in local economies, capital resources, the degree of government regulation or deregulation, management and other factors. Fidelity normally will invest the Fund's assets according to its investment strategy. For temporary defensive purposes, the Fund may invest without limitation in Temporary Investments (as defined below) and investment grade debt instruments, including unrated securities of equivalent credit quality as determined by Fidelity, short-term indebtedness or cash equivalents denominated in U.S. dollars or, if it becomes permissible for the Fund to so invest, denominated in Won. The Fund may also at any time, with respect to up to 35% of its total assets, invest funds in U.S. dollar-denominated money market instruments as reserves for dividends and other distributions to shareholders. TEMPORARY INVESTMENTS The Fund may hold and/or invest its assets without limitation in cash and/or Temporary Investments pending initial investment in accordance with the Fund's investment objective and policies and for temporary defensive purposes. To the extent that the Fund invests in Temporary Investments, it may not achieve its investment objective. In addition, for cash management purposes, the Fund may invest its assets in cash and/or rated or unrated short-term debt securities of any quality. Temporary Investments include high grade debt securities (rated A or above by S&P or A or above by Moody's or with an equivalent rating by any other nationally recognized securities rating organization) or unrated securities judged by Fidelity to be of equivalent quality, denominated in U.S. dollars or in another freely convertible currency including: (1) short-term (less than 12 months to maturity) and medium-term (not more than five years to maturity) obligations issued or guaranteed by (a) the U.S. government, its agencies or instrumentalities or (b) international organizations designated or supported by multiple foreign governmental entities to promote economic reconstruction or development ("supranational entities"); (2) U.S. finance company obligations, corporate commercial paper and other short-term commercial obligations; (3) obligations (including certificates of deposit, time deposits, demand deposits and bankers' acceptances) of banks; and (4) repurchase agreements with respect to securities in which the Fund may invest. Repurchase agreements are contracts pursuant to which the seller of a security agrees at the time of sale to repurchase the security at an agreed upon price and date. When the Fund enters into a repurchase agreement, the seller will be required to maintain the value of the securities subject to the repurchase agreement, at not less than their repurchase price. Repurchase agreements may involve risks in the event of insolvency or other default by the seller, including possible delays or restrictions upon the Fund's ability to dispose of the underlying securities. While it does not appear possible to eliminate all risks from these transactions, it will be the Fund's policy to limit repurchase agreement transactions to those parties whose creditworthiness has been reviewed and found satisfactory by Fidelity. OTHER INVESTMENTS Illiquid Securities. The Fund may invest up to 35% of its total assets, valued at the time of purchase, in illiquid securities, that is, securities for which there is no readily available market, or no market at all. 18 21 The Fund may be unable to dispose of its holdings in illiquid securities at market prices and may have to dispose of such securities over extended periods of time. See "Risk Factors and Special Considerations-- Market Characteristics and--Thinly Traded Markets and Illiquid Investments." In many cases, illiquid securities will be subject to contractual or legal restrictions on transfer. In addition, issuers whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements that may be applicable if their securities were publicly traded. Although not all the securities held by the Fund will be illiquid, the Fund anticipates that all or most of its portfolio securities generally will be less liquid than those traded in U.S. securities markets. Depositary Receipts. The Fund may invest in securities of Korean Issuers through sponsored or unsponsored American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), and other types of Depositary Receipts (which, together with ADRs and GDRs, are hereinafter referred to as "Depositary Receipts"). Depositary Receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. In addition, the issuers of the stock of unsponsored Depositary Receipts are not obligated to disclose material information in the United States and, therefore, there may not be a correlation between such information and the market value of the Depositary Receipts. ADRs are Depositary Receipts typically issued by a U.S. bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. GDRs and other types of Depositary Receipts are typically issued by foreign banks or trust companies, although they also may be issued by U.S. banks or trust companies, and evidence ownership of underlying securities issued by either a foreign or a U.S. corporation. Generally, Depositary Receipts in registered form are designed for use in the U.S. securities markets and Depositary Receipts in bearer form are designed for use in securities markets outside the United States. For purposes of the Fund's investment policies, the Fund's investments in ADRs, GDRs and other types of Depositary Receipts will be deemed to be investments in the underlying securities. Shares of Other Investment Funds. The Fund may invest in investment funds which invest principally in securities in which the Fund is authorized to invest. The Fund does not intend to invest in such investment funds unless, in the judgment of Fidelity, the potential benefits of such investment justify the payment of any applicable premium, sales load and expenses. From time to time, such investment funds may be the sole means by which the Fund may invest in securities of certain Korean Issuers. See "Risk Factors and Special Considerations--Investment Restrictions and Foreign Exchange Controls." Under the 1940 Act, the Fund may invest a maximum of 10% of its total assets in the securities of other investment companies. In addition, under the 1940 Act, not more than 5% of the Fund's total assets may be invested in the securities of any one investment company provided that the investment does not represent more than 3% of the voting stock of the related acquired investment company. To the extent the Fund invests in other investment funds, the Fund's shareholders will indirectly incur certain duplicative fees and expenses, including investment advisory fees and sales loads paid for transactions in shares of such funds. For a discussion of possible consequences under U.S. federal income tax laws of the Fund's investment in foreign investment funds, see "Taxation-- U.S. Federal Income Taxes." Rule 144A Securities. The Fund may purchase certain restricted securities ("Rule 144A securities") for which there is a secondary market of qualified institutional buyers, as contemplated by Rule 144A under the Securities Act. Rule 144A provides an exemption from the registration requirements of the Securities Act for the resale of certain restricted securities to qualified institutional buyers. One effect of Rule 144A is that certain Rule 144A securities may be liquid, though there is no assurance that a liquid market for any particular Rule 144A security will develop or be maintained. In promulgating Rule 144A, the Commission stated that the ultimate responsibility for liquidity determinations is that of an investment company's board of directors. However, the Commission stated that the board may delegate the day-to-day function for determining liquidity to a fund's investment adviser, provided that the board retains sufficient oversight. The Board of Directors has adopted policies and procedures for the purpose of determining whether securities that are eligible for resale under Rule 144A are liquid or illiquid securities. Pursuant to those policies and procedures, the Board of Directors delegated to the Investment Manager and the Investment Adviser the determination as to whether a particular security is liquid or illiquid. For the purpose of determining whether the Fund can 19 22 invest in additional illiquid securities, if any Rule 144A security previously determined to be liquid is later determined to be illiquid, such security will be considered illiquid. Convertible Securities. The Fund may invest in convertible securities including securities that are unrated or rated below investment grade. See "Risk Factors and Special Considerations--Debt Securities-- High Yield, High Risk Securities." A convertible security might be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. If a convertible security held by the Fund is called for redemption, the Fund may be required to permit the issuer to redeem the security, convert it into the underlying common or preferred stock or sell it to a third party. Warrants. The Fund may invest in warrants, which are securities permitting, but not obligating, their holder to subscribe for other securities. Warrants do not carry the right to dividends or voting rights with respect to their underlying securities, and they do not represent any rights in the assets of the issuer. An investment in warrants may be considered speculative. In addition, the value of a warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to its expiration date. Currently, foreign investors, including the Fund, are not permitted to invest in rights or warrants to purchase equity securities issued in Korea. Equity-Linked Debt Securities. The Fund may invest in equity-linked debt securities. The amount of interest and/or principal payments which the issuer of equity-linked debt securities is obligated to make is linked to the performance of a specified index of equity securities and may be significantly greater or less than payment obligations in respect of other types of debt securities. As a result, equity-linked debt securities are more volatile than other types of debt securities and an investment in equity-linked debt securities may be considered speculative. Loans and Other Direct Debt Instruments. The Fund may invest in loans and other direct debt instruments. Loans and other direct debt instruments are interests in amounts owed by a corporate, governmental or other borrower to another party. They may represent amounts owed to lenders or lending syndicates (loans and loan participations), to suppliers of goods or services (trade claims or other receivables), or to other parties. Direct debt instruments involve the risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the Fund in the event of fraud or misrepresentation. In addition, loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Direct debt instruments may also include standby financing commitments that obligate the Fund to supply additional cash to the borrower on demand. Loans and other direct debt instruments are generally illiquid and transfers are normally possible only through individually negotiated private transactions. See "Risk Factors and Special Considerations--Loans and Other Direct Debt Instruments." Borrowings. The Fund may borrow for temporary or emergency purposes and to finance tender offers and share repurchases. Borrowings by the Fund create an opportunity for greater total return but, at the same time increase exposure to capital risk. In addition, borrowed funds are subject to interest costs which may offset or exceed the return earned on investment of such funds, and which, if the borrowed funds are used to pay dividends or finance share repurchases or tender offers, will reduce the Fund's net income. Although the Fund is permitted to borrow, as indicated above, the Fund has no present intention of engaging in leveraging by borrowing. Reverse Repurchase Agreements. In a reverse repurchase agreement, the Fund sells a portfolio instrument to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase the instrument at a particular price and time. While a reverse repurchase agreement is outstanding, the Fund will maintain appropriate assets in a segregated custodial account to cover its obligation under the agreement, which will consist only of liquid assets, such as cash, U.S. government securities or other liquid high grade debt securities ("liquid assets"). The Fund will enter into reverse repurchase agreements only with parties whose creditworthiness has been found satisfactory by Fidelity. Such transactions may increase fluctuations in the market value of the Fund's assets and may be viewed as a form of leverage. 20 23 Real Estate-Related Instruments. The Fund may invest in real estate-related instruments, including real estate investment trusts, commercial and residential mortgage-backed securities, and real estate financings. Real estate-related instruments are sensitive to factors such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, overbuilding, and the management skill and creditworthiness of the issuer. Real estate-related instruments may also be affected by tax and regulatory requirements, such as those relating to the environment. ADDITIONAL INVESTMENT PRACTICES HEDGING AND DERIVATIVES Certain investment practices in which the Fund is authorized to engage to hedge market risk, such as certain currency hedging techniques, including currency options and futures, options on such futures and forward foreign currency transactions, and certain investment techniques, such as the lending of portfolio securities, forward commitments, standby commitment agreements and the purchase or sale of put and call options, are not currently permitted under Korean laws or regulations. The Fund may engage in these hedging or investment practices to the extent the practices become available in the future or with respect to instruments outside Korea. See "Appendix A--General Characteristics and Risks of Derivatives" in the SAI for a further discussion of currency hedging techniques. The Fund is also authorized to manage the effective maturity or duration of debt instruments held by the Fund, or to seek to increase the Fund's income or gain. Although these strategies are regularly used by some investment companies and other institutional investors, few of these strategies can practicably be used to a significant extent by the Fund at the present time and may not become available for extensive use in the future. Over time, techniques and instruments may change as new instruments and strategies are developed or regulatory changes occur. Subject to the constraints described above, the Fund may purchase and sell interest rate, currency or stock index futures contracts and enter into currency forward contracts and currency swaps; it may purchase and sell (or write) exchange listed and over-the-counter put and call options on debt and equity securities, currencies, futures contracts, fixed income and stock indices and other financial instruments and it may enter into interest rate transactions, equity swaps and related transactions and other similar transactions which may be developed to the extent Fidelity determines that they are consistent with the Fund's investment objective and policies and applicable regulatory requirements (collectively, these transactions are referred to herein as "Derivatives." See "Appendix A--General Characteristics and Risks of Derivatives") in the SAI. The Fund may enter into futures contracts or options thereon for purposes other than bona fide hedging if, immediately thereafter, the sum of the amount of its initial margin and premiums on open contracts and options would not exceed 5% of the liquidation value of the Fund's portfolio; provided, that in the case of an option that is in-the-money at the time of the purchase, the in-the-money amount may be excluded in calculating the 5% limitation. The Fund's interest rate transactions may take the form of swaps, caps, floors and collars, currency forward contracts, currency futures contracts, currency swaps and options on currency or currency futures contracts. Derivatives may be used to attempt to protect against possible changes in the market value of securities held in or to be purchased for the Fund's portfolio resulting from securities markets or currency exchange rate fluctuations, to protect the Fund's unrealized gains in the value of its portfolio securities, to facilitate the sale of those securities for investment purposes, to manage the effective maturity or duration of the Fund's portfolio, or to establish a position in the derivatives markets as a substitute for purchasing or selling particular debt or equity securities. The ability of the Fund to utilize Derivatives successfully will depend on the Investment Adviser's ability to predict pertinent market movements, which cannot be assured. These skills are different from those needed to select portfolio securities. The use of Derivatives in certain circumstances will require that the Fund segregate cash, liquid high grade debt obligations or other assets to the extent the Fund's obligations are not otherwise "covered" through ownership of the underlying security, financial instrument or currency. A detailed discussion of Derivatives, including applicable requirements of the U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission, the requirement to segregate assets 21 24 with respect to these transactions and special risks associated with such strategies, appears in Appendix A in the SAI. See also "Risk Factors and Special Considerations--Investment Practices." The degree of the Fund's use of Derivatives may be limited by certain provisions of the Code. See "Taxation." WHEN-ISSUED AND DELAYED DELIVERY SECURITIES The Fund may purchase securities on a when-issued or delayed delivery basis. Securities purchased on a when-issued or delayed delivery basis are purchased for delivery beyond the normal settlement date at a stated price. No income accrues to the purchaser of a security on a when-issued or delayed delivery basis prior to delivery. Such securities are recorded as an asset and are subject to changes in value based upon changes in market prices. Purchasing a security on a when-issued or delayed delivery basis can involve a risk that the market price at the time of delivery may be lower than the agreed-upon purchase price, in which case there could be an unrealized loss at the time of delivery. The Fund generally will establish a segregated account in which it will maintain liquid assets in an amount at least equal in value to the Fund's commitments to purchase securities on a when-issued or delayed delivery basis. If the value of these assets declines, the Fund will place additional liquid assets in the account on a daily basis so that the value of the assets in the account is equal to the amount of such commitments. As an alternative, the Fund may elect to treat when-issued or delayed delivery securities as senior securities representing indebtedness, which are subject to asset coverage requirements under the 1940 Act. PURCHASE OF SECURITIES ON MARGIN The Fund does not currently intend to purchase securities on margin, except that the Fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts will not constitute purchasing securities on margin. Current Korean laws and regulations do not allow foreign investors such as the Fund to purchase Korean securities on margin. SHORT SALES "AGAINST THE BOX" The Fund may from time to time sell securities short "against the box." If the Fund enters into a short sale against the box, it will be required to set aside securities equivalent in kind and amount to the securities sold short (or securities convertible or exchangeable into such securities at no added cost) and will be required to hold such securities while the short sale is outstanding. The Fund will incur transaction costs, including interest expense, in connection with opening, maintaining, and closing short sales against the box. If the Fund engages in any short sales against the box it will incur the risk that the security sold short will appreciate in value after the sale, with the result that the Fund will lose the benefit of any such appreciation. The Fund may enter into short sales with respect to stocks underlying its convertible security holdings. For example, if the Investment Adviser anticipates a decline in the price of the stock underlying a convertible security the Fund holds, it may sell the stock short. If the stock price subsequently declines, the proceeds of the short sale could be expected to offset all or a portion of the effect of the stock's decline on the value of the convertible security. The Fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash, U.S. government securities or other liquid high grade debt obligations. In addition, the Fund will place in a segregated account with its custodian, or designated sub-custodian, an amount of cash, U.S. government securities or other liquid high grade debt obligations equal to the difference, if any, between (1) the market value of the securities sold at the time they were sold short and (2) any cash, U.S. government securities or other liquid high grade debt obligations deposited as collateral with the broker in connection with the short sale (not including the proceeds of the short sale). Until it replaces the borrowed securities, the Fund will maintain the segregated account daily at a level so that (1) the amount deposited in the account plus the amount deposited with the broker (not including the proceeds from the short sale) will equal the current market value of the securities sold short [and 22 25 (2) the amount deposited in the account plus the amount deposited with the broker (not including the proceeds from the short sale) will not be less than the market value of the securities at the time they were sold short.] A lesser amount of assets may be set aside by the Fund if it owns certain types of instruments, such as a call option on the security sold short, that effectively "cover" the short sale. Short sales by the Fund involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security, because losses from short sales may be unlimited, whereas losses from purchases can equal only the total amount invested. The Fund is not currently permitted under Korean laws and regulations to engage in short sales of Korean securities. RISK FACTORS AND SPECIAL CONSIDERATIONS DILUTION An immediate dilution of the net asset value per share of Common Stock will be experienced as a result of the Offer because the Subscription Price will be less than the Fund's then net asset value per share (and the Fund will incur expenses in connection with the Offer), and the number of shares outstanding after the Offer will increase in a greater percentage than the increase in the size of the Fund's assets. In addition, Record Date shareholders who do not fully exercise their Rights should expect that they will, at the completion of the Offer, own a smaller proportional interest in the Fund than would otherwise be the case. Although it is not possible to state precisely the amount of such a decrease in net asset value per share because it is not known at this time what the net asset value per share will be on the Expiration Date or what proportion of the Shares will be subscribed for or what the Subscription Price will be, such dilution could be substantial. For example, assuming all of the Shares are sold at the Estimated Subscription Price and after deducting all expenses related to the issuance of the Shares, the Fund's current net asset value per share would be reduced by approximately $ or % (or, in the event that all of the rights are executed and the Fund increases the number of Shares subject to subscription by 25% pursuant to the Over-Subscription Privilege, by approximately $ or %). RISK OF INVESTING IN KOREAN AND OTHER ASIAN ISSUERS Investors should recognize that investing in securities of Korean Issuers and other Asian Issuers involves certain risks and special considerations including those set forth below, which are not typically associated with investing in U.S. securities. These include: (i) certain restrictions on foreign investment in the Korean securities markets which will preclude investment in certain securities by the Fund and limit investment opportunities for the Fund; (ii) currency devaluations and fluctuations in the rate of exchange between the U.S. dollar and the Won with the resultant fluctuations in the net asset value of the Fund (which is expressed in U.S. dollars); (iii) substantial government involvement in, and influence on, the Korean economy and the private sector; (iv) political, economic and social instability, including the potential for increased militarization in North Korea; (v) the substantially smaller size and lower trading volume of the securities markets for Korean equity securities compared to the U.S. securities markets, resulting in a potential lack of liquidity and increased price volatility; (vi) the risk that large Korean institutional investors may adversely impact the market value of securities in the Fund's portfolio; (vii) the risk that less information with respect to Korean companies may be available due to the fact that Korean accounting, auditing and financial reporting standards are not equivalent to those applicable to U.S. companies; (viii) the heavy concentration of market capitalization and trading volume in a small number of issuers, which results in potentially fewer investment opportunities for the Fund; (ix) fluctuations in the prices and premium valuations of securities held by the Fund that are traded over the counter among foreign investors; (x) controls on foreign investment and limitations on repatriation of invested capital and on the Fund's ability to exchange Wons for U.S. dollars; (xi) the risk of nationalization or expropriation of assets or confiscatory taxation; (xii) higher rates of inflation; (xiii) less government supervision and regulation of Korean securities markets and participants in those markets; (xiv) settlement delays; (xv) the risk that tax or dividends will be withheld at the source; (xvi) the unavailability of currency hedging techniques in the Korean markets; (xvii) the fact that companies in Korea may be smaller, less seasoned and newly organized; (xviii) the risk that it may be more difficult to obtain 23 26 and/or enforce a judgment in a court outside the United States; and (xix) the risk of taxation of the Fund, its investments and its income by Korea. INVESTMENT RESTRICTIONS AND FOREIGN EXCHANGE CONTROLS Investment in securities of Korean companies by foreign investors is subject to significant restrictions and controls. As a result, the Fund may be limited in its investments or precluded from investing in certain Korean companies, which may adversely affect the performance of the Fund. Conversion of Won into U.S. dollars or other foreign exchange, transfer of funds from Korea to foreign countries and repatriation of foreign capital invested in Korea are subject to certain regulatory requirements pursuant to foreign exchange control laws and regulations. See "The Securities Markets of Korea--Regulation of Foreign Investment." Under the Foreign Exchange Management Act, if the Minister of Finance and Economy of Korea deems that an event of emergency is likely to occur, he may impose any necessary restrictions such as requiring foreign investors, including the Fund, to obtain approval for the acquisition of Korean equity shares or for the remittance overseas of the sale proceeds thereof. Foreign investors are allowed to directly purchase and sell equity securities listed on the KSE subject to certain investment ceiling and procedural requirements. As of October 1, 1996, the limit on the percentages of a company's outstanding equity shares that may be held by foreign investors as a group was raised to 20%. Foreign investors such as the Fund are unable to effect share purchase transactions on the KSE in a security that has reached or exceeded the maximum aggregate foreign ownership limit (or the limit less odd-lot shares). As of June 30, 1996, of the 30 largest KSE-listed companies (as measured by total market capitalization), which accounted for approximately 50.5% of the aggregate market capitalization of the KSE, nearly all had reached or exceeded the applicable maximum aggregate foreign ownership limit. As of September 24, 1996, 85 companies of the 724 companies listed on the KSE had reached or exceeded the applicable maximum aggregate foreign ownership limit (11.7% of all companies listed on the KSE). As of June 30, 1996, 13.4% and 11.2% of the permitted foreign holding amount were invested by foreign investors in terms of KSE market capitalization and the number of shares, respectively. During 1994 and 1995, U.S.$18.7 billion was invested in Korea by foreign investors for stock investment, of which U.S.$14.5 billion in stock investments was sold and repatriated outside Korea. As of June 30, 1996, foreign investors held 808.7 million shares, which amounted to 11.2% of the total number of listed shares and 13.4% of total KSE market capitalization at that time. During the first six months in 1996, aggregate inflow of foreign stock investments totaled U.S.$7.1 billion by foreign investors and aggregate sales and repatriation of foreign stock investments equaled U.S.$4.1 billion. The Korean government has implemented a system to monitor foreign investment limits and transactions, including the issuance of an investment registration card to each foreign investor for stock investment and a separate card for bond investment. The Fund has obtained the stock investment registration card and the bond investment registration card. The Securities and Exchange Commission of Korea ("the KSEC") has authority to increase or decrease foreign investment limits and from time to time has exercised such authority. The Korean government has announced its intention to gradually raise the aggregate foreign investment limit by 3% in each of 1997, 1998 and 1999, and to consider in 2000 whether it will abolish such limit. If, and when, the aggregate foreign investment limit is raised, the Fund may have more flexibility in selecting investments for its portfolio. There can be no assurance that the aggregate foreign investment limit will be raised. As of , 1996, foreign investors are allowed (i) to invest in non-guaranteed convertible bonds listed on the KSE which are issued by small and medium-sized companies the shares of which are listed on the KSE, with foreign investors in the aggregate and a single foreign investor being allowed to invest in up to 30% and 5% of the listed value of each class of such bonds, respectively; (ii) to participate in new issues of certain low interest rate government or public bonds to be designated from time to time and up to the limit determined from time to time by the KSEC; (iii) to purchase warrants representing the right to subscribe for shares of a listed company; and (iv) to purchase certain Won-denominated bonds issued by foreign corporations and sold outside of Korea, each denominated in Won and in each case subject to certain procedural requirements. 24 27 Securities acquired by foreign investors must be traded on the KSE, with certain exceptions as described below. For transactions on the KSE, a foreign investor must open a Won account for securities transactions with a securities company for stock investment and a separate account for bond investment and at that time must present its investment registration card to the securities company. A foreign investor which intends to acquire shares must designate a foreign exchange bank in Korea at which it must open a foreign currency account and a Won account ("Foreign Currency Account" and "Won Account," respectively) exclusively for stock investments and a separate set of such accounts for bond investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the Foreign Currency Account. Upon confirmation by the designated foreign exchange bank, foreign currency funds may be transferred from the Foreign Currency Account at the time required to place a deposit for, or to settle the purchase price of, a stock purchase transaction to a Won account opened at a securities company. Funds in the Foreign Currency Account may be remitted abroad without any governmental approval. Dividends on shares, or interest on bonds, of Korean companies are paid in Won. No governmental approval is required for foreign investors to receive dividends or interest on, or the Won proceeds of the sale of, any such shares or bonds to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any such shares or bonds held by a non-resident of Korea must be deposited either in a Won account with the investor's securities company or its Won Account according to the type of investment (i.e., monies relating to stock investment must be deposited at the stock account and monies relating to bond investment must be placed in the bond account). Funds in the investor's Won Account may be transferred to its Foreign Currency Account or withdrawn for local living expenses (subject to a certain limitations), in each case report to the investor's designated foreign exchange bank. In addition, funds in the Won Account may be used for future investment in stocks or bonds or for payment of the subscription price of new shares obtained through the exercise of pre-emptive rights. In 1995, certain designated securities companies were allowed to open foreign currency accounts and Won accounts with foreign exchange banks exclusively for accommodating foreign investors' stock investments in Korea. The repatriation of capital invested by foreign investors may be restricted by the Korean government in its discretion in certain emergency circumstances including, but not limited to, sudden fluctuations in interest rates or exchange rates, extreme difficulty in stabilizing the balance of payments or a substantial disturbance in the Korean financial or capital markets. It is impossible to predict the extent to which foreign investment will continue to increase in Korea or the Fund's ability to participate in such increased foreign investment in light of the foreign holding limitations or governmental restrictions that may be imposed in the future. Foreign investors may trade securities of Korean companies only through the KSE except in certain limited circumstances, which include odd-lot trading of securities, acquisition of shares by exercise of warrant, conversion rights under convertible bonds or withdrawal rights under depositary receipts issued outside of Korea by a Korean company, acquisition of shares as a result of exercising applicable conversion rights attached to certain eligible domestic convertible bonds issued by listed small and medium-sized companies, acquisition of shares as a result of inheritance, donation, bequeathal or exercise of shareholders' rights (preemptive rights or rights to participate in free distributions and receive dividends), and direct transactions between foreigners involving the transfer of a class of shares for which the ceiling on acquisition by foreigners in total (as explained above) has been reached or exceeded ("foreign OTC transactions"). Odd-lot trading of shares outside the KSE must involve a licensed securities company in Korea as the second party. For direct transfers of shares outside the KSE between foreigners, a securities company licensed in Korea must act as an intermediary. However, foreign investors such as the Fund are not permitted to enter into such foreign OTC transactions with branches and subsidiaries of foreign banks, securities companies and insurance companies. Foreign OTC transactions typically occur at a premium over prices on the KSE. The Fund may invest in shares of KSE-listed companies through such foreign OTC transactions, and thus pay a premium over the share prices quoted on the KSE. There can be no assurance that the Fund will be able to realize such premium if it sells the shares to another foreign investor. Such premium may be affected by changes in regulation and otherwise, including any change in the percentage of foreign stock ownership permitted in KSE-listed companies. Foreign investors are prohibited from engaging in margin transactions. 25 28 EXCHANGE RATE FLUCTUATIONS Fidelity currently anticipates that, once the proceeds of the Offer are fully invested, at least 80% of the Fund's total assets will be invested in equity securities of Korean Issuers. As a result, most of the income received by the Fund, and assets held by the Fund will be denominated in Won. The computation of net asset value and the distribution of income by the Fund, however, will be made in U.S. dollars. Therefore, the Fund's reported net asset value and its computation and distribution of income in U.S. dollars will be affected adversely by reductions in the value of the Won relative to the U.S. dollar. The Fund also will incur costs of conversion between currencies. In addition, the computation of income and capital gains will be made on the date of its accrual by the Fund at the foreign exchange rate in effect on that date, and thus, if the value of the Won falls relative to the U.S. dollar between recognition of the income and the making of Fund distributions, the Fund may be required to liquidate investments in order to make distributions if the Fund has insufficient cash in U.S. dollars to meet distribution requirements under the Code. Such liquidation of investments, if required, may have adverse effects on the Fund's performance. In addition, if the liquidated investments include securities that have been held less than three months, such sales may jeopardize the Fund's status as a regulated investment company under the Code. See "Taxation." Prior to 1980, the value of the Won was fixed against the U.S. dollar. In January 1980, the Korean government devalued the Won against the U.S. dollar by 16.6%, in part to enhance the competitiveness of Korean exports. Since June 1, 1996, the permitted daily range of fluctuation was increased to plus or minus 2.25%. See ["The Securities Markets of Korea--Recent Market and Economic Developments--Financial Liberalization and Market Opening Plan" and "The Republic of Korea--Foreign Exchange."] The Won appreciated in value an aggregate of 23.74% relative to the U.S. dollar between December 1985 and December 1989, depreciated by 18.9% in value relative to the U.S. dollar between December 1989 and December 1993, and appreciated again by 4.13% in value relative to the U.S. dollar between December 1993 and December 1995. See ["The Republic of Korea."] The Fund is permitted to engage in a variety of currency hedging transactions, which may involve certain risks, although such transactions, with certain exceptions, are not currently permitted under Korean law or regulations. See "Investment Objective and Policies--Other Investments," "Additional Investment Activities" and "Appendix A--General Characteristics and Risks of Derivatives" in the SAI. POLITICAL AND ECONOMIC FACTORS The value of the Fund's assets may be adversely affected by political, economic or social instability in Korea. Following World War II, the Korean peninsula was partitioned. The demilitarized zone at the boundary between Korea and North Korea was established after the Korean War of 1950-1953 and is supervised by United Nations forces. The United States maintains a military force in Korea to help deter the ongoing military threat from North Korean forces. The situation remains a source of tension, although negotiations to ease tensions and resolve the political division of the Korean peninsula have been carried on from time to time. There also have been efforts from time to time to increase economic, cultural and humanitarian contacts between North Korea and Korea. There can be no assurance that such negotiations or efforts will continue to occur or will result in an easing of tensions between North Korea and the Republic. Tension between the two Koreas rose following the announcement in March 1993 by North Korea of its intention to withdraw from the Nuclear Non-Proliferation Treaty. Subsequent events involving, among other things, North Korea's refusal to comply with the Nuclear Non-Proliferation Treaty and the death on July 8, 1994 of North Korea's President, Kim Il-Sung, have caused the level of tension between the two Koreas to fluctuate. Recently, tension between Korea and North Korea was increased following the discovery of a North Korean submarine off the coast of Korea on September 1996 and the ensuing manhunt for the submarine's crew members and North Korean commandos. No assurance can be given that the level of tension with North Korea will not increase or change abruptly as a result of future events, including political developments in North Korea following developments in the dispute concerning North Korea's nuclear program (such as any moves to impose trade sanctions against North Korea, further increasing political tensions and the risk of military conflict) or developments related to proposed meetings between Korea and North Korea. See "The Republic of Korea." 26 29 The heightened tensions between Korea and North Korea have depressed new foreign investment in Korea from time to time and the availability of foreign financing for Korean companies, and the uncertainty surrounding the situation may adversely affect the economic climate in Korea. The tensions between North Korea and Korea also may adversely affect both the prices of the Fund's portfolio securities and the Fund's share price. In addition, there have been reports of increased militarization in North Korea, accompanied by a general economic decline in that country. Military action or the risk of military action or the economic collapse of North Korea could have a material adverse effect on Korea, and consequently, on the ability of the Fund to achieve its investment objective. The domestic political situation in Korea has undergone significant change in recent years. Following the 1979 assassination of President Park Chung Hee, General Chun Doo Hwan became President under an authoritarian regime which emphasized social and political order, while encouraging renewed economic growth. Following public demonstrations, Roh Tae Woo was democratically elected as President in December 1987. In December 1992, the Korean people elected Kim Young Sam as President. Kim Young Sam is the first popularly elected President of Korea since 1960 not affiliated with the military. With its lack of natural resources and with exports constituting a large proportion of GNP, the Korean economy is significantly affected by changes in commodity prices (particularly oil), changes in protectionist sentiment among its trading partners and exchange rate movements. The rapid economic development of Korea has in the past led to large foreign borrowings. Korean companies tend to be substantially more leveraged than U.S. and European companies. The high degree of leverage increases the risk of business failures should adverse business conditions develop. In addition, Korean accounting, auditing and financial reporting standards and practices are not equivalent to those in the United States. Therefore, certain material disclosures (including disclosures as to off-balance sheet financing loan guaranties) may not be made, and less information may be available with respect to investments in Korea than with respect to those in the United States. MARKET CHARACTERISTICS Differences Between the U.S. and Korean Markets. The Korean securities markets have substantially less volume than the NYSE, and equity and debt securities of most Korean companies are less liquid and more volatile than equity and debt securities of U.S. companies of comparable size. Many companies traded on Korean securities markets are smaller, newer and less seasoned than companies whose securities are traded on securities markets in the United States. Investments in smaller companies involve greater risk than is customarily associated with investing in larger companies. Smaller companies may have limited product lines, markets or financial or managerial resources and may be more susceptible to losses and risks of bankruptcy. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity of such markets. Accordingly, the Korean securities markets may be subject to greater influence by adverse events generally affecting the market, and by large investors trading significant blocks of securities, than is usual in the United States. To the extent that Korea experiences rapid increases in its money supply and investment in equity securities for speculative purposes, the equity securities traded in Korea may trade at price-earnings multiples higher than those of comparable companies trading on securities markets in the United States, which may not be sustainable. Korean securities markets may also be subject to substantial governmental control, which may cause sudden or prolonged disruptions in market prices unrelated to supply and demand considerations. This may also be true of currency markets. The development of the Korean securities markets may be attributed to, among other things, the Korean government's extensive involvement in the private sector, including the securities markets. The aggregate market capitalization of domestic equity securities listed on the KSE was approximately W134 trillion (approximately U.S.$165 billion) at June 30, 1996, as compared to approximately U.S.$6.47 trillion on the NYSE. As discussed above in "Investment Restrictions and Foreign Exchange Controls," however, only a small portion of the equity securities that compose this market capitalization may be purchased by foreign investors. 27 30 The Korean government has from time to time taken measures to minimize excessive price volatility on the KSE, including the imposition of limitations on daily price movements of securities and varying margin requirements. Such actions by the Korean government have had and in the future could have a significant effect on the market prices and dividend yields of Korean equity securities. In particular, during 1990, the Korea Securities Stabilization Fund (the "Stabilization Fund"), a partnership operated by its contributors which include substantially all KSE-listed companies, Korean securities companies and certain institutional investors, was formed to stabilize the market through the purchase and sale of securities. On April 30, 1996, the contributors to the Stabilization Fund adopted a resolution to liquidate the Stabilization Fund on May 3, 1996. Such resolution provided that upon the liquidation of the Stabilization Fund, its cash and liquid assets, amounting to approximately Won 1.3 trillion, would be distributed to its members by August 1996, while the listed shares held by the Stabilization Fund, with an aggregate market value of Won 4.1 trillion, will be deposited with the Korea Securities Depositary and thereafter distributed to its members at the rate of 20% per annum beginning in May 1998. This schedule for distribution of listed shares is subject to amendment in accordance with market conditions. Government Supervision of Korean Securities Markets; Legal System. There is less government supervision and regulation of securities exchanges, listed companies and brokers in Korea than exists in the United States. Less information, therefore, may be available to the Fund than in respect of investments in the United States. Further, in Korea, less information may be available to the Fund than to local market participants. Brokers in Korea may not be as well capitalized as those in the United States, so that they are more susceptible to financial failure in times of market, political, or economic stress. In addition, existing laws and regulations are often inconsistently applied. As legal systems in Korea develop, foreign investors may be adversely affected by new laws and regulations, changes to existing laws and regulations and preemption of local laws and regulations by national laws. In circumstances where adequate laws exist, it may not be possible to obtain swift and equitable enforcement of the law. Currently a mixture of legal and structural restrictions affect the Korean securities markets. Financial Information and Standards. Korean accounting, auditing and financial standards and requirements differ, in some cases significantly, from those applicable to U.S. issuers. In particular, the assets and profits appearing on the financial statements of a Korean issuer may not reflect its financial position or results of operations in accordance with U.S. generally accepted accounting principles. In addition, for an issuer that keeps accounting records in local currency, inflation accounting rules may require, for both tax and accounting purposes, that certain assets and liabilities be restated on the issuer's balance sheet in order to express items in terms of currency of constant purchasing power. Inflation accounting may indirectly generate losses or profits. Consequently, financial data may be materially affected by restatements for inflation and may not accurately reflect the real condition of those issuers and securities markets. Moreover, substantially less information may be publicly available about issuers in Korea than is available about U.S. issuers. SUBSTANTIAL GOVERNMENT INFLUENCE ON THE PRIVATE SECTOR The Korean government has historically exercised and continues to exercise substantial influence over many aspects of the private sector. The Korean government from time to time has informally influenced the payment of dividends and the prices of certain products, encouraged companies to invest or to concentrate in particular industries, induced mergers between companies in industries suffering from excess capacity and induced private companies to publicly offer their securities. In addition, the government has sought to minimize excessive price volatility on the KSE through various steps, including the imposition of limitations on daily price movements of securities. Such actions by the government in the future could have a significant effect on the market prices and dividend yields of equity securities, including those in the Fund's portfolio. THINLY TRADED MARKETS AND ILLIQUID INVESTMENTS Compared to securities traded in the United States, generally all securities of Korean Issuers may be considered to be thinly traded. Even relatively widely held securities in Korea may not be able to absorb trades of a size customarily transacted by institutional investors, without price disruptions. Accordingly, the Fund's ability to reposition itself will be more constrained than would be the case for a mutual fund that invests in the 28 31 U.S. equity market. The Fund, in addition, may invest up to 35% of its total assets in illiquid equity or debt securities, that is, securities for which there is no readily available market, or no market at all. Investment of the Fund's assets in relatively illiquid securities may restrict the ability of the Fund to dispose of its investments in a timely fashion and for a fair price as well as its ability to take advantage of market opportunities. The risks associated with illiquidity are particularly acute in situations in which the Fund's operations require cash, such as when the Fund repurchases shares, commences a tender offer, or pays dividends or distributions, and could result in the Fund borrowing to meet short-term cash requirements or incurring capital losses on the sale of illiquid investments. Further, companies whose securities are not publicly traded are not subject to the disclosure and other investor protection requirements which would be applicable if their securities were publicly traded. Illiquid investments are investments that cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued because of the absence of a market for such investments. Under the supervision of the Board of Directors, the Investment Manager and the Investment Adviser determine the liquidity of the Fund's investments and, through reports from the Investment Manager, the Board monitors investments in illiquid instruments. In determining the liquidity of the Fund's investments, the Investment Manager and the Investment Adviser may consider various factors, including (1) the frequency of trades and quotations, (2) the number of dealers and prospective purchasers in the marketplace, (3) dealer undertakings to make a market, (4) the nature of the security (including any demand or tender features), and (5) the nature of the marketplace for trades (including the ability to assign or offset the Fund's rights and obligations relating to the investment). In the absence of market quotations, illiquid investments are priced at fair value as determined in good faith by a committee appointed by the Board of Directors. If through a change in values, assets, or other circumstances, the Fund were in a position where more than 35% of its total assets were invested in illiquid securities, the Fund would seek to take appropriate steps to protect liquidity. SETTLEMENT PROCEDURES AND DELAYS Settlement procedures in Korea are somewhat less developed and reliable than those in the United States and in other developed securities markets, and the Fund may experience settlement delays or other material difficulties. Accordingly, the Fund may be subject to significant delays or limitations on the volume of trading during any particular period as a result of these factors. The foregoing factors could impede the ability of the Fund to effect portfolio transactions on a timely basis and could have an adverse impact on the net asset value of the shares of the Fund's Common Stock and the price at which the shares trade. INVESTMENTS IN ASIAN ISSUERS Up to 35% of the Fund's total assets may be invested in equity and debt securities of Asian Issuers, if warranted, in Fidelity's judgment, by economic, political or regulatory conditions in Korea or valuations in the Korean securities markets relative to such conditions. Asian Issuers are issuers (other than issuers meeting the definition of Korean Issuers as defined below), that (i) are organized under the laws of Hong Kong, Japan or Taiwan, (ii) regardless of where organized, and as determined by Fidelity, derive at least 50% of their revenues or profits from goods produced or sold, investments made, or services performed in Hong Kong, Japan or Taiwan, (iii) have the primary trading market for their securities in Hong Kong, Japan or Taiwan or (iv) are governments, or their agencies, instrumentalities or other political sub-divisions of Hong Kong, Japan or Taiwan. The risk factors identified herein with respect to Korean Issuers generally also apply to investments the Fund may make in Asian Issuers, although the specific nature of such risks may vary according to the country in which investments are made. In addition, Korea, Hong Kong, Japan and Taiwan may be subject to greater degrees of economic, political and social instability than is the case in the United States and Western European countries. Such instability may result from, among other things, the following: (i) authoritarian governments or military involvement in political and economic decision-making, including changes in government through extra--constitutional means; (ii) popular unrest associated with demands for improved political, economic and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring 29 32 countries; and (v) ethnic, religious and racial disaffection. Such social, political and economic instability could disrupt the principal financial markets in which the Fund invests and cause losses to the Fund. Hong Kong. In Hong Kong, British proposals to extend limited democracy have caused a political rift with the Peoples Republic of China (the "PRC"), which is scheduled to assume sovereignty over the colony in 1997. Although the PRC has committed by treaty to preserve the economic and social freedoms enjoyed in Hong Kong for 50 years after regaining control of Hong Kong, the continuance of the current form of economic system in Hong Kong after the reversion will depend on the actions of the government of the PRC. The PRC and the United Kingdom have also yet to resolve their differences on certain issues relating to the reversion of sovereignty, such as the nationality status of certain ethnic minorities in Hong Kong, the construction of a new international airport and most recently, electoral reforms. In addition, such reversion has increased sensitivity in Hong Kong to political developments and statements by public figures in the PRC. Business confidence in Hong Kong, therefore, can be significantly affected by such developments and statements, which in turn can affect markets and business performance. The Hong Kong stock market can be volatile and is sensitive both to developments in the PRC and to the strength of other world markets. As an example, in 1989, the Hang Seng Index of the Hong Kong stock market rose to 3,310 in May from its previous year-end level of 2,687, but fell to 2,094 in early June following the events at Tiananmen Square. The Hang Seng Index gradually climbed in subsequent months, but fell by 181 points on October 16, 1989 (approximately 6.5%) following a substantial fall in the U.S. stock market, and at the year end closed at a level of 2,837. Japan. Japan currently has the second-largest GDP in the world. The Japanese economy has grown substantially over the last three decades. Its growth rate averaged over 5% in the 1970s and 1980s. However, in 1992, the growth rate in Japan slowed to 0.6% and the budget showed a deficit of 1.5% percent of GDP. Despite small rallies and market gains, Japan has been plagued with economic sluggishness. Economic conditions have weakened considerably in Japan since October 1992. The boom in Japan's equity and property markets during the expansion of the late 1980s supported high rates of investment and consumer spending on durable goods, but both of these components of demand have now retreated sharply following the decline in asset prices. Profits have fallen sharply, the previously tight labor market conditions have eased considerably, and consumer confidence is low. The banking sector has experienced a sharp rise in non-performing loans, and strains in the financial system are likely to continue. The decline in interest rates and two large fiscal stimulus packages should help to contain the recessionary forces, but substantial uncertainties remain. The general government position has deteriorated as a result of weakening economic growth, as well as stimulative measures taken recently to support economic activity and to restore financial stability. Although Japan's economic growth has declined significantly since 1990, Fidelity believes many Japanese companies seem capable of rebounding due to increased investments, smaller borrowings, increased product development and continued government support. Taiwan. As Taiwan's domestic labor costs have risen, Taiwanese manufacturers have been aggressively relocating production facilities to the southern PRC provinces of Guangdong and Fujian. In addition, as costs in the southern PRC have increased, Taiwanese manufacturers are developing facilities further north, utilizing their historic ties to the region surrounding Shanghai. If official relations between the PRC and Taiwan improve, Taiwan may eventually replace Hong Kong as the PRC's largest regional trading partner. In addition, in Hong Kong and Taiwan, there are restrictions on the percent of permitted foreign investment in shares of certain companies, mainly those in highly regulated industries, although in Taiwan there are limitations on foreign ownership of shares of any listed company. Investment in Taiwan requires an investment permit. [The Investment Manager intends to apply for a permit on behalf of the Fund and certain other funds managed by the Investment Manager.] The Fund may not be permitted to invest in Taiwan until such permit is issued. Taiwan imposes a waiting period on the repatriation of investment capital for certain foreign investors. These restrictions may in the future make it undesirable to invest in Taiwan. With respect to investments in Taiwan, it should be noted that Taiwan lacks formal diplomatic relations with many nations, although it conducts trade and financial relations with most major economic powers. Both the government of the PRC and the government of the Republic of China in Taiwan claim sovereignty over all 30 33 of China. Although relations between Taiwan and the PRC are currently peaceful, renewed frictions or hostility could interrupt operations of Taiwanese companies in which the Fund invests and create uncertainty that could adversely affect the value and marketability of its Taiwanese investments. Tension also exists over the PRC's possession of nuclear capabilities and its proximity to Taiwan. DEBT SECURITIES--HIGH YIELD, HIGH RISK SECURITIES The Fund's investment policies do not limit the percentage of the Fund's debt securities investments which may be invested in debt securities that are unrated or rated below investment grade. Under current Korean laws and regulations, the Fund is prohibited from investing in debt securities denominated in Won except to a very limited extent as explained above. The market value of debt securities generally varies in response to changes in interest rates and the financial conditions of each issuer. During periods of declining interest rates, the value of debt securities generally increases. Conversely, during periods of rising interest rates, the value of such securities generally declines. These changes in market value will be reflected in the Fund's net asset value. The Fund's investments in debt securities of Korean Issuers or of Asian Issuers may generally be considered to have credit quality below investment grade as determined by internationally recognized credit rating agency organizations. Debt securities rated below investment grade (commonly referred to as "junk bonds" when issued in the United States) are considered to be speculative. Investment in low rated securities typically involves risks not associated with higher rated securities, including, among others, overall greater risk of timely and ultimate payment of interest and principal, potentially greater sensitivity to general economic conditions, greater market price volatility and less liquid secondary market trading. Certain of the Fund's investments may be considered to have extremely poor prospects of ever attaining any real investment standing, to have a current identifiable vulnerability to default, to be unlikely to have the capacity to pay interest and repay principal when due in the event of adverse business, financial or economic conditions, or to be in default or not current in the payment of interest or principal. Low rated debt securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade securities. The prices of low rated debt securities have been found to be less sensitive to interest rate changes than higher rated investments, but more sensitive to adverse economic downturns or individual corporate developments. A projection of an economic downturn or of a period of rising interest rates, for example, could cause a decline in low rated debt securities prices because the advent of a recession could lessen the ability of a highly leveraged company to make principal and interest payments on its debt securities. If the issuer of low rated debt securities defaults, the Fund may incur additional expenses in seeking recovery. See "Appendix B--Debt Ratings" in the SAI for a description of ratings of debt instruments. LOANS AND OTHER DIRECT DEBT INSTRUMENTS Purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the borrower for payment of principal and interest. Direct debt instruments may not be rated by any nationally recognized rating service. If the Fund does not receive scheduled interest or principal payments on such indebtedness, the Fund's share price and total return could be adversely affected. Loans that are fully secured offer the Fund more protections than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the borrower's obligation, or that the collateral can be liquidated. Indebtedness of borrowers whose creditworthiness is poor involves substantially greater risks, and may be highly speculative. Borrowers that are in bankruptcy or restructuring may never pay off their indebtedness, or may pay only a small fraction of the amount owed. Direct indebtedness of Korea will also involve a risk that the governmental entities responsible for the repayment of the debt may be unable, or unwilling, to pay interest and repay principal when due. Investments in loans through direct assignment of a financial institution's interests with respect to a loan may involve additional risks to the Fund. For example, if a loan is foreclosed, the Fund could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the 31 34 collateral. In addition, it is conceivable that under emerging legal theories of lender liability, the Fund could be held liable as a co-lender. Direct debt instruments may also involve a risk of insolvency of the lending bank or other intermediary. Direct debt instruments that are not in the form of securities may offer less legal protection to the Fund in the event of fraud or misrepresentation. In the absence of definitive regulatory guidance, the Fund relies on Fidelity's research in an attempt to avoid situations where fraud or misrepresentation could adversely affect the Fund. A loan is often administered by a bank or other financial institution that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. Unless, under the terms of the loan or other indebtedness, the Fund has direct recourse against the borrower, it may have to rely on the agent to apply appropriate credit remedies against a borrower. If assets held by the agent for the benefit of the Fund were determined to be subject to the claims of the agent's general creditors, the Fund might incur certain costs and delays in realizing payment on the loan or loan participation and could suffer a loss of principal or interest. Direct indebtedness purchased by the Fund may include letters of credit, revolving credit facilities, or other standby financing commitments obligating the Fund to pay additional cash on demand. These commitments may have the effect of requiring the Fund to increase its investment in a borrower at a time when it would not otherwise have done so, even if the borrower's condition makes it unlikely that the amount will ever be repaid. The Fund will set aside appropriate liquid assets in a segregated custodial account to cover its potential obligations under standby financing commitments. The Fund limits the amount of total assets that it will invest in any one issuer. For purposes of these limitations, the Fund generally will treat the borrower as the "issuer" of indebtedness held by the Fund. In the case of loan participations where a bank or other lending institution serves as financial intermediary between the Fund and the borrower, if the participation does not shift to the Fund the direct debtor-creditor relationship with the borrower, the Commission's interpretations require the Fund, in appropriate circumstances, to treat both the lending bank or other lending institution and the borrower as "issuers" for these purposes. Treating a financial intermediary as an issuer of indebtedness may restrict the Fund's ability to invest in indebtedness related to a single financial intermediary, even if the underlying borrowers represent many different companies. SWAP AGREEMENTS Swap agreements can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. Depending on their structure, swap agreements may increase or decrease the Fund's exposure to long- or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, corporate borrowing rates, or other factors such as security prices or inflation rates. Swap agreements can take many different forms and are known by a variety of names. The Fund is not limited to any particular form of swap agreement if Fidelity determines it is consistent with the Fund's investment objective and policies. In a typical cap or floor agreement, one party agrees to make payments only under specified circumstances, usually in return for payment of a fee by the other party. For example, the buyer of an interest rate cap obtains the right to receive payments to the extent that a specified interest rate exceeds an agreed-upon level, while the seller of an interest rate floor is obligated to make payments to the extent that a specified interest rate falls below an agreed-upon level. An interest rate collar combines elements of buying a cap and selling a floor. Swap agreements will tend to shift the Fund's investment exposure from one type of investment to another. For example, if the Fund agreed to exchange payments in U.S. dollars for payments in foreign currency, the swap agreement would tend to decrease the Fund's exposure to U.S. interest rates and increase its exposure to foreign currency and interest rates. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the Fund's investments and its share price and yield. 32 35 The most significant factor in the performance of swap agreements is the change in the specific interest rate, currency, or other factors that determine the amounts of payments due to and from the Fund. If a swap agreement calls for payments by the Fund, the Fund must be prepared to make such payments when due. In addition, if the counterparty's creditworthiness declined, the value of a swap agreement would be likely to decline, potentially resulting in losses. The Fund expects to be able to eliminate its exposure under swap agreements either by assignment or other disposition, or by entering into an offsetting swap agreement with the same party or a similarly creditworthy party. The Fund will maintain appropriate liquid assets in a segregated custodial account to cover its current obligations under swap agreements. If the Fund enters into a swap agreement on a net basis, it will segregate assets with a daily value at least equal to the excess, if any, of the Fund's accrued obligations under the swap agreement over the accrued amount the Fund is entitled to receive under the agreement. If the Fund enters into a swap agreement on other than a net basis, it will segregate assets with a value equal to the full amount of the Fund's accrued obligations under the agreement. INDEXED SECURITIES The Fund may purchase securities whose prices are indexed to the prices of other securities, securities indices, currencies, precious metals or other commodities, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Gold-indexed securities, for example, typically provide for a maturity value that depends on the price of gold, resulting in a security whose price tends to rise and fall together with gold prices. Currency-indexed securities typically are short-term to intermediate-term debt securities whose maturity values or interest rates are determined by reference to the values of one or more specified foreign currencies, and may offer higher yields than U.S. dollar-denominated securities of equivalent issuers. Currency-indexed securities may be positively or negatively indexed; that is, their maturity value may increase when the specified currency value increases, resulting in a security that performs similarly to a foreign currency-denominated instrument, or their maturity value may decline when foreign currencies increase, resulting in a security whose price characteristics are similar to a put on the underlying currency. Currency-indexed securities may also have prices that depend on the values of a number of different foreign currencies relative to each other. To the extent that the Fund invests in indexed securities, it will be subject to the risks associated with changes in the particular indices, which may include reduced or eliminated interest payments and losses of invested principal. Certain indexed securities may have the effect of providing a degree of investment leverage, because they may increase or decrease in value at a rate that is a multiple of the changes in applicable indices. As a result, the market value of such securities will generally be more volatile than the market values of fixed-rate securities. The performance of indexed securities depends to a great extent on the performance of the security, currency, or other instrument to which they are indexed, and may also be influenced by interest rate changes in the United States and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer's creditworthiness deteriorates. Recent issuers of indexed securities have included banks, corporations, and certain U.S. government agencies. Indexed securities may be more volatile than the underlying instruments. INVESTMENT PRACTICES Certain risks and special considerations of certain of the investment practices in which the Fund may engage are described above under "Investment Objective and Policies" and "Additional Investment Activities." In addition, the Fund's ability to engage in these investment practices may be limited by certain rules and regulations in Korea. Derivatives (as defined below) involve special risks, including possible default by the other party to the transaction, illiquidity and, to the extent Fidelity's view as to certain market movements is incorrect, the risk that the use of a Derivative could result in greater losses than if it had not been used. Use of put and call options could result in losses to the Fund, force the purchase or sale of portfolio securities at 33 36 inopportune times or for prices higher or lower than current market values, or cause the Fund to hold a security it might otherwise sell. The use of currency transactions could result in the Fund incurring losses as a result of the imposition of exchange controls, suspension of settlements, or the inability to deliver or receive a specified currency in addition to exchange rate fluctuations. The use of options and futures transactions entails certain special risks. In particular, the variable degree of correlation between price movements of futures contracts and price movements in the related portfolio position of the Fund could create the possibility that losses on the derivative instrument will be greater than gains in the value of the Fund's position. In addition, futures and options markets could be illiquid in some circumstances and certain over-the-counter options could have no markets. The Fund might not be able to close out certain positions without incurring substantial losses. To the extent the Fund utilizes futures and options transactions for hedging, such transactions should tend to minimize the risk of loss due to a decline in the value of the hedged position and, at the same time, limit any potential gain to the Fund that might result from an increase in value of the position. Finally, the daily variation margin requirements for futures contracts create a greater ongoing potential financial risk than would purchases of options, in which case the exposure is limited to the cost of the initial premium and transaction costs. Losses resulting from the use of Derivatives will reduce the Fund's net asset value, and possibly income, and the losses may be greater than if Derivatives had not been used. Additional information regarding the risks and special considerations associated with Derivatives appears in "Appendix A--General Characteristics and Risks of Derivatives" in the SAI. NON-DIVERSIFICATION The Fund is classified as a non-diversified investment company under the 1940 Act, which means that the Fund is not limited by the 1940 Act in the proportion of its assets that may be invested in the obligations of a single issuer. Thus, the Fund may invest a greater proportion of its assets in the securities of a smaller number of issuers and, as a result, could be subject to greater risk of loss. The Fund, however, intends to continue to comply with the diversification requirements imposed by the Code for qualification as a regulated investment company, which generally limits investments in any one issuer to 25% of the Fund's total assets. See "Taxation--U.S. Federal Income Taxes" and "Investment Restrictions." WITHHOLDING AND OTHER TAXES The Fund may be subject to certain taxes, including withholding or other taxes on income and capital gains, that are or may be imposed by Korea or other foreign governments, which will reduce the return to the Fund. The Fund does not intend to engage in activities that will create a permanent establishment in Korea within the meaning of the Korea-U.S. Tax Treaty. Therefore, the Fund generally will not be subject to any Korean income taxes other than Korean withholding taxes. Exemptions or reductions in these taxes apply if the Korea-U.S. Tax Treaty applies to the Fund. If the treaty provisions are not, or cease to be, applicable to the Fund, significant additional withholding taxes would apply. Korean counsel to the Fund, Shin & Kim, have given their opinion that the treaty presently applies to the Fund if and so long as the Fund operates as described herein. The Fund has received written confirmation from the Ministry of Finance and Economy of Korea (the "MOFE") that, so long as all of the issued shares of the Fund are listed on one or more publicly acknowledged stock exchanges in the United States only and they are traded on such exchanges by the general public, the Fund will be entitled to the benefits of the Treaty. See "Taxation--Korean Taxes." The imposition of such taxes and the rates imposed are subject to change. The Fund may elect, when eligible, to "pass-through" to the Fund's shareholders such taxes that are treated as income taxes for U.S. Federal income tax purposes. If the Fund makes such election, shareholders will be required to include in income their proportionate shares of the amount of non-U.S. income taxes paid by the Fund and may be entitled to claim either a credit or deduction for all or a portion of such taxes. See "Taxation--U.S. Federal Income Taxes" below for a discussion of the rules and limitations applicable to the treatment of non-U.S. income taxes under the U.S. Federal income tax laws. Certain shareholders, including some non-U.S. shareholders, will not be entitled to the benefit of a deduction or credit with respect to non-U.S. income taxes paid by the Fund. If a shareholder is eligible and elects to credit foreign taxes, such credit is subject to limitations. Other foreign taxes, such as transfer taxes, may be imposed on the Fund, but would not be eligible to be passed through to shareholders as a credit or deduction. Also, additional U.S. Federal income taxes and charges may be incurred 34 37 as a result of any investment made in "passive foreign investment companies." See "Taxation--U.S. Federal Income Taxes" and "--Other Taxation." CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION The Fund's Articles of Incorporation include provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Fund or to change the composition of its Board of Directors. Such provisions could have the effect of depriving shareholders of an opportunity to sell their shares of Common Stock at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. See "Description of Capital Stock--Special Voting Provisions." NET ASSET VALUE DISCOUNT Shares of closed-end investment companies frequently trade at a discount from net asset value. This characteristic of shares of a closed-end fund is a risk separate and distinct from the risk that the Fund's net asset value will decrease. Among the factors that may be expected to affect whether shares of the Fund trade above or below net asset value are portfolio investment results, the general performance of the Korean economy and Korean securities, supply and demand for shares of the Fund and the development of alternatives to the Fund as a vehicle through which United States and other foreign investors may invest in Korean securities. The Fund cannot predict whether its shares will trade at, below or above net asset value. The risk of purchasing shares of a closed-end fund that might trade at a discount is more pronounced for investors who wish to sell their shares in a relatively short period of time because, for those investors, realization of gain or loss on their investments is likely to be more dependent upon the existence of a premium or discount than upon portfolio performance. FOREIGN SUBCUSTODIANS AND SECURITIES DEPOSITORIES Rules adopted under the 1940 Act permit the Fund to maintain its foreign securities and cash in the custody of certain eligible non-U.S. banks and securities depositories. Certain banks in foreign countries may not be eligible sub-custodians for the Fund under such rules, in which event the Fund may be precluded from purchasing securities in which it would otherwise invest, and other banks that are eligible foreign sub-custodians may be recently organized or otherwise lack extensive operating experience. In addition, in certain countries, such as Korea, there may be legal restrictions or limitations on the ability of the Fund to recover assets held in custody by foreign sub-custodians in the event of the bankruptcy of the sub-custodian. The Fund also may experience settlement delays or other material difficulties. See "Risk Factors and Special Considerations--Settlement Procedures and Delays." EXPENSES The operating expense ratio of the Fund is higher than that of a fund investing primarily in the securities of U.S. issuers since the expenses of the Fund (such as custodial, currency exchange and communication costs) are higher. See "Fee Table." Brokerage commissions and transaction costs for transactions both on and off the KSE are generally higher than in the United States. It is expected, however, that the Fund's investment advisory fee, as well as its overall expense ratio, will be comparable to those of many closed-end management investment companies of comparable size that invest primarily in securities of issuers in a single foreign country. 35 38 MANAGEMENT OF THE FUND BOARD OF DIRECTORS The management of the Fund, including general supervision duties performed by the Investment Manager under the Management Agreement, is the responsibility of the Board of Directors. For certain information regarding the Directors and officers of the Fund, see "Management of the Fund--Directors and Officers" in the SAI. Certain directors of the Fund reside outside the United States and substantially all of the assets of such persons are located outside the United States. None of the Directors of the Fund who reside outside the United States have appointed an agent for service of process in the United States. It may not be possible, therefore, for investors to effect service of process within the United States upon such persons or to enforce against them, in the U.S. courts or foreign courts, judgments obtained in U.S. courts predicated upon the civil liability provisions of the Federal securities laws of the United States. In addition, it is not certain that a foreign court would enforce, in original actions, liabilities against such persons predicated solely upon the U.S. securities laws. INVESTMENT MANAGER, INVESTMENT ADVISER AND SUB-ADVISER The Investment Manager is Fidelity Management & Research Company. Pursuant to a management agreement (the "Management Agreement") between the Fund and the Investment Manager, the Investment Manager supervises the Fund's investment program. The Investment Manager consults with the Investment Adviser and the Sub-Adviser on a regular basis regarding the Investment Adviser's and the SubAdviser's decisions concerning the purchase, sale or holding of particular securities. In addition to the foregoing, the Investment Manager monitors the performance of the Fund's service providers, including the Fund's administrator, transfer agent and custodian. The Investment Manager pays the reasonable salaries and expenses of such of the Fund's officers and employees and any fees and expenses of such of the Fund's directors who are directors, officers or employees of the Investment Manager, except that the Fund may bear travel expenses or an appropriate portion thereof of directors and officers of the Fund who are directors, officers or employees of the Investment Manager to the extent that such expenses relate to attendance at meetings of the Board of Directors or any committees thereof. Pursuant to an investment advisory agreement (the "Advisory Agreement") among the Investment Manager, the Investment Adviser and the Fund, the Investment Adviser is responsible on a day-to-day basis for investing the Fund's portfolio in accordance with its investment objective, policies and limitations. The Investment Adviser has discretion over investment decisions for the Fund and, in that connection, places purchase and sale orders for the Fund's portfolio securities. The Advisory Agreement authorizes the delegation of these responsibilities to the Sub-Adviser. Pursuant to the Sub-Advisory Agreement (the "Sub-Advisory Agreement"), the Investment Adviser has delegate certain of its responsibilities for the day-to-day management of the Fund to the SubAdviser which manages the Fund's portfolio through its Tokyo office. Hokeun Chung is primarily responsible for the day-to-day management of the Fund's portfolio. Mr. Chung has served as the Fund's portfolio manager since 1996 after acting as co-portfolio manager since 1995. Mr. Chung joined Fidelity Investments as an Analyst in 1991. Prior to joining Fidelity, Mr. Chung worked as a Senior Analyst at W.I. Carr in Seoul. In addition, the Investment Adviser provides research and statistical data to the Fund. The Investment Adviser and the Sub-Adviser will pay the reasonable salaries and expenses of such of the Fund's officers and employees and any fees and expenses of such of the Fund's directors who are directors, officers or employees of the Investment Adviser, except that the Fund may bear travel expenses or an appropriate portion thereof of directors and officers of the Fund who are directors, officers or employees of the Investment Adviser or the Sub-Adviser to the extent that such expenses relate to attendance at meetings of the Board of Directors or any committees thereof. Fidelity investment personnel may invest in securities for their own account pursuant to a code of ethics that establishes procedures for personal investing and restricts certain transactions. For example, all personal trades require pre-clearance, and participation in initial public offerings are prohibited. In addition, restrictions 36 39 on the timing of personal investing relative to trades by Fidelity funds and on short-term trading have been adopted. Personal investing is monitored to protect shareholders' interests. Investment Manager. Fidelity Management & Research Company acts as Investment Manager of the Fund. The Fidelity investment management organization was established in 1946. Today, the Fidelity organization is the largest mutual fund company in the United States, and is known as an innovative provider of high quality financial services to individuals and institutions. In addition to its mutual fund business, the Fidelity organization operates one of the leading discount brokerage firms in the United States, Fidelity Brokerage Services, Inc. As of August 31, 1996, the Investment Manager, the Investment Adviser, the SubAdviser and their affiliates had over $425 billion under management, of which more than $76 billion was invested in non-U.S. securities (including over $18 billion in Asian securities, over $550 million in Korean securities and over $11 billion managed from Asian offices). The Fidelity organization employs over investment professionals worldwide. The Investment Manager is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). The Investment Manager also manages the Fidelity Advisor Emerging Asia Fund, Inc., a closed-end investment company. The Investment Manager, together with the Investment Adviser, the Sub-Adviser and its other affiliates, has extensive research capabilities both worldwide, with over 300 investment professionals, as of August 31, 1994 and within the Asian region, and maintains offices in Hong Kong, Singapore, Taiwan and Tokyo which were staffed by 35 investment professionals. All of the stock of the Investment Manager is owned by FMR Corp., its parent company organized in 1972. The voting common stock of FMR Corp. is divided into two classes. Class B is held predominantly by members of the Edward C. Johnson 3d family and is entitled to 49% of the vote on any matter acted upon by the voting common stock. Class T is held predominantly by non-Johnson family member employees of FMR Corp. and its affiliates and is entitled to 51% of the vote on any such matter. The Johnson family group and all other Class B shareholders have entered into a shareholders' voting agreement under which all Class B shares will be voted in accordance with the majority vote of Class B shares. Under the 1940 Act, control of a company is presumed where one individual or group of individuals owns more than 25% of the voting stock of that company. Therefore, through their ownership of voting common stock and the execution of the shareholders' voting agreement, members of the Johnson family may be deemed, under the 1940 Act, to form a controlling group with respect to FMR Corp. The Investment Manager's main offices are located at 82 Devonshire Street, Boston, Massachusetts 02109. Investment Adviser. Fidelity International Investment Advisors Limited, the Fund's Investment Adviser and an affiliate of the Investment Manager, has delegated certain of its responsibilities for providing discretionary portfolio management services to the Sub-Adviser. The Investment Adviser may, however, elect to manage the portfolios directly through the Investment Adviser's office in Hong Kong. The Investment Adviser is an investment adviser registered under the Advisers Act and was organized in 1983 under the laws of Bermuda. The Investment Adviser primarily provides investment advisory services to U.S. investment companies investing throughout the world. The Investment Adviser is a wholly-owned subsidiary of Fidelity International Limited ("FIL"). The Investment Adviser's and FIL's main offices are located at Pembroke Hall, 42 Crow Lane, Pembroke, Bermuda. FIL is a Bermuda company formed in 1968 which primarily provides investment advisory services to non-U.S. investment companies and institutional investors investing in securities of issuers throughout the world. More than 25% of the voting stock of FIL is owned directly or indirectly by Edward C. Johnson 3d and trusts for the benefits of Johnson family members. Sub-Adviser. Fidelity Investments Japan Limited ("FIJ"), the Sub-Adviser, upon delegation by the Investment Adviser, provides advisory services concerning the Fund's assets invested in Japanese and other securities and is primarily responsible for the day-to-day management of the Fund's portfolio. The Sub- Adviser is an affiliate of the Investment Manager. The Investment Adviser and is registered as an investment adviser under the Advisers Act. The Sub-Adviser was formed on November 17, 1986 under the laws of Japan 37 40 and its main offices are located at 19th Floor, Shiroyama JT Mori Building, 4-3-1 Toranomon, Minato-ku, Tokyo 105, Japan. It is a wholly-owned subsidiary of FIL. COMPENSATION AND EXPENSES As compensation for its services, the Investment Manager receives from the Fund a monthly fee at an annual rate of 1.00% of the Fund's average daily net assets. The Investment Adviser receives from the Investment Manager 60% of the fees paid by the Fund to the Investment Manager. The Sub-Adviser receives from the Investment Adviser a fee equal to 50% of the fee paid to the Investment Adviser with respect to any assets managed by the Sub-Adviser on a discretionary basis and 30% of the fee paid to the Investment Adviser with respect to any assets managed by the Sub-Adviser on a non-discretionary basis. For the period from October 31, 1994 to September 30, 1995 and for the fiscal year ended September 30, 1996, the Investment Manager received aggregate compensation of $487,825 and $536,280, respectively, of which the Investment Manager paid the Investment Adviser aggregate compensation of $ and $ , respectively, and of which the Investment Adviser paid the Sub-Adviser aggregate compensation of $ and $ , respectively. Except for the expenses borne by the Investment Manager, the Investment Adviser or the Sub-Adviser pursuant to the Management Agreement, the Advisory Agreement and Sub-Advisory Agreement, the Fund pays or causes to be paid all of its expenses including, among other things: organizational and offering expenses (which will include out-of-pocket expenses, but not overhead or employee costs, of the Investment Manager, the Investment Adviser and the Sub-Adviser); expenses for legal, accounting and auditing services; taxes and governmental fees; dues and expenses incurred in connection with membership in investment company organizations; fees and expenses incurred in connection with listing the Fund's shares on any stock exchange; costs of printing and distributing shareholder reports, proxy materials, prospectuses, offering circulars, stock certificates and distributions of dividends; charges of the Fund's custodians, sub-custodians, registrars, transfer agents, dividend disbursing agents and dividend reinvestment plan agents; payment for portfolio pricing services to a pricing agent, if any; registration and filing fees of the Commission; expenses of registering or qualifying securities of the Fund for sale in the various states; freight and other charges in connection with the shipment of the Fund's portfolio securities; fees and expenses of non-interested directors; costs of shareholders' meetings; insurance; interest; brokerage costs; and litigation and other extraordinary or nonrecurring expenses. The Fund will also reimburse the Dealer Manager for certain of its expenses up to $ . See "Distribution Arrangements." DURATION AND TERMINATION; NON-EXCLUSIVE SERVICES Unless earlier terminated as described below, each of the Management Agreement and the Advisory Agreement will remain in effect until October 25, 1997, and the Sub-Advisory Agreement will remain in effect until October 25, 1997, and from year to year thereafter if approved annually (i) by a majority of the non-interested directors of the Fund and (ii) by the Board of Directors of the Fund or by a majority of the outstanding voting securities of the Fund. The Management Agreement may be terminated upon 60 days' written notice without penalty by the Fund's Board of Directors or by vote of a majority of the outstanding voting securities of the Fund or by the Investment Manager and will terminate in the event it is assigned (as defined in the 1940 Act). The Advisory Agreement may be terminated upon 60 days' written notice without penalty by the Fund's Board of Directors or by vote of a majority of the outstanding voting securities of the Fund or by the Investment Manager and will terminate in the event it is assigned (as defined in the 1940 Act). The Sub-Advisory Agreement may be terminated upon 60 days' written notice without penalty by the Fund's Board of Directors or by vote of a majority of the outstanding voting securities of the Fund or by the Investment Adviser or the Sub-Adviser and will terminate in the event it is assigned (as defined in the 1940 Act). The services of the Investment Manager, the Investment Adviser and the Sub-Adviser are not deemed to be exclusive, and nothing in the relevant service agreements will prevent any of them or their affiliates from providing similar services to other investment companies and other clients (whether or not their investment objectives and policies are similar to those of the Fund) or from engaging in other activities. 38 41 ADMINISTRATION Fidelity Service Co. ("Service"), a division of FMR Corp., serves as the Fund's administrator pursuant to an agreement with the Fund (the "Administration Agreement"). As compensation for its services, Service receives from the Fund monthly fees at an annual rate of .20% of the Fund's average daily net assets. Service is located at 82 Devonshire Street, Boston, MA 02109. Service performs various administrative services, including providing the Fund with the services of persons to perform administrative and clerical functions, maintenance of the Fund's books and records, pricing and securities lending services, preparation of various filings, reports, statements and returns filed with government authorities, and preparation of financial information for the Fund's proxy statements and semiannual and annual reports to shareholders. THE REPUBLIC OF KOREA [To Be Included By Amendment] THE SECURITIES MARKETS OF KOREA [To Be Included By Amendment] DISTRIBUTION ARRANGEMENTS PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York, a broker-dealer and member of the National Association of Securities Dealers, Inc., will act as the Dealer Manager for the Offer. Under the terms and subject to the conditions contained in the Dealer Manager Agreement dated the date hereof, the Dealer Manager will provide financial advisory and marketing services in connection with the Offer and will solicit the exercise of Rights and participation in the Over-Subscription Privilege by Record Date Shareholders. The Offer is not contingent upon any number of Rights being exercised. The Fund has agreed to pay the Dealer Manager a fee for financial advisory and marketing services equal to % of the aggregate Subscription Price for Shares issued pursuant to the exercise of such Rights and pursuant to the Over-Subscription Privilege and to pay broker-dealers, including the Dealer Manager, fees for their solicitation efforts (the "Solicitation Fees") of % of the Subscription Price per Share for each Share issued pursuant to the exercise of such Rights and pursuant to the Over-Subscription Privilege as a result of their soliciting efforts. Solicitation Fees will be paid to the broker-dealer designated on the applicable portion of the Subscription Certificates or in the absence of such designation, to the Dealer Manager. In addition, the Fund has agreed to reimburse the Dealer Manager up to an aggregate of $ for its reasonable expenses incurred in connection with the Offer. The Fund and the Investment Manager have each agreed to indemnify the Dealer Manager or contribute to losses arising out of certain liabilities including liabilities under the Securities Act. The Dealer Manager Agreement also provides that the Dealer Manager will not be subject to any liability to the Fund in rendering the services contemplated by such Agreement except for any act of bad faith, willful misconduct, or gross negligence of the Dealer Manager or reckless disregard by the Dealer Manager of its obligations and duties under such Agreement. The Fund has agreed not to offer or sell, or enter into any agreement to sell, any equity or equity related securities of the Fund or securities convertible into such securities for a period of 180 days after the date of the 39 42 Dealer Manager Agreement, except for the Shares and Common Stock issued in reinvestment of dividends or distributions. DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN The Fund intends to distribute annually to shareholders substantially all of its net investment income, and to distribute any net realized capital gains at least annually. Net investment income for this purpose is income other than net realized long- and short-term capital gains net of expenses. Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"), shareholders whose shares of Common Stock are registered in their own names may elect to have all distributions automatically reinvested by State Street Bank and Trust Company (the "Plan Agent") in Fund shares pursuant to the Plan. Shareholders who do not elect to participate in the Plan will receive distributions in cash paid by check in U.S. dollars mailed directly to the shareholder by State Street Bank and Trust Company, as dividend paying agent. In the case of shareholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the shareholders as representing the total amount registered in such shareholders' names and held for the account of beneficial owners that have not elected to receive distributions in cash. Investors that own shares registered in the name of a bank, broker or other nominee should consult with such nominee as to participation in the Plan through such nominee, and may be required to have their shares registered in their own names in order to participate in the Plan. The Plan Agent serves as agent for the shareholders in administering the Plan. If the directors of the Fund declare an income dividend or a capital gains distribution payable either in the Fund's Common Stock or in cash, nonparticipants in the Plan will receive cash and participants in the Plan will receive Common Stock, to be issued by the Fund or purchased by the Plan Agent in the open market, as provided below. If the market price per share on the valuation date equals or exceeds net asset value per share on that date, the Fund will issue new shares to participants at net asset value; provided, however, if the net asset value is less than 95% of the market price on the valuation date, then such shares will be issued at 95% of the market price. The valuation date will be the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading day, the next preceding trading day. If net asset value exceeds the market price of Fund shares at such time, or if the Fund should declare an income dividend or capital gains distribution payable only in cash, the Plan Agent will, as agent for the participants, buy Fund shares in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts on, or shortly after, the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value of a Fund share, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Fund's shares, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued by the Fund on the dividend payment date. Because of the foregoing difficulty with respect to open-market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases and will receive the uninvested portion of the dividend amount in newly issued shares at the close of business on the last purchase date. Participants have the option of making additional cash payments to the Plan Agent, annually, in any amount from $100 to $3,000, for investment in the Fund's Common Stock. the Plan Agent will use all such funds received from participants to purchase Fund shares in the open market on or about February 15. Any voluntary cash payment received more than 30 days prior to this date will be returned by the Plan Agent, and interest will not be paid on any invested cash payment. To avoid unnecessary cash accumulations, and also to allow ample time for receipt and processing by the Plan Agent, it is suggested that participants send in voluntary cash payments to be received by the Plan Agent approximately ten days before an applicable purchase date specified above. A participant may withdraw a voluntary cash payment by written notice, if the notice is received by the Plan Agent not less than 48 hours before such payment is to be invested. 40 43 The Plan Agent maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in an account, including information needed by shareholders for personal and tax records. Shares in the account of each Plan participant will be held by the Plan Agent in the name of the participant, and each shareholder's proxy will include those shares purchased pursuant to the Plan. There is no charge to participants for reinvesting dividends or capital gains distributions or voluntary cash payments. The Plan Agent's fees for the reinvestment of dividends and capital gains distributions and voluntary cash payments will be paid by the Fund. There will be no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or capital gains distributions payable either in stock or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and capital gains distributions and voluntary cash payments made by the participant. Brokerage charges for purchasing small amounts of stock for individual accounts through the Plan are expected to be less than the usual brokerage charges for such transactions, because the Plan Agent will be purchasing stock for all participants in blocks and prorating the lower commission thus attainable. The receipt of dividends and distributions under the Plan will not relieve participants of any income tax which may be payable on such dividends or distributions. See "Taxation." Experience under the Plan may indicate that changes in the Plan are desirable. Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan as applied to any voluntary cash payments made and any dividend or distribution paid subsequent to notice of the termination sent to members of the Plan at least 30 days before the record date for such dividend or distribution. The Plan also may be amended by the Fund or the Plan Agent, but (except when necessary or appropriate to comply with applicable law, rules or policies of a regulatory authority) only by at least 30 days' written notice to participants in the Plan. All correspondence concerning the Plan should be directed to the Plan Agent at Two Heritage Drive, Quincy, Massachusetts 02171. TAXATION U.S. FEDERAL INCOME TAXES The Fund intends to continue to qualify, and elect to be treated, as a regulated investment company for each taxable year under the Code. The Fund intends to distribute substantially all its net investment income and net capital gains each year (thereby avoiding the imposition of Federal income and excise taxes on such distributed income and gain in the Fund). Such distributions will be taxable as ordinary income and long-term capital gains, respectively, to shareholders of the Fund who are subject to tax whether received in shares or in cash. Distributions in excess of the Fund's earnings and profits will first reduce the adjusted tax basis of a holder's shares and, after such adjusted tax basis is reduced to zero, will constitute capital gains to such holder (assuming such shares are held as a capital asset). Notwithstanding the above, the Fund may decide to retain all or part of any net capital gains for reinvestment. If the Fund retains for reinvestment or otherwise an amount of such net long-term capital gains, it will be subject to a tax of 35% of the amount retained. The Board of Directors of the Fund will determine at least once a year whether to distribute any net long-term capital gains in excess of net short-term capital losses and capital loss carryovers from prior years. The Fund expects to designate amounts retained as undistributed capital gains in a notice to its shareholders who, if subject to U.S. federal income taxation on long-term capital gains, (a) will be required to include in income for U.S. federal income tax purposes, as long-term capital gains, their proportionate shares of the undistributed amount, and (b) will be entitled to credit against their U.S. federal income tax liabilities their proportionate shares of the tax paid by the Fund on the undistributed amount and to claim refunds to the extent that their credits exceed their liabilities. For U.S. federal income tax purposes, the basis of shares owned by a shareholder of the Fund will be increased by an amount equal to 65% of the amount of undistributed capital gains included in the shareholder's income. The Fund may be subject to certain taxes, including withholding taxes, imposed by Korea and possibly other foreign countries with respect to its income and capital gains. If the Fund qualifies as a regulated 41 44 investment company, if certain distribution requirements are satisfied and if more than 50% of the value of the Fund's total assets at the close of any taxable year consists of stock or securities of foreign corporations, which for this purpose may include obligations of foreign governmental issuers, the Fund may elect, for U.S. federal income tax purposes, to treat any foreign country's income or withholding taxes paid by the Fund that can be treated as income taxes under the U.S. income tax principles, as paid by its shareholders. The Fund expects to qualify for and make this election. For any year that the Fund makes such an election, each shareholder will be required to include in its income an amount equal to its allocable share of such income taxes paid by the Fund to a foreign country's government and shareholders will be entitled, subject to certain limitations, to credit their portions of these amounts against their U.S. federal income tax due, if any, or to deduct their portions from their U.S. taxable income, if any. No deductions for foreign taxes paid by the Fund may be claimed, however, by non-corporate shareholders (including certain foreign shareholders described below) who do not itemize deductions. Shareholders that are exempt from tax under Section 501(a) of the Code, such as pension plans, generally will derive no benefit from the Fund's election. However, such shareholders should not be disadvantaged either because the amount of additional income they are deemed to receive equal to their allocable share of such foreign countries' income taxes paid by the Fund generally will not be subject to U.S. federal income tax. The amount of foreign taxes that may be credited against a shareholder's U.S. federal income tax liability generally will be limited, however, to an amount equal to the shareholder's U.S. federal income tax rate multiplied by its foreign source taxable income. For this purpose, the Fund generally expects that the capital gains it distributes, whether as dividends or capital gains distributions, will not be treated as foreign source taxable income. In addition, this limitation must be applied separately to certain categories of foreign source income, one of which is foreign source "passive income." For this purpose, foreign source "passive income" includes dividends, interest, capital gains and certain foreign currency gains. As a consequence, certain shareholders may not be able to claim a foreign tax credit for the full amount of their proportionate share of foreign taxes paid by the Fund. Each shareholder will be notified within 60 days after the close of the Fund's taxable year whether, pursuant to the election described above, the foreign taxes paid by the Fund will be treated as paid by its shareholders for that year and, if so, such notification will designate (i) such shareholder's portion of the foreign taxes and (ii) the portion of the Fund's dividends and distributions that represents income derived from foreign sources. After the end of each taxable year, the Fund will notify shareholders of the Federal income tax status of any distributions, or deemed distributions, made by the Fund during such year. For a further discussion of certain income tax consequences to the Fund and to shareholders of the Fund, see "Taxation -- U.S. Federal Income Taxes" in the SAI. KOREAN TAXES Under current Korean law, payments to non-residents of Korea (such as the Fund) by Korean corporations in respect of income are subject to Korean withholding tax and capital gains derived by non-residents of Korea (such as the Fund) with respect to stock and securities of Korean corporations are subject to withholding tax, unless exempted by relevant laws or tax treaties. More specifically, dividends and interest will be subject to withholding tax at the rate of 27.5% until December 31, 1998 and 26.875% thereafter and capital gains (without deduction for capital losses) will be subject to withholding tax equal to the lower of (i) 11% until December 31, 1998 and 10.75% thereafter of the gross sales proceeds, or (ii) if satisfactory evidence of acquisition cost is produced, 27.5% until December 31, 1998 and 26.875% thereafter of the difference between the gross sales proceeds and the acquisition cost of the stock or security sold (excluding any transaction charges, commissions, fees or taxes paid at the time of acquisition). The applicable withholding tax rate under the U.S.-Korea Income Tax Treaty presently in effect (the "Treaty"), is generally 15% (plus a resident tax of 11% until December 31, 1998 and 7.5% thereafter of such amount, or a total of 16.5% until December 31, 1998 and 16.125% thereafter) on dividends paid to the Fund by Korean corporations, and generally 12% (plus a resident tax of 10% until December 31, 1998 and 7.5% thereafter of such amount, or a total of 13.2% until December 31, 1998 and 12.9% thereafter) on interest paid to the Fund by Korean corporations. Under the Treaty, no withholding tax will be applicable to capital gains realized by the Fund. 42 45 The reduced tax rate and exemption under the provisions of the Treaty will not apply to the dividend, interest and capital gain income derived by the Fund from Korean corporations if both (i) the Fund is, by reason of the existence of special measures under U.S. federal income tax law with respect to those types of income, subject to U.S. federal income tax in an amount substantially less than the U.S. federal income tax generally imposed on corporate profits (Article 17(a) of the Treaty), and (ii) at least 25% of the Fund's outstanding shares are held of record or otherwise determined to be owned, directly or indirectly, by one or more persons who are not individual residents of the United States (Article 17(b) of the Treaty). Questions have recently been raised as to whether the U.S. regulated investment company provisions contained in the Code constitute "special measures" for purposes of Article 17(a) of the Treaty. Regardless of the resolution of these questions, under Article 17(b) of the Treaty, the Fund will qualify for the benefits of the Treaty so long as less than 25% of the Fund's outstanding shares are determined to be held other than by individual residents of the United States. Shin & Kim, Korean counsel to the Fund, have given their opinion that the Treaty presently applies to the Fund if and so long as the Fund operates as described herein. The Fund has received written confirmation from the MOFE that, so long as all of the issued shares of the Fund are listed on one or more publicly acknowledged stock exchanges in the United States only and they are traded on such exchanges by the general public, the Fund will be entitled to the benefits of the Treaty because Article 17(b) of the Treaty will not apply. The Fund's Common Stock has been approved for listing on the New York Stock Exchange upon notice of issuance. In order to qualify for the benefits of the Treaty, the Fund will not apply to list the Fund's shares on any stock exchange outside the United States. Notwithstanding the foregoing, the Tax Exemption and Reduction Control Law (the "TERCL") exempts interest on bonds denominated in a non-Korean currency from Korean income and corporation taxes. The residents' tax referred to above is therefore eliminated with respect to such investments. The TERCL tax exemptions expire on December 31, 1998. Under present Korean law, the Korean Inheritance and Gift Tax will not apply to any testate, intestate or inter-vivos transfer of shares of the Fund to the extent the deceased or the donee, as the case may be, is not domiciled in Korea. Korean stamp duty will not apply to transfers of Korean securities, nor to the Fund's portfolio securities transactions. A securities transaction tax is payable on the transfer by the Fund of shares and certain other equities (throughout this paragraph, collectively, "shares") issued by a Korean company at the rate of 0.15% of the sale price of the shares (except in certain circumstances in which case no tax is charged, and where the shares are traded outside the KSE, in which case the tax is payable at the rate of 0.5% of the sale price or where the shares are traded through licensed broker-dealers on the over-the-counter market, in which case the tax is payable at the rate of 0.3% of the sale price) unless (i) the shares are listed on a foreign stock exchange and the sales are executed on such exchange; or (ii) those sales are executed between non-residents without a permanent establishment in Korea, the non-resident transferor did not own 10% or more of the total issued and outstanding shares of the issuer of such shares at any time during the five years before the year within which the transfer occurs, and the non-resident transferor does not sell such shares through a securities company in Korea (which latter condition cannot be fulfilled under current KSEC regulations which require all sales of Korean securities off the KSE to be through a Korean securities company). Effective from July 1, 1994, the Korean government introduced an additional agricultural and fishery special tax on securities transactions on the KSE which is equal to 0.15% of the sale price of the shares and which will remain effective for a period of ten years thereafter. The transferor of the shares pays the securities transaction tax. When the transfer is made through a securities company only, such securities company will make the withholding. Where the transfer is effected by a non-resident individual or a non-resident corporation without a permanent establishment in Korea otherwise than through the Korea Securities Depository or a securities company, the transferee is required to withhold the securities transaction tax. This tax treatment could change in the event of changes in Korean or U.S. tax laws, changes in the terms of, or the MOFE's interpretation of, the Treaty, or changes in relevant facts. 43 46 DESCRIPTION OF CAPITAL STOCK COMMON STOCK The authorized capital stock of the Fund is 100,000,000 shares of Common Stock ($.001 par value). All shares of Common Stock are equal as to dividends, distributions and voting privileges. There are no conversion, preemptive or other subscription rights. In the event of liquidation, each share of Common Stock is entitled to its proportion of the Fund's assets after payment of all debts and expenses and any preferential liquidating distributions to holders of any preferred stock issued by the Fund. There are no cumulative voting rights for the election of directors. The Fund's Board of Directors has the authority to classify and reclassify any authorized but unissued shares of capital stock and to establish the rights and preferences of such unclassified shares. The Fund has no present intention of offering additional shares of its Common Stock except in connection with the Offer, any future rights offering and the Plan. See "Dividends and Distributions: Dividend Reinvestment and Cash Purchase Plan." Other offerings of its Common Stock, if made, will require approval of the Fund's Board of Directors. Any additional offering will be subject to the requirements of the 1940 Act that shares of Common Stock may not be sold at a price below the then current net asset value (exclusive of underwriting discounts and commissions) except in connection with an offering to existing shareholders or with the consent of a majority of the Fund's outstanding Common Stock. SPECIAL VOTING PROVISIONS The Fund presently has provisions in its Articles of Incorporation and By-Laws which may have the effect of limiting the ability of other entities or persons to acquire control of the Fund, to cause it to engage in certain transactions, or to modify its structure. Under these provisions, a director may be removed from office only for cause by vote of at least 75% of the shares of capital stock entitled to be voted on the matter. Also conversion of the Fund from a closed-end to an openend investment company requires approval of 75% of the entire Board of Directors and the affirmative vote of holders of at least 75% of the Common Stock outstanding unless it is approved by a vote of 75% of the Continuing Directors (as defined below), in which event such conversion requires the approval of the holders of a majority of the outstanding Common Stock. A "Continuing Director" is any member of the Board of Directors of the Fund who is not a person or affiliate of a person who enters or proposes to enter into a Business Combination (as defined below) with the Fund (an "Interested Party") and who has been a member of the Board of Directors for a period of at least 12 months, or is a successor of a Continuing Director who is unaffiliated with an Interested Party and is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on the Board of Directors of the Fund. The Board of Directors is classified into three classes, each with a term of three years with only one class of directors standing for election in any year. Commencing on the date of the annual meeting of stockholders in the year 2000, the Board of Directors will no longer be divided into classes and each director will stand for election at such meeting and at each annual meeting of stockholders held thereafter. Such classification may prevent replacement of a majority of the directors for up to a two-year period while the classification is in effect. Additionally, the affirmative vote of 75% of the entire Board of Directors and the holders of at least (i) 75% of the Common Stock and (ii) in the case of a Business Combination (as defined below), 66% of the Common Stock other than Common Stock held by an Interested Party who is (or whose affiliate is) a party to a Business Combination (as defined below) or an affiliate or associate of the Interested Party, are required to authorize any of the following transactions: (i) merger, consolidation or statutory share exchange of the Fund with or into any other person; (ii) issuance or transfer by the Fund (in one or a series of transactions in any 12 month period) of any securities of the Fund to any person or entity for cash, securities or other property (or combination thereof) having an aggregate fair market value of $1,000,000 or more, excluding issuances or transfers of 44 47 debt securities of the Fund, sales of securities of the Fund in connection with a public offering, issuances of securities of the Fund pursuant to a dividend reinvestment plan adopted by the Fund and issuances of securities of the Fund upon the exercise of any stock subscription rights distributed by the Fund and portfolio transactions effected by the Fund in the ordinary course of its business; (iii) sale, lease, exchange, mortgage, pledge, transfer or other disposition by the Fund (in one or a series of transactions in any 12 month period) to or with any person or entity of any assets of the Fund having an aggregate fair market value of $1,000,000 or more except for portfolio transactions (including pledges of portfolio securities in connection with borrowings) effected by the Fund in the ordinary course of its business (transactions within clauses (i), (ii) and (iii) above being known individually as a "Business Combination"); (iv) the voluntary liquidation or dissolution of the Fund, or an amendment to the Fund's Articles of Incorporation, to terminate the Fund's existence; or (v) unless the 1940 Act or federal law requires a lesser vote, any stockholder proposal as to specific investment decisions made or to be made with respect to the Fund's assets as to which stockholder approval is required under federal or Maryland law. However, the stockholder vote described above will not be required with respect to the foregoing transactions (other than those set forth in (v) above) if they are approved by a vote of 75% of the Continuing Directors. In that case, if Maryland law requires stockholder approval, the affirmative vote of a majority of the votes entitled to be cast thereon shall be required. Reference is made to the Articles of Incorporation and By-Laws of the Fund, on file with the Commission, for the full text of these provisions. See "Further Information." ANNUAL TENDER OFFERS AND SHARE REPURCHASES In recognition of the possibility that the Fund's Shares might trade at a discount to net asset value, the Board of Directors of the Fund has determined that it would be in the best interests of the shareholders of the Fund to take action to attempt to reduce or eliminate a market value discount from net asset value. To that end, the Board of Directors of the Fund has determined that annual tender offers for shares of its Common Stock may help reduce any market discount that may develop. In this connection, during the first calendar quarter of each calendar year commencing in 1998, the Board of Directors of the Fund has committed to conduct a tender offer for shares of its Common Stock on an annual basis under certain circumstances. During the fourth quarter of the previous calendar year, the Board of Directors will fix in advance a period of 12 consecutive calendar weeks beginning during such fourth calendar quarter and ending in the immediately following first quarter for the purpose of calculating the average trading price of the Fund's Common Stock. In the event that the average of the closing prices of the Common Stock of the Fund for the last trading day in each week during such 12-week period, on the principal securities exchange where listed, is below the initial offering price of $15.00 per share and represents a discount of 10% or more from the average net asset value of the Fund as determined on the same days in the same period, a tender offer for up to 10% of the then outstanding shares of Common Stock of the Fund will be conducted during such first calendar quarter, subject to certain conditions described below. In addition, the Board of Directors may consider from time to time open market repurchases of the Fund's Common Stock or converting the Fund into an open-end investment company. Subject to the Fund's investment restrictions with respect to borrowings, the Fund may incur debt to finance tender offers and/or repurchases. See "Investment Restrictions" in the SAI. Interest on any such borrowings will reduce the Fund's net investment income, and any such borrowings are subject to special considerations. No assurance can be given that annual tender offers or repurchases of shares of its Common Stock will reduce or eliminate any market discount from net asset value of the Fund's Common Stock. The Fund anticipates that the market price of its Common Stock will from time to time vary from its net asset value. 45 48 The market price of the Fund's Common Stock will, among other things, be determined by the relative demand for and supply of shares of its Common Stock in the market, the Fund's investment performance, the Fund's dividends and yield and investor perception of the Fund's overall attractiveness as an investment as compared with other investment alternatives. Nevertheless, the fact that the Fund's Common Stock may be subject to tender offers at net asset value from time to time may reduce the spread between market price and net asset value that might otherwise exist. In the opinion of the Investment Manager, sellers may be less inclined to accept a significant discount if they have a reasonable expectation of being able to recover net asset value in conjunction with an annual tender offer. Although the Board of Directors believes that tender offers and repurchases of shares of Common Stock generally would have a favorable effect on the market price of the Fund's Common Stock, the repurchase of shares of Common Stock by the Fund will decrease the total assets of the Fund and, therefore, have the effect of increasing the Fund's expense ratio. Because of the nature of the Fund's investment objective and policies and the Fund's portfolio, the Investment Manager does not anticipate that tender offers and repurchases should have a materially adverse effect on the Fund's investment performance and does not anticipate any material difficulty in disposing of sufficient portfolio securities in order to consummate tender offers and repurchases. Although the Board of Directors has committed to annual tender offers under the circumstances set forth above, it is the Board of Directors' announced policy, which may be changed by the Board of Directors, that the Fund cannot accept tenders or effect repurchases if (1) such transactions, if consummated, would (a) result in the delisting of the Fund's Common Stock from the NYSE (the NYSE having advised the Fund that it would consider delisting if the aggregate market value of the Fund's outstanding shares is less than $5,000,000, the number of publicly held shares of Common Stock falls below 600,000 or the number of round-lot holders falls below 1,200) or (b) impair the Fund's status as a regulated investment company under the Code (which would make the Fund subject to U.S. federal income taxes on all of its income and gains in addition to the taxation of shareholders who receive distributions from the Fund); (2) the amount of shares of Common Stock tendered would require liquidation of such a substantial portion of the Fund's securities that the Fund would not be able to liquidate portfolio securities in an orderly manner in light of the existing market conditions and such liquidation would have an adverse effect on the net asset value of the Fund to the detriment of non-tendering shareholders; (3) there is any (a) in the Board of Directors' judgment, material legal action or proceeding instituted or threatened challenging such transactions or otherwise materially adversely affecting the Fund, (b) suspension of or limitation on prices for trading securities generally on the NYSE or other national securities exchange(s), or the NASDAQ National Market System, (c) declaration of a banking moratorium by Federal or state authorities or any suspension of payment by banks in the United States or New York State, (d) limitation affecting the Fund or the issuers of its portfolio securities imposed by federal or state authorities on the extension of credit by lending institutions, (e) commencement of war, armed hostilities or other international or national calamity directly or indirectly involving the United States, or (f) in the Board of Directors' judgment, other event or condition which would have a material adverse effect on the Fund or its shareholders if Shares were repurchased; or (4) the Board of Directors determines that effecting any such transaction would constitute a breach of their fiduciary duty owed to the Fund or its shareholders. The Board of Directors may modify these conditions in light of experience. Any tender offer made by the Fund for its shares of Common Stock will be at a price equal to the net asset value of the Common Stock on a date subsequent to the Fund's receipt of all tenders. During the pendency of any tender offer by the Fund, the Fund will calculate daily the net asset value of the Common Stock and will establish procedures which will be specified in the tender offer documents, to enable shareholders to ascertain readily such net asset value. Each offer will be made and shareholders notified in accordance with the requirements of the Securities Exchange Act of 1934 and the 1940 Act, either by publication or mailing or both. Each offering document will contain such information as is prescribed by such laws and the rules and regulations promulgated thereunder, including information for shareholders to consider in deciding whether to tender shares of Common Stock and detailed instructions on how to tender such shares of Common Stock. When a tender offer is authorized to be made by the Fund's Board of Directors, a shareholder wishing to accept the offer will be required to tender all (but not less than all) of the shares of 46 49 Common Stock owned by such shareholder (or attributed to him for U.S. federal income tax purposes under Section 318 of the Code) unless the Fund has received a ruling from the Internal Revenue Service, or an opinion satisfactory to it, that a tender of less than all of a shareholder's shares of Common Stock will not cause certain adverse tax consequences with respect to non-tendering shareholders. There can be no assurance that the Fund will receive such a ruling or opinion. A shareholder who sells all of his shares of Common Stock (including shares attributed to him for U.S. Federal income tax purposes under Section 318 of the Code) pursuant to a tender offer or open-market repurchase by the Fund will realize a taxable gain or loss, treated as described in "Taxation--U.S. Federal Income Taxes." A shareholder who sells less than all of his shares of Common Stock (including shares so attributed) may be treated as receiving a dividend from the Fund in the amount of some or all of the proceeds of sale; in that event, the amount of proceeds not treated as a dividend would be a return of capital, reducing the shareholder's basis in his shares of Common Stock (including the shares sold pursuant to the tender offer or repurchase) and a gain (treated as a capital gain for a shareholder owning the shares as a capital asset) to the extent of any amount in excess of such basis. Also, in the case of open-market repurchases, it is possible that shareholders who do not have their shares of Common Stock repurchased would be treated as having received a dividend distribution as a result of their proportionate increase in the ownership of the Fund. The Fund will not specify a record date for the tender offer which will not permit a shareholder of record on the effective date of the tender offer to tender its shares of Common Stock. The Fund will purchase all shares of Common Stock tendered in accordance with the terms of the offer unless it determines to accept none of them (based upon one of the conditions set forth above), or unless more shares are tendered than the Fund is required to purchase, in which case the Fund will purchase the shares tendered on a pro rata basis. Each person tendering shares of Common Stock will pay to the Fund a reasonable service charge, currently anticipated to be $25.00, but subject to change, to help defray certain costs, including the processing of tender forms, effecting payment, postage and handling. It is the position of the staff of the Commission that such service charge may not be deducted from the proceeds of the purchase. The Fund's transfer agent will receive the fee as an offset to these costs. The Fund expects that the cost to the Fund of effecting a tender offer will exceed the aggregate of all service charges received from those who tender their shares of Common Stock. Such excess costs associated with the tender will be charged against capital. Tendered shares of Common Stock that have been accepted and purchased by the Fund will be recorded and reported as an offset to shareholders' equity and accordingly will reduce the Fund's total assets. In order to finance share repurchases, the Fund currently anticipates that it will liquidate a portion of its investments. Although the Fund has no current intention to incur debt in order to finance share repurchases, it is permitted to borrow to finance such repurchases. If the Fund does borrow to finance share repurchases, this would have the effect of leveraging on the Fund. If the Fund must liquidate portfolio securities in order to purchase shares of Common Stock tendered, the Fund may realize gains and losses. Such gains may be realized on securities held for less than three months. Because the Fund, as a regulated investment company under the Code, may not derive 30% or more of its gross income from the sale or disposition of stocks and securities held less than three months, such gains would reduce the ability of the Fund to sell other securities held for less than three months that the Fund may wish to sell in the ordinary course of its portfolio management, which may adversely affect the Fund's return. See "Taxation--U.S. Federal Income Taxes." The portfolio turnover rate of the Fund may or may not be affected by the Fund's repurchases of Shares pursuant to a tender offer. CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017-2070, acts as custodian for the Fund's assets. The Hong Kong and Shanghai Banking Corporation, Seoul Branch will serve as the Fund's sub-custodian for its assets held in Korea. State Street Bank and Trust Company acts as the transfer agent, dividend paying agent and registrar for the Fund's Common Stock. 47 50 EXPERTS The financial statements of the Fund included herein and in the SAI have been so included in reliance on the report of , the Fund's independent accountants, given on the authority of said firm as experts in auditing and accounting. LEGAL MATTERS The validity of the Shares offered hereby will be passed on for the Fund by Rogers & Wells, New York, New York and certain legal matters will be passed upon for the Dealer Manager by Skadden, Arps, Slate, Meagher & Flom. Counsel for the Fund and the Dealer Manager will rely, as to matters of Maryland law, on Piper & Marbury L.L.P., Baltimore, Maryland. With respect to all matters of Korean law, counsel for the Fund and counsel for the Dealer Manager will rely on Shin & Kim, Seoul, Korea. FURTHER INFORMATION The Fund has filed with the U.S. Securities and Exchange Commission, Washington, D.C. 20549, a Registration Statement under the U.S. Securities Act of 1933, as amended, with respect to the Common Stock offered hereby. Further information concerning the Shares and the Fund may be found in the Registration Statement, of which this Prospectus constitutes a part. The Registration Statement may be inspected without charge at the Commission's office in Washington, D.C., and copies of all or any part thereof may be obtained from such office after payment of the fees prescribed by the Commission. The Commission maintains a Web site at http://www.sec.gov containing reports, proxy and information statements and other information regarding registrants, including the Fund, that file electronically with the Commission. TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION Investment Objective and Policies................................................... 2 Investment Restrictions............................................................. 2 Management of the Fund.............................................................. 4 Estimated Expenses.................................................................. 7 Portfolio Transactions.............................................................. 8 Net Asset Value..................................................................... 10 Taxation............................................................................ 11 Index to Financial Statements....................................................... F-1 Appendix A--General Characteristics and Risks of Derivatives........................ A-1 Appendix B--Debt Ratings............................................................ B-1
48 51 - --------------------------------------------------------- - --------------------------------------------------------- NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, THE FUND'S INVESTMENT MANAGER, INVESTMENT ADVISER OR SUB-ADVISER OR THE DEALER MANAGER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE FUND SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE SUPPLEMENTED OR AMENDED ACCORDINGLY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. ------------------------ TABLE OF CONTENTS
PAGE ------ Fee Table................................ 4 Financial Highlights..................... 5 Market and Net Asset Value Information... 7 The Offer................................ 8 The Fund................................. 16 Use of Proceeds.......................... 16 Investment Objective and Policies........ 16 Additional Investment Practices.......... 21 Risk Factors and Special Considerations......................... 23 Management of the Fund................... 36 The Republic of Korea.................... 39 The Securities Markets of Korea.......... 39 Distribution Arrangements................ 39 Dividends and Distributions; Dividend Reinvestment and Cash Purchase Plan.... 40 Taxation................................. 41 Description of Capital Stock............. 44 Annual Tender Offers and Share Repurchases............................ 45 Custodian, Transfer Agent, Dividend Paying Agent and Registrar............. 47 Experts.................................. 48 Legal Matters............................ 48 Further Information...................... 48 Table of Contents of Statement of Additional Information................. 48
- --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- 100,000 Shares of Common Stock Issuable Upon Exercised Rights to Subscribe for Such Shares LOGO FIDELITY ADVISOR KOREA FUND, INC. COMMON STOCK ------------------------ PROSPECTUS ------------------------ PAINEWEBBER INCORPORATED ------------------------ NOVEMBER , 1996 - --------------------------------------------------------- - --------------------------------------------------------- 52 FIDELITY ADVISOR KOREA FUND, INC. ------------------------ STATEMENT OF ADDITIONAL INFORMATION This Statement of Additional Information ("SAI") is not a prospectus and should be read in conjunction with the Prospectus, dated November , 1996 (the "Prospectus"). This SAI does not include all information that a prospective investor should consider before purchasing shares of Fidelity Advisor Korea Fund, Inc. (the "Fund") and investors should obtain and read the Prospectus prior to purchasing shares. A copy of the Prospectus may be obtained without charge by calling the Fund's Information Agent, at (800) . This SAI incorporates by reference the entire Prospectus. Defined terms used herein shall have the same meaning as provided in the Prospectus. The date of this SAI is November , 1996. ------------------------ TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION Investment Objective and Policies................................................... 2 Investment Restrictions............................................................. 2 Management of the Fund.............................................................. 4 Estimated Expenses.................................................................. 7 Portfolio Transactions.............................................................. 8 Net Asset Value..................................................................... 10 Taxation............................................................................ 11 Index to Financial Statements....................................................... F-1 Appendix A--General Characteristics and Risks of Derivatives........................ A-1 Appendix B--Debt Ratings............................................................ B-1
53 INVESTMENT OBJECTIVE AND POLICIES The investment objective of the Fund is long-term capital appreciation. The Fund seeks to achieve its objective through investment primarily in equity and debt securities of Korean Issuers. There can be no assurance that the Fund's investment objective will be achieved. See "Investment Objective and Polices" in the Prospectus. INVESTMENT RESTRICTIONS The Fund's only fundamental policies, that is, policies that cannot be changed without the approval of the holders of a majority of the Fund's outstanding voting securities, are (i) its investment objective, (ii) its policy that under normal market conditions, at least 65% of the Fund's total assets will be invested in equity and debt securities of Korean Issuers, and (iii) the following seven restrictions. As used herein, a "majority of the Fund's outstanding voting securities" means the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares. The other policies and investment restrictions referred to herein are not fundamental policies of the Fund and may be changed by the Fund's Board of Directors without shareholder approval. Unless otherwise noted, whenever an investment policy or limitation states a maximum percentage of the Fund's assets that may be invested in any security or other asset, or sets forth a policy regarding quality standards, such standard or percentage limitation will be determined immediately after and as a result of the Fund's acquisition of such security or other asset. Accordingly, any subsequent change in values, assets, or other circumstances will not be considered when determining whether the investment complies with the Fund's investment policies and limitations. Under its fundamental policies, the Fund may not: (1) purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities), if, as a result, more than 25% of the Fund's total assets would be invested in companies whose principal business activities are in the same industry; (2) issue senior securities, except as permitted under the 1940 Act; (3) borrow money, except that the Fund may borrow money for temporary or emergency purposes or to finance tender offers and/or share repurchases in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings); any borrowings that come to exceed this amount will be reduced promptly in accordance with reasonable investment practice to the extent necessary to comply with the 33 1/3% limitation; (4) underwrite securities issued by others, except to the extent that the Fund may be considered an underwriter within the meaning of the Securities Act in the disposition of restricted securities; (5) purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this will not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business); (6) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this will not prevent the Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by or indexed to, or representing interests in, physical commodities or investing or trading in derivative investments); or (7) make any loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements. As a matter of non-fundamental policy, the Fund will not purchase any portfolio securities while borrowings representing more than 5% of its total assets are outstanding. To meet federal tax requirements for qualification as a "regulated investment company," the Fund intends to limit its investments so that at the close of each quarter of its taxable year: (a) with regard to at least 50% of total assets, no more than 5% of total assets are invested in the securities of a single issuer and the Fund will not hold more than 10% of the outstanding voting securities of that issuer; and (b) no more than 25% of total assets are invested in the 2 54 securities of a single issuer. Limitations (a) and (b) do not apply to "Government securities" as defined for federal tax purposes. AFFILIATED FINANCIAL INSTITUTION TRANSACTIONS The Fund may engage in transactions with financial institutions that are, or may be considered to be, "affiliated persons" of the Fund under the 1940 Act. These transactions may include, for example, repurchase agreements with custodian banks; purchase of short-term obligations of, and repurchase agreements with, the 50 largest U.S. banks (measured by deposits); municipal securities; U.S. government securities with affiliated financial institutions that are primary dealers in these securities; short-term currency transactions; and short-term borrowings. In accordance with exemptive orders issued by the Commission, the Board of Directors will establish and periodically review procedures applicable to transactions involving affiliated financial institutions. FUND'S RIGHTS AS A SHAREHOLDER The Fund does not intend to direct or administer the day-to-day operations of any company. The Fund, however, may exercise its rights as a shareholder and may communicate its views on important matters of policy to management, the Board of Directors, and shareholders of a company when the Investment Manager or the Investment Adviser determines that such matters could have a significant effect on the value of the Fund's investment in the company. The activities that the Fund may engage in, either individually or in conjunction with others, may include, among others, supporting or opposing proposed changes in a company's corporate structure or business activities; seeking changes in a company's directors or management; seeking changes in a company's direction or policies; seeking the sale or reorganization of the company or a portion of its assets; or supporting or opposing third party takeover efforts. This area of corporate activity is increasingly prone to litigation and it is possible that the Fund could be involved in lawsuits related to such activities. The Investment Manager or the Investment Adviser will monitor such activities with a view to mitigating, to the extent possible, the risk of litigation against the Fund, and the risk of actual liability if the Fund is involved in litigation. No guarantee can be made, however, that litigation against the Fund will not be undertaken or liabilities incurred. 3 55 MANAGEMENT OF THE FUND DIRECTORS AND OFFICERS The names of the directors and principal officers of the Fund are set forth below, together with their positions and their principal occupations during the past five years and, in the case of the directors, their positions with certain other international organizations and publicly held companies.
PRINCIPAL OCCUPATION AND OTHER NAME AND ADDRESS POSITION WITH FUND AFFILIATIONS - ------------------------------ ------------------ -------------------------------------- Edward C. Johnson 3d*......... Director and Chief Executive Officer, Chairman and Fidelity Investments President a Director of FMR Corp.; Chairman of 82 Devonshire Street Fidelity Investments Limited; Director Boston, MA 02109 and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.; Director or Trustee and President of all Fidelity U.S.-registered management investment companies managed by FMR; Chairman of each of the funds in the Fidelity Group of International Funds and of Fidelity Advisor World Funds. J. Gary Burkhead*............. Director and President of FMR; and President and a Fidelity Investments Senior Vice Director of FMR Texas Inc., Fidelity 82 Devonshire Street President Management & Research (U.K.) Inc. and Boston, MA 02109 Fidelity Management & Research (Far East) Inc.; Director or Trustee and Senior Vice President of all U.S.-registered management investment companies managed by FMR and of Fidelity Advisor World Funds. Helmert Frans van den Hoven... Director Former Member, Supervisory Board, Marevista 35 Royal Dutch Petroleum Company; former 2202 BX Noordwijk Aan Zee Chairman, Supervisory Board ABN/Amro The Netherlands Bank (1992-1994) and of Unilever N.V. (1975-1984); Member, Supervisory Boards, Hunter Douglass and Vendex International; Director of a number of other funds in the Fidelity Group of International Funds and of Fidelity Advisor World Funds. Bertram High Witham, Jr....... Director Chairman and Director, Preferred 89 Fox Hill Road Lodging System; Director, Bill Glass Stamford, CT 06903 Ministries; Trustee, Fidelity North Carolina Capital Management Fund; former Treasurer, IBM Co. (1973-1978); Director of Fidelity Advisor Emerging Asia Fund, Inc. and of Fidelity Advisor World Funds.
4 56
PRINCIPAL OCCUPATION AND OTHER NAME AND ADDRESS POSITION WITH FUND AFFILIATIONS - ------------------------------ ------------------ -------------------------------------- David L. Yunich............... Director Former Consultant, W.R. Grace & 26 Cooper Road Company (1977-1995); former Director Scarsdale, New York W.R. Grace & Company (1977-1995); former Director, New York Racing Association (1977-1995); former Director, Prudential Insurance Company of America (1955-1991); Director, River Bank America (1964-present); former Director, NYNEX Corporation (1970-1990); Trustee, Saratoga Performing Arts Center, Boy Scouts of America, and Carnegie Hall; former President, Vice Chairman and Director, R.H. Macy & Company (1955-1978); Trustee, Fidelity Investments Charitable Gift Fund (1992); Director, Fidelity Investments Charitable Gift Fund Inc. (1994); Director, Fidelity Advisor Emerging Asia Fund, Inc.; Director, Fidelity Advisor World Funds. William Ebsworth.............. Vice President Chief Investment Officer, Fidelity Fidelity Investments and Fund Investments (Hong Kong); Director, Management (H.K.) Ltd. Co-Manager Fidelity Investments Management (Hong 16th Floor Kong) Ltd.; Research Director, Citibank Tower Fidelity Investments (Tokyo and Hong 3 Garden Road Kong) (1990-1991); Fund Manager and Central, Hong Kong Analyst, Fidelity Investments (Boston and Tokyo) (1986-1990); Vice President of Fidelity Advisor Emerging Asia Fund, Inc. Billy W. Wilder............... Vice President President, Fidelity Investments Fidelity Management & Research (Japan) Limited (1995); Director of (Far East) Research, Fidelity Management & Shiroyama JT Mori Building Research (Far East) (1992); Director 19th Floor of Research and General Manager, 4-3-1 Toranomon, Minato-ku Schroder Securities (Japan), Ltd. Tokyo 105 Japan (1988-1992); Senior Analyst, Schroder Securities (Japan), Ltd. (1986-1988); Manager, Impedance Analysis Equipment Marketing, Yokogawa-Hewlett-Packard, Ltd. (1979-1986). Arthur S. Loring.............. Secretary Senior Vice President and General Fidelity Investments Counsel of FMR; Vice President--Legal 82 Devonshire Street of FMR Corp.; Vice President and Clerk Boston, MA 02109 of Fidelity Distributors Corporation; Secretary of all other registered management investment companies managed by FMR. Kenneth A. Rathgeber.......... Treasurer Treasurer of all other registered Fidelity Investments management investment companies 82 Devonshire Street managed by FMR and an employee of FMR; Boston, MA 02109 Vice President, Goldman Sachs & Co. (1978-1995), including Vice President of Proprietary Accounting (1988-1992), Global Co-Controller (1992-1994) and Chief Operations Officer of Goldman Sachs (Asia) LLC (1994-1995). Stuart E. Fross............... Assistant An employee of FMR Corp. Fidelity Investments Secretary (1990-present); Assistant Secretary of 82 Devonshire Street Fidelity Advisor Emerging Asia Fund, Boston, MA 02109 Inc.
5 57
PRINCIPAL OCCUPATION AND OTHER NAME AND ADDRESS POSITION WITH FUND AFFILIATIONS - ------------------------------ ------------------ -------------------------------------- John H. Costello.............. Assistant Assistant Treasurer of all other Fidelity Investments Treasurer registered management investment 82 Devonshire Street companies managed by FMR and an Boston, MA 02109 employee of FMR Co. Pradip Darooka................ Assistant Vice President of FMR Co. (1996); Fidelity Investments Treasurer Principal (1995-1996), Vice President 82 Devonshire Street (1993-1995), Morgan Stanley Group, Boston, MA 02109 Inc.; Senior Manager (1990-1992), Price Waterhouse LLP.
- --------------- *Director who is an "interested person" of the Fund within the meaning of the 1940 Act. Directors who are not "interested persons" (as defined in the 1940 Act) of the Investment Manager or the Investment Adviser will be paid a fee of $7,000 per year, plus up to $1,500 for every meeting of the Board attended and $1,000 as an annual committee meeting fee. All directors will be reimbursed for travel and out-of-pocket expenses incurred in connection with meetings of the Board of Directors. For the fiscal year ended September 30, 1996, such fees and expenses aggregated $ . The following table sets forth the aggregate compensation paid by the Fund paid to each director during the fiscal year ended September 30, 1996, as well as the total compensation paid to each director by the Fund and other investment companies advised by the Investment Manager or its affiliates (collectively, the Fund Complex).
ESTIMATED ANNUAL AGGREGATE BENEFITS UPON TOTAL COMPENSATION PENSION OR RETIREMENT RETIREMENT FROM COMPENSATION FROM THE BENEFITS ACCRUED FROM THE FUND FROM THE NAME OF DIRECTOR FUND* THE FUND COMPLEX** COMPLEX** FUND COMPLEX** - ------------------------- ------------- ------------------------ ---------------- ----------------- Edward C. Johnson 3d***.................. $ 0 $0 $0 $ 0 J. Gary Burkhead***...... 0 0 0 0 H.F. Van den Hoven....... 12,000 0 0 24,000 Bertram H. Witham, Jr.... 12,000 0 0 55,350 David L. Yunich.......... 12,000 0 0 24,000
- --------------- * Includes compensation paid to Directors by the Fund. The Fund's Directors do not receive any pension or retirement benefits from the Fund as compensation for their services as Directors of the Fund. ** Including the Fund, as of September 30, 1996, there were 235 investment companies in the Fund Complex. Messrs. Johnson and Burkhead are both Directors or Trustees of 233 investment companies in the Fund Complex. Messrs. van den Hoven and Yunich are Directors of two investment companies in the Fund Complex, including the Fund. Mr. Witham is a Director or Trustee of four investment companies in the Fund Complex, including the Fund. Under a retirement program adopted in July 1988 by the open-end investment companies in the Fund Complex (the "Open-End Funds"), Messrs. Witham and Yunich, upon reaching age 72, became eligible to participate in a retirement program under which they receive payments during their lifetime from a fund based upon their basic trustees fees and length of service as trustee for the Open-End Funds. During the year ended September 30, 1996, they each received $50,000 in payments under that retirement program. The obligation of the Open-End Funds to make such payments is not secured or funded. *** Messrs. Johnson and Burkhead, who are "interested persons" of the Fund, do not receive any compensation from the Fund or other investment companies in the Fund Complex for their services as Directors or Trustees, and are compensated by FMR. The officers of the Fund conduct and supervise the daily business operations of the Fund, while the directors review such actions and decide on general policy. The Fund also has an Audit Committee composed currently of Messrs. van den Hoven, Witham and Yunich. In addition, at the Fund's first annual stockholders meeting, the Board of Directors were classified into three classes, each with a term of three years with only one class of directors standing for election in any year. Such classification may prevent replacement of a majority of the directors for up to a two-year period while 6 58 the classification is in effect. Commencing on the date of the annual meeting of stockholders in the year 2000, the Board of Directors will no longer be divided into classes and each director will stand for election at such meeting and at each annual meeting of stockholders held thereafter. The Articles of Incorporation and By-Laws of the Fund provide that the Fund will indemnify its directors and officers and will indemnify employees or agents of the Fund against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Fund to the fullest extent permitted by law. Under Maryland law, a corporation may indemnify any director or officer made a party to any proceeding by reason of service in that capacity unless it is established that (1) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (A) was committed in bad faith or (B) was the result of active and deliberate dishonesty; (2) the director or officer actually received an improper personal benefit in money, property or services; or (3) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. In addition, the Fund's Articles of Incorporation provide that the Fund's directors and officers will not be liable to shareholders for money damages, except in limited instances. Under Maryland law, a corporation may restrict or limit the liability of directors or officers to the corporation or its stockholders for money damages, except to the extent that (1) it is proved that the person actually received an improper benefit or profit in money, property, or services, or (2) a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. However, nothing in the Articles of Incorporation, or By-Laws of the Fund protects or indemnifies a director, officer, employee or agent against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. The Fund's Articles of Incorporation and By-Laws provide that the Fund's Board of Directors has the sole power to adopt, alter or repeal the Fund's By-Laws. ESTIMATED EXPENSES On the basis of the anticipated size of the Fund immediately following the Offer and the actual expenses of the Fund since the commencement of operations in October 1994, the Investment Manager estimates that the Fund's normal operating expenses (exclusive of expenses related to the Offer and not including the 25% over-allotment) for its fiscal year ending September 30, 1997 will be approximately $ . While the foregoing estimate has been made in good faith on the basis of information as to current prices available to the Investment Manager, including estimates furnished by the Fund's agents, there can be no assurance, given the nature of the Fund, that actual operating expenses for fiscal 1997 will not be substantially more or less than such estimate. For the period from October 31, 1994 to September 30, 1995 and for the fiscal year ended September 30, 1996 the operating expenses of the Fund, exclusive of amortization of organizational expenses, amounted to $889,248 and $929,568, respectively. The Fund's estimated annual operating expenses are higher than the annual normal operating expenses of most other U.S. investment companies of comparable size investing in the securities of U.S. issuers. This results from the fact that (i) the advisory fees (reflecting the specialized nature of the Fund, the nature of the advisory effort involved and the need for outside research services) are higher than advisory fees paid by a number of other investment companies, (ii) many other registered U.S. investment companies do not pay fees to administrators in addition to fees paid to investment advisers, and (iii) the fees charged by certain of the Fund's agents are higher (reflecting communications and other costs associated with an investment company investing in Korea, rather than in the United States) than fees charged by such agents for services to a more typical investment company investing in the United States. 7 59 PORTFOLIO TRANSACTIONS The Fund has no obligation to deal with any brokers or dealers in the execution of transactions in portfolio securities. Subject to policies established by the Fund's Board of Directors, the Investment Adviser has delegated to the Sub-Adviser primary responsible for the Fund's portfolio decisions and the placing of the Fund's portfolio transactions. In accordance with the policies described below, all orders for the purchase or sale of portfolio securities will be placed on behalf of the Fund by the Sub-Adviser pursuant to authority contained in the Sub-Advisory Agreement or by the Investment Adviser pursuant to the Investment Advisory Agreement. The Investment Adviser and the Sub-Adviser also will be responsible for the placement of transaction orders for other investment companies and accounts for which either of them or their affiliates act as investment adviser. In selecting broker-dealers, subject to applicable limitations of the federal securities laws, the Investment Adviser and the Sub-Adviser will consider various relevant factors, including, but not limited to the size and type of the transaction; the nature and character of the markets for the security to be purchased or sold; the execution efficiency, settlement capability, and financial condition of the broker-dealer firm; the broker-dealer's execution services rendered on a continuing basis; the reasonableness of any commissions and arrangements for payment of Fund expenses. The Fund anticipates that its portfolio transactions involving securities of companies domiciled in Korea will be conducted primarily on the KSE and in foreign OTC transactions. Commissions for securities traded on the KSE will generally be higher than for U.S. securities and may not be subject to negotiation. The Fund may execute portfolio transactions with broker-dealers who provide research and execution services to the Fund or other accounts over which the Investment Adviser, the Sub-Adviser or their affiliates exercise investment discretion. Such services may include advice concerning the value of securities; the advisability of investing in, purchasing, or selling securities; and the availability of securities or the purchasers or sellers of securities. In addition, such broker-dealers may furnish analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and performance of accounts; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). The selection of such broker-dealers generally is made by the Investment Adviser or the Sub-Adviser (to the extent possible consistent with execution considerations) in accordance with a ranking of broker-dealers determined periodically by the Investment Adviser's or the Sub-Adviser's investment staff (for equity funds) based upon its assessment of the quality of research and execution services provided. The receipt of research from broker-dealers that execute transactions on behalf of the Fund may be useful to the Investment Adviser or the Sub-Adviser in rendering investment management services to the Fund or their other clients, and conversely, such information provided by broker-dealers who have executed transaction orders on behalf of other Investment Adviser or Sub-Adviser clients may be useful to the Investment Adviser or the Sub-Adviser in carrying out their obligations to the Fund. The receipt of such research has not reduced the Investment Adviser's or the Sub-Adviser's normal independent research activities; however, it enables the Investment Adviser and the Sub-Adviser to avoid the additional expenses that could be incurred if the Investment Adviser and the Sub-Adviser tried to develop comparable information through their own efforts. Subject to applicable limitations of the federal securities laws, broker-dealers may receive commissions for agency transactions that are in excess of the amount of commissions charged by other broker-dealers in recognition of their research and execution services. In order to cause the Fund to pay such higher commissions, the Investment Adviser or the Sub-Adviser must determine in good faith that such commissions are reasonable in relation to the value of the brokerage and research services provided by such executing broker-dealers, viewed in terms of a particular transaction or the Investment Adviser's or the Sub-Adviser's overall responsibilities to the Fund and its other clients. In reaching this determination, the Investment Adviser and the Sub-Adviser will not attempt to place a specific U.S. dollar value on the brokerage and research services provided, or to determine what portion of the compensation should be related to those services. 8 60 The Investment Adviser and the Sub-Adviser are authorized to use research services provided by and to place portfolio transactions with brokerage firms that have provided assistance in the distribution of shares of the Fund or shares of other Fidelity funds to the extent permitted by law. The Investment Adviser and the Sub-Adviser may use research services provided by and place agency transactions with Fidelity Brokerage Services, Inc. ("FBSI") and Fidelity Brokerage Services ("FBS"), subsidiaries of FMR Corp., if the commissions are fair, reasonable, and comparable to commissions charged by non-affiliated, qualified brokerage firms for similar services. From September 1992 through December 1994, FBS operated under the name Fidelity Brokerage Services, Limited ("FBSL"). As of January 1995, FBSL was converted to an unlimited liability company and assumed the name FBS. The Investment Adviser and the Sub-Adviser may allocate brokerage transactions to the Fund's custodians, acting as a broker-dealer, or the other broker-dealers who have entered into arrangements with the Investment Manager, the Investment Adviser or the Sub-Adviser under which the broker-dealer allocates a portion of the commissions paid by the Fund toward payment of the Fund's expenses, such as transfer agency fees or custodian fees. The transaction quality must, however, be comparable to those of other qualified broker-dealers. Section 11(a) of the Securities Exchange Act of 1934 prohibits members of national securities exchanges from executing exchange transactions for accounts which they or their affiliates manage, unless certain requirements are satisfied. Pursuant to such requirements, the Board of Directors has authorized FBSI to effect Fund portfolio transactions on national securities exchanges in accordance with approved procedures and applicable Commission rules. The Board of Directors periodically reviews the Investment Adviser's and the Sub-Adviser's performance of their responsibilities in connection with the placement of portfolio transactions on behalf of the Fund and reviews the commissions paid by the Fund over representative periods of time to determine if they are reasonable in relation to the benefits to the Fund. The Fund's portfolio turnover rates during the period from October 31, 1994 to September 30, 1995 and for the fiscal year ended September 30, 1996 were 25% (annualized) and 28%, respectively. Because a high turnover rate increases transaction costs and may increase taxable gains, the Investment Adviser and the Sub-Adviser each carefully weighs the anticipated benefits of short-term investing against these consequences. An increased turnover rate may be due to short-term interest rate volatility or other special market conditions. Brokerage commissions paid by the Fund during the period from October 31, 1994 to September 30, 1995 and for the fiscal year ended September 30, 1996, were $376,929 and $142,449, respectively. No brokerage commissions were paid to FBSI or FBS (formerly FBSL). For the fiscal year ended September 30, 1996, the Fund paid $142,449 in brokerage commissions to firms providing research. The approximate dollar amount of transactions on which brokerage commissions were paid for the fiscal year ended September 30, 1996 was $29,083,249. The Fund pays both commissions and spreads in connection with the placement of portfolio transactions. From time to time the Board of Directors reviews whether the recapture for the benefit of the Fund of some portion of the brokerage commissions or similar fees paid by the Fund on portfolio transactions is legally permissible and advisable. The Fund seeks to recapture soliciting broker-dealer fees on the tender of portfolio securities, but at present no other recapture arrangements are in effect. The Board of Directors intends to continue to review whether recapture opportunities are available and are legally permissible and, if so, to determine in the exercise of their business judgment, whether it would be advisable for the Fund to seek such recapture. Investment decisions for the Fund are made independently from those for other funds and accounts advised or managed by Fidelity. A particular security may be held by one or more funds or accounts. Simultaneous transactions are inevitable when several funds and accounts are managed by the same investment adviser, particularly when the same security is suitable for the investment objective of more than one fund or account. 9 61 When two or more funds or accounts managed by Fidelity are simultaneously engaged in the purchase or sale of the same security, the prices and amounts are allocated in accordance with a formula considered by Fidelity to be equitable for each fund. In some cases this system could have a detrimental effect on the price or value of a security as far as the Fund is concerned. In other cases, however, the ability of the Fund to participate in volume transactions will produce better executions and prices for the Fund. It is the current opinion of the Board of Directors that the desirability of retaining FIIA and FIJ as Investment Adviser and Sub-Adviser to the Fund outweighs any disadvantages that may be said to exist from exposure to simultaneous transactions. NET ASSET VALUE Net asset value will be determined daily by dividing the value of the net assets of the Fund (the value of its assets less its liabilities including borrowings, exclusive of capital stock and surplus) by the total number of shares of Common Stock outstanding. Portfolio securities will be valued by various methods depending on the primary market or exchange on which they trade. Most equity securities for which the primary market is the United States will be valued at the last sale price or, if no sale has occurred, at the closing bid price. Equity securities for which the primary market is outside the United States will be valued using the official closing price or the last sale price in the principal market where they are traded. If the last sale price (on the local exchange) is unavailable, the last evaluated quote or last bid price normally will be used. Shares listed on the KSE which are traded by foreign investors in foreign OTC transactions may be valued at prices at which it is expected such shares may be sold, as determined by or under the direction of a committee appointed by the Board of Directors, provided that the committee determines that such valuations are accurate; otherwise such KSE shares will be valued using the procedures for listed securities. Short-term securities will be valued either at amortized cost or at original cost plus accrued interest, both of which approximate current value. Convertible securities and fixed-income securities will be valued primarily by a pricing service that uses a vendor security valuation matrix which incorporates both dealer-supplied valuations and electronic data processing techniques. This two-fold approach is believed to more accurately reflect fair value because it takes into account appropriate factors such as institutional trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data, without exclusive reliance upon quoted, exchange, or over-the-counter prices. Use of pricing services has been approved by the Board of Directors. Securities and other assets for which there is no readily available market will be valued in good faith by a committee appointed by the Board of Directors. The procedures set forth above need not be used to determine the value of the securities owned by the Fund if, in the opinion of a committee appointed by the Board of Directors, some other method (e.g., closing over-the-counter bid prices in the case of debt instruments traded on an exchange) would more accurately reflect the fair market value of such securities. Generally, the valuation of foreign and domestic equity securities, as well as corporate bonds, U.S. government securities, money market instruments, and repurchase agreements, will be substantially completed each day at the close of the NYSE. The values of any such securities held by the Fund are determined as of such time for the purpose of computing the Fund's net asset value. Foreign security prices are furnished by independent brokers or quotation services which express the value of securities in their local currency. Fidelity Service Company gathers all exchange rates daily at the close of the NYSE using the last quoted price on the local currency and then translates the value of foreign securities from their local currency into U.S. dollars. Any changes in the value of forward contracts due to exchange rate fluctuations and days to maturity are included in the calculation of net asset value. If an extraordinary event that is expected to materially affect the value of a portfolio security occurs after the close of an exchange on which that security is traded, then the security will be valued as determined in good faith by a committee appointed by the Board of Directors. 10 62 TAXATION U.S. FEDERAL INCOME TAXES The Fund intends to continue to qualify, and elect to be treated, as a regulated investment company for each taxable year under the Code. To so qualify the Fund must, among other things: (a) derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock or securities and gains from the sale or other disposition of foreign currencies, or other income (including gains from options, futures contracts and forward contracts) derived with respect to the Fund's business of investing in stocks, securities or currencies; (b) derive less than 30% of its gross income from the sale or other disposition of the following assets held for less than three months--(i) stock and securities, (ii) options, futures and forward contracts (other than options, futures and forward contracts on foreign currencies), and (iii) foreign currencies (and options, futures and forward contracts on foreign currencies) which are not directly related to the Fund's principal business of investing in stocks and securities (or options and futures with respect to stock or securities); and (c) diversify its holdings so that, at the end of each quarter, (i) at least 50% of the value of the Fund's total assets is represented by cash and cash items, U.S. Government securities, securities of other regulated investment companies, and other securities, with such other securities limited in respect of any one issuer to an amount not greater in value than 5% of the Fund's total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the Fund's total assets is invested in the securities (other than U.S. Government securities or securities of other regulated investment companies) of any one issuer or of any two or more issuers that the Fund controls and that are determined to be engaged in the same business or similar or related businesses. As a regulated investment company, the Fund will not be subject to U.S. federal income tax on its investment company taxable income that it distributes to its shareholders, provided that at least 90% of its investment company taxable income for the taxable year is distributed to its shareholders; however, the Fund will be subject to tax on its income and gains to the extent that it does not distribute to its shareholders an amount equal to such income and gains. See also "Passive Foreign Investment Companies" below. Investment company taxable income includes dividends, interest and net short-term capital gains in excess of net long-term capital losses, but does not include net long-term capital gains in excess of net short-term capital losses. The Fund intends to distribute annually to its shareholders substantially all of its investment company taxable income. If necessary, the Fund may borrow money temporarily or liquidate assets to make such distributions. Dividend distributions of investment company taxable income (including distributions from short-term capital gains) are taxable to a shareholders as ordinary income to the extent of the Fund's current and accumulated earnings and profits, whether paid in cash or in shares. Since the Fund will not invest in the stock of domestic corporations, distributions to corporate shareholders of the Fund will not be entitled to the deduction for dividends received by corporations. If the Fund fails to satisfy the 90% distribution requirement or fails to qualify as a regulated investment company in any taxable year, it will be subject to tax in such year on all of its taxable income, whether or not the Fund makes any distributions to its shareholders. As a regulated investment company, the Fund also will not be subject to U.S. federal income tax on its net long-term capital gains, if any, that it distributes to its shareholders. If the Fund retains for reinvestment or otherwise an amount of such net long-term capital gains, it will be subject to a tax of up to 35% of the amount retained. The Board of Directors of the Fund will determine at least once a year whether to distribute any net long-term capital gains in excess of net short-term capital losses and capital loss carryovers from prior years. The Fund expects to designate amounts retained as undistributed capital gains in a notice to its shareholders who, if subject to U.S. federal income taxation on long-term capital gains, (a) will be required to include in income for U.S. federal income tax purposes, as long-term capital gains, their proportionate shares of the undistributed amount, and (b) will be entitled to credit against their U.S. federal income tax liabilities their proportionate shares of the tax paid by the Fund on the undistributed amount and to claim refunds to the extent that their credits exceed their liabilities. For U.S. federal income tax purposes, the basis of shares owned by a shareholder of the Fund will be increased by an amount equal to 65% of the amount of undistributed capital gains included in the shareholder's income. Distributions of net long-term capital gains, if any, by the Fund are taxable to its shareholders as long-term capital gains whether paid in cash or in shares 11 63 and regardless of how long the shareholder has held the Fund's shares. Such distributions of net long-term capital gains are not eligible for the dividends received deduction. Under the Code, net long-term capital gains will be taxed at a rate no greater than 28% for individuals and 35% for corporations. Shareholders will be notified annually as to the U.S. federal income tax status of their dividends and distributions. Shareholders receiving dividends or distributions in the form of additional shares pursuant to the Plan should be treated for U.S. federal income tax purposes as receiving a distribution in an amount equal to the amount of money that the shareholders receiving cash dividends or distributions will receive, and should have a cost basis in the shares equal to such amount. If the net asset value of shares is reduced below a shareholder's cost as a result of a distribution by the Fund, the distribution will be taxable even if it, in effect, represents a return of invested capital. Investors considering buying shares just prior to a dividend or capital gain distribution payment date should be aware that, although the price of shares purchased at that time may reflect the amount of the forthcoming distribution, those who purchase just prior to the record date for a distribution will receive a distribution which will be taxable to them. The amount of capital gains realized and distributed (which from an investment standpoint may represent a partial return of capital rather than income) in any given year will be the result of investment performance, among other things, and can be expected to vary from year to year. If the Fund is the holder of record of any stock on the record date for any dividends payable with respect to such stock, such dividends are included in the Fund's gross income not as of the date received but as of the later of (a) the date such stock became ex-dividend with respect to such dividends (i.e., the date on which a buyer of the stock would not be entitled to receive the declared, but unpaid, dividends) or (b) the date the Fund acquired such stock. Accordingly, in order to satisfy its income distribution requirements, the Fund may be required to pay dividends based on anticipated earnings, and shareholders may receive dividends in an earlier year than would otherwise be the case. Under the Code, the Fund may be subject to a 4% excise tax on a portion of its undistributed income. To avoid the tax, the Fund must distribute annually at least 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year and at least 98% of its capital gain net income for the 12-month period ending, as a general rule, on October 31 of the calendar year. For this purpose, any income or gain retained by the Fund that is subject to corporate income tax will be treated as having been distributed at year-end. In addition, the minimum amounts that must be distributed in any year to avoid the excise tax will be increased or decreased to reflect any under-distribution or over-distribution, as the case may be, in the previous year. For a distribution to qualify under the foregoing test, the distribution generally must be declared and paid during the year. Any dividend declared by the Fund in October, November or December of any year and payable to shareholders of record on a specified date in such a month shall be deemed to have been received by each shareholder on December 31 of such year and to have been paid by the Fund not later than December 31 of such year, provided that such dividend is actually paid by the Fund during January of the following year. The Fund will maintain accounts and calculate income by reference to the U.S. dollar for U.S. federal income tax purposes. If the Fund's dividends exceed its taxable income in any year, which is sometimes the result of currency related losses, all or a portion of the Fund's dividends may be a return of capital to shareholders for tax purposes. Furthermore, exchange control regulations may restrict the ability of the Fund to repatriate investment income or the proceeds of sales of securities. These restrictions and limitations may limit the Fund's ability to make sufficient distributions to satisfy the 90% distribution requirement and avoid the 4% excise tax. The Fund's transactions in foreign currencies, forward contracts, options and futures contracts (including options and futures contracts on foreign currencies) will be subject to special provisions of the Code that, among other things, may affect the character of gains and losses realized by the Fund (i.e., may affect whether gains or losses are ordinary or capital), accelerate recognition of income to the Fund, defer Fund losses, and affect the determination of whether capital gains and losses are characterized as long-term or short-term capital gains or losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also may require the Fund to mark-to-market certain types of the positions in 12 64 its portfolio (i.e., treat them as if they were sold and repurchased for fair market value at the close of the taxable year) which may cause the Fund to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the 90% and 98% distribution requirements for avoiding income and excise taxes. The Fund may make investments that accrue income that is not matched by a current receipt of cash by the Fund, such as investments in certain obligations having original issue discount (i.e., an amount equal to the excess of the stated redemption price of the security at maturity over its issue price), or market discount (i.e., an amount equal to the excess of the stated redemption price of the security at maturity over its basis immediately after it was acquired) if the Fund elects to accrue market discount on a current basis. In addition, income may continue to accrue for federal income tax purposes with respect to a non-performing investment. Any of the foregoing income would be treated as income earned by the Fund and therefore would be subject to the distribution requirements of the Code. Because such income may not be matched by a concurrent receipt of cash to the Fund, the Fund may be required to dispose of other securities to be able to make distributions to its investors. See the discussion of distribution requirements above. The extent to which the Fund may liquidate securities at a gain may be limited by the 30% limitation discussed above. Upon the sale or exchange of its shares, a shareholder will realize a taxable gain or loss depending upon the amount realized and the shareholder's basis in the shares. Such gain or loss will be treated as a capital gain or loss if the shares are capital assets in the shareholder's hands, and will be long-term if the shareholder's holding period for the shares is more than 12 months and otherwise will be short-term. Any loss realized on a sale or exchange will be disallowed to the extent that the shares disposed of are replaced (including replacement through the reinvesting of dividends and capital gains distributions in the Fund) within a period of 61 days beginning 30 days before and ending 30 days after the disposition of the shares. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Any loss realized by a shareholder on the sale of Fund shares held by the shareholder for six months or less will be treated for federal income tax purposes as a long-term capital loss to the extent of any distributions of long-term capital gains received by the shareholder with respect to such shares. An amount received by a shareholder from the Fund in exchange for shares of the Fund (pursuant to a repurchase of shares in a tender offer or otherwise) generally will be treated as a payment in exchange for the shares tendered, which may result in taxable gain or loss as described above. However, if the amount received by a shareholder exceeds the fair market value of the shares tendered, or if a shareholder does not tender all of the shares of the Fund owned or deemed to be owned by the shareholder, all or a portion of the amount received may be treated as a dividend taxable as ordinary income or as a return of capital. In addition, if a tender offer is made, shareholders who do not tender their shares could be deemed, under certain circumstances, to have received a taxable distribution as a result of their increased proportionate interest in the Fund. BACKUP WITHHOLDING The Fund may be required to withhold federal income tax at a rate of 31% ("backup withholding") from dividends and redemption proceeds paid to non-corporate shareholders. This tax may be withheld from dividends if (i) the shareholder fails to furnish the Fund with the shareholder's correct taxpayer identification number (ii) the IRS notifies the Fund that the shareholder has failed to report properly certain interest and dividend income to the IRS and to respond to notices to that effect, or (iii) when required to do so, the shareholder fails to certify that he or she is not subject to backup withholding. Redemption proceeds may be subject to withholding under the circumstances described in (i) above. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from payments made to a shareholder may be credited against such shareholder's federal income tax liability. PASSIVE FOREIGN INVESTMENT COMPANIES The Fund intends to make investments which may, for federal income tax purposes, constitute investments in shares of foreign corporations. If the Fund purchases shares in certain foreign passive 13 65 investment entities described in the Code as passive foreign investment companies ("PFICs"), the Fund will be subject to U.S. federal income tax on a portion of any "excess distribution" (the Fund's ratable share of distributions in any year that exceeds 125% of the average annual distribution received by the Fund in the three preceding years or the Fund's holding period, if shorter, and any gain from the disposition of such shares), even if such income is distributed as a taxable dividend by the Fund to its shareholders. Additional charges in the nature of interest may be imposed on the Fund in respect of deferred taxes arising from such "excess distributions." If the Fund were to invest in a PFIC and elect to treat the PFIC as a "qualified electing fund" under the Code (and if the PFIC were to comply with certain reporting requirements), in lieu of the foregoing requirements the Fund would be required to include in income each year its pro rata share of the PFIC's ordinary earnings and net realized capital gains, whether or not such amounts were actually distributed to the Fund. Legislation has been proposed in the U.S. Congress which would, in the case of a PFIC having "marketable stock," permit U.S. stockholders, such as the Fund, to elect to mark-to-market the PFIC stock annually. Otherwise, U.S. stockholders would be treated substantially the same as under current law. Special rules applicable to mutual funds would classify as "marketable stock" all stock in PFICs held by the Fund. It is unclear if or when the proposed legislation will become law and if it is enacted the form it will take. On March 31, 1992, the U.S. Internal Revenue Service released proposed regulations providing a mark-to-market election for regulated investment companies that would have effects similar to the proposed legislation. These regulations would be effective for taxable years ending after promulgation of the regulations as final regulations. Whether, and to what extent, final regulations may be applied retroactively by the Fund is unclear. FOREIGN TAX CREDITS The Fund may be subject to certain taxes, including withholding taxes, imposed by Korea and possibly other foreign countries with respect to its income and capital gains. If the Fund qualifies as a regulated investment company, if certain distribution requirements are satisfied and if more than 50% of the value of the Fund's total assets at the close of any taxable year consists of stock or securities of foreign corporations, which for this purpose may include obligations of foreign governmental issuers, the Fund may elect, for U.S. federal income tax purposes, to treat any foreign country's income or withholding taxes paid by the Fund that can be treated as income taxes under the U.S. income tax principles, as paid by its shareholders. The Fund expects to qualify for and make this election. For any year that the Fund makes such an election, each shareholder will be required to include in its income an amount equal to its allocable share of such income taxes paid by the Fund to a foreign country's government and shareholders will be entitled, subject to certain limitations, to credit their portions of these amounts against their U.S. federal income tax due, if any, or to deduct their portions from their U.S. taxable income, if any. No deductions for foreign taxes paid by the Fund may be claimed, however, by non-corporate shareholders (including certain foreign shareholders described below) who do not itemize deductions. Shareholders that are exempt from tax under Section 501(a) of the Code, such as pension plans, generally will derive no benefit from the Fund's election. However, such shareholders should not be disadvantaged either because the amount of additional income they are deemed to receive equal to their allocable share of such foreign countries' income taxes paid by the Fund generally will not be subject to U.S. federal income tax. The amount of foreign taxes that may be credited against a shareholder's U.S. federal income tax liability generally will be limited, however, to an amount equal to the shareholder's U.S. federal income tax rate multiplied by its foreign source taxable income. For this purpose, the Fund generally expects that the capital gains it distributes, whether as dividends or capital gains distributions, will not be treated as foreign source taxable income. In addition, this limitation must be applied separately to certain categories of foreign source income, one of which is foreign source "passive income." For this purpose, foreign source "passive income" includes dividends, interest, capital gains and certain foreign currency gains. As a consequence, certain shareholders may not be able to claim a foreign tax credit for the full amount of their proportionate share of foreign taxes paid by the Fund. Each shareholder will be notified within 60 days after the close of the Fund's taxable year whether, pursuant to the election described above, the foreign taxes paid by the Fund will be treated as paid by its shareholders for that year and, if so, such notification will designate (i) such 14 66 shareholder's portion of the foreign taxes and (ii) the portion of the Fund's dividends and distributions that represents income derived from foreign sources. FOREIGN SHAREHOLDERS U.S. taxation of a shareholder who, as to the United States, is a foreign investor depends, in part, on whether the shareholder's income from the Fund is "effectively connected" with a U.S. trade or business carried on by the shareholder. If the foreign investor is not a resident alien and the income from the Fund is not effectively connected with a United States trade or business carried on by the foreign investor, distributions of net investment income and net realized short-term capital gains will be subject to a 30% (or lower treaty rate) U.S. withholding tax. Furthermore, such foreign investors may be subject to an increased U.S. tax on their income resulting from the Fund's election (described above) to "pass-through" amounts of foreign taxes paid by the Fund, but will not be able to claim a credit or deduction in the United States with respect to the foreign taxes treated as having been paid by them. Distributions of net realized long-term capital gains, amounts retained by the Fund which are designated as undistributed capital gains, and gains realized upon the sale of shares of the Fund will not be subject to U.S. tax unless a foreign investor who is a nonresident alien individual is physically present in the United States for more than 182 days during the taxable year and, in the case of a gain realized upon the sale of Fund shares, unless (i) such gain is attributable to an office or fixed place of business in the United States or (ii) such nonresident alien individual has a tax home in the United States and such gain is not attributable to an office or fixed place of business located outside the United States. A determination by the Fund not to distribute long-term capital gains may reduce a foreign investor's overall return from an investment in the Fund, since the Fund will incur a U.S. federal tax liability with respect to retained long-term capital gains, thereby reducing the amount of cash held by the Fund that is available for distribution, and the foreign investor may not be able to claim a credit or deduction with respect to such taxes. In the case of a foreign investor who is a nonresident alien individual, the Fund may be required to withhold U.S. federal income tax at a rate of 31%, unless the foreign investor files an appropriate form certifying under penalty of perjury as to his nonresident alien status. If a foreign investor is a resident alien or if dividends or distributions from the Fund are effectively connected with a U.S. trade or business carried on by the foreign investor, dividends of net investment income, distributions of net short-term and long-term capital gains, amounts retained by the Fund that are designated as undistributed capital gains and any gains realized upon the sale of shares of the Fund will be subject to U.S. income tax at the rates applicable to U.S. citizens or domestic corporations. If the income from the Fund is effectively connected with a U.S. trade or business carried on by a foreign investor that is a corporation, then such foreign investor also may be subject to the 30% branch profits tax. The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described in this section. Shareholders may be required to provide appropriate documentation to establish their entitlement to the benefits of such a treaty. Foreign investors are advised to consult their own tax advisers with respect to (a) whether their income from the Fund is or is not effectively connected with a U.S. trade or business carried on by them (b) whether they may claim the benefits of an applicable tax treaty and (c) any other tax consequences to them of an investment in the Fund. OTHER TAXATION Distributions also may be subject to state, local and foreign taxes depending on each shareholder's particular position. THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY. IN VIEW OF THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OWN TAX ADVISER WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO HIM OF PARTICIPATION IN THE FUND, INCLUDING THE EFFECT AND APPLICABILITY OF 15 67 STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. Ordinary income and capital gain dividends may also be subject to state and local taxes. KOREAN TAXES The following description of certain Korean tax matters relating to the Fund and its shareholders represents the opinion of Shin & Kim, Korean counsel to the Fund. Under current Korean law, payments to non-residents of Korea (such as the Fund) by Korean corporations in respect of income are subject to Korean withholding tax and capital gains derived by non-residents of Korea (such as the Fund) with respect to stock and securities of Korean corporations are subject to withholding tax, unless exempted by relevant laws or tax treaties. More specifically, dividends and interest will be subject to withholding tax at the rate of 27.5% until December 31, 1998 and 26.875% thereafter and capital gains (without deduction for capital losses) will be subject to withholding tax equal to the lower of (i) 11% until December 31, 1998 and 10.75% thereafter of the gross sales proceeds, or (ii) if satisfactory evidence of acquisition cost is produced, 27.5% until December 31, 1998 and 26.875% thereafter of the difference between the gross sales proceeds and the acquisition cost of the stock or security sold (excluding any transaction charges, commissions, fees or taxes paid at the time of acquisition). The applicable withholding tax rate under the U.S.-Korea Income Tax Treaty presently in effect (the "Treaty"), is generally 15% (plus a resident tax of 11% until December 31, 1998 and 7.5% thereafter of such amount, or a total of 16.5% until December 31, 1998 and 16.125% thereafter) on dividends paid to the Fund by Korean corporations, and generally 12% (plus a resident tax of 10% until December 31, 1998 and 7.5% thereafter of such amount, or a total of 13.2% until December 31, 1998 and 12.9% thereafter) on interest paid to the Fund by Korean corporations. Under the Treaty, no withholding tax will be applicable to capital gains realized by the Fund. The reduced tax rate and exemption under the provisions of the Treaty will not apply to the dividend, interest and capital gain income derived by the Fund from Korean corporations if both (i) the Fund is, by reason of the existence of special measures under U.S. federal income tax law with respect to those types of income, subject to U.S. federal income tax in an amount substantially less than the U.S. federal income tax generally imposed on corporate profits (Article 17(a) of the Treaty), and (ii) at least 25% of the Fund's outstanding shares are held of record or otherwise determined to be owned, directly or indirectly, by one or more persons who are not individual residents of the United States (Article 17(b) of the Treaty). Questions have recently been raised as to whether the U.S. regulated investment company provisions contained in the Code constitute "special measures" for purposes of Article 17(a) of the Treaty. Regardless of the resolution of these questions, under Article 17(b) of the Treaty, the Fund will qualify for the benefits of the Treaty so long as less than 25% of the Fund's outstanding shares are determined to be held other than by individual residents of the United States. Shin & Kim have given their opinion that the Treaty presently applies to the Fund if and so long as the Fund operates as described herein. The Fund has received written confirmation from the MOFE that, so long as all of the issued shares of the Fund are listed on one or more publicly acknowledged stock exchanges in the United States only and they are traded on such exchanges by the general public, the Fund will be entitled to the benefits of the Treaty because Article 17(b) of the Treaty will not apply. The Fund's Common Stock has been approved for listing on the New York Stock Exchange upon notice of issuance. In order to qualify for the benefits of the Treaty, the Fund will not apply to list the Fund's shares on any stock exchange outside the United States. Notwithstanding the foregoing, the Tax Exemption and Reduction Control Law (the "TERCL") exempts interest on bonds denominated in a non-Korean currency from Korean income and corporation taxes. The residents' tax referred to above is therefore eliminated with respect to such investments. The TERCL tax exemptions expire on December 31, 1998. 16 68 Under present Korean law, the Korean Inheritance and Gift Tax will not apply to any testate, intestate or inter-vivos transfer of shares of the Fund to the extent the deceased or the donee, as the case may be, is not domiciled in Korea. Korean stamp duty will not apply to transfers of Korean securities, nor to the Fund's portfolio securities transactions. A securities transaction tax is payable on the transfer by the Fund of shares and certain other equities (throughout this paragraph, collectively, "shares") issued by a Korean company at the rate of 0.15% of the sale price of the shares (except in certain circumstances in which case no tax is charged, and where the shares are traded outside the KSE, in which case the tax is payable at the rate of 0.5% of the sale price or where the shares are traded through licensed broker-dealers in the over-the-counter market, in which case the tax is payable at the rate of 0.3% of the sale price) unless (i) the shares are listed on a foreign stock exchange and the sales are executed on such exchange; or (ii) those sales are executed between non-residents without a permanent establishment in Korea, the non-resident transferor did not own 10% or more of the total issued and outstanding shares of the issuer of such shares at any time during the five years before the year within which the transfer occurs, and the non-resident transferor does not sell such shares through a securities company in Korea (which latter condition cannot be fulfilled under current KSEC regulations which require all sales of Korean securities off the KSE to be through a Korean securities company). Effective from July 1, 1994, the Korean government introduced an additional agricultural and fishery special tax on securities transactions on the KSE which is equal to 0.15% of the sale price of the shares and which will remain effective for a period of ten years thereafter. The transferor of the shares pays the securities transaction tax. When the transfer is made through a securities company only, such securities company will make the withholding. Where the transfer is effected by a non-resident individual or a non-resident corporation without a permanent establishment in Korea otherwise than through the Korea Securities Depository or a securities company, the transferee is required to withhold the securities transaction tax. This tax treatment could change in the event of changes in Korean or U.S. tax laws, changes in the terms of, or the MOFE's interpretation of, the Treaty, or changes in relevant facts. NOTICES Shareholders will be notified annually by the Fund of the dividends, distributions and deemed distributions made by the Fund to its shareholders. Furthermore, shareholders will be sent, if appropriate, various written notices after the close of the Fund's taxable year regarding certain dividends, distributions and deemed distributions that were paid (or that were treated as having been paid) by the Fund to its shareholders during the preceding taxable year. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS CONCERNING FOREIGN, FEDERAL, STATE AND LOCAL TAX MATTERS, AND WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE FUND. 17 69 INDEX TO FINANCIAL STATEMENTS [To Be Included By Amendment] F-1 70 APPENDIX A GENERAL CHARACTERISTICS AND RISKS OF DERIVATIVES The following investment practices in which the Fund is authorized to engage are generally not currently permitted under Korean laws or regulations. A detailed discussion of Derivatives (as defined below) that may be used by the Investment Adviser or the Sub-Adviser on behalf of the Fund follows below. The Fund will not be obligated, however, to use any Derivatives and makes no representation as to the availability of these techniques at this time or at any time in the future. "Derivatives," as used in this Appendix A, refers to interest rate, currency or stock index futures contracts, currency forward contracts and currency swaps, the purchase and sale (or writing) of exchange listed and over-the-counter ("OTC") put and call options on debt and equity securities, currencies, interest rate, currency or stock index futures and fixed income and stock indices and other financial instruments, entering into various interest rate transactions such as swaps, caps, floors, collars, entering into equity swaps, caps, floors or trading in other types of derivatives. The Fund's ability to pursue certain of these strategies may be limited by the U.S. Commodity Exchange Act, as amended, applicable regulations of the Commodity Futures Trading Commission ("CFTC") thereunder and the federal income tax requirements applicable to regulated investment companies which are not operated as commodity pools. PUT AND CALL OPTIONS ON SECURITIES AND INDICES The Fund may purchase and sell put and call options on debt and equity securities and indices based upon the prices of debt or equity securities or other market or economic factors that may affect securities in which the Fund may invest, such as commodity price levels or rates of inflation. A put option on a security gives the purchaser of the option the right to sell and the writer the obligation to buy the underlying security at the exercise price during the option period. The Fund may also purchase and sell options on indices based upon the prices of debt or equity securities ("index options"). Index options are similar to options on securities except that, rather than taking or making delivery of securities underlying the option at a specified price upon exercise, an index option gives the holder the right to receive cash upon exercise of the option if the level of the index upon which the option is based is greater, in the case of a call, or less in the case of a put, than the exercise price of the option. The purchase of a put option on a security would be designed to protect against a substantial decline in the market value of a security held by the Fund. A call option on a security gives the purchaser of the option the right to buy and the writer the obligation to sell the underlying security at the exercise price during the option period. The purchase of a call option on a security would be intended to protect the Fund against an increase in the price of a security that it intended to purchase in the future. In the case of either put or call options that it has purchased, if the option expires without being sold or exercised, the Fund will experience a loss in the amount of the option premium plus any related commissions. When the Fund sells put and call options, it receives a premium as the seller of the option. The premium that the Fund receives for writing the option will serve as a partial hedge, in the amount of the option premium, against changes in value of the securities in its portfolio. During the term of the option, however, a covered call seller has, in return for the premium on the option, given up the opportunity for capital appreciation above the exercise price of the option if the value of the underlying security increases, but has retained the risk of loss should the price of the underlying security decline. Conversely, a secured put seller retains the risk of loss should the market value of the underlying security decline below the exercise price of the option, less the premium received on the sale of the option. The Fund is authorized to purchase and sell exchange listed options and over-the-counter options ("OTC Options") which are privately negotiated with the counterparty to such contract. U.S. listed options are issued by the Options Clearing Corporation ("OCC"), which guarantees the performance of the obligations of the parties to such options. All such call options sold (written) by the Fund will be "covered" as long as the call is outstanding (i.e., the Fund will own the instrument subject to the call or other securities or assets acceptable under applicable segregation and coverage rules). All such put options sold (written) by the Fund will be secured by A-1 71 segregated assets consisting of cash or liquid high grade debt securities having a value not less than the exercise price. The Fund's ability to close out its position as a purchaser or seller of an exchange listed put or call option is dependent upon the existence of a liquid secondary market. Among the possible reasons for the absence of a liquid secondary market on an exchange are: (i) insufficient trading interest in certain options; (ii) restrictions on transactions imposed by an exchange; (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities; (iv) interruption of the normal operations on an exchange; (v) inadequacy of the facilities of an exchange or the OCC to handle current trading volume; or (vi) a decision by one or more exchanges to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been listed by the OCC as a result of trades on that exchange would generally continue to be exercisable in accordance with their terms. OTC Options are purchased from or sold to dealers, financial institutions or other counterparties which have entered into direct agreements with the Fund. With OTC Options, such variables as expiration date, exercise price and premium will be agreed upon between the Fund and the counterparty, without the intermediation of a third party such as the OCC. If the counterparty fails to make or take delivery of the securities underlying an option it has written, or otherwise settle the transaction in accordance with the terms of that option as written, the Fund would lose the premium paid for the option as well as any anticipated benefit of the transaction. The Fund must rely on the credit quality of the counterparty rather than the guarantee of the OCC. OTC Options with foreign brokers in Korea subject the Fund to the credit of such brokers which may be weak, making such options speculative. The hours of trading for options on securities may not conform to the hours during which the underlying securities are traded. To the extent that the option markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying markets that cannot be reflected in the option markets. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS Characteristics. The Fund may purchase and sell futures contracts on interest rates and indices of debt and equity securities or other financial indicators and purchase and sell (write) put and call options on such futures contracts traded on recognized domestic exchanges as a hedge against anticipated interest rate changes or movements in equity markets. The sale of a futures contract creates an obligation by the Fund, as seller, to deliver the specific type of financial instrument called for in the contract at a specified future time for a specified price. Options on futures contracts are similar to options on securities except that an option on a futures contract gives the purchaser the right in return for the premium paid to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put). Margin Requirements. At the time a futures contract is purchased or sold, the Fund must allocate cash or securities as a deposit payment ("initial margin"). It is expected that the initial margin that the Fund will pay may range from approximately 1% to approximately 5% of the value of the instruments underlying the contract. In certain circumstances, however, such as during periods of high volatility, the Fund may be required by an exchange to increase the level of its initial margin payment. Additionally, initial margin requirements may be increased in the future pursuant to regulatory action. An outstanding futures contract is valued daily and the payment in cash of "variation margin" may be required, a process known as "marking to the market." Transactions in listed options and futures are usually settled by entering into an offsetting transaction, and are subject to the risk that the position may not be able to be closed if no offsetting transaction can be arranged. Limitations on Use of Futures Contracts and Options on Futures Contracts. The Fund's use of futures contracts and options on futures contracts will in all cases be consistent with applicable regulatory requirements and in particular, the rules and regulations of the CFTC. The Fund may enter into futures contracts or options thereon for purposes other than bona fide hedging if, immediately thereafter, the sum of the amount of its initial margin and premiums on open contracts and A-2 72 options would not exceed 5% of the liquidation value of the Fund's portfolio; provided, further, that in the case of an option that is in-the-money at the time of the purchase, the in-the-money amount may be excluded in calculating the 5% limitation. Also, when required, a segregated account of cash or cash equivalents will be maintained and marked to market in an amount equal to the market value of the contract. The Investment Adviser and the Sub-Adviser may be required to comply with such different standards as may be established from time to time by CFTC (or Korean regulators) rules and regulations with respect to the purchase and sale of futures contracts and options thereon. CURRENCY TRANSACTIONS The Fund may deal in forward currency contracts and other currency transactions such as futures contracts, options, options on futures contracts and swaps for any purpose consistent with its investment objective and policies. Currency transactions include currency forward contracts, exchange listed currency futures contracts, exchange listed and OTC options on currencies and currency swaps. A forward currency contract involves a privately negotiated obligation to purchase or sell (with delivery generally required) a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. A currency swap is an agreement to exchange cash flows based on the notional difference among two or more currencies and operates similarly to an interest rate swap, which is described below. The Fund may enter into currency transactions with counterparties that are determined to be creditworthy by Fidelity. The following discussion summarizes some, but not all, of the possible currency management strategies involving forward contracts, options on currencies and futures on currencies that could be used by the Fund. Transaction hedging is entering into a currency transaction with respect to specific assets or liabilities of the Fund, which will generally arise in connection with the purchase or sale of the Fund's portfolio securities or the receipt of income from them. Position hedging is entering into a currency transaction with respect to portfolio security positions denominated or generally quoted in that currency. The Fund may cross-hedge currencies by entering into transactions to purchase or sell one or more currencies that are expected to decline in value relative to other currencies to which the Fund has or in which the fund expects to have portfolio exposure. To reduce the effect of currency fluctuations on the value of existing or anticipated holdings of portfolio securities, the Fund may also engage in proxy hedging. Proxy hedging is often used when the currency to which the Fund's portfolio is exposed is difficult to hedge or to hedge against the U.S. dollar. Proxy hedging entails entering into a forward contract to sell a currency whose changes in value are generally considered to be well correlated with a currency or currencies in which some or all of the Fund's portfolio securities are or are expected to be denominated, and to buy U.S. dollars. Currency transactions can result in losses to the Fund if the currency being hedged fluctuates in value to a degree or in a direction that is not anticipated. Further, the risk exists that the perceived linkage between various currencies may not be present or may not be present during the particular time that the Fund is engaging in proxy hedging. If the Fund enters into a currency hedging transaction, the Fund will comply with the asset segregation requirements described below. The Fund may enter into forward contracts to shift its investment exposure from one currency into another currency that is expected to perform better relative to the U.S. dollar. For example, if the Fund held investments denominated in or otherwise exposed to the Japanese Yen, the Fund could enter into forward contracts to sell Japanese Yen and purchase Hong Kong Dollars. This type of strategy, sometimes known as a "cross-hedge," will tend to reduce or eliminate exposure to the currency that is sold, and increase exposure to the currency that is purchased, much as if the Fund had sold a security denominated in one currency and purchased an equivalent security denominated in another. Cross-hedges protect against losses resulting from a decline in the hedged currency, but will cause the Fund to assume the risk of fluctuations in the value of the currency it purchases. Successful use of forward currency contracts will depend on the Investment Adviser and the Sub-Adviser's skill in analyzing and predicting currency values. Forward contracts may substantially change the Fund's investment exposure to changes in currency exchange rates, and could result in losses to the Fund if currencies do not perform as the Sub-Adviser anticipates. For example, if a currency's value rose at a time when the Investment Adviser and the Sub-Adviser had hedged the Fund by selling that currency in exchange A-3 73 for U.S. dollars, the Fund would be unable to participate in the currency's appreciation. If the Investment Adviser or the Sub-Adviser hedges currency exposure through proxy hedges, the Fund could realize currency losses from the hedge and the security position at the same time if the two currencies do not move in tandem. Similarly, if the Investment Adviser or the Sub-Adviser increases the Fund's exposure to a foreign currency, and that currency's value declines, the Fund will realize a loss. There is no assurance that the Investment Adviser's or the Sub-Adviser's use of forward currency contracts will be advantageous to the Fund, or that they will hedge at an appropriate time. Currency transactions are subject to risks different from those of other portfolio transactions. Because currency control is of great importance to the issuing governments and influences economic planning and policy, purchases and sales of currency and related instruments can be adversely affected by government exchange controls, limitations or restrictions on repatriation of currency, and manipulations or exchange restrictions imposed by governments. These forms of governmental actions can result in losses to the Fund if it is unable to deliver or receive currency or monies in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Buyers and sellers of currency futures are subject to the same risks that apply to the use of futures generally. Further, settlement of a currency futures contract for the purchase of most currencies must occur at a bank based in the issuing nation. Trading options on currency futures is relatively new, and the ability to establish and close out positions on these options is subject to the maintenance of a liquid market that may not always be available. Currency exchange rates may fluctuate based on factors extrinsic to that country's economy. INTEREST RATE TRANSACTIONS The Fund may enter into interest rate swaps and may purchase or sell interest rate caps and floors. The Fund would enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio, to manage the duration of its portfolio or to protect against any increase in the price of the securities the Fund anticipates purchasing at a later date or for any other purpose consistent with its objective. The Fund may enter into interest rate swaps, caps and floors on either an asset-based or liability-based basis, depending on whether it is hedging its assets or liabilities, and will usually enter into interest rate swaps on a net basis, i.e., the two payments are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments on the payment date. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. Caps and floors are more recent innovations for which standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps. EQUITY SWAPS AND RELATED TRANSACTIONS The Fund may enter into equity swaps and may purchase or sell equity caps and floors. The Fund would enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio, or to protect against any increase in the price of the securities the Fund anticipates purchasing at a later date or for any other purpose consistent with its objective. The Fund may enter into equity swaps, caps and floors on either an asset-based or liability-based basis, depending on whether it is hedging its assets or liabilities, and will usually enter in equity swaps on a net basis, i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments on the payment date. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. Caps and floors are more recent innovations for which standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps. Equity swaps, caps and floors generally will be considered illiquid. In such instances, investment in such equity swaps, caps and floors will be governed by the Fund's policy on A-4 74 investment in illiquid securities and such securities will be included in the 35% limit on investment in illiquid securities by the Fund. The staff of the Securities and Exchange Commission has taken the position that equity swaps, caps and floors are illiquid securities. See "Risk Factors and Special Considerations--Thinly Traded Markets and Illiquid Investments" and "Investment Objective and Policies--Other Investments." RISKS OF DERIVATIVES The use of Derivatives involves special risks, including possible default by the other party to the transaction, illiquidity and, to the extent the Investment Adviser's or the Sub-Adviser's view as to certain market movements is incorrect, the risk that the use of Derivatives could result in losses greater than if such investment strategies had not been used. The use of currency transactions could result in the Fund's incurring losses as a result of the imposition of exchange controls, suspension of settlements, or the inability to deliver or receive a specified currency. The use of options and futures transactions entails certain special risks. In particular, the variable degree of correlation between price movements in the related portfolio position of the Fund could create the possibility that losses on the hedging instrument are greater than gains in the value of the Fund's position. In addition, futures and options markets could be illiquid in some circumstances and certain over-the-counter options could have no markets. As a result, in certain markets, the Fund might not be able to close out a position without incurring substantial losses. Although the Fund's use of futures and options transactions for hedging purposes should tend to minimize the risk of loss due to a decline in the value of the hedged position at the same time it will tend to limit any potential gain to the Fund that might result from an increase in value of the position. Finally, the daily variation margin requirements for futures contracts create a greater ongoing potential financial risk than would purchases of options, in which case the exposure is united to the cost of the initial premium and transaction costs. Losses resulting from Derivatives will reduce the Fund's net asset value, and possibly income, and the losses can be greater than if the Derivatives had not been used. When conducted outside the United States, the use of Derivatives may not be regulated as rigorously as in the United States, may not involve a clearing mechanism and related guarantees, and will be subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities, currencies and other instruments. The value of positions taken as part of non-U.S. Hedging also could be adversely affected by: (1) other complex foreign political, legal and economic factors; (2) lesser availability of data on which to make trading decisions in the United States; (3) delays in the Fund's ability to act upon economic events occurring in foreign markets during non-business hours in the United States; (4) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States; and (5) lower trading volume and liquidity. SEGREGATION AND COVER REQUIREMENTS Many of the Derivatives which may be used by the Fund are subject to segregation and coverage requirements established by either the CFTC or the Commission, with the result that, if the Fund does not hold the instrument underlying the futures contract or option or another offsetting position, the Fund may be required to segregate on an ongoing basis with its custodian, cash, U.S. government securities, or other liquid high grade debt obligations in an amount at least equal to the Fund's obligations with respect to such instruments. Such amounts will fluctuate as the market value of the obligations increases or decreases. The segregation requirement can result in the Fund maintaining positions it would otherwise liquidate and consequently segregating assets with respect thereto at a time when it might be disadvantageous to do so. In addition, with respect to futures contracts purchased by the Fund, the Fund will also be subject to the segregation requirements with respect to the value of the instruments underlying the futures contract. In general, those Derivatives in which the Fund may invest which involve the possibility of leverage are subject to segregation and coverage requirements that do not require offsetting positions and are not subject to such requirements. OTHER LIMITATIONS The degree of the Fund's use of Derivatives may be limited by certain provisions of the Code. See "Taxation" herein and in the Prospectus. A-5 75 APPENDIX B DEBT RATINGS A description of the rating policies of Moody's and S&P with respect to bonds and debentures appears below. MOODY'S INVESTORS SERVICE'S CORPORATE BOND RATINGS Aaa -- Bonds which are rated Aaa are judged to be of the best quality and carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin, and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A -- Bonds which are rated A possess many favorable investment qualities and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa -- Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance and other terms of the contract over any long period of time may be small. Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds which are rated Ca represent obligations which are speculative in high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's applies numerical modifiers "1", "2" and "3" to certain of its rating classifications. The modifier "1" indicates that the security ranks in the higher end of its generic rating category; the modifier "2" indicates a midrange ranking; and the modifier "3" indicates that the issue ranks in the lower end of its generic rating category. STANDARD & POOR'S CORPORATE BOND RATINGS AAA -- This is the highest rating assigned by Standard & Poor's to a debt obligation and indicates an extremely strong capacity to repay principal and pay interest. B-1 76 AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to pay principal and interest is very strong, and differs from AAA issues only in small degree. A -- Bonds rated A have a strong capacity to repay principal and pay interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Bonds rated BBB are regarded as having an adequate capacity to repay principal and pay interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to repay principal and pay interest for bonds in this category than for higher rated categories. BB-B-CCC-CC-C -- Bonds rated BB, B, CCC and CC, and C are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. CI -- Bonds rated CI are income bonds on which no interest is being paid. D -- Bonds rated D are in default. The D category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired unless S&P believes that such payments will be made during such grace period. The D rating is also used upon the filing of a bankruptcy petition if debt service payments are jeopardized. The ratings set forth above may be modified by the addition of a plus or minus to show relative standing within the major rating categories. MOODY'S INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS Prime-1 -- Issuers (or related supporting institutions) rated Prime-1 have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries, high rates of return on funds employed, conservative capitalization structures with moderate reliance on debt and ample asset protection, broad margins in earnings coverage of fixed financial charges and high internal cash generation, and well-established access to a range of financial markets and assured sources of alternate liquidity. Prime-2 -- Issuers (or related supporting institutions) rated Prime-2 have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternative liquidity is maintained. Prime-3 -- Issuers (or related supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and the requirement for relatively high financial leverage. Adequate alternate liquidity is maintained. Not Prime -- Issuers rated Not Prime do not fall within any of the Prime rating categories. B-2 77 STANDARD & POOR'S COMMERCIAL PAPER RATINGS A S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. Ratings are graded into several categories, ranging from "A-1" for the highest quality obligations to "D" for the lowest. The four categories are as follows: A-1 -- This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus (+) sign designation. A-2 -- Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated "A-1". A-3 -- Issues carrying this designation have adequate capacity for timely payment. They are, however, somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B -- Issues rated "B" are regarded as having only speculative capacity for timely payment. C -- This rating is assigned to short-term debt obligations with a doubtful capacity for payment. D -- Debt rated "D" is in payment default. The "D" rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. B-3 78 PART C--OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (1) Financial Statements [INSERT] (2) Exhibits (a) -- Articles of Incorporation+ (b) -- By-Laws, as amended+ (c) -- Not applicable (d) (1) -- Specimen certificate for Common Stock, par value $.001 per share+ (2) -- Form of Subscription Certificate* (3) -- Form of Beneficial Owner Listing Certification* (4) -- Form of Nominee Holder Over-Subscription Form/ Form of DTC Participant Over-Subscription Form* (5) -- Form of Notice of Guaranteed Delivery* (6) -- Form of Subscription Agent Agreement** (7) -- Form of Information Agent Agreement** (e) -- Dividend Reinvestment and Cash Purchase Plan+ (f) -- Not applicable (g) (1) -- Investment Management Agreement dated October 25, 1994, between Fidelity Advisor Korea Fund, Inc. and Fidelity Management & Research Company+ (2) -- Investment Advisory Agreement dated October 25, 1994, among Fidelity International Investment Advisory and Fidelity Management & Research Company and Fidelity Advisory Korea Fund, Inc.+ (3) -- Sub-Investment Advisory Agreement among Fidelity International Investment Advisors and Fidelity Investments Japan Limited and Fidelity Advisor Korea Fund, Inc.+ (h) (1) -- Form of Dealer Manager Agreement** (2) -- Form of Soliciting Dealer Agreement** (i) -- Not applicable (j) -- Custodian Agreement, dated as of May 31, 1995, between Fidelity Advisor Korea Fund, Inc. and The Chase Manhattan Bank, N.A.+ (k) (1) -- Transfer Agency and Service Agreement, dated as of October 25, 1994, between Fidelity Advisor Korea Fund, Inc. and State Street Bank and Trust Company+ (2) -- Administration Agreement, dated as of October 25, 1994, between Fidelity Advisor Korea Fund, Inc. and Fidelity Service Co.+ (l) (1) -- Opinion and Consent of Rogers & Wells** (2) -- Opinion and Consent of Piper & Marbury L.L.P.** (3) -- Opinion and Consent of Shin & Kim** (m) -- Not applicable (n) -- Consent of Independent Accountants** (o) -- Not applicable (p) -- Not applicable (q) -- Not applicable
- --------------- * Filed herewith. **To be filed by Amendment. + Filed herewith pursuant to the EDGAR (Electronic Data Gathering, Analysis and Retrieval) phase-in requirements. C-1 79 ITEM 25. MARKETING ARRANGEMENTS See Exhibit 2(h) to this Registration Statement. ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the estimated expenses to be incurred in connection with the offering described in this Registration Statement. U.S. Securities and Exchange Commission registration fees............... $ New York Stock Exchange listing fee..................................... Printing (other than stock certificates)................................ * Engraving and printing stock certificates............................... * Fees and expenses of qualification under state securities laws (including fees of counsel)........................................... * Auditing and accounting fees............................................ * Dealer Managers' expenses allowance..................................... * Subscription Agent fee and expenses..................................... * Information Agent fee and expenses...................................... * Legal fees and expenses................................................. * NASD fee................................................................ * Miscellaneous........................................................... * -------- Total.............................................................. $ * ========
- --------------- * To be provided by amendment. ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT Not applicable ITEM 28. NUMBER OF HOLDERS OF SECURITIES As of the effective date of the Registration Statement:
NUMBER OF TITLE OF CLASS RECORD HOLDERS --------------------------------------------------------------------- -------------- Common Stock, $.001 par value........................................
ITEM 29. INDEMNIFICATION Section 2-418 of the General Corporation Law of the State of Maryland, Article SEVENTH of the Fund's Articles of Incorporation, Article VII of the Fund's By-Laws, the Dealer Manager Agreement and the Administration Agreement provide for indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to directors, officers and controlling persons of the Fund, pursuant to the foregoing provisions or otherwise, the Fund has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Fund of expenses incurred or paid by a director, officer or controlling person of the Fund in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Fund will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. C-2 80 ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER AND INVESTMENT ADVISER The description of the business of Fidelity Management & Research Company ("FMR") and Fidelity International Investment Advisors ("FIIA") is set forth under the caption "Management of the Fund" in the Prospectus forming part of this Registration Statement. The information as to the directors and officers of FMR and FIIA is set forth in their respective Form ADVs filed with the Securities and Exchange Commission (File No. 801-7884) and (File No. 801-21347), each as amended as of the date hereof is incorporated herein by reference. ITEM 31. LOCATION OF ACCOUNTS AND RECORDS Fidelity Advisor Korea Fund, Inc. 82 Devonshire Street, Boston, Massachusetts 02109 (Fund's Articles of Incorporation and By-Laws) Fidelity Management & Research Company 82 Devonshire Street, Boston, Massachusetts 02109 (with respect to its services as Investment Manager) Fidelity International Investment Advisors Limited Pembroke Hall, 42 Crow Lane, Pembroke, Bermuda (with respect to its service as Investment Adviser) Fidelity Investments Japan Limited 19th Floor, Shiroyama JT Mori Building, 4-3-1 Toranamon, Minato-ku, Tokyo 105, Japan (with respect to its service as Sub-Adviser) Fidelity Service Co. 82 Devonshire Street, Boston, Massachusetts 02109 (with respect to its services as Administrator) The Chase Manhattan Bank 270 Park Avenue, New York, New York 10017-2070 (with respect to its services as Custodian for the Fund's U.S. assets) State Street Bank and Trust Company Two Heritage Drive, Quincy, Massachusetts 02171 (with respect to its services as Transfer Agent) ITEM 32. MANAGEMENT SERVICES Not applicable ITEM 33. UNDERTAKINGS (a) The Fund undertakes to suspend offering its shares until it amends its prospectus contained herein if (1) subsequent to the effective date of its registration statement, the net asset value per share declines more than 10 percent from its net asset value per share as of the effective date of this registration statement or (2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus. C-3 81 (b) The Fund hereby undertakes: (1) That for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Fund under Rule 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective; (2) That for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To send by first class mail or other means designated to ensure equally prompt delivery, within two business days of receipt of written oral request, any Statement of Additional Information. C-4 82 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Hong Kong on the 10th day of October, 1996. FIDELITY ADVISOR KOREA FUND, INC. By: /s/ EDWARD C. JOHNSON 3D ------------------------------- Edward C. Johnson 3d, President Chairman of the Board KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Laurence E. Cranch and Leonard B. Mackey, Jr., and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all Amendments (including pre-effective and post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------- -------------------------------------- ----------------- /s/ EDWARD C. JOHNSON 3D Director and President October 10, 1996 - ------------------------------------- Edward C. Johnson 3d /s/ J. GARY BURKHEAD Director and Senior Vice President October 10, 1996 - ------------------------------------- (Principal Executive Officer) J. Gary Burkhead /s/ KENNETH A. RATHGEBER Treasurer (Principal Financial and October 10, 1996 - ------------------------------------- Accounting Officer) Kenneth A. Rathgeber /s/ H.F. VAN DEN HOVEN Director October 10, 1996 - ------------------------------------- H.F. Van den Hoven /s/ BERTRAM H. WITHAM, JR. Director October 10, 1996 - ------------------------------------- Bertram H. Witham, Jr. /s/ DAVID L. YUNICH Director October 10, 1996 - ------------------------------------- David L. Yunich
C-5 EX-99.2A 2 ARTICLES OF INCORPORATION 1 ARTICLES OF INCORPORATION OF FIDELITY ADVISOR KOREA FUND, INC. THE UNDERSIGNED, Larry P. Medvinsky, whose post office address is c/o Rogers & Wells, 200 Park Avenue, New York, New York 10166, being at least eighteen years of age, does hereby act as an incorporator, under and by virtue of the general laws of the State of Maryland authorizing the formation of corporations and with the intent of forming a corporation. FIRST: The name of the corporation (hereinafter called the "Corporation") is Fidelity Advisor Korea Fund, Inc. SECOND: The Corporation was formed for the following purposes: 1. To act as a closed-end investment company of the management type registered as such with the Securities and Exchange Commission pursuant to the Investment Company Act of 1940, as amended. (2) To hold, invest and reinvest its assets in securities and other investments or to hold all or part of its assets in cash. (3) To issue and sell shares of its capital stock in such amounts and on such terms and conditions and for such purposes and for such amount or kind of consideration as may now or hereafter be permitted by law. (4) To enter into management, supervisory, advisory, administrative, custody, underwriting and other contracts and otherwise do business with other corporations, and subsidiaries or affiliates thereof, or any other firm or organization, notwithstanding that the Board of Directors of the Corporation may be composed in part of officers, directors or employees of such corporation, firm or organization and, in the absence of fraud, the Corporation and such corporation, firm or organization may deal freely with each other and neither such management, supervisory, advisory, administrative or underwriting contract nor any other contract or transaction between the Corporation and such corporation, firm or organization shall be invalidated or in any way affected thereby. (5) To do any and all additional acts and exercise any and all additional powers or rights as may be necessary, incidental, appropriate or desirable for the accomplishment of all or any of the foregoing purposes. The Corporation shall be authorized to exercise and generally to enjoy all of the powers, rights and privileges granted to, or conferred upon, corporations by the General Laws of the State of Maryland now or hereafter in force. THIRD: The post office address of the place at which the principal office of the Corporation in the State of Maryland is located is c/o P&M Agent Corp., 36 South Charles Street, Baltimore, Maryland 21201. The name of the Corporation's resident agent is P&M Agent Corp., and its post office address is P&M Agent Corp., 36 South Charles Street, Baltimore, Maryland 21201. Said resident agent is a corporation of the State of Maryland. FOURTH: SECTION 1. (1) The total number of shares of capital stock that the Corporation has authority to issue is 100,000,000 shares of capital stock of the par value of $.001 each, having an aggregate par value of $100,000, all of which 100,000,000 shares are initially classified as "Common Stock." (2) The following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the Common Stock of the Corporation: (a) Each share of Common Stock shall have one vote, and, except as otherwise provided in respect of any class of stock hereafter classified or reclassified, the exclusive voting power for all purposes shall be vested in the holders of the Common Stock. (b) Subject to the provisions of law and any preferences of any class of stock hereafter classified or reclassified, dividends, including dividends payable in shares of another class of the Corporation's stock, 2 may be paid on the Common Stock of the Corporation at such time and in such amounts as the Board of Directors may deem advisable. (c) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation and the amount to which the holders of any class of stock hereafter classified or reclassified having a preference on distributions in the liquidation, dissolution or winding up of the Corporation shall be entitled, together with the holders of any other class of stock hereafter classified or reclassified not having a preference on distributions in the liquidation, dissolution or winding up of the Corporation, to share ratably in the remaining net assets of the Corporation. SECTION 2. (1) Without the assent or vote of the stockholders, the Board of Directors shall have the authority by resolution to classify and reclassify any authorized but unissued shares of capital stock from time to time by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of the capital stock. (2) The foregoing powers of the Board of Directors to classify and reclassify any of the shares of capital stock shall include, without limitation, subject to the provisions of the Charter, authority to classify or reclassify any unissued shares of such stock into a class or classes of preferred stock, preference stock, special stock or other stock, and to divide and classify shares of any class into one or more series of such class, by determining, fixing, or altering one or more of the following: (a) The distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other class or series shall become part of the authorized capital stock and be subject to classification and reclassification as provided in this subparagraph; (b) Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative and as participating or non-participating; (c) Whether or not shares of such class or series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights; (d) Whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provisions for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine; (e) Whether or not shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof; (f) The rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of stock; 2 3 (g) Whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this subparagraph, and, if so, the terms and conditions thereof; and (h) Any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the Charter of the Corporation. (3) For the purposes hereof and of any articles supplementary to the Charter providing for the classification or reclassification of any shares of capital stock or of any other charter document of the Corporation (unless otherwise provided in any such articles or document), any class or series of stock of the Corporation shall be deemed to rank: (a) prior to another class or series either as to dividends or upon liquidation, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable on liquidation, dissolution or winding up, as the case may be, in preference or priority to holders of such other class or series; (b) on a parity with another class or series either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation price per share thereof be different from those of such others, if the holders of such class or series of stock shall be entitled to receipt of dividends or amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or redemption or liquidation prices, without preference or priority over the holders of such other class or series; and (c) junior to another class or series either as to dividends or upon liquidation, if the rights of the holders of such class or series shall be subject or subordinate to the rights of the holders of such other class or series in respect of the receipt of dividends or the amounts distributable upon liquidation, dissolution or winding up, as the case may be. (4) The provisions of Section 2 of this Article Fourth may not be amended, altered or repealed except by vote of three-fourths of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon. SECTION 3. The presence in person or by proxy of the holders of record of a majority of the aggregate number of shares of capital stock issued and outstanding and entitled to vote thereat shall constitute a quorum for the transaction of any business at all meetings of the stockholders except as otherwise provided by law or in these Articles of Incorporation. SECTION 4. Notwithstanding any provision of the General Laws of the State of Maryland requiring action to be taken or authorized by the affirmative vote of the holders of a designated proportion greater than a majority of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon, such action shall, except as otherwise provided in these Articles of Incorporation, be valid and effective if taken or authorized by the affirmative vote of the holders of a majority of the total number of shares of capital stock of the Corporation outstanding and entitled to vote thereupon voting together as a single class. SECTION 5. No holder of shares of capital stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any part of any new or additional issue of stock of any class, or of rights or options to purchase any stock, or of securities convertible into, or carrying rights or options to purchase, stock of any class, whether now or hereafter authorized or whether issued for money, for a consideration other than money or by way of a dividend or otherwise, and all such rights are hereby waived by each holder of capital stock and of any other class of stock or securities which may hereafter be created. SECTION 6. All persons who shall acquire capital stock in the Corporation shall acquire the same subject to the provisions of these Articles of Incorporation. SECTION 7. (1) In addition to the affirmative vote of three-fourths of the entire Board of Directors, the affirmative vote of at least (i) three-fourths of the shares of capital stock of the Corporation outstanding and 3 4 entitled to vote thereupon voting together as a single class and (ii) in the case of a Business Combination (as defined below), 66 2/3% of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon voting together as a single class other than votes entitled to be cast thereon by an Interested Party (as defined below) who is, or whose Affiliate (as defined below), is a party to a Business Combination (as defined below) or an Affiliate or associate of the Interested Party, shall be required to advise, approve, adopt or authorize any of the following: (i) a merger, consolidation or statutory share exchange of the Corporation with or into another person; (ii) issuance or transfer by the Corporation (in one or a series of transactions in any 12 month period) of any securities of the Corporation to any person or entity for cash, securities or other property (or combination thereof) having an aggregate fair market value of $1,000,000 or more, excluding issuances or transfers of debt securities of the Corporation, sales of securities of the Corporation in connection with a public offering, issuances of securities of the Corporation pursuant to a dividend reinvestment plan adopted by the Corporation, issuances of securities of the Corporation upon the exercise of any stock subscription rights distributed by the Corporation and portfolio transactions effected by the Corporation in the ordinary course of business; (iii) sale, lease, exchange, mortgage, pledge, transfer or other disposition by the Corporation (in one or a series of transactions in any 12 month period) to or with any person or entity of any assets of the Corporation having an aggregate fair market value of $1,000,000 or more except for portfolio transactions (including pledges of portfolio securities in connection with borrowings) effected by the Corporation in the ordinary course of its business (transactions within clauses (i), (ii) and (iii) above being known individually as a "Business Combination"); (iv) the voluntary liquidation or dissolution of the Corporation, or an amendment to these Articles of Incorporation to terminate the Corporation's existence; or (v) unless the 1940 Act or federal law requires a lesser vote, any shareholder proposal as to specific investment decisions made or to be made with respect to the Corporation's assets as to which stockholder approval is required under Federal or Maryland law. However, a three-fourths shareholder vote will not be required with respect to the foregoing transactions (other than those set forth in (v) above) if they are approved by a vote of three-fourths of the Continuing Directors (as defined below). In that case, if Maryland law requires shareholder approval, the affirmative vote of a majority of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon voting together as a single class shall be required. For purposes of this Article Fourth the following terms shall have the meanings prescribed thereto: (i) "Continuing Director" means any member of the Board of Directors of the Corporation who is not an Interested Party or an Affiliate of an Interested Party and has been a member of the Board of Directors for a period of at least 12 months, or has been a member of the Board of Directors since April 1, 1994, or is a successor of a Continuing Director who is unaffiliated with an Interested Party and is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on the Board of Directors. (ii) "Interested Party" shall mean any person, other than an investment company advised by the Corporation's initial investment manager or any of its Affiliates, which enters, or proposes to enter, into a Business Combination with the Corporation. (iii) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended. (2) Notwithstanding any other provisions of these Articles of Incorporation, the affirmative vote of three-fourths of the entire Board of Directors shall be required to advise, approve, adopt or authorize the conversion of the Corporation from a closed-end company to an open-end company, and any amendments 4 5 necessary to effect the conversion. Such conversion or any such amendment shall also require the approval of the holders of three-fourths of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon voting together as a single class unless approved by a vote of three-fourths of the Continuing Directors, in which event such conversion shall require the approval of the holders of a majority of the votes entitled to be cast thereon by stockholders of the Corporation. (3) The provisions of this Section 7 of this Article Fourth may not be amended, altered or repealed except by the approval of at least three-fourths of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon voting together as a single class. FIFTH: The initial number of directors of the Corporation is three (3), and the name of the directors who shall act as such until the first annual meeting or until their successor or successors are duly elected and qualify are Edward C. Johnson 3d, J. Gary Burkhead and Gary L. French. The By-Laws of the Corporation may fix the number of directors at a number other than three and may authorize the Board of Directors, by the vote of a majority of the entire Board of Directors, to increase or decrease the number of directors within a limit specified in the By-Laws, provided that in no case shall the number of directors be less than the number prescribed by law, and to fill the vacancies created by any such increase in the number of directors. Unless otherwise provided by the By-Laws of the Corporation, the directors of the Corporation need not be stockholders. A director may be removed only with cause, and any such removal may be made only by the vote of three-fourths of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon. The provisions of this Article Fifth may not be amended, altered or repealed except by a vote of three-fourths of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon voting together as a single class. SIXTH SECTION 1. All corporate powers and authority of the Corporation (except as at the time otherwise provided by statute, by these Articles of Incorporation or by the By-Laws) shall be vested in and exercised by the Board of Directors. SECTION 2. The Board of Directors shall have the sole power to adopt, alter or repeal the By-Laws of the Corporation except to the extent that the By-Laws otherwise provide. The provisions of this Section 2 of this Article Sixth may not be amended, altered or repealed except by vote of three-fourths of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon voting together as a single class. SECTION 3. The Board of Directors shall have the power from time to time to determine whether and to what extent, and at what times and places and under what conditions and regulations, the accounts and books of the Corporation (other than the stock ledger) or any of them shall be open to the inspection of stockholders; and no stockholder shall have any right to inspect any account, book or document of the Corporation except to the extent permitted by statute or the By-Laws. SECTION 4. The Board of Directors shall have the power to determine, as provided herein, or if a provision is not made herein, in accordance with generally accepted accounting principles, what constitutes net income, total assets and the net asset value of the shares of capital stock of the Corporation. SECTION 5. The Board of Directors shall have the power to distribute dividends from the funds legally available therefor in such amounts, if any, and in such manner to the stockholders of record as of a date, as the Board of Directors may determine. SECTION 6. Without the assent or vote of the stockholders, the Board of Directors shall have the power to authorize the issuance from time to time of shares of the capital stock of any class of the Corporation, whether now or hereafter authorized, and securities convertible into shares of capital stock of the Corporation of any class or classes, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable. SECTION 7. Without the assent or vote of the stockholders, the Board of Directors shall have the power to authorize and issue obligations of the Corporation, secured or unsecured, as the Board of Directors may 5 6 determine, and to authorize and cause to be executed mortgages and liens upon the real or personal property of the Corporation. SECTION 8. The provisions of Sections 6 and 7 of this Article Sixth may not be amended, altered or repealed except by vote of three-fourths of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon voting together as a single class. SEVENTH: SECTION 1. To the fullest extent permitted by Maryland statutory or decisional law, subject to the requirements of the Investment Company Act of 1940, as amended, no director or officer of the Corporation shall be personally liable to the Corporation or its security holders for money damages. This limitation on liability applies to events occurring at the time a person serves as a director or officer of the Corporation whether or not such person is a director or officer at the time of any proceeding in which such liability is asserted. No amendment of these Articles of Incorporation or repeal of any provision hereof shall limit or eliminate the benefits provided to directors and officers under this provision in connection with any act or omission that occurred prior to such amendment or repeal. SECTION 2. The Corporation shall indemnify, to the fullest extent permitted by law (including the Investment Company Act of 1940) as currently in effect or as the same may hereafter be amended, any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation or serves or served at the request of the Corporation as a director or officer of any other enterprise. To the fullest extent permitted by law (including the Investment Company Act of 1940) as currently in effect or as the same may hereafter be amended, expenses incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this Section 2 of this Article Seventh shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director or officer as provided above. No amendment of this Section 2 of this Article Seventh shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this Section 2 of this Article Seventh, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director or officer of the Corporation which imposes duties on, or involves services by, such director or officer with respect to any other enterprise, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. The provisions of this Section 2 of this Article Seventh shall be in addition to the other provisions of this Article Seventh. SECTION 3. Nothing in this Article Seventh protects or purports to protect any director or officer against any liability to the Corporation or its security holders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. SECTION 4. Each section or portion thereof of this Article Seventh shall be deemed severable from the remainder, and the invalidity of any such section or portion shall not affect the validity of the remainder of this Article. EIGHTH: The duration of the Corporation shall be perpetual. NINTH: From time to time, any of the provisions of these Articles of Incorporation may be amended, altered or repealed (including any amendment that changes the terms of any of the outstanding stock by classification, reclassification or otherwise), and other provisions that may, under the statutes of the State of 6 7 Maryland at the time in force, be lawfully contained in articles of incorporation may be added or inserted, upon the vote of the holders of a majority of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon. If these Articles of Incorporation specifically so provide, however, any such amendment, alteration, repeal, addition or insertion may be affected only upon the vote of three-fourths of the shares of capital stock of the Corporation outstanding and entitled to vote thereupon. The provisions of the prior sentence may not be amended, altered or repealed except by vote of three-fourths of the shares of capital stock of the corporation outstanding and entitled to vote thereupon. All rights at any time conferred upon the stockholders of the Corporation by these Articles of Amendment and Restatement are subject to the provisions of this Article Ninth. IN WITNESS WHEREOF, I have executed these Articles of Incorporation acknowledging the same to be my act, on May 24, 1994. /s/ LARRY P. MEDVINSKY -------------------------------------- Larry P. Medvinsky, Incorporator Witness: /s/ JOSEPH C. BENEDETTI - ------------------------------------- Joseph C. Benedetti 7 EX-99.2B 3 BY-LAWS, AMENDED 1 - -------------------------------------------------------------------------------- FIDELITY ADVISOR KOREA FUND, INC. A MARYLAND CORPORATION BY-LAWS, AS AMENDED NOVEMBER 30, 1994 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ------ ARTICLE I Stockholders.................................................................. 1 Section 1.1. Place of Meeting................................................... 1 Section 1.2. Annual Meetings.................................................... 1 Section 1.3. Special Meetings................................................... 1 Section 1.4. Notice of Meetings of Stockholders................................. 1 Section 1.5. Record Dates....................................................... 1 Section 1.6. Quorum; Adjournment of Meetings.................................... 1 Section 1.7. Voting and Inspectors.............................................. 2 Section 1.8. Conduct of Stockholders' Meetings.................................. 2 Section 1.9. Concerning Validity of Proxies, Ballots, etc....................... 2 Section 1.10. Action Without Meeting............................................. 2 ARTICLE II Board of Directors........................................................... 2 Section 2.1. Function of Directors.............................................. 2 Section 2.2. Number of Directors................................................ 3 Section 2.3. Classes of Directors............................................... 3 Section 2.4. Vacancies.......................................................... 3 Section 2.5. Increase or Decrease in Number of Directors........................ 3 Section 2.6. Place of Meeting................................................... 3 Section 2.7. Regular Meetings................................................... 3 Section 2.8. Special Meetings................................................... 3 Section 2.9. Notices............................................................ 3 Section 2.10. Quorum............................................................. 3 Section 2.11. Executive Committee................................................ 4 Section 2.12. Other Committees................................................... 4 Section 2.13. Telephone Meetings................................................. 4 Section 2.14. Action Without a Meeting........................................... 4 Section 2.15. Compensation of Directors.......................................... 4 ARTICLE III Officers.................................................................... 4 Section 3.1. Executive Officers................................................. 4 Section 3.2. Term of Office..................................................... 5 Section 3.3. Powers and Duties.................................................. 5 Section 3.4. Surety Bonds....................................................... 5 ARTICLE IV Capital Stock................................................................ 5 Section 4.1. Certificates for Shares............................................ 5 Section 4.2. Transfer of Shares................................................. 5 Section 4.3. Stock Ledgers...................................................... 5 Section 4.4. Transfer Agents and Registrars..................................... 5 Section 4.5. Lost, Stolen or Destroyed Certificates............................. 5
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PAGE ------ ARTICLE V Corporate Seal; Location of Offices; Books; Net Asset Value................... 6 Section 5.1. Corporate Seal..................................................... 6 Section 5.2. Location of Offices................................................ 6 Section 5.3. Books and Records.................................................. 6 Section 5.4. Annual Statement of Affairs........................................ 6 Section 5.5. Net Asset Value.................................................... 6 ARTICLE VI Fiscal Year and Accountant................................................... 6 Section 6.1. Fiscal Year........................................................ 6 Section 6.2. Accountant......................................................... 6 ARTICLE VII Indemnification and Insurance............................................... 6 Section 7.1. General............................................................ 6 Section 7.2. Indemnification of Directors and Officers.......................... 6 Section 7.3. Insurance.......................................................... 7 ARTICLE VIII Custodian.................................................................. 7 ARTICLE IX............................................................................... 7 ARTICLE X Amendment of By-Laws.......................................................... 8
ii 4 FIDELITY ADVISOR KOREA FUND, INC. BY-LAWS, AS AMENDED ARTICLE I STOCKHOLDERS SECTION 1.1. PLACE OF MEETING. All meetings of the stockholders should be held at the principal office of the Corporation in the State of Maryland or at such other place within the United States as may from time to time be designated by the Board of Directors and stated in the notice of such meeting. SECTION 1.2. ANNUAL MEETINGS. The annual meeting of the stockholders of the Corporation shall be held during the month of June of each year on such date and at such hour as may from time to time be designated by the Board of Directors and stated in the notice of such meeting, for the purpose of electing directors for the ensuing year and for the transaction of such other business as may properly be brought before the meeting. SECTION 1.3. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board, the President, or a majority of the Board of Directors. Special meetings of stockholders shall also be called by the Secretary upon receipt of the request in writing signed by stockholders holding not less than 25% of the votes entitled to be cast thereat. Such request shall state the purpose or purposes of the proposed meeting and the matters proposed to be acted on at such proposed meeting. The Secretary shall inform such stockholders of the reasonably estimated costs of preparing and mailing such notice of meeting and upon payment to the Corporation of such costs, the Secretary shall give notice as required in this Article to all stockholders entitled to notice of such meeting. No special meeting of stockholders need be called upon the request of the holders of common stock entitled to cast less than a majority of all votes entitled to be cast at such meeting to consider any matter which is substantially the same as a matter voted upon at any special meeting of stockholders held during the preceding twelve months. SECTION 1.4. NOTICE OF MEETINGS OF STOCKHOLDERS. Not less than ten days' and not more than ninety days' written or printed notice of every meeting of stockholders, stating the time and place thereof (and the purpose of any special meeting), shall be given to each stockholder entitled to vote thereat and to each other stockholder entitled to notice of the meeting by leaving the same with such stockholder or at such stockholder's residence or usual place of business or by mailing it, postage prepaid, and addressed to such stockholder at such stockholder's address as it appears upon the books of the Corporation. If mailed, notice shall be deemed to be given when deposited in the mail addressed to the stockholder as aforesaid. No notice of the time, place or purpose of any meeting of stockholders need be given to any stockholder who attends in person or by proxy or to any stockholder who, in writing executed and filed with the records of the meeting, either before or after the holding thereof, waives such notice. SECTION 1.5. RECORD DATES. The Board of Directors may fix, in advance, a record date for the determination of stockholders entitled to notice of or to vote at any stockholders meeting or to receive a dividend or be allotted rights or for the purpose of any other proper determination with respect to stockholders and only stockholders of record on such date shall be entitled to notice of and to vote at such meeting or to receive such dividends or rights or otherwise, as the case may be; provided, however, that such record date shall not be prior to ninety days preceding the date of any such meeting of stockholders, dividend payment date, date for the allotment of rights or other such action requiring the determination of a record date; and further provided that such record date shall not be prior to the close of business on the day the record date is fixed, that the transfer books shall not be closed for a period longer than 20 days, and that in the case of a meeting of stockholders, the record date or the closing of the transfer books shall not be less than ten days prior to the date fixed for such meeting. SECTION 1.6. QUORUM; ADJOURNMENT OF MEETINGS. The presence in person or by proxy of stockholders entitled to cast a majority of the votes entitled to be cast thereat shall constitute a quorum at all meetings of 5 the stockholders, except as otherwise provided in the Articles of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the holders of a majority of the stock present in person or by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote at such meeting shall be present, to a date not more than 120 days after the original record date. At such adjourned meeting at which the requisite amount of stock entitled to vote thereat shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. SECTION 1.7. VOTING AND INSPECTORS. At all meetings, stockholders of record entitled to vote thereat shall have one vote for each share of common stock standing in his name on the books of the Corporation (and such stockholders of record holding fractional shares, if any, shall have proportionate voting rights) on the date for the determination of stockholders entitled to vote at such meeting, either in person or by proxy appointed by instrument in writing subscribed by such stockholder or his duly authorized attorney. All elections shall be had and all questions decided by a majority of the votes cast at a duly constituted meeting, except as otherwise provided by statute or by the Articles of Incorporation or by these By-Laws. At any election of Directors, the Chairman of the meeting may, and upon the request of the holders of ten percent (10%) of the stock entitled to vote at such election shall, appoint two inspectors of election who shall first subscribe an oath or affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall after the election make a certificate of the result of the vote taken. No candidate for the office of Director shall be appointed such Inspector. SECTION 1.8. CONDUCT OF STOCKHOLDERS' MEETINGS. The meetings of the stockholders shall be presided over by the Chairman of the Board, or if he is not present, by the President, or if he is not present, by a Vice-President, or if none of them is present, by a Chairman to be elected at the meeting. The Secretary of the Corporation, if present, shall act as a Secretary of such meetings, or if he is not present, an Assistant Secretary shall so act; if neither the Secretary nor the Assistant Secretary is present, then the meeting shall elect its Secretary. SECTION 1.9. CONCERNING VALIDITY OF PROXIES, BALLOTS, ETC. At every meeting of the stockholders, all proxies shall be received and taken in charge of and all ballots shall be received and canvassed by the Secretary of the meeting, who shall decide all questions touching the qualification of voters, the validity of the proxies and the acceptance or rejection of votes, unless inspectors of election shall have been appointed by the Chairman of the meeting, in which event such inspectors of election shall decide all such questions. Unless a proxy provides otherwise, it is not valid for more than eleven months after its date. SECTION 1.10. ACTION WITHOUT MEETING. Any action to be taken by stockholders may be taken without a meeting if (1) all stockholders entitled to vote on the matter consent to the action in writing, (2) all stockholders entitled to notice of the meeting but not entitled to vote at it sign a written waiver of any right to dissent and (3) said consents and waivers are filed with the records of the meetings of stockholders. Such consent shall be treated for all purposes as a vote at the meeting. ARTICLE II BOARD OF DIRECTORS SECTION 2.1. FUNCTION OF DIRECTORS. The business and affairs of the Corporation shall be conducted and managed under the direction of its Board of Directors. All powers of the Corporation shall be exercised by or under authority of the Board of Directors except as conferred on or reserved to the stockholders by statute. 2 6 SECTION 2.2. NUMBER OF DIRECTORS. The Board of Directors shall consist of not more than twelve (12) Directors nor less than such number of Directors as may be permitted under Maryland law, as may be determined from time to time by vote of a majority of the Directors then in office. Directors need not be stockholders. SECTION 2.3. CLASSES OF DIRECTORS. The Directors shall be divided into three classes, designated Class I, Class II and Class III. All classes shall be as nearly equal in number as possible. The Directors as initially classified shall hold office for terms as follows: the Class I Directors shall hold office until the date of the annual meeting of stockholders in 1995 or until their successors shall be elected and qualified; the Class II Directors shall hold office until the date of the annual meeting of stockholders in 1996 or until their successors shall be elected and qualified; and the Class III Directors shall hold office until the date of the annual meeting of stockholders in 1997 or until their successors shall be elected and qualified. Upon expiration of the term of office of each class as set forth above, the Directors in each class shall be elected for a term of three years to succeed the Directors whose terms of office expire, except that the Directors elected in 1998 and 1999 shall be elected for a term of two years and one year, respectively, to succeed the Directors whose terms of office expire. Commencing on the date of the annual meeting of stockholders in 2000, the Directors will no longer be divided into classes and will each stand for election at such meeting and on each annual meeting of stockholders held thereafter. Each Director shall hold office until the expiration of his term and until his successor shall have been elected and qualified. SECTION 2.4. VACANCIES. In case of any vacancy in the Board of Directors through death, resignation or other cause, other than an increase in the number of Directors, subject to the provisions of law, a majority of the remaining Directors, although a majority is less than a quorum, by an affirmative vote, may elect a successor to hold office until the next annual meeting of stockholders or until his successor is chosen and qualified. SECTION 2.5. INCREASE OR DECREASE IN NUMBER OF DIRECTORS. The Board of Directors, by the vote of a majority of the entire Board, may increase the number of Directors and may elect Directors to fill the vacancies created by any such increase in the number of Directors until the next annual meeting of stockholders or until their successors are duly chosen and qualified. The Board of Directors, by the vote of a majority of the entire Board, may likewise decrease the number of Directors to a number not less than that permitted by law. SECTION 2.6. PLACE OF MEETING. The Directors may hold their meetings within or outside the State of Maryland, at any office or offices of the Corporation or at any other place as they may from time to time determine. SECTION 2.7. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such time and on such notice as the Directors may from time to time determine. The annual meeting of the Board of Directors shall be held as soon as practicable after the annual meeting of the stockholders for the election of Directors. SECTION 2.8. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held from time to time upon call of the Chairman of the Board, the President, the Secretary or two or more of the Directors, by oral or telegraphic or written notice duly served on or sent or mailed to each Director not less than one day before such meeting. SECTION 2.9. NOTICES. Unless required by statute or otherwise determined by resolution of the Board of Directors in accordance with these By-laws, notices to Directors need not be in writing and need not state the business to be transacted at or the purpose of any meeting, and no notice need be given to any Director who is present in person or to any Director who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. Waivers of notice need not state the purpose or purposes of such meeting. SECTION 2.10. QUORUM. One-third of the Directors then in office shall constitute a quorum for the transaction of business, provided that if there is more than one Director, a quorum shall in no case be less than 3 7 two Directors. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum shall have been obtained. The act of the majority of the Directors present at any meeting at which there is a quorum shall be the act of the Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these By-Laws. SECTION 2.11. EXECUTIVE COMMITTEE. The Board of Directors may appoint from the Directors an Executive Committee to consist of such number of Directors (not less than two) as the Board may from time to time determine. The Chairman of the Committee shall be elected by the Board of Directors. The Board of Directors shall have power at any time to change the members of such Committee and may fill vacancies in the Committee by election from the Directors. When the Board of Directors is not in session, to the extent permitted by law, the Executive Committee shall have and may exercise any or all of the powers of the Board of Directors in the management and conduct of the business and affairs of the Corporation. The Executive Committee may fix its own rules of procedure, and may meet when and as provided by such rules or by resolution of the Board of Directors, but in every case the presence of a majority shall be necessary to constitute a quorum. During the absence of a member of the Executive Committee, the remaining members may appoint a member of the Board of Directors to act in his place. SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint from the Directors other committees which shall in each case consist of such number of Directors (not less than two) and shall have and may exercise such powers as the Board may determine in the resolution appointing them. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to change the members and powers of any such committee, to fill vacancies and to discharge any such committee. SECTION 2.13. TELEPHONE MEETINGS. Members of the Board of Directors or a committee of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means, subject to the provisions of the Investment Company Act of 1940, as amended, constitutes presence in person at the meeting. SECTION 2.14. ACTION WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board or such committee. SECTION 2.15. COMPENSATION OF DIRECTORS. No Director shall receive any stated salary or fees from the Corporation for his services as such if such Director is, otherwise than by reason of being such Director, an interested person (as such term is defined by the Investment Company Act of 1940, as amended) of the Corporation or of its investment manager or principal underwriter. Except as provided in the preceding sentence, Directors shall be entitled to receive such compensation from the Corporation for their services as may from time to time be voted by the Board of Directors. ARTICLE III OFFICERS SECTION 3.1. EXECUTIVE OFFICERS. The executive officers of the Corporation shall be chosen by the Board of Directors. These may include a Chairman of the Board of Directors (who shall be a Director) and shall include a President, a Secretary and a Treasurer. The Board of Directors or the Executive Committee may also in its discretion appoint one or more Vice-Presidents, Assistant Secretaries, Assistant Treasurers and other officers, agents and employees, who shall have such authority and perform such duties as the Board of Directors or the Executive Committee may determine. The Board of Directors may fill any vacancy which may occur in any office. Any two offices, except those of President and Vice-President, may be held by the 4 8 same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is required by law or these By-Laws to be executed, acknowledged or verified by two or more officers. SECTION 3.2. TERM OF OFFICE. The term of office of all officers shall be one year and until their respective successors are chosen and qualified. Any officer may be removed from office at any time with or without cause by the vote of a majority of the whole Board of Directors. Any officer may resign his office at any time by delivering a written resignation to the Corporation and, unless otherwise specified therein, such resignation shall take effect upon delivery. SECTION 3.3. POWERS AND DUTIES. The officers of the Corporation shall have such powers and duties as shall be stated in a resolution of the Board of Directors, or the Executive Committee and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board of Directors and the Executive Committee. SECTION 3.4. SURETY BONDS. The Board of Directors may require any officer or agent of the Corporation to execute a bond (including, without limitation, any bond required by the Investment Company Act of 1940, as amended, and the rules and regulations of the Securities and Exchange Commission) to the Corporation in such sum and with such surety or sureties as the Board of Directors may determine, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting of any of the Corporation's property, funds or securities that may come into his hands. ARTICLE IV CAPITAL STOCK SECTION 4.1. CERTIFICATES FOR SHARES. Each stockholder of the Corporation shall be entitled to a certificate or certificates for the full number of shares of stock of the Corporation owned by him in such form as the Board may from time to time prescribe. SECTION 4.2. TRANSFER OF SHARES. Shares of the Corporation shall be transferable on the books of the Corporation by the holder thereof in person or by his duly authorized attorney or legal representative, upon surrender and cancellation of certificates, if any, for the same number of shares, duly endorsed or accompanied by proper instruments of assignment and transfer, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require; in the case of shares not represented by certificates, the same or similar requirements may be imposed by the Board of Directors. SECTION 4.3. STOCK LEDGERS. The stock ledgers of the Corporation, containing the names and addresses of the stockholders and the number of shares held by them respectively, shall be kept at the principal offices of the Corporation or, if the Corporation employs a Transfer Agent, at the offices of the Transfer Agent of the Corporation. SECTION 4.4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may from time to time appoint or remove transfer agents and/or registrars of transfers of shares of stock of the Corporation, and it may appoint the same person as both transfer agent and registrar. Upon any such appointment being made, all certificates representing shares of capital stock thereafter issued shall be countersigned by one of such transfer agents or by one of such registrars of transfers or by both and shall not be valid unless so countersigned. If the same person shall be both transfer agent and registrar, only one countersignature by such person shall be required. SECTION 4.5. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors or the Executive Committee or any officer or agent authorized by the Board of Directors or Executive Committee may determine the conditions upon which a new certificate of stock of the Corporation of any class may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed; and may, in its discretion, require the owner of such certificate or such owner's legal representative to give bond, with sufficient surety, to the Corporation and each Transfer Agent, if any, to indemnify it and each such Transfer Agent against any and all loss or 5 9 claims which may arise by reason of the issue of a new certificate in the place of the one so lost, stolen or destroyed. ARTICLE V CORPORATE SEAL; LOCATION OF OFFICES; BOOKS; NET ASSET VALUE SECTION 5.1. CORPORATE SEAL. The Board of Directors may provide for a suitable corporate seal, in such form and bearing such inscriptions as it may determine. Any officer or director shall have the authority to affix the corporate seal. If the Corporation is required to place its corporate seal to a document, it shall be sufficient to place the word "(seal)" adjacent to the signature of the authorized officer of the Corporation signing the document. SECTION 5.2. LOCATION OF OFFICES. The Corporation shall have a principal office in the State of Maryland. The Corporation may, in addition, establish and maintain such other offices as the Board of Directors or any officer may, from time to time, determine. SECTION 5.3. BOOKS AND RECORDS. The books and records of the Corporation shall be kept at the places, within or without the State of Maryland, as the directors or any officer may determine; provided, however, that the original or a certified copy of the by-laws, including any amendments to them, shall be kept at the Corporation's principal executive office. SECTION 5.4. ANNUAL STATEMENT OF AFFAIRS. The President or any other executive officer of the Corporation shall prepare annually a full and correct statement of the affairs of the Corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs should be submitted at the annual meeting of stockholders and, within 20 days of the meeting, placed on file at the Corporation's principal office. SECTION 5.5. NET ASSET VALUE. The value of the Corporation's net assets shall be determined at such times and by such method as shall be established from time to time by the Board of Directors. ARTICLE VI FISCAL YEAR AND ACCOUNTANT SECTION 6.1. FISCAL YEAR. The fiscal year of the Corporation, unless otherwise fixed by resolution of the Board of Directors, shall begin on the 1st day of October and shall end on the 30th day of September in each year. SECTION 6.2. ACCOUNTANT. The Corporation shall employ an independent public accountant or a firm of independent public accountants as its Accountant to examine the accounts of the Corporation and to sign and certify financial statements filed by the Corporation. The employment of the Accountant shall be conditioned upon the right of the Corporation to terminate the employment forthwith without any penalty by vote of a majority of the outstanding voting securities at any stockholders' meeting called for that purpose. ARTICLE VII INDEMNIFICATION AND INSURANCE SECTION 7.1. GENERAL. The Corporation shall indemnify directors, officers, employees and agents of the Corporation against judgments, fines, settlements and expenses to the fullest extent authorized and in the manner permitted, by applicable federal and state law. SECTION 7.2. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall indemnify to the fullest extent permitted by law (including the Investment Company Act of 1940, as amended) as currently in effect or as the same may hereafter be amended, any person made or threatened to be made a party to any action, 6 10 suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation or serves or served at the request of the Corporation any other enterprise as a director or officer. To the fullest extent permitted by law (including the Investment Company Act of 1940, as amended) as currently in effect or as the same may hereafter be amended, expenses incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this Article VII shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director or officer as provided above. No amendment of this Article VII shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this Article VII, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprises" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director or officer of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. SECTION 7.3. INSURANCE. Subject to the provisions of the Investment Company Act of 1940, as amended, the Corporation, directly, through third parties or through affiliates of the Corporation, may purchase, or provide through a trust fund, letter of credit or surety bond insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or who, while a Director, officer, employee or agent of the Corporation, is or was serving at the request of the Corporation as a Director, officer, employee, partner, trustee or agent of another foreign or domestic corporation, partnership joint venture, trust or other enterprise against any liability asserted against and incurred by such person in any such capacity or arising out of such person's position, whether or not the Corporation would have the power to indemnify such person against such liability. ARTICLE VIII CUSTODIAN The Corporation shall have as custodian or custodians one or more trust companies or banks of good standing, foreign or domestic, as may be designated by the Board of Directors, subject to the provisions of the Investment Company Act of 1940, as amended, and other applicable laws and regulations; and the funds and securities held by the Corporation shall be kept in the custody of one or more such custodians, provided such custodian or custodians can be found ready and willing to act, and further provided that the Corporation and/or the Custodians may employ such subcustodians as the Board of Directors may approve and as shall be permitted by law. ARTICLE IX Nothing in these By-Laws protects or purports to protect any director or officer against any liability to the Corporation or its security holders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. 7 11 ARTICLE X AMENDMENT OF BY-LAWS The By-Laws of the Corporation may be altered, amended, added to or repealed only by majority vote of the entire Board of Directors. 8 EX-99.2D1 4 COMMON STOCK CERTIFICATE 1 EXHIBIT 2(D)(1) COMMON STOCK COMMON STOCK PAR VALUE PAR VALUE $0.001 $0.001
FIDELITY ADVISOR KOREA FUND, INC. CUSIP 315804104 SEE REVERSE FOR CERTAIN DEFINITIONS INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND This Certificate is transferable in Boston, Massachusetts or in New York, New York THIS CERTIFIES THAT is the owner of FULLY PAID AND NON ASSESSABLE SHARES OF COMMON STOCK OF Fidelity Advisor Korea Fund, Inc. (hereinafter called the "Corporation"), transferable on the books of the Corporation by the registered holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar or its designated agent. In Witness Whereof, the Corporation has caused the facsimile signatures of its duly authorized officers and its facsimile seal to be affixed hereto. Dated: Secretary Senior Vice President COUNTERSIGNED AND REGISTERED: STATE STREET BANK AND TRUST COMPANY (Boston, Massachusetts) Transfer Agent and Registrar AUTHORIZED SIGNATURE 9 2 FIDELITY ADVISOR KOREA FUND, INC. A FULL STATEMENT OR SUMMARY OF THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE CORPORATION IS AUTHORIZED TO ISSUE AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET THE RELATIVE RIGHTS AND PREFERENCES OF ANY SERIES OF CAPITAL STOCK, WILL BE FURNISHED TO ANY SHAREHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE CORPORATION AT THE CORPORATION'S PRINCIPAL OFFICE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian ------------ ------------ (Cust) (Minor) TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act JT TEN -- as joint tenants with right of --------------------------------- survivorship and not as (State) tenants in common
Additional abbreviations may also be used though not in the above list. For value received, hereby sell, assign and transfer unto ---------------------- PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - --------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please print or typewrite name and address including postal zip code of assignee) - -------------------------------------------------------------------------------- Shares - ------------------------------------------------------------------------- of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney - ----------------------------------------------------------------------- to transfer the said shares on the books of the within-named Corporation with full power of substitution in the premises. Dated: ------------------------ Signature(s) ----------------------------------------- NOTICE: The signature(s) to this assignment must correspond with the name as written upon the face of the Certificate, in every particular, without alteration or enlargement, or any change whatever. Signature Guaranteed By: - --------------------------------------------------- 10 EX-99.2D2 5 SUBSCRIPTION CERTIFICATE 1 2-D-2 THE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER , 1996* FIDELITY ADVISOR KOREA FUND, INC. SUBSCRIPTION RIGHTS FOR COMMON STOCK SUBSCRIPTION CERTIFICATE Dear Shareholder: You are entitled to exercise the Rights issued to you as of November , 1996, the Record Date for the Fund's rights offering, to subscribe for the number of Shares of Common Stock of Fidelity Advisor Korea Fund, Inc. shown on this Subscription Certificate pursuant to the Primary Subscription upon the terms and conditions specified in the Fund's Prospectus dated November , 1996 (the "Prospectus"). The terms and conditions of the rights offering (the "Offer") set forth in the Prospectus are incorporated herein by reference. Capitalized terms not defined herein have the meanings attributed to them in the Prospectus. In accordance with the Over-Subscription Privilege, as a Record Date Shareholder, you are also entitled to subscribe for additional Shares if Shares remaining after exercise of Rights pursuant to the Primary Subscription are available and if you have fully exercised all Rights issued to you. If sufficient Shares remain after completion of the Primary Subscription, all over-subscriptions will be honored in full. If sufficient Shares are not available after completion of the Primary Subscription to honor all over-subscriptions, the Fund may, at the discretion of the Board of Directors, issue shares of Common Stock up to an additional 25% of the Shares available pursuant to the Offer (up to an additional Shares) in order to cover such over-subscription requests. To the extent the Fund determines not to issue additional Shares to honor all over-subscriptions or if the aggregate number of Shares requested pursuant to the Over-Subscription Privilege exceeds the number of additional Shares, the available Shares will be allocated among those who over-subscribe based on the number of Rights originally issued to them by the Fund, so that the number of Shares issued to shareholders who subscribe pursuant to the Over-Subscription Privilege will generally be in proportion to the number of Shares owned by them on the Record Date. The Fund will not offer or sell any Shares which are not subscribed for pursuant to the Primary Subscription or the Over-Subscription Privilege. SAMPLE CALCULATION FULL PRIMARY SUBSCRIPTION ENTITLEMENT (one Share for each Rights) No. of shares owned on the Record Date _____________________________ / _____ = _______________ new Shares (equals no. of Rights issued) (ignore fractions)
SUBSCRIPTION PRICE The Subscription Price will be % of the lower of (i) the average of the last reported sales price on the NYSE on the expiration date of the Offer (the "Pricing Date") and on the four preceding business days, and (ii) the net asset value per share on the Pricing Date. METHOD OF EXERCISE OF RIGHTS IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST EITHER (I) COMPLETE AND SIGN THIS SUBSCRIPTION CERTIFICATE ON THE BACK AND RETURN IT TOGETHER WITH PAYMENT AT THE ESTIMATED SUBSCRIPTION PRICE FOR THE SHARES, OR (II) PRESENT A PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY, IN EITHER CASE TO THE SUBSCRIPTION AGENT, STATE STREET BANK AND TRUST COMPANY, BEFORE 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER , 1996* (THE "EXPIRATION DATE"). BY FIRST CLASS MAIL OR EXPRESS MAIL: BY EXPRESS MAIL OR OVERNIGHT COURIER: BY HAND: State Street Bank and Trust State Street Bank and Trust Company State Street Bank and Trust Company Company Corporate Reorganization Corporate Reorganization Corporate Reorganization Two Heritage Drive 225 Franklin Street -- Concourse P.O. Box 9061 North Quincy, Massachusetts 02171 Level Boston, Massachusetts 02205-8686 U.S.A. Boston, Massachusetts 02110 U.S.A. U.S.A. or Bank Boston c/o Boston EquiServe Corporate Reorganization 55 Broadway -- 3rd Floor New York, New York 10006 U.S.A.
DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES LISTED ABOVE WILL NOT CONSTITUTE VALID DELIVERY. FULL PAYMENT OF THE ESTIMATED SUBSCRIPTION PRICE PER SHARE FOR ALL SHARES SUBSCRIBED FOR PURSUANT TO BOTH THE PRIMARY SUBSCRIPTION AND OVER-SUBSCRIPTION PRIVILEGE MUST ACCOMPANY THIS SUBSCRIPTION CERTIFICATE AND MUST BE MADE PAYABLE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE UNITED STATES PAYABLE TO FIDELITY ADVISOR KOREA FUND, INC. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER. ALTERNATIVELY, IF A NOTICE OF GUARANTEED DELIVERY IS USED, A PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION CERTIFICATE, AND FULL PAYMENT, AS DESCRIBED IN SUCH NOTICE, MUST BE RECEIVED BY THE SUBSCRIPTION AGENT NO LATER THAN THE CLOSE OF BUSINESS ON THE THIRD BUSINESS DAY AFTER THE EXPIRATION DATE. FOR ADDITIONAL INFORMATION, SEE THE PROSPECTUS. Certificates for the Shares acquired on Primary Subscription will be mailed promptly after the expiration of the Offer and full payment for the shares subscribed for has been received and cleared. Certificates representing Shares acquired pursuant to the Over-Subscription Privilege will be mailed as soon as practicable after full payment has been received and cleared and all allocations have been effected. Any excess payment to be refunded by the Fund to a shareholder will be mailed by the Subscription Agent to such shareholder as promptly as possible. THESE SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE - ------------------------------ * Unless the Offer is extended. Any questions regarding this Subscription Certificate and the Offer may be directed to the Information Agent, D.F. King & Co. Inc., toll-free at (800) 2 Account #: Control #: Number of Primary Subscription Rights: Number of Shares Entitled in Primary Subscription: PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY SECTION 1: DETAILS OF SUBSCRIPTION IF YOU WISH TO SUBSCRIBE FOR YOUR FULL ENTITLEMENT: A: I apply for ALL of my entitlement of new Shares pursuant to the Primary Subscription. x $ + = $ ----------------- --- ---------- (no. of new Shares) B: I apply for new Shares pursuant to the Over-Subscription Privilege* x $ + = $ ---------------------- --- ---------- (no. of additional Shares) AMOUNT ENCLOSED $ -------------------- * You can only over-subscribe if you have fully exercised your Primary Subscription Rights. IF YOU DO NOT WISH TO APPLY FOR YOUR FULL ENTITLEMENT: C: I apply for x $ + = $ ------------- ---- ------------------------ (no. of new Shares) (AMOUNT ENCLOSED) SECTION 2: TO SUBSCRIBE I acknowledge that I have received the Prospectus for this Offer and I hereby irrevocably subscribe for the number of Shares indicated above as a total of A and B, on the terms and conditions specified in the Prospectus relating to the Primary Subscription and the Over-Subscription Privilege. I understand and agree that I will be obligated to pay any additional amount to the Fund if the Subscription Price as determined on the Pricing Date is in excess of the $ Estimated Subscription Price per Share. I hereby agree that if I fail to pay in full for the Shares for which I have subscribed, the Fund may exercise any of the remedies set forth for in the Prospectus. Signature of subscriber(s) ------------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Telephone number (including area code) ( ) ---------------------------------- If you wish to have your shares and refund check (if any) delivered to an address other than that listed on this Subscription Certificate you must have your signature guaranteed by a member of the New York Stock Exchange or a bank or trust company. Please provide the delivery address below and note if it is a permanent change. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ------------------------------------------------------------------------ SECTION 3: DESIGNATION OF BROKER-DEALER The following broker-dealer is hereby designated as having been instrumental in the exercise of the Rights hereby exercised: FIRM: ----------------------------------------------------------- REPRESENTATIVE NAME: -------------------------------------------- REPRESENTATIVE NUMBER: ------------------------------------------ + NOTE: $ per Share is an estimated price only. The Subscription Price will be determined on December , 1996, the Pricing Date (which is the same as the Expiration Date unless extended), and could be higher or lower depending on the changes in the net asset value and share price of the Common Stock. EX-99.2D3 6 BENEFICIAL OWNER LISTING CERTIFICATION 1 2-D-3 BENEFICIAL OWNER LISTING CERTIFICATION The undersigned, a bank, broker or other nominee holder of Rights ("Rights") to purchase shares of Common Stock, $0.001 par value ("Common Stock"), of Fidelity Advisor Korea Fund, Inc. (the "Fund") pursuant to the Rights Offering (the "Offer") described and provided for in the Fund's Prospectus dated November , 1996 (the "Prospectus"), hereby certifies to the Fund and to State Street Bank and Trust Company, as Subscription Agent for such Offer, that for each numbered line filled in below, the undersigned has exercised, on behalf of the beneficial owner thereof (which may be the undersigned), the number of Rights specified on such line pursuant to the Primary Subscription (as defined in the Prospectus) and such beneficial owner wishes to subscribe for the purchase of additional shares of Common Stock pursuant to the Over-Subscription Privilege (as defined in the Prospectus), in the amount set forth in the third column of such line.
NUMBER OF SHARES NUMBER OF RECORD DATE NUMBER OF RIGHTS EXERCISED REQUESTED PURSUANT TO THE SHARES OWNED PURSUANT TO PRIMARY SUBSCRIPTION OVER-SUBSCRIPTION PRIVILEGE --------------------- -------------------------------- --------------------------- 1) _____________________ ________________________________ 2) _____________________ ________________________________ 3) _____________________ ________________________________ 4) _____________________ ________________________________ 5) _____________________ ________________________________ 6) _____________________ ________________________________ 7) _____________________ ________________________________ 8) _____________________ ________________________________ 9) _____________________ ________________________________ 10) _____________________ ________________________________
- ----------------------------- Name of Nominee Holder By: - -------------------------------------- Name: ---------------------------------- Title: ---------------------------------- Dated: - --------------------------------------, 1996 Provide the following information, if applicable: Name of Broker: - ----------------------------------------------- Depository Trust Corporation ("DTC") Participant Number Address: - ----------------------------------------------- DTC Primary Subscription Confirmation Number(s)
EX-99.2D4 7 OVER-SUBSCRIPTION FORMS 1 2-D-4 FIDELITY ADVISOR KOREA FUND, INC. RIGHTS OFFERING DTC PARTICIPANT OVER-SUBSCRIPTION EXERCISE FORM NOMINEE HOLDER OVER-SUBSCRIPTION EXERCISE FORM THIS FORM IS TO BE USED ONLY BY NOMINEE HOLDERS OR BY THE DEPOSITORY TRUST COMPANY ("DTC") PARTICIPANTS TO EXERCISE THE OVER-SUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS WITH RESPECT TO WHICH THE PRIMARY SUBSCRIPTION PRIVILEGE WAS EXERCISED IN FULL AND DELIVERED THROUGH THE FACILITIES OF A COMMON DEPOSITORY OR DTC. ALL OTHER EXERCISES OF OVERSUBSCRIPTION PRIVILEGES MUST BE EFFECTED BY THE DELIVERY OF THE SUBSCRIPTION CERTIFICATE. THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE FUND'S PROSPECTUS DATED NOVEMBER , 1996 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE INFORMATION AGENT. PLEASE COMPLETE ALL APPLICABLE INFORMATION VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL OR WITH A PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY BEFORE 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER , 1996 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE FUND.
BY FACSIMILE: BY FIRST CLASS MAIL OR (TELECOPIES) EXPRESS MAIL: BY HAND: (617) 774-4519 State Street Bank and Trust Company State Street Bank and Trust Company Confirm by telephone to: Corporate Reorganization Corporate Reorganization (617) 774-4511 Two Heritage Drive 225 Franklin Street -- Concourse Level BY FIRST CLASS MAIL OR North Quincy, Massachusetts 02171 Boston, Massachusetts 02110 EXPRESS MAIL: U.S.A. U.S.A. State Street Bank and Trust Company or Corporate Reorganization Bank Boston P.O. Box 9061 c/o Boston EquiServe Boston, Massachusetts 02285-8686 Corporate Reorganization U.S.A. 55 Broadway -- 3rd Floor New York, New York 10006 U.S.A.
1. The undersigned hereby certifies to the Subscription Agent that it is a participant in [Name of Depository] (the "Depository") and that it has either (i) exercised the Primary Subscription in respect of the Rights and delivered such exercised Rights to the Subscription Agent by means of transfer to the Depository Account of the Fund or (ii) delivered to the Subscription Agent a Notice of Guaranteed Delivery in respect of the exercise of the Primary Subscription Privilege and will deliver the Rights called for in such Notice of Guaranteed Delivery to the Subscription Agent by means of transfer to such Depository Account of the Fund. 2. The undersigned hereby exercises the Over-Subscription Privilege to purchase, to the extent available, shares of Common Stock and certifies to the Subscription Agent that such Over-Subscription Privilege is being exercised for the account or accounts of persons (which may include the undersigned) on whose behalf all Primary Subscription Rights have been exercised. 3. The undersigned understands that payment of the Estimated Subscription Price of $ per Share for each Share of Common Stock subscribed for pursuant to the Over-Subscription Privilege must be received by the Subscription Agent before 5:00 p.m., New York City time, on the Expiration Date, unless a Notice of Guaranteed Delivery is used, in which case, payment in full must be received by the Subscription Agent not later than the close of business on the third business day after the Expiration Date. The undersigned represents that such payment, in the aggregate amount of $ , either (continued on other side) 2 (check appropriate box): / / has been or is being delivered to the Subscription Agent pursuant to the Notice of Guaranteed Delivery referred to above or / / is being delivered to the Subscription Agent herewith or / / has been delivered separately to the Subscription Agent; - --------------------------------------------- --------------------------------------------- Primary Subscription Confirmation Number Name of Nominee Holder - --------------------------------------------- --------------------------------------------- Depository Participant Number Address Contact Name -------------------------------- --------------------------------------------- City State Zip Code Phone Number -------------------------------- By: ------------------------------------------ Dated:_________________________________, 1996 Name: ---------------------------------------- Title: ---------------------------------------
PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION OF RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF OVER-SUBSCRIPTION SHARES, IF APPLICABLE, REQUESTED BY EACH SUCH OWNER. PLEASE NOTE: THIS FORM WILL NOT BE ACCEPTED AS VALID UNLESS THE FOLLOWING INFORMATION IS PROVIDED FOR THE ALLOCATION OF OVER-SUBSCRIPTION SHARES. The positions below pertain to those persons on whose behalf the Over-Subscription is being exercised: - ------------------------------------ Total number of record dateshares - ------------------------------------ Total number of primaryrights exercised
2 EX-99.2D5 8 NOTICE OF GUARANTEED DELIVERY 1 2-D-5 NOTICE OF GUARANTEED DELIVERY FOR SHARES OF COMMON STOCK OF FIDELITY ADVISOR KOREA FUND, INC. SUBSCRIBED FOR PURSUANT TO THE PRIMARY SUBSCRIPTION AND THE OVER-SUBSCRIPTION PRIVILEGE FIDELITY ADVISOR KOREA FUND, INC. RIGHTS OFFERING As set forth in the Fund's Prospectus dated November , 1996 (the "Prospectus") under "The Offer -- Payment for Shares," this form or one substantially equivalent hereto may be used as a means of effecting subscription and payment for all shares of Fidelity Advisor Korea Fund, Inc. Common Stock subscribed for by exercise of Rights pursuant to the Primary Subscription and the Over-Subscription Privilege. Such form may be delivered by hand or sent by facsimile transmission, overnight courier or mail to the Subscription Agent and must be received prior to 5:00 p.m. New York City time on December , 1996 (the "Expiration Date").* The terms and conditions of the Offer set forth in the Prospectus are incorporated by reference herein. Capitalized terms not defined herein have the meanings attributed to them in the Prospectus. THE SUBSCRIPTION AGENT IS: STATE STREET BANK AND TRUST COMPANY
BY FACSIMILE: BY EXPRESS MAIL OR OVERNIGHT (TELECOPIES) COURIER: BY HAND: (617) 774-4519 State Street Bank and Trust Company State Street Bank and Trust Company Confirm by telephone to: Corporate Reorganization Corporate Reorganization (617) 774-4511 Two Heritage Drive, MB2 225 Franklin Street -- Concourse Level BY FIRST CLASS MAIL OR North Quincy, Massachusetts 02171 Boston, Massachusetts 02110 EXPRESS MAIL: U.S.A. U.S.A. State Street Bank and Trust Company or Corporate Reorganization Bank Boston P.O. Box 9061 c/o Boston EquiServe Boston, Massachusetts 02285-8686 Corporate Reorganization U.S.A. 55 Broadway -- 3rd Floor New York, New York 10006 U.S.A.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A TELECOPY OR FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. The New York Stock Exchange member firm or bank or trust company which completes this form must communicate the guarantee and the number of shares subscribed for under both the Primary Subscription and the Over-Subscription Privilege to the Subscription Agent and must deliver this Notice of Guaranteed Delivery guaranteeing delivery of (i) payment in full for all subscribed shares and (ii) a properly completed and executed Subscription Certificate to the Subscription Agent prior to 5:00 p.m., New York City time, on the Expiration Date.* The Subscription Certificate and full payment must then be delivered by the close of business on the third business day after the Expiration Date* to the Subscription Agent. Failure to do so will result in a forfeiture of the Rights. (continued on other side) - --------------- * Unless extended by the Fund. 2 GUARANTEE The undersigned, a member firm of the New York Stock Exchange or a bank or trust company guarantees delivery of payment to the Subscription Agent by the close of business (5:00 p.m., New York City time) on the third business day (December , 1996) after the Expiration Date (December , 1996, unless extended) of (i) a properly completed and executed Subscription Certificate and (ii) payment of the full Subscription Price for shares subscribed for on Primary Subscription and pursuant to the Over-Subscription Privilege, if applicable, as subscription for such shares is indicated herein or in the Subscription Certificate. 1. Primary Number of Rights to be Number of Primary Payment to be made in Subscription exercised Shares requested for connection with Primary Rights which you are Shares guaranteeing delivery $ of Rights and Payment Shares (Rights X by ) 2. Over-Subscription Number of Over- Payment to be made in Subscription Shares connection with Over- requested for which you Subscription Shares are guaranteeing payment Shares $ ---------------- 3. Totals Total Number of Rights $ to be Delivered ---------------- Rights ---------------- Total Payment
Method of Delivery of Rights (circle one) A. Through The Depository Trust Company ("DTC")* B. Direct to the Subscription Agent Please note that if you are guaranteeing for Over-Subscription Shares and are a DTC participant, you must also execute and forward to State Street Bank and Trust Company a Nominee Holder Over-Subscription Certification. - --------------------------------------------- --------------------------------------------- Name of Firm Authorized Signature - --------------------------------------------- --------------------------------------------- Address Title - --------------------------------------------- --------------------------------------------- Zip Code Name (Please Type or Print) - --------------------------------------------- Name of Registered Holder (If Applicable) - --------------------------------------------- --------------------------------------------- Telephone Number Date
* IF THE RIGHTS ARE TO BE DELIVERED THROUGH DTC, CALL THE SUBSCRIPTION AGENT TO OBTAIN A PROTECT IDENTIFICATION NUMBER, WHICH NEEDS TO BE COMMUNICATED BY YOU TO DTC. 2 EX-99.2E 9 DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 1 FIDELITY ADVISOR KOREA FUND, INC. DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN TERMS AND CONDITIONS 1. The shareholder ("Shareholder") holding shares of common stock of Fidelity Advisor Korea Fund, Inc. (the "Fund") elects, by written instruction to State Street Bank and Trust Company (the "Plan Agent"), to be a participant in the Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") and to have all distributions automatically reinvested by the Plan Agent in Fund shares pursuant to the Plan. A Shareholder who does not wish to participate in the Plan will receive all distributions in cash, net of any applicable U.S. withholding tax, and will be paid by check in U.S. dollars mailed directly to such Shareholder by the State Street Bank and Trust Company, as dividend disbursing agent. The Plan Agent will act as agent for individual Shareholders in administering the Plan and will open an account for each Shareholder under the Plan in the same name as her or his shares of common stock are registered. 2. Whenever the directors of the Fund declare an income dividend or capital gains distribution payable either in shares of common stock or in cash, non-participating Shareholders will receive cash, and participating Shareholders will take such dividend or distribution entirely in shares of common stock to be issued by the Fund or to be purchased on the open market by the Plan Agent, and the Plan Agent shall automatically receive such shares of common stock, including fractions, for the Shareholder's account. Whenever the market price per share of common stock equals or exceeds the net asset value per share at the time the shares of common stock are valued for the purpose of determining the number of shares of common stock equivalent to the dividend or distribution (the "Valuation Date"), the Fund will issue new shares to participants at net asset value, or, if the net asset value is less than 95% of the market price on the Valuation Date, then participants will be issued shares valued at 95% of the market price. If net asset value per share on the Valuation Date exceeds the market price per share on that date, the Plan Agent, as agent for the participants, will buy shares of the Fund's common stock on the open market, on the New York Stock Exchange or elsewhere in the United States, for the participants' accounts. If, before the Plan Agent has completed such purchases, the market price exceeds the net asset value per share, the average per share purchase price paid by the Plan Agent may exceed the net asset value per share, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund at net asset value. Additionally, if the market price exceeds the net asset value per share before the Plan Agent has completed its purchases, the Plan Agent is permitted to cease purchasing shares and the Fund may issue the remaining shares at a price equal to the greater of (a) net asset value or (b) 95% of the then current market price. In a case where the Plan Agent has terminated open market purchases and the Fund has issued the remaining shares, the number of shares received by each participant in respect of the dividend or distribution will be based on the weighted average of prices paid for shares purchased in the open market and the price at which the Fund issues the remaining shares. The Valuation Date shall be the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading day, the next preceding trading day. 3. Whenever the directors of the Fund declare an income dividend or capital gains distribution payable only in cash, the Plan Agent, as agent for the participants, will buy shares of the Fund's common stock on the open market, on the New York Stock Exchange or elsewhere in the United States, with the cash in respect of such dividend or distribution for the participants' accounts, on, or shortly after, the payment date. To the extent the market price exceeds the net asset value of the common stock when the Plan Agent makes such purchases, participants may receive fewer shares of common stock than if the dividend or distribution had been payable in common stock issued by the Fund. 4. Participants in the Plan have the option of making additional cash payments to the Plan Agent, annually, in any amount from $100 to $3,000, for investment in shares of common stock of the Fund. The Plan Agent will use all funds received from participants (as well as any dividends or distributions received in cash) to purchase Fund shares of common stock on the open market, on or about the 15th of February. To avoid unnecessary cash accumulations, and also to allow ample time for receipt and processing by the Plan Agent, participants should send in voluntary cash payments to be received by the Plan Agent approximately ten days 2 before the 15th of February. Any voluntary cash payments received more than thirty days prior to that date will be returned by the Plan Agent, and interest will not be paid on any such uninvested cash payment amounts. A participant may withdraw a voluntary cash payment by written notice, if the notice is received by the Plan Agent not less than forty-eight hours before such payment is to be invested. All voluntary cash payments should be made by check drawn on a U.S.(Signed) bank, (or a non-U.S. bank, if the U.S. currency is imprinted on the check) payable in U.S.(Signed) dollars, and should be mailed to the Plan Agent, along with a properly executed cash remittance form (copies of which will be provided by the Plan Agent to participants), at State Street Bank and Trust Company, Two Heritage Drive, Quincy, Massachusetts, 02171. If any check is returned unpaid for any reason, the Plan Agent will be entitled to sell any number of shares from the participant's account required to recoup any funds expended to purchase shares for such participant's account. 5. The Plan Agent will apply all cash received as a dividend or distribution or as a voluntary cash payment to purchase shares of common stock on the open market as soon as practicable after the payment date of the dividend or distribution, but in no event later than 30 days after such payment date, except where necessary to comply with applicable provisions of the federal securities laws. No participant will have any authority to direct the time or price at which the Plan Agent may purchase shares of the Fund's common stock on such participant's behalf. 6. For all purposes of the Plan: (a) the market price of shares of common stock of the Fund on a particular date shall be the last sales price on the New York Stock Exchange at the close of the previous trading day or, if there is no sale on the New York Stock Exchange on that date, then the mean between the closing bid and asked quotations for such stock on the New York Stock Exchange on such date, (b) each Valuation Date shall be the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading day, the next preceding trading day, and (c) the net asset value per share of common stock on a particular date shall be as determined by or on behalf of the Fund. 7. The open-market purchases provided for above may be made on any securities exchange in the United States where the shares of common stock of the Fund are traded, in the over-the-counter market or in negotiated transactions, and may be on such terms as to price, delivery and otherwise as the Plan Agent shall determine. Funds held by the Plan Agent will not bear interest. In addition, it is understood that the Plan Agent shall have no liability (other than as provided in paragraph 15 hereof) in connection with any inability to purchase shares of common stock within 30 days after the payment date of any dividend or distribution as herein provided or with the timing of any purchases effected. The Plan Agent shall have no responsibility as to the value of the shares of common stock of the Fund acquired for any Shareholder's account. 8. The Plan Agent will hold shares of common stock acquired pursuant to the Plan in non-certificated form in the name of the Shareholder for whom such shares are being held, and each Shareholder's proxy will include those shares of common stock held pursuant to the Plan. The Plan Agent will forward to each Shareholder participating in the Plan any proxy solicitation material received by it. In the case of Shareholders, such as banks, brokers or nominees, that hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by such Shareholders as representing the total amount registered in the names of such Shareholders and held for the account of beneficial owners who participate in the Plan. Upon a Shareholder's written request, the Plan Agent will deliver to her or him, without charge and within ten days, a certificate or certificates representing all full shares of common stock held by the Plan Agent pursuant to the Plan for the benefit of such Shareholder. 9. The Plan Agent will confirm, in writing, each acquisition made for the account of a Shareholder as soon as practicable, but in any event not later than 60 days after the date thereof. Such confirmation will indicate the number of shares purchased and the price per share paid, and will include any applicable tax information pertaining to such Shareholder's account. It is understood that the reinvestment of dividends and distributions does not relieve the participant of any income tax which may be payable on such dividends and distributions. Any Shareholder who is subject to U.S. backup withholding tax, or who is a foreign Shareholder subject to U.S. income tax withholding, will have the applicable tax withheld from all dividends and 2 3 distributions received and only the net amount will be reinvested in shares of the Fund's common stock. Although a Shareholder may from time to time have an undivided fractional interest (computed to three decimal places) in a share of common stock of the Fund, no certificates for fractional shares will be issued. However, distributions and dividends on fractional shares of common stock will be credited to each Shareholder's account. In the event of termination of a Shareholder's account under the Plan, the Plan Agent will adjust for any such undivided fractional interest in cash at the current market value of the shares of common stock at the time of termination. 10. Any stock dividends or split shares distributed by the Fund on shares of common stock held by the Plan Agent for a Shareholder will be credited to the Shareholder's account. In the event that the Fund makes available to Shareholders rights to purchase additional shares of common stock or other securities, the Plan Agent will forward to each Shareholder participating in the Plan any materials received by it relating to such rights. 11. There is no charge to Shareholders for reinvesting dividends or capital gains distributions. The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Fund. However, each Shareholder will be charged a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends or distributions. A Shareholder will also pay brokerage commissions incurred in connection with purchases from voluntary cash payments made by the Shareholder. Brokerage charges for purchasing small amounts of stock for individual accounts through the Plan are expected to be less than the usual brokerage charges for such transactions because the Plan Agent will be purchasing stock for all participants in large blocks and prorating the lower commission thus attainable. 12. A Shareholder may terminate her or his participation in the Plan by notifying the Plan Agent. Such notifications should be made in writing on a properly executed withdrawal/termination form (copies of which will be provided by the Plan Agent to participants) mailed to the Plan Agent at State Street Bank and Trust Company, Two Heritage Drive, Quincy, Massachusetts, 02171. Such termination will be effective immediately if notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise such termination will be effective, with respect to any subsequent dividend or distribution, on the first trading day after the dividend or distribution paid for such record date shall have been credited to such Shareholder's account. The Plan may be terminated by the Plan Agent or the Fund with respect to any voluntary cash payments made or any dividends or distributions paid subsequent to the notice of termination in writing mailed to the Shareholders at least 30 days prior to the monthly contribution date, in the case of voluntary cash payments, or the record date for the payment of any dividend or distribution by the Fund. Upon any termination, the Plan Agent will cause a certificate or certificates for the full shares held for a Shareholder under the Plan, and cash adjustment for any fractional shares to be delivered to her or him or, upon the request of such Shareholder, will sell all of the shares held for the Shareholder under the Plan, within ten days of receiving the Shareholder's instructions, and will deliver the proceeds less any brokerage commissions to the Shareholder. 13. If any Shareholder has withdrawn shares from the Plan, or acquires shares which have been withdrawn from the Plan, and wishes to have such shares held through and subject to the Plan, such Shareholder may resubmit such shares by notifying the Plan Agent at State Street Bank and Trust Company, Two Heritage Drive, Quincy, Massachusetts, 02171. 14. These terms and conditions may be amended or supplemented by the Plan Agent or the Fund at any time or times but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to the Shareholders appropriate written notice at least 30 days prior to the effective date thereof. The amendment or supplement shall be deemed to be accepted by the Shareholders unless, prior to the effective date thereof, the Plan Agent receives written notice of the termination of a Shareholder's account under the Plan. Any such amendment may include an appointment by the Plan Agent in its place and stead of a successor Plan Agent under these terms and conditions, with full power and authority to perform all or any of the acts to be performed by the Plan Agent under these terms and conditions. Upon any such appointment of a successor 3 4 Plan Agent for the purpose of receiving dividends and distributions, the Fund will be authorized to pay to such successor Plan Agent, for the Shareholders' accounts, all dividends and distributions payable on the shares of common stock held in the Shareholders' name or under the Plan for retention or application by such successor Plan Agent as provided in these terms and conditions. 15. The Plan Agent shall at all times act in good faith and agree to use its best efforts within reasonable limits to ensure the accuracy of all services performed under this Plan and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by its negligence, bad faith or willful misconduct or that of its employees. 4 EX-99.2G1 10 INVESTMENT MANAGEMENT AGREEMENT 1 2(G)(1) INVESTMENT MANAGEMENT AGREEMENT BETWEEN FIDELITY ADVISOR KOREA FUND, INC. AND FIDELITY MANAGEMENT & RESEARCH COMPANY AGREEMENT made this 25th day of October, 1994, by and between Fidelity Advisor Korea Fund, Inc. a Maryland corporation (hereinafter called the "Fund"), and Fidelity Management & Research Company, a Massachusetts corporation (hereinafter called the "Manager"). 1. (a) Investment Advisory Services. The Manager undertakes to act as investment manager of the Fund and shall, subject to the supervision of the Fund's Board of Directors, direct the investments of the Fund in accordance with the investment objective, policies and limitations as provided in the Fund's Prospectus or other governing instruments, as amended from time to time, the Investment Company Act of 1940 and rules thereunder, as amended from time to time (the "1940 Act"), and such other limitations as the Fund may impose by notice in writing to the Manager. To the extent that an investment adviser is appointed by the Manager and by the Board of Directors of the Fund (the "Investment Adviser"), the Manager may delegate any of its management services and responsibilities hereunder at its sole expense, and the Manager shall supervise the performance by the Investment Adviser of such services and responsibilities and further shall provide the Investment Adviser with such investment advice and research as they shall mutually agree upon. The Manager shall also furnish for the use of the Fund office space and all necessary office facilities, equipment and personnel for servicing the investments of the Fund; and shall pay the salaries and fees of all officers of the Fund, of all Directors of the Fund who are "interested persons" of the Fund or of the Manager and of all personnel of the Fund or the Manager performing services relating to research, statistical and investment activities. The Manager is authorized, in its discretion and without prior consultation with the Fund, to buy, sell, lend and otherwise trade in any stocks, bonds and other securities and investment instruments on behalf of the Fund. The investment policies and all other actions of the Fund are and shall at all times be subject to the control and direction of the Fund's Board of Directors. (b) Management Services. The Manager shall perform (or arrange for the performance by its affiliates of) the management services necessary for the operation of the Fund. The Manager shall, subject to the supervision of the Board of Directors, perform various services for the Fund, including but not limited to: (1) providing investment research and recommendations; (2) providing investment and tax compliance services; (3) supervising any Investment Adviser appointed under paragraph 1(a); (4) providing internal legal services; (5) providing the Fund with office space, equipment and facilities (which may be its own) for maintaining its organization; (6) on behalf of the Fund, supervising relations with, and monitoring the performance of, custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, insurers and other persons in any capacity deemed to be necessary or desirable; (7) preparing all general shareholder communications, including shareholder reports; (8) conducting shareholder relations; (9) maintaining the Fund's existence and its records; (10) during such times as shares are publicly offered, maintaining the registration and qualification of the Fund's shares under federal and state law; and (11) investigating the development of and developing and implementing, if appropriate, management and shareholder services designed to enhance the value or convenience of the Fund as an investment vehicle. The Manager shall also furnish such reports, evaluations, information or analyses to the Fund as the Fund's Board of Directors may request from time to time or as the Manager may deem to be desirable. The Manager shall make recommendations to the Fund's Board of Directors with respect to Fund policies, and shall carry out such policies as are adopted by the Directors. The Manager shall, subject to review by the Board of Directors, furnish such other services as the Manager shall from time to time determine to be necessary or useful to perform its obligations under this Contract. (c) Unless an Investment Adviser has been appointed pursuant to paragraph 1(a), the Manager shall place all orders for the purchase and sale of portfolio securities for the Fund's account with brokers or dealers 2 selected by the Manager, which may include brokers or dealers affiliated with the Manager. The Manager shall use its best efforts to seek to execute portfolio transactions at prices which are advantageous to the Fund and at commission rates which are reasonable in relation to the benefits received. In selecting brokers or dealers qualified to execute a particular transactions, brokers or dealers may be selected who also provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to the Fund and/or the other accounts over which the Manager or its affiliates exercise investment discretion. The Manager is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Manager determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer. This determination may be viewed in terms of either that particular transaction or the overall responsibilities which the Manager and its affiliates have with respect to accounts over which they exercise investment discretion. The Directors of the Fund shall periodically review the commissions paid by the Fund to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits to the Fund. The Manager shall, in acting hereunder, be an independent contractor. The Manager shall not be an agent of the Fund. 2. It is understood that the Directors, officers and shareholders of the Fund are may be or become interested in the Manager as directors, officers or otherwise and that directors, officers and stockholders of the Manager are or may be or become similarly interested in the Fund, and that the Manager may be or become interested in the Fund as a shareholder or otherwise. 3. The Manager will be compensated on the following basis for the services and facilities to be furnished hereunder. The Manager shall receive a monthly management fee, payable monthly as soon as practicable after the last day of each month. The Fee will be computed as follows: (a) Fee Rate: The Annual Fee Rate shall be 1.00%. (b) Fee. One-twelfth of the Fee Rate shall be applied to the average of the net assets of the Fund (computed in the manner set forth in the Fund's Articles of Incorporation, other organizational document or prospectus) determined as of the close of business on each business day throughout the month. The resulting dollar amount comprises the Fee. (c) In the case of termination of this Contract during any month, the fee for that month shall be reduced proportionately on the basis of the number of weeks during which it is in effect for that month. The Fee Rate will be computed on the basis of and applied to net assets averaged over that month ending on the last business day on which this Contract is in effect. 4. It is understood that the Fund will pay all its expenses other than those expressly stated to be payable by the Manager hereunder, which expenses payable by the Fund shall include, without limitation, (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase or sale of securities and other investment instruments; (iii) fees and expenses of the Fund's Directors other than those who are "interested persons" of the Fund or the Manager; (iv) legal and audit expenses; (v) custodian, registrar and transfer agent fees and expenses; (vi) fees and expenses related to the registration and qualification of the Fund and the Fund's shares for distribution under state and federal securities laws; (vii) expenses of printing and mailing reports and notices and proxy material to shareholders of the Fund; (viii) all other expenses incidental to holding meetings of the Fund's shareholders, including proxy solicitations therefor; (ix) 50% of insurance premiums for Fidelity and other coverage; (x) its proportionate share of association membership dues; (xi) expenses of typesetting for printing Prospectuses and supplements thereto; (xii) expenses of printing and mailing Prospectuses and supplements; and (xiii) such non-recurring or extraordinary expenses as may arise, including those relating to actions, suits or proceedings to which the Fund is a party and the legal obligation which the Fund may have to indemnify the Fund's Directors and officers with respect thereto. 5. The services of the Manager to the Fund are not to be deemed exclusive, the Manager being free to render services to others and engage in other activities, provided, however, that such other services and 2 3 activities do not, during the term of this Contract, interfere, in a material manner, with the Manager's ability to meet all of its obligations with respect to rendering services to the Fund hereunder. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Manager, the Manager shall not be subject to liability to the Fund or to any shareholder of the Fund for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security or other investment instrument. 6. (a) Subject to prior termination as provided in sub-paragraph (d) of this paragraph 6, this Contract shall continue in force until , 1996, and indefinitely thereafter, but only so long as the continuance after such date shall be specifically approved at least annually by vote of the Directors of the Fund or by vote of a majority of the outstanding voting securities of the Fund. (b) This Contract may be modified by mutual consent, such consent on the part of the Fund to be authorized by vote of a majority of the outstanding voting securities of the Fund. (c) In addition to the requirements of sub-paragraphs (a) and (b) of this paragraph 6, the terms of any continuance or modification of this Contract must have been approved by the vote of a majority of those Directors of the Fund who are not parties to the Contract or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. (d) Either party hereto may, at any time on sixty (60) days' prior written notice to the other, terminate this Contract, without payment of any penalty, by action of its Board of Directors or with respect to the Fund by vote of a majority of the outstanding voting securities of the Fund. This Contract shall terminate automatically in the event of its assignment. 7. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to the choice of laws provisions thereof. The terms "vote of a majority of the outstanding voting securities." "assignment", "investment adviser" and "interested persons," when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or as hereafter amended, and subject to such orders as may be granted by the Securities and Exchange Commission. 8. The Manager consents and grants to the Fund a non-exclusive license for the use by the Fund of the word "Fidelity" in the name of the Fund. Such consent is subject to revocation by the Manager in its discretion, and the Manager may require the Fund to cease using the word "Fidelity" in its name, if the Manager or an affiliate is not employed as an investment adviser to the Fund. The Fund acknowledges that as between it and the Manager, the Manager controls the use of the name of the Fund insofar as it contains the identifying word "Fidelity" and the Manager and its affiliates may use the identifying word "Fidelity" in any other connection and for any purpose, without limitation. 3 4 IN WITNESS WHEREOF the parties have caused this instrument to be signed in their behalf by their respective officers thereunto duly authorized, and their respective seals to be hereunto affixed, all as of the date written above. FIDELITY ADVISOR KOREA FUND, INC. By: /s/ GARY L. FRENCH ----------------------------------- Gary L. French FIDELITY MANAGEMENT & RESEARCH COMPANY By: /s/ GARY L. FRENCH ----------------------------------- Gary L. French 4 EX-99.2G2 11 INVESTMENT ADVISORY AGREEMENT 1 2(G)(2) INVESTMENT ADVISORY AGREEMENT AMONG FIDELITY INTERNATIONAL INVESTMENT ADVISORS AND FIDELITY MANAGEMENT & RESEARCH COMPANY AND FIDELITY ADVISORY KOREA FUND, INC. AGREEMENT made this 25th day of October, 1994 by and among Fidelity Management & Research Company, a Massachusetts corporation with principal offices at 82 Devonshire Street, Boston, Massachusetts (hereinafter called the "Manager"); Fidelity International Investment Advisors, a Bermuda company with principal offices at Pembroke Hall, Pembroke, Bermuda (hereinafter called the "Advisor"); and Fidelity Advisor Korea Fund, Inc., a Maryland corporation which may issue one or more series of shares (hereinafter called the "Fund"). WHEREAS the Fund and the Manager have entered into an Investment Management Agreement on behalf of the Fund, pursuant to which the Manager is to act as investment manager of the Fund; and WHEREAS the Advisor and its subsidiaries and other affiliated persons have personnel in various locations throughout the world and have been formed in part for the purpose of researching and compiling information and recommendations with respect to the economies of various countries, and securities of issuers located in such countries, and providing investment advisory services in connection therewith; NOW, THEREFORE, in consideration of the premises and the mutual promises hereinafter set forth, the Fund, the Manager and the Advisor agree as follows: 1. DUTIES: The Manager hereby appoints the Advisor to perform the following services with respect to all of the investment of the Fund. The Advisor shall pay the salaries and fees of all personnel of the Advisor performing services for the Fund relating to research, statistical and investment activities. (A) INVESTMENT DISCRETION: The Advisor shall, subject to the supervision of the Manager, manage the investment of the Fund in accordance with the investment objective, policies and limitations provided in the Fund's Prospectus or other governing instruments, as amended from time to time, the Investment Company Act of 1940 (the "1940 Act") and rules thereunder, as amended from time to time, and such other limitations as the Directors or the Manager may impose with respect to the Fund by notice to the Advisor. The Advisor is authorized to make investment decisions on behalf of the Fund by notice to the Advisor. The Advisor is authorized to make investment decisions on behalf of the Fund with regard to any stock, bond, other security or investment instrument, and to place orders for the purchase and sale of such securities or other instruments through such broker-dealers as the Advisor may select. The Advisor is also authorized to provide additional investment management services to the Fund, including but not limited to services such as managing foreign currency investments, purchasing and selling or writing futures and options contracts, borrowing money, or lending securities on behalf of the Fund. All investment management and any other activities of the Advisor shall at all times be subject to the control and direction of the Manager and the Fund's Board of Directors. SUBSIDIARIES AND AFFILIATES: The Advisor may perform any or all of the services contemplated by this Agreement directly or through such of its subsidiaries or other affiliated persons as the Advisor shall determine; provided, however, that performance of such services through such subsidiaries or other affiliated persons shall have been approved by the Fund to the extent required pursuant to the 1940 Act and rules thereunder. 2. INFORMATION TO BE PROVIDED TO THE FUND AND THE MANAGER: The Advisor shall furnish such reports, evaluations, information or analyses to the Fund and the Manager as the Fund's Board of Directors or the Manager may reasonably request from time to time, or as the Advisor may deem to be desirable. 2 3. BROKERAGE: In connection with the services provided under paragraph 1(a) of this Agreement, the Advisor shall place all orders for the purchase and sale of Fund securities for the Fund's account with brokers or dealers selected by the Advisor, which may include brokers or dealers affiliated with the Manager or Advisor. The Advisor shall use its best efforts to seek to execute Fund transactions at prices which are advantageous to the Fund and at commission rates which are reasonable in relation to the benefits received. In selecting brokers or dealers qualified to execute a particular transaction, brokers or dealers may be selected who also provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to the Fund and/or to the other accounts over which the Advisor or Manager exercise investment discretion. The Advisor is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a Fund transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Advisor determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer. This determination may be viewed in terms of either that particular transaction or the overall responsibilities which the Advisor has with respect to accounts over which it exercises investment discretion. The Directors of the Fund shall periodically review the commissions paid by the Fund to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits to the Fund. 4. COMPENSATION: The Manager shall compensate the Advisor on the following basis for the services to be furnished hereunder. For services provided under this Agreement, the Manager agrees to pay the Advisor a monthly Investment Advisory Fee. The Investment Advisory Fee shall be equal to 60% of the monthly management fee rate (including performance adjustments, if any) that the Fund is obligated to pay the Manager under its Investment Management Agreement with the Manager. If in any fiscal year the aggregate expenses of the Fund exceed any applicable expense limitation imposed by any state or federal securities laws or regulations, and the Manager waives all or a portion of its management fee or reimburses the Fund for expenses to the extent required to satisfy such limitation, the Investment Advisory Fee paid to the Advisor will be reduced by 60% of the amount of such waivers or reimbursements multiplied by the fraction equal to the net assets of the Fund as to which the Advisor shall have provided the investment management services divided by the net assets of the Fund for that month. If the Advisor reduces its fees to reflect such waivers or reimbursements and the Manager subsequently recovers all or any portion of such waivers and reimbursements, then the Advisor shall be entitled to receive from the Manager a proportionate share of the amount recovered. To the extent that waivers and reimbursements by the Manager required by such limitations are in excess of the Manager's management fee, the Investment Advisory Fee paid to the Advisor will be reduced to zero for that month, but in no event shall the Advisor be required to reimburse the Manager for all or a portion of such excess reimbursements. 5. EXPENSES: It is understood that the Fund will pay all of its expenses other than those expressly stated to be payable by the Advisor hereunder or by the Manager under the Investment Management Agreement with the Fund, which expenses payable by the Fund shall include, without limitation, (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase or sale of securities and other investment instruments; (iii) fees and expenses of the Fund's Directors other than those who are "interested persons" of the Fund, the Manager or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and transfer agent fees and expenses; (vi) fees and expenses related to the registration and qualification of the Fund and the Fund's shares for distribution under state and federal securities laws; (vii) expenses of printing and mailing reports and notices and proxy material to shareholders of the Fund; (viii) all other expenses incidental to holding meetings of the Fund's shareholders, including proxy solicitations therefor; (ix) 50% of insurance premiums for fidelity and other coverage; (x) its association membership dues; (xi) expenses of typesetting for printing Prospectuses and supplements thereto; (xii) expenses of printing and mailing Prospectuses and supplements thereto; and (xiii) such non-recurring or extraordinary expenses as may arise, including those relating to actions, suits or proceedings to which the Fund is a party and the legal obligation which the Fund may have to indemnify the Fund's Directors and officers with respect thereto. 6. INTERESTED PERSONS: It is understood that Directors, officers, and shareholders of the Fund are or may be or become interested in the Manager or the Advisor as directors, officers or otherwise and that directors, 2 3 officers and stockholders of the Manager or the Advisor are or may be or become similarly interested in the Fund, and that the Manager or the Advisor may be or become interested in the Fund as a shareholder or otherwise. 7. SERVICES TO OTHER COMPANIES OR ACCOUNTS: The services of the Advisor to the Manager are not to be deemed to be exclusive, the Advisor being free to render services to others and engage in other activities, provided, however, that such other services and activities do not, during the term of this Agreement, interfere, in a material manner, with the Advisor's ability to meet all of its obligations hereunder. The Advisor shall for all purposes be an independent contractor and not an agent or employee of the Manager or the Fund. 8. STANDARD OF CARE: In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Advisor, the Advisor shall not be subject to liability to the Manager, the Fund or to any shareholder of the Fund for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security or other investment instrument. 9. DURATION AND TERMINATION OF AGREEMENT; AMENDMENTS: (a) Subject to prior termination as provided in subparagraph (d) of this paragraph 9, this Agreement shall continue in force until October 25, 1996 and indefinitely thereafter, but only so long as the continuance after such period shall be specifically approved at least annually by vote of the Fund's Board of Directors or by vote of a majority of the outstanding voting securities of the Fund. (b) This Agreement may be modified by mutual consent of the Manager, the Advisor and the Fund, such consent on the part of the Fund to be authorized by vote of a majority of the outstanding voting securities of the Fund. (c) In addition to the requirements of subparagraphs (a) and (b) of this paragraph 9, the terms of any continuance or modification of this Agreement must have been approved by the vote of a majority of those Directors of the Fund who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. (d) Either the Manager, the Advisor or the Fund may, at any time on sixty (60) days' prior written notice to the other parties, terminate this Agreement, without payment of any penalty, by action of its Board of Directors, or with respect to the Fund by vote of a majority of its outstanding voting securities. This Agreement shall terminate automatically in the event of its assignment. 10. GOVERNING LAW: This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to the choice of laws provisions thereof. The terms "registered investment company," "vote of a majority of the outstanding voting securities," "assignment," and "interested persons," when used herein, shall have the respective meanings specified in the 1940 Act as now in effect or as hereafter amended. 3 4 IN WITNESS WHEREOF the parties hereto have caused this instrument to be signed in their behalf by their respective officers thereunto duly authorized, and their respective seals to be hereunto affixed, all as of the date written above. FIDELITY INTERNATIONAL INVESTMENT ADVISORS BY: /s/ DAVID J. SAUL ----------------------------- Title FIDELITY MANAGEMENT & RESEARCH COMPANY BY: /s/ GARY L. FRENCH ----------------------------- Title FIDELITY ADVISOR KOREA FUND, INC. BY: /s/ GARY L. FRENCH ----------------------------- Title 4 EX-99.2G3 12 SUB-INVESTMENT ADVISORY AGREEMENT 1 2(G)(3) SUB-INVESTMENT ADVISORY AGREEMENT AMONG FIDELITY INTERNATIONAL INVESTMENT ADVISORS AND FIDELITY INVESTMENT JAPAN LIMITED AND FIDELITY ADVISOR KOREA FUND, INC. AGREEMENT made this 25th day of October, 1994 by and among Fidelity International Investment Advisors, a Bermuda company with principal offices at Pembroke Hall, Pembroke, Bermuda (hereinafter called "Advisor"). Fidelity Investments Japan Limited, a corporation organized under the laws of Japan with principal offices at 19th Floor, Shiroyama JT Mori Building. 4-3-11.C. Toranomon, Minato, Tokyo 105. Japan, (hereinafter called the "Sub-Advisor") and Fidelity Advisor Korea Fund. Inc., a Maryland corporation (the "Fund"). WHEREAS the Fund and the Advisor have entered into an Investment Advisory Agreement pursuant to which the Advisor is to act as the investment adviser of the Fund; and WHEREAS the Sub-Advisor has personnel in Japan and has been formed in part for the purpose of researching and compiling information and recommendations with respect to the economies of various countries, including Japan, and securities of issuers located in such countries and providing investment advisory services in connection therewith; NOW. THEREFORE, in consideration of the premises and the mutual promises hereinafter set forth, the Fund, the Advisor and The Sub-Advisor agree as follows: 1. DUTIES: The Advisor may, in its discretion, appoint the Sub-Advisor to perform one or more of the following services with respect to all or a portion of the investments of the Fund. The services and the portion of the investments of the Fund to be advised or managed by the Sub-Advisor shall be as agreed upon from time to time by the Advisor and The Sub-Advisor, provided, however, that until further notice from the Advisor to the Sub-Advisor, the Advisor hereby appoints the Sub-Advisor, and the Sub-Advisor hereby accepts appointment, to manage all the investments of the Fund in accordance with subparagraph 1(b) of this Agreement. The Sub-Advisor shall pay the salaries and fees of all personnel of the Sub-Advisor performing services for the Fund relating to research, statistical and investment activities. (A) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the Sub-Advisor shall provide investment advice to the Fund and the Advisor with respect to all or a portion of the investments of the Fund, and in connection with such advice shall furnish the Fund and the Advisor such factual information, research reports and investment recommendations as the Advisor may reasonably require. Such information may include written and oral reports and analyses. (B) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor, the Sub-Advisor shall, subject to the supervision of the Advisor, manage all or a portion of the investments of the Fund in accordance with the investment objective, policies and limitations provided in the Fund's Prospectus or other governing instruments, as amended from time to time, the Investment Company Act of 1940 (the "1940 Act") and rules thereunder as amended from time to time, and such other limitations as the Fund or Advisor may impose by notice to the Sub-Advisor. With respect to the portion of the investments of the Fund under its management, the Sub-Advisor is authorized to make investment decisions on behalf of the Fund with regard to any stock, bond, other security or investment instruments, and to place order for the purchase and sale of such securities or investment instrument through such broker-dealers as the Sub-Advisor may select. The Sub-Advisor is also authorized to provide additional investment management services to the Fund, including but not limited to services such as managing foreign currency investments, purchasing and selling or writing futures and options contracts, borrowing money, or lending 2 securities on behalf of the Fund. All investment management and any other activities of the Sub-Advisor shall at all times be subject to the control and direction of the Advisor and the Fund's Board of Directors. (C) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all of the services contemplated by this Agreement directly or through such of its subsidiaries or other affiliated persons as the Sub-Advisor shall determine; provided, however, that performance of such services through such subsidiaries or other affiliated persons shall have been approved by the Fund to the extent required pursuant to the 1940 Act and rules thereunder. 2. INFORMATION TO BE PROVIDED TO THE FUND AND THE ADVISOR: The Sub-Advisor shall furnish such reports, evaluations, information or analyses to the Fund and the Advisor as the Fund's Board of Directors or the Advisor may reasonably request from time to time, or as the Sub-Advisor may deem to be desirable. 3. BROKERAGE: In connection with the services provided under paragraph (b) of paragraph 1 of this Agreement, the Sub-Advisor shall place all orders for the purchase and sale of portfolio securities for the Fund's account with brokers or dealers selected by the Sub-Advisor, which may include brokers or dealers affiliated with the Advisor or Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute portfolio transactions at prices which are advantageous to the Fund and at commission rates which are reasonable in relation to the benefits received. In selecting brokers or dealers qualified to execute a particular transaction, brokers or dealers may be selected who also provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to the Fund and/or to the other accounts over which the Sub-Advisor or Advisor exercise investment discretion. The Sub-Advisor is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction in the Sub-Advisor determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer. This determination may be viewed in terms of either that particular transaction or the overall responsibilities, which the Sub-Advisor has with respect to accounts over which it exercises investment discretion. The Directors of the Fund shall periodically review the commissions paid by the Fund to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits to the Fund. 4. COMPENSATION: The Advisor shall compensate the Sub-Advisor on the following basis for the services to be furnished hereunder. (A) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to: (i) 30% of the monthly management fee rate (including performance adjustments, if any) that the Advisor receives under its Investment Advisory Agreement, multiplied by (ii) the fraction equal to the net assets of the Fund as to which the Sub-Advisor shall have provided investment advice divided by the net assets of the Fund for that month. (B) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor a monthly Investment Management Fee. The Investment Management Fee shall be equal to: (1) 50% of the monthly management fee rate (including performance adjustments, if any) that the Advisor receives under its Investment Advisory Agreement with the Fidelity Management & Research Company and the Fund, multiplied by: (ii) the fraction equal to the net assets of the Fund as to which the Sub-Advisor shall have provided investment management Services divided by the net assets of the Fund for that month. If in any fiscal year the aggregate expenses of the Fund exceed any applicable expense limitation imposed by any state or federal securities laws or regulations, and the Advisor waives all or a portion of its management fee or reimburses the Fund for expenses to the extent required to satisfy such limitation, the Investment Management Fee paid to the Sub-Advisor will be reduced by 50% of the amount of such waivers or reimbursements multiplied by the fraction determined in (ii). If the Sub-Advisor reduces its fees to reflect such waivers or reimbursements and the Advisor subsequently recovers all or any portion of such waivers and reimbursements, then the Sub-Advisor shall be entitled to receive from the Advisor a proportionate share of the amount recovered. 2 3 To the extent that waivers and reimbursements by the Advisor required by such limitations are in excess of the Advisor's management fee, the Investment Management Fee paid to the Sub-Advisor will be reduced to zero for that month, but in no event shall the Sub-Advisor be required to reimburse the Advisor for all or a portion of such exceed reimbursements. (C) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have provided both investment advisory services under subparagraph (a) and investment management services under subparagraph (b) of paragraph 1 for the same portion of the investments of the Fund for the same period, the fees paid to the Sub-Advisor with respect to such investments shall be calculated exclusively under subparagraph (b) of this paragraph 4. 5. EXPENSES: It is understood that the Fund will pay all of its expenses other than those expressly stated to be payable by the Sub-Advisor hereunder or by the Advisor under the Investment Advisory Agreement, or by the Fund's Investment Manager under the Investment Management Agreement with the Fund, which expenses payable by the Fund shall include, without limitation, (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase or sale of securities and other investment instruments; (iii) fees and expenses of the Fund's Directors other than those who are "interested persons" of the Fund, the Sub-Advisor or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and transfer agent fees and expenses; (vi) fees and expenses related to the registration and qualification of the Fund's shares for distribution under state and federal securities laws; (vii) expenses of printing and mailing reports and notices and proxy material to shareholders of the Fund; (viii) all other expenses incidental to holding meetings of the Fund's shareholders, including proxy solicitations therefor; (ix) 50% of insurance premiums for fidelity and other coverage; (x) its proportionate share of association membership dues; (xi) expenses of typesetting for printing Prospectuses and supplements thereto; (xii) expenses of printing and mailing Prospectuses and supplements thereto; and (xiii) such non-recurring or extraordinary expenses as may arise, including those relating to actions, suits or proceedings to which the Fund is a party and the legal obligations which the Fund may have to indemnify its Directors and officers with respect thereto. 6. INTERESTED PERSONS: It is understood that Directors, officers, and shareholders of the Fund are or may be or become interested in the Advisor or the Sub-Advisor as directors, officers or otherwise and that directors, officers and stockholders of the Advisor or the Sub-Advisor are or may be or become similarly interested in the Fund, and that the Advisor or the Sub-Advisor may be or become interested in the Fund as a shareholder or otherwise. 7. SERVICES TO OTHER COMPANIES OR ACCOUNTS: The services of the Sub-Advisor to the Advisor are not to be deemed to be exclusive, the Sub-Advisor being free to render services to others and engage in other activities, provided, however, that such other services and activities do not, during the term of this Agreement, interfere, in a material manner, with the Sub-Advisor's ability to meet all of its obligations hereunder. The Sub-Advisor shall for all purposes be an independent contractor and not an agent or employee of the Advisor or the Fund. 8. STANDARD OF CARE: In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to liability to the Advisor, the Fund or to any shareholder for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security or other investment instrument. 9. DURATION AND TERMINATION OF AGREEMENT; AMENDMENTS: (a) Subject to prior termination as provided in subparagraph (d) of this paragraph 9, this Agreement shall continue in force until , 1996 and indefinitely thereafter, but only so long as the continuance after such period shall be specifically approved at least annually by vote of the Fund's Board of Directors or by vote of a majority of the outstanding voting securities of the Fund. (b) This Agreement may be modified by mutual consent of the Advisor, the Sub-Advisor and the Fund, such consent on the part of the Fund to be authorized by vote of a majority of the outstanding voting securities of the Fund. 3 4 (c) In addition to the requirements of subparagraphs (a) and (b) of this paragraph 9, the terms of any continuance or modification of this Agreement must have been approved by the vote of a majority of those Directors of the Fund who are not parties to this Agreement or interested persons or any such party, cast in person at a meeting called for the purpose of voting on such approval. (d) Either the Advisor, the Sub-Advisor or the Fund may, at any time on sixty (60) days prior written notice to the other parties, terminate this Agreement, without payment of any penalty, by action of its Board of Directors, or with respect to the Fund by vote of a majority of its outstanding voting securities. This Agreement shall terminate automatically in the event of its assignment. 10. GOVERNING LAW: This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to the choice of laws provisions thereof. The terms "registered investment company," "vote of a majority of the outstanding voting securities," "assignment," "investment advisor," and "interested persons," when used herein, shall have the respective meanings specified in the 1940 Act as now in effect or as hereafter amended. IN WITNESS WHEREOF the parties hereto have caused this instrument to be signed in their behalf by their respective officers thereunto duly authorized, and their respective seals to be hereunto affixed, all as of the date written above. FIDELITY INTERNATIONAL INVESTMENT ADVISORS BY: /s/ DAVID J. SAUL ---------------------------------- Title FIDELITY INVESTMENTS JAPAN LIMITED BY: /s/ ---------------------------------- Title FIDELITY ADVISOR KOREA FUND, INC. BY: /s/ GARY L. FRENCH ---------------------------------- Title 4 EX-99.2J 13 CUSTODIAN AGREEMENT 1 CUSTODIAN AGREEMENT Dated as of: May 31, 1995 Between Fidelity Advisor Korea Fund, Inc. and The Chase Manhattan Bank, N.A. 2 TABLE OF CONTENTS ARTICLE Page - ------- ---- I. APPOINTMENT OF CUSTODIAN 1 II. POWERS AND DUTIES OF CUSTODIAN 1 2.01 Safekeeping.................................................................. 1 2.02 Manner of Holding Securities................................................. 1 2.03 Security Purchases........................................................... 2 2.04 Exchanges of Securities...................................................... 2 2.05 Sales of Securities.......................................................... 2 2.06 Depositary Receipts.......................................................... 3 2.07 Exercise of Rights; Tender Offers............................................ 3 2.08 Stock Dividends, Rights, Etc................................................. 3 2.09 Options...................................................................... 4 2.10 Futures Contracts............................................................ 4 2.11 Borrowing.................................................................... 4 2.12 Interest Bearing Deposits.................................................... 4 2.13 Foreign Exchange Transactions................................................ 5 2.14 Securities Loans............................................................. 5 2.15 Collections.................................................................. 6 2.16 Dividends, Distributions and Redemptions..................................... 6 2.17 Proceeds from Shares Sold.................................................... 6 2.18 Proxies, Notices, Etc........................................................ 6 2.19 Bills and Other Disbursements................................................ 7 2.20 Nondiscretionary Functions................................................... 7 2.21 Bank Accounts................................................................ 7 2.22 Deposit of Fund Assets in Securities Systems................................. 8 2.23 Other Transfers.............................................................. 9 2.24 Establishment of Segregated Account.......................................... 9 2.25 Custodian's Books and Records................................................ 9 2.26 Opinion of Fund's Independent Certified Public Accountants......................................................... 10 2.27 Reports of Independent Certified Public Accountants.......................... 10 2.28 Overdraft Facility........................................................... 10
3 III. PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS AND RELATED MATTERS 11 3.01 Proper Instructions and Special Instructions.................................11 3.02 Authorized Persons...........................................................11 3.03 Persons Having Access to Assets of the Fund.................................11 3.04 Actions of the Custodian Based on Proper Instructions and Special Instructions......................................................12 IV. SUBCUSTODIANS 12 4.01 Domestic Subcustodians.......................................................12 4.02 Foreign Subcustodians and Interim Subcustodians..............................12 4.03 Special Subcustodians........................................................13 4.04 Termination of a Subcustodian................................................14 4.05 Certification Regarding Foreign Subcustodians................................14 V. STANDARD OF CARE; INDEMNIFICATION 14 5.01 Standard of Care.............................................................14 5.02 Liability of Custodian for Actions of Other Persons..........................15 5.03 Indemnification..............................................................16 5.04 Investment Limitations.......................................................17 5.05 Fund's Right to Proceed......................................................17 VI. COMPENSATION 17 VII. TERMINATION 17 7.01 Termination of Agreement.....................................................17 VIII. DEFINED TERMS 18 IX. MISCELLANEOUS 19 9.01 Execution of Documents, Etc..................................................19 9.02 Representative Capacity; Nonrecourse Obligations.............................19 9.03 Several Obligations of the Fund..............................................19 9.04 Representations and Warranties...............................................20 9.05 Entire Agreement.............................................................20 9.06 Waivers and Amendments.......................................................20 9.07 Interpretation...............................................................20 9.08 Captions.....................................................................21 9.09 Governing Law................................................................21 9.10 Notices......................................................................21 9.11 Assignment...................................................................21 9.12 Counterparts.................................................................21 9.13 Confidentiality; Survival of Obligations.....................................21
4 APPENDICES Appendix "A" - List of Foreign Subcustodians and Special Subcustodians Appendix "B" - Procedures Relating to Custodian's Security Interest 5 CUSTODIAN AGREEMENT AGREEMENT made as of the 31st day of May, 1995 between Fidelity Advisor Korea Fund, Inc. (the "Fund") and The Chase Manhattan Bank, N.A. (the "Custodian"). W I T N E S S E T H WHEREAS, the Fund desires to appoint the Custodian as custodian in accordance with the provisions of the Investment Company Act of 1940 (the "1940 Act") and the rules and regulations thereunder, under the terms and conditions set forth in this Agreement, and the Custodian has agreed so to act as custodian. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE I APPOINTMENT OF CUSTODIAN The Fund hereby employs and appoints the Custodian as a custodian, subject to the terms and provisions of this Agreement. The Fund shall deliver to the Custodian, or shall cause to be delivered to the Custodian, cash, securities and other assets owned by the Fund from time to time during the term of this Agreement. ARTICLE II POWERS AND DUTIES OF CUSTODIAN As custodian, the Custodian shall have and perform the powers and duties set forth in this Article II. Pursuant to and in accordance with Article IV hereof, the Custodian may appoint one or more Subcustodians (as hereinafter defined) to exercise the powers and perform the duties of the Custodian set forth in this Article II and references to the Custodian in this Article II shall include any Subcustodian so appointed. Section 2.01. Safekeeping. The Custodian shall keep safely all cash, securities and other assets of the Fund delivered to the Custodian, and the Custodian shall, from time to time, accept delivery of cash, securities and other assets for safekeeping. Section 2.02. Manner of Holding Securities. (a) The Custodian shall at all times hold securities of the Fund either: (i) by physical possession of the share certificates or other instruments representing such securities in registered or bearer form; or (ii) in book-entry form by a Securities System (as hereinafter defined) in accordance with the provisions of Section 2.22 below. (b) The Custodian shall at all times hold registered securities of the Fund in the name of the Custodian, the Fund or a nominee of either of them, unless specifically directed by Proper Instructions to hold such registered securities in so-called street name; provided that, in any event, all such securities and other assets shall be held in an account of the Custodian containing only assets of the Fund, or only assets held by Custodian as a fiduciary or custodian for customers; and provided further, that the records of the Custodian shall indicate at all times the Fund or other customer for which such securities and other assets are held in such account and the respective interests therein. Section 2.03. Security Purchases. Upon receipt of Proper Instructions (as hereinafter defined), the Custodian shall pay for and receive securities purchased for the account of the Fund, provided that payment shall be made by the Custodian only upon receipt of the securities: (a) by the Custodian; (b) by a clearing corporation of a national securities exchange of which the Custodian is a member; or (c) by a Securities System. Notwithstanding the foregoing, upon receipt of Proper Instructions: (i) in the case of a repurchase agreement, the Custodian may release funds to a Securities System prior to the 6 receipt of advice from the Securities System that the securities underlying such repurchase agreement have been transferred by book-entry into the Account (as hereinafter defined) maintained with such Securities System by the Custodian, provided that the Custodian's instructions to the Securities system require that the Securities System may make payment of such funds to the other party to the repurchase agreement only upon transfer by book-entry of the securities underlying the repurchase agreement into the Account; (ii) in the case of time deposits, call account deposits, currency deposits, and other deposits, foreign exchange transactions, futures contracts or options, pursuant to Sections 2.09, 2.10, 2.12 and 2.13 hereof, the Custodian may make payment therefor before receipt of an advice or confirmation evidencing said deposit or entry into such transaction; (iii) in the case of the purchase of securities, the settlement of which occurs outside of the United States of America, the Custodian may make payment therefor and receive delivery of such securities in accordance with local custom and practice generally accepted by Institutional Clients (as hereinafter defined) in the country in which the settlement occurs, but in all events subject to the standard of care set forth in Article V hereof; and (iv) in the case of the purchase of securities in which, in accordance with standard industry custom and practice generally accepted by Institutional Clients with respect to such securities, the receipt of such securities and the payment therefor take place in different countries, the Custodian may receive delivery of such securities and make payment therefor in accordance with standard industry custom and practice for such securities generally accepted by Institutional Clients, but in all events subject to the standard of care set forth in Article V hereof. For purposes of this Agreement, an "Institutional Client" shall mean a major commercial bank, corporation, insurance company, or substantially similar institution, which, as a substantial part of its business operations, purchases or sells securities and makes use of custodial services. Section 2.04. Exchanges of Securities. Upon receipt of Proper Instructions, the Custodian shall exchange securities held by it for the account of the Fund for other securities in connection with any reorganization, recapitalization, split-up of shares, change of par value, conversion or other event relating to the securities or the issuer of such securities, and shall deposit any such securities in accordance with the terms of any reorganization or protective plan. The Custodian shall, without receiving Proper Instructions: surrender securities in temporary form for definitive securities; surrender securities for transfer into the name of the Custodian, the Fund or a nominee of either of them, as permitted by Section 2.02(b); and surrender securities for a different number of certificates or instruments representing the same number of shares or same principal amount of indebtedness, provided that the securities to be issued will be delivered to the Custodian or a nominee of the Custodian. Section 2.05. Sales of Securities. Upon receipt of Proper Instructions, the Custodian shall make delivery of securities which have been sold for the account of the Fund, but only against payment therefor in the form of: (a) cash, certified check, bank cashier's check, bank credit, or bank wire transfer; (b) credit to the account of the custodian with a clearing corporation of a national securities exchange of which the Custodian is a member; or (c) credit to the Account of the Custodian with a Securities System, in accordance with the provisions of Section 2.22 hereof. Notwithstanding the foregoing: (i) in the case of the sale of securities, the settlement of which occurs outside of the United States of America, such securities shall be delivered and paid for in accordance with local custom and practice generally accepted by Institutional Clients in the country in which the settlement occurs, but in all events subject to the standard of care set forth in Article V hereof; (ii) in the case of the sale of securities in which, in accordance with standard industry custom and practice generally accepted by Institutional Clients with respect to such securities, the delivery of such securities and receipt of payment therefor take place in different countries, the Custodian may deliver such securities and receive payment therefor in accordance with standard industry custom and practice for such securities generally accepted by Institutional Clients, but in all events subject to the standard of care set forth in Article V hereof; and (iii) in the case of securities held in physical form, such securities shall be delivered and paid for in accordance with "street delivery custom" to a broker or its clearing agent, against delivery to the Custodian of a receipt for such securities, provided that the Custodian shall have taken reasonable steps to ensure prompt collection of the payment for, or the return of, such securities by the broker or its clearing agent, and provided further that the Custodian shall not be responsible for the selection of or the failure or inability to perform of such broker or its clearing agent. 2 7 Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions, the Custodian shall surrender securities to the depositary used for such securities by an issuer of American Depositary Receipts or Global Depositary Receipts (hereinafter referred to, collectively, as "ADRs"), against a written receipt therefor adequately describing such securities and written evidence satisfactory to the Custodian that the depositary has acknowledged receipt of instructions to issue ADRs with respect to such securities in the name of the Custodian or a nominee of the Custodian, for delivery to the Custodian at such place as the Custodian may from time to time designate. Upon receipt of Proper Instructions, the Custodian shall surrender ADRs to the issuer thereof, against a written receipt therefor adequately describing the ADRs surrendered and written evidence satisfactory to the Custodian that the issuer of the ADRs has acknowledged receipt of instructions to cause its depository to deliver the securities underlying such ADRs to the Custodian. Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of Proper Instructions, the Custodian shall: (a) deliver warrants, puts, calls, rights or similar securities to the issuer or trustee thereof, or to the agent of such issuer or trustee, for the purpose of exercise or sale, provided that the new securities, cash or other assets, if any, acquired as a result of such actions are to be delivered to the Custodian; and (b) deposit securities upon invitations for tenders thereof, provided that the consideration for such securities is to be paid or delivered to the Custodian, or the tendered securities are to be returned to the Custodian. Notwithstanding any provision of this Agreement to the contrary, the Custodian shall take all necessary action, unless otherwise directed to the contrary in Proper Instructions, to comply with the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions, or similar rights of security ownership, and shall promptly notify the Fund of such action in writing by facsimile transmission or in such other manner as the Fund and Custodian may agree in writing. Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive and collect all stock dividends, rights and other items of like nature and, upon receipt of Proper Instructions, take action with respect to the same as directed in such Proper Instructions. Section 2.09. Options. Upon receipt of Proper Instructions and in accordance with the provisions of any agreement between the Custodian, any registered broker-dealer and, if necessary, the Fund relating to compliance with the rules of the Options Clearing Corporation or of any registered national securities exchange or similar organization(s), the Custodian shall: (a) receive and retain confirmations or other documents, if any, evidencing the purchase or writing of an option on a security or securities index by the Fund; (b) deposit and maintain in a segregated account, securities (either physically or by book-entry in a Securities System), cash or other assets; and (c) pay, release and/or transfer such securities, cash or other assets in accordance with notices or other communications evidencing the expiration, termination or exercise of such options furnished by the Options Clearing Corporation, the securities or options exchange on which such options are traded, or such other organization as may be responsible for handling such option transactions. The Fund and the broker-dealer shall be responsible for the sufficiency of assets held in any segregated account established in compliance with applicable margin maintenance requirements and the performance of other terms of any option contract. Section 2.10. Futures Contracts. Upon receipt of Proper Instructions, or pursuant to the provisions of any futures margin procedural agreement among the Fund, the Custodian and any futures commission merchant (a "Procedural Agreement"), the Custodian shall: (a) receive and retain confirmations, if any, evidencing the purchase or sale of a futures contract or an option on a futures contract by the Fund; (b) deposit and maintain in a segregated account, cash, securities and other assets designated as initial, maintenance or variation "margin" deposits intended to secure the Fund's performance of its obligations under any futures contracts purchased or sold or any options on futures contracts written by the Fund, in accordance with the provisions of any Procedural Agreement designed to comply with the rules of the Commodity Futures Trading Commission and/or any commodity exchange or contract market (such as the Chicago Board of Trade), or any similar organization(s), regarding such margin deposits; and (c) release assets from and/or transfer assets into such margin accounts only in accordance with any such Procedural Agreements. The Fund and such futures commission merchant shall be responsible for the sufficiency of assets held in the segregated account in 3 8 compliance with applicable margin maintenance requirements and the performance of any futures contract or option on a futures contract in accordance with its terms. Section 2.11. Borrowing. Upon receipt of Proper Instructions, the Custodian shall deliver securities of the Fund to lenders or their agents, or otherwise establish a segregated account as agreed to by the Fund and the Custodian, as collateral for borrowings effected by the Fund, provided that such borrowed money is payable by the lender (a) to or upon the Custodian's order, as Custodian for the Fund, and (b) concurrently with delivery of such securities. Section 2.12. Interest Bearing Deposits. Upon receipt of Proper Instructions directing the Custodian to purchase interest bearing fixed term and call deposits (hereinafter referred to collectively, as "Interest Bearing Deposits") for the account of the Fund, the Custodian shall purchase such Interest Bearing Deposits in the name of the Fund with such banks or trust companies (including the Custodian, any Subcustodian or any subsidiary or affiliate of the Custodian) (hereinafter referred to as "Banking Institutions") and in such amounts as the Fund may direct pursuant to Proper Instructions. Such Interest Bearing Deposits may be denominated in U.S. Dollars or other currencies, as the Fund may determine and direct pursuant to Proper Instructions. The Custodian shall include in its records with respect to the assets of the Fund appropriate notation as to the amount and currency of each such Interest Bearing Bank Deposit, the accepting Banking Institution and all other appropriate details, and shall retain such forms of advice or receipt evidencing such account, if any, as may be forwarded to the Custodian by the Banking Institution. The responsibilities of the Custodian to the Fund for Interest Bearing Deposits accepted on the Custodian's books in the United States shall be that of a U.S. bank for a similar deposit. With respect to Interest Bearing Deposits other than those accepted on the Custodian's books, (a) the Custodian shall be responsible for the collection of income as set forth in Section 2.15 and the transmission of cash and instructions to and from such accounts; and (b) the Custodian shall have no duty with respect to the selection of the Banking Institution or, so long as the Custodian acts in accordance with Proper Instructions, for the failure of such Banking Institution to pay upon demand. Upon receipt of Proper Instructions, the Custodian shall take such reasonable actions as the Fund deems necessary or appropriate to cause each such Interest Bearing Deposit Account to be insured to the maximum extent possible by all applicable deposit insurers including, without limitation, the Federal Deposit Insurance Corporation. Section 2.13. Foreign Exchange Transactions (a) Foreign Exchange Transactions Other than as Principal. Upon receipt of Proper Instructions, the Custodian shall settle foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf of and for the account of the Fund with such currency brokers or Banking Institutions as the Fund may determine and direct pursuant to Proper Instructions. The Custodian shall be responsible for the transmission of cash and instructions to and from the currency broker or Banking Institution with which the contract or option is made, the safekeeping of all certificates and other documents and agreements evidencing or relating to such foreign exchange transactions and the maintenance of proper records as set forth in Section 2.25. The Custodian shall have no duty with respect to the selection of the currency brokers or Banking Institutions with which the Fund deals or, so long as the Custodian acts in accordance with Proper Instructions, for the failure of such brokers or Banking Institutions to comply with the terms of any contract or option. (b) Foreign Exchange Contracts as Principal. The Custodian shall not be obligated to enter into foreign exchange transactions as principal. However, if the Custodian has made available to the Fund its services as a principal in foreign exchange transactions, upon receipt of Proper Instructions, the Custodian shall enter into foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf of and for the account of the Fund with the Custodian as principal. The Custodian shall be responsible for the selection of the currency brokers or Banking Institutions and the failure of such currency brokers or Banking Institutions to comply with the terms of any contract or option. 4 9 (c) Payments. Notwithstanding anything to the contrary contained herein, upon receipt of Proper Instructions the Custodian may, in connection with a foreign exchange contract, make free outgoing payments of cash in the form of U.S. Dollars or foreign currency prior to receipt of confirmation of such foreign exchange contract or confirmation that the countervalue currency completing such contract has been delivered or received. Section 2.14. Securities Loans. Upon receipt of Proper Instructions, the Custodian shall, in connection with loans of securities by the Fund, deliver securities of the Fund to the borrower thereof prior to receipt of the collateral, if any, for such borrowing; provided that, in cases of loans of securities secured by cash collateral, the Custodian's instructions to the Securities System shall require that the Securities System deliver the securities of the Fund to the borrower thereof only upon receipt of the collateral for such borrowing. Section 2.15. Collections. The Custodian shall, and shall cause any Subcustodian to: (a) collect amounts due and payable to the Fund with respect to portfolio securities and other assets of the Fund; (b) promptly credit to the account of the Fund all income and other payments relating to portfolio securities and other assets held by the Custodian hereunder upon Custodian's receipt of such income or payments or as otherwise agreed in writing by the Custodian and the Fund; (c) promptly endorse and deliver any instruments required to effect such collections; (d) promptly execute ownership and other certificates and affidavits for all federal, state and foreign tax purposes in connection with receipt of income, capital gains or other payments with respect to portfolio securities and other assets of the Fund, or in connection with the purchase, sale or transfer of such securities or other assets; and (e) promptly file any certificates or other affidavits for the refund or reclaim of foreign taxes paid, and promptly notify the Fund of any changes to law, interpretative rulings or procedures regarding such reclaims, and otherwise use all available measures customarily used to minimize the imposition of foreign taxes at source, and promptly inform the Fund of alternative means of minimizing such taxes of which the Custodian shall become aware (or with the exercise of reasonable care should have become aware); provided, however, that with respect to Fund securities registered in so-called street name, the Custodian shall use its best efforts to collect amounts due and payable to the Fund. The Custodian shall promptly notify the Fund in writing by facsimile transmission or in such other manner as the Fund and Custodian may agree in writing if any amount payable with respect to portfolio securities or other assets of the Fund is not received by the Custodian when due. The Custodian shall not be responsible for the collection of amounts due and payable with respect to portfolio securities or other assets that are in default. Section 2.16. Dividends, Distributions and Redemptions. The Custodian shall promptly release funds or securities: (a) upon receipt of Proper Instructions, to one or more Distribution Accounts designated by the Fund in such Proper Instructions; or (b) upon receipt of Special Instructions, as otherwise directed by the Fund, for the purpose of the payment of dividends or other distributions to shareholders of the Fund, and payment to shareholders who have requested repurchase or redemption of their shares of the Fund (collectively, the "Shares"). For purposes of this Agreement, a "Distribution Account" shall mean an account established at a Banking Institution designated by the Fund in Special Instructions. Section 2.17. Proceeds from Shares Sold. The Custodian shall receive funds representing cash payments received for Shares issued or sold from time to time by the Fund, and shall promptly credit such funds to the account(s) of the applicable Fund). The Custodian shall promptly notify the Fund of Custodian's receipt of cash in payment for Shares issued by the Fund by facsimile transmission or in such other manner as the Fund and Custodian may agree in writing. Upon receipt of Proper Instructions, the Custodian shall: (a) deliver all federal funds received by the Custodian in payment for Shares in payment for such investments as may be set forth in such Proper Instructions and at a time agreed upon between the Custodian and the Fund; and (b) make federal funds available to the Fund as of specified times agreed upon from time to time by the Fund and the Custodian, in the amount of checks received in payment for Shares which are deposited to the accounts of the Fund. Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to the Fund, in the most expeditious manner practicable, all forms of proxies, all notices of meetings, and any other notices or announcements affecting or relating to securities owned by the Fund that are received by the Custodian, 5 10 any Subcustodian, or any nominee of either of them, and, upon receipt of Proper Instructions, the Custodian shall execute and deliver, or cause such Subcustodian or nominee to execute and deliver, such proxies or other authorizations as may be required. Except as directed pursuant to Proper Instructions, neither the Custodian nor any Subcustodian or nominee shall vote upon any such securities, or execute any proxy to vote thereon, or give any consent or take any other action with respect thereto. Section 2.19. Bills and Other Disbursements. Upon receipt of Proper Instructions, the Custodian shall pay or cause to be paid, all bills, statements, or other obligations of the Fund. Section 2.20. Nondiscretionary Functions. The Custodian shall attend to all nondiscretionary details in connection with the sale, exchange, substitution, purchase, transfer or other dealings with securities or other assets of the Fund held by the Custodian, except as otherwise directed from time to time pursuant to Proper Instructions. Section 2.21. Bank Accounts (a) Accounts with the Custodian and any Subcustodians. The Custodian shall open and operate a bank account or accounts (hereinafter referred to collectively, as "Bank Accounts") on the books of the Custodian or any Subcustodian provided that such account(s) shall be in the name of the Custodian or a nominee of the Custodian, for the account of the Fund, and shall be subject only to the draft or order of the Custodian; provided however, that such Bank Accounts in countries other than the United States may be held in an account of the Custodian containing only assets held by the Custodian as a fiduciary or custodian for customers, and provided further, that the records of the Custodian shall indicate at all times the Fund or other customer for which such securities and other assets are held in such account and the respective interests therein. Such Bank Accounts may be denominated in either U.S. Dollars or other currencies. The responsibilities of the Custodian to the Fund for deposits accepted on the Custodian's books in the United States shall be that of a U.S. bank for a similar deposit. The responsibilities of the Custodian to the Fund for deposits accepted on any Subcustodian's books shall be governed by the provisions of Section 5.02. (b) Accounts With Other Banking Institutions. The Custodian may open and operate Bank Accounts on behalf of the Fund, in the name of the Custodian or a nominee of the Custodian, at a Banking Institution other than the Custodian or any Subcustodian, provided that such account(s) shall be in the name of the Custodian or a nominee of the Custodian, for the account of the Fund, and shall be subject only to the draft or order of the Custodian; provided however, that such Bank Accounts may be held in an account of the Custodian containing only assets held by the Custodian as a fiduciary or custodian for customers, and provided further, that the records of the Custodian shall indicate at all times the Fund or other customer for which such securities and other assets are held in such account and the respective interests therein. Such Bank Accounts may be denominated in either U.S. Dollars or other currencies. Subject to the provisions of Section 5.01(a), the Custodian shall be responsible for the selection of the Banking Institution and for the failure of such Banking Institution to pay according to the terms of the deposit. (c) Deposit Insurance. Upon receipt of Proper Instructions, the Custodian shall take such reasonable actions as the Fund deems necessary or appropriate to cause each deposit account established by the Custodian pursuant to this Section 2.21 to be insured to the maximum extent possible by all applicable deposit insurers including, without limitation, the Federal Deposit Insurance Corporation. Section 2.22. Deposit of Fund Assets in Securities Systems. The Custodian may deposit and/or maintain domestic securities owned by the Fund in: (a) The Depository Trust Company; (b) the Participants Trust Company; (c) any book-entry system as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii) Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or (iii) the book-entry regulations of federal agencies substantially in the form of 31 CFR 306.115; or (d) any other domestic clearing agency registered with the Securities and Exchange Commission ("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may otherwise be authorized by the Securities and Exchange Commission to serve in the capacity of depository or 6 11 clearing agent for the securities or other assets of investment companies) which acts as a securities depository and the use of which the Fund has previously approved by Special Instructions (as hereinafter defined) (each of the foregoing being referred to in this Agreement as a "Securities System"). Use of a Securities System shall be in accordance with applicable Federal Reserve Board and SEC rules and regulations, if any, and subject to the following provisions: (A) The Custodian may deposit and/or maintain securities held hereunder in a Securities System, provided that such securities are represented in an account ("Account") of the Custodian in the Securities System which Account shall not contain any assets of the Custodian other than assets held as a fiduciary, custodian, or otherwise for customers and shall be so designated on the books and records of the Securities System. (B) The Securities System shall be obligated to comply with the Custodian's directions with respect to the securities held in such Account and shall not be entitled to a lien against the assets in such Account for extensions of credit to the Custodian other than for payment of the purchase price of such assets. (C) The Fund hereby designates the Custodian as the party in whose name any securities deposited by the Custodian in the account are to be registered. (D) The books and records of the Custodian shall at all times identify those securities belonging to the Fund which are maintained in a Securities System. (E) The Custodian shall pay for securities purchased for the account of the Fund only upon (w) receipt of advice from the Securities System that such securities have been transferred to the Account of the Custodian, and (x) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund only upon (y) receipt of advice from the Securities System that payment for such securities has been transferred to the Account of the Custodian, and (z) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System relating to transfers of securities for the account of the Fund shall identify the Fund and shall be maintained for the Fund by the Custodian. The Custodian shall deliver to the Fund on the next succeeding business day daily transaction reports which shall include each day's transactions in the Securities System for the account of the Fund. Such transaction reports shall be delivered to the Fund or any agent designated by the Fund pursuant to Proper Instructions, by computer or in such other manner as the Fund and Custodian may agree in writing. (F) The Custodian shall, if requested by the Fund pursuant to Proper Instructions, provide the Fund with all reports obtained by the Custodian or any Subcustodian with respect to a Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities System. (G) Upon receipt of Special Instructions, the Custodian shall terminate the use of any Securities System (except the federal book-entry system) on behalf of any Fund as promptly as practicable and shall take all actions reasonably practicable to safeguard the securities of the Fund maintained with such Securities System. Section 2.23. Other Transfers. (a) Upon receipt of Proper Instructions, the Custodian shall transfer to or receive from a third party that has been appointed to serve as an additional custodian of the Fund (an "Additional Custodian") securities, cash and other assets of the Fund in accordance with such Proper Instructions. Each Additional Custodian shall be identified as such on Appendix A, as the same may be amended from time to time in accordance with the provisions of Section 9.06(a). (b) Upon receipt of Special Instructions, the Custodian shall make such other dispositions of securities, funds or other property of the Fund in a manner or for purposes other than as expressly set forth in this Agreement, provided that the Special Instructions relating to such disposition shall 7 12 include a statement of the purpose for which the delivery is to be made, the amount of funds and/or securities to be delivered, and the name of the person or persons to whom delivery is to be made, and shall otherwise comply with the provisions of Sections 3.01 and 3.03 hereof. Section 2.24. Establishment of Segregated Account. Upon receipt of Proper Instructions, the Custodian shall establish and maintain on its books a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities or other assets of the Fund, including securities maintained by the Custodian in a Securities System pursuant to Section 2.22 hereof, said account or accounts to be maintained: (a) for the purposes set forth in Sections 2.09, 2.10 and 2.11 hereof; (b) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the SEC relating to the maintenance of segregated accounts by registered investment companies; or (c) for such other purposes as set forth, from time to time, in Special Instructions. Section 2.25. Custodian's Books and Records. The Custodian shall provide any assistance reasonably requested by the Fund in the preparation of reports to Fund shareholders and others, audits of accounts, and other ministerial matters of like nature. The Custodian shall maintain complete and accurate records with respect to securities and other assets held for the accounts of the Fund as required by the rules and regulations of the SEC applicable to investment companies registered under the 1940 Act, including: (a) journals or other records of original entry containing a detailed and itemized daily record of all receipts and deliveries of securities (including certificate and transaction identification numbers, if any), and all receipts and disbursements of cash; (b) ledgers or other records reflecting (i) securities in transfer, (ii) securities in physical possession, (iii) securities borrowed, loaned or collateralizing obligations of the Fund, (iv) monies borrowed and monies loaned (together with a record of the collateral therefor and substitutions of such collateral), (v) dividends and interest received, (vi) the amount of tax withheld by any person in respect of any collection made by the Custodian or any Subcustodian, and (vii) the amount of reclaims or refunds for foreign taxes paid; and (c) canceled checks and bank records related thereto. The Custodian shall keep such other books and records of the Fund as the Fund shall reasonably request. All such books and records maintained by the Custodian shall be maintained in a form acceptable to the Fund and in compliance with the rules and regulations of the SEC, including, but not limited to, books and records required to be maintained by Section 31(a) of the 1940 Act and the rules and regulations from time to time adopted thereunder. All books and records maintained by the Custodian pursuant to this Agreement shall at all times be the property of the Fund and shall be available during normal business hours for inspection and use by the Fund and its agents, including, without limitation, its independent certified public accountants. Notwithstanding the preceding sentence, the Fund shall not take any actions or cause the Custodian to take any actions which would cause, either directly or indirectly, the Custodian to violate any applicable laws, regulations or orders. Section 2.26. Opinion of Fund's Independent Certified Public Accountants. The Custodian shall take all reasonable action as the Fund may request to obtain from year to year favorable opinions from the Fund's independent certified public accountants with respect to the Custodian's activities hereunder in connection with the preparation of the Fund's Form N-2 and the Fund's Form N-SAR or other periodic reports to the SEC and with respect to any other requirements of the SEC. Section 2.27. Reports by Independent Certified Public Accountants. At the request of the Fund, the Custodian shall deliver to the Fund a written report prepared by the Custodian's independent certified public accountants with respect to the services provided by the Custodian under this Agreement, including, without limitation, the Custodian's accounting system, internal accounting control and procedures for safeguarding cash, securities and other assets, including cash, securities and other assets deposited and/or maintained in a Securities System or with a Subcustodian. Such report shall be of sufficient scope and in sufficient detail as may reasonably be required by the Fund and as may reasonably be obtained by the Custodian. Section 2.28. Overdraft Facility. In the event that the Custodian is directed by Proper Instructions to make any payment or transfer of funds on behalf of the Fund for which there would be, at the close of business on the date of such payment or transfer, insufficient funds held by the Custodian on behalf of the Fund, the Custodian may, in its discretion, provide an 8 13 overdraft (an "Overdraft") to the Fund on behalf of the Fund, in an amount sufficient to allow the completion of such payment. Any Overdraft provided hereunder: (a) shall be payable on the next Business Day, unless otherwise agreed by the Fund and the Custodian; and (b) shall accrue interest from the date of the Overdraft to the date of payment in full by the Fund on behalf of the Fund at a rate agreed upon in writing, from time to time, by the Custodian and the Fund. The Custodian and the Fund acknowledge that the purpose of such Overdrafts is to temporarily finance the purchase or sale of securities for prompt delivery in accordance with the terms hereof, or to meet emergency expenses not reasonably foreseeable by the Fund. The Custodian shall promptly notify the Fund in writing (an "Overdraft Notice") of any Overdraft by facsimile transmission or in such other manner as the Fund and the Custodian may agree in writing. At the request of the Custodian, the Fund, shall pledge, assign and grant to the Custodian a security interest in certain specified securities of the Fund, as security for Overdrafts provided to the Fund, under the terms and conditions set forth in Appendix "B" attached hereto. 9 14 ARTICLE III PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS AND RELATED MATTERS Section 3.01. Proper Instructions and Special Instructions. (a) Proper Instructions. As used herein, the term "Proper Instructions" shall mean: (i) a tested telex, a written (including, without limitation, facsimile transmission) request, direction, instruction or certification signed or initialed by or on behalf of the Fund by one or more Authorized Persons (as hereinafter defined); (ii) a telephonic or other oral communication by one or more Authorized Persons; or (iii) a communication effected directly between an electro-mechanical or electronic device or system (including, without limitation, computers) by or on behalf of the Fund by one or more Authorized Persons; provided, however, that communications of the types described in clauses (ii) and (iii) above purporting to be given by an Authorized Person shall be considered Proper Instructions only if the Custodian reasonably believes such communications to have been given by an Authorized Person with respect to the transaction involved. Proper Instructions in the form of oral communications shall be confirmed by the Fund by tested telex or in writing in the manner set forth in clause (i) above, but the lack of such confirmation shall in no way affect any action taken by the Custodian in reliance upon such oral instructions prior to the Custodian's receipt of such confirmation. The Fund and the Custodian are hereby authorized to record any and all telephonic or other oral instructions communicated to the Custodian. Proper Instructions may relate to specific transactions or to types or classes of transactions, and may be in the form of standing instructions. (b) Special Instructions. As used herein, the term "Special Instructions" shall mean Proper Instructions countersigned or confirmed in writing by the Treasurer or any Assistant Treasurer of the Fund or any other person designated by the Treasurer of the Fund in writing, which countersignature or confirmation shall be (i) included on the same instrument containing the Proper Instructions or on a separate instrument relating thereto, and (ii) delivered by hand, by facsimile transmission, or in such other manner as the Fund and the Custodian agree in writing. (c) Address for Proper Instructions and Special Instructions. Proper Instructions and Special Instructions shall be delivered to the Custodian at the address and/or telephone, telecopy or telex number agreed upon from time to time by the Custodian and the Fund. Section 3.02. Authorized Persons. Concurrently with the execution of this Agreement and from time to time thereafter, as appropriate, the Fund shall deliver to the Custodian, duly certified as appropriate by a Treasurer or Assistant Treasurer of the Fund, a certificate setting forth: (a) the names, titles, signatures and scope of authority of all persons authorized to give Proper Instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the Fund (collectively, the "Authorized Persons" and individually, an "Authorized Person"); and (b) the names, titles and signatures of those persons authorized to issue Special Instructions. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until delivery to the Custodian of a similar certificate to the contrary. Upon delivery of a certificate which deletes the name(s) of a person previously authorized to give Proper Instructions or to issue Special Instructions, such persons shall no longer be considered an Authorized Person or authorized to issue Special Instructions. Section 3.03. Persons Having Access to Assets of the Fund . Notwithstanding anything to the contrary contained in this Agreement, no Authorized Person, Trustee, officer, employee or agent of the Fund shall have physical access to the assets of the Fund held by the Custodian nor shall the Custodian deliver any assets of the Fund for delivery to an account of such person; provided, however, that nothing in this Section 3.03 shall prohibit (a) any Authorized Person from giving Proper Instructions, or any person authorized to issue Special Instructions from issuing Special Instructions, so long as such action does not result in delivery of or access to assets of any Fund prohibited by this Section 3.03; or (b) the Fund's independent certified public accountants from examining or reviewing the assets of the Fund held by the Custodian. The Fund shall deliver to the Custodian a written certificate identifying such Authorized Persons, Trustees, officers, employees and agents of the Fund. 10 15 Section 3.04. Actions of Custodian Based on Proper Instructions and Special Instructions. So long as and to the extent that the Custodian acts in accordance with (a) Proper Instructions or Special Instructions, as the case may be, and (b) the terms of this Agreement, the Custodian shall not be responsible for the title, validity or genuineness of any property, or evidence of title thereof, received by it or delivered by it pursuant to this Agreement. ARTICLE IV SUBCUSTODIANS The Custodian may, from time to time, in accordance with the relevant provisions of this Article IV, appoint one or more Domestic Subcustodians, Foreign Subcustodians, Interim Subcustodians and Special Subcustodians to act on behalf of the Fund. (For purposes of this Agreement, all duly appointed Domestic Subcustodians, Foreign Subcustodians, Interim Subcustodians, and Special Subcustodians are hereinafter referred to collectively, as "Subcustodians.") Section 4.01. Domestic Subcustodians. The Custodian may, at any time and from time to time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a custodian under Section 17(f) of the 1940 Act and the rules and regulations thereunder, to act as a subcustodian for purposes of holding cash, securities and other assets of the Fund and performing other functions of the Custodian within the United States (a "Domestic Subcustodian"); provided, that, the Custodian shall notify the Fund in writing of the identity and qualifications of any proposed Domestic Subcustodian at least thirty (30) days prior to appointment of such Domestic Subcustodian, and the Fund may, in its sole discretion, by written notice to the Custodian executed by an Authorized Person disapprove of the appointment of such Domestic Subcustodian. If following notice by the Custodian to the Fund regarding appointment of a Domestic Subcustodian and the expiration of thirty (30) days after the date of such notice, the Fund shall have failed to notify the Custodian of its disapproval thereof, the Custodian may, in its discretion, appoint such proposed Domestic Subcustodian as its subcustodian. Section 4.02. Foreign Subcustodians and Interim Subcustodians. (a) Foreign Subcustodians. The Custodian may, at any time and from time to time, appoint: (i) any bank, trust company or other entity meeting the requirements of an "eligible foreign custodian" under Section 17(f) of the 1940 Act and the rules and regulations thereunder or by order of the Securities and Exchange Commission exempted therefrom, or (ii) any bank as defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a custodian under Section 17(f) of the 1940 Act and the rules and regulations thereunder to act on behalf of the Fund as a subcustodian for purposes of holding cash, securities and other assets of the Fund and performing other functions of the Custodian in countries other than the United States of America (a "Foreign Subcustodian"); provided, that, prior to the appointment of any Foreign Subcustodian, the Custodian shall have obtained written confirmation of the approval of the Board of Directors or other governing body or entity of the Fund (which approval may be withheld in the sole discretion of such Board of Directors or other governing body or entity) with respect to (i) the identity and qualifications of any proposed Foreign Subcustodian, (ii) the country or countries in which, and the securities depositories or clearing agencies, if any, through which, any proposed Foreign Subcustodian is authorized to hold securities and other assets of the Fund, and (iii) the form and terms of the subcustodian agreement to be entered into between such proposed Foreign Subcustodian and the Custodian. Each such duly approved Foreign Subcustodian and the countries where and the securities depositories and clearing agencies through which they may hold securities and other assets of the Fund shall be listed on Appendix "A" attached hereto, as it may be amended, from time to time, in accordance with the provisions of Section 9.06(a) hereof. The Fund shall be responsible for informing the Custodian sufficiently in advance of a proposed investment which is to be held in a country in which no Foreign Subcustodian is authorized to act, in order that there shall be sufficient time for the Custodian to effect the appropriate arrangements with a proposed foreign subcustodian, including obtaining approval as provided in this Section 4.02(a). The Custodian shall not amend any subcustodian agreement entered into with a Foreign Subcustodian, or agree to change or permit any changes thereunder, or waive any rights under such agreement, which materially affect the Fund's rights or the Foreign Subcustodian's obligations or duties to the Fund under such agreement, except upon prior approval pursuant to Special Instructions. 11 16 (b) Interim Subcustodians. Notwithstanding the foregoing, in the event that the Fund shall invest in a security or other asset to be held in a country in which no Foreign Subcustodian is authorized to act, the Custodian shall promptly notify the Fund in writing by facsimile transmission or in such other manner as the Fund and Custodian shall agree in writing of the unavailability of an approved Foreign Subcustodian in such country; and the Custodian shall, upon receipt of Special Instructions, appoint any Person designated by the Fund in such Special Instructions to hold such security or other asset. (Any Person appointed as a subcustodian pursuant to this Section 4.02(b) is hereinafter referred to as an "Interim Subcustodian.") Section 4.03. Special Subcustodians. Upon receipt of Special Instructions, the Custodian shall, on behalf of the Fund, appoint one or more banks, trust companies or other entities designated in such Special Instructions to act as a subcustodian for purposes of: (i) effecting third-party repurchase transactions with banks, brokers, dealers or other entities through the use of a common custodian or subcustodian; (ii) establishing a joint trading account for the Fund and other registered management investment companies for which Fidelity Management & Research Company serves as investment adviser, through which the Fund and such other investment companies shall collectively participate in certain repurchase transactions; (iii) providing depository and clearing agency services with respect to certain variable rate demand note securities; and (iv) effecting any other transactions designated by the Fund in Special Instructions. (Each such designated subcustodian is hereinafter referred to as a "Special Subcustodian.") Each such duly appointed Special Subcustodian shall be listed on Appendix "A" attached hereto, as it may be amended from time to time in accordance with the provisions of Section 9.06(a) hereof. In connection with the appointment of any Special Subcustodian, the Custodian shall enter into a subcustodian agreement with the Special Subcustodian in form and substance approved by the Fund, provided that such agreement shall in all events comply with the provisions of the 1940 Act and the rules and regulations thereunder and the terms and provisions of this Agreement. The Custodian shall not amend any subcustodian agreement entered into with a Special Subcustodian, or agree to change or permit any changes thereunder, or waive any rights under such agreement, except upon prior approval pursuant to Special Instructions. Section 4.04. Termination of a Subcustodian. The Custodian shall (i) cause each Domestic Subcustodian and Foreign Subcustodian to, and (ii) use its best efforts to cause each Interim Subcustodian and Special Subcustodian to, perform all of its obligations in accordance with the terms and conditions of the subcustodian agreement between the Custodian and such Subcustodian. In the event that the Custodian is unable to cause such Subcustodian to fully perform its obligations thereunder, the Custodian shall forthwith, upon the receipt of Special Instructions, terminate such Subcustodian with respect to the Fund and, if necessary or desirable, appoint a replacement Subcustodian in accordance with the provisions of Section 4.01 or Section 4.02, as the case may be. In addition to the foregoing, the Custodian (A) may, at any time in its discretion, upon written notification to the Fund, terminate any Domestic Subcustodian, Foreign Subcustodian or Interim Subcustodian, and (B) shall, upon receipt of Special Instructions, terminate any Subcustodian with respect to the Fund, in accordance with the termination provisions under the applicable subcustodian agreement. Section 4.05. Certification Regarding Foreign Subcustodians. Upon request of the Fund, the Custodian shall deliver to the Fund a certificate stating: (i) the identity of each Foreign Subcustodian then acting on behalf of the Custodian; (ii) the countries in which and the securities depositories and clearing agents through which each such Foreign Subcustodian is then holding cash, securities and other assets of any Fund; and (iii) such other information as may be requested by the Fund to ensure compliance with Rule 17f-5 under the 1940 Act. ARTICLE V STANDARD OF CARE; INDEMNIFICATION Section 5.01. Standard of Care. (a) General Standard of Care. The Custodian shall exercise reasonable care and diligence in carrying out all of its duties and obligations under this Agreement, and shall be liable to the Fund for all 12 17 loss, damage and expense suffered or incurred by the Fund resulting from the failure of the Custodian to exercise such reasonable care and diligence. (b) Actions Prohibited by Applicable Law, Etc. In no event shall the Custodian incur liability hereunder if the Custodian or any Subcustodian or Securities System, or any subcustodian, securities depository or securities system utilized by any such Subcustodian, or any nominee of the Custodian or any Subcustodian (individually, a "Person") is prevented, forbidden or delayed from performing, or omits to perform, any act or thing which this Agreement provides shall be performed or omitted to be performed, by reason of: (i) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or of any foreign country, or political subdivision thereof or of any court of competent jurisdiction; or (ii) any act of God or war or other similar circumstance beyond the control of the Custodian, unless, in each case, such delay or nonperformance is caused by (A) the negligence, misfeasance or misconduct of the applicable Person, or (B) a malfunction or failure of equipment operated or utilized by the applicable Person other than a malfunction or failure beyond such Person's control and which could not reasonably be anticipated and/or prevented by such Person. (c) Mitigation by Custodian. Upon the occurrence of any event which causes or may cause any loss, damage or expense to the Fund, (i) the Custodian shall, (ii) the Custodian shall cause any applicable Domestic Subcustodian or Foreign Subcustodian to, and (iii) the Custodian shall use its best efforts to cause any applicable Interim Subcustodian or Special Subcustodian to, use all commercially reasonable efforts and take all reasonable steps under the circumstances to mitigate the effects of such event and to avoid continuing harm to the Fund. (d) Advice of Counsel. The Custodian shall be entitled to receive and act upon advice of counsel on all matters. The Custodian shall be without liability for any action reasonably taken or omitted in good faith pursuant to the advice of (i) counsel for the Fund, or (ii) at the expense of the Custodian, such other counsel as the Fund and the Custodian may agree upon; provided, however, with respect to the performance of any action or omission of any action upon such advice, the Custodian shall be required to conform to the standard of care set forth in Section 5.01(a). (e) Expenses of the Fund. In addition to the liability of the Custodian under this Article V, the Custodian shall be liable to the Fund for all reasonable costs and expenses incurred by the Fund in connection with any claim by the Fund against the Custodian arising from the obligations of the Custodian hereunder including, without limitation, all reasonable attorneys' fees and expenses incurred by the Fund in asserting any such claim, and all expenses incurred by the Fund in connection with any investigations, lawsuits or proceedings relating to such claim; provided, that the Fund has recovered from the Custodian for such claim. (f) Liability for Past Records. The Custodian shall have no liability in respect of any loss, damage or expense suffered by the Fund, insofar as such loss, damage or expense arises from the performance of the Custodian's duties hereunder by reason of the Custodian's reliance upon records that were maintained for the Fund by entities other than the Custodian prior to the Custodian's employment hereunder. Section 5.02. Liability of Custodian for Actions of Other Persons. (a) Domestic Subcustodians and Foreign Subcustodians. The Custodian shall be liable for the actions or omissions of any Domestic Subcustodian or any Foreign Subcustodian to the same extent as if such action or omission were performed by the Custodian itself. In the event of any loss, damage or expense suffered or incurred by the Fund caused by or resulting from the actions or omissions of any Domestic Subcustodian or Foreign Subcustodian for which the Custodian would otherwise be liable, the Custodian shall promptly reimburse the Fund in the amount of any such loss, damage or expense. (b) Interim Subcustodians. Notwithstanding the provisions of Section 5.01 to the contrary, the Custodian shall not be liable to the Fund for any loss, damage 13 18 or expense suffered or incurred by the Fund resulting from the actions or omissions of an Interim Subcustodian unless such loss, damage or expense is caused by, or results from, the negligence, misfeasance or misconduct of the Custodian; provided, however, in the event of any such loss, damage or expense, the Custodian shall take all reasonable steps to enforce such rights as it may have against such Interim Subcustodian to protect the interests of the Fund. (c) Special Subcustodians and Additional Custodians. Notwithstanding the provisions of Section 5.01 to the contrary and except as otherwise provided in any subcustodian or custodian agreement to which the Custodian, the Fund and any Special Subcustodian or Additional Custodian are parties, the Custodian shall not be liable to the Fund for any loss, damage or expense suffered or incurred by the Fund resulting from the actions or omissions of a Special Subcustodian or Additional Custodian, unless such loss, damage or expense is caused by, or results from, the negligence, misfeasance or misconduct of the Custodian; provided, however, that in the event of any such loss, damage or expense, the Custodian shall take all reasonable steps to enforce such rights as it may have against any Special Subcustodian or Additional Custodian to protect the interests of the Fund. (d) Securities Systems. Notwithstanding the provisions of Section 5.01 to the contrary, the Custodian shall not be liable to the Fund for any loss, damage or expense suffered or incurred by the Fund resulting from the use by the Custodian of a Securities System, unless such loss, damage or expense is caused by, or results from, the negligence, misfeasance or misconduct of the Custodian; provided, however, that in the event of any such loss, damage or expense, the Custodian shall take all reasonable steps to enforce such rights as it may have against the Securities System to protect the interests of the Fund. (e) Reimbursement of Expenses. The Fund agrees to reimburse the Custodian for all reasonable out-of-pocket expenses incurred by the Custodian in connection with the fulfillment of its obligations under this Section 5.02; provided, however, that such reimbursement shall not apply to expenses occasioned by or resulting from the negligence, misfeasance or misconduct of the Custodian. Section 5.03. Indemnification. (a) Indemnification Obligations. Subject to the limitations set forth in this Agreement, the Fund agrees to indemnify and hold harmless the Custodian and its nominees from all loss, damage and expense (including reasonable attorneys' fees) suffered or incurred by the Custodian or its nominee caused by or arising from actions taken by the Custodian in the performance of its duties and obligations under this Agreement; provided, however, that such indemnity shall not apply to loss, damage and expense occasioned by or resulting from the negligence, misfeasance or misconduct of the Custodian or its nominee. In addition, the Fund agrees to indemnify any Person against any liability incurred by reason of taxes assessed to such Person, or other loss, damage or expenses incurred by such Person, resulting from the fact that securities and other property of the Fund are registered in the name of such Person; provided, however, that in no event shall such indemnification be applicable to income, franchise or similar taxes which may be imposed or assessed against any Person. (b) Notice of Litigation, Right to Prosecute, Etc. The Fund shall not be liable for indemnification under this Section 5.03 unless a Person shall have promptly notified the Fund in writing of the commencement of any litigation or proceeding brought against such Person in respect of which indemnity may be sought under this Section 5.03. With respect to claims in such litigation or proceedings for which indemnity by the Fund may be sought and subject to applicable law and the ruling of any court of competent jurisdiction, the Fund shall be entitled to participate in any such litigation or proceeding and, after written notice from the Fund to any Person, the Fund may assume the defense of such litigation or proceeding with counsel of its choice at its own expense in respect of that portion of the litigation for which the Fund may be subject to an indemnification obligation; provided, however, a Person shall be entitled to participate in (but not control) at its own cost and expense, the defense of any such litigation or proceeding if the Fund has not acknowledged in writing its obligation to indemnify the Person with respect to such litigation or proceeding. If the Fund is not permitted to participate or control such litigation or proceeding under applicable law or by a ruling of a court of competent jurisdiction, such Person shall reasonably prosecute such litigation or proceeding. A Person shall not consent to the entry of any judgment or enter into any settlement in any such litigation or proceeding without providing the Fund with adequate notice of any such settlement or judgment, and 14 19 without the Fund's prior written consent. All Persons shall submit written evidence to the Fund with respect to any cost or expense for which they are seeking indemnification in such form and detail as the Fund may reasonably request. Section 5.04. Investment Limitations. If the Custodian has otherwise complied with the terms and conditions of this Agreement in performing its duties generally, and more particularly in connection with the purchase, sale or exchange of securities made by or for the Fund, the Custodian shall not be liable to the Fund and the Fund agrees to indemnify the Custodian and its nominees, for any loss, damage or expense suffered or incurred by the Custodian and its nominees arising out of any violation of any investment or other limitation to which the Fund is subject. Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the contrary contained herein, the Fund shall have, at its election upon reasonable notice to the Custodian, the right to enforce, to the extent permitted by any applicable agreement and applicable law, the Custodian's rights against any Subcustodian, Securities System, or other Person for loss, damage or expense caused the Fund by such Subcustodian, Securities System, or other Person, and shall be entitled to enforce the rights of the Custodian with respect to any claim against such Subcustodian, Securities System or other Person, which the Custodian may have as a consequence of any such loss, damage or expense, if and to the extent that the Fund has not been made whole for any such loss or damage. If the Custodian makes the Fund whole for any such loss or damage, the Custodian shall retain the ability to enforce its rights directly against such Subcustodian, Securities System or other Person. Upon the Fund's election to enforce any rights of the Custodian under this Section 5.05, the Fund shall reasonably prosecute all actions and proceedings directly relating to the rights of the Custodian in respect of the loss, damage or expense incurred by the Fund; provided that, so long as the Fund has acknowledged in writing its obligation to indemnify the Custodian under Section 5.03 hereof with respect to such claim, the Fund shall retain the right to settle, compromise and/or terminate any action or proceeding in respect of the loss, damage or expense incurred by the Fund without the Custodian's consent and provided further, that if the Fund has not made an acknowledgment of its obligation to indemnify, the Fund shall not settle, compromise or terminate any such action or proceeding without the written consent of the Custodian, which consent shall not be unreasonably withheld or delayed. The Custodian agrees to cooperate with the Fund and take all actions reasonably requested by the Fund in connection with the Fund's enforcement of any rights of the Custodian. The Fund agrees to reimburse the Custodian for all reasonable out-of-pocket expenses incurred by the Custodian in connection with the fulfillment of its obligations under this Section 5.05 provided, however, that such reimbursement shall not apply to expenses occasioned by or resulting from the negligence, misfeasance or misconduct of the Custodian. ARTICLE VI COMPENSATION The Fund shall compensate the Custodian in an amount, and at such times, as may be agreed upon in writing, from time to time, by the Custodian and the Fund. ARTICLE VII TERMINATION Section 7.01. Termination of Agreement. This Agreement shall continue in full force and effect until the first to occur of: (a) termination by the Custodian by an instrument in writing delivered or mailed to the Fund, such termination to take effect not sooner than ninety (90) days after the date of such delivery; (b) termination by the Fund by an instrument in writing delivered or mailed to the Custodian, such termination to take effect not sooner than thirty (30) days after the date of such delivery; or (c) termination by the Fund by written notice delivered to the Custodian, based upon the Fund's determination that there is a reasonable basis to conclude that the Custodian is insolvent or that the financial condition of the Custodian is deteriorating in any material respect, in which case termination shall take effect upon the Custodian's receipt of such notice or at such later time as the Fund shall designate. In the event of termination pursuant to this Section 7.01, the Fund shall make payment of all accrued fees and unreimbursed expenses within a reasonable time following termination and delivery of a statement to the Fund setting forth such fees and expenses. The Fund shall identify in any notice of termination a successor custodian to which the cash, securities and other assets of the Fund 15 20 shall, upon termination of this Agreement, be delivered. In the event that no written notice designating a successor custodian shall have been delivered to the Custodian on or before the date when termination of this Agreement shall become effective, the Custodian may deliver to a bank or trust company doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities and other assets held by the Custodian and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement. In the event that securities and other assets remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to appoint a successor custodian, the Custodian shall be entitled to compensation for its services in accordance with the fee schedule most recently in effect, for such period as the Custodian retains possession of such securities and other assets, and the provisions of this Agreement relating to the duties and obligations of the Custodian and the Fund shall remain in full force and effect. In the event of the appointment of a successor custodian, it is agreed that the cash, securities and other property owned by the Fund and held by the Custodian, any Subcustodian or nominee shall be delivered to the successor custodian; and the Custodian agrees to cooperate with the Fund in the execution of documents and performance of other actions necessary or desirable in order to substitute the successor custodian for the Custodian under this Agreement. ARTICLE VIII DEFINED TERMS The following terms are defined in the following sections:
Term Section ---- ------- Account ..................... 2.22 ADRs ........................ 2.06 Additional Custodian ........ 2.23(a) Authorized Person(s) ........ 3.02 Banking Institution ......... 2.12(a) Business Day ................ Appendix "B" Bank Accounts ............... 2.21 Distribution Account ........ 2.16 Domestic Subcustodian ....... 4.01 Foreign Subcustodian ........ 4.02(a) Institutional Client ........ 2.03 Interim Subcustodian ........ 4.02(b) Overdraft ................... 2.28 Overdraft Notice ............ 2.28 Person ...................... 5.01(b) Procedural Agreement ........ 2.10 Proper Instructions ......... 3.01(a) SEC ......................... 2.22 Securities System ........... 2.22 Shares ...................... 2.16 Special Instructions ........ 3.01(b) Special Subcustodian ........ 4.03 Subcustodian ................ Article IV 1940 Act .................... Preamble
ARTICLE IX MISCELLANEOUS Section 9.01. Execution of Documents, Etc. 16 21 (a) Actions by the Fund. Upon request, the Fund shall execute and deliver to the Custodian such proxies, powers of attorney or other instruments as may be reasonable and necessary or desirable in connection with the performance by the Custodian or any Subcustodian of their respective obligations under this Agreement or any applicable subcustodian agreement, provided that the exercise by the Custodian or any Subcustodian of any such rights shall in all events be in compliance with the terms of this Agreement. (b) Actions by Custodian. Upon receipt of Proper Instructions, the Custodian shall execute and deliver to the Fund or to such other parties as the Fund may designate in such Proper Instructions, all such documents, instruments or agreements as may be reasonable and necessary or desirable in order to effectuate any of the transactions contemplated hereby. Section 9.02. Representative Capacity; Nonrecourse Obligations. A COPY OF THE ARTICLES OF INCORPORATION OF THE FUND IS ON FILE WITH THE SECRETARY OF THE STATE OF THE FUND'S FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT EXECUTED ON BEHALF OF THE DIRECTORS OF THE FUND AS INDIVIDUALS, AND THE OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE DIRECTORS, OFFICERS, SHAREHOLDERS OR PARTNERS OF THE FUND INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS AND PROPERTY OF THE FUND. THE CUSTODIAN AGREES THAT NO SHAREHOLDER, DIRECTOR, OFFICER OR PARTNER OF THE FUND MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE FOR ANY OBLIGATIONS OF THE FUND ARISING OUT OF THIS AGREEMENT. Section 9.03. Several Obligations of the Fund. WITH RESPECT TO ANY OBLIGATIONS OF THE FUND ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS ARISING UNDER SECTIONS 2.28, 5.03, 5.05 and ARTICLE VI HEREOF, THE CUSTODIAN SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY OBLIGATION SOLELY TO THE ASSETS AND PROPERTY OF THE FUND TO WHICH SUCH OBLIGATION RELATES AS THOUGH THE FUND HAD SEPARATELY CONTRACTED WITH THE CUSTODIAN BY SEPARATE WRITTEN INSTRUMENT. Section 9.04. Representations and Warranties. (a) Representations and Warranties of the Fund. The Fund hereby represents and warrants that each of the following shall be true, correct and complete at all times during the term of this Agreement: (i) the Fund is duly organized under the laws of its jurisdiction of organization and is registered as an closed-end management investment company under the 1940 Act; and (ii) the execution, delivery and performance by the Fund of this Agreement are (w) within its power, (x) have been duly authorized by all necessary action, and (y) will not (A) contribute to or result in a breach of or default under or conflict with any existing law, order, regulation or ruling of any governmental or regulatory agency or authority, or (B) violate any provision of the Fund's corporate charter or other organizational document, or bylaws, or any amendment thereof or any provision of its most recent Prospectus. (b) Representations and Warranties of the Custodian. The Custodian hereby represents and warrants that each of the following shall be true, correct and complete at all times during the term of this Agreement: (i) the Custodian is duly organized under the laws of its jurisdiction of organization and qualifies to act as a custodian to closed-end management investment companies under the provisions of the 1940 Act; and (ii) the execution, delivery and performance by the Custodian of this Agreement are (w) within its power, (x) have been duly authorized by all necessary action, and (y) will not (A) contribute to or result in a breach of or default under or conflict with any existing law, order, regulation or ruling of any governmental or regulatory agency or authority, or (B) violate any provision of the Custodian's corporate charter, or other organizational document, or bylaws, or any amendment thereof. Section 9.05. Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and accordingly, supersedes as of the effective date of this Agreement any custodian agreement heretofore in effect between the Fund and the Custodian. 17 22 Section 9.06. Waivers and Amendments. No provision of this Agreement may be waived, amended or terminated except by a statement in writing signed by the party against which enforcement of such waiver, amendment or termination is sought; provided, however: (a) Appendix "A" listing Foreign Subcustodians, Special Subcustodians and Additional Custodians approved by the Fund may be amended from time to time to add or delete one or more Foreign Subcustodians, Special Subcustodians or Additional Custodians by the Fund's execution and delivery to the Custodian of an amended Appendix "A", in which case such amendment shall take effect immediately upon execution by the Custodian; and (b) Appendix "B" setting forth the procedures relating to the Custodian's security interest may be amended only by an instrument in writing executed by the Fund and the Custodian. Section 9.07. Interpretation. In connection with the operation of this Agreement, the Custodian and the Fund may agree in writing from time to time on such provisions interpretative of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. No interpretative or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. Section 9.08. Captions. Headings contained in this Agreement, which are included as convenient references only, shall have no bearing upon the interpretation of the terms of the Agreement or the obligations of the parties hereto. Section 9.09. Governing Law. Insofar as any question or dispute may arise in connection with the custodianship of foreign securities pursuant to an agreement with a Foreign Subcustodian that is governed by the laws of the State of New York, the provisions of this Agreement shall be construed in accordance with and governed by the laws of the State of New York, provided that in all other instances this Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts, in each case without giving effect to principles of conflicts of law. Section 9.10. Notices. Except in the case of Proper Instructions or Special Instructions, notices and other writings contemplated by this Agreement shall be delivered by hand or by facsimile transmission (provided that in the case of delivery by facsimile transmission, notice shall also be mailed postage prepaid to the parties at the following addresses: (a) If to the Fund: c/o Fidelity Management & Research Company 82 Devonshire Street Boston, Massachusetts 02109 Attn: Treasurer of the Fidelity Funds Telephone: (617) 570-6556 Telefax: (617) 742-1231 (b) If to the Custodian: Global Securities Services Financial Institutions Markets 3 Chase MetroTech Center, 6th Floor Brooklyn, NY 11245 Attn: Bill Feil Telephone: (718) 242-1951 Telefax: (718) 242-1102 or to such other address as either party may have designated in writing to the other party hereto. Section 9.11. Assignment. This Agreement shall be binding on and shall inure to the benefit of the Fund and the Custodian and their respective successors and assigns, provided that, subject to the 18 23 provisions of Section 7.01 hereof, neither party hereto may assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the other party. Section 9.12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement shall become effective when one or more counterparts have been signed and delivered by each of the parties. Section 9.13. Confidentiality; Survival of Obligations. The parties hereto agree that each shall treat confidentially the terms and conditions of this Agreement and all information provided by each party to the other regarding its business and operations. All confidential information provided by a party hereto shall be used by any other party hereto solely for the purpose of rendering services pursuant to this Agreement and, except as may be required in carrying out this Agreement, shall not be disclosed to any third party without the prior consent of such providing party. The foregoing shall not be applicable to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this Agreement, or that is required to be disclosed by any bank examiner of the Custodian or any Subcustodian, any auditor of the parties hereto, by judicial or administrative process or otherwise by applicable law or regulation. The provisions of this Section 9.12 and Sections 9.01, 9.02, 9.03, 9.07, Section 2.28, Section 3.04, Section 7.01, Article V and Article VI hereof and any other rights or obligations incurred or accrued by any party hereto prior to termination of this Agreement shall survive any termination of this Agreement. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed in its name and behalf on the day and year first above written. FIDELITY ADVISOR KOREA FUND, INC. THE CHASE MANHATTAN BANK, N.A. By: By: ------------------------------ ------------------------------- Name: Name: ---------------------------- ----------------------------- Title: Title: --------------------------- ---------------------------- 19 24 APPENDIX "A" TO CUSTODIAN AGREEMENT BETWEEN Fidelity Advisor Korea Fund, Inc. and The Chase Manhattan Bank, N.A. Dated as of May 31, 1995 The following is a list of Special Subcustodians, Foreign Subcustodians and Additional Custodians under the Custodian Agreement dated as of May 31, 1995: A. Special Subcustodians: SUBCUSTODIAN PURPOSE The Bank of New York FICASH B. Foreign Subcustodians: COUNTRY FOREIGN SUBCUSTODIAN DEPOSITORY AS PROVIDED FOR IN EXHIBIT I. C. Additional Custodians: None. FIDELITY ADVISOR KOREA FUND, INC. THE CHASE MANHATTAN BANK, N.A. By: - ------------------------------- ---------------------------------- Kenneth A. Rathgeber, Treasurer Name: -------------------------------- Title: ------------------------------- 20 25 APPENDIX "B" TO THE CUSTODIAN AGREEMENT BETWEEN FIDELITY ADVISOR KOREA FUND, INC. AND THE CHASE MANHATTAN BANK, N.A. DATED AS OF MAY 31, 1995 PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST As security for any Overdrafts (as defined in the Custodian Agreement) of the Fund, the Fund shall pledge, assign and grant to the Custodian a security interest in Collateral (as hereinafter defined), under the terms, circumstances and conditions set forth in this Appendix "B". Section 1. Defined Terms. As used in this Appendix "B" the following terms shall have the following respective meanings: (a) "Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which the Custodian is closed for business. (b) "Collateral" shall mean the securities having a fair market value (as determined in accordance with the procedures set forth in the prospectus for the Fund) equal to the aggregate of all Overdraft Obligations of the Fund: (i) identified in any Pledge Certificate executed on behalf of the Fund; or (ii) designated by the Custodian for the Fund pursuant to Section 3 of this Appendix B. Such securities shall consist of marketable securities held by the Custodian on behalf of the Fund or, if no such marketable securities are held by the Custodian on behalf of the Fund, such other securities designated by the Fund in the applicable Pledge Certificate or by the Custodian pursuant to Section 3 of this Appendix B. (c) "Overdraft Obligations" shall mean the amount of any outstanding Overdraft(s) provided by the Custodian to the Fund together with all accrued interest thereon. (d) "Pledge Certificate" shall mean a Pledge Certificate in the form attached to this Appendix "B" as Schedule 1 executed by a duly authorized officer of the Fund and delivered by the Fund to the Custodian by facsimile transmission or in such other manner as the Fund and the Custodian may agree in writing. (e) "Release Certificate" shall mean a Release Certificate in the form attached to this Appendix "C" as Schedule 2 executed by a duly authorized officer of the Custodian and delivered by the Custodian to the Fund by facsimile transmission or in such other manner as the Fund and the Custodian may agree in writing. (f) "Written Notice" shall mean a written notice executed by a duly authorized officer of the party delivering the notice and delivered by facsimile transmission or in such other manner as the Fund and the Custodian shall agree in writing. Section 2. Pledge of Collateral. To the extent that any Overdraft Obligations of the Fund are not satisfied by the close of business on the first Business Day following the Business Day on which the Fund receives Written Notice requesting security for such Overdraft Obligation and stating the amount of such Overdraft Obligation, the Fund shall pledge, assign and grant to the Custodian a first priority security interest, by delivering to the Custodian, a Pledge Certificate executed by the Fund describing the applicable Collateral. Such Written Notice may, in the discretion of the Custodian, be included within or accompany the Overdraft Notice relating to the applicable Overdraft Obligations. Section 3. Failure to Pledge Collateral. In the event that the Fund shall fail: (a) to pay the Overdraft Obligation described in such Written Notice; (b) to deliver to the Custodian a Pledge Certificate pursuant to Section 2; or (c) to identify substitute securities pursuant to Section 6 upon the sale or maturity of any securities identified as Collateral, the Custodian may, by Written Notice to the Fund specify Collateral which shall secure 21 26 the applicable Overdraft Obligation. The Fund hereby pledges, assigns and grants to the Custodian a first priority security interest in any and all Collateral specified in such Written Notice; provided that such pledge, assignment and grant of security shall be deemed to be effective only upon receipt by the Fund of such Written Notice. Section 4. Delivery of Additional Collateral. If at any time the Custodian shall notify the Fund by Written Notice that the fair market value of the Collateral securing any Overdraft Obligation is less than the amount of such Overdraft Obligation, the Fund shall deliver to the Custodian, within one (1) Business Day following the Fund's receipt of such Written Notice, an additional Pledge Certificate describing additional Collateral. If the Fund shall fail to deliver such additional Pledge Certificate, the Custodian may specify Collateral which shall secure the unsecured amount of the applicable Overdraft Obligation in accordance with Section 3 of this Appendix B. Section 5. Release of Collateral. Upon payment by the Fund of any Overdraft Obligation secured by the pledge of Collateral, the Custodian shall promptly deliver to the Fund a Release Certificate pursuant to which the Custodian shall release Collateral from the lien under the applicable Pledge Certificate or Written Notice pursuant to Section 3 having a fair market value equal to the amount paid by the Fund on account of such Overdraft Obligation. In addition, if at any time the Fund shall notify the Custodian by Written Notice that the Fund desires that specified Collateral be released and: (a) that the fair market value of the Collateral securing any Overdraft Obligation shall exceed the amount of such Overdraft Obligation; or (b) that the Fund has delivered a Pledge Certificate substituting Collateral for such Overdraft Obligation, the Custodian shall deliver to the Fund, within one (1) Business Day following the Custodian's receipt of such Written Notice, a Release Certificate relating to the Collateral specified in such Written Notice. Section 6. Substitution of Collateral. The Fund may substitute securities for any securities identified as Collateral by delivery to the Custodian of a Pledge Certificate executed by the Fund, indicating the securities pledged as Collateral. Section 7. Security for Fund Overdraft Obligations. The pledge of Collateral by the Fund shall secure only the Overdraft Obligations of the Fund. In no event shall the pledge of Collateral by one Fund be deemed or considered to be security for the Overdraft Obligations of any other Fund. Section 8. Custodian's Remedies. Upon (a) the Fund's failure to pay any Overdraft Obligation of the Fund within thirty (30) days after receipt by the Fund of a Written Notice demanding security therefore, and (b) one (1) Business Day's prior Written Notice to the Fund, the Custodian may elect to enforce its security interest in the Collateral securing such Overdraft Obligation, by taking title to (at the then prevailing fair market value), or selling in a commercially reasonable manner, so much of the Collateral as shall be required to pay such Overdraft Obligation in full. Notwithstanding the provisions of any applicable law, including, without limitation, the Uniform Commercial Code, the remedy set forth in the preceding sentence shall be the only right or remedy to which the Custodian is entitled with respect to the pledge and security interest granted pursuant to any Pledge Certificate or Section 3, without limiting the foregoing, the Custodian hereby waives and relinquishes all contractual and common law rights of set off to which it may now or hereafter be or become entitled with respect to any obligations of the Fund to the Custodian arising under this Appendix B to the Agreement. IN WITNESS WHEREOF, each of the parties has caused this Appendix to be executed in its name and behalf on the day and year first above written. FIDELITY ADVISOR KOREA FUND, INC. THE CHASE MANHATTAN BANK, N.A. By: By: --------------------------- -------------------------- Name: Name: ------------------------- ------------------------ Title: Title: ------------------------ ----------------------- 22 27 SCHEDULE 1 TO APPENDIX "B" PLEDGE CERTIFICATE This Pledge Certificate is delivered pursuant to the Custodian Agreement dated as of March 19, 1994 (the "Agreement"), between Fidelity Advisor Korea Fund, Inc. (the "Fund") and The Chase Manhattan Bank, N.A. (the "Custodian"). Capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Agreement. Pursuant to [Section 2 or Section 4] of Appendix "B" attached to the Agreement, the Fund hereby pledges, assigns and grants to the Custodian a first priority security interest in the securities listed on Exhibit "A" attached to this Pledge Certificate (collectively, the "Pledged Securities"). Upon delivery of this Pledge Certificate, the Pledged Securities shall constitute Collateral, and shall secure all Overdraft Obligations of the Fund described in that certain Written Notice dated__________, 19__, delivered by the Custodian to the Fund. The pledge, assignment and grant of security in the Pledged Securities hereunder shall be subject in all respect to the terms and conditions of the Agreement, including, without limitation, Sections 7 and 8 of Appendix "B" attached thereto. IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be executed in its name, on behalf of the Fund this_________day of 19__. Fidelity Advisor Korea Fund., Inc. By: _________________________ Name: _______________________ Title:_______________________ 23 28 EXHIBIT "A" TO PLEDGE CERTIFICATE Type of Certificate/CUSIP Number of Issuer Security Numbers Shares ------ -------- ----------------- --------- 24 29 SCHEDULE 2 TO APPENDIX "B" RELEASE CERTIFICATE This Release Certificate is delivered pursuant to the Custodian Agreement dated as of March 19, 1994 (the "Agreement"), between Fidelity Advisor Korea Fund, Inc. (the "Fund") and The Chase Manhattan Bank, N.A. (the "Custodian"). Capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Agreement. Pursuant to Section 5 of Appendix "B" attached to the Agreement, the Custodian hereby releases the securities listed on Exhibit "A" attached to this Release Certificate from the lien under the [Pledge Certificate dated , 19 or the Written Notice delivered pursuant to Section 3 of Appendix "B" dated , 19 ]. IN WITNESS WHEREOF, the Custodian has caused this Release Certificate to be executed in its name and on its behalf this ________day of 19__. The Chase Manhattan Bank, N.A. By: _____________________ Name: _____________________ Title: _____________________ 25 30 EXHIBIT "A" TO RELEASE CERTIFICATE Type of Certificate/CUSIP Number of Issuer Security Numbers Shares ------ -------- ----------------- --------- 26 EX-99.2K1 14 TRANSFER AGENY AND SERVICE AGREEMENT 1 2(K)(1) TRANSFER AGENCY AND SERVICE AGREEMENT BETWEEN FIDELITY ADVISOR KOREA FUND, INC. AND STATE STREET BANK AND TRUST COMPANY 2 TABLE OF CONTENTS
PAGE ------ 1. Terms of Appointment; Duties of the Bank........................................... 1 2. Fees and Expenses.................................................................. 2 3. Representations and Warranties of the Bank......................................... 2 4. Representations and Warranties of the Fund......................................... 2 5. Data Access and Proprietary Information............................................ 2 6. Indemnification.................................................................... 3 7. Standard of Care................................................................... 4 8. Covenants of the Fund and the Bank................................................. 4 9. Termination of Agreement........................................................... 5 10. Assignment......................................................................... 5 11. Amendment.......................................................................... 5 12. Massachusetts Law to Apply......................................................... 5 13. Force Majeure...................................................................... 5 14. Consequential Damages.............................................................. 6 15. Merger of Agreement................................................................ 6 16. Counterparts....................................................................... 6
i 3 TRANSFER AGENCY AND SERVICE AGREEMENT AGREEMENT made as of the 25th day of October, 1994, by and between FIDELITY ADVISOR KOREA FUND, INC., a Maryland corporation, having its principal office and place of business at 82 Devonshire Street, Boston, Massachusetts 02109, (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank"). WHEREAS, the Fund desires to appoint the Bank as its transfer agent, dividend disbursing agent, custodian of certain retirement plans and agent in connection with certain other activities, and the Bank desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. TERMS OF APPOINTMENT; DUTIES OF THE BANK 1.1 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints the Bank to act as, and the Bank agrees to act as its transfer agent for the Fund's authorized and issued shares of its common stock, ("Shares"), dividend disbursing agent, custodian of certain retirement plans and agent in connection with any dividend reinvestment plan as set out in the prospectus of the Fund, corresponding to the date of this Agreement. 1.2 The Bank agrees that it will perform the following services. (a) In accordance with procedures established from time to time by agreement between the Fund and the Bank, the Bank shall: (i) Issue and record the appropriate number of Shares as authorized and hold such Shares in the appropriate Shareholder account; (ii) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions; (iii) Execute transactions directly with broker-dealers authorized by the Fund who shall thereby be deemed to be acting on behalf of the Fund; (iv) Prepare and transmit payments for dividends and distributions declared by the Fund; (v) Act as agent for Shareholders pursuant to the dividend reinvestment and cash purchase plan as amended from time to time in accordance with the terms of the agreement to be entered into between the Shareholders and the Bank. (vi) Issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by the Bank of indemnification satisfactory to the Bank and protecting the Bank and the Fund, and the Bank at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof and without such indemnity; (b) In addition to and neither in lieu nor in contravention of the services set forth in the above paragraph (a), the Bank shall: (i) perform all the customary services of a registrar, transfer agent, dividend disbursing agent, custodian of certain retirement plans and agent of the dividend reinvestment and cash purchase plan as described in Article 1 consistent with those requirements in effect as at the date of this Agreement. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, mailing Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all registered Shareholders. 1 4 (c) The Bank shall provide additional services on behalf of the Fund (i.e., escheatment services) which may be agreed upon in writing between the Fund and the Bank. 2. FEES AND EXPENSES 2.1 For the performance by the Bank pursuant to this Agreement, the Fund agrees to pay the Bank an annual maintenance fee for each Shareholder account as set out in the initial fee schedule attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.2 below may be changed from time to time subject to mutual written agreement between the Fund and the Bank. 2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees to reimburse the Bank at such rate as may be agreed to from time to time for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Bank for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by the Bank at the request or with the consent of the Fund, will be reimbursed by the Fund. 3. REPRESENTATIONS AND WARRANTIES OF THE BANK The Bank represents and warrants to the Fund that: 3.1 It is a trust company duly organized and existing and in good standing under that laws of the Commonwealth of Massachusetts. 3.2 It is duly qualified to carry on its business in the Commonwealth of Massachusetts. 3.3 It is registered as a transfer agent under the Securities Exchange Act of 1934, as amended. 3.4 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement. 3.5 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 3.6 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. 4. REPRESENTATIONS AND WARRANTIES OF THE FUND The Fund represents and warrants to the Bank that: 4.1 It is a corporation duly organized and existing and in good standing under the laws of Maryland. 4.2 It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement. 4.3 All corporate proceedings required by said Articles of Incorporation and By-Laws have been taken to authorize it to enter into and perform this Agreement. 4.4 It is a closed-end, non-diversified investment company registered under the Investment Company Act of 1940, as amended. 4.5 To the extend required by federal securities laws a registration statement under the Securities Act of 1933 has been filed with the Securities and Exchange Commission, and appropriate state securities law filings have been or will be made with respect to all Shares of the Fund being offered for sale; information to the contrary will result in immediate notification to the Bank. 4.6 It shall make all required filings under federal and state securities laws. 5. DATA ACCESS AND PROPRIETARY INFORMATION 5.1 The Fund acknowledges that the data bases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the Fund by the Bank as part of 2 5 the Fund's ability to access certain Fund-related data ("Customer Data") maintained by the Bank on data bases under the control and ownership of the Bank or other third party ("Data Access Services") constitute copyrighted, trade secret, or other proprietary information (collectively, "Proprietary Information") of substantial value to the Bank or other third party. In no event shall Proprietary Information be deemed Customer Data. The Fund agrees to treat all Proprietary Information as proprietary to the Bank and further agrees that it shall not divulge any Proprietary Information to any person or organization except as may be provided hereunder. Without limiting the foregoing, the Fund agrees for itself and its employees and agents: (a) to access Customer Data solely from locations as may be designated in writing by the Bank and solely in accordance with the Bank's applicable user documentation; (b) to refrain from copying or duplicating in any way the Proprietary Information; (c) to refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform in a timely manner of such fact and dispose of such information in accordance with the Bank's instructions; (d) to refrain from causing or allowing third-party data acquired hereunder from being retransmitted to any other computer facility or other location, except with the prior written consent of the Bank; (e) that the Fund shall have access only to those authorized transactions agreed upon by the parties; (f) to honor all reasonable written requests made by the Bank to protect at the Bank's expense the rights of the Bank in Proprietary Information at common law, under federal copyright law and under other federal or state law. Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 5. The obligations of this Section shall survive any earlier termination of this Agreement. Each Data Entry Service shall be approved by the Fund prior to the Bank's reliance on data provided by such service in the performance of the Bank's duties hereunder. 5.2 If the Fund notifies the Bank that any of the Data Access Services do not operate in material compliance with the most recently issued user documentation for such services, the Bank shall endeavor in a timely manner to correct such failure. Organizations from which the Bank may obtain certain data included in the Data Access Services are solely responsible for the contents of such data and the Fund agrees to make no claim against the Bank arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 5.3 If the transactions available to the Fund include the ability to originate electronic instructions to the Bank in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, (such transactions constituting a "COEFI"), then in such event the Bank shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by the Bank from time to time. 6. INDEMNIFICATION 6.1 The Bank shall not be responsible for, and the Fund shall indemnify and hold the Bank harmless from and against, any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liability arising out of or attributable to: 3 6 (a) All actions of the Bank or its agent or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct. (b) The Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder. (c) The reliance on or use by the Bank or its agents or subcontractors of information, records, documents or services which (i) are received by the Bank or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund including but not limited to any previous transfer agent or registrar. (d) The reliance on, or the carrying out by the Bank or its agents or subcontractors of any Proper Instructions or requests of the Fund. Proper Instructions shall mean instructions received from an individual duly authorized by the Fund in writing, facsimile or in such other manner as may be agreed to from time to time. (e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violations of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state. 6.2 At any time the Bank may apply to any officer of the Fund for Proper Instructions, and may consult with legal counsel approved by the Fund with respect to any matter arising in connection with the services to be performed by the Bank under this Agreement, and the Bank and its agents or subcontractors shall not be liable and shall be indemnified by the Fund for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Bank, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided by the Bank or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund. 6.3 In order that the indemnification provisions contained in this Section 6 shall apply, upon the assertion of a claim for which the Fund may be required to indemnify the Bank, the Bank shall promptly notify the Fund of such assertion, and shall keep the Fund advised with respect to all developments concerning such claim. The Fund shall have the option to participate with the Bank in the defense of such claim or to defend against said claim in its own name or in the name of the Bank. The Bank shall in no case confess any claim or make any compromise in any case in which the Fund may be required to indemnify the Bank except with the Fund's prior written consent. 7. STANDARD OF CARE The Bank shall at all times act in good faith and agrees to use due care in the performance of its services under this Agreement, but assumes no responsibility and shall not be liable for loss or damage unless such loss or damage is caused by its negligence, bad faith, or willful misconduct or that of its employees. 8. COVENANTS OF THE FUND AND THE BANK 8.1 The fund shall promptly furnish to the Bank the following: (a) A certified copy of the resolution of the Board of Directors of the Fund authorizing the appointment of the Bank and the execution and delivery of this Agreement. (b) A copy of the Articles of Incorporation and By-Laws of the Fund and all amendments thereto. 4 7 8.2 The Bank hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. 8.3 The Bank shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Bank agrees that all such records prepared or maintained by the Bank relating to the services to be performed by the Bank hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request. 8.4 The Bank and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. 8.5 In case of any requests or demands for the inspection of the Shareholder records of the Fund, the Bank will endeavor to notify the fund and to secure instructions from an authorized officer of the Fund as to such inspection. The Bank reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person. 9. TERMINATION OF AGREEMENT 9.1 This Agreement may be terminated (1) by the Bank upon one hundred twenty (120) days written notice to the Fund or (2) by the Fund upon sixty (60) days written notice to the Bank. 9.2 Should the Fund exercise its right to terminate, all reasonable out-of-pocket expenses associated with the movement of records and material will be borne by the Fund. 10. ASSIGNMENT 10.1 Except as provided in Section 10.3 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. 10.2 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. 10.3 The Bank may, without further consent on the part of the Fund, subcontract for the performance hereof with (i) Boston Financial Data Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as a transfer agent pursuant to Section 17A(c)(1), (iii) a legally qualified BFDS affiliate of (iv) an employee of any of the foregoing entities; provided, however, that the Bank shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions. 11. AMENDMENT This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Directors of the Fund. 12. MASSACHUSETTS LAW TO APPLY This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts. 13. FORCE MAJEURE In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other 5 8 causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes. 14. CONSEQUENTIAL DAMAGES Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder. 15. MERGER OF AGREEMENT This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written. 16. COUNTERPARTS This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written. FIDELITY ADVISOR KOREA FUND, INC. By: /s/ GARY L. FRENCH ---------------------------------- ATTEST: /s/ STUART E. FROSS ---------------------------------- STATE STREET BANK AND TRUST COMPANY By: /s/ ---------------------------------- Executive Vice President ATTEST: /s/ ---------------------------------- 6 EX-99.2K2 15 ADMINISTRATION AGREEMENT 1 ADMINISTRATION AGREEMENT BETWEEN FIDELITY ADVISOR KOREA FUND, INC. AND FIDELITY SERVICE CO. AGREEMENT dated as of this 25th day of October, 1994 between Fidelity Advisor Korea Fund, Inc., a Maryland corporation (the "Fund"), and FMR Corp., a Massachusetts corporation, acting through its Fidelity Service Co. (the "Administrator") division. WHEREAS, the Fund wishes to employ the services of the Administrator, with such assistance from the Administrator's affiliated companies as the latter may provide; and WHEREAS, the Administrator wishes to provide such services under the conditions set forth below. NOW, THEREFORE, in consideration of the premises and mutual covenants contained in this Agreement, the Fund and the Administrator agree as follows: 1. APPOINTMENT. The Fund hereby appoints and employs the Administrator and the Administrator accepts the appointment as agent to perform the services described herein. 2. FUND ADMINISTRATION. Subject to the direction and control of the Board of Directors of the Fund, the Administrator shall assist in supervising aspects of the Fund's operation not otherwise supervised by the Fund's investment manager, investment adviser, sub-investment adviser, transfer agent, custodian, auditors, counsel or other agents. To the extent not otherwise the responsibility of, or provided by, the Fund or other agents of the Fund, the Administrator shall provide: (i) office space, equipment and facilities (which may be the Administrator's or its affiliates) for performing administrative services hereunder; (ii) non-investment related statistical and research data and such other reports, evaluations, and information as the Fund may request from time to time; (iii) internal clerical and accounting services; and (iv) stationery and office supplies. The Administrator shall prepare: (i) to the extent requested by the Fund, the Fund's Prospectus and Annual and Semi-Annual Reports to Shareholders; (ii) for execution and filing all federal and state tax returns and required filings with the Securities and Exchange Commission and state Blue Sky authorities; and (iii) applications and filings in connection with required fidelity bonds and other insurances, including directors' and officers' insurance, as requested by the Fund. The Administrator shall also: (i) keep and maintain the financial accounts and records of the Fund; and (ii) generally assist as requested from time to time by the Funds' investment manager, in other aspects of the Fund's operations, as appropriate, including monitoring performance of the Fund's other agents. In compliance with requirements of Rule 31a-3 under the Investment Company Act of 1940 (the "1940 Act"), the Administrator hereby agrees that all records which it maintains with respect to the Fund are the property of the Fund, and further agrees to surrender promptly to the Fund any of such records upon the Fund's request. Administrator further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records subject to Rule 31a-1 under the 1940 Act that are maintained by the Administrator. 3. FUND ACCOUNTING: SECURITIES LENDING, AND TRADING DESK SERVICES. The Administrator shall perform the obligations and the services set forth in the attached schedules upon the terms and conditions hereinafter set forth. The Administrator shall be responsible for performing as agent, as of the date of this Agreement, the services described in the following schedules attached hereto and made a part hereof, as said schedules may be amended from time to time: Schedule A: Agent for pricing and bookkeeping. Schedule B: Agent for securities lending transactions. Schedule C: Agent for portfolio executions. 2 Operating procedures and standards to be followed for each function may be established from time to time by agreement between the Fund and the Administrator. The above schedules may be amended or deleted, or additional schedules may be included, as deemed necessary from time to time by agreement between the Fund and the Administrator. Deletion of any schedule shall be in accordance with the termination provisions of Paragraph 13 of this Agreement. Each schedule and any amendments thereto shall be dated and signed by the parties to this Agreement. 4. AUDITS, INSPECTIONS AND VISITS. The Administrator shall make available during regular business hours all records and other data created and maintained hereunder for reasonable audit and inspection by the Fund, any agent or person designated by the Fund, or any regulatory agency having authority over the Fund. Upon reasonable notice by the Fund, the Administrator shall make available during regular business hours its facilities and premises employed in connection with its performance of this Agreement for reasonable visits by the Fund, any agent or person designated by the Fund, or any regulatory agency having authority over the Fund. 5. APPOINTMENT OF AGENTS. The Administrator, at its expense, may at any time or times in its discretion appoint (and may at any time remove) one or more other parties as Agent to perform any or all of the services specified hereunder and to carry out such provisions of this Agreement as the Administrator may from time to time direct; provided, however, that the appointment of any such Agent shall not relieve the Administrator of any of its responsibilities or liabilities hereunder. 6. USE OF THE ADMINISTRATOR'S NAME. The Fund shall not use the name of the Administrator in any Prospectus, sales literature or other material relating to the Fund in a manner not consented to prior to use; provided, however, that the Administrator shall approve all uses of its name which merely refer in accurate terms to its appointments, duties or fees hereunder or which are required by the Securities and Exchange Commission or a state securities commission; and further provided, that in no event shall such approval be unreasonably withheld. 7. USE OF FUND'S NAME. The Administrator shall not use the name of the Fund or material relating to the Fund on any forms (including any checks, bank drafts or bank statements) for other than internal use in a manner not consented to prior to use, provided, however, that the Fund shall approve all uses of its name which merely refer in accurate terms to the appointment of the Administrator hereunder or which are required by the Securities and Exchange Commission or a state securities commission; and further, provided that in no event shall such approval be unreasonably withheld. 8. SECURITY. The Administrator represents and warrants that, to the best of its knowledge, the various procedures and systems which the Administrator has implemented with regard to the safeguarding from loss or damage attributable to fire, theft or any other cause (including provision for twenty-four hours a day restricted access) of the Fund's blank checks, certificates, records and other data and the Administrator's records, data, equipment, facilities and other property used in the performance of its obligations hereunder are adequate, and that it will make such changes therein from time to time as in its judgment are required for the secure performance of its obligations hereunder. The Administrator shall review such systems and procedures on a periodic basis and the Fund shall have access to review these systems and procedures. 9. INSURANCE. The Administrator shall maintain or shall arrange for its agents to maintain insurance of the types and in the amounts deemed by it to be appropriate and shall notify the Fund should any of its insurance coverage be changed for any reason. Such notification shall include the date of change and the reason or reasons therefor. The Administrator shall notify the Fund of any material claims against the Administrator, whether or not they may be covered by insurance, and shall notify the Fund from time to time as may be appropriate of the total outstanding claims made by the Administrator under its insurance coverage. Nothing in this Agreement shall be construed to relieve an insurer of any obligation to pay claims to the Fund, the Administrator its agents or other insured party which would otherwise be a covered claim in the absence of any provision of this Agreement. 2 3 10. INDEMNIFICATION. A. The Fund shall indemnify and hold the Administrator harmless against any losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from: (1) any claim, demand, action or suit brought by any person other than the Fund, including by a shareholder, which names the Administrator or its agents and/or the Fund as a party and is not based on and does not result from the Administrator's willful misfeasance, bad faith or negligence or reckless disregard of duties of the Administrator or its agents, and arises out of or in connection with the performance hereunder; or (2) any claim, demand, action or suit (except to the extent contributed to by the Administrator's willful misfeasance, bad faith or negligence or reckless disregard of duties) which results from the negligence of the Fund, or from the Administrator's acting upon any instruction(s) reasonably believed by it to have been executed or communicated by any person duly authorized by the Fund, or as a result of the Administrator's acting in reliance upon advice reasonably believed by the Administrator or its agents to have been given by counsel for the Fund, or as a result of the Administrator's or its agents acting in reliance upon any instrument or stock certificate reasonably believed by it to have been genuine and signed, countersigned or executed by the proper person. B. The Administrator shall indemnity and hold the Fund harmless against any losses, claims, damages, liabilities or expenses (including reasonable counsels fees and expenses) resulting from any claim, demand, action or suit brought by any person other than the Administrator, which names the Fund and/or the Administrator as a party and is based upon and arises out of the Administrator's willful misfeasance, bad faith or negligence or reckless disregard of duties in connection with its performance hereunder. In the event that either party requests the other to indemnify or hold it harmless hereunder, the party requesting indemnification (the "Indemnified Party") shall inform the other party (the "Indemnifying Party") of the relevant facts known to the Indemnified Party concerning the matter in question. The Indemnified Party shall use reasonable care to identify and promptly to notify the Indemnifying Party concerning any matter which presents, or appears likely to present, a claim for indemnification. The Indemnifying Party shall have the election of defending the Indemnified Party against any claim which may be the subject of indemnification or of holding the Indemnified Party harmless hereunder. In the event the Indemnifying Party so elects, it will so notify the Indemnified Party and thereupon the Indemnifying Party shall take over defense of the claim and, if so requested by the Indemnifying Party, the Indemnified Party shall incur no further legal or other expenses related thereto for which it shall be entitled to indemnity or to being held harmless hereunder; provided, however, that nothing herein shall prevent the Indemnified Party from retaining counsel at its own expense to defend any claim. Except with the Indemnifying Party's prior written consent, the Indemnified Party shall in no event confess any claim or make any compromise in any matter in which the Indemnifying Party will be asked to indemnify or hold the Indemnified Party harmless hereunder. 11. ACTS OF GOD, ETC. The Administrator shall not be liable for delays or errors occurring by reason of circumstances beyond its control, including but not limited to acts of civil or military authority, national emergencies, work stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or failure of communication equipment of common carriers or power supply. In the event of equipment breakdowns beyond its control, the Administrator shall, at no additional expense to the Fund, take reasonable steps to minimize the service interruptions and mitigate their effects but shall have no liability with respect thereto. The Administrator shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision for emergency use of electronic data processing equipment. 12. AMENDMENTS. The Administrator and the Fund shall regularly consult with each other regarding the Administrator's performance of its obligations and its compensation hereunder. In connection therewith, the fund shall submit to the Administrator at a reasonable time in advance of filing with the Securities and Exchange Commission copies of any amended or supplemented registration statements (including exhibits) under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and, a 3 4 reasonable time in advance of their proposed use, copies of any amended or supplemented forms relating to any plan, program or the services offered by the fund. Any change in such material which would require any change in the Administrator's obligations hereunder shall be subject to the Administrator's approval, which shall not be unreasonably withheld. In the event that a change in such documents or in the procedures contained therein materially increases the cost to the Administrator of performing its obligations hereunder, the Administrator shall be entitled to receive reasonable compensation therefor. 13. DURATION, TERMINATION, ETC. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by written instrument which shall make specific reference to this Agreement and which shall be signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Agreement shall continue in effect until , 1995 and indefinitely thereafter so long as such continuance is approved at least annually by vote of the Fund's Board of Directors; provided, however, that this Agreement may be terminated at any time by six months' written notice given by the Administrator to the Fund or six months' written notice given by the Fund to the Administrator; and provided further that this Agreement may be terminated immediately at any time for cause either by the Fund or by the Administrator in the event that such cause remains unremedied for a reasonable period of time not to exceed ninety days after receipt of written specification of such cause. Any such termination shall not affect the rights and obligations of the parties under paragraph 10 hereof. Upon the termination hereof, the Fund shall pay to the Administrator such compensation as may be due for the period prior to the date of such termination. In the event that the Fund designates a successor to any of the Administrator's obligations hereunder, the Administrator shall, at the expense and direction of the Fund, transfer to such successor all relevant books, records and other data established or maintained by the Administrator hereunder. To the extent that the Administrator incurs expenses related to a transfer of responsibilities to a successor, the Administrator shall be entitled to be reimbursed for such expenses, including any out-of-pocket expenses reasonably incurred by the Administrator in connection with the transfer. 14. FEES. As compensation for the services, facilities and personnel which the Administrator is to provide or cause to be provided, the Fund shall, beginning with its commencement of operations, pay to the Administrator an annual fee, which shall be computed and accrued daily and paid in arrears on the first business day of every month, at the annual rate of .20% of the average net assets of the Fund. For the purpose of determining fees payable to the Administrator, the value of the net assets of the Fund shall be computed in the manner described in the Fund's Prospectus. The fee for any partial month under this Agreement shall be calculated on a proportional basis. The services of the Administrator provided hereunder are not to be deemed exclusive and the Administrator shall be free to render similar services to others and engage in other activities. The Administrator or its affiliates shall be free to enter other agreements with the Fund for providing additional services to the Fund which are not covered by this Agreement, and to receive additional compensation for such services. 15. EXPENSES. The Administrator shall bear all expenses in connection with its performance of services hereunder. The Fund will pay, or contract with persons not parties to this Agreement to pay for, all its expenses other than those expressly stated to be payable by the Administrator hereunder, which expenses payable by the Fund shall include, without limitation, (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase or sale of securities and other investment instruments; (iii) fees and expenses of the Fund's Directors other than those who are "interested" persons of the Fund, the Investment Manager, or the Administrator; (iv) legal and audit expenses (other than services provided by the Administrator); (v) custodian, pricing and bookkeeping, registrar and transfer agent fees and expenses; (vi) fees and expenses related to the registration and qualifications of the Fund's shares for distribution under state and federal securities laws; (vii) expenses of printing and mailing reports and notices and proxy material to shareholders of the Fund; (viii) all other expenses incidental to holding meetings of the Fund's 4 5 shareholders, including proxy solicitations therefor; (ix) expenses of typesetting Prospectuses and supplements thereto; (x) expenses of printing and mailing any notice to existing shareholders; (xi) 50% of the insurance premiums for fidelity bonds and other coverage to the extent approved by the Board of Directors; (xii) association membership dues authorized by the Board of Directors; and (xiii) such nonrecurring or extraordinary expenses as may arise, including those relating to actions, suits, or proceedings to which the Fund is a party or to which the Fund's assets are subject and the legal obligation which the Fund may have to indemnify the Fund's Directors and officers with respect thereto. The Administrator has no obligation to reimburse the Fund for (or to have deducted from its fees) any Fund expense in excess of expense limitations, if any, imposed by state securities authorities having jurisdiction over the Fund. 16. PROPRIETARY AND CONFIDENTIAL INFORMATION. Administrator agrees on behalf of itself and its employees to treat confidentially and as proprietary information of the Fund all records and other information relative to the Fund and prior, present or potential shareholders, and not to use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be reasonably withheld and may not be withheld and will be deemed granted where Administrator may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Fund. The Fund agrees that any information obtained by the Administrator, or an affiliate, independently and not from the Fund, shall not be deemed to be confidential and proprietary. 17. MISCELLANEOUS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. This Agreement shall be construed and enforced in accordance with and governed by the laws of the Commonwealth of Massachusetts, without giving effect to the choice of laws provisions thereof. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement may be executed simultaneously in one or more counterparts, each of which taken together shall constitute one and the same instrument. 5 6 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written. FIDELITY SERVICE CO., A DIVISION OF FMR CORP. By: /s/ FREDERICK S. KNAPP ----------------------------------- Title: FIDELITY ADVISOR KOREA FUND, INC. By: /s/ GARY L. FRENCH ----------------------------------- Title: Treasurer 6 7 Dated: October 24, 1994 FIDELITY ADVISOR KOREA FUND, INC. (the "Fund") SCHEDULE A: AGENT TO PERFORM PORTFOLIO PRICING AND BOOKKEEPING I. SERVICES TO BE PERFORMED. Fidelity Services Company (the "Administrator") appoints Fidelity Accounting and Custody Services (FACS) to be responsible for: A. Accounting and relating to the Fund and portfolio transactions of the Fund. B. The determination of net asset value per share of the outstanding shares of the Fund and the offering price, if any, at which shares are to be sold, at the times and in the manner described in the Articles of Incorporation as it may be amended from time to time, and the Prospectus of the Fund (pricing). C. The determination of distributions, if any. D. The timely communication of information determined in B and C above, to the person or persons designated by the Fund. E. Maintaining the books of account of the Fund. F. In conjunction with the Custodian, receiving information and keeping records about all corporate actions, including, but not limited to, cash and stock distributions or dividends, stock splits and reverse stock splits, taken by companies whose securities are held by the Fund. G. Monitoring foreign corporate actions and foreign trades and entering orders to convert foreign currency or establish contracts for future settlement of foreign currency. H. Processing and monitoring the settlement of Variable Rate Demand Notes and GNMA's. I. Monitoring and accounting for futures and options. II. COMPENSATION. For the performance of its obligations hereunder, the Fund Manager shall pay FACS an annual fee based on average daily net assets for each month. The fee schedule is as follows:
FUND'S AVERAGE DAILY NET ASSETS FEE RATE ----------------------------------------------------------- -------- $500 million and under..................................... .06% Over $500 million.......................................... .03%
7 8 provided, however, that the minimum total annual fee payable by the Administrator shall be $45,000 and the maximum total annual fee payable by the Administrator shall be $750,000. FACS shall be reimbursed by the Administrator for out-of-pocket expenses for pricing, dividend and interest quotation services and related communications and telephone charges. FIDELITY SERVICE COMPANY A DIVISION OF FMR CORP. By: /s/ FREDERICK J. KNAPP ----------------------------------- Name: F.J. Knapp Title: President FIDELITY ACCOUNTING AND CUSTODY SERVICES By: ----------------------------------- Name: Title: FIDELITY ADVISOR KOREA FUND, INC. By: /s/ GARY L. FRENCH ----------------------------------- Name: Gary L. French Title: Treasurer 8 9 Dated: October 24, 1994 FIDELITY ADVISOR KOREA FUND, INC. SCHEDULE B: AGENT FOR SECURITIES LENDING TRANSACTIONS I. SERVICES TO BE PERFORMED. FACS shall be responsible for administering a program of securities lending from the Fund's portfolio by: A. Carrying out security loan transactions between approved borrowers and the Fund, including assisting the Custodian in receiving and returning collateral for loans. B. Marking to market loans outstanding each day. C. Ensuring that the value of collateral for loans is 100% or more of loaned securities at market price and issuing demands for additional collateral should the percentage fall below 100%. The details of operating standards and procedures to be followed shall be established from time to time by agreement between the Administrator and the Fund and shall be expressed in a procedures manual maintained by Service. II. COMPENSATION. For the performance of its obligations hereunder, the Administrator shall pay FACS according to the following: Opening a loan............................................... $15 Closing a loan............................................... $15 Daily market to market of collateral......................... $ 5
FIDELITY SERVICE COMPANY A DIVISION OF FMR CORP. By: ----------------------------------- Treasurer FIDELITY ACCOUNTING AND CUSTODY SERVICES By: ----------------------------------- FIDELITY ADVISOR KOREA FUND, INC. By: ----------------------------------- Treasurer 9 -----END PRIVACY-ENHANCED MESSAGE-----