NEW YORK -- A billion here, a billion there, and pretty soon even Fidelity Investments is talking about real money -- money that it will not distribute to investors in its giant Magellan Fund.
The Boston mutual fund company announced late yesterday that Magellan, the country's largest mutual fund, will not make a year-end distribution of taxable income to its three million shareholders because of an accounting error.
Just last month, the company had told investors who asked that they should expect to get about $4.32 a share, one cent less than they received last December.
Fidelity said the error did not affect the value of investors' shares; the money that would have been distributed simply remains in the fund, and the share price is unchanged.
Although the value of Magellan has fallen 2.3 percent since the end of September, Fidelity said the problem was not caused by big, last-minute losses or changes in the fund's portfolio.
"It really was an error in the calculation of the estimate," said Jane Jamieson, a spokesman, who declined to provide further details.
This is the second major accounting problem at Fidelity this year. On June 18, the company gave out incorrect prices for its funds when its computer systems broke down.
The company would not confirm the size of its mistake in calculating the distribution, but the $36 billion fund has more than 500 million shares outstanding, which means the glitch was more than $2 billion.
Industry experts expressed bewilderment at the size of the error, but suggested that aside from a simple miscalculation, its problem could have resulted from mistakes in recording the historical cost of certain investments or the nature of some income the fund received from its investments.
Coming on the heels of the earlier problem, "there's a 'Gee, are they out of control?' issue," said Michael Stolper, who manages about $50 million of his clients' investments in mutual funds.
But the glitch should not cause financial hardship for Magellan shareholders, he said, most of whom reinvest their distributions in the fund.