Fidelity® Magellan® Fund
Annual Report March 31, 2019 |
 |
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Contents
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You may also call 1-800-544-8544 if you’re an individual investing directly with Fidelity, call 1-800-835-5092 if you’re a plan sponsor or participant with Fidelity as your recordkeeper or call 1-877-208-0098 on institutional accounts or if you’re an advisor or invest through one to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third-party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. © 2019 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of distributions from dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The hypothetical investment and the average annual total returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund’s total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
| For the periods ended March 31, 2019 | Past 1 year | Past 5 years | Past 10 years |
| Fidelity® Magellan® Fund | 6.51% | 10.77% | 14.63% |
| Class K | 6.63% | 10.88% | 14.76% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Magellan® Fund, a class of the fund, on March 31, 2009.
The chart shows how the value of your investment would have changed, and also shows how the S&P 500® Index performed over the same period.
| Period Ending Values |
| $39,161 | Fidelity® Magellan® Fund |
| $43,809 | S&P 500® Index |
Management's Discussion of Fund Performance
Market Recap: The S&P 500
® index gained 9.50% for the 12 months ending March 31, 2019, as the U.S. equity bellwether began the new year on a high note after enduring a final quarter of 2018 in which resurgent volatility upset the aging bull market. In October, rising U.S. Treasury yields and concern about peaking corporate earnings growth sent many investors fleeing from risk assets as they were still dealing with lingering uncertainty related to global trade and the U.S. Federal Reserve picking up the pace of interest rate hikes. The index returned -6.84% in October, at the time its largest monthly drop in seven years. But conditions worsened through Christmas, as jitters about the economy and another hike in rates led to a spike in market volatility and a -9.03% result for December. Sharply reversing course to begin 2019, the S&P 500
® gained 13.65% year-to-date, its strongest opening quarter since 1998, amid upbeat company earnings/outlooks and signs the Fed may pause on rates. For the full period, three defensive sectors stood out to the upside: real estate (+21%), utilities (+19%) and health care (+15%). Information technology and consumer discretionary were rattled in the late-2018 downturn, but earlier strength and a late surge contributed to advances of roughly 18% and 14%, respectively. Consumer staples and communication services were about in line with the index. Conversely, some economically sensitive sectors struggled, with financials (-5%) faring worst, followed by materials (0%), energy (+1%) and industrials (+3%).
Comments from Portfolio Manager Jeffrey Feingold: For the fiscal year, the fund’s share classes gained about 7%, trailing the benchmark S&P 500
® index. The fund’s underperformance of the benchmark the past 12 months was primarily due to security selection, and to a lesser extent by sector allocation. Stock picking was especially weak among industrials stocks. The portfolio’s negligible exposure to the market-leading utilities sector also hampered our relative result. An overweighting in defense contractor Northrop Grumman was the biggest detractor, as the shares returned -22%. This period, I reduced exposure to Northrop Grumman and a number of other defense stocks. Other notable detractors included an overweighting in apparel, accessories & luxury goods retailer PVH (-19%), which came under pressure due to a fashion issue in its jeans business, as well as oil & gas exploration & production company Anadarko Petroleum (-23%). Turning to contributors, both choices and a notable overweighting in the information technology sector, especially software & services companies, lifted our relative result most. Here, software maker Microsoft (+31%), the fund’s largest holding, continued to benefit from growth in its cloud businesses, enabling it to better compete with Amazon Web Services. Real estate investment trust American Tower (+39%) – which rents towers used to build out current- and next-generation cellular service networks – was another key contributor, driven by a worldwide increase in the use of mobile data.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Notes to Shareholders: On February 22, 2019, Sammy Simnegar assumed co-management responsibilities for the fund, joining Jeff Feingold, who will be retiring from Fidelity at the end of 2019.
Investment Summary (Unaudited)
Top Ten Stocks as of March 31, 2019
| | % of fund's net assets |
| Microsoft Corp. | 6.4 |
| Amazon.com, Inc. | 4.4 |
| Apple, Inc. | 3.3 |
| UnitedHealth Group, Inc. | 2.7 |
| Berkshire Hathaway, Inc. Class B | 2.4 |
| Alphabet, Inc. Class C | 2.3 |
| JPMorgan Chase & Co. | 2.3 |
| Alphabet, Inc. Class A | 2.3 |
| American Tower Corp. | 2.2 |
| Visa, Inc. Class A | 2.1 |
| | 30.4 |
Top Five Market Sectors as of March 31, 2019
| | % of fund's net assets |
| Information Technology | 26.3 |
| Health Care | 14.6 |
| Financials | 14.4 |
| Consumer Discretionary | 12.9 |
| Industrials | 10.5 |
Asset Allocation (% of fund's net assets)
| As of March 31, 2019* |
| | Stocks | 96.8% |
| | Convertible Securities | 0.9% |
| | Short-Term Investments and Net Other Assets (Liabilities) | 2.3% |
* Foreign investments - 5.6%
Schedule of Investments March 31, 2019
Showing Percentage of Net Assets
| Common Stocks - 96.8% | | | |
| | | Shares | Value (000s) |
| COMMUNICATION SERVICES - 7.8% | | | |
| Entertainment - 2.0% | | | |
| Electronic Arts, Inc. (a) | | 497,100 | $50,520 |
| Live Nation Entertainment, Inc. (a) | | 401,197 | 25,492 |
| Netflix, Inc. (a) | | 631,500 | 225,168 |
| WME Entertainment Parent, LLC Class A (a)(b)(c)(d) | | 7,678,711 | 23,727 |
| | | | 324,907 |
| Interactive Media & Services - 5.8% | | | |
| Alphabet, Inc.: | | | |
| Class A (a) | | 318,116 | 374,388 |
| Class C (a) | | 326,354 | 382,914 |
| Facebook, Inc. Class A (a) | | 1,154,700 | 192,477 |
| | | | 949,779 |
|
| TOTAL COMMUNICATION SERVICES | | | 1,274,686 |
|
| CONSUMER DISCRETIONARY - 12.9% | | | |
| Hotels, Restaurants & Leisure - 2.9% | | | |
| Domino's Pizza, Inc. | | 419,500 | 108,273 |
| Hilton Worldwide Holdings, Inc. | | 965,700 | 80,259 |
| McDonald's Corp. | | 1,449,624 | 275,284 |
| | | | 463,816 |
| Internet & Direct Marketing Retail - 5.2% | | | |
| Amazon.com, Inc. (a) | | 402,300 | 716,396 |
| Meituan Dianping Class B | | 3,163,704 | 21,320 |
| The Booking Holdings, Inc. (a) | | 63,700 | 111,151 |
| | | | 848,867 |
| Multiline Retail - 0.7% | | | |
| Dollar Tree, Inc. (a) | | 1,130,600 | 118,758 |
| Specialty Retail - 3.2% | | | |
| Best Buy Co., Inc. | | 949,000 | 67,436 |
| Five Below, Inc. (a) | | 195,500 | 24,291 |
| Home Depot, Inc. | | 1,667,263 | 319,931 |
| TJX Companies, Inc. | | 1,940,400 | 103,249 |
| | | | 514,907 |
| Textiles, Apparel & Luxury Goods - 0.9% | | | |
| NIKE, Inc. Class B | | 619,300 | 52,151 |
| PVH Corp. | | 817,345 | 99,675 |
| | | | 151,826 |
|
| TOTAL CONSUMER DISCRETIONARY | | | 2,098,174 |
|
| CONSUMER STAPLES - 2.7% | | | |
| Beverages - 0.6% | | | |
| Monster Beverage Corp. (a) | | 1,656,200 | 90,395 |
| Food & Staples Retailing - 0.9% | | | |
| Costco Wholesale Corp. | | 591,100 | 143,129 |
| Food Products - 0.7% | | | |
| Post Holdings, Inc. (a) | | 1,119,288 | 122,450 |
| Personal Products - 0.5% | | | |
| Unilever NV (Certificaten Van Aandelen) (Bearer) | | 1,489,900 | 86,863 |
|
| TOTAL CONSUMER STAPLES | | | 442,837 |
|
| ENERGY - 4.3% | | | |
| Energy Equipment & Services - 0.3% | | | |
| Baker Hughes, a GE Co. Class A | | 1,798,206 | 49,846 |
| Oil, Gas & Consumable Fuels - 4.0% | | | |
| Anadarko Petroleum Corp. | | 3,538,789 | 160,944 |
| ConocoPhillips Co. | | 3,198,783 | 213,487 |
| Devon Energy Corp. | | 1,783,800 | 56,297 |
| EOG Resources, Inc. | | 1,036,692 | 98,672 |
| Pioneer Natural Resources Co. | | 306,111 | 46,615 |
| Suncor Energy, Inc. | | 2,333,600 | 75,630 |
| | | | 651,645 |
|
| TOTAL ENERGY | | | 701,491 |
|
| FINANCIALS - 14.4% | | | |
| Banks - 6.6% | | | |
| Bank of America Corp. | | 8,445,636 | 233,015 |
| Citigroup, Inc. | | 2,511,626 | 156,273 |
| JPMorgan Chase & Co. | | 3,774,233 | 382,066 |
| U.S. Bancorp | | 1,885,449 | 90,860 |
| Wells Fargo & Co. | | 4,658,477 | 225,098 |
| | | | 1,087,312 |
| Capital Markets - 3.6% | | | |
| BlackRock, Inc. Class A | | 220,583 | 94,271 |
| Charles Schwab Corp. | | 2,685,974 | 114,852 |
| CME Group, Inc. | | 20,239 | 3,331 |
| Moody's Corp. | | 354,800 | 64,251 |
| Morgan Stanley | | 1,453,939 | 61,356 |
| MSCI, Inc. | | 597,543 | 118,815 |
| PJT Partners, Inc. | | 237,309 | 9,920 |
| S&P Global, Inc. | | 236,600 | 49,816 |
| The Blackstone Group LP | | 1,905,900 | 66,649 |
| | | | 583,261 |
| Diversified Financial Services - 2.4% | | | |
| Berkshire Hathaway, Inc. Class B (a) | | 1,929,673 | 387,652 |
| Insurance - 1.8% | | | |
| Aon PLC | | 25,693 | 4,386 |
| Chubb Ltd. | | 935,577 | 131,056 |
| Marsh & McLennan Companies, Inc. | | 885,200 | 83,120 |
| The Travelers Companies, Inc. | | 515,212 | 70,666 |
| | | | 289,228 |
|
| TOTAL FINANCIALS | | | 2,347,453 |
|
| HEALTH CARE - 14.6% | | | |
| Biotechnology - 3.1% | | | |
| Alexion Pharmaceuticals, Inc. (a) | | 1,570,900 | 212,354 |
| Amgen, Inc. | | 850,187 | 161,519 |
| Amicus Therapeutics, Inc. (a) | | 4,388,694 | 59,686 |
| Vertex Pharmaceuticals, Inc. (a) | | 403,000 | 74,132 |
| | | | 507,691 |
| Health Care Equipment & Supplies - 3.9% | | | |
| Becton, Dickinson & Co. | | 782,235 | 195,348 |
| Boston Scientific Corp. (a) | | 6,787,972 | 260,522 |
| Danaher Corp. | | 845,924 | 111,679 |
| Intuitive Surgical, Inc. (a) | | 76,400 | 43,592 |
| Stryker Corp. | | 139,281 | 27,511 |
| | | | 638,652 |
| Health Care Providers & Services - 5.0% | | | |
| Cigna Corp. | | 687,172 | 110,511 |
| HCA Holdings, Inc. | | 767,300 | 100,041 |
| Humana, Inc. | | 623,940 | 165,968 |
| UnitedHealth Group, Inc. | | 1,739,584 | 430,130 |
| | | | 806,650 |
| Life Sciences Tools & Services - 1.2% | | | |
| Agilent Technologies, Inc. | | 805,958 | 64,783 |
| Bruker Corp. | | 151,322 | 5,817 |
| Thermo Fisher Scientific, Inc. | | 448,414 | 122,740 |
| | | | 193,340 |
| Pharmaceuticals - 1.4% | | | |
| AstraZeneca PLC sponsored ADR | | 2,967,400 | 119,972 |
| Bristol-Myers Squibb Co. | | 2,360,000 | 112,596 |
| | | | 232,568 |
|
| TOTAL HEALTH CARE | | | 2,378,901 |
|
| INDUSTRIALS - 10.2% | | | |
| Aerospace & Defense - 4.5% | | | |
| General Dynamics Corp. | | 73,614 | 12,461 |
| HEICO Corp. Class A | | 587,603 | 49,394 |
| Lockheed Martin Corp. | | 383,509 | 115,114 |
| Northrop Grumman Corp. | | 645,242 | 173,957 |
| Raytheon Co. | | 486,658 | 88,611 |
| The Boeing Co. | | 269,900 | 102,945 |
| TransDigm Group, Inc. (a) | | 76,300 | 34,639 |
| United Technologies Corp. | | 1,229,121 | 158,421 |
| | | | 735,542 |
| Air Freight & Logistics - 0.4% | | | |
| C.H. Robinson Worldwide, Inc. | | 694,300 | 60,397 |
| Commercial Services & Supplies - 0.9% | | | |
| Cintas Corp. | | 194,700 | 39,351 |
| Copart, Inc. (a) | | 922,900 | 55,919 |
| Waste Connection, Inc. (United States) | | 538,813 | 47,733 |
| | | | 143,003 |
| Industrial Conglomerates - 1.2% | | | |
| General Electric Co. | | 10,167,930 | 101,578 |
| Roper Technologies, Inc. | | 277,600 | 94,931 |
| | | | 196,509 |
| Professional Services - 1.4% | | | |
| IHS Markit Ltd. (a) | | 3,532,100 | 192,076 |
| Verisk Analytics, Inc. | | 324,569 | 43,168 |
| | | | 235,244 |
| Road & Rail - 1.8% | | | |
| Lyft, Inc. | | 1,211,542 | 85,366 |
| Norfolk Southern Corp. | | 1,057,703 | 197,674 |
| Union Pacific Corp. | | 77,825 | 13,012 |
| | | | 296,052 |
|
| TOTAL INDUSTRIALS | | | 1,666,747 |
|
| INFORMATION TECHNOLOGY - 25.8% | | | |
| Electronic Equipment & Components - 0.2% | | | |
| Amphenol Corp. Class A | | 446,600 | 42,177 |
| IT Services - 6.8% | | | |
| Accenture PLC Class A | | 1,130,346 | 198,964 |
| Gartner, Inc. (a) | | 6,475 | 982 |
| GoDaddy, Inc. (a) | | 1,138,131 | 85,576 |
| MasterCard, Inc. Class A | | 1,260,513 | 296,788 |
| PayPal Holdings, Inc. (a) | | 1,354,200 | 140,620 |
| Shopify, Inc. Class A (a) | | 211,800 | 43,721 |
| Visa, Inc. Class A | | 2,157,734 | 337,016 |
| | | | 1,103,667 |
| Semiconductors & Semiconductor Equipment - 2.4% | | | |
| Broadcom, Inc. | | 503,900 | 151,528 |
| Lam Research Corp. | | 389,200 | 69,671 |
| NVIDIA Corp. | | 952,100 | 170,959 |
| | | | 392,158 |
| Software - 13.1% | | | |
| Adobe, Inc. (a) | | 860,600 | 229,341 |
| Autodesk, Inc. (a) | | 662,400 | 103,215 |
| Citrix Systems, Inc. | | 1,415,510 | 141,070 |
| DocuSign, Inc. | | 1,167,909 | 60,544 |
| Intuit, Inc. | | 979,600 | 256,077 |
| Microsoft Corp. | | 8,918,500 | 1,051,846 |
| Salesforce.com, Inc. (a) | | 1,059,233 | 167,751 |
| Tableau Software, Inc. (a) | | 487,300 | 62,024 |
| Tanium, Inc. Class B (a)(c)(d) | | 415,800 | 3,615 |
| Workday, Inc. Class A (a) | | 342,100 | 65,974 |
| | | | 2,141,457 |
| Technology Hardware, Storage & Peripherals - 3.3% | | | |
| Apple, Inc. | | 2,805,913 | 532,983 |
|
| TOTAL INFORMATION TECHNOLOGY | | | 4,212,442 |
|
| MATERIALS - 0.6% | | | |
| Chemicals - 0.6% | | | |
| Ecolab, Inc. | | 277,600 | 49,008 |
| Sherwin-Williams Co. | | 125,500 | 54,054 |
| | | | 103,062 |
| REAL ESTATE - 3.3% | | | |
| Equity Real Estate Investment Trusts (REITs) - 3.2% | | | |
| American Tower Corp. | | 1,815,251 | 357,713 |
| Crown Castle International Corp. | | 1,013,700 | 129,754 |
| Prologis, Inc. | | 425,771 | 30,634 |
| SBA Communications Corp. Class A (a) | | 12,331 | 2,462 |
| | | | 520,563 |
| Real Estate Management & Development - 0.1% | | | |
| Rialto Real Estate Fund LP (b)(c)(d)(e) | | 500,000 | 315 |
| RREF CMBS AIV, LP (b)(c)(d)(e)(f) | | 500,000 | 19,640 |
| RREF Midtown Colony REIT, Inc. (a)(b)(c)(d)(e)(g) | | 500,000 | 0 |
| | | | 19,955 |
|
| TOTAL REAL ESTATE | | | 540,518 |
|
| UTILITIES - 0.2% | | | |
| Electric Utilities - 0.2% | | | |
| NextEra Energy, Inc. | | 186,966 | 36,144 |
| TOTAL COMMON STOCKS | | | |
| (Cost $10,220,104) | | | 15,802,455 |
|
| Convertible Preferred Stocks - 0.9% | | | |
| CONSUMER DISCRETIONARY - 0.0% | | | |
| Hotels, Restaurants & Leisure - 0.0% | | | |
| Neutron Holdings, Inc.: | | | |
| Series C (c)(d) | | 34,090,300 | 8,267 |
| Series D (c)(d) | | 6,659,794 | 1,615 |
| | | | 9,882 |
| CONSUMER STAPLES - 0.1% | | | |
| Food & Staples Retailing - 0.1% | | | |
| Sweetgreen, Inc. Series H (c)(d) | | 766,871 | 10,000 |
| INDUSTRIALS - 0.3% | | | |
| Road & Rail - 0.3% | | | |
| Uber Technologies, Inc. Series D, 8.00% (a)(c)(d) | | 966,928 | 46,471 |
| INFORMATION TECHNOLOGY - 0.5% | | | |
| Software - 0.5% | | | |
| Bird Rides, Inc. Series C 0.00 (c)(d) | | 527,862 | 6,200 |
| Cloudflare, Inc. Series D, 8.00% (a)(c)(d) | | 878,142 | 9,660 |
| Malwarebytes Corp. Series B (a)(c)(d) | | 3,373,494 | 59,677 |
| | | | 75,537 |
| TOTAL CONVERTIBLE PREFERRED STOCKS | | | |
| (Cost $80,921) | | | 141,890 |
|
| Money Market Funds - 2.2% | | | |
| Fidelity Cash Central Fund, 2.48% (h) | | | |
| (Cost $355,669) | | 355,600,099 | 355,671 |
| TOTAL INVESTMENT IN SECURITIES - 99.9% | | | |
| (Cost $10,656,694) | | | 16,300,016 |
| NET OTHER ASSETS (LIABILITIES) - 0.1% | | | 18,896 |
| NET ASSETS - 100% | | | $16,318,912 |
Values shown as $0 in the Schedule of Investments may reflect amounts less than $500.
Legend
(a) Non-income producing
(b) Investment is owned by a wholly-owned subsidiary (Subsidiary) that is treated as a corporation for U.S. tax purposes.
(c) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $189,187,000 or 1.2% of net assets.
(d) Level 3 security
(e) Affiliated company
(f) Investment represents the Fund's ownership interest in a limited partnership, which is under common ownership and management with Rialto Real Estate Fund, LP.
(g) Investment represents the Fund's ownership interest in a real estate investment trust, which is under common ownership and management with Rialto Real Estate Fund, LP.
(h) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request.
Additional information on each restricted holding is as follows:
| Security | Acquisition Date | Acquisition Cost (000s) |
| Bird Rides, Inc. Series C 0.00 | 12/21/18 | $6,200 |
| Cloudflare, Inc. Series D, 8.00% | 11/5/14 - 9/10/18 | $6,874 |
| Malwarebytes Corp. Series B | 12/21/15 | $35,000 |
| Neutron Holdings, Inc. Series C | 7/3/18 | $6,233 |
| Neutron Holdings, Inc. Series D | 1/25/19 | $1,615 |
| Rialto Real Estate Fund LP | 2/24/11 - 8/17/12 | $33,049 |
| RREF CMBS AIV, LP | 8/10/11 - 8/17/12 | $15,528 |
| RREF Midtown Colony REIT, Inc. | 12/31/12 | $1,423 |
| Sweetgreen, Inc. Series H | 11/9/18 | $10,000 |
| Tanium, Inc. Class B | 4/21/17 | $2,064 |
| Uber Technologies, Inc. Series D, 8.00% | 6/6/14 | $15,000 |
| WME Entertainment Parent, LLC Class A | 4/13/16 | $15,000 |
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| | (Amounts in thousands) |
| Fidelity Cash Central Fund | $2,901 |
| Fidelity Securities Lending Cash Central Fund | 1,309 |
| Total | $4,210 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable.
Other Affiliated Issuers
An affiliated company is a company in which the Fund has ownership of at least 5% of the voting securities. Fiscal year to date transactions with companies which are or were affiliates are as follows:
| Affiliate (Amounts in thousands) | Value, beginning of period | Purchases | Sales Proceeds(a) | Dividend Income | Realized Gain (loss) | Change in Unrealized appreciation (depreciation) | Value, end of period |
| elf Beauty, Inc. | $42,463 | $3,499 | $19,703 | $-- | $(37,599) | $11,340 | $-- |
| Rialto Real Estate Fund LP | 942 | -- | -- | 460 | -- | (627) | 315 |
| RREF CMBS AIV, LP | 20,983 | -- | -- | 2,794 | -- | (1,343) | 19,640 |
| RREF Midtown Colony REIT, Inc. | -- | -- | -- | -- | -- | -- | -- |
| Total | $64,388 | $3,499 | $19,703 | $3,254 | $(37,599) | $9,370 | $19,955 |
(a) Includes the value of securities delivered through in-kind transactions, if applicable.
Investment Valuation
The following is a summary of the inputs used, as of March 31, 2019, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| (Amounts in thousands) | | | | |
| Investments in Securities: | | | | |
| Equities: | | | | |
| Communication Services | $1,274,686 | $1,250,959 | $-- | $23,727 |
| Consumer Discretionary | 2,108,056 | 2,098,174 | -- | 9,882 |
| Consumer Staples | 452,837 | 355,974 | 86,863 | 10,000 |
| Energy | 701,491 | 701,491 | -- | -- |
| Financials | 2,347,453 | 2,347,453 | -- | -- |
| Health Care | 2,378,901 | 2,378,901 | -- | -- |
| Industrials | 1,713,218 | 1,581,381 | 85,366 | 46,471 |
| Information Technology | 4,287,979 | 4,208,827 | -- | 79,152 |
| Materials | 103,062 | 103,062 | -- | -- |
| Real Estate | 540,518 | 520,563 | -- | 19,955 |
| Utilities | 36,144 | 36,144 | -- | -- |
| Money Market Funds | 355,671 | 355,671 | -- | -- |
| Total Investments in Securities: | $16,300,016 | $15,938,600 | $172,229 | $189,187 |
The following is a reconciliation of Investments in Securities for which Level 3 inputs were used in determining value:
| (Amounts in thousands) | |
| Investments in Securities: | |
| Beginning Balance | $188,702 |
| Net Realized Gain (Loss) on Investment Securities | -- |
| Net Unrealized Gain (Loss) on Investment Securities | 23,584 |
| Cost of Purchases | 27,501 |
| Proceeds of Sales | (50,600) |
| Amortization/Accretion | -- |
| Transfers into Level 3 | -- |
| Transfers out of Level 3 | -- |
| Ending Balance | $189,187 |
| The change in unrealized gain (loss) for the period attributable to Level 3 securities held at March 31, 2019 | $31,266 |
The information used in the above reconciliation represents fiscal year to date activity for any Investments in Securities identified as using Level 3 inputs at either the beginning or the end of the current fiscal period. Transfers in or out of Level 3 represent the beginning value of any Security or Instrument where a change in the pricing level occurred from the beginning to the end of the period. The cost of purchases and the proceeds of sales may include securities received or delivered through corporate actions or exchanges. Realized and unrealized gains (losses) disclosed in the reconciliation are included in Net Gain (Loss) on the Fund's Statement of Operations.
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| Amounts in thousands (except per-share amounts) | | March 31, 2019 |
| Assets | | |
Investment in securities, at value — See accompanying schedule:
Unaffiliated issuers (cost $10,268,780) | $15,924,390 | |
| Fidelity Central Funds (cost $355,669) | 355,671 | |
| Other affiliated issuers (cost $32,245) | 19,955 | |
| Total Investment in Securities (cost $10,656,694) | | $16,300,016 |
| Restricted cash | | 284 |
| Receivable for investments sold | | 123,661 |
| Receivable for fund shares sold | | 950 |
| Dividends receivable | | 3,712 |
| Distributions receivable from Fidelity Central Funds | | 505 |
| Prepaid expenses | | 13 |
| Other receivables | | 1,661 |
| Total assets | | 16,430,802 |
| Liabilities | | |
| Payable for investments purchased | $93,539 | |
| Payable for fund shares redeemed | 7,626 | |
| Accrued management fee | 7,379 | |
| Other affiliated payables | 1,753 | |
| Other payables and accrued expenses | 1,593 | |
| Total liabilities | | 111,890 |
| Net Assets | | $16,318,912 |
| Net Assets consist of: | | |
| Paid in capital | | $10,523,220 |
| Total distributable earnings (loss) | | 5,795,692 |
| Net Assets | | $16,318,912 |
| Net Asset Value and Maximum Offering Price | | |
| Magellan: | | |
| Net Asset Value, offering price and redemption price per share ($14,729,363 ÷ 1,439,275 shares) | | $10.23 |
| Class K: | | |
| Net Asset Value, offering price and redemption price per share ($1,589,549 ÷ 155,549 shares) | | $10.22 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| Amounts in thousands | | Year ended March 31, 2019 |
| Investment Income | | |
| Dividends (including $3,254 earned from other affiliated issuers) | | $211,615 |
| Income from Fidelity Central Funds | | 4,210 |
| Total income | | 215,825 |
| Expenses | | |
| Management fee | | |
| Basic fee | $91,830 | |
| Performance adjustment | (2,609) | |
| Transfer agent fees | 20,263 | |
| Accounting and security lending fees | 1,588 | |
| Custodian fees and expenses | 230 | |
| Independent trustees' fees and expenses | 100 | |
| Registration fees | 150 | |
| Audit | 125 | |
| Legal | 28 | |
| Miscellaneous | 114 | |
| Total expenses before reductions | 111,819 | |
| Expense reductions | (738) | |
| Total expenses after reductions | | 111,081 |
| Net investment income (loss) | | 104,744 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 929,284 | |
| Fidelity Central Funds | 18 | |
| Other affiliated issuers | (37,599) | |
| Foreign currency transactions | (119) | |
| Total net realized gain (loss) | | 891,584 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 55,919 | |
| Fidelity Central Funds | (13) | |
| Other affiliated issuers | 9,370 | |
| Assets and liabilities in foreign currencies | (12) | |
| Total change in net unrealized appreciation (depreciation) | | 65,264 |
| Net gain (loss) | | 956,848 |
| Net increase (decrease) in net assets resulting from operations | | $1,061,592 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| Amounts in thousands | Year ended March 31, 2019 | Year ended March 31, 2018 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $104,744 | $131,678 |
| Net realized gain (loss) | 891,584 | 1,470,150 |
| Change in net unrealized appreciation (depreciation) | 65,264 | 1,370,457 |
| Net increase (decrease) in net assets resulting from operations | 1,061,592 | 2,972,285 |
| Distributions to shareholders | (1,551,557) | – |
| Distributions to shareholders from net investment income | – | (130,349) |
| Distributions to shareholders from net realized gain | – | (1,449,762) |
| Total distributions | (1,551,557) | (1,580,111) |
| Share transactions - net increase (decrease) | (368,237) | 424,778 |
| Total increase (decrease) in net assets | (858,202) | 1,816,952 |
| Net Assets | | |
| Beginning of period | 17,177,114 | 15,360,162 |
| End of period | $16,318,912 | $17,177,114 |
| Other Information | | |
| Undistributed net investment income end of period | | $20,975 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
Fidelity Magellan Fund
| Years ended March 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
| Selected Per–Share DataA | | | | | |
| Net asset value, beginning of period | $10.57 | $9.72 | $8.75 | $9.52 | $9.43 |
| Income from Investment Operations | | | | | |
| Net investment income (loss)B | .06 | .08C | .06 | .06 | .08 |
| Net realized and unrealized gain (loss) | .57 | 1.78 | 1.18 | (.13)D | 1.22 |
| Total from investment operations | .63 | 1.86 | 1.24 | (.07) | 1.30 |
| Distributions from net investment income | (.06) | (.08) | (.06) | (.05) | (.07) |
| Distributions from net realized gain | (.91) | (.93) | (.21) | (.65) | (1.14) |
| Total distributions | (.97) | (1.01) | (.27) | (.70) | (1.21) |
| Net asset value, end of period | $10.23 | $10.57 | $9.72 | $8.75 | $9.52 |
| Total ReturnE | 6.51% | 20.16% | 14.46% | (.99)%D | 14.98% |
| Ratios to Average Net AssetsF,G | | | | | |
| Expenses before reductions | .67% | .69% | .68% | .84% | .68% |
| Expenses net of fee waivers, if any | .67% | .69% | .67% | .84% | .68% |
| Expenses net of all reductions | .66% | .69% | .67% | .83% | .68% |
| Net investment income (loss) | .60% | .79%C | .68% | .62% | .83% |
| Supplemental Data | | | | | |
| Net assets, end of period (in millions) | $14,729 | $14,906 | $13,467 | $12,950 | $14,224 |
| Portfolio turnover rateH | 42%I | 53%I | 51%I | 78% | 71% |
A Per share amounts have been adjusted to reflect the impact of the 10 for 1 share split that occurred on August 10, 2018.
B Calculated based on average shares outstanding during the period.
C Net investment income per share reflects a large, non-recurring dividend which amounted to $.02 per share. Excluding this non-recurring dividend, the ratio of net investment income (loss) to average net assets would have been .57%.
D Net realized and unrealized gain (loss) per share reflects proceeds received from litigation which amounted to $.01 per share. Excluding these litigation proceeds, the total return would have been (1.05)%
E Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
I Portfolio turnover rate excludes securities received or delivered in-kind.
See accompanying notes which are an integral part of the financial statements.
Fidelity Magellan Fund Class K
| Years ended March 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
| Selected Per–Share DataA | | | | | |
| Net asset value, beginning of period | $10.56 | $9.71 | $8.74 | $9.50 | $9.42 |
| Income from Investment Operations | | | | | |
| Net investment income (loss)B | .07 | .09C | .07 | .07 | .09 |
| Net realized and unrealized gain (loss) | .57 | 1.78 | 1.18 | (.12)D | 1.21 |
| Total from investment operations | .64 | 1.87 | 1.25 | (.05) | 1.30 |
| Distributions from net investment income | (.07) | (.09) | (.06) | (.06) | (.08) |
| Distributions from net realized gain | (.91) | (.93) | (.22) | (.65) | (1.14) |
| Total distributions | (.98) | (1.02) | (.28) | (.71) | (1.22) |
| Net asset value, end of period | $10.22 | $10.56 | $9.71 | $8.74 | $9.50 |
| Total ReturnE | 6.63% | 20.27% | 14.57% | (.89)%D | 15.08% |
| Ratios to Average Net AssetsF,G | | | | | |
| Expenses before reductions | .58% | .61% | .58% | .74% | .58% |
| Expenses net of fee waivers, if any | .58% | .60% | .58% | .74% | .58% |
| Expenses net of all reductions | .58% | .60% | .58% | .74% | .58% |
| Net investment income (loss) | .69% | .88%C | .78% | .71% | .93% |
| Supplemental Data | | | | | |
| Net assets, end of period (in millions) | $1,590 | $2,271 | $1,893 | $2,252 | $2,528 |
| Portfolio turnover rateH | 42%I | 53%I | 51%I | 78% | 71% |
A Per share amounts have been adjusted to reflect the impact of the 10 for 1 share split that occurred on August 10, 2018.
B Calculated based on average shares outstanding during the period.
C Net investment income per share reflects a large, non-recurring dividend which amounted to $.02 per share. Excluding this non-recurring dividend, the ratio of net investment income (loss) to average net assets would have been .65%.
D Net realized and unrealized gain (loss) per share reflects proceeds received from litigation which amounted to $.01 per share. Excluding these litigation proceeds, the total return would have been (.95)%
E Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
I Portfolio turnover rate excludes securities received or delivered in-kind.
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements
For the period ended March 31, 2019
(Amounts in thousands except percentages)
1. Organization.
Fidelity Magellan Fund (the Fund) is a fund of Fidelity Magellan Fund (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The Fund offers Magellan and Class K shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class.
Effective August 10, 2018, each class underwent a 10 for 1 share split. The effect of the share split transaction was to multiply the number of outstanding shares of the Class by a split factor of 10:1, with a corresponding decrease in net asset value (NAV) per share. This event does not impact the overall net assets of each class. The per share data presented in the Financial Highlights and Share Transactions presented in the Notes to Financial Statements have been retroactively adjusted to reflect this share split.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of the investment adviser. Annualized expenses of the Money Market Central Funds as of their most recent shareholder report date are less than .005%.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investments Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy. Equity securities, including restricted securities, for which observable inputs are not available are valued using alternate valuation approaches, including the market approach and the income approach and are categorized as Level 3 in the hierarchy. The market approach generally consists of using comparable market transactions while the income approach generally consists of using the net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
The following provides information on Level 3 securities held by the Fund that were valued at period end based on unobservable inputs. These amounts exclude valuations provided by a broker.
| Asset Type | Fair Value | Valuation Technique(s) | Unobservable Input | Amount or Range/Weighted Average | Impact to Valuation from an Increase in Input(a) |
| Equities | $189,187 | Market comparable | Enterprise value/Sales multiple (EV/S) | 2.4 - 7.2 / 5.2 | Increase |
| | | | Discount rate | 9.0% | Decrease |
| | | | Discount for lack of marketability | 10.0% - 20.0% / 15.6% | Decrease |
| | | Book value | Book value multiple | 1.0 | Increase |
| | | Market approach | Transaction price | $0.24 - $13.04 / $8.72 | Increase |
(a) Represents the directional change in the fair value of the Level 3 investments that could have resulted from an increase in the corresponding input as of period end. A decrease to the unobservable input would have had the opposite effect. Significant changes in these inputs may have resulted in a significantly higher or lower fair value measurement at period end.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of March 31, 2019, as well as a roll forward of Level 3 investments, is included at the end of the Fund's Schedule of Investments.
Foreign Currency. The Fund may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent fees incurred. Certain expense reductions may also differ by class. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan) for the Fund, certain independent Trustees have elected to defer receipt of a portion of their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees of $1,456 are included in the accompanying Statement of Assets and Liabilities in other receivables and other payables and accrued expenses, respectively.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. As of March 31, 2019, the Fund did not have any unrecognized tax benefits in the financial statements; nor is the Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. In addition, the Fund claimed a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, redemptions in kind, partnerships, deferred trustees compensation and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $5,811,755 |
| Gross unrealized depreciation | (189,609) |
| Net unrealized appreciation (depreciation) | $5,622,146 |
| Tax Cost | $10,677,870 |
The tax-based components of distributable earnings as of period end were as follows:
| Undistributed ordinary income | $21,132 |
| Undistributed long-term capital gain | $153,869 |
| Net unrealized appreciation (depreciation) on securities and other investments | $5,622,148 |
The tax character of distributions paid was as follows:
| | March 31, 2019 | March 31, 2018 |
| Ordinary Income | $173,590 | $ 219,807 |
| Long-term Capital Gains | 1,377,967 | 1,360,304 |
| Total | $1,551,557 | $ 1,580,111 |
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
Consolidated Subsidiary. The Fund invests in certain investments through a wholly-owned subsidiary ("Subsidiary"), which may be subject to federal and state taxes upon disposition.
As of period end, the Fund held an investment of $43,966 in these Subsidiaries, representing .27% of the Fund's net assets. The financial statements have been consolidated and include accounts of the Fund and each Subsidiary. Accordingly, all inter-company transactions and balances have been eliminated.
Any cash held by the Subsidiaries is restricted as to its use and is presented as Restricted cash in the Statement of Assets and Liabilities.
New Rule Issuance. During August 2018, the U.S. Securities and Exchange Commission issued Final Rule Release No. 33-10532, Disclosure Update and Simplification. This Final Rule includes amendments specific to registered investment companies that are intended to eliminate overlap in disclosure requirements between Regulation S-X and GAAP. In accordance with these amendments, certain line-items in the Fund's financial statements have been combined or removed for the current period as outlined in the table below.
| Financial Statement | Current Line-Item Presentation (As Applicable) | Prior Line-Item Presentation (As Applicable) |
| Statement of Assets and Liabilities | Total distributable earnings (loss) | Undistributed/Distributions in excess of/Accumulated net investment income (loss)
Accumulated/Undistributed net realized gain (loss)
Net unrealized appreciation (depreciation) |
| Statement of Changes in Net Assets | N/A - removed | Undistributed/Distributions in excess of/Accumulated net investment income (loss) end of period |
| Statement of Changes in Net Assets | Distributions to shareholders | Distributions to shareholders from net investment income
Distributions to shareholders from net realized gain |
| Distributions to Shareholders Note to Financial Statements | Distributions to shareholders | Distributions to shareholders from net investment income
Distributions to shareholders from net realized gain |
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, aggregated $7,032,003 and $8,927,651, respectively.
Redemptions In-Kind.
During the period, 9,679* shares of the Fund held by an unaffiliated entity were redeemed in-kind for investments and cash with a value of $104,703. The net realized gain of $45,383 on investments delivered through in-kind redemptions is included in the accompanying Statement of Operations. The amount of the redemptions is included in share transactions activity shown in the accompanying Statement of Changes in Net Assets as well as the Notes to Financial Statements. The Fund recognized no gain or loss for federal income tax purposes.
* Share activity prior to August 10, 2018 has been adjusted to reflect the impact of the 10 for 1 share split that occurred on that date.
Prior Fiscal Year Redemptions In-Kind.
During the prior period, 6,490* shares of the Fund held by an unaffiliated entity were redeemed in-kind for investments and cash with a value of $69,000. The Fund had a net realized gain of $31,253 on investments delivered through the in-kind redemptions. The amount of in-kind redemptions is included in share transactions in the accompanying Statement of Changes in Net Assets as well as the Notes to Financial Statements. The Fund recognized no gain or loss for federal income tax purposes.
* Share activity prior to August 10, 2018 has been adjusted to reflect the impact of the 10 for 1 share split that occurred on that date.
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .24% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by the investment adviser, including any mutual funds previously advised by the investment adviser that are currently advised by Fidelity SelectCo, LLC, an affiliate of the investment adviser. The group fee rate decreases as assets under management increase and increases as assets under management decrease. In addition, the management fee is subject to a performance adjustment (up to a maximum of +/- .20% of the Fund's average net assets over a 36 month performance period). The upward or downward adjustment to the management fee is based on the relative investment performance of Magellan as compared to its benchmark index, the S&P 500 Index, over the same 36 month performance period. For the reporting period, the total annual management fee rate, including the performance adjustment, was .52% of the Fund's average net assets. The performance adjustment included in the management fee rate may be higher or lower than the maximum performance adjustment rate due to the difference between the average net assets for the reporting and performance periods.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc., (FIIOC), an affiliate of the investment adviser, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of Magellan. FIIOC receives an asset-based fee of Class K's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements.
For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets |
| Magellan | $19,309 | .13 |
| Class K | 954 | .05 |
| | $20,263 | |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions. For the period, the fees were equivalent to an annual rate of .01%.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were $207 for the period.
Interfund Trades. The Fund may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note.
6. Committed Line of Credit.
The Fund participates with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $46 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, the Fund did not borrow on this line of credit.
7. Security Lending.
The Fund lends portfolio securities through a lending agent from time to time in order to earn additional income. For equity securities, a lending agent is used and may loan securities to certain qualified borrowers, including Fidelity Capital Markets (FCM), a broker-dealer affiliated with the Fund. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. The Fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund may apply collateral received from the borrower against the obligation. The Fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. At period end, there were no security loans outstanding. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Total security lending income during the period amounted to $1,309, including $47 from securities loaned to FCM.
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset certain expenses. This amount totaled $553 for the period. In addition, through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $3. During the period, credits reduced each class' transfer agent expense as noted in the table below.
| | Transfer Agent expense reduction |
| Magellan | $37 |
In addition, during the period the investment adviser reimbursed and/or waived a portion of fund-level operating expenses in the amount of $145.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Year ended
March 31, 2019 | Year ended
March 31, 2018 |
| Distributions to shareholders | | |
| Magellan | $1,362,766 | $– |
| Class K | 188,791 | – |
| Total | $1,551,557 | $– |
| From net investment income | | |
| Magellan | $– | $113,877 |
| Class K | – | 16,472 |
| Total | $– | $130,349 |
| From net realized gain | | |
| Magellan | $– | $1,277,701 |
| Class K | – | 172,061 |
| Total | $– | $1,449,762 |
10. Share Transactions.
Share transactions for each class were as follows and may contain automatic conversions between classes or exchanges between affiliated funds:
| | Shares | Shares | Dollars | Dollars |
| | Year ended March 31, 2019(a) | Year ended March 31, 2018(a) | Year ended March 31, 2019 | Year ended March 31, 2018 |
| Magellan | | | | |
| Shares sold | 27,889 | 25,840 | $289,309 | $267,383 |
| Reinvestment of distributions | 130,932 | 134,860 | 1,296,977 | 1,323,766 |
| Shares redeemed | (129,716) | (135,550) | (1,340,264) | (1,388,381) |
| Net increase (decrease) | 29,105 | 25,150 | $246,022 | $202,768 |
| Class K | | | | |
| Shares sold | 19,494 | 50,990 | $202,900 | $546,431 |
| Reinvestment of distributions | 19,017 | 19,270 | 188,791 | 188,533 |
| Shares redeemed | (98,072)(b) | (50,080)(c) | (1,005,950)(b) | (512,953)(c) |
| Net increase (decrease) | (59,561) | 20,180 | $(614,259) | $222,011 |
(a) Share activity prior to August 10, 2018 has been adjusted to reflect the impact of the 10 for 1 share split that occurred on that date.
(b) Amount includes in-kind redemptions (see the Redemptions In-Kind note for additional details).
(c) Amount includes in-kind redemptions (see the Prior Fiscal Year Redemptions In-Kind note for additional details).
11. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Fidelity Magellan Fund and Shareholders of Fidelity Magellan Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Fidelity Magellan Fund (the "Fund") as of March 31, 2019, the related statement of operations for the year ended March 31, 2019, the statement of changes in net assets for each of the two years in the period ended March 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended March 31, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of March 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended March 31, 2019 and the financial highlights for each of the five years in the period ended March 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of March 31, 2019 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 15, 2019
We have served as the auditor of one or more investment companies in the Fidelity group of funds since 1932.
Trustees and Officers
The Trustees, Members of the Advisory Board (if any), and officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, oversee management of the risks associated with such activities and contractual arrangements, and review the fund's performance. Except for Michael E. Wiley, each of the Trustees oversees 290 funds. Mr. Wiley oversees 196 funds.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) of the trust and the fund is referred to herein as an Independent Trustee. Each Independent Trustee shall retire not later than the last day of the calendar year in which his or her 75th birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. Officers and Advisory Board Members hold office without limit in time, except that any officer or Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544 if you’re an individual investing directly with Fidelity, call 1-800-835-5092 if you’re a plan sponsor or participant with Fidelity as your recordkeeper or call 1-877-208-0098 on institutional accounts or if you’re an advisor or invest through one.
Experience, Skills, Attributes, and Qualifications of the Trustees. The Governance and Nominating Committee has adopted a statement of policy that describes the experience, qualifications, attributes, and skills that are necessary and desirable for potential Independent Trustee candidates (Statement of Policy). The Board believes that each Trustee satisfied at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by the Statement of Policy. The Governance and Nominating Committee also engages professional search firms to help identify potential Independent Trustee candidates who have the experience, qualifications, attributes, and skills consistent with the Statement of Policy. From time to time, additional criteria based on the composition and skills of the current Independent Trustees, as well as experience or skills that may be appropriate in light of future changes to board composition, business conditions, and regulatory or other developments, have also been considered by the professional search firms and the Governance and Nominating Committee. In addition, the Board takes into account the Trustees' commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout their tenure.
In determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes, and skills, which allow the Board to operate effectively in governing the fund and protecting the interests of shareholders. Information about the specific experience, skills, attributes, and qualifications of each Trustee, which in each case led to the Board's conclusion that the Trustee should serve (or continue to serve) as a trustee of the fund, is provided below.
Board Structure and Oversight Function. James C. Curvey is an interested person and currently serves as Chairman. The Trustees have determined that an interested Chairman is appropriate and benefits shareholders because an interested Chairman has a personal and professional stake in the quality and continuity of services provided to the fund. Independent Trustees exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman, regardless of whether the Trustee happens to be independent or a member of management. The Independent Trustees have determined that they can act independently and effectively without having an Independent Trustee serve as Chairman and that a key structural component for assuring that they are in a position to do so is for the Independent Trustees to constitute a substantial majority for the Board. The Independent Trustees also regularly meet in executive session. Ned C. Lautenbach serves as Chairman of the Independent Trustees and as such (i) acts as a liaison between the Independent Trustees and management with respect to matters important to the Independent Trustees and (ii) with management prepares agendas for Board meetings.
Fidelity® funds are overseen by different Boards of Trustees. The fund's Board oversees Fidelity's high income and certain equity funds, and other Boards oversee Fidelity's investment-grade bond, money market, asset allocation, and other equity funds. The asset allocation funds may invest in Fidelity® funds overseen by the fund's Board. The use of separate Boards, each with its own committee structure, allows the Trustees of each group of Fidelity® funds to focus on the unique issues of the funds they oversee, including common research, investment, and operational issues. On occasion, the separate Boards establish joint committees to address issues of overlapping consequences for the Fidelity® funds overseen by each Board.
The Trustees operate using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Trustees, the fund, and fund shareholders and to facilitate compliance with legal and regulatory requirements and oversight of the fund's activities and associated risks. The Board, acting through its committees, has charged FMR and its affiliates with (i) identifying events or circumstances the occurrence of which could have demonstrably adverse effects on the fund's business and/or reputation; (ii) implementing processes and controls to lessen the possibility that such events or circumstances occur or to mitigate the effects of such events or circumstances if they do occur; and (iii) creating and maintaining a system designed to evaluate continuously business and market conditions in order to facilitate the identification and implementation processes described in (i) and (ii) above. Because the day-to-day operations and activities of the fund are carried out by or through FMR, its affiliates, and other service providers, the fund's exposure to risks is mitigated but not eliminated by the processes overseen by the Trustees. While each of the Board's committees has responsibility for overseeing different aspects of the fund's activities, oversight is exercised primarily through the Operations, Audit, and Compliance Committees. In addition, the Independent Trustees have worked with Fidelity to enhance the Board's oversight of investment and financial risks, legal and regulatory risks, technology risks, and operational risks, including the development of additional risk reporting to the Board. Appropriate personnel, including but not limited to the fund's Chief Compliance Officer (CCO), FMR's internal auditor, the independent accountants, the fund's Treasurer and portfolio management personnel, make periodic reports to the Board's committees, as appropriate, including an annual review of Fidelity's risk management program for the Fidelity® funds. The responsibilities of each standing committee, including their oversight responsibilities, are described further under "Standing Committees of the Trustees."
Interested Trustees*:
Correspondence intended for a Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+
James C. Curvey (1935)
Year of Election or Appointment: 2007
Trustee
Chairman of the Board of Trustees
Mr. Curvey also serves as Trustee of other Fidelity® funds. Mr. Curvey is Vice Chairman (2007-present) and Director of FMR LLC (diversified financial services company). In addition, Mr. Curvey is an Overseer Emeritus for the Boston Symphony Orchestra, a Director of Artis-Naples, and a Trustee of Brewster Academy in Wolfeboro, New Hampshire. Previously, Mr. Curvey served as a Director of Fidelity Research & Analysis Co. (investment adviser firm, 2009-2018), Director of Fidelity Investments Money Management, Inc. (investment adviser firm, 2009-2014) and a Director of FMR and FMR Co., Inc. (investment adviser firms, 2007-2014).
* Determined to be an “Interested Trustee” by virtue of, among other things, his or her affiliation with the trust or various entities under common control with FMR.
+ The information includes the Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to the Trustee's qualifications to serve as a Trustee, which led to the conclusion that the Trustee should serve as a Trustee for the fund.
Independent Trustees:
Correspondence intended for an Independent Trustee may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+
Dennis J. Dirks (1948)
Year of Election or Appointment: 2005
Trustee
Mr. Dirks also serves as Trustee of other Fidelity® funds. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) and President and Board member of the National Securities Clearing Corporation (NSCC). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation, Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation, as a Trustee and a member of the Finance Committee of Manhattan College (2005-2008), as a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-2008), as a member of the Independent Directors Council (IDC) Governing Council (2010-2015), and as a member of the Board of Directors for The Brookville Center for Children’s Services, Inc. (2009-2017). Mr. Dirks is a member of the Finance Committee (2016-present) and Board of Directors (2017-present) and is Treasurer (2018-present) of the Asolo Repertory Theatre.
Donald F. Donahue (1950)
Year of Election or Appointment: 2018
Trustee
Mr. Donahue also serves as a Trustee of other Fidelity® funds. Mr. Donahue is President and Chief Executive Officer of Miranda Partners, LLC (risk consulting for the financial services industry, 2012-present). Previously, Mr. Donahue served as a Member of the Advisory Board of certain Fidelity® funds (2015-2018) and Chief Executive Officer (2006-2012), Chief Operating Officer (2003-2006), and Managing Director, Customer Marketing and Development (1999-2003) of The Depository Trust & Clearing Corporation (financial markets infrastructure). Mr. Donahue serves as a Member (2007-present) and Co-Chairman (2016-present) of the Board of Directors of United Way of New York, Member of the Board of Directors of NYC Leadership Academy (2012-present) and Member of the Board of Advisors of Ripple Labs, Inc. (financial services, 2015-present). He also served as Chairman (2010-2012) and Member of the Board of Directors (2012-2013) of Omgeo, LLC (financial services), Treasurer of United Way of New York (2012-2016), and Member of the Board of Directors of XBRL US (financial services non-profit, 2009-2012) and the International Securities Services Association (2009-2012).
Alan J. Lacy (1953)
Year of Election or Appointment: 2008
Trustee
Mr. Lacy also serves as Trustee of other Fidelity® funds. Mr. Lacy serves as a Director of Bristol-Myers Squibb Company (global pharmaceuticals, 2008-present). He is a Trustee of the California Chapter of The Nature Conservancy (2015-present) and a Director of the Center for Advanced Study in the Behavioral Sciences at Stanford University (2015-present). In addition, Mr. Lacy served as Senior Adviser (2007-2014) of Oak Hill Capital Partners, L.P. (private equity) and also served as Chief Executive Officer (2005) and Vice Chairman (2005-2006) of Sears Holdings Corporation (retail) and Chief Executive Officer and Chairman of the Board of Sears, Roebuck and Co. (retail, 2000-2005). Previously, Mr. Lacy served as Chairman (2014-2017) and a member (2010-2017) of the Board of Directors of Dave & Buster’s Entertainment, Inc. (restaurant and entertainment complexes), as Chairman (2008-2011) and a member (2006-2015) of the Board of Trustees of the National Parks Conservation Association, and as a member of the Board of Directors for The Hillman Companies, Inc. (hardware wholesalers, 2010-2014), Earth Fare, Inc. (retail grocery, 2010-2014), and The Western Union Company (global money transfer, 2006-2011).
Ned C. Lautenbach (1944)
Year of Election or Appointment: 2000
Trustee
Chairman of the Independent Trustees
Mr. Lautenbach also serves as Trustee of other Fidelity® funds. Mr. Lautenbach currently serves as Chair (2018-present) and Member (2013-present) of the Board of Governors, State University System of Florida and is a member of the Council on Foreign Relations (1994-present). He is also a member and has most recently served as Chairman of the Board of Directors of Artis-Naples (2012-present). Previously, Mr. Lautenbach served as a member and then Lead Director of the Board of Directors of Eaton Corporation (diversified industrial, 1997-2016). He was also a Partner and Advisory Partner at Clayton, Dubilier & Rice, LLC (private equity investment, 1998-2010), as well as a Director of Sony Corporation (2006-2007). In addition, Mr. Lautenbach also had a 30-year career with IBM (technology company) during which time he served as Senior Vice President and a member of the Corporate Executive Committee (1968-1998).
Joseph Mauriello (1944)
Year of Election or Appointment: 2008
Trustee
Mr. Mauriello also serves as Trustee of other Fidelity® funds. Prior to his retirement in January 2006, Mr. Mauriello served in numerous senior management positions including Deputy Chairman and Chief Operating Officer (2004-2005), and Vice Chairman of Financial Services (2002-2004) of KPMG LLP US (professional services, 1965-2005). Mr. Mauriello currently serves as a member of the Independent Directors Council (IDC) Governing Council (2015-present). Previously, Mr. Mauriello served as a member of the Board of Directors of XL Group plc. (global insurance and re-insurance, 2006-2018).
Cornelia M. Small (1944)
Year of Election or Appointment: 2005
Trustee
Ms. Small also serves as Trustee of other Fidelity® funds. Ms. Small is a member of the Board of Directors (2009-present) and Chair of the Investment Committee (2010-present) of the Teagle Foundation. Ms. Small also serves on the Investment Committee of the Berkshire Taconic Community Foundation (2008-present). Previously, Ms. Small served as Chairperson (2002-2008) and a member of the Investment Committee and Chairperson (2008-2012) and a member of the Board of Trustees of Smith College. In addition, Ms. Small served as Chief Investment Officer, Director of Global Equity Investments, and a member of the Board of Directors of Scudder, Stevens & Clark and Scudder Kemper Investments.
Garnett A. Smith (1947)
Year of Election or Appointment: 2018
Trustee
Mr. Smith also serves as Trustee of other Fidelity® funds. Prior to Mr. Smith's retirement, he served as Chairman and Chief Executive Officer of Inbrand Corp. (manufacturer of personal absorbent products, 1990-1997). He also served as President (1986-1990) of Inbrand Corp. Prior to his employment with Inbrand Corp., he was employed by a retail fabric chain and North Carolina National Bank. In addition, Mr. Smith served as a Member of the Advisory Board of certain Fidelity® funds (2012-2013) and as a board member of the Jackson Hole Land Trust (2009-2012).
David M. Thomas (1949)
Year of Election or Appointment: 2008
Trustee
Mr. Thomas also serves as Trustee of other Fidelity® funds. Mr. Thomas serves as Non-Executive Chairman of the Board of Directors of Fortune Brands Home and Security (home and security products, 2011-present) and as a member of the Board of Directors (2004-present) and Presiding Director (2013-present) of Interpublic Group of Companies, Inc. (marketing communication). Previously, Mr. Thomas served as Executive Chairman (2005-2006) and Chairman and Chief Executive Officer (2000-2005) of IMS Health, Inc. (pharmaceutical and healthcare information solutions), a Director of Fortune Brands, Inc. (consumer products, 2000-2011), and a member of the Board of Trustees of the University of Florida (2013-2018).
Michael E. Wiley (1950)
Year of Election or Appointment: 2018
Trustee
Mr. Wiley also serves as Trustee or Member of the Advisory Board of other Fidelity® funds. Mr. Wiley serves as a Director of High Point Resources (exploration and production, 2005-present). Previously, Mr. Wiley served as a Director of Andeavor Corporation (independent oil refiner and marketer, 2005-2018), a Director of Andeavor Logistics LP (natural resources logistics, 2015-2018), a Director of Post Oak Bank (privately-held bank, 2004-2018), a Director of Asia Pacific Exploration Consolidated (international oil and gas exploration and production, 2008-2013), a member of the Board of Trustees of the University of Tulsa (2000-2006; 2007-2010), a Senior Energy Advisor of Katzenbach Partners, LLC (consulting, 2006-2007), an Advisory Director of Riverstone Holdings (private investment), a Director of Spinnaker Exploration Company (exploration and production, 2001-2005) and Chairman, President, and CEO of Baker Hughes, Inc. (oilfield services, 2000-2004).
+ The information includes the Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to the Trustee's qualifications to serve as a Trustee, which led to the conclusion that the Trustee should serve as a Trustee for the fund.
Advisory Board Members and Officers:
Correspondence intended for a Member of the Advisory Board (if any) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for an officer or Peter S. Lynch may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210. Officers appear below in alphabetical order.
Name, Year of Birth; Principal Occupation
Vicki L. Fuller (1957)
Year of Election or Appointment: 2018
Member of the Advisory Board
Ms. Fuller also serves as Member of the Advisory Board of other Fidelity® funds. Ms. Fuller serves as a member of the Board of Directors, Audit Committee, and Nominating and Governance Committee of The Williams Companies, Inc. (natural gas infrastructure, 2018-present). Previously, Ms. Fuller served as the Chief Investment Officer of the New York State Common Retirement Fund (2012-2018) and held a variety of positions at AllianceBernstein L.P. (global asset management, 1985-2012), including Managing Director (2006-2012) and Senior Vice President and Senior Portfolio Manager (2001-2006).
Peter S. Lynch (1944)
Year of Election or Appointment: 2003
Member of the Advisory Board
Mr. Lynch also serves as Member of the Advisory Board of other Fidelity® funds. Mr. Lynch is Vice Chairman and a Director of FMR (investment adviser firm) and FMR Co., Inc. (investment adviser firm). In addition, Mr. Lynch serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. Previously, Mr. Lynch served on the Special Olympics International Board of Directors (1997-2006).
Carol B. Tomé (1957)
Year of Election or Appointment: 2018
Member of the Advisory Board
Ms. Tomé also serves as Member of the Advisory Board of other Fidelity® funds. Ms. Tomé is Chief Financial Officer (2001-present) and Executive Vice President of Corporate Services (2007-present) of The Home Depot, Inc. (home improvement retailer) and a Director (2003-present) and Chair of the Audit Committee (2004-present) of United Parcel Service, Inc. (package delivery and supply chain management). Previously, Ms. Tomé served as Trustee of certain Fidelity® funds (2017), Senior Vice President of Finance and Accounting/Treasurer (2000-2007) and Vice President and Treasurer (1995-2000) of The Home Depot, Inc. and Chair of the Board (2010-2012), Vice Chair of the Board (2009 and 2013), and a Director (2008-2013) of the Federal Reserve Bank of Atlanta. Ms. Tomé is also a director or trustee of many community and professional organizations.
Elizabeth Paige Baumann (1968)
Year of Election or Appointment: 2017
Anti-Money Laundering (AML) Officer
Ms. Baumann also serves as AML Officer of other funds. She is Chief AML Officer (2012-present) and Senior Vice President (2014-present) of FMR LLC (diversified financial services company) and is an employee of Fidelity Investments. Previously, Ms. Baumann served as AML Officer of the funds (2012-2016), and Vice President (2007-2014) and Deputy Anti-Money Laundering Officer (2007-2012) of FMR LLC.
Craig S. Brown (1977)
Year of Election or Appointment: 2019
Assistant Treasurer
Mr. Brown also serves as Assistant Treasurer of other funds. Mr. Brown is an employee of Fidelity Investments (2013-present).
John J. Burke III (1964)
Year of Election or Appointment: 2018
Chief Financial Officer
Mr. Burke also serves as Chief Financial Officer of other funds. Mr. Burke serves as Head of Investment Operations for Fidelity Fund and Investment Operations (2018-present) and is an employee of Fidelity Investments (1998-present). Previously Mr. Burke served as head of Asset Management Investment Operations (2012-2018).
William C. Coffey (1969)
Year of Election or Appointment: 2018
Secretary and Chief Legal Officer (CLO)
Mr. Coffey also serves as Secretary and CLO of other funds. Mr. Coffey serves as CLO, Secretary, and Senior Vice President of Fidelity Management & Research Company and FMR Co., Inc. (investment adviser firms, 2018-present); Secretary of Fidelity SelectCo, LLC and Fidelity Investments Money Management, Inc. (investment adviser firms, 2018-present); and CLO of Fidelity Management & Research (Hong Kong) Limited, FMR Investment Management (UK) Limited, and Fidelity Management & Research (Japan) Limited (investment adviser firms, 2018-present). He is Senior Vice President and Deputy General Counsel of FMR LLC (diversified financial services company, 2010-present), and is an employee of Fidelity Investments. Previously, Mr. Coffey served as Assistant Secretary of certain funds (2009-2018) and as Vice President and Associate General Counsel of FMR LLC (2005-2009).
Timothy M. Cohen (1969)
Year of Election or Appointment: 2018
Vice President
Mr. Cohen also serves as Vice President of other funds. Mr. Cohen serves as Executive Vice President of Fidelity SelectCo, LLC (2019-present), Co-Head of Equity (2018-present), a Director of Fidelity Management & Research (Japan) Limited (investment adviser firm, 2016-present), and is an employee of Fidelity Investments. Previously, Mr. Cohen served as Head of Global Equity Research (2016-2018), Chief Investment Officer - Equity and a Director of Fidelity Management & Research (U.K.) Inc. (investment adviser firm, 2013-2015) and as a Director of Fidelity Management & Research (Hong Kong) Limited (investment adviser firm, 2017).
Jonathan Davis (1968)
Year of Election or Appointment: 2010
Assistant Treasurer
Mr. Davis also serves as Assistant Treasurer of other funds. Mr. Davis serves as Assistant Treasurer of FMR Capital, Inc. (2017-present) and is an employee of Fidelity Investments. Previously, Mr. Davis served as Vice President and Associate General Counsel of FMR LLC (diversified financial services company, 2003-2010).
Adrien E. Deberghes (1967)
Year of Election or Appointment: 2016
Assistant Treasurer
Mr. Deberghes also serves as an officer of other funds. He serves as Assistant Treasurer of FMR Capital, Inc. (2017-present), Executive Vice President of Fidelity Investments Money Management, Inc. (FIMM) (investment adviser firm, 2016-present), and is an employee of Fidelity Investments (2008-present). Previously, Mr. Deberghes served as President and Treasurer of certain Fidelity® funds (2013-2018). Prior to joining Fidelity Investments, Mr. Deberghes was Senior Vice President of Mutual Fund Administration at State Street Corporation (2007-2008), Senior Director of Mutual Fund Administration at Investors Bank & Trust (2005-2007), and Director of Finance for Dunkin' Brands (2000-2005). Previously, Mr. Deberghes served in other fund officer roles.
Laura M. Del Prato (1964)
Year of Election or Appointment: 2018
Assistant Treasurer
Ms. Del Prato also serves as an officer of other funds. Ms. Del Prato is an employee of Fidelity Investments (2017-present). Prior to joining Fidelity Investments, Ms. Del Prato served as a Managing Director and Treasurer of the JPMorgan Mutual Funds (2014-2017). Prior to JPMorgan, Ms. Del Prato served as a partner at Cohen Fund Audit Services (accounting firm, 2012-2013) and KPMG LLP (accounting firm, 2004-2012).
Colm A. Hogan (1973)
Year of Election or Appointment: 2016
Deputy Treasurer
Mr. Hogan also serves as an officer of other funds. Mr. Hogan serves as Assistant Treasurer of FMR Capital, Inc. (2017-present) and is an employee of Fidelity Investments (2005-present). Previously, Mr. Hogan served as Assistant Treasurer of certain Fidelity® funds (2016-2018).
Pamela R. Holding (1964)
Year of Election or Appointment: 2018
Vice President
Ms. Holding also serves as Vice President of other funds. Ms. Holding serves as Executive Vice President of Fidelity SelectCo, LLC (2019-present), Co-Head of Equity (2018-present) and is an employee of Fidelity Investments (2013-present). Previously, Ms. Holding served as Chief Investment Officer of Fidelity Institutional Asset Management (2013-2018).
Chris Maher (1972)
Year of Election or Appointment: 2013
Assistant Treasurer
Mr. Maher serves as Assistant Treasurer of other funds. Mr. Maher is Vice President of Valuation Oversight, serves as Assistant Treasurer of FMR Capital, Inc. (2017-present), and is an employee of Fidelity Investments. Previously, Mr. Maher served as Vice President of Asset Management Compliance (2013), Vice President of the Program Management Group of FMR (investment adviser firm, 2010-2013), and Vice President of Valuation Oversight (2008-2010).
Kenneth B. Robins (1969)
Year of Election or Appointment: 2016
Chief Compliance Officer
Mr. Robins also serves as an officer of other funds. Mr. Robins serves as Compliance Officer of Fidelity Management & Research Company and FMR Co., Inc. (investment adviser firms, 2016-present) and is an employee of Fidelity Investments (2004-present). Previously, Mr. Robins served as Executive Vice President of Fidelity Investments Money Management, Inc. (investment adviser firm, 2013-2016) and served in other fund officer roles.
Stacie M. Smith (1974)
Year of Election or Appointment: 2016
President and Treasurer
Ms. Smith also serves as an officer of other funds. Ms. Smith serves as Assistant Treasurer of FMR Capital, Inc. (2017-present), is an employee of Fidelity Investments (2009-present), and has served in other fund officer roles. Prior to joining Fidelity Investments, Ms. Smith served as Senior Audit Manager of Ernst & Young LLP (accounting firm, 1996-2009). Previously, Ms. Smith served as Assistant Treasurer (2013-2018) and Deputy Treasurer (2013-2016) of certain Fidelity® funds.
Marc L. Spector (1972)
Year of Election or Appointment: 2016
Assistant Treasurer
Mr. Spector also serves as an officer of other funds. Mr. Spector serves as Assistant Treasurer of FMR Capital, Inc. (2017-present) and is an employee of Fidelity Investments (2016-present). Prior to joining Fidelity Investments, Mr. Spector served as Director at the Siegfried Group (accounting firm, 2013-2016), and prior to Siegfried Group as audit senior manager at Deloitte & Touche (accounting firm, 2005-2013).
Jim Wegmann (1979)
Year of Election or Appointment: 2019
Assistant Treasurer
Mr. Wegmann also serves as Assistant Treasurer of other funds. Mr. Wegmann is an employee of Fidelity Investments (2011-present).
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2018 to March 31, 2019).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
October 1, 2018 | Ending
Account Value
March 31, 2019 | Expenses Paid
During Period-B
October 1, 2018
to March 31, 2019 |
| Magellan | .63% | | | |
| Actual | | $1,000.00 | $949.70 | $3.06 |
| Hypothetical-C | | $1,000.00 | $1,021.79 | $3.18 |
| Class K | .54% | | | |
| Actual | | $1,000.00 | $951.10 | $2.63 |
| Hypothetical-C | | $1,000.00 | $1,022.24 | $2.72 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
C 5% return per year before expenses
Distributions (Unaudited)
The Board of Trustees of Fidelity Magellan Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:
| | Pay Date | Record Date | Dividends | Capital Gains |
| Fidelity Magellan Fund | | | | |
| Magellan | 05/13/19 | 05/10/19 | $0.016 | $0.097 |
| Class K | 05/13/19 | 05/10/19 | $0.018 | $0.097 |
|
The fund hereby designates as a capital gain dividend with respect to the taxable year ended March 31, 2019, $ 851,166,870, or, if subsequently determined to be different, the net capital gain of such year.
Magellan designates 42%, and 100%; Class K designates 40%, and 100%; of the dividends distributed in May and December, respectively during the fiscal year as qualifying for the dividends–received deduction for corporate shareholders.
Magellan designates 48%, and 100%; Class K designates 46%, and 100%; of the dividends distributed in May and December, respectively during the fiscal year as amounts which may be taken into account as a dividend for purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
The fund will notify shareholders in January 2020 of amounts for use in preparing 2019 income tax returns.
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Magellan Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
At its January 2019 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and would be realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) reducing management fees and total expenses for certain growth equity funds and index funds; (vii) lowering expense caps for certain existing funds and classes, and converting certain voluntary expense caps to contractual caps, to reduce expenses borne by shareholders; (viii) eliminating short-term redemption fees for funds that had such fees; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income
goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index ("benchmark index") and a peer group of funds with similar objectives ("peer group"), if any. In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, and compared to peer groups, as applicable, over the same periods, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index and peer group for the most recent one-, three-, and five-year periods ended June 30, 2018, as shown below. Returns are shown compared to the 25th percentile (top of box, 75% beaten) and 75th percentile (bottom of box, 25% beaten) of the peer universe.
Fidelity Magellan Fund
The Board also considered that the fund's management fee is subject to upward or downward adjustment depending upon whether, and to what extent, the fund's investment performance for the performance period (a rolling 36-month period) exceeds, or is exceeded by, a securities index, thus leading to a performance adjustment for the same period. The Board noted that the performance adjustment provides FMR with a strong economic incentive to seek to achieve superior long-term performance for the fund's shareholders and helps to more closely align the interests of FMR and the shareholders of the fund.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods (ended June 30 for 2018 and December 31 for prior periods) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps, and without giving effect to the fund's performance adjustment, relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure without taking into account performance adjustments, if any. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked and the impact of the fund's performance adjustment, is also included in the chart and was considered by the Board.
Fidelity Magellan Fund
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended June 30, 2018. The Board also noted the effect of the fund's performance adjustment, if any, on the fund's management fee ranking.
The Board noted that it and the boards of other Fidelity funds formed an ad hoc Committee on Group Fee, which meets periodically, to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
The Board also noted that, in 2013, the ad hoc Committee on Management Fees was formed to conduct an in-depth review of the management fee rates of Fidelity's active equity mutual funds. The Committee focused on the following areas: (i) standard fee structures; (ii) research consumption and trading evolution; (iii) management fee competitiveness/profitability by category; and (iv) factors that drive institutional pricing.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board noted the impact of the fund's performance adjustment. The Board also noted that Fidelity may agree to waive fees and expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expense ratio of each class ranked below the competitive median for the 12-month period ended June 30, 2018.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of the fund profitability information and its conformity to established allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the fund's business. The Board noted that changes to fall-out benefits year-over-year reflect business developments at Fidelity's various businesses.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total group assets increase, and for higher group fee rates as total group assets decrease (with "group assets" defined to include fund assets under FMR's management plus the assets of sector funds previously under FMR's management). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as group assets increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund performance trends, in particular the underperformance of certain funds, and Fidelity's long-term strategies for certain funds; (ii) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (iii) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (iv) the methodology with respect to the evaluation of competitive fund data and peer group classifications and fee comparisons; (v) the expense structures for different funds and classes; (vi) information regarding other accounts managed by Fidelity, including collective investment trusts; and (vii) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
MAG-ANN-0519
1.702307.121
