Fidelity Strategic Dividend & Income Fund

[Pages:10]PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2022

Fidelity? Strategic Dividend & Income? Fund

Key Takeaways

? For the semiannual reporting period ending May 31, 2022, the fund's

Retail Class shares returned -1.80%, outperforming the -2.75% result of the Fidelity Strategic Dividend & Income Composite IndexSM.

? Despite the difficult market environment, Co-Lead Portfolio Managers

Adam Kramer and Ford O'Neil were nevertheless pleased with the fund's outperformance of the Composite index the past six months, especially the strong impact of asset class positioning, their primary means of driving the fund's relative result.

? Versus the Composite index, the fund's out-of-index allocation to

master limited partnerships, which benefited from the tailwind of higher energy prices and a robust income stream, contributed. Positioning among convertible securities and an average underweight in preferred stocks also helped.

? In contrast, notable key relative detractors the past six months

included security selection in the fund's large-cap, dividend-paying equity subportfolio, as well as picks among real estate investment trusts (REITs), especially in the industrial/office and self-storage categories.

? As the period progressed, Adam and Ford made several notable

positioning changes, highlighted by an increase in preferred stocks and a reduction in the portfolio's exposure to convertible securities.

? As of May 31, Adam and Ford anticipated the market environment

would likely remain volatile for some time, making it prudent to reduce investment risk and gradually move the portfolio to a more neutral stance over time.

? They also pledged to continue to monitor shifts in inflation trends and

monetary policy, and that they would not hesitate to make changes to the portfolio as they saw warranted amid an evolving investment landscape.

Not FDIC Insured ? May Lose Value ? No Bank Guarantee

MARKET RECAP

For the six months ending May 31, 2022, U.S. large-cap stocks retreated to begin the new year amid several notable headwinds that stoked market volatility and investor uncertainty. Chief among these was the U.S. Federal Reserve's accelerated plan to hike interest rates and aggressively wind down its balance sheet to rein in historically high inflation. In addition, geopolitical unrest rose as Russia invaded Ukraine in late February and escalated its attack through period end. Against this backdrop, the Fidelity Strategic Dividend & Income Composite Index returned -2.75%. In this generally challenging environment, U.S. dividendpaying large-cap value stocks made up the only positive-performing component within the index. The category, as measured by the MSCI USA High Dividend Yield Index, gained 4.51%, as value-oriented, income-paying stocks significantly outperformed their growth counterparts. Elsewhere, real estate investment trusts (REITs), indicated by the FTSE NAREIT Equity REITs Index, returned -6.20%. Alongside higher interest rates, many segments of the REIT market lost ground this period, with hotels (+13%) and health care (+7%) being the notable exceptions. Meanwhile, convertible securities returned -14.90%, according to the ICE BofA? All U.S. Convertibles Index. Preferred stocks, as measured by the ICE BofA Fixed Rate Preferred Securities Index, returned -8.53%, as this interestrate-sensitive asset class struggled amid rising rates.

PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2022

Q&A

Adam Kramer Co-Lead Manager

Fund Facts

Trading Symbol: Start Date: Size (in millions):

Ford O'Neil Co-Lead Manager

FSDIX December 23, 2003 $5,617.86

Investment Approach

? Fidelity? Strategic Dividend & Income? Fund is a multiasset-class strategy that seeks to provide reasonable income, and potentially also capital appreciation, by investing in a diversified mix of dividend-oriented equity and hybrid securities.

? The fund's assets are allocated among high dividendyielding stocks, preferred stocks, real estate investment trusts (REITs) and convertible securities, using a target weighting of 50%, 20%, 15% and 15%, respectively. This strategic allocation attempts to take advantage of the low correlation among these equity/hybrid classes with a goal of optimizing total returns while containing volatility over time.

? Specialized subportfolio managers are responsible for security selection in their respective areas of expertise and represent the primary source of alpha (risk-adjusted excess return), while the lead portfolio managers have the flexibility to make tactical allocation shifts around the target mix to help manage risk and capitalize on relativevalue opportunities.

An interview with Co-Lead Managers Adam Kramer and Ford O'Neil

Q: Ford, how did the fund perform for the six months ending May 31, 2022

F.O. We're disappointed anytime the fund loses value, as it did in this highly challenging market environment. That said, we were happy the fund outperformed the Composite index for the six months. We were especially pleased that asset class positioning contributed to the fund's positive relative showing, given that this is the primary means Adam and I, as the fund's co-lead portfolio managers, have available to drive the fund's result.

For the past six months, the fund's Retail Class shares returned -1.80%, outpacing the -2.75% result of the Fidelity Strategic Dividend & Income Composite IndexSM. The fund significantly outperformed the peer group average.

Taking a slightly longer-term view, the fund gained 0.25% for the trailing 12 months, topping both the Composite index and peer group average.

Q: What influenced performance most versus the Composite index the past six months

F.O. The biggest boost to the fund's relative performance came from a small non-Composite stake in master limited partnerships (MLPs). These investments, which primarily consist of energy transportation companies, fared particularly well this period due to the tailwind of higher energy prices and a robust income stream in a volatile market environment. Security selection in this category added further value, as the subportfolio benefited from additional exposure to energy producers. The fund's MLP subportfolio gained about 48% this period, besting the category benchmark, the Alerian MLP Index, by 16 percentage points.

Positioning among convertible securities also helped. On average, the fund was underweighted in this asset class, the weakest-performing group in the Composite index this period. Security selection here also proved beneficial, as the subportfolio outperformed its category benchmark, the ICE BofA? All US Convertibles Index, by 3 percentage points, largely due to an overweight in the strong-performing energy sector.

Also bolstering performance was our average underweight in preferred stocks. Given that the category, as measured by the ICE BofA? Fixed Rate Preferred Securities Index, trailed

2 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2022

the Composite index by 5.78 percentage points, our lower exposure here lifted the fund's relative return.

Q: What factors detracted most, Adam

A.K. Security selection in the fund's large-cap, dividendpaying equity subportfolio had the most detrimental effect on relative performance, as this subportfolio modestly lagged its category benchmark, the MSCI USA High Dividend Index. More specifically, the subportfolio manager's picks in the consumer staples and industrials sectors detracted, even as outsized exposure to the market-leading energy sector helped.

Further pressuring the fund's relative performance this period was security selection among real estate investment trusts (REITs). Here, picks in the industrial/office and selfstorage categories disproportionately hindered the subportfolio's result, despite positive investment choices in the retail and health care groups.

Q: Did you and Ford make any notable portfolio shifts this period

A.K. First, let me remind shareholders that the portfolio is designed to be a vehicle for income, along with providing the potential for capital appreciation. As the fund's co-lead portfolio managers, Ford and I allocate its assets across several dividend- and income-paying categories. Based on Fidelity's research, we've established a target (neutral) mix of 50% dividend-paying common equities, 20% preferred stocks, 15% convertible securities and 15% REITs. As the fund's neutral positioning, this is the combination of asset classes and weightings that, over time, we believe should provide the most favorable risk/reward. Our approach to managing the fund is always highly tactical, meaning we make shifts to the fund's asset mix based on where we see opportunities in the marketplace at any given time.

This period, our biggest shift involved increasing the fund's allocation to preferred stocks while reducing exposure to convertible securities. When the period began last December, the fund was significantly underweighted in preferreds. In recent months, however, we opted to move to a neutral weighting in this asset class. At period end, the fund's allocation here was 19%, slightly below our 20% target. Market movement and time lags between portfolio rebalancing can cause target and actual weights to differ. In the callout portion of this review, I'll more fully describe the growing opportunity we see in preferreds.

Proceeds for this uptick in exposure to preferreds came primarily from the sale of convertibles, whose risk/reward potential we believed had become considerably less attractive over time. I'll point out that this represented a shift in our thinking, as the fund had a roughly Composite-neutral allocation to convertibles as late as March. However, once

the Federal Reserve dramatically shifted its interest rate policy to combat inflation, we believed the near-term outlook for convertibles had deteriorated. By period end, we maintained a roughly 2.25 percentage-point target underweight in the asset class.

F.O. Another notable change involved our allocation to REITs. We began the six-month period with a 1.75 percentage-point overweight in this asset class but were neutrally positioned as of May 31. As the period progressed, we, in conversation with the subportfolio's manager, began to see less opportunity in REITs due to weakening fundamentals in certain segments of the market. Because we still saw the opportunity for attractive dividend growth, however, we wanted to maintain a neutral allocation as we gain more clarity about REIT-market conditions.

We also maintained a modest but consistent non-Composite stake in MLPs. Even as we still saw good potential here, we wanted to limit our exposure to the category because of its elevated valuation and volatility levels. As the portfolio's MLP stake grew due to market appreciation, we trimmed our exposure and reinvested the proceeds into infrastructure investments, a new non-Composite equity asset class. We were attracted to these securities for their potential to broaden the fund's dividend-paying stock exposure and help manage risk in an increasingly volatile market environment.

Of final note, we maintained the fund's modest 0.5 percentage point target overweighting in large-cap dividend equities, reflecting our view that the equity market, despite what we see as its limited opportunity, offered better potential than certain other asset classes within the fund's investment universe, namely convertibles and REITs. During the period, the fund's stake in equities drifted up from 50.5% to 51.7%, representing a slight overweight relative to the Composite index.

Q: Any closing thoughts as of May 31, Ford

F.O. With the Fed aggressively hiking interest rates to seek to rein in inflation, it seems clear we've moved from the middle phase of the economic cycle, where we started this period, to the late phase. As we progress along this path, and because the market environment is likely to remain volatile and uncertain for some time, we think it makes sense to reduce risk in the portfolio. Therefore, with a few notable exceptions, we've moved the fund's exposures closer to a neutral stance over time.

We will continue to monitor shifts in inflation trends and monetary policy, and we will not hesitate to make changes to the portfolio, as warranted, amid this evolving investment landscape.

3 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2022

Co-Lead Manager Adam Kramer on opportunity he sees in preferreds:

"The past six months, the highly interest-ratesensitive preferred stock asset class struggled amid rising rates, with the category benchmark returning roughly -9%. "We began the reporting period meaningfully underweighted in this asset class but by period end had shifted to a neutral allocation. This stance reflects our view that the group had become far more attractive from a risk/reward standpoint. "Based on our analysis, we determined that preferreds were generally trading at wider spreads than investment-grade bonds of the same company. In other words, the preferreds appeared to be pricing in more credit and recessionary risk, even as investors seemed to be ignoring the benefits of their floating-rate structure and opportunities to be called. "The sell-off in preferreds accelerated this period, and we think we're moving into the later stages of the current down cycle in the preferred market. We believe this has created an attractive opportunity for investors willing to look past current interest rate fears. "In our view, preferreds may already reflect the downside of higher interest rates and may stop going down sooner rather than later. In the meantime, if we don't actually see all the bad news that investors are anticipating ? that is, if the Fed doesn't raise rates as much as investors expect ? then we believe preferreds offer opportunity via their high coupons and opportunity for capital appreciation."

4 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2022

SUBPORTFOLIO COMPOSITION

Asset Class

Portfolio Weight Strategic Allocation Relative Weight

Relative Change From Six Months

Ago

Dividend-Paying Equities

51.67%

50.00%

1.67%

1.15%

Domestic Equities

45.07%

--

--

--

International Equities

5.52%

--

--

--

REITs

0.44%

--

--

--

Cash & Net Other Assets

0.63%

--

--

--

Preferred Stock

18.97%

20.00%

-1.03%

1.62%

Preferred Stock/Convertible Preferred

7.35%

--

--

--

Corporate Bonds

10.97%

--

--

--

Cash & Net Other Assets

0.64%

--

--

--

Convertibles

12.91%

15.00%

-2.09%

-1.09%

Convertibles

11.23%

--

--

--

Domestic Equities

0.66%

--

--

--

International Equities

0.49%

--

--

--

Corporate Bonds

0.22%

--

--

--

Cash & Net Other Assets

0.30%

--

--

--

REITs

14.61%

15.00%

-0.39%

-2.30%

REITs & Related Investments

14.53%

--

--

--

Cash & Net Other Assets

0.08%

--

--

--

MLPs

1.52%

--

1.52%

0.19%

MLPs & Related Investments

1.50%

--

--

--

Cash & Net Other Assets

0.02%

--

--

--

Top Level Fund

0.32%

--

0.32%

0.44%

Top-Level Cash & Net Other Assets

0.32%

--

--

--

Net Other Assets can include fund receivables, fund payables, and offsets to other derivative positions, as well as certain assets that do not fall into any of the portfolio composition categories. Depending on the extent to which the fund invests in derivatives and the number of positions that are held for future settlement, Net Other Assets can be a negative number.

5 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2022

MARKET-SEGMENT DIVERSIFICATION

Market Segment Real Estate Health Care Financials Consumer Staples Information Technology Industrials Communication Services Utilities Energy Consumer Discretionary Materials Other

Portfolio Portfolio Weight Weight Six Months Ago

15.46%

17.65%

13.52%

11.54%

11.64%

11.83%

9.77%

7.99%

8.46%

9.10%

6.42%

6.94%

5.63%

5.36%

5.47%

4.71%

4.95%

3.50%

3.69%

4.94%

1.85%

1.74%

0.00%

0.00%

6 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2022

10 LARGEST HOLDINGS

Holding

Market Segment

Portfolio Weight

Portfolio Weight Six Months Ago

Procter & Gamble Co.

Consumer Staples

2.50%

2.48%

The Coca-Cola Co.

Consumer Staples

2.18%

1.76%

Eli Lilly & Co.

Health Care

1.90%

1.47%

AbbVie, Inc.

Health Care

1.74%

1.39%

Bristol-Myers Squibb Co.

Health Care

1.60%

1.08%

Merck & Co., Inc.

Health Care

1.43%

1.13%

PepsiCo, Inc.

Consumer Staples

1.42%

1.32%

Amgen, Inc.

Health Care

1.41%

1.07%

Cisco Systems, Inc.

Information Technology

1.40%

1.66%

Comcast Corp. Class A

Communication Services

1.35%

1.34%

10 Largest Holdings as a % of Net Assets

16.92%

16.42%

Total Number of Holdings

781

740

The 10 largest holdings are as of the end of the reporting period, and may not be representative of the fund's current or future investments. Holdings do not include money market investments.

FISCAL PERFORMANCE SUMMARY: Periods ending May 31, 2022

Cumulative

6 Month

YTD

1 Year

Annualized

3 Year

5 Year

10 Year/ LOF1

Fidelity Strategic Dividend & Income Fund Gross Expense Ratio: 0.68%2

-1.80%

-7.00%

0.25%

11.26%

8.95%

10.17%

S&P 500 Index

-8.85%

-12.76%

-0.30%

16.44%

13.38%

14.40%

Fidelity Strategic Dividend & Income Composite Index

-2.75%

-7.83%

-0.70%

9.63%

8.52%

10.41%

Morningstar Fund Allocation--70% to 85% Equity

-7.14%

-10.35%

-5.36%

9.26%

7.16%

8.56%

% Rank in Morningstar Category (1% = Best)

--

--

9%

13%

11%

6%

# of Funds in Morningstar Category

--

--

332

304

280

220

1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/23/2003. 2 This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year, or estimated amounts for the current fiscal year in the case of a newly launched fund. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio.

Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit performance, institutional., or . Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. Please see the last page(s) of this Q&A document for most-recent calendarquarter performance.

7 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF MAY 31, 2022

Definitions and Important Information

Information provided in this document is for informational and educational purposes only. To the extent any investment information in this material is deemed to be a recommendation, it is not meant to be impartial investment advice or advice in a fiduciary capacity and is not intended to be used as a primary basis for you or your client's investment decisions. Fidelity, and its representatives may have a conflict of interest in the products or services mentioned in this material because they have a financial interest in, and receive compensation, directly or indirectly, in connection with the management, distribution and/or servicing of these products or services including Fidelity funds, certain third-party funds and products, and certain investment services.

FUND RISKS Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Fixed income investments entail interest rate risk (as interest rates rise bond prices usually fall), the risk of issuer default, issuer credit risk and inflation risk. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry. Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. Value stocks can perform differently than other types of stocks and can continue to be undervalued by the market for long periods of time.

IMPORTANT FUND INFORMATION Relative positioning data presented in this commentary is based on the fund's primary benchmark (index) unless a secondary benchmark is provided to assess performance.

INDICES It is not possible to invest directly in an index. All indices represented are unmanaged. All indices include reinvestment of dividends and interest income unless otherwise noted.

Fidelity Strategic Dividend & Income Composite Index is a customized blend of unmanaged indices, weighted as follows: MSCI USA High Dividend Yield - 50%; ICE BofA Fixed Rate Preferred Index- 20%; FTSE NAREIT Equity REITs - 15% and ICE BofA U.S. Convertibles Index - 15%. The composition differed in periods prior to December 18, 2010.

S&P 500 is a market-capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Alerian MLP Index is an industry gauge of energy Master Limited Partnerships (MLPs). The float-adjusted, capitalizationweighted index, whose 50 constituents represent approximately 75% of total market capitalization, is disseminated real-time on a price-return basis (AMZ) and on a total-return basis (AMZX).

FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs. Constituents of the index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

ICE BofA Fixed Rate Preferred Securities Index is designed to replicate the total return of a diversified group of investment-grade preferred securities.

ICE BofA All US Convertibles Index consists of convertible bonds traded in the U.S. dollar denominated investment grade and noninvestment grade convertible securities sold into the U.S. market and publicly traded in the United States. The Index constituents are market value weighted based on the convertible securities prices and outstanding shares, and the underlying index is rebalanced daily.

MSCI USA High Dividend Yield Index is based on the MSCI USA Index, its parent index, and includes large and mid-cap stocks. The index is designed to reflect the performance of equities in the parent index (excluding REITs) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent.

MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. They should not be construed or used as a recommendation for any sector or industry.

RANKING INFORMATION ? 2022 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for the most up-to-date information concerning applicable loads, fees and expenses.

% Rank in Morningstar Category is the fund's total-return percentile rank relative to all funds that have the same Morningstar Category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The topperforming fund in a category will always receive a rank of 1%. % Rank in Morningstar Category is based on total returns which include reinvested dividends and capital gains, if any, and exclude sales charges. Multiple share classes of a fund have a common portfolio but impose different expense structures.

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