Fidelity Mid Cap Enhanced Index Fund Key Takeaways The fund gained 1.72% for the six months ending August 31, 2017 the period since our previous annual report lagging the 3.24% increase in the benchmark Russell Midcap Index. The fund was hampered by its elevated exposure to low-valuation companies and corresponding underweighting in growth- and momentum-oriented investments, as growth stocks significantly outperformed value stocks this period. Stock picking in the consumer discretionary sector hurt relative to the Russell benchmark, with several struggling brick-and-mortar retailers finishing among the fund's biggest detractors. The fund benefited from its positioning in the energy sector, with a combination of modestly favorable stock picking and a helpful underweighting resulting from our bottom-up security-selection approach adding value. Senior Manager Max Kaufmann and his team continued to employ an investment model designed with the goal of identifying companies with strong fundamental characteristics they believe may be correlated with long-term outperformance. The team's data-driven approach is intended to help reduce emotional biases and generate a more objective investment decision-making process. FISCAL PERFORMANCE SUMMARY: Periods ending August 31, 2017 6 Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Mid Cap Enhanced Index Fund Gross Expense Ratio: 0.59% 2 1.72% 6.47% 12.70% 6.84% 14.30% 8.54% Russell MidCap Index 3.24% 8.73% 12.44% 7.32% 14.11% 8.50% Morningstar Fund Mid-Cap Blend 1.70% 6.10% 11.91% 5.27% 12.51% -- % Rank in Morningstar Category (1% = Best) -- -- 37% 37% 14% -- # of Funds in Morningstar Category -- -- 429 358 321 -- 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/20/2007. 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. 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 fidelity.com/performance, institutional.fidelity.com, or 401k.com. 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. For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.
Not FDIC Insured May Lose Value No Bank Guarantee
Q&A Fund Facts Trading Symbol: Maximilian Kaufmann Manager FMEIX Start Date: December 20, 2007 Size (in millions): $1,184.11 Investment Approach Fidelity Mid Cap Enhanced Index Fund is a diversified domestic equity strategy with a mid-cap core orientation. The fund seeks to outperform its benchmark through a quantitative investment process that balances both risk and return. Our approach involves building multifactor statistical models to help us select companies with desirable fundamental characteristics. We generally favor companies with improving fundamentals and that are also trading at reasonable valuations. Our systematic investment process accounts for both topdown market indicators and bottom-up fundamental insights, using a dynamic factor allocation that allows the fund to adapt to changing market conditions in a riskaware manner. An interview with Maximilian Kaufmann, Senior Manager of the Geode Capital Management, LLC, investment management team Q: Max, how did the fund perform for the sixmonth review period ending August 31, 2017 The fund gained 1.72%, trailing the 3.24% return of the benchmark Russell Midcap Index. The fund edged the peer group average during the same time frame. During the period, mid- and small-cap stocks each lagged the S&P 500, a proxy for the overall U.S. large-cap market, by a few percentage points. Meanwhile, large-cap growth stocks, as measured by the Russell 1000 Growth Index, significantly outpaced their large-cap value counterparts, as measured by the Russell 1000 Value Index, with a narrow slice of large-cap technology companies increasingly responsible for growth stocks' significant outperformance. Looking out a bit further, the fund was up 12.70% for the 12 months ending August 31, 2017 slightly better than the 12.44% gain in the Russell Midcap Index and meaningfully outpacing the peer group average. Q: What factors influenced the fund's results for the past six months After the U.S. presidential election last November, the prospects of lower corporate taxes and deregulation raised investors' expectation for economic growth dynamics that, as we approached the reporting period, had been benefiting cheaply valued companies. Beginning in 2017, however, and continuing through period end, political gridlock in Washington dampened investors' optimism, leading to a reversal in the performance of cheap stocks. Unfortunately for the fund, our relatively high exposure to lower-valuation stocks within the mid-cap universe hurt. At the same time, growth and momentum were desirable characteristics the past six months, but our generally low exposure to these factors muted the positive impact on the fund. Such positioning was, as always, the product of our 3 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.
quantitative approach to investing. This involves building systems that select investments with a variety of desirable fundamental traits that our research has shown to be correlated with potential long-term outperformance. Ultimately, we're seeking to identify good businesses with durable competitive advantages and with stocks that are selling at what we consider reasonable prices. To accomplish this objective, my team and I use computeraided analytical models to help us examine and rank individual securities. With these models, we build a portfolio that seeks to outperform the benchmark. These rankings generally are based on factors such as valuations, earnings growth and technical indicators. In general, we seek to establish a risk profile for the portfolio similar to that of the index. Our models are designed to provide a framework in which we may decide to overweight securities that our quantitative process shows have more exposure to the fundamental factors we believe can lead to outperformance, and underweight those that have little to no exposure to such characteristics. In addition, we consider the fund's security, industry and market-capitalization weightings relative to the benchmark. We generally invest at least 80% of the fund's assets in common stocks included in the benchmark, but maintain the ability to invest in non-index securities if our models identify attractive opportunities elsewhere. Q: Why do you favor a data-driven approach One important reason is our view that financial markets are less than 100% efficient, primarily due to investors' behavioral tendencies. In an effort to reduce the influence of human emotion and potentially eliminate some common investing biases that affect both institutional and individual investors we apply a systematic investment process grounded in traditional fundamental security analysis to make the process more objective. Q: What decisions influenced results relative to the Russell benchmark Stock picking in the consumer discretionary sector proved the biggest drag on relative performance this period, with exposure to several brick-and-mortar retailers hurting most. An increasingly competitive business environment weighed on footwear retailer Foot Locker, home products retailer Bed Bath & Beyond and department store chain Macy's all of which our models favored for the companies' extremely low valuations. Those valuations went even lower during the period, however, and, at the recommendation of our models, we added to our position in all three stocks. The fund was well-positioned in the energy sector. Modestly favorable stock picking here added value, along with an underweighting in this lagging category, which was a byproduct of our bottom-up process. That said, because persistently sluggish oil prices hindered the financial results of many energy stocks this period, our relative overweighting in exploration and production company Southwestern Energy detracted from the fund's performance. Our top individual contributor was NVIDIA, a graphicsprocessing company that produced strong earnings and revenue. As the period progressed, our models continued to like certain aspects of NVIDIA's business but found the company's stock less attractively valued over time. We ultimately sold the fund's stake in late June. Also contributing was Pilgrim's Pride; our investment in the chicken producer was up about 44%. For much of the period, our models found the stock attractively valued albeit somewhat less so over time while also noting its improving price momentum. Note to shareholders: During 2018, Fidelity's Large-Cap, Mid-Cap and International Enhanced Index Funds will begin investing all or substantially all of their assets in a "master portfolio." The master portfolio will be an affiliated mutual fund with an investment objective and investment strategies substantially the same as the existing enhanced index mutual funds. This is commonly referred to as a master-feeder structure. In this structure, a fund does not invest in securities directly and instead invests in a master portfolio that, in turn, invests directly in securities. Fidelity will file preliminary registration statements for five multifactor, enhanced index exchange-traded funds (ETFs) with the Securities and Exchange Commission (SEC) that, if approved, also will invest in the master portfolio. In order to facilitate the conversion of the Large-Cap, Mid- Cap and International Enhanced Index Funds to a masterfeeder structure, the following changes were made: the fiscal year-end of each fund changed to August 31 from February 28; and each fund is now allowed to pay dividends quarterly instead of semiannually, and capital gains once a year instead of twice. In addition, pursuant with the conversion, the funds will disclose the full holdings of the underlying master portfolios daily with no lag, rather than the current monthly disclosure with a 30-day lag. 4 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.
LARGEST CONTRIBUTORS VS. BENCHMARK 10 LARGEST HOLDINGS Holding NVIDIA Corp. Market Segment Average Relative Relative Contribution (basis points)* 0.33% 23 Pilgrim's Pride Corp. Staples 0.50% 18 Lam Research Corp. PVH Corp. Electronic Arts, Inc. * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Foot Locker, Inc. Discovery Communications, Inc. Class A Bed Bath & Beyond, Inc. Macy's, Inc. Southwestern Energy Co. * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Market Segment 0.53% 18 0.49% 14 0.42% 13 Average Relative Relative Contribution (basis points)* 0.41% -30 0.91% -27 0.47% -19 0.45% -18 Energy 0.45% -16 Six Months Ago Domestic Equities 98.53% 99.87% International Equities 1.45% 0.09% Developed Markets 0.43% 0.09% Emerging Markets 1.02% 0.00% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.00% 0.00% Cash & Net Other Assets 0.02% 0.04% 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. Holding Market Segment Six Months Ago Prologis, Inc. Real Estate 1.05% 0.17% Lam Research Corp. Delphi Automotive PLC 0.95% 0.79% 0.94% 0.53% PPL Corp. Utilities 0.94% 0.89% Synchrony Financial Financials 0.92% 0.94% Western Digital Corp. 0.91% 0.24% Cummins, Inc. Industrials 0.91% 0.85% Weyerhaeuser Co. Real Estate 0.87% 0.88% Agilent Technologies, Inc. Health Care 0.86% 0.68% T. Rowe Price Group, Inc. Financials 0.84% 0.76% 10 Largest Holdings as a % of Net Assets 9.19% 9.11% Total Number of Holdings 278 306 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. MARKET-SEGMENT DIVERSIFICATION Market Segment Six Months Ago 17.39% 16.82% 15.83% 16.48% Financials 13.41% 11.62% Industrials 12.73% 12.36% Health Care 12.04% 10.51% Real Estate 8.11% 7.95% Staples 5.79% 6.37% Materials 5.24% 6.23% Utilities 5.16% 4.77% Energy 3.23% 4.94% Multi Sector 0.91% 1.10% Telecommunication Services 0.14% 0.81% Other 0.00% 0.00% "Tax-Advantaged Domiciles" represent countries whose tax policies may be favorable for company incorporation. 5 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.
Definitions and Important Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, act as an impartial adviser, or to give advice in a fiduciary capacity. FUND RISKS Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The securities of smaller, less well-known companies can be more volatile than those of larger companies. Although the fund seeks to beat the index, this is not guaranteed and the fund may trail the index. 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. 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 top-performing 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. RELATIVE WEIGHTS Relative weights represents the % of fund assets in a particular market segment, asset class or credit quality relative to the benchmark. A positive number represents an overweight, and a negative number is an underweight. The fund's benchmark is listed immediately under the fund name in the Performance Summary. 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. Russell Midcap Index is a market-capitalization-weighted index designed to measure the performance of the mid-cap segment of the U.S. equity market. It contains approximately 800 of the smallest securities iin the Russell 1000 Index. Russell 1000 Growth Index is a market-capitalization-weighted index designed to measure the performance of the large- cap growth segment of the U.S. equity market. It includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth rates. Russell 1000 Value Index is a market-capitalization-weightedindex designed to measure the performance of the large-cap value segment of the U.S. equity market. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth rates. 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. Should not be construed or used as a recommendation for any sector or industry. RANKING INFORMATION 2017 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 6
Manager Facts Maximilian Kaufmann is a senior portfolio manager on the equity portfolio team at Geode Capital Management. In this role Max is responsible for the management of the Quantitative Active Equity strategies, as well as portfolio construction, optimization, and continuous development of Geode's Quantitative Active Equity capabilities. He is the lead manager of the Fidelity Enhanced Index Funds, which Geode has sub-advised since 2007. Prior to joining Geode in 2009, Max worked as a portfolio manager of Active Quantitative Equities at Lazard Asset Management, LLC where he was responsible for developing the firm's quantitative long/short and long-only equity capabilities. In this role, he oversaw the investment process including analysis, trading and obtaining new investment mandates in active quantitative equity strategies. Prior to that, Max worked as lead portfolio manager of the Global Equity team at PanAgora Asset Management, Inc., where he was responsible for global equity research and investment process. Preceding that, he was a quantitative research analyst at Putnam Investments and CitiGroup Asset Management. Max earned his bachelor of science degree in economics from State University of New York at Binghamton and his master of arts degree in statistics from Columbia University. 7 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.
PERFORMANCE SUMMARY: Quarter ending September 30, 2017 1 3 Annualized 5 10 / LOF 1 Fidelity Mid Cap Enhanced Index Fund Gross Expense Ratio: 0.59% 2 16.38% 9.04% 14.73% 8.83% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/20/2007. 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. 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 fidelity.com/performance, institutional.fidelity.com, or 401k.com. 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. Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest. Past performance is no guarantee of future results. Views expressed are through the end of the period stated and do not necessarily represent the views of Fidelity. 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. The securities mentioned are not necessarily holdings invested in by the portfolio manager(s) or FMR LLC. References to specific company securities should not be construed as recommendations or investment advice. included on this page is as of the most recent calendar quarter. S&P 500 is a registered service mark of Standard & Poor's Financial Services LLC. 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. Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street, Smithfield, RI 02917. Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917. 2017 FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. 738628.5.0 Diversification does not ensure a profit or guarantee against a loss.