Fidelity Intermediate Municipal Income Fund

[Pages:11]PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2021

Fidelity? Intermediate Municipal Income Fund

Key Takeaways

? For the semiannual reporting period ending June 30, 2021, the fund's

Retail Class shares rose 1.02%, outpacing, net of fees, the 0.57% advance of the Bloomberg Barclays 1-17 Year Municipal Bond Index. The fund performed roughly in line with its Lipper peer group average.

? The past six months, Co-Managers Cormac Cullen, Michael Maka and

Elizah McLaughlin continued to focus on longer-term objectives and sought to generate attractive tax-exempt income and competitive riskadjusted returns over time.

? Overweighting health care and airport bonds ? two of the muni

market's top-performing sectors the past six months ? helped performance versus the index.

? Overweighting bonds issued by Illinois and related entities, including

Chicago Public Schools and Metropolitan Pier and Exposition Authority, contributed notably.

? The fund's larger-than-index exposure to lower-quality investment-

grade munis also added value.

? There were no notable detractors from a sector allocation, security

selection, credit quality positioning or interest-rate stance.

? As of June 30, Cormac, Michael and Elizah believe demand for munis

will remain solid over the summer. They foresee continued outperformance for lower-quality municipal bonds and sectors amid tight credit spreads.

Not FDIC Insured ? May Lose Value ? No Bank Guarantee

MARKET RECAP

Tax-exempt municipal bonds posted a modest gain for the six months ending June 30, 2021, driven by robust investor demand in an environment shaped by an improved fiscal outlook for many municipal issuers, increased muni-bond supply, the threat of rising interest rates and growing inflation fears. The Bloomberg Barclays Municipal Bond Index rose 1.06% for the period. In December 2020 and January 2021, the muni market rallied amid economic optimism due to the rollout of effective COVID-19 vaccination programs. Munis were further bolstered by an easing of credit concerns that had been triggered by the economic shutdowns caused by COVID-19. Also, investor demand for taxexempt munis increased due to the Biden administration's plan to push for higher taxes to fund health care, environmental and infrastructure programs. State and local tax collections took less of a hit than originally feared and an extremely large federal aid package for muni issuers helped fill budget gaps and boost reserves. In February, the municipal market suffered a modest decline, reflecting investor concerns that stimulus-induced inflation could diminish real bond returns over time and accelerate a tapering of the Federal Reserve's monthly open market purchases. Munis then generated small monthly gains from March through the end of June, propelled by better-thanexpected tax revenue from many state and local governments and reduced inflation expectations.

PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2021

Q&A

Elizah McLaughlin Co-Manager

Cormac Cullen Co-Manager

Michael Maka Co-Manager

Fund Facts

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

FLTMX April 15, 1977 $10,063.69

Investment Approach

? Fidelity? Intermediate Municipal Income Fund is a diversified national municipal bond strategy investing primarily in intermediate-maturity general obligation and revenue-backed securities.

? Our investment approach focuses on fundamental credit analysis, yield-curve positioning and an analysis of the structural characteristics of each security.

? The fund's interest rate sensitivity is targeted closely to that of its benchmark to prevent interest rate speculation from overwhelming research-based strategies that we deem to have a higher likelihood of success.

? We emphasize a total-return approach that seeks to generate a high level of tax-exempt income, consistent with the preservation of capital.

An interview with Co-Managers Elizah McLaughlin, Cormac Cullen and Michael Maka

Q: Elizah, how did the fund perform for the six months ending June 30, 2021

E.M. The fund's Retail Class shares rose 1.02%, outpacing, net of fees, the 0.57% gain of the Bloomberg Barclays 1-17 Year Municipal Bond Index. The fund performed roughly in line with its Lipper peer group average.

Looking a bit longer term, the fund rose 4.06% for the trailing 12 months, outpacing the index, but modestly lagging the Lipper peer average.

Q: What factors drove the muni market the past six months

E.M. Municipal bonds posted modest returns, hurt by rising inflation and interest-rate worries in early 2021, although overall, munis emerged as one of the best-performing fixedincome categories during the first half of the year. The asset class benefited from strong investor demand for tax-exempt income amid the threat of higher federal taxes.

Improving credit quality also helped the muni market. Massive federal emergency aid, along with better-thanexpected revenues for many municipalities as the U.S. economy gradually reopened, improved the fiscal outlook for many state, local and other municipal issuers.

Bonds in the lower-quality investment-grade and belowinvestment-grade tiers benefited disproportionately as investors sought incremental yields in a low-rate environment and looked for bargains among credits that had been hit the hardest by the widespread COVID-19-induced economic shutdown.

Similarly, sectors that suffered the most in 2020, including health care, transportation and higher education, strongly rebounded and outpaced the muni market as a whole.

For the period, Cormac, Michael and I attempted to generate attractive tax-exempt income and a competitive risk-adjusted total return, including both price appreciation and income.

Following our investment strategy and process, we did this with an eye toward carefully managing risk exposure through close collaboration with our team of portfolio managers, credit and quantitative research analysts, and traders.

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 JUNE 30, 2021

Q: What drove the fund's outperformance of the index

E.M. The fund's overweighting in two outperforming sectors provided a notable boost to our relative result.

We maintained a larger-than-index exposure to the health care sector, reflecting our bottom-up analysis that suggested select bonds in this category offered an attractive longerterm risk/reward profile.

After coming under severe pressure during 2020, the health care sector rebounded strongly the past six months as many patients resumed elective health services that had been postponed due to the pandemic. An extraordinary amount of federal aid also offered support to hospitals and other health care organizations. Furthermore, health care bonds were some of the biggest beneficiaries of strong investor demand for higher-yielding bonds. Our larger-than-index exposure to airport bonds also added value. These securities were boosted by the combination of improving fundamentals as air travel increased and investors' appetite for higher-yielding munis.

Q: What else made a relative contribution

M.M. Having more exposure to bonds issued by Illinois and related entities, including Chicago Public Schools and Metropolitan Pier and Exposition Authority, helped versus the index. They posted some of the biggest gains the past six months as both Moody's and S&P upgraded the state's general-obligation credit.

I'll also point to the fund's overweighting in lower-rated investment-grade munis, which generally outpaced their higher-quality counterparts as investors clamored for higheryielding bonds. Receding worries about muni credit quality also supported lower-quality issuers.

Demand also rose in recognition of the improved outlook for many municipal credits.

Furthermore, some investors turned to munis amid their concern about other asset classes; equity valuations continued to increase, and U.S. Treasuries carried low yields and produced negative real returns the past six months.

Over the short term, we believe muni demand will remain solid. Munis often experience strong seasonal performance in the summer as the proceeds from semiannual coupon payments, as well as from bond calls and maturities, are reinvested in the marketplace. If this trend holds true this year, we think it's likely to be a positive performance driver, especially considering the supply of munis is constrained and the fundamental outlook for issuers appears healthy.

M.M. Our view is that most of the credit-spread tightening that benefited lower-quality munis at the expense of higherquality bonds may be in the rearview mirror. The yield difference between low- and high-quality munis remained historically tight as of June 30, which we think leaves little room for additional spread tightening. But we believe spreads could stabilize at tight levels, barring any market shocks or demand disruptions.

E.M. Lastly, we see potential for elevated volatility, reflecting shifting expectations for economic growth, inflation, interest rates, and monetary and fiscal policy.

As always, we will continue to monitor portfolio exposures and carefully and routinely measure the risk/reward profile of each holding. Cormac, Michael and I are grateful to shareholders for their continued support, and for our entire team for showing resilience, nimbleness and perseverance.

Q: What factors detracted

C.C. Our overall strategy was rewarded the past six months and our decisions regarding sector allocation, individual security selection, credit-quality positioning and duration (interest-rate) positioning either added value or roughly kept pace with the index.

Q: Team, what's your outlook for the muni market as of June 30

C.C. We could see continued gains for the muni marketplace, following recent trends. Steady investor demand among fixed-income investors helped muni returns outpace the negative result for some investment-grade taxable U.S. bonds the past six months. Some of this demand came from investors seeking tax-exempt income amid worries that taxes could be headed higher.

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 JUNE 30, 2021

The co-managers explain the improved credit quality of municipal issuers:

C.C. "The credit quality of many municipal bond issuers notably improved the past year, defying expectations that the COVID-19 pandemic would result in significant deterioration in the fiscal health of cities, states and other municipal issuers. "Massive federal aid drove this credit-quality improvement. In March 2020, the CARES Act provided $150 billion to state and local governments, and the Consolidated Appropriations Act in December 2020 provided $54 billion for K?12 education ? and $22 billion to states for COVID testing. In 2021, the American Rescue Plan provided an additional $219.8 billion for state governments, $130 billion for local governments and $122.8 billion for schools." E.M. "Also, revenue collections broadly outperformed budget projections made earlier in the pandemic. Personal-income taxes, a major source of states' revenues, showed resiliency as high-income earners remained relatively insulated from the pandemic's economic effects. The types of consumption most curtailed by the pandemic, such as services, tourism and leisure, comprise a relatively small portion of states' sales tax bases, and therefore had a minimal effect on overall revenues. Sales-tax collections generally held up well, as shoppers shifted their purchases online and to goods purchases instead of services." M.M. "Furthermore, state rainy-day funds, which stood at an all-time high prior to the pandemic, recorded very small reductions overall. "Most states enter fiscal 2022 in a stronger position than we initially expected. That said, the pandemic's duration and its uneven impact on individual states are yet to be seen. "We will be monitoring these factors closely in the coming year."

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 JUNE 30, 2021

MUNICIPAL-SECTOR DIVERSIFICATION

Sector

Portfolio Weight Index Weight

Relative Weight

Relative Change From Six Months

Ago

Health Care

16.32%

5.64%

10.68%

-1.27%

Transportation

16.22%

12.15%

4.07%

0.15%

Local Obligations

15.89%

16.78%

-0.89%

-0.37%

State Obligations

14.72%

21.99%

-7.27%

-0.14%

Corporate-Backed

8.86%

3.51%

5.35%

1.24%

Special Tax

6.73%

12.33%

-5.60%

0.72%

Electric & Gas

4.87%

4.67%

0.20%

0.03%

Pre-Refunded

3.37%

8.63%

-5.26%

1.19%

Higher Education

3.25%

4.38%

-1.13%

0.14%

Water & Sewer

2.79%

7.66%

-4.87%

-0.08%

Lease/Other

1.92%

0.39%

1.53%

0.55%

Housing

1.80%

1.18%

0.62%

0.59%

Tobacco

0.56%

0.49%

0.07%

-0.03%

Cash & Net Other Assets

2.70%

0.20%

2.50%

-2.72%

Futures, Options & Swaps

0.00%

0.00%

0.00%

0.00%

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.

WEIGHTED AVERAGE MATURITY

Six Months Ago

Years

4.6

5.0

This is a weighted average of all maturities held in the fund.

DURATION

Years

Six Months Ago

4.3

4.6

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 JUNE 30, 2021

CREDIT-QUALITY DIVERSIFICATION

Credit Quality

Portfolio Weight

Index Weight

Relative Weight

Relative Change From Six Months

Ago

U.S. Government

0.00%

0.00%

0.00%

0.00%

AAA

9.16%

22.48%

-13.32%

0.30%

AA

39.13%

53.79%

-14.66%

-0.56%

A

33.12%

16.77%

16.35%

1.06%

BBB

11.61%

6.03%

5.58%

0.34%

BB

1.44%

0.00%

1.44%

-0.20%

B

0.00%

0.00%

0.00%

0.00%

CCC & Below

0.01%

0.00%

0.01%

0.00%

Short-Term Rated

0.00%

0.00%

0.00%

0.00%

Not Rated/Not Available

2.71%

0.93%

1.78%

1.52%

Cash & Net Other Assets

2.82%

0.00%

2.82%

-2.46%

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.

Credit ratings for a rated issuer or security are categorized using the highest credit rating among the following three Nationally Recognized Statistical Rating Organizations ("NRSRO"): Moody's Investors Service (Moody's); Standard & Poor's Rating Services (S&P); or Fitch, Inc. Securities that are not rated by any of these three NRSRO's (e.g. equity securities) are categorized as Not Rated. All U.S. government securities are included in the U.S. Government category. The table information is based on the combined investments of the fund and its pro-rata share of any investments in other Fidelity funds.

10 LARGEST STATE WEIGHTS

State Texas Illinois Florida New York California New Jersey Non-State-Specific Pennsylvania Michigan Arizona

Portfolio Weight 12.64% 11.34% 9.17% 6.51% 5.39% 5.15% 4.13% 3.65% 3.48% 3.13%

Index Weight 9.30% 4.59% 4.08% 13.90% 16.38% 4.18% -3.41% 1.46% 1.77%

Relative Weight 3.34% 6.75% 5.09% -7.39% -10.99% 0.97% 4.13% 0.24% 2.02% 1.36%

Relative Change From Six Months

Ago 0.03% -1.15% -1.17% 1.46% 0.46% 0.97% -0.08% 0.08% -0.11% -0.14%

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 JUNE 30, 2021

FISCAL PERFORMANCE SUMMARY: Periods ending June 30, 2021

Cumulative

6 Month

YTD

1 Year

Annualized

3 Year

5 Year

10 Year/ LOF1

Fidelity Intermediate Municipal Income Fund Gross Expense Ratio: 0.34%2

1.02%

1.02%

4.06%

4.50%

2.83%

3.44%

Bloomberg Barclays Municipal Bond Index

1.06%

1.06%

4.17%

5.10%

3.25%

4.28%

Bloomberg Barclays 1-17 Year Municipal Bond Index

0.57%

0.57%

3.08%

4.45%

2.82%

3.52%

Lipper Intermediate Municipal Debt Funds Classification

1.27%

1.27%

4.55%

4.35%

2.56%

3.34%

Morningstar Fund Muni National Interm

1.33%

1.33%

4.61%

4.51%

2.72%

3.64%

1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 04/15/1977. 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. 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.

DIVIDENDS AND YIELD: Fiscal Periods ending June 30, 2021

Past One Month

30-Day SEC Yield

0.53%

30-Day SEC Restated Yield

--

30-Day SEC Tax-Equivalent Yield

0.90%

Average Share Price

$10.89

Dividends Per Share

1.59?

Fiscal period represents the fund's semiannual or annual review period.

Past Six Months ----

$10.86 9.94?

Past One Year ----

$10.82 20.80?

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 JUNE 30, 2021

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.

DIVIDENDS AND YIELD 30-Day SEC Restated Yield is the fund's 30-day yield without applicable waivers or reimbursements, stated as of month-end.

30-day SEC Yield is a standard yield calculation developed by the Securities and Exchange Commission for bond funds. The yield is calculated by dividing the net investment income per share earned during the 30-day period by the maximum offering price per share on the last day of the period. The yield figure reflects the dividends and interest earned during the 30-day period, after the deduction of the fund's expenses. It is sometimes referred to as "SEC 30-Day Yield" or "standardized yield".

30-day SEC Tax-Equivalent Yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you are in the 37% effective federal income tax bracket and also subject to the 3.8% Medicare Contribution tax, but does not reflect the payment of the federal alternative minimum tax, if applicable. Medicare Contribution tax is a tax on non-municipal investment income that applies to individuals with incomes over $200,000 (or $250,000, filing jointly). For state-specific funds, TEY is based not only on the highest federal tax rate (40.8%) but also the highest state tax rate. For state-specific funds, TEYs assume investors are state residents and would not be able to take an itemized deduction on their federal returns for state taxes on investment income. For NY funds, TEYs reflect NYC income taxes and treat them the same as state taxes. For MD funds, TEYs reflect the highest city/county tax rates in MD and treat them the same as state taxes. Consult a tax professional for further detail.

Dividends per share show the income paid by the fund for a set period of time. If you annualize this number, you can compare the fund's income over different periods.

DURATION Duration is a measure of a security's price sensitivity to changes in interest rates. Duration differs from maturity in that it considers a security's interest payments in addition to the amount of time until the security reaches maturity, and also takes into account certain maturity shortening features (e.g., demand features, interest rate resets, and call options) when applicable. Securities with longer durations generally tend to be more sensitive to interest rate changes than securities with shorter durations. A fund with a longer average duration generally can be expected to be more sensitive to interest rate changes than a fund with a shorter average duration.

FUND RISKS

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. The municipal market can be affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. Leverage can increase market exposure and magnify investment risk. Income exempt from federal income tax may be subject to state or local tax. All or a portion of the fund's income may be subject to the federal alternative minimum tax. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes.

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.

Bloomberg Barclays 1-17 Year Municipal Bond Index is a marketvalue-weighted index of investment-grade fixed-rate municipal bonds with maturities between one and 17 years.

Bloomberg Barclays Municipal Bond Index is a market-valueweighted index of investment-grade municipal bonds with maturities of one year or more.

LIPPER INFORMATION Lipper Averages are averages of the performance of all mutual funds within their respective investment classification category. The number of funds in each category periodically changes. Lipper, a Refinitiv company, is a nationally recognized organization that ranks the performance of mutual funds.

MORNINGSTAR INFORMATION ? 2021 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.

SECTOR WEIGHTS Sector weights illustrate examples of market segments 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 subset of the market.

WEIGHTED AVERAGE MATURITY Weighted average maturity (WAM) can be used as a measure of sensitivity to interest rate changes and market changes. Generally, the longer the maturity, the greater the sensitivity to such changes.

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