Fidelity Maryland Municipal Income Fund

[Pages:11]PORTFOLIO MANAGER Q&A | AS OF AUGUST 31, 2023

Fidelity? Maryland Municipal Income Fund

Key Takeaways

? For the fiscal year ending August 31, 2023, the fund gained 1.54%,

outpacing, net of fees, the 0.92% advance of the state-specific Bloomberg Maryland 2+ Year Enhanced Municipal Linked 8/1/2018 Index, but modestly trailing the 1.70% result of the broad-market benchmark, the Bloomberg Municipal Bond Index. The fund outperformed its Lipper peer group average.

? Municipal bonds, including those backed by Maryland issuers, posted

a small gain the past 12 months, muted by heightened market volatility and shifting expectations for the trajectory of U.S. interest rates, which pushed bond yields higher and prices lower.

? Co-Managers Michael Maka, Cormac Cullen and Elizah McLaughlin

stuck to their long-held investment approach, seeking attractive taxexempt income and a competitive risk-adjusted return.

? The fund's overweight in bonds issued for hospitals was a key

contributor to performance versus the state index this period because they outperformed as their credit quality improved.

? The fund's "carry" advantage ? that is, its higher yield versus the

Maryland index ? boosted relative performance. Differences in the way fund holdings and state index components were priced modestly helped for the 12 months.

? In contrast, the fund's yield-curve positioning ? with its overweight in

longer-term securities ? detracted from performance versus the Maryland index this period.

? As of August 31, the fund is cautiously positioned, given uncertainty

about the economy and interest rates. The co-managers believe muni bonds are somewhat richly valued at period end, but still offer attractive, tax-advantaged income and potential diversification benefits in the longer term.

? The portfolio management team believes the state of Maryland

remains a solid credit, benefiting from a fairly stable economy and conservative budgeting practices.

Not FDIC Insured ? May Lose Value ? No Bank Guarantee

MARKET RECAP

Tax-exempt municipal bonds gained 1.70% for the 12 months ending August 31, 2023, according to the Bloomberg Municipal Bond Index. Munis were muted this period, as the U.S. Federal Reserve continued to raise interest rates, sending bond yields further upward. Though the pace of the Fed's rate hikes has slowed since the beginning of 2023, bond market sentiment darkened in the latter part of the period, as mixed economic data ? lower inflation but resilient jobs and consumer spending ? prompted the central bank to indicate it would continue its hiking cycle for longer than the market expected earlier in the year. Improved supply and demand, though, helped bolster munis, especially those with a lower credit rating and higher credit spread. Demand for highyield munis in the first half of 2023 pushed credit spreads lower. But overall demand was uneven for the 12 months and declined significantly in August, causing yields to move meaningfully higher and prices lower. Meanwhile, supply declined, as higher rates suppressed issuers' appetite for new debt, especially given that many states and municipalities still retain unspent pandemic-related federal stimulus cash. For the full 12 months, muni tax-backed credit fundamentals remained solid, and the risk of credit-rating downgrades appeared low for most issuers. Lowerquality investment-grade munis (rated BAA) and longer-term securities (15 and 20 years) delivered the muni market's best returns exempt.

PORTFOLIO MANAGER Q&A | AS OF AUGUST 31, 2023

Q&A

Michael Maka Co-Manager

Cormac Cullen Co-Manager

Elizah McLaughlin Co-Manager

Fund Facts

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

SMDMX April 22, 1993 $165.87

Investment Approach

? Fidelity? Maryland Municipal Income Fund is a singlestate-focused municipal bond strategy investing in general obligation and revenue-backed municipal securities across the yield curve.

? 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 Michael Maka, Cormac Cullen and Elizah McLaughlin

Q: Michael, how did the fund perform for the fiscal year ending August 31, 2023

M.M. The fund gained 1.54% the past 12 months, outpacing, net of fees, the 0.92% advance of the state-specific Bloomberg Maryland 2+ Year Enhanced Municipal Linked 8/1/2018 Index, but modestly lagging the 1.70% result of the broad-market benchmark, the Bloomberg Municipal Bond Index. The fund outperformed its Lipper peer group average.

Q: How would you describe the market environment for munis the past 12 months

M.M. Municipal bonds, including those backed by Maryland issuers, were crimped by rising interest rates, as well as shifting expectations about inflation and future rate hikes.

Yields on munis and most other bonds rose late last summer and early fall, as the U.S. Federal Reserve continued to hike its benchmark interest rate to stymie inflation, an effort it began in March 2022. As muni yields rose, their prices, which move inversely to yields, declined. From November through January, however, yields significantly declined and prices rallied amid lower-than-expected inflation and indications from the Fed that it would soon slow the pace of rate increases and ultimately cut rates later in 2023. In January alone, the Bloomberg Municipal Bond Index gained 2.87%, its strongest start to a new year since 2009.

Unfortunately, munis lost momentum in February (-2.26%) when the Fed, after raising interest rates by half- and threequarter percentage point increments through much of 2022, downshifted to a quarter-point rate hike. Even though investors viewed this favorably, muni yields climbed higher after strong data on jobs and consumer spending fueled renewed worries about further rate hikes.

Munis rebounded in March (+2.22%), due to improved demand for bonds as a relative safe haven amid stress in the U.S. regional banking system. Also, investors welcomed the Fed's decision to raise its benchmark rate by a quarter point, rather than the half-point move the market had priced in just weeks earlier.

Worries about the U.S. debt ceiling, the liquidation of $7 billion of municipal bonds from Silicon Valley Bank - a

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 AUGUST 31, 2023

regional bank that failed in March - and the Fed's reluctance to forecast an end to its rate-hike cycle sent munis lower in April (-0.23%) and May (-0.87%). In June, munis rose 1.00%, as the Fed held policy rates steady. The start of the seasonal June through August period of reinvestment of bond maturities, called bonds and coupons, fueled demand for the asset class. Although this favorable demand extended into July, when munis advanced 0.40%, it wasn't enough to offset the dampening effects of the Fed bumping up rates another quarter point. Munis returned -1.44% in August, as stillresilient economic growth and hawkish comments from the Fed fanned rate concerns.

Q: What meaningfully hurt performance

M.M. The primary detractor versus the Maryland index was yield-curve positioning, or how we spread investments across bonds with various duration, a measure of their sensitivity to changes in interest rates. In the first half of this reporting period, we positioned the fund with larger-thanindex exposure to longer-term securities because we felt they were more attractively valued than intermediate-term bonds. But longer-term bond yields rose more and their prices declined more than intermediate-term munis, in which we were underweight.

Q: What was your investment approach, and how did it pan out

M.M. Co-Managers Cormac Cullen, Elizah McLaughlin and I stuck to our fundamental approach to choosing investments for the fund. As always, we attempted to generate attractive tax-exempt income and a competitive risk-adjusted total return, including both price appreciation and income. Given that shifting rate expectations produced significant market volatility, we're satisfied that our investment approach helped the fund outpace the Maryland municipal market for the 12 months.

At the outset of the period, we felt credit spreads would likely tighten ? in particular, we believed spreads for bonds with lower investment-grade ratings would narrow ? so we sought to overweight areas of the muni market we thought were poised to outperform.

An overweight in lower-rated health care bonds was a good example. These holdings meaningfully contributed versus the state index, as health care bonds were bolstered by favorable fundamental trends, including Americans catching up on medical procedures they'd delayed during the COVID19 pandemic. Health care securities drew comparatively strong demand from investors seeking high-yielding municipals. We purchased some of these bonds when they were under intense pressure during the depths of the pandemic, at valuations we felt were compelling.

To a lesser extent, the fund benefited from its "carry" advantage over the state index, meaning we had proportionately more high-coupon bonds. In effect, the higher coupon provides a cushion against rising rates. Given that rates rose this period, having more exposure to highercoupon securities helped relative performance.

I'll note that pricing factors modestly helped. Fund holdings are priced by a third-party pricing service and validated daily by Fidelity Management & Research's fair-value processes. Securities within the state-specific index are priced by the index provider. These two approaches employ different methodologies in estimating the prices of municipal securities, most of which trade infrequently.

Q: Team, what's your outlook for the muni market as of August 31

C.C. We continue to cautiously position the fund, given uncertainty related to the macroeconomy and interest rates. We're optimistic about near-term credit fundamentals for most Maryland municipal government issuers, based on continued solid economic performance and fairly strong financial reserves.

We believe munis are somewhat richly valued as of August 31, but still offer attractive, tax-advantaged income and potential diversification benefits in the longer term, particularly as the U.S. economy and financial markets continue to feel the impact of higher interest rates. While the economy appears strong, we think it's important to note that munis historically have performed well and exhibited low correlation with equities and other risk assets during an economic downturn.

M.M. The muni market may remain volatile until investors receive a definitive signal from the Fed that its interest rate hikes will end. Still, we think volatility could support us in our aim to generate strong longer-term performance. In fact, we believe it will play to our strengths, since the fund is constructed with a careful and intentional emphasis on security selection.

E.M. We're taking a balanced approach to credit and rate risk. We hold lower-quality investment-grade bonds that provide the fund with income and that we think have betterthan-average upside potential. We're focused on maintaining an appropriate allocation to higher-quality securities and cash, which we believe will provide liquidity should market conditions remain volatile.

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 AUGUST 31, 2023

The co-managers on their credit outlook for Maryland:

C.C. "Maryland's credit outlook is solid as of August 31, in our view, benefiting from a fairly stable economy and conservative budgeting practices. The state's well-educated workforce has strong ties to the federal government, and federal budget cuts have contributed to Maryland's revenue volatility in the past. That said, the state has proactively made changes to its reserve polices to reduce the impact of revenue shortfalls." E.M. "Revenue for Maryland's fiscal year 2023 ended June 30 lagged estimates, with the state lowering forecasted collections in March by $77 billion (-0.2%) versus the December estimate and by $400 million (-1.6%) for fiscal year 2024. The primary reason for the downward revision was underwhelming income taxes." M.M. "Maryland's 2024 budget was enacted in April, well in advance of the July 1 start of the fiscal year. General fund appropriations for the current budget total $27.2 billion, a 3.2% decline in spending versus fiscal 2023. The decline includes the removal of rainy day fund contributions following a $2.4 billion deposit in 2023 and a cut to pay-go capital appropriations, which fund projects that are paid for with general, special and federal funds as part of an agency's operating budget. "The budget increases K?12 education spending, as required under the 'Blueprint for Maryland's Future.' Additionally, it provides an estimated structural surplus of $150 million and an estimated rainy day fund balance of $2.5 billion. Furthermore, Gov. Wes Moore approved $200 million in tax-relief measures by expanding the state's earned income tax credit and child tax credit programs."

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 AUGUST 31, 2023

MUNICIPAL-SECTOR DIVERSIFICATION

Sector

Portfolio Weight Index Weight

Relative Weight

Relative Change From Six Months

Ago

Health Care

26.36%

9.73%

16.63%

0.54%

Local Obligations

18.09%

36.77%

-18.68%

-0.65%

Special Tax

13.38%

11.51%

1.87%

-0.19%

Transportation

12.68%

5.96%

6.72%

0.23%

Water & Sewer

10.99%

3.35%

7.64%

0.07%

Higher Education

5.78%

3.79%

1.99%

0.19%

Housing

3.57%

5.69%

-2.12%

0.86%

Pre-Refunded

3.43%

0.79%

2.64%

0.18%

State Obligations

1.25%

20.56%

-19.31%

0.15%

Corporate-Backed

0.00%

0.43%

-0.43%

-0.12%

Electric & Gas

0.00%

0.00%

0.00%

0.00%

Lease/Other

0.00%

0.17%

-0.17%

0.01%

Tobacco

0.00%

0.00%

0.00%

0.00%

Cash & Net Other Assets

4.47%

1.25%

3.22%

-1.27%

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

8.6

8.0

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

DURATION

Years

Six Months Ago

6.4

6.6

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 AUGUST 31, 2023

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

13.84%

63.98%

-50.14%

-1.53%

AA

34.47%

21.14%

13.33%

-0.67%

A

29.87%

9.03%

20.84%

2.41%

BBB

15.74%

5.60%

10.14%

-0.35%

BB

1.34%

0.00%

1.34%

-0.01%

B

0.90%

0.00%

0.90%

0.90%

CCC & Below

0.00%

0.00%

0.00%

-0.91%

Short-Term Rated

0.00%

0.00%

0.00%

0.00%

Not Rated/Not Available

2.37%

0.25%

2.12%

0.37%

Cash & Net Other Assets

1.47%

0.00%

1.47%

-0.21%

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.

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 AUGUST 31, 2023

FISCAL PERFORMANCE SUMMARY: Periods ending August 31, 2023

Cumulative

6 Month

YTD

1 Year

Annualized

3 Year

5 Year

10 Year/ LOF1

Fidelity Maryland Municipal Income Fund Gross Expense Ratio: 0.55%2

0.84%

1.31%

1.54%

-1.35%

1.11%

2.46%

Bloomberg Municipal Bond Index Bloomberg Maryland 2+ Year Enhanced Municipal Linked 08/01/2018 Index Lipper Maryland Municipal Debt Funds Classification

1.04% 0.57% 1.02%

1.59% 0.93% 1.62%

1.70% 0.92% 1.10%

-1.32% -1.86% -1.43%

1.52% 1.27% 0.79%

2.81% 2.71% 2.03%

Morningstar Fund Muni Single State Long

0.73%

1.21%

0.58%

-1.96%

0.67%

2.23%

1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 04/22/1993. 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 calendar-quarter performance.

DIVIDENDS AND YIELD: Fiscal Periods ending August 31, 2023

Past One Month

30-Day SEC Yield

3.33%

30-Day SEC Restated Yield

--

30-Day SEC Tax-Equivalent Yield

6.63%

Average Share Price

$10.45

Dividends Per Share

2.20?

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

Past Six Months ----

$10.57 12.85?

Past One Year ----

$10.50 24.99?

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 AUGUST 31, 2023

Definitions and Important Information

interest rate changes than a fund with a shorter average duration.

Information provided in, and presentation of, this document are for informational and educational purposes only and are not a recommendation to take any particular action, or any action at all, nor an offer or solicitation to buy or sell any securities or services presented. It is not investment advice. Fidelity does not provide legal or tax advice.

Before making any investment decisions, you should consult with your own professional advisers and take into account all of the particular facts and circumstances of your individual situation. Fidelity and its representatives may have a conflict of interest in the products or services mentioned in these materials because they have a financial interest in them, 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 The municipal market can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. 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. Leverage can increase market exposure and magnify investment risk. The fund may have additional volatility because it can invest a significant portion of assets in securities of a small number of individual issuers.

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.

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 do not reflect the NY state tax rate that applies to income in excess of $5 million. 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

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 Maryland 2+ Year Enhanced Municipal Bond Index Linked (08/01/2018) represents the performance of the Bloomberg Maryland 2+ Year Enhanced Municipal Bond Index since August 1, 2018, and the Bloomberg Maryland 4+ Year Enhanced Municipal Bond Index prior to that date.

Bloomberg Municipal Bond Index is a market value-weighted 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 ? 2023 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

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