Fidelity New Jersey Municipal Income Fund

[Pages:11]PORTFOLIO MANAGER Q&A | AS OF NOVEMBER 30, 2022

Fidelity? New Jersey Municipal Income Fund

Key Takeaways

? For the fiscal year ending November 30, 2022, the fund had a return of

-9.22%, lagging, net of fees, the -8.63% result of the state-specific Bloomberg New Jersey Enhanced Modified Municipal Bond Index and the -8.64% return of the benchmark, the broad-based Bloomberg Municipal Bond Index. The fund modestly outperformed the Lipper peer group average.

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

McLaughlin continued to focus on longer-term objectives and sought to generate attractive tax-exempt income and a competitive riskadjusted return.

? During the 12-month period, municipals, like almost all bond types,

declined in response to investor outflows that were spurred by quickly rising interest rates.

? The New Jersey municipal market performed roughly in line with the

national muni market this period.

? The fund's overweight in lower-quality bonds in the health care and

higher education sectors detracted from performance versus the statespecific index.

? Differences in the way fund holdings and state index components

were priced also crimped the fund's relative result.

? Conversely, the team added the most value through duration (interest

rate) positioning.

? As of November 30, Cormac, Michael and Elizah believe that muni

yields are attractive, which could inspire demand from investors seeking tax-exempt income.

Not FDIC Insured ? May Lose Value ? No Bank Guarantee

MARKET RECAP

Tax-exempt municipal bonds had a return of -8.64% for the 12 months ending November 30, 2022, according to the Bloomberg Municipal Bond Index, as sharply rising interest rates resulted in notable declines for both bond and stock indexes. In December 2021, the U.S. Federal Reserve began its shift to a more "hawkish" (restrictive) policy stance, shrinking its monetary reserves by allowing Treasury and government bond holdings to mature without reinvesting the proceeds. By early 2022, the Fed, faced with quickly elevating inflationary pressure, implemented an aggressive series of policy rate hikes ? raising its benchmark rate six times, by a total of 3.75%, between March and November, which represented the fastest-ever pace of monetary tightening. U.S. Treasury and municipal yields moved significantly higher as rates rose, and prices, which move inverse to yields, fell. Muni benchmark yields finished September at levels not seen in more than a decade. Munis rallied strongly in November (+4.68%), their best monthly gain since the mid-1980s, as investor sentiment improved amid better-than-expected inflation data and comments from Fed officials signaling an intention to moderate the size and pace of upcoming rate increases. Muni credit fundamentals remained solid throughout the 12 months and, for most issuers, the risk of credit-rating downgrades appeared low. Shorter-duration (lower sensitivity to interest rates) and higher credit-quality munis performed best for the period.

PORTFOLIO MANAGER Q&A | AS OF NOVEMBER 30, 2022

Q&A

Cormac Cullen Co-Manager

Michael Maka Co-Manager

Elizah McLaughlin Co-Manager

Fund Facts

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

FNJHX January 01, 1988 $506.77

Investment Approach

? Fidelity? New Jersey 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 Cormac Cullen, Michael Maka and Elizah McLaughlin

Q: Cormac, how did the fund perform for the fiscal year ending November 30, 2022

C.C. The fund returned -9.22% the past 12 months, lagging, net of fees, the -8.63% result of the state-specific Bloomberg New Jersey Enhanced Modified Municipal Bond Index and the -8.64% return of the benchmark, the broadly based Bloomberg Municipal Bond Index.

The fund modestly outperformed the Lipper peer group average.

Q: What shaped the muni market this period, including bonds issued in New Jersey

C.C. The municipal market declined through most of the period because investors retreated from bonds of all types as the U.S. Federal Reserve aggressively raised interest rates to cool inflation.

The central bank hiked its benchmark rate six times, by a total of 3.75%, between March and November this year, representing the fastest-ever pace of monetary tightening. Bond yields moved significantly higher as rates rose, and prices, which move inverse to yields, fell.

Muni credit fundamentals remained fundamentally solid both nationally and in New Jersey, as tax revenue generally exceeded budgeted levels. Additionally, most state-level muni issuers continued to benefit from unspent federal aid distributed during the COVID crisis.

This aid, coupled with budget outperformance, allowed the state of New Jersey and local issuers to meaningfully boost their reserves the past 12 months.

The New Jersey municipal market performed roughly in line with the national municipal market this period.

As always, Michael, Elizah and I attempted to generate attractive tax-exempt income and a competitive risk-adjusted return, including both price appreciation and income.

Following our investment strategy and process, we did this with an eye toward carefully managing the fund's 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 NOVEMBER 30, 2022

Q: Why did the fund lag the result of the state- Q: Team, what's your outlook for the muni

specific index this period

market as of November 30

C.C. The fund's overweight in certain lower-rated investment-grade bonds worked against us this period and was the primary detractor from relative performance. Specifically, the fund had larger exposure than the statespecific index to lower-rated hospital and higher education bonds. We maintained our holdings in both areas, based on our view that they offered an attractive combination of yield and potential outperformance as the U.S. economy comes out of the pandemic.

As a reminder, lower-quality bonds typically pay higher yields to compensate investors for the added credit risk of owning these securities. For much of the period, investors pushed credit spreads ? the excess yield offered by a security relative to a risk-free security with the same maturity ? even wider, largely reflecting uncertainty about interest rates and the economy. Selling by municipal bond portfolios and others that needed to raise money to meet shareholder redemptions caused additional spread widening.

Health care bonds faced other significant challenges. Hospitals struggled amid wage and supply inflation, as well as with weaker-than-expected patient volume, particularly in the inpatient setting. Their balance sheets eroded under weak operating cash flow, negative investment returns and repayment of government loans provided to them at the onset of the pandemic.

Meanwhile, public and private colleges were challenged by volatile enrollment, weak endowment returns and the unwinding of federal aid established during the pandemic to provide emergency grants to educational institutions. These short-term headwinds compounded the effects of structural demographic factors, with many institutions loosening admissions standards or increasing tuition discounts to attract students.

Lastly, pricing-related factors notably hurt performance versus the state index. Fund holdings are priced by a thirdparty pricing service and validated daily by Fidelity Management & Research's fair-value processes. Securities within the index, however, are priced by the index provider. These two approaches employ somewhat different methodologies in estimating the prices of municipal securities, most of which trade infrequently.

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

We find more reasons to be optimistic about the medium term. Absolute muni yields are attractive at period end, by our analysis, which could inspire demand from investors seeking tax-exempt income. Additionally, the Fed has signaled it is ready to moderate the pace of its current ratehiking cycle, which investors are likely to view positively.

Although the muni market may face further volatility into 2023, we think this could present opportunities for the fund to perform well over the longer term. In fact, we believe this will play to our strengths, since the fund is constructed with a careful and intentional emphasis on security selection.

M.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 also focused on maintaining an appropriate allocation to higher-quality securities and cash, which we believe will provide us liquidity should market conditions continue to be weak.

E.M. Once again, security selection is key, especially with consideration to the liquidity of the security and financial resiliency of the issuer. In the current environment, we continue to evaluate each of the fund's investments and are monitoring those that may be more financially challenged than others.

We remain committed to the approach of building individual exposures in the fund that reflect risks with which we are comfortable, at entry prices that we believe offer strong relative value.

Q: What contributed

C.C. We added the most value versus the state index through duration positioning. Duration is a measure of a fund's sensitivity to changes in interest rates. Specifically, the fund had a shorter duration (less sensitivity to interest rates) at points during the period when interest rates rose. This meant that, all else being equal, the fund declined less than the index during those periods.

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 NOVEMBER 30, 2022

Co-Portfolio Manager Cormac Cullen on the credit outlook for New Jersey:

"As of November 30, we're constructive on the nearterm credit outlook for New Jersey. The state's financial health has substantially improved since the early depths of the COVID-19 pandemic, bolstered in part by a surge in tax revenue. The state has also benefited from meaningful federal funding, a relatively wealthy tax base and improved budgetary discipline. "Specifically, state budget officials were conservative in their revenue projection for the current fiscal year 2023, which began on July 1, 2022, forecasting that general fund revenue would decline by 3.8%. "But through October, revenue rose 14% on a yearover-year basis. In other positive developments, the state has maintained its commitment to fully fund its pension program and has increased its budgeted reserves target to $6 billion, or 11.9% of budget. Furthermore, the state has $1.8 billion in remaining federal COVID-related aid to spend. "With all that said, New Jersey will continue to face challenges as it addresses legacy spending and attempts to avoid tax increases. This balancing act may become even more challenging since revenue growth is expected to moderate in the months ahead, due to inflationary pressure and an anticipated slowing of the U.S. economy. "We believe Gov. Phil Murphy and his team will be mindful of these challenges as they begin crafting the fiscal year 2024 budget. We think New Jersey's strong tax base, healthy reserves and strong executive ability to cut spending will be helpful as the state's leaders navigate these challenges."

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 NOVEMBER 30, 2022

MUNICIPAL-SECTOR DIVERSIFICATION

Sector

Portfolio Weight Index Weight

Relative Weight

Relative Change From Six Months

Ago

State Obligations

25.29%

38.95%

-13.66%

-0.07%

Transportation

24.44%

35.18%

-10.74%

-3.88%

Higher Education

17.00%

6.75%

10.25%

1.90%

Health Care

12.86%

5.94%

6.92%

-6.30%

Local Obligations

5.23%

3.63%

1.60%

-0.19%

Pre-Refunded

2.03%

2.04%

-0.01%

0.88%

Housing

1.63%

1.44%

0.19%

0.30%

Tobacco

1.24%

2.66%

-1.42%

-0.09%

Corporate-Backed

0.94%

0.38%

0.56%

0.22%

Special Tax

0.64%

1.93%

-1.29%

0.33%

Water & Sewer

0.24%

0.61%

-0.37%

0.09%

Electric & Gas

0.00%

0.10%

-0.10%

0.02%

Lease/Other

0.00%

0.24%

-0.24%

0.01%

Cash & Net Other Assets

8.46%

0.15%

8.31%

6.78%

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

8.0

6.1

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

DURATION

Years

Six Months Ago

6.7

6.2

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 NOVEMBER 30, 2022

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

5.18%

4.87%

0.31%

2.76%

AA

38.37%

43.33%

-4.96%

-8.60%

A

36.25%

47.91%

-11.66%

-0.04%

BBB

8.54%

3.61%

4.93%

-1.51%

BB

0.00%

0.00%

0.00%

0.00%

B

0.00%

0.00%

0.00%

0.00%

CCC & Below

0.00%

0.00%

0.00%

0.00%

Short-Term Rated

0.00%

0.00%

0.00%

0.00%

Not Rated/Not Available

3.19%

0.28%

2.91%

0.48%

Cash & Net Other Assets

8.47%

0.00%

8.47%

6.91%

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 NOVEMBER 30, 2022

FISCAL PERFORMANCE SUMMARY: Periods ending November 30, 2022

Cumulative

6 Month

YTD

1 Year

Annualized

3 Year

5 Year

10 Year/ LOF1

Fidelity New Jersey Municipal Income Fund Gross Expense Ratio: 0.47%2

-1.33%

-9.32%

-9.22%

-0.65%

1.68%

2.08%

Bloomberg Municipal Bond Index Bloomberg New Jersey Enhanced Modified Municipal Bond Index Lipper New Jersey Municipal Debt Funds Classification

-1.43% -0.97% -2.07%

-8.79% -8.83% -9.79%

-8.64% -8.63% -9.64%

-0.77% -0.30% -1.03%

1.40% 2.00% 1.30%

1.98% 2.45% 1.60%

Morningstar Fund Muni New Jersey

-1.98%

-9.58%

-9.42%

-0.93%

1.38%

1.64%

1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 01/01/1988. 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.

DIVIDENDS AND YIELD: Fiscal Periods ending November 30, 2022

Past One Month

30-Day SEC Yield

3.31%

30-Day SEC Restated Yield

--

30-Day SEC Tax-Equivalent Yield

6.83%

Average Share Price

$10.90

Dividends Per Share

2.21?

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

Past Six Months ----

$11.11 13.69?

Past One Year ----

$11.52 26.26?

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 NOVEMBER 30, 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.

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 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. 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. 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.

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

Bloomberg New Jersey 4+ Year Municipal Bond with Port Authority of New York/New Jersey Index is a market-valueweighted index of New Jersey fixed-rate investment-grade municipal bonds, including Port Authority of New York and New Jersey bonds, with maturities of four years or more.

Bloomberg New Jersey Enhanced Modified Municipal Bond Index is a market-value-weighted index of New Jersey fixed-rate investment-grade municipal bonds, including Port Authority of New York and New Jersey 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

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