N-CSR 1 main.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-4085

Fidelity Income Fund
(Exact name of registrant as specified in charter)

82 Devonshire St., Boston, Massachusetts 02109
(Address of principal executive offices) (Zip code)

Scott C. Goebel, Secretary

82 Devonshire St.

Boston, Massachusetts 02109
(Name and address of agent for service)

Registrant's telephone number, including area code: 617-563-7000

Date of fiscal year end:	July 31

Date of reporting period:	July 31, 2008

Item 1. Reports to Stockholders

Fidelity® Ginnie Mae Fund
Fidelity Intermediate
Government Income Fund

Annual Report

July 31, 2008

(2_fidelity_logos) (Registered_Trademark)

Chairman's Message	<Click Here>	Ned Johnson's message to shareholders.
Shareholder Expense Example	<Click Here>	An example of shareholder expenses.
Fidelity Ginnie Mae Fund
	<Click Here>	Performance
	<Click Here>	Management's Discussion of Fund Performance
	<Click Here>	Investment Changes
	<Click Here>	Investments
	<Click Here>	Financial Statements
Fidelity Intermediate Government Income Fund
	<Click Here>	Performance
	<Click Here>	Management's Discussion of Fund Performance
	<Click Here>	Investment Changes
	<Click Here>	Investments
	<Click Here>	Financial Statements
Notes	<Click Here>	Notes to the financial statements
Report of Independent Registered Public Accounting Firm	<Click Here>
Trustees and Officers	<Click Here>
Distributions	<Click Here>
Board Approval of Investment Advisory Contracts and Management Fees	<Click Here>

To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com (search for "proxy voting guidelines") or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.

Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.

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.

Annual Report

This report and the financial statements contained herein are submitted for the general information of the shareholders of the funds. This report is not authorized for distribution to prospective investors in the funds unless preceded or accompanied by an effective prospectus.

A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com or http://www.advisor.fidelity.com, as applicable.

NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE

Neither the funds nor Fidelity Distributors Corporation is a bank.

Annual Report

Chairman's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

Domestic and international securities markets have struggled thus far in 2008. High-grade fixed-income investments produced modestly positive results, but many stock benchmarks suffered double-digit losses through the first half of this year. Financial markets are always unpredictable, but there are a number of time-tested principles that can put the historical odds in your favor.

One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.

You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best-performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).

A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.

We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.

Sincerely,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Shareholder Expense Example

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2008 to July 31, 2008).

Actual Expenses

The first line of the accompanying table for each fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each fund provides information about hypothetical account values and hypothetical expenses based on a fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

Annual Report

	Beginning Account Value February 1, 2008	Ending Account Value July 31, 2008	Expenses Paid During Period* February 1, 2008 to July 31, 2008
Ginnie Mae Fund
Actual	$ 1,000.00	$ 1,003.50	$ 2.24
Hypothetical^A	$ 1,000.00	$ 1,022.63	$ 2.26
Intermediate Government Income Fund
Actual	$ 1,000.00	$ 1,004.50	$ 2.24
Hypothetical^A	$ 1,000.00	$ 1,022.63	$ 2.26

^A 5% return per year before expenses

* Expenses are equal to each Fund's annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).

	Annualized Expense Ratio
Ginnie Mae Fund	.45%
Intermediate Government Income Fund	.45%

Annual Report

Fidelity Ginnie Mae Fund

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.

Average Annual Total Returns

Periods ended July 31, 2008	Past 1 year	Past 5 years	Past 10 years
Fidelity® Ginnie Mae Fund	7.27%	4.45%	5.24%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in Fidelity® Ginnie Mae Fund on July 31, 1998. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® GNMA Index performed over the same period.

fid43

Annual Report

Fidelity Ginnie Mae Fund

Management's Discussion of Fund Performance

Comments from William Irving, Portfolio Manager of Fidelity® Ginnie Mae Fund

Bonds with less credit risk generally produced higher returns for investment-grade debt during the 12 months ending July 31, 2008. In that span, the Lehman Brothers® U.S. Aggregate Index - a proxy for high-quality, fixed-rate, taxable bonds - returned 6.15%. Treasuries did the best, buoyed by their reputation as the safest haven in turbulent times, with the Lehman Brothers U.S. Treasury Index up 8.99% during the period. Agency bonds, with their perceived "implicit" government backing, also did well, as the Lehman Brothers U.S. Agency Index rose 7.79%. Mortgage-backed securities ended the period with a gain of 6.96%, according to the Lehman Brothers U.S. Mortgage-Backed Securities Index, while the Lehman Brothers U.S. Credit Index - a measure of high-quality corporate debt - finished with a modest 2.85% increase. The asset-backed sector - home to weak-performing subprime debt - had negative results, as reflected in the 2.69% loss of the Lehman Brothers U.S. Fixed-Rate Asset-Backed Securities Index.

During the past 12 months, the fund returned 7.27%, outpacing the 7.12% gain of the Lehman Brothers GNMA Index. Security selection - which in large measure was predicated on our view that mortgage prepayments would slow even if interest rates declined - bolstered the fund's performance relative to the index. In particular, our larger-than-index exposure to higher-coupon and "seasoned" mortgage securities - meaning those that have not been refinanced despite borrowers being presented with opportunities to do so at lower interest rates - was rewarded. Each segment kept high coupon payments in place for a longer period of time and also enjoyed some price appreciation due to strengthening investor demand. We also gained ground by holding a portion of our higher-coupon and seasoned mortgages as collateralized mortgage obligations (CMOs), which did well when investors sought them out for their resistance to prepayments. We also enjoyed a lift from my use of "to be announced" (TBA) securities, a term that means the actual mortgage-backed bond to be delivered is not designated at the time the trade is made. An out-of-benchmark position in hybrid adjustable-rate mortgage securities (ARMs) benefited us because they generally outpaced the index when adjusted for their lower interest-rate sensitivity. With the benefit of 20/20 hindsight, owning more of these types of securities may have been beneficial given how well they performed, but I was mindful of the importance of diversification.

The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such 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.

Annual Report

Fidelity Ginnie Mae Fund

Investment Changes (Unaudited)

Coupon Distribution as of July 31, 2008
	% of fund's investments	% of fund's investments 6 months ago
Less than 4%	2.0	3.0
4 - 4.99%	5.7	10.9
5 - 5.99%	43.7	44.3
6 - 6.99%	35.2	33.7
7 - 7.99%	4.7	4.4
8% and over	1.0	1.1

Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments.

Weighted Average Maturity as of July 31, 2008
		6 months ago
Years	5.4	5.0

The weighted average maturity is based on the dollar-weighted average length of time until principal payments are expected or until securities reach maturity, taking into account any maturity shortening feature such as a call, refunding or redemption provision.

Duration as of July 31, 2008
		6 months ago
Years	4.5	3.1

Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example.

Asset Allocation (% of fund's net assets)
As of July 31, 2008*^A			As of January 31, 2008**^B
	Mortgage Securities 93.1%			Mortgage Securities 95.2%
	CMOs and Other Mortgage Related Securities 16.4%			CMOs and Other Mortgage Related Securities 20.0%
	Asset-Backed Securities 0.1%			Asset-Backed Securities 0.2%
	Short-Term Investments and Net Other Assets (9.6)%^†			Short-Term Investments and Net Other Assets (15.4)%^†
* GNMA Securities		98.8%	** GNMA Securities		98.2%
^AFutures and Swaps		(2.6)%	^BFutures and Swaps		(9.7)%

fid57

^† Short-Term Investments and Net Other Assets are not included in the pie chart.

Annual Report

Fidelity Ginnie Mae Fund

Investments July 31, 2008

Showing Percentage of Net Assets

U.S. Government Agency - Mortgage Securities - 93.1%
	Principal Amount (000s)		Value (000s)
Fannie Mae - 5.7%
3.613% 9/1/33 (e)	$ 1,068		$ 1,079
3.732% 6/1/33 (e)	3,520		3,511
3.737% 6/1/33 (e)	1,117		1,119
3.741% 10/1/33 (e)	319		321
3.809% 10/1/33 (e)	2,955		2,971
3.901% 6/1/33 (e)	3,139		3,140
3.908% 9/1/33 (e)	2,857		2,909
3.953% 8/1/33 (e)	1,373		1,390
4.002% 4/1/34 (e)	3,587		3,616
4.006% 6/1/34 (e)	6,996		6,992
4.108% 5/1/34 (e)	3,625		3,653
4.11% 4/1/34 (e)	4,400		4,419
4.157% 9/1/33 (e)	2,278		2,297
4.164% 8/1/34 (e)	1,740		1,751
4.165% 12/1/33 (e)	2,722		2,762
4.168% 10/1/33 (e)	3,189		3,234
4.205% 11/1/34 (e)	3,132		3,154
4.235% 1/1/34 (e)	852		861
4.259% 10/1/33 (e)	134		135
4.284% 3/1/33 (e)	163		165
4.391% 6/1/35 (e)	1,187		1,188
4.408% 5/1/35 (e)	1,888		1,900
4.41% 10/1/34 (e)	1,700		1,714
4.412% 4/1/33 (e)	668		669
4.42% 6/1/35 (e)	1,322		1,331
4.424% 6/1/35 (e)	964		967
4.451% 5/1/34 (e)	3,854		3,874
4.473% 7/1/35 (e)	1,162		1,163
4.499% 3/1/35 (e)	1,339		1,352
4.545% 5/1/35 (e)	910		917
4.599% 10/1/35 (e)	84		85
4.618% 8/1/35 (e)	3,756		3,828
4.628% 8/1/35 (e)	1,578		1,596
4.644% 8/1/35 (e)	1,759		1,778
4.669% 8/1/34 (e)	5,458		5,485
4.717% 2/1/36 (e)	4,345		4,396
4.727% 6/1/33 (e)	100		101
4.731% 3/1/35 (e)	1,242		1,251
4.749% 1/1/35 (e)	1,266		1,277
4.774% 12/1/34 (e)	349		353
4.776% 4/1/35 (e)	131		132
4.791% 10/1/35 (e)	788		797
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
4.799% 9/1/36 (e)	$ 2,804		$ 2,855
4.821% 9/1/34 (e)	1,433		1,449
4.837% 10/1/34 (e)	3,332		3,366
4.844% 9/1/34 (e)	1,636		1,655
4.847% 1/1/35 (e)	1,119		1,131
4.852% 9/1/34 (e)	544		551
4.863% 12/1/35 (e)	7,390		7,488
4.873% 8/1/34 (e)	234		235
4.896% 3/1/33 (e)	920		931
4.918% 8/1/34 (e)	2,294		2,320
4.942% 9/1/34 (e)	400		404
4.977% 1/1/35 (e)	6,357		6,401
5.012% 7/1/34 (e)	144		145
5.067% 3/1/34 (e)	5,324		5,379
5.089% 9/1/34 (e)	301		304
5.1% 7/1/35 (e)	1,543		1,561
5.127% 8/1/33 (e)	378		381
5.185% 3/1/35 (e)	162		165
5.243% 11/1/36 (e)	1,141		1,163
5.245% 7/1/35 (e)	138		139
5.298% 12/1/34 (e)	416		421
5.328% 1/1/36 (e)	3,797		3,850
5.424% 11/1/36 (e)	3,738		3,791
5.5% 11/1/13 to 3/1/20 (d)	13,373		13,545
5.502% 6/1/47 (e)	800		815
5.513% 3/1/35 (e)	84		85
5.591% 4/1/37 (e)	4,051		4,127
5.708% 12/1/35 (e)	3,840		3,882
5.759% 4/1/36 (e)	4,290		4,382
5.802% 1/1/35 (e)	4,904		4,900
5.843% 3/1/36 (e)	3,446		3,497
5.906% 5/1/36 (e)	3,261		3,334
6.061% 1/1/35 (e)	4,103		4,122
6.102% 3/1/33 (e)	135		137
6.125% 2/1/33 (e)	278		278
6.398% 7/1/36 (e)	6,840		7,038
6.5% 10/1/17 to 7/1/32	12,813		13,309
7% 11/1/16 to 3/1/17	1,612		1,687
7.5% 7/1/09 to 4/1/17	1,239		1,288
8.5% 12/1/27	198		215
9.5% 9/1/30	463		517
10.25% 10/1/18	9		10
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
11.5% 5/1/14 to 7/1/15	$ 23		$ 26
12.5% 11/1/13 to 7/1/16	51		57
13.25% 9/1/11	28		31
			199,000
Freddie Mac - 3.3%
3.758% 10/1/33 (e)	3,781		3,827
3.789% 5/1/35 (e)	2,980		2,989
4.121% 7/1/35 (e)	2,351		2,369
4.21% 6/1/33 (e)	3,915		3,920
4.221% 1/1/35 (e)	4,985		5,044
4.301% 6/1/33 (e)	4,168		4,185
4.336% 6/1/33 (e)	4,126		4,130
4.35% 6/1/33 (e)	1,427		1,422
4.458% 3/1/34 (e)	5,007		5,035
4.806% 5/1/35 (e)	784		789
4.819% 5/1/35 (e)	3,068		3,089
4.882% 10/1/35 (e)	2,050		2,080
5.013% 10/1/36 (e)	2,029		2,071
5.212% 12/1/35 (e)	1,898		1,918
5.27% 11/1/35 (e)	1,920		1,936
5.341% 10/1/35 (e)	6,330		6,439
5.415% 3/1/37 (e)	636		646
5.5% 11/1/17 to 1/1/25	11,104		11,057
5.601% 3/1/35 (e)	7,017		7,090
5.64% 4/1/36 (e)	2,034		2,069
5.804% 11/1/36 (e)	6,668		6,797
5.832% 5/1/37 (e)	673		685
5.886% 7/1/36 (e)	4,026		4,058
6.366% 8/1/34 (e)	931		932
6.491% 3/1/33 (e)	86		87
6.594% 10/1/36 (e)	10,775		11,084
6.734% 9/1/36 (e)	17,530		17,975
8.5% 2/1/09 to 6/1/25	47		50
9% 5/1/09 to 4/1/21	38		40
9.5% 7/1/30	73		83
10% 1/1/09 to 11/1/19	187		206
10.25% 2/1/09 to 11/1/16	33		35
10.5% 5/1/10	1		1
11.25% 2/1/10	4		4
12% 5/1/10 to 6/1/15	46		51
12.5% 11/1/12 to 5/1/15	58		65
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Freddie Mac - continued
13% 5/1/14 to 11/1/14	$ 9		$ 10
13.5% 1/1/13 to 12/1/14	5		5
			114,273
Government National Mortgage Association - 84.1%
3.5% 3/20/34	1,081		957
3.5% 5/20/35 (e)	1,554		1,530
3.5% 6/20/35 (e)	1,477		1,459
3.625% 3/20/35 (e)	687		680
3.75% 4/20/35 (e)	549		543
4% 11/20/33	1,358		1,202
4% 4/20/35 (e)	7,968		7,864
4% 5/20/35 (e)	8,851		8,735
4.5% 7/20/33 to 4/20/34	47,862		44,164
4.5% 5/20/34 (e)	1,014		1,027
4.75% 4/20/34 (e)	15,111		14,945
4.75% 6/20/34 (e)	14,648		14,486
4.75% 10/20/35 (e)	3,930		3,932
5% 8/15/18 to 6/15/38 (d)	393,792		382,661
5% 4/20/37 (e)	39,405		39,797
5% 8/1/38 (a)(b)	200		193
5% 8/20/38 (a)(b)	100		97
5% 8/20/38 (a)(b)	200		193
5.25% 7/20/34 (e)	737		740
5.25% 7/20/34 (e)	2,282		2,300
5.5% 12/20/18 to 3/15/38 (c)	379,031		378,040
5.5% 9/20/34 (e)	3,352		3,368
5.5% 6/20/35 (e)	2,681		2,678
5.5% 8/1/38 (a)	6,000		5,956
5.5% 8/1/38 (a)	39,000		38,711
5.5% 8/1/38 (a)	17,000		16,874
5.5% 8/1/38 (a)	3,000		2,978
5.5% 8/1/38 (a)	3,000		2,978
5.5% 8/1/38 (a)	50,000		49,629
5.5% 8/1/38 (a)	15,000		14,889
5.5% 8/1/38 (a)(b)	95,000		93,902
5.5% 8/1/38 (a)	25,000		24,815
5.5% 8/1/38 (a)	15,000		14,827
5.5% 8/1/38 (a)	85,000		84,017
5.5% 8/1/38 (a)	36,000		35,584
5.5% 8/1/38 (a)	25,000		24,711
5.5% 8/1/38 (a)	83,000		82,040
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Government National Mortgage Association - continued
5.5% 8/1/38 (a)	$ 29,000		$ 28,665
5.5% 8/1/38 (a)	27,200		26,998
5.5% 8/20/38 (a)	20,000		19,852
5.5% 8/20/38 (a)	15,000		14,827
5.5% 8/20/38 (a)	3,000		2,965
5.5% 8/20/38 (a)	400		397
5.5% 8/20/38 (a)	500		494
5.5% 8/20/38 (a)	200		199
5.5% 8/20/38 (a)	500		494
5.5% 8/20/38 (a)	200		199
5.5% 9/1/38 (a)	11,000		10,838
5.5% 9/1/38 (a)	3,000		2,968
5.5% 9/1/38 (a)	25,000		24,736
5.5% 9/1/38 (a)	31,000		30,673
5.75% 8/20/35 (e)	613		623
6% 8/15/17 to 6/20/38	919,601		936,032
6% 8/1/38 (a)	2,000		2,020
6% 8/1/38 (a)(b)	5,000		5,049
6% 8/20/38 (a)	300		303
6% 8/20/38 (a)	300		303
6% 8/20/38 (a)	200		202
6% 8/20/38 (a)	400		404
6.5% 4/15/23 to 11/20/37	241,818		252,884
6.5% 8/1/38 (a)(b)	3,000		3,092
6.5% 8/20/38 (a)	100		103
6.5% 8/20/38 (a)	200		206
6.5% 8/20/38 (a)	100		103
7% 10/20/16 to 9/20/34	94,666		100,321
7.25% 9/15/27	211		225
7.395% 6/20/25 to 11/20/27	1,634		1,737
7.5% 5/15/17 to 9/20/32	37,377		39,912
8% 8/15/18 to 7/15/32	9,633		10,386
8.5% 9/15/09 to 2/15/31	3,215		3,484
9% 2/15/09 to 5/15/30	1,402		1,550
9.5% 12/20/15 to 4/20/17	485		535
10.5% 1/15/14 to 5/15/19	611		687
13% 2/15/11 to 1/15/15	98		111
13.5% 7/15/10 to 1/15/15	15		17
			2,928,096
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $3,240,733)		3,241,369
Asset-Backed Securities - 0.1%
	Principal Amount (000s)		Value (000s)
Fannie Mae Grantor Trust Series 2005-T4 Class A1C, 2.6113% 9/25/35 (e) (Cost $2,776)	$ 2,776		$ 2,762
Collateralized Mortgage Obligations - 16.0%

U.S. Government Agency - 16.0%
Fannie Mae:
floater Series 2007-95 Class A1, 2.7113% 8/27/36 (d)(e)	25,784		25,606
Series 2003-39 Class IA, 5.5% 10/25/22 (e)(f)	3,716		583
Series 2006-48 Class LF, 0% 8/25/34 (e)	79		82
target amortization class Series G94-2 Class D, 6.45% 1/25/24	2,397		2,467
Fannie Mae STRIP:
Series 331 Class 12, 6.5% 2/1/33 (f)	2,391		607
Series 339 Class 5, 5.5% 7/1/33 (f)	3,827		937
Series 343 Class 16, 5.5% 5/1/34 (f)	2,749		668
Freddie Mac Multi-class participation certificates guaranteed:
floater:
Series 2861 Class JF, 2.7575% 4/15/17 (e)	2,268		2,252
Series 3094 Class UF, 0% 9/15/34 (e)	1,030		734
planned amortization class:
Series 2220 Class PD, 8% 3/15/30	3,250		3,404
Series 2787 Class OI, 5.5% 10/15/24 (f)	1,395		40
Series 40 Class K, 6.5% 8/17/24	1,493		1,554
sequential payer:
Series 2204 Class N, 7.5% 12/20/29	6,314		6,587
Series 2601 Class TI, 5.5% 10/15/22 (f)	15,618		2,609
Series 2750 Class ZT, 5% 2/15/34	6,382		5,444
Series 2866 Class CY, 4.5% 10/15/19	4,491		4,232
Series 2957 Class SW, 3.5425% 4/15/35 (e)(f)	10,955		634
Ginnie Mae guaranteed Multi-family REMIC pass-thru securities sequential payer Series 2002-71:
Class Z, 5.5% 10/20/32	48,210		47,693
Class ZJ, 6% 10/20/32	24,689		25,033
Ginnie Mae guaranteed REMIC pass-thru securities:
floater:
Series 2001-22 Class FM, 2.8081% 5/20/31 (e)	596		591
Series 2002-41 Class HF, 2.86% 6/16/32 (e)	678		672
Series 2007-22 Class TC, 0% 4/20/37 (e)	1,952		2,346
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Ginnie Mae guaranteed REMIC pass-thru securities: - continued
planned amortization class:
Series 1993-13 Class PD, 6% 5/20/29	$ 15,222		$ 15,449
Series 1994-4 Class KQ, 7.9875% 7/16/24	934		1,001
Series 2000-26 Class PK, 7.5% 9/20/30	2,535		2,602
Series 2001-65 Class PH, 6% 11/20/28	6,323		6,491
Series 2002-5 Class PD, 6.5% 5/16/31	4,266		4,300
Series 2002-50 Class PE, 6% 7/20/32	17,485		17,815
Series 2003-31 Class PI, 5.5% 4/16/30 (f)	2,216		135
Series 2003-70 Class LE, 5% 7/20/32	44,000		42,484
Series 2004-19:
Class DJ, 4.5% 3/20/34	2,184		2,186
Class DP, 5.5% 3/20/34	3,895		4,004
Series 2004-30:
Class PC, 5% 11/20/30	19,736		19,518
Class UA, 3.5% 2/20/32	4,134		4,079
Series 2004-64 Class KE, 5.5% 12/20/33	22,978		22,481
Series 2004-98 Class IG, 5.5% 2/20/30 (f)	2,581		280
Series 2005-17 Class IA, 5.5% 8/20/33 (f)	6,321		646
Series 2005-24 Class TC, 5.5% 3/20/35	5,403		5,273
Series 2005-54 Class BM, 5% 7/20/35	9,658		9,532
Series 2005-57 Class PB, 5.5% 7/20/35	5,673		5,591
Series 2006-50 Class JC, 5% 6/20/36	11,780		11,300
Series 2008-28 Class PC, 5.5% 4/20/34	18,652		19,090
sequential payer:
Series 1995-4 Class CQ, 8% 6/20/25	688		739
Series 2001-40 Class Z, 6% 8/20/31	7,579		7,676
Series 2002-18 Class ZB, 6% 3/20/32	7,468		7,615
Series 2002-29 Class SK, 8.25% 5/20/32 (e)	323		336
Series 2002-42 Class ZA, 6% 6/20/32	4,562		4,613
Series 2002-45 Class Z, 6% 6/20/32	2,713		2,766
Series 2002-67 Class ZA, 6% 9/20/32	87,092		88,318
Series 2003-7 Class VP, 6% 11/20/13	4,327		4,391
Series 2004-65 Class VE, 5.5% 7/20/15	4,195		4,282
Series 2004-86 Class G, 6% 10/20/34	6,273		6,387
Series 2005-28 Class AJ, 5.5% 4/20/35	30,674		30,898
Series 2005-47 Class ZY, 6% 6/20/35	4,811		4,575
Series 2005-6 Class EX, 5.5% 11/20/34	1,001		941
Series 2005-82 Class JV, 5% 6/20/35	3,500		3,234
Series 1995-6 Class Z, 7% 9/20/25	1,974		2,049
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Ginnie Mae guaranteed REMIC pass-thru securities: - continued
Series 2003-11 Class S, 4.09% 2/16/33 (e)(f)	$ 9,294		$ 632
Series 2003-92 Class SN, 3.97% 10/16/33 (e)(f)	27,980		2,000
Series 2004-32 Class GS, 4.04% 5/16/34 (e)(f)	2,523		170
Series 2005-6 Class EY, 5.5% 11/20/33	1,016		951
Series 2006-13 Class DS, 7.4128% 3/20/36 (e)	41,316		35,955
Series 2007-18 Class S, 4.34% 4/16/37 (e)(f)	42,993		3,208
Series 2007-35 Class SC, 25.44% 6/16/37 (e)	14,563		18,066
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $556,142)		558,834
Commercial Mortgage Securities - 0.4%

Fannie Mae subordinate REMIC pass-thru certificates:
Series 1998-M3 Class IB, 0.7378% 1/17/38 (e)(f)	18,265		246
Series 1998-M4 Class N, 1.0775% 2/25/35 (e)(f)	5,731		47
Ginnie Mae guaranteed Multi-family REMIC pass-thru securities:
sequential payer Series 2001-58 Class X, 1.0596% 9/16/41 (e)(f)	126,966		2,393
Series 2001-12 Class X, 0.7887% 7/16/40 (e)(f)	37,031		537
Ginnie Mae guaranteed REMIC pass-thru securities:
sequential payer Series 2002-81 Class IO, 1.8292% 9/16/42 (e)(f)	118,820		3,424
Series 2002-62 Class IO, 1.4027% 8/16/42 (e)(f)	77,327		2,075
Series 2002-85 Class X, 1.7269% 3/16/42 (e)(f)	65,008		4,013
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $30,832)		12,735

Cash Equivalents - 9.2%
	Maturity Amount (000s)		Value (000s)
Investments in repurchase agreements in a joint trading account at 2.19%, dated 7/31/08 due 8/1/08 (Collateralized by U.S. Government Obligations) # (Cost $318,944)	$ 318,963		$ 318,944
TOTAL INVESTMENT PORTFOLIO - 118.8% (Cost $4,149,427)			4,134,644
NET OTHER ASSETS - (18.8)%			(654,196)
NET ASSETS - 100%		$ 3,480,448

Futures Contracts
	Expiration Date	Underlying Face Amount at Value (000s)	Unrealized Appreciation/ (Depreciation) (000s)
Sold
Treasury Contracts
216 UST 2 YR Index Contracts	Oct. 2008	$ 45,792	$ (88)

The face value of futures sold as a percentage of net assets - 1.3%

Swap Agreements
	Expiration Date	Notional Amount (000s)	Value (000s)
Interest Rate Swaps
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 3.554% with Credit Suisse First Boston	April 2013	$ 54,000	$ 803
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 4.92% with Morgan Stanley, Inc.	Sept. 2012	75,000	(3,649)
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 5.523% with JPMorgan Chase, Inc.	August 2017	12,000	(1,038)
		$ 141,000	$ (3,884)

Legend

(a) Security or a portion of the security purchased on a delayed delivery or when-issued basis.

(b) A portion of the security is subject to a forward commitment to sell.

(c) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $650,000.

(d) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $3,221,000.

(e) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages or assets. Principal shown is the outstanding par amount of the pool held as of the end of the period.

# Additional Information on each counterparty to the repurchase agreement is as follows:

Repurchase Agreement / Counterparty	Value (Amounts in thousands)
$318,944,000 due 8/01/08 at 2.19%
BNP Paribas Securities Corp.	$ 23,844
Banc of America Securities LLC	36,982
Bank of America, NA	35,792
Barclays Capital, Inc.	155,708
Greenwich Capital Markets, Inc.	5,839
ING Financial Markets LLC	33,089
J.P. Morgan Securities, Inc.	17,958
RBC Capital Markets Corp.	4,866
WestLB AG	4,866
	$ 318,944

Income Tax Information

At July 31, 2008, the fund had a capital loss carryforward of approximately $40,263,000 all of which will expire on July 31, 2015.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Fidelity Ginnie Mae Fund

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amount)	July 31, 2008

Assets
Investment in securities, at value (including repurchase agreements of $318,944) - See accompanying schedule: Unaffiliated issuers (cost $4,149,427)		$ 4,134,644
Commitment to sell securities on a delayed delivery basis	$ (34,002)
Receivable for securities sold on a delayed delivery basis	33,951	(51)
Receivable for investments sold, regular delivery		4,669
Cash		13
Receivable for fund shares sold		1,897
Interest receivable		17,596
Other receivables		59
Total assets		4,158,827

Liabilities
Payable for investments purchased on a delayed delivery basis	$ 669,560
Payable for fund shares redeemed	1,941
Distributions payable	1,536
Swap agreements, at value	3,884
Accrued management fee	907
Payable for daily variation on futures contracts	98
Other affiliated payables	394
Other payables and accrued expenses	59
Total liabilities		678,379

Net Assets		$ 3,480,448
Net Assets consist of:
Paid in capital		$ 3,555,150
Distributions in excess of net investment income		(14,848)
Accumulated undistributed net realized gain (loss) on investments		(41,048)
Net unrealized appreciation (depreciation) on investments		(18,806)
Net Assets, for 320,563 shares outstanding		$ 3,480,448
Net Asset Value, offering price and redemption price per share ($3,480,448 ÷ 320,563 shares)		$ 10.86

See accompanying notes which are an integral part of the financial statements.

Annual Report

Statement of Operations

Amounts in thousands	Year ended July 31, 2008

Investment Income
Interest		$ 177,329

Expenses
Management fee	$ 10,438
Transfer agent fees	3,313
Fund wide operations fee	1,142
Independent trustees' compensation	14
Miscellaneous	9
Total expenses before reductions	14,916
Expense reductions	(40)	14,876
Net investment income		162,453
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	24,770
Futures contracts	(190)
Swap agreements	(7,770)
Total net realized gain (loss)		16,810
Change in net unrealized appreciation (depreciation) on: Investment securities	48,391
Futures contracts	(88)
Swap agreements	(2,404)
Delayed delivery commitments	(51)
Total change in net unrealized appreciation (depreciation)		45,848
Net gain (loss)		62,658
Net increase (decrease) in net assets resulting from operations		$ 225,111

See accompanying notes which are an integral part of the financial statements.

Annual Report

Fidelity Ginnie Mae Fund
Financial Statements - continued

Statement of Changes in Net Assets

Amounts in thousands	Year ended July 31, 2008	Year ended July 31, 2007
Increase (Decrease) in Net Assets
Operations
Net investment income	$ 162,453	$ 165,363
Net realized gain (loss)	16,810	(26,430)
Change in net unrealized appreciation (depreciation)	45,848	33,224
Net increase (decrease) in net assets resulting from operations	225,111	172,157
Distributions to shareholders from net investment income	(165,414)	(164,399)
Share transactions Proceeds from sales of shares	794,966	321,666
Reinvestment of distributions	146,424	145,593
Cost of shares redeemed	(692,940)	(667,711)
Net increase (decrease) in net assets resulting from share transactions	248,450	(200,452)
Total increase (decrease) in net assets	308,147	(192,694)

Net Assets
Beginning of period	3,172,301	3,364,995
End of period (including distributions in excess of net investment income of $14,848 and distributions in excess of net investment income of $4,664, respectively)	$ 3,480,448	$ 3,172,301
Other Information Shares
Sold	72,697	29,988
Issued in reinvestment of distributions	13,412	13,559
Redeemed	(63,680)	(62,274)
Net increase (decrease)	22,429	(18,727)

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights

Years ended July 31,	2008	2007	2006	2005	2004
Selected Per-Share Data
Net asset value, beginning of period	$ 10.64	$ 10.62	$ 11.00	$ 11.00	$ 11.05
Income from Investment Operations
Net investment income^B	.534	.537	.497	.443	.404
Net realized and unrealized gain (loss)	.230	.017	(.315)	.004	.027
Total from investment operations	.764	.554	.182	.447	.431
Distributions from net investment income	(.544)	(.534)	(.542)	(.447)	(.391)
Distributions from net realized gain	-	-	(.020)	-	(.090)
Total distributions	(.544)	(.534)	(.562)	(.447)	(.481)
Net asset value, end of period	$ 10.86	$ 10.64	$ 10.62	$ 11.00	$ 11.00
Total Return^A	7.27%	5.29%	1.70%	4.11%	3.96%
Ratios to Average Net Assets^C
Expenses before reductions	.45%	.45%	.45%	.57%	.60%
Expenses net of fee waivers, if any	.45%	.45%	.45%	.57%	.60%
Expenses net of all reductions	.45%	.45%	.45%	.57%	.60%
Net investment income	4.90%	5.01%	4.61%	4.00%	3.64%
Supplemental Data
Net assets, end of period (in millions)	$ 3,480	$ 3,172	$ 3,365	$ 4,033	$ 3,977
Portfolio turnover rate	227%	165%	183%	160%	155%

^A Total returns would have been lower had certain expenses not been reduced during the periods shown.

^B Calculated based on average shares outstanding during the period.

^C Expense ratios reflect operating expenses of the Fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the Fund during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the Fund.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Fidelity Intermediate Government Income Fund

Performance: The Bottom Line

Average Annual Total Returns

Periods ended July 31, 2008	Past 1 year	Past 5 years	Past 10 years
Fidelity Intermediate Govt Income Fund	8.24%	4.10%	5.25%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in Fidelity Intermediate Government Income Fund on July 31, 1998. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers U.S. Government Intermediate Index performed over the same period.

fid59

Annual Report

Fidelity Intermediate Government Income Fund

Management's Discussion of Fund Performance

Comments from William Irving, who became Portfolio Manager of Fidelity® Intermediate Government Income Fund on April 1, 2008

For the 12 months ending July 31, 2008, Intermediate Government Income returned 8.24% and the Lehman Brothers U.S. Government Intermediate Index gained 8.42%. What we lost through sector selection - underweighting the better-performing U.S. Treasury and agency segments while overweighting the lagging mortgage-backed sector - we made up for through other Treasury-related decisions. In particular, security lending - whereby we loaned Treasury holdings overnight and invested the proceeds in higher-yielding investments - bolstered the fund's results. Security and sector selection among mortgages also worked in the fund's favor. Specifically, good picks among 15-year securities and collateralized mortgage obligations (CMOs) - which are made up of pools of pass-through securities whose cash flows are carved out into classes with their own expected maturities and cash-flow patterns - aided results. In addition, our decision to maintain exposure to hybrid adjustable-rate mortgage securities (ARMs) - which give homeowners a relatively low fixed-interest rate for an initial period and then convert to an ARM where the interest rate periodically resets - was beneficial because they generally out-paced the index when adjusted for their lower interest-rate sensitivity.

Annual Report

Fidelity Intermediate Government Income Fund

Investment Changes (Unaudited)

Coupon Distribution as of July 31, 2008
	% of fund's investments	% of fund's investments 6 months ago
Less than 2%	12.0	0.0
2 - 2.99%	8.8	5.8
3 - 3.99%	12.6	14.9
4 - 4.99%	28.3	33.6
5 - 5.99%	15.6	19.3
6 - 6.99%	5.8	6.3
7% and over	0.4	0.7

Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments.

Weighted Average Maturity as of July 31, 2008
		6 months ago
Years	3.5	3.8

Duration as of July 31, 2008
		6 months ago
Years	3.4	3.5

Asset Allocation (% of fund's net assets)
As of July 31, 2008*			As of January 31, 2008**
	Mortgage Securities 15.4%			Mortgage Securities 30.5%
	CMOs and Other Mortgage Related Securities 6.8%			CMOs and Other Mortgage Related Securities 9.2%
	U.S. Treasury Obligations 48.3%			U.S. Treasury Obligations 50.5%
	U.S. Government Agency Obligations 28.5%			U.S. Government Agency Obligations 16.0%
	Asset-Backed Securities 0.1%			Asset-Backed Securities 0.2%
	Short-Term Investments and Net Other Assets 0.9%			Short-Term Investments and Net Other Assets (6.4)%^†
* Futures and Swaps		1.1%	** Futures and Swaps		7.2%

fid77

^† Short-Term Investments and Net Other Assets are not included in the pie chart.

Annual Report

Fidelity Intermediate Government Income Fund

Investments July 31, 2008

Showing Percentage of Net Assets

U.S. Government and Government Agency Obligations - 76.8%
	Principal Amount (000s)		Value (000s)
U.S. Government Agency Obligations - 28.5%
Fannie Mae:
2.5% 4/9/10	$ 5,130		$ 5,083
3% 7/12/10	3,000		2,990
3.25% 8/12/10	18,473		18,490
3.375% 5/19/11	21,075		20,999
3.875% 12/10/09	9,980		10,090
3.875% 7/12/13	13,910		13,813
4.75% 11/19/12	16,010		16,520
4.875% 5/18/12	8,000		8,282
5% 2/16/12	15,040		15,640
5.375% 6/12/17	19,239		20,312
6% 5/15/11	8,545		9,102
Freddie Mac:
3.25% 7/16/10	821		822
3.5% 5/29/13	18,200		17,788
3.75% 6/28/13	2,250		2,222
3.875% 6/29/11	16,481		16,626
4.125% 11/30/09	18,200		18,466
4.875% 6/13/18	5,501		5,590
5.125% 4/18/11	2,000		2,083
5.125% 11/17/17 (b)	5,000		5,182
5.25% 7/18/11	12,000		12,564
5.5% 8/23/17	17,907		19,027
Israeli State (guaranteed by U.S. Government through Agency for International Development) 6.8% 2/15/12	7,500		7,967
Private Export Funding Corp. secured:
4.974% 8/15/13	3,435		3,555
5.66% 9/15/11 (c)	9,000		9,511
5.685% 5/15/12	3,915		4,154
Small Business Administration guaranteed development participation certificates Series 2004-20H Class 1, 5.17% 8/1/24	680		672
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A, 6.06% 8/1/10	10,000		10,164
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS			277,714
U.S. Treasury Obligations - 48.3%
U.S. Treasury Notes:
1.75% 3/31/10 (b)	140,042		138,622
2.125% 1/31/10	16,891		16,845
U.S. Government and Government Agency Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Treasury Obligations - continued
U.S. Treasury Notes: - continued
2.75% 7/31/10	$ 14,000		$ 14,057
2.75% 2/28/13	49,225		48,275
2.875% 6/30/10	11,460		11,543
3.375% 6/30/13 (b)	25,378		25,501
3.5% 5/31/13	1,950		1,972
3.875% 5/15/18	3,088		3,061
4% 2/15/14	17,519		18,112
4.25% 11/15/14 (b)	38,000		39,802
4.25% 11/15/17	6,000		6,135
4.625% 7/31/12 (e)	70,500		74,570
4.75% 3/31/11	2,182		2,101
4.75% 5/15/14 (b)(e)	15,608		16,764
4.75% 8/15/17	50,213		53,285
TOTAL U.S. TREASURY OBLIGATIONS			470,645
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $749,175)		748,359
U.S. Government Agency - Mortgage Securities - 15.4%

Fannie Mae - 10.1%
3.613% 9/1/33 (f)	232		235
3.71% 6/1/33 (f)	292		291
3.732% 6/1/33 (f)	768		766
3.737% 5/1/33 (f)	309		309
3.741% 10/1/33 (f)	66		66
3.901% 6/1/33 (f)	684		685
3.906% 5/1/34 (f)	397		399
3.916% 5/1/34 (f)	517		521
3.953% 8/1/33 (f)	299		303
3.98% 9/1/33 (f)	530		533
3.988% 10/1/18 (f)	46		46
4% 9/1/13 to 5/1/20	2,471		2,372
4.085% 6/1/33 (f)	57		57
4.108% 5/1/34 (f)	788		794
4.11% 4/1/34 (f)	955		960
4.174% 1/1/35 (f)	173		174
4.235% 1/1/34 (f)	187		189
4.25% 2/1/35 (f)	82		82
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
4.251% 8/1/33 (f)	$ 109		$ 109
4.259% 10/1/33 (f)	29		29
4.301% 3/1/33 (f)	45		45
4.305% 6/1/33 (f)	700		705
4.306% 5/1/33 (f)	19		19
4.328% 1/1/35 (f)	93		93
4.337% 8/1/33 (f)	316		318
4.341% 10/1/19 (f)	94		94
4.366% 2/1/34 (f)	160		162
4.375% 5/1/35 (f)	190		191
4.378% 1/1/34 (f)	1,015		1,021
4.388% 2/1/35 (f)	158		160
4.391% 10/1/33 (f)	370		370
4.391% 6/1/35 (f)	264		264
4.41% 10/1/34 (f)	383		386
4.418% 5/1/35 (f)	71		71
4.42% 6/1/35 (f)	289		291
4.425% 8/1/34 (f)	219		221
4.427% 1/1/35 (f)	80		80
4.435% 3/1/35 (f)	140		141
4.441% 8/1/35 (f)	1,176		1,180
4.447% 5/1/35 (f)	921		923
4.473% 7/1/35 (f)	252		252
4.483% 11/1/33 (f)	131		132
4.485% 12/1/34 (f)	42		42
4.492% 1/1/35 (f)	438		444
4.5% 3/1/18 to 11/1/19	2,440		2,393
4.545% 5/1/35 (f)	5,337		5,374
4.561% 2/1/35 (f)	353		357
4.565% 7/1/35 (f)	234		234
4.571% 1/1/35 (f)	738		745
4.599% 10/1/35 (f)	42		43
4.618% 8/1/35 (f)	851		868
4.644% 8/1/35 (f)	384		388
4.65% 10/1/34 (f)	274		276
4.669% 8/1/34 (f)	1,193		1,199
4.694% 10/1/34 (f)	256		258
4.701% 2/1/35 (f)	1,200		1,212
4.705% 7/1/34 (f)	238		240
4.707% 2/1/35 (f)	527		535
4.717% 2/1/36 (f)	996		1,008
4.727% 6/1/33 (f)	23		23
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
4.74% 1/1/35 (f)	$ 397		$ 402
4.774% 12/1/34 (f)	72		73
4.776% 4/1/35 (f)	28		28
4.783% 7/1/35 (f)	384		387
4.791% 10/1/35 (f)	162		164
4.797% 6/1/35 (f)	272		273
4.799% 10/1/35 (f)	142		143
4.812% 11/1/34 (f)	200		202
4.821% 9/1/34 (f)	328		331
4.834% 7/1/36 (f)	279		281
4.841% 4/1/35 (f)	939		953
4.847% 1/1/35 (f)	255		257
4.85% 7/1/35 (f)	487		492
4.859% 10/1/34 (f)	807		816
4.873% 8/1/34 (f)	51		51
4.88% 5/1/35 (f)	163		164
4.896% 3/1/33 (f)	211		213
4.926% 8/1/34 (f)	707		714
4.941% 8/1/34 (f)	590		597
4.969% 3/1/35 (f)	422		428
4.985% 2/1/35 (f)	461		467
4.986% 4/1/33 (f)	12		12
4.987% 2/1/34 (f)	629		634
5% 2/1/16 to 4/1/22	538		531
5.012% 7/1/34 (f)	32		32
5.013% 12/1/32 (f)	846		859
5.047% 10/1/35 (f)	519		525
5.089% 9/1/34 (f)	60		61
5.099% 10/1/35 (f)	361		366
5.127% 8/1/33 (f)	82		83
5.131% 8/1/34 (f)	495		502
5.171% 3/1/36 (f)	1,223		1,242
5.185% 3/1/35 (f)	41		41
5.199% 5/1/35 (f)	55		55
5.243% 11/1/36 (f)	249		254
5.245% 7/1/35 (f)	30		30
5.267% 12/1/36 (f)	240		245
5.271% 7/1/35 (f)	2,239		2,270
5.278% 3/1/35 (f)	52		52
5.298% 12/1/34 (f)	83		84
5.326% 4/1/36 (f)	426		438
5.328% 1/1/36 (f)	839		850
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
5.349% 2/1/36 (f)	$ 78		$ 79
5.349% 2/1/37 (f)	218		223
5.354% 3/1/37 (f)	1,602		1,631
5.357% 2/1/36 (f)	633		643
5.392% 2/1/37 (f)	1,096		1,115
5.409% 3/1/35 (f)	470		472
5.448% 2/1/37 (f)	1,464		1,494
5.5% 1/1/09 to 6/1/20 (d)	11,246		11,386
5.502% 6/1/47 (f)	175		179
5.513% 3/1/35 (f)	18		18
5.524% 11/1/36 (f)	433		440
5.591% 4/1/37 (f)	885		902
5.632% 2/1/36 (f)	260		265
5.641% 4/1/36 (f)	1,036		1,057
5.665% 6/1/36 (f)	619		632
5.793% 3/1/36 (f)	2,107		2,152
5.801% 1/1/36 (f)	256		260
5.816% 5/1/36 (f)	1,545		1,578
5.822% 9/1/36 (f)	407		414
5.896% 12/1/36 (f)	383		392
5.906% 5/1/36 (f)	713		729
5.951% 5/1/36 (f)	244		250
5.955% 2/1/35 (f)	19		19
6% 5/1/12 to 3/1/31	14,243		14,633
6.009% 4/1/36 (f)	4,352		4,457
6.095% 3/1/37 (f)	432		444
6.102% 3/1/33 (f)	30		30
6.125% 2/1/33 (f)	57		57
6.169% 4/1/36 (f)	417		428
6.206% 2/1/35 (f)	22		23
6.226% 3/1/37 (f)	140		143
6.234% 2/1/35 (f)	51		51
6.251% 6/1/36 (f)	59		60
6.5% 6/1/16 to 7/1/32	1,799		1,866
7% 12/1/08 to 9/1/31	271		280
7.5% 5/1/37	339		359
9% 2/1/13	69		72
9.5% 11/15/09	58		59
10.25% 10/1/09 to 10/1/18	6		6
11% 8/1/10 to 1/1/16	170		180
11.25% 5/1/14 to 1/1/16	45		50
11.5% 9/1/11 to 6/15/19	139		152
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
12.25% 7/1/12 to 8/1/13	$ 6		$ 7
12.5% 9/1/12 to 7/1/16	126		144
12.75% 10/1/11 to 6/1/15	64		69
13% 7/1/13 to 7/1/15	58		67
13.25% 9/1/11	45		50
13.5% 11/1/14 to 12/1/14	13		15
15% 4/1/12	2		3
			98,315
Freddie Mac - 5.2%
3.474% 7/1/33 (f)	721		721
3.789% 5/1/35 (f)	661		663
4% 1/1/19 to 11/1/20	3,862		3,668
4.006% 4/1/34 (f)	1,310		1,310
4.121% 7/1/35 (f)	520		524
4.221% 1/1/35 (f)	1,086		1,099
4.275% 6/1/35 (f)	116		116
4.307% 12/1/34 (f)	117		118
4.35% 6/1/33 (f)	312		311
4.406% 3/1/35 (f)	128		128
4.422% 2/1/34 (f)	89		89
4.429% 3/1/35 (f)	124		124
4.541% 2/1/35 (f)	235		237
4.556% 5/1/33 (f)	882		885
4.667% 9/1/36 (f)	277		279
4.79% 2/1/36 (f)	110		111
4.791% 3/1/35 (f)	237		239
4.84% 4/1/35 (f)	465		468
4.882% 10/1/35 (f)	449		455
5% 3/1/18 to 9/1/35	8,846		8,818
5.013% 10/1/36 (f)	463		472
5.027% 7/1/35 (f)	1,355		1,370
5.125% 7/1/35 (f)	409		414
5.264% 12/1/33 (f)	752		759
5.27% 11/1/35 (f)	417		421
5.275% 2/1/36 (f)	38		38
5.376% 3/1/35 (f)	80		81
5.415% 3/1/37 (f)	141		143
5.485% 1/1/36 (f)	397		403
5.5% 8/1/14 to 11/1/20	2,806		2,839
5.52% 1/1/36 (f)	562		570
5.52% 4/1/37 (f)	177		181
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Freddie Mac - continued
5.579% 2/1/35 (f)	$ 161		$ 162
5.592% 3/1/36 (f)	1,779		1,807
5.743% 10/1/35 (f)	112		114
5.745% 5/1/37 (f)	1,872		1,902
5.782% 3/1/37 (f)	919		933
5.792% 4/1/37 (f)	856		870
5.814% 5/1/37 (f)	1,052		1,069
5.816% 6/1/37 (f)	646		657
5.829% 5/1/37 (f)	290		295
5.832% 5/1/37 (f)	148		150
5.949% 4/1/36 (f)	3,058		3,120
6% 7/1/16 to 2/1/19	3,035		3,142
6.021% 6/1/36 (f)	309		315
6.141% 2/1/37 (f)	272		278
6.143% 12/1/36 (f)	1,933		1,976
6.224% 5/1/36 (f)	253		259
6.273% 12/1/36 (f)	626		641
6.378% 7/1/36 (f)	295		302
6.417% 6/1/37 (f)	69		71
6.483% 9/1/36 (f)	1,448		1,487
6.491% 3/1/33 (f)	19		19
6.5% 12/1/21	812		838
6.641% 8/1/37 (f)	495		510
7.581% 4/1/37 (f)	75		78
8.5% 5/1/17	7		7
9% 11/1/09 to 7/1/16	27		29
9.5% 7/1/16 to 8/1/21	224		246
10% 7/1/09 to 3/1/21	431		478
10.5% 9/1/09 to 5/1/21	16		17
11% 9/1/20	18		20
11.25% 2/1/10 to 6/1/14	54		60
11.5% 10/1/15 to 8/1/19	41		46
11.75% 7/1/15	1		1
12% 10/1/09 to 11/1/19	95		104
12.25% 12/1/11 to 8/1/15	44		49
12.5% 10/1/09 to 6/1/19	445		500
12.75% 2/1/10 to 10/1/10	4		4
13% 9/1/10 to 5/1/17	81		90
13.25% 11/1/10 to 10/1/13	23		27
13.5% 11/1/10 to 8/1/11	16		17
14% 11/1/12 to 4/1/16	4		5
14.5% 12/1/10	0		0
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Freddie Mac - continued
14.75% 3/1/10	$ 0		$ 0
16.25% 7/1/11	0		0
			50,749
Government National Mortgage Association - 0.1%
8% 12/15/23	358		385
8.5% 6/15/16 to 2/15/17	5		5
10.5% 9/15/15 to 10/15/21	590		677
10.75% 12/15/09 to 3/15/10	4		4
11% 5/20/16 to 1/20/21	38		44
12.5% 12/15/10	1		1
13% 1/15/11 to 10/15/13	36		40
13.25% 8/15/14	9		10
13.5% 7/15/11 to 12/15/14	8		9
14% 6/15/11	5		5
			1,180
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $148,683)		150,244
Asset-Backed Securities - 0.1%

Fannie Mae Grantor Trust Series 2005-T4 Class A1C, 2.6113% 9/25/35 (f) (Cost $607)	607		604
Collateralized Mortgage Obligations - 6.8%

U.S. Government Agency - 6.8%
Fannie Mae:
floater:
Series 1994-42 Class FK, 3.34% 4/25/24 (f)	3,019		2,839
Series 2007-95 Class A1, 2.7113% 8/27/36 (f)	1,289		1,280
planned amortization class:
Series 1988-21 Class G, 9.5% 8/25/18	68		75
Series 1994-12 Class PH, 6.25% 1/25/09	112		112
Series 2002-83 Class ME, 5% 12/25/17	5,150		5,063
Series 2003-28 Class KG, 5.5% 4/25/23	725		697
sequential payer Series 1993-238 Class C, 6.5% 12/25/08	400		400
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Fannie Mae subordinate REMIC pass-thru certificates:
floater:
Series 2001-38 Class QF, 3.4413% 8/25/31 (f)	$ 590		$ 594
Series 2002-60 Class FV, 3.4613% 4/25/32 (f)	214		214
Series 2002-74 Class FV, 2.9113% 11/25/32 (f)	2,989		2,963
Series 2002-75 Class FA, 3.4613% 11/25/32 (f)	438		438
planned amortization class:
Series 2001-68 Class QZ, 5.5% 12/25/16	562		570
Series 2002-11:
Class QC, 5.5% 3/25/17	1,229		1,249
Class UC, 6% 3/25/17	942		963
Series 2002-16 Class PG, 6% 4/25/17	1,211		1,244
Series 2002-18 Class PC, 5.5% 4/25/17	1,790		1,820
Series 2002-61 Class PG, 5.5% 10/25/17	1,945		1,978
Series 2002-71 Class UC, 5% 11/25/17	3,155		3,122
Series 2002-9 Class PC, 6% 3/25/17	87		89
Series 2003-122 Class OL, 4% 12/25/18	880		820
Series 2003-128 Class NE, 4% 12/25/16	1,260		1,239
Series 2003-85 Class GD, 4.5% 9/25/18	1,425		1,386
Series 2004-80 Class LD, 4% 1/25/19	980		953
Series 2004-81:
Class KC, 4.5% 4/25/17	690		691
Class KD, 4.5% 7/25/18	1,315		1,295
Series 2005-52 Class PB, 6.5% 12/25/34	1,555		1,618
sequential payer:
Series 2002-56 Class MC, 5.5% 9/25/17	352		360
Series 2002-57 Class BD, 5.5% 9/25/17	311		319
Series 2003-18 Class EY, 5% 6/25/17	1,638		1,654
Freddie Mac Multi-class participation certificates guaranteed:
floater:
Series 2526 Class FC, 2.8575% 11/15/32 (f)	676		669
Series 2630 Class FL, 2.9575% 6/15/18 (f)	58		59
Series 2925 Class CQ, 0% 1/15/35 (f)	225		140
planned amortization class:
Series 2356 Class GD, 6% 9/15/16	365		374
Series 2376 Class JE, 5.5% 11/15/16	325		327
Series 2378 Class PE, 5.5% 11/15/16	918		925
Series 2381 Class OG, 5.5% 11/15/16	263		264
Series 2390 Class CH, 5.5% 12/15/16	838		848
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Freddie Mac Multi-class participation certificates guaranteed: - continued
planned amortization class:
Series 2425 Class JH, 6% 3/15/17	$ 445		$ 456
Series 2628 Class OE, 4.5% 6/15/18	705		687
Series 2640 Class GE, 4.5% 7/15/18	3,690		3,594
Series 2695 Class DG, 4% 10/15/18	1,635		1,521
Series 2752 Class PW, 4% 4/15/22	902		903
Series 2802 Class OB, 6% 5/15/34	1,355		1,390
Series 2810 Class PD, 6% 6/15/33	1,020		1,024
Series 2831 Class PB, 5% 7/15/19	1,975		1,955
Series 2866 Class XE, 4% 12/15/18	1,875		1,825
sequential payer:
Series 1929 Class EZ, 7.5% 2/17/27	2,000		2,113
Series 2546 Class C, 5% 12/15/17	1,115		1,107
Series 2570 Class CU, 4.5% 7/15/17	174		173
Series 2572 Class HK, 4% 2/15/17	242		239
Series 2617 Class GW, 3.5% 6/15/16	897		896
Series 2860 Class CP, 4% 10/15/17	176		174
Series 2866 Class N, 4.5% 12/15/18	1,212		1,217
Series 2937 Class HJ, 5% 10/15/19	835		840
Series 2998 Class LY, 5.5% 7/15/25	295		279
Series 3007 Class EW, 5.5% 7/15/25	1,125		1,070
Series 3013 Class VJ, 5% 1/15/14	1,721		1,739
Series 3266 Class C, 5% 2/15/20	593		595
Series 2715 Class NG, 4.5% 12/15/18	890		857
Series 2769 Class BU, 5% 3/15/34	1,014		904
Series 2975 Class NA, 5% 7/15/23	434		439
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $65,739)		65,648

Cash Equivalents - 19.2%
	Maturity Amount (000s)		Value (000s)
Investments in repurchase agreements in a joint trading account at 2.19%, dated 7/31/08 due 8/1/08:
(Collateralized by U.S. Government Obligations) #	$ 15,311		$ 15,310
(Collateralized by U.S. Government Obligations) # (a)	172,048		172,038
TOTAL CASH EQUIVALENTS (Cost $187,348)		187,348
TOTAL INVESTMENT PORTFOLIO - 118.3% (Cost $1,151,552)			1,152,203
NET OTHER ASSETS - (18.3)%			(178,075)
NET ASSETS - 100%		$ 974,128

Futures Contracts
	Expiration Date	Underlying Face Amount at Value (000s)	Unrealized Appreciation/ (Depreciation) (000s)
Purchased
Treasury Contracts
7 UST 2 YR Index Contracts	Oct. 2008	$ 1,484	$ 4
58 UST 5 YR Index Contracts	Oct. 2008	6,457	34
TOTAL TREASURY CONTRACTS			$ 38

The face value of futures purchased as a percentage of net assets - 0.9%

Swap Agreements
	Expiration Date	Notional Amount (000s)	Value (000s)
Interest Rate Swaps
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 5.35% with Bank of America	March 2037	$ 1,800	$ (118)
Receive semi-annually a fixed rate equal to 3.1899% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs	April 2010	3,300	20
		$ 5,100	$ (98)

Legend

(a) Includes investment made with cash collateral received from securities on loan.

(b) Security or a portion of the security is on loan at period end.

(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $9,511,000 or 1.0% of net assets.

(d) A portion of the security is subject to a forward commitment to sell.

(e) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $316,000.

(f) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

# Additional Information on each counterparty to the repurchase agreement is as follows:

Repurchase Agreement / Counterparty	Value (Amounts in thousands)
$15,310,000 due 8/01/08 at 2.19%
BNP Paribas Securities Corp.	$ 1,145
Banc of America Securities LLC	1,775
Bank of America, NA	1,718
Barclays Capital, Inc.	7,474
Greenwich Capital Markets, Inc.	280
ING Financial Markets LLC	1,588
J.P. Morgan Securities, Inc.	862
RBC Capital Markets Corp.	234
WestLB AG	234
	$ 15,310
$172,038,000 due 8/01/08 at 2.19%
Bank of America, NA	$ 172,038

Income Tax Information

At July 31, 2008, the fund had a capital loss carryforward of approximately $17,628,000 of which $155,000, $6,019,000 and $11,454,000 will expire on July 31, 2013, 2014 and 2015, respectively.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Fidelity Intermediate Government Income Fund

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amount)	July 31, 2008

Assets
Investment in securities, at value (including securities loaned of $168,203 and repurchase agreements of $187,348) - See accompanying schedule: Unaffiliated issuers (cost $1,151,552)		$ 1,152,203
Commitment to sell securities on a delayed delivery basis	$ (7,031)
Receivable for securities sold on a delayed delivery basis	7,081	50
Receivable for investments sold, regular delivery		558
Cash		2
Receivable for fund shares sold		1,533
Interest receivable		7,569
Receivable for daily variation on futures contracts		33
Other receivables		1
Total assets		1,161,949

Liabilities
Payable for investments purchased	$ 14,068
Payable for fund shares redeemed	962
Distributions payable	249
Swap agreements, at value	98
Accrued management fee	251
Other affiliated payables	112
Other payables and accrued expenses	43
Collateral on securities loaned, at value	172,038
Total liabilities		187,821

Net Assets		$ 974,128
Net Assets consist of:
Paid in capital		$ 990,984
Undistributed net investment income		388
Accumulated undistributed net realized gain (loss) on investments		(17,885)
Net unrealized appreciation (depreciation) on investments		641
Net Assets, for 94,056 shares outstanding		$ 974,128
Net Asset Value, offering price and redemption price per share ($974,128 ÷ 94,056 shares)		$ 10.36

See accompanying notes which are an integral part of the financial statements.

Annual Report

Statement of Operations

Amounts in thousands	Year ended July 31, 2008

Investment Income
Interest		$ 36,020

Expenses
Management fee	$ 2,633
Transfer agent fees	835
Fund wide operations fee	288
Independent trustees' compensation	4
Interest	1
Miscellaneous	2
Total expenses before reductions	3,763
Expense reductions	(15)	3,748
Net investment income		32,272
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	22,485
Futures contracts	512
Swap agreements	2,863
Total net realized gain (loss)		25,860
Change in net unrealized appreciation (depreciation) on: Investment securities	1,397
Futures contracts	38
Swap agreements	(638)
Delayed delivery commitments	50
Total change in net unrealized appreciation (depreciation)		847
Net gain (loss)		26,707
Net increase (decrease) in net assets resulting from operations		$ 58,979

See accompanying notes which are an integral part of the financial statements.

Annual Report

Fidelity Intermediate Government Income Fund
Financial Statements - continued

Statement of Changes in Net Assets

Amounts in thousands	Year ended July 31, 2008	Year ended July 31, 2007
Increase (Decrease) in Net Assets
Operations
Net investment income	$ 32,272	$ 31,542
Net realized gain (loss)	25,860	(5,105)
Change in net unrealized appreciation (depreciation)	847	9,911
Net increase (decrease) in net assets resulting from operations	58,979	36,348
Distributions to shareholders from net investment income	(33,538)	(32,742)
Share transactions Proceeds from sales of shares	459,861	66,477
Reinvestment of distributions	29,780	28,271
Cost of shares redeemed	(241,009)	(157,163)
Net increase (decrease) in net assets resulting from share transactions	248,632	(62,415)
Total increase (decrease) in net assets	274,073	(58,809)

Net Assets
Beginning of period	700,055	758,864
End of period (including undistributed net investment income of $388 and undistributed net investment income of $1,908, respectively)	$ 974,128	$ 700,055
Other Information Shares
Sold	44,265	6,665
Issued in reinvestment of distributions	2,886	2,831
Redeemed	(23,326)	(15,756)
Net increase (decrease)	23,825	(6,260)

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights

Years ended July 31,	2008	2007	2006	2005	2004
Selected Per-Share Data
Net asset value, beginning of period	$ 9.97	$ 9.92	$ 10.11	$ 10.18	$ 10.17
Income from Investment Operations
Net investment income^B	.398	.435	.414	.330	.274
Net realized and unrealized gain (loss)	.413	.067	(.219)	(.084)	.014
Total from investment operations	.811	.502	.195	.246	.288
Distributions from net investment income	(.421)	(.452)	(.385)	(.316)	(.278)
Net asset value, end of period	$ 10.36	$ 9.97	$ 9.92	$ 10.11	$ 10.18
Total Return^A	8.24%	5.14%	1.97%	2.43%	2.84%
Ratios to Average Net Assets^C
Expenses before reductions	.45%	.45%	.45%	.57%	.60%
Expenses net of fee waivers, if any	.45%	.45%	.45%	.57%	.60%
Expenses net of all reductions	.45%	.45%	.45%	.57%	.60%
Net investment income	3.86%	4.36%	4.14%	3.23%	2.67%
Supplemental Data
Net assets, end of period (in millions)	$ 974	$ 700	$ 759	$ 884	$ 963
Portfolio turnover rate	318%	121%	97%	90%	152%

^A Total returns would have been lower had certain expenses not been reduced during the periods shown.

^B Calculated based on average shares outstanding during the period.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Notes to Financial Statements

For the period ended July 31, 2008

(Amounts in thousands except ratios)

1. Organization.

Fidelity Ginnie Mae Fund and Fidelity Intermediate Government Income Fund (the Funds) are funds of Fidelity Income Fund (the trust). The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Each Fund is authorized to issue an unlimited number of shares.

2. Significant Accounting Policies.

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Funds:

Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. Wherever possible, each Fund uses independent pricing services approved by the Board of Trustees to value their investments. Debt securities, including restricted securities, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value. Actual prices received at disposition may differ.

When current market prices or quotations are not readily available or reliable, valuations may be determined in good faith in accordance with procedures adopted by the Board of Trustees. Factors used in determining value may include significant market or security specific events, changes in interest rates and credit quality, and developments in foreign markets which are monitored by evaluating the performance of ADRs, futures contracts and exchange-traded funds. The frequency with which these procedures are used cannot be predicted and may be utilized to a significant extent. The value of securities used for net asset value (NAV) calculation under these procedures may differ from published prices for the same securities.

Annual Report

2. Significant Accounting Policies - continued

Investment Transactions and Income - continued

calculated as of the close of business of the New York Stock Exchange (NYSE) normally 4:00 pm Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.

Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan) for Fidelity Ginnie Mae Fund, independent Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.

Income Tax Information and Distributions to Shareholders. Each year, each Fund intends to qualify as a regulated investment company by distributing substantially all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code and filing its U.S. federal tax return. As a result, no provision for income taxes is required. Each Fund is subject to the provisions of FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes (FIN 48). FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. Each of the Funds' federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

2. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

Capital accounts within the financial statements are adjusted for permanent book-tax differences. Certain adjustments have been made to the accounts relating to prior periods. Collectively, these adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.

Book-tax differences are primarily due to swap agreements, prior period premium and discount on debt securities, market discount, deferred trustees compensation, financing transactions, capital loss carryforwards, losses deferred due to wash sales and excise tax regulations.

The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows for each Fund:

	Cost for Federal Income Tax Purposes	Unrealized Appreciation	Unrealized Depreciation	Net Unrealized Appreciation/ (Depreciation)
Ginnie Mae Fund	$ 4,166,569	$ 25,019	$ (56,944)	$ (31,925)
Intermediate Government Income Fund	1,151,435	7,600	(6,832)	768

	Undistributed Ordinary Income	Undistributed Long-term Capital Gain	Capital Loss Carryforward
Ginnie Mae Fund	$ 1,537	$ -	$ (40,263)
Intermediate Government Income Fund	68	-	(17,628)

The tax character of distributions paid was as follows:

July 31, 2008	Ordinary Income	Long-term Capital Gains	Total
Ginnie Mae Fund	$ 165,414	$ -	$ 165,414
Intermediate Government Income Fund	33,538	-	33,538
July 31, 2007	Ordinary Income	Long-term Capital Gains	Total
Ginnie Mae Fund	$ 164,399	$ -	$ 164,399
Intermediate Government Income Fund	32,742	-	32,742

New Accounting Pronouncements. In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and results in expanded disclosures about fair value measurements.

Annual Report

2. Significant Accounting Policies - continued

New Accounting Pronouncements - continued

In addition, in March 2008, Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161), was issued and is effective for fiscal years beginning after November 15, 2008. SFAS 161 requires enhanced disclosures to provide information about the reasons the Funds invest in derivative instruments, the accounting treatment and the effect derivatives have on financial performance. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Funds' financial statement disclosures.

3. Operating Policies.

Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits certain Funds and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. Certain Funds may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Each applicable Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.

Delayed Delivery Transactions and When-Issued Securities. Certain Funds may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in each applicable Fund's Schedule of Investments. Certain Funds may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, each applicable Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

3. Operating Policies - continued

Delayed Delivery Transactions and When-Issued Securities - continued

both payables and receivables in each applicable fund's Statement of Assets and Liabilities under the caption "Delayed delivery." Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.

Futures Contracts. Certain Funds may use futures contracts to manage their exposure to the bond market and to fluctuations in interest rates. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in each applicable fund's Schedule of Investments. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Futures contracts involve, to varying degrees, risk of loss in excess of any futures variation margin reflected in each applicable fund's Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in each applicable fund's Schedule of Investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

Restricted Securities. Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of each applicable Fund's Schedule of Investments.

Swap Agreements. Certain Funds may invest in swaps for the purpose of managing their exposure to interest rate, credit or market risk.

Annual Report

3. Operating Policies - continued

Swap Agreements - continued

Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.

Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Periodic payments received or made by each applicable Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on each applicable Funds Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in each applicable Fund's Schedule of Investments under the caption "Swap Agreements."

Mortgage Dollar Rolls. Certain Funds may enter into dollar rolls in which the Fund sells mortgage-backed securities, realizing a gain or loss, and simultaneously agrees to repurchase substantially similar securities at a future date. In addition, certain Funds may enter into reverse dollar rolls in which the Fund purchases and simultaneously agrees to sell substantially similar securities at a future date. During the period between the sale and repurchase in a dollar roll transaction, the Fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities that are permissible investments of the Fund. During the period between the purchase and subsequent sale in a reverse dollar roll transaction, the Fund is entitled to interest and principal payments on the securities purchased. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the Funds with investment management related services for which the Funds pay a monthly management fee. The management fee is the sum of an individual fund fee rate and a group fee rate. The individual fund fee rate is applied to each Fund's average net assets. The group fee rate is based

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Management Fee - continued

upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, each Fund's annual management fee rate expressed as a percentage of each Fund's average net assets was as follows:

	Individual Rate	Group Rate	Total
Ginnie Mae Fund	.20%	.12%	.32%
Intermediate Government Income Fund	.20%	.12%	.32%

Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the Funds' transfer, dividend disbursing and shareholder servicing agent. FIIOC receives an asset-based fee of .10% of each Fund's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. Prior to January 1, 2008, Fidelity Service Company, Inc. (FSC), also an affiliate of FMR, was the Funds' transfer agent.

Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, the compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fees were equivalent to the following annual rates expressed as a percentage of average net assets:

Ginnie Mae Fund	.03%
Intermediate Government Income Fund	.03%

5. Committed Line of Credit.

Certain Funds participate with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro rata portion of the line of credit, which is reflected in Miscellaneous Expense on the Statement of Operations, and is as follows:

Ginnie Mae Fund	$ 8
Intermediate Government Income Fund	2

During the period, there were no borrowings on this line of credit.

Annual Report

6. Security Lending.

Certain Funds lend portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, each applicable Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Funds and any additional required collateral is delivered to the Funds on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on each applicable Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented on each applicable Fund's Statement of Operations as a component of interest income. Net income from lending portfolio securities during the period amounted to:

Intermediate Government Income Fund

$ 729

7. Bank Borrowings.

Each Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. Each Fund has established borrowing arrangements with certain banks. The interest rate on the borrowings is the bank's base rate, as revised from time to time. At period end, there were no bank borrowings outstanding. Each applicable Fund's activity in this program during the period for which loans were outstanding was as follows:

	Average Daily Loan Balance	Weighted Average Interest Rate	Interest Expense
Intermediate Government Income Fund	$ 7,508	2.31%	$ 1

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

8. Expense Reductions.

Through arrangements with each applicable Fund's custodian and transfer agent, credits realized as a result of uninvested cash balances were used to reduce each applicable Fund's expenses. All of the applicable expense reductions are noted in the table below.

	Fund Wide Operations expense reduction	Transfer Agent expense reduction

Ginnie Mae Fund	$ 7	$ 33
Intermediate Government Income Fund	5	10

9. Other.

The Funds' organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Funds. In the normal course of business, the Funds may also enter into contracts that provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Funds. The risk of material loss from such claims is considered remote.

Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Ginnie Mae Fund and Fidelity Intermediate Government Income Fund:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial positions of Fidelity Ginnie Mae Fund and Fidelity Intermediate Government Income Fund (funds of Fidelity Income Fund) at July 31, 2008, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Income Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts
September 26, 2008

Annual Report

Trustees and Officers

The Trustees, Member of the Advisory Board, and executive officers of the trust and funds, as applicable, are listed below. The Board of Trustees governs each fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee each fund's activities, review contractual arrangements with companies that provide services to each fund, and review each fund's performance. Except for Edward C. Johnson 3d and James C. Curvey, each of the Trustees oversees 159 funds advised by FMR or an affiliate. Messrs. Johnson and Curvey oversee 377 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The funds' Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation
Edward C. Johnson 3d (78)
	Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR LLC; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of FIL Limited. Previously, Mr. Johnson served as President of FMR LLC (2006-2007). Mr. Edward C. Johnson 3d and Mr. Arthur E. Johnson are not related.
James C. Curvey (73)
	Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2006-present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University.

* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR. FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.

Independent Trustees:

Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Age; Principal Occupation
Albert R. Gamper, Jr. (66)
	Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities), a member of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. Previously, Mr. Gamper served as Chairman of the Board of Governors, Rutgers University (2004-2007).
George H. Heilmeier (72)
	Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology), Compaq, Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame.
Arthur E. Johnson (61)
	Year of Election or Appointment: 2008 Mr. Johnson serves as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor). In addition, Mr. Johnson serves as a member of the Board of Directors of AGL Resources, Inc. (holding company), and IKON Office Solutions, Inc. (document management systems and services). Mr. Arthur E. Johnson and Mr. Edward C. Johnson 3d are not related.
James H. Keyes (67)
	Year of Election or Appointment: 2007 Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines) and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). Previously, Mr. Keyes served as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008).
Marie L. Knowles (61)
	Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of McKesson Corporation (healthcare service). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007).
Kenneth L. Wolfe (69)
	Year of Election or Appointment: 2005 Mr. Wolfe is Chairman and a Director of Hershey Foods Corporation (2007-present), where prior to his retirement in 2001, he was Chairman and Chief Executive Officer. Mr. Wolfe currently serves as a member of the board of Revlon Inc. (2004-present). Previously, Mr. Wolfe served as a member of the boards of Adelphia Communications Corporation (2003-2006) and Bausch & Lomb, Inc. (1993-2007).

Advisory Board Member and Executive Officers**:

Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation
Peter S. Lynch (64)
	Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund.
John R. Hebble (50)
	Year of Election or Appointment: 2008 President and Treasurer of Ginnie Mae and Intermediate Government Income. Mr. Hebble also serves as President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2003-present). Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds.
Boyce I. Greer (52)
	Year of Election or Appointment: 2006 Vice President of Ginnie Mae and Intermediate Government Income. Mr. Greer also serves as Vice President of Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). Mr. Greer is President and a Director of Fidelity Investments Money Management, Inc. (2007- present), and an Executive Vice President of FMR and FMR Co., Inc. (2005-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005).
Dwight D. Churchill (54)
	Year of Election or Appointment: 2008 Vice President of Ginnie Mae and Intermediate Government Income. Mr. Churchill also serves as Vice President of Fidelity's Bond Funds (2008-present). Mr. Churchill is Executive Vice President of FMR (2005-present), FMR Co., Inc. (2005-present) and Fidelity Investments Money Management, Inc. (2008-present). Previously, Mr. Churchill served as Senior Vice President of FMR (1997-2005) and Senior Vice President of Fidelity Investments Money Management, Inc. (2000-2006).
Scott C. Goebel (40)
	Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of Ginnie Mae and Intermediate Government Income. Mr. Goebel also serves as Secretary and CLO of other Fidelity funds (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008-present); and Deputy General Counsel of FMR LLC. Previously, Mr. Goebel served as Assistant Secretary of the Funds (2007-2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007).
Nancy D. Prior (41)
	Year of Election or Appointment: 2008 Assistant Secretary of Ginnie Mae and Intermediate Government Income. Ms. Prior also serves as Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2002-present).
Holly C. Laurent (54)
	Year of Election or Appointment: 2008 Anti-Money Laundering (AML) officer of Ginnie Mae and Intermediate Government Income. Ms. Laurent also serves as AML officer of other Fidelity funds (2008-present) and is an employee of FMR LLC. Previously, Ms. Laurent was Senior Vice President and Head of Legal for Fidelity Business Services India Pvt. Ltd. (2006-2008), Senior Vice President, Deputy General Counsel and Group Head for FMR LLC (2005-2006).
Christine Reynolds (49)
	Year of Election or Appointment: 2008 Chief Financial Officer of Ginnie Mae and Intermediate Government Income. Ms. Reynolds also serves as Chief Financial Officer of other Fidelity funds (2008-present). Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. She served as Chief Operating Officer of FPCMS from 2007 through July 2008. Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was an audit partner with PwC's investment management practice.
Michael H. Whitaker (41)
	Year of Election or Appointment: 2008 Chief Compliance Officer of Ginnie Mae and Intermediate Government Income. Mr. Whitaker also serves as Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2007-present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel.
Bryan A. Mehrmann (47)
	Year of Election or Appointment: 2005 Deputy Treasurer of Ginnie Mae and Intermediate Government Income. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004).
Robert G. Byrnes (41)
	Year of Election or Appointment: 2005 Assistant Treasurer of Ginnie Mae and Intermediate Government Income. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003).
Peter L. Lydecker (54)
	Year of Election or Appointment: 2004 Assistant Treasurer of Ginnie Mae and Intermediate Government Income. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004-present) and is an employee of FMR.
Paul M. Murphy (61)
	Year of Election or Appointment: 2007 Assistant Treasurer of Ginnie Mae and Intermediate Government Income. Mr. Murphy also serves as Assistant Treasurer of other Fidelity funds (2007-present) and is an employee of FMR (2007-present). Previously, Mr. Murphy served as Chief Financial Officer of the Fidelity Funds (2005-2006), Vice President and Associate General Counsel of FMR (2007), and Senior Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (1994-2007).
Gary W. Ryan (49)
	Year of Election or Appointment: 2005 Assistant Treasurer of Ginnie Mae and Intermediate Government Income. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005).

** FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.

Annual Report

Distributions (Unaudited)

A percentage of the dividends distributed during the fiscal year for the following funds was derived from interest on U.S. Government securities which is generally exempt from state income tax:

Intermediate Government Income

15.94%

The funds designate the amounts noted below as distributions paid during the period January 1, 2008 to July 31, 2008 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.

Fund
Ginnie Mae	$ 95,007,957
Intermediate Government Income	$ 20,873,244

The fund will notify shareholders in January 2009 of amounts for use in preparing 2008 income tax returns.

Annual Report

Board Approval of Investment Advisory Contracts and Management Fees

Fidelity Ginnie Mae Fund / Fidelity Intermediate Government Income Fund

Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for each fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.

The Board meets regularly and, acting directly and through its separate committees, requests and receives information concerning, and considers at each of its meetings factors that are relevant to, its annual consideration of the renewal of each fund's Advisory Contracts, including the services and support provided to each fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has a written charter outlining the structure and purposes of the committee. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts.

At its June 2008 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew each fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to each fund and its shareholders (including the investment performance of each fund); (ii) the competitiveness of each fund's management fee and total expenses; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with each fund; (iv) the extent to which economies of scale would be realized as each fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders. The Board also approved agreements with foreign sub-advisers Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Japan) Inc., and Fidelity Management & Research (Hong Kong) Limited.

In considering whether to renew the Advisory Contracts for each fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contracts is consistent with Fidelity's fiduciary duty under applicable law. The Board's decision to renew the Advisory Contracts was not based on any single factor noted above, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, is aware that shareholders in each fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that each fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in that fund, managed by Fidelity.

Annual Report

Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the funds' investment personnel and the funds' investment objectives and disciplines. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.

Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers. In addition, the Board considered the trading resources that are an integrated part of the fixed-income portfolio management investment process.

Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for each fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, each fund's compliance policies and procedures.

The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.

Annual Report

Board Approval of Investment Advisory Contracts and
Management Fees - continued

Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of a fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that Fidelity has taken a number of actions over the previous year that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) contractually agreeing to reduce the management fees on Fidelity's Institutional Money Market Funds and launching Class IV and Institutional Class of certain of these funds; (iii) reducing the transfer agent fees for the Fidelity Select Portfolios and Investor Class of the VIP funds; and (iv) launching Class K of 29 equity funds as a lower-fee class available to certain employer-sponsored retirement plans.

Investment Performance. The Board considered whether each fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed each fund's absolute investment performance, as well as each fund's relative investment performance measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. For each fund, the following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2007, the fund's cumulative total returns, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten number noted below each chart corresponds to the percentile box and represents the percentage of funds in the peer group whose performance was equal to or lower than that of the fund.

Annual Report

Fidelity Ginnie Mae Fund

fid79

The Board reviewed the fund's relative investment performance against its peer group and stated that the performance of the fund was in the first quartile for all the periods shown. The Board also stated that the investment performance of the fund was lower than its benchmark for all the periods shown. The Board discussed with FMR actions that may be taken by FMR to improve the fund's below-benchmark performance and how investment personnel evaluate potential for incremental return against the risks involved in obtaining that incremental return. The Board considered the steps that FMR has taken to strengthen and refine its risk management processes in light of recent credit events that have affected various sectors of the fixed-income markets.

Annual Report

Board Approval of Investment Advisory Contracts and
Management Fees - continued

Fidelity Intermediate Government Income Fund

fid81

Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to each fund will benefit each fund's shareholders, particularly in light of the Board's view that each fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.

Competitiveness of Management Fee and Total Fund Expenses. The Board considered each fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.

Annual Report

The Board considered two proprietary management fee comparisons for the 12-month periods shown in the charts below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than a fund's. For example, a TMG % of 9% means that 91% of the funds in the Total Mapped Group had higher management fees than a fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which a fund's management fee ranked, is also included in the charts and considered by the Board.

Fidelity Ginnie Mae Fund

fid83

Annual Report

Board Approval of Investment Advisory Contracts and
Management Fees - continued

Fidelity Intermediate Government Income Fund

fid85

The Board noted that each fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2007.

Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to each fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that each fund's chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.

Based on its review, the Board concluded that each fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.

In its review of each fund's total expenses, the Board considered the fund's management fee as well as other fund expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each fund compared to competitive fund median expenses. Each fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.

The Board also considered that the current contractual arrangements for each fund (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee to 10 basis points, and (iii) limit each fund's total expenses to 45 basis points. These contractual arrangements may not be increased without Board and shareholder approval.

Annual Report

The Board noted that each fund's total expenses ranked below its competitive median for 2007.

The Board recognized that each fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR determines the group fee rates based on a tiered asset "breakpoint" schedule. The Board noted, however, that because the current contractual arrangements set each fund's total fund-level expenses at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses.

In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.

Based on its review, the Board concluded that each fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.

Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing each fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.

On an annual basis, FMR presents to the Board Fidelity's profitability for each fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.

PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.

Annual Report

Board Approval of Investment Advisory Contracts and
Management Fees - continued

The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the funds' business.

The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of each fund and determined that the amount of profit is a fair entrepreneurial profit for the management of each fund.

Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including each fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which each fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.

Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including (i) fund performance trends and actions to be taken by FMR to improve certain funds' overall performance; (ii) portfolio manager changes that have occurred during the past year; (iii) Fidelity's fund profitability methodology, the profitability of certain fund service providers, and profitability trends for certain funds; (iv) Fidelity's compensation structure for portfolio managers and key personnel, including its effects on fund profitability and the extent to which portfolio manager compensation is linked to fund performance; (v) Fidelity's fee structures; (vi) the funds' sub-advisory arrangements; and (vii) accounts managed by Fidelity other than the Fidelity funds.

Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that each fund's Advisory Contracts should be renewed.

Annual Report

Managing Your Investments

Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.

By Phone

Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.

(phone_graphic)

Fidelity Automated
Service Telephone (FAST®)
1-800-544-5555

Press

fid87 For mutual fund and brokerage trading.

fid89 For quotes.*

fid91 For account balances and holdings.

fid93 To review orders and mutual
fund activity.

fid95 To change your PIN.

fid97 fid99 To speak to a Fidelity representative.

By PC

Fidelity's web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services.

(computer_graphic)

Fidelity's Web Site
www.fidelity.com

* When you call the quotes line, please remember that a fund's yield and return will vary and, except for money market funds, share price will also vary. This means that you may have a gain or loss when you sell your shares. There is no assurance that money market funds will be able to maintain a stable $1 share price; an investment in a money market fund is not insured or guaranteed by the U.S. government. Total returns are historical and include changes in share price, reinvestment of dividends and capital gains, and the effects of any sales charges.

Annual Report

To Write Fidelity

We'll give your correspondence immediate attention and send you written confirmation upon completion of your request.

(letter_graphic)

Making Changes
To Your Account

(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

(letter_graphic)

For Non-Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

(letter_graphic)

For Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

Annual Report

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Advisers

Fidelity Research & Analysis Company

Fidelity Management & Research (U.K.) Inc.

Fidelity Investments
Money Management, Inc.

Fidelity International Investment Advisors

Fidelity International Investment Advisors
(U.K.) Limited

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Service Agents

Fidelity Investments Institutional
Operations Company, Inc.

Boston, MA

Fidelity Service Company, Inc.

Boston, MA

Custodian

The Bank of New York

New York, NY

The Fidelity Telephone Connection

Mutual Fund 24-Hour Service

Exchanges/Redemptions
and Account Assistance 1-800-544-6666

Product Information 1-800-544-6666

Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)

TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)

Fidelity Automated Service
Telephone (FAST®) fid101 1-800-544-5555

Automated line for quickest service

GMIG-UANN-0908
1.844592.101

fid105

Fidelity®
Government Income
Fund

Annual Report

July 31, 2008

(2_fidelity_logos) (Registered_Trademark)

Chairman's Message	<Click Here>	Ned Johnson's message to shareholders.
Performance	<Click Here>	How the fund has done over time.
Management's Discussion	<Click Here>	The manager's review of fund performance, strategy and outlook.
Shareholder Expense Example	<Click Here>	An example of shareholder expenses.
Investment Changes	<Click Here>	A summary of major shifts in the fund's investments over the past six months.
Investments	<Click Here>	A complete list of the fund's investments with their market values.
Financial Statements	<Click Here>	Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights.
Notes	<Click Here>	Notes to the financial statements.
Report of Independent Registered Public Accounting Firm	<Click Here>
Trustees and Officers	<Click Here>
Distributions	<Click Here>
Board Approval of Investment Advisory Contracts and Management Fees	<Click Here>

Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.

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.

Annual Report

This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.

NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE

Neither the fund nor Fidelity Distributors Corporation is a bank.

Annual Report

Chairman's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

Sincerely,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of Government Income's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.

Average Annual Total Returns

Periods ended July 31, 2008	Past 1 year	Past 5 years	Past 10 years
Government Income	8.25%	4.69%	5.39%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in Government Income on July 31, 1998. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® U.S. Government Index performed over the same period.

fid1498

Annual Report

Management's Discussion of Fund Performance

Comments from William Irving, Portfolio Manager of Fidelity® Government Income Fund

For the 12 months ending July 31, 2008, Government Income returned 8.25%, beating the 8.20% return of the Lehman Brothers 75% U.S. Government/25% U.S. Mortgage-Backed Securities Index. What we lost by underweighting Treasuries - the index's biggest sector concentration and its best performer during the period - we more than made up for through other Treasury-related decisions. In particular, security lending - whereby we loaned Treasury holdings overnight and invested the proceeds in higher-yielding investments - bolstered the fund's results. We also were successful with tactical trades of Treasury Inflation-Protected Securities (TIPS), which are not part of the index. Advantageous yield-curve positioning also benefited the fund's performance. In the mortgage sector, good picks among 15-year securities and collateralized mortgage obligations (CMOs) - which are made up of pools of pass-through securities whose cash flows are carved out into classes with their own expected maturities and cash-flow patterns - worked in the fund's favor. Likewise, my decision to maintain a larger-than-index exposure to hybrid adjustable-rate mortgage securities (ARMs) - which give homeowners a relatively low fixed-interest rate for an initial period and then convert to an ARM where the interest rate periodically resets - benefited relative performance, as they generally outpaced the index after adjusting for their lower interest-rate sensitivity. With the benefit of 20/20 hindsight, owning more of these types of securities may have been helpful given how well they performed, but I was mindful of the importance of diversification.

Annual Report

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2008 to July 31, 2008).

Actual Expenses

The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.

Annual Report

Shareholder Expense Example - continued

	Beginning Account Value February 1, 2008	Ending Account Value July 31, 2008	Expenses Paid During Period* February 1, 2008 to July 31, 2008
Class A
Actual	$ 1,000.00	$ 999.60	$ 3.98
Hypothetical^A	$ 1,000.00	$ 1,020.89	$ 4.02
Class T
Actual	$ 1,000.00	$ 1,000.70	$ 3.88
Hypothetical^A	$ 1,000.00	$ 1,020.98	$ 3.92
Class B
Actual	$ 1,000.00	$ 996.10	$ 7.54
Hypothetical^A	$ 1,000.00	$ 1,017.30	$ 7.62
Class C
Actual	$ 1,000.00	$ 996.00	$ 7.64
Hypothetical^A	$ 1,000.00	$ 1,017.21	$ 7.72
Government Income
Actual	$ 1,000.00	$ 1,001.40	$ 2.24
Hypothetical^A	$ 1,000.00	$ 1,022.63	$ 2.26
Institutional Class
Actual	$ 1,000.00	$ 1,002.10	$ 2.49
Hypothetical^A	$ 1,000.00	$ 1,022.38	$ 2.51

^A 5% return per year before expenses

	Annualized Expense Ratio
Class A	.80%
Class T	.78%
Class B	1.52%
Class C	1.54%
Government Income	.45%
Institutional Class	.50%

Annual Report

Investment Changes (Unaudited)

Coupon Distribution as of July 31, 2008
	% of fund's investments	% of fund's investments 6 months ago
Zero coupon bonds	1.2	1.6
Less than 2%	2.8	0.8
2 - 2.99%	5.5	1.6
3 - 3.99%	10.1	8.7
4 - 4.99%	14.1	25.6
5 - 5.99%	27.4	24.9
6 - 6.99%	12.7	14.7
7% and over	1.9	3.0

Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments.

Weighted Average Maturity as of July 31, 2008
		6 months ago
Years	4.8	4.6

Duration as of July 31, 2008
		6 months ago
Years	5.1	4.5

Asset Allocation (% of fund's net assets)
As of July 31, 2008*			As of January 31, 2008**
	Mortgage Securities 30.9%			Mortgage Securities 34.5%
	CMOs and Other Mortgage Related Securities 8.3%			CMOs and Other Mortgage Related Securities 7.7%
	U.S. Treasury Obligations 34.3%			U.S. Treasury Obligations 33.6%
	U.S. Government Agency Obligations 21.7%			U.S. Government Agency Obligations 29.9%
	Asset-Backed Securities 0.1%			Asset-Backed Securities 0.2%
	Short-Term Investments and Net Other Assets 4.7%			Short-Term Investments and Net Other Assets (5.9)%^†
* Futures and Swaps		11.1%	** Futures and Swaps		5.7%

fid1524

^† Short-Term Investments and Net Other Assets are not included in the pie chart.

Annual Report

Investments July 31, 2008

Showing Percentage of Net Assets

U.S. Government and Government Agency Obligations - 56.0%
	Principal Amount (000s)		Value (000s)
U.S. Government Agency Obligations - 21.7%
Fannie Mae:
2.5% 4/9/10	$ 46,360		$ 45,939
3% 7/12/10	150,000		149,515
3.25% 8/12/10 (b)	157,020		157,168
3.375% 5/19/11	24,967		24,877
3.625% 2/12/13 (b)	32,905		32,437
3.875% 7/12/13 (b)	26,275		26,091
4.75% 11/19/12	29,255		30,187
4.875% 4/15/09	43,349		43,966
4.875% 5/18/12	170,000		175,996
5% 2/16/12	31,355		32,606
5.125% 4/15/11	188,800		196,783
5.375% 6/12/17	49,471		52,231
6% 5/15/11	10,130		10,790
6.625% 9/15/09	149,585		155,586
Freddie Mac:
3.25% 7/16/10	11,145		11,162
3.5% 5/29/13 (b)	123,800		120,997
3.75% 6/28/13	5,000		4,938
3.875% 6/29/11	19,531		19,703
4.75% 3/5/12	10,000		10,316
4.875% 2/9/10	27,220		27,962
4.875% 6/13/18 (b)	44,378		45,095
5% 6/11/09 (b)	100,000		101,783
5% 1/30/14	25,000		25,973
5.125% 11/17/17 (b)	25,000		25,911
5.25% 5/21/09	154,235		157,143
5.25% 7/18/11	29,530		30,918
5.75% 1/15/12	32,906		34,934
Israeli State (guaranteed by U.S. Government through Agency for International Development):
5.5% 9/18/23	110,500		118,392
6.8% 2/15/12	30,000		31,869
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates:
6.77% 11/15/13	5,627		5,944
6.99% 5/21/16	19,051		20,852
Private Export Funding Corp. secured:
4.974% 8/15/13	22,940		23,745
5.66% 9/15/11 (c)	18,000		19,023
5.685% 5/15/12	24,035		25,501
U.S. Government and Government Agency Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency Obligations - continued
Private Export Funding Corp. secured: - continued
6.67% 9/15/09	$ 3,500		$ 3,644
Small Business Administration guaranteed development participation certificates:
Series 2002-20J Class 1, 4.75% 10/1/22	5,675		5,494
Series 2002-20K Class 1, 5.08% 11/1/22	12,402		12,225
Series 2003-P10B, Class 1 5.136% 8/10/13	8,023		8,027
Series 2004-20H Class 1, 5.17% 8/1/24	3,521		3,480
Tennessee Valley Authority 5.375% 4/1/56	8,429		8,485
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A, 5.96% 8/1/09	18,380		18,660
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS			2,056,348
U.S. Treasury Obligations - 34.3%
U.S. Treasury Bonds:
4.375% 2/15/38	130,700		125,952
4.75% 2/15/37 (f)	19,000		19,398
5% 5/15/37 (b)	139,000		147,677
6.125% 8/15/29	162,102		193,712
6.25% 8/15/23	1,500		1,777
8% 11/15/21 (f)	146,794		198,585
U.S. Treasury Notes:
1.75% 3/31/10 (b)	341,106		337,642
2.125% 1/31/10 (f)	198,280		197,738
2.5% 3/31/13	43,781		42,454
2.75% 2/28/13	54,231		53,185
2.875% 6/30/10 (b)	308,061		310,299
3.125% 11/30/09	29,100		29,421
3.375% 11/30/12 (b)	217,916		219,993
3.375% 6/30/13 (b)	95,927		96,392
3.375% 7/31/13	80,000		80,375
3.5% 5/31/13	55,000		55,610
3.5% 2/15/18 (b)	78,000		75,154
3.625% 12/31/12 (b)	32,788		33,423
3.875% 5/15/18 (b)	41,449		41,093
4% 9/30/09	3,000		3,060
4% 2/15/14	43,031		44,487
4.25% 11/15/14 (b)	77,185		80,845
4.25% 11/15/17 (b)	189,000		193,238
4.5% 2/28/11	4,190		4,374
U.S. Government and Government Agency Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Treasury Obligations - continued
U.S. Treasury Notes: - continued
4.625% 8/31/11	$ 593		$ 624
4.625% 7/31/12	20		21
4.625% 11/15/16 (b)	117,000		123,645
4.75% 5/15/14 (b)	28,328		30,426
4.75% 8/15/17 (b)	231,000		245,131
5.125% 5/15/16	249,330		272,588
TOTAL U.S. TREASURY OBLIGATIONS			3,258,319
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $5,281,922)		5,314,667
U.S. Government Agency - Mortgage Securities - 30.9%

Fannie Mae - 22.1%
3.695% 10/1/33 (g)	577		581
3.71% 6/1/33 (g)	1,871		1,867
3.737% 5/1/33 (g)	2,933		2,940
3.741% 10/1/33 (g)	525		529
3.75% 1/1/34 (g)	491		496
3.906% 5/1/34 (g)	3,868		3,893
3.916% 5/1/34 (g)	5,174		5,213
3.98% 9/1/33 (g)	5,135		5,164
3.988% 10/1/18 (g)	329		332
4% 9/1/13 to 6/1/20	22,747		21,844
4.085% 6/1/33 (g)	364		363
4.174% 1/1/35 (g)	1,222		1,231
4.235% 1/1/34 (g)	1,642		1,659
4.25% 2/1/35 (g)	626		632
4.251% 8/1/33 (g)	794		797
4.259% 10/1/33 (g)	251		253
4.284% 3/1/33 (g)	228		230
4.301% 3/1/33 (g)	303		306
4.306% 5/1/33 (g)	148		149
4.328% 1/1/35 (g)	709		714
4.341% 10/1/19 (g)	995		1,001
4.366% 2/1/34 (g)	972		983
4.388% 2/1/35 (g)	981		991
4.41% 10/1/34 (g)	3,273		3,299
4.418% 5/1/35 (g)	390		392
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
4.42% 6/1/35 (g)	$ 2,238		$ 2,253
4.425% 8/1/34 (g)	1,549		1,565
4.427% 1/1/35 (g)	606		608
4.431% 5/1/33 (g)	4,876		4,902
4.435% 3/1/35 (g)	936		943
4.473% 7/1/35 (g)	1,977		1,977
4.483% 11/1/33 (g)	1,247		1,258
4.485% 12/1/34 (g)	452		456
4.492% 1/1/35 (g)	4,635		4,692
4.5% 2/1/18 to 6/1/23	32,084		31,093
4.545% 5/1/35 (g)	1,526		1,536
4.565% 7/1/35 (g)	2,267		2,265
4.599% 10/1/35 (g)	253		255
4.65% 10/1/34 (g)	2,860		2,881
4.705% 7/1/34 (g)	1,676		1,692
4.707% 2/1/35 (g)	5,400		5,479
4.727% 6/1/33 (g)	191		192
4.765% 12/1/35 (g)	3,379		3,417
4.774% 12/1/34 (g)	585		592
4.776% 4/1/35 (g)	221		223
4.783% 7/1/35 (g)	4,062		4,099
4.791% 10/1/35 (g)	1,553		1,570
4.797% 6/1/35 (g)	2,647		2,659
4.804% 1/1/34 (g)	55		56
4.812% 11/1/34 (g)	1,855		1,873
4.835% 1/1/35 (g)	9,087		9,176
4.85% 7/1/35 (g)	5,002		5,052
4.852% 7/1/34 (g)	4,740		4,790
4.859% 10/1/34 (g)	6,673		6,740
4.873% 8/1/34 (g)	437		440
4.88% 5/1/35 (g)	1,612		1,629
4.881% 8/1/34 (g)	4,181		4,224
4.926% 8/1/34 (g)	7,237		7,302
4.969% 3/1/35 (g)	4,312		4,372
4.985% 2/1/35 (g)	4,719		4,774
4.986% 4/1/33 (g)	78		78
4.987% 2/1/34 (g)	6,634		6,688
5% 6/1/14 to 9/1/37 (e)	376,475		367,287
5% 8/1/38 (d)	300		285
5% 8/1/38 (d)	300		285
5% 8/1/38 (d)	100		95
5% 8/13/38 (d)	400		381
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
5% 8/13/38 (d)	$ 400		$ 381
5% 8/13/38 (d)	1,000		952
5% 8/13/38 (d)	500		476
5% 8/13/38 (d)	400		381
5% 8/13/38 (d)	1,000		952
5.012% 7/1/34 (g)	272		275
5.069% 1/1/37 (g)	5,486		5,578
5.072% 7/1/34 (g)	1,688		1,708
5.089% 9/1/34 (g)	602		608
5.099% 10/1/35 (g)	3,565		3,613
5.127% 8/1/33 (g)	708		713
5.131% 8/1/34 (g)	5,074		5,148
5.171% 3/1/36 (g)	12,324		12,512
5.185% 3/1/35 (g)	325		329
5.199% 5/1/35 (g)	397		400
5.224% 5/1/35 (g)	4,814		4,880
5.245% 7/1/35 (g)	257		259
5.267% 12/1/36 (g)	2,409		2,453
5.278% 3/1/35 (g)	397		400
5.298% 12/1/34 (g)	798		809
5.304% 3/1/36 (g)	32,767		33,319
5.326% 4/1/36 (g)	4,292		4,407
5.336% 7/1/35 (g)	2,003		2,032
5.349% 2/1/37 (g)	2,311		2,358
5.357% 2/1/36 (g)	6,643		6,738
5.392% 2/1/37 (g)	11,576		11,769
5.409% 3/1/35 (g)	417		418
5.438% 8/1/36 (g)	5,627		5,740
5.5% 4/1/09 to 6/1/37 (e)	525,547		522,803
5.5% 8/1/23 (d)	1,000		1,004
5.5% 8/18/23 (d)	10,000		10,044
5.5% 8/18/23 (d)	15,000		15,066
5.5% 8/18/23 (d)	200		201
5.5% 8/18/23 (d)	100		100
5.5% 8/18/23 (d)	300		301
5.5% 8/18/23 (d)	300		301
5.5% 8/18/23 (d)	500		502
5.5% 8/18/23 (d)	200		201
5.5% 8/18/23 (d)	300		301
5.5% 8/18/23 (d)	400		402
5.5% 8/13/38 (d)	44,000		43,144
5.5% 8/13/38 (d)(e)	150,000		147,083
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
5.5% 8/13/38 (d)	$ 800		$ 784
5.513% 3/1/35 (g)	159		160
5.632% 2/1/36 (g)	2,752		2,806
5.641% 4/1/36 (g)	10,925		11,147
5.665% 6/1/36 (g)	6,505		6,637
5.693% 1/1/36 (g)	28,622		29,214
5.789% 5/1/36 (g)	2,797		2,853
5.793% 3/1/36 (g)	7,587		7,748
5.801% 1/1/36 (g)	2,307		2,339
5.816% 5/1/36 (g)	16,313		16,657
5.843% 3/1/36 (g)	7,391		7,501
5.863% 6/1/35 (g)	1,711		1,744
5.871% 3/1/36 (g)	6,056		6,189
5.896% 12/1/36 (g)	4,029		4,125
5.917% 5/1/36 (g)	4,764		4,877
5.951% 5/1/36 (g)	2,495		2,556
5.955% 2/1/35 (g)	144		145
6% 4/1/12 to 1/1/38 (e)	273,058		279,665
6% 8/1/38 (d)	3,000		3,018
6.009% 4/1/36 (g)	45,752		46,860
6.025% 12/1/36 (g)	27,022		27,690
6.028% 9/1/36 (g)	30,731		31,508
6.062% 4/1/36 (g)	22,968		23,563
6.095% 3/1/37 (g)	4,412		4,526
6.102% 3/1/33 (g)	254		256
6.125% 2/1/33 (g)	547		549
6.169% 4/1/36 (g)	4,271		4,380
6.206% 2/1/35 (g)	153		154
6.226% 3/1/37 (g)	1,494		1,523
6.229% 5/1/36 (g)	12,426		12,767
6.234% 2/1/35 (g)	373		375
6.251% 6/1/36 (g)	629		641
6.3% 10/1/36 (g)	20,621		21,056
6.5% 2/1/12 to 4/1/37	43,655		45,361
6.5% 8/1/38 (d)	63,000		64,727
6.547% 9/1/36 (g)	8,243		8,516
7% 7/1/13 to 7/1/32	4,826		5,121
7.5% 8/1/10 to 4/1/29	99		103
8.5% 1/1/15 to 7/1/31	490		526
9% 11/1/11 to 5/1/14	465		479
9.5% 11/15/09 to 10/1/20	633		692
11% 8/1/10	6		6
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value 000s)
Fannie Mae - continued
11.25% 5/1/14	$ 7		$ 7
11.5% 6/15/19 to 1/15/21	1,044		1,163
12.5% 8/1/15 to 3/1/16	2		2
			2,101,770
Freddie Mac - 5.3%
4% 5/1/19 to 11/1/20	23,219		22,029
4.275% 6/1/35 (g)	888		887
4.307% 12/1/34 (g)	797		803
4.406% 3/1/35 (g)	928		929
4.422% 2/1/34 (g)	546		546
4.429% 3/1/35 (g)	840		846
4.5% 8/1/33	3,577		3,305
4.622% 4/1/35 (g)	6,756		6,786
4.667% 9/1/36 (g)	2,923		2,944
4.716% 2/1/34 (g)	6,855		6,871
4.79% 2/1/36 (g)	1,142		1,149
4.791% 3/1/35 (g)	2,425		2,442
4.84% 4/1/35 (g)	3,414		3,435
5% 1/1/09 to 9/1/35	11,842		11,433
5.022% 4/1/35 (g)	525		526
5.091% 6/1/35 (g)	2,395		2,418
5.125% 7/1/35 (g)	4,049		4,095
5.275% 2/1/36 (g)	287		290
5.376% 3/1/35 (g)	561		564
5.485% 1/1/36 (g)	3,921		3,981
5.5% 8/1/14 to 7/1/37	191,344		193,712
5.5% 8/1/38 (d)	8,000		7,836
5.5% 8/1/38 (d)	600		588
5.5% 8/1/38 (d)	500		490
5.5% 8/13/38 (d)	300		294
5.5% 8/13/38 (d)	1,000		979
5.5% 8/13/38 (d)	1,600		1,567
5.5% 8/13/38 (d)	1,000		979
5.5% 8/13/38 (d)	800		784
5.5% 8/13/38 (d)	1,200		1,175
5.52% 1/1/36 (g)	5,452		5,531
5.579% 2/1/35 (g)	1,119		1,127
5.743% 10/1/35 (g)	1,157		1,177
5.829% 5/1/37 (g)	2,978		3,026
6% 7/1/16 to 5/1/38	68,336		69,567
6% 8/1/38 (d)	9,000		9,055
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Freddie Mac - continued
6% 8/1/38 (d)	$ 300		$ 302
6% 8/13/38 (d)	300		302
6% 8/13/38 (d)	100		101
6% 8/13/38 (d)	400		402
6% 8/13/38 (d)	400		402
6% 8/13/38 (d)	1,000		1,006
6% 8/13/38 (d)	500		503
6% 8/13/38 (d)	400		402
6% 8/13/38 (d)	600		604
6.021% 6/1/36 (g)	3,157		3,221
6.224% 5/1/36 (g)	2,584		2,645
6.278% 3/1/37 (g)	8,086		8,283
6.378% 7/1/36 (g)	3,019		3,094
6.423% 10/1/36 (g)	8,566		8,794
6.491% 3/1/33 (g)	163		165
6.5% 11/1/10 to 10/1/36	46,850		48,674
6.586% 12/1/36 (g)	15,432		15,770
6.685% 1/1/37 (g)	10,780		11,095
6.689% 10/1/36 (g)	7,783		8,008
6.844% 10/1/36 (g)	10,819		11,085
7% 4/1/11	3		3
7.5% 5/1/11 to 7/1/16	1,638		1,723
8.5% 8/1/08 to 9/1/29	194		209
9% 8/1/08 to 10/1/20	68		73
9.5% 6/1/09 to 8/1/21	256		282
9.75% 8/1/14	139		150
10% 7/1/09 to 8/1/21	22		24
11% 7/1/13 to 5/1/14	58		64
12% 8/1/13 to 3/1/15	2		2
12.25% 4/1/11	0		0
12.5% 2/1/10 to 6/1/19	17		19
13% 8/1/10 to 6/1/15	6		7
			501,580
Government National Mortgage Association - 3.5%
5% 2/20/33 to 6/20/38	73,081		70,736
5.25% 7/20/34 (g)	737		740
5.5% 12/15/33 to 2/15/34	65,387		65,264
5.5% 8/1/38 (d)(e)	12,000		11,911
5.5% 8/1/38 (d)(e)	8,000		7,941
5.5% 8/1/38 (d)	1,000		993
5.5% 8/1/38 (d)(e)	22,000		21,837
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Government National Mortgage Association - continued
5.5% 8/1/38 (d)	$ 1,000		$ 993
5.5% 8/1/38 (d)(e)	5,000		4,942
6% 9/15/08 to 1/15/38	121,433		123,541
6.5% 2/15/24 to 10/15/35	19,802		20,673
7% 10/15/26 to 8/15/32	90		95
7.5% 3/15/28 to 8/15/29	112		119
8% 6/15/18 to 12/15/23	1,212		1,303
8.5% 1/15/25	4		4
9% 12/15/09	0		0
9.5% 2/15/25	1		1
10.5% 4/15/14 to 1/20/18	93		106
13.5% 7/15/11	5		6
			331,205
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $2,933,057)		2,934,555
Asset-Backed Securities - 0.1%

Fannie Mae Grantor Trust Series 2005-T4 Class A1C, 2.6113% 9/25/35 (g) (Cost $4,793)	4,793		4,769
Collateralized Mortgage Obligations - 8.3%

U.S. Government Agency - 8.3%
Fannie Mae:
planned amortization class:
Series 1992-168 Class KB, 7% 10/25/22	1,352		1,404
Series 1993-207 Class H, 6.5% 11/25/23	18,360		19,064
Series 1993-240 Class PD, 6.25% 12/25/13	4,400		4,543
Series 1994-23:
Class PG, 6% 4/25/23	3,032		3,055
Class PZ, 6% 2/25/24	10,676		10,961
Series 1996-28 Class PK, 6.5% 7/25/25	3,796		3,911
Series 2003-28 Class KG, 5.5% 4/25/23	4,940		4,750
Series 2006-45 Class OP, 6/25/36 (i)	5,849		4,310
Series 2006-62 Class KP, 4/25/36 (i)	12,300		8,624
sequential payer:
Series 1997-41 Class J, 7.5% 6/18/27	2,598		2,751
Series 2007-115 Class BE, 4.5% 12/25/22	15,400		14,430
Series 2003-22 6% 4/25/33 (h)	17,992		4,307
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Fannie Mae Grantor Trust planned amortization class Series 2005-81 Class PC, 5.5% 9/25/35	$ 2,150		$ 2,088
Fannie Mae subordinate REMIC pass-thru certificates:
floater:
Series 2001-38 Class QF, 3.4413% 8/25/31 (g)	631		635
Series 2002-49 Class FB, 3.0563% 11/18/31 (g)	1,011		991
Series 2002-60 Class FV, 3.4613% 4/25/32 (g)	428		428
Series 2002-75 Class FA, 3.4613% 11/25/32 (g)	877		876
Series 2004-54 Class FE, 3.6113% 2/25/33 (g)	522		509
planned amortization class:
Series 2002-11 Class QC, 5.5% 3/25/17	12,553		12,752
Series 2002-18 Class PC, 5.5% 4/25/17	1,170		1,190
Series 2002-47 Class QE, 5.5% 8/25/17	9,085		9,208
Series 2003-113 Class PE, 4% 11/25/18	7,545		6,958
Series 2004-21 Class QE, 4.5% 11/25/32	1,500		1,410
Series 2005-102 Class CO, 11/25/35 (i)	6,079		4,523
Series 2006-12 Class BO, 10/25/35 (i)	27,413		20,461
Series 2006-37 Class OW, 5/25/36 (i)	6,574		5,023
sequential payer:
Series 2001-20 Class Z, 6% 5/25/31	20,392		20,716
Series 2001-46 Class ZG, 6% 9/25/31	7,392		7,544
Series 2002-79 Class Z, 5.5% 11/25/22	11,827		11,650
Series 2003-84 Class JK, 4.5% 9/25/18	10,000		9,493
Series 2004-3 Class BA, 4% 7/25/17	585		576
Series 2004-91 Class AH, 4.5% 5/25/29	5,475		5,390
Series 2005-117, Class JN, 4.5% 1/25/36	645		563
Series 2006-72 Class CY, 6% 8/25/26	10,215		10,124
Series 2004-19 Class AY, 4% 4/25/19	37,116		33,730
Series 2007-36:
Class GO, 4/25/37 (i)	1,221		847
Class PO, 4/25/37 (i)	2,728		1,874
Class SB, 4.1388% 4/25/37 (g)(h)	35,426		2,886
Class SG, 4.1388% 4/25/37 (g)(h)	15,882		1,343
Series 2007-66 Class SA, 24.8325% 7/25/37 (g)	4,801		5,783
Freddie Mac:
planned amortization class:
Series 2115 Class PE, 6% 1/15/14	764		785
Series 3149 Class OD, 5/15/36 (i)	32,182		22,588
sequential payer Series 2114 Class ZM, 6% 1/15/29	2,324		2,372
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Freddie Mac Manufactured Housing participation certificates guaranteed:
floater Series 1686 Class FA, 3.4% 2/15/24 (g)	$ 1,017		$ 1,023
planned amortization class Series 1681 Class PJ, 7% 12/15/23	6,066		6,230
Freddie Mac Multi-class participation certificates guaranteed:
floater:
Series 2389 Class DA, 3.3575% 11/15/30 (g)	69		69
Series 2530 Class FE, 3.0575% 2/15/32 (g)	592		583
Series 2630 Class FL, 2.9575% 6/15/18 (g)	550		555
Series 3008 Class SM, 0% 7/15/35 (g)	376		284
planned amortization class:
Series 1141 Class G, 9% 9/15/21	372		389
Series 1614 Class L, 6.5% 7/15/23	3,624		3,700
Series 1671 Class G, 6.5% 8/15/23	1		1
Series 2006-15 Class OP, 3/25/36 (i)	7,321		5,141
Series 2131 Class BG, 6% 3/15/29	48,671		49,175
Series 2356 Class GD, 6% 9/15/16	481		492
Series 2376 Class JE, 5.5% 11/15/16	3,321		3,345
Series 2378 Class PE, 5.5% 11/15/16	9,393		9,459
Series 2381 Class OG, 5.5% 11/15/16	2,691		2,711
Series 2390 Class CH, 5.5% 12/15/16	8,558		8,666
Series 2628 Class OE, 4.5% 6/15/18	6,815		6,644
Series 2640 Class GE, 4.5% 7/15/18	7,310		7,121
Series 2660 Class ML, 3.5% 7/15/22	225		225
Series 2682 Class LD, 4.5% 10/15/33	777		673
Series 2752 Class PW, 4% 4/15/22	1,134		1,136
Series 2802 Class OB, 6% 5/15/34	10,455		10,727
Series 2810 Class PD, 6% 6/15/33	995		999
Series 2937 Class KC, 4.5% 2/15/20	19,686		18,940
Series 2962 Class BE, 4.5% 4/15/20	15,015		14,332
Series 3077 Class TO, 4/15/35 (i)	16,048		11,535
Series 3110 Class OP, 9/15/35 (i)	15,175		10,993
Series 3119 Class PO, 2/15/36 (i)	18,377		13,446
Series 3121 Class KO, 3/15/36 (i)	6,321		4,847
Series 3123 Class LO, 3/15/36 (i)	11,927		8,394
Series 3145 Class GO, 4/15/36 (i)	10,703		7,558
Series 3151 Class PO, 5/15/36 (i)	11,593		8,092
sequential payer:
Series 2388 Class ZA, 6% 12/15/31	6,485		6,567
Series 2546 Class MJ, 5.5% 3/15/23	2,861		2,738
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Freddie Mac Multi-class participation certificates guaranteed: - continued
sequential payer:
Series 2570 Class CU, 4.5% 7/15/17	$ 1,643		$ 1,633
Series 2574 Class HP, 5% 2/15/18	42,150		41,381
Series 2587 Class AD, 4.71% 3/15/33	5,785		5,017
Series 2601 Class TB, 5.5% 4/15/23	869		832
Series 2611 Class CH, 4.5% 5/15/18	37,220		35,824
Series 2617 Class GW, 3.5% 6/15/16	2,184		2,181
Series 2675 Class CB, 4% 5/15/16	1,565		1,550
Series 2677 Class BC, 4% 9/15/18	20,040		18,500
Series 2683 Class JA, 4% 10/15/16	1,678		1,659
Series 2685 Class ND, 4% 10/15/18	9,064		8,349
Series 2750 Class ZT, 5% 2/15/34	1,072		914
Series 2770 Class TW, 4.5% 3/15/19	19,670		18,531
Series 2773 Class HC, 4.5% 4/15/19	704		660
Series 2809 Class UA, 4% 12/15/14	1,869		1,870
Series 2849 Class AL, 5% 5/15/18	7,482		7,547
Series 2860 Class CP, 4% 10/15/17	1,845		1,825
Series 2866 Class N, 4.5% 12/15/18	6,417		6,442
Series 2874 Class BC, 5% 10/15/19	43,000		41,778
Series 2937 Class HJ, 5% 10/15/19	7,911		7,961
Series 2998 Class LY, 5.5% 7/15/25	2,011		1,904
Series 3007 Class EW, 5.5% 7/15/25	8,875		8,443
Series 3013 Class VJ, 5% 1/15/14	1,716		1,735
Series 3401 Class EB, 5% 12/15/22	7,495		7,172
Series 2769 Class BU, 5% 3/15/34	5,712		5,090
Series 2863 Class DB, 4% 9/15/14	1,216		1,175
Series 2957 Class SW, 3.5425% 4/15/35 (g)(h)	25,113		1,454
Series 3002 Class SN, 4.0425% 7/15/35 (g)(h)	25,256		1,945
target amortization class:
Series 2156 Class TC, 6.25% 5/15/29	8,376		8,529
Series 2877 Class JC, 5% 10/15/34	1,293		1,284
Ginnie Mae guaranteed REMIC pass-thru securities planned amortization class:
Series 1997-8 Class PE, 7.5% 5/16/27	4,184		4,443
Series 2003-116 Class JE, 5% 12/20/33	13,248		12,215
Series 2004-4 Class MG, 5% 1/16/34	10,425		9,630
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $788,317)		783,689

Cash Equivalents - 30.4%
	Maturity Amount (000s)		Value (000s)
Investments in repurchase agreements in a joint trading account at 2.19%, dated 7/31/08 due 8/1/08:
(Collateralized by U.S. Government Obligations) #	$ 625,554		$ 625,516
(Collateralized by U.S. Government Obligations) # (a)	2,261,736		2,261,598
TOTAL CASH EQUIVALENTS (Cost $2,887,114)		2,887,114
TOTAL INVESTMENT PORTFOLIO - 125.7% (Cost $11,895,203)			11,924,794
NET OTHER ASSETS - (25.7)%			(2,441,152)
NET ASSETS - 100%		$ 9,483,642

Swap Agreements
	Expiration Date	Notional Amount (000s)
Interest Rate Swaps
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 4.64% with JPMorgan Chase, Inc.	April 2038	$ 35,000	1,650
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 4.82% with Citibank	June 2018	135,000	(1,899)
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 5.03% with Credit Suisse First Boston	Oct. 2017	72,000	(3,042)
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 5.57% with Goldman Sachs	August 2017	100,000	(7,022)
Receive semi-annually a fixed rate equal to 2.528% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs	March 2010	69,000	(342)
Receive semi-annually a fixed rate equal to 3.1899% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs	April 2010	89,050	547
Swap Agreements - continued
	Expiration Date	Notional Amount (000s)	Value (000s)
Interest Rate Swaps - continued
Receive semi-annually a fixed rate equal to 3.427% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston	March 2013	$ 88,000	$ (1,625)
Receive semi-annually a fixed rate equal to 4.42% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston	Oct. 2009	300,000	8,082
Receive semi-annually a fixed rate equal to 4.465% and pay quarterly a floating rate based on 3-month LIBOR with Citibank	June 2013	160,000	2,469
Receive semi-annually a fixed rate equal to 4.66% and pay quarterly a floating rate based on 3-month LIBOR with Barclays Bank	August 2018	141,807	0
Receive semi-annually a fixed rate equal to 4.663% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs	August 2018	43,594	0
Receive semi-annually a fixed rate equal to 4.88% and pay quarterly a floating rate based on 3-month LIBOR with Bank of America	Sept. 2010	106,700	4,692
Receive semi-annually a fixed rate equal to 5.03% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc.	August 2010	91,000	4,429
Receive semi-annually a fixed rate equal to 5.706% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank	June 2017	75,000	6,194
Receive semi-annully a fixed rate equal to 2.8575% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc.	April 2011	201,000	(2,856)
		$ 1,707,151	$ 11,277

Legend

(a) Includes investment made with cash collateral received from securities on loan.

(b) Security or a portion of the security is on loan at period end.

(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis.

(e) A portion of the security is subject to a forward commitment to sell.

(f) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $9,384,000.

(g) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

(h) Security represents right to receive monthly interest payments on an underlying pool of mortgages or assets. Principal shown is the outstanding par amount of the pool held as of the end of the period.

(i) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans.

# Additional Information on each counterparty to the repurchase agreement is as follows:

Repurchase Agreement / Counterparty	Value (Amounts in thousands)
$625,516,000 due 8/01/08 at 2.19%
BNP Paribas Securities Corp.	$ 46,762
Banc of America Securities LLC	72,530
Bank of America, NA	70,196
Barclays Capital, Inc.	305,376
Greenwich Capital Markets, Inc.	11,452
ING Financial Markets LLC	64,895
J.P. Morgan Securities, Inc.	35,219
RBC Capital Markets Corp.	9,543
WestLB AG	9,543
	$ 625,516
$2,261,598,000 due 8/01/08 at 2.19%
Bank of America, NA	$ 2,261,598

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amounts)	July 31, 2008

Assets
Investment in securities, at value (including securities loaned of $2,216,611 and repurchase agreements of $2,887,114) - See accompanying schedule: Unaffiliated issuers (cost $11,895,203)		$ 11,924,794
Commitment to sell securities on a delayed delivery basis	$ (224,131)
Receivable for securities sold on a delayed delivery basis	225,704	1,573
Receivable for investments sold, regular delivery		237,639
Cash		1
Receivable for fund shares sold		16,231
Interest receivable		70,254
Swap agreements, at value		11,277
Other receivables		20
Total assets		12,261,789

Liabilities
Payable for investments purchased Regular delivery	$ 131,636
Delayed delivery	366,875
Payable for fund shares redeemed	13,492
Distributions payable	701
Accrued management fee	2,447
Distribution fees payable	186
Other affiliated payables	1,122
Other payables and accrued expenses	90
Collateral on securities loaned, at value	2,261,598
Total liabilities		2,778,147

Net Assets		$ 9,483,642
Net Assets consist of:
Paid in capital		$ 9,356,625
Undistributed net investment income		6,028
Accumulated undistributed net realized gain (loss) on investments		78,548
Net unrealized appreciation (depreciation) on investments		42,441
Net Assets		$ 9,483,642

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Assets and Liabilities - continued

Amounts in thousands (except per-share amounts)	July 31, 2008

Calculation of Maximum Offering Price Class A: Net Asset Value and redemption price per share ($232,188 ÷ 22,333 shares)		$ 10.40

Maximum offering price per share (100/96.00 of $10.40)		$ 10.83
Class T: Net Asset Value and redemption price per share ($235,918 ÷ 22,693 shares)		$ 10.40

Maximum offering price per share (100/96.00 of $10.40)		$ 10.83
Class B: Net Asset Value and offering price per share ($40,948 ÷ 3,938 shares)^A		$ 10.40

Class C: Net Asset Value and offering price per share ($71,002 ÷ 6,829 shares)^A		$ 10.40

Government Income: Net Asset Value, offering price and redemption price per share ($8,153,823 ÷ 785,229 shares)		$ 10.38

Institutional Class: Net Asset Value, offering price and redemption price per share ($749,763 ÷ 72,124 shares)		$ 10.40

^ARedemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Statement of Operations

Amounts in thousands	Year ended July 31, 2008

Investment Income
Interest		$ 376,011

Expenses
Management fee	$ 25,333
Transfer agent fees	8,928
Distribution fees	2,029
Fund wide operations fee	2,777
Independent trustees' compensation	33
Miscellaneous	18
Total expenses before reductions	39,118
Expense reductions	(396)	38,722
Net investment income		337,289
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	204,260
Futures contracts	259
Swap agreements	(1,299)
Total net realized gain (loss)		203,220
Change in net unrealized appreciation (depreciation) on: Investment securities	47,602
Swap agreements	10,913
Delayed delivery commitments	3,090
Total change in net unrealized appreciation (depreciation)		61,605
Net gain (loss)		264,825
Net increase (decrease) in net assets resulting from operations		$ 602,114

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Changes in Net Assets

Amounts in thousands	Year ended July 31, 2008	Year ended July 31, 2007
Increase (Decrease) in Net Assets
Operations
Net investment income	$ 337,289	$ 296,314
Net realized gain (loss)	203,220	(39,749)
Change in net unrealized appreciation (depreciation)	61,605	63,955
Net increase (decrease) in net assets resulting from operations	602,114	320,520
Distributions to shareholders from net investment income	(333,995)	(303,351)
Distributions to shareholders from net realized gain	-	(2,616)
Total distributions	(333,995)	(305,967)
Share transactions - net increase (decrease)	1,973,783	1,895,812
Total increase (decrease) in net assets	2,241,902	1,910,365

Net Assets
Beginning of period	7,241,740	5,331,375
End of period (including undistributed net investment income of $6,028 and undistributed net investment income of $1,411, respectively)	$ 9,483,642	$ 7,241,740

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class A

Years ended July 31,	2008	2007^F
Selected Per-Share Data
Net asset value, beginning of period	$ 10.01	$ 9.98
Income from Investment Operations
Net investment income^E	.402	.311
Net realized and unrealized gain (loss)	.387	.033
Total from investment operations	.789	.344
Distributions from net investment income	(.399)	(.314)
Net asset value, end of period	$ 10.40	$ 10.01
Total Return^{B, C, D}	7.96%	3.49%
Ratios to Average Net Assets^G
Expenses before reductions	.81%	.78%^A
Expenses net of fee waivers, if any	.81%	.78%^A
Expenses net of all reductions	.80%	.77%^A
Net investment income	3.88%	4.08%^A
Supplemental Data
Net assets, end of period (in millions)	$ 232	$ 145
Portfolio turnover rate	269%	164%^H

^A Annualized

^B Total returns for periods of less than one year are not annualized.

^C Total returns would have been lower had certain expenses not been reduced during the periods shown.

^D Total returns do not include the effect of the sales charges.

^E Calculated based on average shares outstanding during the period.

^F For the period October 24, 2006 (commencement of sale of shares) to July 31, 2007.

^G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

^H The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class T

Years ended July 31,	2008	2007^F
Selected Per-Share Data
Net asset value, beginning of period	$ 10.01	$ 9.98
Income from Investment Operations
Net investment income^E	.404	.306
Net realized and unrealized gain (loss)	.387	.036
Total from investment operations	.791	.342
Distributions from net investment income	(.401)	(.312)
Net asset value, end of period	$ 10.40	$ 10.01
Total Return^{B, C, D}	7.98%	3.46%
Ratios to Average Net Assets^G
Expenses before reductions	.78%	.79%^A
Expenses net of fee waivers, if any	.78%	.79%^A
Expenses net of all reductions	.78%	.79%^A
Net investment income	3.90%	4.02%^A
Supplemental Data
Net assets, end of period (in millions)	$ 236	$ 181
Portfolio turnover rate	269%	164%^H

^A Annualized

^B Total returns for periods of less than one year are not annualized.

^C Total returns would have been lower had certain expenses not been reduced during the periods shown.

^D Total returns do not include the effect of the sales charges.

^E Calculated based on average shares outstanding during the period.

^F For the period October 24, 2006 (commencement of sale of shares) to July 31, 2007.

^H The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class B

Years ended July 31,	2008	2007^F
Selected Per-Share Data
Net asset value, beginning of period	$ 10.01	$ 9.98
Income from Investment Operations
Net investment income^E	.329	.251
Net realized and unrealized gain (loss)	.387	.037
Total from investment operations	.716	.288
Distributions from net investment income	(.326)	(.258)
Net asset value, end of period	$ 10.40	$ 10.01
Total Return^{B, C, D}	7.21%	2.91%
Ratios to Average Net Assets^G
Expenses before reductions	1.51%	1.50%^A
Expenses net of fee waivers, if any	1.51%	1.50%^A
Expenses net of all reductions	1.50%	1.50%^A
Net investment income	3.17%	3.30%^A
Supplemental Data
Net assets, end of period (in millions)	$ 41	$ 43
Portfolio turnover rate	269%	164%^H

^A Annualized

^B Total returns for periods of less than one year are not annualized.

^C Total returns would have been lower had certain expenses not been reduced during the periods shown.

^D Total returns do not include the effect of the contingent deferred sales charge.

^E Calculated based on average shares outstanding during the period.

^F For the period October 24, 2006 (commencement of sale of shares) to July 31, 2007.

^H The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class C

Years ended July 31,	2008	2007^F
Selected Per-Share Data
Net asset value, beginning of period	$ 10.01	$ 9.98
Income from Investment Operations
Net investment income^E	.326	.249
Net realized and unrealized gain (loss)	.387	.033
Total from investment operations	.713	.282
Distributions from net investment income	(.323)	(.252)
Net asset value, end of period	$ 10.40	$ 10.01
Total Return^{B, C, D}	7.18%	2.85%
Ratios to Average Net Assets^G
Expenses before reductions	1.53%	1.55%^A
Expenses net of fee waivers, if any	1.53%	1.55%^A
Expenses net of all reductions	1.53%	1.55%^A
Net investment income	3.15%	3.26%^A
Supplemental Data
Net assets, end of period (in millions)	$ 71	$ 39
Portfolio turnover rate	269%	164%^H

^A Annualized

^B Total returns for periods of less than one year are not annualized.

^C Total returns would have been lower had certain expenses not been reduced during the periods shown.

^D Total returns do not include the effect of the contingent deferred sales charge.

^E Calculated based on average shares outstanding during the period.

^F For the period October 24, 2006 (commencement of sale of shares) to July 31, 2007.

^H The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Government Income

Years ended July 31,	2008	2007	2006	2005	2004
Selected Per-Share Data
Net asset value, beginning of period	$ 10.00	$ 9.95	$ 10.20	$ 10.13	$ 10.16
Income from Investment Operations
Net investment income^B	.438	.443	.429	.329	.307
Net realized and unrealized gain (loss)	.378	.068	(.274)	.097	.124
Total from investment operations	.816	.511	.155	.426	.431
Distributions from net investment income	(.436)	(.456)	(.405)	(.321)	(.301)
Distributions from net realized gain	-	(.005)	-	(.035)	(.160)
Total distributions	(.436)	(.461)	(.405)	(.356)	(.461)
Net asset value, end of period	$ 10.38	$ 10.00	$ 9.95	$ 10.20	$ 10.13
Total Return^A	8.25%	5.22%	1.56%	4.24%	4.30%
Ratios to Average Net Assets^C
Expenses before reductions	.45%	.45%	.45%	.58%	.63%
Expenses net of fee waivers, if any	.45%	.45%	.45%	.58%	.63%
Expenses net of all reductions	.45%	.44%	.44%	.58%	.63%
Net investment income	4.23%	4.42%	4.27%	3.21%	3.01%
Supplemental Data
Net assets, end of period (in millions)	$ 8,154	$ 6,118	$ 5,331	$ 5,127	$ 4,168
Portfolio turnover rate	269%	164%^D	108%	114%	224%

^A Total returns would have been lower had certain expenses not been reduced during the periods shown.

^B Calculated based on average shares outstanding during the period.

^C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

^D The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Institutional Class

Years ended July 31,	2008	2007^E
Selected Per-Share Data
Net asset value, beginning of period	$ 10.01	$ 9.98
Income from Investment Operations
Net investment income^D	.432	.329
Net realized and unrealized gain (loss)	.388	.034
Total from investment operations	.820	.363
Distributions from net investment income	(.430)	(.333)
Net asset value, end of period	$ 10.40	$ 10.01
Total Return^{B, C}	8.28%	3.67%
Ratios to Average Net Assets^F
Expenses before reductions	.51%	.53%^A
Expenses net of fee waivers, if any	.51%	.53%^A
Expenses net of all reductions	.51%	.53%^A
Net investment income	4.17%	4.32%^A
Supplemental Data
Net assets, end of period (in millions)	$ 750	$ 715
Portfolio turnover rate	269%	164%^G

^A Annualized

^B Total returns for periods of less than one year are not annualized.

^C Total returns would have been lower had certain expenses not been reduced during the periods shown.

^D Calculated based on average shares outstanding during the period.

^E For the period October 24, 2006 (commencement of sale of shares) to July 31, 2007.

^F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

^G The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Notes to Financial Statements

For the period ended July 31, 2008

(Amounts in thousands except ratios)

1. Organization.

Fidelity Government Income Fund (the Fund) is a fund of Fidelity Income Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The Fund offers Class A, Class T, Class B, Class C, Government Income, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.

2. Significant Accounting Policies.

Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value. Actual prices received at disposition may differ.

Annual Report

2. Significant Accounting Policies - continued

Security Valuation - continued

and exchange-traded funds. The frequency with which these procedures are used cannot be predicted and may be utilized to a significant extent. The value of securities used for net asset value (NAV) calculation under these procedures may differ from published prices for the same securities.

Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.

Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing substantially all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code and filing its U.S. federal tax return. As a result, no provision for income taxes is required. The Fund is subject to the provisions of FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes (FIN 48). FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. Each of the Fund's federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

2. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

Book-tax differences are primarily due to swap agreements, market discount, deferred trustees compensation, futures transactions, financing transactions, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.

The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:

Unrealized appreciation	$ 92,078
Unrealized depreciation	(69,550)
Net unrealized appreciation (depreciation)	22,528
Undistributed ordinary income	35,327
Undistributed long-term capital gain	37,386

Cost for federal income tax purposes	$ 11,902,266

The tax character of distributions paid was as follows:

	July 31, 2008	July 31, 2007
Ordinary Income	$ 333,995	$ 305,967

New Accounting Pronouncements. In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and results in expanded disclosures about fair value measurements.

In addition, in March 2008, Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161), was issued and is effective for fiscal years beginning after November 15, 2008. SFAS 161 requires enhanced disclosures to provide information about the reasons the Fund invests in derivative instruments, the accounting treatment and the effect derivatives have on financial performance. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Fund's financial statement disclosures.

Annual Report

3. Operating Policies.

Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.

Delayed Delivery Transactions and When-Issued Securities. The Fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the Fund's Schedule of Investments. The Fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.

Futures Contracts. The Fund may use futures contracts to manage its exposure to the bond market and to fluctuations in interest rates. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

3. Operating Policies - continued

Futures Contracts - continued

Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.

Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.

Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Periodic payments received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the Fund's Schedule of Investments under the caption "Swap Agreements."

Mortgage Dollar Rolls. The Fund may enter into dollar rolls in which the Fund sells mortgage-backed securities, realizing a gain or loss, and simultaneously agrees to repurchase substantially similar securities at a future date. In addition, the Fund may enter into reverse mortgage dollar rolls in which the Fund purchases and simultaneously agrees to sell substantially similar securities at a future date. During the period between the sale and repurchase in a dollar roll transaction, the Fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities that are permissible investments of the Fund. During the period between the purchase and subsequent sale in a reverse dollar roll transaction

Annual Report

3. Operating Policies - continued

Mortgage Dollar Rolls - continued

the Fund is entitled to interest and principal payments on the securities purchased. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and a group fee rate that averaged .12% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .32% of the Fund's average net assets.

Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:

	Distribution Fee	Service Fee	Paid to FDC	Retained by FDC
Class A	0%	.25%	$ 491	$ 54
Class T	0%	.25%	549	3
Class B	.65%	.25%	400	288
Class C	.75%	.25%	589	97
			$ 2,029	$ 442

Sales Load. FDC receives a front-end sales charge of up to 4.00% for selling Class A shares and Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, .75% to .50% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Sales Load - continued

For the period, sales charge amounts retained by FDC were as follows:

	Retained by FDC
Class A	$ 46
Class T	18
Class B*	60
Class C*	11
	$ 135

* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.

Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. Prior to January 1, 2008, Fidelity Service Company, Inc. (FSC), also an affiliate of FMR, was the transfer agent for Government Income. For the period, each class paid the following transfer agent fees:

	Amount	% of Average Net Assets
Class A	$ 401	.20
Class T	393	.18
Class B	113	.25
Class C	107	.18
Government Income	6,883	.10
Institutional Class	1,031	.16
	$ 8,928

Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .03% of average net assets.

Annual Report

5. Committed Line of Credit.

The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounted to $18 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.

6. Security Lending.

The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Net income from lending portfolio securities during the period amounted to $8,983.

7. Expense Reductions.

Through arrangements with the Fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's expenses by $15. During the period, credits reduced each class' transfer agent expense as noted in the table below.

	Transfer Agent expense reduction
Class A	$ 7
Government Income	354
Institutional Class	20
	$ 381

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

8. Other.

The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

At the end of the period, Fidelity Freedom 2010 and Fidelity Freedom 2020 were the owners of record of approximately 12% and 14%, respectively of the total outstanding shares of Fidelity Government Income Fund. The Fidelity Advisor Freedom Funds and Fidelity Freedom Funds were the owners of record, in aggregate, of approximately 57% of the total outstanding shares of Fidelity Government Income Fund.

9. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

Years ended July 31,	2008	2007^A
From net investment income
Class A	$ 7,464	$ 4,138
Class T	8,439	5,771
Class B	1,398	1,298
Class C	1,798	1,042
Government Income	288,379	269,231
Institutional Class	26,517	21,871
Total	$ 333,995	$ 303,351
From net realized gain
Government Income	-	2,616

^A Distributions for Class A, Class T, Class B, Class C and Institutional Class are for the period October 24, 2006 (commencement of sale of shares) to
July 31, 2007.

10. Share Transactions.

Transactions for each class of shares were as follows:

	Shares		Dollars
Years ended July 31,	2008	2007^A	2008	2007^A
Class A
Shares sold	17,630	5,668	$ 183,928	$ 56,865
Issued in exchange for shares of Fidelity Advisor Government Investment Fund	-	11,639	-	116,974
Reinvestment of distributions	653	374	6,798	3,759
Shares redeemed	(10,466)	(3,165)	(108,879)	(31,770)
Net increase (decrease)	7,817	14,516	$ 81,847	$ 145,828

Annual Report

10. Share Transactions - continued

	Shares		Dollars
Years ended July 31,	2008	2007^A	2008	2007^A
Class T
Shares sold	15,236	3,593	$ 158,292	$ 36,101
Issued in exchange for shares of Fidelity Advisor Government Investment Fund	-	19,997	-	200,973
Reinvestment of distributions	772	549	8,030	5,508
Shares redeemed	(11,375)	(6,079)	(118,003)	(60,985)
Net increase (decrease)	4,633	18,060	$ 48,319	$ 181,597
Class B
Shares sold	2,313	524	$ 24,145	$ 5,289
Issued in exchange for shares of Fidelity Advisor Government Investment Fund	-	5,890		59,191
Reinvestment of distributions	108	104	1,126	1,045
Shares redeemed	(2,809)	(2,192)	(29,186)	(22,000)
Net increase (decrease)	(388)	4,326	$ (3,915)	$ 43,525
Class C
Shares sold	5,069	517	$ 52,892	$ 5,201
Issued in exchange for shares of Fidelity Advisor Government Investment Fund	-	4,449		44,717
Reinvestment of distributions	114	64	1,185	643
Shares redeemed	(2,289)	(1,095)	(23,797)	(10,981)
Net increase (decrease)	2,894	3,935	$ 30,280	$ 39,580
Government Income
Shares sold	308,696	105,528	$ 3,217,869	$ 1,058,863
Issued in exchange for shares of Spartan Government Income Fund	-	71,077	-	713,611
Reinvestment of distributions	27,173	26,531	282,009	266,315
Shares redeemed	(162,519)	(127,164)	(1,689,834)	(1,271,926)
Net increase (decrease)	173,350	75,972	$ 1,810,044	$ 766,863
Institutional Class
Shares sold	30,491	16,978	$ 316,702	$ 170,642
Issued in exchange for shares of Fidelity Advisor Government Investment Fund	-	57,200	-	574,860
Reinvestment of distributions	2,538	2,169	26,319	21,772
Shares redeemed	(32,353)	(4,899)	(335,813)	(48,855)
Net increase (decrease)	676	71,448	$ 7,208	$ 718,419

^A Share transactions for Class A, Class T, Class B, Class C and Institutional Class are for the period October 24, 2006 (commencement of sale of
shares) to July 31, 2007.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

11. Merger Information.

On October 27, 2006, the Fund acquired all of the assets and assumed all of the liabilities of Fidelity Advisor Government Investment Fund and Spartan Government Income Fund pursuant to an agreement and plan of reorganization approved by the shareholders on September 20, 2006. The acquisition was accomplished by an exchange of 11,639, 19,997, 5,890, 4,449, and 57,200 shares of Class A, Class T, Class B, Class C and Institutional Class of the Fund, respectively, for 11,840, 20,358, 6,003, 4,531, and 58,535 shares then outstanding of Class A, Class T, Class B, Class C and Institutional Class (valued at $9.88, $9.87, $9.86, $9.87, and $9.82, per share for Class A, Class T, Class B, Class C and Institutional Class, respectively) of Fidelity Advisor Government Investment Fund. Further, the acquisition was accomplished by an exchange of 71,077 shares of Government Income class for the 66,115 shares then outstanding (valued at $10.79 per share) of Spartan Government Income Fund. The reorganization qualified as a tax-free reorganization for federal income tax purposes with no gain or loss recognized to the funds or their shareholders. Fidelity Advisor Government Investment Fund's net assets, including $1,514 of unrealized depreciation, and Spartan Government Income Fund's net assets, including $3,295 of unrealized depreciation, were combined with the Fund's net assets of $5,214,485 for total net assets after the acquisition of $6,924,811.

12. Proposed Reorganization.

On June 19, 2008, the Board of Trustees of the Fund and the Board of Trustees of the Capital One U.S. Government Income Fund ("U.S. Government Income Fund") approved an Agreement and Plan of Reorganization between the Fund and U.S. Government Income Fund. The agreement provides for the transfer of all the assets of U.S. Government Income Fund (other than any deferred, accrued or prepaid expenses or any assets necessary to discharge any liabilities of U.S. Government Income Fund following the merger) in exchange solely for the number of shares of Class A of the Fund with an equal dollar value of the outstanding shares of U.S. Government Income Fund on the day the reorganization is effective.

A meeting of the shareholders of U.S. Government Income Fund is expected to be held in October, 2008 to vote on the reorganization. If approved by shareholders, the reorganization is expected to become effective on or about November 21, 2008. The reorganization is expected to qualify as a tax-free transaction with no gain or loss recognized by the Funds or their shareholders.

Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Government Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Government Income Fund (a fund of Fidelity Income Fund) at July 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Government Income Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts

September 23, 2008

Annual Report

Trustees and Officers

The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for Edward C. Johnson 3d and James C. Curvey, each of the Trustees oversees 159 funds advised by FMR or an affiliate. Messrs. Johnson and Curvey oversee 377 funds advised by FMR or an affiliate.

The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation
Edward C. Johnson 3d (78)
	Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR LLC; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of FIL Limited. Previously, Mr. Johnson served as President of FMR LLC (2006-2007). Mr. Edward C. Johnson 3d and Mr. Arthur E. Johnson are not related.
James C. Curvey (73)
	Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2006- present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University.

Independent Trustees:

Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Age; Principal Occupation
Albert R. Gamper, Jr. (66)
	Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities), a member of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. Previously, Mr. Gamper served as Chairman of the Board of Governors, Rutgers University (2004-2007).
George H. Heilmeier (72)
	Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology), Compaq, Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame.
Arthur E. Johnson (61)
	Year of Election or Appointment: 2008 Mr. Johnson serves as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor). In addition, Mr. Johnson serves as a member of the Board of Directors of AGL Resources, Inc. (holding company), and IKON Office Solutions, Inc. (document management systems and services). Mr. Arthur E. Johnson and Mr. Edward C. Johnson 3d are not related.
James H. Keyes (67)
	Year of Election or Appointment: 2007 Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines) and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). Previously, Mr. Keyes served as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008).
Marie L. Knowles (61)
	Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of McKesson Corporation (healthcare service). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007).
Kenneth L. Wolfe (69)
	Year of Election or Appointment: 2005 Mr. Wolfe is Chairman and a Director of Hershey Foods Corporation (2007-present), where prior to his retirement in 2001, he was Chairman and Chief Executive Officer. Mr. Wolfe currently serves as a member of the board of Revlon Inc. (2004-present). Previously, Mr. Wolfe served as a member of the boards of Adelphia Communications Corporation (2003-2006) and Bausch & Lomb, Inc. (1993-2007).

Advisory Board Member and Executive Officers**:

Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation
Peter S. Lynch (64)
	Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund.
John R. Hebble (50)
	Year of Election or Appointment: 2008 President and Treasurer of Government Income. Mr. Hebble also serves as President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2003-present). Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds.
Boyce I. Greer (52)
	Year of Election or Appointment: 2006 Vice President of Government Income. Mr. Greer also serves as Vice President of Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). Mr. Greer is President and a Director of Fidelity Investments Money Management, Inc. (2007-present), and an Executive Vice President of FMR and FMR Co., Inc. (2005-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005).
Dwight D. Churchill (54)
	Year of Election or Appointment: 2008 Vice President of Government Income. Mr. Churchill also serves as Vice President of Fidelity's Bond Funds (2008-present). Mr. Churchill is Executive Vice President of FMR (2005-present), FMR Co., Inc. (2005-present) and Fidelity Investments Money Management, Inc. (2008-present). Previously, Mr. Churchill served as Senior Vice President of FMR (1997- 2005) and Senior Vice President of Fidelity Investments Money Management, Inc. (2000-2006).
Scott C. Goebel (40)
	Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of Government Income. Mr. Goebel also serves as Secretary and CLO of other Fidelity funds (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008-present); and Deputy General Counsel of FMR LLC. Previously, Mr. Goebel served as Assistant Secretary of the Funds (2007- 2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007).
Nancy D. Prior (41)
	Year of Election or Appointment: 2008 Assistant Secretary of Government Income. Ms. Prior also serves as Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2002-present).
Holly C. Laurent (54)
	Year of Election or Appointment: 2008 Anti-Money Laundering (AML) officer of Government Income. Ms. Laurent also serves as AML officer of other Fidelity funds (2008-present) and is an employee of FMR LLC. Previously, Ms. Laurent was Senior Vice President and Head of Legal for Fidelity Business Services India Pvt. Ltd. (2006-2008), Senior Vice President, Deputy General Counsel and Group Head for FMR LLC (2005-2006).
Christine Reynolds (49)
	Year of Election or Appointment: 2008 Chief Financial Officer of Government Income. Ms. Reynolds also serves as Chief Financial Officer of other Fidelity funds (2008-present). Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. She served as Chief Operating Officer of FPCMS from 2007 through July 2008. Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was an audit partner with PwC's investment management practice.
Michael H. Whitaker (41)
	Year of Election or Appointment: 2008 Chief Compliance Officer of Government Income. Mr. Whitaker also serves as Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2007- present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel.
Bryan A. Mehrmann (47)
	Year of Election or Appointment: 2005 Deputy Treasurer of Government Income. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004).
Robert G. Byrnes (41)
	Year of Election or Appointment: 2005 Assistant Treasurer of Government Income. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of Fidelity Pricing Cash Management Services (FPCMS) (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003).
Peter L. Lydecker (54)
	Year of Election or Appointment: 2004 Assistant Treasurer of Government Income. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004-present) and is an employee of FMR.
Paul M. Murphy (61)
	Year of Election or Appointment: 2007 Assistant Treasurer of Government Income. Mr. Murphy also serves as Assistant Treasurer of other Fidelity funds (2007-present) and is an employee of FMR (2007-present). Previously, Mr. Murphy served as Chief Financial Officer of the Fidelity Funds (2005-2006), Vice President and Associate General Counsel of FMR (2007), and Senior Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (1994-2007).
Gary W. Ryan (49)
	Year of Election or Appointment: 2005 Assistant Treasurer of Government Income. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005).

** FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.

Annual Report

Distributions (Unaudited)

The Board of Trustees of Fidelity Government Income Fund voted to pay on September 15, 2008, to shareholders of record at the opening of business on September 12, 2008, a distribution of $.07 per share derived from capital gains realized from sales of portfolio securities.

A total of 9.13% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.

The fund hereby designates as a capital gain dividend with respect to the taxable year ended July 31, 2008, $37,386,227, or, if subsequently determined to be different, the net capital gain of such year.

The fund designates $258,906,779 of distributions paid during the period January 1, 2008 to July 31, 2008 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.

The fund will notify shareholders in January 2009 of amounts for use in preparing 2008 income tax returns.

Annual Report

Board Approval of Investment Advisory Contracts and Management Fees

Fidelity Government Income Fund

Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.

The Board meets regularly and, acting directly and through its separate committees, requests and receives information concerning, and considers at each of its meetings factors that are relevant to, its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has a written charter outlining the structure and purposes of the committee. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts.

At its June 2008 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expenses; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders. The Board also approved agreements with foreign sub-advisers Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Japan) Inc., and Fidelity Management & Research (Hong Kong) Limited.

In considering whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. The Board's decision to renew the Advisory Contracts was not based on any single factor noted above, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.

Annual Report

Board Approval of Investment Advisory Contracts and

Management Fees - continued

Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.

Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.

Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that Fidelity has taken a number of actions over the previous year that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) contractually agreeing to reduce the management fees on Fidelity's Institutional Money Market Funds and launching Class IV and Institutional Class of certain of these funds; (iii) reducing the transfer agent fees for the Fidelity Select Portfolios and Investor Class of the VIP funds; and (iv) launching Class K of 29 equity funds as a lower-fee class available to certain employer-sponsored retirement plans.

Annual Report

Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a proprietary custom index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2007, as available, the cumulative total returns of Fidelity Government Income (retail class) and Class C of the fund, the cumulative total returns of a proprietary custom index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Fidelity Government Income (retail class) and Class C show the performance of the highest and lowest performing classes, respectively. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated. The fund's proprietary custom index is an index developed by FMR that represents the performance of the fund's general investment categories.

Annual Report

Board Approval of Investment Advisory Contracts and

Management Fees - continued

Fidelity Government Income Fund

fid1526

The Board reviewed the fund's relative investment performance against its peer group and stated that the performance of Fidelity Government Income (retail class) of the fund was in the first quartile for all the periods shown. The Board also stated that the investment performance of the fund was lower than its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board discussed with FMR actions that may be taken by FMR to improve the fund's below-benchmark performance and how investment personnel evaluate potential for incremental return against the risks involved in obtaining that incremental return. The Board considered the steps that FMR has taken to strengthen and refine its risk management processes in light of recent credit events that have affected various sectors of the fixed-income markets.

Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.

Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.

Annual Report

The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 9% means that 91% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.

Fidelity Government Income Fund

fid1528

The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2007.

Annual Report

Board Approval of Investment Advisory Contracts and

Management Fees - continued

Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to the fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that the chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.

Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.

In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.

The Board also considered that the current contractual arrangements for the fund (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) for each class at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee for Fidelity Government Income (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Government Income (retail class) to 45 basis points. These contractual arrangements may not be increased without the approval of the Board and the shareholders of the applicable class. The fund's Advisor classes are subject to different "class-level" expenses (transfer agent fees and 12b-1 fees).

The Board noted that the total expenses of each class ranked below its competitive median for 2007.

The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR determines the group fee rates based on a tiered asset "breakpoint" schedule. The Board noted, however, that because the current contractual arrangements set the total fund-level expenses for each class at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses.

Annual Report

Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.

Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.

On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.

The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.

Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.

Annual Report

Board Approval of Investment Advisory Contracts and

Management Fees - continued

Annual Report

Managing Your Investments

By Phone

(phone_graphic)

Fidelity Automated
Service Telephone (FAST®)
1-800-544-5555

Press

fid1530 For mutual fund and brokerage trading.

fid1532 For quotes.*

fid1534 For account balances and holdings.

fid1536 To review orders and mutual
fund activity.

fid1538 To change your PIN.

fid1540 fid1542 To speak to a Fidelity representative.

By PC

Fidelity's web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services.

(computer_graphic)

Fidelity's Web Site
www.fidelity.com

Annual Report

To Visit Fidelity

For directions and hours,
please call 1-800-544-9797.

Arizona

7001 West Ray Road
Chandler, AZ

15445 N. Scottsdale Road
Scottsdale, AZ

California

815 East Birch Street
Brea, CA

1411 Chapin Avenue
Burlingame, CA

851 East Hamilton Avenue
Campbell, CA

19200 Von Karman Avenue
Irvine, CA

601 Larkspur Landing Circle
Larkspur, CA

2000 Avenue of the Stars
Los Angeles, CA

27101 Puerta Real
Mission Viejo, CA

73-575 El Paseo
Palm Desert, CA

251 University Avenue
Palo Alto, CA

123 South Lake Avenue
Pasadena, CA

16656 Bernardo Ctr. Drive
Rancho Bernardo, CA

1220 Roseville Parkway
Roseville, CA

1740 Arden Way
Sacramento, CA

7676 Hazard Center Drive
San Diego, CA

11943 El Camino Real
San Diego, CA

8 Montgomery Street
San Francisco, CA

3793 State Street
Santa Barbara, CA

1200 Wilshire Boulevard
Santa Monica, CA

398 West El Camino Real
Sunnyvale, CA

111 South Westlake Blvd
Thousand Oaks, CA

21701 Hawthorne Boulevard
Torrance, CA

2001 North Main Street
Walnut Creek, CA

6326 Canoga Avenue
Woodland Hills, CA

Colorado

281 East Flatiron Circle
Broomfield, CO

1625 Broadway
Denver, CO

9185 Westview Road
Lone Tree, CO

Connecticut

48 West Putnam Avenue
Greenwich, CT

265 Church Street
New Haven, CT

300 Atlantic Street
Stamford, CT

29 South Main Street
West Hartford, CT

Delaware

400 Delaware Avenue
Wilmington, DE

Florida

175 East Altamonte Drive
Altamonte Springs, FL

4400 N. Federal Highway
Boca Raton, FL

121 Alhambra Plaza
Coral Gables, FL

2948 N. Federal Highway
Ft. Lauderdale, FL

4671 Town Center Parkway
Jacksonville, FL

8880 Tamiami Trail, North
Naples, FL

230 Royal Palm Way
Palm Beach, FL

3501 PGA Boulevard
Palm Beach Gardens, FL

3550 Tamiami Trail, South
Sarasota, FL

1502 N. Westshore Blvd.
Tampa, FL

2465 State Road 7
Wellington, FL

Georgia

3445 Peachtree Road, N.E.
Atlanta, GA

1000 Abernathy Road
Atlanta, GA

Illinois

One North LaSalle Street
Chicago, IL

401 North Michigan Avenue
Chicago, IL

One Skokie Valley Road
Highland Park, IL

1415 West 22nd Street
Oak Brook, IL

15105 S LaGrange Road
Orland Park, IL

1572 East Golf Road
Schaumburg, IL

Indiana

4729 East 82nd Street
Indianapolis, IN

8480 Keystone Crossing
Indianapolis, IN

Kansas

5400 College Boulevard
Overland Park, KS

Maine

Three Canal Plaza
Portland, ME

Maryland

7315 Wisconsin Avenue
Bethesda, MD

610 York Road
Towson, MD

Massachusetts

801 Boylston Street
Boston, MA

155 Congress Street
Boston, MA

300 Granite Street
Braintree, MA

44 Mall Road
Burlington, MA

238 Main Street
Cambridge, MA

200 Endicott Street
Danvers, MA

Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC

Annual Report

405 Cochituate Road
Framingham, MA

551 Boston Turnpike
Shrewsbury, MA

Michigan

500 E. Eisenhower Pkwy.
Ann Arbor, MI

280 Old N. Woodward Ave.
Birmingham, MI

30200 Northwestern Hwy.
Farmington Hills, MI

43420 Grand River Avenue
Novi, MI

Minnesota

7740 France Avenue South
Edina, MN

8342 3rd Street North
Oakdale, MN

Missouri

1524 South Lindbergh Blvd.
St. Louis, MO

Nevada

2225 Village Walk Drive
Henderson, NV

New Jersey

501 Route 73 South
Marlton, NJ

150 Essex Street
Millburn, NJ

35 Morris Street
Morristown, NJ

396 Route 17, North
Paramus, NJ

3518 Route 1 North
Princeton, NJ

530 Broad Street
Shrewsbury, NJ

New Mexico

2261 Q Street NE
Albuquerque, NM

New York

1130 Franklin Avenue
Garden City, NY

37 West Jericho Turnpike
Huntington Station, NY

1271 Avenue of the Americas
New York, NY

980 Madison Avenue
New York, NY

61 Broadway
New York, NY

350 Park Avenue
New York, NY

200 Fifth Avenue
New York, NY

733 Third Avenue
New York, NY

11 Penn Plaza
New York, NY

2070 Broadway
New York, NY

1075 Northern Blvd.
Roslyn, NY

799 Central Park Avenue
Scarsdale, NY

North Carolina

4611 Sharon Road
Charlotte, NC

7011 Fayetteville Road
Durham, NC

Ohio

3805 Edwards Road
Cincinnati, OH

1324 Polaris Parkway
Columbus, OH

1800 Crocker Road
Westlake, OH

28699 Chagrin Boulevard
Woodmere Village, OH

Oregon

7493 SW Bridgeport Road
Tigard, OR

Pennsylvania

600 West DeKalb Pike
King of Prussia, PA

1735 Market Street
Philadelphia, PA

12001 Perry Highway
Wexford, PA

Rhode Island

10 Memorial Boulevard
Providence, RI

Tennessee

3018 Peoples Street
Johnson City, TN

7628 West Farmington Blvd.
Germantown, TN

2035 Mallory Lane
Franklin, TN

Texas

10000 Research Boulevard
Austin, TX

4001 Northwest Parkway
Dallas, TX

12532 Memorial Drive
Houston, TX

2701 Drexel Drive
Houston, TX

6560 Fannin Street
Houston, TX

1701 Lake Robbins Drive
The Woodlands, TX

6500 N. MacArthur Blvd.
Irving, TX

6005 West Park Boulevard
Plano, TX

14100 San Pedro
San Antonio, TX

1576 East Southlake Blvd.
Southlake, TX

Utah

279 West South Temple
Salt Lake City, UT

Virginia

1861 International Drive
McLean, VA

Washington

10500 NE 8th Street
Bellevue, WA

1518 6th Avenue
Seattle, WA

Washington, DC

1900 K Street, N.W.
Washington, DC

Wisconsin

16020 West Bluemound Road
Brookfield, WI

Annual Report

To Write Fidelity

We'll give your correspondence immediate attention and send you written confirmation upon completion of your request.

(letter_graphic)

Making Changes
To Your Account

(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

(letter_graphic)

For Non-Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

(letter_graphic)

For Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

Annual Report

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Advisers

Fidelity Research & Analysis Company

Fidelity Management & Research
(U.K.) Inc.

Fidelity Investments
Money Management, Inc.

Fidelity International Investment Advisors

Fidelity International Investment Advisors
(U.K.) Limited

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Service Agents

Fidelity Investments Institutional

Operations Company, Inc.

Boston, MA

Fidelity Service Company, Inc.

Boston, MA

Custodian

The Bank of New York

New York, NY

The Fidelity Telephone Connection

Mutual Fund 24-Hour Service

Exchanges/Redemptions
and Account Assistance 1-800-544-6666

Product Information 1-800-544-6666

Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)

TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)

Fidelity Automated Service
Telephone (FAST®) fid1544 1-800-544-5555

Automated line for quickest service

GVT-UANN-0908
1.789246.105

fid1547

(Fidelity Investment logo)(registered trademark)
Fidelity Advisor
Government Income
Fund - Class A, Class T, Class B
and Class C

Annual Report

July 31, 2008

Class A, Class T, Class B, and Class C are classes of Fidelity^® Government Income Fund

(2_fidelity_logos) (Registered_Trademark)

Chairman's Message	<Click Here>	Ned Johnson's message to shareholders.
Performance	<Click Here>	How the fund has done over time.
Management's Discussion	<Click Here>	The manager's review of fund performance, strategy and outlook.
Shareholder Expense Example	<Click Here>	An example of shareholder expenses.
Investment Changes	<Click Here>	A summary of major shifts in the fund's investments over the past six months.
Investments	<Click Here>	A complete list of the fund's investments with their market values.
Financial Statements	<Click Here>	Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights.
Notes	<Click Here>	Notes to the financial statements.
Report of Independent Registered Public Accounting Firm	<Click Here>
Trustees and Officers	<Click Here>
Distributions	<Click Here>
Board Approval of Investment Advisory Contracts and Management Fees	<Click Here>

To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com (search for "proxy voting guidelines") or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.

Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.

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.

Annual Report

NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE

Neither the fund nor Fidelity Distributors Corporation is a bank.

Annual Report

Chairman's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

Sincerely,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

Average Annual Total Returns

Periods ended July 31, 2008	Past 1 year	Past 5 years	Past 10 years
Class A (incl. 4.00% sales charge) ^A	3.64%	3.75%	4.91%
Class T (incl. 4.00% sales charge) ^B	3.66%	3.75%	4.91%
Class B (incl. contingent deferred sales charge)^C	2.21%	4.00%	5.21%
Class C (incl. contingent deferred sales charge)^D	6.18%	4.32%	5.20%

^A As of April 1, 2007, Class A shares bear a 0.25% 12b-1 fee. The initial offering of Class A shares took place on October 24, 2006. Returns between October 24, 2006 and March 31, 2007 reflect a 0.15% 12b-1 fee. Returns prior to October 24, 2006 are those of Government Income, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class A shares' current 12b-1 fee been reflected, returns prior to April 1, 2007 would have been lower.

^B Class T shares bear a 0.25% 12b-1 fee. The initial offering of Class T shares took place on October 24, 2006. Returns prior to October 24, 2006 are those of Government Income, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class T shares' 12b-1 fee been reflected, returns prior to October 24, 2006 would have been lower.

^C Class B shares bear a 0.90% 12b-1 fee. The initial offering of Class B shares took place on October 24, 2006. Returns prior to October 24, 2006 are those of Government Income, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to October 24, 2006 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five years, and past ten years total return figures are 5%, 2%, and 0%, respectively.

^D Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on October 24, 2006. Returns prior to October 24, 2006 are those of Government Income, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to October 24, 2006 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five years, and past ten years total return figures are 1%, 0%, and 0%, respectively.

Annual Report

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in Fidelity Advisor Government Income Fund - Class A on July 31, 1998, and the current 4.00% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers U.S. Government Index performed over the same period. The initial offering of Class A took place on October 24, 2006. See the previous page for additional information regarding the performance of Class A.

fid1561

In prior years, the performance from year to year was represented by the performance of Class T. Going forward, the fund's performance will be represented by Class A for consistency with other fund materials.

Annual Report

Management's Discussion of Fund Performance

Comments from William Irving, Portfolio Manager of Fidelity Advisor Government Income Fund

For the 12 months ending July 31, 2008, the fund's Class A, Class T, Class B and Class C shares returned 7.96%, 7.98%, 7.21% and 7.18%, respectively (excluding sales charges). In comparison, the Lehman Brothers 75% U.S. Government/25% U.S. Mortgage-Backed Securities Index returned 8.20%. What we lost by underweighting Treasuries - the index's biggest sector concentration and its best performer during the period - we more than made up for through other Treasury-related decisions. In particular, security lending - whereby we loaned Treasury holdings overnight and invested the proceeds in higher-yielding investments - bolstered the fund's results. We also were successful with tactical trades of Treasury Inflation-Protected Securities (TIPS), which are not part of the index. Advantageous yield-curve positioning also benefited the fund's performance. In the mortgage sector, good picks among 15-year securities and collateralized mortgage obligations (CMOs) - which are made up of pools of pass-through securities whose cash flows are carved out into classes with their own expected maturities and cash-flow patterns - worked in the fund's favor. Likewise, my decision to maintain a larger-than-index exposure to hybrid adjustable-rate mortgage securities (ARMs) - which give homeowners a relatively low fixed-interest rate for an initial period and then convert to an ARM where the interest rate periodically resets - benefited relative performance, as they generally outpaced the index after adjusting for their lower interest-rate sensitivity. With the benefit of 20/20 hindsight, owning more of these types of securities may have been helpful given how well they performed, but I was mindful of the importance of diversification.

Annual Report

Shareholder Expense Example

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2008 to July 31, 2008).

Actual Expenses

Hypothetical Example for Comparison Purposes

Annual Report

	Beginning Account Value February 1, 2008	Ending Account Value July 31, 2008	Expenses Paid During Period* February 1, 2008 to July 31, 2008
Class A
Actual	$ 1,000.00	$ 999.60	$ 3.98
Hypothetical^A	$ 1,000.00	$ 1,020.89	$ 4.02
Class T
Actual	$ 1,000.00	$ 1,000.70	$ 3.88
Hypothetical^A	$ 1,000.00	$ 1,020.98	$ 3.92
Class B
Actual	$ 1,000.00	$ 996.10	$ 7.54
Hypothetical^A	$ 1,000.00	$ 1,017.30	$ 7.62
Class C
Actual	$ 1,000.00	$ 996.00	$ 7.64
Hypothetical^A	$ 1,000.00	$ 1,017.21	$ 7.72
Government Income
Actual	$ 1,000.00	$ 1,001.40	$ 2.24
Hypothetical^A	$ 1,000.00	$ 1,022.63	$ 2.26
Institutional Class
Actual	$ 1,000.00	$ 1,002.10	$ 2.49
Hypothetical^A	$ 1,000.00	$ 1,022.38	$ 2.51

^A 5% return per year before expenses

	Annualized Expense Ratio
Class A	.80%
Class T	.78%
Class B	1.52%
Class C	1.54%
Government Income	.45%
Institutional Class	.50%

Annual Report

Investment Changes (Unaudited)

Coupon Distribution as of July 31, 2008
	% of fund's investments	% of fund's investments 6 months ago
Zero coupon bonds	1.2	1.6
Less than 2%	2.8	0.8
2 - 2.99%	5.5	1.6
3 - 3.99%	10.1	8.7
4 - 4.99%	14.1	25.6
5 - 5.99%	27.4	24.9
6 - 6.99%	12.7	14.7
7% and over	1.9	3.0

Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments.

Weighted Average Maturity as of July 31, 2008
		6 months ago
Years	4.8	4.6

Duration as of July 31, 2008
		6 months ago
Years	5.1	4.5

Asset Allocation (% of fund's net assets)
As of July 31, 2008*			As of January 31, 2008**
	Mortgage Securities 30.9%			Mortgage Securities 34.5%
	CMOs and Other Mortgage Related Securities 8.3%			CMOs and Other Mortgage Related Securities 7.7%
	U.S. Treasury Obligations 34.3%			U.S. Treasury Obligations 33.6%
	U.S. Government Agency Obligations 21.7%			U.S. Government Agency Obligations 29.9%
	Asset-Backed Securities 0.1%			Asset-Backed Securities 0.2%
	Short-Term Investments and Net Other Assets 4.7%			Short-Term Investments and Net Other Assets (5.9)%^†
* Futures and Swaps		11.1%	** Futures and Swaps		5.7%

fid1575

^† Short-Term Investments and Net Other Assets are not included in the pie chart.

Annual Report

Investments July 31, 2008

Showing Percentage of Net Assets

U.S. Government and Government Agency Obligations - 56.0%
	Principal Amount (000s)		Value (000s)
U.S. Government Agency Obligations - 21.7%
Fannie Mae:
2.5% 4/9/10	$ 46,360		$ 45,939
3% 7/12/10	150,000		149,515
3.25% 8/12/10 (b)	157,020		157,168
3.375% 5/19/11	24,967		24,877
3.625% 2/12/13 (b)	32,905		32,437
3.875% 7/12/13 (b)	26,275		26,091
4.75% 11/19/12	29,255		30,187
4.875% 4/15/09	43,349		43,966
4.875% 5/18/12	170,000		175,996
5% 2/16/12	31,355		32,606
5.125% 4/15/11	188,800		196,783
5.375% 6/12/17	49,471		52,231
6% 5/15/11	10,130		10,790
6.625% 9/15/09	149,585		155,586
Freddie Mac:
3.25% 7/16/10	11,145		11,162
3.5% 5/29/13 (b)	123,800		120,997
3.75% 6/28/13	5,000		4,938
3.875% 6/29/11	19,531		19,703
4.75% 3/5/12	10,000		10,316
4.875% 2/9/10	27,220		27,962
4.875% 6/13/18 (b)	44,378		45,095
5% 6/11/09 (b)	100,000		101,783
5% 1/30/14	25,000		25,973
5.125% 11/17/17 (b)	25,000		25,911
5.25% 5/21/09	154,235		157,143
5.25% 7/18/11	29,530		30,918
5.75% 1/15/12	32,906		34,934
Israeli State (guaranteed by U.S. Government through Agency for International Development):
5.5% 9/18/23	110,500		118,392
6.8% 2/15/12	30,000		31,869
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates:
6.77% 11/15/13	5,627		5,944
6.99% 5/21/16	19,051		20,852
Private Export Funding Corp. secured:
4.974% 8/15/13	22,940		23,745
5.66% 9/15/11 (c)	18,000		19,023
5.685% 5/15/12	24,035		25,501
U.S. Government and Government Agency Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency Obligations - continued
Private Export Funding Corp. secured: - continued
6.67% 9/15/09	$ 3,500		$ 3,644
Small Business Administration guaranteed development participation certificates:
Series 2002-20J Class 1, 4.75% 10/1/22	5,675		5,494
Series 2002-20K Class 1, 5.08% 11/1/22	12,402		12,225
Series 2003-P10B, Class 1 5.136% 8/10/13	8,023		8,027
Series 2004-20H Class 1, 5.17% 8/1/24	3,521		3,480
Tennessee Valley Authority 5.375% 4/1/56	8,429		8,485
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A, 5.96% 8/1/09	18,380		18,660
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS			2,056,348
U.S. Treasury Obligations - 34.3%
U.S. Treasury Bonds:
4.375% 2/15/38	130,700		125,952
4.75% 2/15/37 (f)	19,000		19,398
5% 5/15/37 (b)	139,000		147,677
6.125% 8/15/29	162,102		193,712
6.25% 8/15/23	1,500		1,777
8% 11/15/21 (f)	146,794		198,585
U.S. Treasury Notes:
1.75% 3/31/10 (b)	341,106		337,642
2.125% 1/31/10 (f)	198,280		197,738
2.5% 3/31/13	43,781		42,454
2.75% 2/28/13	54,231		53,185
2.875% 6/30/10 (b)	308,061		310,299
3.125% 11/30/09	29,100		29,421
3.375% 11/30/12 (b)	217,916		219,993
3.375% 6/30/13 (b)	95,927		96,392
3.375% 7/31/13	80,000		80,375
3.5% 5/31/13	55,000		55,610
3.5% 2/15/18 (b)	78,000		75,154
3.625% 12/31/12 (b)	32,788		33,423
3.875% 5/15/18 (b)	41,449		41,093
4% 9/30/09	3,000		3,060
4% 2/15/14	43,031		44,487
4.25% 11/15/14 (b)	77,185		80,845
4.25% 11/15/17 (b)	189,000		193,238
4.5% 2/28/11	4,190		4,374
U.S. Government and Government Agency Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Treasury Obligations - continued
U.S. Treasury Notes: - continued
4.625% 8/31/11	$ 593		$ 624
4.625% 7/31/12	20		21
4.625% 11/15/16 (b)	117,000		123,645
4.75% 5/15/14 (b)	28,328		30,426
4.75% 8/15/17 (b)	231,000		245,131
5.125% 5/15/16	249,330		272,588
TOTAL U.S. TREASURY OBLIGATIONS			3,258,319
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $5,281,922)		5,314,667
U.S. Government Agency - Mortgage Securities - 30.9%

Fannie Mae - 22.1%
3.695% 10/1/33 (g)	577		581
3.71% 6/1/33 (g)	1,871		1,867
3.737% 5/1/33 (g)	2,933		2,940
3.741% 10/1/33 (g)	525		529
3.75% 1/1/34 (g)	491		496
3.906% 5/1/34 (g)	3,868		3,893
3.916% 5/1/34 (g)	5,174		5,213
3.98% 9/1/33 (g)	5,135		5,164
3.988% 10/1/18 (g)	329		332
4% 9/1/13 to 6/1/20	22,747		21,844
4.085% 6/1/33 (g)	364		363
4.174% 1/1/35 (g)	1,222		1,231
4.235% 1/1/34 (g)	1,642		1,659
4.25% 2/1/35 (g)	626		632
4.251% 8/1/33 (g)	794		797
4.259% 10/1/33 (g)	251		253
4.284% 3/1/33 (g)	228		230
4.301% 3/1/33 (g)	303		306
4.306% 5/1/33 (g)	148		149
4.328% 1/1/35 (g)	709		714
4.341% 10/1/19 (g)	995		1,001
4.366% 2/1/34 (g)	972		983
4.388% 2/1/35 (g)	981		991
4.41% 10/1/34 (g)	3,273		3,299
4.418% 5/1/35 (g)	390		392
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
4.42% 6/1/35 (g)	$ 2,238		$ 2,253
4.425% 8/1/34 (g)	1,549		1,565
4.427% 1/1/35 (g)	606		608
4.431% 5/1/33 (g)	4,876		4,902
4.435% 3/1/35 (g)	936		943
4.473% 7/1/35 (g)	1,977		1,977
4.483% 11/1/33 (g)	1,247		1,258
4.485% 12/1/34 (g)	452		456
4.492% 1/1/35 (g)	4,635		4,692
4.5% 2/1/18 to 6/1/23	32,084		31,093
4.545% 5/1/35 (g)	1,526		1,536
4.565% 7/1/35 (g)	2,267		2,265
4.599% 10/1/35 (g)	253		255
4.65% 10/1/34 (g)	2,860		2,881
4.705% 7/1/34 (g)	1,676		1,692
4.707% 2/1/35 (g)	5,400		5,479
4.727% 6/1/33 (g)	191		192
4.765% 12/1/35 (g)	3,379		3,417
4.774% 12/1/34 (g)	585		592
4.776% 4/1/35 (g)	221		223
4.783% 7/1/35 (g)	4,062		4,099
4.791% 10/1/35 (g)	1,553		1,570
4.797% 6/1/35 (g)	2,647		2,659
4.804% 1/1/34 (g)	55		56
4.812% 11/1/34 (g)	1,855		1,873
4.835% 1/1/35 (g)	9,087		9,176
4.85% 7/1/35 (g)	5,002		5,052
4.852% 7/1/34 (g)	4,740		4,790
4.859% 10/1/34 (g)	6,673		6,740
4.873% 8/1/34 (g)	437		440
4.88% 5/1/35 (g)	1,612		1,629
4.881% 8/1/34 (g)	4,181		4,224
4.926% 8/1/34 (g)	7,237		7,302
4.969% 3/1/35 (g)	4,312		4,372
4.985% 2/1/35 (g)	4,719		4,774
4.986% 4/1/33 (g)	78		78
4.987% 2/1/34 (g)	6,634		6,688
5% 6/1/14 to 9/1/37 (e)	376,475		367,287
5% 8/1/38 (d)	300		285
5% 8/1/38 (d)	300		285
5% 8/1/38 (d)	100		95
5% 8/13/38 (d)	400		381
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
5% 8/13/38 (d)	$ 400		$ 381
5% 8/13/38 (d)	1,000		952
5% 8/13/38 (d)	500		476
5% 8/13/38 (d)	400		381
5% 8/13/38 (d)	1,000		952
5.012% 7/1/34 (g)	272		275
5.069% 1/1/37 (g)	5,486		5,578
5.072% 7/1/34 (g)	1,688		1,708
5.089% 9/1/34 (g)	602		608
5.099% 10/1/35 (g)	3,565		3,613
5.127% 8/1/33 (g)	708		713
5.131% 8/1/34 (g)	5,074		5,148
5.171% 3/1/36 (g)	12,324		12,512
5.185% 3/1/35 (g)	325		329
5.199% 5/1/35 (g)	397		400
5.224% 5/1/35 (g)	4,814		4,880
5.245% 7/1/35 (g)	257		259
5.267% 12/1/36 (g)	2,409		2,453
5.278% 3/1/35 (g)	397		400
5.298% 12/1/34 (g)	798		809
5.304% 3/1/36 (g)	32,767		33,319
5.326% 4/1/36 (g)	4,292		4,407
5.336% 7/1/35 (g)	2,003		2,032
5.349% 2/1/37 (g)	2,311		2,358
5.357% 2/1/36 (g)	6,643		6,738
5.392% 2/1/37 (g)	11,576		11,769
5.409% 3/1/35 (g)	417		418
5.438% 8/1/36 (g)	5,627		5,740
5.5% 4/1/09 to 6/1/37 (e)	525,547		522,803
5.5% 8/1/23 (d)	1,000		1,004
5.5% 8/18/23 (d)	10,000		10,044
5.5% 8/18/23 (d)	15,000		15,066
5.5% 8/18/23 (d)	200		201
5.5% 8/18/23 (d)	100		100
5.5% 8/18/23 (d)	300		301
5.5% 8/18/23 (d)	300		301
5.5% 8/18/23 (d)	500		502
5.5% 8/18/23 (d)	200		201
5.5% 8/18/23 (d)	300		301
5.5% 8/18/23 (d)	400		402
5.5% 8/13/38 (d)	44,000		43,144
5.5% 8/13/38 (d)(e)	150,000		147,083
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Fannie Mae - continued
5.5% 8/13/38 (d)	$ 800		$ 784
5.513% 3/1/35 (g)	159		160
5.632% 2/1/36 (g)	2,752		2,806
5.641% 4/1/36 (g)	10,925		11,147
5.665% 6/1/36 (g)	6,505		6,637
5.693% 1/1/36 (g)	28,622		29,214
5.789% 5/1/36 (g)	2,797		2,853
5.793% 3/1/36 (g)	7,587		7,748
5.801% 1/1/36 (g)	2,307		2,339
5.816% 5/1/36 (g)	16,313		16,657
5.843% 3/1/36 (g)	7,391		7,501
5.863% 6/1/35 (g)	1,711		1,744
5.871% 3/1/36 (g)	6,056		6,189
5.896% 12/1/36 (g)	4,029		4,125
5.917% 5/1/36 (g)	4,764		4,877
5.951% 5/1/36 (g)	2,495		2,556
5.955% 2/1/35 (g)	144		145
6% 4/1/12 to 1/1/38 (e)	273,058		279,665
6% 8/1/38 (d)	3,000		3,018
6.009% 4/1/36 (g)	45,752		46,860
6.025% 12/1/36 (g)	27,022		27,690
6.028% 9/1/36 (g)	30,731		31,508
6.062% 4/1/36 (g)	22,968		23,563
6.095% 3/1/37 (g)	4,412		4,526
6.102% 3/1/33 (g)	254		256
6.125% 2/1/33 (g)	547		549
6.169% 4/1/36 (g)	4,271		4,380
6.206% 2/1/35 (g)	153		154
6.226% 3/1/37 (g)	1,494		1,523
6.229% 5/1/36 (g)	12,426		12,767
6.234% 2/1/35 (g)	373		375
6.251% 6/1/36 (g)	629		641
6.3% 10/1/36 (g)	20,621		21,056
6.5% 2/1/12 to 4/1/37	43,655		45,361
6.5% 8/1/38 (d)	63,000		64,727
6.547% 9/1/36 (g)	8,243		8,516
7% 7/1/13 to 7/1/32	4,826		5,121
7.5% 8/1/10 to 4/1/29	99		103
8.5% 1/1/15 to 7/1/31	490		526
9% 11/1/11 to 5/1/14	465		479
9.5% 11/15/09 to 10/1/20	633		692
11% 8/1/10	6		6
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value 000s)
Fannie Mae - continued
11.25% 5/1/14	$ 7		$ 7
11.5% 6/15/19 to 1/15/21	1,044		1,163
12.5% 8/1/15 to 3/1/16	2		2
			2,101,770
Freddie Mac - 5.3%
4% 5/1/19 to 11/1/20	23,219		22,029
4.275% 6/1/35 (g)	888		887
4.307% 12/1/34 (g)	797		803
4.406% 3/1/35 (g)	928		929
4.422% 2/1/34 (g)	546		546
4.429% 3/1/35 (g)	840		846
4.5% 8/1/33	3,577		3,305
4.622% 4/1/35 (g)	6,756		6,786
4.667% 9/1/36 (g)	2,923		2,944
4.716% 2/1/34 (g)	6,855		6,871
4.79% 2/1/36 (g)	1,142		1,149
4.791% 3/1/35 (g)	2,425		2,442
4.84% 4/1/35 (g)	3,414		3,435
5% 1/1/09 to 9/1/35	11,842		11,433
5.022% 4/1/35 (g)	525		526
5.091% 6/1/35 (g)	2,395		2,418
5.125% 7/1/35 (g)	4,049		4,095
5.275% 2/1/36 (g)	287		290
5.376% 3/1/35 (g)	561		564
5.485% 1/1/36 (g)	3,921		3,981
5.5% 8/1/14 to 7/1/37	191,344		193,712
5.5% 8/1/38 (d)	8,000		7,836
5.5% 8/1/38 (d)	600		588
5.5% 8/1/38 (d)	500		490
5.5% 8/13/38 (d)	300		294
5.5% 8/13/38 (d)	1,000		979
5.5% 8/13/38 (d)	1,600		1,567
5.5% 8/13/38 (d)	1,000		979
5.5% 8/13/38 (d)	800		784
5.5% 8/13/38 (d)	1,200		1,175
5.52% 1/1/36 (g)	5,452		5,531
5.579% 2/1/35 (g)	1,119		1,127
5.743% 10/1/35 (g)	1,157		1,177
5.829% 5/1/37 (g)	2,978		3,026
6% 7/1/16 to 5/1/38	68,336		69,567
6% 8/1/38 (d)	9,000		9,055
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Freddie Mac - continued
6% 8/1/38 (d)	$ 300		$ 302
6% 8/13/38 (d)	300		302
6% 8/13/38 (d)	100		101
6% 8/13/38 (d)	400		402
6% 8/13/38 (d)	400		402
6% 8/13/38 (d)	1,000		1,006
6% 8/13/38 (d)	500		503
6% 8/13/38 (d)	400		402
6% 8/13/38 (d)	600		604
6.021% 6/1/36 (g)	3,157		3,221
6.224% 5/1/36 (g)	2,584		2,645
6.278% 3/1/37 (g)	8,086		8,283
6.378% 7/1/36 (g)	3,019		3,094
6.423% 10/1/36 (g)	8,566		8,794
6.491% 3/1/33 (g)	163		165
6.5% 11/1/10 to 10/1/36	46,850		48,674
6.586% 12/1/36 (g)	15,432		15,770
6.685% 1/1/37 (g)	10,780		11,095
6.689% 10/1/36 (g)	7,783		8,008
6.844% 10/1/36 (g)	10,819		11,085
7% 4/1/11	3		3
7.5% 5/1/11 to 7/1/16	1,638		1,723
8.5% 8/1/08 to 9/1/29	194		209
9% 8/1/08 to 10/1/20	68		73
9.5% 6/1/09 to 8/1/21	256		282
9.75% 8/1/14	139		150
10% 7/1/09 to 8/1/21	22		24
11% 7/1/13 to 5/1/14	58		64
12% 8/1/13 to 3/1/15	2		2
12.25% 4/1/11	0		0
12.5% 2/1/10 to 6/1/19	17		19
13% 8/1/10 to 6/1/15	6		7
			501,580
Government National Mortgage Association - 3.5%
5% 2/20/33 to 6/20/38	73,081		70,736
5.25% 7/20/34 (g)	737		740
5.5% 12/15/33 to 2/15/34	65,387		65,264
5.5% 8/1/38 (d)(e)	12,000		11,911
5.5% 8/1/38 (d)(e)	8,000		7,941
5.5% 8/1/38 (d)	1,000		993
5.5% 8/1/38 (d)(e)	22,000		21,837
U.S. Government Agency - Mortgage Securities - continued
	Principal Amount (000s)		Value (000s)
Government National Mortgage Association - continued
5.5% 8/1/38 (d)	$ 1,000		$ 993
5.5% 8/1/38 (d)(e)	5,000		4,942
6% 9/15/08 to 1/15/38	121,433		123,541
6.5% 2/15/24 to 10/15/35	19,802		20,673
7% 10/15/26 to 8/15/32	90		95
7.5% 3/15/28 to 8/15/29	112		119
8% 6/15/18 to 12/15/23	1,212		1,303
8.5% 1/15/25	4		4
9% 12/15/09	0		0
9.5% 2/15/25	1		1
10.5% 4/15/14 to 1/20/18	93		106
13.5% 7/15/11	5		6
			331,205
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $2,933,057)		2,934,555
Asset-Backed Securities - 0.1%

Fannie Mae Grantor Trust Series 2005-T4 Class A1C, 2.6113% 9/25/35 (g) (Cost $4,793)	4,793		4,769
Collateralized Mortgage Obligations - 8.3%

U.S. Government Agency - 8.3%
Fannie Mae:
planned amortization class:
Series 1992-168 Class KB, 7% 10/25/22	1,352		1,404
Series 1993-207 Class H, 6.5% 11/25/23	18,360		19,064
Series 1993-240 Class PD, 6.25% 12/25/13	4,400		4,543
Series 1994-23:
Class PG, 6% 4/25/23	3,032		3,055
Class PZ, 6% 2/25/24	10,676		10,961
Series 1996-28 Class PK, 6.5% 7/25/25	3,796		3,911
Series 2003-28 Class KG, 5.5% 4/25/23	4,940		4,750
Series 2006-45 Class OP, 6/25/36 (i)	5,849		4,310
Series 2006-62 Class KP, 4/25/36 (i)	12,300		8,624
sequential payer:
Series 1997-41 Class J, 7.5% 6/18/27	2,598		2,751
Series 2007-115 Class BE, 4.5% 12/25/22	15,400		14,430
Series 2003-22 6% 4/25/33 (h)	17,992		4,307
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Fannie Mae Grantor Trust planned amortization class Series 2005-81 Class PC, 5.5% 9/25/35	$ 2,150		$ 2,088
Fannie Mae subordinate REMIC pass-thru certificates:
floater:
Series 2001-38 Class QF, 3.4413% 8/25/31 (g)	631		635
Series 2002-49 Class FB, 3.0563% 11/18/31 (g)	1,011		991
Series 2002-60 Class FV, 3.4613% 4/25/32 (g)	428		428
Series 2002-75 Class FA, 3.4613% 11/25/32 (g)	877		876
Series 2004-54 Class FE, 3.6113% 2/25/33 (g)	522		509
planned amortization class:
Series 2002-11 Class QC, 5.5% 3/25/17	12,553		12,752
Series 2002-18 Class PC, 5.5% 4/25/17	1,170		1,190
Series 2002-47 Class QE, 5.5% 8/25/17	9,085		9,208
Series 2003-113 Class PE, 4% 11/25/18	7,545		6,958
Series 2004-21 Class QE, 4.5% 11/25/32	1,500		1,410
Series 2005-102 Class CO, 11/25/35 (i)	6,079		4,523
Series 2006-12 Class BO, 10/25/35 (i)	27,413		20,461
Series 2006-37 Class OW, 5/25/36 (i)	6,574		5,023
sequential payer:
Series 2001-20 Class Z, 6% 5/25/31	20,392		20,716
Series 2001-46 Class ZG, 6% 9/25/31	7,392		7,544
Series 2002-79 Class Z, 5.5% 11/25/22	11,827		11,650
Series 2003-84 Class JK, 4.5% 9/25/18	10,000		9,493
Series 2004-3 Class BA, 4% 7/25/17	585		576
Series 2004-91 Class AH, 4.5% 5/25/29	5,475		5,390
Series 2005-117, Class JN, 4.5% 1/25/36	645		563
Series 2006-72 Class CY, 6% 8/25/26	10,215		10,124
Series 2004-19 Class AY, 4% 4/25/19	37,116		33,730
Series 2007-36:
Class GO, 4/25/37 (i)	1,221		847
Class PO, 4/25/37 (i)	2,728		1,874
Class SB, 4.1388% 4/25/37 (g)(h)	35,426		2,886
Class SG, 4.1388% 4/25/37 (g)(h)	15,882		1,343
Series 2007-66 Class SA, 24.8325% 7/25/37 (g)	4,801		5,783
Freddie Mac:
planned amortization class:
Series 2115 Class PE, 6% 1/15/14	764		785
Series 3149 Class OD, 5/15/36 (i)	32,182		22,588
sequential payer Series 2114 Class ZM, 6% 1/15/29	2,324		2,372
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Freddie Mac Manufactured Housing participation certificates guaranteed:
floater Series 1686 Class FA, 3.4% 2/15/24 (g)	$ 1,017		$ 1,023
planned amortization class Series 1681 Class PJ, 7% 12/15/23	6,066		6,230
Freddie Mac Multi-class participation certificates guaranteed:
floater:
Series 2389 Class DA, 3.3575% 11/15/30 (g)	69		69
Series 2530 Class FE, 3.0575% 2/15/32 (g)	592		583
Series 2630 Class FL, 2.9575% 6/15/18 (g)	550		555
Series 3008 Class SM, 0% 7/15/35 (g)	376		284
planned amortization class:
Series 1141 Class G, 9% 9/15/21	372		389
Series 1614 Class L, 6.5% 7/15/23	3,624		3,700
Series 1671 Class G, 6.5% 8/15/23	1		1
Series 2006-15 Class OP, 3/25/36 (i)	7,321		5,141
Series 2131 Class BG, 6% 3/15/29	48,671		49,175
Series 2356 Class GD, 6% 9/15/16	481		492
Series 2376 Class JE, 5.5% 11/15/16	3,321		3,345
Series 2378 Class PE, 5.5% 11/15/16	9,393		9,459
Series 2381 Class OG, 5.5% 11/15/16	2,691		2,711
Series 2390 Class CH, 5.5% 12/15/16	8,558		8,666
Series 2628 Class OE, 4.5% 6/15/18	6,815		6,644
Series 2640 Class GE, 4.5% 7/15/18	7,310		7,121
Series 2660 Class ML, 3.5% 7/15/22	225		225
Series 2682 Class LD, 4.5% 10/15/33	777		673
Series 2752 Class PW, 4% 4/15/22	1,134		1,136
Series 2802 Class OB, 6% 5/15/34	10,455		10,727
Series 2810 Class PD, 6% 6/15/33	995		999
Series 2937 Class KC, 4.5% 2/15/20	19,686		18,940
Series 2962 Class BE, 4.5% 4/15/20	15,015		14,332
Series 3077 Class TO, 4/15/35 (i)	16,048		11,535
Series 3110 Class OP, 9/15/35 (i)	15,175		10,993
Series 3119 Class PO, 2/15/36 (i)	18,377		13,446
Series 3121 Class KO, 3/15/36 (i)	6,321		4,847
Series 3123 Class LO, 3/15/36 (i)	11,927		8,394
Series 3145 Class GO, 4/15/36 (i)	10,703		7,558
Series 3151 Class PO, 5/15/36 (i)	11,593		8,092
sequential payer:
Series 2388 Class ZA, 6% 12/15/31	6,485		6,567
Series 2546 Class MJ, 5.5% 3/15/23	2,861		2,738
Collateralized Mortgage Obligations - continued
	Principal Amount (000s)		Value (000s)
U.S. Government Agency - continued
Freddie Mac Multi-class participation certificates guaranteed: - continued
sequential payer:
Series 2570 Class CU, 4.5% 7/15/17	$ 1,643		$ 1,633
Series 2574 Class HP, 5% 2/15/18	42,150		41,381
Series 2587 Class AD, 4.71% 3/15/33	5,785		5,017
Series 2601 Class TB, 5.5% 4/15/23	869		832
Series 2611 Class CH, 4.5% 5/15/18	37,220		35,824
Series 2617 Class GW, 3.5% 6/15/16	2,184		2,181
Series 2675 Class CB, 4% 5/15/16	1,565		1,550
Series 2677 Class BC, 4% 9/15/18	20,040		18,500
Series 2683 Class JA, 4% 10/15/16	1,678		1,659
Series 2685 Class ND, 4% 10/15/18	9,064		8,349
Series 2750 Class ZT, 5% 2/15/34	1,072		914
Series 2770 Class TW, 4.5% 3/15/19	19,670		18,531
Series 2773 Class HC, 4.5% 4/15/19	704		660
Series 2809 Class UA, 4% 12/15/14	1,869		1,870
Series 2849 Class AL, 5% 5/15/18	7,482		7,547
Series 2860 Class CP, 4% 10/15/17	1,845		1,825
Series 2866 Class N, 4.5% 12/15/18	6,417		6,442
Series 2874 Class BC, 5% 10/15/19	43,000		41,778
Series 2937 Class HJ, 5% 10/15/19	7,911		7,961
Series 2998 Class LY, 5.5% 7/15/25	2,011		1,904
Series 3007 Class EW, 5.5% 7/15/25	8,875		8,443
Series 3013 Class VJ, 5% 1/15/14	1,716		1,735
Series 3401 Class EB, 5% 12/15/22	7,495		7,172
Series 2769 Class BU, 5% 3/15/34	5,712		5,090
Series 2863 Class DB, 4% 9/15/14	1,216		1,175
Series 2957 Class SW, 3.5425% 4/15/35 (g)(h)	25,113		1,454
Series 3002 Class SN, 4.0425% 7/15/35 (g)(h)	25,256		1,945
target amortization class:
Series 2156 Class TC, 6.25% 5/15/29	8,376		8,529
Series 2877 Class JC, 5% 10/15/34	1,293		1,284
Ginnie Mae guaranteed REMIC pass-thru securities planned amortization class:
Series 1997-8 Class PE, 7.5% 5/16/27	4,184		4,443
Series 2003-116 Class JE, 5% 12/20/33	13,248		12,215
Series 2004-4 Class MG, 5% 1/16/34	10,425		9,630
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $788,317)		783,689

Cash Equivalents - 30.4%
	Maturity Amount (000s)		Value (000s)
Investments in repurchase agreements in a joint trading account at 2.19%, dated 7/31/08 due 8/1/08:
(Collateralized by U.S. Government Obligations) #	$ 625,554		$ 625,516
(Collateralized by U.S. Government Obligations) # (a)	2,261,736		2,261,598
TOTAL CASH EQUIVALENTS (Cost $2,887,114)		2,887,114
TOTAL INVESTMENT PORTFOLIO - 125.7% (Cost $11,895,203)			11,924,794
NET OTHER ASSETS - (25.7)%			(2,441,152)
NET ASSETS - 100%		$ 9,483,642

Swap Agreements
	Expiration Date	Notional Amount (000s)
Interest Rate Swaps
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 4.64% with JPMorgan Chase, Inc.	April 2038	$ 35,000	1,650
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 4.82% with Citibank	June 2018	135,000	(1,899)
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 5.03% with Credit Suisse First Boston	Oct. 2017	72,000	(3,042)
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 5.57% with Goldman Sachs	August 2017	100,000	(7,022)
Receive semi-annually a fixed rate equal to 2.528% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs	March 2010	69,000	(342)
Receive semi-annually a fixed rate equal to 3.1899% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs	April 2010	89,050	547
Swap Agreements - continued
	Expiration Date	Notional Amount (000s)	Value (000s)
Interest Rate Swaps - continued
Receive semi-annually a fixed rate equal to 3.427% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston	March 2013	$ 88,000	$ (1,625)
Receive semi-annually a fixed rate equal to 4.42% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston	Oct. 2009	300,000	8,082
Receive semi-annually a fixed rate equal to 4.465% and pay quarterly a floating rate based on 3-month LIBOR with Citibank	June 2013	160,000	2,469
Receive semi-annually a fixed rate equal to 4.66% and pay quarterly a floating rate based on 3-month LIBOR with Barclays Bank	August 2018	141,807	0
Receive semi-annually a fixed rate equal to 4.663% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs	August 2018	43,594	0
Receive semi-annually a fixed rate equal to 4.88% and pay quarterly a floating rate based on 3-month LIBOR with Bank of America	Sept. 2010	106,700	4,692
Receive semi-annually a fixed rate equal to 5.03% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc.	August 2010	91,000	4,429
Receive semi-annually a fixed rate equal to 5.706% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank	June 2017	75,000	6,194
Receive semi-annully a fixed rate equal to 2.8575% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc.	April 2011	201,000	(2,856)
		$ 1,707,151	$ 11,277