November 11, 1998

______________________________________________________________________

Requested Action: Approval (i) to propose to shareholders of Spartan Ginnie Mae Fund that the Fund be merged into Fidelity Ginnie Mae Fund, (ii) of an Agreement and Plan of Reorganization ("Merger Plan") and the issuance of shares of Fidelity Ginnie Mae Fund to shareholders of Spartan Ginnie Mae Fund, and (iii) of record and meeting dates for the shareholder meeting.

Background:

(bullet) At your June 1998 meeting, you approved changes designed to consolidate and streamline the Fidelity and Spartan taxable bond product lines. As discussed at the meeting, non-surviving funds of future mergers were closed to new shareholders as of the close of business June 26, 1998 and externalized transaction fees for Spartan taxable bond funds were removed on June 27, 1998.

(bullet) Each Fund has substantially the same investment objective. Fidelity Ginnie Mae seeks high current income, consistent with prudent investment risk, by investing in Ginnie Maes. Spartan Ginnie Mae seeks high current income by investing in Ginnie Maes. The Funds have the same manager.

- The asset levels and fund features are summarized in Attachment I. The Funds differ primarily in their expense structures and investment minimums. Attachment II compares their performance.

(bullet) Fidelity Ginnie Mae pays management fees under the group fee rate structure. In anticipation of the merger proposal, effective June 27, 1998, FMR voluntarily capped the Fund's total expenses at 65 bp (total expenses were 74 bp prior to the voluntary cap). Spartan Ginnie Mae has an all-inclusive management fee rate of 65 bp, with expenses capped at 38 bp through December 31, 1998.

(bullet) Fidelity and Spartan Ginnie Mae are managed to have similar overall interest rate risk to the Lehman Brothers GNMA Index. As of September 30, 1998, the average maturity of Fidelity Ginnie Mae, Spartan Ginnie Mae and the Index was approximately 5.5 years, 5.5 years and 4.5 years, respectively.

Discussion:

(bullet) FMR recommends that Spartan Ginnie Mae Fund be merged into Fidelity Ginnie Mae Fund. The merger would simplify the retail taxable bond product line by offering one Ginnie Mae fund, with the Fidelity name and features. The surviving Fund would have Fidelity Ginnie Mae's investment policies, investment minimums and expense structure.

- You previously reviewed this merger in concept as part of FMR's overall product line plans. This memorandum presents the details of the merger proposal and requests your vote on matters requiring Board approval.

(bullet) If the merger is approved by shareholders, FMR will voluntarily cap the surviving Fund's expenses at 63 bp through June 30, 2001. This will represent a 2 bp lower expense ratio for Spartan

Ginnie Mae and Fidelity Ginnie Mae shareholders. The expense ratio for Fidelity Ginnie Mae shareholders will be 11 bp less than its 74 bp expense ratio before the June 27, 1998 voluntary cap.

- Spartan Ginnie Mae's 38 bp total expense cap will not be renewed following its expiration on December 31, 1998.

- Prior to the expiration of the surviving fund's expense cap, FMR will review the expense ratio of the surviving fund with the Board if it is above 65 bp, the all-inclusive management fee rate of Spartan Ginnie Mae.

(bullet) In order to approve the merger, the Board must find that it is in the best interests of shareholders of each Fund, and will not result in any dilution of the shareholders' interests of either Fund.

(bullet) FMR believes the merger would be in the best interests of shareholders of each Fund. The proposed merger would provide Spartan Ginnie Mae shareholders with a fund that has substantially identical investment policies and generally comparable historical returns. In addition, the merger would provide a two year 2 bp reduction in expenses for Spartan and Fidelity Ginnie Mae shareholders.

(bullet) As Attachment II indicates, Fidelity and Spartan Ginnie Mae have experienced generally comparable performance on a year-to-year and cumulative basis. The slightly stronger performance of Spartan Ginnie Mae is primarily due to historical expense differences.

(bullet) Fidelity and Spartan Ginnie Mae have net unrealized gains as of September 30, 1998 of $0.196 and $0.177 per share, respectively. The surviving Fund would have approximately $0.193 per share of net unrealized gains. FMR believes that the differences in unrealized gains per share, particularly given the uncertainty of when and if such gains would be realized, do not require an adjustment to the conversion ratio.

- Due largely to pay-downs on mortgage securities, Spartan Ginnie Mae has paid out more in distributions than it has earned in income. As a result, a portion of the distribution that Spartan Ginnie Mae is expected to make to shareholders immediately prior to the merger may be non-taxable. The proxy will disclose this possible non-taxable distribution.

(bullet) FMR believes that the merger will not result in a dilution of the shareholders' interests.

- FMR will obtain an opinion of counsel that the merger will qualify as a tax-free reorganization for federal income tax purposes.

(bullet) FMR proposes the form of Merger Plan approved at your September 1998 meeting, with any changes approved by Fund counsel.

The Merger Plan provides for the transfer of the assets of Spartan Ginnie Mae Fund in exchange for shares of Fidelity Ginnie Mae Fund, and the assumption by Fidelity Ginnie Mae Fund of Spartan Ginnie Mae Fund's liabilities. The current holdings of Spartan Ginnie Mae Fund would be eligible investments under Fidelity Ginnie Mae Fund's investment policies.

- Approval of the merger will be determined by the shareholders of Spartan Ginnie Mae Fund.

- Following the transfer, each shareholder of Spartan Ginnie Mae will receive shares of equal value of Fidelity Ginnie Mae, based on relative NAVs as of the close of business on the date of the merger.

(bullet) FMR will bear any merger-related expenses for Spartan Ginnie

Mae, which has an all-inclusive fee. Expenses associated with the merger for Fidelity Ginnie Mae will be paid by the Fund; however, FMR will bear any merger-related expenses that exceed the Fund's expense cap. Any portfolio trading costs will be borne by each Fund.

(bullet) FMR requests that the Board set a record date of March 22, 1999 and a meeting date and time of May 19, 1999 at 10:00 a.m. It is anticipated that the closing of the merger will be completed by the end of May 1999.

Conclusion: FMR believes that the proposed merger is in the best interests of the shareholders of each Fund and will not result in a dilution of their interests. FMR requests approval of the actions and related documentation required to effect the proposed merger.

Attachment I

FUND EXPENSES AND FEATURES

<TABLE>

<CAPTION>

<s> <c> <c> <c> <c> <c> <c> <c>

NET ASSETS MANAGEMENT FEE TOTAL EXPENSES

Fidelity Ginnie Mae

$1,020 Group Fee 65 bp+ $2,500 $250 $2,000 none

Spartan Ginnie Mae

$674 All-In 38 bp** $10,000 $1,000 $5,000 none

</TABLE>

<TABLE>

<CAPTION>

<s> <c>

REDEMPTION

FEE

Fidelity Ginnie Mae

none

Spartan Ginnie Mae

none

</TABLE>

* If the merger is approved, FMR will voluntarily limit the surviving

Fund's expense ratio to 63 bp through June 30, 2001.

+ Reflects a voluntary expense cap effective June 27, 1998. Prior to

the cap, the expense ratio was 74 bp.

** Reflects a voluntary expense cap expiring December 31, 1998. Upon

expiration of this expense cap, total expenses will be 65 bp, the

Fund's all-inclusive fee rate.

Attachment II

<TABLE>

<CAPTION>

<s> <c> <c> <c> <c> <c> <c>

ANNUAL TOTAL RETURNS

(PERIODS ENDED DECEMBER 31)

Fidelity Ginnie Mae Fund

(2.00)% 16.60% 4.86% 8.70% 5.70%

Spartan Ginnie Mae Fund

(1.51)% 16.65% 4.97% 8.95% 5.99%

</TABLE>

CUMULATIVE TOTAL RETURNS

(PERIODS ENDED DECEMBER 31, 1997)

1 Year 3 Year

Fidelity Ginnie Mae Fund

8.70% 32.91%

Spartan Ginnie Mae Fund

8.95% 33.42%