Nuveen Multi-Market Income Fund NCSRS Certified semi-annual shareholder report (management investment company)

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 811-05642

American Income Fund, Inc.

(Exact name of registrant as specified in charter)

800 Nicollet Mall, Minneapolis, MN		55402
(Address of principal executive offices)		(Zip code)

Charles D. Gariboldi, Jr., 800 Nicollet Mall, Minneapolis, MN 55402

(Name and address of agent for service)

Registrant’s telephone number, including area code: 800-677-3863

Date of fiscal year end: August 31

Date of reporting period: February 28, 2007

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.

Item 1. Report to Shareholders

AMERICAN
INCOME FUND


		February 28, 2007
		SEMIANNUAL REPORT

AMERICAN INCOME
FUND

Our Image – George Washington

His rich legacy as patriot and leader is widely recognized as embodying the sound judgment, reliability, and strategic vision that are central to our brand. Fashioned in a style reminiscent of an 18th century engraving, the illustration conveys the symbolic strength and vitality of Washington, which are attributes that we value at First American.

Table of Contents

1		Fund Overview

2		Financial Statements

6		Notes to Financial Statements

14		Schedule of Investments

22		Notice to Shareholder


NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE

Fund OVERVIEW

Portfolio Allocation

As a percentage of total assets on February 28, 2007

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Financial STATEMENTS

Statement of Assets and Liabilities February 28, 2007 (unaudited)

Assets:
Investments in unaffiliated securities, at value (cost: $106,541,118) (note 2)	$	107,439,428
Investment in affiliated money market fund, at value (cost: $1,583,125) (note 3)		1,583,125
Receivable for investments sold		630,035
Receivable for accrued interest		919,546
Receivable for futures variation margin (note 2)		18,828
Prepaid expenses and other assets		25,093
Total assets		110,616,055
Liabilities:
Payable for securities purchased on a when issued basis (note 2)		7,006,875
Payable for reverse repurchase agreements (note 2)		18,983,130
Payable for swap agreements		1,994
Payable for investment advisory fees (note 3)		41,825
Bank overdraft		70,869
Payable for administrative fees (note 3)		6,435
Payable for professional fees		21,292
Payable for transfer agent fees		6,810
Payable for interest expense		40,776
Payable for other expenses		6,430
Total liabilities		26,186,436
Net assets applicable to outstanding capital stock	$	84,429,619
Composition of net assets:
Capital stock and additional paid-in capital	$	95,102,771
Undistributed net investment income		175,569
Accumulated net realized loss on investments in securities (note 5)		(11,707,278	)
Net unrealized appreciation of investments in securities		898,310
Net unrealized depreciation of futures contracts		(67,476	)
Net unrealized appreciation of swap agreements		27,723
Total–representing net assets applicable to capital stock	$	84,429,619
Net asset value and market price of capital stock:
Net assets outstanding	$	84,429,619
Shares outstanding (authorized 200 million shares of $0.01 par value)		9,454,221
Net asset value per share	$	8.93
Market price per share	$	8.30

See accompanying Notes to Financial Statements.

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Statement of Operations For the Six-Month Period Ended February 28, 2007 (unaudited)

Investment Income:
Interest from unaffiliated securities	$	3,422,617
Dividends from unaffiliated securities		5,829
Dividends from affiliated money market funds		24,588
Dividends from unaffiliated money market fund		1,332
Total investment income		3,454,366
Expenses (note 3):
Investment advisory fees		269,229
Interest expense		642,233
Administrative fees		41,420
Custodian fees		5,795
Professional fees		24,275
Postage and printing fees		16,098
Transfer agent fees		9,712
Listing fees		11,778
Directors' fees		7,706
Other expenses		20,925
Total expenses		1,049,171
Less: Indirect payments from the custodian		(296	)
Total net expenses		1,048,875
Net investment income		2,405,491
Net realized and unrealized gains (losses) on investments in securities, futures contracts, and swap agreements (notes 2 and 4):
Net realized gain (loss) on:
Investments in securities		505,197
Futures contracts		(82,440	)
Swap agreements		(116,242	)
Net change in unrealized appreciation or depreciation of:
Investments in securities		1,248,805
Futures contracts		(4,449	)
Swap agreements		27,723
Net gain on investments		1,578,594
Net increase in net assets resulting from operations	$	3,984,085

See accompanying Notes to Financial Statements.

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Financial STATEMENTS continued

Statement of Changes in Net Assets

	Six-Month Period Ended 2/28/07 (unaudited)			Year Ended 8/31/06
Operations:
Net investment income	$	2,405,491		$	4,925,013
Net realized gain (loss) on:
Investments in securities		505,197			(468,871	)
Futures contracts		(82,440	)		189,765
Options written		—			5,172
Swap agreements		(116,242	)		—
Net change in unrealized appreciation or depreciation of:
Investments in securities		1,248,805			(1,717,940	)
Futures contracts		(4,449	)		(16,191	)
Options written		—			(242	)
Swap agreements		27,723			—
Net increase in net assets resulting from operations		3,984,085			2,916,706
Distributions to shareholders (note 2):
From net investment income		(2,458,098	)		(4,892,562	)
Total increase (decrease) in net assets		1,525,987			(1,975,856	)
Net assets at beginning of period		82,903,632			84,879,488
Net assets at end of period	$	84,429,619		$	82,903,632
Undistributed net investment income	$	175,569		$	228,176

See accompanying Notes to Financial Statements.

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Statement of Cash Flows For the Six-Month Period Ended February 28, 2007 (unaudited)

Cash flows from operating activities:
Net increase in net assets resulting from operations	$	3,984,085
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities:
Purchases of investments		(47,991,396	)
Proceeds from sales of investments		56,730,592
Net purchases/sales of short-term securities		(874,776	)
Net amortization of bond discount and premium		(4,884	)
Net change in unrealized appreciation or depreciation of investments in securities		(1,248,805	)
Net change in unrealized appreciation or depreciation of futures contracts		4,449
Net change in unrealized appreciation or depreciation of swap agreements		(27,723	)
Net realized gain/loss on investments in securities		(505,197	)
Net realized gain/loss on futures contracts		82,440
Net realized gain/loss on swap agreements		116,242
Decrease in receivable for accrued interest		40,326
Increase in receivable for futures variation margin		(141,358	)
Increase in prepaid expenses		(13,492	)
Increase in payable for swap agreements		(86,525	)
Decrease in accrued fees and expenses		(45,937	)
Net cash provided by operating activities		10,018,041
Cash flows from financing activities:
Net payments from reverse repurchase agreements		(8,412,696	)
Distributions paid to shareholders		(2,458,098	)
Net cash used in financing activities		(10,870,794	)
Net decrease in cash		(852,753	)
Cash at beginning of period		781,884
Bank overdraft at end of period	$	(70,869	)
Supplemental disclosure of cash flow information: Cash paid for interest	$	688,060

See accompanying Notes to Financial Statements.

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Notes to Financial STATEMENTS

(1) Organization
American Income Fund, Inc. (the "fund") is registered under the Investment Company Act of 1940 as a diversified, closed-end management investment company. The fund invests in fixed-income securities, primarily in mortgage-backed securities. The fund also invests in other debt securities, such as collateralized mortgage obligations (CMOs) and asset-backed securities, high-yield bonds, corporate bonds, and preferred stock. The fund will invest at least 65% of its total assets in investment-grade securities under normal market conditions. No more than 35% of the fund's total assets may be held in high-yield issues. The fund is authorized to borrow funds or issue senior securities in amounts not exceeding 33 1/3% of its total assets. Fund shares are li sted on the New York Stock Exchange under the symbol MRF.

(2) Summary of Significant Accounting Policies
Security Valuations

Debt obligations exceeding 60 days to maturity are valued by an independent pricing service that has been approved by the fund's board of directors. The pricing service may employ methodologies that utilize actual market transactions, broker-dealer supplied valuations, or other formula-driven valuation techniques. These techniques generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings, and general market conditions. Securities for which prices are not available from an independent pricing service but where an active market exists are valued using market quotations obtained from one or more dealers that make markets in the securities or from a widely-used quotation system. When market quotations are not readily available, securities are valued at fair value as determined in good faith by procedures established and approved by the fund's board of directors. Some of the factors which may be considered in determining fair value are fundamental analytical data relating to the investment; the nature and duration of any restrictions on disposition; trading in similar securities of the same issuer or comparable companies; information from broker-dealers; and an evaluation of the forces that influence the market in which the security is purchased or sold. If events occur that materially affect the value of securities (including non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities will be valued at fair value. Debt obligations with 60 days or less remaining until maturity may be valued at their amortized cost, which approximates market value. Security valuations are performed once a week and at the end of each month.

As of February 28, 2007, the fund had no fair valued securities.

Securities Transactions and Investment Income

For financial statement purposes, the fund records security transactions on the trade date of the security purchase or sale. Dividend income is recorded on the ex-dividend date. Interest income, including accretion of bond discounts and amortization of bond premiums, is recorded on an accrual basis. Security gains and losses are determined on the basis of identified cost, which is the same basis used for federal income tax purposes.

Reverse Repurchase Agreements

Reverse repurchase agreements involve the sale of a portfolio-eligible security by the fund, coupled with an agreement to repurchase the security at a specified date and price. Reverse repurchase agreements may increase volatility of the fund's net asset value and involve the risk that interest costs on money borrowed may exceed the return on securities purchased with that borrowed money. Reverse repurchase agreements are considered to be borrowings by the fund, and are subject to the fund's overall restriction on borrowing under which it must maintain asset coverage of at least 300%. For the six-month ended February 28, 2007, the weighted average borrowings

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outstanding were $23,557,258. The weighted average interest rate paid by the fund on such borrowings was 5.46%.

Repurchase Agreements

For repurchase agreements entered into with broker-dealers, the fund, along with other affiliated registered investment companies, may transfer uninvested cash balances into a joint trading account, the daily aggregate balance of which is invested in repurchase agreements secured by U.S. government or agency obligations. Securities pledged as collateral for all individual and joint repurchase agreements are held by the fund's custodian bank until maturity of the repurchase agreement. All agreements require that the daily market value of the collateral be in excess of the repurchase amount, including accrued interest, to protect the fund in the event of a default. As of February 28, 2007, the fund had no outstanding repurchase agreements.

Futures Transactions

In order to protect against changes in interest rates, the fund may buy and sell interest rate futures contracts. Upon entering into a futures contract, the fund is required to deposit cash or pledge U.S. government securities in an amount equal to 5% of the purchase price indicated in the futures contract (initial margin). Subsequent payments, which are dependent on the daily fluctuations in the value of the underlying security or securities, are made or received by the fund each day (daily variation margin) and recorded as unrealized gains (losses) until the contract is closed. When the contract is closed, the fund records a realized gain (loss) equal to the difference between the proceeds from (or cost of) the closing transaction and the fund's basis in the contract.

Risks of entering into futures contracts, in general, include the possibility that there will not be a perfect price correlation between the futures contracts and the underlying securities. Second, it is possible that a lack of liquidity for futures contracts could exist in the secondary market, resulting in an inability to close a futures position prior to its maturity date. Third, the purchase of a futures contract involves the risk that the fund could lose more than the original margin deposit required to initiate a futures transaction. These contracts involve market risk in excess of the amount reflected in the fund's statement of assets and liabilities. Unrealized gains (losses) on outstanding positions in futures contracts held at the close of the period will be recognized as capital gains (losses) for federal income tax purposes. As of February 28, 2007, the fund had outstanding futures contracts as disclosed in the Sched ule of Investments.

Options Transactions

The fund may utilize options in an attempt to manage market or business risk or enhance its yield. When a call or put option is written, an amount equal to the premium received is recorded as a liability. The liability is marked-to-market daily to reflect the current market value of the option written. When a written option expires, a gain is realized in the amount of the premium originally received. If a closing purchase contract is entered into, a gain or loss is realized in the amount of the original premium less the cost of the closing transaction. If a written call is exercised, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received reduces the cost of the security that is purchased upon exercise of the option.

Purchased options are recorded as investments and marked-to-market daily to reflect the current market value of the option contract. If a purchased option expires, a loss is realized in the amount of the cost of the option. If a closing transaction is entered into, a gain or loss is realized, to the

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Notes to Financial STATEMENTS continued

extent that the proceeds from the sale are greater or less than the cost of the option. If a put option is exercised, a gain or loss is realized from the sale of the underlying security by adjusting the proceeds from such sale by the amount of the premium originally paid. If a call option is exercised, the cost of the security purchased upon exercise is increased by the premium originally paid. As of February 28, 2007, the fund had no written or purchased options outstanding.

Swap Agreements

The fund may invest in swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The fund may enter into interest rate and credit default swap agreements to manage exposure to interest rates and credit risk.

Interest rate swap agreements involve the exchange by the fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments with respect to the notational amount of principal). As of February 28, 2007, the fund had no outstanding interest rate swap agreements.

In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a specified reference entity on its obligation (typically corporate issues or sovereign issues of an emerging country). The fund may use credit default swaps to provide a measure of protection against defaults of particular issuers (i.e., to reduce risk where the fund owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. As of February 28, 2007, the fund had outstanding credit default swap agreements as disclosed in the Schedule of Investments.

Swaps are marked-to-market daily based upon quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made at the beginning of the measurement period are reflected on the Statement of Assets and Liabilities. A liquidation payment received or made at the termination of the swap agreement is recorded as realized gain or loss in the Statement of Operations. Net periodic payments received by the fund are included as part of miscellaneous income on the Statement of Operations. Entering into these agreements involves, to varying degrees, elements of credit, market and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements, and that there may be unfavorable changes in interest rates.

Securities Purchased on a When-Issued Basis

Delivery and payment for securities that have been purchased by the fund on a when-issued or forward-commitment basis can take place a month or more after the transaction date. Such securities do not earn interest, are subject to market fluctuation, and may increase or decrease in value prior to their delivery. The fund segregates assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued or forward-commitment basis may increase the volatility of the fund's net asset value if the fund makes such purchases while remaining substantially fully invested. As of February 28, 2007, the fund had when-issued or forward-commitment securities outstanding with a total cost of $7,006,875.

In connection with the ability to purchase securities on a when-issued basis, the fund may also enter into dollar rolls in which the fund sells securities purchased on a forward-commitment basis

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and simultaneously contracts with a counterparty to repurchase similar (same type, coupon, and maturity), but not identical securities on a specified future date. As an inducement for the fund to "rollover" its purchase commitments, the fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. Dollar rolls are considered a form of leverage. As of and for the six-month period ended February 28, 2007, the fund had no outstanding dollar roll transactions.

Illiquid Securities and Restricted Securities

A security may be considered illiquid if it lacks a readily available market. Securities are generally considered liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the security is valued by the fund. Illiquid securities may be valued under methods approved by the fund's board of directors as reflecting fair value.

Illiquid securities may include restricted securities, which are often purchased in private placement transactions, are not registered under the Securities Act of 1933, and may have contractual restrictions on resale. However, certain restricted securities eligible for resale to qualified institutional investors, including Rule 144A securities, are not subject to the limitation on a fund's investment in illiquid securities if they are determined to be liquid in accordance with procedures adopted by the fund's board of directors.

As of February 28, 2007, the fund held one illiquid security, the value of which was $12,542, which represents 0.01% of net assets. This security's valuation was furnished by an independent pricing service. As of February 28, 2007, there were no restricted securities. Information concerning the illiquid security is as follows:

Security				Par				Date Acquired				Cost Basis
California Federal Bank Los Angeles, Series 1991-C12, Class A, 6.78%, 7/15/21				$	12,435				7/93			$	2,392

Federal Taxes

The fund intends to continue to qualify as a regulated investment company as provided in Subchapter M of the Internal Revenue Code, as amended, and to distribute all taxable income, if any, to its shareholders. Accordingly, no provision for federal income taxes is required. The fund also intends to distribute its taxable net investment income and realized gains, if any, to avoid the payment of any federal excise taxes.

Net investment income and net realized gains and losses may differ for financial statement and tax purposes. These differences are primarily due to deferred wash sales and post-October losses, paydown gains and losses, and the tax recognition of mark-to-market gains and losses on open futures contracts. The character of distributions made during the fiscal period from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. In addition, due to the timing of dividend distributions, the fiscal period in which amounts are distributed may differ from the fiscal period that income or realized gains or losses were recorded by the fund.

The tax character of distributions paid during the six-month period ended February 28, 2007 (estimated) and the fiscal year ended August 31, 2006 were as follows:

				2/28/07				8/31/06
Distributions paid from ordinary income				$	2,458,098			$	4,892,562

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Notes to Financial STATEMENTS continued

At August 31, 2006, the fund's most recently completed fiscal year-end, the components of accumulated deficit on a tax basis were as follows:

Undistributed ordinary income	$	228,176
Accumulated capital and post-October losses		(12,044,472	)
Unrealized appreciation		(382,843	)
Accumulated deficit	$	(12,199,139	)

Distributions to Shareholders

Distributions from net investment income are declared and paid on a monthly basis. Any net realized capital gains on sales of securities for the fund are distributed to shareholders at least annually. Such distributions are payable in cash or, pursuant to the fund's dividend reinvestment plan, reinvested in additional shares of the fund's capital stock.

Deferred Compensation Plan

Under a Deferred Compensation Plan (the "Plan"), non-interested directors of the First American Family of Funds may participate and elect to defer receipt of part or all of their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of open-end First American Funds, preselected by each Director. All amounts in the Plan are 100% vested and accounts under the Plan are obligations of the funds. Deferred amounts remain in the funds until distributed in accordance with the Plan.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. Actual results could differ from these estimates.

(3) Expenses
Investment Advisory Fees

Pursuant to an investment advisory agreement (the "Agreement"), FAF Advisors, Inc. ("FAF Advisors"), a subsidiary of U.S. Bank National Association ("U.S. Bank"), manages the fund's assets and furnishes related office facilities, equipment, research, and personnel. The Agreement provides FAF Advisors with a monthly investment advisory fee in an amount equal to an annualized rate of 0.65% of the fund's average weekly net assets. For its fee, FAF Advisors provides investment advice and, in general, conducts the management and investment activities of the fund.

The fund may invest in related money market funds that are series of First American Funds, Inc., subject to certain limitations. In order to avoid the payment of duplicative investment advisory fees to FAF Advisors, which acts as the investment advisor to both the fund and the related money market funds, FAF Advisors will reimburse the fund an amount equal to the investment advisory fee received from the related money market funds that is attributable to the assets of the fund. For financial statement purposes, this reimbursement is recorded as investment income.

Administrative Fees

FAF Advisors serves as the fund's administrator pursuant to an administration agreement between FAF Advisors and the fund. Under this administration agreement, FAF Advisors receives a monthly administrative fee equal to an annualized rate of 0.10% of the fund's average weekly net assets.

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For its fee, FAF Advisors provides numerous services to the fund including, but not limited to, handling the general business affairs, financial and regulatory reporting, and various other services.

Custodian Fees

U.S. Bank serves as the fund's custodian pursuant to a custodian agreement with the fund. The custodian fee charged to the fund equals an annual rate of 0.005% of average weekly net assets. These fees are computed weekly and paid monthly.

Under this agreement, interest earned on uninvested cash balances is used to reduce a portion of the fund's custodian expenses. These credits, if any, are disclosed as "Indirect payments from the custodian" in the Statement of Operations. Conversely, the custodian charges a fee for any cash overdrafts incurred, which will increase the fund's custodian expenses. For the six-month period ended February 28, 2007, custodian fees were increased by $3,725 as a result of overdrafts and reduced by $296 as a result of interest earned.

Other Fees and Expenses

In addition to the investment advisory, administrative, and custodian fees, the fund is responsible for paying most other operating expenses, including: legal, auditing, and accounting services, postage and printing of shareholder reports, transfer agent fees and expenses, listing fees, outside directors' fees and expenses, insurance, interest, taxes, and other miscellaneous expenses. For the six-month period ended February 28, 2007, legal fees and expenses of $1,297 were paid to a law firm of which an Assistant Secretary of the fund is a partner.

Expenses that are directly related to the fund are charged directly to the fund. Other operating expenses of the First American Family of Funds are allocated to the fund on several bases, including evenly across all funds, allocated based on relative net assets of all funds within the First American Family of Funds, or a combination of both methods.

(4) Investment Security Transactions
Cost of purchases and proceeds from sales of securities, other than temporary investments in short-term securities, for the six-month period ended February 28, 2007, aggregated $49,919,609 and $57,360,627, respectively.

(5) Capital Loss Carryover/Post October Loss For federal income tax purposes, the fund had capital loss carryovers at August 31, 2006, which, if not offset by subsequent capital gains, will expire on the fund's fiscal year-ends as follow:

Capital Loss Carryover		Expiration
$	2,573,283		2007
	4,931,683		2008
	662,186		2009
	3,362,188		2010
$	11,529,340

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Notes to Financial STATEMENTS continued

(6) Indemnifications
The fund enters into contracts that contain a variety of indemnifications. The fund's maximum exposure under these arrangements is unknown. However, the fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

(7) New Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current y ear. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the effective date. Recent Securities and Exchange Commission guidance allows implementing FIN 48 in fund net asset value calculations as late as the fund's last net asset value calculation in the first required financial statement reporting period. As a result, the fund will incorporate FIN 48 in its February 28, 2008 semiannual report.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair value and requires additional disclosure about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. As of February 28, 2007, the fund does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the Statement of Operations for the fiscal period.

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(8) Financial Highlights
Per-share data for a share of capital stock outstanding throughout each period and selected information for each period are as follows:

	Six-Month Period Ended (unaudited)			Year Ended			Ten-Month Fiscal Period Ended			Year Ended October 31,
	2/28/2007			8/31/06			8/31/05			2004			2003			2002			2001
Per-Share Data
Net asset value, beginning of period	$	8.77		$	8.98		$	9.17		$	9.06		$	8.70		$	9.19		$	8.90
Operations:
Net investment income		0.26			0.52			0.48			0.64			0.67			0.70			0.65
Net realized and unrealized gains (losses) on investments		0.16			(0.21	)		(0.18	)		0.11			0.37			(0.50	)		0.26
Total from operations		0.42			0.31			0.30			0.75			1.04			0.20			0.91
Distributions to shareholders:
From net investment income		(0.26	)		(0.52	)		(0.47	)		(0.64	)		(0.68	)		(0.69	)		(0.59	)
Tax return of capital		—			—			(0.02	)		—	(d)		—	(d)		—			(0.03	)
Total distributions to shareholders		(0.26	)		(0.52	)		(0.49	)		(0.64	)		(0.68	)		(0.69	)		(0.62	)
Net asset value, end of period	$	8.93		$	8.77		$	8.98		$	9.17		$	9.06		$	8.70		$	9.19
Market value, end of period	$	8.30		$	8.01		$	8.13		$	8.55		$	8.55		$	8.37		$	8.53
Selected Information
Total return, net asset value (a)		4.86	% (g)		3.62	%		3.86	% (g)		9.02	%		12.53	%		2.48	%		10.96	%
Total return, market value (b)		6.92	% (g)		5.23	%		0.85	% (g)		7.71	%		10.38	%		6.22	%		13.69	%
Net assets at end of period (in millions)	$	84		$	83		$	85		$	87		$	86		$	82		$	87
Ratio of expenses to average weekly net assets excluding interest expense		0.98	% (f)		0.97	%		0.96	% (f)		0.93	%		0.95	%		0.96	%		0.89	%
Ratio of expenses to average weekly net assets		2.53	% (f)		2.26	%		1.62	% (f)		1.23	%		1.48	%		2.00	%		2.06	%
Ratio of net investment income to average weekly net assets		5.81	% (f)		5.96	%		6.35	% (f)		7.00	%		7.49	%		7.88	%		7.37	%
Portfolio turnover rate		45	%		80	%		168	%		193	% (e)		135	%		54	%		82	%
Amount of borrowings outstanding at end of period (in millions)	$	19		$	27		$	23		$	22		$	10		$	33		$	33
Per-share amount of borrowings outstanding at end of period	$	2.01		$	2.90		$	2.45		$	2.28		$	1.04		$	3.48		$	3.46
Per-share amount of net assets, excluding borrowings, at end of period	$	10.98		$	11.67		$	11.43		$	11.45		$	10.10		$	12.18		$	12.66
Asset coverage ratio (c)		547	%		403	%		467	%		502	%		970	%		350	%		366	%

(a) Assumes reinvestment of distributions at net asset value.

(b) Assumes reinvestment of distributions at actual prices pursuant to the fund's dividend reinvestment plan.

(c) Represents net assets, excluding borrowings, at end of period divided by borrowings outstanding at end of period.

(d) Less than $0.01 per share.

(e) The large turnover is due to increased activity in mortgage dollar roll transactions.

(f) Annualized.

(g) Total return has not been annualized.

2007 Semiannual Report

American Income Fund Inc.
13

Schedule of INVESTMENTS (unaudited)

American Income Fund February 28, 2007

Description of Security	Principal Amount/ Shares		Market Value (a)
(Percentages of each investment category relate to net assets)
High Yield Corporate Bonds — 31.5%
Basic Industry — 5.1%
Basell AF SCAI, 8.38%, 8/15/15 (b)	$	250,000	$	263,750
Coeur D'Alene Mines, 1.25%, 1/15/24		100,000		92,375
Evraz Group, 8.25%, 11/10/15		250,000		255,950
FMG Finance Property, 10.00%, 9/1/13 (b)		250,000		271,250
Griffin Coal Mining, 9.50%, 12/1/16 (b)		200,000		211,500
Hexion, 9.75%, 11/15/14 (b)		250,000		265,000
Ineos Group Holdings, 8.50%, 2/15/16 (b)		250,000		243,125
LPG International, 7.25%, 12/20/15		250,000		258,125
Lyondell Chemical Company, 8.00%, 9/15/14		250,000		263,125
Massey Energy, 6.88%, 12/15/13		250,000		240,000
Newark Group, 9.75%, 3/15/14		200,000		210,000
Noble Group, 6.63%, 3/17/15 (b)		250,000		234,082
OM Group, 9.25%, 12/15/11		300,000		313,875
Polyone, 8.88%, 5/1/12		200,000		203,500
Sappi Papier Holding, 7.50%, 6/15/32 (b)		250,000		243,314
Sino Forest, 9.13%, 8/17/11 (b)		250,000		263,438
Stone Container, 8.38%, 7/1/12		200,000		204,000
Vedanta Resource, 6.63%, 2/22/10 (b)		250,000		248,750
				4,285,159
Capital Goods — 1.3%
Allied Waste North America, 6.13%, 2/15/14		300,000		292,500
Case New Holland, 9.25%, 8/1/11		200,000		211,000
Owens-Broadway Glass Container, 8.88%, 2/15/09		500,000		511,250
Solo Cup Co., 8.50%, 2/15/14		150,000		130,125
				1,144,875
Communications — 5.6%
C & M Finance, 8.10%, 2/1/16 (b)		250,000		257,813
CCH I, 11.75%, 5/14/15		300,000		293,250
CCO Holdings LLC, 8.75%, 11/15/13		500,000		520,000
CSC Holdings, Series B, 7.63%, 4/1/11		250,000		256,875
Dex Media, 8.00%, 11/15/13		200,000		209,000
Echostar,
7.00%, 10/1/13 (b)		200,000		205,500
6.63%, 10/1/14		300,000		303,000
Horizon PCS, 11.38%, 7/15/12		200,000		222,000
Idearc, 8.00%, 11/15/16 (b)		250,000		256,875
Intelsat, 8.63%, 1/15/15		250,000		268,750
Level 3 Financing, 12.25%, 3/15/13		250,000		291,875
MetroPCS Wireless, 9.25%, 11/1/14 (b)		250,000		262,500
Panamsat,
9.00%, 8/15/14		250,000		274,375
9.00%, 6/15/16 (b)		195,000		210,600
Qwest, 8.88%, 3/15/12		400,000		442,000
Time Warner Telecommunications Holdings, 9.25%, 2/15/14		175,000		187,688
Vimpelcom, 8.25%, 5/23/16		250,000		266,250
				4,728,351

See accompanying Notes to Schedule of Investments.

2007 Semiannual Report

American Income Fund Inc.
14

American Income Fund (continued)

Description of Security	Principal Amount/ Shares		Market Value (a)
Consumer Cyclical — 5.0%
American Axle & Manufacturing, 7.88%, 3/1/17	$	250,000	$	250,000
Buffalo Thunder Development Authority, 9.38%, 12/14/15 (b)		250,000		258,125
Ford Motor 7.45%, 7/16/31		250,000		200,625
Ford Motor Credit, 7.00%, 10/1/13		500,000		479,647
Galaxy Entertainment, 9.88%, 12/15/12 (b)		250,000		272,813
General Motors, 8.25%, 7/15/23		250,000		232,500
General Motors Acceptance Corporation, 5.63%, 5/15/09		300,000		295,866
Hanesbrands Inc., 8.73%, 12/15/14		250,000		255,625
Harrahs Operating Company, 5.63%, 6/1/15		250,000		216,250
Hertz, 8.88%, 1/1/14 (b)		250,000		269,375
Hovnanian K Enterprises, 6.25%, 1/15/16		250,000		232,500
Libbey Glass, 12.44%, 6/1/11 (b) (c)		200,000		220,000
Mandalay Resort, Series B, 10.25%, 8/1/07		250,000		254,375
Mohegan Tribal Gaming, 6.38%, 7/15/09		250,000		250,000
Six Flags, 9.75%, 4/15/13		250,000		245,000
Wynn Las Vegas, 6.63%, 12/1/14		250,000		247,500
				4,180,201
Consumer Non Cyclical — 2.4%
Delhaize America, 9.00%, 4/15/31		250,000		300,313
HCA,
6.75%, 7/15/13		250,000		229,375
9.63%, 11/15/16 (b)		200,000		216,000
JBS SA, 10.50%, 8/4/16		250,000		277,500
RJ Reynolds Tobacco Holdings, 6.50%, 7/15/10 (b)		250,000		255,524
Supervalu, 7.50%, 5/15/12		250,000		265,647
Tenet Healthcare, 9.25%, 2/1/15		250,000		249,687
Vitro SAB, 9.13%, 2/1/17		250,000		255,000
				2,049,046
Electric — 3.1%
Allegheny Energy Supply, 7.80%, 3/15/11		200,000		213,000
Ava Capital Trust III, 6.50%, 4/1/34 (c)		300,000		299,214
CMS Energy, 8.50%, 4/15/11		500,000		542,500
Dynegy-Roseton Danskammer, Series B, 7.67%, 11/8/16		200,000		212,000
ISA Capital do Brasil, 8.80%, 1/30/17		250,000		261,875
Mission Energy Holdings, 13.50%, 7/15/08		250,000		272,812
Nevada Power, 9.00%, 8/15/13		262,000		283,350
NRG Energy, 7.38%, 2/1/16		300,000		306,000
Teco Energy, 7.20%, 5/1/11		250,000		265,000
				2,655,751
Energy — 1.5%
Baytex Energy LLC, 9.63%, 7/15/10		250,000		262,500
Bluewater Finance, 10.25%, 2/15/12		290,000		302,325
Chesapeake Energy, 7.00%, 8/15/14		250,000		256,875
Stone Energy, 8.25%, 12/15/11		250,000		248,750
Tesoro, 6.63%, 11/1/15 (b)		250,000		252,500
				1,322,950
Industrials Other — 0.4%
Chart Industries, 9.13%,10/15/15 (b)		300,000		315,000
Miscellaneous — 1.6%
Dow Jones, Series 5-T2, 7.25%, 12/29/10		292,683		301,098
Dow Jones, Series 6-T1, 8.63%, 6/29/11		990,000		1,044,450
				1,345,548

See accompanying Notes to Schedule of Investments.

2007 Semiannual Report

American Income Fund Inc.
15

Schedule of INVESTMENTS (unaudited) continued

American Income Fund (continued)

Description of Security	Principal Amount/ Shares		Market Value (a)
Natural Gas — 2.0%
El Paso, 7.75%, 6/15/10	$	200,000	$	213,000
SemGroup, 8.75%, 11/15/15 (b)		250,000		253,750
Southern Union, 7.20%, 11/1/66 (c)		200,000		200,566
Targa Resources, 8.50%, 11/1/13 (b)		250,000		253,750
Williams, 7.13%, 9/1/11		500,000		522,500
Williams Partners, 7.25%, 2/1/17		250,000		262,500
				1,706,066
Real Estate — 0.9%
Greentown China Holdings, 9.00%, 11/8/13 (b)		200,000		203,250
Senior Housing Trust, 8.63%, 1/15/12		300,000		327,000
Shimao Property Holdings Limited, 8.00%, 12/1/16		250,000		251,250
				781,500
Sovereigns — 1.0%
Republic of Panama, 7.25%, 3/15/15		500,000		540,000
Republic of Uruguay, 8.00%, 11/18/22		250,000		279,375
				819,375
Technology — 1.2%
Compucom Systems, 12.00%, 11/1/14 (b)		250,000		261,875
Lucent Technologies, 6.45%, 3/15/29		250,000		227,500
NXP BV/NXP Funding, 9.50%, 10/15/15 (b)		250,000		258,125
Seagate Technology HDD Holdings, 6.80%, 10/1/16		250,000		251,875
				999,375
Transportation — 0.4%
Continental Airlines, Series 99-2, 7.57%, 3/15/20		303,417		307,968
Total High Yield Corporate Bonds (cost: $25,783,854)				26,641,165
U.S. Government Agency Mortgage-Backed Securities — 40.6%
Adjustable Rate (c) — 0.9%
Federal Home Loan Mortgage Corporation, 6.28%, 9/1/18, #605911		197		199
Federal National Mortgage Association, 6.34%, 7/1/27, #70179		2,351		2,356
6.55%, 10/1/32, #725110 (d)		453,544		460,797
Government National Mortgage Association, 6.13%, 12/20/22, #008096		323,717		327,734
				791,086
Fixed Rate — 39.7%
Federal Home Loan Mortgage Corporation, 6.50%, 8/1/30, #C43641		113,967		117,275
Federal Home Loan Mortgage Corporation Gold, 6.50%, 11/1/28, #C00676		318,682		327,932
5.50%, 10/1/33, #A15120 (d)		1,157,629		1,151,434
Federal National Mortgage Association, 4.00%, 11/1/10, #254956		1,804,396		1,752,051
6.00%, 12/1/13, #190179		349,978		351,652
7.50%, 5/1/15, #537440		32,388		33,358
7.00%, 6/1/17, #254384		265,772		273,337
7.00%, 7/1/17, #254414		334,282		343,797
6.00%, 9/1/17, #653368		263,588		268,049
5.00%, 11/1/18, #750989		570,993		564,818
5.00%, 2/1/19, #767182 (d)		915,319		905,420
5.00%, 2/1/21, #745279		884,203		872,792
5.50%, 4/1/21, #840466 (d)		1,392,821		1,396,084
6.00%, 3/1/22 (e)		5,500,000		5,584,216

See accompanying Notes to Schedule of Investments.

2007 Semiannual Report

American Income Fund Inc.
16

American Income Fund (continued)

Description of Security	Principal Amount/ Shares		Market Value (a)
6.00%, 5/1/29, #323702 (d)	$	547,714	$	555,837
6.50%, 5/1/31, #540814		124,768		128,200
7.00%, 9/1/31, #596680 (d)		448,324		460,218
7.00%, 3/1/32, #635970		209,230		216,167
6.50%, 6/1/32, #596712 (d)		618,494		630,622
5.50%, 6/1/33, #709700		790,926		786,387
5.50%, 11/1/33, #555967 (d)		1,930,075		1,919,000
6.00%, 11/1/33, #743642		589,194		596,214
5.50%, 12/1/33, #756202		1,153,913		1,147,291
6.00%, 1/1/34, #763687 (d)		976,637		987,144
5.50%, 2/1/34, #766070 (d)		933,624		927,718
6.00%, 1/1/35, #810225 (d)		801,408		810,030
6.50%, 2/1/35, #735273 (d)		1,080,699		1,109,635
5.50%, 3/1/35, #815979 (d)		1,682,148		1,670,256
6.00%, 6/1/36, #882685		3,854,009		3,887,566
5.00%, 3/1/37 (e)		1,500,000		1,455,938
Government National Mortgage Association, 6.50%, 4/15/33, #602233		362,367		372,521
5.50%, 8/15/33, #604567		1,285,436		1,285,322
6.00%, 7/15/34, #631574		616,528		626,602
				33,514,883
Total U.S. Government Agency Mortgage-Backed Securities (cost: $34,488,698)				34,305,969
Collateralized Mortgage Obligation — Private Mortgage-Backed Securities — 32.1%
Adjustable Rate (c) — 9.0%
California Federal Bank Los Angeles, Series 1991-C12, Class A, 6.78%, 7/15/21 (f)		12,435		12,542
Goldman Sachs Mortgage Securities, Series 2005-AR1, Class B1, 4.88%, 1/25/35		1,473,554		1,464,338
Series 2003-1, Class B2, 6.90%, 3/25/43		1,874,614		1,930,938
Series 2003-10, Class 1A1, 4.72%, 10/25/33 (d)		1,397,436		1,369,861
IndyMac Indx Mortgage Loan Trust, Series 2006-AR13, Class A3, 6.11%, 7/25/36		1,500,000		1,523,203
Sequoia Mortgage Trust, Series 2004-5, Class X1, 0.80%, 6/20/34 (g)		26,510,945		124,371
Washington Mutual MCS Mortgage, Series 2003-AR3, Class B1, 5.33%, 6/25/33		905,159		909,825
Wells Fargo Mortgage-Backed Securities Trust, Series 2003-D, Class A1, 4.80%, 2/25/33		222,486		224,265
				7,559,343
Fixed Rate — 23.1%
Citicorp Mortgage Securities, Series 2004-5, Class B3, 5.28%, 8/25/34		1,193,677		1,095,975
Credit Suisse First Boston Mortgage Securities Corporation, Series 2003-8, Class DB1, 6.25%, 4/25/33		1,484,926		1,505,742
Series 2005-11, Class 6A7, 6.00%, 12/25/35		1,000,000		1,014,504
Series 2005-12, Class DB4, 5.84%, 1/25/36		828,387		756,250
Countrywide Alternative Loan Trust, Series 2005-7CB, Class 2A4, 5.50%, 4/25/35		750,000		748,978
GMAC Mortgage Corporation Loan Trust, Series 2003-GH2, Class A3, 5.00%, 3/25/23		448,362		446,365
Series 2003-J9, Class A15, 5.00%, 1/25/34		1,325,000		1,303,889
Series 2004-J5, Class A7, 6.50%, 1/25/35		914,987		926,282
Goldman Sachs Mortgage Securities, Series 2001-2, Class A, 7.50%, 6/19/32 (b)		336,629		350,415
Series 2005-4F, Class B1, 5.73%, 5/25/35		1,273,241		1,269,584
Morgan Stanley Mortgage Loan Trust, Series 2004-9, Class 1A, 6.22%, 10/25/34		1,362,803		1,372,812
Nomura Asset Acceptance Corporation, Series 2004-R2, Class B1, 6.74%, 10/25/34		1,094,714		1,108,263
Prime Mortgage Trust, Series 2004-2, Class B2, 5.04%, 11/25/19		382,296		370,247
Series 2004-2, Class B3, 5.04%, 11/25/19		286,500		270,823

See accompanying Notes to Schedule of Investments.

2007 Semiannual Report

American Income Fund Inc.
17

Schedule of INVESTMENTS (unaudited) continued

American Income Fund (continued)

Description of Security	Principal Amount/ Shares		Market Value (a)
Residential Accredit Loans, Series 2003-QS12, Class M1, 5.00%, 6/25/18	$	939,343	$	926,195
Residential Asset Mortgage Products, Series 2003-SL1, Class M2, 7.32%, 4/25/31		1,031,573		1,027,009
Series 2004-SL4, Class A3, 6.50%, 7/25/32		1,071,859		1,092,475
Structured Asset Securities Corporation, Series 2005-6, Class 5A6, 5.00%, 5/25/35		1,000,000		998,410
Washington Mutual MSC Mortgage, Series 2003-MS9, Class CB2, 7.45%, 4/25/33		395,223		387,417
Wells Fargo Mortgage-Backed Securities Trust, Series 2003-7, Class A3, 4.50%, 8/25/18		752,054		741,754
Series 2004-7, Class 2A2, 5.00%, 7/25/19		741,149		728,179
Series 2004-7, Class B2, 4.72%, 7/25/19		643,416		616,558
Series 2004-7, Class B3, 4.72%, 7/25/19		482,779		451,842
				19,509,968
Total Collateralized Mortgage Obligation — Private Mortgage-Backed Securities (cost: $27,296,896)				27,069,311
Collateralized Mortgage Obligation — U.S. Agency Mortgage-Backed Securities — 11.7%
Fixed Rate — 7.1%
Federal Home Loan Mortgage Corporation, Series 2690, Class OE, 5.00%, 11/15/28		1,274,000		1,264,886
Series 2972, Class KA, 4.50%, 6/15/18		871,017		856,936
Federal National Mortgage Association, Series 2004-27, Class HB, 4.00%, 5/25/19 (d)		1,923,137		1,741,576
Series 2004-29, Class WG, 4.50%, 5/25/19 (d)		942,115		889,928
Series 2004-90, Class GA, 4.35%, 3/25/34 (d)		796,567		774,699
Series 2002-WI, Class 2A, 7.50%, 2/25/42		443,856		461,479
				5,989,504
Z-Bonds (h) — 4.6%
Federal Home Loan Mortgage Corporation, Series 2676, Class GZ, 4.50%, 9/15/33 (d)		1,767,687		1,466,535
Government National Mortgage Association, Series 2001-8, Class Z, 6.50%, 3/20/31 (d)		2,351,021		2,427,653
				3,894,188
Total Collateralized Mortgage Obligation — U.S. Agency Mortgage-Backed Securities (cost: $9,531,132)				9,883,692
Asset-Backed Securities — 7.2%
Home Equity — 4.7%
Residential Funding Mortgage Securities I, Series 2004-HI2, Class A4, 5.24%, 9/25/18		1,640,594		1,632,681
Series 2003-HI4, Class M1, 5.53%, 2/25/29 (i)		2,327,000		2,312,867
				3,945,548
Manufactured Housing — 1.3%
Green Tree Financial, Series 1994-2, Class A5, 8.30%, 5/15/19		328,538		329,042
Origen Manufactured Housing, Series 2005-B, Class M1, 5.99%, 1/15/37		750,000		747,726
				1,076,768

See accompanying Notes to Schedule of Investments.

2007 Semiannual Report

American Income Fund Inc.
18

American Income Fund (continued)

Description of Security	Principal Amount/ Shares		Market Value (a)
Other — 1.2%
Crown Castle Towers LLC, Series 2005-1A, Class D, 5.61%, 6/15/35 (b)	$	1,000,000	$	1,001,739
GRP/AG Real Estate Asset Trust, Series 2005-1, Class A, 4.85%, 1/25/35 (b) (i)		32,928		32,637
				1,034,376
Total Asset-Backed Securities (cost: $6,103,977)				6,056,692
Investment Grade Corporate Bonds — 2.6%
Basic Industry — 0.8%
Southern Copper, 7.50%, 7/27/35		400,000		444,156
Vale Overseas, 6.25%, 1/11/16		250,000		257,818
				701,974
Consumer Non Cyclical — 0.6%
Fisher Scientific International, 6.75%, 8/15/14		500,000		517,767
Energy — 0.2%
GAZ Capital, 6.21%, 11/22/16 (b)		200,000		199,900
Sovereigns — 0.4%
United Mexican States, 5.63%, 1/15/17		300,000		301,200
Transportation — 0.6%
American Airlines, Series 99-1, 7.02%, 10/15/09		500,000		518,500
Total Investment Grade Corporate Bonds (cost: $2,114,690)				2,239,341
Preferred Stocks — 0.5%
Real Estate Investment Trusts — 0.5%
National Retail Properties, Series C		4,000		101,760
Northstar Realty Finance, Series A		4,000		104,600
Series B		4,000		99,920
Thornburg Mortgage, Series D		4,000		98,400
Total Preferred Stocks (cost: $402,200)				404,680
Municipal Bond — 0.9%
Sullivan County, Tennessee, Health, Educational and Housing Facilities Board, Hospital Revenue, Wellmont Health System, 6.95%, 9/1/16 (cost: $750,000)		750,000		768,907
Short-Term Investments — 2.0%
Money Market Fund (j) — 1.9%
First American Prime Obligations Fund, Class Z		1,583,125		1,583,125
U.S. Treasury Obligation (k) — 0.1%
U.S. Treasury Bills, 4.83%, 4/5/06		60,000		59,719
4.93%, 4/5/07		10,000		9,952
				69,671

See accompanying Notes to Schedule of Investments.

2007 Semiannual Report

American Income Fund Inc.
19

Schedule of INVESTMENTS continued

American Income Fund (concluded)

Description of Security	Market Value (a)
Total Short-Term Investments (cost: $1,652,796)	$	1,652,796
Total Investments in Securities (l) — 129.1% (cost: $108,124,243)	$	109,022,553
Other Assets and Liabilities — (29.1)%		(24,592,934	)
Total Net Assets — 100.0%	$	84,429,619

Notes to Schedule of Investments:

(a) Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements.

(b) Securities sold within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, which may be sold only to dealers in that program or other "qualified institutional buyers." These securities have been determined to be liquid under guidelines established by the fund's board of directors. As of February 28, 2007, the value of these investments was $7,052,411 or 8.4% of net assets. See note 2 in Notes to Financial Statements.

(d) On February 28, 2007, securities valued at $21,654,447 were pledged as collateral for the following outstanding reverse repurchase agreements:

Amount		Acquisition Date	Rate*			Due	Accrued Interest		Name of Broker and Description of Collateral
$	13,902,488	2/12/2007		5.40	%	3/12/2007	$	58,391		(1	)
	5,080,642	2/22/2007		5.39	%	3/22/2007		21,299		(1	)
$	18,983,130						$	79,690

* Interest rate as of February 28, 2007. Rates are based on the London InterBank Offered Rate (LIBOR) and reset monthly.

Name of broker and description of collateral:

(1) Morgan Stanley:
Federal Home Loan Mortgage Corporation Gold, 5.50%, 10/1/33, $1,157,629 par
Federal Home Loan Mortgage Corporation, 4.50%, 9/15/33, $1,767,687 par
Federal National Mortgage Association, 5.00%, 2/1/19, $915,319 par
Federal National Mortgage Association, 4.35%, 3/25/34, $796,567 par
Federal National Mortgage Association, 4.00%, 5/25/19, $1,923,137 par
Federal National Mortgage Association, 4.50%, 5/25/19, $942,115 par
Federal National Mortgage Association, 5.50%, 4/1/21, $1,392,821 par
Federal National Mortgage Association, 6.00%, 5/1/29, $547,714 par
Federal National Mortgage Association, 7.00%, 9/1/31, $448,324 par
Federal National Mortgage Association, 6.50%, 6/1/32, $618,494 par
Federal National Mortgage Association, 5.50%, 11/1/33, $1,930,075 par
Federal National Mortgage Association, 6.00%, 1/1/34, $976,637 par
Federal National Mortgage Associa tion, 5.50%, 2/1/34, $933,624 par
Federal National Mortgage Association, 6.00%, 1/1/35, $801,408 par
Federal National Mortgage Association, 6.50%, 2/1/35, $1,080,699 par
Federal National Mortgage Association, 5.50%, 3/1/35, $1,682,148 par
Federal National Mortgage Association, 6.55%, 10/1/32, $453,544 par
Goldman Sachs Mortgage Securities, 4.72%, 10/25/33, $1,397,436 par
Government National Mortgage Association, 6.50%, 3/20/31, $2,351,021 par

(e) This security has been purchased on a when-issued basis. On February 28, 2007, the total cost of securities purchased on a when-issued basis was $7,006,875. See note 2 in Notes to Financial Statements.

(f) Security considered illiquid. As of February 28, 2007, the value of this investment was $12,542 or 0.01% of net assets. See note 2 in Notes to Financial Statements.

(g) Interest only – Represents securities that entitle holders to receive only interest payments on the mortgage. The interest rate disclosed represents the coupon rate in effect as of February 28, 2007.

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American Income Fund Inc.
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(h) Z-Bond – Represents securities that pay no interest or principal during their accrual periods, but accrue additional principal at specified rates. Interest rate shown represents the current yield based upon the current cost basis and estimated future cash flows.

(i) Delayed interest (Step Bonds) – Securities for which the coupon rate of interest will adjust on specified future date(s).

(j) Investment in affiliated security. This money market fund is advised by FAF Advisors, Inc., which also serves as advisor for the fund. See note 3 in Notes to Financial Statements.

(k) Security has been deposited as initial margin on open futures contracts and swap agreements. Yield shown is effective yield as of February 28, 2007. See note 2 in Notes to Financial Statements.

(l) On February 28, 2007, the cost of investments in securities for federal income tax purposes was $108,124,243. The aggregate gross unrealized appreciation and depreciation of investments in securities, based on this cost, were as follows:

Gross unrealized appreciation	$	1,928,808
Gross unrealized depreciation		(1,030,498	)
Net unrealized appreciation	$	898,310
Schedule of Open Futures Contracts

Description	Number of Contracts Sold			Notional Contract Value			Settlement Month	Unrealized Depreciation
U.S. Treasury 2 Year Note Futures		(60	)	$	(12,297,188	)	June 2007	$	(30,668	)
U.S. Treasury 5 Year Note Futures		(49	)		(5,191,703	)	June 2007		(24,481	)
U.S. Treasury 10 Year Note Futures		(16	)		(1,737,500	)	June 2007		(11,950	)
U.S. Treasury Long Bond Futures		(1	)		(112,938	)	June 2007		(377	)
								$	(67,476	)
Credit Default Swap Agreements

Counterparty	Reference Entity	Buy/Sell Protection	Pay/Receive Fixed Rate			Expiration Date	Notional Amount		Unrealized Appreciation
UBS	ABX-HE-A	Buy		0.440	%	5/25/2046	$	360,000	$	1,800
UBS	Dow Jones CDX-EM6 Index	Buy		1.400	%	12/20/2011		3,500,000		23,280
UBS	Residential Capital	Buy		1.030	%	3/20/2012		100,000		2,643
									$	27,723

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NOTICE TO SHAREHOLDERS (unaudited)

ANNUAL MEETING RESULTS

An annual meeting of the fund's shareholders was held on December 4, 2006. Each matter voted upon at that meeting, as well as the number of votes cast for, against or withheld, and the number of abstentions, are set forth below. There were no broker non-votes.

(1) The fund's shareholders elected the following directors:

	Shares Voted "For"		Shares Withholding Authority to Vote
Benjamin R. Field III		7,759,712		606,178
Roger A. Gibson		7,758,205		607,685
Victoria J. Herget		7,762,379		603,511
John P. Kayser		7,754,092		611,798
Leonard W. Kedrowski		6,488,576		1,877,314
Richard K. Riederer		7,758,942		606,948
Joseph D. Strauss		7,758,584		607,306
Virginia L. Stringer		7,760,829		605,061
James M. Wade		7,762,929		602,961

(2) The fund's shareholders ratified the selection by the fund's board of directors of Ernst & Young LLP as the independent registered public accounting firm for the fund for the fiscal period ending August 31, 2007. The following votes were cast regarding this matter:

Shares Voted "For"				Shares Voted "Against"				Abstentions
	8,292,145				27,853				45,892

HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICIES AND PROXY VOTING RECORD

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, as well as information regarding how the fund voted proxies relating to portfolio securities during the most recent 12 month period ended June 30, is available (1) without charge upon request by calling 800.677.FUND; (2) at www.firstamericanfunds.com; and (3) on the U.S. Securities and Exchange Commission's website at http://www.sec.gov.

FORM N-Q HOLDINGS INFORMATION

The fund is required to file its complete schedule of portfolio holdings for the first and third quarters of each fiscal year with the Securities and Exchange Commission on Form N-Q. The fund's Forms N-Q are available (1) without charge upon request by calling 800.677.FUND and (2) on the U.S. Securities and Exchange Commission's website at http://www.sec.gov. In addition, you may review and copy the fund's Forms N-Q at the Commissions Public Reference Room in Washington D.C. You may obtain information on the operation of the Public Reference Room by calling 1-800-SEC-0330.

QUARTERLY PORTFOLIO HOLDINGS

The Fund will make portfolio holdings information publicly available by posting the information at www.firstamericanfunds.com on a quarterly basis. The fund will attempt to post such information within 10 days of the quarter end.

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Board of DIRECTORS

VIRGINIA STRINGER

Chairperson of American Income Fund, Inc.

Governance Consultant; former Owner and President of Strategic Management Resources, Inc.

BENJAMIN FIELD III