<PAGE>
[Logo] SEMIANNUAL REPORT, SEPTEMBER 30, 1997
AMERICAN GAS INDEX FUND, INC.
4922 FAIRMONT AVENUE, BETHESDA, MARYLAND 20814
(800) 622-1386 (301) 657-1510
- --------------------------------------------------------------------------------
November 17, 1997
Dear Shareholders:
During the six-month period ended September 30, 1997, the American Gas Index
Fund's net asset value increased from $14.84 to $16.38. In addition, dividends
totaling 23 cents per share were paid out. The resulting total return of 11.97%
exceeded that of the Dow Jones Utility Average but lagged behind the broadbased
Dow Jones Industrial Average and S&P 500 Index. Eighty-five percent of the
Fund's holdings, including nine out of the ten largest, increased in share
value.
Several major previously announced gas company buy-outs were finalized during
this period. As a result, new names appear as Fund holdings. The most
significant acquisitions involve PanEnergy Corp. by Duke Energy Corporation,
NorAm Energy Corp. by Houston Industries, and ENSERCH Corp. by Texas Utilities.
Other announced takeovers and mergers are being finalized and more are predicted
for 1998. This type of activity tends to focus investor interest on the Fund's
holdings and enhance share value.
Forecasts of continued growth in demand and consumption of natural gas continue
to dominate reports by industry and government analysts. A growing domestic
marketplace combined with media emphasis on economic and environmental issues
are positives for gas company stocks. For example, major automobile and engine
manufacturers are turning to natural gas as the most economic
<TABLE>
<S> <C>
TOP FIVE PERFORMERS
PRICE CHANGE: MARCH 31, 1997 - SEPT. 30, 1997
Pennsylvania Enterprises, Inc. 35.93%
National Gas & Oil Corporation 31.25%
Rochester Gas and Electric Corp. 30.26%
Minnesota Power & Light Co. 29.82%
Commonwealth Energy System 29.34%
</TABLE>
<TABLE>
<S> <C>
BOTTOM FIVE PERFORMERS
PRICE CHANGE: MARCH 31, 1997 - SEPT. 30, 1997
Citizens Utilities Company,
Series B -22.11%
LG&E Energy Corp. -8.03%
Virginia Gas Company -7.69%
Sonat, Inc. -6.65%
Illinova Corporation -5.74%
</TABLE>
TOTAL RETURN COMPARISON
(MARCH 31, 1997 - SEPTEMBER 30, 1997)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Dow Jones
American Gas Index Fund Dow Jones Industrials Utilities S&P 500
11.97% 21.51% 11.23% 26.26%
</TABLE>
The average annual total return was 19.23% for the one-year period, 14.86% for
the five-year period, and 10.66% for the period 5/10/89 (inception) through
September 30, 1997. Returns are historical and include changes in principal
and reinvested dividends and capital gains. Your return and principal will
vary and you may have a gain or loss when you sell shares.
<PAGE>
and achievable way to meet urban air quality standards. As the electric
generation market is opened to competition and nuclear power plants are phased
out, natural gas is predicted to be a major beneficiary. Continuous publicity
regarding overseas pipeline and exploration activities will help to maintain the
financial community and the public focus on natural gas. Fund investors are in
an excellent position to participate in these exciting developments.
Sincerely,
/s/ Richard J. Garvey
- ---------------------
Richard J. Garvey
Chairman
American Gas Index Fund, Inc.
2
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
MARKET VALUE PERCENT OF
SHARES (NOTE 1) NET ASSETS
------- ------------ ----------
<S> <C> <C> <C>
COMMON STOCKS
Duke Energy Corp. ....... 215,000 $10,629,063 4.88%
Enron Corp. ............. 275,000 10,587,500 4.87%
Consolidated Natural Gas
Co. ................... 175,000 10,182,812 4.68%
The Williams Companies,
Inc. .................. 215,000 10,064,688 4.62%
Occidental Petroleum
Corp. ................. 380,000 9,856,250 4.53%
The Coastal Corp. ....... 160,000 9,800,000 4.50%
El Paso Energy Co. ...... 155,000 9,387,187 4.31%
The Columbia Gas System,
Inc. .................. 130,000 9,100,000 4.18%
Pacific Enterprises...... 220,000 7,452,500 3.42%
Sonat, Inc. ............. 125,000 6,359,375 2.92%
NGC Corp. ............... 346,200 6,145,050 2.82%
PG&E Corp. .............. 265,000 6,144,687 2.82%
Houston Industries,
Inc. .................. 250,000 5,437,500 2.50%
MCN Energy Group,
Inc. .................. 147,000 4,704,000 2.16%
NICOR, Inc. ............. 125,000 4,687,500 2.15%
Peoples Energy Corp. .... 100,000 3,768,750 1.73%
National Fuel Gas Co. ... 85,000 3,740,000 1.72%
Keyspan Energy Corp. .... 110,000 3,671,250 1.69%
KN Energy, Inc. ......... 80,000 3,660,000 1.68%
Washington Gas Light
Co. ................... 125,000 3,203,125 1.47%
AGL Resources, Inc. ..... 150,000 2,840,625 1.31%
Questar Corp. ........... 70,000 2,839,375 1.30%
CMS Energy Corp. ........ 75,000 2,775,000 1.28%
Consolidated Edison Co.
of New York, Inc. ..... 75,000 2,550,000 1.19%
Piedmont Natural Gas Co.,
Inc. .................. 80,000 2,330,000 1.07%
Equitable Resources,
Inc. .................. 70,000 2,205,000 1.01%
ONEOK, Inc. ............. 65,000 2,120,625 0.97%
Atmos Energy Corp. ...... 85,000 2,114,375 0.97%
Public Service Enterprise
Group, Inc. ........... 80,000 2,060,000 0.95%
WICOR, Inc. ............. 45,000 1,943,437 0.89%
NIPSCO Industries,
Inc. .................. 46,000 1,937,750 0.89%
Indiana Energy, Inc. .... 65,000 1,933,750 0.89%
New Century Energies
Inc. .................. 42,500 1,766,406 0.81%
Northwest Natural Gas
Co. ................... 65,000 1,673,750 0.77%
Southwest Gas Corp. ..... 75,000 1,471,875 0.68%
New Jersey Resources
Corp. ................. 45,000 1,456,875 0.67%
UtiliCorp United,
Inc. .................. 45,000 1,355,625 0.62%
Puget Sound Energy
Co. ................... 50,000 1,331,250 0.61%
Eastern Enterprises...... 35,000 1,305,937 0.60%
Cinergy Corp. ........... 37,500 1,253,906 0.58%
</TABLE>
3
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE PERCENT OF
SHARES (NOTE 1) NET ASSETS
------- ------------ ----------
COMMON STOCKS (CONTINUED)
<S> <C> <C> <C>
Laclede Gas Co. ......... 50,000 $ 1,215,625 0.56%
Public Service Co. of
North Carolina,
Inc. .................. 58,900 1,181,681 0.54%
Texas Utilities Co. ..... 32,500 1,170,000 0.54%
Southern Union Co.*...... 45,000 1,096,875 0.50%
Bay State Gas Co. ....... 37,500 1,092,187 0.50%
Enova Corp. ............. 42,500 1,073,125 0.49%
PECO Energy Co. ......... 45,000 1,054,688 0.48%
Baltimore Gas and
Electric Co. .......... 37,500 1,040,625 0.48%
MDU Resources Group,
Inc. .................. 36,000 985,500 0.45%
Energen Corp. ........... 25,000 889,062 0.41%
Northern States Power
Co. ................... 17,500 870,625 0.40%
Western Resources,
Inc. .................. 25,000 857,813 0.39%
Wisconsin Energy
Corp. ................. 30,000 780,000 0.36%
MidAmerican Energy
Holdings Co. .......... 45,000 776,250 0.36%
Long Island Lighting
Co. ................... 30,000 768,750 0.35%
SCANA Corp. ............. 30,000 751,875 0.35%
South Jersey Industries,
Inc. .................. 28,200 708,525 0.33%
NUI Corp. ............... 30,000 705,000 0.32%
Citizens Utilities Co.,
Series B............... 75,000 693,750 0.32%
UGI Corp. ............... 25,000 690,625 0.32%
The Montana Power Co. ... 25,000 665,625 0.31%
Pennsylvania Enterprises,
Inc. .................. 21,800 664,900 0.31%
Yankee Energy System,
Inc. .................. 27,500 651,406 0.30%
North Carolina Natural
Gas Corp. ............. 20,000 650,000 0.30%
CTG Resources, Inc. ..... 27,500 635,938 0.29%
Colonial Gas Co. ........ 25,000 617,188 0.28%
Connecticut Energy
Corp. ................. 25,000 617,187 0.28%
LG&E Energy Corp. ....... 25,000 554,688 0.25%
DPL, Inc. ............... 22,500 551,250 0.25%
SEMCO Energy, Inc. ...... 30,000 540,000 0.25%
New York State Electric
and Gas Corp. ......... 20,000 537,500 0.25%
Rochester Gas & Electric
Corp. ................. 20,000 495,000 0.23%
Public Service Co. of New
Mexico................. 25,000 482,813 0.22%
Commonwealth Energy
System................. 17,000 459,000 0.21%
Illinova Corp. .......... 20,000 431,250 0.20%
Mobile Gas Service
Corp. ................. 11,000 391,875 0.18%
WPS Resources Corp. ..... 12,500 361,719 0.17%
WPL Holdings, Inc. ...... 12,500 357,813 0.16%
Providence Energy
Corp. ................. 17,000 333,625 0.15%
Southwestern Energy
Co. ................... 25,000 320,312 0.15%
Orange and Rockland
Utilities, Inc. ....... 7,500 279,844 0.13%
SIGCORP, Inc. ........... 10,000 255,000 0.12%
</TABLE>
4
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE PERCENT OF
SHARES (NOTE 1) NET ASSETS
------- ------------ ----------
COMMON STOCKS (CONTINUED)
<S> <C> <C> <C>
Delmarva Power and Light
Co. ................... 13,000 $ 245,375 0.11%
TECO Energy.............. 10,000 245,000 0.11%
Central Hudson Gas and
Electric Corp. ........ 6,500 232,781 0.11%
EnergyNorth, Inc. ....... 9,000 207,563 0.10%
Sierra Pacific
Resources.............. 6,000 192,375 0.09%
National Gas and Oil
Co. ................... 15,000 177,188 0.08%
Essex County Gas Co. .... 6,000 172,500 0.08%
Northwestern Public
Service Co. ........... 9,000 165,937 0.08%
Chesapeake Utilities
Corp. ................. 9,000 165,375 0.08%
Fall River Gas Co. ...... 11,000 143,000 0.07%
Valley Resources,
Inc. .................. 12,000 132,750 0.06%
Entergy Corp. ........... 5,000 130,313 0.06%
The Berkshire Gas Co. ... 7,500 123,750 0.06%
Roanoke Gas Co. ......... 7,500 121,875 0.06%
Delta Natural Gas Co.,
Inc. .................. 6,500 116,187 0.05%
Corning Natural Gas
Corp. ................. 4,500 90,000 0.04%
Energy West, Inc. ....... 7,500 66,563 0.03%
Minnesota Power and Light
Co. ................... 1,000 36,188 0.02%
Virginia Gas Co. ........ 2,500 22,500 0.01%
------------ ----------
Total Common Stocks (Cost
$130,220,516).......... 209,890,532 96.45%
------------ ----------
REPURCHASE AGREEMENTS
With PaineWebber Co. at
5.75%, dated 9/30/97,
to be repurchased at
$9,159,874 on 10/1/97,
collaterized by U.S.
Treasury Notes, due
4/30/99 (Cost
$9,158,411)............ 9,158,411 4.21%
------------ ----------
TOTAL INVESTMENTS (COST
$139,378,927).......... 219,048,943 100.66%
LIABILITIES IN EXCESS OF
OTHER ASSETS........... (1,430,117 ) (0.66)%
------------ ----------
NET ASSETS (NOTE 5)...... $217,618,826 100.00%
------------ ----------
------------ ----------
NET ASSET VALUE PER SHARE
(BASED ON 13,287,965
SHARES OUTSTANDING).... $16.38
------------
------------
</TABLE>
*Non-income producing
See Notes to Financial Statements.
5
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME (Note 1)
Dividends........................................................... $ 3,768,118
Interest............................................................ 168,708
-------------
Total Investment Income........................................... 3,936,826
-------------
EXPENSES
Investment Advisory Fee (Note 2).................................... 420,120
Accounting and Administrative Service Fee (Note 2).................. 367,605
Administrative Fee (Note 2)......................................... 105,030
-------------
Total Expenses.................................................... 892,755
-------------
NET INVESTMENT INCOME................................................. 3,044,071
-------------
Net Realized Gain on Investment Transactions.......................... 4,964,803
Net Unrealized Appreciation of Investments (Note 4)................... 15,500,470
-------------
NET GAIN ON INVESTMENTS............................................... 20,465,273
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $ 23,509,344
-------------
-------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
SEPTEMBER 30, 1997 ENDED
(UNAUDITED) MARCH 31, 1997
------------------ ------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income.................................. $ 3,044,071 $ 6,618,283
Net Realized Gain on Investment Transactions........... 4,964,803 8,513,880
Net Unrealized Appreciation of Investments............. 15,500,470 15,598,586
------------------ ------------------
Net Increase in Net Assets Resulting from
Operations......................................... 23,509,344 30,730,749
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income............................. (3,038,145) (6,785,371)
------------------ ------------------
SHARE TRANSACTIONS
Net Proceeds from Sales of Shares...................... 17,523,739 45,036,144
Reinvestment of Distributions.......................... 2,699,498 5,996,997
Cost of Shares Redeemed................................ (36,133,586) (65,920,201)
------------------ ------------------
Net Decrease in Net Assets Resulting from Share
Transactions....................................... (15,910,349) (14,887,060)
------------------ ------------------
TOTAL INCREASE IN NET ASSETS.......................... 4,560,850 9,058,318
NET ASSETS -- Beginning of Period........................ 213,057,976 203,999,658
------------------ ------------------
NET ASSETS -- End of Period.............................. $217,618,826 $213,057,976
------------------ ------------------
------------------ ------------------
SHARES
Sold................................................... 1,111,803 3,081,033
Issued in Reinvestment of Distributions................ 168,693 414,751
Redeemed............................................... (2,345,176) (4,534,204)
------------------ ------------------
Net Decrease in Shares............................... (1,064,680) (1,038,420)
------------------ ------------------
------------------ ------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
AMERICAN GAS INDEX FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED MARCH 31,
1997 -----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value -- Beginning of
Period........................... $ 14.84 $ 13.25 $ 11.13 $ 11.08 $ 12.17 $ 9.45
------------- --------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income............ 0.231 0.448 0.454 0.440 0.410 0.407
Net Realized and Unrealized Gain
(Loss) on Investments.......... 1.539 1.601 2.121 0.050 (1.031) 2.853
------------- --------- --------- --------- --------- ---------
Total from Investment
Operations................... 1.770 2.049 2.575 0.490 (0.621) 3.260
------------- --------- --------- --------- --------- ---------
Distributions to Shareholders:
From Net Investment Income....... (0.230) (0.459) (0.455) (0.440) (0.406) (0.410)
From Net Realized Capital Gain... -- -- -- -- (0.063) (0.130)
------------- --------- --------- --------- --------- ---------
Total Distributions to
Shareholders................. (0.230) (0.459) (0.455) (0.440) (0.469) (0.540)
------------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in Net
Asset Value...................... 1.54 1.59 2.12 0.05 (1.09) 2.72
------------- --------- --------- --------- --------- ---------
Net Asset Value -- End of Period... $ 16.38 $ 14.84 $ 13.25 $ 11.13 $ 11.08 $ 12.17
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN.............. 11.97%(B) 15.60% 23.46% 4.72% (5.37)% 35.38%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.85%(C) 0.85% 0.85% 0.85% 0.84% 0.85%
Net Investment Income.............. 2.90%(C) 3.06% 3.71% 4.04% 3.33% 3.82%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate............ 3.6% 8.2% 10.0% 8.5% 11.4% 21.5%
Net Assets at End of Period (000's
omitted)......................... $ 217,619 $ 213,058 $ 204,000 $ 188,544 $ 209,036 $ 215,557
Number of Shares Outstanding at End
of Period (000's omitted)........ 13,288 14,353 15,391 16,941 18,858 17,708
Average Commission Rates Paid...... $ 0.0431 $ 0.0439(A) -- -- -- --
</TABLE>
- ------------------------
(A) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
depending on the mix of trades executed in various markets where trading
practices and commission rate structures may differ.
(B) Total returns for periods of less than one year are not annualized.
(C) Annualized
See Notes to Financial Statements.
8
<PAGE>
AMERICAN GAS INDEX FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
American Gas Index Fund, Inc. ("Fund") is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as an open-end,
diversified investment company. The Fund is authorized to issue 1,000,000,000
shares of $0.001 par value capital stock. The financial statements have been
prepared in conformity with generally accepted accounting principles which
permit management to make certain estimates and assumptions at the date of the
financial statements. The following is a summary of significant accounting
policies which the Fund follows.
(a) Securities listed on stock exchanges are valued at the last sales
price of the applicable exchange. Over-the-Counter securities are
valued at the last sales price. If market quotations are not readily
available, the Board of Directors will value the Fund's securities
in good faith.
(b) Security transactions are recorded on the trade date (the date the
order to buy or sell is executed). Interest income is accrued on a
daily basis. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from securities transactions are computed
on an identified cost basis.
(c) Net investment income is computed, and dividends are declared
quarterly. Dividends are reinvested in additional shares unless
shareholders request payment in cash. Generally short-term capital
gains are distributed quarterly and long-term capital gains, if any,
are distributed annually.
(d) The Fund complies with the provisions of the Internal Revenue Code
applicable to regulated investment companies and distributes all net
investment income to its shareholders. Therefore, no Federal income
tax provision is required.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Investment advisory and management services are provided by Money Management
Associates, ("Adviser"). Under an agreement with the Adviser, the Fund pays a
fee for such services at an annual rate of 0.40% of the average daily net assets
of the Fund. Certain Officers and Directors of the Fund are affiliated with
Money Management Associates.
Rushmore Trust and Savings, FSB ("Trust"), a majority-owned subsidiary of the
Adviser, provides transfer agency, dividend-disbursing and other shareholder
services to the Fund. In addition, the
9
<PAGE>
Trust serves as custodian of the Fund's assets and pays the operating expenses
of the Fund. For these services the Trust receives an annual fee of 0.35% of the
average daily net assets of the Fund.
The American Gas Association, (A. G. A.), serves as administrator for the Fund.
As administrator, A. G. A. calculates and maintains the Index and provides the
Fund with information concerning the natural gas industry. For these services
the Fund pays a fee at an annual rate of 0.10% of the average daily net assets
of the Fund.
3. SECURITIES TRANSACTIONS
For the period ended September 30, 1997, purchases of securities were
$7,350,398, and sales of securities were $27,572,758. These totals exclude
short-term securities.
4. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
As of September 30, 1997, net unrealized appreciation of investments for Federal
income tax purposes was $78,140,601 of which $80,486,401 related to appreciated
investments and $2,345,800 related to depreciated investments. At September 30,
1997, the cost of the Fund's securities for Federal income tax purposes was
$140,908,342.
5. NET ASSETS
At September 30, 1997 net assets consisted of the following:
<TABLE>
<S> <C>
Paid-in-Capital.......................................................... $138,226,324
Net Unrealized Appreciation of Investments............................... 79,670,016
Accummulated Realized Loss on Investments................................ (337,707)
Undistributed Net Investment Income...................................... 60,193
-------------
NET ASSETS............................................................... $217,618,826
-------------
-------------
</TABLE>
6. CAPITAL LOSS CARRYOVERS
At March 31, 1997, for Federal income tax purposes, the Fund had capital loss
carryovers which may be applied against future net taxable realized gains of
each succeeding year until the earlier of its utilization or its expiration:
<TABLE>
<CAPTION>
Expires March 31,
- -------------------
<S> <C>
2003............................................................. $ 931,472
2004............................................................. 2,420,302
-----------
$ 3,351,774
-----------
-----------
</TABLE>
10
<PAGE>
[Logo]
AMERICAN GAS INDEX FUND
-------------------------------------------------------
Semiannual Report
September 30, 1997
