AMERICAN GAS INDEX FUND INC, 485BPOS, 1997-07-23

AMERICAN GAS INDEX FUND INC
485BPOS, 1997-07-23

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As Filed With The Securities And Exchange Commission on July 24, 1997.

File Nos. 33-25678 and 811-5702

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)

Pre-Effective Amendment No.___ ( )

Post-Effective Amendment No. 8 (X)

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)

Amendment No. 12 (X)

AMERICAN GAS INDEX FUND, INC.
(Exact Name of Registrant as Specified in Charter)

4922 Fairmont Avenue, Bethesda, Maryland 20814
(Address of Principal Executive Offices) (Zip Code)

(301) 657-1500
(Registrant's Telephone Number, Including Area Code)

Timothy N. Coakley
4922 Fairmont Avenue
Bethesda, Maryland 20814
(Name and Address of Agent for Service of Process)

Approximate Date of Commencement of the Proposed Public Offering of
the Securities:

It is proposed that this filing will become effective (check appropriate box):

___ immediately upon filing pursuant to paragraph (b) of rule 485.
X on August 1, 1997 pursuant to paragraph (b) (1) (v) of rule 485.
___ 60 days after filing pursuant to paragraph (a) (1) of rule 485.
___ on (date) pursuant to paragraph (a) (1) of rule 485.
___ 75 days after filing pursuant to paragraph (a) (2) of rule 485.
___ on (date) pursuant to paragraph (a) (2) of rule 485.

If appropriate, check the following box:

___ This post-effective amendment designates a new effective date for a
previously-filed post-effective amendment.

The Registrant has previously filed a declaration of indefinite registration
of its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940.
The Rule 24f-2 Notice for the Registrant's fiscal year ended March 31, 1997
was filed on May 28, 1997.

<PAGE>

AMERICAN GAS INDEX FUND, INC.

REGISTRATION STATEMENT ON FORM N-1A

Cross Reference Sheet
Required By Rule 495(a)
Under The Securities Act of 1933

N-1A Location in
Item No. Registration Statement

Part A. Information Required in Prospectus

1. Cover Page Outside Front Cover Page of
Prospectus

2. Synopsis Fee Table

3. Condensed Financial Information Financial Highlights;
Performance Data

4. General Description of Registrant Organization and Description of
Common Stock; Investment Policies

5. Management of the Fund Management of the Fund

5A. Management's Discussion of Fund Management's Discussion of Fund
Performance Performance

6. Capital Stock and Other Organization and Description of
Securities Common Stock; Taxes; Dividends
and Distributions;

7. Purchase of Securities Being How to Invest in the Fund;
Offered Exchanges; Net Asset Value

8. Redemption or Repurchase How to Redeem an Investment
(Withdrawals); Exchanges

9. Legal Proceedings Not Applicable

Part B: Information Required In Statement of Additional Information

10. Cover Page Outside Front Cover Page of
Statement of Additional
Information

11. Table of Contents Table of Contents

12. General Information and History Not Applicable

13. Investment Objectives and Investment Policies; Investment
Policies Restrictions

14. Management of the Registrant Management of the Fund

15. Control Persons and Principal Principal Holders of Securities
Holders of Securities

16. Investment Advisory and Other Investment Advisory and Other
Services Services

17. Brokerage Allocation Investment Objectives and Policies

18. Capital Stock and Other Not Applicable
Securities

19. Purchase, Redemption and Redemptions; Tax-Deferred
Pricing of Securities Being Retirement Plans and Net Asset
Offered Value

20. Tax Status Taxes

21. Underwriters Not Applicable

22. Calculations of Performance Data Calculation of Performance Data

23. Financial Statements Following Part B

Part C: Other Information

24. Financial Statements and Exhibits Financial Statements and Exhibits

25. Persons Controlled by or Under Persons Controlled by or Under
Common Control Common Control

26. Number of Holders of Securities Numbers of Holders of Securities

27. Indemnification Indemnification

28. Business and Other Connections Business and Other Connections of
of Investment Adviser Investment Adviser

29. Principal Underwriters Principal Underwriters

30. Location of Accounts and Records Location of Accounts and Records

31. Management Services Management Services

32. Undertakings Undertakings

33. Signatures Signatures

<PAGE>

PART A

<PAGE>
AMERICAN GAS INDEX FUND, INC.
4922 Fairmont Avenue
Bethesda, Maryland 20814
(800) 343-3355
(301) 657-1500

INVESTMENT OBJECTIVES AND POLICIES

The American Gas Index Fund, Inc. (the "Fund") is a diversified,
open-end management investment company. The Fund is designed as
a common stock index fund. The Fund's investment objective is to
provide investment results that correlate to those of an index
comprising the common stocks of natural gas distribution and
transmission company members of the American Gas Association
("A.G.A."). The Fund is a no-load fund and does not impose any
fees when you buy or sell shares, nor does the Fund pay any
amounts to promote or distribute its shares (that is, it has no
so-called "12b-1 fees").

The shares offered by this Prospectus are not deposits or
obligations of any bank, are not endorsed or guaranteed by any
bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other governmental
agency.

ADDITIONAL INFORMATION

Investors should read this prospectus and retain it for future
reference. It is designed to set forth concisely the information
an investor should know before investing in the Fund. A
statement of Additional Information dated August 1, 1997
containing additional information about the Fund has been filed
with the Securities and Exchange Commission and is incorporated
herein by reference. A copy of the Statement may be obtained,
without charge, by writing or telephoning the Fund at the above
address or telephone number.

The date of this Prospectus is August 1, 1997.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

FEE TABLE

The following table illustrates all expenses and fees that a
shareholder of the Fund will incur.

Shareholder Transaction Expenses

Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
Monthly Account Fee (account under $500)* $5.00

Annual Fund Operating Expenses
(as a percentage of average net assets)

Management Fees 0.40%
Administraive Fees 0.10%
12b-1 Fees None
Other Expenses 0.35%
Total Fund Operating Expenses 0.85%

* A charge of $5 per month may be imposed on any account
whose average daily balance for the month falls below $500.
See "Transaction Charges."

EXAMPLE

You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of
each time period. You would pay the same expenses on the same
investment assuming no redemptions.

1 year 3 years 5 years 10 years

$9 $28 $48 $108

The purpose of this table is to assist the investor in
understanding the various expenses that an investor in the Fund
will bear directly or indirectly. The five percent assumed
annual return is for comparison purposes only. As noted above,
the Fund charges no redemption fees. The actual annual return
may be more or less depending on market conditions. The example
should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those
shown. For more complete information about the various costs and
expenses, see "Management of the Fund" in the Prospectus and
"Investment Advisory and Other Services" in the Statement of
Additional Information.

<PAGE>

<TABLE>
American Gas Index Fund, Inc.
Financial Highlights
Audited
<CAPTION>
For the Year Ended March 31,
1997 1996 1995 1994 1993 1992 1991 1990*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 13.25 $ 11.13 $ 11.08 $ 12.17 $ 9.45 $ 10.20 $ 11.20 $ 10.00
-------- -------- -------- -------- -------- -------- -------- -------
Income from Investment Operations:
Net Investment Income 0.448 0.454 0.440 0.410 0.407 0.472 0.528 0.504
Net Realized and Unrealized Gains
(Losses) on Securities 1.605 2.125 0.050 (1.031) 2.853 (0.758) (0.899) 1.273
-------- ------- -------- --------- ------- --------- -------- ------
Total from Investment Operations 2.053 2.579 0.490 (0.621) 3.260 (0.286) (0.371) 1.777
-------- ------- -------- --------- ------- --------- -------- ------
Distributions to Shareholders
From Net Investment Income (0.459) (0.455) (0.440) (0.406) (0.410) (0.464) (0.530) (0.500)
From Net Realized Capital Gains - - - (0.063) (0.130) - (0.099) (0.077)
------- ------- ------- ------- ------- -------- ------- -------
Total Distributions to Shareholders (0.459) (0.455) (0.440) (0.469) (0.540) (0.464) (0.629) (0.577)
------- ------- ------- ------- ------- --------- -------- -------
Net Increase (Decrease) in Net Asset Value 1.59 2.12 0.05 (1.09) 2.72 (0.75) (1.00) 1.20
-------- -------- --------- --------- --------- -------- -------- -------
Net Asset Value - End of Year $ 14.84 $ 13.25 $ 11.13 $ 11.08 $ 12.17 $ 9.45 $ 10.20 $ 11.20
======== ======== ======== ======== ======== ======== ======== =======
Total Investment Return 15.60% 23.46% 4.72% (5.37)% 35.38% (2.89)% (3.55)% 16.55%

Ratios to Average Net Assets:
Expenses Less Reimbursement from Adviser 0.85% 0.85% 0.85% 0.84% 0.85% 0.85% 0.79% 0.75%
Expenses Before Reimbursement from
Adviser 0.85% 0.85% 0.85% 0.84% 0.85% 0.87% 0.91% 0.90%
Net Investment Income 3.06% 3.71% 4.04% 3.33% 3.82% 4.73% 5.00% 4.99%

Supplementary Data:
Portfolio Turnover Rate 8.2% 10.0% 8.5% 11.4% 21.5% 30.2% 29.9% 25.0%
Net Assets at End of Year (000s omitted) $213,058 $204,000 $188,544 $209,036 $215,557 $129,182 $130,822 $85,989
Number of Shares Outstanding at
End of Year (000s omitted) 14,353 15,391 16,941 18,858 17,708 13,669 12,821 7,676
Average Commission Rate Paid $ 0.0439A - - - - - - -

* Commencement of operations May 10, 1989.

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.

The auditors' report is incorporated by reference in the registration statement. The auditors' report and further information
about the performance of the Fund are contained in the annual report to shareholders which may be obtained without charge by
calling or writing the Fund.

</TABLE>

<PAGE>

AMERICAN GAS INDEX FUND, INC.
Total Return Comparison

American Gas S&P 500 Dow Jones Dow Jones
Index Fund Composite Utility Gas
Index Average Utilities
Index

5/10/89 $10,000 $10,000 $10,000 $10,000
3/31/90 $11,655 $11,450 $11,915 $11,415
3/31/91 $11,241 $13,100 $12,874 $11,041
3/31/92 $10,917 $14,546 $13,047 $ 8,757
3/31/93 $14,779 $16,762 $16,273 $11,897
3/31/94 $13,985 $17,008 $13,989 $10,718
3/31/95 $14,645 $19,656 $14,319 $11,178
3/31/96 $18,081 $25,964 $17,226 $14,637
3/31/97 $20,901 $31,112 $18,689 $18,102

Past performance is not predictive of future performance.

Average Annual Total Return
Year Ended
March 31, 1997

One Year Five Years Since Inception

15.60% 13.87% 9.79%

<PAGE>

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

The total return for the Fund's fiscal year ended March 31, 1997
was 15.60% consisting of a price return of 12.00% and income
return of 3.60%. The first three quarters were positive. After
reaching an all time high net asset value of $15.68 on January
17, 1997 the Fund's performance weakened in the fourth fiscal
quarter. This dip in performance reflected general market
conditions rather than any change in positive gas industry
fundamentals. Sixty percent of the Fund's holdings increased in
value during the fiscal year including 90% of the largest
positions. There were no major changes in the Fund's holdings
except for those necessitated by merger and acquisition activity.

The outlook for favorable publicity predicting increased natural
gas consumption remains strong. Recent regulatory pronouncements
on revisited clean air standards are a strong incentive for gas
usage in electric power generation and industrial applications.
In addition, the regulatory restructuring of electric power
generation and transmission seems to indicate that as nuclear
power plants are retired after their 40 year licenses expire, gas
usage will get a further boost for purely economic advantages
plus less political challenges. Gas supply and delivery are
being enhanced by new pipeline capacity, robust exploration and
production and expanded gas storage facilities. Merger and
acquisition activity is continuing to strengthen the
attractiveness of the Fund's portfolio. Investing in companies
involved in natural gas transmission and distribution, through
the American Gas Index Fund, is an ideal way to financially
participate in this dynamic industry.

According to the American Gas Association, the market value of
pipeline companies represented 27% of the portfolio,
diversified/integrated companies comprised 31%, combination
companies made up 18% and natural gas utility companies were 24%.

PERFORMANCE DATA

The Fund may from time to time include total return in
advertisements or reports to shareholders or prospective
shareholders. Quotations of average annual total return for the
Fund will be expressed in terms of the average annual compounded
rate of return on a hypothetical investment in the Fund over a
period of at least one, five and ten years (up to the life of the
fund) (the ending date of the period will be stated). Total
return is calculated from two factors: the amount of dividends
earned by each share and by the increase or decrease in value of
the Fund's share price.

Performance information for the Fund contained in reports and
promotional literature may be compared to various unmanaged
indices, including but not limited to, the Standard & Poor's 500
Stock Index ("S&P 500") or the Dow Jones Industrial Average.
Such unmanaged indices may assume the reinvestment of dividends
but generally do not reflect deductions for operating costs and
expenses. In addition, the Fund's total return may be compared
to the performance of other mutual funds as published by such
organizations as Lipper Analytical Services, Inc., and CDA
Investment Technologies, Inc. among others.

INVESTMENT POLICIES

The Fund is designed as a common stock index fund. The Fund's
investment objective is to provide investment results that
correlate to the performance of an index comprising the common
stocks of natural gas distribution and transmission company
members of A.G.A. The A.G.A. Stock Index (the "Index") contains
approximately 102 publicly traded stocks of those A.G.A. member
companies headquartered in the United States that largely make up
the American natural gas distribution and transmission industry.
(See Attachment for the Composition of the Index as of March 31,
1997.) Money Management Associates, the Fund's investment
adviser (the "Adviser"), believes that the Index is the most
representative stock index of the natural gas industry. The
industry is composed of gas distribution companies, gas pipeline
companies, diversified gas companies and combination gas and
electric companies. The stocks included in the Fund are chosen
solely on the statistical basis of their weightings in the Index.
No attempt is made to manage the Fund's portfolio actively in the
traditional sense, using economic, financial and market analysis;
nor will the adverse financial situation of a company directly
result in the elimination of its common stock from the portfolio
unless the company is removed from the Index. Normally, the
stocks of gas distribution and transmission companies produce
relatively high dividend income and, as such, a significant
proportion of the Fund's investment performance is expected to
result from such dividend income. The values of such high
dividend yield stocks typically move inversely to interest rates.

The A.G.A., a national trade association of natural gas
companies, periodically determines each company's proportion of
the Index. The A.G.A. will furnish an updated Index to the Fund
monthly. The composition of the Index will change only as gas
distribution or transmission companies join or resign from the
A.G.A. Each stock's proportion of the Index is based on that
stock's market capitalization, that is, the number of shares
outstanding multiplied by the market price of the stock. Such
computation is also weighted to reduce the effect of assets not
connected with natural gas distribution and transmission
revenue. The percentage of the Fund's assets to be invested in
each company's stock contained within the Index is approximately
the same as the percentage the stock represents in the Index. The
Fund's securities holdings will be monitored by the Adviser so
that its holdings do not deviate significantly from the
composition and weightings of the Index. Transaction expenses
related to brokerage commission, management fees and other fund
expenses will tend to reduce the Fund's investment return below
that of the Index; however, such expenses are expected to be
lower than those for most actively managed investment companies.

The Fund's performance calculations will be based on a total
return basis. Total return of the Fund is defined as the
percentage increase or decrease in the Fund's per share price
plus the amount of dividends earned per share expressed as a
percentage per share. A similar total return calculation of the
Index will be computed quarterly. The calculation will consist
of the proportionate aggregate percentage increase or decrease of
the Index stocks' prices plus the proportionate percentage
dividend yield of the Index stocks. Excluding management fees
and expenses, the Adviser anticipates a positive correlation
between the total return of the Fund and that of the Index. To
avoid deviation in the Fund's performance from the Index, the
Fund will normally seek to invest most of its assets in the
stocks of the Index. However, generally up to five percent of
the Fund's assets may be maintained in short-term investments to
provide for liquidity. These short-term investments will be in
the form of U.S. Government securities, high quality bank money
market instruments and repurchase agreements.

Specialized Investment Practices and Risks

Index Methodology
The Fund is managed with the goal that changes in the net asset
value per share will closely correlate to changes in the stock
index. Since the valuation of a stock index does not consider
any transaction, custodial or brokerage expenses, the investment
adviser seeks to minimize these charges so that the goal of
correlating changes in the net asset value of the Fund to changes
in the Index will be met. The Adviser will use the proportional
weighting of each stock in the Index as a target for the
composition of the Fund itself. Since these weightings change in
very small amounts during the trading day, continual small
adjustments would be needed to track the Index exactly.
Furthermore, purchases and sales of every stock within the Index
would be necessary as contributions and redemptions to the Fund
are made. To minimize brokerage and transaction expenses, the
Adviser will make adjustments to the Fund as follows:

Comparison of the actual composition of the Fund to the
theoretical target will be made daily. Adjustments to the
holdings of any single stock will be made at least weekly
whenever the actual proportion of that stock in the Fund
varies by more than .5% of the weighting of that stock in the
Index. The percentage of each stock holding is based on the
total Fund value less the necessary cash reserves (not to
exceed 5%) for redemptions and expenses. For example, if
Stock A represented 3% of the total weighting in the Index at
the close of business, adjustments to the holdings of Stock A
will be made if the value of Stock A is greater than 3.5% or
less than 2.5% of the assets invested in stocks. Adjustments
may be made at other times even though these tolerances are
not exceeded if the adjustment can be made without incurring
unreasonable transaction expenses.

While the use of this methodology should cause changes in the net
asset value of the Fund to approximate changes in the Index, the
Fund may nevertheless outperform or underperform the Index.
Although there is no predetermined acceptable range of deviation
between the performance of the Index and that of the Fund, so
long as the Adviser follows the investment policies described, it
would be reasonable to expect that the Fund's performance will
not deviate more than 500 basis points (5%) per year from the
performance of the Index. The performance deviation in question
may occur as a result of various expenses incurred by the Fund,
such as management fees, transaction costs and other operating
expenses.

Industry Concentration
The Adviser does not select stocks for investment based on a
judgment of their individual future returns, but rather invests
proportionately in all of the issues included in the Index. By
employing a statistical approach which concentrates all
investment in a single industry, the Fund is subject to those
risks associated with the natural gas distribution and
transmission industry. Among the primary risks is the
competitive risk associated with prices of alternative fuels.
For example, major gas customers such as industrial users often
have the ability to switch between the use of coal, oil or gas.
During periods when competing fuels are less expensive, revenues
to gas utility companies may decline with a corresponding impact
on earnings. The gas industry also is sensitive to increased
interest rates because of the capital intensive nature of the
industry. Typically, a significant portion of the financing of
the gas industry's assets is obtained through debt. As interest
rates increase, such debt scheduled to be refinanced would be
acquired at higher rates thereby adversely affecting earnings.

Repurchase Agreements
In order to effectively utilize cash reserves kept for liquidity,
the Fund may invest in repurchase agreements secured by
securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities. Under a repurchase agreement,
the Fund purchases a security and simultaneously agrees to sell
it back to the seller on an agreed upon future price and date,
normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed upon market
interest rate. The Fund will enter into repurchase agreements
only with member banks of the Federal Reserve System or primary
dealers of U.S. Government securities. The Fund's Adviser will
monitor the credit worthiness of the firms involved in repurchase
agreements. In the event of a default or bankruptcy by the
seller, the Fund will liquidate those securities held under
repurchase agreements. However, liquidation could involve costs
or delays and, to the extent proceeds from their sales were less
than the agreed upon repurchase price, the Fund could suffer a
loss. As stated above, up to five percent of the Fund's assets
may be maintained in short-term investments such as repurchase
agreements.

General Matters
Brokerage commissions are normally paid on common stock
transactions. Such brokerage commissions as well as other Fund
expenses will reduce the overall performance of the Fund relative
to the Index. Orders for transactions in portfolio securities are
placed for the Fund with a number of brokers and dealers. It is
the policy of the Fund to obtain the best price and execution for
all of its security transactions.

The Fund may not borrow money except as a temporary measure to
facilitate redemptions. Such a borrowing may not exceed 30% of
the Fund's total assets, taken at current net asset value before
any borrowing, and securities may not be purchased while such
borrowing is outstanding.

HOW TO INVEST IN THE FUND

The minimum initial investment is $2,500. Retirement accounts
may be opened with a $500 minimum investment. The shares of the
Fund are offered at the daily public offering price which is the
net asset value per share (See "Net Asset Value") next computed
after receipt of your order. There is no minimum amount for
subsequent investments. All accounts will be held in book-entry
form. NO CERTIFICATES FOR SHARES WILL BE ISSUED. The Fund
reserves the right to reject any purchase order. Foreign checks
will not be accepted.

Investment in the Fund can be made directly with the Fund or
through third parties such as broker-dealers, banks or other
financial institutions that purchase securities for their
customers. Such third parties may charge their customers a fee
in connection with services offered to customers. When shares
are purchased through third parties, the third party, rather than
the customer, may be the shareholder of record of the shares.
Investors who do not wish to receive the services of a third
party may invest directly with the Fund without charge. Certain
third party organizations may receive compensation from the Fund,
the Fund's transfer agent, or the Fund's Adviser for the
shareholder accounting services they provide.

By Mail: Complete an application and make your check payable to
"American Gas Index Fund, Inc." Mail the check along with the
application to:

American Gas Index Fund, Inc.
4922 Fairmont Avenue
Bethesda, MD 20814

By Bank Wire: Request a wire transfer to:

Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing Number 0550-71084
For Account of:
American Gas Index Fund, Inc.
Account Number 029-385-770

AFTER INSTRUCTING YOUR BANK TO TRANSFER MONEY BY WIRE, YOU MUST
CALL THE FUND AT 800-622-1386 OR 301-657-1510 AND TELL US THE
AMOUNT YOU TRANSFERRED AND THE NAME OF THE BANK SENDING THE
TRANSFER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. IT IS
IMPORTANT THAT YOU TELEPHONE BEFORE THE CLOSE OF THE NEW YORK
STOCK EXCHANGE (CURRENTLY, 4:00 P.M. EASTERN TIME) FOR A PURCHASE
ORDER TO BE EFFECTIVE IN THE FUND. IF THE PURCHASE IS CANCELED
BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE LIABLE FOR
ANY LOSS THE FUND MAY INCUR.

HOW TO REDEEM AN INVESTMENT (WITHDRAWALS)

On any day the Fund is open for business, an investor may
withdraw all or any portion of his investment by redeeming shares
at the next determined net asset value per share after receipt of
the order by writing the Fund or telephoning 800-622-1386 or 301-
657-1510 between 8:30 A.M. and 4:00 P.M. Eastern time.

Telephone redemptions will only be sent to the address of record
or to bank accounts specified in the account application. When
acting on instructions believed to be genuine, the Fund will not
be liable for any loss resulting from a fraudulent telephone
redemption request and the investor would bear the risk of any
such loss. The Fund will employ reasonable procedures to confirm
that redemption instructions communicated by telephone are
genuine; and if the Fund does not employ such procedures, then
the Fund may be liable for any losses due to unauthorized or
fraudulent instructions. The Fund follows specific procedures
for transactions initiated by telephone, including among others,
requiring some form of personal identification prior to acting on
instruction received by telephone, providing written confirmation
not later than five business days after the transaction, and/or
tape recording of telephone transactions.

The proceeds of redemptions will be sent directly to the
investor's address of record. If the investor requests payment
of redemptions to a third party or to a location other than his
address of record listed on the account application, the request
must be in writing and the investor's signature must be
guaranteed by an eligible institution. Eligible institutions
generally include banking institutions, securities exchanges,
associations, agencies or broker/dealers, and "STAMP" program
participants. There are no fees charged for redemptions.

The Fund will redeem its shares at a redemption price equal to
their net asset value as next computed following the receipt of a
request for redemption. Payment at the redemption price will be
made within seven days after the Fund's receipt of the request
for redemption. For investments that have been made by check,
payment on withdrawal requests may be delayed for up to ten
business days or until the check clears, whichever occurs first.
This delay is necessary to assure the Fund that investments made
by checks are good funds. The proceeds of the redemption will be
forwarded promptly upon confirmation of receipt of good funds.

The right of redemption may also be suspended, or the date of
payment postponed, (a) for any period during which the New York
Stock Exchange is closed (other than customary weekend or holiday
closings); or (b) when trading on the Exchange is restricted, or
an emergency exists, as determined by the Securities and Exchange
Commission, so that disposal of the Fund's investments for
determination of net asset value is not reasonably practicable;
or (c) for such other periods as the Commission, by order, may
permit for protection of the Fund's investors. Investors should
also be aware that telephone redemptions or exchanges may be
difficult to implement in a timely manner during periods of
drastic economic or market changes. If such conditions occur,
redemption or exchange orders can be made by mail. Because of
the administrative expense of handling small accounts, the Fund
reserves the right to involuntarily redeem an investor's account
which falls below $500 in value due to redemptions or exchanges
after providing 60 days written notice.

The Fund is not meant to afford market timers a way to speculate
on short-term movements in the market. Accordingly, to reduce
the negative impact of excessive trading on the Fund's
performance and to minimize transaction costs, the Fund restricts
excessive trading.

Trading by shareholders (and those managing multiple accounts)
will not be deemed excessive if limited to five redemptions per
year. Shareholders or account managers who exceed these
limitations may be prohibited from making additional investments.
These policies do not prohibit you from redeeming shares of the
Fund.

EXCHANGES

The Fund's shares may be exchanged, without cost, for shares of
Fund for Government Investors, Fund for Tax-Free Investors, Inc.,
The Rushmore Fund, Inc. or the Cappiello-Rushmore Trust, upon
receipt by the Fund of the order at the respective net asset
values next computed of the shares involved. Exchanges between
the American Gas Index Fund, Inc. and the above funds may be made
by telephone or letter. (See also "How to Invest in the Fund"
and "How to Redeem an Investment.") Written requests should be
sent to American Gas Index Fund, Inc. 4922 Fairmont Avenue,
Bethesda, MD 20814 and be signed by the record owner or owners.
Telephone exchange requests may be made by calling the Fund at
800-622-1386 or 301- 657-1510 between 8:30 A.M. and 4:00 P.M.
Eastern time. Exchanges will be effected at respective net asset
values of the shares involved as next determined after receipt of
the exchange request. To implement an exchange, shareholders
must provide the following information: account registration
including address and number; taxpayer identification number;
number, percentage or dollar value of shares to be redeemed; and
name and account number of the Fund to which the investment is
to be transferred. Exchanges may be made only if they are
between identically registered accounts. Shareholders
contemplating such an exchange should obtain and review the
prospectuses of those funds. The exchange privilege is available
only in states where the exchange may legally be made. Telephone
exchange privileges may be terminated or modified by the Fund
upon 60 days notice to all shareholders of the Fund.

TRANSACTION CHARGES

In addition to charges described elsewhere in this Prospectus,
the Fund may impose a charge of $5 per month for any account
whose average daily balance is below $500. The fee will continue
to be imposed during months when the account balance remains
below $500. This fee will be paid to Rushmore Trust and Savings,
FSB. The fee will not be imposed on tax-sheltered retirement
plans or accounts established under the Uniform Gifts or
Transfers to Minors Act. Because of the administrative expense
of handling small accounts, the Fund reserves the right to
involuntarily redeem an investor's account which falls below $500
due to redemptions or exchanges after providing 60 days written
notice. The Fund may also assess a charge of $10 for items
returned for insufficient or uncollectible funds.

TAX-SHELTERED RETIREMENT PLANS

The following tax-sheltered retirement plans will be available to
investors:

Individual Retirement Accounts (IRAs)
Defined Contribution Plans (Profit-Sharing Plans)
Defined Contribution Plans (Money Purchase Plans)
Section 401(k) Plans
Section 403(b) Plans

Additional information regarding these retirement plans may be
obtained by contacting the Fund.

DIVIDENDS AND DISTRIBUTIONS

Dividends of the Fund will be declared on the next to last
business day of each calendar quarter (the declaration and record
date). Investors will receive dividends and distributions in
additional shares at the net asset value at the end of the last
business day of the quarter (the ex-dividend date) unless they
elect in writing to receive cash. Dividends and distributions
paid in cash to those investors so electing will be mailed on the
second business day of the following month. Dividends and
distributions will be paid in cash or reinvested at the net asset
value per share calculated on the ex-dividend date. Dividends
and distributions are taxable to shareholders, as discussed
below, whether they are reinvested in shares of the Fund or
received in cash. Long-term capital gains, if any, will be
distributed on an annual basis while short-term capital gains, if
any, will be distributed quarterly. Statements of account
showing dividends and distributions paid will be sent at least
quarterly. To change the method of receiving dividends,
investors should notify the Fund in writing.

NET ASSET VALUE

The net asset value of the Fund's shares will be determined daily
as of 4:00 P.M., Eastern time except on customary national
business holidays which result in the closing of the New York
Stock Exchange, and weekends. The net asset value per share is
calculated by adding the total value of all securities held by
the Fund plus cash and accrued interest minus liabilities,
including accrued expenses, and then dividing this amount by the
total number of shares outstanding at such time, rounded to the
nearest cent. Listed securities will be valued at the last sales
price on the New York Stock Exchange and other major exchanges.
Over-the-counter securities shall be valued at the last sales
price. If market quotations are not readily available, the Board
of Directors will value the portfolio's securities in good faith.
The Directors will periodically review these methods of valuation
and recommend changes which may be necessary to assure that the
Fund's investments are valued at fair value.

TAXES

The Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. Because of this
qualification under current regulations, the Fund will not be
liable for Federal income taxes to the extent its earnings are
distributed to shareholders.

Dividends derived from interest and dividends received by the
Fund, together with distributions of any short-term or long-term
capital gains, are taxable as ordinary income whether or not
reinvested. Dividends paid by the Fund may be eligible for the
dividends received deduction for corporations.

Distributions of net long-term gains, if any, realized by the
Fund and designated as capital gains distributions will be made
annually and will be taxed to shareholders as long-term capital
gains regardless of the length of time the shares have been held.
Currently, long-term capital gains are taxed at a maximum rate of
28%. Statements as to the Federal tax status of shareholders'
dividends and distributions will be mailed annually. Shareholders
should consult their tax advisers concerning the tax status of
the Fund's dividends in their own states and localities.

Shareholders are required by law to certify that their tax
identification number is correct and that they are not subject to
back-up withholding. In the absence of this certification, the
Fund is required to withhold taxes at the rate of 20% on
dividends, capital gains distributions and redemptions.
Shareholders who are non-resident aliens may be subject to a
withholding tax on dividends earned.

Ordinary dividends paid to corporate or individual residents of
foreign countries are subject to a 30 percent withholding tax.
The rate of withholding tax may be reduced if the United States
has an income tax treaty with the foreign country where the
recipient resides. Capital gains distributions received by
foreign investors should, in most cases, be exempt from U.S. tax.
A foreign investor will have to provide the Fund with any
required documentation in order for the Fund to apply a reduced
rate or exemption from U.S. withholding tax.

ORGANIZATION AND DESCRIPTION OF COMMON STOCK

The Fund is an open-end, diversified investment company,
incorporated in Maryland on November 21, 1988 and has a present
authorized capital of 1,000,000,000 shares of $.001 par value
common stock.

All shares of the Fund are freely transferable. The shares do
not have preemptive rights, and none of the shares has any
preference to conversion, exchange, dividends, retirements,
liquidation, redemption or any other feature. Because the shares
have non-cumulative voting rights, the holders of more than 50%
of the shares voting for the election of directors can elect 100%
of the directors, if they choose to do so. In such event, the
holders of the remaining less than 50% of the shares voting will
not be able to elect any directors. Shareholder inquiries can be
made by telephone (800-343-3355) or by mail (4922 Fairmont
Avenue, Bethesda, MD 20814).

Under Maryland Corporate law, a registered investment company is
not required to hold an annual shareholders' meeting if the
Investment Company Act of 1940 does not require a meeting. The
Act does require a meeting if the following actions are
necessary: ratification of the selection of independent public
accountants, approval of the investment advisory agreement,
election of the board of directors, or approval of the
appointment of directors to board vacancies when such vacancies
cause less than two-thirds of the board to have been elected.
Under the Investment Company Act of 1940, shareholders have the
right to remove directors and, if holders of 10% of the
outstanding shares request in writing, a shareholders' meeting
must be called.

Officers and directors of the Fund, as a group, own less than 1%
of the shares outstanding.

MANAGEMENT OF THE FUND

Officer and Directors
The Fund has a Board of Directors which is responsible for the
general supervision of the Fund's business. The day-to-day
operations of the Fund are the responsibility of the Fund's
officers.

Investment Adviser, Administrator, and Servicing Agent

The Fund is provided investment advisory and management services
by Money Management Associates (the "Adviser"), 1001 Grand Isle
Way, Palm Beach Gardens, Florida 33418. The Adviser is a limited
partnership formed under the laws of the District of Columbia on
August 15, 1974. Daniel L. O'Connor is the sole general partner
of the Adviser, and as such, exercises control of the Adviser.
Its primary business has been to serve as the Adviser to four
registered investment companies, including Fund for Government
Investors, The Rushmore Fund, Inc., Fund for Tax Free Investors,
Inc. and American Gas Index Fund, Inc. Net assets under
management currently approximate $900 million.

Under an Investment Advisory Agreement between the Fund and the
Adviser, the Fund pays the Adviser a fee at an annual rate based
on 0.40% of the average daily net assets of the Fund. Subject to
the control of the officers and Directors of the Fund, the
Adviser administers the affairs of the Fund and is responsible
for purchasing and selling securities of the Index and making
short-term cash investments.

The Fund's administrator is A.G.A., 1515 Wilson Boulevard,
Arlington, Virginia 22209, a national trade association for the
natural gas industry established in 1918. As administrator of
the Fund, A.G.A. calculates and maintains the Index and provides
the Fund with information about the natural gas industry. The
Fund pays a fee at an annual rate of 0.10% of the average daily
net assets of the Fund to A.G.A. under an agreement for its
services.

Rushmore Trust and Savings, FSB ( "RTS"), 4922 Fairmont Avenue,
Bethesda, Maryland 20814, a majority-owned subsidiary of the
Adviser, provides the Fund with transfer agency, dividend-
disbursing, and other shareholder services. RTS receives an
annual fee of 0.35% of the average daily net assets of the Fund
as compensation for providing these services to the Fund.

Under the foregoing Agreements, ultimately the Adviser or RTS is
responsible for paying the expenses of the Fund other than taxes
and extraordinary expenses.

<PAGE>

ATTACHMENT
American Gas Association Stock Index
as of March 31, 1997

Common Stocks Value Weighting (%)
AGL Resources, Inc. 1.49
Atmos Energy Corporation 0.58
Baltimore Gas and Electric Company 0.61
Bay State Gas Company 0.50
Brooklyn Union 1.58
Central Hudson Gas & Electric Corporation 0.10
Chesapeake Utilities Corporation 0.08
Cinergy Corporation 0.67
Citizens Utilities Company, Series B 0.41
CMS Energy Corporation 1.29
Colonial Gas Company 0.24
Commonwealth Energy System 0.17
Connecticut Energy Corporation 0.29
Consolidated Edison Co. of NY, Inc. 1.16
Consolidated Natural Gas Company 5.00
Corning Natural Gas Corporation 0.01
CTG Resources, Inc. 0.30
Delmarva Power & Light Co. 0.12
Delta Natural Gas Company, Inc. 0.06
DPL Inc. 0.26
Eastern Enterprises 0.55
El Paso Energy Corporation 4.50
Energen Corporation 0.35
EnergyNorth, Inc. 0.09
Energy West, Incorporated 0.02
Enova Corporation 0.49
Enron Corporation 5.00
ENSERCH Corporation 1.05
Entergy Corp. 0.06
Equitable Resources, Inc. 1.11
Essex County Gas Company 0.06
Fall River Gas Company 0.04
Illinova Corporation 0.22
Indiana Energy, Inc. 0.79
KN Energy, Inc. 1.67
Laclede Gas Company 0.51
LG&E Energy Corp. 0.29
Long Island Lighting Company 0.38
MCN Energy Group Inc. 2.12
MDU Resources Group, Inc. 0.38
MidAmerican Energy Holdings Company 0.38
Minnesota Power & Light Co. 0.01
Mobile Gas Service Corporation 0.13
National Fuel Gas Company 1.90
National Gas & Oil Corporation 0.06
New Jersey Resources Corporation 0.63
New York State Electric & Gas Corporation 0.22
NGC Corporation 2.53
NICOR, Inc. 2.12
NIPSCO Industries, Inc. 0.88
NorAm Energy Corporation 2.90
North Carolina Natural Gas Corporation 0.30
Northern States Power Company 0.53
Northwest Natural Gas Company 0.75
Northwestern Public Service Company 0.06
NUI Corporation 0.32
Occidental Petroleum Corp. 4.89
ONEOK Inc. 0.94
Orange and Rockland Utilities, Inc. 0.13
Pacific Enterprises 3.64
PG&E Corporation 3.36
PanEnergy Corporation 5.00
PECO Energy Company 0.46
Pennsylvania Enterprises, Inc. 0.61
Peoples Energy Corporation 1.67
Piedmont Natural Gas Company, Inc. 0.98
Providence Energy Corporation 0.15
Public Service Company of Colorado 0.85
Public Service Company of New Mexico 0.21
Public Service Co. of North Carolina, Inc. 0.49
Public Service Enterprise Group Inc. 1.16
Puget Sound Energy 0.61
Questar Corporation 1.31
Roanoke Gas Company 0.04
Rochester Gas and Electric Corporation 0.19
SCANA Corporation 0.40
Sierra Pacific Resources 0.08
SIGCORP, Inc. 0.10
Sonat Inc. 3.60
South Jersey Industries, Inc. 0.31
SEMCO Energy, Inc. 0.31
Southern Union Company 0.51
Southwest Gas Corporation 0.66
Southwestern Energy Company 0.16
TPC Corp. 0.33
The Berkshire Gas Company 0.05
The Coastal Corporation 4.07
The Columbia Gas System, Inc. 4.16
The Montana Power Company 0.28
UGI Corporation 0.30
United Cities Gas Company 0.37
UtiliCorp United Inc. 0.60
Valley Resources, Inc. 0.07
Virginia Gas Company 0.03
Washington Gas Light Company 1.41
Western Resources, Inc. 0.40
WICOR, Inc. 0.78
The Williams Companies, Inc. 5.00
Wisconsin Energy Corporation 0.38
WPL Holdings, Inc. 0.16
WPS Resources Corporation 0.17
Yankee Energy System, Inc. 0.31

<PAGE>

CONTENTS [LOGO]

Fee Table 2 AMERICAN GAS INDEX FUND

Financial Highlights 3 Prospectus

Management's Discussion August 1, 1997
of Fund Performance 5

Performance Data 5

Investment Policies 5

How to Invest in the Fund 8

How to Redeem an Investment
(Withdrawals) 9

Exchanges 10

Transaction Charges 10

Tax-Sheltered Retirement Plans 10

Dividends and Distributions 11

Net Asset Value 11

Taxes 11

Organization and Description
of Common Stock 12

Management of the Fund 12

Attachment 14

<PAGE>

PART B

Statement of Additional Information

<PAGE>

AMERICAN GAS INDEX FUND, INC.

4922 Fairmont Avenue, Bethesda, MD 20814
(800) 343-3355
(301) 657-1500

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Fund's Prospectus, dated
August 1, 1997. A copy of the Prospectus may be obtained without
charge by writing or telephoning the Fund at the above address or
telephone number.

The date of this Statement of Additional Information is August 1, 1997.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

Table of Contents

Cross Reference to Related Item in Prospectus

Page in
Statement
of
Additional Page in
Information Prospectus

Investment Objectives and Policies 3 5

Redemptions 4 8

Tax-Deferred Retirement Plans 4 10

Management of the Fund 4 12

Principal Holders of Securities 5 -

Investment Advisory and Other Services 5 12

Net Asset Value 6 11

Taxes 6 11

Auditors and Custodian 6 13

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

General

Index Methodology

The American Gas Association Stock Index (the "Index") is
comprised of approximately 102 of the publicly traded companies
that are members of A.G.A. and headquartered in the United
States. These companies are engaged in the distribution and
transmission of natural gas. A.G.A. computes this Index by
multiplying the number of outstanding shares of common stock of
each company by the closing market price per share at the end of
each month. This product then is multiplied by the percentage of
each company's assets devoted to natural gas distribution and
transmission. This is done to recognize the natural gas
component of the company's asset base and this determination is
done at least annually. The result is each company's "gas market
capitalization value". The sum of all the companies' "gas market
capitalization values" is totaled. This summation results in a
base number called the "industry's gas market capitalization
value". Each company's stock percentage within the Index is
determined by dividing the company's "gas market capitalization
value" by the "industry's gas market capitalization value". The
"gas market capitalization value" for each company will be
recalculated at least quarterly. In computing the Index, A.G.A.
will limit an individual stock to no more than five percent of
the Index. Therefore in calculating the Index, A.G.A. will
reapportion any representation in the Index exceeding five
percent. Money Management Associates (the "Adviser") seeks to
purchase sufficient shares of each company's stock such that its
proportion of the Fund's assets will substantially equal that
stock's proportion of the Index. The Adviser will monitor the
Fund's securities holdings so that those holdings reflect the
composition of the Index. As market conditions dictate and as
significant shareholder purchases and redemptions occur, the
Adviser will buy or sell stocks to maintain holdings of each
stock to reflect proper weightings within the Index.

The Adviser will maintain cash reserves in the form of short-term
investments such as repurchase agreements. Reference is made to
the discussion under the caption "Investment Policies-Specialized
Investment Practices and Risks" in the Prospectus for information
with respect to the risks inherent in repurchase agreements. To
the extent the Adviser maintains such cash reserves, a deviation
between the Fund's investment performance, usually expressed as
"rate of return" and that of the Index will occur. Generally
the adviser will maintain a cash liquidity reserve not exceeding
5% of the Fund's total assets.

Industry Concentration

The Adviser does not select stocks for investment based on a
judgment of their individual future returns, but rather invests
proportionally in all of the issues included in the Index. By
employing a statistical approach which concentrates all
investment in a single industry, the Fund is subject to those
risks associated with the natural gas transportation and
distribution industry. Among the primary risks is the
competitive risk associated with prices of alternative fuels.
For example, major gas customers such as industrial users often
have the ability to switch between the use of coal, oil or gas.
During periods when competing fuels are less expensive, revenues
to gas utility companies may decline with a corresponding impact
on earnings. The gas industry also is sensitive to increased
interest rates because of the capital intensive nature of the
industry. Such concentration of investment in a single industry
represents a fundamental investment policy which may not be
changed without shareholder approval.

Portfolio Turnover

Brokerage commissions will normally be paid on the Fund's common
stock. The Adviser intends to place orders for transactions for
the Fund with a number of brokers and dealers. It is the policy
of the Fund to obtain the best price and execution for all of its
security transactions. For the years ended March 31, 1997, 1996
and 1995, the Fund paid $70,000, $92,000, and $95,000,
respectively, in brokerage commissions.

Investment Restrictions

The Fund has adopted the investment restrictions listed below.
These restrictions may not be changed without prior approval of a
majority of holders of the Fund's outstanding voting shares. As
defined in the Investment Company Act of 1940, the term
"majority" means the vote of the lesser of (a) 67% of the shares
of the Fund at a meeting where more than 50% of the outstanding
shares are present in person or by proxy; or (b) more than 50% of
the outstanding shares of the Fund.

The Fund may not:

1. issue senior securities.
2. make short sales of securities or purchase securities on margin.
3. borrow money except as a temporary measure to facilitate
redemptions. Such borrowing may not exceed 30% of the Fund's
total assets, taken at current value, before such borrowing. The
Fund may not purchase securities if a borrowing by the Fund is
outstanding.
4. underwrite securities of any other issuer, nor purchase or
sell restricted securities.
5. Purchase or sell real estate or real estate mortgage loans.
6. buy or sell commodities or futures contracts.
7. invest in oil, gas or other mineral leases.
8. make loans except through repurchase agreements provided the
borrower maintains collateral equal to at least 100% of the value
of the borrowed security, and marked to market daily.
9. purchase securities of any issuer if, as a result of such a
purchase, such securities would account for more than 5% of the
Fund's assets.

The following restrictions are not fundamental and may be changed
by the Board of Directors:

The Fund may not:

1. invest in warrants;
2. invest more than 15% of the Fund's net assets in illiquid securities.

REDEMPTIONS

The right of redemption may be suspended, or the date of payment
postponed, (a) for any period during which the New York Stock
Exchange is closed (other than customary weekend or holiday
closings); or (b) when trading on the Exchange is restricted, or
an emergency exists, as determined by the Securities and Exchange
Commission, so that disposal of the Fund's investments for
determination of net asset value is not reasonably practicable;
or (c) for such other periods as the Securities and Exchange
Commission, by order, may permit for protection of the Fund's
investors.

TAX-DEFERRED RETIREMENT PLANS

Three tax-deferred retirement plans are available to investors.
Forms for establishing retirement plan accounts are available by
writing or calling the Fund at 800-343-3355 or 301-657-1500. An
annual maintenance fee and an account liquidation fee are charged
on all such accounts.

Individual Retirement Accounts (IRAs)

Regular, "rollover" and Simplified Employee Pension ("SEP") IRA
accounts are available. Regular IRA contributions may be wholly
or partially deductible for Federal income tax purposes depending
on the investor's adjusted gross income and whether the investor
is a participant in a employer sponsored retirement plan.

Pension/Profit Sharing Plans

The Fund offers defined contribution plans suitable for
self-employed individuals or businesses. A separate account may
be established for each employee. Statutory vesting options are
contained in these plans.

Section 401 (k) Plans

A Section 401 (k) plan is available for businesses. Such plans
provide for both employee and employer contributions and are
adopted in conjunction with a Fund profit-sharing plan. However,
the Fund does not act as administrator for Section 401 (k) plans.
Administration of a Section 401 (k) plan would be the
responsibility of the sponsoring organization.

Section 403 (b)(7) - Custodial Accounts

A 403 (b)(7) custodial account is a tax-deferred retirement plan
for certain non-profit organizations under Section 501 (c) of the
Internal Revenue Code.

MANAGEMENT OF THE FUND

The names and addresses of the directors and officers of the
Fund, together with information as to their principal business
occupations during the past five years, are set forth below.
Fees and expenses for non-interested directors will be paid by
the Fund. For the year ended March 31, 1997, the Fund paid
$7,000 in Directors' fees.

Michael Baly, III, 48 - Director. Chief Executive Officer of the
American Gas Association (A.G.A.), a natural gas trade
association from January 1995 to April 1997. A.G.A. President,
October 1990 to April 1997. Address: 1561 35th Street, N.W.,
Washington, D.C. 20007.

*Phillip Borish, 69 - Director. Employee of Rushmore Services,
Inc., a subsidiary of the Adviser, since 1995. Address: 4922
Fairmont Avenue, Bethesda, MD 20814.

Bette Clemens, 73 - Director. President of Consumer Affairs
Associates since 1978, a management consulting firm providing
advice on consumer trends. Address: 315 Market St., New
Cumberland, PA 17070.

Louis T. Donatelli, 60 - Director. President of Donatelli and
Klein, Inc., engaged in the acquisition of real estate, primarily
office buildings and multi-family housing projects since 1993.
Address: 7200 Wisconsin Avenue, Bethesda, MD 20814.

*Richard J. Garvey, 64 - Chairman of the Board, Director of the
Fund, President and Treasurer of the Fund since 1989. Vice
President of Rushmore Services, Inc., a subsidiary of the
Adviser, since 1995. Limited Partner of the Adviser since 1975.
Address: 4922 Fairmont Avenue, Bethesda, Maryland 20814.

George H. Lawrence, 71 - Director. Of Counsel Akin, Gump,
Strauss, Hauer & Feld since 1991. Retired President of American
Gas Association. Address: 8707 Eaglebrook Court, Alexandria, VA
22308.

Carl Levin, 84 - Director. Public Affairs Consultant since 1986.
Executive Director for the U.S. Council for Coconut Research
until 1992. Address: 5450 Whitley Park Terrace, #809, Bethesda,
MD 20814.

Patrick F. Noonan, 54 - Director. Chairman of the Conservation
Fund since 1985. Chairman, Executive Committee, American Farmland
Trust and Trustee, American Conservation Association since 1985.
President of Conservation Resources, Inc., since 1981. Address:
1101 Glen Mill Drive, Potomac, MD 20854.

*Daniel L. O'Connor, 55 - Director. General Partner of the
adviser since 1974. President of Rushmore Trust and Savings, FSB
since 1989. Address: 1001 Grand Isle Way, Palm Beach Gardens, FL
33418.

Eugene A. Tracy, 69 - Director. Retired since 1992. Chairman of
the Executive Committee, Peoples Energy Corporation until 1992.
Address: 1424 Sequoia Trail, Glenview, IL 60325.

*David J. Muchow, 52 - Vice President and Secretary since 1989.
General Counsel and Corporate Secretary of American Gas
Association since 1978. Address: 1515 Wilson Blvd., Arlington,
VA 22209.

*Timothy N. Coakley, CPA, 29 - Vice President and Controller
since 1994. Chief Financial Officer, Rushmore Trust and Savings,
FSB since 1995. Formerly Audit Manager, Deloitte & Touche LLP
until 1994. Address: 4922 Fairmont Avenue, Bethesda, MD 20814.

*Stephenie E. Adams, 28 - Assistant Secretary. Manager, Fund
Administration and Marketing, Rushmore Services, Inc., from July
1994 to present. Regional Sales Coordinator, Media General
Cable, from June 1993 to June 1994. Graduate Student,
Northwestern University, M.S., from September 1991 to December
1992. Address: 4922 Fairmont Avenue, Bethesda, Maryland 20814.

*Indicates interested person as defined in the Investment Company
Act of 1940.

Certain Directors and Officers of the Fund are also directors and
officers of Fund for Government Investors, Fund for Tax-Free
Investors, Inc. and The Rushmore Fund, Inc., other investment
companies managed by the Adviser.

PRINCIPAL HOLDERS OF SECURITIES

On July 1, 1997, there were 13,308,884.504 shares outstanding.
Charles Schwab & Co., Inc. San Francisco, California, held, for
the benefit of others, 13.54% of the Fund's shares as of July 1,
1997. No other person owned more than 5% of the outstanding
shares of the Fund. Officers and directors of the Fund, as a
group, own less than 1% of the shares outstanding.

INVESTMENT ADVISORY AND OTHER SERVICES

Reference is made to "Management of the Fund" in the Prospectus
for certain information concerning the management of and advisory
arrangement of the Fund. The Adviser, Money Management
Associates, which has its office at 1001 Grand Isle Way, Palm
Beach Gardens, Florida 33418, provides the Fund with investment
advisory services. Subject to the general supervision of the
Fund's Board of Directors and in conformance with the stated
policies of the Fund, the Adviser renders investment management
services to the Fund. In this regard, it is the responsibility
of the Adviser to place the purchase and sale orders for the
portfolio transactions of the Fund. The Adviser is a limited
partnership formed under the laws of the District of Columbia on
August 15, 1974. Its primary business has been to serve as the
investment adviser to Fund for Government Investors, Fund for
Tax-Free Investors, Inc., and The Rushmore Fund, Inc. with assets
of $563.1 million, $98.1 million and $17.8 million, respectively,
on July 1, 1997. Daniel L. O'Connor is the sole general partner
of the Adviser, and, as such, exercises control thereof.

Under an Investment Advisory Agreement with the Adviser, dated
February 13, 1989 and last renewed by the Board of Directors on
April 24, 1997, the Adviser executes all securities transactions
of the Fund and oversees its day-to-day operations, subject to
direction and control by the Fund's Board of Directors. Pursuant
to the Agreement, the Fund pays the Adviser a fee at an annual
rate based on 0.40% of the average daily net assets of the Fund.
The Adviser may, from its own resources, including profits from
advisory fees received from the Fund, (provided such fees are
legitimate and not excessive), make payments to broker-dealers
for their expenses in connection with the distribution of Fund
shares. Although such payments may be based upon the number of
shares distributed, it is the understanding of the Adviser that
such payments will be for reimbursement and will not exceed the
expenses of the recipients in arranging for and administering
distribution of Fund shares.

For the years ended March 31, 1997, 1996, and 1995 the Adviser
earned fees of $863,761, $783,272, and $775,316, respectively.

Under an Administrative Services Agreement dated November 1, 1993
and last renewed by the Board of Directors on April 24, 1997,
Rushmore Trust and Savings, FSB ("RTS"), 4922 Fairmont Avenue,
Bethesda, Maryland, a majority-owned subsidiary of the Adviser,
provides transfer agency, dividend-disbursing and other
shareholder services to the Fund. Under the agreement, the
services of RTS are provided to the Fund on a fee basis and are
paid by the Fund. The fees are calculated at the annual rate of
0.35% of the average daily net assets of the Fund. The amount
paid to RTS for these services for the year ended March 31, 1997
was $755,792.

Under the foregoing Agreements, ultimately the Adviser or RTS is
responsible for paying the expenses of the Fund other than taxes
and extraordinary expenses.

The non-interested directors of the Fund have reviewed the fee
structure and determined that it is competitive and in the best
interest of the shareholders of the Fund. The fees will be
reviewed and approved annually by the non-interested directors.
The Fund is subject to the self-custodian rules of the Securities
and Exchange Commission. These rules require that the custodian
be subject to three securities verification examinations each
year conducted by the Fund's independent accountants. Two of the
examinations must be performed on an unannounced surprise basis.

Under an Agreement dated April 27, 1989 and last approved by the
Board of Directors on April 24, 1997, A.G.A. provides
administrative services to the Fund. These administrative
services include calculation and maintenance of the Index and the
provision of statistical support and information related to the
Index. It will not furnish securities advice to the Fund or the
Adviser or make recommendations to them regarding the purchase or
sale of securities by the Fund. Under the terms of the
agreement, A.G.A. shall provide the Adviser with current
information regarding the common stock composition of the Index
no less than quarterly but may supply such information more
frequently. In addition, A.G.A. shall provide the Fund with
information on the natural gas industry. The Fund pays A.G.A. in
its capacity as administrator a fee at an annual rate of 0.10% of
the average daily net assets of the Fund. For the year ended
March 31, 1997, the administration fee was $215,941.

NET ASSET VALUE

The net asset value of the Fund's shares will be determined daily
as of 4:00 P.M., Eastern Time, except on customary national
business holidays which result in the closing of the New York
Stock Exchange and on weekends. The net asset value per share of
the Fund is calculated by dividing the Fund's net worth by the
number of outstanding shares. Listed securities will be valued
at their last sales price on the New York Stock Exchange and
other major exchanges. Over-the-counter securities shall be
valued at their last sales price. If market quotations are not
readily available, the Board of Directors will value the
portfolio's securities in good faith. The directors will
periodically review these methods of valuation and recommend
changes which may be necessary to assure that the portfolio's
instruments are valued at fair value.

TAXES

The Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. To qualify, at
least 90% of the Fund's gross income must be derived from
dividends, interest, and gains from the sale of securities. No
more than 30% of the Fund's gross income may be derived from
gains on the sale of securities held less than three months. As
a regulated investment company, the Fund will not be subject to
Federal income taxes on the net investment income and capital
gains that it distributes to its shareholders. The distribution
of net investment income and capital gains will be taxable to
shareholders regardless of whether the shareholder elects to
receive these distributions in cash or in additional shares.
Distributions reported to shareholders as long-term capital gains
shall be taxable as such, regardless of how long the shareholder
has owned the shares. Shareholders will be notified annually by
the Fund as to the Federal tax status of all distributions made
by the Fund. Distributions may be subject to state and local
taxes.

AUDITORS AND CUSTODIAN

Deloitte & Touche LLP, independent certified public accountants,
are the auditors of the Fund and are responsible for auditing the
annual financial statements of the fund. RTS acts as the
custodian bank for the Fund and is responsible for safeguarding
and controlling the Fund's cash and securities, handling the
securities and collecting interest on the Fund's investments.

<PAGE>
American Gas Index Fund, Inc.
March 31, 1997 Financial Statements

<PAGE>
ANNUAL REPORT, March 31, 1997

AMERICAN GAS INDEX FUND, INC.

4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 622-1386 (301) 657-1510

[DELETED LOGO] RUSHMORE

Dear Shareholders:

The total return for the Fund's fiscal year ended March 31, 1997
was 15.60% consisting of a price return of 12.00% and income
return of 3.60%. The first three quarters were positive. After
reaching an all time high net asset value of $15.68 on January
17, 1997, the Fund's performance weakened in the fourth fiscal
quarter. This dip in performance reflected general market
conditions rather than any change in positive gas industry
fundamentals. Sixty percent of the Fund's holdings increased in
value during the fiscal year including 90% of the largest
positions. There were no major changes in the Fund's holdings
except for those necessitated by merger and acquisition activity.

The outlook for favorable publicity predicting increased natural
gas consumption remains strong. Recent regulatory pronouncements
on revisited clean air standards are a strong incentive for gas
usage in electric power generation and industrial applications.
In addition, the regulatory restructuring of electric power
generation and transmission seems to indicate that as
nuclear power plants are retired after their 40 year licenses
expire, gas usage will get a further boost for purely economic
advantages plus less political challenges. Gas supply and
delivery are being enhanced by new pipeline capacity, robust
exploration and production and expanded gas storage facilities.
Merger and acquisition activity is continuing to strengthen the
attractiveness of the Fund's portfolio. Investing in companies
involved in natural gas transmission and distribution, through
the American Gas Index Fund, is an ideal way to financially
participate in this dynamic industry.

Top Five Performers
(Price Change: April 1, 1996 - March 31, 1997)

Noram Energy Corp. 58.11%
El Paso Energy Corp. 53.04%
Sonat, Inc. 51.39%
TPC Corp. 50.70%
PanEnergy Corp. 38.55%

Bottom Five Performers
(Price Change: April 1, 1996 - March 31, 1997)

PECO Energy Co. -23.47%
WPS Resources Corp. -22.68%
Illinova Corp. -18.67%
Wisconsin Energy Corp. -13.66%
Delmarva Power & Light Co. -13.53%

Total Return Comparison
(April 1, 1996 - March 31, 1997)

[Deleted bar graph]

American Gas Index Fund 15.60%
Dow Jones industrials 19.74%
Dow Jones Utilities 8.34%
S&P 500 19.82%

The average annual total return was 15.60%
for the one-year period, 13.87% for the
five-year period, and 9.79% for the period
5/10/89 (inception) through March 31, 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.

American Gas Index Fund
Three Largest Holdings By Sector

Natural Gas Utilities (24%) Pipeline (27%)
Pacific Enterprises PanEnergy Corp.
NICOR, Inc. Enron Corp.
MCN Energy Group, Inc. The Williams Companies, Inc.

[Deleted pie chart]

Diversified/Integrated (31%) Combination Natural Gas &
Occidental Petroleum Corp. Electric Utilities (18%)
Consolidated Natural Gas Co. PG&E Corp.
The Columbia Gas System, Inc. CMS Energy Corp.
Consolidated Edison Co. of NY, Inc.

We look forward to future growth in the value of the Fund and your continued
participation.

Sincerely,

/s/ Richard J. Garvey
Richard J. Garvey
Chairman
American Gas Index Fund, Inc.

<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.

STATEMENT OF NET ASSETS

March 31, 1997
<CAPTION>
Market Value Percent of
Shares (Note 1) Net Assets
COMMON STOCKS
<S> <C> <C> <C>
PanEnergy Corp. 250,000 $ 10,781,250 5.06%
Occidental Petroleum Corp. 425,000 10,465,625 4.91%
Enron Corp. 275,000 10,450,000 4.90%
The Williams Companies, Inc. 230,000 10,235,000 4.80%
Consolidated Natural Gas Co. 200,000 10,075,000 4.73%
El Paso Energy Co. 175,000 9,909,375 4.65%
The Coastal Corp. 175,000 8,400,000 3.94%
The Columbia Gas System, Inc. 145,000 8,391,875 3.94%
Pacific Enterprises 250,000 7,562,500 3.55%
Sonat, Inc. 135,000 7,357,500 3.45%
PG&E Corp. 300,000 7,050,000 3.31%
NorAm Energy Corp. 475,000 6,946,875 3.26%
NGC Corp. 390,000 6,142,500 2.88%
NICOR, Inc. 145,000 4,640,000 2.18%
MCN Energy Group Inc. 160,000 4,500,000 2.11%
National Fuel Gas Co. 90,000 3,847,500 1.81%
Brooklyn Union 120,000 3,300,000 1.55%
KN Energy, Inc. 90,000 3,555,000 1.67%
Peoples Energy Corp. 100,000 3,312,500 1.55%
AGL Resources, Inc. 170,000 3,123,750 1.47%
Washington Gas Light Co. 135,000 3,037,500 1.43%
Questar Corp. 80,000 2,870,000 1.35%
CMS Energy Corp. 75,000 2,465,625 1.16%
Consolidated Edison Co. of New York, Inc. 80,000 2,400,000 1.13%
Public Service Enterprise Group, Inc. 90,000 2,362,500 1.11%
Equitable Resources, Inc. 70,000 2,143,750 1.01%
Piedmont Natural Gas Co., Inc. 90,000 2,070,000 0.97%
ENSERCH Corp. 100,000 2,050,000 0.96%
NIPSCO Industries, Inc. 50,000 1,962,500 0.93%
ONEOK Inc. 75,000 1,950,000 0.92%
Public Service Co. of Colorado 45,000 1,743,750 0.82%
Indiana Energy, Inc. 70,000 1,723,750 0.81%
WICOR, Inc. 50,000 1,700,000 0.80%
Northwest Natural Gas Co. 65,000 1,592,500 0.75%
Cinergy Corp. 40,000 1,365,000 0.64%
Southwest Gas Corp. 75,000 1,303,125 0.61%
Atmos Energy Corp. 50,000 1,268,750 0.60%
New Jersey Resources Corp. 45,000 1,282,500 0.60%
Puget Sound Energy Co. 50,000 1,262,500 0.59%
Eastern Enterprises 40,000 1,235,000 0.58%
</TABLE>

AMERICAN GAS INDEX FUND, INC.

STATEMENT OF NET ASSETS - (continued)
<CAPTION>
Market Value Percent of
Shares (Note 1) Net Assets
<S> <C> <C> <C>
COMMON STOCKS (Continued)
Southern Union Co.* 50,000 $ 1,143,750 0.54%
UtiliCorp United, Inc. 45,000 1,147,500 0.54%
Baltimore Gas and Electric Co. 42,500 1,136,875 0.53%
Enova Corp. 50,000 1,100,000 0.52%
Public Service Co. of North Carolina, Inc. 60,000 1,072,500 0.50%
Laclede Gas Co. 50,000 1,043,750 0.49%
Bay State Gas Co. 40,000 1,025,000 0.48%
PECO Energy Co. 50,000 1,018,750 0.48%
Citizens Utilities Co., Series B 75,000 890,625 0.42%
MDU Resources Group, Inc. 40,000 870,000 0.41%
Long Island Lighting Co. 35,000 840,000 0.39%
Northern States Power Co. 17,500 829,063 0.39%
Western Resources, Inc. 27,500 825,000 0.39%
MidAmerican Energy Holdings Co. 47,500 813,437 0.38%
United Cities Gas Co. 35,000 805,000 0.38%
SCANA Corp. 30,000 761,250 0.36%
Energen Corp. 25,000 746,875 0.35%
TPC Corp.* 55,000 735,625 0.35%
Wisconsin Energy Corp. 30,000 735,000 0.34%
Yankee Energy System, Inc. 30,000 660,000 0.31%
North Carolina Natural Gas Corp. 20,000 642,500 0.30%
Connecticut Energy Corp. 27,500 615,312 0.29%
NUI Corp. 30,000 618,750 0.29%
CTG Resources, Inc. 27,500 605,000 0.28%
L G & E Energy Corp. 25,000 603,125 0.28%
The Montana Power Co. 27,500 591,250 0.28%
South Jersey Industries, Inc. 28,200 602,775 0.28%
UGI Corp. 25,000 593,750 0.28%
Colonial Gas Co. 27,500 570,625 0.27%
DPL, Inc. 22,500 542,813 0.25%
Illinova Corp. 22,500 514,688 0.24%
Public Service Co. of New Mexico 27,500 474,375 0.22%
Commonwealth Energy System 20,000 417,500 0.20%
New York State Electric and Gas Corp. 20,000 432,500 0.20%
Rochester Gas and Electric Corp. 20,000 380,000 0.18%
Pennsylvania Enterprises, Inc. 8,000 359,000 0.17%
Southwestern Energy Co. 25,000 334,375 0.16%
WPL Holdings, Inc. 12,500 343,750 0.16%
Providence Energy Corp. 17,500 310,625 0.15%
WPS Resources Corp. 12,500 325,000 0.15%
Mobile Gas Service Corp. 11,000 305,250 0.14%
SEMCO Energy, Inc. 16,500 305,250 0.14%
</TABLE>

AMERICAN GAS INDEX FUND, INC.

STATEMENT OF NET ASSETS - (continued)

<CAPTION>
Market Value Percent of
Shares (Note 1) Net Assets
<S> <C> <C> <C>
COMMON STOCKS (Continued)
Delmarva Power and Light Co. 15,000 $ 275,625 0.13%
Orange and Rockland Utilities, Inc. 7,500 265,312 0.12%
SIGCORP, Inc. 11,250 262,969 0.12%
Central Hudson Gas and Electric Corp. 7,000 230,125 0.11%
EnergyNorth, Inc. 10,000 217,500 0.10%
Sierra Pacific Resources 7,000 205,625 0.10%
Northwestern Public Service Co. 5,000 190,000 0.09%
Chesapeake Utilities Corp. 10,000 173,750 0.08%
Fall River Gas Co. 11,000 176,000 0.08%
Essex County Gas Co. 6,000 145,500 0.07%
Valley Resources, Inc. 12,500 145,313 0.07%
Entergy Corp. 5,000 122,500 0.06%
National Gas and Oil Co. 15,000 135,000 0.06%
Roanoke Gas Co. 7,500 127,500 0.06%
The Berkshire Gas Co. 7,500 114,375 0.05%
Corning Natural Gas Corp. 5,000 105,000 0.05%
Delta Natural Gas Co., Inc. 6,500 115,375 0.05%
Energy West, Inc. 7,500 64,687 0.03%
Minnesota Power and Light Co. 1,000 27,875 0.01%
Virginia Gas Co. 2,500 24,375 0.01%
___________ _______
Total Common Stocks (Cost $145,478,073) 209,647,619 98.40%
----------- -------

REPURCHASE AGREEMIENTS

With Paine Webber at 6.25%, dated 3/31/97,
due 4/l/97, collaterized by
U.S. Treasury Notes, due 12/31/97
(Cost $5,094,849) 5,094,849 2.39%
____________ _______
Total Investments (Cost $150,572,922) 214,742,468 100.79%
Liabilities in Excess of Other Assets (1,684,492) (0.79)%
____________ ________
Net Assets (Note 5) $213,057,976 100.00%
============ ========
Net Asset Value Per Share (Based on
14,352,645 Shares Outstanding) $14.84
======

*Non-income producing.

See Notes to Financial Statements.
</TABLE>

<PAGE>

AMERICAN GAS INDEX FUND, INC.

STATEMENT OF OPERATIONS

For the Year Ended March 31, 1997

Investment Income (Note 1)
Dividends $ 8,131,193
Interest 322,584
-----------
Total Investment Income 8,453,777
-----------
Expenses
Investment Advisory Fee (Note 2) 863,761
Accounting and Administrative Service Fee (Note 2) 755,792
Administrative Fee (Note 2) 215,941
-----------
Total Expenses 1,835,494
-----------
Net Investment Income 6,618,283
-----------
Net Realized Gain on Investments 8,513,880
Net Change in Unrealized Appreciation of Investments (Note 4) 15,598,586
-----------
Net Gain on Investments 24,112,466
-----------
Net Increase in Net Assets Resulting from Operations $30,730,749
===========

See Notes to Financial Statements.

AMERICAN GAS INDEX FUND, INC.

STATEMENTS OF CHANGES IN NET ASSETS

For the Year Ended March 31,
<CAPTION>
1997 1996
<S> <C> <C>
From Investment Activities
Net Investment Income $ 6,618,283 $ 7,270,542
Net Realized Gain (Loss) on Investments 8,513,880 (1,999,723)
Net Change in Unrealized Appreciation of Investments 15,598,586 35,810,773
----------- -----------
Net Increase in Net Assets Resulting from Operations 30,730,749 41,081,592
----------- -----------
Distributions to Shareholders
From Net Investment Income (Note 1) (6,785,371) (7,193,118)
From Net Realized Gain on Investments - -
------------ -----------
Total Distributions to Shareholders (6,785,371) (7,193,118)
------------ -----------
From Share Transactions
Net Proceeds from Sales of Shares 45,036,144 44,037,602
Reinvestment of Distributions 5,996,997 6,120,501
Cost of Shares Redeemed (65,920,201) (68,590,822)
------------ ------------
Net Decrease in Net Assets Resulting from Share Transactions (14,887,060) (18,432,719)
------------ ------------
Total Increase in Net Assets 9,058,318 15,455,755

Net Assets - Beginning of Year 203,999,658 188,543,903
------------ ------------
Net Assets - End of Year $213,057,976 $203,999,658
============ ============
Shares
Sold 3,081,033 3,519,043
Issued in Reinvestment of Distributions 414,751 492,283
Redeemed (4,534,204) (5,561,511)
----------- -----------
Net Decrease (1,038,420) (1,550,185)
=========== ===========

See Notes to Financial Statements.
</TABLE>

<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.
FINANCIAL HIGHLIGHTS

<CAPTION>
For the Year Ended March 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year $ 13.25 $ 11.13 $ 11.08 $ 12.17 $ 9.45
Income from Investment Operations: -------- -------- -------- -------- --------
Net Investment Income 0.448 0.454 0.440 0.410 0.407
Net Realized and Unrealized Gains (Losses) on
Securities 1.605 2.125 0.050 (1.031) 2.853
-------- -------- -------- --------- --------
Total from Investment Operations 2.053 2.579 0.490 (0.621) 3.260
Distributions to Shareholders: -------- -------- -------- --------- ---------
From Net Investment Income (0.459) (0.455) (0.440) (0.406) (0.410)
From Net Realized Capital Gains - - - (0.063) (0.130)
--------- -------- --------- --------- ---------
Total Distributions to Shareholders (0.459) (0.455) (0.440) (0.469) (0.540)
--------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset Value 1.59 2.12 0.05 (1.09) 2.72
-------- -------- -------- --------- ---------
Net Asset Value - End of Year $ 14.84 $ 13.25 $ 11.13 $ 11.08 $ 12.17
======== ======== ======== ======== =========
Total Investment Return 15.60% 23.46% 4.72% (5.37)% 35.38%
Ratios to Average Net Assets:
Expenses 0.85% 0.85% 0.85% 0.84% 0.85%
Net Investment Income 3.06% 3.71% 4.04% 3.33% 3.82%
Supplementary Data:
Portfolio Turnover Rate 8.2% 10.0% 8.5% 11.4% 21.5%

Net Assets at End of Year (000's omitted) $213,058 $204,000 $188,544 $209,036 $215,557
Number of Shares Outstanding at End of Year (000's
omitted) 14,353 15,391 16,941 18,858 17,708
Average Commission Rate Paid $ 0.0439A - - - -

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.

See Notes to Financial Statements.
</TABLE>

<PAGE>
AMERICAN GAS INDEX FUND, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 1997

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 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 year ended March 31, 1997, purchases of securities were
$17,177,954, and sales of securities were $32,763,920. These
totals exclude short-term securities.

4. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS

As of March 31, 1997, net unrealized appreciation of investments
for Federal income tax purposes was $62,218,810 of which
$63,693,208 related to appreciated investments and $1,474,398
related to depreciated investments. At March 31, 1997, the cost
of the Fund's securities for Federal income tax purposes was
$152,523,658.

5. NET ASSETS

At March 31, 1997 net assets consisted of the following:

Paid-in-Capital $154,136,673
Net Unrealized Appreciation of Investments 64,169,546
Accumulated Realized Loss on Investments (5,302,510)
Undistributed Net Investment Income 54,267
------------
NET ASSETS $213,057,976
============

6. CAPITAL LOSS CARRYOVERS

At March 31, 1997, for Federal income tax purposes, the Fund had
capital loss carry-overs which may be applied against future net
taxable realized gains of each succeeding year until the earlier
of its utilization or its expiration:

Expires March 31,
2003 $ 931,472
2004 2,420,302
------------
$ 3,351,774
============

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors
of American Gas Index Fund, Inc.

We have audited the statement of net assets of American Gas Index
Fund, Inc. (the Fund) as of March 31, 1997, the related
statements of operations for the year then ended and changes in
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. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned at March 31, 1997 by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the
financial position of American Gas Index Fund, Inc. at March 31,
1997, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting
principles.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Washington, D.C.
May 2, 1997

<PAGE>

[DELETED LOGO] RUSHMORE

AMERICAN GAS INDEX FUND

Annual Report

March 31, 1997

<PAGE>
PART C

OTHER INFORMATION
American Gas Index Fund, Inc.

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

a. Financial statements: The following financial statements are
incorporated by reference in Part B of this registration statement
amendment.

Statement of Net Assets as of March 31, 1997
Statement of Operations for the year ended March 31, 1997
Statements of Changes in Net Assets for the years ended March 31,
1997 and March 31, 1996
Financial Highlights for the years ended March 31, 1997, 1996, 1995,
1994, 1993, 1992, and 1991

No Statement of Sources of Net Assets will be included because the
full amount of net assets on March 31, 1997 represents cash received
from issuance of shares (less cost of shares redeemed). See
Statements of Changes in Net Assets.

b. Exhibits:

11 Consent of Deloitte & Touche LLP independent auditors for Registrant
16 Calculation of Total Return
27 Financial Data Schedule

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

Approximate Number of
Shareholders of Record
Title of Class at July 1, 1997

Common Stock, $.001 par value 10,623

ITEM 27. INDEMNIFICATION

Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer of controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Money Management Associates ("MMA"), 1001 Grand Isle Way, Palm
Beach Gardens, Florida 33418, a limited partnership organized
under the laws of the District of Columbia on August 15, 1974,
has one general partner and four limited partners. Daniel L.
O'Connor is the general partner and sole employee of MMA.
Limited partners John R. Crallle, Richard J. Garvey and Martin M.
O'Connor, are full-time employees of Rushmore Services, Inc.
("RSI"), a subsidiary of MMA, at 4922 Fairmont Avenue, Bethesda,
Maryland 20814. Limited partner Rita A. Gardner is a retired
employee of Rushmore Trust and Savings, FSB, the Fund's transfer
agent and custodian.

MMA also serves as the investment adviser to Fund for Government
Investors, The Rushmore Fund, Inc., and Fund for Tax-Free
Investors, Inc., all regulated investment companies since their
inception.

ITEM 29. PRINCIPAL UNDERWRITERS

Not applicable

ITEM 30. LOCATIONS OF ACCOUNTS AND RECORDS

The physical location for all accounts, books and records
required to be maintained and preserved to Section 31(a) of the
Investment Company Act of 1940, as amended, and Rules 31a-1 and
31a-2 thereunder, is 4922 Fairmont Avenue, Bethesda, Maryland,
20814 for shareholder accounting records. Rushmore Trust and
Savings Bank, FSB, 4922 Fairmont Avenue, Bethesda, Maryland
maintains the records of Portfolio securities.

ITEM 31. MANAGEMENT SERVICES

Not Applicable.

ITEM 32. UNDERTAKINGS

None

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in this City of Bethesda in the State
of Maryland on the 24th day of July 1997.

American Gas Index Fund, Inc.

By:

/s/ Richard J. Garvey
Richard J. Garvey, Chairman

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

Name Title Date

/s/ Michael Baly, III Director July 24, 1997
Michael Baly, III

/s/ Philip Borish Director July 24, 1997
Philip Borish

/s/ Bette Clemons Director July 24, 1997
Bette Clemens

/s/ Louis T. Donatelli Director July 24, 1997
Louis T. Donatelli

/s/Richard J. Garvey Chairman, Director July 24, 1997
Richard J. Garvey President and Treasurer

/s/ George H. Lawrence Director July 24, 1997
George H. Lawrence

/s/ Carl Levin Director July 24, 1997
Carl Levin

/s/ Patrick F. Noonan Director July 24, 1997
Patrick F. Noonan

/s/ Daniel L. O'Connor Director July 24, 1997
Daniel L. O'Connor

/s/ Eugene A. Tracy Director July 24, 1997
Eugene A. Tracy

EXHIBIT 11

Consent of Deloitte & Touche LLP

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

The American Gas Index Fund, Inc.:

We consent to the incorporation by reference in this Post-Effective
Amendment No. 8 to Registration Statement Nos. 33-25678 and 811-5702
of our report dated May 2, 1997 appearing in the Annual Report of
American Gas Index Fund, Inc. for the year ended March 31, 1997, and
to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which is alsoa part of such Registration
Statement.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Washington, D.C.
July 21, 1997

EXHIBIT 16

Calculation of Total Return

<PAGE>
Exhibit 16

American Gas Index Fund, Inc.

Total Return Calculation

Item 22, Part B

A. For the year ended March 31, 1997

n
P (1 + T) = ERV

ERV = $1,155.96

n = 1.0 year

T = 15.60%

B. For the five year period ended March 31, 1997

n
P (1 + T) = ERV

ERV = $1,914.64

n = 5.0 years

T = 13.86%

C. For the period May 10, 1989 (Commencement of Operations)
to March 31, 1997

n
P (1 + T) = ERV

ERV = $2,090.17

n = 7.89589 years

T = 9.79%

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<NAME> AMERICAN GAS INDEX FUND, INC.
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</TABLE>