<PAGE>
[Logo] SEMIANNUAL REPORT, SEPTEMBER 30, 1998
AMERICAN GAS INDEX FUND, INC.
4922 FAIRMONT AVENUE, BETHESDA, MARYLAND 20814
(800) 622-1386 (301) 657-1510
- --------------------------------------------------------------------------------
November 17, 1998
Dear Shareholders:
During the six-month period ended September 30, 1998, the net asset value (NAV)
of the American Gas Index Fund exhibited uncharacteristic volatility. The Fund's
NAV of $18.59, at the beginning of this period, climbed to an all-time high of
$18.95 on April 2. It retreated to $16.32 on August 31 and closed at $18.22 on
September 30. The resulting total return, including dividends totaling 26 cents
per share, was a negative 0.60%. For this six-month period, the Fund
outperformed the broad market represented by the Dow Jones Industrials and S&P
500 benchmarks but lagged behind the Dow Jones Utility average. Many analysts
attribute the strong gains in utility stocks to a so called "flight-to-quality"
or "safe havens" by numerous nervous individual and institutional investors.
Two major mergers within the Fund's holdings were finalized during this period.
Sempra Energy was formed from Enova Corp. and Pacific Enterprises and MarketSpan
Corp. from Keyspan Energy Corp. and Long Island Lighting Company. Several
additional previously or newly announced mergers and acquisitions have been
completed or are pending finalization.
The natural gas industry continues to receive positive forecasts from financial,
government and energy analysts. The recent so called "final rule" issued by the
United States Environmental Protection Agency regarding urban smog is considered
by many commentators to promote
<TABLE>
<S> <C>
TOP FIVE PERFORMERS
PRICE CHANGE: MARCH 31, 1998 - SEPT. 30, 1998
PECO Energy Co. 65.25%
National Gas & Oil Co. 27.95%
Energy East Corp. 27.90%
Southern Union Co. 25.00%
The Montana Power Co. 23.92%
</TABLE>
<TABLE>
<S> <C>
BOTTOM FIVE PERFORMERS
PRICE CHANGE: MARCH 31, 1998 - SEPT. 30, 1998
MCN Energy Group, Inc. -54.35%
Virginia Gas Company -44.26%
Sonat, Inc. -31.32%
Equitable Resources, Inc. -23.50%
Citizens Utilities Co., Series B -23.08%
</TABLE>
TOTAL RETURN COMPARISON
(MARCH 31, 1998 - SEPTEMBER 30, 1998)
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
- -0.60% -9.92% 9.04% -10.31%
</TABLE>
The average annual total return was 15.07% for the one-year period, 10.87% for
the five-year period, and 11.12% for the period 5/10/89 (inception) through
September 30, 1998. 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>
natural gas consumption at the expense of other fossil fuels, mainly coal.
Abundant domestic and Canadian supply combined with expanding pipeline delivery
systems provide confidence in the gas industry's ability to satisfy this
predicted demand growth. This growth is expected to be particularly apparent in
electric power generation and municipal vehicular transportation applications.
Environmental, economic and national security considerations have renewed
interest in other uses such as natural gas powered locomotives.
The Fund should continue to provide dividend income and long-term asset growth
as the nation's economy expands and with it the demand for America's most benign
fossil fuel. Please look for our website at www.rushmorefunds.com for daily NAV
information, financial reports and quarterly Fund performance reviews. And, as
always, please feel free to contact us if you have questions or if we can help
you in any way. Your interest in and support of the Fund is appreciated.
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, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET VALUE PERCENT OF
SHARES (NOTE 1) NET ASSETS
------- ------------- ----------
<S> <C> <C> <C>
COMMON STOCKS
Duke Energy Corp. ...................... 180,000 $11,913,750 5.12%
Columbia Energy Group .................. 200,000 11,725,000 5.04
The Williams Companies, Inc. ........... 400,000 11,500,000 4.94
Consolidated Natural Gas Co. ........... 200,000 10,900,000 4.68
The Coastal Corp. ...................... 310,000 10,462,500 4.49
Sempra Energy .......................... 400,000 10,425,000 4.48
MarketSpan Corp. ....................... 350,000 10,040,625 4.31
Enron Corp. ............................ 190,000 10,034,375 4.31
El Paso Energy Corp. ................... 295,000 9,569,062 4.11
PG&E Corp. ............................. 265,000 8,463,438 3.64
Houston Industries, Inc. ............... 265,000 8,248,125 3.54
KN Energy, Inc. ........................ 110,000 5,637,500 2.42
NICOR, Inc. ............................ 125,000 5,179,688 2.23
Consolidated Edison Inc. ............... 85,000 4,430,625 1.90
National Fuel Gas Co. .................. 85,000 3,995,000 1.72
Sonat, Inc. ............................ 130,000 3,883,750 1.67
Peoples Energy Corp. ................... 95,000 3,420,000 1.47
Washington Gas Light Co. ............... 120,000 3,322,500 1.43
NIPSCO Industries, Inc. ................ 100,000 3,287,500 1.41
CMS Energy Corp. ....................... 75,000 3,267,187 1.40
Public Service Enterprise Group,
Inc. ................................. 80,000 3,145,000 1.35
Piedmont Natural Gas Company, Inc. ..... 90,000 3,048,750 1.31
AGL Resources, Inc. .................... 155,000 3,003,125 1.29
Questar Corp. .......................... 140,000 2,695,000 1.19
ONEOK, Inc. ............................ 75,000 2,550,000 1.09
Atmos Energy Corp. ..................... 85,000 2,427,813 1.04
MCN Energy Group, Inc. ................. 135,000 2,303,437 0.99
New Century Energies, Inc. ............. 42,500 2,069,219 0.89
Indiana Energy, Inc. ................... 62,300 1,954,663 0.84
WICOR, Inc. ............................ 80,000 1,910,000 0.82
Eastern Enterprises .................... 42,103 1,773,589 0.76
Puget Sound Energy, Inc. ............... 61,000 1,692,750 0.73
Northwest Natural Gas Co. .............. 60,000 1,659,378 0.71
Texas Utilities Co. .................... 35,000 1,629,687 0.70
PECO Energy Co. ........................ 42,500 1,553,906 0.67
Southwest Gas Corp. .................... 75,000 1,532,812 0.66
Bay State Gas Co. ...................... 37,500 1,460,156 0.63
Cinergy Corp. .......................... 37,500 1,434,375 0.62
New Jersey Resources Corp. ............. 40,000 1,425,000 0.61
</TABLE>
3
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE PERCENT OF
SHARES (NOTE 1) NET ASSETS
------- ------------- ----------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
MDU Resources Group, Inc. .............. 52,500 $1,378,125 0.59%
UtiliCorp United, Inc. ................. 35,000 1,378,125 0.59
Southern Union Co.* .................... 66,937 1,338,740 0.58
Interstate Energy Corp. ................ 40,000 1,282,500 0.55
Equitable Resources, Inc. .............. 50,000 1,271,875 0.54
Public Service Co. of North Carolina,
Inc. ................................. 55,000 1,271,875 0.54
Northern States Power Co. .............. 45,000 1,262,812 0.54
Baltimore Gas and Electric Co. ......... 37,500 1,251,562 0.53
The Montana Power Co. .................. 25,000 1,117,187 0.48
Nigara Mohawk Power Corp. .............. 70,000 1,076,250 0.46
Laclede Gas Co. ........................ 46,000 1,060,875 0.46
MidAmerican Energy Holdings Co. ........ 40,000 1,057,500 0.45
Energy East Corp. ...................... 20,000 1,020,000 0.44
Pennsylvania Enterprises, Inc. ......... 40,600 1,015,000 0.44
Wisconsin Energy Corp. ................. 30,000 946,875 0.41
TECO Energy, Inc. ...................... 30,000 856,875 0.37
Energen Corp. .......................... 45,000 855,000 0.37
LG&E Energy Corp. ...................... 30,000 836,250 0.36
DPL, Inc. .............................. 40,000 785,000 0.34
South Jersey Industries, Inc. .......... 30,000 774,375 0.33
North Carolina Natural Gas Corp. ....... 30,000 750,000 0.32
Colonial Gas Co. ....................... 25,000 723,438 0.31
Yankee Energy System, Inc. ............. 27,500 720,156 0.31
NUI Corp. .............................. 30,000 690,000 0.30
Connecticut Energy Corp. ............... 25,000 675,000 0.29
Dynegy, Inc. ........................... 47,300 635,594 0.27
Rochester Gas & Electric Corp. ......... 20,000 625,000 0.27
Commonwealth Energy System ............. 17,000 618,375 0.27
Citizens Utilities Co., Series B ....... 75,000 609,375 0.26
CTG Resources, Inc. .................... 25,000 604,687 0.26
UGI Corp. .............................. 25,000 578,125 0.25
Illinova Corp. ......................... 20,000 573,750 0.25
SEMCO Energy, Inc. ..................... 36,750 537,469 0.23
Public Service Co. of New Mexico ....... 22,500 499,219 0.21
Connectiv, Inc. ........................ 20,000 456,250 0.20
WPS Resources Corp. .................... 12,500 446,875 0.19
Orange and Rockland Utilities, Inc. .... 7,500 411,563 0.18
Providence Energy Corp. ................ 17,000 331,500 0.14
EnergySouth, Inc. ...................... 16,000 330,000 0.14
SIGCORP, Inc. .......................... 10,000 323,125 0.14
Central Hudson Gas and Electric
Corp. ................................ 6,500 272,188 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
------- ------------- ----------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
EnergyNorth, Inc. ...................... 9,000 $ 248,063 0.11%
Sierra Pacific Resources ............... 6,000 232,875 0.10
National Gas & Oil Co. ................. 15,300 196,988 0.08
Southwestern Energy Co. ................ 22,000 187,000 0.08
Chesapeake Utilities Corp. ............. 10,000 179,375 0.08
The Berkshire Gas Co. .................. 7,500 168,750 0.07
Fall River Gas Co. ..................... 10,000 154,375 0.07
Entergy Corp. .......................... 5,000 153,750 0.07
Roanoke Gas Co. ........................ 7,500 146,250 0.06
Valley Resources, Inc. ................. 12,000 140,250 0.06
PP&L Resources, Inc. ................... 5,000 129,375 0.06
Delta Natural Gas Co., Inc. ............ 6,500 110,094 0.05
Corning Natural Gas Corp. .............. 4,500 90,000 0.04
Energy West, Inc. ...................... 7,500 69,375 0.03
Virginia Gas Co. ....................... 15,000 63,750 0.03
Minnesota Power, Inc. .................. 1,000 44,063 0.02
------------- ----------
Total Common Stocks (Cost
$128,924,137) ........................ 224,537,108 96.50
------------- ----------
REPURCHASE AGREEMENT
With PaineWebber Inc. at 5.25%, dated
9/30/98, to be repurchased at
$10,253,732 on 10/1/98, collaterized
by U.S. Treasury Notes due 8/31/99
(Cost $10,252,236) ................... 10,252,236 4.41
------------- ----------
TOTAL INVESTMENTS (COST
$139,176,373) ........................ 234,789,344 100.91
LIABILITIES IN EXCESS OF OTHER
ASSETS ............................... (2,120,585) (0.91)
------------- ----------
NET ASSETS (NOTE 5) .................... $232,668,759 100.00%
------------- ----------
------------- ----------
NET ASSET VALUE PER SHARE (BASED ON
12,772,312 SHARES OUTSTANDING) ....... $18.22
-------------
-------------
</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, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME (Note 1)
Dividends...................................................... $ 3,998,087
Interest....................................................... 243,951
-----------
Total Investment Income...................................... 4,242,038
-----------
EXPENSES
Investment Advisory Fee (Note 2)............................... 455,577
Accounting and Administrative Service Fee (Note 2)............. 398,630
Administrative Fee (Note 2).................................... 113,894
-----------
Total Expenses............................................... 968,101
-----------
NET INVESTMENT INCOME............................................ 3,273,937
-----------
Net Realized Gain on Investment Transactions..................... 3,996,497
Change in Net Unrealized Appreciation/Depreciation of Investments
(Note 4)....................................................... (8,813,495)
-----------
NET LOSS ON INVESTMENTS.......................................... (4,816,998)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $(1,543,061)
-----------
-----------
</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, 1998 ENDED
(UNAUDITED) MARCH 31, 1998
------------------ --------------
<S> <C> <C>
OPERATIONS
Net Investment Income..................................... $ 3,273,937 $ 6,200,861
Net Realized Gain on Investment Transactions.............. 3,996,497 10,027,070
Change in Net Unrealized Appreciation/Depreciation of
Investments............................................. (8,813,495) 40,256,921
------------------ --------------
Net Increase (Decrease) in Net Assets Resulting from
Operations............................................ (1,543,061) 56,484,852
------------------ --------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income................................ (3,292,399) (6,222,067)
From Net Realized Gain on Investment Transactions......... -- (1,570,262)
------------------ --------------
Total Distributions to Shareholders..................... (3,292,399) (7,792,329)
------------------ --------------
SHARE TRANSACTIONS
Net Proceeds from Sales of Shares......................... 18,853,196 47,979,895
Reinvestment of Distributions............................. 2,955,761 6,937,426
Cost of Shares Redeemed................................... (28,672,458) (72,300,100)
------------------ --------------
Net Decrease in Net Assets Resulting from Share
Transactions.......................................... (6,863,501) (17,382,779)
------------------ --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................. (11,698,961) 31,309,744
NET ASSETS -- Beginning of Period........................... 244,367,720 213,057,976
------------------ --------------
NET ASSETS -- End of Period................................. $232,668,759 $244,367,720
------------------ --------------
------------------ --------------
SHARES
Sold...................................................... 1,053,558 2,842,334
Issued in Reinvestment of Distributions................... 160,702 402,257
Redeemed.................................................. (1,589,702) (4,449,482)
------------------ --------------
Net Decrease in Shares.................................. (375,442) (1,204,891)
------------------ --------------
------------------ --------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
AMERICAN GAS INDEX FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED MARCH 31,
SEPTEMBER 30, 1998 ----------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
-------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value -- Beginning of
Period.......................... $ 18.59 $ 14.84 $ 13.25 $ 11.13 $ 11.08 $ 12.17
------ ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net Investment Income........... 0.26 0.47 0.45 0.45 0.44 0.41
Net Realized and Unrealized
Gains (Losses) on
Securities.................... (0.37) 3.87 1.60 2.13 0.05 (1.03)
------ ---------- ---------- ---------- ---------- ----------
Total from Investment
Operations.................. (0.11) 4.34 2.05 2.58 0.49 (0.62)
------ ---------- ---------- ---------- ---------- ----------
Distributions to Shareholders:
From Net Investment Income........ (0.26) (0.47) (0.46) (0.46) (0.44) (0.41)
From Net Realized Gain on
Investments..................... -- (0.12) -- -- -- (0.06)
------ ---------- ---------- ---------- ---------- ----------
Total Distributions........... (0.26) (0.59) (0.46) (0.46) (0.44) (0.47)
------ ---------- ---------- ---------- ---------- ----------
Net Increase (Decrease) in Net
Asset Value..................... (0.37) 3.75 1.59 2.12 0.05 (1.09)
------ ---------- ---------- ---------- ---------- ----------
Net Asset Value -- End of
Period.......................... $ 18.22 $ 18.59 $ 14.84 $ 13.25 $ 11.13 $ 11.08
------ ---------- ---------- ---------- ---------- ----------
------ ---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN............. (0.60)%(A) 29.62% 15.60% 23.46% 4.72% (5.37)%
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................... 0.85%(B) 0.85% 0.85% 0.85% 0.85% 0.84%
Net Investment Income............. 2.90%(B) 2.83% 3.06% 3.71% 4.04% 3.33%
SUPPLEMENTARY DATA:
Portfolio Turnover Rate........... 5.3% 12.9% 8.2% 10.0% 8.5% 11.4%
Net Assets at End of Period (000's
omitted)........................ $232,669 $244,368 $213,058 $204,000 $188,544 $209,036
Number of Shares Outstanding at
End of Period (000's omitted)... 12,772 13,148 14,353 15,391 16,941 18,858
</TABLE>
- ------------------------------
(A) Total returns for periods of less than one year are not annualized.
(B) Annualized
See Notes to Financial Statements.
8
<PAGE>
AMERICAN GAS INDEX FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
American Gas Index Fund, Inc. (the "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 Fund invests primarily in the
common stock of natural gas distribution and transmisson companies. Since the
Fund has a specialized focus, it carries more risk than a fund that invests more
generally. The financial statements have been prepared in conformity with
generally accepted accounting principals 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. 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 (the "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 the
Adviser.
9
<PAGE>
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 period ended September 30, 1998, purchases of securities were
$15,656,323, and sales of securities were $11,621,156. These totals exclude
short-term securities.
4. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
As of September 30, 1998, net unrealized appreciation of investments for Federal
income tax purposes was $94,427,597 of which $95,500,988 related to appreciated
investments and $1,073,391 related to depreciated investments. At September 30,
1998, the cost of the Fund's securities for Federal income tax purposes was
$140,361,747.
5. NET ASSETS
At September 30, 1998 net assets consisted of the following:
<TABLE>
<S> <C>
Paid-in-Capital.......................................................... $129,890,394
Net Unrealized Appreciation of Investments............................... 95,612,971
Accumulated Realized Gain on Investments................................. 7,150,795
Undistributed Net Investment Income...................................... 14,599
-------------
Net Assets............................................................... $232,668,759
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-------------
</TABLE>
10
<PAGE>
[LOGO]
Semi-Annual Report
September 30, 1998
