AMERICAN GAS INDEX FUND INC, 485BPOS, 1998-07-29

AMERICAN GAS INDEX FUND INC
485BPOS, 1998-07-29

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As Filed With The Securities And Exchange Commission on July 29, 1998.

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. 9 (X)

and/or

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

Amendment No. 13 (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, 1998 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, 1998 was filed on June 29, 1998.

<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 Financial Highlights;
Information Performance Data

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

5. Management of the Fund Management of the Fund

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

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

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

8. Redemption or How to Redeem an Investment
Repurchase (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 Not Applicable
and History

13. Investment Objectives Investment Policies;
and Policies Investment Restrictions

14. Management of the Management of the Fund
Registrant

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

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

17. Brokerage Allocation Investment Objectives and
Policies

<PAGE>

18. Capital Stock and Not Applicable
Other Securities

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

20. Tax Status Taxes

21. Underwriters Not Applicable

22. Calculations of Calculation of Performance
Performance Data Data

23. Financial Statements Following Part B

Part C: Other Information

24. Financial Statements Financial Statements and
and Exhibits Exhibits

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

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

27. Indemnification Indemnification

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

29. Principal Underwriters Principal Underwriters

30. Location of Accounts Location of Accounts and
and Records 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, 1998 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, 1998.

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 (accounts under $500)* $5.00

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

Management Fees 0.40%
Administrative 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.

FINANCIAL HIGHLIGHTS
American Gas Index Fund, Inc.
Audited

<CAPTION>
For the Period Ended March 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value - Beginning of
Period $ 14.84 $ 13.25 $ 11.13 $ 11.08 $ 12.17 $ 9.45 $ 10.20 $ 11.20 $ 10.00
Income from Investment Operations:
Net Investment Income 0.47 0.45 0.45 0.44 0.41 0.41 0.47 0.53 0.50
Net Realized and Unrealized Gain
(Loss) on Investments 3.87 1.60 2.13 0.05 (1.03) 2.85 (0.76) (0.90) 1.28
Total from Investment Operations 4.34 2.05 2.58 0.49 (0.62) 3.26 (0.29) (0.37) 1.78
Distributions to Shareholders:
From Net Investment Income (0.47) (0.46) (0.46) (0.44) (0.41) (0.41) (0.46) (0.53) (0.50)
From Net Realized Capital Gain (0.12) - - - (0.06) (0.13) - (0.10) (0.08)
Total Distributions (0.59) (0.46) (0.46) (0.44) (0.47) (0.54) (0.46) (0.63) (0.58)

Net Increase (Decrease) in
Net Asset Value 3.75 1.59 2.12 0.05 (1.09) 2.72 (0.75) (1.00) 1.20

Net Asset Value - End of Period $ 18.59 $ 14.84 $ 13.25 $ 11.13 $ 11.08 $ 12.17 $ 9.45 $ 10.20 $ 11.20

Total Investment Return 29.62 % 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 % 0.85 % 0.84 % 0.85 % 0.85 % 0.79 % 0.75 %
Expenses Before Reimbursement from
Adviser 0.85 % 0.85 % 0.85 % 0.85 % 0.84% 0.85 % 0.87 % 0.91 % 0.90 %
Net Investment Income 2.83 % 3.06 % 3.71 % 4.04 % 3.33 % 3.82 % 4.73 % 5.00 % 4.99 %

Supplementary Data
Portfolio Turnover Rate 12.9 % 8.2 % 10.0 % 8.5 % 11.4 % 21.5 % 30.2 % 29.9 % 25.0 %
Net Assets at End of Year
(000s omitted) $244,368 $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) 13,148 14,353 15,391 16,941 18,858 17,708 13,669 12,821 7,676
Average Commission Rate Paid A $0.0422 $0.0439 - - - - - - -

* 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
Index Fund Composite Index Gas Utilities
Index

5/10/89 $10,000 $10,000 $10,000
3/31/90 $11,655 $11,450 $11,415
3/31/91 $11,241 $13,100 $11,041
3/31/92 $10,917 $14,546 $ 8,759
3/31/93 $14,779 $16,762 $11,983
3/31/94 $13,985 $17,008 $10,796
3/31/95 $14,645 $19,656 $11,259
3/31/96 $18,081 $25,964 $14,064
3/31/97 $20,901 $31,112 $17,393
3/31/98 $27,092 $46,045 $22,488

Past performance is not predictive of future performance. The
Standard & Poor's 500 Composite Index and the Dow Jones Gas Utilities
Index are unmanaged indices and, unlike the Fund, have no management
fee or other operating expenses to reduce their reported return.
Returns are historical and include changes in principal and reinvested
dividends and capital gains.

Average Annual Total Return
Year Ended
March 31, 1998

One Year Five Years Since Inception

29.62% 12.89% 11.86%

<PAGE>

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

The net asset value of the American Gas Index Fund increased from
$14.84 at the beginning of the Fund's fiscal year to $18.59 at the end
on March 31, 1998. In addition, during this period, the Fund declared
regular dividends of 47 cents per share and a capital gains dividend
of 20 cents. The resulting fiscal year total return is 29.62%. Over
ninety percent of the Fund's holdings, including all of the ten
largest increased in value.

During the fiscal year, several new names in the Fund's portfolio are
the result of finalization of previously reported mergers,
acquisitions and restructurings. The major changes include:

Old Listing New Listing

Brooklyn Union Keyspan Energy
Delmarva Power and Light Connectiv
ENSERCH Texas Utilities
NorAm Houston Industries
Pan Energy Duke Energy
Public Service of Colorado New Century Energies
Southeastern Michigan Gas Co. SEMCO

Other changes were the result of gas properties being purchased. such
as KN Energy buying Occidental Petroleum's Midcom pipeline, Atmos
Energy acquiring United Cities Gas and ONEOK taking over Western
Resources gas utility operations.

The robust performance of the Fund during this period was attributed
to several positive influences. Growth in natural gas utilization was
stressed by private sector and government analysts in spite of the
negative impact of the El Nino winter on the seasonal heating load.
They also emphasized the low emission and high efficiency attributes
of natural gas in response to concerns regarding air quality, global
warming and worldwide economic competitiveness.

Looking ahead, industries desire to generate electricity close to the
point of use with small power plants, called distributed power, is
growing, and gas is the preferred fuel. In addition, several aging
nuclear plants are being decommissioned and hydropower expansion is
losing environmental support. These developments provide excellent
opportunities for new gas fired units. Other potential sources of
increased demand result from technological developments in gas fueled
climate control, power generation and fleet vehicles. Also, the stock
markets' record gains have made many investment advisors cautious and
starting to suggest natural gas stocks as a flight to quality refuge.
Merger and acquisition activity should continue to be an important
influence on the value of the Fund's portfolio.

INVESTMENT OBJECTIVE, POLICIES and RISKS

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 100 publicly
traded stocks of those A.G.A. member companies headquartered in the
United States. (See Attachment for the Composition of the Index as of
March 31, 1998.) The Index 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 dividend income and,
as such, a significant proportion of the Fund's investment performance
is expected to result from such dividend income.

The A.G.A., a national trade association of natural gas companies,
periodically determines each company's proportion of the Index. The

<PAGE>

A.G.A. will furnish an updated Index to the Fund quarterly. 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
Money Management Associates, the Fund's investment adviser
("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. 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.

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

<PAGE>

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

FACTS TO KNOW BEFORE YOU INVEST
- The minimum initial investment is $2,500.
- Retirement accounts may be opened with a $500 minimum investment
(see "Tax-Sheltered Retirement Plans" for plan types).
- There is no minimum amount for subsequent investments.
- Shares of the Fund are offered for sale continuously by the Fund.
- There is no sales charge.
- The Fund reserves the right to reject any purchase order.
- All accounts will be held in book entry form. No certificates
for shares will be issued.
- Orders received prior to 4:00 P.M., Eastern time, will be
invested in shares of the Fund at the next determined net asset value.

PURCHASING SHARES
By Mail
Complete an application and make a check payable to "American Gas
Index Fund." Send your completed and signed application and check
drawn on a U.S. bank to:

American Gas Index Fund
4922 Fairmont Avenue
Bethesda, Maryland 208l4

By Bank Wire
Speak to the branch manager of your bank. Request a transfer of
Federal funds to Rushmore Trust and Savings, FSB, instructing the
bank to wire transfer the money before 4:00 P.M., Eastern time to:

Rushmore Trust and Savings, FSB
Bethesda, Maryland
Routing No. 0550-71084
For Account of
American Gas Index Fund
Account No. 029385770

After instructing your bank to transfer Federal funds, you must
telephone the Fund at (800) 622-1386 or (301) 657-1510 between 8:30

<PAGE>

A.M. and 4:00 P.M. Eastern time 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 (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.

Through Brokers
Investors may invest in the Fund by purchasing shares through
registered broker-dealers, banks or other financial institutions
that purchase securities for their customers. When an authorized
third party accepts an order, the Fund will be deemed to have
received the order. Orders accepted by an authorized third party
will be priced at the Fund's net asset value next computed after
acceptance. Such third parties who process orders may charge a fee
for such service. 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.

HOW TO REDEEM AN INVESTMENT
(WITHDRAWALS)

FACTS TO KNOW BEFORE YOU REDEEM
- An investor may withdraw all or any portion of his investment by
redeeming shares by writing or telephoning the Fund at (800) 622-1386
or (301) 657-1510 on any day that the Fund is open for business. The
shares will be redeemed at the next determined net asset value per
share after receipt of the order.

- 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.

- Normally, the Fund will make payment for all shares redeemed
within seven business days. However, withdrawal requests upon
investments that have been made by check may be delayed up to ten
calendar days following such investment or until the check clears,
whichever occurs first. This delay is necessary to assure the Fund
that investments made by check are good funds. The proceeds of the
redemption will be forwarded promptly upon confirmation of receipt of
good funds.

- The right of redemption may be suspended, or the date of payment
postponed during the following periods: (a) periods during which the
New York Stock Exchange (the "NYSE") is closed (other than customary
weekend or holiday closings); (b) periods when trading on the NYSE 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.

- After receipt of redemption instructions, shareholders may
receive monies by bank wire, check, or ACH. When the amount to be
redeemed is at least $5,000, the Fund, upon telephone or written
instructions, will wire transfer the amount to the investor's
commercial bank or brokerage account specified in the account
application. For amounts less than $5,000, investors may have
redemption proceeds deposited directly into an account specified on
the account application or request that a redemption check be
delivered by mail to the address of record.

- 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.

<PAGE>

REDEEMING SHARES
By Telephone

The privilege to initiate redemption transactions by telephone will
be made available to Fund shareholders automatically. Telephone
orders for redemptions must be received by 4:00 P.M. Eastern time
to be effective that day. Telephone redemptions will only be sent
to the address of record or to bank accounts specified in the
account applications. 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 instructions received by telephone, providing written
confirmation not later than five business days after such
transactions, and/or tape recording of telephone transactions.
Telephone redemption privileges may be terminated or modified by
the Fund upon 60 days notice to all shareholders of the Fund.

By Mail or Fax
Mail your instructions for Fax your instructions for
redemption to: redemption to:
Rushmore Trust and Savings, FSB (301) 657-1520
4922 Fairmont Avenue Attn: Shareholder Services
Bethesda, MD 20814
Attn: Shareholder Services

Include the following information:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as it appears on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.

SHAREHOLDER ACCOUNTS

ACCOUNT STATEMENTS
The Fund maintains an account for each investor in full and fractional
shares. Statements of account will be sent quarterly showing the
beginning balance and the ending balance and detailing transactions
for the month. Confirmations of individual transactions will not be
sent.

TRANSACTION CHARGES
In addition to charges described elsewhere in this Prospectus, the
Fund may impose a charge of $5 per month for any Fund account whose
average daily balance for the month falls below $500. The fee may
continue to be imposed during the 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 ACCOUNTS
Tax-Sheltered Retirement Plans of the following types are available to
investors. Additional information regarding these accounts may be
obtained by contacting the Fund at (800) 343-3355.

- Individual Retirement Accounts (IRAs)
Traditional IRAs

<PAGE>

Roth IRAs
Education IRAs
- - Keogh Accounts - Defined Contribution Plan (Profit Sharing Plan)
- - Keogh Accounts - Money Purchase Plan (Pension Plan)
- - Internal Revenue Code
Section 401(k) Plans
Section 403(b) Plans

EXCHANGE PRIVILEGES

Shares of the Fund may be exchanged for shares of Fund for Government
Investors, Fund for Tax-Free Investors, Inc., The Rushmore Fund, Inc.,
or the Cappiello-Rushmore Trust on the basis of the respective net
asset values of the shares involved, provided such exchange is
permitted under the applicable laws of the state of the investor's
residence. Shareholders contemplating such an exchange should obtain
and review the prospectuses of those funds. Exchanges may be made by
telephone or letter. Written requests should be sent to the American
Gas Index Fund, 4922 Fairmont Avenue, Bethesda, Maryland 20814 and be
signed by the record owner or owners. Telephone exchange requests may
be made by telephoning the Fund at (800) 622-1386 or (301) 657-1510
between 8:30 A.M. and 4:30 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 should provide the following information:
account registration including address and number, taxpayer
identification number, number, percentage or dollar value of shares to
be redeemed, name and account number of the portfolio to which the
investment is to be transferred. Exchanges may be made only if they
are between identically registered accounts. Telephone exchange
privileges may be terminated or modified by the Fund upon 60 days
notice to all shareholders of the Fund.

ADDITIONAL INFORMATION ABOUT THE FUND

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/Weisenberger Investment Technologies, Inc.
among others.

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.

<PAGE>

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.

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.

MANAGEMENT AND ORGANIZATION OF THE FUND

OFFICERS 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. A complete list
of the Fund's Directors and officers is provided in the Statement of
Additional Information.

INVESTMENT ADVISER AND ADMINISTRATIVE 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 American Gas Index Fund, Inc., Fund for Government
Investors, The Rushmore Fund, Inc., and Fund for Tax Free Investors,
Inc. Net assets under management currently approximate $900 million.

<PAGE>

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.

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.

Shareholders having inquires about the Fund's organization or
operation should contact the Fund in writing at 4922 Fairmont Avenue,
Bethesda, Maryland, or by telephone at (301) 657-1500 or
(800) 343-3355.

<PAGE>

ATTACHMENT
American Gas Association Stock Index
as of March 31, 1998

Common Stocks Value Weighting (%)
AGL Resources, Inc. 1.54
Atmos Energy Corporation 1.16
Baltimore Gas and Electric Company 0.60
Bay State Gas Company 0.67
Central Hudson Gas & Electric Corporation 0.12
Chesapeake Utilities Corporation 0.09
Cinergy Corporation 0.67
Citizens Utilities Company, Series B 0.35
CMS Energy Corporation 1.49
Colonial Gas Company 0.31
Commonwealth Energy System 0.30
Conectiv 0.25
Connecticut Energy Corporation 0.41
Consolidated Edison Co. of NY, Inc. 1.87
Consolidated Natural Gas Company 5.00
Corning Natural Gas Corporation 0.01
CTG Resources, Inc. 0.28
Delta Natural Gas Company, Inc. 0.05
DPL Inc. 0.34
Duke Energy Corporation 5.00
Eastern Enterprises 0.82
El Paso Energy Corporation 4.59
Energen Corporation 0.53
EnergyNorth, Inc. 0.12
Energy West, Incorporated 0.02
EnergySouth, Inc. 0.15
Enova Corporation 0.59
Enron Corporation 4.01
Entergy Corp. 0.06
Equitable Resources, Inc. 0.75
Essex County Gas Company 0.10
Fall River Gas Company 0.04
Houston Industries Incorporated 3.40
Illinova Corporation 0.27
Indiana Energy, Inc. 0.89
KeySpan Energy Corporation 1.79
KN Energy, Inc. 2.06
Laclede Gas Company 0.55
LG&E Energy Corp. 0.23
Long Island Lighting Company 0.56
MCN Energy Group Inc. 2.22
MDU Resources Group, Inc. 0.54
MidAmerican Energy Holdings Company 0.44
Minnesota Power & Light Co. 0.01
National Fuel Gas Company 1.87
National Gas & Oil Corporation 0.07
New Century Energies 1.00
New Jersey Resources Corporation 0.84
New York State Electric & Gas Corporation 0.39
NGC Corporation 0.20
Niagara Mohawk Power Corporation 0.35
NIPSCO Industries, Inc. 0.88
NICOR, Inc. 2.45

<PAGE>

American Gas Association Stock Index
as of March 31, 1998

Common Stocks Value Weighting (%)
North Carolina Natural Gas Corporation 0.53
Northern States Power Company 0.70
Northwest Natural Gas Company 0.82
NUI Corporation 0.45
ONEOK Inc. 1.25
Orange and Rockland Utilities, Inc. 0.15
Pacific Enterprises 4.35
PG&E Corporation 4.38
PECO Energy Company 0.44
Pennsylvania Enterprises, Inc. 0.31
Peoples Energy Corporation 1.66
Piedmont Natural Gas Company, Inc. 1.39
Providence Energy Corporation 0.16
Public Service Company of New Mexico 0.29
Public Service Co. of North Carolina, Inc. 0.54
Public Service Enterprise Group Inc. 1.43
Puget Sound Energy 0.77
Questar 1.32
Roanoke Gas Company 0.04
Rochester Gas and Electric Corporation 0.32
SCANA Corporation 0.40
Sierra Pacific Resources 0.10
SIGCORP, Inc. 0.15
Sonat Inc. 1.99
South Jersey Industries, Inc. 0.41
SEMCO Energy, Inc. 0.28
Southern Union Company 0.59
Southwest Gas Corporation 0.72
Southwestern Energy Company 0.10
TECO Energy, Inc. 0.38
Texas Utilities Company 0.59
The Berkshire Gas Company 0.07
The Coastal Corporation 4.58
The Columbia Energy Group, Inc. 5.00
The Montana Power Company 0.42
UGI Corporation 0.33
UtiliCorp United Inc. 0.58
Valley Resources, Inc. 0.07
Virginia Gas Company 0.06
Washington Gas Light Company 1.57
WICOR, Inc. 0.84
The Williams Companies, Inc. 5.00
Wisconsin Energy Corporation 0.43
WPL Holdings, Inc. 0.24
WPS Resources Corporation 0.22
Yankee Energy System, Inc. 0.34

<PAGE>
Page

Fee Table

Financial Highlights

Management's Discussion of Fund Performance

Investment Objective, Policies and Risks
Specialized Investment Practices and Risks

How to Invest in the Fund
Facts to Know Before You Invest
Purchasing Shares

How to Redeem an Investment (Withdrawals)
Facts to Know Before You Redeem
Redeeming Shares

Shareholder Accounts
Account Statements
Transaction Charges
Tax-Sheltered Retirement Accounts

Exchange Privileges

Additional Information About the Fund
Performance Data
Net Asset Value
Dividends
Taxes

Management and Organization of the Fund
Officers and Directors
Investment Adviser and Administrative
Servicing Agent
Organization and Description of
Common Stock

American Gas Association Stock Index

<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, 1998. 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, 1998.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

Table of Contents

Cross Reference to Related Item in Prospectus

Page in
Statement of Page in
Additional Prospectus
Information

Investment Objectives and Policies

Redemptions

Tax-Deferred Retirement Plans

Management of the Fund

Principal Holders of Securities

Investment Advisory and Other Services

Net Asset Value

Taxes

Auditors and Custodian

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

General

Index Methodology

The American Gas Association Stock Index (the "Index") is comprised of
approximately 100 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 index date. 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.

Since the Index 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 0.5% 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.

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

<PAGE>

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, 1998, 1997 and 1996, the
Fund paid $122,024, $70,000 and $92,000, 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

<PAGE>

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, 1998, the Fund paid $7,500 in Directors' fees.

*Philip Borish, 70 - Director. Employee of Rushmore Services, Inc., a
subsidiary of the Adviser, since 1995. Address: 4922 Fairmont
Avenue, Bethesda, MD 20814.

Bette Clemens, 74 - 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, 61 - 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, 65 - 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, 72 - Director. Of Counsel Akin, Gump, Strauss,
Hauer & Feld since 1991. Retired President of American Gas
Association. Address: 8707 Eaglebrook Court, Alexandria, VA 22308.

<PAGE>

Carl Levin, 85 - 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, 55 - 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, 56 - Director. General Partner of the adviser
since 1974. Director of Rushmore Trust and Savings, FSB since 1989.
Address: 1001 Grand Isle Way, Palm Beach Gardens, FL 33418.

Eugene A. Tracy, 70 - Director. Retired since 1992. Chairman of the
Executive Committee, Peoples Energy Corporation until 1992. Address:
1424 Sequoia Trail, Glenview, IL 60325.

*David J. Muchow, 53 - Vice President and Secretary since 1989.
Special Counsel, American Gas Association since 1998. Formerly
General Counsel and Corporate Secretary, American Gas Association 1978-
1998. Address: 1515 Wilson Blvd., Arlington, VA 22209.

*Timothy N. Coakley, CPA, 30 - Vice President 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.

*Edward J. Karpowicz, CPA, 34 - Controller since July 1997.
Treasurer, Bankers Finance Investment Management Corp., August 1993 to
June 1997. Senior Accountant, Ernst & Young, September 1989 to
February 1993. Address: 4922 Fairmont Avenue, Bethesda, MD 20814.

*Stephenie E. Adams, 29 - 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, 1998, there were 12,699,187.07 shares outstanding. Charles
Schwab & Co., Inc. San Francisco, California, held, for the benefit of
others, 14.27% of the Fund's shares as of July 1, 1998. 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 $559
million, $97 million and $19 million, respectively, on July 1, 1998.

<PAGE>

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
30, 1998, 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, 1998, 1997 and 1996, the Adviser earned
fees of $877,926, $863,761 and $783,272, respectively.

Under an Administrative Services Agreement dated November 1, 1993 and
last renewed by the Board of Directors on April 30, 1998, 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, 1998 was $768,186.

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 30, 1998, 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, 1998, the administration fee was $219,482.

YEAR 2000
The investment management services provided to the Fund by the Adviser
and the services provided to the Fund and its shareholders by RTS depend
on the smooth functioning of computer systems. Like other mututal funds and
financial and business organizations around the world, the Fund could be
adversely affected if the computer systems used by the Adviser and RTS and
their vendors do not properly process and calculate date-related information
and data on and after January 1, 2000. The Adviser and RTS are taking
necessary steps to assure that the computer systems utilized by them will
be prepared for the year 2000. Although at this time there can be no
assurance of sufficient or timely remediation, they do not anticipate that
the transition to the 21st century will have a material impact on their
ability to continue to service the Fund at current levels.

<PAGE>

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, 1998 Financial Statements

<PAGE>

[Logo] ANNUAL REPORT, MARCH 31, 1998
AMERICAN GAS INDEX FUND, INC.
4922 FAIRMONT AVENUE, BETHESDA, MARYLAND 20814
(800) 622-1386 (301) 657-1510

- --------------------------------------------------------------------------------
Dear Shareholders:
The net asset value of the American Gas Index Fund, Inc. (the "Fund") increased
from $14.84 at the beginning of the Fund's fiscal year to $18.59 at the end on
March 31, 1998. In addition, during this period, the Fund declared regular
dividends of 47 cents per share and a capital gain distribution of 12 cents per
share. The resulting fiscal year total return is 29.62%. Over ninety percent of
the Fund's holdings, including all of the ten largest increased in value.

During the fiscal year, several new names in the Fund's portfolio are the
result of finalization of previously reported mergers, acquisitions and
restructurings.

The major changes include:

OLD LISTING NEW LISTING
- ------------------------------- ---------------------------
Brooklyn Union Keyspan Energy Corp.
Delmarva Power and Light Co. Connectiv, Inc.
ENSERCH Corp. Texas Utilities Co.
NorAm Energy Corp. Houston Industries, Inc.
Pan Energy Corp. Duke Energy Corp.
Public Service Co. of Colorado New Century Energies, Inc.

Other changes were the result of gas properties being purchased, such as KN
Energy buying Occidental Petroleum's Midcom Pipeline, Atmos Energy acquiring
United Cities Gas Co. and ONEOK, Inc. taking over Western Resources gas utility
operations.

The robust performance of the Fund during this period was attributed to several
positive influences. Growth in natural gas utilization was stressed by private
sector and government

TOP FIVE PERFORMERS
(PRICE CHANGE: YEAR ENDED MARCH 31, 1998)
Commonwealth Energy System Co. 91.02%
Essex County Gas Co. 90.21%
New York State Electrical and Gas Corp. 84.39%
MDU Resources Group, Inc. 71.55%
Rochester Gas and Electric Corp. 71.05%

BOTTOM FIVE PERFORMERS
(PRICE CHANGE: YEAR ENDED MARCH 31, 1998)
Virginia Gas Co. -21.80%
Southwestern Energy Co. -20.56%
Sonat, Inc. -20.18%
Citizens Utilities Co., Series B -11.05%
SEMCO Energy, Inc. - 8.78%

TOTAL RETURN COMPARISON
(YEAR ENDED MARCH 31, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Dow Jones
American Gas Index Fund Dow Jones Industrials Utilities S&P 500
29.62% 34.67% 34.52% 48.00%

The average annual total return was 29.62% for the one-year period, 12.89% for
the five-year period, and 11.86% for the period 5/10/89 (inception) through
March 31, 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>

analysts in spite of the negative impact of the El Nino winter on the seasonal
heating load. They also emphasized the low emission and high efficiency
attributes of natural gas in response to concerns regarding air quality, global
warming and worldwide economic competitiveness.

Looking ahead, industry's desire to generate electricity close to the point of
use with small power plants, called distributed power, is growing, and gas is
the preferred fuel. In addition, several aging nuclear plants are being
decommissioned and hydropower expansion is losing environmental support. These
developments provide excellent opportunities for new gas-fired units. Other
potential sources of increased demand result from technological developments in
gas-fueled climate control, power generation and fleet vehicles. Also, the stock
markets' record gains have made many investment advisors cautious and starting
to suggest natural gas stocks as a flight-to-quality refuge. Merger and
acquisition activity should continue to be an important influence on the value
of the Fund's portfolio.

The future of the natural gas industry seems bright. With gas supply and
delivery capacity expanding to meet growing demand, the Fund's holdings should
appreciate and financially reward Fund investors.

Sincerely,

[SIGNATURE]

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

<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS
MARCH 31, 1998

MARKET VALUE PERCENT OF
SHARES (NOTE 1) NET ASSETS
------- ------------- ----------
COMMON STOCKS
The Williams Companies, Inc. ........... 375,000 $ 12,000,000 4.91%
Duke Energy Corp. ...................... 200,000 11,912,500 4.88
El Paso Energy Co. ..................... 160,000 11,290,000 4.62
Consolidated Natural Gas Co. ........... 195,000 11,249,062 4.60
The Coastal Corp. ...................... 162,000 10,550,250 4.32
Enron Corp. ............................ 225,000 10,434,375 4.27
The Columbia Gas System, Inc. .......... 130,000 10,107,500 4.14
P G & E Corp. .......................... 295,000 9,735,000 3.98
Pacific Enterprises .................... 235,000 9,590,937 3.92
Houston Industries, Inc. ............... 270,000 7,762,500 3.18
MCN Energy Group, Inc. ................. 160,000 5,980,000 2.45
NICOR, Inc. ............................ 125,000 5,281,250 2.16
Sonat, Inc. ............................ 120,000 5,220,000 2.14
KN Energy, Inc. ........................ 85,400 5,043,938 2.06
Keyspan Energy Corp. ................... 115,000 4,175,938 1.71
National Fuel Gas Co. .................. 85,000 3,995,000 1.63
CMS Energy Corp. ....................... 75,000 3,520,312 1.44
Consolidated Edison Co. of New York,
Inc. ................................. 75,000 3,506,250 1.43
Peoples Energy Corp. ................... 95,000 3,455,625 1.41
AGL Resources, Inc. .................... 155,000 3,332,500 1.36
Washington Gas Light Co. ............... 120,000 3,285,000 1.34
Public Service Enterprise Group,
Inc. ................................. 80,000 3,030,000 1.24
Questar Corp. .......................... 70,000 2,909,375 1.19
Piedmont Natural Gas Co., Inc. ......... 80,000 2,780,000 1.14
ONEOK, Inc. ............................ 65,000 2,648,750 1.08
NIPSCO Industries, Inc. ................ 90,000 2,520,000 1.03
Atmos Energy Corp. ..................... 85,000 2,518,125 1.03
NGC Corp. .............................. 150,000 2,193,750 0.90
WICOR, Inc. ............................ 45,000 2,176,875 0.89
New Century Energies, Inc. ............. 42,500 2,140,937 0.88
Indiana Energy, Inc. ................... 61,700 1,877,994 0.77
Equitable Resources, Inc. .............. 55,000 1,828,750 0.75
Puget Sound Energy Co. ................. 61,000 1,719,438 0.70
Northwest Natural Gas Co. .............. 60,000 1,687,500 0.69
UtiliCorp United, Inc. ................. 40,000 1,577,500 0.65
Texas Utilities Co. .................... 40,000 1,572,500 0.64
New Jersey Resources Corp. ............. 40,000 1,567,500 0.64
Southwest Gas Corp. .................... 75,000 1,565,625 0.64
Eastern Enterprises .................... 35,000 1,505,000 0.62
Bay State Gas Co. ...................... 37,500 1,413,281 0.58

3
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)

MARKET VALUE PERCENT OF
SHARES (NOTE 1) NET ASSETS
------- ------------- ----------
COMMON STOCKS (CONTINUED)
Cinergy Corp. .......................... 37,500 $ 1,387,500 0.57%
Northern States Power Co. .............. 22,500 1,327,500 0.54
MDU Resources Group, Inc. .............. 35,000 1,305,938 0.53
Baltimore Gas and Electric Co. ......... 37,500 1,225,781 0.50
Enova Corp. ............................ 42,500 1,187,344 0.49
Laclede Gas Co. ........................ 46,000 1,152,875 0.47
Pennsylvania Enterprises, Inc. ......... 45,300 1,143,825 0.47
Public Service Co. of North Carolina,
Inc. ................................. 55,000 1,127,500 0.46
Southern Union Co.* .................... 44,625 1,071,000 0.44
Long Island Lighting Co. ............... 30,000 945,000 0.39
PECO Energy Co. ........................ 42,500 940,312 0.38
Wisconsin Energy Corp. ................. 30,000 920,625 0.38
MidAmerican Energy Holdings Co. ........ 40,000 907,500 0.37
The Montana Power Co. .................. 25,000 901,563 0.37
Energen Corp. .......................... 40,000 880,000 0.36
TECO Energy ............................ 30,000 847,500 0.35
South Jersey Industries, Inc. .......... 28,200 837,188 0.34
NUI Corp. .............................. 30,000 821,250 0.34
New York State Electric and Gas
Corp. ................................ 20,000 797,500 0.33
Citizens Utilities Co., Series B ....... 75,000 792,188 0.32
Connecticut Energy Corp. ............... 25,000 768,750 0.31
North Carolina Natural Gas Corp. ....... 28,200 763,163 0.31
Colonial Gas Co. ....................... 25,000 717,188 0.29
UGI Corp. .............................. 25,000 706,250 0.29
Commonwealth Energy System Co. ......... 17,000 677,875 0.28
Yankee Energy System, Inc. ............. 27,500 675,469 0.28
Rochester Gas & Electric Corp. ......... 20,000 650,000 0.27
CTG Resources, Inc. .................... 25,000 642,187 0.26
Illinova Corp. ......................... 20,000 603,750 0.25
SEMCO Energy, Inc. ..................... 35,000 590,625 0.24
DPL, Inc. .............................. 30,000 585,000 0.24
L G & E Energy Corp. ................... 22,500 580,781 0.24
Public Service Co. of New Mexico ....... 22,500 549,844 0.23
WPL Holdings, Inc. ..................... 12,500 421,094 0.17
WPS Resources Corp. .................... 12,500 416,406 0.17
EnergySouth, Inc. ...................... 16,000 377,000 0.15
Providence Energy Corp. ................ 17,000 355,937 0.15
Orange and Rockland Utilities, Inc. .... 7,500 336,562 0.14
Niagara Mohawk Power ................... 25,000 325,000 0.13
SIGCORP, Inc. .......................... 10,000 319,375 0.13
Connectiv, Inc. ........................ 13,000 285,187 0.12

4
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)

MARKET VALUE PERCENT OF
SHARES (NOTE 1) NET ASSETS
------- ------------- ----------
COMMON STOCKS (CONTINUED)
Central Hudson Gas and Electric
Corp. ................................ 6,500 $ 283,562 0.12%
Essex County Gas Co. ................... 6,000 276,750 0.11
EnergyNorth, Inc. ...................... 9,000 260,438 0.11
Southwestern Energy Co. ................ 22,000 233,750 0.10
Sierra Pacific Resources ............... 6,000 225,375 0.09
Chesapeake Utilities Corp. ............. 10,000 183,750 0.08
The Berkshire Gas Co. .................. 7,500 181,875 0.07
Fall River Gas Co. ..................... 11,000 178,063 0.07
Roanoke Gas Co. ........................ 7,500 166,875 0.07
National Gas and Oil Co. ............... 15,300 153,956 0.06
Entergy Corp. .......................... 5,000 148,750 0.06
Valley Resources, Inc. ................. 12,000 133,500 0.05
Delta Natural Gas Co., Inc. ............ 6,500 108,875 0.04
Corning Natural Gas Corp. .............. 4,500 90,000 0.04
Energy West, Inc. ...................... 7,500 65,625 0.03
Virginia Gas Co. ....................... 7,500 57,188 0.02
Minnesota Power and Light Co. .......... 1,000 42,500 0.02
------------- ----------
Total Common Stocks (Cost
$120,892,534) ........................ 225,319,001 92.20
------------- ----------

REPURCHASE AGREEMENT

With PaineWebber dated 3/31/98, at 5.75%
to be repurchased at $18,203,007 on
4/1/98, collaterized by U.S. Treasury
Notes due 8/15/98 (Cost
$18,200,100) ......................... 18,200,100 7.45
------------- ----------
TOTAL INVESTMENTS (COST
$139,092,634) ........................ 243,519,101 99.65
OTHER ASSETS LESS LIABILITIES .......... 848,619 0.35
------------- ----------
NET ASSETS (NOTE 5) .................... $244,367,720 100.00%
------------- ----------
------------- ----------
NET ASSET VALUE PER SHARE (BASED ON
13,147,754 SHARES OUTSTANDING) ....... $18.59
-------------
-------------

*Non-income producing.
See Notes to Financial Statements.

5
<PAGE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998

INVESTMENT INCOME
Dividends...................................................... $ 7,715,972
Interest....................................................... 350,483
-----------
Total Investment Income...................................... 8,066,455
-----------
EXPENSES
Investment Advisory Fee (Note 2)............................... 877,926
Accounting and Administrative Service Fee (Note 2)............. 768,186
Administrative Fee (Note 2).................................... 219,482
-----------
Total Expenses............................................... 1,865,594
-----------
NET INVESTMENT INCOME............................................ 6,200,861
-----------
Net Realized Gain on Investment Transactions..................... 10,027,070
Change in Net Unrealized Appreciation/Depreciation of
Investments.................................................... 40,256,921
-----------
NET GAIN ON INVESTMENTS.......................................... 50,283,991
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $56,484,852
-----------
-----------

See Notes to Financial Statements.

6
<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31,
<CAPTION>
1998 1997
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
<S> <C> <C>
Net Investment Income........................... $ 6,200,861 $ 6,618,283
Net Realized Gain on Investment Transactions.... 10,027,070 8,513,880
Change in Net Unrealized
Appreciation/Depreciation of Investments...... 40,256,921 15,598,586
------------- -------------
Net Increase in Net Assets Resulting from
Operations.................................. 56,484,852 30,730,749
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income...................... (6,222,067) (6,785,371)
From Net Realized Gain on Investments........... (1,570,262) --
------------- -------------
Total Distributions to Shareholders........... (7,792,329) (6,785,371)
------------- -------------
SHARE TRANSACTIONS
Net Proceeds from Sales of Shares............... 47,979,895 45,036,144
Reinvestment of Distributions................... 6,937,426 5,996,997
Cost of Shares Redeemed......................... (72,300,100) (65,920,201)
------------- -------------
Net Decrease in Net Assets Resulting from
Share Transactions.......................... (17,382,779) (14,887,060)
------------- -------------

TOTAL INCREASE IN NET ASSETS................... 31,309,744 9,058,318

NET ASSETS -- Beginning of Year................... 213,057,976 203,999,658
------------- -------------
NET ASSETS -- End of Year......................... $244,367,720 $213,057,976
------------- -------------
------------- -------------

SHARES
Sold............................................ 2,842,334 3,081,033
Issued in Reinvestment of Distributions......... 402,257 414,751
Redeemed........................................ (4,449,482) (4,534,204)
------------- -------------
Net Decrease in Shares........................ (1,204,891) (1,038,420)
------------- -------------
------------- -------------

See Notes to Financial Statements.

</TABLE>
7

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

FINANCIAL HIGHLIGHTS
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------------------------
1998 1997 1996 1995 1994
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value -- Beginning of Year................................ $ 14.84 $ 13.25 $ 11.13 $ 11.08 $ 12.17
----------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income............................................. 0.47 0.45 0.45 0.44 0.41
Net Realized and Unrealized Gain (Loss) on Investments............ 3.87 1.60 2.13 0.05 (1.03)
----------- -------- -------- -------- --------
Total from Investment Operations................................ 4.34 2.05 2.58 0.49 (0.62)
----------- -------- -------- -------- --------
Distributions to Shareholders:
From Net Investment Income........................................ (0.47) (0.46) (0.46) (0.44) (0.41)
From Net Realized Capital Gain.................................... (0.12) -- -- -- (0.06)
----------- -------- -------- -------- --------
Total Distributions............................................. (0.59) (0.46) (0.46) (0.44) (0.47)
----------- -------- -------- -------- --------
Net Increase (Decrease) in Net Asset Value.......................... 3.75 1.59 2.12 0.05 (1.09)
----------- -------- -------- -------- --------
Net Asset Value -- End of Year...................................... $ 18.59 $ 14.84 $ 13.25 $ 11.13 $ 11.08
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------

TOTAL INVESTMENT RETURN............................................... 29.62% 15.60% 23.46% 4.72% (5.37)%

RATIOS TO AVERAGE NET ASSETS
Expenses............................................................ 0.85% 0.85% 0.85% 0.85% 0.84%
Net Investment Income............................................... 2.83% 3.06% 3.71% 4.04% 3.33%

SUPPLEMENTARY DATA
Portfolio Turnover Rate............................................. 12.9% 8.2% 10.0% 8.5% 11.4%
Net Assets at End of Year (000's omitted)........................... $ 244,368 $213,058 $204,000 $188,544 $209,036
Number of Shares Outstanding at End of Year (000's omitted)......... 13,148 14,353 15,391 16,941 18,858
Average Commission Rate Paid(A)..................................... $ 0.0422 $ 0.0439 -- -- --

- ------------------------------

(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.

See Notes to Financial Statements.
</TABLE>

<PAGE>
AMERICAN GAS INDEX FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998

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 transmission
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 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. 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 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

<PAGE>

Trust serves as custodian of the Fund's assets and pays the operating expenses
of the Fund. For these services the Trust receives an annual fee of 0.35% of
the average daily net assets of the Fund.

The American Gas Association (A.G.A.) serves as administrator for the Fund. As
administrator, A.G.A. calculates and maintains the Index and provides the Fund
with information concerning the natural gas industry. For these services, the
Fund pays a fee at an annual rate of 0.10% of the average daily net assets of
the Fund.

3. SECURITIES TRANSACTIONS

For the year ended March 31, 1998, purchases of securities were $27,651,058,
and sales of securities were $62,263,017. These totals exclude short-term
securities.

4. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS

As of March 31, 1998, net unrealized appreciation of investments for Federal
income tax purposes was $103,132,484 of which $103,436,893 related to
appreciated investments and $304,409 related to depreciated investments. At
March 31, 1998, the cost of the Fund's securities for Federal income tax
purposes was $140,386,617.

5. NET ASSETS

At March 31, 1998 net assets consisted of the following:

Paid-in-Capital................................................ $136,753,894
Net Unrealized Appreciation of Investments..................... 104,426,467
Accumulated Realized Gain on Investments....................... 3,154,298
Undistributed Net Investment Income............................ 33,061
-------------
NET ASSETS..................................................... $244,367,720
-------------
-------------

10
<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, 1998, 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, 1998 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, 1998, 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.

[SIGNATURE]

/s/ Deloitte & Touche LLP
Princeton, New Jersey

May 1, 1998

11
<PAGE>
[LOGO]

Annual Report
March 31, 1998

<PAGE>

PART C

<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, 1998
Statement of Operations for the year ended March 31, 1998
Statements of Changes in Net Assets for the years ended March 31, 1998
and March 31, 1997
Financial Highlights for the years ended March 31, 1998, 1997, 1996,
1995 and 1994

No Statement of Sources of Net Assets will be included because
the full amount of net assets on March 31, 1998 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, 1998

Common Stock, $.001 par value 9,828

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.

<PAGE>

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 three limited partners. Daniel L. O'Connor is the general
partner of MMA. Limited partners John R. Cralle, 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.

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 23rd day of July 1998.

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/ Philip Borish Director July 23, 1998
Philip Borish

/s/ Bette Clemons Director July 23, 1998
Bette Clemens

/s/ Louis T. Donatelli Director July 23, 1998
Louis T. Donatelli

/s/Richard J. Garvey Chairman, Director July 23, 1998
Richard J. Garvey President and Treasurer

/s/ George H. Lawrence Director July 23, 1998
George H. Lawrence

/s/ Carl Levin Director July 23, 1998
Carl Levin

/s/ Patrick F. Noonan Director July 23, 1998
Patrick F. Noonan

/s/ Daniel L. O'Connor Director July 23, 1998
Daniel L. O'Connor

/s/ Eugene A. Tracy Director July 23, 1998
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. 9 to Registration Statement Nos. 33-25678 and 811-5702
of our report dated May 1, 1998 appearing in the Annual Report of
American Gas Index Fund, Inc. for the year ended March 31, 1998, and
to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which is also a part of such Registration
Statement.

DELOITTE & TOUCHE LLP
Princeton, New Jersey
July 27, 1998

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, 1998

n
P (1 + T) = ERV

ERV = $ 1,296

n = 1.0 year

T = 29.62 %

B. For the five year period ended March 31, 1998

n
P (1 + T) = ERV

ERV = $ 1,833

n = 5.0 years

T = 12.89 %

C. For the period May 10, 1989 (Commencement of Operations)
to March 31, 1998

n
P (1 + T) = ERV

ERV = $ 2,710

n = 8.89589 years

T = 11.86 %

<ARTICLE> 6

<S> <C>
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<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 139,092,634
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</TABLE>