As Filed With The Securities And Exchange Commission on May 25, 1999.
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. 10 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 14 (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.
_____ on (date) pursuant to paragraph (b)(1)(v) of rule 485.
_____ 60 days after filing pursuant to paragraph (a) (1) of rule 485.
__X__ on August 1, 1999 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.
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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
Form N-1A Location in
Item No. Registration Statement
- ---------- ----------------------
Part A. Information Required in Prospectus
------------------------------------------
1. Front and Back Cover Pages Front Cover Page of
Prospectus;
Back Cover Page of Prospectus
2. Risk/Return Summary Risk and Return Summary
3. Risk/Return Summary: Fee Table Risk/Return Bar Chart and
Table; Performance Table; Fees
and Expenses
4. Investment Objectives, Principal Investment Objectives,
Investment Strategies, and Principal Investment
Related Risks Strategies, and Related Risks
5. Management's Discussion of Fund Management Discussion of Fund
Performance Performance: Performance
Comparison
6. Management, Organization, and Management, Organization, and
Capital Structure Capital Structure: Investment
Adviser; Year 2000
Preparations
7. Shareholder Information Shareholder Information: How
to Invest in the Fund; How to
Redeem Your Investment; Additional
Information About the Fund:
Exchanging Fund Shares; Pricing of
Fund Shares; Dividends and
Distributions; Tax Consequences of
Investing in the Fund
8. Distribution Arrangements Not Applicable
9. Financial Highlights Information Financial Highlights
Part B: Information Required In
Statement of Additional Information
-----------------------------------
10. Cover Page and Table of Contents Cover Page and Table of
Contents
11. Fund History Not Applicable
12. Description of the Fund and Its Fund Description, Investments,
Investments and Risks and Risks; Investment
Limitations
13. Management of the Fund Management of the Fund
14. Control Persons and Principal Control Persons and Principal
Holders of Securities Holders of Securities
15. Investment Advisory and Other Investment Advisory and Other
Services Services: Investment Adviser;
Custodian and Independent
Public Accountant
16. Brokerage Allocation and Other Brokerage Allocation and Other
Practices Practices
<PAGE>
Form N-1A Location in
Item No. Registration Statement
- --------- ----------------------
17. Capital Stock and Other Not Applicable
Securities
18. Purchase, Redemption and Purchase and Redemption of
Pricing of Shares Shares
19. Taxation of the Fund Taxation of the Fund
20. Underwriters Not Applicable
21. Calculation of Performance Data Calculation of Performance
Data: Average Annual Total
Return Quotation; Computation
of Yield
22. Financial Statements Financial Statements
Part C: Other Information
-------------------------
23. Exhibits Exhibits
24. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Fund Common Control with the Fund
25. Indemnification Indemnification
26. Business and Other Connections Business and Other Connections
of Investment Adviser of Investment Adviser
27. Principal Underwriters Not Applicable
28. Location of Accounts and Records Location of Accounts and
Records
29. Management Services Not Applicable
32. Undertakings Not Applicable
Signatures Signatures
<PAGE>
PART A
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AMERICAN GAS INDEX FUND, INC.
Prospectus
August 1, 1999
The American Gas Index Fund, Inc. (the "Fund") is a no-load mutual
fund designed to provide investment results that correlate to those of
an index comprising the common stocks of natural gas distribution and
transmission companies including members of the American Gas
Association ("A.G.A.").
This Prospectus contains important information about the Fund and
should be read before investing. Please keep the Prospectus on file
for future reference.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
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TABLE of CONTENTS
Page
Risk and Return Summary:
Investments, Risks, and Performance
Risk/Return Bar Chart and Table
Performance Table
Fees and Expenses
Investment Objectives, Principal Investment
Strategies, and Related Risks
Management's Discussion of Fund Performance
Performance Comparison
Shareholder Information
How to Invest in the Fund
How to Redeem Your Investment
Additional Information About the Fund
Exchanging Fund Shares
Pricing of Fund Shares
Dividends and Distributions
Tax Consequences of Investing in the Fund
Management, Organization, and Capital Structure
Investment Adviser
Year 2000 Preparations
Financial Highlights
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RISK and RETURN SUMMARY
Investments, Risks, and Performance
Fund Investment Objective
The American Gas Index Fund's investment objective is income and
capital appreciation.
Principal Fund Investment Strategy
Designed as an index fund, the Fund intends to provide investment
results that correlate to the performance of an index of natural gas
distribution and transmission companies including members of the
American Gas Association ("A.G.A."), a national trade association of
natural gas companies. In so doing, the Fund principally invests in
the common stocks of natural gas distribution, gas pipeline,
diversified gas, and combination gas and electric companies
headquartered in the United States.
Principal Risks of Investing in the Fund
Because the Fund principally invests in the common stocks of natural
gas distribution and transmission companies, the Fund is concentrated
in a single industry and is therefore subject to risks associated with
this industry. Additionally, the gas industry 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.
Considering these risks, there is a risk you could lose as well as
make money by investing in the Fund. As with any fund, there is no
guarantee that the Fund's performance will be positive over any period
of time, either short-term or long-term. Also, please note that an
investment in the Fund is not a deposit of the bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
Risk/Return Bar Chart and Table
The chart and table below shows the annual calendar-year returns and
the performance of the Fund. The Fund commenced operations on May 10,
1989, and has a fiscal year-end of March 31. The information in the
chart and the table provides some indication of the risks of investing
in the Fund by showing changes in Fund performance from year to year.
The chart and the table below assume the reinvestment of dividends and
distributions. Please keep in mind that how the Fund has performed in
the past does not necessarily indicate how the Fund will perform in
the future.
Annual Total Return Chart
[Deleted Bar Chart]
1991 3.2%
1992 11.4%
1993 16.6%
1994 -9.8%
1995 30.5%
1996 20.8%
1997 24.2%
1998 5.3%
Best Quarter: 15.14% 3rd Qtr of 1993
Worst Quarter: (8.79)% 1st Qtr of 1999
The Fund's year-to-date total return as of June 30, 1999 was ___%.
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Performance Table
Average Annual Total Returns
(for Periods Ended December 31, 1998)
American Gas Dow Jones
Index Fund Utility Average
One Year 5.26% 18.66%
Five Years 13.21% 12.26%
FEES and EXPENSES
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees 0.40%
Administrative Fees 0.10%
Other Expenses 0.35%
-----
Total Annual Fund Operating Expenses 0.85%
If your monthly account balance averages $500 or less due to redemptions
you may be charged a $5 fee.
Example
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated below and then redeem all of your shares at the end
of those periods. The Example also assumes that your investment has a
5% return each year, that all dividends are reinvested, and that the
Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would
be:
1 year 3 years 5 years 10 years
$ 87 $ 271 $ 471 $ 1,049
INVESTMENT OBJECTIVES, PRINCIPAL
INVESTMENT STRATEGIES, and RELATED RISKS
Fund Investment Objective
The American Gas Index Fund's investment objective is income and
capital appreciation.
Principal Investment Strategies
The Fund is designed as a common stock index fund and intends to
invest at least 85% of its net assets in natural gas distribution and
transmission companies including members of the A.G.A. The A.G.A.
Stock Index (the "Index") contains approximately 100 publicly traded
stocks of gas companies headquartered in the United States. The Index
is composed of gas distribution companies, gas pipeline companies,
diversified gas companies and combination gas and electric companies.
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
its elimination from the portfolio unless the company is removed from
the Index. The stocks included in the Fund are chosen solely on the
statistical basis of their weightings in the Index. Each stock's
proportion of the Index is based on that stock's market
4
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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. To avoid deviation in the Fund's performance from the
Index, the Fund will seek to invest most of its assets in the stocks
of the Index. Although there is no predetermined acceptable range of
deviation between the performance of the Index and that of the Fund,
it would be reasonable to expect that the Fund's performance will not
deviate more than 5% per year from the performance of the Index. If a
deviation occurs, it may be the result of various expenses incurred by
the Fund, such as management fees, transaction costs and other
operating expenses.
Generally up to 10% 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. The
Fund may also lend portfolio securities for the purpose of earning
additional income.
Principal Risks of Investing in the Fund
The adviser of the Fund does not select stocks for investment based on
a judgment of their individual future returns, but generally invests
in the issues included in the Index. By employing a statistical
approach that concentrates all investments 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 and electric
power generators 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. Additionally, weather may also
affect gas company earnings. For example, a warmer winter could
decrease the amount of gas used by heating customers and reduce
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.
MANAGEMENT'S DISCUSSION of FUND PERFORMANCE
Two consecutive near record warmer than average winters reduced gas
heating demand in the residential, commercial and industrial sectors.
As a result, gas company financial results were dismal and gas stocks
were jettisoned by short-term market traders. According to one
veteran industry analyst, "The good news is that the odds for a repeat
performance in 1999/00 are very slim." Consequently, the fiscal year
ending March 31, 1999 was the Fund's low point in performance, since
the Fund was launched in May of 1989.
For the fiscal year ended March 31, 1999, the Fund's total return was
a negative 6.35%. Net asset value (NAV) at the beginning of the
period was $18.59 and reached an all time high of $18.95 on April 2.
As the financial impact of the first of the warm winters became
widespread and was compounded by the second warm winter the Fund's NAV
steadily declined to a low of $16.27 on February 16,1999. During the
fiscal year, the Fund provided an income return of 6.08% composed of a
regular dividend of $0.5070 cents and capital gains distributions of
$0.6832 cents per share. Six of the Fund's ten largest holdings
declined during the fiscal year, as did 78% of total portfolio. As a
result, the Fund lagged behind most market benchmarks.
The American Gas Association forecasts that with normal weather, gas
demand will grow by 5% this year and increase by 32% by the year 2010.
Similar predictions have been promulgated by American and Canadian
governmental bodies and energy "think tanks". The industry is
preparing for this growth by expanding pipeline delivery capacity,
increasing storage facilities, and maintaining domestic and Canadian
gas reserves. New technology, especially in power generation and
climate control, is expected to account for much of the growth. In
addition, new construction and conversion of non-gas heated homes
represent a huge and profitable market for gas utilities. This
positive long term industry outlook combined with the deregulation of
gas and electric power companies and depressed stock prices has
accelerated merger and acquisition activity by growth oriented
management. Several major announced "deals" are being finalized.
This activity has increased investor interest in the Fund's holdings
and should be a bonus for the Fund by providing financial rewards for
Fund shareholders. You can follow the Fund's progress on our web site
www.rushmorefunds.com or contact us directly. We welcome your
interest and participation in the Fund.
5
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Performance Comparison
Assuming a $10,000 initial investment, the following graph compares
the Fund's total return to the performance of the Dow Jones Utility
Average ("Utility Average") and the Dow Jones Gas Utilities Index
("Gas Utilities Index") since the Fund began operating on May 10,
1989. The Gas Utilities Index was used in the performance comparison
in the preceding year; however, the companies that comprise the
Utility Average best represent the Fund's top holdings. Consequently,
going forward, an investment in the Fund will only be compared to a
hypothetical investment in the Utility Average rather than the Gas
Utilities Index. Please remember that past performance does not
necessarily reflect how the Fund may perform in the future.
[Deleted Line Chart]
American Gas Dow Jones Dow Jones Gas
Index Fund Utility Average Utilities Index
5/10/89 $10,000 $10,000 $10,000
3/31/90 $11,655 $11,385 $11,415
3/31/91 $11,241 $12,320 $11,041
3/31/92 $10,917 $12,452 $ 8,759
3/31/93 $14,779 $15,519 $11,918
3/31/94 $13,985 $13,368 $10,738
3/31/95 $14,645 $13,700 $11,199
3/31/96 $18,081 $16,472 $13,987
3/31/97 $20,901 $17,881 $17,298
3/31/98 $27,092 $24,380 $22,365
3/31/99 $25,373 $23,085 $18,753
Average Annual Total Returns as of March 31, 1999
One Year (6.35)%
Five Year 12.65 %
Since Inception 9.87 %
SHAREHOLDER INFORMATION
Facts To Know Before You Invest:
- The minimum initial investment is $2,500
- Retirement accounts may be opened with a $500 minimum investment
- There are no minimum amounts for subsequent investments
- There are no sales charges
- The Funds reserve the right to reject any purchase order
- All shares are electronically recorded; the Fund will not issue
certificates
- A $10 fee may be charged for items returned for insufficient or
uncollectible funds
How to Invest In The Fund
Invest 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:
6
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American Gas Index Fund
4922 Fairmont Avenue
Bethesda, Maryland 208l4
Invest 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 # 0550-71084
Specify the Fund name, your account number (if assigned), and the
name(s) in which the account is registered.
After instructing your bank to transfer Federal funds, you must
telephone Shareholder Services at (800) 622-1386 or (301) 657-1510
between 8:30 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 its services. Remember that it is
important to complete the wire transfer before 4:00 P.M. Eastern
time.
Invest Through Brokers
You may also 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, such as those mentioned, 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 their services. Certain third party
organizations may receive compensation from the Fund, the Fund's
transfer agent, or the Fund's Adviser for the shareholder services
they provide.
How To Redeem Your Investment
Redeem By Telephone
Contact Shareholder Services at (800) 622-1386
between the hours of 8:30 A.M. and 4:30 P.M., Eastern time
For your protection, we will take measures to verify your identity
by requiring some form of personal identification prior to acting
on telephone instructions and may also record telephone
transactions. A written confirmation will be mailed to you within
five business days after your redemption. Please note that we may
terminate or modify telephone redemption privileges upon 60 days
notice.
Redeem By Mail or Fax
Mail your instructions for Fax your instructions for redemption
redemption to: 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 in your redemption request:
- 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.
Additional Information You Should Know When You Redeem:
- There are no fees charged for redemptions.
7
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- You may receive redemption proceeds by bank wire, check, or
through the Automated Clearing House System (ACH). When the amount
to be redeemed is at least $5,000, we will, upon instruction, wire
transfer the amount to your commercial bank or brokerage account
specified in your account application. For amounts less than
$5,000, you 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 your address of record.
- If you request payment of redemptions to a third party or to a
location other than an address on record, the request must be in
writing and your 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).
- Normally, payment for all shares redeemed will be issued within
one business day. However, withdrawal requests on investments that
have been made by check may be delayed up to ten calendar days
following the investment or until the check clears, whichever
occurs first. This delay is necessary to assure us that investments
made by check are good funds. You will receive redemption proceeds
promptly upon confirmation of receipt of good funds.
- If your monthly account balance averages less than $500 you may
be charged a $5 fee. The fee will not be imposed on accounts
established under the Uniform Gifts or Transfers to Minors Acts.
Additionally, we reserve the right to involuntarily redeem accounts
which fall below $500 after providing 60 days written notice.
- 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 (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 or 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.
- 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.
ADDITIONAL INFORMATION ABOUT THE FUND
Exchanging Fund Shares
You may exchange shares of the Fund, without cost, for shares of any
of the following Rushmore Funds: Fund for Government Investors, U.S.
Government Bond Portfolio, Tax-Free Money Market Portfolio, Maryland
Tax-Free Portfolio, or the Virginia Tax-Free Portfolio. You may also
exchange shares of the Fund for shares of the Cappiello-Rushmore
Emerging Growth, Growth and Utility Income Funds. The fund you are
exchanging into must be available for sale in your state and the
registration for both accounts must be identical. You should obtain a
current prospectus for the fund into which you are exchanging by
calling (800) 343-3355. Exchanges will be effected at the respective
net asset values of the Funds involved as next determined after
receipt of the exchange request. The Fund may change or cancel their
exchange policies at any time, upon 60 days' notice to shareholders.
Pricing of Fund Shares
The price of the Fund's shares is its net asset value per share. This
figure is computed by dividing the total value of the Fund's
investments and other assets, less any liabilities, by the number of
Fund shares outstanding. The net asset value per share of the Fund is
determined as of 4:00 P.M. Eastern time on days when the New York
Stock Exchange is open for business. Orders accepted by the Fund
directly or by an authorized third party will be priced at the next
computed net asset value after the orders are received. This means
that if you place a purchase or redemption order after 4:00 P.M.
Eastern time, it will be effected at the next calculation of net asset
value, normally 4:00 P.M. the next business day.
The Fund values its portfolio securities based on their market value.
Each security held by the Fund is valued at the last quoted sale price
for a given day, or if a sale is not reported for that date, at the
mean between the most recent quoted bid and asked prices. Price
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information on each listed security is taken from the exchange where
the security is primarily traded. Unlisted securities for which
market quotations are readily available are valued at the last sales
prices. The value of assets for which no quotations are readily
available, including any restricted securities, are valued at fair
value in good faith by the Board of Directors or at the direction of
the Directors.
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 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 paid in cash to those investors so electing will be mailed
by the second business day of the following month. Capital gains, if
any, will be distributed on an annual basis. Statements of account
showing dividends and distributions paid will be sent at least
quarterly. To change the method of receiving dividends, investors
must notify the Fund in writing. 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.
"Undeliverable" or "Uncashed" Dividend Checks
If you elect to receive dividends and distributions in cash and the
payment (1) is returned and marked as "undeliverable" or (2)
remains uncashed for six months, your cash election will be changed
automatically and future dividends will be reinvested in the Fund
at the per share net asset value determined as of the date of
payment. In addition, any undeliverable checks or checks that
remain uncashed for six months will be canceled and then reinvested
in the Fund at the per share net asset value determined as of the
date of cancellation.
Tax Consequences of Investing
Taxability of Distributions
As long as the Fund meets the requirements for being tax-qualified
regulated investment company, which the Fund intends to do, the
Fund pays no federal income tax on the earnings distributed to
shareholders. As a result, dividends and any short-term capital
gains you receive, whether reinvested or taken as cash, are
generally considered taxable as ordinary income. The Form 1099 that
is mailed to you each January details your dividends and their
federal tax category, although you should verify your tax liability
with your tax professional.
Taxability of Transactions
Any time you sell or exchange shares of the Fund, it is considered
a taxable event for you. For example, if you exchange shares of
the Fund for shares of another Rushmore or Cappiello-Rushmore fund,
the transaction would be treated as a sale. Consequently, any gain
resulting from the transaction would be subject to federal income
tax.
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 31% on
dividends, capital gains distributions, and redemptions.
Shareholders who are non-resident aliens may be subject to a
withholding tax on dividends earned.
MANAGEMENT, ORGANIZATION and CAPITAL STRUCTURE
Investment Adviser
Money Management Associates ("Adviser"), 100 Lakeshore Drive, Suite
1555, North Palm Beach, Florida 33408, has served as the Fund's
investment adviser since the Fund commenced operations on May 10,
1989. Established in 1974, the Adviser manages six no-load mutual
funds (including the Fund) with total assets under management of
approximately $900 million.
Subject to the general supervision of the Board of Directors of the
Fund, the Adviser manages the investment and reinvestment of the
assets of the Fund and is responsible for the overall management of
the Fund's business affairs. An Adviser Group makes investment
decisions; therefore, no one person is primarily responsible for
making investment decisions. For the advisory services performed, the
Adviser received 0.40% of the average net assets of the Fund for the
fiscal year ended March 31, 1999.
Year 2000 Preparations
The day-to-day operations of the Fund are dependent upon the Fund's
service providers, principally the Adviser, Rushmore Trust and
Savings, FSB, Rushmore Services, Inc. and the American Gas Association
(collectively, the "Servicers"), and upon the smooth functioning of
the computer systems that they utilize. Many computer systems
currently cannot properly recognize or process date-sensitive
information relating to the year 2000 and beyond. Like other mutual
funds and financial and business organizations around the world, the
Fund, therefore, could be adversely affected if the computer systems
9
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used by these Servicers, and their vendors, do not properly process
and calculate date-related information and data on and after January
1, 2000. The Servicers have been evaluating the impact that the year
2000 issue may have on the computer systems that they utilize and are
making appropriate modifications to these systems in order to assure
that they will be prepared for the year 2000. The Fund and the
Servicers expect that any further modifications to their computer
systems necessary to address the year 2000 issue will be made and
tested in a timely manner. The Servicers also are working with their
outside vendors, and other persons whose systems are linked to those
of the Fund and the Servicers, to obtain satisfactory assurances
regarding the year 2000 issue. The costs of this systems remediation
will not be paid directly by the Fund. Inadequate remediation could
have an adverse effect on the Fund's operations, including pricing and
securities trading and settlement, and the provision of shareholder
services. Although, at this time, there can be no assurance that the
remedial action taken by the Servicers will be sufficient or timely,
the Servicers do not anticipate that the transition to the 21st
century will have a material impact on the ability of the Servicers to
continue to service the Fund at current levels.
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FINANCIAL HIGHLIGHTS
The following financial highlights table is intended to help you
understand the Fund's financial performance for the past five years.
Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has
been audited by Deloitte & Touche LLP, whose report, along with the
Fund's financial statements, is included in the annual report, which
is available upon request.
<TABLE>
<CAPTION>
For the Years Ended March 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 18.59 $ 14.84 $ 13.25 $ 11.13 $ 11.08
Income from Investment Operations:
Net Investment Income 0.51 0.47 0.45 0.45 0.44
Net Realized and Unrealized Gain
on Investments (1.63) 3.87 1.60 2.13 0.05
--------- --------- --------- ---------- ---------
Total from Investment Operations (1.12) 4.34 2.05 2.58 0.49
--------- --------- --------- ---------- ---------
Less Distributions:
Dividends (from net investment income) (0.51) (0.47) (0.46) (0.46) (0.44)
Distributions (from net realized capital gain) (0.68) (0.12) - - -
--------- --------- --------- ---------- ---------
Total Distributions (1.19) (0.59) (0.46) (0.46) (0.44)
--------- --------- --------- ---------- ---------
Net Asset Value, End of Period $ 16.28 $ 18.59 $ 14.84 $ 13.25 $ 11.13
========== ========= ========= ========= =========
Total Investment Return (6.35)% 29.62% 15.60% 23.46% 4.72%
Ratios and Supplemental Data:
Net Assets at End of Year (in thousands) $200,317 $244,368 $213,058 $204,000 $188,544
Ratio of Expenses to Average Net Assets 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of Net Income to Average Net Assets 2.84% 2.83% 3.06% 3.71% 4.04%
Portfolio Turnover Rate 10.4% 12.9% 8.2 % 10.0 % 8.5 %
</TABLE>
11
<PAGE>
In addition to this prospectus, the following information is available
to assist you in making an investment decision:
Information Available Upon Request Description
Statement of Additional Information A document that includes additional
information about the Fund.
Annual and Semiannual Reports Reports that contain information
about the Fund's investments. The
reports also discuss the market
conditions and investment strategies
that significantly affected the
Fund's performance during its last
fiscal year.
There are a variety of ways to receive the above information and make
other inquiries of the Fund. You may contact the Fund directly by
telephone at 1-800-343-3355, visit our internet site at
http://www.rushmorefunds.com, or you may send a written request to the
Fund's offices at 4922 Fairmont Avenue, Bethesda, Maryland 20814.
Additional information about the Fund can also be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in
Washington D.C. (for hours of operation please call the Commission at
(800) SEC-0330). You may also obtain copies of the information by
visiting the Commission's internet site at http://www.sec.gov, or,
upon payment of a duplicating fee, by writing the Public Reference
Section of the Commission at 450 Fifth Street, N.W. Washington, D.C.
20549.
American Gas Index Fund, Inc. Investment Company Act File No. 811-5702
12
<PAGE>
PART B
Statement of Additional Information
13
<PAGE>
AMERICAN GAS INDEX FUND, INC.
4922 Fairmont Avenue, Bethesda, MD 20814
(800) 343-3355
(301) 657-1500
Statement of Additional Information
August 1, 1999
This Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Fund's Prospectus, dated August
1, 1999. A copy of the Fund's Prospectus may be obtained without
charge by writing or telephoning the Fund at the above address or
telephone numbers.
The audited financial statements of the Fund, for the Fund's fiscal
year ended March 31, 1999, are included in the Fund's 1999 Annual
Report to Shareholders, which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. Copies
of the Fund's 1999 Annual Report are available, without charge, by
request by writing or telephoning the Fund at the above address or
telephone numbers.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Table of Contents
Page in
Statement of
Additional Page in
Information Prospectus
------------ ----------
Fund Description, Investments, and Risks
Investment Limitations -
Management of the Fund
Control Persons and Principal Holders of -
Securities
Investment Advisory and Other Services
Brokerage Allocation and Portfolio -
Transactions
Taxation of the Fund -
Calculation of Performance Data -
Financial Statements
2
<PAGE>
FUND DESCRIPTION, INVESTMENTS and RISKS
Description
The American Gas Index Fund (the "Fund") is an open-end, diversified
management investment company incorporated in the State of Maryland on
November 21, 1988.
Investments
Discussion of Index Methodology
The American Gas Association Stock Index (the "Index") is comprised of
approximately 100 of the publicly traded companies including members
of the American Gas Association ("A.G.A.") and headquartered in the
United States. These companies are engaged in the distribution and/or
transmission of natural gas. The Index is computed 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 process, completed at
least annually, is done to recognize the natural gas component of the
company's asset base. 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, individual stocks will be limited to no more than
5% of the Index. Therefore in calculating the Index, any
representation in the Index exceeding 5% will be reallocated. 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. Generally, 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 Fund's net asset value. 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 net assets. 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.
Non-Principal Investment Strategies and Risks
As stated in the Fund's prospectus and discussed above, the Fund is
designed as a common stock index fund and intends to invest at least
85% of its net assets in natural gas distribution and transmission
companies according to the Index monitored by A.G.A. In addition to
the Fund's principal investment strategies, generally the Fund may
also invest up to 10% of the Fund's assets 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. A description of these
investments and their corresponding risks follow.
U.S. Government Securities
The term "government securities" is used is defined broadly in the
rules that regulate investment companies. There are, in fact, three
major classifications, each of which the Fund may invest in:
3
<PAGE>
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the U.S.
Government and are backed by the full faith and credit of the U.S.
Treasury. U.S. Treasury securities differ only in their interest
rates, maturities, and dates of issuance. Treasury Bills have
maturities of one year or less. Treasury Notes have maturities of
one to ten years, and Treasury Bonds generally have maturities of
greater than ten years at the date of issuance. Yields on short-,
intermediate-, and long-term U.S. Treasury securities are dependent
on a variety of factors, including the general conditions of the
money and bond markets, the size of a particular offering, and the
maturity of the obligation.
Government Agency Securities
Government agency securities, often called agencies, are indirect
obligations of the U.S. government, and are issued by federal
agencies and government-sponsored corporations under authority from
Congress. Government agency securities may be backed by the full
faith and credit of the federal government, which is the case with
Government National Mortgage Association and Small Business
Administration certificates, but are more often guaranteed by the
sponsoring agency with the implied backing of Congress. Examples
of government agency securities include, Export-Import Bank of the
United States, the Federal Home Loan Bank, and the Government
National Mortgage Association.
Government-Sponsored Enterprises
Government-sponsored enterprises are characterized as being
privately owned and publicly chartered. These entities were
created by the U.S. Government to help certain important sectors of
the economy reduce their borrowing costs. The U.S. Government does
not back government-sponsored enterprise securities. However, the
fact that the government sponsored the enterprise creates the
assumption that the federal government would not let the entity go
into default. The Student Loan Marketing Association, the Federal
National Mortgage Association, and Federal Home Loan Banks are
examples of government-sponsored enterprise securities.
Risks Associated with Investing in U.S. Government Securities
The U.S. Government is considered to be the best credit-rated
issuer in the debt markets. Since Treasury securities are direct
obligations of the U.S. Government, there is no credit risk. While
most other government-sponsored securities are not direct
obligations of the U.S. Government (some are guaranteed), they also
offer little, if any, credit risk.
However, another type of risk that may effect the Fund is market
and/or interest rate risk. For example, debt securities with
longer maturities tend to produce higher yields and are generally
subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities and lower
yields. The market value of U.S. Government securities generally
varies inversely with changes in market interest rates. An
increase in interest rates, therefore, would generally reduce the
market value of any U.S. Government securities held by the Fund,
while a decline in interest rates would generally increase the
market value of these investments.
Bank Money Market Instruments
What is a Bank Money Market Instrument?
Bank money markets are insured by federally sponsored agencies and
provide high liquidity and a relatively risk-free way to earn
interest on cash reserves.
Risks of Bank Money Market Instruments
Bank deposits and CDs are insured to $100,000 per depositor by the
Bank Insurance Fund and the Savings Association Insurance Fund,
units of the Federal Deposit Insurance Corporation ("FDIC"), and by
the National Credit Union Administration ("NCUA"). The FDIC and
NCUA are federally sponsored agencies. Consequently, bank money
market instruments offer little risk.
Repurchase Agreements
What is a Repurchase Agreement?
A repurchase agreement is an agreement where a Fund acquires a
money market instrument from a commercial bank or broker/dealer
with the understanding that the Fund will sell the instrument
back at an agreed-upon price and date (normally, the next
business day). Essentially, a repurchase agreement may be
considered a loan backed by securities. The resale price
reflects an agreed-upon interest rate effective for the period
the instrument is held by the Fund. In these transactions, the
value of the securities acquired by the Fund (including accrued
interest earned) must be greater than the value of the repurchase
agreement itself. The securities are held by the Fund's
custodian bank until repurchased.
4
<PAGE>
Why Would the Fund Use Repurchase Agreements?
The Fund may invest in repurchase agreements secured by
securities issued or guaranteed by the U.S. Government, its
agencies and government-sponsored enterprises: (i) for defensive
purposes due to market conditions; or (ii) to generate income
from the Fund's excess cash balances. The Fund will only enter
into repurchase agreements with member banks of the Federal
Reserve system or primary dealers of U.S. Government securities.
Risks of Repurchase Agreements
The use of repurchase agreements involves certain risks. For
example, if the other party to the agreement defaults on its
obligations to repurchase the underlying security at a time when
the value of the security has declined, the Fund may incur a loss
when the security is sold. If the other party to the agreement
becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine
that the underlying security is collateral for a loan by the Fund
not within the control of the Fund. Consequently, the Fund may
not be able to substantiate its interest in the underlying
security and may be deemed an unsecured creditor of the other
party to the agreement. While the Fund's investment adviser
acknowledges these risks, it is expected that these risks can be
controlled through monitoring procedures. These procedures
include effecting repurchase transactions only with large, well-
capitalized and well-established financial institutions whose
condition will be continually monitored. In addition, the value
of the collateral underlying the repurchase agreement will always
be at least equal to the repurchase price, including any accrued
interest earned in the repurchase agreement.
Lending of Securities
The Fund may lend its securities to qualified institutional investors
(i.e., brokers, dealers, banks or other financial institutions) who
need to borrow securities in order to complete certain transactions,
such as covering short sales, avoiding failures to deliver securities,
or completing arbitrage operations.
Why Would the Fund Lend its Securities?
By lending its portfolio securities, the Fund attempts to
increase its net investment income through the receipt of
interest on the loan. Any gain or loss in the market price of
the securities loaned that might occur during the term of the
loan would be for the account of the Fund. The Fund may pay
reasonable finders, borrowers, administrative and custodial fees
in connection with the loan.
To lend securities, the following requirements must be met:
1. the borrower must pledge and maintain with the Fund collateral
consisting of cash, a letter of credit issued by a domestic U.S.
bank, or securities issued or guaranteed by the federal government
having at least equal the value of the securities loaned;
2. the borrower must add to the collateral whenever the price of the
securities loaned rises;
3. the Fund must be able to terminate the loan at any time; borrowed
securities must be returned when the loan is terminated.
4. the Fund should receive reasonable interest on the loan (which
may include the Fund's investing any cash collateral in portfolio
securities, thereby earning additional income), any distribution on
the loaned securities, and any increase in the market value of the
loaned securities; and,
Risks of Lending
A Fund will enter into securities lending and repurchase
transactions only with nationally recognized brokers, banks,
dealers or other financial institutions. In the event of a
default or bankruptcy by a seller or borrower, the Fund will
promptly liquidate collateral. However, the exercise of the
Fund's right to liquidate such collateral could involve certain
costs or delays and, to the extent that proceeds from any sale of
collateral on a default of the seller or borrower were less than
the seller's or borrower's obligation, the Fund could suffer a
loss.
INVESTMENT LIMITATIONS
The following investment limitations are fundamental and may not be
changed without prior approval of a majority of the Fund's outstanding
voting shares.
5
<PAGE>
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.
MANAGEMENT OF THE FUND
A Board of Directors governs the Fund. The Directors are responsible
for overseeing the management of the Fund's business affairs and play
a vital role in protecting the interests of Fund shareholders. Among
other things, the Directors approve and review the Fund's contracts
and other arrangements and monitor Fund performance and operations.
The names, ages 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.
<TABLE>
<CAPTION>
Name, Age, Address Position Held Principal Occupation(s)
With Fund During Past 5 Years
<S> <S> <S>
Richard J. Garvey*, 66 Chairman, Limited partner of Money Management Associates
730 Southwest 67th Place President, 1975-1998. Vice President of Rushmore
Portland, OR 97225 Treasurer and Services, Inc. 1992-1998. Director of four
Director Rushmore Fund Boards.
Philip Borish*, 71 Director Employee of Rushmore Services, Inc., a
4922 Fairmont Avenue subsidiary of the Adviser, since 1991.
Bethesda, MD 20814
Bette Clemons, 75 Director President of Consumer Affairs Associates, a
315 Market St. management consulting firm providing advice on
New Cumberland, PA 17070 consumer trends since 1978.
Louis T. Donatelli, 62 Director President of Donatelli and Klein, Inc., engaged
7200 Wisconsin Avenue in the acquisition of real estate, primarily
Bethesda, MD 20814 office buildings and multi-family housing
projects since 1993.
George H. Lawrence, 73 Director Retired. Of Counsel Akin, Gump, Strauss, Hauer
8707 Eaglebrook Court & Feld, 1991-1998. Retired President of
Alexandria, VA 22308 American Gas Association.
Carl Levin, 86 Director Semi-Retired. Public Affairs Consultant since
5450 Whitley Park Terrace, #809 1986. Executive Director for the U.S. Council
Bethesda, MD 20814 for Coconut Research until 1992.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Address Position Held Principal Occupation(s)
With Fund During Past 5 Years
<S> <S> <S>
Patrick F. Noonan, 57 Director Chairman and Chief Executive Officer of the
11901 Glen Mill Drive Conservation Fund since 1986. Vice Chairman,
Potomac, MD 20854 American Farmland Trust and Trustee, American
Conservation Association since 1985.
President, Conservation Resources, Inc. since
1981. Director of four Rushmore Fund Boards.
Daniel L. O'Connor*, 57 Director General Partner of Money Management Associates,
100 Lakeshore Drive registered investment adviser of the Rushmore
Suite 1555 Funds, since 1975. Director, Rushmore Trust
North Palm Beach, FL 33408 and Savings, FSB, the Trust's transfer agent
and custodian. Director of four Rushmore Fund
Boards. Director of the Cappiello-Rushmore
Trust.
David N. Parker*, 59 Director President and Chief Executive Officer, American
400 North Capital Street, N.W. Gas Association since September, 1997.
Washington, D.C. 20001 President, Aluminum Association, 1989-1997.
Eugene A. Tracy, 71 Director Retired since 1992. Chairman of the Executive
1424 Sequoia Trail Committee, Peoples Energy Corporation until
Glenview, IL 60325 1992.
David J. Muchow*, 53 Vice President Attorney and Counselor at Law and Energy
4449 North 38th Street and Secretary Consultant since 1998. Special Counsel,
Arlington, VA 22207 American Gas Association since 1998. Formerly
General Counsel and Corporate Secretary,
American Gas Association 1976-1998.
Timothy N. Coakley, CPA*, 32 Vice President Chief Financial Officer and Treasurer, Rushmore
4922 Fairmont Avenue Trust and Savings, FSB, since 1995. Vice
Bethesda, MD 20814 President of four Rushmore Funds and the
Cappiello-Rushmore Trust (collectively, the
"Funds"). Controller of the Funds, 1995-1997.
Formerly Audit Manager, Deloitte & Touche LLP
until 1994.
Edward J. Karpowicz, CPA*, 36 Controller Vice President of Rushmore Trust and Savings,
4922 Fairmont Avenue FSB, since 1997. Controller of the Funds.
Bethesda, MD 20814 Treasurer, Bankers Finance Investment
Management Corp., August 1993 to June 1997.
Stephenie E. Adams*, 30 Assistant Manager, Fund Administration and Marketing,
4922 Fairmont Avenue Secretary Rushmore Services, Inc., from July 1994 to
Bethesda, MD 20814 Present. Secretary of three Rushmore Funds and
the Cappiello-Rushmore Trust. Assistant
Secretary of one Rushmore Fund.
* Indicates an "interested" person. An interested person has any
one of several close business or family ties to the Fund, the
Fund's investment adviser, or an affiliated company of the Fund.
</TABLE>
7
<PAGE>
<TABLE>
The aggregate compensation paid to the Directors serving during the
fiscal year ended March 31, 1999, is set forth in the table below:
<CAPTION>
Pension or Estimated Total Compensation
Aggregate Retirement Annual Paid to Directors for
Name of Person Compensation Benefits Benefits Upon Services to the Fund
and Position Paid Accrued Retirement and Fund Complex
------------ ---------- ------------- ---------------------
<S> <C> <C> <C> <C>
Richard J. Garvey,*
Chairman, President,
Treasurer and Director $0 $0 $0 $0
Philip Borish, *
Director $0 $0 $0 $0
Bette Clemons,
Director $1,000 $0 $0 $0
Louis T. Donatelli,
Director $1,000 $0 $0 $0
George H. Lawrence,
Director $1,000 $0 $0 $0
Carl Levin,
Director $1,000 $0 $0 $0
Patrick F. Noonan,
Director $1,000 $0 $0 $10,000
Daniel L. O'Connor, *
Director $0 $0 $0 $0
David N. Parker, *
Director $0 $0 $0 $0
Eugene A. Tracy,
Director $1,000 $0 $0 $0
* Indicates an "interested" person. An interested person has any
one of several close business or family ties to the Fund, the Fund's
adviser, or an affiliated company of the Fund.
</TABLE>
CONTROL PERSONS and PRINCIPAL HOLDERS of SECURITIES
As of May 3, 1999, the following parties were the only owners of
record owning 5% or more of the shares of the Fund.
Controlling Party or Shares % Owned
Principal Holder of Securities Outstanding
Address
------------------------------ ------------- --------
Charles Schwab & Co., Inc. 1,636,525.588 13.451%
101 California Street
San Francisco, CA 94101
Officers and Directors of the Fund, as a group, owned, of record and
beneficially, less than 1% of the outstanding shares of the Fund.
INVESTMENT ADVISORY and OTHER SERVICES
Investment Adviser
Money Management Associates (the "Adviser"), 100 Lakeshore Drive,
Suite 1555, North Palm Beach, Florida 33408, has served as the Fund's
investment adviser since the Fund commenced operations on May 10,
1989. The Adviser provides investment advice to the Fund and oversees
its day-to-day operations, subject to direction and control by the
Fund's Board of Directors. For its services, the Adviser receives a
fee at an annual rate based on 0.40% of the net assets of the Fund.
For the fiscal years ended March 31, 1999, 1998, and 1997, the Funds
paid the investment advisory fees to the Adviser of $901,335,
$877,926 and $863,761, respectively.
The Adviser also advises: Fund for Government Investors, a money
market fund established in 1975 that invests only in U.S. Treasury
securities; The Rushmore Fund, Inc., which was established in 1985 and
currently consists of one series, the U.S. Government Bond Portfolio;
8
<PAGE>
and Fund for Tax-Free Investors, Inc., which was established in 1983
and currently consists of three series, each of which invests
primarily in securities the interest on which is exempt either from
federal income tax or from state income tax. As of March 31, 1999,
total assets under the Adviser's management were approximately $900
million.
Fund expenses which are paid by the Adviser include, but are not
limited to: the expenses of shareholders and directors meetings, the
cost of office space, and the preparation, filing, printing and
distribution of the Fund's prospectus and Statement of Additional
Information. Additionally, 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 and other financial institutions for their expenses in
connection with the distribution of Fund shares.
Administrator
Under an Administrative Services Agreement between the Fund and
Rushmore Trust and Savings, FSB ("RTS"), 4922 Fairmont Avenue,
Bethesda, Maryland 20814, a majority-owned subsidiary of the Adviser,
RTS provides transfer agency, dividend-disbursing, fund accounting and
administrative services to the Fund. Under the Administrative
Services Agreement with RTS, which has been approved by the Board of
Directors, RTS receives an annual fee of 0.35% of average daily net
assets of the Fund for the services it provides. For the fiscal years
ended March 31, 1999, 1998, and 1997, the Fund paid the following
administrative services fees to the RTS: $788,668, $768,186 and
$755,792, respectively.
As the Administrator, RTS is responsible for all costs of the Fund
except for the investment advisory fee, extraordinary legal expenses,
interest and the expenses paid by the Adviser. Specifically, RTS pays
costs of registration of the Funds' shares with the Securities and
Exchanges commission and the various states, all expenses of dividend
and transfer agent services, outside auditing and legal fees,
preparation of shareholders reports, and all costs incurred in
providing custodial services.
Other Administrator
The American Gas Association also provides administrative services to
the Fund. These administrative services include overseeing the
calculation of the Index. A.G.A. will not furnish other securities
advice to the Fund or the Adviser or make recommendations regarding
the purchase or sale of securities by the Fund. Under the terms of an
agreement approved by the Board of Directors, A.G.A. provides 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. provides 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 years ended March 31,
1999, 1998 and 1997, the administration fees were $225,334, $219,482
and $215,941.
Other Servicer
Under an agreement between the Adviser and Rushmore Services, Inc.
("RSI"), 4922 Fairmont Avenue, Bethesda, Maryland 20814, a wholly-
owned subsidiary of the Adviser, certain administrative services
provided to the Fund by the adviser, such as prospectus preparation,
are provided by RSI.
Custodian and Independent Public Accountant
RTS is the Fund's custodian and is responsible for safeguarding and
controlling the Fund's cash and securities, handling the securities,
and collecting interest on the Fund's investments.
Independent certified public accountants, Deloitte & Touche LLP,
University Square, 117 Campus Drive, Princeton, New Jersey 08540, are
responsible for auditing the annual financial statements of the Fund.
Brokerage Allocation and Other Practices
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.
For the years ended March 31, 1999, 1998, and 1997, the Fund paid
$66,437, $122,024, and $70,000, respectively, in brokerage
commissions.
9
<PAGE>
TAXATION OF THE FUND
The Fund currently qualifies, and will seek to continue to qualify, as
a regulated investment company (a "RIC") under Subchapter M of the
U.S. Internal Revenue Code of 1986, as amended (the "Code"). As a RIC,
the Fund will not be subject to federal income taxes on the net
investment income and capital gains that the Fund distributes to its
shareholders. The distribution of net investment income and capital
gains by the Fund to a Fund shareholder will be taxable to the
shareholder regardless of whether the shareholder elects to receive
these distributions in cash or in additional shares. Distributions
reported to a Fund shareholder as long-term capital gains shall be
taxable as such, regardless of how long the shareholder has owned the
shares. Fund 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.
If the Fund fails to qualify as a RIC for any taxable year, the Fund
would be taxed in the same manner as an ordinary corporation. In that
event, the Fund would not be entitled to deduct the distributions
which the Fund had paid to shareholders and, thus, would incur a
corporate income tax liability on all of the Fund's taxable income
whether or not distributed. The imposition of corporate income taxes
on the Fund would directly reduce the return a shareholder would
receive from an investment in the Fund.
CALCULATION OF PERFORMANCE DATA
Average Annual Total Return Quotations
For purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be
stated in terms of total return. Under the rules of the Securities
and Exchange Commission (the "SEC Rules"), Fund advertising stating
performance must include total return quotes calculated according to
the following formula:
n
P (1+T) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1-, 5-, or 10-
year periods at the end of the 1-, 5-, or 10-year periods
(or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the
most recent quarter prior to submission of the advertising for
publication, and will cover 1, 5, and 10 year periods or a shorter
period dating from the effectiveness of the Registration Statement of
the Fund. In calculating the ending redeemable value, all dividends
and distributions by the Fund are assumed to have been reinvested at
net asset value as described in the Prospectus for the Fund on the
reinvestment dates during the period. Total return, or "T" in the
formula above, is computed by finding the average annual compounded
rates of return over the 1, 5, and 10 year periods (or fractional
portion thereof) that would equate the initial amount invested to the
ending redeemable value.
The Fund, from time to time, also may include in such advertising a
total return figure that is not calculated according to the formula
set forth above in order to compare more accurately the performance of
the Funds with other measures of investment return. For example, in
comparing the total return of the Fund with data published by Lipper
Analytical Services, Inc., or with the performance of the Dow Jones
Utility Average, as appropriate, the Fund calculates its aggregate
total return for the specified periods of time by assuming the
investment of $10,000 in the Fund's shares and assuming the
reinvestment of each dividend or other distribution at net asset value
on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value
and by dividing the remainder by the beginning value. Such
alternative total return information will be given no greater
prominence in such advertising than the information prescribed under
SEC Rules.
The Fund's average annual compounded rates of return, assuming the
reinvestment of all dividends and distributions as of March 31, 1999,
are as follows:
One Year (6.35)%
Five Years 12.65 %
Since Inception 9.87 %
10
<PAGE>
Financial Statements
Copies of the Fund's audited financial statements for the fiscal year
ended March 31, 1999, may be obtained without charge by contacting the
Fund at 4922 Fairmont Avenue, Bethesda, Maryland 20814, or by
telephoning the Fund at (800) 343-3355 or (301) 657-1500.
11
<PAGE>
American Gas Index Fund, Inc.
FINANCIAL STATEMENTS
<PAGE>
[LOGO]
ANNUAL REPORT, March 31, 1999
AMERICAN GAS INDEX FUND, INC.
4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 622-1386 (301) 657-1510
Dear Shareholders:
Two consecutive near record warmer than average winters reduced gas heating de-
mand in the residential, commercial and industrial sectors. As a result, gas
company financial results were dismal and gas stocks were jettisoned by short-
term market traders. According to one veteran industry analyst, "The good news
is that the odds for a repeat performance in 1999/2000 are very slim." Conse-
quently, the fiscal year ended March 31, 1999 was the Fund's low point in per-
formance, since the Fund was launched in May 1989.
For the fiscal year ended March 31, 1999, the Fund's total return was a nega-
tive 6.35%. Net asset value (NAV) at the beginning of the period was $18.59 and
reached an all-time high of $18.95 on April 2, 1998. As the financial impact of
the first of the warm winters became widespread and was compounded by the sec-
ond warm winter the Fund's NAV steadily declined to a low of $16.27 on February
16, 1999. Dur-ing the fiscal year, the Fund provided an income return of 6.08%
composed of a regular dividend of $0.507 and capital gains distributions of
$0.6832 per share. Six of the Fund's ten largest holdings declined during the
fiscal year, as did 78% of the total portfolio. As a result, the Fund lagged
behind most market benchmarks.
The American Gas Association forecasts that with normal
<TABLE>
<CAPTION>
Top Five Performers
(Price Change: Year Ended March 31, 1999)
<S> <C>
PECO Energy Company 109.04%
The Montana Power Company 103.99%
Enron Corporation 38.54%
Public Service Co. of North Carolina, Inc. 38.42%
Energy East Corporation 31.82%
</TABLE>
<TABLE>
<CAPTION>
Bottom Five Performers
(Price Change: Year Ended March 31, 1999)
<S> <C>
Virginia Gas Company (67.21)%
MCN Energy Group (57.02)%
KN Energy, Inc. (49.37)%
UGI Corporation (40.93)%
ONEOK, Inc. (39.26)%
</TABLE>
<TABLE>
Total Return Comparison
(Year Ended March 31, 1999)
[DELETED BAR CHART]
<S> <C>
American Gas Index Fund (6.35)%
Dow Jones Industrials 12.82 %
Dow Jones Utilities 5.98 %
S&P 500 18.46 %
The average annual total return was (6.35)% for the one-year period, 12.65% for
the five-year period, and 9.87% for the period 5/10/89 (inception) through
March 31, 1999. Returns are historical and include changes in principal and
reinvested dividends and capital gains. Your return and principal will vary and
you may hav a gain or loss when you sell shares.
</TABLE>
<PAGE>
weather, gas demand will grow by 5% this year and increase by 32% by the year
2010. Similar predictions have been promulgated by American and Canadian gov-
ernmental bodies and energy "think tanks". The industry is preparing for this
growth by expanding pipeline delivery capacity, increasing storage facilities,
and maintaining domestic and Canadian gas reserves. New technology, especially
in power generation and climate control, is expected to account for much of
the growth. In addition, new construction and conversion of non-gas heated
homes represent a huge and profitable market for gas utilities. This positive
long-term industry outlook combined with the deregulation of gas and electric
power companies and depressed stock prices has accelerated merger and acquisi-
tion activity by growth oriented management. Several major announced "deals"
are being finalized. This activity has increased investor interest in the
Fund's holdings and should be a bonus for the Fund by providing financial re-
wards for Fund shareholders.
You can follow the Fund's progress on our web site www.rushmorefunds.com or
contact us directly. We welcome your interest and participation in the Fund.
Sincerely,
/s/ Richard Garvey
Richard J. Garvey
Chairman
American Gas Index Fund, Inc.
2
<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS
March 31, 1999
<CAPTION>
Market Value Percent of
Shares (Note 1) Net Assets
------- ------------ ----------
<S> <C> <C> <C>
COMMON STOCKS
The Williams Companies, Inc. ................... 285,000 $11,257,500 5.62%
Columbia Energy Group........................... 200,000 10,450,000 5.22
Consolidated Natural Gas Co. ................... 205,000 9,980,938 4.98
The Coastal Corp. .............................. 300,000 9,900,000 4.94
Duke Energy Corp. .............................. 175,000 9,559,375 4.77
El Paso Energy Corp. ........................... 285,000 9,315,937 4.65
KeySpan Energy Corp. ........................... 365,000 9,170,625 4.58
Enron Corp. .................................... 135,200 8,686,600 4.34
Sempra Energy................................... 401,600 7,705,700 3.85
PG&E Corp. ..................................... 225,000 6,989,063 3.49
NICOR, Inc. .................................... 125,000 4,492,188 2.24
Reliant Energy, Inc. ........................... 170,000 4,430,625 2.21
Sonat, Inc. .................................... 130,000 3,900,000 1.95
Consolidated Edison, Inc........................ 85,000 3,851,562 1.92
NIPSCO Industries, Inc.......................... 129,052 3,484,404 1.74
National Fuel Gas Co. .......................... 85,000 3,336,250 1.67
KN Energy, Inc. ................................ 165,000 3,289,688 1.64
Public Service Enterprise Group, Inc............ 85,000 3,245,938 1.62
UtiliCorp United, Inc. ......................... 139,500 3,173,625 1.58
Piedmont Natural Gas Co., Inc. ................. 90,000 3,150,000 1.57
Peoples Energy Corp. ........................... 95,000 3,069,688 1.53
CMS Energy Corp. ............................... 75,000 3,004,688 1.50
Washington Gas Light Co. ....................... 130,000 2,941,250 1.47
AGL Resources, Inc. ............................ 165,000 2,897,812 1.45
Questar Corp.................................... 140,000 2,371,250 1.18
MCN Energy Group, Inc. ......................... 135,000 2,168,437 1.08
Southwest Gas Corp. ............................ 75,000 2,062,500 1.03
Atmos Energy Corp............................... 85,000 2,045,313 1.02
PECO Energy Co. ................................ 42,500 1,965,625 0.98
ONEOK, Inc. .................................... 75,000 1,856,250 0.93
The Montana Power Co. .......................... 25,000 1,839,063 0.92
WICOR, Inc. .................................... 80,000 1,620,000 0.81
Indiana Energy, Inc. ........................... 83,066 1,573,062 0.79
Public Service Co. of North Carolina, Inc....... 55,000 1,560,625 0.78
Eastern Enterprises............................. 42,103 1,531,497 0.76
Southern Union Co.*............................. 78,750 1,486,406 0.74
Texas Utilities Co.............................. 35,000 1,459,063 0.73
New Century Energies, Inc. ..................... 42,500 1,447,656 0.72
New Jersey Resources Corp. ..................... 40,000 1,422,500 0.71
Northwest Natural Gas Co........................ 60,000 1,312,500 0.66
</TABLE>
3
<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS (continued)
<CAPTION>
Market Value Percent of
Shares (Note 1) Net Assets
------ ------------ ----------
<S> <C> <C> <C>
COMMON STOCKS (continued)
Equitable Resources, Inc......................... 50,000 $1,303,125 0.65%
MDU Resources Group, Inc. ....................... 52,500 1,200,938 0.60
Northern States Power Co. ....................... 50,000 1,159,375 0.58
Niagara Mohawk Holdings, Inc.*................... 80,000 1,075,000 0.54
Energy East Corp................................. 20,000 1,051,250 0.52
Cinergy Corp..................................... 37,500 1,031,250 0.51
Laclede Gas Co. ................................. 46,000 963,125 0.48
Baltimore Gas and Electric Co. .................. 37,500 951,562 0.48
Pennsylvania Enterprises, Inc.................... 39,500 948,000 0.47
North Carolina Natural Gas Corp.................. 30,000 911,250 0.45
Colonial Gas Co. ................................ 25,000 862,500 0.43
L G & E Energy Corp. ............................ 40,000 832,500 0.42
Interstate Energy, Inc. ......................... 30,000 795,000 0.40
Wisconsin Energy Corp............................ 30,000 783,750 0.39
Energen Corp. ................................... 45,000 672,187 0.34
Dynegy, Inc. .................................... 47,300 665,156 0.33
DPL, Inc. ....................................... 40,000 660,000 0.33
Commonwealth Energy System Co. .................. 17,000 654,500 0.33
South Jersey Industries, Inc..................... 30,000 648,750 0.32
NUI Corp. ....................................... 30,000 646,875 0.32
Yankee Energy System, Inc. ...................... 27,500 634,219 0.32
Connecticut Energy Corp. ........................ 25,000 606,250 0.30
CTG Resources, Inc. ............................. 25,000 603,125 0.30
TECO Energy, Inc. ............................... 30,000 596,250 0.30
Citizens Utilities Co., Series B*................ 75,000 581,250 0.29
SEMCO Energy, Inc................................ 36,750 565,031 0.28
Rochester Gas & Electric Corp.................... 20,000 512,500 0.26
Orange and Rockland Utilities, Inc............... 7,500 430,781 0.22
Illinova Corp.................................... 20,000 423,750 0.21
UGI Corp. ....................................... 25,000 417,188 0.21
Connectiv, Inc. ................................. 20,000 387,500 0.19
Public Service Co. of New Mexico................. 22,500 382,500 0.19
WPS Resources Corp. ............................. 12,500 368,750 0.18
EnergySouth, Inc................................. 16,000 328,000 0.16
Providence Energy Corp........................... 17,000 312,375 0.16
MidAmerican Energy Holdings Co................... 10,000 280,000 0.14
SIGCORP, Inc. ................................... 10,000 273,750 0.14
EnergyNorth, Inc. ............................... 9,000 247,500 0.12
Central Hudson Gas and Electric Corp............. 6,500 232,781 0.12
Sierra Pacific Resources......................... 6,000 211,125 0.11
Fall River Gas Co................................ 10,000 176,250 0.09
Chesapeake Utilities Corp. ...................... 10,000 160,625 0.08
</TABLE>
4
<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF NET ASSETS (continued)
<CAPTION>
Market Value Percent of
Shares (Note 1) Net Assets
------ ------------ ----------
<S> <C> <C> <C>
COMMON STOCKS (continued)
Southwestern Energy Co. ........................ 22,000 $ 155,375 0.08%
Roanoke Gas Co. ................................ 7,500 146,250 0.07
Berkshire Energy Resources...................... 7,500 143,437 0.07
Entergy Corp.................................... 5,000 137,500 0.07
Valley Resources, Inc........................... 12,000 126,000 0.06
P P & L Resources, Inc. ........................ 5,000 123,750 0.06
Delta Natural Gas Co., Inc. .................... 6,500 116,187 0.06
Corning Natural Gas Corp........................ 4,500 96,750 0.05
Energy West, Inc. .............................. 7,500 65,625 0.03
USX-Marathon Group.............................. 2,000 55,000 0.03
Minnesota Power, Inc. .......................... 2,000 39,500 0.02
Virginia Gas Co................................. 15,000 37,500 0.02
UNITIL Corp..................................... 1,000 23,000 0.01
------------ -------
Total Common Stocks (Cost $122,813,982)......... 196,818,670 98.26
------------ -------
REPURCHASE AGREEMENT
With PaineWebber Inc., at 4.80%, dated 3/31/99,
to be repurchased at $2,187,597 on 4/1/99,
collaterized by U.S. Treasury Notes due
12/31/99 (Cost $2,187,305)..................... 2,187,305 1.09
------------ -------
Total Investments (Cost $125,001,287)........... 199,005,975 99.35
Other Assets Less Liabilities................... 1,310,835 0.65
------------ -------
Net Assets (Note 5)............................. $200,316,810 100.00%
============ =======
Net Asset Value Per Share (Based on 12,305,907
Shares Outstanding)............................ $16.28
============
</TABLE>
*Non-income producing
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
<S> <C>
Investment Income
Dividends....................................................... $ 7,929,361
Interest........................................................ 383,326
------------
Total Investment Income........................................ 8,312,687
------------
Expenses
Investment Advisory Fee (Note 2)................................ 901,335
Accounting and Administrative Service Fee (Note 2).............. 788,668
Administrative Fee (Note 2)..................................... 225,334
------------
Total Expenses................................................. 1,915,337
------------
Net Investment Income............................................ 6,397,350
------------
Net Realized Gain on Investment Transactions..................... 9,883,696
Change in Net Unrealized Appreciation of Investments............. (30,421,779)
------------
Net Loss on Investments.......................................... (20,538,083)
------------
Net Decrease in Net Assets Resulting from Operations............. $(14,140,733)
============
See Notes to Financial Statements.
</TABLE>
6
<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended March 31,
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net Investment Income............................. $ 6,397,350 $ 6,200,861
Net Realized Gain on Investment Transactions...... 9,883,696 10,027,070
Change in Net Unrealized Appreciation of
Investments...................................... (30,421,779) 40,256,921
------------ ------------
Net Increase (Decrease) in Net Assets Resulting
from Operations................................. (14,140,733) 56,484,852
------------ ------------
Distributions to Shareholders
From Net Investment Income........................ (6,353,353) (6,222,067)
From Net Realized Gain on Investments............. (8,531,808) (1,570,262)
------------ ------------
Total Distributions to Shareholders.............. (14,885,161) (7,792,329)
------------ ------------
Share Transactions
Net Proceeds from Sales of Shares................. 35,889,754 47,979,895
Reinvestment of Distributions..................... 13,403,164 6,937,426
Cost of Shares Redeemed........................... (64,317,934) (72,300,100)
------------ ------------
Net Decrease in Net Assets Resulting from Share
Transactions.................................... (15,025,016) (17,382,779)
------------ ------------
Total Increase (Decrease) in Net Assets.......... (44,050,910) 31,309,744
Net Assets -- Beginning of Year.................... 244,367,720 213,057,976
------------ ------------
Net Assets -- End of Year.......................... $200,316,810 $244,367,720
============ ============
Shares
Sold.............................................. 2,006,326 2,842,334
Issued in Reinvestment of Distributions........... 764,283 402,257
Redeemed.......................................... (3,612,456) (4,449,482)
------------ ------------
Net Decrease in Shares........................... (841,847) (1,204,891)
============ ============
See Notes to Financial Statements.
</TABLE>
7
<PAGE>
<TABLE>
AMERICAN GAS INDEX FUND, INC.
FINANCIAL HIGHLIGHTS
<CAPTION>
For the Years Ended March 31,
-------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net Asset Value --
Beginning of Year........ $ 18.59 $ 14.84 $ 13.25 $ 11.13 $ 11.08
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net Investment Income...... 0.51 0.47 0.45 0.45 0.44
Net Realized and Unrealized
Gain (Loss) on
Investments............... (1.63) 3.87 1.60 2.13 0.05
-------- -------- -------- -------- --------
Total from Investment
Operations............... (1.12) 4.34 2.05 2.58 0.49
-------- -------- -------- -------- --------
Distributions to
Shareholders:
From Net Investment Income. (0.51) (0.47) (0.46) (0.46) (0.44)
From Net Realized Capital
Gain...................... (0.68) (0.12) -- -- --
-------- -------- -------- -------- --------
Total Distributions....... (1.19) (0.59) (0.46) (0.46) (0.44)
-------- -------- -------- -------- --------
Net Increase (Decrease) in
Net Asset Value........... (2.31) 3.75 1.59 2.12 0.05
-------- -------- -------- -------- --------
Net Asset Value -- End of
Year...................... $ 16.28 $ 18.59 $ 14.84 $ 13.25 $ 11.13
======== ======== ======== ======== ========
Total Investment Return..... (6.35)% 29.62% 15.60% 23.46% 4.72%
Ratios to Average Net Assets
Expenses................... 0.85% 0.85% 0.85% 0.85% 0.85%
Net Investment Income...... 2.84% 2.83% 3.06% 3.71% 4.04%
Supplementary Data
Portfolio Turnover Rate.... 10.4% 12.9% 8.2% 10.0% 8.5%
Net Assets at End of Year
(in thousands)............ $200,317 $244,368 $213,058 $204,000 $188,544
Number of Shares
Outstanding at End of Year
(in thousands)............ 12,306 13,148 14,353 15,391 16,941
See Notes to Financial Statements.
</TABLE>
8
<PAGE>
AMERICAN GAS INDEX FUND, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
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 the Adviser.
Rushmore Trust and Savings, FSB (the "Rushmore Trust"), a majority-owned
subsidiary of the Adviser, provides transfer agency, dividend-disbursing
and other shareholder services to the Fund. In addition, Rushmore Trust
serves as custodian of the Fund's assets and pays the operating expenses
of the Fund. For these services Rushmore Trust receives an annual fee of
0.35% of the average daily net assets of the Fund.
9
<PAGE>
The American Gas Association (A.G.A.) serves as administrator for the Fund. As
administrator, A.G.A. is responsible for calculating and maintaining the Index
and providing 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, 1999, purchases of securities were $22,477,220,
and sales of securities were $30,439,272. These totals exclude short-term
securities.
4. UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS
As of March 31, 1999, net unrealized appreciation of investments for Federal
income tax purposes was $72,840,720 of which $76,935,426 related to
appreciated investments and $4,094,706 related to depreciated investments. At
March 31, 1999, the cost of the Fund's securities for Federal income tax
purposes was $126,165,255.
5. NET ASSETS
At March 31, 1999 net assets consisted of the following:
<TABLE>
<S> <C>
Paid-in-Capital................................................... $121,728,878
Net Unrealized Appreciation of Investments........................ 74,004,688
Accumulated Realized Gain on Investment Transactions.............. 4,506,186
Undistributed Net Investment Income............................... 77,058
------------
NET ASSETS........................................................ $200,316,810
============
</TABLE>
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, 1999, the related statement 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, 1999 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, 1999, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
April 30, 1999
11
<PAGE>
[LOGO]
American Gas Index Fund
Annual Report
March 31, 1999
<PAGE>
PART C
<PAGE>
PART C
OTHER INFORMATION
American Gas Index Fund, Inc.
ITEM 23. Exhibits
(a)(1) Articles of Incorporation. 3/
(b) Bylaws of Registrant. 3/
(c) Voting Trust Agreement. 2/
(d) Management Contract between Registrant and Money Management
Associates. 1/
(e) Underwriting Contracts. 2/
(f) Bonus or Profit Sharing Contracts. 2/
(g) Custody Agreement between Registrant and Rushmore Trust and
Savings, FSB. 1/
(h)(1) Administrative Services Agreement between Registrant and
Rushmore Trust and Savings, FSB. 1/
(h)(2) Administrative Services Agreement between Registrant and
American Gas Association. 1/
(h)(3) Agreement between Money Management Associates and Rushmore
Services, Inc. as amended. 1/
(i) Opinion of Dunnells, Duvall, Bennett & Porter, regarding the
legality of securities being registered. 3/
(j) Consent of Deloitte & Touche LLP, independent public accountants
for the Registrant. 1/
(k) Omitted Financial Statements. 2/
(l) Initial Capital Agreements. 2/
(m) Rule 12b-1 Plan. 2/
(n) Financial Data Schedule for the Registrant. 1/
(o) Rule 18f-3 Plan. 2/
1/ Filed herewith.
2/ None.
3/ Incorporated by reference to the Registrant's Registration
Statement on Form N-1A, previously filed with the Securities and
Exchange Commission on February 17, 1989 (Registration Nos. 33-25678
and 811-5702).
ITEM 24. Persons Controlled By or Under Common Control with the Fund
The following persons may be deemed to be directly or indirectly
controlled by or under common control with the Fund, a Maryland
corporation:
<PAGE>
<TABLE>
<CAPTION>
Percentage of Voting Securities
State of Organization and Owned and/or Controlled by the
Relationship (if any) to Controlling Persons or
Company the Fund Other Basis of Common Control
------- ------------------------- -------------------------------
<S> <S> <S>
Money Management Associates ("MMA" a District of Columbia limited Daniel L. O'Connor holds 100% of
or the "Adviser") partnership, registered the voting authority in MMA in
transfer agent and registered Daniel L. O'Connor's capacity as
investment adviser to four the sole general partner of MMA.
investment companies, including
the Fund
Rushmore Trust and Savings, FSB a Maryland corporation, and a 72.2% of the voting securities of
("RTS" or the "Administrator") registered transfer agent, RTS is held by MMA, and 27.6% of
which provides transfer agency, the voting securities of RTS is
dividend disbursing, and held by Daniel L. O'Connor, the
shareholder services to the sole general partner of MMA.
Fund, and serves as the Fund's
custodian
Rushmore Services, Inc. ("RSI") a Maryland Corporation which 100% of the voting securities of
provides certain services to RSI is owned by MMA.
the Fund
The Rushmore Fund, Inc. a Maryland corporation, and a
registered investment company,
which is advised by MMA
Fund for Tax-Free Investors, Inc. a Maryland corporation, and a
registered investment company,
which is advised by MMA
Fund for Government Investors a Delaware business trust, and
a registered investment
company, which is advised by
MMA
Cappiello-Rushmore Trust a Delaware business trust, and
a registered investment
company, of which MMA is the
administrator
</TABLE>
ITEM 25. Indemnification
The Fund's Articles of Incorporation provides that officers and
Directors shall be indemnified by the Fund against liabilities and
expenses of defense in proceedings against them by reason of the
fact that they serve as officers or Directors of the Fund or as an
officer or director of another entity at the request of the entity.
The indemnification is subject to the following conditions:
(a) no Director or officer is indemnified against all liability
to the Fund or its security holders which was the result of
any willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties;
(b) officers and Directors are only indemnified for actions
taken in good faith which they believed were in or not
opposed to the best interests of the Fund;
(c) expenses of any suit or proceeding will be paid in
advance only if the persons who will benefit by such advance
undertake to repay the expenses unless it is subsequently
determined that they are entitled to indemnification.
The Articles of Incorporation provide that if indemnification is
not ordered by a court, it may be authorized upon determination by
shareholders, by a majority vote of a quorum of the Directors who
were not parties to the proceedings or if a quorum is not
obtainable, or if directed by a quorum of disinterested Directors,
by independent legal counsel in a written opinion that the persons
to be indemnified have met the applicable standard.
<PAGE>
In connection with the approval of indemnification to officers and
Directors, the Fund hereby undertakes in all cases where
indemnification is not ordered by a court not to submit any
proposed indemnification to a vote of its shareholders or Directors
unless it has obtained a legal opinion from independent counsel
that the product of the persons seeking indemnification did not
involve willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "1933 Act"), 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 1933 Act and, therefore, is
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, or 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, unless in the opinion of the
Registrant's counsel the matter has been settled by controlling
precedent, will submit to a court of appropriate jurisdiction the
question whether such indemnification by the Registrant is against
public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
ITEM 26. Business and Other Connections of the Investment Adviser
Money Management Associates ("MMA"), 100 Lakeshore Drive, Suite 1555,
North Palm Beach, Florida 33408, a limited partnership organized under
the laws of the District of Columbia on August 15, 1974, has one
general partner and two limited partners. Daniel L. O'Connor is the
general partner and sole employee of MMA. Limited partners Martin M.
O'Connor and John R. Cralle, 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 27. Principal Underwriters
Not applicable
ITEM 28. Location of Accounts and Records
The physical location for all accounts, books, and records required to
be maintained and preserved by 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.
ITEM 29. Management Services
Not Applicable
ITEM 30. Undertakings
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in this City
of Bethesda in the State of Maryland, on the 19th day of May, 1999.
American Gas Index Fund, Inc.
By:
/s/ Richard J. Garvey
Richard J. Garvey, Chairman of the Board
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 May 19, 1999
Philip Borish
Director May 19, 1999
Bette Clemens
/s/ Louis T. Donatelli Director May 19, 1999
Louis T. Donatelli
/s/ Richard J. Garvey Chairman, President, May 19, 1999
Richard J. Garvey Treasurer and Director
/s/ George H. Lawrence Director May 19, 1999
George H. Lawrence
/s/ Carl Levin Director May 19, 1999
Carl Levin
/s/ Patrick F. Noonan Director May 19, 1999
Patrick F. Noonan
/s/ Daniel L. O'Connor Director May 19, 1999
Daniel L. O'Connor
/s/ David N. Parker Director May 19, 1999
David N. Parker
/s/ Eugene A. Tracy Director May 19, 1999
Eugene A. Tracy
Exhibit D
Management Contract between the Registrant and Money Management
Associates
<PAGE>
MANAGEMENT CONTRACT
Between
AMERICAN GAS INDEX FUND, INC.
And
MONEY MANAGEMENT ASSOCIATES
This Management Contract (the "Contract"), dated as of the
13th day of February, 1989, is entered into by and between American
Gas Index Fund, Inc. (hereinafter referred to as the "Fund") and Money
Management Associates (hereinafter referred to as the "Manager").
WITNESSTH
THAT in consideration of the mutual covenants hereinafter
contained, it is agreed as follows:
1. THE FUND hereby employs the Manager to manage the
investment and reinvestment of the assets of the Fund and to
administer the affairs of the Fund, subject to the control of the
officers and Board of Directors of the Fund, for the period and on the
terms set forth in this Agreement. The Manager hereby accepts such
employment and agrees during such period to render the services and to
assume the obligations set forth, for the compensation herein
provided.
2. The Manager assumes and shall pay or reimburse the Fund
for: (a) all expenses in connection with the management of the
investment and reinvestment of the assets of the Fund, except that the
Fund assumes and shall pay all broker's commissions and issue and
transfer taxes chargeable to the Fund in connection with securities
transactions to which the Fund is a party; (b) the compensation (if
any) of those directors and officers of the Fund who also serve as
directors, officers or employees of the Manager; and (c) all expenses
not hereinafter specifically assumed by the Fund where such expenses
are incurred by the Manager or by the Fund in connection with the
administration of the affairs of the Fund.
The Fund assumes and shall pay or reimburse the Manager for
the Fund's taxes, corporate fees, interest expenses (if any) and its
allocable share of all charges, costs and expenses incurred in
connection with : (a) maintaining its offices, determining from time
to time the net assets of the Fund, maintaining its books and records,
and preparing, reproducing and filing its tax returns and reports to
governmental agencies; (b) auditing its financial statements; (c)
providing stock certificates representing shares of the Fund and the
services rendered in the registration or transfer of such shares, in
the payment and disbursement of dividends and distributions by the
Fund, and in the custody of the cash, securities and other assets of
the Fund; (d) stockholders' and directors' meetings, and preparation,
printing and distribution of all reports and proxy materials; (e)
printing the Fund's prospectus on at least an annual basis, and
distributing it to its then-existing shareholders; (f) legal services
rendered to the Fund; (g) retaining and compensating those directors,
officers and employees of the Fund who do not also serve as directors,
officers of employees of the Manager; (h) maintaining appropriate
insurance coverage for the Fund and its directors and officers; and
(i) its membership in trade associations; and (j) federal and state
filing and registration fees.
3. In connection with the management of the investment and
reinvestment of the assets of the Fund, the Manager is authorized on
behalf of the Fund, to place orders for the execution of the Fund's
portfolio transactions in accordance with the applicable policies of
the Fund as set forth in the Fund's registration statements under the
Securities Act of 1933 and the Investment Company Act of 1940, as such
registration statements may be amended from time to time, and is
directed to use its best efforts to obtain the best available price
and most favorable execution with respect to all such transactions for
the Fund.
<PAGE>
4. As compensation for the services to be rendered and the
charges and expenses to be assumed and paid by the Manager as provided
in Section 2, the Fund shall pay the Manager an annual fee of four-
tenths (0.40%) of one percent of the average daily net asset value of
the Fund. The fee will be paid monthly.
If in any fiscal year the aggregate expenses of the Fund,
exclusive of taxes, brokerage, interest and extraordinary legal
expenses, but including the management fee, exceed 1.25% of the
average market value of the net assets for that fiscal year of the
Fund, the Manager will refund to the Fund, or bear, the excess
expenses over 1.25%. These expense reimbursements, if any, will be
estimated, reconciled and paid on a monthly basis.
In the event of termination of this Contract, the fee shall be
computed on the basis of the period ending on the last business day on
which this Contract is in effect subject to a pro rata adjustment
based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
5. Subject to and in accordance with the governing instruments
of the Fund and of the Manager respectively, directors, officers,
agents and shareholders of the Fund are or may be interested in the
Manager (or any successor thereof) as partners or otherwise; partners
and agents of the Manager are or may be interested in the Fund as
directors, officers, agents, shareholders or otherwise; the Manager
(or any successor) is or may be interested in the Fund as a
shareholder or otherwise; and the effect of any such
interrelationships shall be governed by said governing instruments and
the applicable provisions of the Investment Company Act of 1940.
The Manager shall notify the Fund of any change in partners of
Money Management Associates within ten days after such change.
6. This Contract shall continue in effect until the first
meeting of the Shareholders of the Fund (but in no event longer than
two years from the date hereof), and if approved at such shareholders'
meeting, until two years from the date hereof, and thereafter only so
long as such continuance is approved at least annually by a vote of a
majority of the Fund's Board of Directors, including the votes of a
majority of the directors who are not parties to such contract or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting such approval. Provided, however,
that (a) this Contract may at any time be terminated without payment
of any penalty either by vote of the Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of the
Fund, on sixty days prior written notice to the Manager, (b) this
Contract shall automatically terminate in the event of its assignment
(within the meaning of the Investment Company Act of 1940), and (c)
this Contract may be terminated by the Manager on sixty days prior
written notice to the Fund. Any notice under this contract shall be
given in writing, addressed and delivered, or mailed post paid, to the
other party at any office of such party.
As used in this Section 6, the terms "interested persons" and
"vote of a majority of the outstanding securities" shall have the
respective meanings set forth in Section 2(a)(9) and Section 2(a)(42)
of the Investment Company Act of 1940.
7. The services of the Manager to the Fund hereunder are not to
be deemed exclusive, and the Manager shall be free to render similar
services to others so long as its services hereunder are not impaired
thereby. The Manager shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Fund in
any way or otherwise be deemed an agent of the Fund.
8. No provisions of this Contract shall be deemed to protect the
Manager against any liability to the Fund or its shareholders to which
it might otherwise be subject by reasons of any willful misfeasance,
bad faith or gross negligence in the performance of its duties or the
reckless disregard of its obligations under this Contract. Nor shall
any provisions hereof be deemed to protect any director or officer of
the Fund against any such liability to which he might otherwise be
subject by reasons of any willful misfeasance, bad faith or gross
negligence in the performance of his duties or the reckless disregard
of his obligations. If any provision of this Contract shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Contract shall not be affected thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contract
to be executed on the day and year first above written.
AMERICAN GAS INDEX FUND, INC.
WITNESS:
/s/ Timothy P. Hagan By: /s/ Richard J. Garvey
Chairman of the Board
MONEY MANAGEMENT ASSOCIATES
WITNESS:
/s/ Rhonda Baroody By: /s/ Daniel L. O'Connor
General Partner
Exhibit G
Custody Agreement between the Registrant and Rushmore Trust and
Savings, FSB
<PAGE>
CUSTODY AGREEMENT BETWEEN
AMERICAN GAS INDEX FUND, INC.
AND
RUSHMORE TRUST AND SAVINGS BANK, FSB
This Agreement (the "Agreement") is entered into this 22nd day of
May, 1992 by and between American Gas Index Fun, Inc. (the "Fund") and
Rushmore Trust and Savings Bank, FSB (the "Custodian").
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the
Fund and the Custodian, intending to be legally bound hereby, agree as
follows:
1. APPOINTMENT OF CUSTODIAN. The Fund hereby designates and
appoints the Custodian, subject to the provisions hereof. In
connection with such appointment, the Fund shall promptly deliver to
the Custodian certified or authenticated copies of its Charter and By-
laws, all amendments thereto, certified resolutions of its Board of
Directors appointing the Custodian and certified copies of such other
resolutions of its Board of Directors, contracts and other documents
as may be reasonably required by the Custodian.
2. DELIVERY OF ASSETS. The Fund shall, on receipt, promptly
deliver and pay or cause to be delivered and paid to the Custodian all
securities and cash hereafter acquired by the Fund.
3. DUTIES OF THE CUSTODIAN. The Custodian shall have and
perform the following powers and duties with reference to the
portfolio securities and cash of the Fund:
(a) Safekeeping of Securities. To keep safely the securities of
the Fund in its possession, in a depository or by book entry, and to
receive for such safekeeping delivery of securities acquired by the
Fund from time to time. The Custodian may hold such securities in
bearer form, registered in the name of the Fund, registered in the
name of the nominee of the Custodian or registered in the name of the
nominee of any depository of the Custodian.
(b) Sales and Redemptions. To make delivery of securities which
have been sold for the account of the Fund upon receipt of proper
instructions, or which have been called, exchanged, redeemed, retired
or otherwise become payable, such delivery to be made only upon
payment therefore, in cash or in such other proper medium of payment
as may be acceptable to the Custodian in the reasonable exercise of
its discretion, or as such instructions may designate.
(c) Cash Accounts. To retain all cash of the Fund in a separate
account or accounts in the name of the Fund subject only to draft or
order by the Bank, as Custodian, in accordance with the terms of this
Agreement. All monies received by the Custodian from or for the
account of the Fund shall be deposited in said account or accounts.
(d) Purchases. Upon receipt of proper instructions, and insofar
as funds are available for the purpose, to pay for all securities
purchased from the account of the Fund, payment being made only upon
receipt of the securities in bearer form or registered in form
satisfactory to the Custodian.
(e) Collections. Unless otherwise directed by receipt of proper
instructions, to collect and receive all income with respect to the
securities held hereunder, and to do all other things necessary and
proper in connection with the collection of such items, including but
not limited to the authority to:
(i) present for payment all income items requiring presentation;
(ii) present for payment all securities which may mature or be
called, redeemed, retired, or otherwise become payable;
<PAGE>
(iii) endorse for collection, for the account of the Fund,
checks, drafts, or other negotiable instruments.
(f) Sales of Shares of the Funds. To receive all considerations
paid into the Fund in connection with the issuance of shares of the
Fund and to deposit such considerations in the account or accounts
maintained hereunder.
(g) Redemption of Shares. Upon the request of the Fund, the
Custodian shall pay such sums to the Fund, its redemption agent or its
shareholders as the Fund may advise the Custodian are necessary in
connection with a redemption of shares of the Fund.
(h) Dividends and Distributions. Upon receipt of proper
instructions, to release available funds to the Fund or its disbursing
agent for the payment of dividends or other distributions payable in
cash to shareholders of the Fund.
(i) Transfer of Funds. Prohibit the Custodian's transfer of
funds upon receipt by the Custodian directly of a telephone purchase
or redemption request. The Custodian should forward all requests for
purchases and redemptions made by telephone directly to the Fund for
proper processing.
(j) Other Payments of Cash. Upon receipt of proper
instructions, to release available funds to the Fund or cause to be
paid on behalf of the Fund, insofar as funds are available, for the
following particular purposes: such taxes, interest charges,
investment advisory fees, administrative fees, and legal fees as well
as such amounts payable in connection with the conversion or exchange
of securities owned by the Fund or for other proper purposes of the
Fund as may be approved generally or from time to time by the
Treasurer or such other person or persons as the Board of Directors of
the Fund may authorize, except that if such payment is made for other
proper corporate purposes not otherwise specified above in this
Agreement, it shall be made only upon receipt of proper instructions
together with a certified copy of a resolution of the Board of
Directors of the Fund setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper corporate purpose
and naming the persons or persons to whom such payment is to be made.
(4) OTHER DUTIES AS CUSTODIAN. The Custodian shall perform
other duties on behalf of the Fund as follows:
(a) Accounts and Statements. To send daily statements of cash
transactions to the Fund and such listings of securities held by the
Custodian for the account of the Fund as may from time to time be
requested by the Fund.
(b) Retention of Records. To preserve for the periods required
in Section 31a-2 of the General Rules and Regulations under the
Investment Company Act of 1940 such records maintained by it as are
required to be maintained by Section 31a-1 of such rules. Unless
otherwise instructed by the Fund, the Custodian shall maintain its
records in such form that the securities held by it for the Fund shall
at all times by identifiable by date of purchase and purchase price
per share or unit. Said records shall be available at the office of
the Custodian for inspection by the Fund or its agents at reasonable
times.
(c) Reports. To assist the Fund in the (a) preparation of
reports to shareholders of the Fund, the Federal Securities and
Exchange Commission, the various state "Blue Sky" authorities and
others, (b) audits of accounts and (c) other ministerial matters of
like nature.
(d) Miscellaneous. In general to attend to all non-
discretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealing with the portfolio
securities and cash of the Fund entrusted to its care except as
otherwise directed from time to time by proper instructions.
(5) MATTERS OF GENERAL APPLICATION
<PAGE>
(a) Investments and Limitations. In performing its duties
generally, and more particularly in connection with the purchase, sale
and exchange of securities made by or for the Fund, the Custodian may
take cognizance of the provisions of the Charter and By-Laws of the
Fund as from time to time amended, but, nevertheless, except as
otherwise expressly provided herein, it may assume unless and until
notified in writing to the contrary that so called proper instructions
received by it are not in conflict with or in any way contrary to any
provisions of said Charter or By-Laws, as amended, or resolutions or
proceedings of the Board of Directors of the Fund.
(b) Proper Instructions. For purposes of this Agreement, the
Custodian shall be deemed to have received "proper instructions" upon
receipt of written instructions signed by a majority of the Directors
of the Fund or by such person or persons as the Board of Directors
shall have from time to time authorized to give particular class of
instructions in question. Different persons may be authorized to give
instructions for different purposes. A certified copy of a resolution
or action of the Board of Directors of the Fund including facsimile
signatures of such person or persons, may be received and accepted by
the Custodian as conclusive evidence of the authority of such person
or persons to act and may be considered as in full force and effect
until receipt of written notice to the contrary. Such instructions
may be general or specific in terms.
(c) Reliance Upon Instructions. The Custodian shall be
protected in acting upon any instruction, notice, request, consent,
certificate or other instrument or paper believed by it to be genuine,
and to have been properly authorized and executed and shall, unless
otherwise specifically provided herein, be entitled to receive as
conclusive proof for any fact or matter required to be ascertained by
its hereunder, a certificate signed by the Secretary of the Fund with
respect to corporate proceedings of the Fund or otherwise by two
officers of the Fund then authorized to give instructions under
paragraph 5(b) hereof.
(d) Indemnification. The Fund shall be indemnified for any loss
it sustains as a result of any embezzlement of the Fund's assets by
the Custodian, its agent, officers, directors or employees. The
Custodian shall provide a blanket indemnification to the Fund for any
loss it sustains as a result of any omission of the Custodian, its
agents, officers, directors, or employees in administering or
performing any and all of its obligations under the Agreement.
6. COMPENSATION. The Fund shall pay to the Custodian such
compensation and at such time as may from time to time be agreed upon
in writing by the Fund and the Custodian.
7. TERMINATION. Either party may terminate this Agreement by
notice in writing delivered or mailed, postage prepaid, to the other
party hereto not less than thirty (30) days prior to the date of which
such termination shall take place. In the event of the legal
inability of the Custodian to serve hereunder or of termination of
this Agreement as aforesaid by either party, the Fund shall forthwith
appoint a bank, Federal savings bank or trust company of good standing
as successor custodian, and the Custodian shall deliver all funds and
all securities of the Fund, duly endorsed and in form for transfer, to
such successor custodian. If while this Agreement is in force the
Fund shall be liquidated pursuant to law, the Custodian shall
distribute either in cash or (if the Fund so orders by proper
instructions), in kind, prorata among the holders of shares in the
Fund, the securities and property of the Fund which remains after
paying or satisfying all expenses and liabilities of the Fund.
8. LAW OF CONTRACT. This agreement is executed and delivered in
the State of Maryland and shall be subject to and be construed
according to the laws of said State of Maryland.
9. NOTICES. Notices and other writings shall be deemed to have
been properly delivered or given hereunder to the respective addresses
if delivered or mailed, postage prepaid, to the appropriate party at
the address set forth below:
<PAGE>
If to the Fund:
American Gas Index Fund
4922 Fairmont Avenue
Bethesda, MD 20814
If to the Custodian:
Rushmore Trust and Savings Bank, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
10. LIABILITY WAIVED. Neither the holders of shares in the
Funds nor the Directors of the Fund shall be personally liable
hereunder.
11. SUCCESSORS. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their
respective successors.
12. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by a duly
authorized officer on the day and year first above written.
ATTEST: AMERICAN GAS INDEX FUND
/s/ William L. Major By: /s/ Richard J. Garvey
Chairman of the Board
/s/ John R. Stanley By: /s/ Timothy P. Hagan
Executive Vice President
ATTEST: RUSHMORE TRUST AND SAVINGS BANK, FSB:
/s/ Helen Pate By: /s/ Marjorie B. Deyo
<PAGE>
SCHEDULE A
Effective with the execution of this Agreement, the Custodian
shall be compensated for its services as follows:
5 basis points on the market value of the Fund
<PAGE>
SCHEDULE B
In an effort to permit direct communications between a company
which issues securities and the shareholder who votes those securities,
the Securities and Exchange Commission has adopted Rule 14b-1 (c).
The Securities and Exchange Commission Rule directs us to
contact each customer for whom we hold securities and determine whether
or not you authorize us to provide your name, address and share
position to requesting companies whose stock you own. If you tell us
"no", we will not provide this information to requesting companies. If
you tell us "yes", we will provide the information. Under the Rule,
you "yes" or "no" will apply to all securities that we hold for you.
We may provide this information either directly to the
requesting companies or through a third party vendor.
For your protection, the Rule prohibit the requesting company from
using you name and address for any purpose other than corporate
communications.
Please complete the authorization below by checking one of
the alternatives. Under the law, unless you indicate your objection in
writing, you are deemed to "not object".
YES ( X ) You are authorized to release my name, address, and
share positions to requesting issuers.
NO ( ) You are not authorized to release my name, address
or share positions to requesting issuers.
/s/ Richard J. Garvey June 10, 1992
Authorized signature Date
<PAGE>
RUSHMORE TRUST
January 24, 1997
Mr. Richard J. Garvey
Chairman of the Board
American Gas Index Fund, Inc.
4922 Fairmont Avenue
Bethesda, MD 20814
Dear Mr. Garvey:
I have enclosed a revised Schedule A, the fee schedule, of the Custody
Agreement between the American Gas Index Fund, Inc. and Rushmore Trust
and Savings, FSB. This revision states that the compensation for
custody services provided is an internal allocation of a fee described
in the Administrative Services Agreement between our companies.
Please date and sign below to indicate acceptance of this revised
schedule.
Should you have any questions, call me at (301) 657-0291.
Sincerely,
/s/ David M. Shawler
David M. Shawler
Vice President and Trust Manager
Accepted: /s/ Richard J. Garvey
Date: 1-29-97
<PAGE>
SCHEDULE A
The fees for Custodian services is an internal allocation of the fee
described in the Administrative Services Agreement between American Gas
Index Fund, Inc. and Rushmore Trust and Savings, FSB.
Exhibit H (1)
Administrative Services Agreement between the Registrant and Rushmore
Trust and Savings, FSB
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
Between
AMERICAN GAS INDEX FUND
And
RUSHMORE TRUST AND SAVINGS, FSB
This Administrative Services Agreement (the "Agreement") is
entered into this 1st day of November, 1993 by and between American
Gas Index Fund, Inc. (the "Fund") and Rushmore Trust and Savings, FSB
("RTS" sometimes hereinafter to as the "Administrator").
RECITALS
I. WHEREAS RTS and its personnel have expertise and experience
in providing custodian, transfer agent, shareholder accounting and
other administrative services to registered investment management
companies, and
II. WHEREAS the parties wish to set forth herein the manner and
terms upon which services will be provided.
NOW THEREFORE, the parties hereto agree as follows:
EMPLOYMENT OF RTS
1. The Fund hereby employs RTS to perform the services as set
forth in Exhibit I to this agreement.
2. As compensation for the services to be rendered, the Fund
shall pay RTS an annual fee based on 35 basis points (0.35 of 1%) of
the average daily net asset value of the Fund.
The fee will be accrued by the Fund daily and paid on such terms
as may from time-to-time be mutually agreeable to the Fund and RTS.
In the event of termination of this contract, the fee shall be
computed on the basis of the period ending on the last business day on
which this contract is in effect subject to a pro rata adjustment
based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
In addition to the fees described above, RTS may impose a charge
of $5 per month on any account whose average daily balance for the
month falls below $500 due to redemptions. The fee will continue to
be imposed during the months when the account balance remains below
$500. The fee will be imposed on the last business day of the month.
This fee will not be imposed on tax-sheltered retirement plans or
accounts established under the Uniform Gifts or Transfers to Minors
Act.
3. Subject to and in accordance with the governing instruments
of the Fund and of RTS respectively, directors, officers, agents, and
stockholders of the Fund are or may be interested in RTS (or any
successor thereof) as shareholders or otherwise; and the effect of any
such inter-relationships shall be governed by said governing
instruments and the applicable provisions of the Investment Company
Act of 1940.
4. This contract shall continue in effect so long as such
continuance is approved at least annually by a vote of a majority of
the Fund's Board of Directors, including the votes of a majority of
the Directors who are not parties to such contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting such approval. Provided, however, that (a) this
Contract may be terminated without penalty either by vote of the Board
of Directors of the Fund or by vote of majority of the outstanding
voting securities of the Fund, on sixty days prior written notice to
<PAGE>
RTS, (b) this Contract shall automatically terminate in the event of
its assignment (within the meaning of the Investment Company Act of
1940), and (c) this Contract may be terminated by RTS on sixty days
prior written notice to the Fund. Any notice under this Contract
shall be given in writing, addressed and delivered, or mailed
postpaid, to the other party at any office of such party. As used in
this Agreement, the terms "interested persons" and "vote of a majority
of the outstanding securities" shall have the respective meanings set
forth in Section 2(a) (19) and Section 2(a) (42) of the Investment
Company Act of 1940.
5. The services of RTS to the Fund hereunder are not to be
deemed exclusive, and RTS shall be free to render similar services to
others so long as its services hereunder are not impaired thereby.
RTS shall for purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any
way or otherwise by deemed an agent of the Fund.
6. No provisions of this Agreement shall be deemed to protect
RTS against any liability to the Fund or its shareholders to which it
otherwise would be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or the
reckless disregard of its obligations under this Agreement. Nor shall
any provisions hereof be deemed to protect any Director or Officer of
the Fund against any such liability to which he might otherwise be
subject by reasons of any willful misfeasance, bad faith, or gross
negligence in the performance of his duties or the reckless disregard
of his obligations. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule, or otherwise, the
remainder of this Agreement shall not be affected thereby.
7. Upon delivery of services by RTS to the Fund, RTS shall
prepare and submit to the Fund, an invoice for the amounts to be paid
by the Fund under this Agreement. The invoice shall contain a
description of the services rendered. The calculation of the amount
of the invoice shall be in accordance with the fee schedule as set
forth in Section 2 which has been reviewed as to the reasonableness of
the amounts by the Directors of the Fund who are not "interested
persons" of the Fund. Unless agreed otherwise, within thirty (30)
days of receipt of such invoice, the Fund shall pay to RTS all amounts
indicated as due and payable notwithstanding the provisions of Section
8 of this Agreement.
8. If the Fund or its designees shall determine any discrepancy
in the invoice, the Fund shall give RTS written notice of such
discrepancy and the amount thereof. Within ten (10) days after
receipt of such notice, RTS shall either pay the Fund the amount of
the discrepancy or inform the Fund in writing that RTS disputes the
existence or amount of the discrepancy. If RTS disputes the existence
or amount of the discrepancy, the parties agree that for a period of
thirty (30) days they shall use their best efforts to resolve such
dispute on a mutually satisfactory basis.
9. Any dispute or disagreement arising between RTS and the Fund
in conjunction with any provision of this Agreement, or the compliance
or non-compliance therewith, or the validity or enforceability thereof
which is not settled within thirty (30) days (or such other period as
may be mutually agreed upon) from the date that either party informs
the other in writing that such dispute or disagreement exists, shall
be settled by arbitration in accordance with rules set by a three
member panel, one member each selected by RTS and the Fund and the
third being an attorney selected by mutual agreement of RTS and the
Fund, the aforesaid with all charges submitted by said attorney to be
shared equally by RTS and the Fund. The member representing the Fund
shall be selected by a majority of the Directors of the Fund who are
not "interested persons" of the Fund. A decision shall be rendered by
the panel within thirty (30) days of a meeting held in such place or
places as may be agreed by the panel, and RTS and the Fund shall
comply with such decision. The decision of the panel shall be final
and not subject to judicial review, and judgment may be entered
thereon in accordance with applicable law in any court having
jurisdiction thereof.
10. Absent willful misfeasance, bad faith, gross negligence, or
reckless disregard of duties, RTS shall not be liable to the Fund for
any special, incidental, or consequential damages for losses arising
out of or relating to the performance of its obligations under this
<PAGE>
Agreement, whether or not such damages or losses were caused by the
acts or omissions of RTS or its employees. RTS is fully responsible
for the accurate transmission to the Fund of information provided to
RTS by third parties but is not responsible for the accuracy of the
information so provided.
11. All documents and files which may be or have been furnished
by RTS to the Fund and which may be produced or prepared by RTS in
connection with this Agreement shall be and remain the exclusive
property of the Fund.
11. RTS will preserve for the period required in Rule 31a-2 of
the General Rules and Regulations under the Investment Company Act of
1940, such records maintained by RTS as are required to be maintained
by Rule 31a-1 of such rules.
12. At the option of a majority of the Directors of the Fund who
are not "interested persons" of the Fund, the books and records of
RTS, insofar as such books and records pertain to the services, shall
be available for inspection by the Fund and its agent at the offices
of RTS during regular business hours, upon prior written notice to RTS
by the Fund.
13. Neither RTS nor the Fund shall be considered to be in
default in the performance of their respective obligations hereunder
to the extent that the performance of any such obligation or
obligations is prevented or delayed by an Act of God or any cause
beyond the control of RTS or the Fund, as the case may be. In the
event of equipment breakdown beyond its control, RTS shall take
reasonable steps to minimize service interruptions.
14. The services as provided by RTS in accordance with this
Agreement shall not be deemed accepted until the Fund has verified the
content and accuracy of those services provided by RTS. The Fund
shall notify RTS in writing within ten (10) days of the Fund's receipt
of services of its acceptance or rejection of such services. If such
notification is not received within ten (10) days of the Fund's
receipt of services, the services will be deemed to have been
accepted.
15. In the event that RTS fails to meet the performance
schedules (if any) contained herein and such failure is not caused by
the Fund, RTS shall take such steps as may be necessary to improve the
schedule(s) in such form as is required to meet such performance or
delivery schedules (if any) described herein.
16. RTS and the Fund may amend, modify, or supplement this
Agreement only by a written instrument executed by both RTS and the
Fund. If any such amendment, modification, or supplement causes an
increase or decrease in the price of, or time required for, the
performance of this Agreement, an equitable adjustment shall be made,
and this adjustment shall be mutually agreed upon by RTS and the Fund
and the Agreement modified in writing accordingly.
17. All notices, demand, and other communications required or
permitted to be given hereunder shall be made in writing and shall be
deemed to be duly given if personally delivered or if deposited in the
United States mail registered or certified mail, with postage prepaid,
and addressed to the appropriate party at the address set forth below,
or at such other address as the parties may designate in writing
delivered in accordance with the provisions of this Section 17.
If to RTS:
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, Maryland 20814
Attention: ________________________
If to the Fund:
American Gas Index Fund, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
Attention: Richard J. Garvey, Chairman
<PAGE>
18. This Agreement is intended by the parties as a full
expression of their agreement with respect to the subject matter
hereof and a complete and exclusive statement of the terms thereof.
No course of prior dealings between the parties and no usage of trade
shall be relevant or admissible to supplement, explain, or vary any of
the terms of this Agreement. Acceptance of, or acquiescence in, a
course of performance rendered under this Agreement shall not be
relevant or admissible to vary the terms and meaning of this
Agreement, even though the accepting or acquiescing party has
knowledge of the nature of the performance and the opportunity to make
objection. No representations, undertakings, or agreements have been
made or relied upon in the making of this Agreement other than those
specifically set forth herein.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland and shall be binding
upon and shall inure to the benefit of the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
Witness: AMERICAN GAS INDEX FUND, INC.
/s/ Richard J. Garvey
By: Chairman
Witness: Rushmore Trust and Savings, FSB
/s/ Marjorie B. Tilch
By: Senior Vice President
<PAGE>
EXHIBIT I
RUSHMORE TRUST AND SAVINGS, FSB
DESCRIPTION OF SERVICES
SHAREHOLDER SERVICING AND TRANSFER AGENT SERVICES
Services included:
Maintenance of individual shareholder accounts
Posting all transactions
Preparation of periodic shareholder statements
Preparation of transaction confirmations
Income distributions
Respond to inquiries from shareholders
Process account changes such as name or address
CUSTODIAN SERVICES
Services included:
Safekeeping of securities
Delivery of securities sold
Receipt of securities purchased
Retain Fund cash in separate account(s)
ADMINISTRATIVE SERVICES
Services included:
General ledger accounting
Portfolio accounting
Daily share pricing
Maintenance of records per SEC regulations
SEC registration fees
State "blue sky" fees
Directors fees and expenses
Insurance
Legal fees
Prospectus preparation
Tax return preparation
Shareholder report preparation
Printing
Postage
Printing of statement stock
Mailing envelopes
Exhibit (h) (2)
Administrative Services Agreement between the Registrant and American
Gas Association
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
AMERICAN GAS ASSOCIATION and AMERICAN GAS INDEX FUND, INC.
This Administrative Services Agreement (The "Agreement") is
entered into this 27th day of April 1989 by and between the American
Gas Association (herein "A.G.A.") and the American Gas Index Fund,
Inc. (herein the "Fund").
WITNESSETH
In consideration of the mutual agreements hereinafter contained,
it is agreed as follows:
1. Employment of A.G.A. A.G.A. shall be the fund "Administrator";
that is, A.G.A. shall perform for the Fund the calculation and
maintenance of the American Gas Association Stock Index ("Index"
herein), the description of which is found in Exhibit A attached
hereto and made a part hereof. In addition, A.G.A. shall provide the
Fund with information on the natural gas industry.
2. Payment to A.G.A. In consideration for the services provided by
A.G.A., the Fund shall pay A.G.A. at an annual rate of one-tenth of
one percent (0.10%) of the Fund's average daily net asset value. The
fee shall be paid monthly, within fifteen (15) calendar days after the
end of the preceding month.
3. Arbitration of Disputes. Any dispute or disagreement arising
between A.G.A. and the Fund in conjunction with any provision of this
Agreement, or the compliance or non-compliance therewith, or the
validity or enforceability thereof which is not settled within thirty
(30) days (or such other period as may be mutually agreed upon) from
the date that either party informs the other in writing that such
dispute or disagreement exists, shall be settled by arbitration in
accordance with rules set by a three member panel. One member each
shall be selected by A.G.A. and the Fund and the third shall be an
attorney selected by mutual agreement of A.G.A. and the Fund. If
A.G.A. and the Fund are unable to agree on the selection of the third
member of the panel within fifteen (15) days, the two panel members
shall agree upon a neutral attorney as the third panel member. All
reasonable expenses submitted by the third panel member shall be
shared equally by A.G.A. and the Fund. The member representing the
Fund shall be selected by a majority of the directors of the Fund who
are not "interested persons" of the Fund within the meaning of the
Investment Company Act of 1940 ("the Act"). A decision shall be
rendered by the panel within thirty (3) days of a meeting held in such
place or places as may be agreed upon by the panel, and A.G.A. and the
Fund shall comply with such decision. The decision of the panel shall
be final and not subject to judicial review, and the judgment may be
entered thereon in accordance with applicable law in any court having
jurisdiction thereof.
4. Liability of A.G.A.; Limitation of Damages. Absent willful
misfeasance, bas faith, gross negligence or reckless disregard of
duties, A.G.A. shall not be liable to the Fund for any special,
incidental, or consequential damages for losses arising out of or
relating to the performance of its obligations under this Agreement,
whether or not such damages or losses were caused by the acts of
omissions of A.G.A. or its employees. The parties agree, for example,
that an error in A.G.A.'s calculation of the Index shall not create
any liability on the part of A.G.A.
5. Independent Contractor. A.G.A. shall be considered an
independent contractor in its relationship with the Fund and in all
matters under this contract. A.G.A. is not an agent of the Fund.
6. Force Majeure. Neither A.G.A. nor the Fund shall be considered
to be in default in the performance of their respective obligations
hereunder to the extent that the performance of any such obligation or
obligations is prevented or delayed by an Act of God or any cause
beyond the control of A.G.A. or the Fund.
7. Modifications. A.G.A. and the Fund may amend, modify or
supplement this Agreement only by a written instrument executed by
both A.G.A. and the Fund. If any such amendment, modification or
supplement causes an increase in the price of the services performed,
such increase must be approved by a majority of the Fund's
shareholders as defined by the Act.
8. Approval and Termination. This contract shall continue in effect
until the first meeting of the Shareholders of the Fund (but in no
event longer than two years from the date hereof), and if approved at
such shareholders' meeting, until two years from the date hereof, and
thereafter only so long as such continuance is approved at least
annually by a vote of a majority of the Fund's Board of Directors,
including the votes of a majority of the directors who are not parties
to such contract or interested persons of any such party, cast in
person at a meeting called for the purpose of voting such approval.
Provided, however that (a) this Contract may at any time be terminated
<PAGE>
without payment of any penalty wither by vote of the Board of
Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Fund, on sixty days prior written notice to
the Manager, (b) this Contract shall automatically terminate in the
event of its assignment (within the meaning of the Investment Company
Act of 1940), and (c) this Contract may be terminated by the
Administrator on sixty days prior written notice to the Fund. Any
notice under this contract shall be given in writing, addressed and
delivered or mailed post paid, to the other party at any office of
such party. Upon any termination in accordance herewith, the Fund
shall pay A.G.A. all amounts due hereunder for all periods up to and
including the date of termination (such amounts to be determined in
accordance with Paragraph 2 of this Agreement) and A.G.A. shall take
such steps as reasonably may be requested by the Fund to effect an
orderly termination.
As used in this Section 8, the terms "interested persons" and
"vote of a majority of the outstanding securities" shall have the
respective meanings set forth in Section 2(a)(19) and Section
2(a)(42) of the Investment Company Act of 1940.
9. Notice. All notices, demand and other communications required or
permitted to be given hereunder shall be made in writing and shall be
deemed to be duly given if personally delivered or if deposited in the
United States registered or certified mail, with postage prepaid, and
addressed to the appropriate party at the address set forth below, or
at such other address as the parties may designate in writing
delivered in accordance with the provisions of this Paragraph 9.
If to A.G.A.:
American Gas Association
1515 Wilson Boulevard
Arlington, Virginia 22209
Attn:________________________
If to the Fund:
American Gas Index Fund, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
10. Waiver and Related Matters. This Agreement is intended by the
parties as a full expression of their agreement with respect to the
subject matter hereof and a complete and exclusive statement of the
terms thereof. No course of prior dealings between the parties and no
usage of trade shall be relevant or admissible to supplement, explain,
or vary any of the terms of this Agreement. Acceptance of, or
acquiescence in, a course of performance rendered under this Agreement
shall not be relevant or admissible to vary the terms and the meaning
of this Agreement, even though the accepting or acquiescing party has
knowledge of the nature of the performance and the opportunity to make
objection. No representations, understandings or agreements have been
made or relied upon in the making of this Agreement other than those
specifically set forth herein.
11. Controlling Law and Successor Interests. This Agreement shall be
governed by construed in accordance with the laws of the State of
Virginia and shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
12. Multiple Originals. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one counterpart has been
signed by each party and delivered to the other party hereto.
13. Assignment. Subject to the provisions of Section 8, this
Agreement shall not be assigned by either the Fund or A.G.A. without
the prior written consent of the other party hereto.
14. Heading. The headings in this Agreement are included solely as a
matter of convenient reference and shall not limit or control the
meaning of any provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
AMERICAN GAS ASSOCIATION
By: /s/ Philip Borish
AMERICAN GAS INDEX FUND, INC.
By: /s/ Richard J. Garvey
<PAGE>
Exhibit A
CALCULATING AND MAINTAINING THE
AMAERICAN GAS ASSOCIATION (A.G.A.) STOCK INDEX
The Administrator shall calculate and maintain the American Gas
Association ("A.G.A.") Stock Index ("Index" herein) as follows:
A. Collection of Company Data:
1. The following information shall be collected quarterly or at such
other mutually agreed upon times ("the period" herein):
a. Number of shares of publicly traded common stock outstanding
(exclusive of treasury stock) for natural gas distribution and
transmission company members of A.G.A. which are headquartered in
the United States.
b. Share price at the end of the period.
2. The following information shall be collected annually or at such
other mutually agreed upon times:
a. Total assets of the publicly traded company.
b. Assets devoted to natural gas distribution and transmission.
B. Calculation of the Index - The Index shall be calculated as
follows, using the data in section A above:
1. The number of shares of common stock outstanding, times the
closing share price1 at the end of the period equals the "market
capitalization value." The "market capitalization value" times the
percentage of assets devoted to natural gas distribution and
transmission will equal the "gas market capitalization value."
2. The sum of each company's "gas market capitalization value" shall
equal the "industry gas market capitalization value."
3. Each company's stock percentage within the Index shall be
calculated by dividing its "gas market capitalization value" by the
"industry gas market capitalization value."
4. No individual company's stock shall exceed five percent of the
total Index value. The Index shall be recalculated as necessary, to
apportion "gas market capitalization values" in excess of five percent
to all other gas market capitalization values" comprising the Index.
5. The Index shall be calculated at least quarterly.
C. Maintenance of the Index - The Index shall be maintained as
follows:
1. If there is a change which impacts a company's eligibility to be
included in the Index, as defined in section A.1.a. above, such change
shall be reflected in the first quarterly calculation of the Index
following A.G.A.'s receipt of the necessary data.
2. If any stock price in section A moves twenty-five (25) percent or
more over any consecutive ten-day (10) trading period, the Fund shall
advise A.G.A., which then shall recalculate the Index under section
A.1. within five (5) business days. Such calculation shall not be
made unless the company's "gas market capitalization value" is at
least one (1.00) percent as shown in the last Index provided to the
Fund.
3. At the request of the Fund, A.G.A. shall provide a recalculated
Index.
1 Listed securities shall be valued at the last sales price at the New
York Stock Exchange and other major exchanges. Over-the-counter
securities shall be valued at the last sales price.
Exhibit (h)(3)
Agreement between Money Management Associates and Rushmore Services, Inc.
<PAGE>
AGREEMENT
This Agreement by and between Money Management Associates, a
District of Columbia limited partnership located at Palm Beach
Gardens, Florida ("MMA") and Rushmore Services, Inc., a Maryland
corporation located at 4922 Fairmont Avenue, Bethesda, Maryland 20814
("RSI"). This Agreement is made and entered into on the 1st day of
October 1994.
WITNESSETH
WHEREAS MMA provides investment advisory services to mutual
funds; those mutual funds currently being advised by MMA are: Fund
for Tax-Free Investors, Inc., The Rushmore Fund, Inc., Fund for
Government Investors, and American Gas Index Fund, Inc.; MMA provides
administrative services to the Cappiello-Rushmore Trust (collectively
the "Mutual Funds"); and
WHEREAS RSI provides administrative services to MMA in connection
with its management, promotion and distribution of Mutual Funds; and
IT IS the purpose of this Agreement to clearly define the
obligations of each of the parties hereto with respect to services
rendered by RSI.
NOW THEREFORE in consideration of the mutual promises herein
exchanged the parties agree as follows:
1. RSI shall provide the administrative services as set forth
above to MMA. It shall also execute trades and monitor portfolios for
the Mutual Funds. It shall maintain MMA records in Bethesda, Maryland
at its offices and assemble, prepare and file required reports with
the Securities and Exchange Commission and the Office of Thrift
Supervision.
2. MMA shall pay a monthly service fee to RSI of $82,350.00
which is intended to compensate RSI for management of the Mutual
Funds, salary, rental expense, and profit. Additional expenses which
are reimbursable include, but are not limited to, advertising,
promotion, distribution, professional fees, telephone, postage and
travel expense. The monthly service fee shall be paid at the
beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then
to reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1995. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
4. The monthly fee, however, shall be renegotiable annually
between the parties. In the event that the parties cannot come to an
agreement on the amount of the monthly fee thirty (30) days in advance
of the termination of the current annual contract, such failure to
agree shall constitute a termination notice of the contract.
5. Any dispute or disagreement arising between MMA and RSI in
conjunction with any provision of this Agreement, or the compliance or
non-compliance therewith, which is not settled within thirty (30) days
(or such period as may be mutually agreed upon) from the date that
either party informs the other in writing that such dispute or
disagreement exists, shall be settled by arbitration in accordance
with rules set by a three member panel, one member each selected by
MMA and RSI and the third being an attorney selected by mutual
agreement of MMA and RSI, with all charges submitted by said attorney
to be shared equally by MMA and RSI. The decision of the panel shall
be by majority vote and final and not subject to judicial review, and
judgment may be entered thereon in accordance with applicable law in
any court having jurisdiction thereof.
6. All notices, demands and other communications required or
permitted to be given hereunder shall be made in writing and shall be
deemed to be duly given if personally delivered or if deposited in the
United States mail, registered or certified mail, with postage
<PAGE>
prepaid, and addressed to the appropriate party at the address set
forth below, or at such other address as the parties may designate in
writing delivered in accordance with the provisions of this paragraph.
If to MMA:
Money Management Associates
P.O. Box 31237
Palm Beach Gardens, Florida 33420
Attention: Daniel L. O'Connor
If to RSI:
Rushmore Services, Inc.
4922 Fairmont Avenue
Bethesda, Maryland 20814
Attention: Martin M. O'Connor
7. This Agreement is intended by the parties as a full
expression of their agreement with respect to the subject matter
hereof and a complete and exclusive statement of the terms thereof.
No course of prior dealings between the parties and no usage of trade
shall be relevant or admissible to supplement, explain, or vary any of
the terms of this Agreement. Acceptance of, or acquiescence in, a
course of performance rendered under this Agreement shall not be
relevant or admissible to vary the terms and meaning of this
Agreement, even though the accepting or acquiescing party has
knowledge of the nature of the performance and the opportunity to make
objection. No representations, undertakings, or agreements have been
made or relied upon in the making of this Agreement other than those
specifically set forth herein.
8. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland and shall be binding
upon and shall inure to the benefit of the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
WITNESS: MONEY MANAGEMENT ASSOCIATES:
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the original Agreement:
2. MMA shall pay a monthly service fee to RSI of $63,500.00
which is intended to compensate RSI for management of the Mutual
Funds, salary, rental expense, and profit. Additional expenses which
are reimbursable include, but are not limited to, advertising,
promotion, distribution, professional fees, telephone, postage and
travel expense. The monthly service fee shall be paid at the
beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then
to reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1996. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
December 24, 1995
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $56,000.00
which is intended to compensate RSI for management of the Mutual
Funds, salary, rental expense, and profit. Additional expenses which
are reimbursable include, but are not limited to, advertising,
promotion, distribution, professional fees, telephone, postage and
travel expense. The monthly service fee shall be paid at the
beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then
to reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1997. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
December 23, 1996
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $75,000.00
which is intended to compensate RSI for management of the Mutual
Funds, salary, rental expense, and profit. Additional expenses which
are reimbursable include, but are not limited to, advertising,
promotion, distribution, professional fees, telephone, postage and
travel expense. The monthly service fee shall be paid at the
beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then
to reimbursement.
3. The term of this Agreement shall be six months beginning on
the 1st day of July, 1997. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
June 30, 1997
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $60,000.00
which is intended to compensate RSI for management of the Mutual
Funds, salary, rental expense, and profit. Additional expenses which
are reimbursable include, but are not limited to, advertising,
promotion, distribution, professional fees, telephone, postage and
travel expense. The monthly service fee shall be paid at the
beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then
to reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1998. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
December 31, 1997
<PAGE>
AMENDMENT
TO
AGREEMENT BETWEEN
MONEY MANAGEMENT ASSOCIATES
AND
RUSHMORE SERVICES, INC.
The following amendment is hereby made to the Agreement dated
October 1, 1994 between Money Management Associates and Rushmore
Services, Inc. The following paragraphs shall replace in their
entirety paragraphs (2) and (3) of the amended Agreement:
2. MMA shall pay a monthly service fee to RSI of $70,000.00
which is intended to compensate RSI for management of the Mutual
Funds, salary, rental expense, and profit. Additional expenses which
are reimbursable include, but are not limited to, advertising,
promotion, distribution, professional fees, telephone, postage and
travel expense. The monthly service fee shall be paid at the
beginning of each month and the reimbursement shall be paid as billed
monthly. Payments will be first allocated to the service fee and then
to reimbursement.
3. The term of this Agreement shall be one year beginning on the
1st day of January, 1999. This Agreement shall be automatically
renewed between the parties on an annual basis unless within thirty
(30) days of an annual termination date notice is given by one party
or the other of its intention not to renew.
WITNESS: MONEY MANAGEMENT ASSOCIATES
/s/ Stephenie E. Adams /s/ Daniel L. O'Connor
By: Stephenie E. Adams By: Daniel L. O'Connor
General Partner
WITNESS: RUSHMORE SERVICES, INC.
/s/ Stephenie E. Adams /s/ Martin M. O'Connor
By: Stephenie E. Adams By: Martin M. O'Connor
Vice President, Secretary
December 31, 1998
Exhibit J
Consent of Independent Auditors
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. 10 to Registration Statement Nos. 33-25678 and 811-5702
of our report dated April 30, 1999 appearing in the Annual Report of
American Gas Index Fund, Inc. for the year ended March 31, 1999, and
to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which is also a part of such Registration
Statement.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
May 26, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 125,001,288
<INVESTMENTS-AT-VALUE> 199,005,975
<RECEIVABLES> 0
<ASSETS-OTHER> 1,310,835
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 200,316,810
<PAYABLE-FOR-SECURITIES> 0
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<TOTAL-LIABILITIES> 0
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<PAID-IN-CAPITAL-COMMON> 121,728,878
<SHARES-COMMON-STOCK> 12,305,907
<SHARES-COMMON-PRIOR> 13,147,754
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<EXPENSES-NET> (1,915,337)
<NET-INVESTMENT-INCOME> 6,397,350
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<APPREC-INCREASE-CURRENT> (30,421,779)
<NET-CHANGE-FROM-OPS> (14,140,733)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,353,353)
<DISTRIBUTIONS-OF-GAINS> (8,531,808)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,006,326
<NUMBER-OF-SHARES-REDEEMED> (3,612,457)
<SHARES-REINVESTED> 764,283
<NET-CHANGE-IN-ASSETS> (44,050,910)
<ACCUMULATED-NII-PRIOR> 33,061
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<GROSS-ADVISORY-FEES> 901,335
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<GROSS-EXPENSE> 1,915,337
<AVERAGE-NET-ASSETS> 225,333,845
<PER-SHARE-NAV-BEGIN> 18.590
<PER-SHARE-NII> 0.510
<PER-SHARE-GAIN-APPREC> (1.630)
<PER-SHARE-DIVIDEND> (0.510)
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