<PAGE>
Semiannual Report, September 30, 2000
AMERICAN GAS INDEX FUND, INC.
4922 Fairmont Avenue, Bethesda, Maryland 20814
(800) 343-3355 (301) 657-1500
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Dear Shareholder: November 6, 2000
The American Gas Index Fund experienced a
robust total return of 30.29% for the six
months ended September 30, 2000. The Fund's
net asset value (NAV) reached an all time
high of $21.99 per share on September 15 and
ended the quarter at $21.77. The six-month
dividend distribution totaled 25.80 cents
per share. The vast majority of the Fund's
holdings (87%), including nine of the ten
largest holdings, increased in value. The
healthy total return of the Fund lagged
behind the surging Dow Jones Utility Average
as several depressed electric utility stocks
rebounded strongly during this reporting
period.
The impressive positive performance of gas
energy stocks in contrast to the weakness in
the general equity markets is attributed to
factors internal to the gas industry and a
major shift in the outlook of the investment
community.
Top Five Performers
-------------------------------------------------------
(Price Change: Six Months Ended Sept. 30, 2000)
PPL Corporation 99.40%
Reliant Energy, Inc. 98.40%
Energen Corp. 86.67%
Entergy Corp. 84.52%
Dynegy, Inc. 81.67%
Bottom Five Performers
-------------------------------------------------------
(Price Change: Six Months Ended Sept. 30, 2000)
Montana Power Co. -47.85%
Avista Corp. -44.79%
Citizens Communications Co. -17.94%
Unitil Corp. -11.63%
New Jersey Resources Corp. -4.97%
Natural gas is positioned to be the
primary energy source utilized to produce
the increase in electric power required by
the computer-based economy. In addition,
growing gas demand is forecasted for
commercial and residential applications. It
is estimated that, in 1999, over 90% of
reported planned new electric generating
capacity is gas fueled. To ensure the
necessary gas supply, domestic gas rigs in
operation are at an all time record high.
Canadian producers are stepping up
investment and activities. Even long dormant
schemes to utilize Alaska's huge gas
reserves are being revived. The mothballed
liquefied natural gas (LNG) facilities are
being activated. Environmental and economic
considerations have resulted in 65% of the
transit agencies in the U.S. operating gas-
Total Return Comparison
(Six Months Ended September 30, 2000)
[GRAPH APPEARS HERE]
American Gas Index Fund 30.29
Dow Jones Utilities 38.97
The average annual total return was 37.87% for the one-year period, 18.94% for
the five-year period, and 13.28% for the ten-year period ended September 30,
2000. Returns are historical and include changes in principal and reinvested
dividends and capital gains. Your return and principal will vary and your may
have a gain or loss when you sell shares.
<PAGE>
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fueled busses. Some agencies, including those in several of the largest urban
centers, have announced that only natural gas powered buses will be ordered in
the future.
The shift in investor sentiment was characterized by a noted industry
observer as "the flight to safety from NASDAQ." Institutions and individuals
are pursuing companies with good cash flow and "real" profits. The recent
stock market volatility is expected to continue. The performance of the Fund
during the past several months is an indication of the attractive aspects of
long term investing in a diversified portfolio of gas energy companies.
Please contact us directly if you have questions about the Fund. Your
continued interest in and support of the Fund is appreciated.
Sincerely,
/s/ Richard J. Garvey
Richard J. Garvey
Chairman of the Board
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2
<PAGE>
American Gas Index Fund, Inc.
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STATEMENT OF NET ASSETS
September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Value Percent of
Shares (Note 1) Net Assets
------- ------------ ----------
<S> <C> <C> <C>
COMMON STOCKS
Duke Energy Corp............................... 180,000 $ 15,435,000 5.44%
The Williams Companies, Inc.................... 335,000 14,153,750 4.99
The Coastal Corp............................... 190,000 14,083,750 4.96
Enron Corp..................................... 160,000 14,020,000 4.94
El Paso Energy Corp............................ 225,000 13,865,625 4.88
Columbia Energy Group.......................... 192,800 13,688,800 4.82
KeySpan Energy Corp............................ 311,400 12,494,925 4.40
Reliant Energy, Inc............................ 260,000 12,090,000 4.26
PG&E Corp...................................... 425,000 10,279,687 3.62
Dominion Resources, Inc........................ 175,000 10,160,937 3.58
Public Service Enterprise Group, Inc........... 221,500 9,898,281 3.49
Dynegy, Inc.................................... 150,000 8,550,000 3.01
Xcel Energy, Inc............................... 270,000 7,425,000 2.62
PECO Energy Co................................. 100,000 6,056,250 2.13
NICOR, Inc..................................... 165,000 5,970,937 2.10
National Fuel Gas Co........................... 100,000 5,606,250 1.98
Questar Corp................................... 185,000 5,145,313 1.81
Eastern Enterprises............................ 75,000 4,785,938 1.69
MCN Energy Group, Inc.......................... 185,000 4,740,625 1.67
Washington Gas Light Co........................ 175,000 4,703,125 1.66
Peoples Energy Corp............................ 140,000 4,672,500 1.65
AGL Resources, Inc............................. 210,000 4,213,125 1.48
CMS Energy Corp................................ 150,000 4,040,625 1.42
Equitable Resources, Inc....................... 60,000 3,802,500 1.34
Consolidated Edison, Inc....................... 110,000 3,753,750 1.32
Piedmont Natural Gas Co., Inc.................. 120,000 3,675,000 1.29
Southern Union Co.............................. 185,000 3,665,313 1.29
ONEOK, Inc..................................... 90,000 3,577,500 1.26
NiSource, Inc.................................. 140,000 3,412,500 1.20
Constellation Energy Group, Inc................ 55,000 2,736,250 0.96
Southwest Gas Corp............................. 130,000 2,721,875 0.96
New Jersey Resources Corp...................... 60,000 2,437,500 0.86
Atmos Energy Corp.............................. 110,000 2,268,750 0.80
Vectren Corporation............................ 110,000 2,234,375 0.79
Northwest Natural Gas Company.................. 90,000 2,047,500 0.72
Energy East Corporation........................ 90,000 2,036,250 0.72
</TABLE>
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3
<PAGE>
American Gas Index Fund, Inc.
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STATEMENT OF NET ASSETS (continued)
September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Value Percent of
Shares (Note 1) Net Assets
------- ------------ ----------
<S> <C> <C> <C>
COMMON STOCKS (continued)
The Montana Power Co........................... 60,000 $ 2,002,500 0.71%
UtiliCorp United, Inc.......................... 75,000 1,940,625 0.68
MDU Resources Group, Inc....................... 60,000 1,785,000 0.63
OGE Energy Corp................................ 80,000 1,705,000 0.60
Wisconsin Energy Corp.......................... 85,000 1,694,688 0.60
Niagara Mohawk Holdings, Inc.*................. 100,000 1,575,000 0.56
Citizens Communications Company*............... 115,000 1,545,313 0.54
Laclede Gas Co................................. 70,000 1,513,750 0.53
Cinergy Corp................................... 45,000 1,487,813 0.52
Energen Corp................................... 50,000 1,487,500 0.52
Texas Utilities Co............................. 35,000 1,386,875 0.49
DPL, Inc....................................... 40,000 1,190,000 0.42
South Jersey Industries, Inc................... 40,000 1,167,500 0.41
TECO Energy, Inc............................... 40,000 1,150,000 0.41
Northeast Utilities............................ 50,000 1,084,375 0.38
NUI Corp....................................... 35,000 1,056,562 0.37
CTG Resources, Inc............................. 25,000 1,025,000 0.36
Carolina Power & Light Co...................... 20,000 833,750 0.29
SEMCO Energy, Inc.............................. 47,500 730,313 0.26
Providence Energy Corp......................... 17,000 721,437 0.25
NSTAR.......................................... 17,850 718,462 0.25
PPL Corp. ..................................... 15,000 626,250 0.22
UGI Corp....................................... 25,000 606,250 0.21
Public Service Co. of New Mexico............... 22,500 582,187 0.21
RGS Energy Group, Inc.......................... 20,000 563,750 0.20
Avista Corp.................................... 25,000 562,500 0.20
EnergyNorth, Inc............................... 9,000 546,188 0.19
WPS Resources Corp............................. 12,500 409,375 0.14
Connectiv, Inc................................. 20,000 357,500 0.13
EnergySouth, Inc............................... 16,000 320,000 0.11
CH Energy Group, Inc........................... 6,500 259,187 0.09
Fall River Gas Co.............................. 10,000 245,000 0.09
Southwestern Energy Resources.................. 27,100 237,125 0.08
Madison Gas & Electric Co...................... 10,000 227,500 0.08
Allegheny Energy, Inc.......................... 5,000 190,938 0.07
Entergy Corp................................... 5,000 186,250 0.07
</TABLE>
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4
<PAGE>
American Gas Index Fund, Inc.
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STATEMENT OF NET ASSETS (continued)
September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Value Percent of
Shares (Note 1) Net Assets
-------------------------------
<S> <C> <C> <C>
COMMON STOCKS (continued)
Chesapeake Utilities Corp..................... 10,000 $ 181,250 0.06%
Sierra Pacific Resources...................... 10,000 180,000 0.06
Delta Natural Gas Co., Inc.................... 10,000 175,000 0.06
RGC Resources, Inc............................ 7,500 143,906 0.05
Energy West, Inc.............................. 7,500 65,625 0.02
Virginia Gas Co............................... 15,000 56,250 0.02
ALLETE........................................ 2,000 44,250 0.02
Unitil Corp................................... 1,000 26,125 0.01
------------ ------
Total Common Stocks (Cost $150,231,240)................ 279,043,375 98.28
------------ ------
REPURCHASE AGREEMENT
With PaineWebber dated 9/29/00 at 6.4% to be
repurchased at $3,310,668 on 10/2/00, collateralized
by $3,357,340 in U.S. Treasury Notes, due 12/31/00
(Cost $3,308,903)..................................... 3,308,903 1.17
------------ ------
Total Investments (Cost $153,540,143).................. 282,352,278 99.45
Other Assets less Liabilities.......................... 1,571,719 0.55
------------ ------
Net Assets............................................. $283,923,997 100.00%
============ ======
Net Asset Value Per Share (Based on 13,040,033 Shares
Outstanding).......................................... $21.77
============
Net Assets Consist of:
Paid-in-Capital....................................... $136,567,262
Accumulated Undistributed Net Investment Income....... 46,327
Accumulated Undistributed Net Realized Gain on
Investments.......................................... 18,498,273
Net Unrealized Appreciation of Investments............ 128,812,135
------------
Net Assets............................................ $283,923,997
============
</TABLE>
Income Tax Information:
At September 30, 2000, the cost of the investment securities for Federal
income tax purposes was $153,540,143. Net unrealized appreciation was
$128,812,135 of which $131,255,009 related to appreciated investment
securities and $2,442,874 related to depreciated investment securities.
Other Information:
For the six months ended September 30, 2000, purchases of securities,
excluding short-term securities, were $54,931,057 and sales (including
maturities) of securities were $20,722,043.
*Non-income producing security
See Notes to Financial Statements.
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5
<PAGE>
American Gas Index Fund, Inc.
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STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 2000
(unaudited)
<TABLE>
<S> <C>
Investment Income
Dividends......................................................... $ 3,775,168
Interest.......................................................... 427,172
-----------
Total Investment Income.......................................... 4,202,340
-----------
Expenses
Investment Advisory Fee (Note 2).................................. 461,352
Accounting and Administrative Service Fee (Note 2)................ 403,787
Administrative Fee (Note 2)....................................... 115,338
-----------
Total Expenses................................................... 980,477
-----------
Net Investment Income.............................................. 3,221,863
-----------
Net Realized Gain on Investment Transactions....................... 8,262,280
Change in Net Unrealized Appreciation of Investments............... 50,327,285
-----------
Net Gain on Investments............................................ 58,589,565
-----------
Net Increase in Net Assets Resulting from Operations............... $61,811,428
===========
</TABLE>
See Notes to Financial Statements.
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6
<PAGE>
American Gas Index Fund, Inc.
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six Months
Ended For the Year
September 30, 2000 Ended
(unaudited) March 31, 2000
------------------ --------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net Investment Income....................... $ 3,221,863 $ 5,987,825
Net Realized Gain on Investment
Transactions............................... 8,262,280 21,478,664
Change in Net Unrealized Appreciation of
Investments................................ 50,327,285 4,480,162
------------ ------------
Net Increase in Net Assets Resulting from
Operations................................ 61,811,428 31,946,651
------------ ------------
Distributions to Shareholders
From Net Investment Income.................. (3,177,221) (6,063,198)
From Net Realized Gain on Investments....... -- (15,748,857)
------------ ------------
Total Distributions to Shareholders........ (3,177,221) (21,812,055)
------------ ------------
Share Transactions
Net Proceeds from Sales of Shares........... 97,967,656 26,860,337
Reinvestment of Distributions............... 2,965,462 20,383,792
Cost of Shares Redeemed..................... (70,136,759) (63,202,104)
------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Share Transactions......... 30,796,359 (15,957,975)
------------ ------------
Total Increase (Decrease) in Net Assets.... 89,430,566 (5,823,379)
Net Assets--Beginning of Period.............. 194,493,431 200,316,810
------------ ------------
Net Assets--End of Period.................... $283,923,997 $194,493,431
============ ============
Shares
Sold........................................ 4,977,585 1,524,570
Issued in Reinvestment of Distributions..... 150,868 1,297,020
Redeemed.................................... (3,576,294) (3,639,623)
------------ ------------
Net Increase (Decrease) in Shares.......... 1,552,159 (818,033)
============ ============
</TABLE>
See Notes to Financial Statements.
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7
<PAGE>
American Gas Index Fund, Inc.
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Six
Months Ended
September For the Years Ended March 31,
30, 2000 ------------------------------------------------
(unaudited) 2000 1999 1998 1997 1996
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net Asset Value--
Beginning of Period... $ 16.93 $ 16.28 $ 18.59 $ 14.84 $ 13.25 $ 11.13
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net Investment Income. 0.26 0.52 0.51 0.47 0.45 0.45
Net Realized and
Unrealized Gain
(Loss) on
Investments.......... 4.84 2.07 (1.63) 3.87 1.60 2.13
-------- -------- -------- -------- -------- --------
Total from Investment
Operations.......... 5.10 2.59 (1.12) 4.34 2.05 2.58
-------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
From Net Investment
Income............... (0.26) (0.52) (0.51) (0.47) (0.46) (0.46)
From Net Realized
Gain................. -- (1.42) (0.68) (0.12) -- --
-------- -------- -------- -------- -------- --------
Total Distributions.. (0.26) (1.94) (1.19) (0.59) (0.46) (0.46)
-------- -------- -------- -------- -------- --------
Net Increase (Decrease)
in Net Asset Value.... 4.84 0.65 (2.31) 3.75 1.59 2.12
-------- -------- -------- -------- -------- --------
Net Asset Value--End of
Period................ $ 21.77 $ 16.93 $ 16.28 $ 18.59 $ 14.84 $ 13.25
======== ======== ======== ======== ======== ========
Total Investment Return. 30.29%A 17.18% (6.35)% 29.62% 15.60% 23.46%
Ratios to Average Net
Assets:
Expenses............... 0.85%B 0.85% 0.85% 0.85% 0.85% 0.85%
Net Investment Income.. 2.78%B 2.95% 2.84% 2.83% 3.06% 3.71%
Supplementary Data:
Portfolio Turnover
Rate.................. 9% 16% 10% 13% 8% 10%
Net Assets at End of
Period (in thousands). $283,924 $194,493 $200,317 $244,368 $213,058 $204,000
Number of Shares
Outstanding at End of
Period (in thousands). 13,040 11,488 12,306 13,148 14,353 15,391
</TABLE>
---------------------
A Total returns for periods of less than one year are not annualized.
B Annualized
See Notes to Financial Statements.
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8
<PAGE>
American Gas Index Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
American Gas Index Fund, Inc. (the "Fund") is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 as an open-
end, diversified investment company. The Fund is authorized to issue
1,000,000,000 shares of $0.001 par value capital stock. The Fund invests
primarily in the common stock of natural gas distribution and 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 security 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 ("Rushmore Trust"), a majority-owned
subsidiary of the Adviser, provides transfer agency, dividend-disbursing and
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.
On October 20, 1999, the Adviser and Rushmore Trust reached a definitive
agreement to be acquired by Friedman, Billings, Ramsey Group, Inc. (the
"Transaction"). The Transaction is subject to various regulatory approvals
including the approval of a new investment advisory contract by the Fund's
shareholders (see Note 3).
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9
<PAGE>
American Gas Index Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2000
(unaudited)
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. SPECIAL MEETING OF SHAREHOLDERS
A special meeting of shareholders of the Fund was held on June 1, 2000 (the
"Meeting"). The Meeting was held to (1) elect the Board of Trustees of the
Fund; (2) approve a new investment advisory contract which would take effect
upon consummation of the Transaction; (3) ratify the selection of independent
auditors; and (4) transact such other business as may properly come before
the Meeting. At record date, March 17, 2000, 11,535,140.678 shares were
outstanding of which 7,635,476 shares were represented at the Meeting. Each
matter received the required number of affirmative votes for ratification.
Below details the votes recorded with respect to the stated matters.
(1) Election of Board
<TABLE>
<CAPTION>
Withhold
For Authority
--------- ---------
<S> <C> <C>
Richard J. Garvey 7,372,422 263,054
Bette Clemens 7,360,851 274,625
Louis T. Donatelli 7,377,013 258,463
Bruce R. Ellis 7,346,562 288,914
Jeffrey R. Ellis 7,350,136 285,340
F. David Fowler 7,354,880 280,586
Patrick F. Noonan 7,368,569 266,907
David N. Parker 7,363,697 271,779
Eugene A. Tracy 7,372,030 263,446
Michael A. Willner 7,358,236 277,240
</TABLE>
(2) New investment advisory contract with Money Management Associates, L.P.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
7,040,391 232,482 362,603
</TABLE>
(3) Appointment of Deloitte & Touche LLP as independent auditors
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
7,290,413 76,018 269,045
</TABLE>
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10
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Semiannual Report
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September 30, 2000
