<PAGE> 1
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
FOR YIELD, PRICE, LAST TRANSACTION,
AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
FOR ASSISTANCE WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. ROWE PRICE
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to
others who have received a copy of the prospectus of the T. Rowe Price
Equity Index Fund.
[T. ROWE PRICE INVEST WITH CONFIDENCE(R) LOGO]
EXF
[T. ROWE PRICE LOGO]
--------------------
EQUITY INDEX FUND
DECEMBER 31, 1995
<PAGE> 2
- --------------------------------------------------------------------------------
Fellow Shareholders
The stock market could do no wrong in 1995, making equity index funds a great
place to invest. In particular, the unmanaged Standard & Poor's 500 Stock Index,
which your fund seeks to replicate, had a stellar year, outperforming most other
indices and equity mutual funds with a gain of 37.6%. The index is dominated by
the large, multinational companies that paced the stock market's rally for most
of the year.
Your fund's performance closely tracked the S&P 500 for both reporting
periods, with the small difference attributable to the expenses of portfolio
management. One reason for our close proximity to the index's performance was
the fund's policy of maintaining a fully invested portfolio: any cash held for
purposes of meeting redemptions is used as collateral against futures contracts,
which allows the fund to maintain an effective 100% equity position. In a year
like 1995, where the gap between equity and cash returns was large, the penalty
for holding cash was high.
- ------------------------------------------------------
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 12/31/95
6 Months 12 Months
-------- ---------
<S> <C> <C>
Equity Index Fund 14.3% 37.2%
S&P 500 14.5 37.6
</TABLE>
- ------------------------------------------------------
YEAR-END DISTRIBUTIONS
Your Board of Directors declared a fourth quarter dividend of $0.12 per share, a
short-term capital gain of $0.10, and a long-term capital gain of $0.19. All
distributions were paid on December 28 to shareholders of record on December 26.
You should have already received a check or statement reflecting these
distributions as well as your Form 1099-DIV reporting them for tax purposes.
MARKET REVIEW
The 1995 rally in stocks was broad and powerful: every sector of the S&P 500
showed double-digit gains (as shown in the chart on the next page). Technology
stocks led the way for most of the year, but faltered in
the fourth quarter after valuations reached extraordinary levels. The
top-performing sector was health care, as these stocks continued to rebound from
the depressed levels of 1993 caused by the Clinton administration's ill-fated
plan to provide health insurance to all Americans. Financial stocks were a close
second, benefiting from sharply lower interest rates, which have the double
effect of boosting these companies' profits and enhancing the attractiveness of
their relatively higher dividend yields. Mergers and restructurings, compelled
by the need to cut costs while maintaining superior service, also lifted the
financial arena. CHASE MANHATTAN agreed to merge with CHEMICAL BANKING, and
FIRST INTERSTATE was pursued by both WELLS FARGO and FIRST BANK SYSTEMS.
The laggards in 1995 included most stocks related to consumer spending, as
retailers, autos, and makers of consumer nondurables struggled to meet
expectations. Now that the economic expansion is into its fifth year and
beginning to mature, deeply cyclical industries -- such as paper, forest
products, and steel manufacturers -- significantly trailed the overall market.
The size of a company's stock was integral to performance too, as large
companies generally outpaced their smaller brethren. Since the fund consists
mainly of large companies and the weight of a stock in the fund is determined by
its market capitalization, it benefited from the dominance of large caps. On a
relative basis, growth stocks nosed out value stocks: for the year, the
Barra/S&P Growth index returned 38%, versus 37% for the Barra/S&P Value Index.
The best gains were found among medium-sized companies with rapidly-growing
earnings.
<PAGE> 3
- ------------------------------------------------------
Returns by Market Sector
<TABLE>
<CAPTION>
Periods Ended 12/31/95
6 Months 12 Months
-------- ---------
<S> <C> <C>
Health Care 28.2% 54.7%
- ---------------------------------------------------
Financial 21.1 51.1
Technology 3.9 38.4
- ---------------------------------------------------
Utilities 22.5 37.4
Consumer Nondurables 15.5 36.6
- ---------------------------------------------------
Capital Equipment 15.6 33.9
Energy 14.7 31.1
- ---------------------------------------------------
Business Services and
Transportation 11.8 28.0
Process Industries 4.3 24.9
- ---------------------------------------------------
Miscellaneous -- 21.6
Consumer Cyclicals 9.4 20.7
- ---------------------------------------------------
Consumer Services 2.7 18.7
Basic Materials 1.2 11.4
</TABLE>
- ------------------------------------------------------
PORTFOLIO REVIEW
Your fund's top performers included two banks, First Interstate and SHAWMUT,
each of which more than doubled after announcing mergers, and AMERICAN
INTERNATIONAL GROUP, a diversified insurance powerhouse which is one of our
largest holdings. In the health care area, the best-performing major drug stock
was MERCK, up 75%, making it the fifth-largest stock in the index, while the
biotech firm AMGEN doubled. Among the best performers in the index was SUN
MICROSYSTEMS, a manufacturer of workstations -- small computers that are more
powerful than personal computers and serve as individual or departmental
systems. Sun's workstations have been very popular choices for firms
establishing a presence on the Internet, and the stock rode the Internet
euphoria to rise over 150%. Although energy stocks in general lagged the market,
the major international oils posted good returns, with EXXON, MOBIL, TEXACO, and
ROYAL DUTCH basically matching the overall market.
As shown in the table on the next page, there were 33 changes in the S&P 500
Index during the year, mostly due to corporate mergers or restructurings. The
total would have been larger were it not for the fact that several big mergers
were not completed by year-end. The biggest deals -- DISNEY'S acquisition of
CAPITAL CITIES/ABC and the merger of Chemical Banking and Chase Manhattan -- are
still awaiting consummation. The additions made up almost 4% of the value of the
index at year-end; about 1.6% of the holdings at the beginning of the year were
deleted. In addition to mergers, a number of small issues were removed from the
index to make way for larger companies. The index committee at Standard & Poor's
makes these changes to keep the S&P 500 reflective of the overall U.S. stock
market. As a result of this policy, and in yet another indication of the
increasingly pervasive influence of technology, a number of the additions came
from the computer, telecommunications, and semiconductor fields, 3COM, APPLIED
MATERIALS, CABLETRON SYSTEMS, SILICON GRAPHICS, and LSI LOGIC.
Some of the more significant changes included the breakup of the
conglomerate ITT into three smaller companies, all of which were added to the
S&P 500; Upjohn's merger with Pharmacia AB, a Swedish pharmaceutical company;
KIMBERLY CLARK'S acquisition of Scott Paper; and the merger of two aerospace
giants, Martin Marietta and Lockheed, into the new LOCKHEED MARTIN. Several
banks were dropped from the index as mergers took a toll -- First Chicago, First
Fidelity, and Shawmut National.
The list of stocks entering the S&P included PHARMACIA & UPJOHN, the
insurance company ALLSTATE, BANK OF NEW YORK, the insurance and tobacco company
LOEWS, and U.S. WEST MEDIA GROUP, a spin - off from the regional telephone
company U.S. West.
OUTLOOK
The past year was an ideal environment for stocks -- declining interest rates,
low inflation, and apparently sustainable economic growth. Political news during
the year was mainly favorable for financial markets, as
2
<PAGE> 4
prospects for both tax cuts and restraint in the growth of government spending
improved.
Today's valuations, particularly the price/ earnings ratio, are high by
historical standards, although comparisons with the past should take into
account the relatively low level of inflation and long-term interest rates. High
valuations mean the market is vulnerable to any deterioration in outlook, and we
wouldn't be surprised to see some pullback over the next few months.
Nevertheless, timing the market is an exercise few can pull off successfully.
The Equity Index Fund remains, in our view, an excellent vehicle for long-term
equity investors.
Respectfully submitted,
/s/ RICHARD T. WHITNEY
Richard T. Whitney
President and Chairman of the
Investment Advisory Committee
January 18, 1996
- ------------------------------------------------------
The Evolving S&P 500 Stock Index
Changes in the index in 1995
<TABLE>
<CAPTION>
Additions Deletions
- -------------------------- -----------------------
<S> <C>
3Com Bassett Furniture
Allstate Bruno's
Applied Materials CBS
Bank of New York Clark Equipment
Boston Scientific Continental Corp.
Cabletron Systems E-Systems
Comerica First Chicago
CUC International First Fidelity Bancorp
Darden Restaurants First Mississippi
Federated Dept. Stores Hartmarx
First Bank Systems ITT Corp.
First Chicago NBD Lockheed
Freeport McMoran Copper Lotus Development
Fruit of the Loom M/A - Com
General Public Utilities Martin Marietta
Harrah's Maxus Energy
Humana Morrison-Knudsen
ITT New National Education
ITT Hartford NBD Bancorp
ITT Industries Oshkosh B'Gosh
Laidlaw Pet
Lockheed Martin Rollins Environmental
Loews Santa Fe Pacific
LSI Logic Scott Paper
Morgan Stanley Shawmut National
Pharmacia & Upjohn Skyline
PP&L Resources SPX
Republic New York Promus Cos.
Silicon Graphics Transco Energy
Tellabs U.S. West
U.S. WEST Upjohn
U.S. West Media Zenith Electronics
Willamette Industries Zurn Industries
- ---------------------------------------------------
</TABLE>
3
<PAGE> 5
- ------------------------------------------------------
A Word on Market Corrections
After the stock market's spectacular run in 1995, concerns about a
"correction" have intensified. Most market observers consider a correction to
be a short and sometimes steep decline following a period of rising prices.
Moderate corrections of around 10% have been quite common, occurring on
average about once every two years over the last half-century, according to
Ned Davis Research.
The market as measured by the Dow Jones Industrial Average has not
experienced a moderate correction since early 1994. Furthermore, the Dow last
hit a bear market bottom -- defined as a drop of at least 20% -- in October
1990. Therefore, it would not be surprising to see a modest pullback in 1996,
on the order of 5% to 10%. In fact, as we write, the market has gotten off to
a rocky start.
Corrections are not only common, but can be beneficial for long-term
investors, especially those who invest in regular amounts through dollar cost
averaging. In a correction, overall stock prices decline, often leading to
more attractive valuations and good buying opportunities. History has shown
that investors who continue to buy through a downturn fare quite well. In
fact, the Dow has proven resilient in the aftermath of past corrections of
around 10%, taking an average of just six months to recover its losses,
according to Ned Davis. (To realize the benefits of dollar cost averaging, you
should be prepared to continuously purchase securities over a period of time,
in up and down markets. This approach does not assure a gain nor protect you
from a loss in declining markets.)
We raise the issue of a market correction not as a prediction, but as a
reminder that stock prices do not move in only one direction. If you are
satisfied that your investments are appropriate for your various objectives,
we recommend that you stay the course when a correction eventually occurs.
- ------------------------------------------------------
Twenty-Five Largest Holdings
December 31, 1995
<TABLE>
<CAPTION>
Percent of
Company Net Assets
- --------------------------------------- ----------
<S> <C>
GE 2.5%
- --------------------------------------------------
AT&T 2.1
Exxon 2.1
- --------------------------------------------------
Coca-Cola 1.9
Merck 1.7
- --------------------------------------------------
Philip Morris 1.6
Royal Dutch Petroleum 1.6
- --------------------------------------------------
P&G 1.2
Johnson & Johnson 1.2
- --------------------------------------------------
IBM 1.1
Microsoft 1.1
- --------------------------------------------------
Wal-Mart 1.1
Intel 1.0
- --------------------------------------------------
Mobil 0.9
PepsiCo 0.9
- --------------------------------------------------
American International Group 0.9
Bristol-Myers Squibb 0.9
- --------------------------------------------------
BellSouth 0.9
Hewlett-Packard 0.9
- --------------------------------------------------
GTE 0.9
Pfizer 0.8
- --------------------------------------------------
GM 0.8
DuPont 0.8
- --------------------------------------------------
Amoco 0.7
SBC Communications 0.7
- --------------------------------------------------
Total 30.3%
- --------------------------------------------------
</TABLE>
4
<PAGE> 6
- --------------------------------------------------------------------------------
Contributions to the Change in Net Asset Value Per Share
Six Months Ended December 31, 1995
- ------------------------------------------------------
- ------------------------------------------------------
TEN BEST CONTRIBUTORS
<TABLE>
<S> <C>
GE 8 cent
- ------------------------------------------------------
Merck 7
AT&T 6
- ------------------------------------------------------
Philip Morris 4
Coca-Cola 4
- ------------------------------------------------------
BellSouth 4
Exxon 4
- ------------------------------------------------------
Johnson & Johnson 4
Royal Dutch Petroleum 3
- ------------------------------------------------------
Pfizer 3
- ------------------------------------------------------
Total 47 cent
- ------------------------------------------------------
</TABLE>
- ------------------------------------------------------
TEN WORST CONTRIBUTORS
<TABLE>
<S> <C>
Wal-Mart -3 cent
- ------------------------------------------------------
Sears 3
Motorola 2
- ------------------------------------------------------
Intel 2
Micron Technology 1
- ------------------------------------------------------
K mart 1
Texas Instruments 1
- ------------------------------------------------------
Novell 1
Toys "R" Us 1
- ------------------------------------------------------
Advanced Micro Devices 0
- ------------------------------------------------------
Total -15 cent
- ------------------------------------------------------
</TABLE>
Twelve Months Ended December 31, 1995
- ------------------------------------------------------
- ------------------------------------------------------
TEN BEST CONTRIBUTORS
<TABLE>
<S> <C>
GE 12 cent
- ------------------------------------------------------
Merck 11
Coca-Cola 9
- ------------------------------------------------------
Philip Morris 9
Exxon 8
- ------------------------------------------------------
AT&T 8
Intel 7
- ------------------------------------------------------
Johnson & Johnson 7
Royal Dutch Petroleum 6
- ------------------------------------------------------
Hewlett-Packard 6
- ------------------------------------------------------
Total 83 cent
- ------------------------------------------------------
</TABLE>
- ------------------------------------------------------
TEN WORST CONTRIBUTORS
<TABLE>
<S> <C>
Sears -1 cent
- ------------------------------------------------------
K mart 1
Toys "R" Us 1
- ------------------------------------------------------
Morgan Stanley* 1
Novell 1
- ------------------------------------------------------
Archer Daniels Midland 0
Advanced Micro Devices 0
- ------------------------------------------------------
Silicon Graphics* 0
Apple Computer 0
- ------------------------------------------------------
Reebok 0
- ------------------------------------------------------
Total -5 cent
- ------------------------------------------------------
</TABLE>
* Position added
5
<PAGE> 7
Performance Comparison
as of 12/31/95
<TABLE>
<CAPTION>
Equity Index Fund S&P 500 Index
<S> <C> <C>
3/31/90 $ 10,000 $ 10,000
12/90 10,031 9,990
12/91 12,962 13,034
12/92 13,894 14,027
12/93 15,202 15,440
12/94 15,356 15,645
12/95 21,063 21,523
</TABLE>
Note: The Index return does not reflect expenses, which have been deducted
from the fund's return.
- ------------------------------------------------------
Average Annual Compound Total Return
Periods Ended December 31, 1995
<TABLE>
<CAPTION>
Since Inception
1 Year 5 Years 3/30/90
- --------- ----------- ------------------
<S> <C> <C>
37.16% 15.99% 13.81%
</TABLE>
- ------------------------------------------------------
Investment return and principal
value represent past performance and
will vary. Shares may be worth more
or less at redemption than at
original purchase. Total returns do
not reflect the deduction of a $10
annual account maintenance fee.
6
<PAGE> 8
- --------------------------------------------------------------------------------
Investment Record
T. Rowe Price Equity Index Fund
The table below shows the investment record of one share of the T. Rowe Price
Equity Index Fund, purchased at the initial offering price of $10.00, for the
period 3/30/90 through 12/31/95. Over this time, stock prices in general have
risen. The results shown should not be considered a representation of the
dividend income or capital gain or loss which may be realized from an investment
made in the fund today.
- --------------------------------------------------------------------------------
Per Share Data
<TABLE>
<CAPTION>
With Capital Gains and Income Dividends
Annual Total
Taken in Cash Reinvested in Additional Shares Return
----------------------------------- ---------------------------------------- on Investment
Year Net Capital Capital % Change
Ended Asset Gain Income Gain Income Value of ---------------
12/31 Value Distributions(1) Dividends Distributions Dividends Investment Fund S&P 500
- ------- ------ ------------- --------- ------------- --------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990(2) $ 9.72 -- $ 0.31 -- $ 0.31 $ 10.03 0.3% 0.2%
- ----------------------------------------------------------------------------------------------------------------
1991 12.10 $0.08 0.34 $0.08 0.35 12.96 29.2 30.3
1992 12.63 0.01 0.31 0.01 0.34 13.89 7.2 7.6
- ----------------------------------------------------------------------------------------------------------------
1993 13.48 0.01 0.32 0.01 0.36 15.20 9.4 10.1
1994 13.09 0.16 0.36 0.19 0.41 15.36 1.0 1.3
- ----------------------------------------------------------------------------------------------------------------
1995 17.21 0.30 0.40 0.36 0.48 21.06 37.2 37.6
- ----------------------------------------------------------------------------------------------------------------
Total $0.56 $ 2.04 $0.65 $ 2.25
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes short-term capital gains of $0.05 in 1994 and $0.10 in 1995.
(2) From inception 3/30/90 to 12/31/90.
7
<PAGE> 9
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price Equity Index Fund / December 31, 1995
(values in thousands)
<TABLE>
<CAPTION>
Value
----------
- ------------------------------------------------------
Common & Preferred Stocks -- 95.6%
- ------------------------------------------------------
<S> <C> <C>
INDUSTRIAL -- 72.1%
158,932 shs GE.......................... $ 11,443
150,969 AT&T........................ 9,775
118,297 Exxon....................... 9,479
120,022 Coca-Cola................... 8,912
117,704 Merck....................... 7,739
79,974 Philip Morris............... 7,238
51,015 Royal Dutch Petroleum ADR... 7,199
65,419 P&G......................... 5,430
61,418 Johnson & Johnson........... 5,259
54,162 IBM......................... 4,969
55,900 * Microsoft................... 4,909
218,722 Wal-Mart.................... 4,894
78,508 Intel....................... 4,460
37,644 Mobil....................... 4,216
74,931 PepsiCo..................... 4,187
48,249 Bristol-Myers Squibb........ 4,143
48,652 Hewlett-Packard............. 4,075
60,156 Pfizer...................... 3,790
71,111 GM.......................... 3,760
52,824 DuPont...................... 3,691
47,213 Amoco....................... 3,393
62,080 Chevron..................... 3,259
56,248 Motorola.................... 3,206
75,523 Abbott Laboratories......... 3,153
66,112 McDonald's.................. 2,983
102,214 Ford Motor.................. 2,964
52,420 Eli Lilly................... 2,949
49,605 Disney...................... 2,927
29,525 American Home Products...... 2,864
40,046 3M.......................... 2,653
32,564 Boeing...................... 2,552
26,696 Kimberly-Clark.............. 2,209
42,360 Gillette.................... 2,208
32,519 Eastman Kodak............... 2,179
45,312 Home Depot.................. 2,169
42,210 Columbia/HCA Healthcare..... 2,142
15,187 Unilever N.V. ADR........... 2,138
36,492 Chrysler.................... 2,021
24,794 Texaco...................... 1,946
35,412 Schering-Plough............. 1,939
25,800 * Cisco Systems............... 1,927
47,969 Pharmacia & Upjohn.......... 1,859
14,660 Capital Cities/ABC.......... 1,809
25,582 Dow Chemical................ 1,800
41,381 * Oracle Systems.............. 1,754
21,432 Emerson Electric............ 1,752
15,272 Atlantic Richfield.......... 1,691
64,530 MCI......................... 1,690
<CAPTION>
Value
----------
<S> <C> <C> <C>
24,356 shs Anheuser-Busch.............. $ 1,629
34,344 * Viacom (Class B)............ 1,627
20,875 Kellogg..................... 1,613
22,992 Schlumberger................ 1,592
19,060 Lockheed Martin............. 1,506
25,242 * Amgen....................... 1,497
45,624 Sara Lee.................... 1,454
37,030 Sears....................... 1,444
23,794 Campbell.................... 1,428
10,259 Xerox....................... 1,405
21,000 First Data.................. 1,404
36,793 Time Warner................. 1,394
46,129 WMX Technologies............ 1,378
11,017 Monsanto.................... 1,350
47,089 * AirTouch Communications..... 1,330
33,175 Sprint...................... 1,323
22,897 Computer Associates......... 1,302
26,914 AlliedSignal................ 1,278
12,844 Warner-Lambert.............. 1,247
62,197 Tele-Communications (Class
A)....................... 1,240
22,096 Medtronic................... 1,235
35,453 Seagram..................... 1,228
25,120 * COMPAQ Computer............. 1,206
34,798 Heinz....................... 1,153
18,958 Caterpillar................. 1,114
11,713 United Technologies......... 1,111
26,369 Baxter International........ 1,104
23,238 Raytheon.................... 1,098
20,703 RockWell.................... 1,095
16,600 United HealthCare........... 1,087
16,165 Dun & Bradstreet............ 1,047
24,155 Northern Telecom............ 1,039
21,614 J.C. Penney................. 1,029
13,678 Automatic Data Processing... 1,016
23,642 May Department Stores....... 999
10,752 McDonnell Douglas........... 989
13,885 Colgate-Palmolive........... 975
23,589 ConAgra..................... 973
13,935 CPC International........... 956
13,638 NIKE........................ 950
51,625 Archer Daniels Midland...... 929
17,902 Texas Instruments........... 926
24,202 International Paper......... 917
14,047 * Digital Equipment........... 901
16,962 Alcoa....................... 897
33,700 Barrick Gold................ 889
19,296 PPG Industries.............. 883
24,874 Deere....................... 877
15,042 General Mills............... 869
17,200 Tenneco..................... 854
25,002 Phillips Petroleum.......... 853
</TABLE>
8
<PAGE> 10
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<S> <C> <C> <C> <C>
44,786 shs U. S. West Media Group...... $ 851
19,302 Weyerhaeuser................ 835
18,182 * Sun Microsystems............ 831
13,332 Gannett..................... 818
16,600 * Boston Scientific........... 813
18,036 American Brands............. 805
20,706 AMP......................... 795
24,144 Albertson's................. 794
19,700 Micron Technology........... 781
21,902 Corning..................... 701
23,432 Walgreen.................... 700
14,700 U. S. Healthcare............ 683
23,429 Unocal...................... 682
14,466 Pitney Bowes................ 680
21,403 Alcan Aluminum.............. 666
16,800 * Applied Materials........... 660
11,146 Illinois Tool Works......... 658
14,452 Goodyear Tire & Rubber...... 656
21,146 Mattel...................... 650
30,321 Occidental Petroleum........ 648
18,598 UST......................... 621
9,951 Ralston Purina.............. 621
37,357 Westinghouse................ 616
6,912 Marsh & McLennan............ 613
8,769 Georgia-Pacific............. 602
10,607 Hercules.................... 598
20,262 Browning-Ferris............. 598
12,206 Honeywell................... 593
34,033 The Limited................. 591
11,041 ITT Corporation............. 585
11,058 Wrigley..................... 581
16,320 Loral....................... 577
13,735 The Gap..................... 577
26,416 * Toys "R" Us................. 575
14,581 R. R. Donnelly.............. 574
16,700 * CUC International........... 570
17,373 Sysco....................... 565
10,619 Air Products and Chemicals.. 560
28,281 USX-Marathon................ 551
6,800 * Cabletron Systems........... 551
8,148 Textron..................... 550
10,855 Halliburton................. 550
22,714 Placer Dome................. 548
19,400 Freeport McMoRan Copper and
Gold (Class B)........... 546
14,516 Winn-Dixie.................. 535
19,400 * Federated Department
Stores................... 533
8,999 W. R. Grace................. 532
14,644 Tyco Laboratories........... 522
7,897 Fluor....................... 521
6,831 Dayton Hudson............... 512
10,643 International Flavors &
Fragrances............... 511
14,216 Morton International........ 510
<CAPTION>
Value
----------
<S> <C> <C> <C> <C>
15,200 shs Lowes....................... $ 509
35,140 * Novell...................... 499
13,108 Union Carbide............... 492
6,511 Avon........................ 491
10,660 Alco Standard............... 486
7,729 Eastman Chemical............ 484
6,227 TRW......................... 483
7,386 Hershey Foods............... 480
11,699 Genuine Parts............... 480
8,372 Nucor....................... 478
15,095 Masco....................... 474
8,894 Amerada Hess................ 471
12,000 Burlington Resources........ 471
6,250 Becton, Dickinson........... 469
11,960 Marriott International...... 457
6,298 Great Lakes Chemical........ 453
8,000 Pioneer Hi-Bred............. 445
12,866 Quaker Oats................. 444
13,140 Praxair..................... 442
11,642 * Kroger...................... 437
9,894 Service Corp. .............. 435
17,355 Dresser Industries.......... 423
15,400 * Humana...................... 422
4,798 McGraw-Hill................. 418
15,100 * Silicon Graphics............ 415
22,800 Comcast (Class A Special)... 415
6,383 Rohm & Haas................. 411
6,592 Phelps Dodge................ 410
10,085 H&R Block................... 408
10,952 * DSC Communications.......... 405
10,860 Dover....................... 400
12,200 * LSI Logic................... 400
7,388 Eaton....................... 396
19,006 * Tenet Healthcare............ 394
15,052 Newell...................... 389
9,198 Champion International...... 386
15,006 Rubbermaid.................. 383
6,227 Tribune..................... 381
14,154 American Stores............. 379
11,334 Inco........................ 377
10,207 Cooper Industries........... 375
5,316 * Computer Sciences........... 373
6,993 Whirlpool................... 372
8,198 Newmont Mining.............. 371
11,588 Apple Computer.............. 369
5,129 Clorox...................... 367
9,199 Dow Jones................... 367
10,667 Times Mirror (Class A)...... 361
10,213 Ingersoll-Rand.............. 359
8,567 * Crown Cork & Seal........... 358
5,956 General Dynamics............ 352
7,700 * 3Com........................ 339
5,991 Reynolds Metals............. 339
8,158 Sherwin-Williams............ 332
</TABLE>
9
<PAGE> 11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<S> <C> <C> <C> <C>
13,579 shs Baker Hughes................ $ 331
7,434 Interpublic Group........... 322
6,081 V. F. ...................... 321
4,822 W. W. Grainger.............. 319
6,689 Union Camp.................. 319
43,698 K mart...................... 317
7,798 Nordstrom................... 315
8,400 * Tellabs..................... 312
4,885 Kerr-McGee.................. 310
10,025 Melville.................... 308
10,797 Dillard Department Stores
(Class A)................ 308
6,044 Premark International....... 306
4,687 Northrop.................... 300
5,300 Willamette Industries....... 298
13,660 Engelhard................... 297
4,722 Knight-Ridder............... 295
7,000 Harcourt General............ 293
10,853 Pall........................ 292
8,195 Black & Decker.............. 289
28,100 Laidlaw (Class B)........... 288
4,676 Hilton...................... 288
18,527 * PriceCostco................. 285
6,636 * St. Jude Medical............ 284
9,638 Dana........................ 282
9,351 New York Times (Class A).... 277
3,993 Johnson Controls............ 275
7,980 Rite Aid.................... 273
9,711 Westvaco.................... 269
8,974 Dial........................ 266
5,081 Mead........................ 265
11,041 ITT Industries.............. 265
7,249 Mallinckrodt Group.......... 264
11,773 * National Semiconductor...... 262
8,400 Hasbro...................... 260
6,269 * Ceridian.................... 259
5,087 * Western Atlas............... 257
6,160 Tandy....................... 256
5,092 Avery Dennison.............. 255
9,212 Circuit City Stores......... 254
10,296 Louisiana Pacific........... 250
7,927 USX-U.S. Steel.............. 244
7,068 Parker Hannifin............. 242
6,601 Brown-Forman (Class B)...... 241
3,558 * FMC......................... 241
9,799 * Harrah's Entertainment...... 238
4,157 Raychem..................... 236
5,347 Temple-Inland............... 236
4,700 Sigma Aldrich............... 233
10,001 Whitman..................... 233
8,796 Cyprus Amax Minerals........ 230
7,821 Deluxe Corp................. 227
4,333 Federal Paper Board......... 225
3,560 Armstrong World............. 221
<CAPTION>
Value
----------
<S> <C> <C> <C> <C>
9,139 shs Brunswick................... $ 219
4,248 Stanley Works............... 219
5,480 Bausch & Lomb............... 217
4,820 * Owens-Corning............... 216
6,084 Ashland..................... 214
7,500 Reebok...................... 212
6,624 Supervalu................... 209
5,945 Manor Care.................. 208
10,255 Maytag...................... 208
5,685 Echlin...................... 207
9,746 Wendys...................... 207
13,110 Homestake Mining............ 205
4,295 Polaroid.................... 203
3,704 Harris...................... 202
6,149 Allergan.................... 200
7,190 American Greetings (Class
A)....................... 199
7,149 Liz Claiborne............... 198
8,029 Cooper Tire................. 198
10,920 * Biomet...................... 194
7,830 * ALZA (Class A).............. 194
6,384 Nalco Chemical.............. 192
7,795 James River................. 188
4,411 Pennzoil.................... 186
6,148 Ecolab...................... 184
6,633 Sun Company................. 182
8,633 Worthington Industries...... 180
15,042 Darden Restaurants.......... 179
4,316 Millipore................... 177
5,618 Giant Food.................. 177
9,458 Moore....................... 176
7,200 * Fruit of the Loom (Class
A)....................... 175
3,833 Snap-On..................... 173
5,243 C. R. Bard.................. 169
2,477 B. F. Goodrich.............. 169
3,927 Foster Wheeler.............. 167
3,575 Merchantile Stores.......... 165
12,631 WoolWorth................... 164
9,907 Advanced Micro Devices...... 163
4,563 Boise Cascade............... 158
3,172 Tektronix................... 156
3,657 PACCAR...................... 154
4,472 Autodesk.................... 153
4,051 Perkin-Elmer................ 153
4,593 Harnischfeger............... 153
4,612 National Service
Industries............... 149
3,988 * Varity...................... 148
10,504 * Bethlehem Steel............. 147
3,719 * Andrew...................... 144
3,818 Cummins Engine.............. 141
1,877 Thomas & Betts.............. 138
3,209 Louisiana Land &
Exploration.............. 138
3,016 Briggs & Stratton........... 131
9,080 Stone Container............. 131
10,758 Santa Fe Pacific Gold....... 130
</TABLE>
10
<PAGE> 12
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<S> <C> <C> <C>
5,077 shs Pep Boys.................... $ 130
6,874 TJX......................... 130
4,985 Bemis....................... 128
3,896 General Signal.............. 126
3,180 * King World Productions...... 124
4,780 Teledyne.................... 122
11,560 Echo Bay Mines.............. 120
2,207 Shared Medical Systems...... 120
11,226 * Tandem Computers............ 119
4,747 Inland Steel Industries..... 119
5,428 United States Surgical...... 116
3,608 ASARCO...................... 115
2,996 Timken...................... 115
4,410 Fleetwood................... 114
8,382 * Oryx Energy................. 112
7,342 Scientific-Atlanta.......... 110
2,903 Crane....................... 107
2,591 Potlatch.................... 104
4,709 McDermott International..... 104
3,685 Russell..................... 102
17,752 * Unisys...................... 100
2,382 Meredith.................... 100
4,659 Ogden....................... 100
11,380 * Amdahl...................... 97
3,851 EG&G........................ 93
2,661 Alberto Culver.............. 91
5,508 Safety-Kleen................ 86
8,621 * Santa Fe Energy Resources... 83
8,401 * Rowan....................... 83
7,730 * Beverly Enterprises......... 82
1,969 Springs Industries.......... 81
4,225 Alexander & Alexander....... 80
3,046 Cincinnati Milacron......... 80
2,778 TRINOVA..................... 80
3,149 Jostens..................... 76
7,129 * Navistar.................... 75
2,102 Centex...................... 73
2,639 Ball........................ 73
1,497 Longs Drug Stores........... 72
4,285 * Intergraph.................. 68
3,267 Fleming Companies........... 67
1,956 Pulte....................... 66
2,696 A & P....................... 62
4,888 Community Psychiatric
Centers.................. 60
2,657 Coors (Class B)............. 59
3,729 Kaufman & Broad............. 55
1,723 Helmerich & Payne........... 51
4,704 * Shoney's.................... 48
3,243 * Bally Entertainment......... 45
2,152 John H. Harland............. 45
7,243 * Armco....................... 43
1,662 * Cray Research............... 41
1,814 Luby's Cafeterias........... 40
<CAPTION>
Value
----------
<S> <C> <C>
2,426 shs Giddings & Lewis............ $ 40
2,523 * Data General................ 35
581 NACCO Industries (Class A).. 32
3,763 * Ryan's Family Steak Houses.. 26
3,502 Stride Rite................. 26
1,207 Outboard Marine............. 25
7,176 Charming Shoppes............ 21
1,272 Brown Group................. 18
2,216 Handleman................... 12
47 Teledyne, $15 Cum.
Preferred................ 1
TOTAL INDUSTRIAL 329,746
- ------------------------------------------------------
UTILITIES -- 9.5%
94,556 BellSouth................... 4,113
92,361 GTE......................... 4,064
58,008 SBC Communications.......... 3,335
52,710 Ameritech................... 3,110
41,564 Bell Atlantic............... 2,780
40,660 NYNEX....................... 2,196
44,786 U. S. WEST.................. 1,601
63,364 Southern Company............ 1,560
40,789 Pacific Telesis............. 1,372
40,382 Pacific Gas and Electric.... 1,146
19,520 Duke Power.................. 925
23,948 Enron....................... 913
21,525 Texas Utilities............. 885
17,693 FPL Group................... 821
42,516 SCEcorp..................... 755
17,721 American Electric Power..... 718
22,321 Consolidated Edison......... 714
23,283 Public Service Enterprise... 713
16,488 Dominion Resources.......... 680
20,427 Unicom...................... 669
21,165 PECO Energy................. 638
21,667 Entergy..................... 634
24,956 Houston Industries.......... 605
27,029 PacifiCorp.................. 574
18,000 ALLTEL...................... 531
14,782 Carolina Power & Light...... 510
18,261 Central and South West...... 509
13,956 DTE Energy.................. 481
14,839 CINergy..................... 454
9,730 Williams Companies.......... 427
9,076 Consolidated Natural Gas.... 412
9,724 Union Electric.............. 406
14,070 BGE......................... 401
14,259 Panhandle Eastern........... 397
15,100 PP&L Resources.............. 378
11,100 General Public Utilities.... 377
10,015 Coastal..................... 373
14,491 Ohio Edison................. 341
6,411 Northern States Power....... 315
</TABLE>
11
<PAGE> 13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<S> <C> <C>
8,174 shs Sonat....................... $ 291
8,177 Pacific Enterprises......... 231
4,790 * Columbia Gas System......... 210
4,778 NICOR....................... 131
11,709 Niagara Mohawk.............. 113
12,067 Noram Energy................ 107
6,517 ENSERCH..................... 106
3,330 Peoples Energy.............. 106
1,445 Eastern Enterprises......... 51
1,896 ONEOK....................... 43
TOTAL UTILITIES 43,222
- ------------------------------------------------------
FINANCIAL -- 12.5%
45,138 American International
Group.................... 4,175
25,933 Fannie Mae.................. 3,219
40,480 Citicorp.................... 2,722
35,676 BankAmerica................. 2,310
46,442 American Express............ 1,922
30,423 Travelers Group............. 1,913
25,788 NationsBank................. 1,795
42,650 Allstate.................... 1,754
26,671 First Union................. 1,484
17,918 J. P. Morgan................ 1,438
17,194 Freddie Mac................. 1,436
37,583 BANC ONE.................... 1,419
24,043 Chemical Banking............ 1,413
7,851 General Re.................. 1,217
30,220 First Chicago NBD........... 1,194
33,652 Norwest..................... 1,110
32,534 PNC Bank.................... 1,049
16,699 Chase Manhattan............. 1,012
4,629 Wells Fargo................. 1,000
24,437 Fleet Financial Group....... 996
7,196 First Interstate............ 982
18,300 Bank of New York............ 892
11,200 Loews....................... 878
16,862 Merrill Lynch............... 860
8,252 Chubb....................... 798
21,727 KeyCorp..................... 788
16,122 Dean Witter, Discover....... 758
13,987 Mellon Bank................. 752
10,790 Aetna....................... 747
10,900 SunTrust.................... 747
16,300 Wachovia.................... 746
7,013 CIGNA....................... 724
19,482 American General............ 679
12,900 First Bank Systems.......... 640
7,400 Morgan Stanley Group........ 597
<CAPTION>
Value
----------
<S> <C> <C>
9,280 Household International..... $ 549
9,238 shs Barnett Banks............... 545
11,041 ITT Hartford Group.......... 534
14,099 MBNA........................ 520
13,420 CoreStates Financial........ 508
7,419 Bankers Trust New York...... 493
12,046 Boatmen's Bancshares........ 493
10,644 Bank of Boston.............. 492
9,026 Lincoln National............ 485
14,305 U. S. Bancorp............... 480
6,484 Transamerica................ 473
14,000 National City............... 464
8,044 St. Paul Companies.......... 447
10,900 Comerica.................... 437
12,026 SAFECO...................... 416
6,900 UNUM........................ 379
9,118 Providian................... 372
10,113 Salomon..................... 359
5,300 Republic New York........... 329
12,897 Great Western Financial..... 329
5,718 Golden West Financial....... 316
6,747 Jefferson Pilot............. 314
6,883 Torchmark................... 311
11,148 H. F. Ahmanson.............. 295
4,996 Beneficial.................. 233
10,628 USF&G....................... 179
3,382 USLIFE...................... 101
TOTAL FINANCIAL 57,019
- ------------------------------------------------------
TRANSPORTATION -- 1.5%
19,629 Union Pacific............... 1,296
13,552 Burlington Northern Santa
Fe....................... 1,057
12,504 Norfolk Southern............ 992
20,026 CSX......................... 914
7,270 * AMR......................... 540
7,424 Conrail..................... 520
5,352 * Federal Express............. 395
4,791 Delta....................... 354
13,700 Southwest Airlines.......... 319
7,633 Ryder System................ 189
3,682 Caliber Systems............. 180
3,992 Pittston Services........... 125
3,490 Consolidated Freightways.... 92
5,076 * USAir....................... 67
1,996 Yellow Corp................. 25
TOTAL TRANSPORTATION 7,065
TOTAL COMMON & PREFERRED
STOCKS
(COST $342,338) 437,052
</TABLE>
12
<PAGE> 14
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<S> <C>
- ------------------------------------------------------
Short-Term Investments -- 4.1%
CERTIFICATES OF DEPOSIT -- 1.0%
$5,000,000 Mellon Bank, 5.70%,
3/7/96................... $ 5,000
COMMERCIAL PAPER -- 2.2%
4,977,000 BMW U.S. Capital, 5.93%,
1/2/96................... 4,974
5,000,000 Chemical Banking, 5.58%,
3/15/96.................. 4,922
9,896
<CAPTION>
Value
----------
<S> <C>
U.S. GOVERNMENT OBLIGATIONS -- 0.9%
$4,000,000 United States Treasury
Bills, 5.335-5.415%,
1/18/96.................. $ 3,901
TOTAL SHORT-TERM INVESTMENTS
(COST $18,797) 18,797
- ----------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 99.7%
OF NET ASSETS (COST $361,135) 455,849
- ----------------------------------------------------------------
FUTURES CONTRACTS
</TABLE>
<TABLE>
<CAPTION>
Contract Unrealized
Expiration Value Gain (Loss)
----------- --------- -----------
<S> <C> <C> <C>
Long, 61 Standard & Poor's 500 Stock Index
contracts, $3,500,000 of U.S. Treasury Bills
pledged as initial margin....................... 3/96 $18,863 $(146)
Net payments (receipts) of variation margin to date.................................. 169
Variation margin receivable (payable) on open futures contracts...................... 23
OTHER ASSETS LESS LIABILITIES........................................................ 1,384
----------
<CAPTION>
Value
-----------
<S> <C> <C>
NET ASSETS CONSIST OF:
Accumulated net realized gain/loss -- net of distributions........................... $ 4,569
Net unrealized gain (loss)........................................................... 94,568
Paid-in-capital applicable to 26,576,467 shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares authorized....................................... 358,119
-----------
NET ASSETS........................................................................... $ 457,256
==========
NET ASSET VALUE PER SHARE............................................................ $17.21
======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 15
- --------------------------------------------------------------------------------
Statement of Operations
T. Rowe Price Equity Index Fund / Year Ended December 31, 1995
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividend....................................................................... $ 7,413
Interest....................................................................... 2,758
--------
Total income................................................................... 10,171
--------
Expenses
Shareholder servicing.......................................................... 702
Investment management.......................................................... 498
Custody and accounting......................................................... 143
Prospectus and shareholder reports............................................. 58
Registration................................................................... 58
Legal and audit................................................................ 24
Directors...................................................................... 13
Miscellaneous.................................................................. 22
--------
Total expenses................................................................. 1,518
--------
Net investment income............................................................ 8,653
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities..................................................................... 858
Futures........................................................................ 13,287
--------
Net realized gain (loss)....................................................... 14,145
--------
Change in net unrealized gain or loss on:
Securities..................................................................... 82,028
Futures........................................................................ (650)
--------
Change in net unrealized gain or loss.......................................... 81,378
--------
Net realized and unrealized gain (loss).......................................... 95,523
--------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................................ $104,176
=========
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 16
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
T. Rowe Price Equity Index Fund
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income............................................. $ 8,653 $ 5,740
Net realized gain (loss).......................................... 14,145 1,232
Change in net unrealized gain or loss............................. 81,378 (3,724)
-------------- --------------
Increase (decrease) in net assets from operations................. 104,176 3,248
-------------- --------------
Distributions to shareholders
Net investment income............................................. (9,122) (5,776)
Net realized gain................................................. (7,691) (1,677)
In excess of net realized gain.................................... -- (1,356)
-------------- --------------
Decrease in net assets from distributions......................... (16,813) (8,809)
-------------- --------------
Capital share transactions*
Shares sold....................................................... 159,642 142,421
Distributions reinvested.......................................... 16,390 8,570
Shares redeemed................................................... (76,638) (42,357)
Redemption fees received.......................................... 12 --
-------------- --------------
Increase (decrease) in net assets from capital share
transactions.................................................... 99,406 108,634
-------------- --------------
Net equalization.................................................... 322 98
-------------- --------------
Increase (decrease) in net assets................................... 187,091 103,171
NET ASSETS
Beginning of period................................................. 270,165 166,994
-------------- --------------
End of period....................................................... $457,256 $270,165
=============== ===============
- ---------------------------------------------------------------------------------------------------------
* Share information
Shares sold..................................................... 10,147 10,780
Distributions reinvested........................................ 993 653
Shares redeemed................................................. (5,197) (3,187)
-------------- --------------
Increase (decrease) in shares outstanding....................... 5,943 8,246
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 17
- --------------------------------------------------------------------------------
Notes to Financial Statements
T. Rowe Price Equity Index Fund / December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Index Fund (the fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Listed securities that are not traded on a particular day and
securities that are regularly traded in the over-the-counter market are valued
at the mean of the latest bid and asked prices.
Short-term debt securities are valued at their cost which, when combined
with accrued interest, approximates fair value. Financial futures contracts are
valued at closing settlement prices.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
B) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles. The fund follows the practice of equalization
under which undistributed net investment income per share is unaffected by fund
shares sold or redeemed. Payments ("variation margin") made or received by the
fund to settle the daily fluctuations in the value of futures contracts are
recorded as unrealized gain or loss until the contracts are closed. Unrealized
gains and losses on futures contracts are included in Change in net unrealized
gain or loss in the accompanying financial statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
A) Futures Contracts - At December 31, 1995, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an agreed
upon price, date, time, and place. Risks arise from possible illiquidity of the
futures market and from movements in security values.
B) Securities Lending - To earn additional income, the fund lends its securities
to approved brokers. At December 31, 1995, the market value of securities on
loan was $12,796,000, which was fully collateralized with cash. Although the
risk is mitigated by the collateral, the fund could experience a delay in
recovering its securities and a possible loss of income or value if the borrower
fails to return them.
C) Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $124,079,000 and $3,864,000, respectively, for the year
ended December 31, 1995.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to
16
<PAGE> 18
- --------------------------------------------------------------------------------
qualify as a regulated investment company and distribute all of its taxable
income.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, $467,000 of undistributed
net realized gains was reclassified as a $320,000 increase to paid-in-capital
and a $147,000 increase to undistributed net investment income during the year
ended December 31, 1995. The results of operations and net assets were not
affected by the reclassifications.
At December 31, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $361,135,000 and net unrealized gain
aggregated $94,714,000, of which $99,274,000 related to appreciated investments
and $4,560,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management fee,
of which $78,000 was payable at December 31, 1995. The fee, computed daily and
paid monthly, is equal to 0.20% of average daily net assets.
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through December 31, 1995, which would cause the
fund's ratio of expenses to average net assets to exceed 0.45%. Thereafter
through December 31, 1997, the fund is required to reimburse the Manager for
these expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio of
expenses to average net assets to exceed 0.45%. Pursuant to this agreement,
$181,000 of management fees for the year ended December 31, 1995 and $264,000 of
management fees for the year ended December 31, 1994 were not accrued by the
fund. Additionally, $651,000 of unaccrued fees and expenses related to a
previous agreement have been permanently waived.
In addition, the fund has entered into agreements with the Manager and two
wholly owned subsidiaries of the Manager, pursuant to which the fund receives
certain other services. The Manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc., is the fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $671,000 for the year ended
December 31, 1995, of which $54,000 was payable at period-end.
17
<PAGE> 19
- --------------------------------------------------------------------------------
Financial Highlights
T. Rowe Price Equity Index Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
---------------------------------------------------
Year Ended December 31,
---------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $13.09 $13.48 $12.63 $12.10 $9.72
------ ------ ------ ------ ------
Investment activities
Net investment income............................. 0.39* 0.36* 0.32* 0.32* 0.34*
Net realized and unrealized gain (loss)........... 4.43 (0.23) 0.86 0.53 2.46
------ ------ ------ ------ ------
Total from investment activities.................. 4.82 0.13 1.18 0.85 2.80
------ ------ ------ ------ ------
Distributions
Net investment income............................. (0.40) (0.36) (0.32) (0.31) (0.34)
Net realized gain................................. (0.30) (0.09) (0.01) (0.01) (0.08)
Distributions in excess of net realized gain...... -- (0.07) -- -- --
------ ------ ------ ------ ------
Total distributions............................... (0.70) (0.52) (0.33) (0.32) (0.42)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD...................... $17.21 $13.09 $13.48 $12.63 $12.10
====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total return........................................ 37.2%* 1.0%* 9.4%* 7.2%* 29.2%*
Ratio of expenses to average net assets............. 0.45%* 0.45%* 0.45%* 0.45%* 0.45%*
Ratio of net investment income to
average net assets................................ 2.54%* 2.73%* 2.40%* 2.57%* 3.07%*
Portfolio turnover rate............................. 1.3% 1.3% 0.8% 0.1% 5.8%
Net assets, end of period (in thousands)............ $457,256 $270,165 $166,994 $128,242 $22,069
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Excludes expenses in excess of a 0.45% voluntary expense limitation in effect
through December 31, 1995.
18
<PAGE> 20
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Shareholders and Board of Directors of
T. Rowe Price Equity Index Fund, Inc.
We have audited the accompanying statement of net assets of T. Rowe Price Equity
Index Fund, Inc. as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of 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 investments owned as of
December 31, 1995, 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, the financial statements and financial highlights, referred
to above, present fairly, in all material respects, the financial position of T.
Rowe Price Equity Index Fund, Inc. as of December 31, 1995, the results of its
operations, the changes in its net assets and financial highlights for each of
the respective periods stated in the first paragraph in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 18, 1996
19
