- --------------------------------------------------------------------------------
T. Rowe Price
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Annual Report
Equity Index Fund
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December 31, 1997
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REPORT HIGHLIGHTS
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EQUITY INDEX FUND
* Despite some volatility, the Equity Index Fund posted a 10.40% return for
the six months ended December 31, 1997, capping an outstanding 32.87%
return for the year.
* The fund closely tracked the returns of its benchmark index, the S&P 500.
* Several sectors, including utilities, financials, and consumer services,
performed extremely well during the period. Most natural resource stocks
sharply lagged the overall market.
* Although we are not forecasting a major correction, we expect that high
volatility will continue. It seems unlikely that the index can post gains
comparable with 1997's.
FELLOW SHAREHOLDERS
In an environment of nearly ideal economic conditions, the Standard &
Poor's 500 Stock Index posted another outstanding six-month gain, capping an
astonishing three-year cumulative return of over 123%. Even an escalating
currency crisis in Southeast Asia, and the global market declines that ensued,
were not enough to halt the longstanding bull market.
<PAGE>
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/97 6 Months 12 Months
Equity Index Fund 10.40% 32.87%
S&P 500 10.58 33.36
================================================================================
The Equity Index Fund's performance reflected these positive trends. Its 6-
and 12-month gains of 10.40% and 32.87%, respectively, closely tracked the S&P
500's returns, the difference owing primarily to the fund's operating and
management expenses.
We continue to be pleasantly surprised with the strength of your fund and
the index that it tracks. As we noted in our last report to you, such lengthy
periods of stock market prosperity are rare. It is also rare, however, for the
U.S. economy to combine steady economic growth, high employment, and declining
inflation, as was the case in 1997. U.S. large-cap stocks also performed
impressively, posting heady earnings growth despite the maturity of their
businesses. These factors have been fueling the S&P 500's engine for many
quarters now.
Nonetheless, the exceptionally low volatility that had characterized this
advance disappeared in 1997, and market gyrations returned to more-normal
levels. In particular, one-day market movements of more than 1% were far more
common than in recent years. This is a trend we expect will continue in the
coming year.
YEAR-END DISTRIBUTIONS
Your fund's directors declared a fourth quarter dividend of $0.09 per
share, a short-term capital gain of $0.05 per share, and a long-term capital
gain of $0.11 per share. These distributions were paid on December 30 to
shareholders of record on December 26. You should already have received a check
or statement reflecting these distributions, as well as your form 1099-DIV
reporting them for tax purposes.
MARKET REVIEW
The bulk of this year's 33.36% gain by the S&P 500 came during the first
half, when news of the economy and corporate earnings was excellent. A March
interest rate hike by the Federal Reserve slowed investor enthusiasm, but any
concerns about rising interest rates were quickly forgotten. Between the end of
April and the end of July, the index posted a sweeping 19.66% return.
<PAGE>
Although the past six months have also been rewarding for investors, gains
have been more sporadic. The index corrected modestly in August in the wake of
earnings disappointments by such major corporations as COCA-COLA and PROCTER &
GAMBLE. Then, in mid-October, several major Southeast Asian currencies
collapsed, setting the stage for steep global stock market declines. In one
week, between October 21 and 27, the S&P 500 lost nearly 10% of its value.
Although it later recovered those losses, aftershocks of the event rippled for
the rest of the year and into 1998. Investors found it difficult to ignore the
implications of the currency crisis: many U.S. large-cap companies have come to
rely on Southeast Asian labor to help make their products and Southeast Asian
consumers to help buy them.
================================================================================
Operational Changes to Your Fund
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On January 30, the Equity Index Fund's name will change to the Equity Index
500 Fund. This change occurs in conjunction with the introduction of two new T.
Rowe Price index funds focusing on different market benchmarks. The new name
will help shareholders to distinguish between this fund and the new funds, Total
Equity Market Index Fund and Extended Equity Market Index Fund. If you would
like information about these new funds, please call T. Rowe Price to request a
prospectus. Read it carefully before investing.
In addition, as of September 5, 1997, the fund ceased to charge a quarterly
account maintenance fee to accounts of at least $10,000. Please note that
accounts with balances less than $10,000 will still be charged a $2.50 quarterly
account maintenance fee.
This updates your fund prospectus dated May 1, 1997.
================================================================================
Nonetheless, for the period as a whole, large-cap stocks sharply
outperformed smaller issues, even within the index. In an important second-half
trend, traditional value stocks significantly surpassed their growth stock
counterparts. The more modest multiples of value stocks-and, not infrequently,
an income component-helped draw investor attention to them as volatility
increased. At the same time, exposure to foreign markets combined with high
multiples put a damper on the performance of growth stocks.
PORTFOLIO REVIEW
The S&P 500's gains for the year were broad-based, with most sectors
participating. Among the best performers were financials, as these companies
posted strong earnings and enjoyed a favorable interest rate environment.
Consolidation within the financial services industry, led by TRAVELERS GROUP'S
acquisition of SALOMON BROTHERS, also spurred gains.
<PAGE>
Consumer services remained strong despite worries about sluggish Christmas
sales at year-end. Large retailers like WAL-MART and HOME DEPOT performed well.
A healthy economic environment also helped media stocks rebound from recent
weakness, with COMCAST and CBS among the significant beneficiaries.
For the first time in several years, utility stocks posted outstanding
gains for the six-month period, as global market volatility encouraged investors
to seek refuge in conservative stocks. Electric utilities did especially well in
the second half. The stable U.S. economy combined with the turmoil in Asia
suggested a very low probability that interest rates would increase-good news
for these income-paying, interest rate-sensitive issues. Telephone stocks posted
good results as well, emerging stronger than many had anticipated from an
uncertain competitive landscape and a period of strict regulation. AT&T, for
example, became the top contributor to fund performance in the second half. The
market reacted approvingly toward the company's new management team.
Not all sectors were in the black, however. Most notably, basic materials
stocks were harmed this year when the bottom fell out of gold prices. Large
technology stocks like IBM, MICROSOFT, and INTEL were also weak in the second
half, although they held up considerably better than smaller companies in the
technology sector.
Of the 30 changes to the S&P 500's composition this year, 24 were the
result of mergers and acquisitions. Merger and acquisition activity rose along
with the market, as acquisitive companies used their own highly valued stock as
currency in these transactions. In comparison, during the 1980s, an active
merger and acquisition period, an average of 25 changes a year were made to the
S&P 500.
================================================================================
Returns by Market Sector
- --------------------------------------------------------------------------------
Periods Ended 12/31/97 6 Months 12 Months
Utilities .......................................... 25.3% 32.2%
Consumer Services .................................. 19.4 43.1
Financial .......................................... 19.1 43.9
Consumer Cyclicals ................................. 15.2 27.3
Miscellaneous ...................................... 11.4 33.1
Business Services and Transportation ............... 9.4 24.5
Health Care ........................................ 9.2 43.2
Energy ............................................. 5.9 23.9
Consumer Nondurables ............................... 5.1 26.6
Capital Equipment .................................. 4.3 33.9
Technology ......................................... 3.5 24.5
Process Industries ................................. -0.6 16.6
Basic Materials .................................... -20.8 4.2
================================================================================
<PAGE>
After a quiet first half, there were 22 new names in the S&P 500 in the
second half, including some that resulted from mergers and others that were
outright additions. Eight of the changes were from the financial services sector
and included a large thrift, WASHINGTON MUTUAL, that acquired a former S&P 500
company, GREAT WESTERN FINANCIAL, in early July. Also, four banks-HUNTINGTON
BANCSHARES, STATE STREET, BB&T, and SYNOVUS FINANCIAL-were added. Rounding out
the additions were three insurance companies: SUNAMERICA, PROGRESSIVE, and
CINCINNATI FINANCIAL. These additions, combined with strong performance, have
boosted the financial sector's representation in the S&P 500 by more than two
percentage points since the beginning of the year.
Corporate restructurings resulted in two new names in the S&P 500. GENERAL
INSTRUMENT, which had been in the index, split into three companies in July.
Only one of them, NEXTLEVEL SYSTEMS, a supplier of communications products,
remained. In October, PEPSICO spun off its fast-food business, TRICON GLOBAL
RESTAURANTS, which was added to the index.
Four new companies in the S&P 500 were new incarnations of familiar names.
The largest, CENDANT, resulted from the merger of two S&P 500 companies-HFS, a
hotel franchiser, real estate broker, and car rental agency, and CUC
INTERNATIONAL, a membership-based consumer services company-in an attempt to
combine CUC's consumers with HFS's services. Finally, two S&P 500 companies
merged with companies outside the index: JAMES RIVER with Fort Howard to form
FORT JAMES, a manufacturer of paper products, and OHIO EDISON with Centerior
Energy to form FIRSTENERGY, a new utility for Ohio and western Pennsylvania.
The remaining additions to the index represented a wide range of
industries, including two energy companies (ANADARKO PETROLEUM and APACHE) and
two technology companies (KLA-TENCOR, a supplier of process-control systems for
the semiconductor industry, and HBO, a provider of information systems to the
health care industry). Rounding out the group are OWENS-ILLINOIS, a manufacturer
of containers and packaging products; MIRAGE RESORTS, a large developer and
operator of casino-hotels; CLEAR CHANNEL COMMUNICATIONS, a radio and television
station owner; and OMNICOM, an advertising agency.
OUTLOOK
The U.S. has been experiencing superb economic and corporate conditions,
and at this time rising interest rates seem unlikely. However, we do not expect
another year like the past few. Although we see no clear signs of a change of
course for the market, a number of minor trends could affect 1998 returns. For
example, a weakened Southeast Asia could dampen our export markets, thus
restraining the growth of corporate profits. In addition, the valuations of U.S.
stocks, and particularly U.S. large-caps, fully reflect the good economic
conditions, leaving stocks vulnerable to disappointing news.
Historically, equities have provided the best long-term returns among all
asset classes, and we expect this to remain true in the future. However, we
would not be surprised if returns were more modest than in the past, and if
market volatility stayed at current levels.
<PAGE>
Respectfully submitted,
/s/
Richard T. Whitney
President and Chairman of the Investment Advisory Committee
/s/
Kristen F. Culp
Executive Vice President
January 22, 1998
<PAGE>
T. Rowe Price Equity Index Fund
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The Evolving S&P 500 Index
- --------------------------------------------------------------------------------
Changes in the Index in 1997
ADDITIONS DELETIONS
- --------------------------------------------------------------------------------
Adobe Systems Alexander & Alexander
Ameren Amdahl
Anadarko Petroleum Beverly Enterprises
Apache Boatmen's Bancshares
BB&T Conrail
Cardinal Health CUC International
Cendant ENSERCH
Charles Schwab Fleming Companies
Cincinnati Financial General Instrument
Clear Channel Communications Giddings & Lewis
Conseco Great Western Financial
Countrywide Credit HFS
Equifax Intergraph
FirstEnergy James River
Fort James Louisiana Land & Exploration
HBO McDonnell Douglas
HealthSouth Morgan Stanley Group
Huntington Bancshares Noram Energy
KLA-Tencor NYNEX
Mirage Resorts Ohio Edison
NextLevel Systems Pacific Telesis
Omnicom Panenergy
Owens-Illinois Salomon
Parametric Technology Santa Fe Energy Resources
Progressive Santa Fe Pacific Gold
State Street Stride Rite
Sunamerica Tandem Computers
Synovus Financial Union Electric
Tricon Global Restaurants U.S. Bancorp Oregon
Washington Mutual USLIFE
================================================================================
<PAGE>
T. Rowe Price Equity Index Fund
================================================================================
Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
- --------------------------------------------------------------------------------
GE .......................................................... 3.1%
Coca-Cola ................................................... 2.1
Microsoft ................................................... 2.0
Exxon ....................................................... 2.0
Merck ....................................................... 1.7
- --------------------------------------------------------------------------------
Royal Dutch Petroleum ....................................... 1.5
Intel ....................................................... 1.5
Philip Morris ............................................... 1.4
Procter & Gamble ............................................ 1.4
IBM ......................................................... 1.3
- --------------------------------------------------------------------------------
AT&T ........................................................ 1.3
Pfizer ...................................................... 1.3
Bristol-Myers Squibb ........................................ 1.2
Johnson & Johnson ........................................... 1.2
Wal-Mart .................................................... 1.2
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Eli Lilly ................................................... 1.0
American International Group ................................ 1.0
Bell Atlantic ............................................... 0.9
DuPont ...................................................... 0.9
SBC Communications .......................................... 0.9
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Disney ...................................................... 0.9
Hewlett-Packard ............................................. 0.8
Travelers Group ............................................. 0.8
Fannie Mae .................................................. 0.8
Ford Motor .................................................. 0.8
- --------------------------------------------------------------------------------
Total ....................................................... 33.0%
================================================================================
<PAGE>
T. Rowe Price Equity Index Fund
================================================================================
Portfolio Highlights
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 12/31/97
Ten Best Contributors
- --------------------------------------------------------------------------------
AT&T .................................................................. 15c
GE .................................................................... 9
Pfizer ................................................................ 7
Eli Lilly ............................................................. 6
IBM ................................................................... 5
Fannie Mae ............................................................ 5
Wal-Mart .............................................................. 5
Ford Motor ............................................................ 4
Bristol-Myers Squibb .................................................. 4
Disney ................................................................ 4
- --------------------------------------------------------------------------------
Total ................................................................. 64c
Ten Worst Contributors
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Motorola .............................................................. -4c
Oracle ................................................................ 4
3M .................................................................... 3
Columbia/HCA Healthcare ............................................... 2
First Data ............................................................ 2
Eastman Kodak ......................................................... 2
Boeing ................................................................ 2
NIKE .................................................................. 2
Aetna ................................................................. 2
Corning ............................................................... 1
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Total ................................................................. -24c
<PAGE>
12 Months Ended 12/31/97
Ten Best Contributors
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GE .................................................................... 27c
Microsoft ............................................................. 20
Pfizer ................................................................ 15
Bristol-Myers Squibb .................................................. 13
Wal-Mart .............................................................. 13
Eli Lilly ............................................................. 12
Procter & Gamble ...................................................... 12
Coca-Cola ............................................................. 12
AT&T .................................................................. 11
Merck ................................................................. 11
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Total ................................................................. 146c
Ten Worst Contributors
- --------------------------------------------------------------------------------
3Com .................................................................. -3c
Columbia/HCA Healthcare ............................................... 3
Eastman Kodak ......................................................... 2
NIKE .................................................................. 2
Boeing ................................................................ 2
Oracle ................................................................ 2
Seagate Technology .................................................... 2
Barrick Gold .......................................................... 1
First Data ............................................................ 1
KLA-Tencor ............................................................ 1
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Total ................................................................. -19c
================================================================================
<PAGE>
T. Rowe Price Equity Index Fund
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[Equity Index Fund SEC graph shown here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Since Inception
Periods Ended 12/31/97 1 Year 3 Years 6 Years Inception Date
Equity Index Fund 32.87% 30.75% 19.83% 17.23% 3/30/90
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
<TABLE>
T. Rowe Price Equity Index Fund
================================================================================
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
<CAPTION>
Year
Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ........................ $ 20.34 $ 17.21 $ 13.09 $ 13.48 $ 12.63
Investment activities
Net investment income .............. 0.35** 0.38** 0.39* 0.36* 0.32*
Net realized and
unrealized gain (loss) ............. 6.28 3.47 4.43 (0.23) 0.86
Total from
investment activities .............. 6.63 3.85 4.82 0.13 1.18
Distributions
Net investment income .............. (0.34) (0.38) (0.40) (0.36) (0.32)
Net realized gain .................. (0.25) (0.34) (0.30) (0.09) (0.01)
In excess of net
realized gain ...................... -- -- -- (0.07) --
Total distributions ................ (0.59) (0.72) (0.70) (0.52) (0.33)
NET ASSET VALUE
End of period .............................. $ 26.38 $ 20.34 $ 17.21 $ 13.09 $ 13.48
Ratios/Supplemental Data
Total return ............................... 32.87%** 22.65%** 37.16%* 1.01%* 9.42%*
Ratio of expenses to
average net assets ......................... 0.40%** 0.40%** 0.45%* 0.45%* 0.45%*
Ratio of net investment
income to average
net assets ................................. 1.49%** 2.05%** 2.54%* 2.73%* 2.40%*
Portfolio turnover rate .................... 0.7% 1.3% 1.3% 1.3% 0.8%
Average commission
rate paid .................................. $ 0.0152 $ 0.0183 -- -- --
Net assets, end of period
(in millions) .............................. $ 1,908 $ 808 $ 457 $ 270 $ 167
====================================================================================================================================
<FN>
* Excludes expenses in excess of a 0.45% voluntary expense limitation in
effect through 12/31/95.
** Excludes expenses in excess of a 0.40% voluntary expense limitation in
effect through 12/31/97.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Equity Index Fund
================================================================================
December 31, 1997
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
COMMON STOCKS 98.1%
INDUSTRIAL 72.7%
GE ............................................... 812,822 $ 59,641
Coca-Cola ........................................ 612,201 40,788
Microsoft * ...................................... 297,066 38,387
Exxon ............................................ 611,923 37,442
Merck ............................................ 297,401 31,599
Royal Dutch Petroleum ADR ........................ 533,674 28,918
Intel ............................................ 405,621 28,482
Philip Morris .................................... 603,713 27,356
Procter & Gamble ................................. 332,994 26,577
IBM .............................................. 241,592 25,261
AT&T ............................................. 401,402 24,586
Pfizer ........................................... 320,343 23,886
Bristol-Myers Squibb ............................. 246,928 23,366
Johnson & Johnson ................................ 334,972 22,066
Wal-Mart ......................................... 556,721 21,956
Eli Lilly ........................................ 275,332 19,170
DuPont ........................................... 281,644 16,916
Disney ........................................... 168,155 16,658
Hewlett-Packard .................................. 257,185 16,074
Ford Motor ....................................... 296,327 14,427
Gillette ......................................... 139,023 13,963
Mobil ............................................ 193,229 13,949
Cisco Systems * .................................. 248,713 13,881
PepsiCo .......................................... 375,476 13,681
Lucent Technologies .............................. 159,932 12,775
Abbott Laboratories .............................. 190,592 12,496
Chevron .......................................... 162,237 12,492
American Home Products ........................... 161,657 12,367
Boeing ........................................... 248,834 12,177
Schering-Plough .................................. 181,501 11,276
GM ............................................... 178,318 10,811
Home Depot ....................................... 181,395 10,680
COMPAQ Computer .................................. 188,707 10,650
Amoco ............................................ 121,249 10,321
Unilever N.V. ADR ................................ 159,638 9,967
Schlumberger ..................................... 123,720 9,959
Time Warner ...................................... 139,789 8,667
Motorola ......................................... 147,999 8,445
Warner-Lambert ................................... 68,082 8,442
3M ............................................... 101,785 8,353
<PAGE>
McDonald's ....................................... 170,268 $ 8,130
Texaco ........................................... 137,003 7,450
MCI .............................................. 172,167 7,376
Computer Associates .............................. 135,368 7,158
WorldCom ......................................... 224,648 6,803
Dell Computer * .................................. 80,845 6,794
Cendant * ........................................ 197,223 6,780
Kimberly-Clark ................................... 136,070 6,710
Sara Lee ......................................... 118,893 6,695
Campbell ......................................... 112,368 6,531
Atlantic Richfield ............................... 79,695 6,386
Monsanto ......................................... 148,709 6,246
Sprint ........................................... 106,285 6,231
Emerson Electric ................................. 109,550 6,183
Medtronic ........................................ 116,923 6,117
Tyco International ............................... 132,858 5,987
Xerox ............................................ 80,646 5,953
Chrysler ......................................... 165,313 5,817
Northern Telecom ................................. 64,893 5,775
Dow Chemical ..................................... 56,088 5,693
AlliedSignal ..................................... 139,634 5,437
Oracle * ......................................... 243,743 5,431
Colgate-Palmolive ................................ 73,284 5,386
Anheuser-Busch ................................... 121,456 5,344
AirTouch Communications * ........................ 125,370 5,211
CBS .............................................. 174,417 5,134
Kellogg .......................................... 101,490 5,036
Eastman Kodak .................................... 80,410 4,890
Columbia/HCA Healthcare .......................... 161,114 4,773
Lockheed Martin .................................. 48,053 4,733
Heinz ............................................ 90,592 4,603
Pharmacia & Upjohn ............................... 124,277 4,552
Caterpillar ...................................... 91,864 4,461
Automatic Data Processing ........................ 72,558 4,453
Texas Instruments ................................ 97,468 4,386
Sears ............................................ 96,541 4,368
Gannett .......................................... 70,216 4,340
U S WEST Media * ................................. 148,943 4,301
United Technologies .............................. 57,939 4,219
ConAgra .......................................... 118,024 3,873
Walgreen ......................................... 123,192 3,865
CPC International ................................ 35,772 3,854
Illinois Tool Works .............................. 62,069 3,732
J.C. Penney ...................................... 61,588 3,715
Sun Microsystems * ............................... 92,556 3,696
Raytheon (Class B) ............................... 72,451 3,659
Viacom (Class B) * ............................... 87,858 3,641
Dayton Hudson .................................... 53,809 3,632
Deere ............................................ 62,178 3,626
The Gap .......................................... 100,408 3,558
Baxter International ............................. 70,289 3,545
Tele-Communications (Class A) * .................. 125,125 3,492
<PAGE>
Amgen ............................................ 64,302 $ 3,480
EMC * ............................................ 124,029 3,403
Halliburton ...................................... 64,605 3,355
Pitney Bowes ..................................... 36,016 3,239
International Paper .............................. 74,349 3,206
First Data ....................................... 108,487 3,173
Marsh & McLennan ................................. 42,277 3,152
Phillips Petroleum ............................... 64,554 3,139
Waste Management ................................. 112,572 3,096
Alcoa ............................................ 43,054 3,030
May Department Stores ............................ 56,865 2,996
Archer Daniels Midland ........................... 137,897 2,991
3Com * ........................................... 85,340 2,979
Seagram .......................................... 91,157 2,946
Albertson's ...................................... 60,618 2,872
NIKE ............................................. 73,058 2,868
General Mills .................................... 39,467 2,827
CVS .............................................. 42,596 2,729
Mattel ........................................... 72,945 2,717
Rockwell International ........................... 51,899 2,712
Comcast (Class A Special) ........................ 85,539 2,697
HealthSouth * .................................... 96,986 2,691
Applied Materials * .............................. 89,365 2,689
Textron .......................................... 40,844 2,553
PPG Industries ................................... 43,926 2,509
Tenet Healthcare * ............................... 75,158 2,490
Goodyear Tire & Rubber ........................... 38,852 2,472
Occidental Petroleum ............................. 84,017 2,463
Weyerhaeuser ..................................... 49,823 2,444
Ralston Purina ................................... 25,998 2,416
ITT * ............................................ 29,139 2,415
Tellabs * ........................................ 45,626 2,408
Aon .............................................. 40,747 2,389
USX-Marathon ..................................... 70,659 2,385
HBO .............................................. 49,553 2,377
Unocal ........................................... 60,505 2,348
Guidant .......................................... 37,360 2,326
Kroger * ......................................... 62,585 2,312
Costco Companies * ............................... 51,812 2,311
Wrigley .......................................... 28,955 2,304
United HealthCare ................................ 46,355 2,303
Service Corp. International ...................... 62,043 2,292
AMP .............................................. 54,034 2,269
Toys "R" Us * .................................... 71,893 2,260
Hershey Foods .................................... 36,130 2,238
Air Products and Chemicals ....................... 27,086 2,228
Honeywell ........................................ 32,359 2,217
Federated Department Stores * .................... 51,372 2,212
Boston Scientific * .............................. 47,997 2,202
Marriott International ........................... 31,716 2,196
Corning .......................................... 56,682 2,104
<PAGE>
Masco ............................................ 40,831 $ 2,077
Pioneer Hi-Bred .................................. 19,277 2,067
Lowes ............................................ 43,191 2,060
Cardinal Health .................................. 27,058 2,033
Clorox ........................................... 25,689 2,031
Fort James ....................................... 52,224 1,998
Avon ............................................. 32,203 1,976
Dover ............................................ 54,268 1,960
Clear Channel Communications * ................... 24,574 1,952
Burlington Resources ............................. 42,878 1,921
Sysco ............................................ 42,074 1,917
Hilton ........................................... 63,224 1,881
Tribune .......................................... 30,085 1,873
Browning-Ferris .................................. 50,314 1,862
Dresser Industries ............................... 43,955 1,843
Northrop Grumman ................................. 16,008 1,841
Quaker Oats ...................................... 34,468 1,818
Baker Hughes ..................................... 41,391 1,806
Rite Aid ......................................... 30,611 1,796
McGraw-Hill ...................................... 24,205 1,791
Praxair .......................................... 39,648 1,784
Cognizant ........................................ 39,622 1,766
Eaton ............................................ 19,384 1,730
Newell ........................................... 40,269 1,711
Barrick Gold ..................................... 91,578 1,706
The Limited ...................................... 66,628 1,699
Thermo Electron * ................................ 38,069 1,694
Tenneco .......................................... 42,376 1,674
Ingersoll-Rand ................................... 41,317 1,673
UST .............................................. 44,548 1,646
Computer Sciences * .............................. 19,411 1,621
Crown Cork & Seal ................................ 32,226 1,615
Winn-Dixie ....................................... 36,683 1,603
New York Times (Class A) ......................... 24,145 1,597
TRW .............................................. 29,795 1,590
Alcan Aluminum ................................... 56,767 1,568
Interpublic Group ................................ 31,434 1,566
Fortune Brands ................................... 41,913 1,553
Parametric Technology * .......................... 32,154 1,521
Becton, Dickinson ................................ 30,330 1,517
Union Pacific Resources .......................... 62,127 1,507
Cooper Industries ................................ 30,625 1,501
W. R. Grace ...................................... 18,372 1,478
Genuine Parts .................................... 43,074 1,462
Georgia-Pacific .................................. 23,839 1,448
TJX .............................................. 41,968 1,443
V. F ............................................. 31,211 1,434
Times Mirror (Class A) ........................... 23,254 1,430
Rohm & Haas ...................................... 14,705 1,408
Micron Technology * .............................. 53,579 1,393
Bay Networks * ................................... 54,451 1,392
<PAGE>
American Stores .................................. 67,351 $ 1,385
Digital Equipment * .............................. 37,342 1,382
Kmart * .......................................... 119,192 1,378
R.R. Donnelly .................................... 36,843 1,372
International Flavours & Fragrances .............. 26,406 1,360
General Dynamics ................................. 15,679 1,355
Dun & Bradstreet ................................. 43,240 1,338
Union Carbide .................................... 30,053 1,290
Owens-Illinois * ................................. 33,892 1,286
Equifax .......................................... 36,076 1,278
Dow Jones ........................................ 23,793 1,277
Hercules ......................................... 25,224 1,263
Parker Hannifin .................................. 27,075 1,242
Dana ............................................. 25,568 1,214
Amerada Hess ..................................... 21,968 1,206
Sherwin-Williams ................................. 43,201 1,199
Newmont Mining ................................... 40,042 1,176
W. W. Grainger ................................... 11,985 1,165
Nordstrom ........................................ 19,002 1,145
Seagate Technology * ............................. 59,363 1,143
Morton International ............................. 33,221 1,142
Allegheny Teledyne ............................... 44,021 1,139
Eastman Chemical ................................. 18,930 1,128
Knight-Ridder .................................... 21,508 1,118
H&R Block ........................................ 24,919 1,117
Avery Dennison ................................... 24,616 1,102
Case ............................................. 18,180 1,099
AutoZone * ....................................... 37,874 1,098
Reynolds Metals .................................. 18,067 1,084
Laidlaw .......................................... 79,254 1,080
Nucor ............................................ 22,323 1,078
National Semiconductor * ......................... 41,551 1,078
Champion International ........................... 23,590 1,069
Stanley Works .................................... 22,453 1,060
Tricon Global Restaurants * ...................... 36,297 1,055
Ashland .......................................... 19,267 1,034
PACCAR ........................................... 19,614 1,031
Western Atlas .................................... 13,864 1,026
Tandy ............................................ 26,070 1,005
Mirage Resorts * ................................. 43,800 996
Whirlpool ........................................ 17,875 983
Hasbro ........................................... 31,158 981
Union Camp ....................................... 18,146 974
Sigma Aldrich .................................... 24,314 963
Johnson Controls ................................. 20,015 956
Dillard Department Stores ........................ 26,775 944
Black & Decker ................................... 23,980 937
Maytag ........................................... 25,065 935
Harcourt General ................................. 17,064 934
Brown-Forman (Class B) ........................... 16,755 926
Rubbermaid ....................................... 36,575 914
<PAGE>
Omnicom .......................................... 21,400 $ 907
Willamette Industries ............................ 28,168 907
Raychem .......................................... 20,968 903
Anadarko Petroleum ............................... 14,867 902
Ikon Office Solutions ............................ 32,046 901
Harris ........................................... 19,613 900
ITT Industries ................................... 28,649 899
Phelps Dodge ..................................... 14,413 897
Ecolab ........................................... 15,980 886
Ceridian * ....................................... 19,170 878
KLA-Tencor * ..................................... 22,234 858
Circuit City Stores .............................. 23,916 851
Humana * ......................................... 38,839 806
Apache ........................................... 22,452 787
Kerr-McGee ....................................... 12,132 768
Westvaco ......................................... 24,134 759
Sun Company ...................................... 18,007 757
B. F. Goodrich ................................... 18,231 755
Freeport McMoRan Copper & Gold (Class B) ......... 47,908 755
Pennzoil ......................................... 11,252 752
Wendys ........................................... 31,017 746
Perkin-Elmer ..................................... 10,475 744
Brunswick ........................................ 24,547 744
Fluor ............................................ 19,828 741
Deluxe Corp. ..................................... 21,444 740
Liz Claiborne .................................... 17,412 728
Mallinkrodt ...................................... 19,127 727
Placer Dome ...................................... 57,043 724
Biomet ........................................... 27,899 713
Supervalu ........................................ 16,950 710
Mead ............................................. 25,298 708
DSC Communications * ............................. 29,554 707
Temple-Inland .................................... 13,436 703
St. Jude Medical * ............................... 23,007 702
Armstrong World .................................. 9,371 700
Adobe Systems .................................... 16,972 699
American Greetings (Class A) ..................... 17,775 696
WoolWorth * ...................................... 34,122 695
Inco ............................................. 40,495 688
Nalco Chemical ................................... 17,129 678
USX-U.S. Steel ................................... 21,665 677
NextLevel Systems * .............................. 37,732 674
LSI Logic * ...................................... 34,126 674
Thomas & Betts ................................... 13,892 656
FMC * ............................................ 9,749 656
Great Lakes Chemical ............................. 14,506 651
Whitman .......................................... 24,928 650
Snap-On .......................................... 14,663 640
ALZA (Class A) * ................................. 20,066 638
Novell * ......................................... 84,326 630
Rowan * .......................................... 20,543 627
<PAGE>
Oryx Energy * .................................... 24,422 $ 623
Pall ............................................. 29,803 617
Engelhard ........................................ 35,400 615
Silicon Graphics * ............................... 47,518 591
Advanced Micro Devices * ......................... 32,821 589
Unisys * ......................................... 42,150 585
Mercantile Stores ................................ 9,564 582
Bemis ............................................ 13,156 580
United States Surgical ........................... 19,597 574
Echlin ........................................... 15,707 568
Cummins Engine ................................... 9,617 568
Manor Care ....................................... 16,170 566
Bausch & Lomb .................................... 14,165 561
Raytheon (Class A) ............................... 11,371 561
Cabletron Systems * .............................. 37,206 558
National Service Industries ...................... 11,144 552
Andrew * ......................................... 22,882 548
Allergan ......................................... 16,183 543
Giant Food (Class A) ............................. 16,026 540
Polaroid ......................................... 10,828 527
King World Productions ........................... 9,070 524
Crane ............................................ 11,715 508
Timken ........................................... 14,414 495
General Signal ................................... 11,654 492
Louisiana Pacific ................................ 25,856 491
McDermott International .......................... 13,393 491
Harrah's Entertainment * ......................... 25,522 482
Cooper Tire ...................................... 19,734 481
Tektronix ........................................ 11,913 473
Navistar * ....................................... 18,805 467
Fruit of the Loom (Class A) * .................... 18,085 463
Darden Restaurants ............................... 35,944 449
Centex ........................................... 7,101 447
Meredith ......................................... 12,519 447
Helmerich & Payne ................................ 6,391 434
Owens Corning .................................... 12,591 430
Harnischfeger .................................... 12,146 429
Alberto Culver ................................... 13,010 417
Shared Medical Systems ........................... 6,275 414
Autodesk ......................................... 11,046 407
Apple Computer * ................................. 31,036 406
Tupperware ....................................... 14,561 406
C. R. Bard ....................................... 12,936 405
Boise Cascade .................................... 13,131 397
Worthington Industries ........................... 23,929 393
Reebok * ......................................... 13,287 383
Safety-Kleen ..................................... 13,907 382
Millipore ........................................ 10,839 368
Pep Boys ......................................... 15,196 363
Longs Drug Stores ................................ 11,155 358
Cyprus Amax Minerals ............................. 23,075 355
<PAGE>
Aeroquip-Vickers ................................. 6,963 $ 342
Fleetwood ........................................ 7,893 335
Homestake Mining ................................. 36,663 325
Moore ............................................ 21,512 325
Coors (Class B) .................................. 9,450 314
Scientific-Atlanta ............................... 18,440 309
Ball ............................................. 8,544 302
Briggs & Stratton ................................ 6,196 301
Battle Mountain Gold (Class A) ................... 51,068 300
Potlatch ......................................... 6,690 288
Cincinnati Milacron .............................. 10,850 281
Foster Wheeler ................................... 10,236 277
A & P ............................................ 8,892 264
ASARCO ........................................... 11,426 256
EG&G ............................................. 12,290 256
NACCO Industries (Class A) ....................... 2,302 247
Stone Container * ................................ 22,590 236
Bethlehem Steel * ................................ 27,280 235
Pulte ............................................ 5,414 226
Russell .......................................... 8,177 217
Data General * ................................... 12,050 210
Springs Industries ............................... 4,002 208
Kaufman & Broad .................................. 8,679 195
Jostens .......................................... 8,149 188
Inland Steel Industries .......................... 10,398 178
John H. Harland .................................. 8,061 169
Armco * .......................................... 23,892 118
Charming Shoppes * ............................... 24,119 112
Echo Bay Mines * ................................. 29,376 72
Total Industrial ................................. 1,388,057
UTILITIES 7.5%
Bell Atlantic .................................... 193,018 17,565
SBC Communications ............................... 227,690 16,678
BellSouth ........................................ 247,047 13,912
GTE .............................................. 237,685 12,419
Ameritech ........................................ 136,433 10,983
U S WEST Communications .......................... 120,048 5,417
Duke Energy ...................................... 88,662 4,910
Southern Company ................................. 167,554 4,335
PG&E ............................................. 107,073 3,259
Enron ............................................ 78,098 3,246
FPL Group ........................................ 45,330 2,683
Edison International ............................. 96,986 2,637
Texas Utilities .................................. 60,731 2,524
American Electric Power .......................... 46,889 2,421
Consolidated Edison .............................. 57,728 2,367
Williams Companies ............................... 79,012 2,242
Houston Industries ............................... 77,380 2,065
PacifiCorp ....................................... 72,447 1,979
Dominion Resources ............................... 45,529 1,938
<PAGE>
ALLTEL ........................................... 46,360 $ 1,904
Entergy .......................................... 59,681 1,787
Public Service Enterprise ........................ 56,289 1,784
Unicom ........................................... 53,837 1,655
Coastal .......................................... 26,657 1,651
Carolina Power & Light ........................... 38,159 1,619
FirstEnergy ...................................... 55,492 1,609
CINergy .......................................... 39,549 1,515
Central and South West ........................... 52,948 1,433
Consolidated Natural Gas ......................... 23,465 1,420
PECO Energy ...................................... 56,208 1,363
GPU .............................................. 29,420 1,239
BGE .............................................. 35,728 1,217
DTE Energy ....................................... 34,802 1,207
Union Electric ................................... 25,448 1,101
Columbia Gas System .............................. 13,874 1,090
Northern States Power ............................ 18,679 1,088
PP&L Resources ................................... 42,542 1,018
Frontier ......................................... 40,742 980
Sonat ............................................ 21,216 971
Pacific Enterprises .............................. 20,409 768
NICOR ............................................ 11,531 486
Niagara Mohawk * ................................. 36,951 388
ONEOK ............................................ 8,697 351
Peoples Energy ................................... 8,510 335
Eastern Enterprises .............................. 4,380 197
Total Utilities ................................. 143,756
FINANCIAL 16.6%
American International Group ..................... 172,915 18,805
Travelers Group .................................. 284,721 15,339
Fannie Mae ....................................... 264,353 15,085
Citicorp ......................................... 113,245 14,318
BankAmerica ...................................... 172,683 12,606
Chase Manhattan .................................. 105,004 11,498
NationsBank ...................................... 174,683 10,623
American Express ................................. 114,761 10,242
Allstate ......................................... 107,107 9,733
Morgan Stanley Dean Witter Discover .............. 146,146 8,641
First Union ...................................... 156,625 8,027
BANC ONE ......................................... 146,940 7,981
Wells Fargo ...................................... 21,521 7,305
Freddie Mac ...................................... 173,993 7,297
Norwest .......................................... 187,233 7,232
U.S. Bancorp ..................................... 60,660 6,790
First Chicago NBD ................................ 72,992 6,095
Merrill Lynch .................................... 82,821 6,041
Bank of New York ................................. 94,479 5,462
J. P. Morgan ..................................... 43,951 4,961
Fleet Financial Group ............................ 61,750 4,627
PNC Bank ......................................... 75,877 4,330
<PAGE>
General Re ....................................... 19,667 $ 4,169
Wachovia ......................................... 50,758 4,118
Washington Mutual ................................ 63,297 4,037
CoreStates Financial ............................. 49,909 3,996
KeyCorp .......................................... 54,761 3,878
Mellon Bank ...................................... 62,783 3,806
SunTrust ......................................... 52,220 3,727
National City .................................... 53,824 3,539
Barnett Banks .................................... 48,420 3,480
Household International .......................... 26,606 3,394
BankBoston ....................................... 36,009 3,383
MBNA ............................................. 123,182 3,364
American General ................................. 61,426 3,321
Chubb ............................................ 41,893 3,168
CIGNA ............................................ 18,196 3,149
Fifth Third Bancorp .............................. 38,353 3,133
Loews ............................................ 28,490 3,024
Charles Schwab ................................... 65,805 2,760
Bankers Trust New York ........................... 24,388 2,742
Hartford Financial Services ...................... 29,146 2,727
Aetna ............................................ 36,786 2,596
Comerica ......................................... 26,146 2,360
State Street ..................................... 39,049 2,272
Progressive ...................................... 18,002 2,158
BB&T ............................................. 33,483 2,145
Conseco .......................................... 46,271 2,102
Sunamerica ....................................... 48,195 2,060
Lincoln National ................................. 25,755 2,012
UNUM ............................................. 35,132 1,910
MGIC Investment .................................. 27,695 1,842
Huntington Bancshares ............................ 47,734 1,715
St. Paul Companies ............................... 20,872 1,713
SAFECO ........................................... 35,111 1,709
Transamerica ..................................... 15,616 1,663
H. F. Ahmanson ................................... 24,367 1,631
Republic New York ................................ 13,782 1,574
MBIA ............................................. 22,552 1,507
Torchmark ........................................ 34,583 1,455
Synovus Financial ................................ 44,089 1,444
Jefferson Pilot .................................. 17,711 1,379
Golden West Financial ............................ 13,811 1,351
Cincinnati Financial ............................. 8,953 1,259
Countrywide Credit ............................... 27,144 1,164
Beneficial ....................................... 12,971 1,078
Providian Financial .............................. 23,799 1,075
Green Tree Financial ............................. 33,202 869
USF&G ............................................ 27,309 603
Total Financial ................................. 316,599
<PAGE>
TRANSPORTATION 1.3%
Union Pacific .................................... 60,993 $ 3,808
Burlington Northern Santa Fe ..................... 38,345 3,564
AMR * ............................................ 22,740 2,922
CSX .............................................. 53,843 2,907
Norfolk Southern ................................. 93,945 $2,895
Delta ............................................ 17,967 2,138
Federal Express * ................................ 28,392 1,734
US Airways * ..................................... 23,214 1,451
Southwest Airlines ............................... 54,070 1,331
Ryder System ..................................... 18,828 617
Caliber Systems .................................. 9,183 447
Total Transportation ............................. 23,814
Total Common Stocks (Cost $1,339,536) .......... 1,872,226
Short-Term Investments 1.9%
Commercial Paper 0.8%
Daimler-Benz North America, 5.50%, 2/10/98 ....... 5,000,000 4,969
Preferred Receivables Funding, 5.62%, 2/5/98 ..... 5,000,000 4,973
Rio Tinto, 5.70%, 1/9/98 ......................... 5,000,000 4,994
14,936
Money Market Funds 0.9%
Reserve Investment Fund, 5.84% # ................. 18,124,931 18,125
18,125
U.S. Government Obligations 0.2%
U.S. Treasury Bills, 5.11 - 5.13%, 3/5 - 4/16/98 . 3,000,000 2,967
2,967
Total Short-Term Investments (Cost $36,028) ..... 36,028
Total Investments in Securities
100.0% of Net Assets (Cost $1,375,564) ........... $1,908,254
Futures Contracts
In thousands
Contract Unrealized
Expiration Value Gain (Loss)
Long, 139 Standard & Poor's 500
Stock Index contracts, $1,500,000
of U.S. Treasury Bills pledged as
initial margin 3/98 $34,024 $80
Net payments (receipts) of variation
margin to date (81)
Variation margin receivable (payable)
on open futures contracts ........................ (1)
Other Assets Less Liabilities .................... 68
NET ASSETS ....................................... $1,908,321
<PAGE>
Net Assets Consist of:
Accumulated net investment income -
net of distributions ............................. $ 403
Accumulated net realized gain/loss -
net of distributions ............................. 1,907
Net unrealized gain (loss) ....................... 532,770
Paid-in-capital applicable to 72,343,472
shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares authorized ..... 1,373,241
NET ASSETS ....................................... $1,908,321
NET ASSET VALUE PER SHARE ....................... $ 26.38
* Non-income producing
# Seven-day yield
ADR American Depository Receipt
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Equity Index Fund
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97
Investment Income
Income
Dividend ................................................. $ 23,832
Interest ................................................. 2,581
Other .................................................... 136
Total income ............................................. 26,549
Expenses
Investment management .................................... 2,516
Shareholder servicing .................................... 2,427
Registration ............................................. 276
Custody and accounting ................................... 199
Prospectus and shareholder reports ....................... 138
Legal and audit .......................................... 17
Directors ................................................ 12
Miscellaneous ............................................ 23
Total expenses ........................................... 5,608
Net investment income ........................................ 20,941
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ............................................... 3,033
Futures .................................................. 10,407
Net realized gain (loss) ................................. 13,440
Change in net unrealized gain or loss
Securities ............................................... 328,200
Futures .................................................. 170
Change in net unrealized gain or loss .................... 328,370
Net realized and unrealized gain (loss) ...................... 341,810
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ....................................... $362,751
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Equity Index Fund
================================================================================
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
In thousands
<CAPTION>
Year
Ended
12/31/97 12/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ...................................................... $ 20,941 $ 13,302
Net realized gain (loss) ................................................... 13,440 11,658
Change in net unrealized gain or loss ...................................... 328,370 109,832
Increase (decrease) in net assets from operations .......................... 362,751 134,792
Distributions to shareholders
Net investment income ...................................................... (20,538) (13,495)
Net realized gain .......................................................... (15,557) (12,009)
Decrease in net assets from distributions .................................. (36,095) (25,504)
Capital share transactions *
Shares sold ................................................................ 1,089,014 357,516
Distributions reinvested ................................................... 35,129 24,913
Shares redeemed ............................................................ (350,274) (141,657)
Redemption fees received ................................................... 141 28
Increase (decrease) in net assets from capital
share transactions ......................................................... 774,010 240,800
Net equalization ................................................................... -- 311
Net Assets
Increase (decrease) during period .................................................. 1,100,666 350,399
Beginning of period ................................................................ 807,655 457,256
End of period ...................................................................... $ 1,908,321 $ 807,655
*Share information
Shares sold ................................................................ 45,621 19,435
Distributions reinvested ................................................... 1,426 1,282
Shares redeemed ............................................................ (14,418) (7,579)
Increase (decrease) in shares outstanding .................................. 32,629 13,138
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Equity Index Fund
================================================================================
December 31, 1997
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Index Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company and commenced operations on March 30, 1990.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
VALUATION Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day 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 not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors, or by persons delegated by the Board, best to reflect fair value.
Short-term debt securities are valued at amortized cost which, when
combined with accrued interest, approximates fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Financial futures contracts
are valued at closing settlement prices.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
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.
CURRENCY TRANSLATION Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
<PAGE>
PREMIUMS AND DISCOUNTS Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
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. Effective January 1, 1997, the fund discontinued
its practice of equalization. The results of operations and net assets were not
affected by this change. Payments ("variation margin") made or received by the
fund to settle the daily fluctuations in the value of futures contracts are
recorded as unrealized gains or losses 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 or 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.
FUTURES CONTRACTS At December 31, 1997, 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.
SECURITIES LENDING The fund lends its securities to approved brokers to
earn additional income and takes cash and U.S. Treasury securities as collateral
to secure the loans. Collateral is maintained at not less than 100% of the value
of loaned securities. At December 31, 1997, the value of securities on loan was
$66,150,000. 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.
OTHER Purchases and sales of portfolio securities, other than short-term
securities, aggregated $554,919,000 and $9,765,000, respectively, for the year
ended December 31, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
<PAGE>
At December 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $1,375,564,000, and net unrealized gain
aggregated $532,690,000, of which $550,216,000 related to appreciated
investments and $17,526,000 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 $328,000 was payable at December 31, 1997. The fee is computed daily
and paid monthly, and 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, 1999, which would cause the
fund's ratio of expenses to average net assets to exceed 0.40%. Thereafter,
through December 31, 2001, 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 0.40%. Pursuant to a previous
agreement, $283,000 of management fees were not accrued by the fund for the year
ended December 31, 1997. Additionally, $370,000 of unaccrued 1996 management
fees are subject to reimbursement through December 31, 1999.
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 $2,231,000 for the year ended
December 31, 1997, of which $240,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the year ended December 31, 1997, totaled $140,000
and are reflected as interest income in the accompanying Statement of
Operations.
<PAGE>
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Tax Information (Unaudited) for the Tax Year Ended 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
* $4,949,000 from short-term capital gains, and
* $10,608,000 from long-term capital gains; of which $5,923,000 was subject
to the 20% rate gains category.
For corporate shareholders, 89% of the fund's distributed income and short-term
capital gains qualified for the dividends-received deduction.
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<PAGE>
T. Rowe Price Equity Index Fund
================================================================================
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, 1997, 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, 1997, 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, 1997, 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 21, 1998
<PAGE>
T. Rowe Price Shareholder Services
================================================================================
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE 1-800-225-5132 Available Monday through Friday from 8 a.m. to
10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
CHECKING Available on most fixed income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION OPTIONS Reinvest all, some, or none of your
distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*AccessRegistration Mark and
T. Rowe Price OnLine.
DISCOUNT BROKERAGE*
INDIVIDUAL INVESTMENTS Stocks, bonds, options, precious metals, and
other securities at a savings over regular commission rates.
INVESTMENT INFORMATION
COMBINED STATEMENT Overview of your T. Rowe Price accounts.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and
results.
T. ROWE PRICE REPORT Quarterly investment newsletter discussing
markets and financial strategies.
PERFORMANCE UPDATE Quarterly review of all T. Rowe Price fund results.
INSIGHTS Educational reports on investment strategies and financial
markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning
Kit.
* A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A DISCOUNT BROKERAGE
ACCOUNT OR OBTAIN INFORMATION,
CALL: 1-800-638-5660 toll free
INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
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.
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. F50-050 12/31/97
