-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M/iLSACDzgVzctkcJyZ4Ut41L8rdRlXEYqI1oAQiUmLRXOIFTWAFrsdyNadB8W3Z K2/8cZ8a7ICRsATt/WLuAQ== 0000858581-98-000006.txt : 19980206 0000858581-98-000006.hdr.sgml : 19980206 ACCESSION NUMBER: 0000858581-98-000006 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980205 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE INDEX TRUST INC CENTRAL INDEX KEY: 0000858581 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05986 FILM NUMBER: 98522056 BUSINESS ADDRESS: STREET 1: 100 EAST PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 3015472000 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INSTITUTIONAL EQUITY FUNDS INC DATE OF NAME CHANGE: 19900227 N-30D 1 EQUITY INDEX FUND - -------------------------------------------------------------------------------- T. Rowe Price - -------------------------------------------------------------------------------- Annual Report Equity Index Fund - -------------------------------------------------------------------------------- December 31, 1997 - -------------------------------------------------------------------------------- REPORT HIGHLIGHTS ================================================================================ 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. ================================================================================ 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. 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 - -------------------------------------------------------------------------------- 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. 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 ================================================================================ 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. Respectfully submitted, /s/ Richard T. Whitney President and Chairman of the Investment Advisory Committee /s/ Kristen F. Culp Executive Vice President January 22, 1998 T. Rowe Price Equity Index Fund ================================================================================ 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 ================================================================================ T. Rowe Price Equity Index Fund ================================================================================ Portfolio Highlights - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Eli Lilly ................................................... 1.0 American International Group ................................ 1.0 Bell Atlantic ............................................... 0.9 DuPont ...................................................... 0.9 SBC Communications .......................................... 0.9 - -------------------------------------------------------------------------------- Disney ...................................................... 0.9 Hewlett-Packard ............................................. 0.8 Travelers Group ............................................. 0.8 Fannie Mae .................................................. 0.8 Ford Motor .................................................. 0.8 - -------------------------------------------------------------------------------- Total ....................................................... 33.0% ================================================================================ 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 - -------------------------------------------------------------------------------- Motorola .............................................................. -4c Oracle ................................................................ 4 3M .................................................................... 3 Columbia/HCA Healthcare ............................................... 2 First Data ............................................................ 2 Eastman Kodak ......................................................... 2 Boeing ................................................................ 2 NIKE .................................................................. 2 Aetna ................................................................. 2 Corning ............................................................... 1 - -------------------------------------------------------------------------------- Total ................................................................. -24c 12 Months Ended 12/31/97 Ten Best Contributors - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Total ................................................................. -19c ================================================================================ 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. ================================================================================ T. Rowe Price Equity Index Fund ================================================================================ For a share outstanding throughout each period ==================================================================================================================================== Financial Highlights
Year Ended 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 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 ==================================================================================================================================== * 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.
The accompanying notes are an integral part of these financial statements. 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 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 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 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 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 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 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 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 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 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 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 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. 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. T. Rowe Price Equity Index Fund ================================================================================ Statement of Changes in Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- In thousands
Year Ended 12/31/97 12/31/96 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
The accompanying notes are an integral part of these financial statements. 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. 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. 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. ================================================================================ 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. ================================================================================ 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 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. 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 -----END PRIVACY-ENHANCED MESSAGE-----