Equity Market Index Funds

Transcription

1 ANNual REPORT December 31, 2017 T. Rowe Price Equity Market Index Funds The funds invest to match the performance of their respective indexes.

2 T. Rowe Price Equity Market Index Funds HIGHLIGHTS Nine of 11 sectors in the S&P 500 advanced, led by a 39% return for information technology stocks and a 24% return for materials stocks. Large-cap stocks outperformed mid- and small-cap stocks. The Equity Market Index Funds each tracked their unmanaged benchmarks for the 12 months ended December 31, 2017, and produced positive results. Using full replication and sampling strategies, we kept the composition and other attributes of the portfolios similar to those of their benchmarks. The outlook for the U.S. stock market is guardedly optimistic. Corporate earnings growth is expected to continue into 2018, and business sentiment is likely to remain optimistic. A gradual rise in interest rates is not expected to impede the performance of stocks. The views and opinions in this report were current as of December 31, They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects. REPORTS ON THE WEB Sign up for our Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log in to your account at troweprice.com for more information.

3 T. Rowe Price Equity Market Index Funds Manager s Letter Fellow Shareholders Signs of stronger economic growth lifted stock markets worldwide in In the U.S., stocks benefited from expectations that tax reform would support growth, easing concerns about rising U.S. interest rates, and a global upswing in economic strength. Some of the stock markets exuberance was tempered by rising geopolitical tensions in a few countries and uncertainty about the Trump administration s ability to deliver on its agenda. The major U.S. stock market benchmarks rose to record levels throughout the year. In this supportive environment, the Equity Index 500 Fund, Total Equity Market Index Fund, and Extended Equity Market Index Fund each recorded positive results for the period ended December 31, Market Environment U.S. stocks continued to surge higher in 2017, with many benchmarks, including the S&P 500, reaching record or near-record highs. Rising business sentiment and generally positive economic data helped produce strong corporate earnings for S&P 500-listed companies. The market generally shrugged off lackluster first-quarter economic growth, three interest rate increases from the U.S. Federal Reserve, President Donald Trump s domestic political controversies, and Republicans failed attempts to repeal the Affordable Care Act. Growth stocks widely outpaced value stocks across the capitalization spectrum. Mid- and small-cap stocks lagged large-caps. In the large-cap universe, as measured by the S&P 500 Index, most sectors produced positive returns. Information technology shares fared best, far outpacing the second-strongest-performing sector, materials. Information technology stocks rose 39%, driven by outsized gains in a handful of technology and Internet stocks. The materials, consumer discretionary, financials, and health care sectors all outperformed the 1

4 S&P 500 benchmark returns. Only two sectors, telecommunication services and energy, finished 2017 with negative returns, both in the neighborhood of -1%. Telecommunication services stocks fell as wireless companies contended with slowing growth, and low oil prices in the first half of the year weighed on the energy sector. However, cooperation among the world s major oil producers to curb output helped energy stocks reverse most of their declines by year-end. Summary of Investment Strategies T. Rowe Price s Equity Market Index Funds are designed for investors who want to harness the potential for long-term capital appreciation from broad exposure to large-cap stocks (Equity Index 500 Fund), small- and mid-cap stocks (Extended Equity Market Index Fund), or the entire U.S. stock market (Total Equity Market Index Fund). These funds could serve as core holdings in an investor s portfolio, as they offer attributes that many investors will find appealing. They are well diversified, which can reduce the potentially negative impact of a given stock on the entire portfolio. The Equity Index 500 Fund invests in all S&P 500 Index stocks, while the Total Equity Market Index Fund and the Extended Equity Market Index Portfolio Characteristics Extended Equity Total Equity Equity As of 12/31/17 Index 500 Market Index Market Index Investment- Weighted Median Market Cap (billions) $99.8 $67.8 $4.5 Earnings Growth Rate Estimated Next 5 Years* 10.2% 10.2% 11.7% P/E Ratio (based on next 12 months estimated earnings)* 19.8X 20.0X 22.8X * Source for data: IBES. Forecasts are in no way indicative of future investment returns. Fund owned 1,403 and 1,620 holdings, respectively, as of December 31, (Diversification cannot assure a profit or protect against loss in a declining market.) They tend to closely track their benchmarks. The Equity Index 500 Fund uses a full replication strategy so that the weightings 2

5 of our holdings match those of the S&P 500 Index. The Total Equity Market Index Fund and the Extended Equity Market Index Fund use a sampling strategy to approximate the sector allocations, price-to-earnings ratio, and other attributes of their benchmarks. We occasionally invest in securities such as futures and exchange-traded funds so that the index funds can accommodate cash flows and remain fully invested. They offer instant, broad exposure to different sectors of the stock market, and each fund s sector allocations are consistent with its benchmark s sector breakdown. Therefore, changes in the funds sector diversification and other overall characteristics reflect changes in the composition of the indexes, rather than strategic shifts that are typical of an actively managed fund. Since the funds are designed to track their respective indexes, they do not have the flexibility to shift assets toward stocks or sectors that are rising or away from those that are declining. Their expenses are generally low, which allows investors to retain more of their returns. Equity Index 500 Fund The Equity Index 500 Fund returned 21.55% in the 12 months ended December 31, 2017, versus 21.83% for the S&P 500 Index. (Performance will vary for the I Class shares, reflecting their different fee structure.) Fund performance tends to slightly lag that of the broader index due to operating and management expenses. The majority of the names in the index recorded positive results for the 12-month period. Information technology, health care, and consumer discretionary led. Energy and telecommunication services were the only two sectors to post losses. Performance Comparison Total Return Periods Ended 12/31/17 6 Months 12 Months Equity Index 500 Fund 11.32% 21.55% Equity Index 500 Fund I Class S&P 500 Index Information technology was lifted by increasing levels of consumer and business confidence as well as strong earnings from large technology companies. Visa and Google parent Alphabet were standout performers. 3

6 S&P 500 Index Returns by Sector Periods Ended 12/31/17 6 Months 12 Months Consumer Discretionary 10.79% 22.98% Consumer Staples Energy Financials Health Care Industrials and Business Services Information Technology Materials Real Estate Telecommunication Services Utilities S&P 500 Index Sector Allocations Periods Ended 6/30/17 12/31/17 Information Technology 22.2% 23.8% Financials Health Care Consumer Discretionary Industrials and Business Services Consumer Staples Energy Materials Utilities Real Estate Telecommunication Services Historical weightings reflect current industry/sector classifications. Games maker Electronic Arts and chip maker Intel also surpassed the sector benchmark gains. (Please refer to the fund s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) Performance was strong in the financials sector, particularly among insurers and traditional banks. Marsh & McLennan, Willis Towers Watson, Progressive, and JPMorgan Chase all performed well. During the period, three interest rate rises were announced by the Federal Reserve. Telecommunication services lagged in the period. Fierce competition and a challenging regulatory environment, as well as a rising interest rate environment, hurt the sector. Frontier Communications, Centurylink, and AT&T performed poorly. Energy stocks weighed on the portfolio as crude oil prices in the first half of the year fell into 4

7 a bear market, typically defined as a drop of at least 20% from a recent peak, amid signs of global oversupply. ExxonMobil and Hess underperformed following the drop in energy prices. Energy stocks did recover somewhat by the end of the year as oil prices and demand firmed. Energy stocks represent about 6% of the portfolio s allocation. S&P Dow Jones Indices authorized several additions and deletions to the composition of the S&P 500 Index during the period. Please see The Evolving S&P 500 Index table on page 13 for a complete list of index changes. Performance Comparison Total Return Periods Ended 12/31/17 6 Months 12 Months Total Equity Market Index Fund 10.83% 20.80% S&P Total Market Index S&P Total Market Index Returns by Sector Periods Ended 12/31/17 6 Months 12 Months Consumer Discretionary 10.48% 22.63% Consumer Staples Energy Financials Health Care Industrials and Business Services Information Technology Materials Real Estate Telecommunication Services Utilities Total Equity Market Index Fund The Total Equity Market Index Fund returned 20.80% for the 12 months ended December 31, 2017, versus 21.16% for its benchmark, the S&P Total Market Index. Fund performance tends to slightly lag that of the benchmark because of the fund s operating and management expenses. The S&P Total Market Index represents the entire U.S. stock market. It combines the S&P 500 and S&P Completion Indexes, offering broad exposure to large-, mid-, small-, and micro-cap companies. Stocks in the S&P 500 represent over 75% of the S&P Total Market Index s overall market value. 5

8 S&P Total Market Index Sector Allocations Periods Ended 6/30/17 12/31/17 Information Technology 21.3% 22.8% Financials Health Care Consumer Discretionary Industrials and Business Services Consumer Staples Energy Real Estate Materials Utilities Telecommunication Services Historical weightings reflect current industry/sector classifications. As with the S&P 500, the largest holdings of the S&P Total Market Index have the greatest influence on the fund s performance. In addition, the sector percentage weightings of the two benchmarks are similar, although the S&P Total Market Index provides modestly greater exposure to information technology and financials than the S&P 500 and less exposure to consumer staples and real estate. The performance of the S&P Total Market Index was generally in line with the S&P 500. Extended Equity Market Index Fund The Extended Equity Market Index Fund returned 17.96% for the 12 months ended December 31, 2017, versus 18.11% for its benchmark, the S&P Completion Index. Fund performance tends to slightly lag that of the benchmark because of the fund s operating and management expenses. The S&P Completion Index, a subset of the S&P Total Market Index, excludes all S&P 500 stocks. The index covers more than 3,400 companies and provides exposure to mid-, small-, and micro-cap companies. Performance Comparison Total Return Periods Ended 12/31/17 6 Months 12 Months Extended Equity Market Index Fund 9.83% 17.96% S&P Completion Index During the reporting period, the fund held derivatives as a cash management tool, not to enhance investment outcomes. 6

9 S&P Completion Index Returns by Sector Periods Ended 12/31/17 6 Months 12 Months Consumer Discretionary 9.31% 21.42% Consumer Staples Energy Financials Health Care Industrials and Business Services Information Technology Materials Real Estate Telecommunication Services Utilities S&P Completion Index Sector Allocations Periods Ended 6/30/17 12/31/17 Information Technology 17.1% 18.1% Financials Consumer Discretionary Industrials and Business Services Health Care Real Estate Materials Energy Utilities Consumer Staples Telecommunication Services Historical weightings reflect current industry/sector classifications. Health care, information technology, industrials and business services, and consumer discretionary were the leading sectors. Energy and telecommunication services were the biggest laggards. Health care rebounded from its lackluster performance in 2016, performing strongly as biotechnology shares spiked late in the period because of reduced concerns about new drug pricing regulations. Gains in information technology were driven by a rotation into growth stocks and Internet stocks. Energy stocks lagged due to low energy prices earlier in the year and oversupply. Some of the fund s holdings that performed well included automaker Tesla, weight loss products and services company Weight Watchers, and video game company Take- Two Interactive. Dicks Sporting Goods and telecommunications company Sprint underperformed the benchmark. (Please refer to the fund s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) 7

10 Outlook The outlook for the U.S. stock market is guardedly optimistic. Corporate earnings growth is expected to continue into 2018, and business sentiment is likely to remain positive. A gradual rise in interest rates is not expected to impede the performance of stocks. The trend of synchronized economic growth that began in earnest during the second half of the year is likely to continue into However, this past year s rally has left stock valuations looking stretched. Other risks include an increase in inflationary pressure as a result of strong U.S. economic growth, an unanticipated fast rise in interest rates, volatility in energy prices, and negative repercussions from geopolitical tensions. Thank you for investing with T. Rowe Price. Respectfully submitted, Ken D. Uematsu Chairman of the Investment Advisory Committee, Equity Index 500 Fund, Extended Equity Market Index Fund, and Total Equity Market Index Fund January 19, 2018 The committee chairman has day-to-day responsibility for managing the portfolios and works with committee members in developing and executing the funds investment programs. 8

11 T. Rowe Price Equity Market Index Funds Risks of Investing As with all stock mutual funds, the funds share prices can fall because of weakness in the stock market, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. Glossary Investment-weighted median market capitalization: The investment-weighted midpoint market capitalization (shares outstanding multiplied by current price) representing a typical security in a portfolio. An investment-weighted median represents the breakpoint where 50% of the values are above and 50% of the values are below based on portfolio weight. Price-to-earnings (P/E) ratio: A valuation measure calculated by dividing the price of a stock by its reported earnings per share. The ratio is a measure of how much investors are willing to pay for the company s earnings. Projected earnings growth rate (IBES): A company s expected earnings per share growth rate for a given time period based on the forecast from the Institutional Brokers Estimate System, which is commonly referred to as IBES. S&P 500 Index: An unmanaged index that tracks the stocks of 500 primarily large-cap U.S. companies. S&P Completion Index: Tracks the performance of the U.S. stocks not included in the S&P 500, which are primarily small- and mid-capitalization stocks. The index includes approximately 3,300 stocks. S&P Total Market Index: Tracks the performance of a broad spectrum of small-, mid-, and large-capitalization U.S. stocks. Because the largest stocks in the index carry the most weight, large-capitalization stocks make up a substantial majority of the S&P Total Market Index s value. The index includes approximately 3,800 stocks. 9

12 T. Rowe Price Equity Market Index Funds Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets Equity Index 500 Fund 12/31/17 Apple 3.8% Microsoft 2.9 Alphabet 2.8 Amazon.com 2.0 Facebook 1.8 Berkshire Hathaway 1.7 Johnson & Johnson 1.6 JPMorgan Chase 1.6 ExxonMobil 1.6 Bank of America 1.3 Wells Fargo 1.2 AT&T 1.0 Chevron 1.0 Procter & Gamble 1.0 Home Depot 1.0 Pfizer 0.9 Verizon Communications 0.9 Intel 0.9 UnitedHealth Group 0.9 Visa 0.9 Citigroup 0.9 Cisco Systems 0.8 Comcast 0.8 Coca-Cola 0.8 PepsiCo 0.7 Total 34.8% Note: The information shown does not reflect any exchange-traded funds (ETFs), cash reserves, or collateral for securities lending that may be held in the portfolio. 10

13 T. Rowe Price Equity Market Index Funds Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets Total Equity Market Index Fund 12/31/17 Apple 3.1% Microsoft 2.3 Alphabet 2.2 Amazon.com 1.6 Facebook 1.5 JPMorgan Chase 1.3 Johnson & Johnson 1.3 Berkshire Hathaway 1.3 ExxonMobil 1.3 Bank of America 1.0 Wells Fargo 1.0 Procter & Gamble 0.8 AT&T 0.8 Home Depot 0.8 Chevron 0.8 Verizon Communications 0.8 UnitedHealth Group 0.7 Citigroup 0.7 Visa 0.7 Intel 0.7 Pfizer 0.7 Cisco Systems 0.7 Comcast 0.7 Coca-Cola 0.6 Boeing 0.6 Total 28.0% Note: The information shown does not reflect any exchange-traded funds (ETFs), cash reserves, or collateral for securities lending that may be held in the portfolio. 11

14 T. Rowe Price Equity Market Index Funds Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets Extended Equity Market Index Fund 12/31/17 Tesla 0.8% Liberty Global 0.6 ServiceNow 0.5 Las Vegas Sands 0.4 FleetCor Technologies 0.4 BioMarin Pharmaceutical 0.4 T-Mobile US 0.4 Liberty Broadband 0.3 TD Ameritrade Holding 0.3 Diamondback Energy 0.3 Ally Financial 0.3 Dell Technologies 0.3 Workday 0.3 First Republic Bank 0.3 Twitter 0.3 Alnylam Pharmaceuticals 0.3 NVR 0.3 Markel 0.3 Teleflex 0.3 SVB Financial Group 0.3 Annaly Capital Management 0.3 Arch Capital Group 0.3 Palo Alto Networks 0.2 Vantiv 0.2 Splunk 0.2 Total 8.6% Note: The information shown does not reflect any exchange-traded funds (ETFs), cash reserves, or collateral for securities lending that may be held in the portfolio. 12

15 T. Rowe Price Equity Market Index Funds The Evolving S&P 500 Index Changes in the index in 2017 Additions Advanced Micro Devices Alexandria Real Estate Align Technology ANSYS Brighthouse Financial Cadence Design Systems CBOE Holdings DISH Network Duke Realty DXC Technology Company Everest Re Group Gartner Hilton Worldwide Holdings IDEXX Laboratories IHS Markit Incyte MGM Resorts International Norwegian Cruise Line Holdings Packaging Corp. of America Quintiles IMS Holdings Raymond James Financial Regency Centers ResMed SBA Communications Smith A.O. Synopsys Deletions AutoNation Bed Bath & Beyond Dun & Bradstreet E. I. du Pont de Nemours and Company Endo International First Solar Frontier Communications Harman Intl. Industries Level 3 Communications Linear Technology Mallinckrodt Mead Johnson Nutrition Murphy Oil Pitney Bowes Reynolds American Ryder System Southwestern Energy Spectra Energy St. Jude Medical Staples TEGNA Teradata Transocean Urban Outfitters Whole Foods Market Yahoo 13

16 T. Rowe Price Equity Market Index Funds Performance and Expenses Growth of $10,000 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 benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. EQUITY INDEX 500 FUND $22,000 19,000 16,000 13,000 10,000 As of 12/31/17 Equity Index 500 Fund $22,090 S&P 500 Index $22,603 12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 Note: Performance for the I Class shares will vary due to its differing fee structure. See the returns table below. Average Annual Compound Total Return Since Inception Periods Ended 12/31/17 1 Year 5 Years 10 Years Inception Date Equity Index 500 Fund 21.55% 15.50% 8.25% Equity Index 500 Fund I Class % 8/28/15 Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance, please visit our website (troweprice.com) or contact a T. Rowe Price representative at , or for I Class shares, The performance information shown does not reflect the deduction of a 0.5% redemption fee on shares held for 90 days or less; if it did, the performance would be lower. 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. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. When assessing performance, investors should consider both short- and long-term returns. 14

17 T. Rowe Price Equity Market Index Funds Growth of $10,000 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 benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. TOTAL EQUITY MARKET INDEX FUND $22,000 19,000 16,000 13,000 10,000 As of 12/31/17 Total Equity Market Index Fund $22,678 Linked Performance Benchmark* $22,787 12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 *The Linked Performance Benchmark reflects the performance of the Dow Jones Wilshire 5000 Composite Index to 3/31/07 and the performance of the S&P Total Market Index from 4/1/07 forward. Average Annual Compound Total Return Periods Ended 12/31/17 1 Year 5 Years 10 Years Total Equity Market Index Fund 20.80% 15.44% 8.53% Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance, please visit our website (troweprice.com) or contact a T. Rowe Price representative at The performance information shown does not reflect the deduction of a 0.5% redemption fee on shares held for 90 days or less; if it did, the performance would be lower. 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. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. When assessing performance, investors should consider both short- and long-term returns. 15

18 T. Rowe Price Equity Market Index Funds Growth of $10,000 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 benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. EXTENDED EQUITY MARKET INDEX FUND $22,000 19,000 16,000 13,000 10,000 As of 12/31/17 Extended Equity Market Index Fund $24,197 Linked Performance Benchmark* $24,037 12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 *The Linked Performance Benchmark reflects the performance of the Dow Jones Wilshire 4500 Completion Index to 3/31/07 and the performance of the S&P Completion Index from 4/1/07 forward. Average Annual Compound Total Return Periods Ended 12/31/17 1 Year 5 Years 10 Years Extended Equity Market Index Fund 17.96% 14.52% 9.24% Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance, please visit our website (troweprice.com) or contact a T. Rowe Price representative at The performance information shown does not reflect the deduction of a 0.5% redemption fee on shares held for 90 days or less; if it did, the performance would be lower. 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. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. When assessing performance, investors should consider both short- and long-term returns. 16

19 T. Rowe Price Equity Market Index Funds Expense Ratio Equity Index 500 Fund 0.23% Equity Index 500 Fund I Class 0.06 Total Equity Market Index Fund 0.30 Extended Equity Market Index Fund 0.35 The expense ratios shown are as of the funds fiscal year ended 12/31/16 except for the Equity Index 500 Fund and Equity Index 500 Fund I Class, which were updated as of 8/1/17. These numbers may vary from the expense ratios shown elsewhere in this report because they are based on a different time period and, if applicable, include acquired fund fees and expenses but do not include fee or expense waivers. Fund Expense Example As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period. Please note that the Equity Index 500 Fund has two share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, and I Class shares are also available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. Each share class is presented separately in the table. Actual Expenses The first line of the following table (Actual) provides information about actual account values and actual expenses. You may use the information on this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number on the first line under the heading Expenses Paid During Period to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The information on the second line of the table (Hypothetical) is based on hypothetical account values and expenses derived from the fund s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. 17

20 T. Rowe Price Equity Market Index Funds Fund Expense Example (continued) Note: T. Rowe Price charges an account service fee that is not included in the accompanying table. The account service fee is charged on a quarterly basis, usually during the last week of a calendar quarter, and applies to accounts with balances below $10,000 on the day of the assessment. The fee is charged to accounts that fall below $10,000 for any reason, including market fluctuations, redemptions, or exchanges. When an account with less than $10,000 is closed either through redemption or exchange, the fee is charged and deducted from the proceeds. The fee applies to IRAs but not to retirement plans directly registered with T. Rowe Price Services or accounts maintained by intermediaries through NSCC Networking. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher. Equity Index 500 Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 7/1/17 12/31/17 7/1/17 to 12/31/17 Investor Class Actual $1, $1, $1.17 Hypothetical (assumes 5% return before expenses) 1, , I Class Actual 1, , Hypothetical (assumes 5% return before expenses) 1, , * Expenses are equal to the fund s annualized expense ratio for the 6-month period, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.22%, and the I Class was 0.07%. Prior to August 1, 2017, the annual investment management fee for the fund was 0.10% and the expense limitation for the Investor Class was 0.25%. Effective August 1, 2017, Price Associates agreed to reduce the fund s management fee to 0.06% and the expense limitation for the Investor Class to 0.21%. For the Investor Class, the actual ending account value and expenses paid during the period would have been $1, and $1.12, and the hypothetical ending account value and expenses paid during the period would have been $1, and $1.07, respectively, had the fund s reduced management fee and expense limitation been in effect throughout the full 6-month period. For the I Class, the actual ending account value and expenses paid during the period would have been $1, and $0.32, and the hypothetical ending account value and expenses paid during the period would have been $1, and $0.31, respectively, had the fund s reduced management fee been in effect throughout the full 6-month period. 18

21 T. Rowe Price Equity Market Index Funds Total Equity Market Index Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 7/1/17 12/31/17 7/1/17 to 12/31/17 Actual $1, $1, $1.59 Hypothetical (assumes 5% return before expenses) 1, , * Expenses are equal to the fund s annualized expense ratio for the 6-month period (0.30%), multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184), and divided by the days in the year (365) to reflect the half-year period. Extended Equity Market Index Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 7/1/17 12/31/17 7/1/17 to 12/31/17 Actual $1, $1, $1.85 Hypothetical (assumes 5% return before expenses) 1, , * Expenses are equal to the fund s annualized expense ratio for the 6-month period (0.35%), multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184), and divided by the days in the year (365) to reflect the half-year period. 19

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24 T. Rowe Price Mutual Funds This page contains supplementary information that is not part of the shareholder report. STOCK FUNDS BOND FUNDS Domestic Domestic Taxable Blue Chip Growth Corporate Income Capital Appreciation Credit Opportunities Capital Opportunity Floating Rate Diversified Mid-Cap Growth GNMA Dividend Growth High Yield Equity Income Inflation Protected Bond Equity Index 500 Limited Duration Inflation Extended Equity Market Index Focused Bond Financial Services New Income Growth & Income Short-Term Bond Growth Stock Total Return Health Sciences Ultra Short-Term Bond Media & Telecommunications U.S. Bond Enhanced Index Mid-Cap Growth U.S. High Yield Mid-Cap Value U.S. Treasury Intermediate New America Growth U.S. Treasury Long-Term New Era New Horizons Domestic Tax-Free California Tax-Free Bond QM U.S. Small & Mid-Cap Core Equity Georgia Tax-Free Bond QM U.S. Small-Cap Growth Equity Intermediate Tax-Free High Yield QM U.S. Value Equity Maryland Short-Term Tax-Free Bond Real Estate Maryland Tax-Free Bond Science & Technology Small-Cap Stock New Jersey Tax-Free Bond New York Tax-Free Bond Small-Cap Value Summit Municipal Income Tax-Efficient Equity Summit Municipal Intermediate Total Equity Market Index Tax-Free High Yield U.S. Large-Cap Core Tax-Free Income Value Tax-Free Short-Intermediate Virginia Tax-Free Bond ASSET ALLOCATION FUNDS Balanced Global Allocation Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income Real Assets Spectrum Growth Spectrum Income Spectrum International Target Date Fundsˆ MONEY MARKET FUNDS Taxable Cash Reserves 1 Government Money 2 U.S. Treasury Money 2 MONEY MARKET FUNDS (cont.) Tax-Free California Tax-Free Money 1 Maryland Tax-Free Money 1 New York Tax-Free Money 1 Summit Municipal Money Market 1 Tax-Exempt Money 1 INTERNATIONAL/GLOBAL FUNDS Stock Africa & Middle East Asia Opportunities Emerging Europe Emerging Markets Stock Emerging Markets Value Stock European Stock Global Consumer Global Growth Stock Global Industrials Global Real Estate Global Stock Global Technology International Concentrated Equity International Discovery International Equity Index International Stock International Value Equity Japan Latin America New Asia Overseas Stock QM Global Equity Bond Dynamic Global Bond Emerging Markets Bond Emerging Markets Corporate Bond Emerging Markets Local Currency Bond Global High Income Bond Global Multi-Sector Bond International Bond International Bond (USD Hedged) Call to request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. Subject to certain exceptions, the fund is currently closed to new investors and new accounts. ˆ The Target Date Funds are inclusive of the Retirement Funds, the Target Funds, and the Retirement Balanced Fund. 1 Retail Funds: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. Beginning October 14, 2016, the Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. 2 Government Funds: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, MD C /18

25 ANNual REPORT Financial Statements December 31, 2017 PREIX PRUIX T. Rowe Price Equity Index 500 Fund Equity Index 500 Fund I Class

26 Financial Highlights For a share outstanding throughout each period Investor Class Year Ended 12/31/17 12/31/16 12/31/15 12/31/14 12/31/13 NET ASSET VALUE Beginning of period $ $ $ $ $ Investment activities Net investment income (1) 1.16 (2)(3) 1.10 (2) Net realized and unrealized gain / loss (0.52) Total from investment activities Distributions Net investment income (1.18) (1.10) (1.11) (0.94) (0.81) Net realized gain (0.07) (0.12) Total distributions (1.25) (1.22) (1.11) (0.94) (0.81) Redemption fees added to paid-in capital (1) (5) (5) (5) (5) (5) NET ASSET VALUE End of period $ $ $ $ $ Ratios/Supplemental Data Total return (4) 21.55% (2)(3) 11.70% (2) 1.11% 13.40% 32.02% Ratio of total expenses to average net assets 0.23% (2)(3) 0.26% (2) 0.27% 0.27% 0.28% 2

27 Financial Highlights For a share outstanding throughout each period Year Ended 12/31/17 12/31/16 12/31/15 12/31/14 12/31/13 Ratios/Supplemental Data (continued) Ratio of net investment income to average net assets 1.77% (2)(3) 1.96% (2) 1.99% 1.81% 1.82% Portfolio turnover rate 6.8% 8.6% 10.0% 5.7% 10.4% Net assets, end of period (in millions) $ 26,469 $ 27,036 $ 24,933 $ 24,367 $ 20,257 (1) Per share amounts calculated using average shares outstanding method. (2) See Note 6. Excludes expenses in excess of a 0.25% contractual expense limitation in effect through 7/31/17. (3) See Note 6. Excludes expenses in excess of a 0.21% contractual expense limitation in effect through 4/30/20. (4) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions and payment of no redemption or account fees. (5) Amounts round to less than $0.01 per share. The accompanying notes are an integral part of these financial statements. 3

28 Financial Highlights For a share outstanding throughout each period I Class Year Ended 12/31/17 12/31/16 8/28/15 (1) Through 12/31/15 NET ASSET VALUE Beginning of period $ $ $ Investment activities Net investment income (2) (3) Net realized and unrealized gain / loss Total from investment activities Distributions Net investment income (1.28) (1.18) (0.60) Net realized gain (0.07) (0.12) Total distributions (1.35) (1.30) (0.60) Redemption fees added to paid-in capital (2) (6) (6) (6) NET ASSET VALUE End of period $ $ $ Ratios/Supplemental Data Total return (4) 21.73% 11.87% 3.47% (3) Ratio of total expenses to average net assets 0.08% 0.10% 0.15% (3)(5) Ratio of net investment income to average net assets 1.92% 2.15% 2.20% (3)(5) Portfolio turnover rate 6.8% 8.6% 10.0% Net assets, end of period (in millions) $ 2,468 $ 1,381 $ 46 (1) Inception date (2) Per share amounts calculated using average shares outstanding method. (3) See Note 6. Excludes expenses in excess of a 0.05% contractual operating expense limitation in effect through 4/30/18. (4) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions and payment of no redemption or account fees. Total return is not annualized for periods less than one year. (5) Annualized (6) Amounts round to less than $0.01 per share. The accompanying notes are an integral part of these financial statements. 4

29 First Page Footer T. Rowe Price Equity Index 500 Fund December 31, 2017 Portfolio of Investments Shares/Par $ Value (Cost and value in $000s) COMMON STOCKS 99.8% CONSUMER DISCRETIONARY 12.2% Auto Components 0.2% Aptiv 339,908 28,834 Borg-Warner 265,254 13,552 Goodyear Tire & Rubber 296,738 9,588 51,974 Automobiles 0.5% Ford Motor 4,949,360 61,818 General Motors 1,610,514 66,015 Harley-Davidson (1) 204,464 10, ,236 Distributors 0.1% Genuine Parts 180,924 17,189 LKQ Corporation (2) 374,300 15,223 32,412 Diversified Consumer Services 0.0% H&R Block 280,694 7,360 7,360 Hotels, Restaurants & Leisure 1.8% Carnival 509,346 33,805 Chipotle Mexican Grill (1)(2) 32,876 9,502 Darden Restaurants 150,652 14,466 Hilton Worldwide Holdings 250,432 19,999 Marriott, Class A 387,858 52,644 McDonald's 1,008, ,525 MGM Resorts International 633,590 21,156 Norwegian Cruise Line Holdings (2) 216,641 11,536 Royal Caribbean Cruises 212,700 25,371 Starbucks 1,798, ,267 Wyndham Worldwide 125,400 14,530 Wynn Resorts 106,154 17,897 5

30 (Cost and value in $000s) Shares/Par $ Value Yum! Brands 423,005 34, ,219 Household Durables 0.4% D. R. Horton 417,100 21,301 Garmin 128,497 7,655 Leggett & Platt 160,024 7,638 Lennar, Class A 270,189 17,087 Mohawk Industries (2) 77,283 21,322 Newell Brands 617,543 19,082 Pulte Group 334,230 11,113 Whirlpool 89,608 15, ,310 Internet & Direct Marketing Retail 2.9% Amazon.com (2) 506, ,194 Expedia 161,603 19,355 Netflix (2) 547, ,154 Priceline (2) 61, ,236 TripAdvisor (1)(2) 150,050 5, ,110 Leisure Products 0.1% Hasbro 149,698 13,606 Mattel (1) 465,119 7,153 20,759 Media 2.7% CBS, Class B 461,987 27,257 Charter Communications, Class A (2) 244,464 82,130 Comcast, Class A 5,902, ,379 Discovery Communications, Class A (1)(2) 197,300 4,416 Discovery Communications, Class C (1)(2) 230,030 4,870 DISH Network, Class A (2) 302,770 14,457 Interpublic Group 525,438 10,593 News Corp, Class A 505,049 8,187 6

31 (Cost and value in $000s) Shares/Par $ Value News Corp, Class B 165,500 2,747 Omnicom (1) 299,866 21,839 Scripps Networks Interactive 131,000 11,185 Time Warner 982,660 89,884 Twenty-First Century Fox 554,900 18,933 Twenty-First Century Fox, Class A 1,333,304 46,039 Viacom, Class B 469,667 14,471 Walt Disney 1,910, , ,795 Multiline Retail 0.5% Dollar General 335,752 31,228 Dollar Tree (2) 300,294 32,224 Kohl's 226,568 12,287 Macy's (1) 413,584 10,418 Nordstrom (1) 147,756 7,001 Target 698,052 45, ,706 Specialty Retail 2.3% Advance Auto Parts 98,233 9,793 AutoZone (2) 35,145 25,001 Best Buy 329,897 22,588 CarMax (2) 241,700 15,500 Foot Locker 143,700 6,737 Gap (1) 287,401 9,789 Home Depot 1,476, ,830 L Brands 320,654 19,310 Lowe's 1,050,767 97,658 O'Reilly Automotive (2) 109,078 26,238 Ross Stores 481,051 38,604 Signet Jewelers (1) 71,500 4,043 Tiffany 125,815 13,079 TJX 811,069 62,014 Tractor Supply 153,500 11,474 7

32 (Cost and value in $000s) Shares/Par $ Value Ulta Beauty (2) 75,075 16, ,449 Textiles, Apparel & Luxury Goods 0.7% Hanesbrands (1) 493,070 10,310 Michael Kors Holdings (2) 194,800 12,263 Nike, Class B 1,658, ,710 PVH 103,681 14,226 Ralph Lauren (1) 64,000 6,636 Tapestry 360,458 15,943 Under Armour, Class A (1)(2) 240,049 3,464 Under Armour, Class C (1)(2) 251,992 3,356 V. F. 406,943 30, ,022 Total Consumer Discretionary 3,528,352 CONSUMER STAPLES 8.2% Beverages 2.0% Brown-Forman, Class B 240,255 16,498 Coca-Cola 4,855, ,785 Constellation Brands, Class A 221,049 50,525 Dr Pepper Snapple 228,804 22,208 Molson Coors Brewing, Class B 228,055 18,717 Monster Beverage (2) 513,592 32,505 PepsiCo 1,801, , ,219 Food & Staples Retailing 1.8% Costco Wholesale 549, ,237 CVS Health 1,278,228 92,672 Kroger 1,144,999 31,430 Sysco 604,255 36,697 Wal-Mart 1,845, ,237 8

33 (Cost and value in $000s) Shares/Par $ Value Walgreens Boots Alliance 1,095,281 79, ,812 Food Products 1.3% Archer-Daniels-Midland 725,840 29,092 Campbell Soup (1) 255,071 12,271 Conagra Brands 499,768 18,826 General Mills 717,269 42,527 Hershey Foods 173,521 19,696 Hormel Foods (1) 323,276 11,764 J.M. Smucker 141,741 17,610 Kellogg (1) 309,115 21,014 Kraft Heinz 765,309 59,510 McCormick (1) 150,505 15,338 Mondelez International 1,881,469 80,527 Tyson Foods, Class A 384,269 31, ,328 Household Products 1.6% Church & Dwight 303,400 15,222 Clorox 161,384 24,004 Colgate-Palmolive 1,111,636 83,873 Kimberly-Clark 444,719 53,660 Procter & Gamble 3,227, , ,279 Personal Products 0.2% Coty, Class A (1) 625,600 12,443 Estee Lauder, Class A 282,134 35,899 48,342 Tobacco 1.3% Altria Group 2,415, ,512 9

34 (Cost and value in $000s) Shares/Par $ Value Philip Morris International 1,966, , ,260 Total Consumer Staples 2,365,240 ENERGY 6.1% Energy Equipment & Services 0.8% Baker Hughes 537,567 17,009 Halliburton 1,122,742 54,868 Helmerich & Payne (1) 143,400 9,269 National Oilwell Varco 461,154 16,611 Schlumberger 1,756, ,396 TechnipFMC 573,450 17, ,108 Oil, Gas & Consumable Fuels 5.3% Anadarko Petroleum 687,619 36,884 Andeavor 175,995 20,123 Apache 472,478 19,948 Cabot Oil & Gas 568,453 16,258 Chesapeake Energy (1)(2) 1,036,000 4,103 Chevron 2,410, ,832 Cimarex Energy 126,500 15,434 Concho Resources (2) 186,859 28,070 ConocoPhillips 1,533,660 84,183 Devon Energy 662,158 27,413 EOG Resources 734,035 79,210 EQT 297,358 16,926 ExxonMobil 5,375, ,613 Hess (1) 333,252 15,820 Kinder Morgan 2,401,420 43,394 Marathon Oil 1,053,882 17,842 Marathon Petroleum 620,142 40,917 Newfield Exploration (2) 266,200 8,393 Noble Energy 607,800 17,711 10

35 (Cost and value in $000s) Shares/Par $ Value Occidental Petroleum 969,728 71,430 ONEOK 480,153 25,664 Phillips ,276 54,345 Pioneer Natural Resources 217,952 37,673 Range Resources 207,767 3,545 Valero Energy 558,528 51,334 Williams Companies 1,061,240 32,357 1,520,422 Total Energy 1,754,530 FINANCIALS 14.8% Banks 6.6% Bank of America 12,277, ,428 BB&T 1,012,062 50,320 Citigroup 3,346, ,979 Citizens Financial 630,745 26,479 Comerica 216,219 18,770 Fifth Third Bancorp 872,743 26,479 Huntington Bancshares 1,348,115 19,629 JPMorgan Chase 4,392, ,746 KeyCorp 1,361,595 27,463 M&T Bank 187,800 32,112 Peoples United Financial 420,900 7,871 PNC Financial Services Group 601,268 86,757 Regions Financial 1,510,785 26,106 SunTrust 610,600 39,439 U.S. Bancorp 1,991, ,689 Wells Fargo 5,608, ,277 Zions Bancorporation 261,928 13,314 1,902,858 Capital Markets 3.1% Affiliated Managers Group 71,927 14,763 Ameriprise Financial 184,105 31,200 11

36 (Cost and value in $000s) Shares/Par $ Value Bank of New York Mellon 1,294,759 69,736 BlackRock 156,281 80,283 Cboe Global Markets 147,470 18,373 Charles Schwab 1,500,260 77,068 CME Group 432,069 63,104 E*TRADE Financial (2) 330,201 16,368 Franklin Resources 429,700 18,619 Goldman Sachs 443, ,965 Intercontinental Exchange 747,596 52,750 Invesco 484,607 17,708 Moody's 211,488 31,218 Morgan Stanley 1,758,224 92,254 Nasdaq 154,800 11,893 Northern Trust 271,990 27,169 Raymond James Financial 170,597 15,234 S&P Global 323,771 54,847 State Street 473,839 46,252 T. Rowe Price Group (3) 305,723 32, ,884 Consumer Finance 0.8% American Express 909,608 90,333 Capital One Financial 606,545 60,400 Discover Financial 466,161 35,857 Navient 278,324 3,707 Synchrony Financial 934,706 36, ,386 Diversified Financial Services 1.7% Berkshire Hathaway, Class B (2) 2,436, ,013 Leucadia National 387,135 10, ,268 Insurance 2.6% Aflac 497,723 43,690 12

37 (Cost and value in $000s) Shares/Par $ Value Allstate 452,591 47,391 American International Group 1,130,244 67,340 Aon 314,660 42,164 Arthur J. Gallagher 237,900 15,054 Assurant 74,300 7,492 Brighthouse Financial (2) 134,370 7,879 Chubb 586,287 85,674 Cincinnati Financial 188,863 14,159 Everest Reinsurance Holdings 54,614 12,084 Hartford Financial Services 450,616 25,361 Lincoln National 279,687 21,500 Loews 338,295 16,925 Marsh & McLennan 651,897 53,058 MetLife 1,331,903 67,341 Principal Financial Group 336,208 23,723 Progressive 743,841 41,893 Prudential Financial 533,960 61,395 The Travelers Companies 350,549 47,548 Torchmark 143,169 12,987 Unum Group 275,951 15,147 Willis Towers Watson 169,226 25,501 XL Group 306,476 10, ,082 Total Financials 4,272,478 HEALTH CARE 13.7% Biotechnology 2.7% AbbVie 2,018, ,196 Alexion Pharmaceuticals (2) 288,142 34,459 Amgen 919, ,840 Biogen (2) 266,930 85,036 Celgene (2) 996, ,953 Gilead Sciences 1,651, ,322 13