NXCR NexCore Healthcare Capital Corporation (CE)

Item 1. Report to Shareholders

• A familiar drama was replayed in 2012, as stocks recovered late in the year from worries over Europe and political wrangling in the U.S.
   
• The Institutional Mid-Cap Equity Growth Fund added to its gain over the past six months and finished roughly in the middle of its peer group for the year.
   
• A wide range of our holdings saw good gains for the year, led by biotechnology positions.
   
• We expect the story may remain much the same in 2013, but we are mindful that longer-term and important changes are taking place offstage.

The views and opinions in this report were current as of December 31, 2012. 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.

Manager’s Letter
T. Rowe Price Institutional Mid-Cap Equity Growth Fund

Dear Investor

Since this drama’s premiere in 2010, it has become a somewhat tiresome annual spectacle:

• Act I: Good earnings lead to gains early in the year!
   
• Act II: European debt crisis worsens, causing summer downturn!
   
• Act III: Washington political battles further threaten recovery!
   
• Act IV: Fed rides to the rescue!

Having long grown weary of the drama, many Americans continued to shun stocks in 2012 in favor of the boredom but seeming safety of the fixed income market. However, the dwindling number of stock investors who persevered realized solid gains from the year’s repeat performance. While our 14.50% gain for 2012 was far better than one might have expected given the news flow through the year, our fund’s relative performance was unexciting. We finished roughly in the middle of our competitive pack, enjoying a decent gain over the past six months and solid results for the year. Overall, mid-cap growth stocks slightly trailed the broader market, as mid-caps outperformed but growth trailed value.

The Institutional Mid-Cap Equity Growth Fund returned 6.21% in the past six months and 14.50% in the year ended December 31, 2012. The fund modestly under-performed its Russell index over the two periods while more substantially lagging the S&P index, which includes some strongly performing value stocks. The fund performed a bit better than its mid-cap growth peer average, however, and remained favorably ranked relative to its competitors over all longer time periods. (Based on cumulative total return, Lipper ranked the Institutional Mid-Cap Equity Growth Fund 164 of 392, 56 of 350, 38 of 318, and 5 of 220 funds in the mid-cap growth funds category for the 1-, 3-, 5-, and 10-year periods ended December 31, 2012, respectively. Past performance cannot guarantee future results. )

When we last wrote, the market had managed a decent gain in the first half of the year despite a global economy that appeared to be slowing, a debt crisis in Europe that had grown worse, and a political situation in the U.S. that was in shambles. Stocks built on their gains in the second half of the year as these obstacles moderated. U.S. economic growth picked up in the third quarter, and more visibly to most Americans, the pace of job growth accelerated. By the end of the year, it became clear that the housing sector had finally engineered a solid turnaround, and consumer confidence gauges were climbing back to multiyear highs. China, a key world growth engine following the Great Recession, appeared to be settling into a pattern of slower but sustainable growth. European economies continued to founder, but the Continent’s debt crisis eased following a new rescue program from the European Central Bank. Politicians in the U.S. managed to avoid going over the fiscal cliff or shutting down the federal government, which, we surmise, counts as progress in this highly polarized age.

“Never fear, the Fed is here!” one observer recently quipped. While the Lone Ranger did not necessarily ride to investors’ rescue in 2012, he certainly made them feel better. In September, the broad market indexes reached multiyear highs and the S&P MidCap 400 established a new record after the Federal Reserve announced a third round of quantitative easing (more commonly called QE3). In what was widely interpreted as a victory for the “doves”—or those Fed officials willing to accept the risk of higher inflation in order to bring down the unemployment rate—the central bank announced that it would begin buying $40 billion of agency mortgage-backed securities each month. In December, the Fed went further by announcing that it would begin purchasing $45 billion in Treasury bonds each month starting in 2013 and surprised most observers by setting specific targets for the unemployment rate and inflation—6.5% and 2.5%, respectively—before it would begin raising short-term interest rates. Thus, QE4 followed on QE3, meaning that the Fed was introducing new stimulus measures even faster than Apple could update its iPad. Stocks went on to finish the year on a high note, boosted further by a last-minute budget deal in Washington.

Portfolio Review

A broad range of the fund’s holdings advanced over the year, with eight of nine sectors contributing to gains. Biotechnology remains a key focus of the fund and was our leading industry contributor. Our single largest contributor was Regeneron Pharmaceuticals , a biotechnology company with an FDA-approved treatment for wet age-related macular degeneration, a widespread cause of blindness in the elderly. Investors’ enthusiasm for the drug increased after a competing product fell under a cloud of controversy surrounding compounding pharmacies. Another strong contributor was Alexion Pharmaceuticals , whose drug, Soliris, developed to treat a life-threatening blood disease, showed potential to treat other serious illnesses. The company is also expected to bring to market a treatment for a genetic deficiency affecting infants and young children. Our portfolio is diversified across the biotech segment, ending the year with 10 such holdings, as the success or failure of any one drug can make or break a company. (Please refer to the fund’s portfolio of investments for a complete list of our holdings and the amount each represents in the portfolio.)

Several of our other health care holdings also performed well. One of our top contributors was Catamaran , formerly SXC Health Solutions, a pharmacy benefit manager that acquired a key competitor to create the fourth-largest player in its industry. Over the past six months, we also added to Agilent Technologies , a high-quality analytical instrument company with substantial exposure to emerging markets; we initiated a position in Wellcare Health Plans , a large Medicaid managed care company; and we eliminated our position in Amerigroup following an acquisition offer at a large premium. We believe select health care services firms are poised to do well given their technological advantages and the imperative to improve health care productivity.

Boasting a large number of attractively valued and responsibly managed growth companies, the industrials and business services sector continued to be a key driver of our results. After poor performance early in the year, one of our leading contributors over the past six months was Gardner Denver , as investors welcomed the firm’s solicitation of acquisition offers and the subsequent news reports indicating that private-equity firms and others had expressed interest in the company. Long-term holding AMETEK , an electrical equipment maker, also performed well. Over the past six months, we added to our position in J.B. Hunt Transport Services , which is benefiting from its growing intermodal business. We initiated positions in Equifax , a data provider for consumers and businesses benefiting from an increase in lending activity, and Alaska Air Group , a well-managed and growing airline. As usual, our valuation-sensitive approach led us to trim some of our winners, such as longtime holding Roper Industries .

Information technology remains an important sector for the fund. Trimble Navigation reported impressive earnings gains as adoption of its technology accelerated. This global provider of advanced positioning and location-based solutions is evolving into a more comprehensive platform with its ongoing shift to software and services. In the second half of the year, we initiated positions in Motorola Solutions , a purveyor of communications products and services for first responders and mobile workers; LinkedIn , the world’s largest professional social network; and ServiceNow , a leading IT management software provider. Conversely, we eliminated Ariba as it was acquired by SAP and trimmed Global Payments due to increasing competitive risks. A notable detractor in the technology sector was Atmel , which has a high-margin and broad-based microcontroller business as well as a solid position in the booming market for touch-based controllers for devices such as smartphones and tablets. While its shares have been under pressure due to increased competition in touch-based technologies, we believe the market has overcompensated for the competitive risks in that segment.

The materials sector is only a small part of the fund, given its limited growth opportunities, but two of our best contributors came from the segment. Franco-Nevada , a gold-focused royalty and investment company that provides capital to mining companies in exchange for royalties on future sales or production, announced a significant investment in a potentially lucrative project in Panama. In 2011, gold miner Agnico-Eagle Mines missed earnings due to operational issues, but the shares rebounded in 2012 after the firm rectified these shortcomings.

In past letters, we have reported our growing skepticism about valuations in the consumer discretionary sector, where momentum-chasing investors have bid up the shares of a small group of fast-growing companies. We sense that this momentum might have peaked in recent months, but our relative returns suffered somewhat due both to our stock selection and our underweight in the sector. Our biggest mistakes in the segment were owning LivingSocial and Groupon . We purchased shares of LivingSocial as a private placement and later bought Groupon well after the sheen had worn off its initial public offering. While we thought that the reduced price we paid for Groupon provided us an adequate cushion for disappointment, the stock fared poorly as the business model proved far less durable than we thought. We eliminated Groupon and greatly marked down our LivingSocial position. Another of our private holdings, Michael Kors Holdings , went public in late 2011 and was one of our largest contributors in 2012 as its products appealed to fashion-conscious consumers. Discount retailer Dollar General also performed well, appealing to empty-nesters and low-income shoppers who increasingly want smaller package sizes and less intimidating stores with convenient parking. We added Dollar Tree to the portfolio as well.

We have little positive to report about the stock performance of the energy sector this year. The massive increase in natural gas production as a result of fracking and other unconventional drilling processes has weighed heavily on both natural gas and coal prices, as have unseasonably warm winters. Trican Well Service , which we eliminated from the portfolio, and SM Energy were among our largest detractors, but the majority of our holdings in the sector detracted from results. Ironically, the pain currently being felt by energy producers is probably setting the stage for strong performance in the coming years from other fund holdings, particularly in the industrials and business services sector. As we have previously described, reliable and cheap domestic energy is already encouraging firms to relocate production back to the U.S., sparking what could evolve into an American industrial renaissance.

Investment Strategy and Outlook

We doubt that our annual market spectacle will get much of a revamp in 2013. Certainly, the cast of characters has not changed much, with the recent elections having preserved the status quo in Washington. Given the ongoing battles over fiscal issues, the nation’s political class appears unlikely to do much to stimulate growth in 2013, although we suspect that the economy might be poised for a solid recovery if policymakers somehow manage to pull the correct levers. Instead, the ongoing political gridlock and strident partisanship in Washington appear to leave us poised for a series of ongoing mini-crises in the coming quarters.

The Federal Reserve’s role as the Lone Ranger might be altered a bit, however. Recent signs suggest that at least some in the Fed are growing wary of its massive bond purchases, and it is unclear whether more monetary stimulus will have much of an effect. It will be up to historians to determine whether several years of zero interest rates and massive quantitative easing have been necessary to boost growth and push investors into riskier assets. At this point, however, we suspect a moderate and controlled upward drift in interest rates would be good for the economy and for the stock market.

Finally, we would note that most of the important drama has been taking place offstage, as is so often the case. The impressive turnaround in domestic energy production, the rise of industrial automation, and the related rebirth of American manufacturing will probably prove to be much more consequential stories over the long run, even if they receive relatively short shrift in the financial press. We are confident that many of our holdings will play leading roles within many of these trends, and we look forward to updating you on their performance in six months.

Respectfully submitted,

Brian W.H. Berghuis
President of the fund and chairman of its Investment
Advisory Committee

John F. Wakeman
Executive vice president of the fund

January 22, 2013

The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund’s investment program.

As with all stock and bond mutual funds, the fund’s share price can fall because of weakness in the stock or bond markets, a particular industry, or specific holdings. The financial 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. In addition, the investment manager’s assessment of companies held in a fund may prove incorrect, resulting in losses or poor performance even in rising markets. The stocks of mid-cap companies entail greater risk and are usually more volatile than the shares of larger companies. In addition, growth stocks can be volatile for several reasons. Since they usually reinvest a high proportion of earnings in their own businesses, they may lack the dividends usually associated with value stocks that can cushion their decline in a falling market. Also, since investors buy these stocks because of their expected superior earnings growth, earnings disappointments often result in sharp price declines.

Lipper indexes: Fund benchmarks that consist of a small number of the largest mutual funds in a particular category as tracked by Lipper Inc.

Russell Midcap Growth Index: An unmanaged index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecast growth values.

Russell Midcap Value Index: An unmanaged index that measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecast growth values.

S&P MidCap 400 Index: An unmanaged index that tracks the stocks of 400 U.S. mid-cap companies.

Note: Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell ^® is a trademark of Russell Investment Group.

Portfolio Highlights

Performance and Expenses
T. Rowe Price Institutional Mid-Cap Equity Growth Fund

This table shows the value of a hypothetical $1 million 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.

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.

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.

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.

Financial Highlights
T. Rowe Price Institutional Mid-Cap Equity Growth Fund

The accompanying notes are an integral part of these financial statements.

Portfolio of Investments ^‡
T. Rowe Price Institutional Mid-Cap Equity Growth Fund
December 31, 2012

The accompanying notes are an integral part of these financial statements.

Statement of Assets and Liabilities
T. Rowe Price Institutional Mid-Cap Equity Growth Fund
December 31, 2012
($000s, except shares and per share amounts)

The accompanying notes are an integral part of these financial statements.

Statement of Operations
T. Rowe Price Institutional Mid-Cap Equity Growth Fund
($000s)

The accompanying notes are an integral part of these financial statements.

Statement of Changes in Net Assets
T. Rowe Price Institutional Mid-Cap Equity Growth Fund
($000s)

The accompanying notes are an integral part of these financial statements.

Notes to Financial Statements
T. Rowe Price Institutional Mid-Cap Equity Growth Fund
December 31, 2012

T. Rowe Price Institutional Equity Funds, Inc. (the corporation), is registered under the Investment Company Act of 1940 (the 1940 Act). The Institutional Mid-Cap Equity Growth Fund (the fund) is a diversified, open-end management investment company established by the corporation. The fund commenced operations on July 31, 1996. The fund seeks to provide long-term capital appreciation by investing in mid-cap stocks with potential for above-average earnings growth.

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), which require the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.

Investment Transactions, Investment Income, and Distributions Income and expenses are recorded on the accrual basis. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Income tax-related interest and penalties, if incurred, would be recorded as income tax expense. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared and paid annually. Capital gain distributions, if any, are generally declared and paid by the fund annually.

Currency Translation Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses.

Rebates and Credits Subject to best execution, the fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the fund in cash. Commission rebates are reflected as realized gain on securities in the accompanying financial statements and totaled $81,000 for the year ended December 31, 2012. Additionally, the fund earns credits on temporarily uninvested cash balances held at the custodian, which reduce the fund’s custody charges. Custody expense in the accompanying financial statements is presented before reduction for credits.

In-Kind Subscriptions Under certain circumstances, and when considered to be in the best interest of the fund, the fund may accept portfolio securities rather than cash as payment for the purchase of fund shares (in-kind subscription). For financial reporting and tax purposes, the cost basis of contributed securities is equal to the market value of the securities on the date of contribution. In-kind subscriptions result in no gain or loss and no tax consequences for the fund. During the year ended December 31, 2012, the fund accepted $821,028,000 of in-kind subscriptions, including $718,549,000 from other T. Rowe Price funds.

New Accounting Pronouncements In December 2011, the FASB issued amended guidance to enhance disclosure for offsetting assets and liabilities. The guidance is effective for fiscal years and interim periods beginning on or after January 1, 2013. Adoption will have no effect on the fund’s net assets or results of operations.

NOTE 2 - VALUATION

The fund’s financial instruments are reported at fair value as defined by GAAP. The fund determines the values of its assets and liabilities and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business.

Valuation Methods Equity securities listed or regularly traded on a securities exchange or in the over-the-counter (OTC) market are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made, except for OTC Bulletin Board securities, which are valued at the mean of the latest bid and asked prices. A security that 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 are valued at the mean of the latest bid and asked prices for domestic securities and the last quoted sale price for international securities.

Investments in mutual funds are valued at the mutual fund’s closing net asset value per share on the day of valuation.

Other investments, including restricted securities and private placements, and those financial instruments 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 the T. Rowe Price Valuation Committee, established by the fund’s Board of Directors (the Board). Subject to oversight by the Board, the Valuation Committee develops pricing-related policies and procedures and approves all fair-value determinations. The Valuation Committee regularly makes good faith judgments, using a wide variety of sources and information, to establish and adjust valuations of certain securities as events occur and circumstances warrant. For instance, in determining the fair value of private-equity instruments, the Valuation Committee considers a variety of factors, including the company’s business prospects, its financial performance, strategic events impacting the company, relevant valuations of similar companies, new rounds of financing, and any negotiated transactions of significant size between other investors in the company. Because any fair-value determination involves a significant amount of judgment, there is a degree of subjectivity inherent in such pricing decisions.

For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the fund determines that developments between the close of a foreign market and the close of the NYSE will, in its judgment, materially affect the value of some or all of its portfolio securities, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust closing prices to reflect fair value, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. A fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. The fund uses outside pricing services to provide it with closing prices and information to evaluate and/or adjust those prices. The fund cannot predict how often it will use closing prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the fund routinely compares closing prices, the next day’s opening prices in the same markets, and adjusted prices. Additionally, trading in the underlying securities of the fund may take place in various foreign markets on certain days when the fund is not open for business and does not calculate a net asset value. As a result, net asset values may be significantly affected on days when shareholders cannot make transactions.

Valuation Inputs Various inputs are used to determine the value of the fund’s financial instruments. These inputs are summarized in the three broad levels listed below:

Level 1 – quoted prices in active markets for identical financial instruments

Level 2 – observable inputs other than Level 1 quoted prices (including, but not limited to, quoted prices for similar financial instruments, interest rates, prepayment speeds, and credit risk)

Level 3 – unobservable inputs

Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund’s own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level. For example, non-U.S. equity securities actively traded in foreign markets generally are reflected in Level 2 despite the availability of closing prices because the fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described above. The following table summarizes the fund’s financial instruments, based on the inputs used to determine their values on December 31, 2012:

Following is a reconciliation of the fund’s Level 3 holdings for the year ended December 31, 2012. Transfers into and out of Level 3 are reflected at the value of the financial instrument at the beginning of the period. Gain (loss) reflects both realized and change in unrealized gain (loss) on Level 3 holdings during the period, if any, and is included on the accompanying Statement of Operations. The change in unrealized gain (loss) on Level 3 instruments held at December 31, 2012, totaled $(7,307,000) for the year ended December 31, 2012.

NOTE 3 - OTHER INVESTMENT TRANSACTIONS

Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to 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.

Restricted Securities The fund may invest in securities that are subject to legal or contractual restrictions on resale. Prompt sale of such securities at an acceptable price may be difficult and may involve substantial delays and additional costs.

Securities Lending The fund lends its securities to approved brokers to earn additional income. It receives as collateral cash and U.S. government securities valued at 102% to 105% of the value of the securities on loan. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund the next business day. Cash collateral is invested by the fund’s lending agent(s) in accordance with investment guidelines approved by management. Although 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 the securities or if collateral investments decline in value. Securities lending revenue recognized by the fund consists of earnings on invested collateral and borrowing fees, net of any rebates to the borrower and compensation to the lending agent. In accordance with GAAP, investments made with cash collateral are reflected in the accompanying financial statements, but collateral received in the form of securities is not. At December 31, 2012, there were no securities on loan.

Other Purchases and sales of portfolio securities other than short-term securities aggregated $1,678,847,000 and $993,733,000, respectively, for the year ended December 31, 2012.

NOTE 4 - FEDERAL INCOME TAXES

No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute to shareholders all of its taxable income and gains. Distributions determined in accordance with federal income tax regulations may differ in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character but are not adjusted for temporary differences.

The fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

Reclassifications between income and gain relate primarily to per-share rounding of distributions. For the year ended December 31, 2012, the following reclassifications were recorded to reflect tax character (there was no impact on results of operations or net assets):

Distributions during the years ended December 31, 2012 and December 31, 2011, were characterized for tax purposes as follows:

At December 31, 2012, the tax-basis cost of investments and components of net assets were as follows:

The difference between book-basis and tax-basis net unrealized appreciation (depreciation) is attributable to the deferral of losses from wash sales and the realization of gains/losses on passive foreign investment companies for tax purposes. The fund intends to retain realized gains to the extent of available capital loss carryforwards. Net realized capital losses may be carried forward indefinitely to offset future realized capital gains. All or a portion of the capital loss carryforwards may be from losses realized between November 1 and the fund’s fiscal year-end, which are deferred for tax purposes until the subsequent year but recognized for financial reporting purposes in the year realized. During the year ended December 31, 2012, the fund utilized $9,213,000 of capital loss carryforwards. In accordance with federal tax laws applicable to investment companies, specified net losses realized between November 1 and December 31, are not recognized for tax purposes until the subsequent year (late-year ordinary loss deferrals); however, such losses are recognized for financial reporting purposes in the year realized.

NOTE 5 - RELATED PARTY TRANSACTIONS

The fund is managed by T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. (Price Group). The investment management agreement between the fund and Price Associates provides for an annual investment management fee equal to 0.60% of the fund’s average daily net assets. The fee is computed daily and paid monthly.

In addition, the fund has entered into service agreements with Price Associates and a wholly owned subsidiary of Price Associates (collectively, Price). Price Associates computes the daily share price and provides certain other administrative services to the fund. T. Rowe Price Services, Inc., provides shareholder and administrative services in its capacity as the fund’s transfer and dividend disbursing agent. For the year ended December 31, 2012, expenses incurred pursuant to these service agreements were $99,000 for Price Associates and $7,000 for T. Rowe Price Services, Inc. The total amount payable at period-end pursuant to these service agreements is reflected as Due to Affiliates in the accompanying financial statements.

The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the T. Rowe Price Reserve Investment Funds), open-end management investment companies managed by Price Associates and considered affiliates of the fund. The T. Rowe Price Reserve Investment Funds are offered as cash management options to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates and are not available for direct purchase by members of the public. The T. Rowe Price Reserve Investment Funds pay no investment management fees.

Report of Independent Registered Public Accounting Firm

To the Board of Directors of T. Rowe Price Institutional Equity Funds, Inc. and
Shareholders of T. Rowe Price Institutional Mid-Cap Equity Growth Fund

In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of T. Rowe Price Institutional Mid-Cap Equity Growth Fund (one of the portfolios comprising T. Rowe Price Institutional Equity Funds, Inc., hereafter referred to as the “Fund”) at December 31, 2012, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, and confirmation of the underlying funds by correspondence with the transfer agent, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
February 15, 2013

Tax Information (Unaudited) for the Tax Year Ended 12/31/12

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:

• $9,143,000 from short-term capital gains,
   
• $1,920,000 from long-term capital gains, subject to the 15% rate gains category

For taxable non-corporate shareholders, $16,319,000 of the fund’s income represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, $16,319,000 of the fund’s income qualifies for the dividends-received deduction.

Information on Proxy Voting Policies, Procedures, and Records

A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information, which you may request by calling 1-800-225-5132 or by accessing the SEC’s website, sec.gov. The description of our proxy voting policies and procedures is also available on our website, troweprice.com. To access it, click on the words “Our Company” at the top of our corporate homepage. Then, when the next page appears, click on the words “Proxy Voting Policies” on the left side of the page.

Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through our website, follow the directions above, then click on the words “Proxy Voting Records” on the right side of the Proxy Voting Policies page.

How to Obtain Quarterly Portfolio Holdings

The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available electronically on the SEC’s website (sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 100 F St. N.E., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.