T. Rowe Price Limited-Term Bond

Objective And Strategy

Objective
High level income consistent with moderate fluctuations of principle value

Strategy
The Fund invests at least 80% of net assets in bonds, with 65% of its total assets in short and intermediate term bonds. There are no maturity limitations on individual securities purchased, but the Fund’s average effective maturity will not exceed five.
Tax Inefficient Fund

Principal Risks

* This portfolio invests in securities of foreign issuers which involves risks not typically associated with domestic issuers, including currency fluctuations and the possibility of political and economic instability. Emerging markets involve risks in addition to those generally associated with foreign securities, because political and economic structures in many emerging markets may be undergoing significant evolution and rapid development.

* This portfolio can leverage or use leveraged instruments or derivatives. Portfolios that use leverage, that is, borrow money, are subject to the risk that the cost of borrowing money to leverage will exceed the returns for the securities purchased or that the securities purchased may actually go down in value. Thus, the portfolio's net asset value can decrease more quickly than if the portfolio had not borrowed. Portfolios that use leveraged instruments or derivatives such as futures, options and swap agreements, may expose the portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The more a portfolio invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments.

* This fund has a risk of prepayment and extension. A mortgage backed bond, unlike other bonds can be hurt when interest rates fall because homeowners refinance and prepay principal. Receiving increasing prepayments in a falling interest rate environment cause the average maturity of the portfolio to shorten, reducing its potential for price gains. It requires the fund to reinvest at lower interest rates, which reduced the portfolio's total return and yield, and may cause certain bond prices to fall below the level the fund paid for them, resulting in a capital loss.

* Fixed income securities are subject to interest rate risk because the prices of fixed income securities tend to move in the opposite direction of interest rates. When interest rates rise, fixed income security prices fall. When interest rates fall, fixed income security prices rise.

* Credit risk is the risk that the issuer of a security may be unable to make interest payments and/or repay principal when due. A downgrade to an issuer's credit rating or a perceived change in an issuer's financial strength may affect a security's value, and thus, impact the VA Short-Term Fixed Portfolio's performance.

* Generally, a security is liquid if the Portfolio is able to sell the security at a fair price within a reasonable time. Liquidity is generally related to the market trading volume for a particular security.