HANCOCK JOHN BOND FUND, 497, 1995-03-15

HANCOCK JOHN BOND FUND
497, 1995-03-15

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<PAGE> 1

John Hancock Global Resources Fund, March 1, 1995
John Hancock High Yield Bond Fund, March 1, 1995
John Hancock High Yield Tax-Free Fund, March 1, 1995
John Hancock Government Income Fund, March 1, 1995
John Hancock Emerging Growth Fund, March 1, 1995
John Hancock Growth and Income Fund, January 1, 1995
John Hancock Government Securities Trust, September 30, 1994
John Hancock Investment Quality Bond Fund, September 30, 1994
John Hancock U.S. Government Trust, September 30, 1994
John Hancock Intermediate Government Trust, September 30, 1994
John Hancock Adjustable U.S. Government Trust, September 30, 1994
John Hancock Capital Growth, April 29, 1994
John Hancock California Tax Free Income Fund, April 29, 1994
John Hancock Tax Free Bond Fund, April 15, 1994

Supplement to Class A and Class B Prospectus

The "Waiver of Initial Sales Charge" section under PURCHASE OF SHARES is
supplemented as follows:

Effective March 15, 1995, participant directed defined contribution
plans with at least 100 eligible employees at the inception of the Fund
account may purchase Class A shares of the Fund without an initial sales
charge but if the shares are redeemed within 12 months after the end of the
calendar year in which the purchase was made, a contingent deferred sales
charge will be imposed at the rate for Class A shares described in the
prospectus.

March 15, 1995
<PAGE> 2

TRANSAMERICA
GOVERNMENT SECURITIES TRUST
A SERIES OF TRANSAMERICA BOND FUND
1000 Louisiana Houston, Texas 77002-5098 (713) 751-2400
- --------------------------------------------------------------------------------

Transamerica Government Securities Trust (the "Fund"), a series of Transamerica
Bond Fund (the "Trust"), seeks as its primary investment objective, to earn a
high level of current income, consistent with safety of principal by investing
in debt obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The Fund does not invest in securities known as junk bonds.
The Fund does not currently engage in the writing of options and has undertaken
not to commence such investment activity without having first given 60 days'
written notice to shareholders in advance thereof. The Fund may also engage in a
variety of other investment techniques, in seeking to anticipate and protect
against changes in the general level of interest rates, including the purchase
of put and call options on debt securities and sale of interest rate futures
contracts and options on such futures. The investment policies and techniques
employed by the Fund may involve a greater degree of risk than those inherent in
more conservative investment approaches, such as money market funds. Investors
should be aware that a rise in interest rates can result in a decrease of the
value of the Fund's investment, in particular those of a derivative nature, and
in turn will result in a decrease in the Fund's net asset value.

This Prospectus provides the basic information an investor should know before
investing in the Fund. INVESTORS SHOULD READ THIS PROSPECTUS AND KEEP IT FOR
FUTURE REFERENCE. A Statement of Additional Information containing further
information about the Trust and the Fund has been filed with the Securities and
Exchange Commission. Copies may be obtained without charge by contacting the
Fund at the address or telephone number listed above.

The Fund's Investment Adviser is Transamerica Fund Management Company (the
"Investment Adviser"). Transamerica Fund Distributors, Inc. (the "Distributor")
acts as principal distributor of shares of the Fund.

- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 30, 1994
IS HEREBY INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.

PROSPECTUS DATED SEPTEMBER 30, 1994
<PAGE> 3

SUMMARY
- ---------------------------------------

THE TRUST. Transamerica Bond Fund (the "Trust") a Massachusetts business trust,
is registered with the Securities and Exchange Commission (the "SEC") as an
open-end, diversified management investment company. See "The Fund and Its
Management."

INVESTMENT OBJECTIVE. The Fund's primary investment objective is to earn a high
level of current income, consistent with safety of principal by investing in
debt obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. See "Investment Objective and Policies."

INVESTMENT ADVISER. Transamerica Fund Management Company, the Investment
Adviser, manages the investment of the Fund's assets, provides administrative
services and supervises the Fund's daily business affairs. The Investment
Adviser presently manages a broad range of mutual funds having multiple
investment portfolios representing approximately $3 billion under management.
See "The Fund and its Management."

DISTRIBUTION ARRANGEMENTS. The Fund offers two classes of shares with
alternative purchase and distribution fee arrangements through the Fund's
distributor, Transamerica Fund Distributors, Inc. (the "Distributor"). See
"Alternative Purchase Plan." Shares of either class may be purchased through
selected financial services firms having dealer agreements with the Distributor.
See "Distributor and Distribution Plans." The minimum initial and subsequent
investment amounts for either class of shares are $1,000 and $50, respectively.

ALTERNATIVE PURCHASE PLAN. Shares of the Fund may be purchased at the next
determined net asset value per share, plus a sales charge which, at the election
of the investor, may be imposed either (i) at the time of purchase in the case
of shares with an initial sales charge ("Class A Shares") or (ii) on a
contingent deferred basis together with an asset-based sales charge, in the case
of shares with a deferred sales charge ("Class B Shares"). See "Purchase of
Shares -- Alternative Purchase Plan."

REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any
time at the net asset value per share next determined after the redemption
request is received in proper form by The Shareholder Services Group (the
"Transfer Agent"). In certain cases, however, redemption proceeds from the Class
B Shares will be reduced by the amount of any applicable contingent deferred
sales charge. See "Redemption and Repurchase of Shares."

RISK FACTORS. Certain investment techniques and policies of the Fund, such as
Repurchase Agreements, Reverse Repurchase Agreements, Lending of Portfolio
Securities and Options and Futures Transactions, entail specific risks which may
be greater than those inherent in an investment vehicle with a more conservative
approach.

The aforesaid is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.

2
<PAGE> 4
<TABLE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates the various expenses and fees a shareholder of
the Fund would bear directly or indirectly. The expenses and fees set forth in
the table below are for the fiscal year ended March 31, 1994, except as
otherwise noted.
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
INITIAL DEFERRED
SALES CHARGE SALES CHARGE
ALTERNATIVE ALTERNATIVE
------------- -------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases.................. 4.75% None
Sales Charge Imposed on Reinvested Dividends............... None None
Deferred Sales Charge (as a percentage of original purchase
price)................................................... None 5.00%
Redemption Fee............................................. None None
Exchange Fee............................................... None None
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets)
Management Fees(3)......................................... 0.62% 0.62%
12b-1 Fees(4).............................................. 0.25% 1.00%
Other Expenses............................................. 0.27% 0.27%
----- -----
Total Fund Operating Expenses.............................. 1.14% 1.89%
===== =====
</TABLE>
<TABLE>
EXAMPLE A(5): You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period.
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A................................................ $59 $82 $107 $180
Class B................................................ $69 $89 $122 $202*
</TABLE>
<TABLE>
EXAMPLE B(5): You would pay the following expenses on the same investment in
Example A assuming no redemption:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A................................................ $59 $82 $107 $180
Class B................................................ $19 $59 $102 $202*
<FN>
- ---------------
(1) Class A Shares have reduced initial sales charges for purchases in excess of
$100,000. Purchases of $1 million or more are not subject to a sales charge;
however, a contingent deferred sales charge of 1% will be applied to
redemptions within 12 months of such purchase (as described under "Initial
Sales Charge Alternative -- Class A Shares"). Deferred sales charge on Class
B Shares declines from 5% during the first year to 0% after the sixth year
in the following manner: 5%, 4%, 3%, 3%, 2%, 1%. See "Information About
Shares of the Fund."
(2) Annual Operating Expenses of Class B Shares are based upon maximum allowed
fees (if collected) and estimates of expenses to be incurred in the current
fiscal year.
(3) See "The Fund and Its Management -- Advisory Fee."
(4) 12b-1 fees are based on maximum allowed fees. For the fiscal year ended
March 31, 1994, actual 12b-1 fees for Class A Shares were 0.24%. See "The
Fund and Its Management -- Distributor and Distribution Plans."
(5) Expenses in Example above should not be considered a representation of past
or future expenses. Actual expenses may be greater or less than those shown
above. Use of assumed annual return (5%) is mandated by the Securities and
Exchange Commission. Long-term shareholders of Class B Shares may pay more
than the economic equivalent of the maximum front-end sales charges
permitted by the NASD.

* Assumes tax-free automatic exchange of Class B Shares for Class A Shares
after the eight year period following the initial purchase of Class B
Shares. If the exchange is declined, such Class B expenses would be $221.
</TABLE>

3
<PAGE> 5
<TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following financial highlights are for Transamerica Government Securities
Trust Class A Shares for each of the nine years in the period ended March 31,
1994 and for the period Decem ber 31, 1984 through March 31, 1985. No
information is shown for Class B Shares since no Class B Shares were outstanding
during the periods represented.
<CAPTION>
PERIOD
YEAR ENDED MARCH 31, ENDED
---------------------------------------------------------------------------------------------------- MARCH 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985(1)
-------- -------- -------- -------- -------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share income
and capital
changes for a
share
outstanding
during each
period:
Net asset value,
beginning of
period.......... $ 8.41 $ 8.04 $ 8.03 $ 7.87 $ 8.17 $ 8.82 $ 9.52 $ 10.11 $ 10.06 $ 10.00
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income.......... 0.64 0.66 0.87 0.89 0.88 0.85 0.76 0.71 0.95 0.30
Net realized and
unrealized gain
(loss) on
securities...... (0.52) 0.40 (0.09) 0.14 (0.27) (0.51) (0.45) (0.15) 0.48 0.12
-------- -------- -------- -------- -------- --------- --------- --------- --------- -------
Total from
Investment
Operations... 0.12 1.06 0.78 1.03 0.61 0.34 0.31 0.56 1.43 0.42
LESS
DISTRIBUTIONS
Dividends from
net investment
income.......... (0.64) (0.69) (0.77) (0.87) (0.88) (0.85) (0.76) (0.71) (0.95) (0.30)
Distributions
from realized
gains........... -- -- -- -- -- (0.07) (0.25) (0.44) (0.43) (0.06)
Returns of
capital......... -- -- -- -- (0.03) (0.07) -- -- -- --
-------- -------- -------- -------- -------- --------- --------- --------- --------- -------
Total
Distributions... (0.64) (0.69) (0.77) (0.87) (0.91) (0.99) (1.01) (1.15) (1.38) (0.36)
-------- -------- -------- -------- -------- --------- --------- --------- --------- -------
Net asset value,
end of period... $ 7.89 $ 8.41 $ 8.04 $ 8.03 $ 7.87 $ 8.17 $ 8.82 $ 9.52 $ 10.11 $ 10.06
======== ======== ======== ======== ======== ========= ========= ========= ========= =======
TOTAL RETURN *... 1.26% 13.68% 10.09% 13.87% 7.54% 4.02% 3.62% 5.82% 15.35% 4.07%
======== ======== ======== ======== ======== ========= ========= ========= ========= =======
RATIOS AND
SUPPLEMENTAL
DATA
Ratio of
operating
expenses to
average net
assets.......... 1.14% 1.17% 1.21% 1.11% 1.09% 1.09% 1.07% 1.03% 1.13% 0.33%
Ratio of interest
expense to
average net
assets.......... 0.02% 0.27% 0.32% -- -- -- -- -- -- --
-------- -------- -------- -------- -------- --------- --------- --------- --------- -------
Ratio of total
expenses to
average net
assets.......... 1.16% 1.44% 1.53% 1.11% 1.09% 1.09% 1.07% 1.03% 1.13% 0.33%
Ratio of expense
reimbursement to
average net
assets.......... -- -- -- -- -- -- -- -- -- (0.32)%
-------- -------- -------- -------- -------- --------- --------- --------- --------- -------
Ratio of net
expenses to
average net
assets.......... 1.16% 1.44% 1.53% 1.11% 1.09% 1.09% 1.07% 1.03% 1.13% 0.01%
======== ======== ======= ======== ======== ========= ========= ========= ========= =======
Ratio of net
investment
income to
average net
assets.......... 7.60% 7.93% 10.63% 11.13% 10.58% 9.89% 8.43% 7.12% 8.57% 1.15%
Portfolio
turnover........ 453% 322% 199% 117% 292% 164% 83% 295% 1328% 62%
Net Assets, end
of period (in
thousands)...... $611,865 $718,426 $725,645 $771,826 $871,636 $1,140,455 $1,492,491 $2,290,368 $1,641,364 $20,911
Debt outstanding
at end of year
(in
thousands)(2)... $ 0 $ 0 $ 94,451 -- -- -- -- -- -- --
Average daily
amount of debt
outstanding
during the year
(in
thousands)(2)... $ 5,912 $ 54,774 $ 55,898 -- -- -- -- -- -- --
Average monthly
number of shares
outstanding
during the year
(in
thousands)...... 82,398 88,348 92,144 -- -- -- -- -- -- --
Average daily
amount of debt
outstanding per
share during the
year(2)......... $ 0.07 $ 0.62 $ 0.61 -- -- -- -- -- -- --
<FN>
- ---------------
(1) Financial highlights are for the period from December 31, 1984 (the date of
commencement of the Fund's operations) to March 31, 1985 and have not been
annualized.
(2) Debt outstanding consists of reverse repurchase agreements entered into
during the year.
* Total return does not include the effect of the initial sales charge for
Class A Shares.
</TABLE>

4
<PAGE> 6

INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------

The Fund's primary investment objective is to seek a high level of current
income, consistent with safety of principal. The Fund seeks to achieve its
investment objective by investing in debt obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities ("U.S. Government
Securities"). U.S. Government Securities include the following:

1. U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance including U.S. Treasury bills (maturity of
one year or less), U.S. Treasury notes (maturities of one to ten years) and
U.S. Treasury bonds (generally maturities greater than ten years).

2. Obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities which are supported by: (i) the full faith and credit of
the U.S. government (e.g., GNMA certificates, see below); (ii) the right of
the issuer to borrow an amount limited to a specific line of credit from the
U.S. government (e.g., securities of the Federal Home Loan Bank Board); (iii)
the credit of the instrumentality (e.g., bonds issued by the Federal National
Mortgage Association).

While the Fund may invest in any of the foregoing obligations, a substantial
portion of the Fund's assets will be invested in Certificates of the Government
National Mortgage Association ("GNMA"). GNMA Certificates are loans that are
issued by lenders such as mortgage bankers, commercial banks and savings and
loan associations and are either insured by the Federal Housing Administration
or guaranteed by the Veterans Administration. A "pool" or group of such
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. Once approved by GNMA, the timely payment
of interest and principal on each mortgage is guaranteed by GNMA and backed by
the full faith and credit of the U.S. government. GNMA Certificates differ from
bonds in that principal is paid back monthly by the borrower over the term of
the loan rather than returned in a lump sum at maturity. GNMA Certificates are
called "pass through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the Certificate.
Upon receipt, principal payments will be reinvested by the Fund in additional
securities.

The Fund may acquire Class 1 and Class 2 Stripped Mortgage-Backed Securities
("SMBS Certificates") issued by the Federal National Mortgage Association
("FNMA"). Since Class 1 Certificates generally benefit from declining interest
rates and Class 2 Certificates generally benefit from rising interest rates,
these securities can provide an effective way to stabilize portfolio value. SMBS
Certificates represent beneficial interests in principal distributions and
interest distributions on certain FNMA Guaranteed Mortgage Pass-Through
Certificates ("MBS Certificate") which represent all or part of the beneficial
interests in pools of first lien, single family (one-to-four family residential
property), fixed-rate residential mortgage loans. The original principal amount
of each SMBS Class 1 Certificate represents the amount payable over the life of
the Certificate from principal distributions on the underlying MBS Certificate
held by the FNMA in its capacity as Trustee of the SMBS Trust. Interest
distributions allocable to the SMBS Class 2 Certificates consist of interest at
the pass-through rate specified on the aggregate amount thereof which will
always be equal to the aggregate outstanding principal amount of each associated
issue of SMBS Class 1 Certificates.

The Fund may engage in a variety of investment techniques in an attempt to
protect against changes in the general level of interest rates. These tech-

5
<PAGE> 7

niques include the purchase of put and call options on debt securities
and the purchase and sale of interest rates futures contracts and options on
such futures. Options and futures contracts derive their value from an
underlying instrument or index and accordingly are known as "derivatives" or
"derivative contracts." These derivative contracts, as well as other types of
derivatives (such as stripped mortgage-backed securities), involve substantial
risk including higher price volatility, liquidity risk and counterparty risk.
These investment techniques and various policies the Fund may employ in seeking
to achieve its investment objective, such as lending its portfolio securities,
and committing to purchase securities for which the normal settlement date for
the transaction occurs later than the normal settlement date for the U.S.
Treasury obligations, or securities subject to repurchase agreements, may
involve a greater degree of risk than those inherent in more conservative
investment approaches. As a non-fundamental investment policy, the Fund will at
all times invest at least 80% of its total assets in U.S. Government
Securities. This will serve to limit investments in put and call options,
futures and options on futures, and reverse repurchase agreements, in the
aggregate, to not more than 20% of its total assets. (See "Investment Practices
and Restrictions" for a discussion of these techniques and their risks).

The Fund's rate of return fluctuates, as does its net asset value per share.
These fluctuations depend largely on changes in the general level of interest
rates. An increase in interest rates will tend to reduce the market values of
such securities; whereas a decline in interest rates will tend to increase their
values. The Fund will seek to reduce risks associated with changes in the
interest rates through its transactions in options and futures contracts.
However, this technique will not eliminate such risks and will result in
transaction costs to the Fund.

Investors should recognize that mortgage-backed securities involve an additional
risk because mortgages can be prepaid. Such prepayments are passed through to
the holder of the mortgage-backed security and must be reinvested. When interest
rates fall, prepayments tend to rise. As a result, the Fund's need to reinvest
may be greater when interest rates are low than when interest rates are high. IN
ADDITION, THE GOVERNMENT GUARANTEES AS TO PAYMENT OF PRINCIPAL AND INTEREST OF
THE FUND'S MORTGAGE-BACKED SECURITIES, DOES NOT EXTEND TO THE VALUE OR YIELD OF
SUCH SECURITIES OR OF THE FUND'S SHARES OF BENEFICIAL INTEREST. SMBS
Certificates involve risks in addition to those associated with regular
mortgage-backed securities. A rate of principal payments on the underlying
mortgage loans slower than the rate anticipated by an investor in calculating
the initial yield to maturity on an SMBS Certificate, which could result from
stable or rising interest rates (which would tend to reduce the market value of
the Certificate), will, by delaying the distribution of principal, reduce the
yield to maturity on SMBS Class 1 Certificates (principal) purchased at a
discount from their original principal amount and increase the yield to maturity
on SMBS Class 2 Certificates (income). Payments of principal on the underlying
mortgage loans at rates faster than the rates or from transfers of the
underlying property, will, conversely, accelerate distributions of principal and
thereby reduce the yield to maturity on SMBS Class 2 Certificate (income) and
increase the yield to maturity on SMBS Class 1 Certificates (principal).
Sufficiently high prepayment rates could result in purchasers of SMBS Class 2
Certificates (income) not recovering the full amount of their initial
investment. Yields on SMBS Certificates will be extremely sensitive to actual or
anticipated prepayment experience on the underlying mortgage loans and
significant fluctuations in interest rates may result in major fluctuations in
the market value of such Certificates. The Fund will not invest more than 10% of
its total assets in SMBS Certificates. (See Appendix B for a description of
investments within this category.

The Fund is actively managed in order to accomplish its investment objective.
Portfolio securities

6
<PAGE> 8

may be sold without regard to the length of time they have been held whenever
such sale will, in the opinion of the Investment Adviser, strengthen the Fund's
position in furtherance of its investment objective. Also, positions in options
and futures may be established with great frequency. For these reasons,
portfolio turnover has been, and is expected to be, substantially higher than
other investment companies with similar investment objectives. Accordingly,
transaction costs associated therewith will be commensurately higher. There can
be no assurance that the Fund's investment objective will be achieved.

INVESTMENT PRACTICES
AND RESTRICTIONS
- --------------------

Unless otherwise specified, each of the investment practices described in this
section is not deemed to be a fundamental policy and may be changed by the Board
of Trustees without approval of the holders of a majority of the Fund's
outstanding shares.

DERIVATIVE SECURITIES AND ASSET BACKED SECURITIES. Apart from Futures and
Options and certain forward contracts, the Fund may invest in instruments having
cash flows derived from the alteration of the securities' natural, original
structure. These instruments include Collateralized Mortgage Obligations, Zero
Coupon, Stripped Securities, Pass-Through Securities and Asset-Backed
Securities. The Fund will limit its investment in derivative securities, i.e.,
stripped mortgage-backed securities to 10% of its total assets. (See Appendix B
for a description of such instruments.)

LENDING OF SECURITIES. In order to earn additional income on its portfolio
securities, the Fund may lend up to one-third of the value of its securities to
brokers, dealers, and other financial institutions, provided that such loans are
callable at any time by the Fund, and are at all times secured by collateral,
consisting of cash or securities issued or guaranteed by the U.S. government or
its agencies, or any combination thereof, equal to not less than 100% of the
market value, determined daily, of the securities loaned. The advantage of such
loan is that the Fund continues to earn interest on the loaned securities, while
at the same time charging interest to the borrower of the securities. Lending
securities involves certain risks, the most significant of which is that a
borrower may fail to return a portfolio security. The Board of Trustees has
adopted policies designed to minimize such risk.

SECURITIES TRANSACTIONS SUBJECT TO DELAYED SETTLEMENT. The Fund may from time to
time commit to purchase securities for which the normal settlement date occurs
later than the settlement date which is normal for U.S. Treasury obligations.
The payment and interest rate received on such securities is fixed at the time
the buyer enters into the commitment. Although the Fund will only enter into
commitments to purchase such securities with the intention of actually acquiring
the securities, the Fund may sell these securities before the settlement date.
Securities purchased on a when-issued basis can involve a risk that the yields
available in the market when delivery takes place may be higher than those
obtained in the transaction itself. There are no limitations on the percentage
of the Fund's assets which may be invested in such securities. However, it is
not expected that more than 10% of the Fund's assets would be so invested at any
time.

7
<PAGE> 9

wise, the Fund will seek to sell the securities, which action could involve
costs or delays. In such a case, the Fund's ability to dispose of the securities
to recover its investment may be restricted or delayed. To minimize this risk,
the securities underlying the repurchase agreement will be maintained with the
Trust's Custodian in an amount at least equal to the repurchase price under the
agreement (including accrued interest due thereunder). However, in the event
that the other party to the repurchase agreement fails to repurchase the
securities subject to such agreement, the Fund could suffer a loss to the extent
proceeds from the sale of the securities subject thereto were less than the
repurchase price. The Fund will not invest in a repurchase agreement maturing in
more than seven (7) days, if such investment, together with other illiquid
securities held by the Fund (including restricted securities and
over-the-counter securities' options described below) would exceed 10% of the
total assets of the Fund.

MORTGAGE "DOLLAR ROLL" TRANSACTIONS. The Fund may enter into mortgage "dollar
roll" transactions with selected banks and broker-dealers pursuant to which the
Fund sells mortgage-backed securities for delivery in the future (generally
within 30 days) and simultaneously contracts to repurchase substantially similar
(same type, coupon and maturity) securities on a specified future date. The Fund
will only enter into covered rolls. A "covered roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of the
dollar roll transaction.

REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse repurchase
agreements which involve the sale of securities held in its portfolio to a bank
or securities firm with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. The Fund will use proceeds obtained
from the sale of securities pursuant to reverse repurchase agreements to
purchase other investments. The use of borrowed funds to make investments is a
practice known as "leverage," which is considered speculative. Use of reverse
repurchase agreements is an investment technique that is intended to increase
income. Thus, the Fund will enter into a reverse repurchase agreement only when
the Investment Adviser determines that the interest income to be earned from the
investment of the proceeds is greater than the interest expense of the
transaction. However, there is a risk that the interest expense will,
nevertheless, exceed the income earned. Reverse repurchase agreements involve
the risk that the market value of securities purchased by the Fund with proceeds
of the transaction may decline below the repurchase price of the securities sold
by the Fund which it is obligated to repurchase. The Fund would also continue to
be subject to the risk of a decline in the market value of the securities sold
under the agreements because it will reacquire those securities upon effecting
their repurchase. To minimize risks associated with reverse repurchase
agreements, the Fund would establish and maintain with the Fund's custodian a
separate account consisting of highly liquid, marketable securities in an amount
at least equal to the repurchase prices of the securities (plus any accrued
interest thereon) under such agreements. Although the Fund's investment
restrictions provide that, the Fund would not enter into reverse repurchase
agreements exceeding in the aggregate more than 33 1/3% of the value of its
total net assets (including, for this purpose, other borrowings of the Fund),
pursuant to the non-fundamental investment policy as previously discussed under
"Investment Objective and Policies," this limitation shall not exceed 20% of the
Fund's total assets. The Fund will enter into reverse repurchase agreements only
with selected registered broker/dealers or with federally insured banks or
savings and loan associations which are approved in advance as being
creditworthy by the Board of Trustees. Under procedures established by the Board
of Trustees, the

8
<PAGE> 10

Investment Adviser will monitor the creditworthiness of the firms involved.

ADDITIONAL INVESTMENT TECHNIQUES. The Fund is authorized to, but presently does
not intend to, engage in certain investment techniques involving the sale of
covered call and secured put options for the purpose of generating additional
income. (See Statement of Additional Information for a discussion of these
techniques.) In addition, the Fund will not engage in such transactions without
first having given shareholders written notice at least 60 days in advanced
thereof.

INVESTMENT RESTRICTIONS. The Fund is subject to certain restrictions upon its
investments, which may not be altered without the approval by the holders of a
majority of the outstanding shares of the Fund. A majority for this purpose
means, the holders of (a) more than 50% of the outstanding shares or (b) 67% or
more of the shares represented at a meeting where more than 50% of the
outstanding shares are represented, whichever is less. Among those restrictions,
one provides that the Fund may not borrow in excess of 15% of the market or
other fair value of its total assets or pledge its assets to an extent greater
than 10% of the market or other fair value of its total assets. Any such
borrowings shall be from banks and shall be undertaken only as a temporary
measure for extraordinary or emergency purposes. Collateral arrangements
maintained in connection with the writing of covered call or secured put
options, or margin deposits in connection with the purchase or sale of futures
contracts and related options, are not deemed to be a pledge or other
encumbrance. The borrowing restrictions set forth above does not prohibit the
use of reverse repurchase agreements, in an amount (including any borrowings)
not to exceed 33 1/3% of net assets (see "Reverse Repurchase Agreements"). As a
matter of operating policy, the Fund will not purchase securities when
borrowings from banks exceed 5% of its total assets. Investors may refer to
additional investment restrictions in the Fund's Statement of Additional
Information.

INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may engage in the
purchase and sale of interest rate futures contracts and options thereon only as
a protection against and in anticipation of changes in the general level of
interest rates in accordance with the strategies more specifically described
below.

An interest rate futures contract is a bilateral agreement pursuant to which two
parties agree to take or make delivery of the specific type of debt security
called for in the contract at a specified future time and at a specified price.
The Fund would purchase an interest rate futures contract when it is not fully
invested in long-term debt securities but wishes to defer their purchase for a
time until it can orderly invest in such securities or because short-term yields
are higher than long-term yields. Such purchase would enable the Fund to earn
the income on a short-term security while at the same time minimizing the effect
of all or part of an increase in the market price of the long-term debt security
which the Fund intended to purchase in the future. A rise in the price of the
long-term debt security prior to its purchase either would generally be offset
by an increase in the value of the futures contract purchased by the Fund or
avoided by taking delivery of the debt securities under the futures contract.

The Fund would sell an interest rate futures contract in order to continue to
receive the income from a long-term debt security, while endeavoring to avoid
part or all of the decline in market value of that security which would
accompany an increase in interest rates. If interest rates did rise, a decline
in the value of the debt security held by the Fund would be substantially offset
by an increase in the value of the futures contract sold by the Fund. While the
Fund could sell the long-term debt security and invest in a short-term security,
ordinarily the Fund would give up income on its investment, since long-term
rates normally exceed short-term rates.

In addition, the Fund may purchase and write call and put options on futures
contracts which are

9
<PAGE> 11

traded on an exchange or a board of trade and enter into closing transactions
with respect to such options to terminate an existing position. Options in
futures contracts are similar to options on securities except that an option on
a futures contract gives the purchaser the right in return for the premium paid
to assume a position in a futures contracts (a long position if the option is a
call and short position if the option is a put). The Fund may use options on
futures contracts in connection with hedging strategies. Generally these
strategies would be employed under the same market conditions in which the Fund
uses put and call options on debt securities.

The Fund may hedge up to full value of its portfolio through the use of options
and futures; provided, however, that the Fund may not purchase or sell futures
contracts or purchase or sell related options if immediately thereafter the sum
of the amount of margin deposits on the Fund's existing futures and related
options positions and the amount of premiums paid for related options (measured
at the time of investment) would exceed 5% of the Fund's total assets. In
addition, at the time the Fund purchases a futures contract or a call option on
a futures contract, an amount of cash or U.S. Government Securities equal to the
market value of the futures contract will be deposited in a segregated account
with the Fund's custodian to collateralize the position.

While the Fund's hedging transactions may protect the Fund against adverse
movements in the general level of interest rates, such transactions could also
preclude the opportunity to benefit from favorable movements in the level of
interest rates. Due to the imperfect correlation between movements in the prices
of futures contracts and movements in the prices of the underlying U.S.
Government Securities or the related securities being hedged, the price of a
futures contract may move more than or less than the price of the securities
being hedged. In addition, the prices of interest rate futures contracts may not
correlate perfectly with movement in the underlying security due to certain
temporary market distortions. Such temporary distortions may reduce the value of
an interest rate futures contract as a hedging device over a very short time
period. Options on futures contracts are generally subject to the same risks
applicable to all option transactions.

Positions in futures contracts may be closed out only on an exchange or board of
trade which provides a market for such futures. Although the Fund intends to
purchase or sell futures only on exchanges or boards of trade where there
appears to be an active market, there is no assurance that a liquid market on an
exchange or board of trade will exist for any particular contract or at any
particular time. In the event a liquid market does not exist, it may not be
possible to close a futures position and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
maintenance margin. In addition, limitations imposed by an exchange or board of
trade in which futures contracts are traded may compel or prevent the Fund from
closing out a contract which may result in reduced gain or increased loss to the
Fund. The absence of a liquid market in futures contracts might cause the Fund
to make or take delivery of the underlying securities at a time when it may be
disadvantageous to do so.

The purchase of call or put options on futures contracts involves less potential
dollar risk to the Fund than an investment of equal amount in futures contracts,
since the premium is the maximum amount of risk the purchaser of the option
assumes. The entire amount of the premium paid for an option can be lost by the
purchaser, but no more than that amount.

The Fund's policy permitting the purchase and sale of futures contracts and
related options for hedging purposes only may not be changed without the
approval of shareholders holding a majority of the Fund's outstanding voting
securities. The Board of Trustees may authorize procedures, including numerical
limitations, with regard to such transactions in furtherance of the Fund's
investment objective.

10
<PAGE> 12

Such procedures are not deemed to be fundamental and may be changed by the Board
of Trustees without the vote of the Fund's shareholders.

PURCHASING OPTIONS. The Fund may invest in put or call options which are traded
either on a national securities exchange (an "Exchange") or in the
over-the-counter market ("OTC Option"). The Fund may purchase put options on
debt securities to protect its holdings in an underlying or related security
against a substantial decline in market value. Securities are considered related
if their price movements generally correlate to one another. The purchase of put
options on debt securities held in its portfolio or related to such securities
will enable the Fund to protect, at least partially, unrealized gains in an
appreciated security in its portfolio without actually selling the security. In
addition, the Fund will continue to receive interest income on the security.

In addition, the Fund may purchase call options on debt securities to protect
against substantial increases in prices of securities the Fund intends to
purchase pending its ability to orderly invest in such securities. The Fund may
sell put or call options it has previously purchased, which could result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put or call option
which is sold.

The purchase of options involve certain risks. If a put or call option purchased
by the Fund is not sold when it has remaining value, and if the market price of
the underlying security, in the case of a put, remains equal to or greater than
the exercise price or, in the case of a call, remains less than or equal to the
exercise price, the Fund will lose its entire investment in the option. Also,
where a put or call option on a particular security is purchased to hedge
against price movements in a related security, the price of the put or call
option may move more or less than the price of the related security. The Fund
will not invest in a put or call option if, as a result, the amount of premiums
paid for such options then outstanding would exceed 10% of the Fund's total
assets.

THE FUND AND
ITS MANAGEMENT
- --------------

GENERAL. The Trust, a Massachusetts business trust, is registered with the
Securities and Exchange Commission as an open-end, diversified, management
investment company, commonly called a mutual fund. The Trust has six series of
shares, one series of which represents interests in the Fund. Through the
purchase of shares of the Fund, a shareholder may participate in the investment
performance of the portfolio of investments held by the Fund. The management and
affairs of the Trust and of the Fund are supervised by the Board of Trustees.
Information about each of the Trustees and Officers is set forth in the
Statement of Additional Information.

INVESTMENT ADVISER. Transamerica Fund Management Company, the
Investment Adviser, is a wholly owned subsidiary of Transamerica Asset
Management Group, Inc., which is a wholly owned subsidiary of Transamerica
Corporation ("Transamerica"), one of the nation's largest and most respected
financial services organizations with more than $35 billion in assets.
Transamerica engages through its subsidiaries in two primary businesses:
finance and insurance. The investment Adviser manages the investment of the
Fund's assets, provides administrative services and supervised the Fund's daily
business affairs. Investment decisions are made by a committee with no one
person being solely responsible for making recommendations to the committee.
These services are subject to general review by the Board of Trustees. The
Investment Adviser (including its predecessors) has been engaged in the
investment advisory business since 1949 and currently serves as investment
adviser to a

11
<PAGE> 13

broad range of mutual funds and investment portfolios.

ADVISORY FEE. For the advisory and administrative services the Investment
Adviser provides to the Fund, the Fund pays a monthly fee computed at the
following annual rates:

<TABLE>
<CAPTION>
ANNUAL
FEE AS A
PERCENTAGE
OF AVERAGE
AVERAGE DAILY DAILY NET
NET ASSETS ASSETS
------------- ----------
<S> <C>
$0-$200 million................... .65 %
$200-$500 million................. .625%
$500 million and above............ .60 %
</TABLE>

For the fiscal year ended March 31, 1994, investment advisory fees paid by the
Fund amounted to .62% of its average daily net assets.

ADMINISTRATIVE SERVICES AGREEMENT. The Fund reimburses each of the Investment
Adviser and Transamerica Fund Distributors, Inc. for actual expenses incurred in
providing certain accounting and bookkeeping services, as well as communications
in response to shareholder inquiries and certain printing services for reports
of the Fund. In addition, the Fund may directly bear the costs of certain data
processing and pricing information services used in providing accounting and
bookkeeping services. For the fiscal year ended March 31, 1994, administrative
services fees paid by the Fund amounted to .05% of its average daily net assets.

DISTRIBUTOR AND DISTRIBUTION PLANS. Transamerica Funds Distributors, Inc., a
wholly owned subsidiary of the Investment Adviser, acts as the distributor and
principal underwriter of shares of the Fund pursuant to a separate plan of
distribution for each of Class A Shares (the "Class A Plan") and Class B Shares
(the "Class B Plan") adopted under Rule 12b-1 of the Investment Company Act of
1940 (the "1940 Act"). The fees paid under the Class A Plan and the Class B Plan
(collectively referred to herein as "the Plans") under Rule 12b-1 of the 1940
Act are referred to herein as the "12b-1 fees." Amounts paid by the Fund under
the Class A Plan are allocated to Class A Shares, and amounts paid under the
Class B Plan are allocated to Class B Shares. As a result, shareholders bear
only the 12b-1 fees associated with the class of shares they hold, and such fees
paid by one class are not used to pay the 12b-1 fees of the other class.
Payments made by the Fund under the Class A Plan and the Class B Plan may be
used to pay fees to, or as reimbursement for certain services provided by, banks
and other depository institutions. Although the Glass-Steagall Act limits the
ability of banks and other depository institutions to act as under-
writers or distributor of securities, the Fund does not believe these
limitations would prohibit such depository institutions from providing such
services or entering into compensation arrangements with the Distributor as
described under "Information About Shares of the Fund -- Purchase of Shares." In
addition, state securities laws may differ from the interpretation of federal
law and depository institutions selling shares of the Fund may be required to
register as dealers under state laws. The Plans have each been approved by the
Fund's Board of Trustees (the "Trustees" or "Board of Trustees"), including a
majority of the Trustees who are not "interested persons" of the Fund (as
defined by the 1940 Act) and who have no direct or indirect financial interest
in the operation of the Plans or any agreement relating thereto (the
"Independent Trustees"), and have also been approved in the case of Class A
Shares by the Class A Shareholders and, in the case of Class B Shares by the
Investment Adviser as sole shareholder Class B Shares. In approving the Plans,
the Board of Trustees, including a majority of the Independent Trustees,
received and considered all pertinent information and determined that there was
a reasonable likelihood that each of the Plans would benefit the Fund and its
shareholders by enabling the Fund to achieve economics of operations and
management through growth of the Fund's assets. The Plans may be continued from
year to year, provided that such

12
<PAGE> 14

continuances are approved at least annually by the Board of Trustees, including
a majority of the Independent Trustees, and each may be terminated at any time
by the Independent Trustees or by vote of shareholders.

CLASS A PLAN. Under the Class A Plan, payments by the Fund are made to reimburse
the Investment Adviser for specific expenses, including primarily: (i) the
payment of compensation (including incentive compensation) to securities dealers
(including the Distributor) and other financial institutions and organizations
including banks and other depository institutions that distribute shares of the
Fund (collectively, "Dealers") to obtain administrative services relating to
Class A Shares in an amount not exceeding .25% annually of the average net asset
value of shares held by customers of any Dealer (such payments may also include
"Service Fees," as such term is used in the current regulations of the National
Association of Securities Dealers, Inc. (the "NASD")); (ii) the costs of
prospectuses used for selling Class A Shares; and (iii) the costs of preparing
and printing sales literature and advertising. The Fund is not obligated under
the Class A Plan to reimburse any distribution expenses in excess of applicable
limitations, and expenses accrued by the Investment Adviser in one fiscal year
may not be reimbursed by the Fund in subsequent fiscal years. For fiscal year
ended March 31, 1994, payments made by the Fund under the Class A Plan amounted
to .24% of its average daily net assets.

CLASS B PLAN. Under the Class B Plan, the Fund makes monthly payments to the
Distributor to compensate it for services provided in connection with the
distribution of Class B Shares and the payment of sales commissions (dealer
concessions) to Dealers that sell such shares ("Distribution Fees"). The Fund
also makes payments to reimburse the Distributor for Service Fees. The Class B
Plan is designed to enable the Distributor to offer Class B Shares to investors
on a basis that does not involve imposition of a front-end sales charge. Sales
commissions payable to Dealers that sell Class B Shares are advanced by the
Distributor and are recovered by the Distributor over time through a combination
of its receipt of contingent deferred sales charges on redemptions of Class B
Shares by investors (see "Information About Shares of the Fund -- Purchase of
Shares -- Deferred Sales Charge Alternative -- Class B Shares") and Distribution
Fees.

Distribution Fees under the Class B Plan (including carrying charges which are
discussed below) may not exceed payments computed at an annual rate of .75% of
the Fund's average daily net assets attributable to Class B Shares and are
determined in accordance with procedures adopted by the Board of Trustees,
including a majority of the Independent Trustees. These fees are based upon a
commission payment charge of 5% of the value of Class B Shares sold (excluding
shares acquired through reinvestment of dividends and other distributions or
through an exchange of shares, excluding shares as to which no contingent
deferred sales charge is applicable), reduced by the amount of contingent
deferred sales charges that have been received by the Distributor on redemptions
of Class B Shares. Distribution Fees also include a charge for interest (a
"carrying charge") to the Distributor to the extent cumulative commission
payment charges, less contingent deferred sales charges received by the
Distributor, have not been paid in full by the Fund. The carrying charge is
computed at the annual rate of 1% over the prevailing prime rate of interest.
The current NASD regulations relating to maximum sales charges assessed by
mutual funds, such as the Fund in respect of its Class B Shares, also limit the
aggregate amount of asset based sales charges the Fund may pay to 6.25% of new
sales plus interest. Commission payment charges and carrying charges may be
adjusted on exchanges involving Class B Shares in accordance with procedures
adopted by the Board of Trustees, including a majority of the Independent
Trustees, so that such charges will be increased (in the case of shares issued
upon an exchange) and decreased (in the

13
<PAGE> 15

case of shares redeemed upon an exchange), by the amount of the commission
payment charges and carrying charges (or a portion of such charges) attributable
to the shares being exchanged. At times when all outstanding commission payment
charges and related carrying charges have been paid to the Distributor, no
Distribution Fees are payable by the Fund, and the Fund (rather than the
Distributor) would be entitled to receive contingent deferred sales charges
imposed on redemptions of Class B Shares.

Because Distribution Fees payable with respect to Class B Shares are subject to
the .75% annual limitation described above, commissions payment charges and
carrying charges relating to sales of Class B Shares in any given year may be
paid by the Fund from Distribution Fees in future years. However, if the Class B
Plan were terminated (or not continued), no amounts (other than current amounts
accrued through the date of termination but not yet paid) would be owed by the
Fund to the Distributor, absent a determination by the Board of Trustees,
including a majority of the Independent Trustees, to continue payment of
Distribution Fees solely to pay outstanding commission payment charges and a
carrying charge on shares sold prior to termination. Applicable Distribution
Fees, in an amount not exceeding the .75% annual limitation, are accrued each
day as an expense of the Class B Shares and reduce the net assets of the Fund
attributable to the Class B Shares. However, in accordance with generally
accepted accounting principles, the Fund does not treat the amount of
Distribution Fees exceeding the .75% limitation as a liability of the Fund and
does not reduce the current net assets of the Fund attributable to the Class B
Shares by such amount, although it may become payable in the future, because the
standards for accrual of a liability under these accounting principles have not
been satisfied due to contingencies as to payment of such amount.

In addition to Distribution Fees, under the Class B Plan, the Fund reimburses
the Distributor for Service Fees it pays to Dealers (including the Distributor)
that sell Class B Shares to their customers. Such reimbursements are payable
monthly in amounts which may not exceed .25% annually of the average daily net
assets of the Fund attributable to Class B Shares, and may be used only to
reimburse the Distributor for fees it pays to Dealers for personal services they
render to customers who are shareholders of the Fund or for services relating to
the maintenance of shareholder accounts of such customers, in amounts which may
not exceed (as to any Dealer) .25% of the average annual net asset value of
Class B Shares held by such Dealer's customers. The foregoing limitations
applicable to Service Fees do not prohibit the Distributor from making payments
to Dealers from its own resources in excess of these limitations or for other
services.

In order to limit the higher ongoing costs associated with an investment in
Class B Shares, the Fund implements arrangements under which Class B Shares are
automatically exchanged, on a tax-free basis, for Class A Shares at the end of
the eight year period following the initial purchase of Class B Shares. (See
"Shareholder Services -- Class B Shares Automatic Exchange.")

PORTFOLIO TRANSACTIONS. Orders for the Fund's portfolio securities transactions
are placed by the Investment Adviser. Subject to seeking the most

14
<PAGE> 16

favorable price and execution available, the Investment Adviser may consider
sales of shares of the Fund as a factor in the selection of broker/dealers. (For
a further discussion, see the Statement of Additional Information "Portfolio
Transactions, Brokerage Allocation and other Practices.")

INFORMATION ABOUT
SHARES OF THE FUND
- ----------------------
NET ASSET VALUE

The net asset value of the Fund is computed once daily as of the close of
trading (presently, 4:00 p.m. New York time) on each day that the New York Stock
Exchange ("NYSE") is open for business. The Fund will also compute its net asset
value on other days if a purchase or redemption request is received on that day
and there is a sufficient degree of trading in securities held by the Fund. Net
asset value per share is calculated by dividing the market or fair value of all
of the Fund's portfolio securities plus the value of its other assets (including
dividends and interest received or accrued), less all liabilities (including
accrued expenses but excluding capital) by the number of shares of the Fund
outstanding. The Board of Trustees has established procedures for the valuation
of the Fund's securities, based in general on market or estimated value (see
"Determination of Net Asset Value" in the Statement of Additional Information).

Although the legal rights of Class A and Class B Shares are identical, the
different expenses borne by each class will result in different net asset values
and dividends. The net asset value of Class B Shares will generally be lower
than the net asset value of Class A Shares as a result of the larger 12b-1 fees
associated with Class B Shares. (However, Class B shareholders will generally
receive more shares at the time of purchase.) It is expected, however, that the
net asset value per share of the two classes will tend to converge immediately
after the recording of dividends which will differ by approximately the amount
of the 12b-1 fees accrual differential between the classes.

PURCHASE OF SHARES
- ----------------------

GENERAL. Shares of the Fund will be offered at a price equal to their net asset
value (next determined following receipt of an order by The Shareholder Services
Group (the Fund's Transfer Agent) or the investor's dealer) plus a sales charge
which, at the option of the purchaser, may be imposed either at the time of
purchase (the "initial sales charge alternative") as described below or on a
contingent deferred basis (the "deferred sales charge alternative"), as
described under "Redemption and Repurchase of Shares." Shares of the Fund are
offered continuously for sale by the Distributor and are available for purchase
through eligible financial service firms such as securities broker/dealer firms
and banks which have entered into sales agreements with the Distributor. Dealers
are responsible for transmitting orders promptly (orders transmitted to and
received by the Transfer Agent prior to 4:00 p.m. New York time will receive
that day's purchase price.) The Distributor, at its expense, may provide
additional promotional incentives or payments to dealers that sell shares of the
Fund. In some instances, these incentives or payments may be offered only to
certain dealers who have sold or may sell significant amounts of shares of the
Fund or other Transamerica mutual funds.

Shares may be purchased by mailing a check, made payable to the Fund noting the
existing account number, and if opening a new account a completed application
form, to Transamerica Funds Shareholder Services either at the post office
address shown on the back page of this Prospectus or, if delivered by express
mail, the street address: Transamerica Funds Shareholder Services, One American
Express Plaza, Providence, Rhode Island 02903. Certificates for shares will not
be issued

15
<PAGE> 17

unless requested by the shareholder in writing and then only for full shares.

The initial purchase must be at least $1,000 with subsequent investments of no
less than $50 ($250 and $25, respectively, for tax-deferred retirement
programs). The minimum investment amounts are waived for tax-deferred retirement
programs involving the submission of additional investments by means of group
remittal statements. Minimum initial and subsequent purchase amounts will be
reduced to $25.00 for programs providing for regular periodic investments.
(i.e., payroll deduction plans and/or investment by bank draft). See "Automatic
Investment Plan" or "Payroll Deduction Plans" under Shareholder Services.

FEDWIRE PURCHASES. In addition to purchases made by mail, investors may make
payment for initial or subsequent investments, by federal funds wire. Investors
should first notify Account Services (1-800-343-6840) of the new account request
(if applicable) and the intended wire purchase. To assure proper credit, banks
wiring federal funds to the Fund should be instructed to include:

(1) name of the Fund,

(2) name of shareholder (as registered exactly in the account) and shareholder
account number or,

(3) if opening an account, the name and address in which the account is being
registered and the taxpayer identification number (a completed application
must be mailed to the Transfer Agent after completing the wire arrangement).

Federal funds may be wired to*:

Boston Safe Deposit & Trust Company
ABA Routing Number: 011001234
Account Number: 159565

* Except during such times or holidays when the Boston Safe Deposit & Trust
Company ("Boston Bank") is not open for business.

The Fund's Board of Trustees reserves the right to waive the minimum investment
requirements and to reject any order for purchase of shares (including wire
purchases) when in its judgement, such rejection is in the Fund's best interest.

ALTERNATIVE PURCHASE PLAN. The Fund issues two classes of shares, each of which
represent an interest in the same portfolio of investments. The alternative
purchase plan of the Fund permits investors to choose the method of purchasing
shares that is most beneficial, given the amount of the purchase, the length of
time the investor expects to hold the shares and other relevant circumstances.
Investors should determine which method of purchase best suits their individual
circumstances, i.e., whether it is more advantageous to incur an initial sales
charge ("Class A Shares") or to have the entire purchase price invested in the
Fund with the investment thereafter being subject to a contingent deferred sales
charge ("Class B Shares"). The Distributor intends to reject any order for
purchase of $1 million or more of Class B Shares (as noted below, a purchase of
Class A Shares in an amount of $1 million or more is not subject to a sales
charge).

16
<PAGE> 18

higher expense ratio and to pay lower dividends than the Class A Shares
(See "Dividends, Distribution and Tax Status.") The two classes also have
separate exchange privileges (See "Shareholder Services -- Exchange
Privilege.") Financial representatives will receive different compensation for
selling Class A and Class B Shares. Except for those differences (and related
voting rights) each share of the Fund, whether Class A or Class B, represents a
proportional interest in the investment portfolio of the Fund. On an ongoing
basis, the Trustees will review and seek to assure that no conflict of interest
arises between the Class A and Class B Shares.

In determining which class of shares to purchase, investors should consider
whether, during the anticipated life of their investment in the Fund, the
accumulated 12b-1 fees under the Class B Plan and deferred sales charges on
Class B Shares would be less than the initial sales charge and accumulated 12b-1
service fees under the Class A Plan if such shares were purchased at the same
time taking into account the Class B Automatic Exchange of Class B Shares for
Class A Shares after eight years, as discussed below. Investors who qualify for
significantly reduced sales charges, or who expect to maintain their investment
for an extended period of time, might elect the initial sales charge
alternative. Because an initial sales charge is deducted at the time of
purchase, investors should consider the extent to which any return would
otherwise be realized on the additional funds initially invested under the
deferred sales charge alternative and weigh such consideration against the
higher per share return of the Class A Shares afforded by the lower 12b-1 fees
of such shares. Certain other investors might determine it to be more
advantageous to have all their funds invested initially, although remaining
subject to 12b-1 fees of up to 1.00% of the average daily net assets allocable
to Class B Shares for the eight years following initial purchase and, for a
six-year period, a contingent deferred sales charge. IN THIS REGARD, INVESTORS
SHOULD UNDERSTAND THAT UNDER CERTAIN MARKET CONDITIONS OR DURING THE TIME THE
INVESTMENT IS HELD, THE ACCUMULATED ONGOING 12B-1 FEES OF CLASS B SHARES MAY
EXCEED THE MAXIMUM INITIAL SALES CHARGES AND ONGOING 12B-1 FEES OF CLASS A
SHARES. SEE "INFORMATION ABOUT SHARES OF THE FUND -- PURCHASE OF SHARES." The
Fund provides each holder of Class B Shares an automatic exchange of their Class
B Shares for Class A Shares at the end of the eight year period following the
initial purchase of their Class B Shares (such exchange occurs unless expressly
waived by the shareholder). This exchange is not subject to federal taxes as in
accordance with a private letter ruling received by the Fund from the Internal
Revenue Service. See "Information About Shares of the Fund -- Purchase of
Shares" and "Shareholder Services -- Class B Automatic Exchange."

INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of
Class A Shares of the Fund is the current net asset value per share (next
computed after receipt of an order by the Fund's Transfer Agent), plus a sales
charge (a percentage of the offering price as set forth in the table below).

<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF
-------------------
NET
AMOUNT OF AMOUNT OFFERING DEALER
PURCHASE INVESTED PRICE DISCOUNT
--------- -------- -------- --------
<S> <C> <C> <C>
Less than $100,000......... 4.99% 4.75% 4.25%
$100,000 but less
than $250,000............ 3.90% 3.75% 3.25%
$250,000 but less
than $500,000............ 2.83% 2.75% 2.35%
$500,000 but less
than $1,000,000.......... 2.04% 2.00% 1.75%
$1,000,000 or more......... * See below*
</TABLE>

17
<PAGE> 19

to shares purchased at the $1 million plus breakpoint, a contingent deferred
sales charge ("CDSC") will be imposed on the proceeds of the redemption of
certain shares so purchased if they are redeemed within 12 months of the end of
the calendar month of their purchase, in an amount equal to 1% of the lesser of
(a) the net asset value of the shares at the time of purchase or (b) the net
asset value of the shares at the time of redemption ("CDSC Shares"). The CDSC
would be deducted from the redemption proceeds otherwise payable to the
shareholder and would be retained by the Distributor. In addition, no CDSC will
be imposed when a shareholder redeems (a) CDSC shares acquired through
reinvestment of income dividends or capital gains distributions; and (b) shares
acquired by exchange from any mutual fund sold with an initial sales charge and
distributed by the Distributor. The CDSC does not apply to purchases at net
asset value described under "Waiver of Initial Sales Charge" and will be waived
in the case of redemptions of shares in connection with (i) distributions to
participants or beneficiaries of certain qualified retirement plans, and returns
of excess contributions made to these plans, and (ii) involuntary redemption of
shares if the aggregate net asset value of shares held in the account is less
than the required minimum. In determining whether a CDSC is payable on any
redemption, the Fund will first redeem shares not subject to any charge.
Although any CDSC shares being exchanged are not subject to any charge, they
will be subject to the applicable CDSC when such acquired shares are eventually
redeemed. For purposes of calculating the CDSC on such redemptions, the original
purchase date of the initial fund investment will be used in lieu of the date
the redeemed shares were acquired by exchange.

To the extent that the dealer discount may be deemed to constitute substantially
the entire sales charge, selling dealers may be deemed to be underwriters as
that term is defined in the Securities Act of 1933.

Reduced Initial Sales Charges. Investors choosing the initial sales charge
alternative are entitled to pay reduced sales charges shown in the above table
through several available purchase plans: Concurrent Purchases, Rights of
Accumulation, Statement of Intention and Group Purchases. An investor and his
immediate family may combine Concurrent Purchases of Class A Shares of the Fund
and shares of other mutual funds managed by the Investment Adviser which are
subject to a front-end sales charge ("other Transamerica funds"), for purposes
of qualifying for, and determining, a reduced sales charge provided that the
purchases are made through a single dealer and any purchase amounts satisfy the
minimum investment amount of the respective Fund. Further information about
these purchase plans is set forth under "Purchase of Shares" in the Statement of
Additional Information (see also Statement of Intention and Rights of
Accumulation in the Account Application and its Terms and Conditions in the back
of the Prospectus).

18
<PAGE> 20

which impose front-end sales charges or deferred sales charges. In addition,
sales charges do not apply to Class A Shares of the Fund purchased in accounts
upon which a broker/dealer or investment adviser charges an account management
fee, provided the broker/dealer has a Fee-based Program Agreement with the
Distributor. Class A Shares are also offered at net asset value to participants
in employee benefit plans qualified under Section 401 of the Internal Revenue
Code subject to certain criteria established by the Distributor. See the
Statement of Additional Information, "Purchase of Shares -- Purchase at Net
Asset Value" for a more complete description of investors eligible to purchase
shares at net asset value. To be eligible to purchase shares of the Fund without
sales charge as described above, the investor or the investor's broker must
establish such eligibility by advising the Distributor at the time shares are
purchased.

DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. The offering price of Class
B Shares of the Fund is the net asset value per share next determined following
receipt of an order by the Transfer Agent or the investor's investment
representative or dealer. Dealers are responsible for transmitting orders
promptly (orders transmitted to and received by the Transfer Agent prior to 4:00
p.m. New York time will receive that day's purchase price.) There is no sales
charge imposed at the time of purchase, so that the Fund will receive for
investment the full amount of the investor's purchase payment. However, a
contingent deferred sales charge may be imposed at the time of redemption. See
"Redemption and Repurchase of Shares -- Class B Shares: Contingent Deferred
Sales Charge" below.

Proceeds from the contingent deferred sales charge are paid to the Distributor
and are used in whole or in part by the Distributor related to providing
distribution-related services to the Fund in connection with the sale of Class B
Shares, such as the payment of compensation to securities dealers for selling
such Shares. The combination of the contingent deferred sales charge and the
distribution fee and service fee facilitates the ability of the Fund to sell
Class B Shares without a sales charge being deducted at the time of purchase
(see "The Fund and Its Management -- Distributor and Distribution Plans").

REDEMPTION AND
REPURCHASE OF SHARES
- ---------------------

GENERAL. Shares of the Fund in any amount may be redeemed at any time at the net
asset value per share next determined after the redemption request is received
in proper form by the Transfer Agent. See "Net Asset Value." In certain cases,
however, redemption proceeds from the Class B Shares will be reduced by the
amount of any applicable contingent deferred sales charge (see "Redemption and
Repurchase of Shares -- Class B Shares -- Contingent Deferred Sales Charge"
below).

If a shareholder holds both Class A and Class B Shares of the Fund, any request
for redemptions must specify whether Class A or Class B Shares are to be
redeemed. Failure to specify which class or insufficient shares of the class
specified will result in the redemption request being delayed until the Transfer
Agent receives further written instructions from the shareholder.

Payment proceeds will be mailed within seven (7) days following receipt of all
required documents. However, in the case of redemptions of shares which were
recently purchased by check, the payment of proceeds of such redemption may be
delayed for a period of up to 15 days or more only until the check used to
purchase the shares has been cleared for payment by the shareholder's bank. The
Fund will not forward proceeds by FedWire Redemption (described below), and such
redemption will not be effective, for a period of 15 days after receipt of the
purchase check. This delay in payment of redemption proceeds can be avoided if

19
<PAGE> 21

shares are purchased by means of a certified check or federal funds wire. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment for
up to seven days or more, as permitted by securities laws.

REDEMPTION BY WRITTEN REQUEST. To redeem shares, send a written request or
"letter of instruction" specifying the name of the Fund, the dollar amount or
number of shares to be redeemed, and shareholder's name and account number to:
Transamerica Funds Shareholder Services, P.O. Box 9656, Providence, Rhode Island
02940-9656. A request for redemption will be processed after receipt by the
Transfer Agent of all required documents in proper order including any issued
share certificates and the letter of instruction (or a stock power) signed by
each account owner exactly as the account is registered. If a redemption of
$50,000 or more is to be made (or if the shareholder's address or bank account
to which proceeds are to be mailed has changed in the prior 30 days) signatures
must be guaranteed subject to the provisions under Rule 17Ad-15 of the
Securities Exchange Act of 1934 ("SEA Rule") without restriction, condition or
qualification by an authorized signatory of a commercial bank, trust company,
savings bank, savings and loan association, federal credit union, or a member
firm of the National Association of Securities Dealers, Inc. or of a domestic
stock exchange, or any other "eligible guarantor institution," as defined under
the SEA Rule. If shares are held in the name of a corporation, trust, estate,
custodianship, guardianship, partnership or pension and profit sharing plan,
additional documentation may be necessary.

TELEPHONE REDEMPTION. Shares of the Fund in amounts of $50,000 or less and for
which no share certificates have been issued may be redeemed by telephone
provided a telephone authorization form is on file with the Fund. Proceeds from
telephone redemptions will be mailed to the shareholder's address of record. The
Fund and/or the Transfer Agent reserve the right to refuse telephone requests at
any time. See "Telephone Privileges" for further information concerning
authenticity of instructions received by telephone. Information concerning
redemptions can be obtained by contacting the Fund at 1-800-343-6840.

FEDWIRE REDEMPTION. Shareholders may redeem shares for which no certificates
have been issued and have redemption proceeds of at least $50,000 wired by
federal funds transfer as specified in the procedures for written
signature-guaranteed requests. Requests for FedWire redemption may be made by
wire communication, telephone or letter if the shareholder has given
authorization by having on file with the Fund a completed FedWire Redemption
form (forms may be obtained by contacting the Fund at 1-800-343-6840). Proceeds
of shares redeemed at the net asset value next determined after receipt of
request are transmitted the following business day by wire to the shareholder's
bank account designated on the FedWire Redemption form (bank must be a member of
the Federal Reserve System). Delivery of the proceeds of a wire redemption
request of $250,000 or more may be delayed by the Fund for up to seven days if
the Investment Adviser deems it appropriate under the then current market
conditions. The Fund cannot be responsible for the efficiency of the federal
wire system or the shareholder's dealer or bank. Redemption of shares purchased
by check are subject to certain limitations and restrictions described in the
Prospectus. The Fund may modify this Privilege at any time or charge a service
fee upon notice to shareholders; no such fee currently is contemplated.

REPURCHASE. The Distributor is authorized to repurchase any shares presented by
telephone or telegraph to the Distributor by certain securities dealers selected
by the Distributor in its sole discretion. Repurchase orders received by dealers
prior to the closing of the NYSE (presently 4:00 p.m. New York time) on any
business day will be priced at the net asset value per share that is based on
that day's close, provided they are time-stamped by the dealer as being received
no later than such time. The offer

20
<PAGE> 22

to repurchase may be suspended by the Distributor at any time. Dealers may
charge for their services in connection with repurchase, but neither the Fund
nor the Distributor makes any charge.

REDEMPTION BY CHECK (DRAFT). Class A Shareholders may, upon request to the Trust
and upon completion of the application form, elect the redemption by check
privilege for shares of the Fund which are not represented by share
certificates. These drafts which are drawn on Boston Safe Deposit & Trust
Company (the "Bank") may be made payable to the order of any person in stated
minimum amounts, currently $500. When such a draft is presented to the Bank for
payment, the Bank as the shareholders' agent acting under the authority of the
redemption by check procedure will cause the Fund to redeem a sufficient number
of full and fractional shares to cover the amount of the draft. A shareholder
should be certain that adequate shares for which certificates have not been
issued are in his or her account to cover the amount of the draft. Shares
purchased by check are not available to cover checks until 15 days, the
redemption check is returned marked "insufficient funds." A shareholder may not
write a draft to close his account but should follow the normal redemption
procedure set forth above as it is impossible to determine in advance the exact
value of an account. For further information concerning redemption by draft,
shareholders should contact the Fund. A Redemption by Draft authorization is
contained in the application in the center of this Prospectus or may be obtained
from the Fund.

INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem a shareholder's
account at any time the total net asset value of the account falls below $100 as
a result of a redemption. Shareholders will be notified in writing that the
value of their account is less than $100 and will be allowed 60 days to make
additional investments before redemption is processed. No CDSC will be imposed
on an involuntary redemption of Class B Shares.

REDEMPTION IN KIND. Although it is the Fund's present policy to make payment of
redemption proceeds in cash, if the Board of Trustees determines that a material
adverse effect would otherwise be experienced by remaining investors, redemption
proceeds may be paid in whole or in part by a distribution in kind of securities
held by the Fund, subject to the limitation that, pursuant to an election under
Rule 18f-1 under the Investment Company Act of 1940, the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or one percent of the
net asset value of the Fund during any 90-day period for any one account. In
such circumstances, a shareholder might be required to bear transaction costs to
dispose of securities distributed in kind.

REINSTATEMENT PRIVILEGE. A shareholder who has redeemed shares of the fund, or
has had shares repurchased by the Fund, may, within 60 days after the date such
shares were redeemed or repurchased, reinvest (reinstate) all or a portion of
the proceeds of such redemption or repurchase in shares of the Fund or in shares
of other Transamerica funds at the next determined net asset value of the shares
being acquired so long as the Transfer Agent is in receipt of a written request
for reinstatement and the appropriate payment. Shares being acquired pursuant to
the reinstatement privilege must be of the identical Class as those which were
redeemed within the previous sixty days.

The CDSC will not be applicable to Class B Shares acquired in a reinstatement,
although it will be assessed in connection with the initial redemption or
repurchase. Exercise of the Reinstatement Privilege does not alter the federal
income tax treatment of any capital gains realized on the redemption of shares
of the Fund. If a loss was realized on the redemption and if reinstatement is
made in shares of the Fund within 30 days, it would be not recognized as a loss
for federal income tax purposes. Investors are advised to consult their tax
advisers as to all possible tax consequences related to the exercise of the
reinstatement privilege. This privilege

21
<PAGE> 23

may be exercised only once as to any specific shares of a Fund and may be
modified or terminated at any time.

CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE. A CDSC is imposed on all
redemptions of Class B Shares after the following exempt dollar amounts have
been subtracted:

(1) the value at the time of purchase of all shares in the account purchased
more than six years (from date of purchase) prior to the redemption;

(2) the value at the time of reinvestment of all shares in the account acquired
through reinvestment of dividends or capital gains distributions; and

(3) the net increase, if any, of the value of all shares in the account over the
purchase price of such shares.

Redemptions are processed in a way that maximizes the amount of redemption that
will not be subject to a CDSC. For example, it is assumed that each redemption
has been made:

(1) first from the exempt amounts referred to in clauses (1), (2) and (3) above
and

(2) second through liquidation of those shares in the account within the six
years preceding the redemption on a first-in-first-out basis.

Any CDSC required to be imposed on share redemptions will be assessed on the
purchase price of the shares redeemed according to the following schedule:

<TABLE>
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
- -------------- ------------
<S> <C>
First.............................. 5%
Second............................. 4%
Third.............................. 3%
Fourth............................. 3%
Fifth.............................. 2%
Sixth.............................. 1%
Seventh and following.............. 0%
</TABLE>

When a CDSC is imposed on a repurchase or a redemption, the following occurs:

(1) the total dollar amount of repurchase or redemption proceeds will be
remitted to the repurchasing or redeeming shareholder; and

(2) the CDSC, if any, will be deducted from the remaining share balance in the
share account, unless a repurchase or redemption, (a) liqui-
dates the account completely or (b) reduces the account to such an extent
that liquidation of the remaining shares in the account would not equal the
amount of the CDSC due (in which case, the CDSC will be deducted from the
redemption proceeds).

If a partial redemption (or exchange) by a shareholder results in a remaining
account balance of less than the amount of the CDSC owed by the shareholder at
the time of the redemption (or exchange) on the shares remaining in the account,
the Fund reserves the right to require the shareholder to redeem (or exchange)
all of the shares in the account. The Fund does not believe that this
constitutes an involuntary redemption.

The CDSC will be paid to the Distributor or to the Fund. (See "Distribution
Plan.")

22
<PAGE> 24

accounts as Systematic Withdrawal Plans ("SWP") with payments of an annual
amount less than or equal to 12% of the value of the account determined at the
time of SWP authorization (subject to subsequent calendar year end adjustments)
and available on a monthly, quarterly, semi-annual or yearly basis; and (2) as
distributions from employer sponsored retirement plans in connection with the
participant's separation of service at age 55 or over from his or her employer.
To be eligible for the waiver, the account holder or the dealer must notify the
Distributor of eligibility at the time of redemption request. The above waivers
of CDSC are subject to change upon 60 days written notice to shareholders. (See
the Statement of Additional Information, "Redemption and Repurchase of Shares"
for a more complete description of the Fund's shareholders on whose shares a
CDSC will not be imposed.)

SHAREHOLDER SERVICES
- --------------------

The Fund offers its shareholders the following services and privileges: (1)
Reinvestment of Dividends and Distributions at net asset value; (2) Automatic
Investment Plan; (3) Exchange Privilege; (4) Systematic Exchange Program; (5)
Systematic Withdrawal Plan; (6) Tax Sheltered Retirement Plans; (7) Payroll
Deduction Plans; (8) Class B Automatic Exchange and (9) Redemption by Draft.
Further information regarding the above services and privileges is set forth in
the Statement of Additional Information which may be obtained by contacting the
Fund at the address or telephone number set forth on the cover page of this
Prospectus.

AUTOMATIC INVESTMENT PLAN. The Fund offers an Automatic Investment Plan whereby
the Transfer Agent is authorized to draft the shareholders bank account monthly
in amounts of no less than $25.00 for investment in shares of the Fund. A
shareholder desiring to open a new account in the Fund may establish this option
by submitting the New Account Application form and Bank Draft Authorization Form
(both of which are in the Prospectus) along with a check made payable to the
Fund for an initial purchase of no less than $25.00. A shareholder with an
existing account in the Fund may establish this option by submitting the Bank
Draft Authorization Form, which is available from the Transfer Agent. Bank Draft
Authorizations remain in effect until written revocation by the shareholder is
received by the Transfer Agent and may be changed or terminated by the
shareholder at any time without penalty upon written notice to the Transfer
Agent.

EXCHANGE PRIVILEGE permits Class A and Class B shareholders of the Fund to
exchange their shares for certain shares of other Transamerica funds on the
basis of the relative net asset value per share subject to the minimum
investment requirements of such funds. Class A Shares may be exchanged for
shares of other Transamerica funds sold with an initial sales charge ("Class A
Shares"). Such other Class A Shares may also be exchanged for Class A Shares of
the Fund provided that any sales charge differential (not previously paid) is
paid by the shareholder. Class B Shares may be exchanged without imposition of
the Fund's CDSC for Class B Shares or shares of other Transamerica funds which
are subject to a CDSC ("CDSC Funds"). Exchanges between CDSC Funds having
different CDSC schedules will retain their respective original CDSC schedules.
Any applicable contingent deferred sales charge payable upon the redemption of
Class B Shares exchanged will be calculated from the date of the initial
purchase. Class B Shares may not be exchanged into money market funds other than
Transamerica Money Market Fund B. See "Shareholder Services -- Exchange
Privilege" in the Statement of Additional Information.

Exchanges may be accomplished by telephone request (see below) or by a written
request from the account owner(s). Forms for both written and telephone
exchanges are available from the Fund upon

23
<PAGE> 25

request. Share certificates, if issued, must be returned to the Fund prior to
any exchange of such shares. There is currently no service fee for an exchange;
however, dealers or other firms may charge for their services in expediting
exchange transactions. In addition, the Fund reserves the right to impose a
service fee. Exchanges are, in effect, a redemption and purchase of shares in
the respective funds. As such, the limitations and restrictions applicable
generally to purchases and redemptions apply, and any exchange constitutes a
sale upon which a gain or loss will be realized for federal income tax purposes.

THIS EXCHANGE PRIVILEGE IS NOT AVAILABLE IN ANY JURISDICTION WHERE
SHARES OF THE OTHER TRANSAMERICA FUND BEING ACQUIRED ARE NOT QUALIFIED FOR
SALE. EACH TRANSAMERICA MUTUAL FUND RESERVES THE RIGHT TO REJECT ANY ORDER TO
ACQUIRE ITS SHARES THROUGH EXCHANGE, OR OTHERWISE TO MODIFY, RESTRICT OR
TERMINATE THE EXCHANGE PRIVILEGE, AT ANY TIME AFTER 60 DAYS' NOTICE TO
SHAREHOLDERS. Because other Transamerica funds have investment objectives and
policies which may differ from those of the Fund, shareholders should carefully
review the prospectus of the other Transamerica fund before effecting an
exchange.

Shares of the Fund for which no share certificates have been issued may be
exchanged by telephone request provided the shareholder has selected this option
in the Account Application or has a telephone authorization form on file. See
"Telephone Privileges" for important information about transactions by
telephone. Telephone requests may be made by contacting Account Services at
1-800-343-6840.

SYSTEMATIC EXCHANGE PROGRAM allows shareholders to exchange a specified dollar
amount from an existing account in any Transamerica Fund (including the Fund)
into any other Transamerica Fund (including the Fund) subject to the
requirements and limitations of the Exchange Privilege as noted above. At the
time this option is selected, the shareholder must have a minimum balance of
$5,000 in the account from which the exchange is to be made and must designate a
monthly exchange amount of no less than $25.00 for a specific Fund. The minimum
initial investment amount (established by the Fund being exchanged into) will be
waived for shareholders utilizing this Program.

Note that the systematic exchange methods do not assure a profit and do not
protect against loss in declining markets. You should consult your broker or
financial adviser to determine whether this Program is suitable for your
investment needs. In particular, consideration should be given to the type of
Transamerica Fund from which such exchanges will be made (i.e., its investment
objective, policies and risks, including the potential for fluctuation in its
net asset value). The Fund currently imposes no service fee for participation in
the Program but reserves the right to do so. Shareholders may change the
exchange amounts or the selection of Funds or terminate their participation in
the Program at any time by directing the Transfer Agent in writing.

PAYROLL DEDUCTION PLANS are available for employer sponsored plans, where
regular, periodic purchases are made into the employees' accounts through the
submission of the Transamerica Group Investment List. The minimum initial and
subsequent purchase amounts are $250 for the Plan and $25 per fund-account in
the Plan. For further information on how to establish a Transamerica Group
Investment List, call Account Services at 1-800-343-6840.

24
<PAGE> 26

wise substantially identical. Class A Shares, therefore, will have a slightly
higher total return than Class B Shares and may have a slightly higher dividend
as a result. Shareholders who have made more than one purchase may hold both
Class B Shares and Class A Shares at the same time. The Class B Automatic
Exchange is available to all Class B Shareholders and requires no action
whatsoever on a shareholder's part. If a shareholder wants to decline taking
advantage of this privilege, however, the Fund must be notified in writing
within three months prior to the Automatic Exchange Date.

Further information regarding the above services and privileges is set forth in
the Statement of Additional Information.

TELEPHONE PRIVILEGES
- --------------------

Neither the Fund, Transfer Agent, nor the Investment Adviser will be
responsible for the authenticity of telephone instructions (including telephone
redemptions). Shareholders should be aware that transactions authorized by
telephone instructions believed to be authentic by the Fund can subject the
shareholder to the risk of loss if such telephone instructions are subsequently
found to be inauthentic.

Privileges associated with telephone exchange, telephone redemption, and FedWire
redemption may be selected in the Fund's Account Application. The privileges
associated with FedWire redemption will not be established unless specifically
instructed. The privileges associated with telephone exchange and/or telephone
redemption will automatically be accorded to the shareholder's account unless
the shareholder specifically declines such privilege in the Account Application.
If establishing a new account through a confirmed trade, the shareholder's
securities dealer should provide a completed new Account Application or submit
specific written instructions requesting specific account privileges at the time
of trade settlement. The Fund will employ reasonable procedures to confirm that
the instructions as to either exchange, redemption or FedWire redemptions
communicated by telephone are genuine, and that absent such procedures, the Fund
or its agents may be liable for any losses due to unauthorized or fraudulent
instructions. Such procedures include:

1. Recording all calls for telephone transactions (each transaction is thereby
indexed by the time of the call placed);

2. Requesting the caller's name and phone number as verification of the origin
of the telephone call;

3.Requesting the name of the Fund and the shareholder's account number, the
name(s) in which the account is registered and the tax identification number
listed on the account;

4.Mailing written confirmation (statements) of each transaction on the following
business day to the registration address and the broker/dealer of record.

DIVIDENDS, DISTRIBUTIONS
AND TAX STATUS
- ------------------------

DIVIDENDS. The Fund declares daily and pays dividends monthly substantially
equal to all of its net investment income (i.e., non capital gain income from
its investments less expenses). Frequency of distribution of net short-term
capital gains will depend upon the Investment Adviser's evaluation of current
market conditions.

25
<PAGE> 27

Although the per share dividends on Class B Shares will be lower than the per
share dividends on Class A Shares due to the higher Distribution Fee payable on
Class B Shares, the actual difference in total dividends generated by the
investment will be less than that suggested by the per share difference since an
investor is usually able to purchase more Class B Shares than Class A Shares for
the same investment amount as Class B Shares are not subject to an initial sales
charge.

To permit the Fund to maintain a more stable distribution, the monthly dividend
is a fixed amount which is periodically adjusted to reflect current market
conditions. The income earned by the Fund during such period will vary, and may
be more or less than the dividend paid. However, it is expected that for the tax
year period, total distributions should approximate net income and all taxable
net investment income will have been distributed to shareholders.

CAPITAL GAINS. The Fund intends that net realized capital gains, if any, will be
distributed at least annually. The excess of net long-term capital gains over
net short-term capital losses including losses carried forward from prior years
represents net realized capital gains. In addition, the Fund may make
"supplemental dividends or distributions" to comply with applicable income and
excise tax laws.

When a dividend or capital gains distribution is paid, the net asset value per
share is reduced by the amount of the payment. The capital gains distribution
will generally be equal for both Class A and Class B Shares. Dividends and/or
distributions are payable to shareholders of record at the day of such dividend
declaration. Dividends and capital gains distributions, if any, are
automatically reinvested in additional shares of the Fund at net asset value per
share on the reinvestment date unless a shareholder requests otherwise by
specifying instructions in the Account Application or by writing to the Transfer
Agent. (See "Shareholder Services" in the Statement of Additional Information.)

TAXES. Because the Fund intends to distribute substantially all of its net
investment income and net realized capital gains to its shareholders, and to
adhere to other applicable requirements, it is not expected that the Fund will
be required to pay any federal income taxes on amounts paid by it as dividends
and distributions. However, shareholders normally will have to pay federal
income taxes on the dividends and capital gains distributions they receive
(either as cash or reinvested shares) from the Fund (unless they are exempt from
taxation or entitled to tax deferral.) Distributions from the Fund's net
investment income and any net short-term capital gains are taxable to
shareholders as ordinary income. Distributions derived from net long-term
capital gains, which are designated by the Fund as capital gains dividends are
taxable to shareholders as long-term capital gains, regardless of the length of
time a shareholder has held the shares. After the end of each calendar year,
shareholders will receive a statement indicating the amount and federal tax
status of all distributions received during such year. This includes information
on the portion taxable as ordinary income and the portion taxable as long-term
capital gains.

The Fund is required to withhold 31% of taxable dividends, distributions and
redemptions paid to shareholders who have not complied with Internal Revenue
Service taxpayer identification requirements. To avoid this "backup" withholding
requirement, a shareholder may furnish the Transfer Agent with his or her
taxpayer identification number and required certifications by completing the
Account Application or Internal Revenue Service Form W-9. (See "Backup
Withholding" in the back of the Prospectus). Investors should consult their own
tax advisers concerning tax consequences of an investment in the Fund.

26
<PAGE> 28

be required to be "marked to market" for federal income tax purposes (i.e.,
treated or deemed as having been sold at market value). The foregoing is an
abbreviated summary of the tax consequences of the Fund's securities
transactions.

Shareholders who are non-resident aliens or foreign corporations partnerships or
trusts may be subject to withholding of U.S. federal income tax on dividend
distributions, including dividends attributable to interest income and
short-term capital gains realized by the Fund.

EACH SHAREHOLDER IS ADVISED TO CONSULT WITH HIS/HER TAX ADVISER CONCERNING THE
EFFECT OF OWNERSHIP OF SHARES OF THE FUND.

ADDITIONAL INFORMATION
- ----------------------

ORGANIZATION OF THE TRUST. The Trust, organized as a Massachusetts
business trust on November 29, 1984, is a beneficiary of an order from the
Securities and Exchange Commission permitting the issuance and sale of multiple
classes of shares. The Fund operates as one series of the Trust. Shares of
other series of the Trust represent interests in Transamerica Investment
Quality Bond Fund, Transamerica Intermediate Government Trust, Transamerica
U.S. Government Trust, Transamerica Adjustable U.S. Government Trust and
Adjustable U.S. Government Fund.

The Board of Trustees is authorized to create additional series of shares and
additional classes within any series at any time without approval by
shareholders. All shares of beneficial interest $0.01 par value per share of the
Trust have equal voting rights and have no preemptive or conversion rights. All
shares represent an interest in the same assets of the Fund and are identical in
all respects except that each class bears different distribution expenses and
has exclusive voting rights with respect to its respective distribution plan.
Shares issued are fully paid, non-assessable, fully transferable and redeemable
at the option of the holder. The Trust is generally not required to hold annual
meetings of shareholders; however, the Board of Trustees may call special
meetings of shareholders for action by shareholder vote if so requested in
writing by the holders of 10% or more of the outstanding shares of the Trust or
as otherwise as may be required by applicable laws or the Declaration of Trust.

Under Massachusetts law, shareholders of a business trust may, in certain
circumstances, be held personally liable as partners for the obligations of the
Trust. However, the Declaration of Trust pursuant to which the Trust was
reorganized contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each instrument entered into or executed by the Trust. The Declaration of Trust
also provides for indemnification out of the Trust's property for any
shareholder held personally liable for any Trust obligation. Thus, the risk of a
shareholder being personally liable as a partner for obligations of the Trust is
limited to the unlikely circumstance in which the Trust itself would be unable
to meet its obligations.

TRANSFER AGENT. Transfer agent and dividend disbursing functions are performed
by The Shareholder Services Group, Inc., One American Express Plaza, Providence,
Rhode Island 02903-1135.

INDEPENDENT AUDITORS. Ernst & Young LLP, 1221 McKinney, Suite 2400, Houston,
Texas 77010, has been selected as the independent auditors of the Fund.

CUSTODIAN. Texas Commerce Bank National Association, P.O. Box 2558, Houston,
77252, is the Custodian for the Fund. Cash balances with the custodian in excess
of $100,000 are unprotected by Federal Deposit Insurance Corporation. Such
uninsured balances may at times be substantial.

SHAREHOLDER INQUIRIES. All inquiries regarding the Fund including questions
concerning share ownership, dividends, transfer of ownership or share re-

27
<PAGE> 29

demption should be directed to the Fund at the telephone number or address on
the cover page of this Prospectus. Each month the Fund prepares an unaudited
list of its portfolio securities holdings which is available without charge by
contacting the Fund.

REPORTS TO SHAREHOLDERS. The Fund will send its shareholders annual and
semiannual reports; the financial statements which will appear in the annual
reports will be audited by independent auditors.

PERFORMANCE INFORMATION. The Fund's annual report contains a discussion of the
Fund's performance and is available without charge upon request. From time to
time the Fund may advertise its yield and total return which are computed
separately for Class A and Class B Shares and in accordance with applicable
regulatory requirements. Yield is computed by annualizing the result of dividing
the net investment income per share over a 30-day period by the maximum offering
price per share on the last day of the period. The Fund may also advertise in
supplemental sales literature a distribution rate which is computed in the same
manner as yield except that actual income dividends declared per share during
the applicable period are substituted for net investment income per share. Yield
and distribution rate quotations of Class B Shares do not reflect any CDSC and,
if included, would be reflected in a lower rate quotation. The distribution rate
is computed separately for Class A and Class B Shares.

The cumulative total return shows the dollar or percentage change in value over
a specified period of time (i.e., 1, 5 or 10 years or since the Fund's
inception), assuming reinvestment of all dividends and distributions on the
reinvestment dates and payment of any deferred sales charges applicable to
redemptions. Average annual total return shows the Fund's cumulative return
divided over the number of years included in the given period ("standardized
performance"). Total returns may, in conjunction with standardized performance,
be calculated for other specified periods and/or excluding the effect of sales
charges (which if included, would reduce the performance quoted). Both the yield
and total return are based on historical earnings and are not indicative of
future performance. The Fund will include performance data for both Class A and
Class B Shares in any advertisement or information including performance data of
the Fund. The Statement of Additional Information contains more detailed
information about the calculation of performance. The Fund also may advertise
its performance relative to certain performance rankings, ratings and indexes
compiled by independent organizations (such as Lipper Analytical Services, Value
Line and Morningstar, Inc.). In addition, the Fund may use comparative
performance information from certain industry research materials or published in
various periodicals. The Statement of Additional Information sets forth under
"Calculation of Performance Data" a list of periodicals, indexes, etc. which the
Fund may use in its advertisements. Dividends paid by the Fund change in
response to fluctuations in the income from securities in its portfolio and in
the expenses of the Fund; also the net asset value of the Fund's shares will
fluctuate. Consequently, any given quotation of the total return should not be
considered as representative of what the Fund's total return may be for any
specified period in the future.

28
<PAGE> 30

APPENDIX A

SPECIAL CONSIDERATIONS APPLICABLE TO
OPTIONS ON U.S. GOVERNMENT SECURITIES

TREASURY BONDS AND NOTES. Because trading interest in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the Exchanges will not continue indefinitely to introduce options with new
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each issue of bonds or notes will this be phased out as new options are
listed on more recent issues, and options representing a full range of
expirations will not ordinarily be available for every issue on which options
are traded.

TREASURY BILLS. Because the deliverable Treasury bill changes from week to week,
writers of Treasury bill calls cannot provide in advance for their potential
exercise settlement obligations by acquiring and holding the underlying
securities. However, if the Fund holds a long position in Treasury bills with a
principal amount corresponding to the principal amount of the securities
deliverable upon exercise of the option, it may be hedged from a risk
standpoint. In addition, the Fund will maintain Treasury bills maturing no later
than those which would be deliverable in the event of an assignment in a
segregated account with its Custodian so that it will be treated as being
covered for margin purposes.

GNMA CERTIFICATES. The following special considerations will be applicable to
the writing of call options on GNMA Certificates when, and if, trading of
options thereon commences. Since the remaining principal balance of GNMA
Certificates declines each month as a result of mortgage payments, the Fund as a
writer of a GNMA call holding GNMA Certificates as "cover" to satisfy its
delivery obligation in the event of exercise may find that the GNMA Certificates
it holds no longer have a sufficient remaining principal balance for this
purpose. Should this occur, the Fund will purchase additional GNMA Certificates
from the same pool (if obtainable) or replacement GNMA Certificates in the cash
market in order to maintain its cover. If for any reason, the Fund was no longer
covered, the Fund will either enter into a closing purchase transaction or
replace such Certificate with a Certificate which represents cover. When the
Fund closes its position or replaces such certificate, it may realize an
unanticipated loss and incur transaction costs.

RISKS RELATING TO TRANSACTIONS
IN FUTURES CONTRACTS AND
RELATED OPTIONS

Positions in futures contracts may be closed out only on an exchange or board of
trade which provides a market for such futures. Although the Fund intends to
purchase or sell futures only on exchanges or boards of trade where there
appears to be active market, there is no assurance that a liquid market on an
exchange or board of trade will exist for any particular contract or at any
particular time. In the event a liquid market does not exist, it may not be
possible to close a futures position and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
maintenance margin. In addition, limitations imposed by an exchange or board of
trade on which futures contracts are traded may compel or prevent the Fund from
closing out a contract which may result in reduced gain or increased loss to the
Fund. The absence of a liquid market in futures contracts might cause the Fund
to make or take delivery of the underlying securities at a time when it may be
disadvantageous to do so.

29
<PAGE> 31

APPENDIX B

DESCRIPTION OF DERIVATIVE SECURITIES
AND ASSET-BACKED SECURITIES

Set forth below is a description of the derivative securities and asset-backed
securities in which the Fund may invest. The Fund may invest in other similar
types of derivative securities and asset-backed securities, including those
which may be developed in the future, without shareholder approval.

CMOS, REMICS AND MULTI-CLASS PASS THROUGH SECURITIES

The Fund may also invest in real estate mortgage investment conduits (REMICs),
collateralized mortgage obligations (CMOs) and multiclass pass through
securities which are issued or guaranteed by a U.S. Government Agency. CMOs are
obligations issued by special purpose trusts secured by mortgages. REMICs own
mortgages and elect REMIC status under the Internal Revenue Code and are similar
to CMOs in that they issue multiple classes of securities. Multiclass pass
through securities are similar to CMOs in that they are generally divided into
several classes; however, they represent equity interests in the pool of
mortgage loans typically held in a trust (unless indicated otherwise all
references to CMOs include REMICs and multiclass pass through securities). CMOs
may be issued by a U.S. Government agency or instrumentality or by private,
nongovernment corporations such as commercial banks, mortgage bankers or other
financial institutions. CMOs are issued in a number of classes or "tranches"
with different maturities. The classes or tranches are retired in sequence as
the underlying mortgages are repaid. Prepayment may shorten the stated maturity
of the obligation and can result in a loss of premium, if any has been paid.
Certain of these securities may have variable or floating interest rates and
others may be stripped (securities which provide only the principal or interest
feature of the underlying security). As part of the process of creating more
predictable cash flows on most of the tranches in a series of CMOs, one or more
tranches generally must be created that absorb most of the volatility in the
cash flows on the underlying mortgage assets. The yields on these more volatile
tranches are generally higher than prevailing market yields on government asset
backed securities with similar average lives. Because of the uncertainty of the
cash flows on these tranches, and the sensitivity thereof to changes in
prepayment rates on the underlying mortgage assets, the market prices of and
yield on these tranches tend to be highly volatile. CMOs, REMICs and multiclass
pass through securities issued by private entities are not considered U.S.
Government securities for purposes of the investment policies of the Fund.

ZERO COUPON BONDS AND OTHER STRIPPED SECURITIES

The Fund may also invest in the interest only or principal only components of
debt securities in which the Fund is permitted to invest. Zero coupon Treasury
securities are (i) U.S. Treasury bills, and both notes and bonds which have been
stripped of their unmatured interest coupons and receipts or (ii) certificates
representing interest in such stripped obligations. A zero coupon security pays
no interest in cash to its holder during its life although interest is accrued
for federal income tax purposes. Its value to an investor consists of the
difference between its face value at the time of maturity and the price for
which it was acquired, which is generally an amount significantly less than its
face value (sometimes referred to as a "deep discount" price). Investing in
"zero coupon" Treasury securities may help to preserve capital during periods of
declining interest rates. For example, if interest rates decline, GNMA
Certificates owned by the Fund which were purchased at greater than par are more
likely to be

30
<PAGE> 32

prepaid, which would cause a loss of principal. In anticipation of this, the
Fund might purchase zero coupon Treasury securities, the value of which would be
expected to increase when interest rates decline. Zero coupon Treasury
securities do not entitle the holder to any periodic payments of interest prior
to maturity. Accordingly, such securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities which make periodic distributions of interest. On the other hand,
because there are not periodic interest payments to be reinvested prior to
maturity, zero coupon securities eliminate the reinvestment risk and lock in a
rate of return to maturity. Current federal tax law requires that a holder (such
as the Fund) of a zero coupon security accrue a portion of the discount at which
the security was purchases as income each year even though the Fund received no
interest payment in cash on the security during the year.

Stripped mortgage-related and mortgage-backed securities (hereinafter referred
to as "Stripped Mortgage Securities") are derivative multiclass mortgage
securities. Stripped Mortgage Securities may be issued by agencies or
instrumentalities of the U.S. Government, or by private originators of, or
investors in, mortgage loans, including mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
Mortgage Securities are usually structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of Stripped Mortgage Securities will have one
class receiving some of the interest and most of the principal from the mortgage
assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and a rapid
rate of principal payments may have a material adverse effect on the securities'
yield to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the fund may fail to fully recoup its
initial investment in an IO. Furthermore, if the underlying mortgage assets
experience slower than anticipated prepayments of principal, the yield of a PO
will be affected more severely than would be the case with a traditional
mortgage-backed security. IOs and POs have exhibited large price changes in
response to changes in interest rates and are considered to be volatile in
nature.

31
<PAGE> 33
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Summary................................. 2
Summary of Fund Expenses................ 3
Financial Highlights.................... 4
Investment Objective and Policies....... 5
Investment Practices and Restrictions... 7
The Fund and Its Management............. 11
Information About Shares of the Fund
Net Asset Value....................... 15
Purchase of Shares...................... 15
Redemption and Repurchase of Shares..... 19
Shareholder Services.................... 23
Telephone Privileges.................... 25
Dividends, Distributions and Tax
Status................................ 25
Additional Information.................. 27
Appendix A.............................. 29
Appendix B.............................. 30
</TABLE>

INVESTMENT ADVISER
- ------------------
Transamerica Fund Management Company
1000 Louisiana
Houston, Texas 77002-5098
(713) 751-2400

DISTRIBUTOR
- -----------
Transamerica Fund Distributors, Inc.
1000 Louisiana
Houston, Texas 77002-5098

SHAREHOLDER INQUIRIES
- ---------------------
Transamerica Funds Shareholder Services
P.O. Box 9656
Providence, RI 02940-9656

Or call 1-800-343-6840

No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus or in official sales literature distributed by the Fund's
Distributor in connection with the offer of the Fund's shares, and if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or its Distributor. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.

1001

TRANSAMERICA GOVERNMENT
SECURITIES TRUST
A Series of Transamerica Bond Fund

PROSPECTUS
September 30, 1994

<PAGE> 34

TRANSAMERICA
INVESTMENT QUALITY BOND FUND
A Series of Transamerica Bond Fund

1000 Louisiana Houston, Texas 77002-5098 (713) 751-2400
- --------------------------------------------------------------------------------

Transamerica Investment Quality Bond Fund (the "Fund"), a series of Transamerica
Bond Fund (the "Trust") seeks as its primary investment objective to earn a high
level of current income, consistent with prudent risk and safety of principal by
investing in a diversified portfolio of "investment quality" fixed income
securities. The Fund invests primarily (at least 65% of its total assets) in
securities rated within the three highest quality ratings assigned by recognized
rating services such as Standard & Poor's Corporation (AAA, AA or A) or Moody's
Investors Services, Inc. (Aaa, Aa or A), U.S. government securities, and high
quality money market instruments, including commercial paper, certificates of
deposit and bankers' acceptances. The Fund may also, in pursuit of its
investment objective, engage in the writing of covered call options and cash
secured put options against such securities and in a variety of hedging
techniques (some or all of which may be derivatives) including put and call
options and interest rate futures contracts and options on such futures. The
Fund may also employ leverage, invest in debt securities of foreign issuers and
invest to a limited extent in high yield/high risk securities which are
corporate debt securities rated lower than BBB by Standard & Poor's or Baa by
Moody's (including up to 5% in Securities rated as low as CCC or Caa). The
investment policies and techniques employed by the Fund may involve a greater
degree of risk than those inherent in more conservative investment approaches.
Investors should be aware that a rise in interest rates can result in a decrease
of the value of the Fund's investment, in particular those of a derivative
nature, and in turn will result in a decrease in the Fund's net asset value.

This Prospectus provides the basic information you should know before investing
in the Fund. INVESTORS SHOULD READ THIS PROSPECTUS AND KEEP IT FOR FUTURE
REFERENCE. A Statement of Additional Information containing further information
about the Trust and the Fund has been filed with the Securities and Exchange
Commission. Copies may be obtained without charge by contacting the Fund at the
address or telephone number listed above. The Fund's investment adviser is
Transamerica Fund Management Company (the "Investment Adviser").

Transamerica Fund Distributors, Inc. (the "Distributor") acts as principal
distributor of shares of the Fund.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

THE STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 30, 1994 IS
HEREBY INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.

PROSPECTUS DATED SEPTEMBER 30, 1994
<PAGE> 35

SUMMARY
- ------------------------------------------------------

INVESTMENT OBJECTIVE. The Fund's primary investment objective is to earn a high
level of current income, consistent with prudent risk and safety of principal.
It pursues its objectives by investing primarily in fixed income securities
rated within the three highest quality ratings assigned by recognized rating
services such as Standard & Poor's Corporation (S&P) or Moody's Investors
Services, Inc. (Moody's) and high quality money market instruments, including
commercial paper, certificates of deposit and bankers' acceptances. (See
"Investment Objective and Policies.")

REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any
time at the net asset value per share next determined after the redemption
request is received in proper form by The Shareholder Services Group (the
"Transfer Agent.") In certain cases, however, redemption proceeds from the Class
B Shares will be reduced by the amount of any applicable contingent deferred
sales charge. See "Redemption and Repurchase of Shares."

RISK FACTORS. Certain investment techniques and policies of the Fund, such as
High Yield/High Risk Securities, Leverage, Reverse Repurchase Agreements,
Foreign Securities, Lending of Portfolio Securities and Options and Futures
Transactions, entail specific risks which may be greater than those inherent in
an investment vehicle with a more conservative approach.

The aforesaid is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and Statement of Additional Infor-
mation.

2
<PAGE> 36

<TABLE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

CLASS A SHARES CLASS B SHARES
-------------- --------------
INITIAL DEFERRED
SALES CHARGE SALES CHARGE
ALTERNATIVE ALTERNATIVE
-------------- --------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................ 4.75% None
Sales Charge Imposed on Reinvested Dividends................. None None
Maximum Contingent Deferred Sales Charge
(as a percentage of offering price)........................ None 5.00%
Redemption Fee............................................... None
Exchange Fee................................................. None None

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees(2)........................................... .60% .60%
12b-1 Fees(3)................................................ .25% 1.00%
Other Expenses............................................... .40% .40%
---- ----
Total Fund Operating Expenses................................ 1.25% 2.00%
==== ====
</TABLE>

<TABLE>
EXAMPLE A: (4) You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and
redemption at the end of each time period.
<CAPTION>

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A................................................ $ 60 $ 85 $113 $191
Class B................................................ $ 70 $ 93 $128 $213*
</TABLE>

<TABLE>
EXAMPLE B: (4) You would pay the following expenses on the same investment assuming no redemptions:
<CAPTION>

<FN>
- ---------------
(1) Class A Shares have reduced initial sales charges for purchases in excess of $100,000. Purchases of
$1 million or more are not subject to a sales charge; however, a contingent deferred sales charge
of 1% will be applied to redemptions within 12 months of such purchase (as described under "Initial
Sales Charge Alternative -- Class A Shares"). Deferred sales charge on Class B Shares declines from
5% during the first year to 0% after the sixth year in the following manner: 5%, 4%, 3%, 3%, 2%, 1%.
See "Information About Shares of the Fund."
(2) See "The Fund and Its Management -- Advisory Fee."
(3) 12b-1 fees are based on maximum allowed fees (if collected). See "The Fund and Its Management" --
"Distributor and Distribution Plans."
(4) Expenses in Example above should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown above. Use of assumed annual return (5%) is
mandated by the Securities and Exchange Commission. Long-term shareholders of Class B Shares may pay
more than the economic equivalent of the maximum front-end sales charge permitted by the NASD.

* Assumes tax-free automatic exchange of Class B Shares for Class A Shares after the eight year period
following the initial purchase of Class B Shares. If the exchange is declined, such Class B expenses
would be $233.

</TABLE>

3
<PAGE> 37

Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

The following financial highlights are for Transamerica Investment Quality Bond Fund Class A Shares for each of the 10 years in
the period ended March 31, 1994.

CLASS A SHARES
----------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share income and capital
changes for a share
outstanding during each year:
Net asset value, beginning
of year.......................... $ 9.26 $ 8.93 $ 8.85 $ 8.52 $ 8.77 $ 9.24 $ 10.05 $ 11.18 $ 9.52 $ 9.26
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......... 0.71 0.79 0.80 0.85 0.86 0.89 0.75 0.75 0.93 1.02
Net realized and unrealized
gain (loss) on investments..... (0.55) 0.31 0.11 0.32 (0.22) (0.51) (0.55) (0.11) 1.87 0.47
------ ------- ------ ------ ----- ------- ------ ------- ------- ------
Total from Investment
Operations............... 0.16 1.10 0.91 1.17 0.64 0.38 0.20 0.64 2.80 1.49
LESS DISTRIBUTIONS
Dividends from net
investment income............ (0.70) (0.77) (0.83) (0.84) (0.89) (0.85) (0.75) (0.75) (0.93) (1.14)
Distributions from realized
gains........................ -- -- -- -- -- -- (0.13) (1.02) (0.21) (0.09)
Returns of capital............. -- -- -- -- -- -- (0.13) -- -- --
------ ------- ------ ------- ------ ------- ------- ------- ------- -------
Total Distributions............ (0.70) (0.77) (0.83) (0.84) (0.89) (0.85) (1.01) (1.77) (1.14) (1.23)
------ ------- ------ ------- ------ ------- ------- ------- ------- -------
Net asset value, end of
year............................. $ 8.72 $ 9.26 $ 8.93 $ 8.85 $ 8.52 $ 8.77 $ 9.24 $ 10.05 $ 11.18 $ 9.52
====== ======= ====== ======= ======= ====== ======= ======= ======= ======
TOTAL RETURN*..................... 1.58% 12.77% 10.72% 14.51% 7.35% 4.39% 2.47% 6.51% 31.51% 17.46%
====== ======= ====== ======= ======= ====== ====== ======= ======= ======

RATIOS AND SUPPLEMENTAL DATA
Ratio of operating expenses
to average net assets........ 1.25% 1.24% 1.36% 1.25% 1.18% 1.16% 1.14% 1.01% 1.01% 1.01%
Ratio of interest expense
to average net assets........ 0.00% 0.07% 0.34% -- -- -- -- -- -- --
------ ------- ------ ------ ------ ------ ------ ------ ------- -------
Ratio of total expenses to
average net assets........... 1.25% 1.31% 1.70% 1.25% 1.18% 1.16% 1.14% 1.01% 1.01% 1.01%
====== ======= ====== ====== ====== ======= ====== ====== ======= =======

Ratio of net investment
income to average net
assets........................... 7.63% 8.47% 8.84% 9.89% 9.64% 9.85% 8.08% 7.08% 9.11% 10.97%
Portfolio turnover................ 242% 191% 316% 134% 162% 173% 189% 150% 322% 93%
Net Assets, end of year (in
thousands)....................... $95,601 $111,836 $96,516 $84,039 $88,521 $108,416 $131,682 $161,466 $105,196 $77,999
Debt outstanding at end of
year (in thousands)(1)........... $ 0 $ 0 $ 6,496 -- -- -- -- -- -- --
Average daily amount of debt
outstanding during the year
(in thousands)(1)................ $ 70 $ 2,003 $ 6,876 -- -- -- -- -- -- --
Average monthly number of shares
outstanding during the year
(in thousands)................... 11,907 11,807 10,003 -- -- -- -- -- -- --
Average daily amount of debt
outstanding per share during
the year(1)...................... $ 0.01 $ 0.17 $ 0.69 -- -- -- -- -- -- --
<FN>
- ---------------
(1) Debt outstanding consists of reverse repurchase agreements entered into during the year.

* Total return does not include the effect of the initial sales charge for Class A Shares or the contingent deferred sales
charge for Class B Shares.

</TABLE>

4
<PAGE> 38

<TABLE>

The following financial highlights are for Transamerica Investment Quality Bond
Fund Class B Shares for the period ended March 31, 1994.
<CAPTION>

CLASS B SHARES
--------------
PERIOD FROM
JUNE 30, 1993 TO
MARCH 31,
1994(1)
--------------
<S> <C>
Per share income and capital changes for a share outstanding during the period:
Net asset value, beginning of period........................................... $ 9.31
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................................... 0.49
Net realized and unrealized loss on investments........................... (0.60)
-------
Total from Investment Operations..................................... (0.11)
LESS DISTRIBUTIONS
Dividends from net investment income...................................... (0.48)
-------
Net asset value, end of period................................................. $ 8.72
=======
TOTAL RETURN*.................................................................. (1.51)%
=======
RATIOS AND SUPPLEMENTAL DATA
Ratio of operating expenses to average net assets......................... 1.50%
Ratio of interest expense to average net assets........................... 0.00%
-------
Ratio of total expenses to average net assets............................. 1.50%
=======
Ratio of net investment income to average net assets...................... 4.96%
Portfolio turnover........................................................ 242%
Net Assets, end of period (in thousands).................................. $ 5,923
Debt outstanding at end of year (in thousands)(2)......................... $ 0
Average daily amount of debt outstanding during the year (in
thousands)(2)............................................................ $ 70
Average monthly number of shares outstanding during the year (in
thousands)............................................................... 11,907
Average daily amount of debt outstanding per share during the year(2)..... $ 0.01
<FN>
- ---------------
(1) Financial highlights, including total return, have not been annualized. Portfolio turnover
and information regarding debt outstanding are for the year ended March 31, 1994, and are
not class specific.
(2) Debt outstanding consists of reverse repurchase agreements entered into during the period.

* Total return does not include the effect of the initial sales charge for Class A Shares or
the contingent deferred sales charge for Class B Shares.

</TABLE>

5
<PAGE> 39

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The Fund's primary investment objective is to earn a high level of current
income, consistent with prudent risk and safety of principal, primarily through
investing in a diversified portfolio of "investment quality" fixed income
securities. The Fund pursues this objective by normally investing at least 65%
of the value of its total assets in "investment quality" fixed income
securities, which include: (1) U.S. dollar denominated debt securities of
foreign and U.S. issuers which are issued in or outside of the U.S. and rated
within the three highest quality ratings (AAA, AA or A by Standard & Poor's
Corporation or Aaa, Aa or A by Moody's Investors Service, Inc.); (2) obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities
("U.S. Government Securities"); and (3) high quality money market instruments
including short-term obligations of the U.S. government or its agencies,
certificates of deposit, bankers' acceptances (each being of investment grade)
and commercial paper rated at least P-1 by Moody's or A-1 by Standard & Poor's
(S&P). The meanings of the various ratings are explained in Appendix A.
Non-rated securities will also be considered for investment by the Fund when the
Investment Adviser believes that the issuer's financial condition, or the
protection afforded by the terms of the securities themselves, limits the risk
to the Fund to a degree comparable to that of rated securities consistent with
the Fund's objectives and policies.

Up to 35% of the value of the Fund's total assets may be held in cash (for
temporary or liquidity purposes such as pending the investment of proceeds of
sales of Fund shares or sales of its portfolio securities) or invested in (1)
publicly offered fixed income securities which are rated lower than the three
highest ratings described above; (2) U.S. dollar denominated foreign fixed
income securities rated lower than the three highest ratings described above;
(3) non dollar denominated foreign fixed income securities having quality
standards consistent with the Fund's objectives and policies; (4) private
placements of fixed income securities so long as such private placements do not
exceed 20% of the Fund's total assets; (5) unrated securities which are
determined by the Investment Adviser to be comparable in quality to securities
rated less than A so long as such unrated securities do not exceed 20% of the
Fund's total assets; (6) taxable municipal securities rated in the four highest
ratings applicable to such securities; (7) convertible fixed income securities
within the four highest ratings applicable to such securities; or (8) money
market instruments that are not of investment grade or rated A-1 or P-1 so long
as such money market investments do not exceed 5% of the Fund's total assets.
The Fund may, from time to time, own common stocks, warrants or other equity
securities as a result of a conversion feature on convertible fixed income
securities or as a result of their being attached to the fixed income security,
but does not intend to make direct purchases of equity securities other than by
conversion or exercise of convertible securities or warrants. As a
non-fundamental investment policy, the Fund will invest, under normal market
conditions, at least 65% of its total assets in corporate and government bonds
both domestic and foreign. For purposes of this policy, the term "corporate
bonds" is deemed to mean debt obligations of corporate issuers secured by
mortgages or liens on the property or revenues of the issuers.

The Fund is authorized to invest up to 35% of its assets in both domestic and
foreign debt securities which are rated lower than the three highest ratings
assigned by S&P or Moody's; however, the Adviser has determined that in no event
will investments in both domestic and foreign securities rated lower than BBB by
S&P or Baa by Moody's ("High Yield/High Risk Securities") exceed 34% of its
assets. Bonds rated BBB by S&P or Baa by Moody's, although of investment
quality, may have

6
<PAGE> 40

speculative characteristics as well. The Fund may invest in securities rated as
low as "CCC" by S&P or "Caa" by Moody's only where, in the opinion of the
Investment Adviser, the rating does not reflect the true quality of the credit
of the issuer and is determined by the Adviser to be comparable to securities
rated at least "B" and provided that no more than 5% of the Fund's total assets
are invested in such securities. High yield/high risk securities, also known as
"junk bonds", generally involve greater volatility of price and risk of loss of
principal and income than securities in the higher rating categories and such
securities are considered speculative by Moody's and S&P. The risks of high
yield/high risk securities, as discussed below (see "Risk Factors -- High
Yield/High Risk Securities"), should be carefully considered by investors. The
percentage and rating limitations applicable to the Fund's investments apply at
the time of acquisition of a security based upon the last previous determination
of the Fund's net asset value; any subsequent change in any ratings by a rating
service or change in percentages resulting from market fluctuations or other
changes in total assets will not require elimination of any security from the
Fund's portfolio. However, the Investment Adviser will evaluate and monitor the
investment to determine whether continued investment in the security will assist
in meeting the Fund's investment objective.

When in the opinion of the Investment Adviser, adverse market conditions warrant
a defensive posturing of the Fund's assets, the Fund may temporarily invest all
or a significant portion of its assets in money market instruments, including
commercial paper, certificates of deposit, bankers' acceptances and other
short-term obligations of financial institutions having total assets of at least
$500 million, and short-term obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, which may include securities
purchased subject to repurchase agreements (see "Investment Practices and
Restrictions"). During such periods, the Fund may have substantially less than
65% of its total assets invested in "investment quality" fixed income securities
other than money market instruments and would not be pursuing its investment
objective.

The Fund may invest, subject to the limitations described above, in debt
obligations of foreign issuers, including those issued by foreign governments
and supranational entities (such as the "World Bank"). While the Fund is
permitted to invest significantly in foreign securities, it intends to maintain
investment emphasis in debt securities of domestic issuers and has undertaken
that it will not invest more than 50% of its total assets in foreign securities
without having first given prior notice to shareholders. Investing in foreign
securities represents a greater degree of risk than investing in domestic
securities. (See "Risk Factors" and "Investment Practices, Techniques and
Restrictions -- Foreign Securities.") The Fund may also enter into forward
foreign currency exchange contracts for the purchase or sale of foreign currency
for hedging purposes (see "Statement of Additional Information").

Included among domestic debt obligations eligible for purchase by the Fund are
adjustable and/or variable (floating) rate securities, zero coupon bonds,
mortgage related securities (including stripped securities, collateralized
mortgage obligations and multi-class pass through securities), asset backed
securities and callable bonds. (See "Risk Factors -- Other Risk Considerations"
and "Appendix C".) The Fund will allocate its investments among a number of
industries without concentration in any particular industry.

In pursuing its investment objective, the Fund may engage to the extent
described below in the purchase and writing of put and call options on debt
securities. In addition, the Fund may engage in a variety of other techniques in
an attempt to protect against changes in the general level of interest rates.
These techniques consist of the purchase and sale of interest rate futures
contracts and options on such futures. Options and futures contracts derive
their

7
<PAGE> 41

value from an underlying instrument or index and accordingly are known as
"derivatives" or "derivative contracts". These derivative contracts, as well as
other types of derivatives (such as stripped mortgage-backed securities),
involve substantial risk including higher price volatility, liquidity risk and
counterparty risk. These investment techniques and various policies the Fund may
employ in seeking to achieve its investment objective, such as lending its
portfolio securities, borrowing funds to invest in securities, and investing in
securities of foreign issuers, as well as high yield/high risk securities, can
involve a greater degree of risk than those inherent in more conservative
investment approaches. (See "Risk Factors" below and "Investment Practices and
Restrictions" and "Appendixes B and C" for a discussion of these techniques and
their risks.)

The Fund may sell securities without regard to how long they have been held
whenever such sale will, in the opinion of the Investment Adviser, strengthen
the Fund's position in furtherance of its investment objective. In addition,
investing in option and
futures contracts may cause the Fund's annual turnover rate to exceed 100%,
which would be higher than many other mutual funds investing in fixed income
securities and may result in higher transaction costs.

The extent to which the Fund will be able to achieve its investment objective
will depend upon the Investment Adviser's ability to evaluate and develop the
information it receives into a successful investment program. There can be no
assurance that the Fund will achieve its investment objective. The primary
investment objective is fundamental and may be changed only by a vote of a
majority of the Fund's outstanding securities (as defined in the Investment
Company Act of 1940). The policies of the Fund may be changed by the vote of the
Board of Trustees without shareholder approval.

RISK FACTORS

GENERAL. The value of the securities held by the Fund, and therefore, net asset
value per share, will fluctuate due to various factors principally interest rate
changes and the ability of the issuers to pay interest and principal of these
obligations. Generally, a rise in interest rates will result in a decrease in
the Fund's net asset value, while a decline in interest rates will result in an
increase in the Fund's net asset value. Therefore, at the time of redemption, an
investor's shares may be worth more or less than the value at the time of
purchase.

HIGH YIELD/HIGH RISK SECURITIES. Risks of high yield/high risk securities may
include: (i) limited liquidity and secondary market support, (ii) substantial
market price volatility resulting from changes in prevailing interest rates,
(iii) subordination to the prior claims of banks and other senior lenders, (iv)
the operation of mandatory sinking fund or call/redemption provisions during
periods of declining interest rates whereby the Fund may be able to reinvest
premature redemption proceeds only in lower yielding portfolio securities, (v)
the possibility that earnings of the issuer may be insufficient to meet its debt
service, and (vi) the issuer's low creditworthiness and potential for insolvency
during period of rising interest rates and economic downturn. As a result of the
limited liquidity of high yield/high risk securities, their prices have at times
experienced significant and rapid decline when a substantial number of holders
decided to sell. A decline is also likely in the high yield/high risk bond
market during an economic downturn. An economic downturn or an increase in
interest rates could severely disrupt the market for high yield/high risk
securities and adversely affect the value of outstanding bonds and the ability
of the issuers to repay principal and interest. In addition, there have been
several Congressional attempts to limit the use of tax and other advantages of
high yield securities which, if enacted, could adversely affect the value of
these securities and the fund's net asset value. For example, federally-insured
savings and loan associations have been required to divest their investments in
high yield securities.

8
<PAGE> 42

During the fiscal year ended March 31, 1994, the Fund's portfolio contained
domestic and foreign corporate bonds in the following rating categories as rated
by Standard & Poor's (the percentages relate to the weighted month end average
value during the fiscal year of the bonds in each rating category):

<TABLE>
<CAPTION>
RATED
-------
<S> <C>
AAA.................................. 2.71%
AA................................... 10.56%
A.................................... 17.00%
BBB.................................. 21.46%
BB................................... 6.88%
B.................................... 3.58%
CCC.................................. 0.32%
CC................................... 0%
C.................................... 0%
D.................................... 0%
Subtotal............................. 62.51%
Plus U.S. Governments................ 37.49%
------
Total................................ 100%
======
</TABLE>

If a bond was not rated by Standard & Poor's but was rated by Moody's, it is
included in the comparable category. Bonds shown as unrated were
not rated by either Moody's or Standard & Poor's. (The Fund did not hold any
unrated securities at each month end during the fiscal year ended March 31,
1994.) The Investment Adviser does not rely solely on the ratings of rated
securities in making investment decisions but evaluates other economic and
business factors affecting the issuer as well. The relative proportion of
securities in particular rating categories will fluctuate over time, and the
proportions listed above should not be viewed as representing the Fund's
current or future proportionate ownership of securities in particular
categories.

OTHER RISK CONSIDERATIONS. In many instances, foreign debt securities may
provide higher yields than securities of domestic issuers which have similar
maturities and quality. Under certain market conditions, these foreign
investments may be less liquid than the securities of U.S. companies and
certainly less liquid than securities issued or guaranteed by the U.S.
government. Additional risks, include the risk of fluctuation in exchange rates,
political or economic instability of the issuer or of the country of issue, or
the possibility of imposition of exchange controls, expropriation or
confiscatory taxation or other foreign governmental laws or restrictions. In
addition, investments in securities of issuers in non-industrialized countries
generally involve more risk and may be considered speculative. (See "Investment
Practices, Techniques and Restrictions -- Foreign Securities and Currency
Transactions" for further information.) The use of options contracts in an
effort to enhance current yield (see "Investment Practices, Techniques and
Restrictions -- Transactions in Operations, Futures and Forward Contracts"
below) may result in the loss of principal under certain market conditions. The
Fund will seek to reduce risks associated with changes in interest rates.
However, these hedging techniques will result in transaction costs to the Fund
and there can be no assurance that the interest rate risks will be eliminated.
In addition, the market volatility of stripped securities, collateralized
mortgage obligations and multi-class pass-through securities may be greater than
the market volatility of other securities which are not of the derivative type
in which the Fund may invest. To the extent these derivative securities are
considered illiquid, their investment, together with other illiquid securities,
will be limited by the 10% investment restriction in respect of illiquid
securities. (See Appendix C.)

INVESTMENT PRACTICES
AND RESTRICTIONS
- --------------------------------------------------------------------------------

9
<PAGE> 43

Securities and Asset-Backed Securities. The Fund will limit its investment in
derivative securities, (i.e.: stripped mortgage-backed securities) to 10% of its
total assets. See Appendix C for a description of such instruments.

LENDING OF PORTFOLIO SECURITIES. In order to earn additional income on its
portfolio securities, the Fund may lend up to one third of the value of its
securities to brokers, dealers and other financial institutions, provided that
such loans are callable at any time by the Fund, and are at all times secured by
collateral, consisting of cash or securities issued or guaranteed by the U.S.
government or its agencies, or any combination thereof, equal to not less than
100% of the market value, determined daily, of the securities loaned. The
advantage of such a loan is that the Fund continues to earn interest on the
loaned securities, while at the same time charging interest to the borrower of
the securities. Lending securities involves certain risks, the most significant
of which is that a borrower may fail to return a portfolio security. The Board
of Trustees has adopted policies designed to minimize such risk.

The Fund may, from time to time, borrow money from banks for investment in
securities. This practice, known as leverage, may be considered speculative. The
aggregate amount of such borrowing, on the date such borrowing is incurred, may
not exceed 20% of the Fund's total assets. For purposes of complying with the
Fund's restrictions on borrowing, leveraged securities and reverse repurchase
agreements are together included in the 33 1/3% borrowing restriction.
(See "Investment Restrictions").

FOREIGN SECURITIES AND CURRENCY TRANSACTIONS. Although the Fund is permitted to
invest up to (i) 100% of its total assets in U.S. dollar denominated fixed
income securities, and (ii) 35% of its total assets in non dollar denominated
fixed income securities, of foreign governments and other foreign issuers, the
Fund will not invest in foreign securities exceeding 50% of its assets without
prior notice to shareholders. In addition, it is anticipated that under normal
conditions no more than 35% of its total assets will be invested in foreign
securities issued in developing countries and no more than 25% of the Fund's
total assets will be invested in securities issued by any one foreign country.
Foreign securities involve certain risks not associated with the investment in
securities of U.S. issuers. These risks include political or economic
instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of imposition of exchange controls
and the risk of currency fluctuations. Such securities may be less liquid or
subject to greater fluctuations in price than securities issued by U.S.
corporations or issued or guaranteed by the U.S. Government, its
instrumentalities or agencies. In addition, there may be less publicly available
information about a foreign company than about a domestic company. Foreign
companies generally are not subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies. There is generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the United States and
foreign transaction costs are generally higher than U.S. investments. In
addition, the values of foreign securities may be affected by application of
foreign laws (including withholding taxes), changes in governmental
administration of economic or monetary policy in the U.S. or diplomatic
relations with foreign countries. Finally, in the event of a default of any such
foreign debt obligations, it may be more difficult for the Fund to obtain or to
enforce a judgment against the issuers of such securities. Investing in the
fixed-income markets of developing countries (i.e., those that are in the
initial stages of industrialization cycle) involves exposure to economic
structures that are generally less diverse and mature, and to political systems
that can be expected to have less stability, than those of developed countries.
Historical experience indicates that the markets of developing countries have
been more volatile than the markets of the more mature economies of devel-

10
<PAGE> 44

oped countries; however, such markets often have provided higher rates of return
to investors.

The Fund may purchase foreign currencies on a spot or forward basis in
conjunction with its investments in foreign securities and to hedge against
fluctuations in foreign currencies. The precise matching of foreign currency
exchange transactions and portfolio securities will not generally be possible
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities and it is
impossible to forecast with precision the change in market value of portfolio
securities. Currency hedging does not eliminate fluctuations in the underlying
prices of the securities, but rather establishes a rate of exchange at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in value of
such currency.

Transactions in foreign securities include currency conversion costs. Foreign
brokerage and custodial costs may be higher than in the United States. See
"Foreign Securities" and "Foreign Currency Transactions" in the Statement of
Additional Information for more information about foreign investments.

REPURCHASE AGREEMENTS. The Fund may invest a portion of its assets in
instruments subject to repurchase agreements with securities dealers or member
banks of the Federal Reserve System. This involves the purchase by the Fund of
Government Securities or other debt obligations with the condition that after a
stated period of time, the original seller will buy back the same securities at
a predetermined price or yield. Repurchase agreements involve certain risks not
associated with direct investments in securities. In the event the original
seller defaults on its obligations to repurchase, as a result of its bankruptcy
or otherwise, the Fund will seek to sell the securities, which action could
involve costs or delays. In such case, the Fund's ability to dispose of the
securities to recover its investment may be restricted or delayed. To minimize
this risk, the securities underlying the repurchase agreement will be maintained
with the Trust's Custodian in an amount at least equal to the repurchase price
under the agreement (including accrued interest due thereunder). However, in the
event that the other party to the repurchase agreement fails to repurchase the
securities subject to said agreement, the Fund could suffer a loss to the extent
proceeds from the sale of the securities subject thereto will be less than the
repurchase price. The Fund will not invest in a repurchase agreement maturing in
more than seven (7) days, if such investment, together with other illiquid
securities held by the Fund (including restricted securities), would exceed 10%
of the total assets of the Fund.

REVERSE REPURCHASE AGREEMENTS AND LEVERAGE. The Fund may also enter into reverse
repurchase agreements which involve the sale of securities held in its portfolio
to a bank or securities firm with an agreement that the Fund will buy back the
securities at a fixed future date at a fixed price plus an agreed amount of
"interest" which may be reflected in the repurchase price. Reverse repurchase
agreements are considered to be borrowings by the Fund. The Fund will use
proceeds obtained from the sale of securities pursuant to reverse repurchase
agreements to purchase other investments. The use of borrowed funds to make
investments is a

11
<PAGE> 45

practice known as "leverage," which is considered speculative. Use of reverse
repurchase agreements is an investment technique that is intended to increase
income. Thus, the Fund will enter into a reverse repurchase agreement only when
the Investment Adviser determines that the interest income to be earned from the
investment of the proceeds is greater than the interest expense of the
transaction. However, there is a risk that interest expense will nevertheless
exceed the income earned. Reverse repurchase agreements involve the risk that
the market value of securities purchased by the Fund with proceeds of the
transaction may decline below the repurchase price of the securities sold by the
Fund which it is obligated to repurchase. The Fund would also continue to be
subject to the risk of a decline in the market value of the securities sold
under the agreements because it will reacquire those securities upon effecting
their repurchase. To minimize various risks associated with reverse repurchase
agreements, the Fund would establish and maintain with the Trust's custodian a
separate account consisting of highly liquid, marketable securities in an amount
at least equal to the repurchase prices of the securities (plus any accrued
interest thereon) under such agreements. In addition, the Fund would not enter
into reverse repurchase agreements exceeding in the aggregate more than 33 1/3%
of the value of its total net assets (including for this purpose other
borrowings of the Fund). The Fund will enter into reverse repurchase agreements
only with selected registered broker/dealers or with federally insured banks or
savings and loan associations which are approved in advance as being
creditworthy by the Board of Trustees. Under procedures established by the Board
of Trustees, the Investment Adviser will monitor the creditworthiness of the
firms involved.

Leverage allows any investment gains made with the additional monies in excess
of the costs of borrowing to increase the net asset value of the Fund's shares
faster than would otherwise be the case. On the other hand, if the borrowed
monies are invested in ways that do not fully recover the costs of such
borrowings to the Fund, the net asset value of the Fund would fall faster than
would otherwise be the case.

WRITING COVERED CALL AND SECURED PUT OPTIONS. In order to earn additional income
on its portfolio securities or to protect partially against declines in the
value of such securities, the Fund may sell (write) covered call options on debt
securities. A call option gives the purchaser of such option in return for a
premium paid, the right to buy, and the seller ("writer") has the obligation to
sell, the underlying security at the exercise price during the option period.
The writer of the call option who receives the premium has the obligation to
sell the underlying security to the purchaser at the exercise price during the
option period if assigned an exercise notice. The Fund will write call options
only on a covered basis, which means that the Fund will own the underlying
security subject to a call option at all times during the option period. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.

During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction.

Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
in conjunction with the sale of the underlying security or to enable the Fund to
write another call option on the underlying security with either a different
exercise price or expiration date or both.

In order to earn additional income or to facilitate its ability to purchase a
security at a price lower than the current market price of such security, the
Fund

12
<PAGE> 46

may write cash secured put options. A put option gives the purchaser of the
option the right to sell, and the writer has the obligation to buy, the
underlying security at the exercise price during the option period. During the
option period, the writer of a put option may be assigned an exercise notice by
the broker/dealer through whom the option was sold requiring the writer to
purchase the underlying security at the exercise price. The Fund will write put
options only on a secured basis, which means that the Fund will maintain, in a
segregated account with the Trust's Custodian, cash or U.S. Government
Securities in an amount not less than the exercise price of the option at all
times during the option period. The amount of cash or U.S. Government Securities
held in the segregated account will be adjusted on a daily basis to reflect
changes in the market value of the securities covered by the put option written
by the Fund. Subject to the limitation that all call and put option writing
transactions be covered or cash secured, the Fund may, to the extent determined
appropriate by the Investment Adviser, engage without limitation in the writing
of options on securities held in its portfolio or related securities.

PURCHASING OPTIONS. The Fund may invest in put or call options on debt
securities which are traded either on a national securities exchange (an
"Exchange") or in the over-the-counter market ("OTC Option"). The Fund may
purchase put options on debt securities to protect its holdings in an underlying
or related security against a substantial decline in market value. Securities
are considered related if their price movements generally correlate to one
another. The purchase of put options on debt securities held in its portfolio or
related to such securities will enable the Fund to protect, at least partially,
unrealized gains in an appreciated security in its portfolio without actually
selling the security. In addition, the Fund will continue to receive interest
income on the security.

The purchase and writing of options involve certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but, as long as its obligation as a writer
continues, has retained the risk of loss should the price of the underlying
security decline. A secured put writer assumes the risk that the underlying
security will fall below the exercise price in which case the writer could be
required to purchase the security at a higher price than the then current market
price of the security. In both cases, the writer has no control over the time
when it may be required to fulfill its obligation as a writer of the option.
Once an option writer has received an exercise notice, it cannot effect a
closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying securities at the exercise price. Special
considerations applicable to the writing of options on the various types of U.S.
government securities are discussed further in "Appendix B." If a put or call
option purchased by the Fund is not sold when it has remaining value, and if the
market price of the underlying security, in the case of a put, remains equal to
or greater than the exercise price or, in the case of a call, remains less than
or equal to the exercise price, the Fund will lose its entire investment in the
option. Also, where a put or call option on a particular security is purchased
to hedge against price movements in a related security, the price of the put or
call option may move more or less than the price of the related security. The
Fund will not invest in a put or call option if as a result the

13
<PAGE> 47

amount of premiums paid for such options then outstanding would exceed 10% of
the Fund's total assets.

The value of certain OTC Options the Fund sells and securities used to "cover"
such options will be included in the 10% investment limitation for restricted
securities to the extent required by Securities and Exchange Commission
guidelines. OTC Options with primary U.S. government securities dealers which
give the Fund an absolute right to repurchase according to a "formula" will be
considered illiquid securities only to the extent the "formula" price exceeds
the amount by which the option is "in-the-money." Other investment restrictions
and the OTC Options repurchase formula are described in the Statement of
Additional Information.

INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may engage in the
purchase and sale of interest rate futures contracts and options thereon only as
a hedge against changes in the general level of interest rates in accordance
with the strategies more specifically described below.

In addition, the Fund may purchase and write call and put options on futures
contracts which are traded on an exchange or a board of trade and enter into
closing transactions with respect to such options to terminate an existing
position. Options on futures contracts are similar to options on securities
except that an option on a futures contract gives the purchaser the right in
return for the premium paid to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put).
The Fund may use options on futures contracts in connection with hedging
strategies. Generally these strategies would be employed under the same market
conditions in which the Fund uses put and call options on debt securities.

The Fund may hedge up to the full value of its portfolio through the use of
options and futures, provided, however, that the Fund may not purchase or sell
futures contracts or purchase or sell related options if immediately thereafter
the sum of the amount of margin deposits on the Fund's existing futures and
related options positions and the amount of premiums paid for related options
(measured at the time of investment) would exceed 5% of the Fund's total assets.
In addition, at the time the Fund purchases a futures contract or a call option
on a futures contract, an amount of cash or U.S.

14
<PAGE> 48

Government Securities equal to the market value of the futures contract will be
deposited in a segregated account with the Fund's Custodian to collateralize the
position.

While the Fund's hedging transaction may protect the Fund against adverse
movements in the general level of interest rates, such transaction could also
preclude the opportunity to benefit from favorable movements in the level of
interest rates. Due to the imperfect correlation between movements in the prices
of futures contracts and movements in the prices of the underlying U.S.
Government Securities or the related securities being hedged, the price of a
futures contract may move more than or less than the price of the securities
being hedged. In addition, the prices of interest rate futures contracts may not
correlate perfectly with movement in the underlying security due to certain
temporary market distortions. Such temporary distortions may reduce the value of
an interest rate futures contract as a hedging device over a very short time
period. Options on futures contracts are generally subject to the same risks
applicable to all option transactions. For a discussion of the inherent risks
involved with futures contracts and options thereon, see "Appendix B."

(1) Invest more than 5% of its total assets in the securities of any one issuer
(other than obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities) or purchase more than 10% of the voting
securities or more than 10% of any class of securities of any one issuer.

(2) Invest more than 5% of its total assets in securities of companies having a
record, together with predecessors, of less than three years continuous
operation. This restriction shall not apply to any obligation of the United
States government, its agencies or instru-
mentalities.

(3) Invest more than 5% of its total assets in restricted securities.

(4) Issue senior securities, as defined in the Act, except that the Funds may
enter into repurchase and reverse repurchase agreements, lend portfolio
securities, and leverage and borrow. For purposes of this restriction, the
Fund will not borrow money except as provided under the Fund's policies
regarding leverage (up to 20% of the Fund's total assets), and reverse
repurchase agreements (up to 33 1/3% of the Fund's net assets) so long as
total borrowings do not exceed 33 1/3% of the Fund's net assets.

Investors may refer to additional investment restrictions in the Statement of
Additional Information.

15
<PAGE> 49

THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

GENERAL. The Trust, a Massachusetts business trust, is registered with the
Securities and Exchange Commission as an open-end diversified, management
investment company, commonly called a mutual fund. The Trust has six series of
shares, one series of which represents interest in the Fund. Through the
purchase of shares of the Fund, investors can participate in the investment
performance of the portfolio of investments held by the Fund. The management and
affairs of the Trust and of the Fund are supervised by the Board of Trustees.
Information about each of the Trustees and Officers is set forth in the
Statement of Additional Information.

INVESTMENT ADVISER. Transamerica Fund Management Company, the Investment
Adviser, is a wholly owned subsidiary of Transamerica Asset Management Group,
Inc., which is a wholly owned subsidiary of Transamerica Corporation ("Trans-
america"), one of the nation's largest and most respected financial services
organizations with more than $38 billion in assets. Transamerica engages through
its subsidiaries in two primary businesses: finance and insurance. The
Investment Adviser manages the investment of the Fund's assets, provides
administrative services and supervises the Fund's daily business affairs.
Investment decisions are made by a committee with no one person being solely
responsible for making recommendations to the committee. These services are
subject to general review by the Board of Trustees. The Investment Adviser
(including its predecessors) has been engaged in the investment advisory
business since 1949 and currently serves as investment adviser to a broad range
of mutual funds having investment portfolios.

ADVISORY FEE. For the advisory and certain administrative services the
Investment Adviser provides to the Fund, the Fund pays a monthly fee, computed
at the following annual rates:

ANNUAL FEE AS
A PERCENTAGE OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
----------- ---------------
<S> <C>
$0 - $75 million................ .6250%
$75 - $150 million.............. .5625%
$150 million and over........... .5000%
</TABLE>

For the fiscal year ended March 31, 1994, investment advisory fees paid by the
Fund amounted to .60% of its average daily net assets.

ADMINISTRATIVE SERVICES AGREEMENT. The Fund reimburses each of the Investment
Adviser and Transamerica Fund Distributors, Inc. pursuant to a separate
Administrative Services Agreement for actual expenses incurred in providing
certain administrative services, such as accounting and bookkeeping services,
communications in response to shareholder inquiries and certain printing
expenses of various fund reports. In addition, the Fund may directly bear the
costs of certain data processing and pricing information services used in
providing accounting and bookkeeping services. For the fiscal year ended March
31, 1994, administrative service fees paid by the Fund amounted to .07% of its
average daily net assets.

16
<PAGE> 50

Shares. As a result, shareholders bear only the 12b-1 fees associated with the
class of shares they hold, and such fees paid by one class are not used to pay
the 12b-1 fees of the other class. Payments made by the Fund under the Class A
Plan and the Class B Plan may be used to pay fees to, or as reimbursement for
certain services provided by, banks and other depository institutions. Although
the Glass-Steagall Act limits the ability of banks and other depository
institutions to act as underwriters or distributor of securities, the Fund does
not believe these limitations would prohibit such depository institutions
from providing such services or entering into compensation arrangements with
the Distributor as described under "Information About Shares of the Fund --
Purchase of Shares." In addition, state securities laws may differ from the
interpretation of federal law and depository institutions selling shares of the
Fund may be required to register as dealers under state laws. The Plans have
each been approved by the Fund's Board of Trustees (the "Trustees" or "Board of
Trustees"), including a majority of the Trustees who are not "interested
persons" of the Fund (as defined by the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plans or any agreement
relating thereto (the "Independent Trustees"), and have also been approved by
the shareholders of Class A and Class B Shares, respectively. In approving the
Plans, the Board of Trustees, including a majority of the Independent Trustees,
received and considered all pertinent information and determined that there was
a reasonable likelihood that each of the Plans would benefit the Fund and its
shareholders by enabling the Fund to achieve economics of operations and
management through growth of the Fund's assets. The Plans may be continued from
year to year, provided that such continuances are approved at least annually by
the Board of Trustees, including a majority of the Independent Trustees, and
each may be terminated at any time by the Independent Trustees or by vote of
shareholders.

17
<PAGE> 51

ternative -- Class B Shares") and Distribution Fees.

18
<PAGE> 52

imburse the Distributor for fees it pays to Dealers for personal services they
render to customers who are shareholders of the Fund or for services relating to
the maintenance of shareholder accounts of such customers, in amounts which may
not exceed (as to any Dealer) .25% of the average annual net asset value of
Class B Shares held by such Dealer's customers. The foregoing limitations
applicable to Service Fees do not prohibit the Distributor from making payments
to Dealers from its own resources in excess of these limitations or for other
services.

For the fiscal year ended March 31, 1994, payments made by the Fund under the
Class A Plan amounted to .25% of the average daily net assets attributable to
Class A Shares. For the period June 30, 1993 to March 31, 1994, payments made by
the Fund under the Class B Plan amounted to .75% of the average daily net assets
attributable to Class B Shares.

EXPENSES. The Fund's expenses which are accrued daily are deducted from its
total income before dividends are paid. These expenses include: the fees paid to
the Investment Adviser; trustees' fees; taxes; legal fees; transfer agent,
custodian, bookkeeping and administrative services fees; distribution and
brokerage fees; and other expenses relating to the operations of the Fund which
are not expressly assumed by the Investment Adviser under its investment
advisory agreement with the Fund. Total operating expenses (which excludes
interest expense) for the fiscal year ended March 31, 1994, for Class A Shares,
including investment advisory fees, amounted to 1.25% of the Fund's Class A
average daily net assets. Total operating expenses for the period June 30, 1993
to March 31, 1994, for Class B Shares amounted to 1.50% of the Fund's Class B
average daily net assets.

PORTFOLIO TRANSACTIONS. Orders for the Fund's portfolio securities transactions
are placed by the Investment Adviser. Subject to seeking the most favorable
price and execution available, the Investment Adviser may consider sales of
shares of the Fund as a factor in the selection of broker/dealers. (For a
further discussion, see the Statement of Additional Information "Portfolio
Transactions, Brokerage Allocation and other Practices").

INFORMATION ABOUT SHARES OF THE FUND
- --------------------------------------------------------------------------------

NET ASSET VALUE

The net asset value of the Fund is computed once daily as of the close of
trading (presently 4:00 p.m. New York Time) on each day that the New York Stock
Exchange is open for business. The Fund will also compute its net asset value on
other days if a purchase or redemption request is received on that day and there
is a sufficient degree of trading in securities held by the Fund. Net asset
value per share is calculated by dividing the market or fair value of all of the
Fund's portfolio securities plus the value of its other assets (including
dividends and interest received or accrued), less all liabilities (including
accrued expenses but excluding capital) by the number of shares of the Fund
outstanding. The Board of Trustees has established procedures for the valuation
of the Fund's securities, based in general on market or estimated value (see
"Net Asset Value" in the Statement of Additional Information).

19
<PAGE> 53

will generally be lower than the net asset value of Class A Shares as a result
of the larger distribution fee accrual with respect to Class B Shares. (However,
Class B shareholders will generally receive more shares at the time of
purchase.) It is expected, however, that the net asset value per share of the
two classes will tend to converge immediately after the recording of dividends
which will differ by approximately the amount of the distribution expense
accrual differential between the classes.

PURCHASE OF SHARES
- --------------------------------------------------------------------------------

GENERAL. Shares of the Fund are offered at a price equal to their net asset
value (next determined following receipt of an order by The Shareholder Services
Group (the Fund's Transfer Agent) or the investor's dealer) plus a sales charge
which, at the option of the purchaser, may be imposed either at the time of
purchase (the "initial sales charge alternative") or on a contingent deferred
basis (the "deferred sales charge alternative"), as described under "Redemption
and Repurchase of Shares". Shares of the Fund are continuously offered for sale
by the Distributor and are available for purchase through eligible financial
service firms such as securities broker/dealer firms and banks which have
entered into selected dealer agreements with the Distributor. Dealers are
responsible for transmitting orders promptly (orders transmitted to and received
by the Transfer Agent prior to 4:00 p.m. New York time will receive that day's
purchase price.) The Distributor, at its expense, may provide additional
promotional incentives or payments to dealers that sell shares of the Fund. In
some instances, these incentives or payments may be offered only to certain
dealers who have sold or may sell significant amounts of shares of the Fund or
other Transamerica mutual funds.

Shares may be purchased by mailing a check, made payable to the Fund, noting the
existing account number and if opening a new account a completed application
form, to Transamerica Funds Shareholder Services either at the post office
address shown on the back page of this Prospectus or, if delivering by express
mail, the street address: Transamerica Funds Shareholder Services, One American
Express Plaza, Providence, R.I. 02903. Certificates for shares will not be
issued unless requested by shareholder in writing and then only for full shares.

The initial purchase must be at least $1,000 with subsequent investments of no
less than $50 ($250 and $25, respectively, for tax-deferred retirement
programs). The minimum investment amounts are waived for tax-deferred retirement
programs involving the submission of additional investments by means of group
remittal statements. Minimum initial and subsequent purchase amounts will be
reduced to $25.00 for programs providing for regular periodic investments.
(i.e., payroll deduction plans and/or investment by bank draft). See
"Shareholder Services -- Automatic Investment Plans" and "Payroll Deduction
Plans" under Shareholder Services.

FEDWIRE PURCHASES. Investors may make payment for initial and subsequent
investments by federal funds wire. Investors should first notify Account
Services (1-800-343-6840) of the new account request (if applicable) and the
intended wire purchase. To assure proper credit, banks wiring federal funds
should be instructed to include:

(1) name of the Fund,

(2) name of the shareholder (as registered exactly in the account), and
shareholder's account number, or;

(3) if opening an account, the name and address in which the account is being
registered and the taxpayer identification number of the investor (a
completed application must be mailed to the Transfer Agent after completing
the wire arrangements).

20
<PAGE> 54

Federal funds may be wired to: *

Boston Safe Deposit & Trust Company
ABA Routing Number: 011001234
Account Number: 159565

* Except during such times or holidays when Boston Safe Deposit and Trust
Company ("Boston Bank") is not open for business.

The two classes of shares have the same rights, except that each class bears
separate 12b-1 fees of the Class A Plan or Class B Plan, respectively, and has
exclusive voting rights with respect to such plan. The expenses of distribution
and servicing of Class A and Class B Shares are paid, in the case of Class A
Shares, from the proceeds of the initial sales charge and the ongoing 12b-1
service fees under the Class A Plan and, in the case of Class B Shares, from
the proceeds of the 12b-1 fees under the Class B Plan and the contingent
deferred sales charge incurred upon redemption within six years of purchase.
The net income attributable to each class and the dividends payable on the
shares of each class will be reduced by the amount of the 12b-1 fees of each
class (see "The Fund and Its Management -- Distributor and Distribution
Plans"). Class B Shares bear the expenses of higher 12b-1 fees which will cause
the Class B Shares to have a higher expense ratio and to pay lower dividends
than the Class A Shares (See "Dividends, Distribution and Tax Status"). The two
classes also have separate exchange privileges (See "Shareholder Services --
Exchange Privilege"). Financial representatives will receive different
compensation for selling Class A and Class B Shares. Except for those
differences (and related voting rights) each share of the Fund, whether Class A
or Class B, represents a proportional interest in the investment portfolio of
the Fund. On an ongoing basis, the Trustees will review and seek to assure that
no conflict of interest arises between the Class A and Class B Shares.

21
<PAGE> 55

1.00% of the average daily net assets allocable to Class B Shares for the eight
years following initial purchase and, for a six-year period, a contingent
deferred sales charge. IN THIS REGARD, INVESTORS SHOULD UNDERSTAND THAT UNDER
CERTAIN MARKET CONDITIONS OR DURING THE TIME THE INVESTMENT IS HELD, THE
ACCUMULATED ONGOING 12B-1 FEES OF CLASS B SHARES MAY EXCEED THE MAXIMUM INITIAL
SALES CHARGES AND ONGOING 12B-1 FEES OF CLASS A SHARES. SEE "INFORMATION ABOUT
SHARES OF THE FUND -- PURCHASE OF SHARES." The Fund provides each holder of
Class B Shares an automatic exchange of their Class B Shares for Class A Shares
at the end of the eight year period following the initial purchase of their
Class B Shares (such exchange occurs unless expressly waived by the
shareholder.) This exchange is not subject to federal taxes as in accordance
with a private letter ruling received by the Fund from the Internal Revenue
Service. See "Information About Shares of the Fund -- Purchase of Shares" and
"Shareholder Services -- Class B Automatic Exchange."

<CAPTION>
SALES CHARGE AS
A PERCENTAGE OF
-------------------

NET
AMOUNT OFFERING DEALER
AMOUNT OF PURCHASE INVESTED PRICE DISCOUNT
- ------------------ -------- -------- --------
<S> <C> <C> <C>
Less than $100,000.......... 4.99% 4.75% 4.25%
$100,000 but less than
$250,000.................. 3.90% 3.75% 3.25%
$250,000 but less than
$500,000.................. 2.83% 2.75% 2.35%
$500,000 but less than
$1,000,000................ 2.04% 2.00% 1.75%
$1,000,000 or more.......... * See below*
<FN>
* Purchases of $1 Million or More.

</TABLE>

On purchases by a single purchaser aggregating $1 million or more, the
Distributor will pay securities dealers an amount on a cumulative basis equal to
1% of the first $3 million, plus .5 of 1% of the next $2 million, plus .25 of 1%
on amounts over $5 million. With respect to shares purchased at the $1 million
plus breakpoint, a contingent deferred sales charge ("CDSC") will be imposed on
the proceeds of the redemption of certain shares so purchased if they are
redeemed within 12 months of the end of the calendar month of their purchase, in
an amount equal to 1% of the lesser of (a) the net asset value of the shares at
the time of purchase or (b) the net asset value of the shares at the time of
redemption ("CDSC Shares"). The CDSC would be deducted from the redemption
proceeds otherwise payable to the shareholder and would be retained by the
Distributor. In addition, no CDSC will be imposed when a shareholder redeems (a)
CDSC shares acquired through reinvestment of income dividends or capital gains
distributions; and (b) shares acquired by exchange from any mutual fund sold
with an initial sales charge and distributed by the Distributor. The CDSC does
not apply to purchases at net asset value described under "Waiver of Initial
Sales Charge" and will be waived in the case of redemptions of shares in
connection with (i) distributions to participants or beneficiaries of certain
qualified retirement plans, and returns of excess contributions made to these
plans, and (ii) involuntary redemption of shares if the aggregate net asset
value of shares held in the account is less than the required minimum. In
determining whether a CDSC is payable on any redemption, the Fund will first
redeem shares not subject to any charge. Although any CDSC shares being
exchanged are not subject to any charge, they will be subject to the applicable
CDSC when such acquired shares are eventually redeemed. For purposes of
calculating the CDSC on such redemptions, the original purchase date of the
initial fund investment will be used in lieu of the date the redeemed shares
were acquired by exchange.

22
<PAGE> 56

Waiver of Initial Sales Charges. No sales charge is applicable to any sale of
the Fund's Class A Shares to (1) trustees, employees and former employees (and
their families) of the Fund or Transamerica Fund Management Company or
Transamerica Investment Services or Transamerica Corporation, (2) Transamerica
Fund Management Company, its Houston-based parent or affiliates or to their
respective employees (and employees' families) or to their clients (including
(a) securities dealers having sales agreements with the Distributor and (b)
employees of financial institutions which are engaged either directly by means
of sales agreements with the Distributor or indirectly by separate arrangements
with a broker/dealer in the sale of the Fund's Class A shares and (c)
institutional clients of certain consulting firms) and (3) participants in
certain (employee) retirement plans sponsored by Transamerica Corporation or
its subsidiaries and (4) investors purchasing shares with proceeds of
redemptions from non-Transamerica mutual funds which impose front-end sales
charges or deferred sales charges. In addition, sales charges do not apply to
Class A Shares of the Fund purchased in accounts upon which a broker/dealer or
investment adviser charges an account management fee, provided the
broker/dealer has a Fee-based Program Agreement with the Distributor. Class A
Shares are also offered at net asset value to participants in employee benefit
plans qualified under Section 401 of the Internal Revenue Code subject to
certain criteria established by the Distributor. See the Statement of
Additional Information, "Purchase of Shares -- Purchase at Net Asset Value" for
a more complete description of investors eligible to purchase shares at net
asset value. To be eligible to purchase shares of the Fund without sales charge
as described above, the investor or the investor's broker must establish such
eligibility by advising the Distributor at the time shares are purchased.

Proceeds from the contingent deferred sales charge are paid to the Distributor
and are used in whole or in part by the Distributor related to providing distri-

23
<PAGE> 57

bution-related services to the Fund in connection with the sale of Class B
Shares, such as the payment of compensation to securities dealers for selling
such Shares. The combination of the contingent deferred sales charge and the
distribution fee and service fee facilitates the ability of the Fund to sell
Class B Shares without a sales charge being deducted at the time of purchase
(see "The Fund and Its Management -- Distributor and Distribution Plans").

REDEMPTION AND REPURCHASE OF SHARES
- --------------------------------------------------------------------------------

TELEPHONE REDEMPTION. Shares of the Fund in amounts of $50,000 or less and for
which no share certificates have been issued may be redeemed by telephone
provided a telephone authorization form

24
<PAGE> 58

is on file with the Fund. Proceeds from telephone redemptions will be mailed to
the shareholder's address of record. The Fund and/or the Transfer Agent reserve
the right to refuse telephone requests at any time. See "Telephone Privileges"
for further information concerning authenticity of instructions received by
telephone. Information concerning redemptions can be obtained by contacting the
Fund at 1-800-343-6840.

25
<PAGE> 59

receipt of a written request for reinstatement and the appropriate payment.
Shares being acquired pursuant to the reinstatement privilege must be of the
identical Class as those which were redeemed within the previous sixty days.

CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE. A CDSC is imposed on all
redemptions of Class B Shares after the following exempt dollar amounts have
been subtracted:

(1) the value at the time of purchase of all shares in the account purchased
more than six years (from date of purchase) prior to the redemption;

(2) the value at the time of reinvestment of all shares in the account acquired
through reinvestment of dividends or capital gains distributions; and

(3) the net increase, if any, of the value of all shares in the account over the
purchase price of such shares.

Redemptions are processed in a way that maximizes the amount of redemption that
will not be subject to a CDSC. For example, it is assumed that each redemption
has been made:

(1) first from the exempt amounts referred to in clauses (1), (2) and (3) above
and

(2) second through liquidation of those shares in the account within the six
years preceding the redemption on a first-in-first-out basis.

<TABLE>
Any CDSC required to be imposed on share redemptions will be assessed on the
purchase price of the shares redeemed according to the following schedule:

CONTINGENT
YEAR OF REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
----------------- --------------
<S> <C>
First.......................... 5%
Second......................... 4%
Third.......................... 3%
Fourth......................... 3%
Fifth.......................... 2%
Sixth.......................... 1%
Seventh and following.......... 0%
</TABLE>

When a CDSC is imposed on a repurchase or a redemption, the following occurs:

(1) the total dollar amount of repurchase or
redemption proceeds will be remitted to the repurchasing or redeeming
shareholder; and

(2) the CDSC, if any, will be deducted from the remaining share balance in the
share account, unless a repurchase or redemption, (a) liquidates the account
completely or (b) reduces the account to such an extent that liquidation of
the remaining shares in the account would not equal the amount of the CDSC
due (in which case, the CDSC will be deducted from the redemption proceeds).

If a partial redemption (or exchange) by a shareholder results in a remaining
account balance of less than the amount of the CDSC owed by the shareholder at
the time of the redemption (or exchange)

26
<PAGE> 60

on the shares remaining in the account, the Fund reserves the right to require
the shareholder to redeem (or exchange) all of the shares in the account. The
Fund does not believe that this constitutes an involuntary redemption.

The CDSC will be paid to the Distributor or to the Fund. (See "Distribution
Plan").

Waiver of CDSC. The CDSC will be waived (a) in the event of the death or total
disability (as evidenced by a determination by the Federal Social Security
Administration) of the shareholder (including a registered joint owner) and (b)
for certain distributions from deferred compensation retirement plans. No CDSC
will be imposed where shares are redeemed in connection with a merger or
reorganization of the Fund into another investment company which imposes a CDSC
and the investor receives shares of the investment company in the transaction.
In such cases any applicable CDSC will be imposed when an investor redeems
shares acquired in such a transaction. In addition, the CDSC is waived on
redemptions made (1) by shareholders (including retirement plan account holders)
having accounts as Systematic Withdrawal Plans ("SWP") with payments of an
annual amount less than or equal to 12% of the value of the account determined
at the time of SWP authorization (subject to subsequent calendar year end
adjustments) and available on a monthly, quarterly, semi-annual or yearly basis;
and (2) as distributions from employer sponsored retirement plans in connection
with the participant's separation of service at age 55 or over from his or her
employer. To be eligible for the waiver, the account holder or the dealer must
notify the Distributor of eligibility at the time of redemption request. The
above waivers of CDSC are subject to change upon 60 days written notice to
shareholders. (See the Statement of Additional Information, "Redemption and
Repurchase of Shares" for a more complete description of the Fund's shareholders
on whose shares a CDSC will not be imposed.)

SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

The Fund offers its shareholders the following services and privileges: (1)
Reinvestment of Dividends and Distributions at net asset value; (2) Automatic
Investment Plan; (3) Exchange Privilege; (4) Systematic Exchange Program; (5)
Systematic Withdrawal Plan; (6) Tax Sheltered Retirement Plans; (7) Payroll
Deduction Plans; and (8) Class B Automatic Exchange. Further information
regarding the above services and privileges is set forth in the Statement of
Additional Information which may be obtained by contacting the Fund at the
address or telephone number set forth on the cover page of this Prospectus.

27
<PAGE> 61

shares of other Transamerica funds sold with an initial sales charge ("Class A
Shares"). Such other Class A Shares may also be exchanged for Class A Shares of
the Fund provided that any sales charge differential (not previously paid) is
paid by the shareholder. Class B Shares may be exchanged without imposition of
the Fund's CDSC for Class B Shares or shares of other Transamerica funds which
are subject to a CDSC ("CDSC Funds"). Exchanges between CDSC Funds having
different CDSC schedules will retain their respective original CDSC schedules.
Any applicable contingent deferred sales charge payable upon the redemption of
Class B Shares exchanged will be calculated from the date of the initial
purchase. Class B Shares may not be exchanged into money market funds other than
Transamerica Money Market Fund B. See "Shareholder Services -- Exchange
Privilege" in the Statement of Additional Information.

Exchanges may be accomplished by telephone request (see below) or by a written
request from the account owner(s). Forms for both written and telephone
exchanges are available from the Fund upon request. Share certificates, if
issued, must be returned to the Fund prior to any exchange of such shares. There
is currently no service fee for an exchange; however, dealers or other firms may
charge for their services in expediting exchange transactions. In addition, the
Fund reserves the right to impose a service fee. Exchanges are, in effect, a
redemption and purchase of shares in the respective funds. As such, the
limitations and restrictions applicable generally to purchases and redemptions
apply, and any exchange constitutes a sale upon which a gain or loss will be
realized for federal income tax purposes.

THIS EXCHANGE PRIVILEGE IS NOT AVAILABLE IN ANY JURISDICTION WHERE SHARES OF THE
OTHER TRANSAMERICA FUND BEING ACQUIRED ARE NOT QUALIFIED FOR SALE. EACH
TRANSAMERICA MUTUAL FUND RESERVES THE RIGHT TO REJECT ANY ORDER TO ACQUIRE ITS
SHARES THROUGH EXCHANGE, OR OTHERWISE TO MODIFY, RESTRICT OR TERMINATE THE
EXCHANGE PRIVILEGE, AT ANY TIME AFTER 60 DAYS' NOTICE TO SHAREHOLDERS. Because
other Transamerica funds have investment objectives and policies which may
differ from those of the Fund, shareholders should carefully review the
prospectus of the other Transamerica fund before effecting an exchange.

28
<PAGE> 62

Funds or terminate their participation in the Program at any time by directing
the Transfer Agent in writing.

CLASS B AUTOMATIC EXCHANGE is a tax-free exchange of Class B Shares for Class A
Shares of the same fund that occurs at the end of the calendar quarter eight
years after the original purchase date of the Class B Shares, the "Automatic
Exchange Date." At the Automatic Exchange Date the Class B Shares will be
exchanged for an equal dollar value of Class A Shares (which may or may not be
the same number of shares). The Class A Shares have lower expenses than Class B
Shares but are otherwise substantially identical. Class A Shares, therefore,
will have a slightly higher total return than Class B Shares and may have a
slightly higher dividend as a result. Shareholders who have made more than one
purchase may hold both Class B Shares and Class A Shares at the same time. The
Class B Automatic Exchange is available to all Class B Shareholders and requires
no action whatsoever on a shareholder's part. If a shareholder wants to decline
taking advantage of this privilege, however, the Fund must be notified in
writing within three months prior to the Automatic Exchange Date.

Further information regarding the above services and privileges is set forth in
the Statement of Additional Information.

TELEPHONE PRIVILEGES
- --------------------------------------------------------------------------------

Neither the Fund, Transfer Agent, nor the Investment Adviser will be responsible
for the authenticity of telephone instructions (including telephone
redemptions). Shareholders should be aware that transactions authorized by
telephone instructions believed to be authentic by the Fund can subject the
shareholder to the risk of loss if such telephone instructions are subsequently
found to be inauthentic.

1. Recording all calls for telephone transactions (each transaction is thereby
indexed by the time of the call placed);

2. Requesting the caller's name and phone number as verification of the origin
of the telephone call;

29
<PAGE> 63

3. Requesting the name of the Fund and the shareholder's account number, the
name(s) in which the account is registered and the tax identification number
listed on the account;

4. Mailing written confirmation (statements) of each transaction on the
following business day to the registration address and the broker/dealer of
record.

DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
- --------------------------------------------------------------------------------

Dividends paid by the Fund with respect to Class A and Class B Shares, to the
extent any dividends are paid, will be calculated in the same manner at the same
time on the same day and will be in the same amount, except that each class will
bear its own distribution expenses and transfer agency expenses. Although the
per share dividends on Class B Shares will be lower than the per share dividends
on Class A Shares due to the higher Distribution Fee payable on Class B Shares,
the actual difference in total dividends generated by the investment will be
less than that suggested by the per share difference since an investor is
usually able to purchase more Class B Shares than Class A Shares for the same
investment amount as Class B Shares are not subject to an initial sales charge.

When a dividend or capital gains distribution is paid, the net asset value per
share is reduced by the amount of the payment. The capital gains distribution
will generally be equal for both Class A and Class B Shares. Dividends and/or
Distributions are payable to shareholders of record at the day of such dividend
declaration. Dividends and capital gains distributions, if any, are
automatically reinvested in additional shares of the Fund at net asset value per
share on the reinvestment date unless a shareholder requests otherwise by
specifying instructions in the Account Application or by writing to the Transfer
Agent. (See "Shareholder Services" in the Statement of Additional Information.)

30
<PAGE> 64

long-term capital gains, which are designated by the Fund as capital gains
dividends are taxable to shareholders as long-term capital gains, regardless of
the length of time a shareholder has held the shares. After the end of each
calendar year, shareholders will receive a statement indicating the amount and
federal tax status of all distributions received during such year. This includes
information on the portion taxable as ordinary income and the portion taxable as
long-term capital gains.

Gains and losses on the sale, lapse or other termination of securities options
and future contracts will be generally treated as gains or losses from the sale
of securities. Futures contracts, and options thereon, held by the Fund at the
end of each fiscal year may be required to be "marked to market" for federal
income tax purposes (i.e., treated or deemed as having been sold at market
value). The foregoing is an abbreviated summary of the tax consequences of the
Fund's securities transactions.

EACH SHAREHOLDER IS ADVISED TO CONSULT WITH HIS/HER TAX ADVISER CONCERNING THE
EFFECT OF OWNERSHIP OF SHARES OF THE FUND.

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION OF THE TRUST. The Trust, organized as a Massachusetts business
trust on November 29, 1984, is a beneficiary of an order from the Securities and
Exchange Commission permitting the issuance and sale of multiple classes of
shares. The Fund operates as one series of the Trust. Shares of other series of
the Trust represent interests in Transamerica Government Securities Trust,
Transamerica Adjustable U.S. Government Trust, Transamerica U.S. Government
Trust, Transamerica Intermediate Government Trust and
Adjustable U.S. Government Fund.

The Board of Trustees is authorized to create additional series of shares and
additional classes within any series at any time without approval by
shareholders. Four series of the Trust currently issue multiple classes. All
shares of beneficial interest $0.01 par value per share of the Trust have equal
voting rights and have no preemptive or conversion rights. All shares represent
an interest in the same assets of the Fund and are identical in all respects
except that each class bears different distribution expenses and has exclusive
voting rights with respect to its respective distribution plan. Shares issued
are fully paid, non-assessable, fully transferable and redeemable at the option
of the holder. The Trust is generally not required to hold annual meetings of
shareholders; however, the Board of Trustees may call special meetings of
shareholders for action by shareholder vote if so requested in writing by the
holders of 10% or more of the outstanding shares of the Trust or as otherwise as
may be required by applicable laws or the Declaration of Trust.

31
<PAGE> 65

obligations of the Trust and requires that notice of such disclaimer be given in
each instrument entered into or executed by the Trust. The Declaration of Trust
also provides for indemnification out of the Trust's property for any
shareholder held personally liable for any Trust obligation. Thus, the risk of a
shareholder being personally liable as a partner for obligations of the Trust is
limited to the unlikely circumstance in which the Trust itself would be unable
to meet its obligations.

TRANSFER AGENT. Transfer agent and dividend disbursing functions are performed
by The Shareholder Services Group, Inc., One American Express Plaza, Providence,
Rhode Island 02903-1135.

INDEPENDENT AUDITORS. Ernst & Young LLP, 1221 McKinney, Suite 2400, Houston,
Texas 77010, has been selected as the independent auditors of the Fund.

CUSTODIAN. Texas Commerce Bank National
Association, P.O. Box 2558, Houston, Texas 77252 is the Custodian for the Fund.
Cash balances with the custodian in excess of $100,000 are unprotected by
Federal Deposit Insurance Corporation. Such uninsured balances may at times be
substantial.

SHAREHOLDER INQUIRIES. All inquiries regarding the Fund including questions
concerning share ownership, dividends, transfer of ownership or share redemption
should be directed to the Fund at the telephone number or address on the cover
page of this Prospectus. Each month, the Fund prepares an unaudited list of its
portfolio securities holdings which is available without charge by contacting
the Fund.

REPORTS TO SHAREHOLDERS. The Fund will send
its shareholders annual and semi-annual reports;
the financial statements which will appear in the annual reports will be audited
by independent auditors.

PERFORMANCE INFORMATION. The Fund's annual report contains a discussion of the
Fund's performance and is available without charge upon request. From time to
time the Fund may advertise its yield and total return which are computed
separately for Class A and Class B Shares and in accordance with applicable
regulatory requirements. Yield is computed by annualizing the result of dividing
the net investment income per share over a 30-day period by the maximum offering
price per share on the last day of the period. The Fund may also advertise in
supplemental sales literature a distribution rate which is computed in the same
manner as yield except that actual income dividends declared per share during
the applicable period are substituted for net investment income per share. The
distribution rate is computed separately for Class A and Class B Shares. Yield
and distribution rate quotations for Class B Shares do not reflect any
contingent deferred sales charge which, if included, would be reflected in a
lower rate quotation.

The cumulative total return shows the dollar or percentage change in value over
a specified period of time (i.e., one, five or ten years or since the Fund's
inception), assuming reinvestment of all dividends and distributions on the
reinvestment dates and payment of the maximum sales charges applicable to
purchases and redemptions. Average annual total return shows the Fund's
cumulative return dividend over the number of years included in the given period
("standardized performance"). Total returns may, in conjunction with
standardized performance, be calculated for other specified periods and/or
excluding the effect of sales charges (which if included, would reduce the
performance quoted). Both the yield and total return are based on historical
earnings and are not indicative of future performance. The Fund will include
performance data for both Class A and Class B Shares in any advertisement or
information including performance data of the Fund. The Statement of Additional
Information contains more detailed information about the calculation of
performance. The Fund also may advertise its performance relative to certain
performance rankings and indexes compiled by independent organizations (such as
Lipper Analytical Services).

32
<PAGE> 66

Dividends paid by the Fund change in response to fluctuations in the income from
securities in its portfolio and in the expenses of the Fund; also the net asset
value of the Fund's shares will fluctuate. Consequently, any given quotation of
the total return should not be considered as representative of what the Fund's
total return may be for any specified period in the future.

33
<PAGE> 67

APPENDIX A

CORPORATE BOND AND COMMERCIAL PAPER RATINGS

MOODY'S INVESTORS SERVICE, INC.
("MOODY'S")
CORPORATE BOND RATINGS:

The ratings of Moody's Investors Service, Inc. and Standard & Poor's Corporation
represent their opinions as to the quality of various debt instruments they
undertake to rate. It should be emphasized that ratings are not absolute
standards of quality. Consequently, debt instruments with the same maturity,
coupon and rating may have different yields while debt instruments of the same
maturity and coupon with different ratings may have the same yield.

MOODY'S INVESTORS SERVICE, INC.

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment at some time in the future.

Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B--Bonds which are rated B generally lack the characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

STANDARD & POOR'S CORPORATION

AAA--Debt rated AAA has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and repay principal is
extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in

34
<PAGE> 68

circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC--Debt rated BB, B and CCC is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CCC the next to highest degree of speculation. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

COMMERCIAL PAPER RATINGS:

A-1--Is judged by S&P to be the highest investment grade possessing the highest
relative strength.

35
<PAGE> 69

APPENDIX B

SPECIAL CONSIDERATIONS APPLICABLE TO OPTIONS
ON U.S. GOVERNMENT SECURITIES

TREASURY BONDS AND NOTES. Because trading interest in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the Exchanges will not continue indefinitely to introduce options with new
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each issue of bonds or notes will thus be phased out as new options are
listed on more recent issues, and options representing a full range of
expirations will not ordinarily be available for every issue on which options
are traded.

GNMA CERTIFICATES. The following special considerations will be applicable to
the writing of call options on GNMA Certificates when and if trading of options
thereon commences. Since the remaining principal balance of GNMA Certificates
declines each month as a result of mortgage payments, the Fund as a writer of a
GNMA call holding GNMA Certificates as "cover" to satisfy its delivery
obligation in the event of exercise may find that the GNMA Certificates it holds
no longer have a sufficient remaining principal balance for this purpose. Should
this occur, the Trust will purchase additional GNMA Certificates from the same
pool (if obtainable) or replacement GNMA Certificates in the cash market in
order to maintain its cover. If for any reason, the Fund were no longer covered,
the Fund will either enter into a closing purchase transaction or replace such
Certificate with a Certificate which represents cover. When the Fund closes its
position or replaces such Certificate, it may realize an unanticipated loss and
incur transaction costs.

RISKS RELATING TO TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS.
Positions in futures contracts may be closed out only on an exchange or
board of trade which provides a market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid market
on an exchange or board of trade will exist for any particular contract or at
any particular time. In the event a liquid market does not exist, it may not be
possible to close a futures position, and in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
maintenance margin. In addition, limitations imposed by an exchange or board of
trade on which futures contracts are traded may compel or prevent the Fund from
closing out a contract which may result in reduced gain or increased loss to the
Fund. The absence of a liquid market in futures contracts might cause the Fund
to make or take delivery of the underlying securities at a time when it may be
disadvantageous to do so.

36
<PAGE> 70

APPENDIX C--DESCRIPTION OF DERIVATIVE SECURITIES
AND ASSET-BACKED SECURITIES

CMOS, REMICS AND MULTI-CLASS PASS THROUGH SECURITIES

The Fund may also invest in real estate mortgage investment conduits (REMICs),
collateralized mortgage obligations (CMOs) and multi-class pass through
securities. CMOs are obligations issued by special purpose trusts secured by
mortgages. REMICs own mortgages and elect REMIC status under the Internal
Revenue Code and are similar to CMOs in that they issue multiple classes of
securi-ties. Multi-class pass through securities are similar to CMOs in that
they are generally divided into several classes; however, they represent equity
interests in the pool of mortgage loans typically held in a trust (unless
indicated otherwise all references to CMOs include REMICs and multi-class pass
through securities). Government CMOs are issued by a U.S. Government agency or
instrumentality and private CMOs are issued by private, non government
corporations such as commercial banks, mortgage bankers or other financial
institutions. CMOs are issued in a number of classes or "tranches" with
different maturities. The classes or tranches are retired in sequence as the
underlying mortgages are repaid. Prepayment may shorten the stated maturity of
the obligation and can result in a loss of premium, if any has been paid.
Certain of these securities may have variable or floating interest rates and
others may be stripped (securities which provide only the principal or interest
feature of the underlying security). As part of the process of creating more
predictable cash flows on most of the tranches in a series of CMOs, one or more
tranches generally must be created that absorb most of the volatility in the
cash flows on the underlying mortgage assets. The yields on these more volatile
tranches are generally higher than prevailing market yields on government asset
backed securities with similar average lives. Because of the uncertainty of the
cash flows on these tranches, and the sensitivity thereof to changes in
prepayment rates on the underlying mortgage assets, the market prices of and
yield on these tranches tend to be highly volatile. CMOs, REMICs and multi-class
pass through securities issued by private entities are not considered U.S.
Government securities for purposes of the investment policies of the Fund and
may be purchased only if they are rated at the time of purchase in the two
highest grades by either Moody's or S & P. Privately issued securities which
have underlying assets consisting of conventional mortgage loans or whole loans
are not guaranteed by an entity having the credit status of a U.S. Government
agency. Such securities are generally structured with one or more types of
credit enhancement such as guarantees, insurance policies or letters of credit
obtained by the issuer or sponsor from third parties so that in the event of a
default on an underlying mortgage no loss would be borne until all credit
enhancement protecting such security is exhausted.

ZERO COUPON BONDS AND OTHER STRIPPED SECURITIES

37
<PAGE> 71

interest is accrued for federal income tax purposes. Its value to an investor
consists of the difference between its face value at the time of maturity and
the price for which it was acquired, which is generally an amount significantly
less than its face value (sometimes referred to as a "deep discount" price).
Investing in "zero coupon" Treasury securities may help to preserve capital
during periods of declining interest rates. For example, if interest rates
decline, GNMA Certificates owned by the Fund which were purchased at greater
than par are more likely to be prepaid, which would cause a loss of principal.
In anticipation of this, the Fund might purchase zero coupon Treasury
securities, the value of which would be expected to increase when interest rates
decline. Zero coupon Treasury securities do not entitle the holder to any
periodic payments of interest prior to maturity. Accordingly, such securities
usually trade at a deep discount from their face or par value and will be
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities which make periodic
distributions of interest. On the other hand, because there are not periodic
interest payments to be reinvested prior to maturity, zero coupon securities
eliminate the reinvestment risk and lock in a rate of return to maturity.
Current federal tax law requires that a holder (such as the Fund) of a zero
coupon security accrue a portion of the discount at which the security was
purchases as income each year even though the Fund received no interest payment
in cash on the security during the year.

Stripped mortgage-related and mortgage-backed securities (hereinafter referred
to as "Stripped Mortgage Securities") are derivative multi-class mortgage
securities. Stripped Mortgage Securities may be issued by agencies or
instrumentalities of the U.S. Government, or by private originators of, or
investors in, mortgage loans, including mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
Mortgage Securities are usually structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of Stripped Mortgage Securities will have one
class receiving some of the interest and most of the principal from the mortgage
assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and a rapid
rate of principal payments may have a material adverse effect on the securities'
yield to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the fund may fail to fully recoup its
initial investment in an IO, even if the IO is rated AAA or Aaa. Furthermore, if
the underlying mortgage assets experience slower than anticipated prepayments of
principal, the yield of a PO will be affected more severely than would be the
case with a traditional mortgage-backed security. IOs and POs have exhibited
large price changes in response to changes in interest rates and are considered
to be volatile in nature.

ASSET-BACKED SECURITIES

The Fund may invest in securities that represent individual interests in pools
of consumer loans and trade receivables similar in structure to mortgage-backed
securities. The assets are securitized either in a pass-through structure
(similar to a mortgage pass-through structure) or in a pay-through structure
(similar to the CMO structure). Although the collateral supporting asset-backed
securities generally is of a shorter maturity than mortgage loans and
historically has been less likely to experience substantial prepayments, no
assurance can be given as to the actual maturity of an asset-backed security
because prepayments of principal may be made at

38
<PAGE> 72

any time. Payments of principal and interest typically supported by some form of
credit enhancement, such as a letter of credit, surety bond, limited guarantee
by another entity or having a priority to certain of the borrower's other
securities. The degree of credit enhancement varies, and generally applies to
only a fraction of the asset-backed security's par value until exhausted. If the
credit enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest are not made
with respect to the underlying loans, the Fund may experience losses or delays
in receiving payment.

Asset-backed securities entail certain risks not presented by mortgage-backed
securities. Asset-backed securities do not have the benefit of the same type of
security interest in the related collateral. Credit card receivables are
generally unsecured and a number of state and federal consumer credit laws give
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the outstanding balance. In the case of automobile receivables, there
is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due to the large
number of vehicles involved in typical issuance, and technical requirements
under state laws. Therefore, recoveries on repossessed collateral may not always
be available to support payments on the securities. For a further discussion of
the risks of investing in asset-backed securities, see the Statement of
Additional Information. The Fund will invest in asset-backed securities only if
they are rated at the time of purchase in the two highest grades by a
nationally-recognized rating agency.

39
<PAGE> 73

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................. 2
Summary of Fund Expenses................. 3
Financial Highlights..................... 4
Investment Objective and Policies........ 6
Risk Factors........................... 8
Investment Practices and Restrictions.... 9
The Fund and Its Management.............. 16
Information About Shares of the Fund..... 19
Net Asset Value........................ 19
Purchase of Shares....................... 20
Redemption and Repurchase of Shares...... 24
Shareholder Services..................... 27
Telephone Privileges..................... 29
Dividends, Distributions and Tax
Status................................. 30
Additional Information................... 31
Appendix A............................... 34
Appendix B............................... 36
Appendix C............................... 37

</TABLE>

INVESTMENT ADVISER
- ------------------------
Transamerica Fund Management Company
1000 Louisiana
Houston, Texas 77002-5098
(713) 751-2400

DISTRIBUTOR
- ---------------
Transamerica Fund Distributors, Inc.
1000 Louisiana
Houston, Texas 77002-5098
(713) 751-2400

SHAREHOLDER INQUIRIES
- ---------------------------
Transamerica Funds Shareholder Services
P.O. Box 9656
Providence, RI 02940-9656
Or call 1-800-343-6840

No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in
this Prospectus or in official sales literature distributed by the
Fund's Distributor in connection with the offer of the Fund's shares,
and if given or made, such other information or representations must not
be relied upon as having been authorized by the Fund or its Distributor.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

1201

TRANSAMERICA INVESTMENT QUALITY
BOND FUND
A Series of Transamerica Bond Fund

PROSPECTUS
September 30, 1994
<PAGE> 74

TRANSAMERICA
U.S. GOVERNMENT TRUST

A Series of Transamerica Bond Fund

1000 Louisiana Houston, Texas 77002-5098 (713) 751-2400

- --------------------------------------------------------------------------------

Transamerica Bond Fund (the "Trust"), is a mutual fund consisting of
six separate portfolios of investments. This Prospectus relates to shares of
Transamerica U.S. Government Trust (the "Fund"), formerly Transamerica
Government Income Trust, whose primary investment objective is to earn a high
level of current income consistent with safety of principal. The Fund seeks to
achieve its investment objective by investing in debt obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The Fund
may also, in pursuit of its investment objective, engage in a variety of other
investment techniques in seeking to hedge against changes in the general level
of interest rates, including the purchase of put and call options on debt
securities and the sale of interest rate futures contracts. The Fund does not
currently engage in the writing of options and has undertaken not to commence
such investment activity without having first given sixty (60) days written
notice to shareholders in advance thereof. The investment policies and
techniques employed by the Fund may involve a greater degree of risk than those
inherent in more conservative investment approaches, such as money market
funds. Investors should be aware that a rise in interest rates can result in a
decrease of the value of the Fund's investment, in particular those of a
derivative nature, and in turn will result in a decrease in the Fund's net
asset value.

This Prospectus provides investors with the basic information they should know
before investing in the Fund. INVESTORS SHOULD READ IT AND KEEP IT FOR FUTURE
REFERENCE. A Statement of Additional Information containing further information
about the Trust and the Fund has been filed with the Securities and Exchange
Commission. Copies may be obtained without charge by contacting the Fund at the
address or telephone number listed below.

The Fund's investment adviser is Transamerica Fund Management Company (the
"Investment Adviser"). Transamerica Fund Distributors, Inc. (the "Distributor")
acts as principal distributor of shares of the Fund.

- --------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK OR FINANCIAL INSTITUTION, NOR ARE SHARES OF THE FUND FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE STATEMENT OF ADDITIONAL INFORMATION, DATED SEPTEMBER 30, 1994,
IS HEREBY INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.

PROSPECTUS DATED SEPTEMBER 30, 1994
<PAGE> 75

SUMMARY
- --------------------------------------------------------------------------------

THE TRUST. The Trust, a Massachusetts business trust, is registered with the
Securities and Exchange Commission as an open-end, diversified management
investment company.

INVESTMENT OBJECTIVE. The Fund's primary investment objective is to earn a high
level of current income, consistent with safety of principal by investing in a
portfolio of U.S. Government Securities and highest rated debt securities.

INVESTMENT ADVISER. Transamerica Fund Management Company, the Investment
Adviser, manages the investment of the Fund's assets, provides administrative
services and supervises the Fund's daily business affairs. The Investment
Adviser currently manages a broad range of mutual funds having multiple
investment portfolios representing approximately $3 billion under management.
(See "The Fund and its Management".)

REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any
time at the net asset value per share next determined after the redemption
request is received in proper form by The Shareholder Services Group (the
"Transfer Agent.") In certain cases, however, redemption proceeds from the Class
B Shares will be reduced by the amount of any applicable contingent deferred
sales charge. See "Redemption and Repurchase of Shares."

The aforesaid is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and Statement of Additional Information.

2
<PAGE> 76

<TABLE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

The following table illustrates the various expenses and fees a shareholder of
the Fund would bear directly or indirectly. The expenses and fees set forth in
the table below are for the fiscal year ended March 31, 1994, except as
otherwise noted.
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
INITIAL DEFERRED
SALES CHARGE SALES CHARGE
ALTERNATIVE ALTERNATIVE
-------------- --------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases.................. 4.75% None
Sales Charge Imposed on Reinvested Dividends............... None None
Deferred Sales Charge (as a percentage of original
purchase price).......................................... None 5.00%
Redemption Fee............................................. None None
Exchange Fee............................................... None None

ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets)
Management Fees(3)......................................... 0.65% 0.65%
12b-1 Fees(4).............................................. 0.25% 1.00%
Other Expenses............................................. 0.52% 0.52%
----- -----
Total Fund Operating Expenses.............................. 1.42% 2.17%
</TABLE>
<TABLE>
EXAMPLE A(5): You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period.
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A................................................ $61 $90 $121 $210
Class B................................................ $72 $98 $136 $231*
</TABLE>
<TABLE>
EXAMPLE B(5): You would pay the following expenses on the same investment in
Example A assuming no redemption:
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A................................................ $61 $90 $121 $210
Class B................................................ $22 $68 $116 $231*
<FN>
(1) Class A Shares have reduced initial sales charges for purchases in excess of $100,000. Purchases of $1 million or more
are not subject to a sales charge; however, a contingent deferred sales charge of 1% will be applied to redemptions within 12
months of such purchase (as described under "Initial Sales Charge Alternative -- Class A Shares"). Deferred sales charge on
Class B Shares declines from 5% during the first year to 0% after the sixth year in the following manner: 5%, 4%, 3%, 3%, 2%,
1%. See "Information About Shares of the Fund".
(2) Annual Operating Expenses of Class B Shares are based upon maximum allowed fees (if collected) and estimates of expenses
to be incurred in the current fiscal year.
(3) See "The Fund and Its Management -- Advisory Fee".
(4) 12b-1 fees are based on maximum allowed fees. For the fiscal year ended March 31, 1994, actual 12b-1 fees for Class A
Shares were 0.20%. See "The Fund and Its Management -- Distributor and Distribution Plans."
(5) Expenses in Example above should not be considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown above. Use of assumed annual return (5%) is mandated by the Securities and Exchange Commission.
Long-term shareholders of Class B Shares of the Fund may pay more in sales charges and 12b-1 fees than the economic equivalent
of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc. (the "NASD").

* Assumes tax-free automatic exchange of Class B Shares for Class A Shares after the eight year period following the
initial purchase of Class B Shares. If the exchange is declined, such Class B expenses would be $250.
</TABLE>

3
<PAGE> 77
<TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following financial highlights are for Transamerica U.S. Government Trust
Class A Shares for each of the eight fiscal years in the period ended March 31,
1994 and for the period from December 31, 1985 through March 31, 1986. No
information is shown for Class B Shares since no Class B Shares were outstanding
during the periods represented.

<CAPTION>
PERIOD
ENDED
YEAR ENDED MARCH 31, MARCH
-------------------------------------------------------------------------------- 31,
1994 1993 1992(3) 1991 1990 1989 1988 1987 1986(1)
------ ------ ------ ------ ------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share income and capital
changes for a share outstanding
during each period:
Net asset value, beginning of
period............................. $ 8.49 $ 8.16 $ 8.34 $ 8.18 $ 8.38 $ 8.88 $ 9.64 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income.............. 0.58 0.61 0.87 0.90 0.89 0.84 0.76 0.71 0.23
Net realized and unrealized
gain (loss) on securities........ (0.48) 0.43 (0.22) 0.11 (0.24) (0.45) (0.53) (0.14) 0.25
------ ------ ------ ------ ------ ------ ------ ------- --------
Total from Investment Operations. 0.10 1.04 0.65 1.01 0.65 0.39 0.23 0.57 0.48
LESS DISTRIBUTIONS
Dividends from net investment
income........................... (0.61) (0.71) (0.83) (0.85) (0.85) (0.84) (0.76) (0.71) (0.23)
Distributions from realized
gains............................ -- -- -- -- -- (0.05) (0.23) (0.40) (0.07)
------ ------ ------ ------ ------ ------ ------ ------- --------
Total Distributions.............. (0.61) (0.71) (0.83) (0.85) (0.85) (0.89) (0.99) (1.11) (0.30)
------ ------ ------ ------ ------ ------ ------ ------- --------
Net asset value, end of period....... $ 7.98 $ 8.49 $ 8.16 $ 8.34 $ 8.18 $ 8.38 $ 8.88 $ 9.64 $ 10.18
====== ====== ====== ====== ====== ====== ====== ======= ========
TOTAL RETURN*........................ 1.05% 13.13% 8.05% 13.04% 7.83% 4.52% 2.70% 6.00% 4.77%
====== ====== ====== ====== ====== ====== ====== ======= ========
RATIOS AND SUPPLEMENTAL DATA
Ratio of operating expenses to
average net assets.................. 1.37% 1.31% 1.08% 1.13% 1.08% 1.05% 1.04% 0.99% 0.33%
Ratio of interest expense to
average net assets.................. 0.04% -- 0.17% -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------- --------
Ratio of total expenses to
average net assets.................. 1.41% 1.31% 1.25% 1.13% 1.08% 1.05% 1.04% 0.99% 0.33%
Ratio of expense reimbursement to
average net assets.................. -- -- -- -- -- -- -- -- (0.27%)
------ ------ ------ ------ ------ ------ ------ ------- --------
Ratio of net expenses to average
net assets.......................... 1.41% 1.31% 1.25% 1.13% 1.08% 1.05% 1.04% 0.99% 0.06%
====== ====== ====== ======= ======= ======= ======= ======= =======
Ratio of net investment income to
average net assets.................. 6.86% 7.07% 10.48% 10.72% 10.46% 9.95% 8.29% 7.18% 2.34%
Portfolio turnover................... 264% 342% 179% 154% 244% 195% 84% 364% 75%
Net Assets, end of period (in
thousands).......................... $23,740 $18,159 $21,184 $123,493 $154,472 $167,513 $266,213 $351,754 $50,959
Debt outstanding at end of year
(in thousands)(2)................... $ 0 -- $ 0 -- -- -- -- -- --
Average daily amount of debt
outstanding during the year (in
thousands)(2)....................... $ 341 -- $ 4,172 -- -- -- -- -- --
Average monthly number of shares
outstanding during the year (in
thousands).......................... 2,604 -- 13,081 -- -- -- -- -- --
Average daily amount of debt
outstanding per share during the
year(2)............................. $ 0.13 -- $ 0.32 -- -- -- -- -- --

- --------------------
<FN>
(1) Financial highlights are for the period from December 31, 1985 (the date of the Fund's initial offering of shares to the
public) to March 31, 1986 and have not been annualized.
(2) Debt outstanding consists of reverse repurchase agreements entered into during the year.
(3) Per share information has been calculated using the average number of shares outstanding.
* Total return does not include the effect of the initial sales charge for Class A Shares.
</TABLE>

4
<PAGE> 78

INVESTMENT OBJECTIVE
AND POLICIES
- ------------------------------------------------------

(1) U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance, including U.S. Treasury bills (maturity
of one year or less), U.S. Treasury notes (maturity of one to ten years),
and U.S. Treasury bonds (generally maturities greater than ten years).

(2) Obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities which are supported by: (i) the full faith and credit of
the U.S. government, e.g., Government National Mortgage Association (GNMA)
the right of the issuer to borrow an amount limited to a specific line of
credit from the U.S. government e.g., securities of the Federal Home Loan
Bank Board; (iii) the credit of the instrumentality e.g., bonds issued by
the Federal National Mortgage Association ("FNMA").

U.S. Government Securities includes collateralized mortgage obligations issued
and guaranteed by a U.S. government agency ("CMOs") and U.S. Treasury Securities
originally issued in the form of a face-amount only security paying no interest
("U.S. Government Zero Coupon Securities,") each as described below.

While as a non-fundamental investment policy, the Fund invests at least 80% of
its total assets in U.S. Government Securities, it is currently anticipated that
a substantial portion of the Fund's assets may be invested in mortgage
pass-through securities set forth in (2) above. However, the Fund has undertaken
to limit (within its 80% limitation) its investment in U.S. Government
Securities to those that are backed by the full faith and credit of the U.S.
Government with no less than 65% of its total assets being invested in GNMA
Securities. Such undertaking may not be terminated or modified without 60 days
prior written notice having been mailed to shareholders.

Types of mortgage-backed securities include GNMA, FNMA, and FHLMC pass-through
securities. Although these mortgage-backed securities are guaranteed or issued
by U.S. government agencies or instrumentalities, FNMA, and FHLMC securities are
not backed by the "full faith and credit" of the U.S. In such cases, the Fund
must look principally to the agency issuing or guaranteeing the security for
ultimate payment. Mortgage pass-through securities are securities representing
interest in "pools" of mortgage loans. Monthly payments of interest and
principal by the individual borrowers on mortgages are passed through to the
holders of the securities (net of fees paid to the issuer or guarantor of the
securities) as the mortgages in the underlying mortgage pools are paid off. The
average lives of the mortgage pass-through securities are variable when issued
because their average lives depend on prepayment rates. The average life of
these securities is likely to be substantially shorter than their stated final
maturity as a result of unscheduled principal prepayments. Prepayments on
underlying mortgages result in a loss of anticipated interest, and all or part
of a premium, if any has been paid, and the actual yield (or total return) to
the Fund may be different than the quoted yield on the securities. Mortgage
prepayments generally increase with falling interest rates and decrease with
rising interest rates. Like other fixed income securities, when interest rates
rise the value of a mortgage pass-through security generally will decline;
however, when interest rates are declining, the value of

5
<PAGE> 79

mortgage pass-through securities with prepayment features may not increase as
much as that of other fixed income securities. In cases where U.S. Government
support of agencies or instrumentalities is discretionary, no assurance can be
given that the U.S. Government will provide financial support, since it is not
lawfully obligated to do so.

STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may acquire Stripped
Mortgage-Backed Securities which are issued and guaranteed by U.S. government
agencies or instrumentalities. For example, Class 1 and Class 2 Stripped
Mortgage-Backed Securities ("SMBS Certificates") are issued by the Federal
National Mortgage Association ("FNMA"). Since Class 1 Certificates generally
benefit from declining interest rates and Class 2 Certificates generally benefit
from rising interest rates, these securities can provide an effective way to
stabilize portfolio value. SMBS Certificates represent beneficial interests in
principal distributions and interest distributions on certain FNMA Guaranteed
Mortgage Pass-Through Certificates ("MBS Certificate") which represent all or
part of the beneficial interests in pools of first lien, single family
(one-to-four family residential property), fixed-rate residential mortgage
loans. The original principal amount of each SMBS Class 1 Certificate represents
the amount payable over the life of the Certificate from principal distributions
on the underlying MBS Certificate held by FNMA in its capacity as Trustee of the
SMBS Trust. Interest distributions allocable to the SMBS Class 2 Certificates
consist of interest at the pass-through rate specified on the aggregate amount
thereof which will always be equal to the aggregate outstanding principal amount
of each associated issue of SMBS Class 1 Certificates. The Fund will not invest
more than 10% of its total assets in Stripped Mortgage-Backed securities.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-THROUGH SECURITIES. The
Fund may invest a portion of its assets in collateralized mortgage obligations
or "CMOs", which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities (such collateral collectively herein referred
to as "Mortgage Assets"). Mortgage Assets underlying CMOs purchased by the Fund
must be U.S. Government Securities. The Fund may also invest a portion of its
assets in multi-class pass-through securities which are issued or guaranteed by
the U.S. Government, its agencies, authorities or instrumentalities. Unless the
context indicates otherwise, all references herein to CMOs include multi-class
pass-through securities. Payments of principal and interest on the Mortgage
Assets, and any reinvestment income thereon, provide the funds to pay debt
service on the CMOs or make scheduled distributions on the multi-class
pass-through securities.

In a CMO, a series of bonds or certificates is usually issued in multiple
classes with different maturities. Each class of CMOs, often referred to as a
"tranche", is issued at a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates, resulting in a loss of all
or part of the premium, if any has been paid.

ADDITIONAL RISKS. In addition to the risks associated with prepayments
previously described, investors should recognize that as a result, the Fund's
need to reinvest may be greater when interest rates are low than when interest
rates are high. In addition, the government guarantee as to payment of principal
and interest of the Fund's mortgage-backed securities does not extend to the
value or yield of such securities or the Fund's shares of beneficial interest.
SMBS Certificates involve risks in addition to those associated with regular
mortgage-backed securities. A rate of principal payments on the underlying
mortgage loans slower than the rate anticipated by an investor in calculating
the initial yield to maturity on an SMBS Certificate, which could result from
stable or rising interest rates (which would tend to reduce the market value of
the Certificate), will, by delaying the distribution

6
<PAGE> 80

of principal, reduce the yield to maturity on SMBS Class 1 Certificates
(principal) purchased at a discount from their original principal amount and
increase the yield to maturity on SMBS Class 2 Certificates (income). Payments
of principal on the underlying mortgage loans at rates faster than the rate
anticipated by investors, which could result from falling interest rates or from
transfers of the underlying property, will, conversely, accelerate distributions
of principal and thereby reduce the yield to maturity on SMBS Class 2
Certificates (income) and increase the yield to maturity on SMBS Class 1
Certificates (principal). Sufficiently high prepayment rates could result in
purchasers of SMBS Class 2 Certificates (income) not recovering the full amount
of their initial investment. Yields on SMBS Certificates will be extremely
sensitive to actual or anticipated prepayment experience on the underlying
mortgage loans and significant fluctuations in interest rates may result in
major fluctuations in the market value of such Certificates.

The Fund may engage in a variety of investment techniques in an attempt to
protect against changes in the general level of interest rates. These techniques
include the sale of interest rate futures contracts as well as the purchase of
call and put options on such futures. Mortgage backed securities derive their
value from an underlying investment structure and accordingly are known as
"derivatives." Derivatives (such as stripped mortgage-backed securities),
involve substantial risk including higher price volatility and the possible lack
of a readily available market. These investment techniques and various policies
the Fund may employ in seeking to achieve its investment objective, such as
lending its portfolio securities, and committing to purchase securities for
which the normal settlement date for the transaction occurs later than the
normal settlement date for U.S. Treasury obligations or securities subject to
repurchase agreements, may involve a greater degree of risk than those inherent
in more conservative investment approaches. As a nonfundamental investment
policy, the Fund will at all times invest at least 80% of its total assets in
U.S. Government Securities. This will serve to limit investments in put and call
options, futures and options on futures, and reverse repurchase agreements, in
the aggregate, to not more than 20% of its total assets. (See "Investment
Practices and Restrictions" for a discussion of these techniques and their
risks.)

The Fund's rate of return fluctuates, as does its net asset value per share.
These fluctuations depend largely on changes in the general level of interest
rates. An increase in interest rates will tend to reduce the market values of
such securities; whereas a decline in interest rates will tend to increase their
values. The Fund will seek to reduce risks associated with changes in interest
rates through its transactions in options and futures contracts. However, this
technique will not eliminate these risks and will result in transaction costs to
the Fund.

The specific securities in which the Fund may invest, and the investment
policies which the Fund may employ, meet the criteria necessary to qualify the
shares of the Fund for purchase by the institutions designated as "qualifying
institutions." (See "Qualifying Institutions" in the Statement of Additional
Information.) In order to facilitate investment in the portfolio by national
banks, effective December 22, 1986, the Fund has undertaken to refrain from
investing in those obligations issued by U.S. government agencies or
instrumentalities which a national bank may not purchase without limitation
(including, but not limited to obligations of the Tennessee Valley Authority and
obligations of the Commodity Credit Corporation not fully guaranteed by the U.S.
government) unless 60 days' prior written notice otherwise has been provided to
shareholders.

The Fund is actively managed in order to accomplish its investment objective and
portfolio securities may be sold without regard to the length of time they have
been held whenever such sale will, in the opinion of the Investment Adviser,
strengthen the Fund's position in furtherance of its investment

7
<PAGE> 81

objective. Also, positions in options and futures for hedging purposes may be
established with great frequency. For these reasons, portfolio turnover is, and
is expected to be, substantially higher than other investment companies with
similar investment objectives. Accordingly, transaction costs associated
therewith will be commensurately higher. There can be no assurance that the
Fund's investment objective will be achieved.

INVESTMENT PRACTICES
AND RESTRICTIONS
- ------------------------------------------------------

Each of the Fund's investment practices described in this section and in the
Statement of Additional Information is deemed to be a fundamental policy and may
not be changed without approval of the holders of a majority of the Fund's
outstanding shares.

DERIVATIVE SECURITIES AND ASSET BACKED SECURITIES. The Fund may invest in
instruments having cash flows derived from the alteration of the securities'
natural, original structure. These instruments include Collateralized Mortgage
Obligations, Zero Coupon, Stripped Securities, Pass-Through Securities and
Asset-Backed Securities. The Fund will limit its investment in derivative
securities, i.e., stripped mortgage-backed securities to 10% of its total
assets. (See Appendix for a description of such instruments.)

LENDING OF SECURITIES. In order to earn additional income on its portfolio
securities, the Fund may lend up to one-third of the value of its securities to
registered brokers or dealers or to federally insured banks or savings and
loans, provided that such loans are callable at any time by the Fund, and are at
all times secured by collateral consisting of cash or securities issued or
guaranteed by the United States Government or its agencies, or any combination
thereof, equal to not less than 100% of the market value determined daily, of
the securities loaned. The advantage of such a loan is that the Fund continues
to earn interest on the loaned securities, while at the same time charging
interest to the borrower of the securities. Lending securities involves certain
risks, the most significant of which is that a borrower may fail to return a
portfolio security. The Board of Trustees has adopted policies designed to
minimize such risk.

SECURITIES TRANSACTIONS SUBJECT TO DELAYED SETTLEMENT. The Fund may from time to
time commit to purchase securities for which the normal settlement date occurs
later than the settlement date which is normal for U.S. Treasury obligations.
The payment and interest rate received on such securities is fixed at the time
the buyer enters into the commitment. Although the Fund will only enter into
commitments to purchase such securities with the intention of actually acquiring
the securities, the Fund may sell these securities before the settlement date.
Such securities can involve a risk that the yields available in the market when
delivery takes place may be higher than those obtained in the transaction
itself. There are no limitations on the percentage of the Fund's assets which
may be invested in such securities. However, it is not expected that at any one
time more than 10% of the Fund's assets would be so invested.

"WHEN-ISSUED" SECURITIES. Some Government Securities may be purchased on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
will be delivered to the Fund at a future date usually beyond customary
settlement time. The commitment to purchase an obligation for which payment will
be made on a future date may be deemed a separate security. Although the Fund is
not limited as to the amount of Government Securities for which it has such
commitments, it is expected that under normal circumstances not more than 10% of
the Trust's total assets will be committed to such purchases. The Fund does not
pay for such obligations until received and does not start earning interest on
the obligations until the contrac-

8
<PAGE> 82

tual settlement date. The Fund will establish a segregated account consisting of
cash, short-term money market instruments or Government Securities equal to the
amount of its commitments to purchase securities issued on such basis.

REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements with
registered brokers or dealers or with federally insured banks or savings and
loans. This involves the purchase by the Fund of government securities with the
condition that after a stated period of time, the original seller will buy back
the same securities at a predetermined price or yield. Repurchase agreements
involve certain risks not associated with direct investments in government
securities. In the event the original seller defaults on its obligations to
repurchase, as a result of its bankruptcy or otherwise, the Fund will seek to
sell the securities, which action could involve costs or delays. In such cases,
the Fund's ability to dispose of the securities in order to recover its
investment may be restricted or delayed. To minimize this risk, the securities
underlying the repurchase agreement will be maintained with the Custodian
(pursuant to a written agreement) in an amount at least equal to the repurchase
price under the agreement (including accrued interest due thereunder). However,
in the event that the other party to the repurchase agreement fails to
repurchase the securities subject to such agreement, the Fund could suffer a
loss to the extent proceeds from the sale of the securities subject thereto were
less than the repurchase price. The Fund will not invest in a repurchase
agreement maturing in more than seven (7) days, if such investment, together
with any other illiquid securities held by the Fund (including restricted
securities), would exceed 10% of the total assets of the Fund.

9
<PAGE> 83

repurchase prices of the securities (plus any accrued interest thereon) under
such agreements. Although the Fund's investment restrictions provide that the
Fund would not enter into reverse repurchase agreements exceeding in the
aggregate more than 33 1/3% of the value of its total net assets (including for
this purpose other borrowings of the Fund), pursuant to the non-fundamental
investment policy as previously discussed under "Investment Objective and
Policies", this limitation shall not exceed 20% of the Fund's total assets. The
Fund will enter into reverse repurchase agreements only with selected registered
broker/dealers or with federally insured banks or savings and loan associations
which are approved in advance as being creditworthy by the Board of Trustees.
Under procedures established by the Board of Trustees, the Investment Adviser
will monitor the creditworthiness of the firms in-
volved.

PURCHASING OPTIONS. The Fund may only invest in put or call options which are
traded on a national securities exchange (an "Exchange"). The Fund may purchase
put options on debt securities to protect its holdings in an underlying or
related security against a substantial decline in market value. Securities are
considered related if their price movements generally correlate to one another.
The purchase of put options on debt securities held in its portfolio or related
to such securities will enable the Fund to protect, at least partially,
unrealized gains in an appreciated security in its portfolio without actually
selling the security. In addition, the Fund will continue to receive interest
income on the security.

In addition, the Fund may purchase call options on debt securities to protect
against substantial increases in prices of securities the Fund intends to
purchase pending its ability to orderly invest in such securities. The Fund may
sell put or call options it has previously purchased, which could result in a
net gain or loss depending on whether the amount on the sale is more or less
than the premium and other transaction costs paid on the put or call option
which is sold.

The purchase of options involve certain risks. If a put or call option purchased
by the Fund is not sold when it has remaining value, and if the market price of
the underlying security, in the case of a put, remains equal to or greater than
the exercise price or, in the case of a call, remains less than or equal to the
exercise price, the Fund will lose its entire investment in the option. Also,
where a put or call option on a particular security is purchased to hedge
against price movements in a related security, the price of the put or call
option may move more or less than the price of the related security. The Fund
will not invest in a put or call option if as a result the amount of premiums
paid for such options then outstanding would exceed 10% of the Fund's total
assets.

INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may engage in the
sale of interest rate futures contracts and call options thereon and the
purchase of put and call options on such futures only as a hedge against changes
in the general level of interest rates in accordance with strategies more
specifically described below.

The sale of an interest rate futures contract obligates the seller to deliver
the specific type of debt security called for in the contract at a specified
future time and at a specified price. The Fund would sell an interest rate
futures contract in order to continue to receive the income from a long-term
debt security, while endeavoring to avoid part or all of the decline in market
value of that security which would accompany an increase in interest rates. If
interest rates did rise, a decline in the value of the debt security held by the
Fund would be substantially offset by an increase in the value of the futures
contract sold by the Fund. While the Fund could sell the long-term debt security
and invest in a short-term security, ordinarily the Fund would give up income on
its investment, since long-term rates normally exceed short-term rates.

10
<PAGE> 84

Futures contracts may be purchased only to close an existing short position in a
futures contract.

In addition, the Fund may purchase and write call options and purchase put
options on futures contracts which are traded on an Exchange or a Board of Trade
and enter into closing transactions with respect to such options to terminate an
existing position. Options on futures contracts are similar to options on
securities except that a call option on a futures contract gives the holder the
right to buy and a put option the right to sell the underlying futures contract
at a specific price (the exercise price) until the option expires (the
expiration date). The price of a call or put option is called a premium. The
writer of an option on a futures contract is required to deposit initial and
variation margin pursuant to requirements similar to those applicable to futures
contracts. Premiums received from the writing of an option will be included in
initial margin. A position in an option may be terminated by the purchaser prior
to expiration by effecting a closing sale transaction which is the sale of an
option of the same series (i.e., the same exercise price and expiration date) as
the option previously purchased. The premium received by the holder on the
closing transaction may be more or less than the premium paid for the option,
resulting in a gain or loss on the transaction. Exercise prices of options are
set at specified intervals above and below the price of the underlying futures
contract by the exchange on which they are traded. Exercise prices are initially
established when a new expiration cycle commences and additional exercise prices
may subsequently be introduced as the futures contract price fluctuates. The
expiration cycle of options is based on the expiration cycle of the underlying
futures contract. An option is in-the-money when its exercise price is below the
price of the futures contract in the case of a call, or above the price of the
futures contract in the case of a put. The Fund may use options on futures
contracts in connection with hedging strategies. Generally these strategies
would be employed under the same market conditions in which the Fund uses put
and call options on debt securities.

The Fund may hedge up to the full value of its portfolio through the use of
options on futures and the sale of futures; provided, however, that the Fund may
not sell futures contracts or purchase or sell related options if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures and related options positions and the amount of premiums paid for
related options (measured at the time of investment) would exceed 5% of the
Fund's total assets.

When the Fund purchases a futures contract or a call option on a futures
contract, an amount of costs or U.S. Government Securities equal to the market
value of the futures contract will be deposited in a segregated account with the
Fund's custodian to collateralize the position.

While the Fund's hedging transactions may protect the Fund against adverse
movements in the general level of interest rates, such transactions could also
preclude the opportunity to benefit from favorable movements in the level of
interest rates. Due to the imperfect correlation between movements in the prices
of futures contracts and movements in the price of the underlying U.S.
Government Securities or the related securities being hedged, the price of a
futures contract may move more than or less than the price of the securities
being hedged. In addition, the prices of interest rate futures contracts may not
correlate perfectly with movement in the underlying security due to certain
temporary market distortions. Such temporary distortions may reduce the value of
an interest rate futures contract as a hedging device over a very short time
period. Options on futures contracts are generally subject to the same risks
applicable to all option transactions. For a discussion of the inherent risks
involved with futures contracts and options thereon, see "Appendix A."

The Board of Trustees may authorize procedures, including numerical limitations,
with regard to such transactions in furtherance of the Fund's investment

11
<PAGE> 85

objective. Such procedures are not deemed to be fundamental and may be changed
by the Board of Trustees without the vote of the Fund's shareholders.

INVESTMENT RESTRICTIONS. The Fund is subject to certain restrictions upon its
investments, which may not be altered without the approval by the holder of a
majority of the outstanding shares of the Fund. A majority for this purpose
means the holders of: (a) more than 50% of the outstanding shares or (b) 67% or
more of the shares represented at a meeting where more than 50% of the
outstanding shares are represented, whichever is less. Among those restrictions
is the one which limits the investments which can be made by the Fund solely to
those investments which a federally chartered savings and loan association by
law or regulation may, without limitation as to percentage of assets, invest in,
sell, redeem, hold or otherwise deal with. Another one provides that the Fund
may not borrow in excess of 15% of the market or other fair value of its total
assets, or pledge its assets to an extent greater than 10% of the market or
other fair value of its total assets. Any such borrowings shall be from banks
and shall be undertaken only as a temporary measure for extraordinary or
emergency purposes. Collateral arrangements maintained in connection with the
writing of covered call options, or margin deposits in connection with the sale
of futures contracts and related options, are not deemed to be a pledge or other
encumbrance. The borrowing restriction set forth above does not prohibit the use
of reverse repurchase agreements in an amount (including any borrowings) not to
exceed 33 1/3% of net assets.

Investors may refer to the additional investment restrictions described in the
Fund's Statement of Additional Information.

THE FUND AND
ITS MANAGEMENT
- ------------------------------------------------------

INVESTMENT ADVISER. Transamerica Fund Management Company, the Investment
Adviser, is a wholly owned subsidiary of Transamerica Asset Management
Group, Inc. which is a wholly owned subsidiary of Transamerica Corporation
("Transamerica"), one of the nation's largest and most respected financial
services organizations with more than $35 billion in assets. Transamerica
engages through its subsidiaries in two primary businesses: finance and
insurance. The Investment Adviser manages the investment of the Fund's assets,
provides administrative services and supervises the Fund's daily business
affairs. Investment decisions are made by a committee with no one person being
solely responsible for making recommendations to the committee. These services
are subject to general review by the Board of Trustees. The Investment

12
<PAGE> 86

Adviser (including its predecessors) has been engaged in the investment advisory
business since 1949 and currently serves as an investment adviser to a broad
range of mutual funds and investment portfolios.

<TABLE>
ADVISORY FEE. For the advisory services the Investment Adviser provides to the
Fund, the Fund pays a monthly fee computed at the following annual rates:
<CAPTION>
ANNUAL FEE AS
A PERCENTAGE
AVERAGE DAILY OF DAILY
NET ASSETS NET ASSETS
- ------------- -------------
<S> <C>
$0-$200 million................... .65%
$200-$500 million................. .625%
$500 million and over............. .60%
</TABLE>

For the fiscal year ended March 31, 1994, investment advisory fees paid by the
Fund amounted to .65% of its average daily net assets.

ADMINISTRATIVE SERVICES AGREEMENT. The Fund reimburses the Investment Adviser
and the Distributor for actual expenses incurred in providing certain
administrative services such as, accounting and bookkeeping services as well as
communications in response to shareholder's inquiries and certain printing
services for reports of the Fund. In addition, the Fund may directly bear the
costs of certain data processing and pricing information services. For the
fiscal year ended March 31, 1994, administrative service fees paid by the Fund
amounted to .17% of its average daily net assets.

DISTRIBUTOR AND DISTRIBUTION PLANS. Transamerica Funds Distributors, Inc., a
wholly owned subsidiary of the Investment Adviser, acts as the distributor and
principal underwriter of shares of the Fund pursuant to a separate plan of
distribution for each of Class A Shares (the "Class A Plan") and Class B Shares
(the "Class B Plan") adopted under Rule 12b-1 of the Investment Company Act of
1940 (the "1940 Act"). The fees paid under the Class A Plan and the Class B Plan
(collectively referred to herein as "the Plans") under Rule 12b-1 of the 1940
Act are referred to herein as the "12b-1 fees". Amounts paid by the Fund under
the Class A Plan are allocated to Class A Shares, and amounts paid under the
Class B Plan are allocated to Class B Shares. As a result, shareholders bear
only the 12b-1 fees associated with the class of shares they hold, and such fees
paid by one class are not used to pay the 12b-1 fees of the other class.
Payments made by the Fund under the Class A Plan and the Class B Plan may be
used to pay fees to, or as reimbursement for certain services provided by, banks
and other depository institutions. Although the Glass-Steagall Act limits the
ability of banks and other depository institutions to act as underwriters or
distributor of securities, the Fund does not believe these limitations would
prohibit such depository institutions from providing such services or entering
into compensation arrangements with the Distributor as described under
"Information About Shares of the Fund -- Purchase of Shares." In addition, state
securities laws may differ from the interpretation of federal law and depository
institutions selling shares of the Fund may be required to register as dealers
under state laws. The Plans have each been approved by the Fund's Board of
Trustees (the "Trustees" or "Board of Trustees"), including a majority of the
Trustees who are not "interested persons" of the Fund (as defined by the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Plans or any agreement relating thereto (the "Independent Trustees"), and
have also been approved in the case of Class A Shares by the Class A
Shareholders, and in the case of Class B Shares by the Investment Adviser as
sole shareholder of Class B Shares. In approving the Plans, the Board of
Trustees, including a majority of the Independent Trustees, received and
considered all pertinent information and determined that there was a reasonable
likelihood that each of the Plans would benefit the Fund and its shareholders by
enabling the Fund to achieve economics of operations and management through
growth of the Fund's assets. The Plans may be continued from year to year,
provided that such continuances are approved at least annually by the Board of
Trustees, including a majority of the Inde-

13
<PAGE> 87

pendent Trustees, and each may be terminated at any time by the Independent
Trustees or by vote of shareholders.

CLASS B PLAN. Under the Class B Plan, the Fund makes monthly payments to the
Distributor to compensate it for services provided in connection with the
distribution of Class B Shares and the payment of sales commissions (dealer
concessions) to Dealers that sell such shares ("Distribution Fees"). The Fund
also makes payments to reimburse the Distributor for Service Fees. The Class B
Plan is designed to enable the Distributor to offer Class B Shares to investors
on a basis that does not involve imposition of a front-end sales charge. Sales
commissions payable to Dealers that sell Class B Shares are advanced by the
Distributor (currently up to 4.00% of the value of Class B Shares sold by them)
and are recovered by the Distributor over time through a combination of its
receipt of contingent deferred sales charges on redemptions of Class B Shares by
investors (see "Information About Shares of the Fund -- Purchase of
Shares -- Deferred Sales Charge Alternative -- Class B Shares") and Distribution
Fees.

14
<PAGE> 88

PORTFOLIO TRANSACTIONS. Orders for the Fund's portfolio securities transactions
are placed by the

15
<PAGE> 89

Investment Adviser. Subject to seeking the most favorable price and execution
available, the Investment Adviser may consider sales of shares of the Fund as a
factor in the selection of broker/dealers. (For a further discussion, see the
Statement of Additional Information "Portfolio Transactions, Brokerage
Allocation and other Practices").

INFORMATION ABOUT
SHARES OF THE FUND
- ------------------------------------------------------

NET ASSET VALUE

PURCHASE OF SHARES
- ------------------------------------------------------

GENERAL. Shares of the Fund will be offered at a price equal to their net asset
value (next determined following receipt of an order by The Shareholder Services
Group (the Fund's Transfer Agent) or the investor's dealer) plus a sales charge
which, at the option of the purchaser, may be imposed either at the time of
purchase (the "initial sales charge alternative") as described below or on a
contingent deferred basis (the "deferred sales charge alternative"), as
described under "Redemption and Repurchase of Shares." Shares of the Fund are
offered continuously for sale by the Distributor and are available for purchase
through eligible financial service firms such as securities broker/dealer firms
and banks which have entered into sales agreements with the Distributor. Dealers
are responsible for transmitting orders promptly (orders transmitted to and
received by the Transfer Agent prior to 4:00 p.m. New York time will receive
that day's purchase price). The Distributor, at its expense, may provide
additional promotional incentives or payments to dealers that sell shares of the
Fund. In some instances, these incentives or payments may be offered only to
certain dealers who have sold or may sell significant amounts of shares of the
Fund or other Transamerica mutual funds.

16
<PAGE> 90

Island 02903. Certificates for shares will not be issued unless requested by the
shareholder in writing and then only for full shares.

(1) name of the Fund,

(2) name of shareholder (as registered exactly in the account) and shareholder
account number or,

Federal funds may be wired to:*

Boston Safe Deposit & Trust Company
ABA Routing Number: 011001234
Account Number: 159565

* Except during such times or holidays when the Boston Safe Deposit & Trust
Company ("Boston Bank") is not open for business.

The Fund's Board of Trustees reserves the right to waive the minimum investment
requirements and to reject any order for purchase of shares (including wire
purchases) when in its judgment, such rejection is in the Fund's best interest.

ALTERNATIVE PURCHASE PLAN. The Fund issues two classes of shares, each of which
represent an interest in the same portfolio of investments. The alternative
purchase plan of the Fund permits investors to choose the method of purchasing
shares that is most beneficial, given the amount of the purchase, the length of
time the investor expects to hold the shares and other relevant circumstances.
Investors should determine which method of purchase best suits their individual
circumstances, i.e., whether it is more advantageous to incur an initial sales
charge ("Class A Shares") or to have the entire purchase price invested in the
Fund with the investment there after being subject to a contingent deferred
sales charge ("Class B Shares"). The Distributor intends to reject any order for
purchase of $1 million or more of Class B Shares (as noted below, a purchase of
Class A Shares in an amount of $1 million or more is not subject to a sales
charge).

17
<PAGE> 91

higher expense ratio and to pay lower dividends than the Class A Shares
(See "Dividends, Distribution and Tax Status"). The two classes also have
separate exchange privileges (See "Shareholder Services -- Exchange
Privilege"). Financial representatives will receive different compensation for
selling Class A and Class B Shares. Except for those differences (and related
voting rights) each share of the Fund, whether Class A or Class B, represents a
proportional interest in the investment portfolio of the Fund. On an ongoing
basis, the Trustees will review and seek to assure that no conflict of interest
arises between the Class A and Class B Shares.

18
<PAGE> 92

redemption of certain shares so purchased if they are redeemed within 12 months
of the end of the calendar month of their purchase, in an amount equal to 1% of
the lesser of (a) the net asset value of the shares at the time of purchase or
(b) the net asset value of the shares at the time of redemption ("CDSC Shares").
The CDSC would be deducted from the redemption proceeds otherwise payable to the
shareholder and would be retained by the Distributor. In addition, no CDSC will
be imposed when a shareholder redeems (a) CDSC shares acquired through
reinvestment of income dividends or capital gains distributions; and (b) shares
acquired by exchange from any mutual fund sold with an initial sales charge and
distributed by the Distributor. The CDSC does not apply to purchases at net
asset value described under "Waiver of Initial Sales Charge" and will be waived
in the case of redemptions of shares in connection with (i) distributions to
participants or beneficiaries of certain qualified retirement plans, and returns
of excess contributions made to these plans, and (ii) involuntary redemption of
shares if the aggregate net asset value of shares held in the account is less
than the required minimum. In determining whether a CDSC is payable on any
redemption, the Fund will first redeem shares not subject to any charge.
Although any CDSC shares being exchanged are not subject to any charge, they
will be subject to the applicable CDSC when such acquired shares are eventually
redeemed. For purposes of calculating the CDSC on such redemptions, the original
purchase date of the initial fund investment will be used in lieu of the date
the redeemed shares were acquired by exchange.

19
<PAGE> 93

counts upon which a broker/dealer or investment adviser charges an account
management fee, provided the broker/dealer has a Fee-based Program Agreement
with the Distributor. Class A Shares are also offered at net asset value to
participants in employee benefit plans qualified under Section 401 of the
Internal Revenue Code subject to certain criteria established by the
Distributor. See the Statement of Additional Information, "Purchase of
Shares -- Purchase at Net Asset Value" for a more complete description of
investors eligible to purchase shares at net asset value. To be eligible to
purchase shares of the Fund without sales charge as described above, the
investor or the investor's broker must establish such eligibility by advising
the Distributor at the time shares are purchased.

DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. The offering price of Class
B Shares of the Fund is the net asset value per share next determined following
receipt of an order by the Transfer Agent or the investor's investment
representative or dealer. Dealers are responsible for transmitting orders
promptly (orders transmitted to and received by the Transfer Agent prior to 4:00
p.m. New York time will receive that day's purchase price). There is no sales
charge imposed at the time of purchase, so that the Fund will receive for
investment the full amount of the investor's purchase payment. However, a
contingent deferred sales charge may be imposed at the time of redemption. See
"Redemption and Repurchase of Shares -- Class B Shares: Contingent Deferred
Sales Charge" below.

REDEMPTION AND
REPURCHASE OF SHARES
- ------------------------------------------------------

20
<PAGE> 94

payment for up to seven days or more, as permitted by securities laws.

21
<PAGE> 95

neither the Fund nor the Distributor makes any charge.

CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE. A CDSC is imposed on all
redemptions of Class B Shares after the following exempt dollar amounts have
been subtracted:

(1) the value at the time of purchase of all shares in the account purchased
more than six years (from date of purchase) prior to the redemption;

(2) the value at the time of reinvestment of all shares in the account acquired
through reinvestment of dividends or capital gains distributions; and

(3) the net increase, if any, of the value of all shares in the account over the
purchase price of such shares.

Redemptions are processed in a way that maximizes the amount of redemption that
will not be subject to a CDSC. For example, it is assumed that each redemption
has been made:

(1) first from the exempt amounts referred to in clauses (1), (2) and (3) above
and

(2) second through liquidation of those shares in the account within the six
years preceding the redemption on a first-in-first-out basis.

22
<PAGE> 96
<TABLE>
Any CDSC required to be imposed on share redemptions will be assessed on the
purchase price of the shares redeemed according to the following schedule:
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
-------------- ------------
<S> <C>
First............................. 5%
Second............................ 4%
Third............................. 3%
Fourth............................ 3%
Fifth............................. 2%
Sixth............................. 1%
Seventh and following............. 0%
</TABLE>

When a CDSC is imposed on a repurchase or a redemption, the following occurs:

(1) the total dollar amount of repurchase or redemption proceeds will be
remitted to the repurchasing or redeeming shareholder; and

The CDSC will be paid to the Distributor or to the Fund. (See "Distribution
Plan.")

SHAREHOLDER SERVICES
- ------------------------------------------------------

23
<PAGE> 97

tematic Exchange Program; (5) Systematic Withdrawal Plan; (6) Tax Sheltered
Retirement Plans; (7) Payroll Deduction Plans and (8) Class B Automatic
Exchange. Further information regarding the above services and privileges is set
forth in the Statement of Additional Information which may be obtained by
contacting the Fund at the address or telephone number set forth on the cover
page of this Prospectus.

THIS EXCHANGE PRIVILEGE IS NOT AVAILABLE IN ANY JURISDICTION WHERE SHARES OF THE
OTHER TRANSAMERICA FUND BEING ACQUIRED ARE NOT QUALIFIED FOR SALE. EACH
TRANSAMERICA MUTUAL FUND RESERVES THE RIGHT TO REJECT ANY ORDER TO ACQUIRE ITS
SHARES THROUGH EXCHANGE, OR OTHERWISE TO MODIFY, RESTRICT OR TERMINATE THE
EXCHANGE PRIVILEGE, AT ANY TIME AFTER 60 DAYS' NOTICE TO SHAREHOLDERS. Because
other Transamerica funds have investment objectives and policies which may
differ from those of the Fund, shareholders should carefully review the
prospectus of the other Transamerica fund before effecting an exchange.

24
<PAGE> 98

Further information regarding the above services and privileges is set forth in
the Statement of Additional Information.

TELEPHONE PRIVILEGES
- ------------------------------------------------------

Neither the Fund, Transfer Agent, nor the Investment Adviser will be responsible
for the authenticity of telephone instructions (including telephone
redemptions). Shareholders should be aware that transactions authorized by
telephone instructions believed to be authentic by the Fund can subject the
shareholder to the risk of loss if such telephone

25
<PAGE> 99

instructions are subsequently found to be inauthentic.

1. Recording all calls for telephone transactions (each transaction is thereby
indexed by the time of the call placed);

2. Requesting the caller's name and phone number as verification of the origin
of the telephone call;

3. Requesting the name of the Fund and the shareholder's account number, the
name(s) in which the account is registered and the tax identification number
listed on the account;

4. Mailing written confirmation (statements) of each transaction on the
following business day to the registration address and the broker/dealer of
record.

DIVIDENDS, DISTRIBUTIONS
AND TAX STATUS
- ------------------------------------------------------

Dividends paid by the Fund with respect to Class A and Class B Shares, to the
extent any dividends are paid, will be calculated in the same manner at the same
time on the same day and will be in the same amount, except that each Class will
bear its own distribution expenses and transfer agency expenses. Although the
per share dividends on Class B Shares will be lower than the per share dividends
on Class A Shares due to the higher Distribution Fee payable on Class B Shares,
the actual difference in total dividends generated by the investment will be
less than that suggested by the per share difference since an investor is
usually able to purchase more Class B Shares than Class A Shares for the same
investment amount as Class B Shares are not subject to an initial sales charge.

CAPITAL GAINS. The excess of net long-term capital gains over net short-term
capital losses carried forward from prior years, represents net realized capital
gains. The Fund has received an order from the Securities and Exchange
Commission which allows the Fund to make monthly distributions of its net
long-term capital gains for certain options transactions. The Board of Trustees
determines annually whether to distribute any additional net long-term capital
gains in excess of any net short-term capital losses.

When a dividend or capital gains distribution is paid, the net asset value per
share is reduced by the amount of the payment. The capital gains distribu-

26
<PAGE> 100

tion will generally be equal for both Class A and Class B Shares. Dividends
and/or distributions are payable to shareholders of record at the day of such
dividend declaration. Dividends and capital gains distributions, if any, are
automatically reinvested in additional shares of the Fund at net asset value per
share on the reinvestment date unless a shareholder requests otherwise by
specifying instructions in the Account Application or by writing to the Transfer
Agent. (See "Shareholder Services" in the Statement of Additional Information.)

TAXES. Because the Fund intends to distribute substantially all of its net
investment income and net realized capital gains to its shareholders, and to
adhere to other applicable requirements, it is not expected that the Fund will
be required to pay any federal income taxes on amounts paid by it as dividends
and distributions. However, shareholders normally will have to pay federal
income taxes on the dividends and capital gains distributions they receive
(either as cash or reinvested shares) from the Fund (unless they are exempt from
taxation or entitled to tax deferral.) Distributions from the Fund's net
investment income and any net short-term capital gains are taxable to
shareholders as ordinary income. Distributions derived from net long-term
capital gains, which are designated by the Fund as capital gains dividends are
taxable to shareholders as long term capital gains, regardless of the length of
time a share holder has held the shares. After the end of each calendar year,
shareholders will receive a statement indicating the amount and federal tax
status of all distributions received during such year. This includes information
on the portion taxable as ordinary income and the portion taxable as long-term
capital gains.

Shareholders who are foreign corporations, partnerships or trusts may be subject
to withholding of U.S. federal income tax on dividend distributions, including
dividends attributable to interest income and short-term capital gains realized
by the Fund.

EACH SHAREHOLDER IS ADVISED TO CONSULT WITH HIS/HER TAX ADVISER CONCERNING THE
EFFECT OF OWNERSHIP OF SHARES OF THE FUND.

ADDITIONAL INFORMATION
- ------------------------------------------------------

ORGANIZATION OF THE TRUST. The Trust, organized as a Massachusetts business
trust under the laws of the Commonwealth of Massachusetts on November 29, 1984,
is a beneficiary of an order from the SEC permitting the issuance and sale of
multiple classes of shares. The Fund operates as one series of the Trust. Shares
of other series of the Trust represent interests in the Transamerica Investment
Quality Bond Fund, Transamerica Government Securities Trust, Transamerica
Adjustable U.S. Government Trust, Transamerica Intermediate Government Trust and
Adjustable U.S. Government Fund. The Board of Trustees is authorized to create
additional series of shares and additional classes within any series at any time
without approval by shareholders. Four series of the Trust currently issue
multiple

27
<PAGE> 101

classes. All shares of beneficial interest $0.01 par value per share of the
Trust have equal voting rights and have no preemptive or conversion rights. All
shares represent an interest in the same assets of the Fund and are identical in
all respects except that each class bears different distribution expenses and
has exclusive voting rights with respect to its respective distribution plan.
Shares issued are fully paid, non-assessable, fully transferable and redeemable
at the option of the holder. The Trust is generally not required to hold annual
meetings of shareholders; however, the Board of Trustees may call special
meetings of shareholders for action by shareholder vote if so requested in
writing by the holders of 10% or more of the outstanding shares of the Trust or
as otherwise as may be required by applicable laws or the Declaration of Trust.

Under Massachusetts law, shareholders of the Fund may, in certain circumstances,
be held personally liable as partners for the obligations of the Trust. However,
the Declaration of Trust pursuant to which the Trust was reorganized contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each instrument entered
into or executed by the Trust. The Declaration of Trust also provides for
indemnification out of the Trust's property for any shareholder held personally
liable as a partner for obligations of the Trust is limited to the unlikely
circumstance in which the Trust itself would be unable to meet its obligations.

CUSTODIAN. Texas Commerce Bank, National Association, P.O. Box 2558, Houston,
Texas 77252 has been designated as custodian of the cash and investment
securities of the Fund and is also responsible for, among other things, receipt
and delivery of the investment securities of the Fund in accordance with
procedures and conditions specified in the custody agreements.

INDEPENDENT AUDITORS. Ernst & Young LLP, 1221 McKinney, Suite 2400, Houston,
Texas 77010 has been selected as the independent auditors of the Fund.

TRANSFER AGENT. Transfer agent and dividend disbursing functions are performed
by The Shareholder Services Group, Inc., One American Express Plaza, Providence,
Rhode Island 02903-1135.

REPORTS TO SHAREHOLDERS. Each month the Fund prepares an unaudited list of its
portfolio securities holdings which is available without charge by contacting
the Fund at the address or telephone number set forth under "Additional
Information Shareholder Inquiries."

In addition, the Fund will send its shareholders annual and semiannual reports;
the financial statements which will appear in the annual reports will be audited
by independent auditors.

28
<PAGE> 102

rate is computed separately for Class A and Class B Shares.

29
<PAGE> 103

APPENDIX

SPECIAL CONSIDERATIONS APPLICABLE TO OPTIONS ON U.S. GOVERNMENT SECURITIES

TREASURY BONDS AND NOTES. Because trading interest in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the Exchanges will not continue indefinitely to introduce options with new
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each issue of bonds or notes will thus be phased out as new options are
listed on more recent issues, and options representing a full range of
expirations will not ordinarily be available for every issue on which options
are traded.

TREASURY BILLS. Because the deliverable Treasury bill changes from week to week,
writers of Treasury bill calls cannot provide in advance for their potential
exercise settlement obligations by acquiring and holding the underlying
security. However, if the Fund holds a long position in Treasury bills with a
principal amount corresponding to the principal amount of the securities
deliverable upon exercise of the option, it may be hedged from a risk
standpoint. In addition, the Fund will maintain Treasury bills maturing no later
than those which would be deliverable in the event of an assignment in a
segregated account with its Custodian so that it will be treated as being
covered for margin purposes.

GNMA CERTIFICATES. The following special considerations will be applicable to
the writing of call options on GNMA Certificates when and if trading of options
thereon commences. Since the remaining principal balance of GNMA Certificates
declines each month as a result of mortgage payments, the Fund as a writer of a
GNMA call holding GNMA Certificates as "cover" to satisfy its delivery
obligation in the event of exercise may find that the GNMA Certificates it holds
no longer have a sufficient remaining principal balance for this purpose. Should
this occur, the Fund will purchase additional GNMA Certificates from the same
pool (if obtainable) or replacement GNMA Certificates in the cash market in
order to maintain its cover. If for any reason, the Fund were no longer covered,
the Fund will either enter into a closing purchase transaction or replace such
Certificate with a Certificate which represents cover. When the Fund closes its
position or replaces such Certificate, it may realize an unanticipated loss and
incur transaction costs.

RISKS RELATING TO TRANSACTIONS IN FUTURES
CONTRACTS AND RELATED OPTIONS

Positions in futures contracts may be closed out only on an exchange or board of
trade which provides a market for such futures. Although the Fund intends to
sell futures only on exchanges or boards of trade where there appears to be an
active market, there is no assurance that a liquid market on an exchange or
board of trade will exist for any particular contract or at any particular time.
In the event a liquid market does not exist, it may not be possible to close a
futures position, and in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of maintenance margin. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Fund from closing out a contract
which may result in reduced gain or increased loss to the Fund. The absence of a
liquid market in futures contracts might cause the Fund to make delivery of the
underlying securities at a time when it may be disadvantageous to do so.

30
<PAGE> 104
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Summary................................. 2
Summary of Fund Expenses................ 3
Financial Highlights.................... 4
Investment Objective and Policies....... 5
Investment Practices and Restrictions... 8
The Fund and Its Management............. 12
Information About Shares of the Fund.... 16
Net Asset Value....................... 16
Purchase of Shares...................... 16
Redemption and Repurchase of Shares..... 20
Shareholder Services.................... 23
Telephone Privileges.................... 25
Dividends, Distributions and Tax
Status................................ 26
Additional Information.................. 27
Appendix................................ 30
</TABLE>

INVESTMENT ADVISER
-----------------------
Transamerica Fund Management Company
1000 Louisiana
Houston, Texas 77002-5098
(713) 751-2400

PRINCIPAL DISTRIBUTOR
-------------------------
Transamerica Fund Distributors, Inc.
1000 Louisiana
Houston, Texas 77002-5098
(713) 751-2400

SHAREHOLDER INQUIRIES
--------------------------
Transamerica Funds Shareholder Services
P.O. Box 9656
Providence, RI 02940-9656

Or call 1-800-343-6840

No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in
this Prospectus or in official sales literature distributed by the Fund's
Distributor in connection with the offer of the Fund's shares, and if
given or made, such other information or representations must not be
relied upon as having been authorized by the Fund or its Distributor.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

3001

TRANSAMERICA

U.S. GOVERNMENT
TRUST
A Series of Transamerica Bond Fund

PROSPECTUS
September 30, 1994
<PAGE> 105

TRANSAMERICA
INTERMEDIATE GOVERNMENT TRUST

A Series of Transamerica Bond Fund

1000 Louisiana Houston, Texas 77002-5098 (713) 751-2400
- --------------------------------------------------------------------------------

Transamerica Bond Fund (the "Trust") is a mutual fund consisting of six separate
portfolios of investments. This Prospectus relates to shares of Transamerica
Intermediate Government Trust (the "Fund"), formerly Transamerica Premium
Limited Term Account, whose primary investment objective is to earn a high level
of current income, consistent with the preservation of capital and maintenance
of liquidity. The Fund seeks to achieve its investment objective by investing in
debt obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities ("U.S. Government Securities") having a dollar-weighted
average portfolio maturity (under normal market conditions) of between one and
ten years.

This Prospectus provides investors with the basic information they should know
before investing in the Fund. Investors should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Trust and the Fund has been filed with the Securities and Exchange
Commission. Copies may be obtained without charge by contacting the Fund at the
address or telephone number listed below.

The Trust's investment adviser is Transamerica Fund Management Company (the
"Investment Adviser"). Transamerica Fund Distributors, Inc. (the "Distributor")
acts as principal distributor of shares of the Fund.

- --------------------------------------------------------------------------------

------------------------

THE STATEMENT OF ADDITIONAL INFORMATION, DATED SEPTEMBER 30, 1994, IS
HEREBY INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.

PROSPECTUS DATED SEPTEMBER 30, 1994
<PAGE> 106

SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE. The Fund's primary investment objective is to earn a high
level of current income, consistent with preservation of capital and maintenance
of liquidity. The Fund seeks to achieve its investment objective by investing in
a portfolio of U.S. Government Securities which portfolio has an average dollar
weighted maturity of between one and ten years.

REDEMPTION OF SHARES. Shares of the Fund in any amount may be redeemed at any
time at the net asset value per share next determined after the redemption
request is received in proper form by The Shareholder Services Group (the
"Transfer Agent.") In certain cases, however, redemption proceeds from the Class
B Shares will be reduced by the amount of any applicable contingent deferred
sales charge. See "Redemption and Repurchase of Shares."

SPECIAL CONSIDERATIONS. Generally, a rise in interest rates will result in a
decrease in the net asset value per share of the Fund, while a decline in
interest rates will result in an increase in the Fund's net asset value per
share. The U.S. government guarantee as to payment of principal and interest of
government backed securities held by the Fund does not extend to the value or
yield of the Fund's shares. In addition, during periods of declining interest
rates, prepayment of mortgages underlying certain obligations held by the Fund
may cause a reduction in the Fund's rate of return. The investment policies and
techniques of the Fund such as options and futures transactions and reverse
repurchase agreements, may involve a greater degree of risk than those inherent
in more conservative investment approaches, such as money market funds.

The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.

2
<PAGE> 107

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- ---------------
INITIAL DEFERRED
SALES CHARGE SALES CHARGE
ALTERNATIVE ALTERNATIVE
-------------- ---------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...................... 4.75% None
Sales Charge Imposed on Reinvested Dividends............... None None
Deferred Sales Charge (as a percentage of original purchase
price)................................................... None 5.00%
Redemption Fee............................................. None None
Exchange Fee............................................... None None
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets)
Management Fees(3)......................................... 0.50% 0.50%
12b-1 Fees(4).............................................. 0.25% 1.00%
Other Expenses............................................. 1.54% 1.54%
Less: Expense Reimbursement(5)............................. (0.99)% (0.99)%
----- -----
Total Fund Operating Expenses.............................. 1.30% 2.05%
===== =====
Such Total Without Reimbursement........................... 2.29% 3.04%
===== =====
</TABLE>

EXAMPLE A(6): You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period (i)
with expense reimbursement and (ii) without expense reimbursement:

<TABLE>
<CAPTION>
NUMBER OF YEARS WITH NO NUMBER OF YEARS
WITH EXPENSE -------------------------- EXPENSE ---------------------------
(I) REIMBURSEMENT 1 3 5 10 (II) REIMBURSEMENT 1 3 5 10
------------- --- --- ---- ---- ------------- --- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A........ $60 $87 $115 $197 Class A....... $70 $116 $164 $298
Class B........ $71 $94 $130 $219* Class B....... $81 $124 $180 $318*
</TABLE>

EXAMPLE B(6): You would pay the following expenses on the same investment in
Example A assuming no redemption (i) with expense reimbursement and (ii) without
expense reimbursement:

<TABLE>
<CAPTION>
NUMBER OF YEARS WITH NO NUMBER OF YEARS
WITH EXPENSE -------------------------- EXPENSE ---------------------------
(I) REIMBURSEMENT 1 3 5 10 (II) REIMBURSEMENT 1 3 5 10
------------- --- --- ---- ---- ------------- --- ---- ---- ----
<S> <C> <C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
Class A........ $60 $87 $115 $197 Class A....... $70 $116 $164 $298
Class B........ $21 $64 $110 $219* Class B....... $31 $ 94 $160 $318*
</TABLE>

(See footnotes on following page)

3
<PAGE> 108

- ---------------

(1) Class A Shares have reduced initial sales charges for purchases in excess of
$100,000. Purchases of $1 million or more are not subject to a sales charge;
however, a contingent deferred sales charge of 1% will be applied to
redemptions within 12 months of such purchase (as described under "Initial
Sales Charge Alternative -- Class A Shares"). Deferred sales charge on Class
B Shares declines from 5% during the first year to 0% after the sixth year
in the following manner: 5%, 4%, 3%, 3%, 2%, 1%. See "Information About
Shares of the Fund."

(2) Annual Operating Expenses of Class B Shares are based on maximum allowed
fees (if collected) and estimates of expenses to be incurred in the current
fiscal year.

(3) See "The Fund and Its Management."

(4) 12b-1 Fees are based on maximum allowed fees. Class A Shares paid no 12b-1
Fees for the fiscal year ended March 31, 1994. See "The Fund and Its
Management -- Distributor and Distribution Plans."

(5) Expense reimbursement is calculated using the maximum reimbursement allowed
per the Fund's reimbursement agreement. See "The Fund and Its
Management -- Expenses."

(6) Expenses in Example above should not be considered a representation of past
or future expenses. Actual expenses may be greater or less than those shown
above. Use of assumed annual return (5%) is mandated by the Securities and
Exchange Commission. Long-term shareholders of Class B Shares of the Fund
may pay more in sales charges and 12b-1 fees than the economic equivalent of
the maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc. (the "NASD").

4
<PAGE> 109

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following financial highlights are for Transamerica Intermediate Government
Trust Class A Shares for each of the seven years in the period ended March 31,
1994 and for the period November 3, 1986 to March 31, 1987. No information is
shown for Class B Shares since no Class B Shares were outstanding during the
periods represented.

<TABLE>
<CAPTION>
PERIOD
YEAR ENDED MARCH 31, ENDED
------------------------------------------------------------------------ MARCH 31,
1994 1993 1992 1991 1990 1989 1988 1987(1)
------ ------ ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per share income and capital
changes for a share
outstanding during each
period:
Net asset value, beginning of
period..................... $10.23 $ 9.84 $ 9.62 $ 9.45 $ 9.38 $ 9.69 $ 9.83 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income...... 0.63 0.57 0.70 0.78 0.86 0.79 0.79 0.36
Net realized and unrealized
gain (loss) on
investments.............. (0.54) 0.40 0.23 0.17 0.08 (0.32) (0.14) (0.17)
------ ------ ------ ------ ------ ------ ------ -------
Total from Investment
Operations............. 0.09 0.97 0.93 0.95 0.94 0.47 0.65 0.19
LESS DISTRIBUTIONS
Dividends from net
investment income........ (0.64) (0.58) (0.71) (0.78) (0.87) (0.78) (0.79) (0.36)
------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of
period..................... $ 9.68 $10.23 $ 9.84 $ 9.62 $ 9.45 $ 9.38 $ 9.69 $ 9.83
====== ====== ====== ====== ====== ====== ====== =======

TOTAL RETURN *............... 0.73% 10.13% 9.89% 10.47% 10.32% 5.06% 7.03% 1.91%
====== ====== ====== ====== ====== ====== ====== =======

Ratios and Supplemental Data
Ratio of expenses to
average net assets....... 2.04% 3.25% 4.01% 2.63% 1.96% 1.39% 5.30% 3.34%
Ratio of expense
reimbursement to average
net assets............... (0.74)% (2.80)% (3.50)% (2.03)% (1.44)% (1.00)% (5.30)% (3.23)%
------ ------ ------ ------ ------ ------ ------ -------
Ratio of net expenses to
average net assets....... 1.30% 0.45% 0.51% 0.60% 0.52% 0.39% 0.00% 0.11%
====== ====== ====== ====== ====== ====== ====== =======

Ratio of net investment
income to average net
assets................... 6.08% 5.64% 7.12% 8.41% 9.16% 8.27% 8.46% 3.60%
Portfolio turnover......... 89% 73% 169% 97% 19% 535% 384% 118%
Net Assets, end of period
(in thousands)........... $9,740 $1,494 $1,414 $1,537 $2,655 $7,341 $1,552 $ 507
- ---------------
<FN>
(1) Financial highlights are for the period from November 3, 1986 (the date of
the Fund's initial offering of shares to the public) to March 31, 1987 and
have not been annualized.

* Total return does not include the effect of the initial sales charge for
Class A Shares.
</TABLE>
5
<PAGE> 110

INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------

The investment objective of the Fund is to achieve a high level of current
income, consistent with preservation of capital and maintenance of liquidity.
The Fund seeks to achieve its investment objective by investing in debt
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities ("U.S. Government Securities") whose dollar-weighted average
portfolio maturity or average life (under normal market conditions) is between
one and ten years. The Fund hereby undertakes that (i) it will maintain an
overall portfolio maturity of not less than three years and (ii) will not alter
such undertaking without first approving a change in the name of the Fund which
deletes the descriptive term "Intermediate" from the resulting name. U.S.
Government Securities consist of the following:

1. U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance, including U.S. Treasury bills (maturity of
one year or less), U.S. Treasury notes (maturity of one to ten years), and
U.S. Treasury bonds (generally maturities greater than ten years).

2. Obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities which are supported by: (i) the full faith and credit of
the U.S. government (e.g., GNMA certificates see below); (ii) the right of
the issuer to borrow an amount limited to a specific line of credit from the
U.S. government (e.g., securities of the Federal Home Loan Bank Board);
(iii) the credit of the instrumentality (e.g., bonds issued by the Federal
National Mortgage Association).

While as a non-fundamental investment policy, the Fund may invest in any of the
foregoing obligations, it is currently anticipated that a substantial portion of
the Fund's assets may be invested in mortgage pass-through securities set forth
in (2) above. Mortgage backed securities derive their value from an underlying
investment structure and accordingly are known as "derivatives". Derivatives
(such as stripped mortgage-backed securities), involve substantial risk
including higher price volatility and the possible lack of a readily available
market. Types of mortgage-backed securities include GNMA, FNMA, and FHLMC
pass-through securities. Although these mortgage-backed securities are
guaranteed or issued by U.S. government agencies or instrumentalities, FNMA, and
FHLMC securities are not backed by the "full faith and credit" of the U.S.
government. In such cases, the Fund must look principally to the agency issuing
or guaranteeing the security for ultimate payment. Mortgage pass-through
securities are securities representing interest in "pools" of mortgage loans.
Monthly payments of interest and principal by the individual borrowers on
mortgages are passed through to the holders of the securities (net of fees paid
to the issuer or guarantor of the securities) as the mortgages in the underlying
mortgage pools are paid off. The average lives of the mortgage pass-through
securities are variable when issued because their average lives depend on
prepayment rates. The average life of these securities is likely to be
substantially shorter than their stated final maturity as a result of
unscheduled principal prepayments. Prepayments on underlying mortgages result in
a loss of anticipated interest, and all or part of a premium, if any has been
paid, and the actual yield (or total return) to the Fund may be different than
the quoted yield on the securities. Mortgage prepayments generally increase with
failing interest rates and decrease with rising interest rates. Like other fixed
income securities, when interest rates rise the value of a mortgage pass-through
security generally will decline; however, when interest rates are declining, the
value of mortgage pass-through securities with prepayment features may not
increase as much as that of other fixed income securities. In cases where U.S.
government support of agencies or instrumentalities is

6
<PAGE> 111

discretionary, no assurance can be given that the U.S. government will provide
financial support, since it is not lawfully obligated to do so.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-THROUGH SECURITIES. The
Fund may invest a portion of its assets in collateralized mortgage obligations
or "CMOs," which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities (such collateral collectively herein referred
to as "Mortgage Assets"). Mortgage Assets underlying CMOs purchased by the Fund
must be U.S. Government Securities. The Fund may also invest a portion of its
assets in multi-class pass-through securities which are issued or guaranteed by
the U.S. government, its agencies, authorities or instrumentalities. Unless the
context indicates otherwise, all references herein to CMOs include multi-class
pass-through securities. Payments of principal and interest on the Mortgage
Assets, and any reinvestment income thereon, provide the funds to pay debt
service on the CMOs or make scheduled distributions on the multi-class
pass-through securities.

In a CMO, a series of bonds or certificates is usually issued in multiple
classes with different maturities. Each class of CMOs, often referred to as a
"tranche," is issued at a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates, resulting in a loss of all
or part of the premium, if any has been paid.

In addition to the risks associated with prepayments previously described,
investors should recognize that as a result, the Fund's need to reinvest may be
greater when interest rates are low than when interest rates are high. In
addition, the government guarantee as to payment of principal and interest of
the Fund's U.S. government mortgage-backed securities, (which does not extend to
the Fund's other asset-backed securities), does not extend to the value or yield
of such securities or of the Fund's shares of beneficial interest. SMBS
Certificates involve risks in addition to those associated with regular
mortgage-backed securities. A rate of principal payments on the underlying
mortgage loans slower than the rate anticipated by an investor in calculating
the initial yield to maturity on an SMBS Certificate, which could result from
stable or rising interest rates (which would tend to reduce the market value of
the Certificate), will, by delaying the distribution of principal, reduce the
yield to maturity on SMBS Class 1 Certificates (principal)

7
<PAGE> 112

purchased at a discount from their original principal amount and increase the
yield to maturity on SMBS Class 2 Certificates (income). Payments of principal
on the underlying mortgage loans at rates faster than the rate anticipated by
investors, which could result from falling interest rates or from transfers of
the underlying property, will, conversely, accelerate distributions of principal
and thereby reduce the yield to maturity on SMBS Class 2 Certificates (income)
and increase the yield to maturity on SMBS Class 1 Certificates (principal).
Sufficiently high prepayment rates could result in purchasers of SMBS Class 2
Certificates (income) not recovering the full amount of their initial
investment. Yields on SMBS Certificates will be extremely sensitive to actual
anticipated prepayment experience on the underlying mortgage loans and
significant fluctuations in interest rates may result in major fluctuations in
the market value of such Certificates.

The investment techniques and various policies the Fund may employ in seeking to
achieve its investment objective, such as lending portfolio securities,
securities transactions subject to delayed settlement, options and futures
transactions, mortgage "dollar roll" transactions, or reverse repurchase
agreements, may involve a greater degree of risk than those inherent in more
conservative investment approaches. As a non-fundamental investment policy, the
Fund will at all times invest at least 80% of its total assets in U.S.
Government Securities. (See "Investment Practices and Restrictions" for a
discussion of these techniques and their risks.) There can be no assurance that
the Fund's investment objective will be achieved.

The policy concerning the securities in which the Fund may invest, as described
above, as well as the Fund's investment objective, restrictions and other
policies described in this Prospectus and in the Statement of Additional
Information, are deemed to be fundamental and may not be changed without
approval by a majority of the Fund's shareholders.

The Fund may sell portfolio securities without regard to the length of time they
have been held whenever such sale will, in the opinion of the Investment
Adviser, strengthen the Fund's position in furtherance of its investment
objective. Such disposition could result in a high portfolio turnover rate but
should not result in increased brokerage commissions since the Fund will
normally purchase its investments directly from the issuer or a dealer in
principal transactions and no brokerage commissions are paid in connection with
such purchases, although principal transactions will normally involve a dealer
mark up or mark down. Portfolio turnover rates of the Fund for recent years are
shown in the section "Financial Highlights." The value of the securities held by
the Fund will vary inversely with changes in interest rates. Thus, it is
anticipated that the Fund's current return and net asset value will fluctuate.

INVESTMENT PRACTICES
AND RESTRICTIONS
- --------------------------------------------------------------------------------

8
<PAGE> 113

LENDING OF SECURITIES. In order to earn additional income on its portfolio
securities, the Fund may lend up to one third of the value of its securities to
registered brokers or dealers or to federally insured banks or savings and
loans, provided that such loans are callable at any time by the Fund, and are at
all times secured by collateral consisting of cash or securities issued or
guaranteed by the U.S. Government or its agencies, or any combination thereof,
equal to not less than 100% of the market value determined daily, of the
securities loaned. The advantage of such loan is that the Fund continues to earn
interest on the loaned securities, while at the same time charging interest to
the borrower of the securities. Lending securities involves certain risks, the
most significant of which is that a borrower may fail to return a portfolio
security. The Trust's Board of Trustees has adopted policies designed to
minimize such risk.

SECURITIES TRANSACTIONS SUBJECT TO DELAYED SETTLEMENT. The Fund may from time to
time commit to purchase securities for which the normal settlement date occurs
later than the settlement date which is normal for U.S. government obligations.
In no event, however, will the settlement date occur later than the 29th day
after the trade date. The payment and interest rate received on such securities
are fixed at the time the buyer enters into the commitment. Although the Fund
will only enter into commitments to purchase such securities with the intention
of actually acquiring the securities, the Fund may sell these securities before
the settlement date. Such securities can involve a risk that the yields
available in the market when delivery takes place may be higher than those
obtained in the transaction itself. It is not expected that at any one time more
than 10% of the Fund's assets would be so invested.

The commitment to purchase an obligation for which payment will be made on a
future date may be deemed a separate security. Although the Fund is not limited
as to the amount of Government Securities for which it has such commitments, it
is expected that under normal circumstances, not more than 10% of the Fund's
total assets will be committed to such purchases. The Fund does not pay for such
obligations until received and does not start earning interest on the
obligations until the contractual settlement date. The Fund will establish a
segregated account consisting of cash, short-term money market instruments or
Government Securities equal to the amount of its commitments to purchase
securities issued on such basis.

REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements with
registered brokers or dealers or with federally insured banks or savings and
loans which are deemed to be creditworthy by the Investment Adviser. This
involves the purchase by the Fund of government securities at market value or a
discount therefrom, limited to those with maturities of three and one half years
or less, with the condition that after a stated period of time, the original
seller will buy back the same securities at a predetermined higher price.
Repurchase agreements involve certain risks not associated with direct
investments in government securities. In the event the original seller defaults
on its obligations to repurchase, as a result of its bankruptcy or otherwise,
the

9
<PAGE> 114

Fund will seek to sell the securities, which action could involve costs or
delays. In such cases, the Fund's ability to dispose of the securities in order
to recover its investment may be restricted or delayed. To minimize this risk,
the securities underlying the repurchase agreement will be maintained with the
Trust's Custodian pursuant to a written custodian agreement (including accrued
interest due thereunder) in an amount at least equal to the repurchase price
under the agreement, which custodian will notify the Fund that it is holding the
securities for the Fund's account. However, in the event that the other party to
the repurchase agreement fails to repurchase the securities subject to such
agreement, the Fund could suffer a loss to the extent proceeds from the sale of
the securities subject thereto were less than the repurchase price. The Fund
will not invest in a repurchase agreement maturing in more than seven (7) days,
if such investment, together with other illiquid securities held by the Fund
(including restricted securities), would exceed 10% of the total assets of the
Fund. Under procedures established by the Board of Trustees, the Investment
Adviser will monitor the credit worthiness of the firms involved.

Reverse repurchase agreements involve the risk that the market value of
securities purchased by the Fund with proceeds of the transaction may decline
below the repurchase price of the securities sold by the Fund which it is
obligated to repurchase. The Fund would also continue to be subject to the risk
of a decline in the market value of the securities sold under the agreements
because it will reacquire those securities upon effecting their repurchase. To
minimize various risks associated with reverse repurchase agreements, the Fund
would establish and maintain with the Trust's custodian a separate account
consisting of highly liquid, marketable securities in an amount at least equal
to the repurchase prices of the securities (plus any accrued interest thereon)
under such agreements. In addition, the Fund would not enter into reverse
repurchase agreements exceeding in the aggregate more than 33% of the value of
its total net assets (including for this purpose other borrowings of the Fund).
The Fund will enter into reverse repurchase agreements only with selected
registered broker/dealers or with federally insured banks or savings and loan
associations which are approved in advance as being creditworthy by the Board of
Trustees. Under procedures established by the Board of Trustees, the Investment
Adviser will monitor the creditworthiness of the firms involved.

INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may engage in the
purchase and sale of interest rate futures contracts and the purchase of put and
call options thereon only as a hedge against changes in the general level of
interest rates in accordance with strategies more specifically described below.

In addition, the Fund may purchase call options and put options on futures
contracts which are traded on

10
<PAGE> 115

an Exchange or a Board of Trade and enter into closing transactions with respect
to such options to terminate an existing position. Options on futures contracts
are similar to options on securities except that a call option on a futures
contract gives the holder the right to buy and a put option the right to sell
the underlying futures contract at a specific price (the exercise price) until
the option expires (the expiration date). The price of a call or put option is
called a premium. The writer of an option on a futures contract is required to
deposit initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an option
will be included in initial margin. A position in an option may be terminated by
the purchaser prior to expiration by effecting a closing sale transaction which
is the sale of an option of the same series (i.e., the same exercise price and
expiration date) as the option previously purchased. The premium received by the
holder on the closing transaction may be more or less than the premium paid for
the option, resulting in a gain or loss on the transaction. Exercise prices of
options are set at specified intervals above and below the price of the
underlying futures contract by the exchange on which they are traded. Exercise
prices are initially established when a new expiration cycle commences and
additional exercise prices may subsequently be introduced as the futures
contract price fluctuates. The expiration cycle of options is based on the
expiration cycle of the underlying futures contract. An option is in-the-money
when its exercise price is below the price of the futures contract in the case
of a call, or above the price of the futures contract in the case of a put. The
Fund may use options on futures contracts in connection with hedging strategies.
Generally these strategies would be employed under the same market conditions in
which the Fund uses put and call options on debt securities.

While the Fund's hedging transactions may protect the Fund against adverse
movements in the general level of interest rates, such transactions could also
preclude the opportunity to benefit from favorable movements in the level of
interest rates. Due to the imperfect correlation between movements in the prices
of futures contracts and movements in the price of the underlying U.S.
Government Securities or the related securities being hedged, the price of a
futures contract may move more than or less than the price of the securities
being hedged. In addition, the prices of interest rate futures contracts may not
correlate perfectly with movement in the underlying security due to certain
temporary market distortions. Such temporary distortions may reduce the value of
an interest rate futures contract as a hedging device over a very short time
period. Options on futures contracts are generally subject to the same risks
applicable to all option transactions. For a discussion of the inherent risks
involved with futures contracts and options thereon, see "Appendix."

The Board of Trustees may authorize procedures, including numerical limitations,
with regard to such transactions in furtherance of the Fund's investment
objective. Such procedures are not deemed to be fundamental and may be changed
by the Board of Trustees without the vote of the Fund's shareholders.

11
<PAGE> 116

INVESTMENT RESTRICTIONS. The Fund is subject to certain restrictions, which may
not be changed without the approval of a majority of the outstanding shares of
the Fund. A majority for this purpose means the lesser of (a) more than 50% of
Fund's outstanding shares, or (b) 67% or more of the Fund's shares represented
at a meeting where more than 50% of the Fund's outstanding shares are
represented. These restrictions provide that the Fund:

(1) Will not invest more than 25% of its total assets in the securities of
issuers in any single industry, provided that there shall be no such
limitation on the purchase of obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities.

(2) May not borrow except (a) pursuant to reverse repurchase agreements as
discussed above; or (b) from banks for temporary or emergency purposes (but
not to purchase securities) in an amount not exceeding 15% of the value of
its total assets and may pledge up to 10% of the value of its assets to
secure such borrowings.

Investors may refer to the additional investment restrictions described in the
Fund's Statement of Additional Information.

THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

INVESTMENT ADVISER. Transamerica Fund Management Company, the Investment
Adviser, is a wholly owned subsidiary of Transamerica Asset Management Group,
Inc. which is a wholly owned subsidiary of Transamerica Corporation ("Trans-
america"), one of the nation's largest and most respected financial services
organizations with more than $38 billion in assets. Transamerica engages through
its subsidiaries in two primary businesses: finance and insurance. The
Investment Adviser manages the investment of the Fund's assets, provides
administrative services and supervises the Fund's daily business affairs.
Investment decisions are made by a committee with no one person being solely
responsible for making recommendations to the Committee. These services are
subject to general review by the Trust's Board of Trustees. The Investment
Adviser (including its predecessors) has been engaged in the investment advisory
business since 1949 and currently serves as investment adviser to a broad range
of mutual funds and investment portfolios.

ADVISORY FEE. For the advisory and certain administrative services the
Investment Adviser provides to the Fund, the Fund pays a monthly fee computed at
an annual rate of .50% of the average daily net assets of the Fund. For the
fiscal year ended March 31, 1994, investment advisory fees paid by the Fund
amounted to .50% of its average daily net assets (without regard to expense
reimbursement).

ADMINISTRATIVE SERVICES AGREEMENT. The Fund reimburses the Investment Adviser
and Transamerica Fund Distributors, Inc. for actual expenses incurred in
providing certain administrative services to the Fund. Such administrative
services include: accounting and bookkeeping, communication in response to
shareholder inquiries and certain printing expenses of various fund reports. In
addition, the Fund may directly bear the costs of certain data processing and
pricing information services used in

12
<PAGE> 117

providing accounting and bookkeeping services. For the fiscal year ended March
31, 1994, administrative service fees paid by the Fund amounted to .57% of the
Fund's average net assets (without regard to expense reimbursement).

DISTRIBUTOR AND DISTRIBUTION PLANS. Transamerica Funds Distributors, Inc., a
wholly owned subsidiary of the Investment Adviser, acts as the distributor and
principal underwriter of shares of the Fund pursuant to a separate plan of
distribution for each of Class A Shares (the "Class A Plan") and Class B Shares
(the "Class B Plan") adopted under Rule 12b-1 of the Investment Company Act of
1940 (the "1940 Act"). The fees paid under the Class A Plan and the Class B Plan
(collectively referred to herein as "the Plans") under Rule 12b-1 of the 1940
Act are referred to herein as the "12b-1 fees." Amounts paid by the Fund under
the Class A Plan are allocated to Class A Shares, and amounts paid under the
Class B Plan are allocated to Class B Shares. As a result, shareholders bear
only the 12b-1 fees associated with the class of shares they hold, and such fees
paid by one class are not used to pay the 12b-1 fees of the other class.
Payments made by the Fund under the Class A Plan and the Class B Plan may be
used to pay fees to, or as reimbursement for certain services provided by, banks
and other depository institutions. Although the Glass-Steagall Act limits the
ability of banks and other depository institutions to act as underwriters or
distributor of securities, the Fund does not believe these limitations would
prohibit such depository institutions from providing such services or entering
into compensation arrangements with the Distributor as described under
"Information About Shares of the Fund -- Purchase of Shares." In addition, state
securities laws may differ from the interpretation of federal law and depository
institutions selling shares of the Fund may be required to register as dealers
under state laws. The Plans have each been approved by the Fund's Board of
Trustees (the "Trustees" or "Board of Trustees"), including a majority of the
Trustees who are not "interested persons" of the Fund (as defined by the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Plans or any agreement relating thereto (the "Independent Trustees"), and
have also been approved in the case of Class A Shares by the Class A
Shareholders and, in the case of Class B Shares by the Investment Adviser as
sole shareholder of Class B Shares. In approving the Plans, the Board of
Trustees, including a majority of the Independent Trustees, received and
considered all pertinent information and determined that there was a reasonable
likelihood that each of the Plans would benefit the Fund and its shareholders by
enabling the Fund to achieve economics of operations and management through
growth of the Fund's assets. The Plans may be continued from year to year,
provided that such continuances are approved at least annually by the Board of
Trustees, including a majority of the Independent Trustees, and each may be
terminated at any time by the Independent Trustees or by vote of shareholders.

13
<PAGE> 118

by the Investment Adviser in one fiscal year may not be reimbursed by the Fund
in subsequent fiscal years. For fiscal year ended March 31, 1994, payments made
by the Fund under the Class A Plan amounted to .24% of its average daily net
assets.

CLASS B PLAN. Under the Class B Plan, the Fund makes monthly payments to the
Distributor to compensate it for services provided in connection with the
distribution of Class B Shares and the payment of sales commissions (dealer
concessions) to Dealers that sell such shares ("Distribution Fees"). The Fund
also makes payments to reimburse the Distributor for Service Fees. The Class B
Plan is designed to enable the Distributor to offer Class B Shares to investors
on a basis that does not involve imposition of a front-end sales charge. Sales
commissions payable to Dealers that sell Class B Shares are advanced by the
Distributor (currently up to 4.00% value of Class B Shares sold by them and are
recovered by the Distributor over time through a combination of its receipt of
contingent deferred sales charges on redemptions of Class B Shares by investors
(see "Information About Shares of the Fund -- Purchase of Shares -- Deferred
Sales Charge Alternative -- Class B Shares") and Distribution Fees.

14
<PAGE> 119

charges and a carrying charge on shares sold prior to termination. Applicable
Distribution Fees, in an amount not exceeding the .75% annual limitation, are
accrued each day as an expense of the Class B Shares and reduce the net assets
of the Fund attributable to the Class B Shares. However, in accordance with
generally accepted accounting principles, the Fund does not treat the amount of
Distribution Fees exceeding the .75% limitation as a liability of the Fund and
does not reduce the current net assets of the Fund attributable to the Class B
Shares by such amount, although it may become payable in the future, because the
standards for accrual of a liability under these accounting principles have not
been satisfied due to contingencies as to payment of such amount.

EXPENSES. The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. These expenses include, but are not limited
to: fees paid to the Investment Adviser; trustees fees; taxes; legal, brokerage
fees; custodian and auditing fees; fees payable pursuant to the administrative
services agreement; and other expenses which are not expressly assumed by the
Investment Adviser under its investment advisory agreement with the Fund. Total
expenses of the Fund for the fiscal year ended March 31, 1994 for Class A
Shares, including investment advisory fees, amounted to 1.30% of average net
assets; without reimbursement, such expenses would have amounted to 2.04% of the
Fund's Class A average daily net assets. The Investment Adviser has voluntarily
agreed to reimburse all normal operating expenses of the Fund in excess of
1.30%, per annum, of the Fund's average daily net assets for Class A and Class B
Shares, respectively until March 31, 1995. The Investment Adviser reserves the
right to terminate this policy upon 60-day written notice to shareholders.

INFORMATION ABOUT
SHARES OF THE FUND
- --------------------------------------------------------------------------------

NET ASSET VALUE

The net asset value of the Fund is computed once daily as of the close of
trading (presently, 4:00 p.m. New York time) on each day that the New York Stock
Exchange ("NYSE") is open for business.

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<PAGE> 120

The Fund will also compute its net asset value on other days if a purchase or
redemption request is received on that day and there is a sufficient degree of
trading in securities held by the Fund. Net asset value per share is calculated
by dividing the market or fair value of all of the Fund's portfolio securities
plus the value of its other assets (including dividends and interest received or
accrued), less all liabilities (including accrued expenses but excluding
capital) by the number of shares of the Fund outstanding. The Board of Trustees
has established procedures for the valuation of the Fund's securities, based in
general on market or estimated value (see "Determination of Net Asset Value" in
the Statement of Additional Information).

PURCHASE OF SHARES
- --------------------------------------------------------------------------------

FEDWIRE PURCHASES. In addition to purchases made by mail, investors may make
payment for

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<PAGE> 121

initial or subsequent investments, by federal funds wire. Investors should first
notify Account Services (1-800-343-6840) of the new account request (if
applicable) and the intended wire purchase. To assure proper credit, banks
wiring federal funds to the Fund should be instructed to include:

(1) name of the Fund,

(2) name of shareholder (as registered exactly in the account) and shareholder
account number or,

Federal funds may be wired to:*

Boston Safe Deposit & Trust Company
ABA Routing Number: 011001234
Account Number: 159565

* Except during such times or holidays when the Boston Safe Deposit & Trust
Company ("Boston Bank") is not open for business.

The Fund's Board of Trustees reserves the right to waive the minimum investment
requirements and to reject any order for purchase of shares (including wire
purchases) when in its judgment, such rejection is in the Fund's best interest.

In determining which class of shares to purchase, investors should consider
whether, during the anticipated life of their investment in the Fund, the

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<PAGE> 122

accumulated 12b-1 fees under the Class B Plan and deferred sales charges on
Class B Shares would be less than the initial sales charge and accumulated 12b-1
service fees under the Class A Plan if such shares were purchased at the same
time taking into account the Class B Automatic Exchange of Class B Shares for
Class A Shares after eight years, as discussed below. Investors who qualify for
significantly reduced sales charges, or who expect to maintain their investment
for an extended period of time, might elect the initial sales charge
alternative. Because an initial sales charge is deducted at the time of
purchase, investors should consider the extent to which any return would
otherwise be realized on the additional funds initially invested under the
deferred sales charge alternative and weigh such consideration against the
higher per share return of the Class A Shares afforded by the lower 12b-1 fees
of such shares. Certain other investors might determine it to be more
advantageous to have all their funds invested initially, although remaining
subject to 12b-1 fees of up to 1.00% of the average daily net assets allocable
to Class B Shares for the eight years following initial purchase and, for a
six-year period, a contingent deferred sales charge. IN THIS REGARD, INVESTORS
SHOULD UNDERSTAND THAT UNDER CERTAIN MARKET CONDITIONS OR DURING THE TIME THE
INVESTMENT IS HELD, THE ACCUMULATED ONGOING 12B-1 FEES OF CLASS B SHARES MAY
EXCEED THE MAXIMUM INITIAL SALES CHARGES AND ONGOING 12B-1 FEES OF CLASS A
SHARES. SEE "INFORMATION ABOUT SHARES OF THE FUND -- PURCHASE OF SHARES." The
Fund provides each holder of Class B Shares an automatic exchange of their Class
B Shares for Class A Shares at the end of the eight year period following the
initial purchase of their Class B Shares (such exchange occurs unless expressly
waived by the shareholder.) This exchange is not subject to federal taxes as in
accordance with a private letter ruling received by the Fund from the Internal
Revenue Service. See "Information About Shares of the Fund -- Purchase of
Shares" and "Shareholder Services -- Class B Automatic Exchange."

<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF
--------------------------
NET
AMOUNT OF AMOUNT OFFERING DEALER
PURCHASE INVESTED PRICE DISCOUNT
--------- ------- ------ -------
<S> <C> <C> <C>
Less than $100,000.... 4.99% 4.75% 4.25%
$100,000 but less than
$250,000............ 3.90% 3.75% 3.25%
$250,000 but less than
$500,000............ 2.83% 2.75% 2.35%
$500,000 but less than
$1,000,000.......... 2.04% 2.00% 1.75%
$1,000,000 or more.... *See below*
</TABLE>

Purchases of $1 Million or More. On purchases by a single purchaser aggregating
$1 million or more, the Distributor will pay securities dealers an amount on a
cumulative basis equal to 1% of the first $3 million, plus .5 of 1% of the next
$2 million, plus .25 of 1% on amounts over $5 million. With respect to shares
purchased at the $1 million plus breakpoint, a contingent deferred sales charge
("CDSC") will be imposed on the proceeds of the redemption of certain shares so
purchased if they are redeemed within 12 months of the end of the calendar month
of their purchase, in an amount equal to 1% of the lesser of (a) the net asset
value of the shares at the time of purchase or (b) the net asset value of the
shares at the time of redemption ("CDSC Shares"). The CDSC would be deducted
from the redemption proceeds otherwise payable to the shareholder and would be
retained by the Distributor. In addition, no CDSC will be imposed when a
shareholder redeems (a) CDSC shares acquired through reinvestment of income
dividends or capital gains distributions; and (b) shares acquired by exchange
from any mutual fund sold with an initial sales charge and distributed by the
Distributor. The CDSC does not apply to purchases at

18
<PAGE> 123

net asset value described under "Waiver of Initial Sales Charge" and will be
waived in the case of redemptions of shares in connection with (i) distributions
to participants or beneficiaries of certain qualified retirement plans, and
returns of excess contributions made to these plans, and (ii) involuntary
redemption of shares if the aggregate net asset value of shares held in the
account is less than the required minimum. In determining whether a CDSC is
payable on any redemption, the Fund will first redeem shares not subject to any
charge. Although any CDSC shares being exchanged are not subject to any charge,
they will be subject to the applicable CDSC when such acquired shares are
eventually redeemed. For purposes of calculating the CDSC on such redemptions,
the original purchase date of the initial fund investment will be used in lieu
of the date the redeemed shares were acquired by exchange.

Waiver of Initial Sales Charges. No sales charge is applicable to any sale of
the Fund's Class A Shares to (1) trustees, employees and former employees (and
their families) of the Fund or Transamerica Fund Management Company or
Transamerica Investment Services or Transamerica Corporation, (2) Transamerica
Fund Management Company, its Houston-based parent or affiliates or to their
respective employees (and employees' families) or to their clients (including
(a) securities dealers having sales agreements with the Distributor and (b)
employees of financial institutions which are engaged either directly by means
of sales agreements with the Distributor or indirectly by separate arrangements
with a broker/dealer in the sale of the Fund's Class A shares and (c)
institutional clients of certain consulting firms) and (3) participants in
certain (employee) retirement plans sponsored by Transamerica Corporation or its
subsidiaries and (4) investors purchasing shares with proceeds of redemptions
from non-Transamerica mutual funds which impose front-end sales charges or
deferred sales charges. In addition, sales charges do not apply to Class A
Shares of the Fund purchased in accounts upon which a broker/dealer or
investment adviser charges an account management fee, provided the broker/dealer
has a Fee-based Program Agreement with the Distributor. Class A Shares are also
offered at net asset value to participants in employee benefit plans qualified
under Section 401 of the Internal Revenue Code subject to certain criteria
established by the Distributor. See the Statement of Additional Information,
"Purchase of Shares -- Purchase at Net Asset Value" for a more complete
description of investors eligible to purchase shares at net asset value. To be
eligible to purchase shares of the Fund without sales charge as described above,
the investor or the investor's broker must establish such eligibility by
advising the Distributor at the time shares are purchased.

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<PAGE> 124

REDEMPTION AND
REPURCHASE OF SHARES
- --------------------------------------------------------------------------------

GENERAL. Shares of the Fund in any amount may be redeemed at any time at the net
asset value per share next determined after the redemption request is received
in proper form by the Transfer Agent. See "Net Asset Value." In certain cases,
however, redemption proceeds from the Class B Shares will be reduced by the
amount of any applicable contingent deferred sales charge (see "Redemption and
Repurchase of Shares -- Class B -- Shares Contingent Deferred Sales Charge"
below.)

20
<PAGE> 125

or bank account to which proceeds are to be mailed has changed in the prior 30
days) signatures must be guaranteed subject to the provisions under Rule 17Ad-15
of the Securities Exchange Act of 1934 ("SEA Rule") without restriction,
condition or qualification by an authorized signatory of a commercial bank,
trust company, savings bank, savings and loan association, federal credit union,
or a member firm of the National Association of Securities Dealers, Inc. or of a
domestic stock exchange, or any other "eligible guarantor institution," as
defined under the SEA Rule. If shares are held in the name of a corporation,
trust, estate, custodianship, guardianship, partnership or pension and profit
sharing plan, additional documentation may be necessary.

21
<PAGE> 126

proceeds may be paid in whole or in part by a distribution in kind of securities
held by the Fund, subject to the limitation that, pursuant to an election under
Rule 18f-1 under the Investment Company Act of 1940, the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or one percent of the
net asset value of the Fund during any 90-day period for any one account. In
such circumstances, a shareholder might be required to bear transaction costs to
dispose of securities distributed in kind.