<PAGE>
TRANSAMERICA PREMIER FUNDS
ADVISER SHARES
Supplement Dated September 22, 1995
to Adviser Shares Prospectus Dated September 22,1995
The following information supplements, and should be read in conjunction
with, the Prospectus to which this endorsement is attached.
The following information supplements the section titled "Fund Expenses."
As an additional subsidy to introduce the Funds, beginning on the date of
commencement of Fund sales, the Investment Adviser will waive the Adviser Fee
and the Administrator will assume any other operating expenses for each Fund,
other than certain extraordinary or non-recurring expenses, which together
exceed the Total Operating Expenses shown below for each Fund until the earlier
of December 31, 1995 or such time as the Fund's assets exceed $50 million.
The estimated operating expenses for the period from the date of
commencement of Fund sales until December 31, 1995 are as follows:
ESTIMATED FUND OPERATING EXPENSES TO 12/31/95
(as a percent of average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL OPERATING
ADVISER FEE AFTER REIM- EXPENSES AFTER WAIVER
FUND AFTER WAIVER 12B-1 FEE BURSEMENT AND REIMBURSEMENT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premier Equity 0.00% 1.00% 0.00% 1.00%
- ----------------------------------------------------------------------------------------------------
Premier Index 0.00% 1.00% 0.15% 1.15%
- ----------------------------------------------------------------------------------------------------
Premier Bond 0.00% 1.00% 0.00% 1.00%
- ----------------------------------------------------------------------------------------------------
Premier Balanced 0.00% 1.00% 0.00% 1.00%
- ----------------------------------------------------------------------------------------------------
Premier Short-
Intermediate Government 0.00% 1.00% 0.00% 1.00%
- ----------------------------------------------------------------------------------------------------
Premier Cash Reserve 0.00% 0.25% 0.15% 0.40%
- ----------------------------------------------------------------------------------------------------
</TABLE>
The estimated annual operating expenses, assuming the above figures until
------
December 31, 1995 and the figures currently in the Prospectus after December 31,
1995 are as follows:
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percent of average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL OPERATING
ADVISER FEE AFTER REIM- EXPENSES AFTER WAIVER
FUND AFTER WAIVER 12B-1 FEE BURSEMENT AND REIMBURSEMENT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premier Equity 0.64% 1.00% 0.30% 1.94%
- ----------------------------------------------------------------------------------------------------
Premier Index 0.22% 1.00% 0.27% 1.49%
- ----------------------------------------------------------------------------------------------------
Premier Bond 0.45% 1.00% 0.34% 1.79%
- ----------------------------------------------------------------------------------------------------
Premier Balanced 0.56% 1.00% 0.34% 1.90%
- ----------------------------------------------------------------------------------------------------
Premier Short-
Intermediate Government 0.37% 1.00% 0.08% 1.45%
- ----------------------------------------------------------------------------------------------------
Premier Cash Reserve 0.26% 0.25% 0.23% 0.74%
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROSPECTUS: SEPTEMBER 22, 1995
TRANSAMERICA PREMIER FUNDS
ADVISER SHARES
TRANSAMERICA PREMIER EQUITY FUND
TRANSAMERICA PREMIER INDEX FUND
TRANSAMERICA PREMIER BOND FUND
TRANSAMERICA PREMIER BALANCED FUND
TRANSAMERICA PREMIER SHORT-INTERMEDIATE GOVERNMENT FUND
TRANSAMERICA PREMIER CASH RESERVE FUND
-------------------------------------------------
YOUR GUIDE This guide (the "Prospectus") will
provide you with helpful insights and details
about the Transamerica Premier Funds. It is
intended to give you what you need to know before
investing. Please read it carefully and save it
for future reference.
TRANSAMERICA INVESTORS Transamerica Investors,
Inc. (also referred to as the Company or we, us,
or our) is an open-end, management investment
company. We are a mutual fund company that offers
a number of portfolios, known as the Transamerica
Premier Funds. Each Fund is managed separately
and has its own investment objective, strategies
and policies designed to meet different goals.
Each Fund and each class of each Fund has its own
levels of expenses and charges. The minimum
investment is $1,000 per Fund, or less in some
instances. See "Minimum Investment Amounts" on
page 19.
FOR ADDITIONAL INFORMATION AND ASSISTANCE For
additional details about the Funds contact your
broker, or write to Transamerica Investors, P.O.
Box 9232, Boston, Massachusetts 02205-9232. A
free Statement of Additional Information (the
"SAI") which has been filed with the Securities
and Exchange Commission. The SAI is a part of
this Prospectus by reference.
-------------------------------------------------
THESE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY
THE UNITED STATES GOVERNMENT. THERE CAN BE NO
ASSURANCE THAT THE TRANSAMERICA PREMIER CASH
RESERVE FUND WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE. LIKE ALL
MUTUAL FUND SHARES, 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.
[LOGO OF TRANSAMERICA APPEARS]
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
SECTION PAGE
<S> <C> <C>
- ----------------------------
HERE'S WHERE YOU CAN GET
A QUICK OVERVIEW OF THE
FUNDS' INVESTMENT OBJEC-
TIVES, STRATEGIES, AND THE TRANSAMERICA PREMIER FUNDS AT A GLANCE P. 3
POLICIES, AND SEE IF YOU'RE
THE TYPE OF INVESTOR WHO
MIGHT BE INTERESTED IN FUND EXPENSES P. 4
THESE FUNDS.
- ----------------------------
- ---------------------------- THE MANAGEMENT TEAM P. 5
READ THIS SECTION FOR
INFORMATION ABOUT THE
INVESTMENT ADVISER,
INCLUDING SOME INVEST-
MENT PERFORMANCE INVESTMENT ADVISER'S PERFORMANCE P. 6
NUMBERS YOU CAN USE TO
COMPARE WITH OTHER FUNDS. TRANSAMERICA PREMIER FUNDS IN DETAIL P. 8
- ----------------------------
- ---------------------------- A GENERAL DISCUSSION ABOUT RISK P. 14
YOUR TOLERANCE FOR RISK IS
ONE MAJOR PART OF YOUR
INVESTMENT DECISION. YOU INVESTMENT PROCEDURES AND RISK CONSIDERATIONS FOR THE FUNDS P. 14
SHOULD BE AWARE OF SEV-
ERAL TYPES OF RISK RELATED
TO THE FUNDS, WHICH ARE SHAREHOLDER SERVICES P. 18
EXPLAINED IN THIS SECTION.
- ----------------------------
- ----------------------------
THE MINIMUM INVESTMENT HOW TO BUY ADDITIONAL SHARES P. 18
IS $1,000 PER FUND, OR
LESS IN SOME INSTANCES. HOW TO SELL SHARES P. 19
- ----------------------------
HOW TO EXCHANGE SHARES P. 21
- ---------------------------- OTHER INVESTOR REQUIREMENTS AND SERVICES P. 22
ONE OF THE ADVANTAGES
OF INVESTING IN MUTUAL
FUNDS IS THE POTENTIAL TO DIVIDENDS AND CAPITAL GAINS P. 23
RECEIVE DIVIDENDS AND/OR
CAPITAL GAINS. WHAT ABOUT TAXES? P. 23
- ----------------------------
SHARE PRICE P. 24
INVESTMENT ADVISER AND ADMINISTRATOR P. 25
GENERAL INFORMATION P. 26
</TABLE>
-------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL SECURITIES IN ANY STATE OR OTHER
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER IN SUCH STATE OR OTHER
JURISDICTION.
-------------------------------------------------
2
<PAGE>
THE TRANSAMERICA PREMIER FUNDS AT A GLANCE
THE TRANSAMERICA PREMIER FUNDS AT A GLANCE
The Transamerica Premier Funds consist of six
diversified Funds with different investment
objectives and risk levels, which invest in a
range of securities types. There is no guarantee
that these investment objectives will be met.
These short descriptions will give you a summary
of each Fund. A more detailed description for
each Fund is in "Transamerica Premier Funds in
Detail" on page 8. For information on the risks
associated with investment in these Funds, see
"Investment Procedures and Risk Considerations
for the Funds" on page 14.
TRANSAMERICA PREMIER EQUITY FUND
. We seek to maximize long-term growth for this
Fund.
. We invest primarily in common stocks of growth
companies that we consider to be premier
companies that are undervalued in the stock
market.
. The Fund is intended for investors who wish to
participate primarily in the common stock
markets. Investors should have the perspective,
patience, and financial ability to take on
above-average stock market volatility in a
focused pursuit of long-term capital growth.
TRANSAMERICA PREMIER INDEX FUND
. We seek to track the performance of the
Standard & Poor's 500 Composite Stock Price
Index, also known as the S&P 500 Index, for
this Fund.
. We attempt to reproduce the overall investment
characteristics of the S&P 500 Index by using a
combination of management techniques. Our stock
purchases reflect the S&P 500 Index, but we
make no attempt to forecast general market
movements.
. The Fund is intended for investors who wish to
participate in the overall growth of the
economy, as reflected by the domestic stock
market. Investors should have the perspective,
patience, and financial ability to take on
average stock market volatility in pursuit of
long-term capital growth.
TRANSAMERICA PREMIER BOND FUND
. We seek to achieve a high total return (income
plus capital changes) from fixed income
securities consistent with preservation of
principal for this Fund.
. We invest primarily in a diversified selection
of investment grade corporate and government
bonds and mortgage-backed securities.
. The Fund is intended for investors who wish to
invest in a diversified portfolio of bonds.
Investors should have the perspective,
patience, and financial ability to take on
above-average bond price volatility in pursuit
of a high total return produced by income from
longer-term securities and capital gains from
undervalued bonds.
TRANSAMERICA PREMIER BALANCED FUND
. We seek to achieve long-term capital growth and
current income with a secondary objective of
capital preservation, by balancing investments
among stocks, bonds, and cash (or cash
equivalents) for this Fund.
. We invest in a diversified selection of common
stocks, bonds, and money market instruments and
other short-term debt securities.
. The Fund is intended for investors who wish to
participate in both the equity and debt
markets, but who wish to leave the allocation
of the balance between them to professional
management. Investors should have the
perspective, patience, and financial ability to
take on average market volatility in pursuit of
long-term total return that balances capital
growth and current income.
TRANSAMERICA PREMIER SHORT-INTERMEDIATE
GOVERNMENT FUND
. We seek to achieve a high level of current
income with the security of investing in
government securities for this Fund.
. We generally invest in securities issued or
guaranteed by the U.S. Government, its agencies
or instrumentalities, or its political
subdivisions. The Fund will have a dollar-
weighted average maturity of more than two
years, but less than five years.
. The Fund is intended for investors who wish to
earn higher income than is available from money
market funds. Investors should have the
perspective and patience to accept the
additional price fluctuation for the advantage
of earning generally higher returns than is
available from money market funds.
TRANSAMERICA PREMIER CASH RESERVE FUND
. We seek to maximize current income from money
market securities consistent with liquidity and
preservation of principal for this Fund.
3
<PAGE>
FUND EXPENSES
. This is a money market fund. We invest
primarily in high quality U.S. dollar-
denominated money market instruments with
remaining maturities of 13 months or less.
. The Fund provides a low risk, relatively low
cost way to maximize current income through
high quality money market securities that offer
stability of principal and liquidity. This Fund
may be a suitable investment for temporary or
defensive purposes and may also be appropriate
as part of an overall long-term investment
strategy.
-------------------------------------------------
SHARES OF THESE FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, AND ARE NOT INSURED BY
THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY. THESE
FUNDS INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
-------------------------------------------------
FUND EXPENSES
Each Fund bears the costs of its operations.
These costs may include, but are not limited to,
fees for investment adviser, distribution,
shareholder service, independent directors,
professional and brokerage services, security
pricing services, custody, transfer agency,
recordkeeping services, pension plan services,
insurance, federal and state registration,
amortized expenses, taxes, and any extraordinary
expenses.
Each Fund is available in two classes of
shares: Investor Shares and Adviser Shares. Each
class of shares will be charged separately for
expenses related solely to that class. Each class
of shares may have different sales charges and
other expenses, which may affect performance.
Fund expenses that are not class specific will be
allocated between the classes based on the net
assets of each class. This Prospectus describes
only Adviser Shares.
ADVISER SHARES Adviser Shares are available only
for Pension and Retirement Savings Programs and
institutional investors, and only from registered
representatives of Transamerica Financial
Resources, Inc. ("TFR"), or other registered
broker-dealers authorized by the Board of
Directors and Transamerica Securities Sales
Corporation ("TSSC"). Individual investors can
buy this class of shares only for an Individual
Retirement Account ("IRA") or through a program
sponsored by their employer, that is offered by a
registered representative (i.e., broker). For a
listing of applicable Pension and Retirement
Savings Programs, see "Pension and Retirement
Savings Programs" on page 28.
INVESTOR SHARES Investor Shares are sold directly
to individuals, companies, Pension and Retirement
Savings Programs, and other institutional
investors from TSSC, the Distribution For a free
prospectus about Investor Shares, call 1-800-89-
ASK-US.
- --------------------------- SHAREHOLDER TRANSACTION EXPENSES
SHAREHOLDER TRANSACTION
EXPENSES ARE CHARGES YOU
PAY AT THE TIME YOU BUY
OR SELL SHARES IN A FUND.
- ---------------------------
<TABLE>
<CAPTION>
PREMIER FUNDS SHORT-INTERM. CASH
TRANSACTION EXPENSES EQUITY INDEX BOND BALANCED GOVERNMENT RESERVE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales Charge on Purchases/1/ None None None None None None
-----------------------------------------------------------------------------------------------------
Redemption Fee None None None None None None
-----------------------------------------------------------------------------------------------------
Sales Charge on Reinvested Dividends None None None None None None
-----------------------------------------------------------------------------------------------------
Exchange Fee None None None None None None
-----------------------------------------------------------------------------------------------------
Contingent Deferred Sales Charge None None None None None None
-----------------------------------------------------------------------------------------------------
</TABLE>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percent of average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL OPERATING
ADVISER FEE AFTER REIM- EXPENSES AFTER WAIVER
FUND AFTER WAIVER/2/ 12B-1 FEE/3/ BURSEMENT AND REIMBURSEMENT/5/
-----------------------------------------------------------------------------------------------------
- ------------------------------ <S> <C> <C> <C> <C>
ANNUAL FUND OPERATING Premier Equity 0.85% 1.00% 0.40% 2.25%
EXPENSES ARE PAID AT A -----------------------------------------------------------------------------------------------------
DAILY RATE OUT OF THE FUND'S Premier Index 0.30% 1.00% 0.30% 1.60%
ASSETS. WE CALCULATE -----------------------------------------------------------------------------------------------------
THE SHARE PRICE AND ANY Premier Bond 0.60% 1.00% 0.45% 2.05%
DIVIDENDS AFTER THESE -----------------------------------------------------------------------------------------------------
EXPENSES ARE PAID. Premier Balanced 0.75% 1.00% 0.45% 2.20%
- ------------------------------ -----------------------------------------------------------------------------------------------------
Premier Short-Intermediate
Government 0.50% 1.00% 0.10% 1.60%
-----------------------------------------------------------------------------------------------------
Premier Cash Reserve 0.35% 0.25% 0.25% 0.85%
-----------------------------------------------------------------------------------------------------
</TABLE>
The preceding tables summarize actual transaction expenses
and anticipated operating expenses. The purpose of the
tables is to assist you in understanding the varying costs
and expenses you will bear directly or indirectly. Without
any fee waiver by the Investment Adviser or expense
reimbursement by the Administrator, the estimated total
operating expenses for the first year of the Funds'
operation, based on $50 million of assets in each Fund,
are 4.01%, 3.67%, 3.85%, 3.91%, 3.65% and 2.77%,
respectively.
4
<PAGE>
THE MANAGEMENT TEAM
EXAMPLE
Using the above tables of transaction expenses
and operating expenses/6/, you would pay the
following expenses based on a $1,000 investment.
The expenses shown assume a 5% annual return. The
expenses are the same whether or not you redeem
your shares at the end of each time period. We
may assess an annual fee against accounts used as
IRA's or SEP's. For more information on this fee,
see "IRA/SEP Accounts" on page 18.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS
----------------------------------------------------------------------
<S> <C> <C>
Premier Equity $23 $70
----------------------------------------------------------------------
Premier Index $16 $50
----------------------------------------------------------------------
Premier Bond $21 $64
----------------------------------------------------------------------
Premier Balanced $22 $69
----------------------------------------------------------------------
Premier Short-Intermediate Government $16 $50
----------------------------------------------------------------------
Premier Cash Reserve $ 9 $27
----------------------------------------------------------------------
</TABLE>
-------------------------------------------------
THE INFORMATION CONTAINED IN THE ABOVE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES. THE ACTUAL EXPENSES MAY BE MORE
OR LESS THAN THOSE SHOWN.
-------------------------------------------------
1. Although there is no sales charge, there is a
12b-1 fee. Over a long period of time, the total
amount of 12b-1 fees paid may exceed the amount
of another fund's sales charges.
2. See "Adviser Fee" on page 25.
3. 12b-1 fees are asset-based charges to
compensate brokers and other sales people. They
also cover costs of advertising and marketing the
Funds. The 12b-1 fee includes a service fee to
compensate sales people for expenses in providing
ongoing shareholder information and advice and
related expenses. For more information on 12b-1
fees, see "Distribution Plan" on page 26.
4. "Other Expenses" are those incurred after any
reimbursements to the Fund by the Administrator.
See "The Management Team" below. Other expenses
include expenses not covered by the adviser fee
or the 12b-1 fee. See "Distribution Plan" on page
26. This can include fees and expenses
attributable solely to a particular class of
shares, such as those for transfer agent,
administrative personnel, and pension plan
services, preparing, printing, mailing and
distributing materials to shareholders of a
particular class; state and federal registration
fees; legal and accounting fees; directors' fees
and expenses incurred as a result of issues
relating solely to a class; and fees and payments
for specific class services including account
maintenance, dividend disbursing or subaccounting
services; or administration of a dividend
reinvestment, systematic investment or withdrawal
plan.
5. "Total Operating Expenses" include adviser
fees. 12b-1 fees, and other expenses that a Fund
incurs. The Investment Adviser has agreed to
waive their Adviser Fee and the Administrator has
agreed to assume any other operating expenses for
each Fund, other than certain extraordinary or
nonrecurring expenses, which together exceed a
specified percentage of the average daily net
assets of that Fund until the earlier of October
1, 1996 or such time as the Fund's assets exceed
$50 million. The specified percentages are 2.25%
for the Premier Equity Fund, 1.60% for the
Premier Index Fund, 2.05% for the Premier Bond
Fund, 2.20% for the Premier Balanced Fund, 1.60%
for the Premier Short-Intermediate Government
Fund, and 0.85% for the Premier Cash Reserve
Fund. The Administrator may, from time to time,
assume additional expenses. Fee waivers and
expense assumption arrangements, which may be
terminated at any time without notice, will
increase a Fund's yield.
6. The expenses in the example assume no fees for
IRA or SEP accounts.
THE MANAGEMENT TEAM
Responsibility for the management and supervision
of the Company and its Funds rests with the Board
of Directors of Transamerica Investors, Inc. (the
"Board"). The Investment Adviser and the
Administrator are subject to the direction of the
Board.
The Funds' Investment Adviser is
Transamerica Investment Services, Inc. (the
"Investment Adviser"), 1150 S. Olive Street, Los
Angeles, California 90015. The Investment
Adviser's duties include, but are not limited to:
(1) supervising and managing the investments of
each Fund and directing the purchase and sale of
its investments; and (2) ensuring that
investments follow the investment objective,
strategies, and policies and comply with
government regulations. For more information on
Fund management, see "Investment Adviser and
Administrator" on page 25.
The Funds' Administrator is Transamerica
Occidental Life Insurance Company (the
"Administrator"), 1150 S. Olive Street, Los
Angeles, California 90015. The Administrator's
duties include, but are not limited to: (1)
providing the Funds with administrative and
clerical services, including the maintenance of
the Funds' books and records; (2) registering the
Fund shares with the Securities and Exchange
Commission (the "SEC") and with those states and
other jurisdictions where its shares are offered
or sold and arranging periodic updating of the
Funds' prospectus; (3) providing proxy materials
and reports to Fund shareholders and the SEC; and
(4) providing the Funds with adequate office
space and all necessary office equipment and
services.
Transamerica Occidental Life Insurance
Company is a wholly owned subsidiary of
Transamerica Insurance Corporation of California.
Both Transamerica Insurance Corporation of
California and Transamerica Investment Services,
Inc. are wholly owned subsidiaries of
Transamerica Corporation, 600 Montgomery Street,
San Francisco, California 94111, one of the
nation's largest financial services companies.
5
<PAGE>
INVESTMENT ADVISER'S PERFORMANCE
INVESTMENT ADVISER'S PERFORMANCE
Because Transamerica Investors, Inc. is a new
mutual fund company, established in 1995, there
is no past performance information available for
the Premier Funds. However, the Investment
Adviser, Transamerica Investment Services, Inc.,
has been managing segregated investment accounts
(or "separate accounts") for pension clients of
Transamerica Corporation's affiliate companies
for over ten years. The Investment Adviser's
performance in managing these investments was a
key factor in our decision to offer mutual funds
to the public. This performance is illustrated in
the tables and graphs that follow.
Five of the Funds described in this
Prospectus have substantially the same investment
objectives and policies and use the same
investment strategies and techniques as the
similarly named, but unrelated, separate accounts
managed by the Investment Adviser. However, there
can be no assurance that their performance will
be the same. The Funds may have total assets
which will be more or less than the total assets
in the separate accounts. The Investment Adviser
believes that asset size is not a significant
factor in the Funds' ability to achieve their
investment objectives.
For comparison purposes, the five separate
accounts match up to the Premier Funds as
follows:
<TABLE>
<CAPTION>
SEPARATE ACCOUNTS PREMIER FUNDS
----------------------------------------------------------------------------------------
<S> <C>
Equity Separate Account Transamerica Premier Equity Fund
----------------------------------------------------------------------------------------
Equity Index Separate Account Transamerica Premier Index Fund
----------------------------------------------------------------------------------------
Bond Separate Account Transamerica Premier Bond Fund
----------------------------------------------------------------------------------------
Balanced Separate Account Transamerica Premier Balanced Fund
----------------------------------------------------------------------------------------
Cash Management Separate Account Transamerica Premier Cash Reserve Fund
----------------------------------------------------------------------------------------
</TABLE>
The following table shows how the separate
accounts' annualized performance compares to
recognized industry indexes over the last one-
year, three-year, and five-year periods.
<TABLE>
<CAPTION>
- ----------------------------- SEPARATE ACCOUNT PERFORMANCE/1/
THE PERFORMANCE FIGURES 1 3 5 Since
SHOWN OPPOSITE ARE FOR Seperate Account of Index Year Years Years Inception/2/
FIVE INVESTMENT FUNDS <S> <C> <C> <C> <C>
WHICH HAVE THE SAME Equity Separate Account 44.02% 26.38% 23.84% 20.69%
INVESTMENT ADVISER AND S&P 500 Index 26.07% 13.26% 12.09% 10.51%
USE THE SAME BASIC
INVESTMENT STRATEGIES AS Equity Index Separate Account 25.45% 12.62% 11.46% 13.47%
THE CORRESPONDING S&P 500 Index 26.07% 13.26% 12.09% 13.72%
PREMIER FUNDS. THIS
DEMONSTRATES THE Bond Separate Account 15.80% 10.13% 11.54% 13.13%
INVESTMENT ADVISER'S Lehman Brothers Govt/Corporate Index 12.77% 7.93% 9.61% 10.44%
INVESTMENT TRACK RECORD.
- ----------------------------- Balanced Separate Account 37.54% -- -- 17.38%
60% S&P 500 Index and 20.75% -- -- 9.57%
40% Lehman Brothers Govt/Corporate Index
Cash Management Separate Account 5.00% 3.56% 4.44% 6.94%
IBC/Donoghue First Tier Index 4.95% 3.51% 4.37% 6.88%
</TABLE>
/1/ Figures are as of 6/30/95
/2/ Inception dates: Equity - 10/1/87; Equity
Index - 10/1/86; Bond - 5/1/83;
Balanced - 4/1/93; Cash Management - 1/3/82
/3/ IBC's Money Fund Report/TM/ - All Taxable,
First Tier
--Prior to separate account inception
The Investment Adviser has had a history of
successfully investing in the three basic
investment categories; equity, bond, and money
markets. Following are graphs of the three
separate accounts representing those categories,
showing their performance since inception
compared with the performance of recognized
industry indexes for each investment category.
Rates of return shown are calculated using a
time-weighted total rate of return with each
period linked to create the long-term rates of
return. Results for periods longer than one year
are annualized. This method was used for each
separate account and will also be used for each
of the Funds. Beginning on October 1, 1992 the
separate account values were calculated daily and
cash flows were daily. Prior to that date,
separate account valuations and cash flows were
monthly.
6
<PAGE>
INVESTMENT ADVISER'S PERFORMANCE
The following graph shows that $1,000
invested in the Equity Separate Account at its
inception on October 1, 1987 would have grown to
about $4,293 as of June 30, 1995. This is
equivalent to a 20.69% return per year. By
comparison $1,000 invested at the same time in
S&P 500 Index securities would have grown to only
about $2,169. The S&P 500 Index is a selection of
500 common stocks designed to be a benchmark for
the equity market in general.
EQUITY SEPARATE ACCOUNT
[LOGO OF GRAPH APPEARS HERE]
The following graph shows that $1,000
invested in the Bond Separate Account at its
inception on May 1, 1983 would have grown to
about $4,487 as of June 30, 1995. This is
equivalent to a 13.13% return per year. By
comparison $1,000 invested at the same time in
Lehman Brothers Government/Corporate Index
securities would have grown to only about $3,348.
The Lehman Brothers Government/Corporate Index is
a mixture of both corporate and government bonds
with maturities of 10 years or longer that are
rated investment grade or higher by Moody's or
Standard & Poor's.
BOND SEPARATE ACCOUNT
[LOGO OF GRAPH APPEARS HERE]
7
<PAGE>
TRANSAMERICA PREMIER FUNDS IN DETAIL
The following graph shows that $1,000
invested in the Cash Management Separate Account
at its inception on January 3, 1982 would have
grown to about $2,417 as of June 30, 1995. This
is equivalent to a 6.94% return per year. And
$1,000 invested at the same time in IBC/Donoghue
First Tier Index securities would have grown to
about $2,399. The IBC/Donoghue First Tier Index
is a composite of taxable money market funds that
meet the SEC's definition of first tier
securities.
CASH MANAGEMENT SEPARATE ACCOUNT CASH MANAGEMENT
SEPARATE ACCOUNT
[LOGO OF GRAPH APPEARS HERE]
Performance for the separate accounts is
shown after reduction for investment management
and administrative charges. The industry indexes
shown in the previous graphs are used for
comparison purposes only. They are unmanaged
indexes that have no management fees or expense
charges, and they are not available for
investment. Performance figures are based on
historical earnings. They are not intended to
indicate future performance.
As you can see, the separate accounts have
good long-term performance records compared with
the indexes. Keep in mind the Premier Funds'
performance may differ from the separate
accounts' performance. Some reasons for this
difference are timing of purchases and sales,
availability of cash for new investments,
brokerage commissions, and diversification of
securities. It's possible that by using different
performance-determining methods than we've used
here, the results could vary. You should not rely
on this performance data when deciding whether to
invest in a particular Premier Fund. Past
performance of the separate accounts is no
guarantee of future results for the Funds.
TRANSAMERICA PREMIER FUNDS IN DETAIL
FUND OBJECTIVES, STRATEGIES AND POLICIES The
investment objectives, strategies, and policies
of each Fund are described below. There is also a
section for each Fund giving some points to
consider when investing in that Fund's shares.
The "Some Points to Consider When Investing"
section is designed to suggest circumstances for
investing in that Fund, and give you a better
understanding of the Fund.
FUND RISKS The "Investment Procedures and Risk
Considerations for the Funds" section on page 14,
details specific risks of the types of securities
in which the Funds invest.
TRANSAMERICA PREMIER EQUITY FUND
INVESTMENT OBJECTIVE We seek to maximize long-
term growth for this Fund.
INVESTMENT STRATEGIES AND POLICIES We invest
primarily in common stocks of growth companies
that we consider to be premier companies that are
undervalued in the stock market. We believe
premier companies have: managements that
demonstrate their outstanding capabilities
through a combination of superior track records
and well-defined plans for the future; low cost
proprietary products; dominance in market share
or
8
<PAGE>
TRANSAMERICA PREMIER FUNDS IN DETAIL
specialized market niches; strong earnings and
cash flows to finance future growth; or
shareholder orientation by increasing dividends,
stock repurchases, and strategic acquisitions.
- --------------------------- We also select companies for their potential
FOR THE TRANSAMERICA for growth based upon trends in the U.S.
PREMIER EQUITY FUND, WE economy. Some major trends have included: a) the
GENERALLY FOCUS ON aging of baby boomers; b) the proliferation of
GROWTH STOCKS OF WHAT communication and information technologies; c)
WE CONSIDER TO BE the shift toward financial assets rather than
PREMIER COMPANIES. real estate or other tangible assets; and d) the
- --------------------------- continuing increase in U.S. productivity.
We focus on growth stocks for this Fund. We
will generally invest at least 65% of the Fund's
assets in common stocks. We may also invest in
preferred stocks, warrants, and bonds convertible
into common stocks. When the Investment Advisor
determines that market conditions warrant, the
Fund may invest without limit in cash and cash
equivalents for temporary defensive purposes. It
is not expected to be used routinely. As part of
the management of cash and cash equivalents and
to help maintain liquidity, we may purchase and
sell the same kind of money market and other
short-term instruments and debt securities as we
do for the Transamerica Premier Cash Reserve
Fund. See "Transamerica Premier Cash Reserve
Fund" on page 13.
We may buy foreign securities if they meet
the same criteria described above for the Fund's
investments in general. We may invest as much as
20% of its assets in foreign securities. At times
the Fund may have no foreign investments. Foreign
securities we purchase will be those traded on
the U.S. exchanges as American depositary
receipts ("ADR's"). ADR's are registered stocks
of foreign companies which trade on U.S. stock
exchanges.
SOME POINTS TO CONSIDER WHEN INVESTING Since we
- -------------------------- invest primarily in common stocks, our
STOCK PRICES GO UP AND investments are subject to stock market price
DOWN ESPECIALLY OVER A volatility. Price volatility means that stock
SHORT-TERM HORIZON. SO prices can go up or down due to a variety of
IF YOU INVEST IN THE economic and market conditions.
TRANSAMERICA PREMIER
EQUITY FUND YOU SHOULD However, we attempt to lessen price
BE WILLING TO ACCEPT volatility by focusing on the potential for each
THESE KINDS OF PRICE prospective holding (a "bottom up" approach)
SWINGS WHILE FOCUSING rather than the economic and business cycle (a
ON THE LONG-TERM "top down" approach). The Fund is constructed one
INVESTMENT OBJECTIVE. stock at a time. Each company passes through our
- -------------------------- research process and in our opinion stands on its
own merits as a viable investment. Our
proprietary fundamental research is designed to
identify companies with potential for improvement
in profitability and acceleration of growth. We
believe a rising stock market will tend to
provide significant opportunities for these
fundamental improvements to be reflected in stock
prices. We believe these stocks to have stable
inherent value under most circumstances and tend
to be better protected in a general declining
market.
The Fund is intended for investors who have
the perspective, patience, and financial ability
to take on above-average stock market volatility
in a focused pursuit of long-term capital growth.
Because of the uncertainty associated with common
stock investments, the Fund is intended to be a
long-term investment.
TRANSAMERICA PREMIER INDEX FUND
INVESTMENT OBJECTIVE We seek to track the
performance of the Standard & Poor's 500
Composite Stock Price Index, also known as the
S&P 500 Index (the "Index"), for this Fund.
INVESTMENT STRATEGIES AND POLICIES To achieve the
Fund's objective, we use a combination of
management techniques. We purchase common stocks,
S&P 500 Stock Index futures, S&P 500 Stock Index
options, and short-term instruments in varying
proportions. For common stocks, investment
decisions are based solely on the market
proportions of securities which are included in
the Index. The only exception is that
Transamerica Corporation common stock will not be
purchased. Our stock purchases reflect the Index,
but we make no attempt to forecast general market
movements.
The Index is an unmanaged index which
assumes reinvestment of dividends and is
generally considered representative of U.S. large
capitalization stocks. The Index is composed of
500 common stocks of large-capitalization
companies that are chosen by Standard and Poor's
Corporation on a statistical basis. The inclusion
of a stock in the Index in no way implies that
Standard & Poor's Corporation believes the stock
to be an attractive investment. The 500 stocks,
most of which trade on the New York Stock
Exchange, represent approximately 70% of the
market value of all U.S. common stocks. Each
stock in the Index is weighted by its market
value.
- ----------------------------- Because of the market value weighting, the
THE TRANSAMERICA 50 largest companies in the Index currently
PREMIER INDEX FUND IS AN account for approximately 50% of the Index.
EASY WAY FOR YOU TO INVEST Typically, companies included in the Index are
IN THE OVERALL STOCK MARKET the largest and most dominant firms in their
SINCE THE FUND WILL TRACK respective industries. As of June 30, 1995, the
THE 500 STOCKS IN THE S&P five companies with the largest weighting in the
500. Index were: General Electric (2.4%), Exxon
- ----------------------------- Corporation (2.2%), AT&T Corporation (2.1%), Coca
Cola (2.0%), and Royal Dutch Petroleum (1.6%).
The Investment Adviser routinely compares the
Fund's composition to the Index and rebalances
the Fund as required.
9
<PAGE>
TRANSAMERICA PREMIER FUNDS IN DETAIL
We may invest in instruments, other than
common stocks, whose return depends on stock
market prices. They include S&P 500 Stock Index
futures contracts, options on the Index, options
on futures contracts, and debt securities. These
are derivative securities whose returns are
linked to the returns of the S&P 500 Index. These
investments are made primarily to help the Fund
track the total return of the Index. The use of
S&P 500 Index derivatives allows the Fund to
achieve close correlation with the Index on a
cost-effective basis while maintaining liquidity.
Purchase of futures and options requires only a
small amount of cash to cover the Fund's position
and approximate the price movement of the Index.
In order to avoid leverage, any cash which we do
not invest in stocks or in futures and options we
invest in short-term debt securities of the same
type as the Transamerica Premier Cash Reserve
Fund can invest. These investments allow the Fund
to approximate the dividend yield of the Index,
to cover the Fund's open positions in the S&P 500
Index derivatives, and to help offset transaction
costs and other expenses not incurred by the
unmanaged Index. For more information on
derivatives, see the section on "Options,
Futures, and Other Derivatives" on page 17 of the
Prospectus, and also in the Statement of
Additional Information.
The Transamerica Premier Index Fund is not
sponsored, endorsed, sold or promoted by Standard
& Poor's Corporation.
SOME POINTS TO CONSIDER WHEN INVESTING The
performance of the Transamerica Premier Index
Fund will reflect the performance of the S&P 500
Index although it may not match it precisely.
Generally, when the Index is rising, the value of
shares in the Fund should also rise. When the
market is declining, the value of shares should
also decline. The Index's returns are not reduced
by investment or operating expenses. So, our
ability to match the Index will be impeded by
such expenses. The Fund's return versus the
Index, and its monthly correlation with the
movement of the Index, will be reviewed by the
Fund's management and reported to the Board.
The portfolio turnover rate may be as high
as 200%. This may result in higher transaction
costs and tax consequences than for a less
actively traded fund, but the Investment Adviser
believes that such turnover will not adversely
affect the Fund's performance. See "Investment
Procedures and Risk Considerations for the Funds"
on page 14 for more information on turnover.
The Fund is intended for investors who wish
to participate in the overall growth of the
economy, as reflected by the domestic stock
market. By owning shares of the Fund, you
indirectly own shares of the largest companies,
according to their proportional representation in
the Index. Investors should have the perspective,
patience, and financial ability to take on
average stock market volatility in pursuit of
long-term capital growth. Because of the
uncertainty associated with common stock
investments, the Fund is intended to be a long-
term investment.
TRANSAMERICA PREMIER BOND FUND
INVESTMENT OBJECTIVE We seek to achieve a high
total return (income plus capital changes) from
fixed income securities consistent with
preservation of principal for this Fund.
INVESTMENT STRATEGIES AND POLICIES We invest in a
diversified selection of corporate and government
bonds and mortgage-backed securities. Through our
proprietary evaluation and credit research, we
attempt to identify bonds whose potential to
outperform other similar bonds, by virtue of
underlying credit strength and market mispricing,
is not fully reflected in the current bond market
valuations. By actively managing the Fund, we
capitalize on these opportunities. We seek to
accumulate additional return by finding price
advantages as they occur in the market.
We normally invest at least 65% of the
Fund's assets in investment grade bonds.
Investment grade bonds are rated Baa or higher by
Moody's Investors Service ("Moody's"). They are
rated BBB or higher by Standard & Poor's
Corporation ("S&P"). Maturities are primarily
between 10 and 30 years. In addition, we may
invest in lower-rated securities (currently not
expected to exceed 20% of the Fund's assets).
Those securities are rated Ba1 or lower (Moody's)
and BB+ or lower (S&P). We may also invest in
unrated securities of similar quality, as
determined by us. For more information on lower-
rated securities, see "High-Yield (`Junk') Bonds"
on page 16 of the Prospectus and see the
Statement of Additional Information. For more
- ---------------------------- information on S&P and Moody's ratings, see
WE INVEST PRIMARILY IN "Summary of Bond Ratings" on page 27.
HIGH QUALITY, INVESTMENT
GRADE CORPORATE AND Our investments may include securities
GOVERNMENT BONDS AND issued or guaranteed by the U.S. Government or
MORTGAGE-BACKED its agencies and instrumentalities, publicly
SECURITIES, AND, TO A traded corporate securities, as well as municipal
LESSER EXTENT, IN obligations. We also may invest in mortgage-
BELOW-INVESTMENT GRADE backed securities issued by various federal
SECURITIES, FOREIGN agencies and government sponsored enterprises and
SECURITIES, AND CASH in other mortgage-related or asset-backed
EQUIVALENTS. securities. The investments in mortgage-related
- ---------------------------- securities can be subject to the risk of early
repayment of principal. For more information, see
"Mortgage-Backed and Asset Backed Securities" on
page 17 and the Statement of Additional
Information.
We may buy foreign securities and other
instruments if they meet the same criteria
described above for the Fund's investments in
general. We may invest as much as 20% of the
Fund's assets in foreign securities. At times the
Fund may have no foreign investments. See
"Foreign Securities" on page 16.
10
<PAGE>
TRANSAMERICA PREMIER FUNDS IN DETAIL
If a security in the Fund that was
originally rated "investment grade" is downgraded
by a ratings service, it may or may not be sold.
This depends on our assessment of the issuer's
prospects. However, we will not purchase below-
investment-grade securities if that would
increase their representation in the Fund to more
than 35%. See "Summary of Bond Ratings" on page
27 and "High Yield (`Junk') Bonds" on page 16 for
a description of bond ratings and junk bonds.
As part of the management of cash and cash
equivalents and to help maintain liquidity, we
may purchase and sell the same kind of money
market and other short-term instruments and debt
securities as we do for the Transamerica Premier
Cash Reserve Fund. See "Transamerica Premier Cash
Reserve Fund" on page 13. We may also invest in
options and futures contracts on other securities
or groups of securities and preferred stock. See
"Options, Futures and Other Derivatives" on page
17 and in the Statement of Additional
Information. We ordinarily invest in common stock
only as a result of conversion of bonds, exercise
of warrants, or other extraordinary business
events.
SOME POINTS TO CONSIDER WHEN INVESTING The
Transamerica Premier Bond Fund is intended for
investors who have the perspective, patience, and
financial ability to take on above-average bond
price volatility in pursuit of a high total
return produced by income from longer-term
securities and capital changes from undervalued
credit strength. Due to the longer maturity of
the Fund's assets, the price of the Fund's
securities can fluctuate more sharply than
shorter-term securities when interest rates go up
or down. An increase in interest rates will cause
prices to fall. A decrease in rates will cause
- ---------------------------- prices to rise. Because of the uncertainty
BOND PRICES AND INTEREST associated with long-term bond investments, the
RATES TEND TO WORK LIKE A Fund is intended to be a long-term investment.
SEE-SAW. LONGER MATURITY
BONDS SIT OUT TOWARDS THE The longer maturity bonds in which we
END. SHORTER MATURITY primarily invest tend to produce higher income
BONDS SIT IN TOWARDS THE than bonds with shorter maturities. Longer
CENTER. WHEN INTEREST maturity bonds also tend to vary more in price in
RATES RISE, BOND PRICES response to changes in interest rates. The basic
FALL. WHEN INTEREST RATES quality of the bonds, which are primarily
FALL, BOND PRICES RISE. investment grade, tends to provide some safety of
- ---------------------------- principal.
In general, lower-rated bonds, which are a
much lesser component of the Fund, offer higher
returns. But they also carry higher risks. These
can include: a) a higher risk of insolvency,
especially during economic downturns; b) a lower
degree of liquidity; and c) the prices of lower-
rated bonds can be more volatile.
TRANSAMERICA PREMIER BALANCED FUND
INVESTMENT OBJECTIVE We seek to achieve long-term
capital growth and current income with a
secondary objective of capital preservation, by
balancing investments among stocks, bonds, and
cash (or cash equivalents) for this Fund.
- ---------------------------
THE NAME OF THE INVESTMENT STRATEGIES AND POLICIES We invest in a
TRANSAMERICA PREMIER diversified selection of common stocks, bonds,
BALANCED FUND IS VERY and money market instruments and other short-term
DESCRIPTIVE. WE ATTEMPT debt securities. We attempt to achieve reasonable
TO BALANCE LONG-TERM asset appreciation during favorable periods and
CAPITAL GROWTH (STOCKS) conservation of principal in adverse times. This
WITH CURRENT INCOME requires flexibility in managing the Fund's
(BONDS AND OTHER FIXED assets. Therefore, we may shift the portions held
INCOME SECURITIES). in bonds and stocks according to business and
- --------------------------- investment conditions. The Fund may hold equity,
fixed income, and cash securities in any
proportion, although at all times it will not
hold less than 25% of its assets in non-
convertible debt securities. When the Investment
Adviser determines that market conditions
warrant, the Fund may invest without limit in
cash or cash equivalents for temporary defensive
purposes. To the extent that the Fund is so
invested, it is not achieving the investment
objectives of the Fund.
Under normal circumstances, we expect that
common stocks will represent 60% to 70% of the
Fund's total assets. The Fund holds common stocks
primarily to provide long-term growth of capital
and income. We invest the remaining 30% to 40% of
the Fund's assets primarily in investment grade
bonds as rated by either Moody's or S&P.
The stocks in the Transamerica Premier
Balanced Fund are generally growth companies that
we consider to be premier companies and
undervalued in the stock market. Equity
securities may be selected by us based on growth
potential and dividend paying properties since
- ----------------------------- income is a consideration. We manage the equity
THE STOCKS IN THE PREMIER portion of the Fund in a similar manner as we do
BALANCED FUND ARE USUALLY the Transamerica Premier Equity Fund, although
CONCENTRATED AMONG the selection of securities may differ. See
PREMIER GROWTH COMPANIES. "Transamerica Premier Equity Fund" on page 8.
WE MANAGE THAT PORTION OF
THE FUND MUCH LIKE WE We invest the fixed income portion of the
MANAGE THE TRANSAMERICA Fund in a diversified selection of corporate and
PREMIER EQUITY FUND. U.S. Government bonds and mortgage-backed
- ----------------------------- securities. We manage this portion in a similar
manner as we do the Transamerica Premier Bond
Fund, although the selection of securities may
differ. See "Transamerica Premier Bond Fund" on
page 10. The fixed income assets are normally at
least 65% high quality, investment grade bonds
with maturities of between 5 and 30 years. Non-
investment grade bonds held in the fixed income
portion of the Fund will be less than 20% of the
Transamerica Premier Balanced Fund's net assets.
For more information on non-investment grade
bonds, see "High-Yield (`Junk') Bonds" on page 16
and the Statement of Additional Information.
11
<PAGE>
TRANSAMERICA PREMIER FUNDS IN DETAIL
- ---------------------------
WE MANAGE THE FIXED The Fund may also hold certain short-term
INCOME PORTION OF THE fixed income securities as a cash reserve. As
TRANSAMERICA PREMIER part of the management of cash and cash
BALANCED FUND (MOSTLY equivalents and to help maintain liquidity, we
BONDS AND MORTGAGE- may purchase and sell the same kind of money
BACKED SECURITIES) MUCH market and other short-term instruments and debt
LIKE WE MANAGE THE securities as we do for the Transamerica Premier
TRANSAMERICA PREMIER Cash Reserve Fund. See "Transamerica Premier Cash
BOND FUND. Reserve Fund" on page 13.
- ---------------------------
We may buy foreign securities and other
instruments if they meet the same criteria
described above for the Fund's investments in
general. We may invest as much as 20% of the
Fund's assets in foreign securities. At times the
Fund may have no foreign investments. Foreign
stock securities purchased by us will be those
traded on the U.S. exchanges as American
depository receipts ("ADR's"). We may also invest
in stock and bond index futures and options to a
limited extent, as well as preferred stocks.
SOME POINTS TO CONSIDER WHEN INVESTING In
general, the Fund holds equities for long-term
capital appreciation, and holds bonds for
stability of principal and income as well as a
reserve for investment opportunities. This
balance often creates a situation where some of
the market risks offset one another. But
investment risks cannot totally be avoided. The
expected performance of such a fund would
normally lie somewhere between the performance of
an equity fund (holding the same stocks) and the
performance of a bond fund (holding the same
bonds). But this depends on the actual
- ---------------------------- proportions of stocks and bonds. Since we have
BY INVESTING IN BOTH flexibility in changing the balance between asset
STOCKS AND BONDS, WE classes, we may increase exposure to the current
ATTEMPT TO LESSEN advantages of one or more of the asset classes.
OVERALL INVESTMENT RISK. Or we may avoid the current disadvantages of one
- ---------------------------- or more of the asset classes.
The Transamerica Premier Balanced Fund is
intended for investors who wish to participate in
both the equity and debt markets, but who wish to
leave the allocation of the balance between them
to professional management. The Fund is intended
for investors who have the perspective, patience,
and financial ability to take on average market
volatility in pursuit of long-term total return
that balances capital growth and current income.
Because of the uncertainties associated with
common stock and bond investments, the Fund is
intended to be a long-term investment.
TRANSAMERICA PREMIER SHORT-INTERMEDIATE
GOVERNMENT FUND
INVESTMENT OBJECTIVE We seek to achieve a high
level of current income with the security of
investing in government securities for this Fund.
INVESTMENT STRATEGIES AND POLLCIES We generally
invest at least 65% of the Fund's assets in
securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or
its political subdivisions. The Fund will have a
dollar-weighted average maturity of more than two
years, but less than five years. The maturity of
individual instruments may range from less than
one to as much as thirty years. Our goal is to
offer higher income than money market funds with
greater price stability than most bond funds.
Because of the Fund's emphasis on income, capital
appreciation is not a significant investment
consideration. Our investments will consist
primarily of bonds and mortgage-backed
securities.
We may invest in U.S. Treasury bills, notes
and bonds. We may also invest in securities
issued by any agency or instrumentality of the
United States. Examples of those securities
include those issued by the Government National
Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA"), the
Federal Housing Administration, the Federal Farm
Credit System, or the Student Loan Marketing
Association. Some agency securities are backed by
the full faith and credit of the U.S. Treasury
(such as those issued by GNMA). Others are
supported by a borrowing facility from the
Treasury (such as those issued by FNMA). The
remainder are backed by the credit of the issuing
agency or instrumentality. Agency securities that
are mortgage-backed (such as those issued by
GNMA) are also subject to prepayment risk. In a
period of rising interest rates, prepayments
would be expected to decline, extending the
average life of these securities and increasing
their price volatility in relation to fixed-
maturity government securities. In certain
situations, this may require the Fund to sell
securities below their cost. For more information
on prepayment risk see the section on "Current
Income Risk" under "A General Discussion About
Risk" on page 14 and the section on "Mortgage-
Backed and Asset-Backed Securities" on page 17.
We may also invest up to 35% of the Fund's
assets in investment grade corporate bonds.
Investment grade bonds are rated Baa or higher by
Moody's Investors Service ("Moody's"). They are
rated BBB or higher by Standard & Poor's
Corporation ("S&P"). For more information on S&P
and Moody's ratings, see "Summary of Bond
Ratings" on page 27. We may also invest in
instruments derived from (i.e. derivative
instruments) government or government agency
securities. For more information on derivatives
see "Options, Futures, and Other Derivatives" on
page 17. As part of the management of cash and
cash equivalents and to help maintain liquidity,
we may purchase and sell the same kind of money
market and other short-term instruments and debt
securities as we do for the Transamerica Premier
Cash Reserve Fund. See "Transamerica Premier Cash
Reserve Fund" on page 13.
SOME POINTS TO CONSIDER WHEN INVESTING Generally,
the Transamerica Premier Short-Intermediate
Government Fund is subject to relatively low
credit risk. This is because we invest primarily
in securities that are issued or
12
<PAGE>
TRANSAMERICA PREMIER FUNDS IN DETAIL
guaranteed by the U.S. Government, its agencies
or instrumentalities, or its political
subdivisions or other top-rated securities,
although the Fund itself is not guaranteed. Under
normal conditions, the Fund provides a higher
yield than money market funds because of the
somewhat longer maturity of the securities. The
high quality and the limited maturity of the
assets tend to provide safety of principal. Most
bonds will fall in price when interest rates
rise. Bonds of higher credit quality tend to
better withstand the changes in the economy.
Also, shorter-term bonds will decline less than
longer-term bonds.
In attempting to achieve its objective, the
Fund will actively trade its investments. This
may result in higher transaction costs and tax
consequences than for a less actively traded
fund, but the Investment Adviser believes that
such turnover will not adversely affect the
Fund's performance. The portfolio turnover rate
may be as high as 300%. See "Investment
Procedures and Risk Considerations for the Funds"
on page 14 for more information on turnover.
The Transamerica Premier Short-Intermediate
Government Fund is intended for investors who
wish to earn higher income than is available from
money market funds. However, this Fund may have
more short-term volatility than a money market
fund. Investors should have the perspective and
patience to accept the additional price
fluctuation for the advantage of earning
generally higher returns than is available from
money market funds.
TRANSAMERICA PREMIER CASH RESERVE FUND
INVESTMENT OBJECTIVE We seek to maximize current
income from money market securities consistent
with liquidity and preservation of principal for
this Fund.
INVESTMENT STRATEGIES AND POLICIES This is a
money market fund. We invest primarily in high
quality U.S. dollar-denominated money market
instruments of U.S. and foreign issuers with
remaining maturities of 13 months or less,
including:
. Obligations issued or guaranteed by the U.S.
and foreign governments and their agencies or
instrumentalities;
. Obligations of U.S. and foreign banks, or their
foreign branches, and U.S. savings banks;
. Short-term corporate obligations, including
commercial paper, notes, and bonds;
. Other short-term debt obligations with
remaining maturities of 397 days or less; and
. Repurchase agreements involving any of the
securities mentioned above.
We may also purchase other marketable, non-
convertible corporate debt securities of U.S.
issuers. These investments include bonds,
debentures, floating rate obligations, and issues
with optional maturities. See the Statement of
Additional Information for a description of these
securities.
Bank obligations are limited to U.S. or
foreign banks having total assets over $1.5
billion. Investments in savings association
obligations are limited to U.S. savings banks
with total assets over $1.5 billion. Investments
in bank obligations can include instruments
issued by foreign branches of U.S. or foreign
banks or domestic branches of foreign banks.
In addition, we may invest in U.S. dollar-
denominated obligations issued or guaranteed by
foreign governments or their political
subdivisions, agencies, or instrumentalities. We
may buy these foreign securities and other
instruments if they meet the same criteria
described above for the Fund's investments in
general. The Fund can invest up to 25% of its
assets in obligations of Canadian and other
foreign issuers. At times the Fund may have no
foreign investments.
The commercial paper and other short-term
corporate obligations are determined by us to
present minimal credit risks. We determine that
they are either: a) rated in the highest short-
term rating category by at least two nationally
recognized statistical rating organizations; b)
rated in the highest short-term rating by a
single rating organization if it's the only
organization that has assigned the obligations a
short-term rating; or c) unrated, but determined
by us to be of comparable quality (also called
"First Tier Securities").
- -------------------------- We seek to maintain a stable net asset value
THE TRANSAMERICA of $1.00 per share by investing in assets which
PREMIER CASH RESERVE present minimal credit risk as defined above, and
FUND OFFERS A PLACE TO by maintaining an average maturity of 90 days or
KEEP YOUR MONEY WHILE less. Securities are valued on an amortized cost
YOU ARE CONSIDERING IN basis.
WHICH FUNDS TO INVEST,
OR FOR YOUR SHORT-TERM SOME POINTS TO CONSIDER WHEN INVESTING The Fund
NEEDS. provides a low risk, relatively low cost way to
- -------------------------- maximize current income through high quality
money market securities that offer stability of
principal and liquidity. The rates on short-term
investments made by us and the daily dividend
paid to investors will vary, rising or falling
with short-term rates generally. The Fund's yield
will tend to lag behind the changes in interest
rates. The speed with which the Fund's yield
reflects current market rates will depend on how
quickly its securities mature and the amount of
money available for new investment.
This Fund may be a suitable investment for
temporary or defensive purposes. It may also be
appropriate as part of an overall long-term
investment strategy.
13
<PAGE>
A GENERAL DISCUSSION ABOUT RISK
-------------------------------------------------
THE TRANSAMERICA PREMIER CASH RESERVE FUND IS
NEITHER INSURED NOR GUARANTEED BY THE UNITED
STATES GOVERNMENT, AND THERE CAN BE NO ASSURANCE
THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.
-------------------------------------------------
WHAT IS FUNDAMENTAL? The investment objectives
given for each Fund are fundamental. This means
they can be changed only with the approval of the
majority of shareholders. We can give you no
assurance that these objectives will be met. Many
of the strategies and policies are not
fundamental. This means strategies and policies
can be changed by the Board without your
approval.
If any investment objectives of a Fund
change, you should decide if the Fund still meets
your financial needs. More information about this
is in the Statement of Additional Information.
A GENERAL DISCUSSION ABOUT RISK
It's important for you to understand the risks
inherent in investing in different kinds of
funds, such as our Funds. All investments are
subject to risk. Even money you hide in your
mattress is subject to the risk that inflation
may erode its value. Each of the Funds is subject
to the following risks:
- ----------------------------- MARKET OR PRICE VOLATILITY RISK For stocks, this
HOW YOU FEEL ABOUT RISK IS refers to the up and down price fluctuations, or
PERSONAL. RISK REFLECTS volatility, caused by changing conditions in the
UNCERTAINTY OR UNEXPECTED financial markets. For bonds and other debt
CHANGE. TRY TO COME UP securities, it is the change in market price
WITH A BALANCE OF INVEST- caused by interest rate movements. Longer-
MENTS THAT ALLOWS YOU TO maturity bond funds and stock funds are more
GO AFTER YOUR MAIN GOALS subject to this risk than money market and
WHILE STILL GIVING YOU shorter-maturity bond funds.
PEACE OF MIND.
- ----------------------------- FINANCIAL OR CREDIT RISK For stocks and other
equity securities, financial risk comes from the
possibility that current earnings of the stock
company will fall or that overall financial
circumstances will decline. Either of these could
cause the security to lose its value. For bonds
and other debt securities, financial risk comes
from the possibility that the issuer will not be
able to pay principal and interest on time. Funds
with low quality bonds and speculative stock
funds are more subject to this risk than funds
with government or high quality bonds. For more
information, see "High-Yield (`Junk') Bonds" on
page 16 and "Summary of Bond Ratings" on page 27.
CURRENT INCOME RISK The Funds receive income,
either as interest or dividends, from the
securities in which they have invested. Each Fund
pays out substantially all of this income to its
shareholders as dividends. See the footnote for
"What About Taxes?" on page 23. The dividends
paid out to shareholders are called current
income. Current income risk means how much and
how quickly overall interest rate or dividend
rate changes on income received by the Funds
affects our ability to maintain the current level
of income paid to shareholders.
INFLATION OR PURCHASING POWER RISK Inflation risk
is the uncertainty that your invested dollars may
not buy as much in the future as they do today.
Longer-maturity bond funds are more subject to
this risk than money market or stock funds.
SOVEREIGN RISK Sovereign risk is the potential
loss of assets or earning power due to government
actions, such as taxation, expropriation, or
regulation. Funds with large investments overseas
or funds with tax-advantaged investments are more
subject to this risk.
More in-depth information about risk is
provided in the following section and in the
Statement of Additional Information.
INVESTMENT PROCEDURES AND RISK
CONSIDERATIONS FOR THE FUNDS
BUYING AND SELLING SECURITIES In general, we
purchase and hold securities for each Fund for
capital growth, current income, or a combination
of those purposes. However, we ordinarily buy and
sell securities whenever we think it is
appropriate in order to achieve the Fund's
investment objective. Fund changes can result
from liquidity needs, securities reaching a price
objective, anticipated changes in interest rates,
a change in the creditworthiness of an issuer, or
from general financial or market developments.
Because investment changes usually are not tied
to the length of time a security has been held, a
significant number of short-term transactions may
result.
- ----------------------------- We may sell one security and simultaneously
WE HAVE THE ABILITY TO BUY purchase another of comparable quality. We may
AND SELL SECURITIES AS simultaneously purchase and sell the same
OFTEN AS WE WISH IN ORDER security to take advantage of short-term
TO ACHIEVE A FUND'S differentials and bond yields. Or we may purchase
INVESTMENT OBJECTIVE. individual securities in anticipation of
- ----------------------------- relatively short-term price gains. The rate of
portfolio turnover will not be a determining
factor in these decisions. However, certain tax
considerations can restrict our ability to sell
securities in some circumstances when the
security has been held for less than three
months. Increased turnover results in higher
costs. These costs result from brokerage
commissions, dealer
14
<PAGE>
INVESTMENT PROCEDURES AND RISK CONSIDERATIONS FOR THE FUNDS
mark-ups and other transaction costs on the sale of securities and reinvestment
in other securities. This can result in the acceleration of taxable gains.
Turnover for the insurance company separate accounts (as described under
"Investment Adviser's Performance" on page 6), also managed by the Investment
Adviser, has not been and will not be a consideration. The Investment Adviser
buys and sells securities for each separate account whenever they believe it is
appropriate to do so. The Transamerica Premier Funds are and will be managed in
a substantially similar manner.
We cannot predict precisely the turnover rates for these new Funds, but we
expect that the annual turnover rates will generally not exceed: 50% for the
Transamerica Premier Equity Fund; 200% for the Transamerica Premier Index Fund;
100% for the Transamerica Premier Bond Fund; 50% for the Transamerica Premier
Balanced Fund; and 300% for the Transamerica Premier Short-Intermediate
Government Fund. We expect the turnover rate for the Transamerica Premier Cash
Reserve Fund to be zero for regulatory purposes. A 100% annual turnover rate
would occur if all of a Fund's securities were replaced one time during a one
year period. Short-term gains realized from turnover are taxable to shareholders
as ordinary income, except for shares held in special tax-qualified accounts
(such as IRA's or employer sponsored pension plans). In addition, higher
turnover rates can result in corresponding increases in brokerage commissions
and other transaction costs. We generally will not consider turnover rates in
making investment decisions on behalf of any Fund consistent with the Fund's
investment objective and policies.
For more information, see "What About Taxes?", on page 23, and the
Statement of Additional Information.
FUND LENDING As a way to earn additional income, we may lend Fund securities to
creditworthy persons not affiliated with the Funds. Such loans must be secured
by cash collateral or by irrevocable letters of credit maintained on a current
basis in an amount at least equal to the market value of the securities loaned.
During the existence of the loan, we must continue to receive the equivalent of
the interest and dividends paid by the issuer on the securities loaned and
interest on the investment of the collateral. We must have the right to call the
loan and obtain the securities loaned at any time on five days' notice. This
includes the right to call the loan to enable us to execute shareholder voting
rights. Such loans cannot exceed one-third of the Fund's net assets taken at
market value. Interest on loaned securities cannot exceed 10% of the annual
gross income of the Fund (without offset for realized capital gains). The
lending policy described in this paragraph is a fundamental policy that can be
changed only by a vote of a majority of shareholders.
Lending securities to broker-dealers and institutions could result in a
loss or a delay in recovering the Fund's securities.
BORROWING POLICIES of the Funds We can borrow money from banks or engage in
reverse repurchase agreements, for temporary or emergency purposes. We can
borrow up to one-third of a Fund's total assets. To secure borrowings, we can
mortgage or pledge securities in an amount up to one-third of a Fund's net
assets. If we borrow money, a Fund's share price may be subject to greater
fluctuation until the borrowing is paid off. The Fund will not make any
additional investments, other than through reverse repurchase agreements, while
the level of borrowing exceeds 5% of the Fund's total assets. For more
information on reverse repurchase agreements see the "Reverse Repurchase
Agreements and Leverage" section below.
REPURCHASE AGREEMENTS We may enter into repurchase agreements with Federal
Reserve System member banks or U.S. securities dealers. A repurchase agreement
occurs when, at the time we purchase an interest-bearing debt obligation, the
seller agrees to repurchase the debt obligation on a specified date in the
future at an agreed-upon price. The repurchase price reflects an agreed-upon
interest rate during the time the Fund's money is invested in the security.
Since the security constitutes collateral for the repurchase obligation, a
repurchase agreement can be considered a collateralized loan. Our risk is the
ability of the seller to pay the agreed-upon price on the delivery date. If the
seller is unable to make a timely repurchase, our expected proceeds could be
delayed, or we could suffer a loss in principal or current interest, or incur
costs in liquidating the collateral. We have established procedures to evaluate
the creditworthiness of parties making repurchase agreements.
The securities underlying repurchase agreements are not subject to the
restrictions applicable to maturity of the Funds or their securities.
We will not invest in repurchase agreements maturing in more than seven
days, if that would constitute more than 10% of its net assets when taking into
account the remaining days to maturity of our existing repurchase agreements.
REVERSE REPURCHASE AGREEMENTS and Leverage We may enter into reverse repurchase
agreements with Federal Reserve member banks and U.S. securities dealers from
time to time. In a reverse repurchase transaction we sell securities and
simultaneously agree to repurchase them at a price which reflects an agreed-upon
rate of interest. We will use the proceeds of reverse repurchase agreements to
make other investments which
15
<PAGE>
INVESTMENT PROCEDURES AND RISK CONSIDERATIONS FOR THE FUNDS
either mature or are under an agreement to resell at a date simultaneous with or
prior to the expiration of the reverse repurchase agreement. The Fund may
utilize reverse repurchase agreements only if the interest income to be earned
from the investment proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction.
Reverse repurchase agreements are a form of leverage which increases the
opportunity for gain and the risk of loss for a given change in market value. In
addition, the gains or losses will cause the net asset value of the Funds'
shares to rise or fall faster than would otherwise be the case. There may also
be a risk of delay in the recovery of the underlying securities, if the opposite
party has financial difficulties.
A Fund's obligations under all borrowings, including reverse repurchase
agreements, will not exceed one-third of the Fund's net assets.
WHEN-ISSUED SECURITIES We may sometimes purchase new issues of securities on a
when-issued basis. The price of when-issued securities is established at the
time the commitment to purchase is made. Delivery of and payment for these
securities typically occur 15 to 45 days after the commitment to purchase. The
market price of the securities at the time of delivery may be higher or lower
than those contracted for on the when-issued security, and there is some risk
the transaction may not be consummated. We maintain a segregated account for
each of the Funds consisting of cash or high-quality liquid debt securities in
an amount at least equal to the when-issued commitments.
SHORT SALES We may sell securities which we do not own, or intend to deliver to
the buyer if we do own ("sell short") if, at the time of the short sale, we own
or have the right to acquire an equal amount of the security being sold short:
at no additional cost. These transactions allow us to hedge against price
fluctuations by locking in a sale price for securities we do not wish to sell
immediately.
We may make a short sale when we want to sell a security we own at a
current attractive price. This allows us to postpone a gain or loss for federal
income tax purposes and to satisfy certain tests applicable to regulated
investment companies under the Internal Revenue Code of 1986, as amended, (the
"Code"). We will make short sales only if the total amount of all short sales
does not exceed 10% of the Fund. This limitation can be changed at any time.
MUNICIPAL OBLIGATIONS We may invest in municipal obligations for any Fund,
except for the Transamerica Premier Index Fund. This includes the equity Funds
as part of their cash management techniques. In addition to the usual risks
associated with investing for income, the value of municipal obligations can be
affected by changes in the actual or perceived credit quality. The credit
quality of a municipal obligation can be affected by, among other factors: a)
the financial condition of the issuer or guarantor; b) the issuer's future
borrowing plans and sources of revenue; c) the economic feasibility of the
revenue bond project or general borrowing purpose; d) political or economic
developments in the region or jurisdiction where the security is issued; and e)
the liquidity of the security. Because municipal obligations are generally
traded over the counter, the liquidity of a particular issue often depends on
the willingness of dealers to make a market in the security. The liquidity of
some municipal issues can be enhanced by demand features which enable us to
demand payment from the issuer or a financial intermediary on short notice.
HIGH-YIELD ("JUNK") BONDS High-yield bonds (commonly called "junk" bonds) are
lower-rated bonds that involve higher current income but are predominantly
speculative because they present a higher degree of credit risk. Credit risk is
the risk that the issuer of the bonds will not be able to make interest or
principal payment on time. If this happens, we would lose some of our income,
and we could expect a decline in the market value of the securities affected. We
need to carefully analyze the financial condition of companies issuing junk
bonds. The prices of junk bonds tend to be more reflective of prevailing
economic and industry conditions, issuers' unique financial situations, and the
bonds' coupon than to small changes in the level of interest rates. But during
an economic downturn or a period of rising interest rates, highly leveraged
companies can have trouble making principal and interest payments, meeting
projected business goals, and obtaining additional financing.
We may also invest in unrated debt securities. Unrated debt, while not
necessarily of lower quality than rated securities, may not have as broad a
market. Because of the size and perceived demand for the issue, among other
factors, certain municipalities may decide not to pay the cost of getting a
rating for their bonds. We analyze the creditworthiness of the issuer, as well
as any financial institution or other party responsible for payments on the
security, to determine whether to purchase unrated municipal bonds.
Unrated debt securities will be included in the 35% limit on non-investment
grade debt of the applicable Funds, unless we deem such securities to be the
equivalent of investment grade securities. See "Summary of Bond Ratings" on page
27 and the Statement of Additional Information for a description of bond rating
categories.
FOREIGN SECURITIES We may invest in foreign securities for each of the Funds,
except the Transamerica Premier Index Fund and the Transamerica Premier Short-
Intermediate Government Fund. Foreign equity invest-
16
<PAGE>
INVESTMENT PROCEDURES AND RISK CONSIDERATIONS FOR THE FUNDS
ments for the Transamerica Premier Equity Fund and the Transamerica Premier
Balanced Fund are limited to the purchase of American depositary receipts
("ADR's") evidencing ownership of the underlying foreign securities. ADR's are
dollar-denominated and are issued by domestic banks or securities firms and
traded in the U.S.
Investing in securities of foreign issuers involves different, and
sometimes greater, risks than investments in securities of U.S. issuers. These
include an increased risk of adverse political and economic developments, and,
with respect to certain countries, the possibility of expropriation,
nationalization or confiscatory taxation or limitations on the removal of the
funds or other assets of a Fund. These risks are discussed under "A General
Discussion About Risk" on page 14.
OPTIONS, FUTURES, AND OTHER DERIVATIVES We may use options, futures, forward
contracts, and swap transactions ("derivatives") for each of the Funds. However,
we do not currently use, nor anticipate using, derivatives for the Transamerica
Premier Cash Reserve Fund. We may seek to protect a Fund against potential
unfavorable movements in interest rates or securities' prices by investing in
derivatives. If those markets do not move in the direction we anticipate, we
could suffer investment losses.
We may purchase, or we may write, call or put options on securities or on
indexes ("options"). We may also enter into interest rate or index futures
contracts for the purchase or sale of instruments based on financial indexes
("futures contracts"), options on futures contracts, forward contracts, and
interest rate swaps and swap-related products. We use these instruments
primarily to adjust a Fund's exposure to changing securities prices, interest
rates, or other factors that affect securities values. This is an attempt to
reduce the overall investment risk. However, the Transamerica Premier Index Fund
will use derivatives as part of its strategy to match the S&P 500 Index.
Risks in the use of these derivatives include, in addition to those
referred to above: a) the risk that interest rates and securities prices do not
move in the directions being hedged against, in which case the Fund has incurred
the cost of the derivative (either its purchase price or, by writing an option,
losing the opportunity to profit from increases in the value of the securities
covered) with no tangible benefit; b) imperfect correlation between the price of
derivatives and the movements of the securities' prices or interest rates being
hedged; c) the possible absence of a liquid secondary market for any particular
derivative at any time; d) the potential loss if the counterparty to the
transaction does not perform as promised; and e) the possible need to defer
closing out certain positions to avoid adverse tax consequences.
More information on derivatives is contained in the Statement of Additional
Information.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES We may invest in mortgage-backed and
asset-backed securities. The Transamerica Premier Bond Fund and the Transamerica
Premier Short-Intermediate Government Fund are more likely to invest in such
securities than the other Funds. Mortgage-backed and asset-backed securities are
generally pools of many individual mortgages or other loans. Part of the cash
flow of these securities is from the early payoff of some of the underlying
loans. The specific amount and timing of such prepayments is difficult to
predict, creating "prepayment risk." For example, prepayments on Government
National Mortgage Association ("GNMA's") are more likely to increase during
periods of declining long-term interest rates because borrowers tend to
refinance when interest rates drop. In the event of very high prepayments, we
may be required to invest these proceeds at a lower interest rate, causing us to
earn less than if the prepayments had not occurred. Prepayments are more likely
to decrease during periods of rising interest rates, causing the expected
average life to become longer. This variability of prepayments will tend to
limit price gains when interest rates drop and to exaggerate price declines when
interest rates rise.
ZERO COUPON BONDS We may invest in zero coupon bonds and strips. Zero coupon
bonds do not make regular interest payments. Instead, they are sold at a
discount from face value. A single lump sum which represents both principal and
interest is paid at maturity. Strips are debt securities whose interest coupons
are taken out and traded separately after the securities are issued, but
otherwise are comparable to zero coupon bonds. The market value of zero coupon
bonds and strips generally is more sensitive to interest rate fluctuations than
interest-paying securities of comparable term and quality.
ILLIQUID SECURITIES We may invest up to 15% of a Fund's net assets in securities
that are illiquid, except that the Transamerica Premier Cash Reserve Fund may
only invest 10%. Securities are considered illiquid when there is no readily
available market or when they have legal or contractual restrictions. Repurchase
agreements which mature in more than seven days are included as illiquid
securities. It may be difficult for us to sell these investments quickly for
their fair market value.
Certain restricted securities that are not registered for sale to the
general public but that can be resold to institutional investors under Rule 144A
may not be considered illiquid. This is provided that a dealer or institutional
trading market exists. The institutional trading market is relatively new.
Liquidity of the Funds' investments could be impaired if trading for these
securities does not further develop or declines. The Investment Adviser
determines the liquidity of Rule 144A securities under guidelines approved by
the Board.
17
<PAGE>
SHAREHOLDER SERVICES
VARIABLE RATE, FLOATING RATE, OR VARIABLE AMOUNT SECURITIES We may invest in
variable rate, floating rate, or variable amount securities for each Fund,
except for the Transamerica Premier Equity Fund. These are short-term unsecured
promissory notes issued by corporations to finance short-term credit needs. They
are interest-bearing notes on which the interest rate generally fluctuates on a
scheduled basis.
INVESTMENTS IN OTHER INVESTMENT COMPANIES We may invest up to 10% of a Fund's
total assets in the shares of other investment companies, but only up to 5% of
its assets in any one other investment company. In addition, we cannot purchase
more than 3% of the securities of any one investment company for any Fund. We
intend to keep these investments to a minimum.
SHAREHOLDER SERVICES
This section details the various services available to you as a shareholder. If
you are a pension plan sponsor, you may wish to contact your plan administrator
for details about the services that apply to your plan. If you are an individual
IRA or SEP shareholder or an institutional shareholder, the following services
are available to you unless otherwise noted in the description.
APPLICATION Your broker may be submitting your application for you. But if you
are completing your own application, one is provided in this Prospectus. Do not
use this application if you are setting up an IRA or SEP account. If you need
help in completing your application, call 1-800-89-ASK-US. Send the application
to the address listed on the application form.
IRA/SEP ACCOUNTS You can establish an Individual Retirement Account ("IRA") or
Simplified Employee Pension ("SEP") with Transamerica Premier Funds.
Contributions to an IRA or SEP may be deductible from your taxable income,
depending on your personal tax situation.
If you are receiving a distribution from your pension plan, or you would
like to transfer your IRA account from another financial institution, you can
continue to get tax-deferred growth by transferring these proceeds to your
Transamerica Premier Fund IRA. If you want to rollover distributions from your
pension plan to an IRA in one or more of the Funds, the money must be paid
directly by your pension plan administrator to Transamerica Investors to avoid a
20% federal withholding tax. See "What About Taxes?" on page 23.
There is an annual fee of $10 per Fund in which you own shares for
administering your IRA or SEP. This is limited to a maximum annual fee of $36
per taxpayer identification number. Alternatively, you can pay a one-time, non-
refundable fee of $100 for all IRA/SEP accounts that are maintained under the
same taxpayer identification number. You may pay the fee to us, otherwise we
will deduct the annual fee ordinarily during December of each year or at the
time you fully redeem your shares in a Fund, if before then. We will waive this
fee if the value of the shares in your IRA/SEP account is $5,000 or more when
the fee is due. The Company reserves the right to change the fee, but we will
notify you at least 30 days in advance of any change.
HOW TO BUY ADDITIONAL SHARES
YOU MAY BUY SHARES IN ONE OF FOUR WAYS:
[LOGO]
1. BY MAIL Fill out an investment coupon from a previous confirmation statement,
or indicate on your check or a separate piece of paper your name, address and
account number, and mail it to:
TRANSAMERICA INVESTORS
P.O. BOX 9232
BOSTON, MA 02205-9232
2. BY AUTOMATIC INVESTMENT PLAN You can make investments automatically by
electing this service in your application. It will authorize us to take regular,
automatic withdrawals from your bank account. These periodic investments must be
at least $50 for each Fund in which you are automatically investing. You can
change the date or amount of your monthly investment, or terminate the Automatic
Investment Plan, at any time by letter or telephone call (with prior
authorization). Give us your request at least 20 business days
18
<PAGE>
________________________________________________________________________________
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
before the change is to become effective. You may
also be able to have investments automatically
deducted from:
(1) your paycheck at work;
(2) your savings account; or
(3) other sources of your choice.
- ----------------------------
WE TAKE REASONABLE STEPS 3. BY TELEPHONE If you elect the telephone
TO MAKE SURE YOUR purchasing service on your application, you can
TELEPHONE INSTRUCTIONS ARE make occasional electronic withdrawals from your
AUTHORIZED AND ACCURATE. designated bank account by calling 1-800-89-ASK-US.
WE RECORD ALL PHONE CALLS
AND SEND YOU CONFIRMATION We take reasonable precautions to make sure
OF ALL TELEPHONE that telephone instructions are genuine.
TRANSACTIONS. YOU ARE Precautions include requiring you to positively
RESPONSIBLE FOR THE identify yourself, tape recording the telephone
ACCURACY OF PHONE instructions, and providing written confirmations.
INSTRUCTIONS. We accept all telephone instructions we reasonably
- ---------------------------- believe to be accurate and genuine. Any losses
arising from communication errors are your
responsibility. If reasonable procedures are not
used to confirm that instructions communicated by
telephone are genuine, the Company may be liable
for any losses due to unauthorized or fraudulent
transactions.
4. BY WIRE You can make your initial or subsequent
investments in the Funds by wire. Here's what you
need to do:
(1) send us your application form (initial
investment only);
(2) call 1-800-89-ASK-US for a wire number;
(3) instruct your bank to wire money to State
Street Bank, ABA number 011000028, DDA number
9905-134-4; and
(4) specify on the wire:
a) "Transamerica Investors, Inc.;"
b) your Fund's account number, if you have one;
c) identify the Funds in which you would like
to purchase shares, and the amount to be
allocated to each Fund (e.g., $5,000 in the
Transamerica Premier Equity Fund and $4,000
in the Transamerica Premier Bond Fund);
d) your name, your city and state; and
e) your wire number.
Wired money is considered received by us when
we receive the wire and all the required
information listed above. If we receive your
telephone call and wire before the New York Stock
Exchange closes, usually 4:00 p.m. Eastern standard
time, the money is credited that same day if you
have supplied us with all other needed information.
MINIMUM INVESTMENT AMOUNTS The minimum initial
investment in any of the Funds is $1,000. The
minimum is reduced to $250 if the account is for a
Pension or Retirement Savings Program. The minimum
subsequent investment by check or telephone is
$100. The minimum initial and subsequent
investments for the Automatic Investment Plan or a
group billing purchase program is $50 per Fund.
There is no minimum subsequent investment if your
account is for a Pension or Retirement Savings
Program.
Your investment must be a specified dollar
amount. We cannot accept purchase requests
specifying a certain price, date, or number of
shares; these investments will be returned. The
price you pay for your shares will be the next
determined net asset value after your purchase
order is received. See "Share Price" on page 24.
The Company reserves the right to reject any
application or investment. There may be
circumstances when the Company will not accept new
investments in one or more of the Funds.
HOW TO SELL SHARES
- ----------------------------
YOU CAN SELL YOUR SHARES You can sell your shares to us (called "redeeming")
VIA ANY OF FOUR WAYS: at any time. You'll receive the net asset value
(1) BY MAIL; next determined after we receive your redemption
(2) BY PHONE; request, assuming all requirements have been met.
(3) BY CHECK OR Before redeeming, please read "When Share Price Is
(4) UNDER AN AUTOMATIC Determined" on page 24, and "Minimum Account
INCOME PLAN. Balances" on page 22.
- ----------------------------
19
<PAGE>
________________________________________________________________________________
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
YOU MAY SELL SHARES IN ONE OF FOUR WAYS:
[LOGO TO COME]
1. BY MAIL Your written instructions to us to
redeem shares can be in any one of the following
forms:
. By redemption form, available by calling
1-800-89-ASK-US.
. By letter; or
. By assignment form or other authorization
granting power with respect to your shares in one
of the Funds.
Once mailed to us, your redemption request is
irrevocable and cannot be modified or canceled.
If the amount redeemed is over $50,000, all
signatures must be guaranteed. See "Signature
Guarantee" on page 22. The request must be signed
by each registered owner. All owners must sign the
request exactly as their names appear in the
registration. For example, if the owner's name
appears in the registration as John Michael Smith,
he must sign that way and not as John M. Smith.
[LOGO GOES HERE]
2. BY TELEPHONE If you have previously authorized
telephone directions in writing (e.g., in your
application), you can redeem your shares by calling
1-800-89-ASK-US. Be careful in calling, since once
made, your telephone request cannot be modified or
canceled.
You have several options for receiving your
redemption:
. By check;
. By electronic transfer to your bank; or
. By wire transfer (minimum of $5,000).
If you call us before the close of the New
York Stock Exchange, usually 4:00 p.m. Eastern
standard time, you will receive the price
determined as of the close of that business day.
See "Share Price" on page 24. Before calling, read
"Points to Remember When Redeeming" on page 21.
We take reasonable precautions to make sure
that telephone instructions are genuine.
Precautions include requiring you to positively
identify yourself, tape recording the telephone
instructions, and providing written confirmations.
We accept all telephone instructions we reasonably
believe to be accurate and genuine. Any losses
arising from communication errors are your
responsibility. If reasonable procedures are not
used to confirm that instructions communicated by
telephone are genuine, the Company may be liable
for any losses due to unauthorized or fraudulent
transactions. For detailed information on how
telephone transactions will operate, see the
Statement of Additional Information.
[LOGO GOES HERE]
- ----------------------------
IF YOU'RE INVESTED IN THE 3. BY CHECK (Transamerica Premier Cash Reserve Fund
TRANSAMERICA PREMIER CASH only) Redemptions can be made from the Transamerica
RESERVED FUND, GETTING Cash Reserve Fund by check. To be eligible, you
YOUR MONEY CAN BE AS EASY must have applied for the check writing feature on
AS WRITING A CHECK. your account application. The signature(s) you
- ---------------------------- designated must appear on the check for it to be
honored. If you close your account by check, we
will send you any accrued dividends by check. You
can write an unlimited number of checks, as long as
each check is for $250 or more, and as long as the
Fund account balance does not drop below $500. See
"Minimum Account Balances" on page 22.
This option is not available for Pension or
Retirement Savings Program accounts (including
IRA's), or any other account controlled by a
fiduciary.
[LOGO APPEARS HERE]
- ----------------------------
IF YOU WANT TO RECEIVE A 4. BY AUTOMATIC INCOME PLAN Under the Automatic
FLAT AMOUNT EACH MONTH, Income Plan we automatically redeem enough shares
USE THE AUTOMATIC INCOME each month to provide you with a check or automatic
PLAN. WE WILL deposit to your bank account. The minimum is $50
AUTOMATICALLY SELL ENOUGH per Fund. Please tell us: a) when you want to be
SHARES EVERY MONTH TO paid each month; b) how much you want to be paid;
PROVIDE YOU WITH AN INCOME and c) from which Fund(s). To set up an Automatic
PAYMENT. AMOUNTS PAID TO Income Plan, call us at 1-800-89-ASK-US.
YOU BY AUTOMATIC INCOME
PLAN ARE NOT A RETURN ON If your monthly income payments exceed the
YOUR INVESTMENT. YOU MUST dividends, interest, and capital appreciation on
REPORT ANY GAINS OR LOSSES your shares, the payments will deplete your
ON YOUR INCOME TAX RETURN. investment.
WE WILL PROVIDE
INFORMATION TO YOU
CONCERNING ANY GAIN OR
LOSS.
- ----------------------------
20
<PAGE>
________________________________________________________________________________
HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
You can specify the Automatic Income Plan when
you make your first investment. If you sign up for
the plan later, the request for the Automatic
Income Plan or any increase in payment amount must
be signed by all owners of your account.
You can request us to send payments to an
address other than the address of record at the
time of your first investment. After that, a
request to send payments to an address other than
the address of record must be signed by all owners
of your account, with their signatures guaranteed.
The Automatic Income Plan option can be
terminated at any time. If it is, we will notify
you. You can terminate the Plan or change the
amount of the payments by writing or calling us.
Termination or change will become effective within
15 days after we receive your instructions.
HOW LONG WILL IT TAKE? We will usually send your
redemption payment to you on the second business
day after we receive your request, but not later
than seven days afterwards, assuming we have all
the information we need. If the information you
provide us is incomplete, we will contact you, but
this may delay the redemption.
The Company may postpone such payment if: (a)
the New York Stock Exchange is closed for other
than usual weekends or holidays, or trading on the
New York Stock Exchange is restricted; (b) an
emergency exists as defined by the U.S. Securities
and Exchange Commission (the "Commission"), or the
Commission requires that trading be restricted; or
(c) the Commission permits a delay for the
protection of investors.
When a redemption occurs shortly after a
recent check purchase, the redemption proceeds may
be held beyond seven days but only until the
purchase check clears, which may take up to 15
days. If you anticipate redemptions soon after you
purchase your shares by check, you can avoid this
delay by wiring your purchase payment.
If you request a redemption check within 30
days of your address change, you must send us your
request in writing with a signature guarantee. Keep
your address current by writing or calling in your
new address to us as soon as possible.
POINTS TO REMEMBER WHEN REDEEMING
. All redemptions are made and the price is
determined on the day we receive all necessary
documentation. See "When Share Price Is
Determined" on page 24.
. We cannot accept redemptions specifying a certain
date or price. We will return these requests.
. For redemptions greater than $250,000 the Company
reserves the right to give you marketable
securities instead of cash. See the Statement of
Additional Information, or call us at 1-800-89-
ASK-US.
. Except for a transfer of redemption proceeds to
the custodian of a tax-qualified plan, we will
make all payments to the registered owner of the
shares, unless you tell us otherwise.
. If the redemption request is made by a
corporation, partnership, trust, fiduciary,
agent, or unicorporated association, the
individual signing the request must be
authorized. If the redemption is from an account
under a qualified pension plan, spousal consent
may be required.
. A request to redeem shares in an IRA or 403(b)
plan must be accompanied by an IRS Form W4-P
(pension income tax withholding form, which we
will provide) and a reason for withdrawal. This
is required by the IRS. Please call us at 1-800-
89-ASK-US or write to Transamerica Investors,
P.O. Box 9232, Boston, MA 02205-9232 for further
information.
HOW TO EXCHANGE SHARES
BETWEEN FUNDS AND CLASSES If your investment needs
change, you can exchange shares in any Fund for
shares of any other Fund within the same class.
Exchanges can be made in writing or by telephone at
any time by shareholders. The procedures relating
to exchanges in writing and by telephone are the
same as for purchases. Exchanges are available to
any resident of any state in which shares of the
Fund are legally sold.
- ----------------------------
EXCHANGING SHARES AMONG Exchanges between different classes of shares
FUNDS WITH DIFFERENT will be on the basis of the relative net asset
INVESTMENT OBJECTIVES values of the respective shares to be exchanged.
GIVES YOU THE OPPORTUNITY You may be able to exchange your shares for shares
TO KEEP YOUR GOALS IN of a class having a different pricing structure if
SIGHT AS YOUR LIFESTYLE you are no longer eligible to purchase shares of
AND NEEDS CHANGE. FOR the original class due to a change in your status.
EXAMPLE, AS YOU GET CLOSER You will receive advance notice if your shares must
TO RETIREMENT AGE, YOU MAY be exchanged for another class of shares.
WANT TO MOVE SOME OF YOUR
INVESTMENT DOLLARS INTO BY AUTOMATIC EXCHANGE PLAN You can make automatic
MORE CONSERVATIVE FUNDS TO share exchanges either once or twice a month. You
BETTER PROTECT YOUR NEST can request the service in writing to us. Your
EGG. request must be signed by all registered owners of
- ---------------------------- the account. Call 1-800-89-ASK-US for information.
POINTS TO REMEMBER WHEN MAKING EXCHANGES Make sure
you understand the investment objective of the Fund
into which you are exchanging shares. The exchange
service is not designed to give shareholders the
21
<PAGE>
________________________________________________________________________________
OTHER INVESTOR REQUIREMENTS AND SERVICES
- --------------------------------------------------------------------------------
opportunity to "time the market." It gives you a
convenient way to change the balance between the
accounts so that it more closely matches your
overall investment objectives and risk tolerance
level.
- ----------------------------
EXCHANGES ARE TREATED THE . You can make an unlimited number of exchanges
SAME AS PURCHASES AND between the Funds. However, unless you are using
REDEMPTIONS. THERE ARE TAX the Automatic Exchange Plan, further exchanges
CONSIDERATIONS YOU SHOULD may be suspended for the remainder of any
DISCUSS WITH YOUR TAX calendar year during which you make more than
ADVISER. four exchanges involving a single Fund. This
- ---------------------------- limitation is designed to keep each Fund's asset
base stable and to reduce its administrative
expenses.
. An exchange is treated as a sale of shares from
one Fund and the purchase of shares in another
Fund. Exchanges are taxable events. See "What
About Taxes?" on page 23.
. Exchanges into or out of the Funds are made at
the next determined net asset value per share
after we receive all necessary information for
the exchange.
. Exchanges are accepted only if the ownership
registrations of both accounts are identical.
. The Company reserves the right to reject any
exchange request and to modify or terminate the
exchange option at any time.
OTHER INVESTOR REQUIREMENTS AND SERVICES
TAX IDENTIFICATION NUMBER You must furnish your
taxpayer identification number and state whether or
not you are subject to back-up withholding for
prior under-reporting. If you don't furnish your
tax I.D. number, redemptions or exchanges of
shares, as well as dividends and capital gains
distributions, will be subject to federal
withholding tax.
CHANGING YOUR ADDRESS To change the address on your
account, please call us at 1-800-89-ASK-US, or send
us a written notification signed by all registered
owners of your account. Include the name of your
Fund(s), the account number(s), the name(s) on the
account and both the old and new addresses. Within
the first 30 days after an address change,
telephone redemptions are permissible only if the
redemption proceeds are wired or electronically
transferred. See "How to Sell Shares" on page 19.
SIGNATURE GUARANTEE When a signature guarantee is
required, e.g., when the redemption amount is more
than $50,000, the signature of each owner of record
must be guaranteed by a bank or trust company (or
savings bank, savings and loan association, or a
member of a national stock exchange). This is
required to comply with general stock transfer
rules. You must obtain a written guarantee that
states "Signature(s) Guaranteed" and is signed in
the name of the guarantor by an authorized person.
If you have any questions, call 1-800-89-ASK-US.
Our policy to waive the signature guarantee
for amounts of $50,000 or less can be amended or
discontinued at any time. A signature guarantee may
be required with regard to any particular
redemption transaction.
- ----------------------------
THERE IS A LOT OF MINIMUM ACCOUNT BALANCES You must maintain a
ADMINISTRATIVE WORK IN minimum balance of $500 in each Fund in which you
MAINTAINING YOUR ACCOUNT own shares. If a Fund's value falls below $500 as a
SO WE REQUIRE THAT YOU result of your action, we will notify you. You will
KEEP AT LEAST $500 IN EACH have 30 days to increase your balance to or above
FUND ACCOUNT. OF COURSE, the minimum. If you do not increase your balance,
YOU'RE INVESTING FOR THE we will redeem your shares and pay the value to
LONG HAUL, SO IT'S TO YOUR you.
ADVANTAGE TO KEEP BUILDING
UP YOUR ACCOUNTS. THIS This minimum does not apply if you are
GIVES YOUR MONEY A CHANCE actively contributing to that Fund through an
TO REALLY WORK FOR YOU. Automatic Investment Program. If your Fund is for a
- ---------------------------- Pension or Retirement Savings Program, you may have
the option of combining your Funds to achieve the
minimum.
HOW YOU WILL GET ONGOING INFORMATION ABOUT THE
FUNDS We will send you a consolidated, quarterly
statement of your account showing all transactions
since the beginning of the current quarter. You can
request a statement of your account activity at any
time. Also, each time you invest, redeem, transfer
or exchange shares, we will send you a confirmation
of the transaction.
- ----------------------------
WE'LL KEEP YOU INFORMED We will send you an annual report that
ABOUT HOW YOUR INVESTMENTS includes audited financial statements for the
ARE DOING WITH QUARTERLY fiscal year. It will include a list of securities
STATEMENTS AND SEMI-ANNUAL in each Fund on that date. We will also send you a
AND ANNUAL REPORTS. semi-annual report that includes unaudited
- ---------------------------- financial statements for the previous six months.
It will also include a list of securities in each
Fund on that date.
We will send you a new Prospectus each year.
The Statement of Additional Information is also
revised each year. We will send this to you only if
you request it.
HOW TO TRANSFER YOUR SHARES TO ANOTHER PERSON You
can transfer ownership of your shares to another
person or organization, or change the name on an
account, by sending us written instructions. The
request must be signed by all registered owners of
your account. To change the name on an account, the
shares must be transferred to a new account. The
request must include a signature guarantee. See
"Signature Guarantee" on page 22. This option is
not available for Pension or Retirement Savings
Programs. Please call us at 1-800-89-ASK-US for
additional information.
22
<PAGE>
________________________________________________________________________________
DIVIDENDS AND CAPITAL GAINS
- --------------------------------------------------------------------------------
DIVIDENDS AND CAPITAL GAINS
We distribute substantially all of the Funds' net
investment income in the form of dividends to you.
The following table shows how often we pay
dividends on each Fund.
<TABLE>
<CAPTION>
FUND DIVIDEND PAID
-------------------------------------------------------------------------
<S> <C>
Transamerica Premier Equity Fund Quarterly
-------------------------------------------------------------------------
Transamerica Premier Index Fund Quarterly
-------------------------------------------------------------------------
Transamerica Premier Bond Fund Monthly
-------------------------------------------------------------------------
Transamerica Premier Balanced Fund Quarterly
-------------------------------------------------------------------------
Transamerica Premier Short-Intermediate Government Fund Monthly
-------------------------------------------------------------------------
Transamerica Premier Cash Reserve Fund Monthly
-------------------------------------------------------------------------
</TABLE>
- ----------------------------
YOU'RE INVESTING IN THE Although we pay dividends monthly on the
FUNDS BECAUSE YOU WANT Transamerica Premier Cash Reserve Fund, dividends
YOUR MONEY TO GROW. THE are determined daily. You may purchase shares of
INVESTMENT INCOME the Transamerica Premier Cash Reserve Fund by
GENERATED BY A FUND IS wiring federal funds to State Street Bank, the
DISTRIBUTED TO YOU EITHER Custodian. If you notify us by calling
AS DIVIDENDS OR CAPITAL 1-800-89-ASK-US by 1:00 p.m. Eastern standard time,
GAINS, OR BOTH. YOU CAN and State Street receives your wired funds by 4:00
CHOOSE TO REINVEST OR TAKE p.m. Eastern standard time, your purchase will be
CASH, ACCORDING TO THE effective immediately, and you will begin to earn
THREE OPTIONS DESCRIBED IN dividends on that business day. Federal funds wires
THIS SECTION. will be accepted only on a day on which the Federal
- ---------------------------- Reserve is open. To redeem shares of the
Transamerica Premier Cash Reserve Fund by federal
funds wire, call 1-800-89-ASK-US. We will wire
funds to you the next business day on which the
Federal Reserve is open. You will earn dividends on
the day you request redemption by telephone.
We distribute net capital gains, if any, on
all of the Funds annually,
You can select from among the following
distribution options:
. REINVESTED You can have all of your dividends and
capital gains distributions reinvested in
additional shares of the same or any other Fund.
Unless you choose one of the other options, we
will select this option for you automatically;
. CASH & REINVESTED You can choose to have either
your dividends or your capital gains paid in cash
and the other will be reinvested in additional
shares in the same or any other Fund; or
. ALL CASH You can choose to have your dividends
and capital gains distributions paid in cash.
We make distributions for each Fund on a per
share basis to the shareholders of record as of the
distribution date of that Fund. We do this
regardless of how long the shares have been held.
That means if you buy shares just before or on a
record date, you will pay the full price for the
shares and then you may receive a portion of the
price back as a taxable distribution.
WHAT ABOUT TAXES?
FEDERAL TAXES* Dividends paid by a Fund from net
investment income, the excess of net short-term
capital gain over net long-term capital loss, and
original issue discount or certain market discount
income will be taxable to shareholders as ordinary
income. Distributions paid by a Fund from the
excess of net long-term capital gain over net
short-term capital loss will be taxable as long-
term capital gains regardless of how long the
shareholders have held their shares. These tax
consequences will apply regardless of whether
distributions are received in cash or reinvested in
shares. A portion of the dividends paid to
corporate shareholders may qualify for the
corporate dividends received deduction to the
extent the Fund earns qualifying dividends. We will
notify you after each calendar year of the amount
and character of distributions you received from
each Fund for federal tax purposes.
- ----------------------------
GENERALLY, WHETHER OR NOT For IRA's and pension plans, dividends and
YOU CHOOSE TO REINVEST capital gains are reinvested and not taxed until
YOUR DIVIDENDS AND CAPITAL you receive a qualified distribution from your IRA
GAINS OR TAKE THEM IN or pension plan.
CASH, THEY ARE CONSIDERED
BY THE IRS TO BE TAXABLE You need to consider the tax implications of
INCOME. buying shares immediately prior to a distribution.
- ---------------------------- Investors who purchase shares shortly before the
record date for a distribution will pay a per share
price that includes the value of the anticipated
distribution. You will be taxed when you receive
the distribution even though the distribution
represents a return of a portion of the purchase
price. You may want to call us at 1-800-89-ASK-US
before your purchase. We'll tell you if a
distribution is due.
Redemptions and exchanges of shares are
taxable events which may represent a gain or a loss
for the shareholder.
Individuals and certain other classes of
shareholders may be subject to backup withholding
of federal income tax on distributions, redemptions
and exchanges if they fail to furnish their
correct taxpayer identification number.
Individuals, corporations and other shareholders
that are not U.S. persons under the Code
23
<PAGE>
________________________________________________________________________________
SHARE PRICE
- --------------------------------------------------------------------------------
are subject to different tax rules. They may be
subject to nonresident alien withholding on amounts
considered ordinary dividends from the Fund.
When you sign your account application, you
will be asked to certify that your social security
or taxpayer identification number is correct. You
will also be asked to certify that you are not
subject to backup withholding for failure to report
income to the Internal Revenue Service.
PENSION AND RETIREMENT SAVINGS PROGRAMS The tax
rules applicable to participants and beneficiaries
in Pension and Retirement Savings Programs vary
according to the type of plan and the terms and
conditions of the plan. In general, distributions
from these plans are taxed as ordinary income.
Special favorable tax treatment may be available
for certain types of contributions and
distributions. Adverse tax consequences may result
from contributions in excess of specified limits:
- ----------------------------
THERE ARE SPECIAL TAX (1) distributions prior to age 591/2 (subject to
CONSIDERATIONS IF YOU ARE certain exceptions);
TAKING A CASH DISTRIBUTION (2) distributions that do not conform to specified
FROM A PENSION PLAN AND commencement and minimum distribution rules;
ROLLING IT OVER TO AN IRA (3) aggregate distributions in excess of a
IN ONE OF THE FUNDS. YOU specified annual amount; and
NEED TO DISCUSS THIS WITH (4) in other specified circumstances.
YOUR TAX ADVISER.
- ---------------------------- You should consult a qualified tax advisor for more
information.
OTHER TAXES In addition to federal taxes, you may
be subject to state and local taxes on payments
received from us. Depending on the state tax rules
pertaining to a shareholder, a portion of the
dividends paid by a Fund that come from direct
obligations of the U.S. Treasury and certain
agencies may be exempt from state and local taxes.
Check with your own tax adviser regarding specific
questions as to federal, state and local taxes.
* For each taxable year, we intend to qualify each
Fund as a regulated investment company under
Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code"). Qualifying
regulated investment companies distributing
substantially all of their ordinary income and
capital gains are not subject to federal income
or excise tax on any net investment income and
net realized capital gains distributed to
shareholders. However, the shareholders (you) are
subject to tax on these distributions.
SHARE PRICE
HOW SHARE PRICE IS DETERMINED We value Fund
securities, primarily traded on a domestic
securities exchange or NASDAQ, at the last sale
price on that exchange on the day the valuation is
made. We take price information on listed
securities from the exchange where the security is
primarily traded. If no sale is reported, we use
the mean of the latest bid and asked prices. We
generally price securities traded over-the-counter
the same way. When market quotations are not
readily available, we value securities and other
assets at fair value as determined in good faith by
the Board.
We will value all securities held by the
Transamerica Premier Cash Reserve Fund, and any
short-term investments of the other Funds with
maturities of 60 days or less at the time of
purchase, on the basis of amortized cost when the
Board determines that amortized cost is fair value.
Amortized cost involves valuing an investment at
its cost and a constant amortization to maturity of
any discount or premium, regardless of the effect
of assuming movements in interest rates. For more
information, see the Statement of Additional
Information.
- ----------------------------
THE PRICES OF YOUR SHARES WHEN SHARE PRICE IS DETERMINED The price of your
IS REFERRED IN AS THEIR shares is their net asset value. We determine the
NET ASSET VALUE. WE net asset value by calculating the total value of
CALCULATE THE NET ASSET the Fund's assets, deducting total liabilities, and
VALUE EACH DAY THE NEW dividing the result by the number of shares
YORK STOCK EXCHANGE (THE outstanding. Except for the Transamerica Premier
"EXCHANGE") IS OPEN. Cash Reserve Fund, we determine the net asset value
- ---------------------------- only on days that the New York Stock Exchange (the
"Exchange") is open. We determine the net asset
value of the Transamerica Premier Cash Reserve Fund
only on days that the Federal Reserve is open.
- ----------------------------
WHEN YOU BUY OR SELL If we receive your investment or redemption
SHARES, YOU GET THE SHARE request before the close of business on the
PRICE THAT WE DETERMINE AT Exchange, usually 4:00 p.m. Eastern standard time,
THE CLOSE OF THE EXCHANGE your share price for that transaction will be the
ON THE DAY WE RECEIVE YOUR price we determine at the close of the Exchange
REQUEST. IF WE RECEIVE that day. When investment and redemption requests
YOUR REQUEST AFTER THE are received after the Exchange is closed, we use
CLOSE OF THE EXCHANGE, YOU the share price at the close of the Exchange the
GET THE SHARE PRICE AT THE next day the Exchange is open. We consider
CLOSE OF THE FOLLOWING investment and redemption requests by telephone to
DAY. be received at the time of your telephone call,
- ---------------------------- assuming you've given us all required information.
We consider purchase payments to be received
only when your check, wire, or automatic investment
funds are received by us along with all required
information. We consider wired funds to be received
on the day they are deposited in the Company's bank
account. If you call us with wire instructions
before the Exchange closes, we usually deposit the
money that day.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE You can
get the current net asset values of your Funds by
calling us at 1-800-89-ASK-US. The net asset value
of each Fund may also be published in leading
newspapers daily, once its net assets reach a
certain amount.
24
<PAGE>
________________________________________________________________________________
INVESTMENT ADVISER AND ADMINISTRATOR
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
INVESTMENT ADVISER SERVICES The Investment Adviser
is responsible for making investment decisions for
the Funds. The Investment Adviser is also
responsible for the selection of brokers and
dealers to execute transactions for each Fund. Some
of these brokers or dealers may be affiliated
persons of the Company, the Investment Adviser,
Administrator, or the Distributor. Since it is our
policy to seek the best price and execution for
each transaction, the Investment Adviser may give
consideration to brokers and dealers who provide us
with statistical information and other services in
addition to transaction services. Additional
information about the selection of brokers and
dealers is provided in the Statement of Additional
Information.
Trading decisions for each of the Funds
described in this Prospectus are made by a team of
expert managers and analysts headed by a team
leader. The team leader is primarily responsible
for the day-to-day decisions related to their Fund.
They are supported by the entire group of managers
and analysts. The team leader of any one Fund may
be on another Fund team. The transactions and
performance of the Funds are reviewed continuously
by the Investment Adviser's senior officers.
Here's a listing and brief biography of the
team leaders for each of the Funds:
. TRANSAMERICA PREMIER EQUITY FUND Glen E.
Bickerstaff. Vice President, Senior Fund Manager
and Director of Research, Transamerica Investment
Services. B.S., University of Southern
California, 1980. Vice President, Fish & Lederer
Investment Counsel, 1986-1987. Vice President,
Pacific Century Advisers, 1980-1986.
. TRANSAMERICA PREMIER INDEX FUND Christopher J.
Bonavico. Equity Trader & Analyst, Transamerica
Investment Services. M.B.A., New York University,
1993. B.S., University of Delaware, 1987. Equity
Research Analyst, Salomon Brothers, 1989-1993.
Business Analyst, Planning & Financial
Management, Chase Manhattan Bank, 1988-1989.
. TRANSAMERICA PREMIER BOND FUND Sharon K. Kilmer,
C.F.A. Vice President and Senior Fund Manager,
Transamerica Investment Services. Member of the
Los Angeles Society of Financial Analysts.
M.B.A., University of Southern California, 1982.
B.A., University of Southern California (Magna
Cum Laude, Phi Beta Kappa), 1980. Joined
Transamerica in 1982.
. TRANSAMERICA PREMIER BALANCED FUND
BONDS Sharon K. Kilmer, C.F.A. (see above).
STOCKS Jeffrey S. Van Harte, C.F.A. Vice
President and Senior Fund Manager, Transamerica
Investment Services. Member of San Francisco
Society of Financial Analysts. B.A., California
State University at Fullerton, 1980. Securities
Analyst and Trader, Transamerica Investment
Services, 1980-1984.
. TRANSAMERICA PREMIER SHORT-INTERMEDIATE
GOVERNMENT FUND AND TRANSAMERICA PREMIER CASH
RESERVE FUND Kevin J. Hickam, C.F.A. Assistant
Vice President and Fund Manager, Transamerica
Investment Services. Member of Los Angeles
Society of Financial Analysts. M.B.A. Cornell
University, 1989. B.S., California State
University at Chico, 1984. Senior Accountant,
Santa Clara Savings, 1984-1987.
ADVISER FEE For its services to the Funds, the
Investment Adviser receives an Adviser Fee. This
fee is based on an annual percentage of the average
daily net assets of each Fund. It is accrued daily,
and paid monthly.
The annual fee percentages for the
Transamerica Premier Equity Fund are .85% on the
first $1 billion of assets. This reduces to: .82%
on the next $1 billion; and finally .80% on assets
over $2 billion. The corresponding fee percentages
for the Transamerica Premier Index Fund are .30%,
.30%, and .30% respectively. The corresponding fee
percentages for the Transamerica Premier Bond Fund
are .60%, .57%, and .55%, respectively. The
corresponding fee percentages for the Transamerica
Premier Balanced Fund are .75%, .72%, and .70%,
respectively. The corresponding fee percentages for
the Transamerica Premier Short-Intermediate
Government Fund are .50%, .50% and .50%,
respectively. The corresponding fee percentages for
the Transamerica Premier Cash Reserve Fund are
.35%, .35%, and .35%, respectively.
The Investment Adviser will reduce the Adviser
Fee each Fund must pay if the fee exceeds any
state-imposed restrictive expense limitations. This
excludes permissible items, such as brokerage
commissions, Rule 12b-1 payments, interest, taxes
and litigation expenses. The Investment Adviser may
waive some or all of these fees from time to time
at its discretion.
ADMINISTRATOR SERVICES The Investment Adviser pays
part of the Adviser Fee to the Administrator. The
Administrator provides office space for the Company
and pays the salaries, fees and expenses of all
Company officers and those directors affiliated
with Transamerica Corporation and not already paid
by the Investment Adviser. Each Fund pays all of
its expenses not assumed by the Administrator. This
includes transfer agent and custodian fees and
expenses, legal and auditing fees, printing costs
of reports to shareholders, registration fees and
expenses, 12b-1 fees, and fees and expenses of
directors unaffiliated with Transamerica
Corporation.
25
<PAGE>
________________________________________________________________________________
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Administrator may from time to time
reimburse the Funds for some or all of their
operating expenses, including 12b-1 fees. Such
reimbursements will increase a Fund's return. This
is intended to make the Funds more competitive.
This practice may be terminated at any time.
GENERAL INFORMATION
TRANSAMERICA INVESTORS, INC. Transamerica
Investors, Inc. was organized as a Maryland
corporation on February 22, 1995. The Company is
registered with the Securities and Exchange
Commission under the 1940 Act as an open-end,
diversified management investment company of the
series type. Each Fund constitutes a separate
series. Each series has two classes of shares,
Investor Shares and Adviser Shares. The fiscal
year-end of each of the Funds is December 31.
The Company is authorized to issue and sell
multiple classes of shares for each of the Funds.
The Company reserves the right to issue additional
classes of shares in the future without the consent
of shareholders, and can allocate any remaining
unclassified shares or reallocate any unissued
classified shares.
Except for the differences noted below and
elsewhere in this Prospectus, each share of a Fund
has equal dividend, redemption and liquidation
rights with other shares of the Funds and when
issued, is fully paid and nonassessable. Each share
of each class represents an identical legal
interest in the same investments of a Fund, except
that Adviser Shares have higher distribution fees.
Each class has certain other expenses related
solely to that class. Each class will have
exclusive voting rights under the 12b-1
distribution plan. In the event that a special
meeting of shareholders is called, separate votes
are taken by each class only if a matter affects,
or requires the vote of, just that class. Although
the legal rights of holders of each class of shares
are identical, it is likely that the difference in
expenses will result in different net asset values
and dividends. The classes may have different
exchange privileges.
As a Maryland corporation, the Company is not
required to hold regular annual meetings of
shareholders. Ordinarily there will be no
shareholder meetings, unless requested by
shareholders holding 10% or more of the outstanding
shares, or unless required by the 1940 Act or
Maryland law. You are entitled to cast one vote for
each share you own of each Fund. At a special
shareholders meeting, if one is called, issues that
affect all the Funds in substantially the same way
will be voted on by all shareholders, without
regard to the Funds. Issues that do not affect a
Fund will not be voted on by that Fund. Issues that
affect all Funds, but in which their interests are
not substantially the same, will be voted on
separately by each Fund.
CUSTODIAN AND TRANSFER AGENT Under a Custodian
Agreement, State Street Bank and Trust Company
("State Street"), 225 Franklin Street, Boston,
Massachusetts 02110, holds all securities and cash
assets of the Funds, provides recordkeeping
services, and serves as the Funds' custodian. State
Street is authorized to deposit securities in
securities depositories or to use services of sub-
custodians.
- ----------------------------
BOSTON FINANCIAL DATA Under a Transfer Agency Agreement, Boston
SERVICES; ONE OF THE Financial Data Services ("BFDS"), Two Heritage
BIGGEST AND MOST Drive, Quincy, Massachusetts 02171, serves as the
EXPERIENCED TRANSFER Funds' transfer agent. The transfer agent is
AGENTS IN THE BUSINESS, responsible for: a) opening and maintaining your
HANDLES ALL YOUR ACCOUNT account; b) reporting information to you about your
TRANSACTIONS AND PROVIDES account; c) paying you dividends and capital gains;
REPORTS TO YOU ABOUT YOUR and d) handling your requests for exchanges,
ACCOUNT. FOR INFORMATION transfers and redemptions.
ABOUT YOUR ACCOUNT, CALL
THE TRANSAMERICA INVESTORS DISTRIBUTOR Transamerica Securities Sales
TEAM AT 1-800-89-ASK-US. Corporation ("TSSC") is the principal underwriter
- ---------------------------- and distributor of the shares of each of the Funds.
TSSC has an agreement with Transamerica Financial
Resources, Inc. ("TFR") to sell Adviser Shares
through its registered representatives. TSSC can
also enter into arrangements where Adviser Shares
will be sold by other broker-dealers, subject to
the approval of the Board.
Both TSSC and TFR are wholly-owned
subsidiaries of Transamerica Insurance Corporation
of California, which is a wholly-owned subsidiary
of Transamerica Corporation. TSSC and TFR are
registered with the Securities and Exchange
Commission as broker-dealers. They are also members
of the National Association of Securities Dealers,
Inc.
DISTRIBUTION PLAN Each Fund makes payments to TSSC
according to a plan adopted to meet the
requirements of Rule 12b-1 under the investment
Company Act of 1940, as amended. These fees accrue
daily and are based on an annual percentage of the
daily average net value of the assets represented
by each class of shares.
The 12b-1 plan of distribution and related
distribution contracts require the Funds to pay
distribution and service fees to TSSC as
compensation for its activities, not as
reimbursement for specific expenses. If TSSC's
expenses are more than its fees for any Fund, the
Fund will not have to pay more than those fees. If
TSSC's expenses are less than the fees, it will
keep the excess. The Company will pay the
distribution and service fees to TSSC until the
distribution contracts are terminated or not
renewed. In that event, TSSC's expenses over and
above any fees through the termination date will be
TSSC's sole responsibility and not the obligation
of the Company. The Transamerica Investors, Inc.
Board of Directors (the "Board") will review the
distribution plan, contracts and TSSC's expenses
for each class of shares quarterly.
26
<PAGE>
________________________________________________________________________________
GENERAL INFORMATION
- --------------------------------------------------------------------------------
For the Adviser Shares class, there is an
annual 12b-1 distribution fee of .75% of the
average daily net assets of the Adviser Shares of
each Fund, except the Transamerica Premier Cash
Reserve Fund. There is no distribution fee for the
Transamerica Premier Cash Reserve Fund. There is
also an annual 12b-1 service fee of .25% of the
average daily net assets of the Adviser Shares of
each Fund. The distribution fee covers compensation
to registered representatives and other sales
personnel involved with selling Adviser Shares, as
well as preparation, printing and mailing of the
Prospectus, Statement of Additional Information,
sales literature, other media advertising, and
related expenses. The service fee compensates sales
people for ongoing shareholder information and
advice, and office expenses such as rent,
communications equipment, employee salaries, and
other overhead costs.
From time to time, and for one or more Funds
within each class of Shares, the Distributor may
waive all or any portion of these fees at its
discretion. All or any portion of these fees may be
paid by the Administrator for the Company, at the
discretion of the Administrator.
DEALER CONCESSION Pursuant to a selling agreement
between TSSC and TFR, a dealer concession is paid
to TFR equal to 1.00% on all Adviser Shares
purchased within the first year of the date of the
initial purchase by each shareholder, and
commencing on the 13th month after the date of the
initial purchase, payments of 0.25% on an annual
basis on all Adviser Share assets. The 0.25%
trailer will be paid quarterly at a rate of 0.0625%
of the quarter-end asset balance.
PERFORMANCE INFORMATION The Company may publish
performance information about the Funds. Fund
performance usually will be shown either as
cumulative total return or average periodic total
return compared with other mutual funds by public
ranking services, such as Lipper Analytical
Services, Inc. Cumulative total return is the
actual performance over a stated period of time.
Average annual total return is the hypothetical
return, compounded annually, that would have
produced the same cumulative return if the Fund's
performance had been constant over the entire
period. Each Fund's total return shows its overall
dollar or percentage change in value. This includes
changes in the share price and reinvestment of
dividends and capital gains.
The performance of a Fund can also be measured
in terms of yield. Each Fund's yield shows the rate
of income the Fund earns on its investments as a
percentage of the Fund's share price.
A Fund can also separate its cumulative and
average annual total returns into income results
and capital gains or losses. Each Fund can quote
its total returns on a before-tax or after-tax
basis.
The performance information which may be
published for the Funds is historical. It is not
intended to represent or guarantee future results.
The value of your Fund shares can be more or less
than their original cost when they are redeemed.
For more information, see the Statement of
Additional Information.
MATERIAL LEGAL PROCEEDINGS There are no material
legal proceedings to which the Company is subject,
or to which the Investment Adviser, the
Administrator, or the Distributor are subject which
are likely to have a material adverse effect on
their ability to perform their obligations to the
Company, or on the Company itself.
SUMMARY OF BOND RATINGS Following is a summary of
the grade indicators used by two of the most
prominent, independent rating agencies (Moody's
Investors Service, Inc. and Standard & Poor's
Corporation) to rate the quality of bonds. The
first four categories are generally considered
investment quality bonds. Those below that level
are of lower quality, commonly referred to as "junk
bonds."
<TABLE>
<CAPTION>
INVESTMENT GRADE MOODY'S STANDARD
& POOR'S
-------------------------------------------------------
<S> <C> <C>
Highest quality Aaa AAA
-------------------------------------------------------
High quality Aa AA
-------------------------------------------------------
Upper medium A A
-------------------------------------------------------
Medium, speculative features Baa BBB
-------------------------------------------------------
INVESTMENT GRADE
-------------------------------------------------------
Moderately speculative Ba BB
-------------------------------------------------------
Speculative B B
-------------------------------------------------------
Very speculative Caa CCC
-------------------------------------------------------
Very high risk Ca CC
--------------------------------------------------------
Highest risk, may not be paying
interest C C
--------------------------------------------------------
In arrears or default C D
--------------------------------------------------------
</TABLE>
For more detailed information on bond ratings,
including gradations within each category of
quality, see the Statement of Additional
Information.
27
<PAGE>
________________________________________________________________________________
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PENSION AND RETIREMENT SAVINGS PROGRAMS Following
is a listing of Pension and Retirement Savings
Programs.
- ----------------------------
TRANSAMERICA PREMIER FUNDS . 401(a), 401(k), profit sharing, or money purchase
PROVIDE A GOOD SELECTION pension plans (including KEOGH/HR 10 Plans)
OF FUNDS FOR YOUR designed to benefit employees of corporations,
RETIREMENT OR SAVINGS partnerships, and sole proprietors.
NEEDS.
- ---------------------------- . Section 403(b)(7) (Tax-Sheltered Annuity) Plans
for employees of educational organizations or
other qualifying, tax exempt organizations.
. Individual Retirement Account ("IRA"), or
comparable program, for individuals and
Simplified Employee Pension ("SEP") Plans for
employers (including sole proprietors) and their
employees.
. Section 457 deferred compensation plans for
employees of state governments and tax exempt
organizations.
. Employers' non-qualified plans or savings
programs, that do not qualify for federal tax
advantages.
. Other retirement plans or savings programs
allowed by the Board.
28
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION:
SEPTEMBER 22, 1995
TRANSAMERICA PREMIER FUNDS
YOUR GUIDE This Statement of Additional Information will provide you with
details beyond what is available in the Prospectus. Please refer to the
Prospectus first, then to this document. Please read it carefully. Save it for
future reference.
THE PREMIER FUNDS
TRANSAMERICA PREMIER EQUITY FUND The Fund seeks to maximize long-term
capital appreciation.
TRANSAMERICA PREMIER INDEX FUND The Fund seeks to track the performance of
the Standard & Poor's 500 Composite Stock Price Index, also known as the S&P
500 Index (the "Index").
TRANSAMERICA PREMIER BOND FUND The Fund seeks to achieve a high total return
(income plus capital changes) consistent with preservation of principal.
TRANSAMERICA PREMIER BALANCED FUND The Fund seeks to achieve long-term
capital growth and current income with a secondary objective of capital
preservation, by balancing its investments among stocks, bonds, and cash.
TRANSAMERICA PREMIER SHORT-INTERMEDIATE GOVERNMENT FUND
The Fund seeks to achieve a high level of current income with the security
of investing in government securities.
TRANSAMERICA PREMIER
CASH RESERVE FUND
This is a money market fund that seeks to maximize current income consistent
with liquidity and preservation of principal.
ABOUT THE PROSPECTUS
This Statement of Additional Information is not a prospectus. It should be
read in connection with the current Prospectus dated September 22, 1995. The
Prospectus is available without charge upon written request to: Transamerica
Investors, P.O. Box 5300, Crawfordsville, IN 47933-5300, or telephone request
to 1-800-89-ASK-US. Terms used in the Prospectus are incorporated in this
Statement of Additional Information.
<PAGE>
CONTENTS
SECTION PAGE
- ------- ----
INVESTMENT RESTRICTIONS........................................ 3
DESCRIPTION OF CORPORATE BOND RATINGS.......................... 7
DESCRIPTION OF FIXED-INCOME INSTRUMENTS........................ 9
INVESTMENT PROCEDURES AND RISK
CONSIDERATIONS FOR THE FUNDS.................................. 11
HIGH YIELD ("JUNK") BONDS................................. 11
RESTRICTED AND ILLIQUID SECURITIES........................ 12
DERIVATIVES............................................... 12
OPTIONS ON SECURITIES AND SECURITIES INDEXES.............. 13
RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS................ 15
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS........ 16
SWAP TRANSACTIONS......................................... 19
FOREIGN SECURITIES........................................ 20
SEGREGATED ACCOUNTS....................................... 21
PURCHASE OF "WHEN-ISSUED" SECURITIES...................... 21
LENDING OF SECURITIES..................................... 21
BORROWING POLICIES OF THE FUNDS........................... 22
REPURCHASE AGREEMENTS..................................... 23
REVERSE REPURCHASE AGREEMENTS AND LEVERAGE................ 23
OTHER INVESTMENT TECHNIQUES AND OPPORTUNITIES............. 24
FUND TURNOVER.................................................. 25
MANAGEMENT OF THE COMPANY...................................... 25
INVESTMENT ADVISORY AND OTHER SERVICES......................... 28
REDEMPTION OF SHARES........................................... 31
EXCHANGE PRIVILEGE............................................. 33
TELEPHONE TRANSACTIONS......................................... 33
BROKERAGE ALLOCATION........................................... 33
DETERMINATION OF NET ASSET VALUE............................... 35
PERFORMANCE INFORMATION........................................ 37
TAXES.......................................................... 40
OTHER INFORMATION.............................................. 42
FINANCIAL STATEMENTS........................................... 42
2
<PAGE>
INVESTMENT RESTRICTIONS
Investment restrictions numbered 1 through 10 below have been adopted by the
Company as fundamental policies of the Funds. Under the Investment Company Act
of 1940, as amended (the "1940 Act"), a fundamental policy may not be changed
with respect to a Fund without the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund. Each Fund will operate as a
"diversified company" within the meaning of the 1940 Act. Investment
restrictions 11 through 16 may be changed by a vote of the Board of Directors of
the Company (the "Board") at any time.
1. BORROWING Each Fund may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests and cash
payments of dividends and distributions that might otherwise require the
untimely disposition of securities, in an amount not to exceed 33-1/3% of the
value of the Fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings, not including reverse repurchase
agreements, of 5% or more of a Fund's total assets are outstanding, the Fund
will not make any additional investments.
2. LENDING No Fund may lend its assets or money to other persons, except through
(a) purchasing debt obligations, (b) lending securities in an amount not to
exceed 33 1/3% of the Fund's assets taken at market value, (c) entering into
repurchase agreements (d) trading in financial futures contracts, index futures
contracts, securities indexes and options on financial futures contracts,
options on index futures contracts, options on securities and options on
securities indexes and (e) entering into variable rate demand notes.
3. 5% FUND RULE No Fund may purchase securities (other than government
securities) of any issuer if, as a result of the purchase, more than 5% of the
Fund's total assets would be invested in the securities of the issuer, except
that up to 25% of the value of the total assets of each Fund, other than the
Transamerica Premier Cash Reserve Fund, may be invested without regard to this
limitation. All securities of a foreign government and its agencies will be
treated as a single issuer for purposes of this restriction. Transamerica
Premier Cash Reserve Fund may invest more than 5% of the Fund's total assets,
but not more than 25% of the Fund's total assets, in the securities of one
issuer for a period not to exceed three business days.
4. 10% ISSUER RULE No Fund may purchase more than 10% of the voting securities
of any one issuer, or more than 10% of the outstanding securities of any class
of issuer, except that (a) this limitation is not applicable to a Fund's
investments in government securities and (b) up to 25% of the value of the
assets of a Fund may be invested without regard to these 10% limitations. All
securities of a foreign government and its agencies will be treated as a single
issuer for purposes of this restriction.
3
<PAGE>
5. 25% INDUSTRY RULE No Fund may invest more than 25% of the value of its total
assets in securities issued by companies engaged in any one industry, including
non-domestic banks or any foreign government. This limitation does not apply to
securities issued or guaranteed by the United States Government, its agencies or
instrumentalities. For the Transamerica Premier Cash Reserve Fund, investments
in the following are not subject to the 25% limitation: repurchase agreements
and securities loans collateralized by United States government securities,
certificates of deposit, bankers' acceptances, and obligations (other than
commercial paper) issued or guaranteed by United States banks and United States
branches of foreign banks.
6. UNDERWRITING No Fund may underwrite any issue of securities, except to the
extent that the sale of securities in accordance with the Fund's investment
objective, policies and limitations may be deemed to be an underwriting, and
except that the Fund may acquire securities under circumstances in which, if the
securities were sold, the Fund might be deemed to be an underwriter for purposes
of the Securities Act of 1933, as amended.
7. REAL ESTATE No Fund may purchase or sell real estate or real estate limited
partnership interests, or invest in oil, gas or mineral leases, or mineral
exploration or development programs, except that a Fund may (a) invest in
securities secured by real estate, mortgages or interests in real estate or
mortgages, (b) purchase securities issued by companies that invest or deal in
real estate, mortgages or interests in real estate or mortgages, (c) engage in
the purchase and sale of real estate as necessary to provide it with an office
for the transaction of business or (d) acquire real estate or interests in real
estate securing an issuer's obligations, in the event of a default by that
issuer.
8. SHORT SALES No Fund may make short sales of securities or maintain a short
position, unless at all times when a short position is open, the Fund owns an
equal amount of the securities or securities convertible into or exchangeable
for, without payment of any further consideration, securities of the same issue
as, and equal in amount to, the securities sold short.
9. MARGIN PURCHASES No Fund may purchase securities on margin, except that a
Fund may obtain any short-term credits necessary for the clearance of purchases
and sales of securities. For purposes of this restriction, the deposit or
payment of initial or variation margin in connection with futures contracts,
financial futures contracts or related options, and options on securities, and
options on securities indexes will not be deemed to be a purchase of securities
on margin by a Fund.
10. COMMODITIES No Fund may invest in commodities, except that each Fund (other
than the Transamerica Premier Cash Reserve Fund) may invest in futures contracts
(including financial futures contracts or securities index futures contracts)
and related options and other similar contracts as described in this Statement
of Additional Information and in the Prospectus.
4
<PAGE>
11. SECURITIES OF OTHER INVESTMENT COMPANIES No Fund may purchase securities of
other investment companies, other than a security acquired in connection with a
merger, consolidation, acquisition, reorganization or offer of exchange and
except as permitted under the 1940 Act, if as a result of the purchase: (a) more
than 10% of the value of the Fund's total assets would be invested in the
securities of investment companies; (b) more than 5% of the value of the Fund's
total assets would be invested in the securities of any one investment company;
or (c) the Fund would own more than 3% of the total securities of any investment
company.
12. INVEST FOR CONTROL No Fund may invest in companies for the purposes of
exercising control or management.
13. 3-YEAR RULE No Fund may purchase securities (other than government
securities) if, as a result of the purchase, the Fund would then have more than
5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years.
This restriction will apply to the entity supplying the revenues from which the
issue is to be paid.
14. AFFILIATED PARTIES No Fund may purchase or retain securities of any company
if any of the Company's officers or directors or any officer or director of the
Investment Adviser who individually own 1/2 of 1% of the company, together own
more than 5% of the company.
15. WARRANTS No Fund may purchase warrants (other than warrants acquired by the
Fund as part of a unit or attached to securities at the time of purchase) if, as
a result, the investments (valued at the lower of cost or market) would exceed
5% of the value of the Fund's net assets of which not more than 2% of the value
of the Fund's net assets may be invested in warrants not listed on the New York
Stock Exchange, Inc. (the "NYSE") or the American Stock Exchange. For purposes
of this restriction, warrants acquired by a Fund in units or attached to
securities may be deemed to be without value. The Transamerica Premier Cash
Reserve Fund may not invest in any form of warrants.
16. RESTRICTED AND ILLIQUID SECURITIES The Funds will each not invest more than
10% of their total assets in securities that are not registered or are offered
in an exempt, non-public offering ("restricted securities") under the Securities
Act of 1933, as amended ("1933 Act"). However, such restriction will not apply
to restricted securities offered and sold to "qualified institutional buyers"
under Rule 144A of the 1933 Act or to foreign securities which are offered or
sold outside the United States in accordance with Regulation S of the 1933 Act.
In addition, no Fund will invest more than 15% (10% for the Transamerica Premier
Cash Reserve Fund) of its net assets in illiquid investments, which includes
most repurchase agreements maturing in more than seven days, currency and
interest rate swaps, time deposits with a notice or demand period of more than
seven days, certain over-the-counter option contracts, participation
5
<PAGE>
interests in loans, securities that are not readily marketable, and restricted
securities, unless the Investment Adviser determines, based upon a continuing
review of the trading markets and available reliable price information for the
specific security, that such restricted securities are eligible under Rule 144A
and are liquid. For purposes of this restriction, illiquid securities are
securities that cannot be disposed of by a Fund within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities. In no event, will any Fund's investment in illiquid
restricted securities, in the aggregate, exceed 15% of its assets. If through a
change in values, net assets, or other circumstances, any Fund were in a
position where more than 15% of its assets were invested in illiquid securities,
it would take appropriate steps to protect liquidity.
The Board has adopted guidelines and delegated to the Investment Adviser the
daily function of determining and monitoring the liquidity of restricted
securities. The Board, however, will retain sufficient oversight and be
ultimately responsible for the determinations. When no market, dealer, or matrix
quotations are available for a security, illiquid investments are priced at fair
value as determined in good faith by a committee appointed by the Board. Since
it is not possible to predict with assurance exactly how the market for
restricted securities sold and offered under Rule 144A will develop, the Board
will carefully monitor each Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity, and availability
of information. To the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities, this investment
practice could have the effect of decreasing the level of liquidity in a Fund.
The purchase price and subsequent valuation of restricted securities normally
reflect a discount from the price at which such securities would trade if they
were not restricted, since the restriction makes them less liquid. The amount of
the discount from the prevailing market prices is expected to vary depending
upon the type of security the character of the issuer, the party who will hear
the expenses of registering the restricted securities, and prevailing supply and
demand conditions.
The Company may make commitments more restrictive than the restrictions listed
above with respect to a Fund to permit the sale of shares of the Fund in certain
states. If the Company determines that any such commitment is no longer in the
best interests of a Fund and its shareholders, the Company will revoke the
commitment by terminating the sale of shares of the Fund in the state involved
or may otherwise modify its commitment based on a change in the state's
restrictions. The percentage limitations in the restrictions listed above apply
at the time of purchases of securities.
6
<PAGE>
DESCRIPTION OF CORPORATE BOND RATINGS
Moody's Investors Service, Inc. and Standard and Poor's Corporation are two
prominent independent rating agencies that rate the quality of bonds. Following
are expanded explanations of the ratings shown in the Prospectus.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds with this rating are judged to be of the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
Aa: Bonds with this rating 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 fluctuation of protective
elements may be of greater amplitude.
A: Bonds with this rating 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 sometime in the future.
Baa: Bonds with this rating 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 with this rating 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 with this rating generally lack characteristics of desirable
investments. 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 with this rating are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds with this rating represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds with this rating are the lowest rated class of bonds. Issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
7
<PAGE>
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Generally, investment-grade debt securities are those rated Baa3 or better by
Moody's.
STANDARD & POOR'S CORPORATION
AAA: This rating is the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is very strong.
AA: This rating indicates a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: This rating indicates a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: This rating indicates 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, CC: These ratings indicate, on balance, a predominantly speculative
capacity of the issuer to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of speculation and
CC the 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.
C: This rating is reserved for income bonds on which no interest is being
paid.
D: This rating indicates debt in default, and payment of interest and/or
repayment of principal are in arrears.
The ratings from "AA" to "B" may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories, for example
A- or B+.
Generally, investment-grade debt securities are those rated BBB- or better by
Standard & Poor's.
8
<PAGE>
DESCRIPTION OF FIXED-INCOME INSTRUMENTS
U.S. GOVERNMENT OBLIGATIONS Securities issued or guaranteed as to principal and
interest by the United States Government include a variety of Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Treasury bills have a maturity of one year or less; Treasury notes
have maturities of one to ten years; and Treasury bonds can be issued with any
maturity period but generally have a maturity of greater than ten years.
Agencies of the United States Government which issue or guarantee obligations
include, among others, the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Government National Mortgage
Association, Maritime Administration, Small Business Administration and The
Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued or guaranteed by, among others,
banks of the Farm Credit System, the Federal National Mortgage Association,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Student Loan
Marketing Association, Federal Intermediate Credit Banks, Federal Land Banks,
Banks for Cooperatives, and the U.S. Postal Service. Some of these securities
are supported by the full faith and credit of the U.S. Treasury; others are
supported by the right of the issuer to borrow from the Treasury, while still
others are supported only by the credit of the instrumentality.
CERTIFICATES OF DEPOSIT Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks, savings and loan
associations or savings banks against funds deposited in the issuing
institution.
TIME DEPOSITS Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which a
negotiable certificate is not received. Certain time deposits may be considered
illiquid.
BANKERS' ACCEPTANCE A bankers' acceptance is a draft drawn on a commercial bank
by a borrower usually in connection with an international commercial transaction
(to finance the import, export, transfer or storage of goods). The borrower is
liable for payment as well as the bank, which unconditionally guarantees to pay
the draft at its face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity.
COMMERCIAL PAPER Commercial paper refers to short-term, unsecured promissory
notes issued by corporations to finance short-term credit needs. Commercial
paper is usually sold on a discount basis and has a maturity at the time of
issuance not exceeding 270 days.
VARIABLE RATE, FLOATING RATE, OR VARIABLE AMOUNT SECURITIES Variable rate,
floating rate, or variable amount securities are short-term unsecured promissory
notes issued by corporations to finance short-term credit needs. These are
interest-bearing notes on which the interest rate generally fluctuates on a
scheduled basis.
CORPORATE DEBT SECURITIES Corporate debt securities are debt issued by a
corporation that pays interest and principal to the holders at specified times.
9
<PAGE>
ASSET-BACKED SECURITIES Asset-backed securities are securities which represent
an undivided fractional interest in a trust whose assets generally consist of
mortgages, motor vehicle retail installment sales contracts, or other consumer-
based loans.
PARTICIPATION INTERESTS IN LOANS A participation interest in a loan entitles the
purchaser to receive a portion of principal and interest payments due on a
commercial loan extended by a bank to a specified company. The purchaser of such
an interest has no recourse against the bank if payments of principal and
interest are not made by the borrower and generally relies on the bank to
administer and enforce the loan's terms.
INTERNATIONAL ORGANIZATION OBLIGATIONS International organization obligations
include obligations of those organizations designated or supported by U.S. or
foreign government agencies to promote economic reconstruction and development
or international banking, and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank, and the
InterAmerican Development Bank.
CUSTODY RECEIPTS A Fund may acquire custody receipts in connection with
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities. Such custody
receipts evidence ownership of future interest payments, principal payments or
both on certain notes or bonds issued by the U.S. Government, its agencies,
authorities or instrumentalities. These custody receipts are known by various
names, including "Treasury Receipts," "Treasury Investors Growth Receipts"
("TIGRs"), and "Certificates of Accrual on Treasury Securities" ("CATS"). For
certain securities law purposes, custody receipts are not considered U.S.
Government securities.
PASS-THROUGH SECURITIES The Funds may invest in mortgage pass-through securities
such as Government National Mortgage Association ("GNMA") certificates or
Federal National Mortgage Association ("FNMA") and other mortgage-backed
obligations, or modified pass-through securities such as collateralized mortgage
obligations issued by various financial institutions. In connection with these
investments, early repayment of investment principal arising from prepayments of
principal on the underlying mortgage loans due to the sale of the underlying
property, the refinancing of the loan, or foreclosure may expose the Fund to a
lower rate of return upon reinvestment of the principal. Prepayment rates vary
widely and may be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayment tends to increase, thereby
shortening the actual average life of the mortgage-related security. Conversely,
when interest rates are rising, the rate of prepayment tends to decrease,
thereby lengthening the actual average life of the mortgage-related security.
Accordingly, it is not possible to accurately predict the average life of a
particular pool of pass-through securities. Reinvestment of prepayments may
occur at higher or lower rates than the original yield on the certificates.
Therefore, the actual maturity and realized yield on pass-through or modified
pass-through mortgage-related securities will vary based upon the prepayment
experience of the underlying pool of mortgages. For purposes of calculating the
average life of the assets of the relevant Fund, the maturity of each of these
securities will be the average life of such securities based on the most recent
or estimated annual prepayment rate.
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INVESTMENT PROCEDURES AND RISK
CONSIDERATIONS FOR THE FUNDS
HIGH YIELD ("JUNK") BONDS High-yield bonds (commonly called "junk" bonds) are
lower rated bonds that involve a higher degree of credit risk. Credit risk is
the risk that the issuer of the bonds will not be able to make interest or
principal payment on time. If this happened to a bond in a Fund, the Fund would
lose some of its income, and could expect a decline in the market value of the
securities affected. So the Investment Adviser needs to carefully analyze the
financial condition of companies issuing junk bonds. The prices of junk bonds
tend to be more reflective of prevailing economic and industry conditions,
issuers' unique financial situations, and the bonds' coupon than to small
changes in the level of interest rates. But during an economic downturn or a
period of rising interest rates, highly leveraged companies may have trouble
making principal and interest payments, meeting projected business goals, and
obtaining additional financing. Junk bonds' values will generally decrease in a
rising interest rate market.
Junk bonds may contain "call" provisions, which enable the issuers of the bond
to redeem the bond at will. If the issuer exercises this privilege during a
declining interest rate market, the Fund would replace the bond most likely with
a lower yield bond, resulting in a lower return for investors.
Periods of economic or political uncertainty and change can create some
volatility for junk bonds. Since the last major economic recession, there has
been a substantial increase in the use of high-yield debt securities to fund
highly leveraged corporate acquisitions and restructurings. Past experience with
high-yield securities in a prolonged economic downturn may not provide an
accurate indication of future performance during such periods. Lower rated
securities may also be harder to sell than higher rate securities because of bad
publicity and investor perceptions of this market, as well as new or proposed
laws dealing with high yield securities. For many junk bonds, there is no
established retail secondary market. As a result, it may be difficult for the
Investment Adviser to accurately value the bonds because they cannot rely on
available, objective data.
Each Fund may also invest in unrated debt securities. Unrated debt, while not
necessarily of lower quality than rated securities, may not have as broad a
market. Since these ratings do not consider factors relevant to each issue, and
may not be updated regularly, the Investment Adviser may treat high yield
securities as unrated debt.
Because of the size and perceived demand of the issue, among other factors,
certain municipalities may decide not to pay the cost of getting a rating for
their bonds. The Investment Adviser will analyze the creditworthiness of the
issuer, as well as any financial institution or other party responsible for pay-
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ments on the security, to determine whether to purchase unrated municipal bonds.
RESTRICTED AND ILLIQUID SECURITIES A Fund may purchase certain restricted
securities of U.S. issuers (those that are not registered under the Securities
Act of 1933, as amended (the "1933 Act") but can be offered and sold to
"qualified institutional buyers" under Rule 144A of that Act) and limited
amounts of illiquid investments, including illiquid restricted securities.
Illiquid investments include many restricted securities, repurchase agreements
that mature in more than seven days, fixed time deposits that mature in more
than seven days and participation interests in loans.
Certain repurchase agreements which provide for settlement in more than seven
days, however, can be liquidated before the nominal fixed term of seven days or
less notice. The Investment Adviser will consider such repurchase agreements as
liquid. Likewise, restricted securities (including commercial paper issued
pursuant to Section 4(2) of the 1933 Act) that the Board or the Investment
Adviser have determined to be liquid will be treated as such.
The SEC staff has taken the position that fixed time deposits maturing in more
than seven days that cannot be traded on a secondary market and participation
interests in loans are illiquid and not readily marketable. A considerable
amount of time may elapse between a Fund's decision to dispose of restricted or
illiquid securities and the time which such Fund is able to dispose of them,
during which time the value of such securities (and therefore the value of the
Fund's shares held by an account) could decline.
DERIVATIVES Each Fund, except for Transamerica Premier Cash Reserve Fund and
Transamerica Premier Equity Fund, may use options, futures, forward contracts,
and swap transactions ("derivatives"). The Funds may purchase and write, call or
put options on securities or on indexes ("options") and may enter into interest
rate or index futures contracts for the purchase or sale of instruments based on
financial indexes ("futures contracts"), options on futures contracts, forward
contracts, and interest rate swaps and swap-related products.
By investing in derivatives, the Investment Adviser may seek to protect a Fund
against potentially unfavorable movements in interest rates or securities'
prices, or attempt to adjust a Fund's exposure to changing securities prices,
interest rates, or other factors that affect securities values. This is done in
an attempt to reduce a Fund's overall investment risk. Although it will not
generally be a significant part of a Fund's strategies, the Adviser may also use
derivatives to enhance returns. Opportunities to enhance returns arise when the
derivative does not reflect the fair value of the underlying securities. None of
the Funds will use derivatives for leverage.
Risks in the use of derivatives include, in addition to those referred to
above: (1) the risk that interest rates and securities prices do not move in the
directions being hedged against, in which case the Fund has incurred the cost
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of the derivative (either its purchase price or, by writing an option, losing
the opportunity to profit from increases in the value of the securities covered)
with no tangible benefit; (2) imperfect correlation between the price of
derivatives and the movements of the securities' prices or interest rates being
hedged; (3) the possible absence of a liquid secondary market for any particular
derivative at any time (some derivatives are not actively traded but are custom
designed to meet the investment needs of a narrow group of institutional
investors and can become illiquid if the needs of that group of investors
change); (4) the potential loss if the counterparty to the transaction does not
perform as promised; and (5) the possible need to defer closing out certain
positions to avoid adverse tax consequences.
The Transamerica Premier Bond Fund, Transamerica Premier Short-Intermediate
Government Fund, and Transamerica Premier Balanced Fund may invest in
derivatives with respect to less than 20% of each Fund's assets; Transamerica
Premier Index Fund may invest with respect to no more than 35% of its assets.
The Board will closely monitor the Investment Adviser's use of derivatives in
each of the Funds to assure they are used in accordance with the investment
objectives of each Fund.
OPTIONS ON SECURITIES AND SECURITIES INDEXES A Fund may write (e.g., sell)
covered call and put options on any securities in which it may invest. A call
option written by a Fund obligates the Fund to sell specified securities to the
holder of the option at a specified price if the option is exercised at any time
before the expiration date. All call options written by a Fund are covered,
which means that the Fund will own the securities subject to the option so long
as the option is outstanding. A Fund's purpose in writing covered call options
is to realize greater income than would be realized on securities transactions
alone. However, by writing the call option a Fund might forgo the opportunity to
profit from an increase in the market price of the underlying security.
A put option written by a Fund would obligate the Fund to purchase specified
securities from the option holder at a specified price if the option is
exercised at any time before the expiration date. All put options written by a
Fund would be covered, which means that such Fund would have deposited with its
custodian cash or liquid high grade debt securities with a value at least equal
to the exercise price of the put option. The purpose of writing such options is
to generate additional income for the Fund. However, in return for the option
premium, a Fund accepts the risk that it might be required to purchase the
underlying securities at a price in excess of the securities' market value at
the time of purchase.
In addition, a written call option or put option may be covered by maintaining
cash or liquid high grade debt securities in a segregated account with its
custodian or by purchasing an offsetting option or any other option which, by
virtue of its exercise price or otherwise, reduces a Fund's net exposure on its
written option position.
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A Fund may also write (sell) covered call and put options on any securities
index composed of securities in which it may invest. Options on securities
indexes are similar to options on securities, except that the exercise of
securities index options requires cash payments and does not involve the actual
purchase or sale of securities. In addition, securities index options are
designed to reflect price fluctuations in a group of securities or segment of
the securities market rather than price fluctuations in a single security.
A Fund may cover call options on a securities index by owning securities whose
price changes are expected to be similar to those of the underlying index, or by
having an absolute and immediate right to acquire such securities without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities in the Fund. A Fund may cover call and put options on a securities
index by maintaining cash or liquid high grade debt securities with a value
equal to the exercise price in a segregated account with its custodian.
A Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase" transactions.
A Fund may purchase put and call options on any securities in which it may
invest or options on any securities index based on securities in which it may
invest. A Fund would also be able to enter into closing sale transactions in
order to realize gains or minimize losses on options it had purchased.
A Fund would normally purchase call options in anticipation of an increase in
the market value of securities of the type in which it may invest. The purchase
of a call option would entitle a Fund, in return for the premium paid, to
purchase specified securities at a specified price during the option period. A
Fund would ordinarily realize a gain if, during the option period, the value of
such securities exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise the Fund would realize a loss on the purchase of
the call option.
A Fund would normally purchase put options in anticipation of a decline in the
market value of its securities ("protective puts") or in securities in which it
may invest. The purchase of a put option would entitle a Fund, in exchange for
the premium paid, to sell specified securities at a specified price during the
option period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of a Fund's securities. Put options may
also be purchased by a Fund for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. A Fund would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise such a Fund would realize a loss on
the purchase of the put option.
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A Fund would purchase put and call options on securities indexes for the same
purposes as it would purchase options on individual securities.
RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS There is no assurance that a liquid
secondary market on an options exchange will exist for any particular exchange-
traded option or at any particular time. If a Fund is unable to affect a closing
purchase transaction with respect to covered options it has written, the Fund
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised. Similarly, if a
Fund is unable to effect a closing sale transaction with respect to options it
has purchased, it would have to exercise the options in order to realize any
profit and will incur transaction costs upon the purchase or sale of underlying
securities.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
A Fund may purchase and sell both options that are traded on U.S., United
Kingdom, and other exchanges and options traded over-the-counter with broker-
dealers who make markets in these options. The ability to terminate over-the-
counter options is more limited than with exchange-traded options and may
involve the risk that broker-dealers participating in such transactions will not
fulfill their obligations. Until such time as the staff of the SEC changes its
position, a Fund will treat purchased over-the-counter options and all assets
used to cover written over-the-counter options as illiquid securities, except
that with respect to options written with primary dealers in U.S. Government
securities pursuant to an agreement requiring a closing purchase transaction at
a formula price, the amount of illiquid securities may be calculated with
reference to the formula.
Transactions by a Fund in options on securities and securities indexes will be
subject to limitations established by each of the exchanges, boards of trade or
other trading facilities governing the maximum number of options in each class
which may be written or purchased by a single investor or group of
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investors acting in concert. Thus, the number of options which a Fund may write
or purchase may be affected by options written or purchased by other investment
advisory clients of the Investment Adviser of the Funds. An exchange, board of
trade or other trading facility may order the liquidations of positions found to
be in excess of these limits, and it may impose certain other sanctions.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary securities transactions. The successful use of protective puts for
hedging purposes depends in part on an ability to anticipate future price
fluctuations and the degree of correlation between the options and securities
markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS A Fund may purchase and sell
futures contracts and may also purchase and write options on futures contracts.
A Fund may purchase and sell futures contracts based on various securities (such
as U.S. Government Securities), securities indexes, and other financial
instruments and indexes. A Fund will engage in futures or related options
transactions only for bona fide hedging purposes as defined below or to increase
total returns to the extent permitted by regulations of the Commodity Futures
Trading Commission ("CFTC"). All futures contracts entered into by a Fund are
traded on U.S. exchanges or boards of trade that are licensed and regulated by
the CFTC.
FUTURES CONTRACTS A futures contract may generally be described as an
agreement between two parties to buy or sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, a Fund can
seek to offset a decline in the value of its current securities through the sale
of futures contracts. When rates are falling or prices are rising, a Fund,
through the purchase of futures contracts, can attempt to secure better rates or
prices than might later be available in the market when it effects anticipated
purchases. The Transamerica Premier Index Fund will use options and futures
contracts only to achieve its performance objective of matching the return on
the S&P 500.
Positions taken in the futures markets are not normally held to maturity, but
are instead liquidated through offsetting transactions which may result in a
profit or a loss. While a Fund's futures contracts on securities will usually be
liquidated in this manner, it may instead make or take delivery of the
underlying securities whenever it appears economically advantageous for a Fund
to do so. A clearing corporation associated with the exchange on which futures
on securities are traded guarantees that, if still open, the sale or purchase
will be performed on the settlement date.
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HEDGING STRATEGIES Hedging by use of futures contracts seeks to establish more
certainty than would otherwise be possible in the effective price or rate of
return on securities that a Fund owns or proposes to acquire. A Fund may, for
example, take a "short" position in the futures market by selling futures
contracts in order to hedge against an anticipated rise in interest rates or a
decline in market prices that would adversely affect the value of the Fund's
securities. Such futures contracts may include contracts for the future delivery
of securities held by the Fund or securities with characteristics similar to
those of a Fund's securities.
If, in the opinion of the Investment Adviser, there is a sufficient degree of
correlation between price trends for a Fund's securities and futures contracts
based on other financial instruments, securities indexes or other indexes, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of a Fund's securities may be more or
less volatile than prices of such futures contracts, the Investment Adviser will
attempt to estimate the extent of this difference in volatility based on
historical patterns and to compensate for it by having a Fund enter into a
greater or lesser number of futures contracts or by attempting to achieve only a
partial hedge against price changes affecting the Fund's securities. When
hedging of this character is successful, any depreciation in the value of the
Fund's securities will be substantially offset by appreciation in the value of
the futures position. On the other hand, any unanticipated appreciation in the
value of the Fund's securities would be substantially offset by a decline in the
value of the futures position.
On other occasions, a Fund may take a "long" position by purchasing such
futures contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or interest rates then available in the applicable market to
be less favorable than prices or rates that are currently available.
OPTIONS ON FUTURES CONTRACTS The acquisition of put and call options on
futures contracts will give a Fund the right (but not the obligation), for a
specified price, to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, a Fund obtains the benefit of the futures position if prices
move in a favorable direction but limits its risk of loss in the event of an
unfavorable price movement to the loss of the option premium and transaction
costs.
The writing of a call option on a futures contract generates a premium which
may partially offset a decline in the value of a Fund's assets. By writing a
call option, a Fund becomes obligated, in exchange for the premium, to sell a
futures contract, which may have a value higher than the exercise price.
Conversely, the writing of a put option on a futures contract generates a
premium, which may partially offset an increase in the price of securities that
a Fund intends to purchase. However, a Fund becomes obligated to purchase a
futures
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contract, which may have a value lower than the exercise price. Thus, the loss
incurred by a Fund in writing options on futures is potentially unlimited and
may exceed the amount of the premium received. A Fund will increase transaction
costs in connection with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.
OTHER CONSIDERATIONS Where permitted, a Fund will engage in futures
transactions and in related options transactions only for bona fide hedging or
to increase total return to the extent permitted by CFTC regulations. A Fund
will determine that the price fluctuations in the futures contracts and options
on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or which it expects to purchase.
Except as stated below, each Fund's futures transactions will be entered into
for traditional hedging purposes, i.e., futures contracts will be sold to
protect against a decline in the price of securities that the Fund owns, or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities it intends to purchase. As evidence of this hedging
intent, a Fund expects that on 75% or more of the occasions on which they take a
long futures or option position (involving the purchase of futures contracts),
that Fund will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities in the cash market at the time when the
futures or option position is closed out. However, in particular cases, when it
is economically advantageous for a Fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets.
As an alternative to literal compliance with the bona fide hedging definition,
a CFTC regulation permits a Fund to elect to comply with a different test, under
which the aggregate initial margin and premiums required to establish positions
in futures contracts and options on futures for the purpose of increasing total
return, will not exceed 5% of the Fund's net asset value, after taking into
account unrealized profits and losses on any such positions and excluding the
amount by which such options were in-the-money at the time of purchase. As
permitted, each Fund will engage in transactions in futures contracts and in
related options transactions only to the extent such transactions are consistent
with the requirements of the Internal Revenue Code of 1986, as amended (the
"Code") for maintaining its qualification as a regulated investment company for
federal income tax purposes.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating a Fund to purchase securities or currencies, require the Fund to
segregate with its custodian liquid high grade debt securities in an amount
equal to the underlying value of such contracts and options.
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While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
unanticipated changes in interest rates or securities prices may result in a
poorer overall performance for a Fund than if it had not entered into any
futures contracts or options transactions. In the event of an imperfect
correlation between a futures position and the position which is intended to be
protected, the desired protection may not be obtained and a Fund may be exposed
to risk of loss.
Perfect correlation between a Fund's futures positions and current positions
may be difficult to achieve because no futures contracts based on individual
equity securities are currently available. The only futures contracts available
to these Funds for hedging purposes are various futures on U.S. Government
securities and securities indexes.
INTEREST RATE SWAPS A Fund may enter into interest rate swaps for hedging
purposes and non-hedging purposes. Since swaps are entered into for good faith
hedging purposes or are offset by a segregated account as described below, the
Investment Adviser believes that swaps do not constitute senior securities as
defined in the 1940 Act and, accordingly, will not treat them as being subject
to the Fund's borrowing restrictions. The net amount of the excess, if any, of a
Fund's obligations over its "entitlement" with respect to each interest rate
swap will be accrued on a daily basis and an amount of cash or liquid high grade
debt securities (i.e., securities rated in one of the top three ratings
categories by Moody's or S&P, or, if unrated, deemed by the Investment Adviser
to be of comparable credit quality) having an aggregate net asset value at least
equal to such accrued excess will be maintained in a segregated account by the
Fund's custodian. A Fund will not enter into any interest rate swap unless the
credit quality of the unsecured senior debt or the claims-paying ability of the
other party thereto is considered to be investment grade by the Investment
Adviser. If there is a default by the other party to such a transaction, a Fund
will have contractual remedies pursuant to the agreement. The swap market has
grown substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid in
comparison with the markets for other similar instruments which are traded in
the interbank market.
SWAP TRANSACTIONS The Funds may, to the extent permitted by the SEC, enter into
privately negotiated "swap" transactions with other financial institutions in
order to take advantage of investment opportunities generally not available in
public markets. In general, these transactions involve "swapping" a return based
on certain securities, instruments, or financial indexes with another party,
such as a commercial bank, in exchange for a return based on different
securities, instruments, or financial indexes.
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By entering into swap transactions, a Fund may be able to protect the value of
a portion of its securities against declines in market value. A Fund may also
enter into swap transactions to facilitate implementation of allocation
strategies between different market segments or to take advantage of market
opportunities which may arise from time to time. A Fund may be able to enhance
its overall performance if the return offered by the other party to the swap
transaction exceeds the return swapped by the Fund. However, there can be no
assurance that the return a Fund receives from the counterparty to the swap
transaction will exceed the return it swaps to that party.
While a Fund will only enter into swap transactions with counterparties it
considers creditworthy (and will monitor the creditworthiness of parties with
which it enters into swap transactions), a risk inherent in swap transactions is
that the other party to the transaction may default on its obligations under the
swap agreement. If the other party to the swap transaction defaults on its
obligations, a Fund would be limited to contractual remedies under the swap
agreement. There can be no assurance that a Fund will succeed when pursuing its
contractual remedies. To minimize a Fund's exposure in the event of default, the
Funds will usually enter into swap transactions on a net basis (i.e., the
parties to the transaction will net the payments payable to each other before
such payments are made). When a Fund enters into swap transactions on a net
basis, the net amount of the excess, if any, of the Fund's obligations over its
entitlements with respect to each such swap agreement will be accrued on a daily
basis and an amount of liquid assets having an aggregate market value at least
equal to the accrued excess will be segregated by the Fund's custodian. To the
extent a Fund enters into swap transactions other than on a net basis, the
amount segregated will be the full amount of the Fund's obligations, if any,
with respect to each such swap agreement, accrued on a daily basis. See
"Segregated Funds" below.
Swap agreements are considered to be illiquid by the SEC staff and will be
subject to the limitations on illiquid investments. See "Restricted and Illiquid
Securities" on page 5.
To the extent that there is an imperfect correlation between the return a Fund
is obligated to swap and the securities or instruments representing such return,
the value of the swap transaction may be adversely affected. A Fund therefore
will not enter into a swap transaction unless it owns or has the right to
acquire the securities or instruments representative of the return it is
obligated to swap with the counterparty to the swap transaction. It is not the
intention of the Funds to engage in swap transactions in a speculative manner,
but rather primarily to hedge or manage the risks associated with assets held in
a Fund, or to facilitate the implementation of strategies of purchasing and
selling assets for a Fund.
FOREIGN SECURITIES All Funds, except the Transamerica Premier Index Fund and the
Transamerica Premier Short-Intermediate Government Fund, can invest in
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foreign securities. The foreign equity investments for the Transamerica Premier
Equity Fund and the Transamerica Premier Balanced Fund will be limited to the
purchase of American depositary receipts ("ADR's"). Foreign securities, other
than ADR's, will be held in custody by State Street London Limited, who will
handle transactions with the transnational depositories Euroclear and Cedel.
SEGREGATED ACCOUNTS In connection with when-issued securities, firm commitment
agreements, futures, the writing of options, and certain other transactions in
which a Fund incurs an obligation to make payments in the future, a Fund may be
required to segregate assets with its custodian in amounts sufficient to settle
the transaction. To the extent required, such segregated assets will consist of
liquid assets such as cash, United States Government securities or other
appropriate high grade, short-term debt obligations as may be permitted by law.
PURCHASE OF "WHEN-ISSUED" SECURITIES The Funds may enter into firm commitment
agreements for the purchase of securities on a specified future date. Thus, the
Funds may purchase, for example, new issues of fixed-income instruments on a
"when-issued" basis, whereby the payment obligation, or yield to maturity, or
coupon rate on the instruments may not be fixed at the time of the transaction.
In addition, the Funds may invest in asset-backed securities on a delayed
delivery basis. This reduces the Funds' risk of early repayment of principal,
but exposes the Funds to some additional risk that the transaction will not be
consummated.
When the Funds enter into firm commitment agreements, liability for the
purchase price and the rights and risks of ownership of the securities accrue to
the Funds at the time they become obligated to purchase such securities,
although delivery and payment occur at a later date. Accordingly, if the market
price of the security should decline, the effect of the agreement would be to
obligate the Funds to purchase the security at a price above the current market
price on the date of delivery and payment. During the time the Funds are
obligated to purchase such securities they will be required to segregate assets.
See "Segregated Accounts," on this page. A Fund will not purchase securities on
a "when-issued" basis if, as a result, more than 15% of the Fund's net assets
would be so invested.
LENDING OF SECURITIES Subject to investment restriction number 2 titled
"Lending" on page 3 (relating to loans of securities), a Fund may lend its
securities to brokers and dealers that are not affiliated with the Investment
Adviser, are registered with the Commission and are members of the NASD, and
also to certain other financial institutions. All loans will be fully
collateralized. In connection with the lending of its securities, a Fund will
receive as collateral cash, securities issued or guaranteed by the United States
Government (i.e., Treasury securities), or other collateral permitted by
applicable law, which at all times while the loan is outstanding will be
maintained in amounts equal to at least
21
<PAGE>
102% of the current market value of the loaned securities, or such lesser
percentage as may be permitted by applicable law, as reviewed daily. The Fund
lending its securities will receive amounts equal to the interest or dividends
paid on the securities loaned and in addition will expect to receive a portion
of the income generated by the short-term investment of cash received as
collateral or, alternatively, where securities or a letter of credit are used as
collateral, a lending fee paid directly to the Fund by the borrower of the
securities. Such loans will be terminable by the Fund at any time and will not
be made to affiliates of the Investment Adviser. A Fund may terminate a loan of
securities in order to regain record ownership of, and to exercise beneficial
rights related to, the loaned securities, including but not necessarily limited
to voting or subscription rights, and may, in the exercise of its fiduciary
duties, terminate a loan in the event that a vote of holders of those securities
is required on a material matter. The Fund may pay reasonable fees to persons
unaffiliated with the Fund for services or for arranging such loans. Loans of
securities will be made only to firms deemed creditworthy. As with any extension
of credit, however, there are risks of delay in recovering the loaned
securities, should the borrower of securities default, become the subject of
bankruptcy proceedings, or otherwise be unable to fulfill its obligations or
fail financially.
BORROWING POLICIES OF THE FUNDS We can borrow money from banks or engage in
reverse repurchase agreements, for temporary or emergency purposes. We can
borrow up to one-third of a Fund's total assets. To secure borrowings, we can
mortgage or pledge securities in an amount up to one-third of a Fund's net
assets. If we borrow money, a Fund's share price may be subject to greater
fluctuation until the borrowing is paid off. The Fund will not make any
additional investments, other than the case of reverse repurchase agreements,
while the level of the borrowing exceeds 5% of the Fund's total assets.
Short-term corporate obligations may also include variable amount master
demand notes. Variable amount master notes are obligations that permit the
investment of fluctuating amounts by the Fund at varying rates of interest
pursuant to direct arrangements between the Fund, as lender, and the borrower.
These notes permit daily changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to the full amount provided
by the note agreement, or to decrease the amount, and the borrower may repay up
to the full amount of the note without penalty. The borrower is typically a
large industrial or finance company which also issues commercial paper.
Typically these notes provide that the interest rate is set daily by the
borrower. The rate is usually the same or similar to the interest rate on
commercial paper being issued by the borrower. Because variable amount master
notes are direct lending arrangements between the lender and borrower, it is not
generally contemplated that such instruments will be traded, and there is no
secondary market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at the face value, plus accrued interest,
at any time.
22
<PAGE>
Accordingly, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. In connection with master
demand note arrangements, the Fund considers earning power, cash flow, and other
liquidity ratios of the issuer. The Fund will only invest in master demand notes
of U.S. issuers. While master demand notes, as such, are not typically rated by
credit rating agencies, if not so rated the Fund may invest in them only if at
the time of an investment the issuer meets the criteria set forth in the
Prospectus for all other commercial paper issuers. The Fund will not invest more
than 25% of its assets in master demand notes.
REPURCHASE AGREEMENTS Repurchase agreements have the characteristics of loans by
a Fund, and will be fully collateralized (either with physical securities or
evidence of book entry transfer to the account of the custodian bank) at all
times. During the term of the repurchase agreement the Fund retains the security
subject to the repurchase agreement as collateral securing the seller's
repurchase obligation, continually monitors the market value of the security
subject to the agreement, and requires the Fund's seller to deposit with the
Fund additional collateral equal to any amount by which the market value of the
security subject to the repurchase agreement falls below the resale amount
provided under the repurchase agreement. The Funds will enter into repurchase
agreements only with member banks of the Federal Reserve System, and with
primary dealers in United States Government securities or their wholly-owned
subsidiaries whose creditworthiness has been reviewed and found satisfactory by
the Investment Adviser and who have, therefore, been determined to present
minimal credit risk.
Securities underlying repurchase agreements will be limited to certificates of
deposit, commercial paper, bankers' acceptances, or obligations issued or
guaranteed by the United States Government or its agencies or instrumentalities,
in which the Fund may otherwise invest.
If a seller of a repurchase agreement defaults and does not repurchase the
security subject to the agreement, the Fund would look to the collateral
security underlying the seller's repurchase agreement, including the securities
subject to the repurchase agreement, for satisfaction of the seller's obligation
to the Fund; in such event the Fund might incur disposition costs in liquidating
the collateral and might suffer a loss if the value of the collateral declines.
In addition, if bankruptcy proceedings are instituted against a seller of a
repurchase agreement, realization upon the collateral may be delayed or limited.
REVERSE REPURCHASE AGREEMENTS AND LEVERAGE We may enter into reverse repurchase
agreements with Federal Reserve member banks and U.S. securities dealers from
time to time. In a reverse repurchase transaction we sell securities and
simultaneously agree to repurchase them at a price which reflects an agreed-upon
rate of interest. We will use the proceeds of reverse repurchase agreements to
make other investments which either mature or are under an agreement to resell
at a date simultaneous with or prior to the expiration of the
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<PAGE>
reverse repurchase agreement. The Fund may utilize reverse repurchase agreements
only if the interest income to be earned from the investment proceeds of the
transaction is greater than the interest expense of the reverse repurchase
transaction.
Reverse repurchase agreements are a form of leverage which increases the
opportunity for gain and the risk of loss for a given change in market value. In
addition, the gains or losses will cause the net asset value of the Funds'
shares to rise or fall faster than would otherwise be the case. There may also
be a risk of delay in the recovery of the underlying securities if the opposite
party has financial difficulties.
A Fund's obligations under all borrowings, including reverse repurchase
agreements, will not exceed one-third of the Fund's net assets.
The use of reverse repurchase agreements is included in the Fund's borrowing
policy and is subject to the limit of Section 18(f)(1) of the Investment Company
Act of 1940, as amended. During the time a reverse repurchase agreement is
outstanding, each Fund that has entered into such an agreement maintains a
segregated account with its Custodian containing cash, U.S. Government or other
liquid high grade debt securities having a value at least equal to the
repurchase price under the reverse repurchase agreement.
OTHER INVESTMENT TECHNIQUES AND OPPORTUNITIES The Funds may take certain actions
with respect to merger proposals, tender offers, conversion of equity-related
securities and other investment opportunities with the objective of enhancing
overall return, irrespective of how these actions may affect the weight of the
particular securities in a Fund. It is not the policy of any of the Funds to
select investment based primarily on the possibility of one or more of these
investment techniques and opportunities being presented.
24
<PAGE>
FUND TURNOVER
The transactions engaged in by the Funds are reflected in the Funds' turnover
rates. The rate of turnover for each Fund is calculated by dividing the lesser
of the amount of purchases or sales of securities during the fiscal year by the
monthly average of the value of the Fund's securities (excluding from the
computation all securities, including options, with maturities at the time of
acquisition of one year or less). A high rate of turnover generally involves
correspondingly greater brokerage commission expenses, which must be borne
directly by the Fund and ultimately by the Fund's shareholder. However, because
turnover is not a limiting factor in determining whether or not to sell
securities, a particular investment may be sold at any time, if investment
judgment or account operations make a sale advisable.
Turnover for the insurance company separate accounts, also managed by the
Investment Adviser, has not been and will not be a consideration. The Investment
Adviser buys and sells securities for each separate account whenever it believes
it is appropriate to do so. The Transamerica Premier Funds are and will be
managed in a substantially similar manner.
The Investment Adviser cannot predict precisely the turnover rates for these
new Funds, but expects that the annual turnover rates will generally not exceed
50% for the Transamerica Premier Equity Fund; 200% for the Transamerica Premier
Index Fund; 100% for the Transamerica Premier Bond Fund; 50% for the
Transamerica Premier Balanced Fund; and 300% for the Transamerica Premier Short-
Intermediate Government Fund. The turnover rate for the Transamerica Premier
Cash Reserve Fund is expected to be zero for regulatory purposes. A 100% annual
turnover rate would occur if all of a Fund's securities were replaced one time
during a one year period. Short-term gains realized from turnover are taxable to
shareholders as ordinary income, except for shares held in special tax-qualified
accounts (such as IRA's or employer sponsored pension plans). In addition,
higher turnover rates can result in corresponding increases in brokerage
commissions and other transaction costs. The Investment Adviser generally will
not consider turnover rates in making investment decisions on behalf of any Fund
consistent with the Fund's investment objective and policies.
MANAGEMENT OF THE COMPANY
The names of the directors and executive officers of the Company, their
business addresses and their principal occupations and certain other
affiliations during the past five years are listed below. Each of the persons
listed below is an employee of an entity that provides services to the Funds. An
asterisk appears before the name of each director who is an "interested person"
of the Company, as defined in the 1940 Act.
25
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING PAST 5
NAME, ADDRESS & AGE POSITION HELD WITH COMPANY YEARS AND OTHER AFFILIATIONS
- ------------------- -------------------------- -----------------------------------
<S> <C> <C>
Nicki Bair President, Chief Financial Vice President, Transamerica
Transamerica Center Officer, and Chief Accounting Investment Services ("TIS") since
1150 South Olive Officer April, 1995; and Vice President,
Los Angeles, CA 90015 Transamerica Life Insurance and
Age 39 Annuity Company ("TALIAC") since 1991;
and Vice President, Transamerica Occidental
Life Insurance Company ("TOLIC") since
1992; formerly Division Manager, Pension
Pricing and Asset Liability Management,
TALIAC and TOLIC.
Reid A. Evers Secretary Second Vice President & Assistant
Transamerica Center General Counsel, TOLIC and
1150 South Olive TALIAC.
Los Angeles, CA 90015
Age 44
Christopher W. Shaw Assistant Vice President Second Vice President & Compliance
Transamerica Center Officer, Transamerica Securities Sales
1150 South Olive Corporation since March, 1995.
Los Angeles, CA 90015 Formerly Manager, Group Pension
Age 49 Implementation, TALIAC since 1984.
*Nooruddin S. Veerjee Chief Executive Officer President, TALIAC and President,
Transamerica Center and Chairman of the Board Group Pension Division, TOLIC,
1150 South Olive since December 1993. Formerly
Los Angeles, CA 90015 Senior Vice President, Group Pension
Age 36 Line, TOLIC, April 1992 - December 1993;
Vice President - Office of the Chairman,
TOLIC, April 1990 - April 1992; Vice President
& Subline Manager, Pension Financial &
Products, TALIAC, March 1985-April 1990.
*Gary U. Rolle Director Executive Vice President & Chief
Transamerica Center Investment Officer, TIS; Chairman
1150 South Olive & President, Transamerica Income
Los Angeles, CA 90015 Shares Investment Company; Chief
Age 54 Investment Officer, TOLIC & TALIAC.
Donald Radisich Vice President Vice President, Administration,
Transamerica Center TALIAC.
1150 South Olive
Los Angeles, CA 90015
Age 52
Howell Margolit Assistant Vice President Assistant Vice President, TIS
Transamerica Center since April, 1995; formerly Manager,
1150 South Olive Pricing and Product Development,
Los Angeles, CA 90015 TALIAC.
Age 43
J. Richard Atwood Treasurer and Compliance Vice President and Chief Financial
Transamerica Center Officer Officer, TIS since 1995; formerly
1150 South Olive Vice President and Controller, First
Los Angeles, CA 90015 Pacific Advisors, Inc. since 1988.
Age 35
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING PAST 5
NAME, ADDRESS & AGE POSITION HELD WITH COMPANY YEARS AND OTHER AFFILIATIONS
- ------------------- -------------------------- -----------------------------------
<S> <C> <C>
Sidney E. Harris Director Dean of the Drucker Center,
The Drucker Center Claremont Graduate School;
Claremont Graduate School Director for The ServiceMaster
Claremont, CA 91711 Company and Family Savings Bank; Trustee
Age 46 of Menlo College, Atherton, California.
Charles C. Reed Director Executive Vice President,
Alexander & Alexander Alexander & Alexander of
55 S. Lake Ave., Suite 500 California, Inc.; Chairman of
Pasadena, CA 91101 L.A. Chamber of Commerce;
Age 62 Director for Los Angeles YMCA, LA 2000
Partnership, and the California Museum
Foundation.
Carl R. Terzian Director Chairman of Carl Terzian
Carl Terzian Associates Associates; Vice President of
12400 Wilshire Blvd., Suite 200 Project Concern; Trustee of
Los Angeles, CA 90025 Woodbury University; Director
Age 60 for Armenian Film Foundation, Arthritis
Foundation, Boy Scouts of America,
California Higher Education Loan Authority,
Hugh O'Brian Youth Foundation, St. Vincent
Medical Center Foundation, The Wellness
Community, The Educational Resource and
Services Center, Inc., and Senior Health and
Peer Counseling.
</TABLE>
No officer, director or employee of Transamerica Investment Services, Inc. or
Transamerica Occidental Life Insurance Company or any of their affiliates
receives any compensation from the Company for acting as a director or officer
of the Company. Each director of the Company who is not an "interested person"
of the Company receives an annual fee of $10,000, and $1,000 for each meeting of
the Company's Board attended, and $500 for each Board committee meeting
attended, and is reimbursed for expenses incurred in connection with such
attendance.
Following is a table of the compensation expected to be paid to all directors
and to all officers and affiliated persons of the Company receiving more than
$60,000 from the Company during the next fiscal year.
<TABLE>
<CAPTION>
Estimated Annual Total Compensation
Name Compensation Paid Pension Benefits Benefits at Retirement All Related Funds
- ---- ----------------- ---------------- ---------------------- -----------------
<S> <C> <C> <C> <C>
Sidney E. Harris $15,000 $0 $0 $15,000
Charles C. Reed $15,000 $0 $0 $15,000
Carl R. Terzian $15,000 $0 $0 $15,000
Gary U. Rolle $0 $0 $0 $0
Nooruddin S. Veerjee $0 $0 $0 $0
</TABLE>
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<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER AND ADMINISTRATOR Responsibility for the management and
supervision of the Company and its Funds rests with the Board of Directors of
Transamerica Investors, Inc. (the "Board"). The Investment Adviser and the
Administrator are subject to the direction of the Board.
The Funds' Investment Adviser is Transamerica Investment Services, Inc. (the
"Investment Adviser"), 550 N. Brand, Glendale, California 91203. The Investment
Adviser will: (1) supervise and manage the investments of each Fund and direct
the purchase and sale of its investment securities; and (2) see that investments
follow the investment objectives and comply with government regulations. The
Investment Adviser is also responsible for the selection of brokers and dealers
to execute transactions for each Fund. Some of these brokers or dealers may be
affiliated persons of the Company, the Investment Adviser, Administrator, or the
Distributor. Since it is our policy to seek the best price and execution for
each transaction, the Investment Adviser may give consideration to brokers and
dealers who provide us with statistical information and other services in
addition to transaction services. For its services to the Funds, the Investment
Adviser receives an Adviser Fee. This fee is based on an annual percentage of
the average daily net assets of each Fund. It is accrued daily, and paid
monthly.
The Adviser Fee for any Fund may be reduced in any year if the Fund's expenses
exceed the limits on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Fund are
qualified to offer for sale. The term "expenses" is defined in the statutes or
regulations of such jurisdictions, but it generally excludes brokerage
commissions, taxes, interest, and extraordinary expenses. The only such
limitation currently known is imposed by the State of California. California's
maximum Fund expenses before the Adviser Fee must be reduced are 2.5% of the
first $30 million of average net assets, 2% of the next $70 million, and 1.5% of
any excess over $100 million.
The Funds' Administrator is Transamerica Occidental Life Insurance Company
(the "Administrator"), 1150 S. Olive Street, Los Angeles, California 90015. The
Administrator will: (1) provide the Funds with administrative and clerical
services, including the maintenance of the Funds' books and records; (2) arrange
periodic updating of the Funds' prospectus and any supplements; (3) provide
proxy materials and reports to Fund shareholders and the Securities and Exchange
Commission; and (4) provide the Funds with adequate office space and all
necessary office equipment and services. The Administrator also provides
services for the registration of Fund shares with those states and other
jurisdictions where its shares are offered or sold.
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<PAGE>
Transamerica Occidental Life Insurance Company is a wholly-owned subsidiary of
Transamerica Insurance Corporation of California. Both Transamerica Insurance
Corporation of California and Transamerica Investment Services, Inc. are wholly-
owned subsidiaries of Transamerica Corporation, 600 Montgomery Street, San
Francisco, California 94111, one of the nation's largest financial services
companies.
CUSTODIAN AND TRANSFER AGENT State Street Bank and Trust Company ("State
Street"), located at 225 Franklin Street, Boston, Massachusetts 02110, serves as
custodian of the Funds' investments. Under its custodian contract with the
Company, State Street is authorized to appoint one or more banking institutions
as subcustodians of assets owned by each Fund. For its custody services, State
Street receives monthly fees charged to the Funds based upon the month-end,
aggregate net asset value of the Funds, plus certain charges for securities
transactions. The assets of the Company are held under bank custodianship in
accordance with the 1940 Act.
Under a Foreign Subcustodian Agreement with State Street, State Street London
Limited is responsible for foreign assets and transactions with the
transnational depositories of Euroclear and Cedel.
Under a Transfer Agency Agreement, Boston Financial Data Services ("BFDS"),
Two Heritage Drive, Quincy, Massachusetts 02171, is responsible for processing
redemption requests and crediting dividends to the accounts of shareholders of
the Funds.
DISTRIBUTION OF SHARES OF THE FUNDS Transamerica Securities Sales Corporation
("TSSC") serves as the principal underwriter of shares of the Funds, which are
continuously distributed. Transamerica Financial Resources, Inc. ("TFR") will
also distribute shares of the Funds pursuant to a selling agreement with TSSC.
Both TSSC and TFR are wholly-owned subsidiaries of Transamerica Insurance
Corporation of California, which is a wholly-owned subsidiary of Transamerica
Corporation, are registered with the Securities and Exchange Commission as
broker/dealers, and are members of the National Association of Securities
Dealers, Inc. TSSC may also enter into arrangements whereby Fund shares may be
sold by other broker/dealers, which may or may not be affiliated with TFR or
TSSC.
The Company has adopted a plan of distribution pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "1940 Act").
Under the Plan, each Fund makes payments daily to TSSC based on an annual
percentage of the average net value of the assets represented by each class of
shares.
For the Investor Shares class, there is an annual 12b-1 distribution fee of
.25% of the average daily net assets of the Investor shares of each Fund, except
the Transamerica Premier Index and Cash Reserve Funds. The distribution fee for
the Index and Cash Reserve Funds is .10%. This fee covers such expenses
29
<PAGE>
as preparation, printing and mailing of the Prospectus and Statement of
Additional Information, as well as sales literature and other media advertising,
and related expenses. It can also be used to compensate sales personnel involved
with selling the Funds.
For the Adviser Shares class, there is an annual 12b-1 distribution fee of
.75% of the average daily net assets of the Adviser Shares of each Fund, except
the Transamerica Premier Cash Reserve Fund. There is no 12b-1 distribution fee
for the Transamerica Premier Cash Reserve Fund. There is also an annual 12b-1
service fee of .25% of the average daily net assets of the Adviser Shares of
each Fund.
The 12b-1 fees for Adviser Shares are higher than Investor Shares because the
distribution fee for the Adviser Shares covers compensation to registered
representatives and other sales personnel involved with selling Adviser Shares,
as well as preparation, printing and mailing of the Prospectus, Statement of
Additional Information, sales literature, other media advertising, and related
expenses. Also, a service fee is charged on Adviser Shares. The service fee
compensates sales people for ongoing shareholder information and advice, and
office expenses such as rent, communications equipment, employee salaries, and
other overhead costs.
From time to time, and for one or more Funds within each class of Shares, the
Distributor may waive any or all of these fees at its discretion. All or any
portion of these fees may be paid by the Administrator for the Company, at the
discretion of the Administrator.
DEALER CONCESSION Pursuant to a selling agreement between TSSC and TFR, a dealer
concession is paid to TFR equal to 1.00% on all Adviser Shares purchased within
the first year of the date of the initial purchase by each shareholder, and
commencing on the 13th month after the date of the initial purchase, payments of
0.25% on an annual basis on all Adviser Share assets. The 0.25% trailer will be
paid quarterly at a rate of 0.0625% of the quarter-end asset balance.
CAPITALIZATION Transamerica Corporation has provided $100,000 in initial
capitalization for the Company which amount has been allocated among the Funds.
Transamerica Corporation acquired its shares for investment and can only dispose
of its shares by redemption. Within three months of this registration statement,
Transamerica Corporation and certain of its wholly-owned subsidiaries intend to
invest an additional $30 million in shares of the Funds. As of the date of this
registration statement, Transamerica Corporation was the only record or
beneficial holder of the shares of the Funds.
30
<PAGE>
REDEMPTION OF SHARES
Detailed information on how to redeem shares of a Fund is included in the
Prospectus. The right of redemption of shares of a Fund may be suspended or the
date of payment postponed (1) for any periods during which the New York Stock
Exchange is closed (other than for customary weekend and holiday closings), (2)
when trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists, making
disposal of a Fund's investments or determination of its net asset value not
reasonably practicable, or (3) for such other periods as the Securities and
Exchange Commission by order may permit for the protection of the Fund's
shareholders. A shareholder who pays for Fund shares by personal check will
receive the proceeds of a redemption of those shares when the purchase check has
been collected, which may take up to 10 days or more. Shareholders who
anticipate the need for more immediate access to their investment should
purchase shares with Federal funds or bank wire or by a certified or cashier's
check.
REDEMPTIONS IN EXCESS OF $250,000 If you request a redemption of up to $250,000,
the amount will be paid in cash. If you redeem more than $250,000 from any one
account in any one Fund in a 90-day period, the entire redemption will be paid
in cash if you provide Transamerica with an unconditional instruction to redeem
at least 30 days prior to the date on which the redemption transaction is to
occur. The instruction must specify the dollar amount or number of shares to be
redeemed and the date of the transaction. The date must be a minimum of 30 days
after receipt of the instruction by Transamerica. If you have authorized
Transamerica to accept such instructions, your instruction may be by telephone
or in writing without a signature guarantee. If you have not done so, the
instruction must be in writing with all signatures guaranteed. Your shares will
be redeemed at the price determined on the date you specify in your instruction
and the proceeds will be sent by mail, wire or electronic funds transfer in
accordance with the procedures specified in the Prospectus.
Receipt of your instruction to redeem 30 days prior to the transaction
provides the Fund with sufficient time to raise the cash in an orderly manner to
pay the redemption and thereby minimizes the effect of the redemption on the
Fund and its shareholders.
You may cancel your redemption instruction prior to the transaction date.
However, if you do so, Transamerica may not accept an instruction from you to
redeem in accordance with this alternative for a period of 90 days from the date
of cancellation.
31
<PAGE>
If you do not provide your instruction to redeem 30 days prior to the
transaction, Transamerica offers you two alternatives:
(1) You may redeem up to $250,000 in cash the first day, and the remainder
over the next 20 business days at the rate of not less than $50,000 or
more than $500,000 per day (and such lesser amount on the last day to
redeem all the shares remaining), but not more than $10 million total. The
redemption each day will be at the price determined that day. For example,
a request to redeem $525,000, or a number of shares worth $525,000, will
be effective at $250,000 on the first day, and $50,000 per day for the
next five business days, and $25,000 on the last day. A request to redeem
$11 million would be effective at $250,000 the first day and $500,000 per
day for the next 20 business days ($10.25 million total) and the remaining
$750,000 to be redeemed by the delivery of securities.
Since the price is determined not on the date the redemption request is
received, but instead on succeeding business days when the redemption is
effected, the number of shares redeemed will vary from day to day. The
total you will receive over the entire period may be more or less than the
amount that you would have received had the redemption been effected on
the day your redemption request was received. In the first example above,
falling per-share prices could cause the value of the shares on the last
day to be less than $25,000, and the redemption on the last day would be
only of the shares left in the account.
(2) In lieu of receiving cash as described earlier, you may elect to receive
securities from Transamerica's fund. The securities delivered will be
selected at the sole discretion of Transamerica. They will be readily
marketable with an active and substantial secondary market given the type
of companies involved and the characteristics of the markets in which they
trade, but will not necessarily be representative of the entire fund, and
will be securities that Transamerica may regard as least desirable. You
may incur brokerage costs in converting the securities to cash.
The method of valuing securities used to make the redemptions will be the
same as the method of valuing securities described under "Determination of
Net Asset Value," page 35, and such valuation will be made as of the same
time the redemption price is determined.
These alternatives are designed to lessen the adverse effect of large
redemptions on the Fund and its non-redeeming shareholders. For example, assume
that a shareholder redeems $1 million on a given day and that the Fund pays him
$250,000 in cash and is required to sell securities for $750,000 to raise the
remainder of the cash to pay him. The securities valued at $750,000 on the day
of the redemption may bring a lower price when sold thereafter, so that more
securities may be sold to realize $750,000. In that case, the redeeming
shareholder's proceeds would be fixed at $750,000 and the market risk would
32
<PAGE>
be imposed on the Fund and its remaining shareholders, who would suffer the
loss. By delivering securities instead of cash or staggering the payment of
cash, the market risk is imposed on the redeeming shareholder. If securities are
delivered, the redeeming shareholder (and not the Fund) bears the brokerage cost
of selling them.
EXCHANGE PRIVILEGE
The exchange privilege described in the Prospectus enables a shareholder of a
Fund to acquire the same class of shares in a Fund having a different investment
objective and policies when the shareholder believes that a shift between Funds
is an appropriate investment decision. Upon receipt of proper instructions and
all necessary supporting documents, shares submitted for exchange are redeemed
at the then-current net asset value and the proceeds are immediately invested in
shares of the Fund being acquired. The Company reserves the right to reject any
exchange request.
TELEPHONE TRANSACTIONS
The Company and its Transfer Agent will employ reasonable procedures such as
requiring certain identifying information from the caller, tape recording the
telephone instructions, and providing written confirmation of the transaction to
confirm that the instructions communicated by telephone are genuine. All
telephone instructions reasonably believed by the Transfer Agent to be genuine
will be the shareholder's responsibility, including losses arising from any
errors in the communication of instructions. As a result of this policy, the
shareholder will bear the risk of loss. If the Company or its Transfer Agent do
not employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, they may be liable for any losses due to unauthorized or
fraudulent transactions.
BROKERAGE ALLOCATION
Subject to the direction of the Board, the Investment Adviser has
responsibility for making a Fund's investment decisions, for effecting the
execution of trades for a Fund and for negotiating any brokerage commissions
thereon. It is the Investment Adviser's policy to obtain the best price and
execution available, giving attention to net price (including commissions where
applicable), execution capability (including the adequacy of a firm's capital
position), and other services related to execution; the relative priority given
to these factors will depend on all of the circumstances regarding a specific
trade.
33
<PAGE>
The Investment Adviser receives a variety of brokerage and research services
from brokerage firms in return for the execution by such brokerage firms of
trades on behalf of the Funds. These brokerage and research services include,
but are not limited to, quantitative and qualitative research information and
purchase and sale recommendations regarding securities and industries, analyses
and reports covering a broad range of economic factors and trends, statistical
data relating to the strategy and performance of the Funds and other investment
companies, services related to the execution of trades in a Fund's securities
and advice as to the valuation of securities. The Investment Adviser considers
the quantity and quality of such brokerage and research services provided by a
brokerage firm along with the nature and difficulty of the specific transaction
in negotiating commissions for trades in a Fund's securities and may pay higher
commission rates than the lowest available when it is reasonable to do so in
light of the value of the brokerage and research services received generally or
in connection with a particular transaction.
Consistent with federal legislation, the Investment Adviser may obtain such
brokerage and research services regardless of whether they are paid for (1) by
means of commissions, or (2) by means of separate, non-commission payments. The
Investment Adviser's judgment as to whether and how it will obtain the specific
brokerage and research services will be based upon its analysis of the quality
of such services and the cost (depending upon the various methods of payment
which may be offered by brokerage firms) and will reflect the Investment
Adviser's opinion as to which services and which means of payment are in the
long-term best interests of the Funds. The Investment Adviser will not effect
any brokerage transactions in the Funds' securities with any affiliate of the
Company, the Investment Adviser, or the Administrator except in accordance with
applicable SEC rules.
Certain executive officers of the Investment Adviser also have supervisory
responsibility with respect to the securities of the Investment Adviser's own
accounts. In placing orders for the purchase and sale of debt securities for a
Fund, the Investment Adviser will normally use its own facilities. A Fund and
another fund or another advisory client of the Investment Adviser, or the
Investment Adviser itself, may desire to buy or sell the name, publicly traded
security at or about the same time. In such a case, the purchases or sales will
normally be allocated as nearly as practicable on a pro rata basis in proportion
to the amounts to be purchased or sold by each. In determining the amounts to be
purchased and sold, the main factors to be considered are the respective
investment objectives of a Fund and the other funds, the relative size of
holdings of the same or comparable securities, availability of cash for
investment by a Fund and the other funds, and the size of their respective
investment commitments.
34
<PAGE>
DETERMINATION OF NET ASSET VALUE
Under the 1940 Act, the Board is responsible for determining in good faith the
fair value of securities of each Fund, and each class of each Fund. In
accordance with procedures adopted by the Board, the net asset value per share
is calculated by determining the net worth of each Fund (assets, including
securities at market value, minus liabilities) divided by the number of that
Fund's outstanding shares. All securities are valued as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern standard
time). Except for the Transamerica Premier Cash Reserve Fund, each Fund will
compute its net asset value once daily at the close of such trading on each day
that the New York Stock Exchange is open for business (as described in the
Prospectus). The Transamerica Premier Cash Reserve Fund will determine its net
asset value only on days that the Federal Reserve is open.
In the event that the New York Stock Exchange, the Federal Reserve, or the
national securities exchange on which stock options are traded adopt different
trading hours on either a permanent or temporary basis, the Board will
reconsider the time at which net asset value is computed. In addition, the Funds
may compute their net asset value as of any time permitted pursuant to any
exemption, order or statement of the SEC or its staff.
Assets of the Funds (other than the Transamerica Premier Cash Reserve Fund)
are valued as follows:
(a) equity securities and other similar investments ("Equities") listed on any
U.S. or foreign stock exchange or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") are valued at the last sale
price on that exchange or NASDAQ on the valuation day; if no sale occurs,
Equities traded on a U.S. exchange or NASDAQ are valued at the mean
between the closing bid and closing asked prices. Equities traded on a
foreign exchange will be valued at the official bid price;
(b) over-the-counter securities not quoted on NASDAQ are valued at the last
sale price on the valuation day or, if no sale occurs, at the mean between
the last bid and asked prices;
(c) debt securities purchased with a remaining maturity of 61 days or more are
valued on the basis of dealer-supplied quotations or by a pricing service
selected by the Investment Adviser and approved by the Board;
(d) options and futures contracts are valued at the last sale price on the
market where any such option or futures contracts is principally traded;
(e) over-the-counter options are valued based upon prices provided by market
makers in such securities or dealers in such currencies.
(f) forward foreign currency exchange contracts are valued based upon
quotations supplied by dealers in such contracts;
35
<PAGE>
(g) all other securities and other assets, including those for which a pricing
service supplies no quotations or quotations are not deemed by the
Investment Adviser to be representative of market values, but excluding
debt securities with remaining maturities of 60 days or less, are valued
at fair value as determined in good faith pursuant to procedures
established by the Board; and
(h) debt securities with a remaining maturity of 60 days or less will be
valued at their amortized cost, which approximates market value.
Equities traded on more than one U.S. national securities exchange or foreign
securities exchange are valued at the last sale price on each business day at
the close of the exchange representing the principal market for such securities.
The value of all assets and liabilities expressed in foreign currencies will be
converted into U.S. dollar values at the noon (Eastern standard time) Reuters
spot rate. If such quotations are not available, the rate of exchange will be
determined in good faith by or under procedures established by the Board.
All of the assets of the Transamerica Premier Cash Reserve Fund are valued on
the basis of amortized cost in an effort to maintain a constant net asset value
of per share $1.00. The Board has determined that to be in the best interests of
the Transamerica Premier Cash Reserve Fund and its shareholders. Under the
amortized cost method of valuation, securities are valued at cost on the date of
their acquisition, and thereafter a constant accretion of any discount or
amortization of any premium to maturity is assumed, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods in which value
as determined by amortized cost is higher or lower than the price the Fund would
receive if it sold the security. During such periods, the quoted yield to
investors may differ somewhat from that obtained by a similar fund which uses
available market quotations to value all of its securities.
The Board has established procedures reasonably designed, taking into account
current market conditions and the Transamerica Premier Cash Reserve Fund's
investment objective, to stabilize the net asset value per share for purposes of
sales and redemptions at $1.00. These procedures include review by the Board, at
such intervals as it deems appropriate, to determine the extent, if any, to
which the net asset value per share calculated by using available market
quotations deviates from $1.00 per share. In the event such deviation should
exceed one half of one percent, the Board will promptly consider initiating
corrective action. If the Board believes that the extent of any deviation from a
$1.00 amortized cost price per share may result in material dilution or other
unfair results to new or existing shareholders, it will take such steps as it
considers appropriate to eliminate or reduce these consequences to the extent
reasonably practicable. Such steps may include: (1) selling securities prior to
maturity; (2) shortening the average maturity of the fund; (3) withholding or
reducing dividends; or (4) utilizing a net asset value per share determined from
available market quotations. Even if these steps were taken, the Transamerica
Premier Cash Reserve Fund's net asset value might still decline.
36
<PAGE>
PERFORMANCE INFORMATION
Performance information for the Funds including the yield and effective yield
of the Transamerica Premier Cash Reserve Fund, the yield of the remaining Funds,
and the total return of all Funds, may appear in reports or promotional
literature to current or prospective shareholders.
MONEY MARKET FUND YIELDS Current yield for the Transamerica Premier Cash Reserve
Fund will be computed by determining the net change, exclusive of capital
changes at the beginning of a seven-day period in the value of a hypothetical
investment, subtracting any deductions from shareholder accounts, and dividing
the difference by the value of the hypothetical investment at the beginning of
the base period to obtain the base period return. This base period return is
then multiplied by (365/7) with the resulting yield figure carried to at least
the nearest hundredth of one percent.
Calculation of "effective yield" begins with the same "base period return"
used in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)365/7] - 1
30-DAY YIELD FOR NON-MONEY MARKET FUNDS Quotations of yield for the remaining
Funds will be based on all investment income per share earned during a
particular 30-day period, less expenses accrued during the period ("net
investment income"), and will be computed by dividing net investment income by
the value of a share on the last day of the period, according to the following
formula:
Yield = 2[({[a-b]/cd} + 1)\6\-1]
Where:
a = dividends and interest earned during the period
b = the expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
d = the maximum offering price per share on the last day of the period
AVERAGE ANNUAL TOTAL RETURN FOR NON-MONEY MARKET FUNDS Quotations of average
annual total return for any Fund will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in a Fund over a
period of one, five and ten years (or, if less, up to the life of the Fund),
calculated pursuant to the formula:
P(1 + T) n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = an average annual total return
n = the number years
37
<PAGE>
ERV = the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year period at the end of the 1, 5, 10 year
period (or fractional portion thereof)
Any performance data quoted for a Fund will represent historical performance
and the investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
original cost.
PUBLISHED PERFORMANCE From time to time the Company may publish, or provide
telephonically, an indication of the Funds' past performance as measured by
independent sources such as (but not limited to) Lipper Analytical Services,
Incorporated, Weisenberger Investment Companies Service, Donoghue's Money Fund
Report, Barron's, Business Week, Changing Times, Financial World, Forbes,
Fortune, Money, Personal Investor, Sylvia Porter's Personal Finance and The Wall
Street Journal. The Company may also advertise information which has been
provided to the NASD for publication in regional and local newspapers.
In addition, the Company may from time to time advertise its performance
relative to certain indexes and benchmark investments, including:
. the Lipper Analytical Services, Inc. Mutual Fund Performance Analysis,
Fixed-Income Analysis and Mutual Fund Indexes (which measure total return
and average current yield for the mutual fund industry and rank mutual fund
performance);
. the CDA Mutual Fund Report published by CDA Investment Technologies, Inc.
(which analyzes price, risk and various measures of return for the mutual
fund industry);
. the Consumer Price Index published by the U.S. Bureau of Labor Statistics
(which measures changes in the price of goods and services);
. Stocks, Bonds, Bills and Inflation published by Ibbotson Associates (which
provides historical performance figures for stocks, government securities
and inflation);
. the Hambrecht & Quist Growth Stock Index;
. the NASDAQ OTC Composite Prime Return;
. the Russell Midcap Index;
. the Russell 2000 Index;
. the ValueLine Composite;
. the Wilshire 4500 Index;
. the Salomon Brothers World Bond Index (which measures the total return in
U.S. dollar terms of government bonds, Eurobonds and foreign bonds of ten
countries, with all such bonds having a minimum maturity of five years);
. the Shearson Lehman Brothers Aggregate Bond Index or its component indexes
(the Aggregate Bond Index measures the performance of Treasury, U.S.
Government agencies, mortgage and Yankee bonds);
38
<PAGE>
. the S&P Bond indexes (which measure yield and price of corporate, municipal
and U.S. Government bonds);
. the J.P. Morgan Global Government Bond Index;
. Donoghue's Money Market Fund Report (which provides industry averages of 7-
day annualized and compounded yields of taxable, tax-free and U.S.
Government money market funds);
. historical investment data supplied by the research departments of Goldman
Sachs, Lehman Brothers, First Boston Corporation, Morgan Stanley (including
EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or
other providers of such data;
. the FT-Actuaries Europe and Pacific Index;
. mutual fund performance indexes published by Morningstar, Inc., Variable
Annuity Research & Data Service, the Investment Company Institute, the
Investment Company Data, Inc., Media General Financial, and Value Line
Mutual Fund Survey; and
. financial industry analytical surveys, such as Piper Universe.
The composition of the investments in such indexes and the characteristics of
such benchmark investments are not identical to, and in some cases are very
different from, those of a Fund. These indexes and averages are generally
unmanaged and the items included in the calculations of such indexes and
averages may be different from those of the equations used by the Company to
calculate a Fund's performance figures.
The Funds may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of a Fund with other measures
of investment return. For example, unmanaged indexes may assume the reinvestment
of dividends but generally do not reflect deductions for administrative and
management costs and expenses.
The Company may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish the Investment
Adviser's views as to markets, the rationale for a Fund's investments, and
discussions of the Fund's current asset allocation.
From time to time, advertisements or information may include a discussion of
certain attributes or benefits to be derived by an investment in a particular
Fund. Such advertisements or information may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
in the communication.
Such performance data will be based on historical results and will not be
intended to indicate future performance. The total return or yield of a Fund
will vary based on market conditions, expenses, investments, and other factors.
The value of a Fund's shares will fluctuate and an investor's shares may be
worth more or less than their original cost upon redemption. The Company may
also, at its discretion, from time to time make a list of a Fund's holdings
available to investors upon request.
39
<PAGE>
TAXES
Each Fund intends to qualify and to continue to qualify as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"). The distribution requirement, in order to qualify for that
treatment, is that each Fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income, consisting
generally of net investment income, net short-term capital gain, and net gains
from certain foreign currency transactions. The Company must also meet the
following additional requirements: (1) The Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, and gains from the sale or other disposition of securities
or foreign currencies, or other income (including gains from options, futures,
or forward contracts) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) The Fund must derive
less than 30% of its gross income each taxable year from gains (without
including losses) on the sales or other disposition of securities, or any of the
following, that were held for less than three months--options, futures, or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures, or forwards thereon) that are not directly
related to the Fund's principal business of investing in securities (or options
and futures with respect thereto) ("Short-Short Limitation"); (3) At the close
of each quarter of the Fund's taxable year, at least 50% of the value of its
total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RIC's, and other securities that, with respect
to any one issuer, do not exceed 5% of the value of the Fund's total assets and
that do not represent more than 10% of the outstanding voting securities of the
issuer; and (4) At the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RIC's) of any
one issuer.
Each Fund will be subject to a nondeductible 4% excise tax on amounts not
distributed to shareholders on a timely basis. The Fund intends to make
sufficient distributions to avoid this 4% excise tax.
Dividends and interest received by each Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and foreign countries generally do not impose taxes on capital gains in
respect to investments by foreign investors.
Certain of the Funds may invest in the stock of "passive foreign investment
companies" ("PFIC's"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) At least 75% of its gross income is passive;
or (2) An average of at least 50% of its assets produce, or are held for the
pro-
40
<PAGE>
duction of, passive income. Under certain circumstances, the Fund would be
subject to Federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain on disposition of that stock (collectively
"PFIC income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
would be included in the Fund's investment company taxable income, and
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If the Fund invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," then in lieu of the foregoing tax and interest
obligation, that Fund will be required to include income each year to its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), even if they are not distributed to the Fund; those amounts would
be subject to the Distribution Requirement. The ability of a Fund to make this
election may be limited.
The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the income received in connection therewith by a Fund.
Income from the disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and income from
transactions in options, futures, and forward contracts derived by a Fund with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income under the Income Requirement. However, income from
the disposition of options and futures contract (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held for
less than three months. Income from the disposition of foreign currencies, and
options, futures, and forward contracts on foreign currencies, that are not
directly related to a Fund's principal business of investing in securities (or
options and futures with respect thereto) also will be subject to the Short-
Short Limitation if they are held for less than three months.
If a Fund satisfies certain requirements, any increase in value on a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether that Fund satisfies the Short-
Short Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. Each Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but it is not clear whether this treatment will be available for all
of the Fund's hedging transactions. To the extent this treatment is not
available, a Fund may be forced to defer the closing out of certain options and
futures contracts beyond the time when it otherwise would be advantageous to do
so, in order for the Fund to qualify as a RIC.
41
<PAGE>
We have sought a ruling from the Internal Revenue Service to the effect that
the payment of different amounts as dividends with respect to the Investor and
Adviser shares by reason of differences in their respective distribution
expenses does not result in the treatment of dividends or distributions of the
Fund as "preferential dividends" under the Internal Revenue Code of 1986, as
amended, and thus will not adversely affect the Fund's tax status as a regulated
investment company. There can be no assurance that such a ruling will be
obtained.
The foregoing is only a general summary of some of the important Federal
income tax considerations generally affecting the Funds and their shareholders.
No attempt is made to present a complete explanation of the Federal tax
treatment of the Funds' activities. Potential investors are urged to consult
their own tax advisers for more detailed information and for information
regarding any applicable state, local, or foreign taxes.
OTHER INFORMATION
LEGAL MATTERS Legal advice relating to certain matters under the federal and
state securities laws applicable to the issue and sale of shares of the Funds
has been provided by Sutherland, Asbill & Brennan, Washington, D.C.
INDEPENDENT AUDITORS Ernst & Young LLP, 200 Clarendon Street, Boston,
Massachusetts 02116, performs audits of the Funds' financial statements.
OTHER INFORMATION A Registration Statement has been filed with the Securities
and Exchange Commission, under the Securities Act of 1933 as amended, with
respect to the Company and the shares of the Funds discussed in this Statement
of Additional Information. Not all of the information set forth in the
Registration Statement, amendments and exhibits thereto has been included in the
Prospectus or this Statement of Additional Information. Statements contained
herein concerning the contents of certain other legal instruments are intended
to be summaries. For a complete statement of the terms of these documents,
reference should be made to the instruments filed with the Commission.
FINANCIAL STATEMENTS
The statement of assets and liabilities of the Funds dated September 7, 1995 is
attached hereto.
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]
Report of Independent Auditors
Board of Directors
Transamerica Investors, Inc.
We have audited the accompanying statement of assets and liabilities of
Transamerica Investors, Inc. (comprised of the following Transamerica Premier
Funds: Equity Fund, Index Fund, Bond Fund, Balanced Fund, Short-Intermediate
Government Fund and Cash Reserve Fund) as of September 7, 1995. The statement of
assets and liabilities is the responsibility of the Company's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of each of the
six funds of Transamerica Investors, Inc. as of September 7, 1995, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
September 14, 1995
<PAGE>
Transamerica Investors, Inc.
Statement of Assets and Liabilities
September 7, 1995
<TABLE>
<CAPTION>
Transamerica
Premier
Transamerica Short- Transamerica
Transamerica Transamerica Transamerica Premier Intermediate Premier
Premier Premier Premier Balanced Government Cash Reserve
Equity Fund Index Fund Bond Fund Fund Fund Fund
----------- ---------- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $16,670 $16,670 $16,670 $16,670 $16,670 $16,650
------- ------- ------- ------- ------- -------
Net Assets $16,670 $16,670 $16,670 $16,670 $16,670 $16,650
------- ------- ------- ------- ------- -------
Shares issued
and outstanding:
Adviser class 1 1 1 1 1 1
Investor class 1,666 1,666 1,666 1,666 1,666 16,649
Net asset value,
offering price
and redemption
price per share:
Adviser class $10.00 $10.00 $10.00 $10.00 $10.00 $1.00
Investor class $10.00 $10.00 $10.00 $10.00 $10.00 $1.00
</TABLE>
See accompanying note.
<PAGE>
Transamerica Investors, Inc.
Note to Statement of Assets and Liabilities
September 7, 1995
1. Organization
Transamerica Investors, Inc. (Company), has filed a registration statement with
the Securities and Exchange Commission to organize and operate as an open-end
management investment company, but the registration has not yet become
effective. The Company, upon commencement of operations, will offer a mutual
fund series called Transamerica Premier Funds, comprising the Equity, Index,
Bond, Balanced, Short-Intermediate Government, and Cash Reserve Funds. Each Fund
is a separate investment portfolio of the Company with a distinct investment
objective, investment program policies, and registrations. The assets of each
Fund are segregated and a shareholder's interest is limited to the Fund in which
shares are owned. Each Fund has two classes of shares, Adviser and Investor. One
billion shares have been authorized for issue for each class.
On August 3, 1995, the Company sold the following Fund shares to Transamerica
Corporation:
<TABLE>
<CAPTION>
ADVISER CLASS INVESTOR CLASS
NUMBER OF PRICE PER NUMBER OF PRICE PER
SHARES SHARE SHARES SHARE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Equity 1 $10.00 1,666 $10.00
Index 1 10.00 1,666 10.00
Bond 1 10.00 1,666 10.00
Balanced 1 10.00 1,666 10.00
Short-Intermediate
Government 1 10.00 1,666 10.00
Cash Reserve 1 1.00 16,649 1.00
</TABLE>
The Administrator, Transamerica Occidental Life Insurance Company, will pay the
organizational and other initial expenses of the Company incurred prior to the
initial offering of the Fund's shares.
