485APOS 1 g97005e485apos.txt TRANSAMERICA IDEX MUTUAL FUNDS As filed with the SEC on August 22, 2005 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Registration No. 33-2659 Pre-Effective Amendment No. Post-Effective Amendment No. 70 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 1940 Act File No. 811-4556 Amendment No. 71 (Check appropriate box or boxes.) TRANSAMERICA IDEX MUTUAL FUNDS (Exact Name of Registrant as Specified in Charter) 570 Carillon Parkway, St. Petersburg, Florida 33716 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (727) 299-1800 John K. Carter, Esq. P.O. Box 5068, Clearwater, Florida 33758-5068 (Name and Address of Agent for Service) Approximate date of proposed public offering: It is proposed that this filing will become effective: [ ] 60 days after filing pursuant to paragraph (a) (1) of Rule 485. [X] 75 days after filing pursuant to paragraph (a) (2) of Rule 485. [ ] On (Date) pursuant to paragraph (a) (1) of Rule 485. [ ] On (Date) pursuant to paragraph (a) (2) of Rule 485. [ ] Immediately upon filing pursuant to paragraph (b) of Rule 485. [ ] On (Date) pursuant to paragraph (b) of Rule 485. If appropriate, check the following box: [ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. Explanatory Note: This Amendment to the Registration Statement of Transamerica IDEX Mutual Funds relates only to TA IDEX AllianceBernstein International Value, TA IDEX Neuberger Berman International, TA IDEX Oppenheimer Emerging Markets, TA IDEX J.P. Morgan International Bond, TA IDEX Federated Conservative Tactical Allocation, TA IDEX Mercury Tactical Allocation and TA IDEX Credit Suisse Commodities. The prospectuses and statements of additional information for the other series of Transamerica IDEX Mutual Funds, as previously filed with the Securities and Exchange Commission, are incorporated herein by reference. PROSPECTUS TRANSAMERICA IDEX MUTUAL FUNDS __________, 2005 TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE TA IDEX NEUBERGER BERMAN INTERNATIONAL TA IDEX OPPENHEIMER EMERGING MARKETS TA IDEX J.P. MORGAN INTERNATIONAL BOND TA IDEX FEDERATED CONSERVATIVE TACTICAL ALLOCATION TA IDEX MERCURY TACTICAL ALLOCATION TA IDEX CREDIT SUISSE COMMODITIES CLASS A AND CLASS I SHARES NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NOT ISSUED BY FDIC OR ANY MAY LOSE VALUE. NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK, FEDERAL GOVERNMENT AGENCY. BANK AFFILIATE, OR CREDIT UNION.
TRANSAMERICA IDEX MUTUAL FUNDS - CLASS A AND CLASS I Transamerica IDEX Mutual Funds (TA IDEX) consists of several individual funds. Each fund invests in a range of securities, such as stocks and/or bonds. Please read this prospectus carefully before you invest or send money. It has been written to provide information and assist you in making an informed decision. If you would like additional information, please request a copy of the Statement of Additional Information (SAI). In addition, we suggest you contact your financial professional or a TA IDEX customer service representative, who will assist you. PLEASE NOTE: THIS PROSPECTUS DESCRIBES CLASS A AND CLASS I SHARES OF CERTAIN TA IDEX FUNDS ONLY. THE CLASS A SHARES OF THE TA IDEX FUNDS LISTED IN THIS PROSPECTUS ARE CURRENTLY OFFERED FOR INVESTMENT TO THE FOLLOWING STRATEGIC ASSET ALLOCATION PORTFOLIOS ONLY: TA IDEX ASSET ALLOCATION - CONSERVATIVE PORTFOLIO, TA IDEX ASSET ALLOCATION - GROWTH PORTFOLIO, TA IDEX ASSET ALLOCATION - MODERATE GROWTH PORTFOLIO AND TA IDEX ASSET ALLOCATION - MODERATE PORTFOLIO. THE CLASS I SHARES OF THE TA IDEX FUNDS LISTED IN THIS PROSPECTUS ARE CURRENTLY OFFERED FOR INVESTMENT TO THE FOLLOWING STRATEGIC ASSET ALLOCATION PORTFOLIOS ONLY: AEGON/TRANSAMERICA SERIES TRUST ("ATST") ASSET ALLOCATION - CONSERVATIVE PORTFOLIO, ATST ASSET ALLOCATION - GROWTH PORTFOLIO, ATST ASSET ALLOCATION - MODERATE GROWTH PORTFOLIO AND ATST ASSET ALLOCATION - MODERATE PORTFOLIO. TABLE OF CONTENTS SECTION A -- FUND DESCRIPTIONS - TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE - TA IDEX NEUBERGER BERMAN INTERNATIONAL - TA IDEX OPPENHEIMER EMERGING MARKETS - TA IDEX J.P. MORGAN INTERNATIONAL BOND - TA IDEX FEDERATED CONSERVATIVE TACTICAL ALLOCATION - TA IDEX MERCURY TACTICAL ALLOCATION - TA IDEX CREDIT SUISSE COMMODITIES SECTION B -- SHAREHOLDER INFORMATION - REGULATORY PROCEEDINGS - INVESTMENT ADVISER - CLASS A SHARES - CLASS I SHARES - FEATURES AND POLICIES - DISTRIBUTION OF SHARES - OTHER DISTRIBUTION OR SERVICE ARRANGEMENTS - DISTRIBUTION AND TAXES - EXPLANATION OF STRATEGIES AND RISKS - APPENDIX A A-1 - BOND RATINGS - APPENDIX B B-L TO HELP YOU UNDERSTAND... In this prospectus, you will see symbols like the ones below. These are "icons," graphic road signs that let you know at a glance the subject of the nearby paragraphs. The icons serve as tools for your convenience as you read this prospectus. OBJECTIVE What is the fund's investment objective? Learn about your fund's goal or objective. The Board of Trustees of TA IDEX may change a fund's investment objective without shareholder approval. As with any investment, there can be no guarantee that a fund will achieve its investment objective. PRINCIPAL STRATEGIES AND POLICIES How does the fund go about trying to meet its goal? Read about the types of investments each fund contains and what style of investment philosophy it employs. PRINCIPAL RISKS What are the specific risks for an investor in the fund? Find-out what type of risks are associated with each fund. PAST PERFORMANCE What is the investment performance of the fund? FEES AND EXPENSES How much does it cost to invest in the fund? Learn about each fund's fees and expenses. ADDITIONAL INFORMATION Who manages the fund and how much are they paid? See information about each fund's investment advisers, as well as the fees paid to them. AN INVESTMENT IN A TA IDEX FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. 2 TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE SUMMARY OF RISKS AND RETURNS OBJECTIVE The investment objective of TA IDEX AllianceBernstein International Value (the "Fund") is long-term growth of capital. PRINCIPAL STRATEGIES AND POLICIES The Fund's sub-adviser, Alliance Capital Management, L.P. (Alliance), seeks to achieve this objective by investing primarily in equity securities of established companies selected from more than 40 industries and from more than 40 developed countries. Under normal market conditions, the Fund will primarily invest in issuers that are economically tied to one or more countries other than the U.S., and will diversify its investments across at least three different foreign countries. An issuer generally will be deemed to be economically tied to the country (or countries) in which the issuer has at least 50% of its assets or from which it derives at least 50% of its revenues or profits, or in whose securities markets its securities principally trade. These countries currently include the developed nations in Europe and the Far East, Canada and Australia. The Fund's investment policies emphasize investment in companies that are determined by Alliance's Bernstein unit ("Bernstein"), to be undervalued, using a fundamental value approach. Investment decisions are the result of the multi-step process described below. Bernstein's fundamental value approach to equity investing generally defines value by reference to the relationship between a security's current price and its intrinsic economic value, as measured by long-term earnings prospects. In each market, this approach seeks to identify, in the first instance, a universe of securities that are considered to be undervalued because they are attractively priced relative to their future earnings power. Accordingly, forecasting corporate earnings and dividend-paying capability is the heart of the fundamental value approach. Bernstein's staff of company and industry analysts prepares its own earnings estimates and financial models for each company analyzed. Bernstein identities and quantifies the critical variables that control a business's performance and analyzes the results in order to forecast each company's long-term prospects and expected returns. A company's financial performance is typically projected over a full economic cycle, including a trough and a peak, within the context of forecasts for real economic growth, inflation and interest rate changes. As a result, forecasts of near term economic events are generally not of major consequence. Once Bernstein has applied its fundamental analysis to determine the intrinsic economic values of each of the companies in its research universe, each company is then ranked in the order of disparity between its intrinsic economic value and its stock price, with companies having the greatest disparities receiving the highest rankings (i.e., being considered the most undervalued). The Fund does not simply purchase the top-ranked securities. Rather, Bernstein considers aggregate portfolio characteristics when deciding how much of each security to purchase for the Fund. Bernstein's team of quantitative analysts builds valuation and risk models to ensure that the Fund's portfolio is constructed to obtain an effective balance of risk and return. In order to reduce the risk that an undervalued security will be purchased before an adverse event, Bernstein also monitors analysts' earnings-estimate revisions and relative return trends (also called "momentum") so as to better time new purchases and sales of securities. Currencies can have a dramatic impact on equity returns, significantly adding to returns in some years and greatly diminishing them in others. Consequently, currency and equity positions are evaluated separately. In addition, Bernstein may seek to hedge a currency exposure resulting from securities positions when it finds the currency exposure unattractive. A security generally will be sold when it no longer meets appropriate valuation criteria. Sale of a stock that has reached its target may be delayed, however, when earnings expectations and/or momentum are favorable. The Fund also may: - Invest in depositary receipts, instruments of supranational entities denominated in the currency of any country, securities of multinational companies and "semi-governmental securities"; - Invest up to 20% of its total assets in convertible securities; - Invest up to 15% of its net assets in illiquid securities; - Invest up to 10% of its total assets in rights and warrants (including but not limited to participation notes); - Enter into forward commitments, futures contracts and options on futures contracts with respect to securities, indices and currencies; 3 TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE - Enter into contracts for the purchase and sale for the future delivery of contracts based on financial indices; - Enter into currency swaps and forward currency exchange contracts for hedging purposes; - Make secured loans of portfolio securities of up to one-third of its total assets; and - Enter into repurchase agreements. Under adverse or unstable market conditions, the Fund could invest some or all of its assets in cash, repurchase agreements and money market instruments. Although the Fund would do this only in seeking to avoid losses, the Fund may be unable to pursue its investment objective during that time, and it could reduce the benefit from any upswing in the market. PRINCIPAL RISKS The Fund is subject to the following principal investment risks: - STOCKS While stocks have historically outperformed other investments over the long term, their prices tend to go up and down more dramatically over the shorter term. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Because the stocks the Fund may hold fluctuate in price, the value of your investments in the Fund will go up and down. - VALUE RISK The value approach carries the risk that the market will not recognize a security's intrinsic value for a long time, or that a stock considered to be undervalued may actually be appropriately priced. - FOREIGN SECURITIES Investments in foreign securities, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), involve risks relating to political, social and economic developments abroad, as well as risks resulting from the difference between the regulations to which U.S. and foreign issuer markets are subject. These risks may include, without limitation: - changes in currency values - currency speculation - currency trading costs - different accounting and reporting practices - less information available to the public - less (or different) regulation of securities markets - more complex business negotiations - less liquidity - more fluctuations in prices - delays in settling foreign securities transactions - higher costs for holding shares (custodial fees) - higher transaction costs - vulnerability to seizure and taxes - political instability and small markets - different market trading days - LIQUIDITY RISK Liquidity risk exists when particular investments are difficult to purchase or sell. The Fund's investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. - DERIVATIVES The use of derivative instruments may involve risks different from, or greater than, the risks associated with investing directly in securities or other traditional investments. Derivatives may be subject to market risk, interest rate risk, and credit risk. Certain derivatives may be illiquid, which may reduce the return of the Fund if it cannot sell or terminate the derivative instrument at an advantageous time or price. Some derivatives may involve the risk of improper valuation, or the risk that changes in the value of the instrument may not correlate well with the underlying asset, rate or index. As a result of inaccurate market predictions by the sub-adviser, the Fund could lose the entire amount of its investment in a derivative and, in some cases, could lose more than the principal amount invested. Also, suitable derivative instruments may not be available in all circumstances, and there is no assurance that the Fund will be able to engage in these transactions to reduce exposure to other risks. - OPTIONS Investing in financial contracts such as options involve additional risks and costs. Risks include: inaccurate market predictions which may result in losses instead of gains; and prices may not match so the benefits of the 4 TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE transaction might be diminished and the Fund may incur substantial losses - SHORT SALES A short sale is effected by selling a security that the Fund does not own, or, if the Fund does own such security, it is not to be delivered upon consummation of the sale. If the price of the security sold short increases, the Fund would incur a loss; conversely, if the price declines, the Fund will realize a gain. Although the gain is limited by the price at which the security was sold short, a loss is potentially unlimited. - REPURCHASE AGREEMENTS Under a repurchase agreement, the seller agrees to repurchase a security at a mutually agreed-upon time and price. If the other party to a repurchase agreement defaults on its obligation, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security and the market value declines, the Fund could lose money. - CREDIT RISK The fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivative contract, is unable or unwilling to meet its financial obligations. - HEDGING The Fund may enter into forward foreign currency contracts to hedge against declines in the value of securities denominated in, or whose value is ties to, a currency other than the U.S. dollar or to reduce the impact of currency fluctuation on purchases and sales of such securities. Shifting the Fund's currency exposure from one currency to another removes the Fund's opportunity to profit from the original currency and involves a risk of increased losses for the Fund if the sub-adviser's projection of future exchange rates is inaccurate. - CURRENCY RISK Because the Fund's foreign investments are generally held in foreign currencies, the Fund is subject to currency risk, meaning the Fund could experience gains or losses solely on changes in the exchange rate between foreign currencies and the U.S. dollar. - INTEREST RATE RISK The values of debt securities are subject to change when prevailing interest rates change. When interest rates go up, the value of debt securities and certain dividend paying stocks tends to fall. If the Fund invests a significant portion of its assets in debt securities or stocks purchased primarily for dividend income and interest rates rise, then the value of your investment may decline. Investors should note that short-term interest rates are still near historic lows. - WARRANTS AND RIGHTS Warrants and rights may be considered more speculative than certain other types of investments because they do not entitle a holder to the dividends or voting rights for the securities that may be purchased. They do not represent any rights in the assets of the issuing company. Also, the value of a warrant or right does not necessarily change with the value of the underlying securities. A warrant or right ceases to have value if it is not exercised prior to the expiration date. - SECURITIES LENDING The Fund may lend securities to other financial institutions that provide cash or other securities as collateral. This involves the risk that the borrower may fail to return the securities in a timely manner or at all. As a result, the Fund may lose money and there may be a delay in recovering the loaned securities. The Fund could also lose money if it does not recover the securities and/or the value of the collateral falls, including the value of investments made with cash collateral. These events could trigger adverse tax consequences to the Fund. - CONVERTIBLE SECURITIES Convertible securities may include corporate notes or preferred stock, but ordinarily are a long-term debt obligation of the issuer convertible at a stated exchange rate into common stock of the issuer. As with all debt securities, the market value of convertible securities tends to decline as interest rates increase. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the price of the convertible security tends to reflect the value of the underlying common stock. - LEVERAGING RISK Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, the sub-adviser will segregate liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, may cause the Fund to be more volatile than if it had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund's portfolio securities. 5 TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND. These and other risks are fully described in the section entitled "Explanation of Strategies and Risks," in Appendix A of this prospectus. DISCLOSURE OF PORTFOLIO HOLDINGS A detailed description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Statement of Additional Information. In addition, investors should note that the Fund publishes its holdings on its website at www.idexfunds.com 30 days after the end of each calendar quarter. Such information will generally remain online for six months or as otherwise consistent with applicable regulations. INVESTOR PROFILE This Fund may be appropriate for investors who seek long-term growth of capital and who can tolerate significant volatility in the value of their principal. PAST PERFORMANCE No performance is shown for the Fund as it was not available until ______________, 2005. Performance information for the Fund will appear in a future version of this prospectus once the Fund has a full calendar year of performance information to report to investors. FEES AND EXPENSES Class A shares of TA IDEX funds are normally sold with an initial sales charge of 5.50% and a 12b-1 distribution and service fees of up to 0.35% of average daily net assets per year. The initial sales charge currently is waived for Class A shares, as these shares are currently being offered for sale only to certain asset allocation funds. There is no sales charge (load) or 12b-1 distribution and service fee on Class I shares, which are currently being offered for sale only to certain other asset allocation funds The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets, expressed as a % of average daily net assets)
CLASS OF SHARES --------------- A I ----- ----- Management fees 0.88% 0.88% Distribution and serve (12b-1) fees 0.35% N/A Other expenses(a) 0.16% 0.16% Total annual fund operating expenses 1.39% 1.04% Expense reduction(b) Net operating expenses 1.39% 1.04%
---------- (a) Other expenses are based on estimates. (b) Contractual arrangements have been made with the Fund's investment adviser, Transamerica Fund Advisors, Inc., through ______________, to waive fees and/or reimburse expenses to the extent that the Fund's total operating expenses exceed 1.13% (excluding 12b-1 fees). TFAI is entitled to reimbursement by the Fund of fees waived or expenses reduced during any of the previous 36 months beginning on the date of the expense limitation arrangement if on any day the estimated annualized total operating expenses are less than 1.13%. EXAMPLE This example is here to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. It shows the cumulative expenses you would pay if you invested $10,000 and held your shares for various time periods, with a 5% annual return and fund operating expenses remaining the same. This return is for illustrative purposes and is not guaranteed. Actual costs may be higher or lower.
SHARE CLASS 1 YEAR 3 YEARS ----------- ------ ------- A $ 142 $ 440 I $ 106 $ 331
ADDITIONAL INFORMATION MANAGEMENT INVESTMENT ADVISER: Transamerica Fund Advisors, Inc. (TFAI) 570 Carillon Parkway St. Petersburg, Florida 33716-1202 For additional information about TFAI, see the section entitled "Shareholder Information - Investment Adviser" of this prospectus. ADVISORY FEE TFAI receives compensation, calculated daily and paid monthly, from the Fund at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $200 million..................... 0.88% Over $200 million up to $500 million... 0.81% Over $500 million...................... 0.77%
SUB-ADVISER: Alliance Capital Management, L.P. 1345 Avenue of the Americas New York, NY 10105 6 TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE SUB-ADVISORY FEE: The sub-adviser receives compensation, calculated daily and paid monthly, from TFAI at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $200 million..................... 0.45% Over $200 million up to $500 million... 0.36% Over $500 million...................... 0.32%
A discussion regarding the basis of TA IDEX's Board of Trustees' approval of the Fund's investment advisory arrangements will be available in the Fund's semi-annual report for the fiscal half-year ending April 30, 2006. PORTFOLIO MANAGERS: Alliance uses the Bernstein team of fund managers to manage this Fund. The team relies heavily on the fundamental analysis and research of Alliance's internal research staff. No one person is principally responsible for making recommendations for the Fund's portfolio. The following portfolio managers are those with the most significant responsibility for the day-to-day management of the Fund: HENRY S. D'AURIA is Senior Vice President, Chief Investment Officer for Emerging Markets Value Equities and Co-Chief Investment Officer for International Value Equities at Alliance Bernstein. He was named co-Chief Investment Officer of International Value equities in 2003, adding to his responsibilities as Chief Investment Officer of Emerging Markets Value equities, which he assumed in 2002. Mr. D'Auria managed Bernstein's global research department from 1998 through 2002. Over the years, he has also served as director of research for Small Cap Value equities and director of research for Emerging Markets Value equities. Mr. D'Auria joined Bernstein in 1991 as a research analyst covering consumer and natural-gas companies, and he later covered the financial-services industry. Before going to Bernstein, Mr. D'Auria was a vice president and sell-side analyst at PaineWebber, specializing in restaurants, lodging and retail. He earned a BA from Trinity College. CFA. KEVIN F. SIMMS is Senior Vice President, Co-Chief Investment Officer of International Value Equities and Director of Research for Global and International Value Equities at Bernstein. He was named co-Chief Investment Officer for International Value equities in 2003, which he has assumed in addition to his role as director of research for Global and International Value equities, a position he has held since 2000. Between 1998 and 2000, Mr. Simms served as director of research for Emerging Markets Value equities. He joined Bernstein in 1992 as a research analyst, and his industry coverage over the next six years included financial services, telecommunications and utilities. Before joining Bernstein, Mr. Simms was a certified public accountant with Price Waterhouse for three years. He earned a BSBA from Georgetown University and an MBA from Harvard Business School. The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the Fund. 7 TA IDEX NEUBERGER BERMAN INTERNATIONAL SUMMARY OF RISKS AND RETURNS OBJECTIVE The investment objective of TA IDEX Neuberger Berman International (the "Fund") is long-term growth of capital by investing primarily in common stocks of foreign companies. PRINCIPAL STRATEGIES AND POLICIES The Fund's sub-adviser, Neuberger Berman Management, Inc. (Neuberger), seeks to achieve this objective by investing the assets of the Fund mainly in foreign companies of any size, including companies in developed and emerging industrialized markets. Under normal market conditions, the Fund will primarily invest in issuers that are economically tied to one or more countries other than the U.S., and will diversify its investments across at least three different foreign countries. An issuer generally will be deemed to be economically tied to the country (or countries) in which the issuer has at least 50% of its assets or from which it derives at least 50% of its revenues or profits, or in whose securities markets its securities principally trade. The Fund seeks to reduce risk by diversifying among many industries. Although it has the flexibility to invest a significant portion of its assets in one country or region, it generally intends to remain well-diversified across countries and geographical regions. In picking stocks, the Fund looks for well-managed and profitable companies that show growth potential and whose stock prices are undervalued. Factors in identifying these firms may include strong fundamentals, such as attractive cash flows and balance sheets, as well as prices that are reasonable in light of projected returns. The Fund also considers the outlooks for various countries and regions around the world, examining economic, market, social, and political conditions. The Fund follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. Neuberger may seek to hedge a currency exposure resulting from securities positions when it finds the currency exposure unattractive. To the extent authorized by laws and regulations, the Fund may also engage in borrowing and securities lending transactions and use derivatives. Under adverse or unstable market conditions, the Fund could invest some or all of its assets in cash, repurchase agreements and money market instruments. Although the Fund would do this only in seeking to avoid losses, the Fund may be unable to pursue its investment objective during that time, and it could reduce the benefit from any upswing in the market. PRINCIPAL RISKS The Fund is subject to the following principal investment risks: - STOCKS While stocks have historically outperformed other investments over the long term, their prices tend to go up and down more dramatically over the shorter term. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Because the stocks the Funds hold fluctuate in price, the value of your investments in the Fund will go up and down. - VALUE RISK The value approach carries the risk that the market will not recognize a security's intrinsic value for a long time, or that a stock considered to be undervalued may actually be appropriately priced. - GROWTH STOCKS Growth stocks can be volatile for several reasons. Since growth companies usually reinvest a high proportion of their earnings in their own businesses, they may lack the dividends often associated with the value stocks that could cushion their decline in a falling market. Also, since investors buy growth stocks because of their expected superior earnings growth, earnings disappointments often result in sharp price declines. Certain types of growth stocks, particularly technology stocks, can be extremely volatile and subject to greater price swings than the broader market. - FOREIGN SECURITIES Investments in foreign securities, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), involve risks relating to political, social and economic developments abroad, as well as risks resulting from the difference between the regulations to which U.S. and foreign issuer markets are subject. These risks may include, without limitation: - changes in currency values - currency speculation - currency trading costs - different accounting and reporting practices - less information available to the public - less (or different) regulation of securities markets - more complex business negotiations - less liquidity - more fluctuations in prices - delays in settling foreign securities transactions - higher costs for holding shares (custodial fees) - higher transaction costs - vulnerability to seizure and taxes 8 TA IDEX NEUBERGER BERMAN INTERNATIONAL - political instability and small markets - different market trading days - COUNTRY, SECTOR OR INDUSTRY FOCUS To the extent the Fund invests a significant portion of its assets in one or more countries, sectors or industries at any time, the Fund will face a greater risk of loss due to factors affecting the single country, sector or industry than if the Fund always maintained wide diversity among the countries, sectors and industries in which it invests. - EMERGING MARKETS RISK Investing in the securities of issuers located in or principally doing business in emerging markets bear foreign risks as discussed above. However, the risks associated with investing in emerging markets are often greater than investing in developed foreign markets. Specifically, the economic structures in emerging markets countries are less diverse and mature than those in developed countries, and their political systems are less stable. Investments in emerging markets countries may be affected by national policies that restrict foreign investments. Emerging market countries may have less developed legal structures, and the small size of their securities markets and low trading volumes can make investments illiquid and more volatile than investments in developed countries. As a result, a portfolio investing in emerging market countries may be required to establish special custody or other arrangements before investing. - SMALL- OR MEDIUM-SIZED COMPANIES Investing in small- and medium-sized companies involves greater risk than is customarily associated with more established companies. Stocks of such companies may be subject to more abrupt or erratic price movements than larger company securities. Small companies often have limited product lines, markets, or financial resources and their management may lack depth and experience. Such companies usually do not pay significant dividends that could cushion returns in a falling market. - DERIVATIVES The use of derivative instruments may involve risks different from, or greater than, the risks associated with investing directly in securities or other traditional investments. Derivatives may be subject to market risk, interest rate risk, and credit risk. Certain derivatives may be illiquid, which may reduce the return of the Fund if it cannot sell or terminate the derivative instrument at an advantageous time or price. Some derivatives may involve the risk of improper valuation, or the risk that changes in the value of the instrument may not correlate well with the underlying asset, rate or index. As a result of inaccurate market predictions by the sub-adviser, the Fund could lose the entire amount of its investment in a derivative and, in some cases, could lose more than the principal amount invested. Also, suitable derivative instruments may not be available in all circumstances, and there is no assurance that the Fund will be able to engage in these transactions to reduce exposure to other risks. - CREDIT RISK The fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivative contract, is unable or unwilling to meet its financial obligations. - INTEREST RATE RISK The values of debt securities are subject to change when prevailing interest rates change. When interest rates go up, the value of debt securities and certain dividend paying stocks tends to fall. If the Fund invests a significant portion of its assets in debt securities or stocks purchased primarily for dividend income and interest rates rise, then the value of your investment may decline. Investors should note that short-term interest rates are still near historic lows. - CURRENCY RISK Because the Fund's foreign investments are generally held in foreign currencies, the Fund is subject to currency risk, meaning the Fund could experience gains or losses solely on changes in the exchange rate between foreign currencies and the U.S. dollar. - HEDGING The Fund may enter into forward foreign currency contracts to hedge against declines in the value of securities denominated in, or whose value is ties to, a currency other than the U.S. dollar or to reduce the impact of currency fluctuation on purchases and sales of such securities. Shifting the Fund's currency exposure from one currency to another removes the Fund's opportunity to profit from the original currency and involves a risk of increased losses for the Fund if the sub-adviser's projection of future exchange rates is inaccurate. - SECURITIES LENDING The Fund may lend securities to other financial institutions that provide cash or other securities as collateral. This involves the risk that the borrower may fail to return the securities in a timely manner or at all. As a result, the Fund may lose money and there may be a delay in recovering the loaned securities. The Fund could also lose money if it does not recover the securities and/or the value of the collateral falls, including the value of investments made with cash collateral. These events could trigger adverse tax consequences to the Fund. - LEVERAGING RISK Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, 9 TA IDEX NEUBERGER BERMAN INTERNATIONAL the sub-adviser will segregate liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, may cause the Fund to be more volatile than if it had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund's portfolio securities. YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND. These and other risks are fully described in the section entitled "Explanation of Strategies and Risks," in Appendix A of this prospectus. DISCLOSURE OF PORTFOLIO HOLDINGS A detailed description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Statement of Additional Information. In addition, investors should note that the Fund publishes its holdings on its website at www.idexfunds.com 30 days after the end of each calendar quarter. Such information will remain online for six months. INVESTOR PROFILE This Fund may be appropriate for investors who seek long-term growth of capital and who can tolerate significant volatility in the value of their principal. PAST PERFORMANCE No performance is shown for the Fund as it was not available until ______________, 2005. Performance information for the Fund will appear in a future version of this prospectus once the Fund has a full calendar year of performance information to report to investors. FEES AND EXPENSES Class A shares of TA IDEX funds are normally subject to an initial sales charge of 5.50% and a 12b-1 distribution and service fees of up to 0.35% of average daily net assets per year. The initial sales charge currently is waived for Class A shares, as these shares are currently being offered for sale only to certain asset allocation funds. There is no sales charge (load) or 12b-1 distribution and service fee on Class I shares, which are currently being offered for sale only to certain other asset allocation funds. The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets, expressed as a % of average daily net assets)
CLASS OF SHARES --------------- A I ----- ----- Management fees 1.00% 1.00% Distribution and serve (12b-1) fees 0.35% N/A Other expenses(a) 0.18% 0.18% Total annual fund operating expenses 1.53% 1.18% Expense reduction(b) - % - % Net operating expenses 1.53% 1.18%
---------- (a) Other expenses are based on estimates. (b) Contractual arrangements have been made with the Fund's investment adviser, Transamerica Fund Advisors, Inc. through ______________, to waive fees and/or reimburse expenses to the extent that the Fund's total operating expenses exceed 1.25% (excluding 12b-1 fees). TFAI is entitled to reimbursement by the Fund of fees waived or expenses reduced during any of the previous 36 months beginning on the date of the expense limitation arrangement if on any day the estimated annualized total operating expenses are less than 1.25%. EXAMPLE This example is here to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. It shows the cumulative expenses you would pay if you invested $10,000 and held your shares for various time periods, with a 5% annual return and fund operating expenses remaining the same. This return is for illustrative purposes and is not guaranteed. Actual costs may be higher or lower.
SHARE CLASS 1 YEAR 3 YEARS ----------- ------ ------- A $ 156 $ 483 I $ 120 $ 375
ADDITIONAL INFORMATION MANAGEMENT INVESTMENT ADVISER: Transamerica Fund Advisors, Inc. (TFAI) 570 Carillon Parkway St. Petersburg, Florida 33716-1202 For additional information about TFAI, see the section entitled "Shareholder Information - Investment Adviser" of this prospectus. ADVISORY FEE TFAI receives compensation, calculated daily and paid monthly, from the Fund at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $100 million... 1.00% Over $100 million.... 0.95%
SUB-ADVISER: 10 TA IDEX NEUBERGER BERMAN INTERNATIONAL Neuberger Berman Management, Inc. 605 Third Avenue, 2nd Floor New York, NY 10158-0180 SUB-ADVISORY FEE: The sub-adviser receives compensation, calculated daily and paid monthly, from TFAI at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $100 million... 0.50% Over $100 million.... 0.45%
A discussion regarding the basis of TA IDEX's Board of Trustees' approval of the Fund's investment advisory arrangements will be available in the Fund's semi-annual report for the fiscal half-year ending April 30, 2006. PORTFOLIO MANAGER: BENJAMIN SEGAL, CFA, is a Vice President of Neuberger and Managing Director of Neuberger Berman, LLC. He joined Neuberger in 1999. He was an assistant portfolio manager at another firm from 1997 to 1998. Prior to 1997, he held positions in international finance and consulting. He is a graduate of The Wharton School of Business, MBA; the University of Pennsylvania, MA; and Jesus College, Cambridge University, England, BA. The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the Fund. 11 TA IDEX OPPENHEIMER EMERGING MARKETS SUMMARY OF RISKS AND RETURNS OBJECTIVE The investment objective of TA IDEX Oppenheimer Emerging Markets (the "Fund") is to aggressively seek capital appreciation. PRINCIPAL STRATEGIES AND POLICIES The Fund's sub-adviser, OppenheimerFunds, Inc. (Oppenheimer), seeks to achieve this objective by investing mainly in common stocks of issuers in emerging markets throughout the world. - Under normal market conditions, the Fund will invest at least 80% of its assets in equity securities of issuers that are economically tied to one or more emerging market countries, and will diversify its investments across at least three different emerging market countries. - The Fund can (but is not required to) invest up to 100% of its total assets in foreign securities. - The Fund will emphasize investments in common stocks and other equity securities. - The Fund will emphasize investments in growth companies, which can be in any market capitalization range. In selecting securities for the Fund, Oppenheimer looks primarily for foreign companies in developing markets with high growth potential. It uses fundamental analysis of a company's financial statements, management structure, operations and product development, and considers the special factors and risks of the country in which the issuer operates. In seeking broad diversification of the Fund's portfolio, Oppenheimer currently seeks. - Companies of different capitalization ranges with strong market positions and the ability to take advantage of barriers to entry in their industry, such as high start-up costs. - Companies with management that has a proven record. - Companies with newer or established businesses that are entering into a growth cycle. - Companies with the potential to withstand high market volatility. - Companies with strong earnings growth whose stock is selling at a reasonable price. In applying these and other selection criteria, the Fund will consider the effect of worldwide trends on the growth of various business sectors, and look for companies that may benefit from four main global trends: development of new technologies, corporate restructuring, the growth of mass affluence and demographic changes. This strategy may change over time. Oppenheimer generally defines "emerging market" as countries outside the U.S. and most of Western Europe, Canada, Japan, Australia and New Zealand that have economies, industries and stock markets that it believes are growing and gaining more stability and offer attractive long-term investment prospects. To determine if an issuer is economically tied to an emerging market, it considers a number of factors, such as where the issuer is organized, the principal trading market for its securities, the sources of its revenues and the location of its assets. The Fund looks for stocks of companies that have growth potential. Growth companies may be companies that are developing new products or services, that have relatively favorable prospects, or that are expanding into new and growing markets. Growth companies include established companies that are entering a growth cycle, they can also include newer companies, whose securities pose greater risks of loss and can result in greater volatility in the Fund's share prices. To seek its investment objective, the Fund can also use the investment techniques and strategies described below: - Other Equity Securities. While the Fund mainly buys common stocks, it can also buy preferred stocks and securities convertible into common stock and can hold rights and warrants. - Hedging. The Fund can buy and sell futures contracts, put and call options, and forward contracts. Some hedging strategies could hedge the Fund's portfolio against price fluctuations. Other hedging strategies would tend to increase the Fund's exposure to the securities market. Forward contracts could be used to try to manage foreign currency risks on the Fund's foreign investments. - Portfolio Turnover. The Fund's investment process may cause the Fund to engage in active and frequent trading. Therefore, the Fund may engage in short-term trading while trying to achieve its objective. - Debt/fixed income securities. The Fund can invest in debt securities, including convertible securities, which can include securities of foreign companies and governments. - Illiquid and restricted securities. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. - Derivatives. The Fund can invest in a number of different derivative instruments to hedge investment risks or to seek increased returns. The allocation of the Fund's portfolio among different investments will vary over time based upon an evaluation of economic and market trends. The Fund's portfolio might not always include all of the different types of investments described in this Prospectus. Under adverse or unstable market conditions, the Fund could invest some or all of its assets in cash, repurchase agreements and money market instruments. Although the Fund would do this only in seeking to avoid losses, the Fund may be unable to pursue its investment objective 12 TA IDEX OPPENHEIMER EMERGING MARKETS during that time, and it could reduce the benefit from any upswing in the market. PRINCIPAL RISKS The Fund is subject to the following principal investment risks: - STOCKS While stocks have historically outperformed other investments over the long term, their prices tend to go up and down more dramatically over the shorter term. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Because the stocks the Fund holds fluctuate in price, the value of your investments in the Fund will go up and down. - GROWTH STOCKS Growth stocks can be volatile for several reasons. Since growth companies usually reinvest a high proportion of their earnings in their own businesses, they may lack the dividends often associated with the value stocks that could cushion their decline in a falling market. Also, since investors buy growth stocks because of their expected superior earnings growth, earnings disappointments often result in sharp price declines. Certain types of growth stocks, particularly technology stocks, can be extremely volatile and subject to greater price swings than the broader market. - FOREIGN SECURITIES Investments in foreign securities, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), involve risks relating to political, social and economic developments abroad, as well as risks resulting from the difference between the regulations to which U.S. and foreign issuer markets are subject. These risks may include, without limitation: - changes in currency values - currency speculation - currency trading costs - different accounting and reporting practices - less information available to the public - less (or different) regulation of securities markets - more complex business negotiations - less liquidity - more fluctuations in prices - delays in settling foreign securities transactions - higher costs for holding shares (custodial fees) - higher transaction costs - vulnerability to seizure and taxes - political instability and small markets - different market trading days - EMERGING MARKETS RISK Investing in the securities of issuers located in or principally doing business in emerging markets bear foreign risks as discussed above. However, the risks associated with investing in emerging markets are often greater than investing in developed foreign markets. Specifically, the economic structures in emerging markets countries are less diverse and mature than those in developed countries, and their political systems are less stable. Investments in emerging markets countries may be affected by national policies that restrict foreign investments. Emerging market countries may have less developed legal structures, and the small size of their securities markets and low trading volumes can make investments illiquid and more volatile than investments in developed countries. As a result, a portfolio investing in emerging market countries may be required to establish special custody or other arrangements before investing. - COUNTRY, SECTOR OR INDUSTRY FOCUS To the extent the Fund invests a significant portion of its assets in one or more countries, sectors or industries at any time, the Fund will face a greater risk of loss due to factors affecting the single country, sector or industry than if the Fund always maintained wide diversity among the countries, sectors and industries in which it invests. - SMALL- OR MEDIUM-SIZED COMPANIES Investing in small- and medium-sized companies involves greater risk than is customarily associated with more established companies. Stocks of such companies may be subject to more abrupt or erratic price movements than larger company securities. Small companies often have limited product lines, markets, or financial resources and their management may lack depth and experience. Such companies usually do not pay significant dividends that could cushion returns in a falling market. - FIXED INCOME SECURITIES The value of these securities may change daily based on changes in interest rates, and other market conditions and factors. Risks include: - fluctuations in market value - changes in interest rates: the value of a fixed income security generally decreases as interest rates rise - length of time to maturity: the longer the duration, the more vulnerable the value of a fixed income security is to fluctuations in interest rates - issuers defaulting on their obligations to pay interest or return principal - CONVERTIBLE SECURITIES Convertible securities may include corporate notes or preferred stock, but ordinarily are a long-term debt obligation of the issuer convertible at a stated exchange rate into common stock of the issuer. As with all debt securities, the market value of convertible securities tends to decline as interest rates increase. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. However, when the market price of the common stock underlying a 13 TA IDEX OPPENHEIMER EMERGING MARKETS convertible security exceeds the conversion price, the price of the convertible security tends to reflect the value of the underlying common stock. - PREFERRED STOCKS Preferred stocks may include the obligation to pay a stated dividend. Their price could depend more on the size of the dividend than on the company's performance. If a company fails to pay the dividend, its preferred stock is likely to drop in price. Changes in interest rates can also affect their price. - CURRENCY RISK Because the Fund's foreign investments are generally held in foreign currencies, the Fund is subject to currency risk, meaning the Fund could experience gains or losses solely on changes in the exchange rate between foreign currencies and the U.S. dollar. - LIQUIDITY RISK Liquidity risk exists when particular investments are difficult to purchase or sell. The Fund's investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. - DERIVATIVES The use of derivative instruments may involve risks different from, or greater than, the risks associated with investing directly in securities or other traditional investments. Derivatives may be subject to market risk, interest rate risk, and credit risk. Certain derivatives may be illiquid, which may reduce the return of the Fund if it cannot sell or terminate the derivative instrument at an advantageous time or price. Some derivatives may involve the risk of improper valuation, or the risk that changes in the value of the instrument may not correlate well with the underlying asset, rate or index. As a result of inaccurate market predictions by the sub-adviser, the Fund could lose the entire amount of its investment in a derivative and, in some cases, could lose more than the principal amount invested. Also, suitable derivative instruments may not be available in all circumstances, and there is no assurance that the Fund will be able to engage in these transactions to reduce exposure to other risks. - OPTIONS Investing in financial contracts such as options involve additional risks and costs. Risks include: inaccurate market predictions which may result in losses instead of gains; and prices may not match so the benefits of the transaction might be diminished and the Fund may incur substantial losses. - HEDGING The Fund may enter into forward foreign currency contracts to hedge against declines in the value of securities denominated in, or whose value is ties to, a currency other than the U.S. dollar or to reduce the impact of currency fluctuation on purchases and sales of such securities. Shifting the Fund's currency exposure from one currency to another removes the Fund's opportunity to profit from the original currency and involves a risk of increased losses for the Fund if the sub-adviser's projection of future exchange rates is inaccurate. - CREDIT RISK The fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivative contract, is unable or unwilling to meet its financial obligations. - INTEREST RATE RISK The values of debt securities are subject to change when prevailing interest rates change. When interest rates go up, the value of debt securities and certain dividend paying stocks tends to fall. If the portfolio invests a significant portion of its assets in debt securities or stocks purchased primarily for dividend income and interest rates rise, then the value of your investment may decline. Investors should note that short-term interest rates are still near historic lows. - WARRANTS AND RIGHTS Warrants and rights may be considered more speculative than certain other types of investments because they do not entitle a holder to the dividends or voting rights for the securities that may be purchased. They do not represent any rights in the assets of the issuing company. Also, the value of a warrant or right does not necessarily change with the value of the underlying securities. A warrant or right ceases to have value if it is not exercised prior to the expiration date. - PORTFOLIO TURNOVER The fund may engage in a significant number of short-term transactions, which may adversely affect the Fund performance. Increased turnover results in higher brokerage costs or mark-up charges for the Fund. The Fund ultimately passes these costs on to shareholders. Short-term trading may also result in short-term capital gains, which are taxed as ordinary income to shareholders. YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND. These and other risks are fully described in the section entitled "Explanation of Strategies and Risks," in Appendix A of this prospectus. DISCLOSURE OF PORTFOLIO HOLDINGS A detailed description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Statement of Additional Information. In addition, investors should note that the Fund publishes its holdings on its website at www.idexfunds.com 30 days after the end of each 14 TA IDEX OPPENHEIMER EMERGING MARKETS calendar quarter. Such information will remain online for six months. INVESTOR PROFILE This Fund may be appropriate for aggressive investors who seek capital appreciation and who can tolerate significant volatility in the value of their principal. PAST PERFORMANCE No performance is shown for the Fund as it was not available until ______________, 2005. Performance information for the Fund will appear in a future version of this prospectus once the Fund has a full calendar year of performance information to report to investors. FEES AND EXPENSES Class A shares of TA IDEX funds are normally subject to an initial sales charge of 5.50% and a 12b-1 distribution and service fees of up to 0.35% of average daily net assets per year. The initial sales charge currently is waived for Class A shares, as these shares are currently being offered for sale only to certain asset allocation funds. There is no sales charge (load) or 12b-1 distribution and service fee on Class I shares, which are currently being offered for sale only to certain other asset allocation funds The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets, expressed as a % of average daily net assets)
CLASS OF SHARES --------------- A I ----- ----- Management fees 1.20% 1.20% Distribution and serve (12b-1) fees 0.35% N/A Other expenses(a) 0.18% 0.18% Total annual fund operating expenses 1.73% 1.38% Expense reduction(b) % Net operating expenses 1.73% 1.38%
---------- (a) Other expenses are based on estimates. (b) Contractual arrangements have been made with the Fund's investment adviser, Transamerica Fund Advisors, Inc. through ______________, to waive fees and/or reimburse expenses to the extent that the Fund's total operating expenses exceed 1.45% (excluding 12b-1 fees). TFAI is entitled to reimbursement by the Fund of fees waived or expenses reduced during any of the previous 36 months beginning on the date of the expense limitation arrangement if on any day the estimated annualized total operating expenses are less than 1.45%. EXAMPLE This example is here to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. It shows the cumulative expenses you would pay if you invested $10,000 and held your shares for various time periods, with a 5% annual return and fund operating expenses remaining the same. This return is for illustrative purposes and is not guaranteed. Actual costs may be higher or lower.
SHARE CLASS 1 YEAR 3 YEARS ----------- ------ ------- A $ 176 $ 545 I $ 141 $ 437
ADDITIONAL INFORMATION MANAGEMENT INVESTMENT ADVISER: Transamerica Fund Advisors, Inc. (TFAI) 570 Carillon Parkway St. Petersburg, Florida 33716-1202 For additional information about TFAI, see the section entitled "Shareholder Information - Investment Adviser" of this prospectus. ADVISORY FEE TFAI receives compensation, calculated daily and paid monthly, from the Fund at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $50 million..................... 1.20% Over $50 million up to $200 million... 1.15% Over $200 million..................... 1.10%
SUB-ADVISER: OppenheimerFunds, Inc. Two World Financial Center 225 Liberty Street, 11th Floor New York, NY 10281-1008 SUB-ADVISORY FEE: The sub-adviser receives compensation, calculated daily and paid monthly, from TFAI at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $50 million..................... 0.70% Over $50 million up to $200 million... 0.65% Over $200 million..................... 0.60%
A discussion regarding the basis of TA IDEX's Board of Trustees' approval of the Fund's investment advisory arrangements will be available in the Fund's semi-annual report for the fiscal half-year ending April 30, 2006. 15 TA IDEX OPPENHEIMER EMERGING MARKETS PORTFOLIO MANAGER: MARK MADDEN joined Oppenheimer in August 2004 as a Vice President and Portfolio Manager of its Global Equity Team and is currently manager of the Fund. He has over 20 years of experience in global financial markets. Prior to joining Oppenheimer, Mr. Madden was Managing Director, Global Emerging Markets Team, at Pioneer Investment Management, Inc., where he led a team of portfolio managers and analysts from 2000 to July 2004 and Senior Vice President and Portfolio Manager from 1998 to 2000. In addition, he served as portfolio manager of the Pioneer Emerging Markets Fund. Before Pioneer, Mr. Madden worked in an investment banking capacity at Dean Witter Reynolds, Inc., and State Street Boston Capital Corporation. Mr. Madden holds an MBA in Finance from the Darden School of Business at the University of Virginia and a BS in Biology from Trinity College. He is a Chartered Financial Analyst. The SAI provides additional information about the portfolio manager's compensation, other accounts managed by the portfolio manager, and the portfolio manager's ownership of securities in the Fund. 16 TA IDEX J.P. MORGAN INTERNATIONAL BOND SUMMARY OF RISKS AND RETURNS OBJECTIVE The investment objective of TA IDEX J.P. Morgan International Bond (the "Fund") is to seek high total return by investing in high-quality, nondollar-denominated government and corporate debt securities of foreign issuers. PRINCIPAL STRATEGIES AND POLICIES The Fund's sub-adviser, J.P. Morgan Investment Management Inc. (J.P. Morgan), seeks to achieve this objective by investing at least 80% of the Fund's assets in high-quality bonds (debt securities with outstanding maturities of at least one year) under normal market conditions. Under normal market conditions, the Fund will primarily invest in nondollar-denominated government and corporate debt securities of issuers that are economically tied to one or more countries other than the U.S., and will diversify its investments across at least three different foreign countries. A corporate issuer generally will be deemed to be economically tied to the country (or countries) in which the issuer has at least 50% of its assets or from which it derives at least 50% of its revenues or profits, or in whose securities markets its securities principally trade. The Fund's dollar-weighted average maturity generally will range from two to 10 years. J.P. Morgan determines whether to buy and sell securities for the Fund by using a combination of fundamental research and bond and currency valuation models, including: - Economic/Political Fundamentals. J.P. Morgan evaluates each country's economic climate and political discipline for controlling deficits and inflation. - Expected Return. Using economic forecasts, J.P. Morgan projects the expected return for each country. - Relative Value. By contrasting expected risks and returns for investments in each country, J.P. Morgan selects those countries expected to produce the best return at reasonable risk. Generally, the Fund will purchase only bonds denominated in foreign currencies. The Fund generally limits its use of hedging strategies that may minimize the effect of currency fluctuations. However, the Fund may hedge up to 25% of its total assets into U.S. dollars when the portfolio manager considers the dollar to be attractive relative to foreign currencies. The Fund also may invest in options, futures contracts, options on futures contracts, and swap agreements, provided that such investments are in keeping with the Fund's investment objective. THIS FUND IS NON-DIVERSIFIED. WHAT IS A NON-DIVERSIFIED FUND? A "non-diversified" fund has the ability to take larger positions in a smaller number of issuers. To the extent a fund invests a greater portion of its assets in the securities of a smaller number of issuers, it may be more susceptible to any single economic, political or regulatory occurrence than a diversified fund and may be subject to greater loss with respect to its portfolio securities. However, to meet federal tax requirements, at the close of each quarter the Fund may not have more than 25% of its total assets invested in any one issuer, and, with respect to 50% of its total assets, not more than 5% of its total assets invested in any one issuer. Under adverse or unstable market conditions, the Fund could invest some or all of its assets in cash, repurchase agreements and money market instruments. Although the Fund would do this only in seeking to avoid losses, the Fund may be unable to pursue its investment objective during that time, and it could reduce the benefit from any upswing in the market. PRINCIPAL RISKS The Fund is subject to the following principal investment risks: - FIXED INCOME SECURITIES The value of these securities may change daily based on changes in interest rates, and other market conditions and factors. Risks include: - fluctuations in market value - changes in interest rates: the value of a fixed income security generally decreases as interest rates rise - length of time to maturity: the longer the duration, the more vulnerable the value of a fixed income security is to fluctuations in interest rates - issuers defaulting on their obligations to pay interest or return principal - FOREIGN SECURITIES Investments in foreign securities, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), involve risks relating to political, social and economic developments abroad, as well as risks resulting from the difference between the regulations to which U.S. and foreign issuer markets are subject. These risks may include, without limitation: - changes in currency values - currency speculation - currency trading costs - different accounting and reporting practices - less information available to the public - less (or different) regulation of securities markets - more complex business negotiations - less liquidity 17 TA IDEX J.P. MORGAN INTERNATIONAL BOND - more fluctuations in prices - delays in settling foreign securities transactions - higher costs for holding shares (custodial fees) - higher transaction costs - vulnerability to seizure and taxes - political instability and small markets - different market trading days - EMERGING MARKETS RISK Investing in the securities of issuers located in or principally doing business in emerging markets bear foreign risks as discussed above. However, the risks associated with investing in emerging markets are often greater than investing in developed foreign markets. Specifically, the economic structures in emerging markets countries are less diverse and mature than those in developed countries, and their political systems are less stable. Investments in emerging markets countries may be affected by national policies that restrict foreign investments. Emerging market countries may have less developed legal structures, and the small size of their securities markets and low trading volumes can make investments illiquid and more volatile than investments in developed countries. As a result, a portfolio investing in emerging market countries may be required to establish special custody or other arrangements before investing. - CREDIT RISK The fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivative contract, is unable or unwilling to meet its financial obligations. - INTEREST RATE RISK The values of debt securities are subject to change when prevailing interest rates change. When interest rates go up, the value of debt securities and certain dividend paying stocks tends to fall. If the Fund invests a significant portion of its assets in debt securities or stocks purchased primarily for dividend income and interest rates rise, then the value of your investment may decline. Investors should note that short-term interest rates are still near historic lows. - CURRENCY RISK Because the Fund's foreign investments are generally held in foreign currencies, the Fund is subject to currency risk, meaning the Fund could experience gains or losses solely on changes in the exchange rate between foreign currencies and the U.S. dollar. - COUNTRY, SECTOR OR INDUSTRY FOCUS To the extent the Fund invests a significant portion of its assets in one or more countries, sectors or industries at any time, the Fund will face a greater risk of loss due to factors affecting the single country, sector or industry than if the Fund always maintained wide diversity among the countries, sectors and industries in which it invests. - DERIVATIVES The use of derivative instruments may involve risks different from, or greater than, the risks associated with investing directly in securities or other traditional investments. Derivatives may be subject to market risk, interest rate risk, and credit risk. Certain derivatives may be illiquid, which may reduce the return of the Fund if it cannot sell or terminate the derivative instrument at an advantageous time or price. Some derivatives may involve the risk of improper valuation, or the risk that changes in the value of the instrument may not correlate well with the underlying asset, rate or index. As a result of inaccurate market predictions by the sub-adviser, the Fund could lose the entire amount of its investment in a derivative and, in some cases, could lose more than the principal amount invested. Also, suitable derivative instruments may not be available in all circumstances, and there is no assurance that the Fund will be able to engage in these transactions to reduce exposure to other risks. - HEDGING The Fund may enter into forward foreign currency contracts to hedge against declines in the value of securities denominated in, or whose value is ties to, a currency other than the U.S. dollar or to reduce the impact of currency fluctuation on purchases and sales of such securities. Shifting the Fund's currency exposure from one currency to another removes the Fund's opportunity to profit from the original currency and involves a risk of increased losses for the Fund if the sub-adviser's projection of future exchange rates is inaccurate. - LIQUIDITY RISK Liquidity risk exists when particular investments are difficult to purchase or sell. The Fund's investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. - OPTIONS Investing in financial contracts such as options involve additional risks and costs. Risks include: inaccurate market predictions which may result in losses instead of gains; and prices may not match so the benefits of the transaction might be diminished and the Fund may incur substantial losses - NON-DIVERSIFICATION RISK Focusing investments in a small number of issuers, industries or foreign currencies increases risk. Because the Fund is non-diversified, it may be more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio might be. YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND. 18 TA IDEX J.P. MORGAN INTERNATIONAL BOND These and other risks are fully described in the section entitled "Explanation of Strategies and Risks," in Appendix A of this prospectus. DISCLOSURE OF PORTFOLIO HOLDINGS A detailed description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Statement of Additional Information. In addition, investors should note that the Fund publishes its holdings on its website at www.idexfunds.com 30 days after the end of each calendar quarter. Such information will remain online for six months. INVESTOR PROFILE This Fund may be appropriate for investors who seek capital appreciation and income growth and are willing to tolerate the fluctuation in principal value associated with changes in interest rates. PAST PERFORMANCE No performance is shown for the Fund as it was not available until ______________, 2005. Performance information for the Fund will appear in a future version of this prospectus once the Fund has a full calendar year of performance information to report to investors. FEES AND EXPENSES Class A shares of TA IDEX funds are normally subject to an initial sales charge of 5.50% and a 12b-1 distribution and service fees of up to 0.35% of average daily net assets per year. The initial sales charge currently is waived for Class A shares, as these shares are currently being offered for sale only to certain asset allocation funds. There is no sales charge (load) or 12b-1 distribution and service fee on Class I shares, which are currently being offered for sale only to certain other asset allocation funds The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets, expressed as a % of average daily net assets)
CLASS OF SHARES --------------- A I ----- ----- Management fees 0.55% 0.55% Distribution and serve (12b-1) fees 0.35% N/A Other expenses(a) 0.16% 0.16% Total annual fund operating expenses 1.06% 0.71% Expense reduction(b) - - Net operating expenses 1.06% 0.71%
---------- (a) Other expenses are based on estimates. (b) Contractual arrangements have been made with the Fund's investment adviser, Transamerica Fund Advisors, Inc. through ______________, to waive fees and/or reimburse expenses to the extent that the Fund's total operating expenses exceed 0.75% (excluding 12b-1 fees). TFAI is entitled to reimbursement by the Fund of fees waived or expenses reduced during any of the previous 36 months beginning on the date of the expense limitation arrangement if on any day the estimated annualized total operating expenses are less than 0.75%. EXAMPLE This example is here to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. It shows the cumulative expenses you would pay if you invested $10,000 and held your shares for various time periods, with a 5% annual return and fund operating expenses remaining the same. This return is for illustrative purposes and is not guaranteed. Actual costs may be higher or lower.
SHARE CLASS 1 YEAR 3 YEARS ----------- ------ ------- A $ 108 $ 337 I $ 73 $ 227
ADDITIONAL INFORMATION MANAGEMENT INVESTMENT ADVISER: Transamerica Fund Advisors, Inc. (TFAI) 570 Carillon Parkway St. Petersburg, Florida 33716-1202 For additional information about TFAI, see the section entitled "Shareholder Information - Investment Adviser" of this prospectus. ADVISORY FEE TFAI receives compensation, calculated daily and paid monthly, from the Fund at the indicated annual rate 19 TA IDEX J.P. MORGAN INTERNATIONAL BOND (expressed as a specified percentage of the Fund's average daily net assets): First $100 million..................... 0.55% Over $100 million up to $250 million... 0.52% Over $250 million up to $500 million... 0.51% Over $500 million up to $1 billion..... 0.50% Over $1 billion........................ 0.47%
SUB-ADVISER: J.P. Morgan Investment Management Inc. 522 Fifth Avenue New York, NY 10036 SUB-ADVISORY FEE: The sub-adviser receives compensation, calculated daily and paid monthly, from TFAI at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $100 million..................... 0.20% Over $100 million up to $250 million... 0.17% Over $250 million up to $500 million... 0.16% Over $500 million up to $1 billion..... 0.15% Over $1 billion........................ 0.12%
A discussion regarding the basis of TA IDEX's Board of Trustees' approval of the Fund's investment advisory arrangements will be available in the Fund's semi-annual report for the fiscal half-year ending April 30, 2006. PORTFOLIO MANAGER: JULIAN LE BERON is Portfolio Manager in the J.P. Morgan International Fixed-Income Group and has been a member of the team since October 2002. He joined J.P. Morgan in 1997 as a portfolio manager. He previously worked as a portfolio risk analyst in the Fleming Asset Management Fixed Income department. He has a bachelor of science degree in management from the London School of Economics. He is a CFA charterholder. The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the Fund. 20 TA IDEX FEDERATED CONSERVATIVE TACTICAL ALLOCATION SUMMARY OF RISKS AND RETURNS OBJECTIVE The investment objective of TA IDEX Federated Conservative Tactical Allocation (the "Fund") is to seek total return by investing in securities that have defensive characteristics. PRINCIPAL STRATEGIES AND POLICIES The Fund's sub-adviser, Federated Equity Management Company of Pennsylvania (Federated), seeks to achieve this objective by investing in securities of both domestic and foreign companies that, in Federated's opinion, are undervalued or out of favor, or securities that appear to display defensive characteristics (i.e. securities that appear to have low volatility in share price relative to the overall equity markets during periods of market turbulence. These are securities that appear to have a low probability of significant price decline relative to the overall equity market. They also will, in the sub-adviser's view, generally have a comparatively low volatility in share price relative to the overall equity market.) Federated uses the "value" style of investing, selecting securities of companies that, in Federated's opinion, are trading at a lower valuation in relation to their historic and current market prices, to industry peers, and to their expected future price based on projected earnings, and that therefore offer the potential for capital appreciation. Because Federated uses a "value" style of investing, the securities held by the Fund may not, under certain market conditions, increase as rapidly in price as stocks selected primarily for their growth attributes. However, historically such securities generally have had lower share price volatility, and a higher yield, when compared with other equity securities. To determine the timing of purchases of portfolio securities, Federated compares the current stock price of an issuer with Federated's judgment as to that stock's intrinsic value. Federated prefers to purchase a stock when it is relatively depressed, rather than after a substantial rise in price. Federated uses technical analysis as an aid in timing purchases and sales. Federated sells a portfolio security if it determines that the issuer does not continue to meet its stock selection criteria. In searching for equity securities that Federated deems to be undervalued Federated may invest in both domestic and foreign issuers. Foreign holdings may take the form of either American Depositary Receipts, which represent interests in underlying securities issued by a foreign company but which are traded in the United States, or foreign securities purchased directly on a foreign exchange. In selecting equity securities for the Fund, Federated emphasizes the following: undervalued and overlooked companies that have the potential for positive changes; equity securities that demonstrate an ability to maintain their value when the broad equity market is weak or that have relatively depressed market values; companies' financial strength, particularly the generation of "free" cash flow that exceeds capital spending and dividend requirements; companies' management skill and shareholder orientation and rising earnings estimates. Companies with similar characteristics may be grouped together in broad categories called sectors. Federated may select securities of issuers in any sector and having any market capitalization range (i.e. number of shares multiplied by the share price). Federated allocates the Fund's assets among the various economic sectors based on Standard & Poor's classifications. Federated's allocations are based on a combination of bottom-up security selection and top-down sector emphasis. Primarily using the bottom-up approach, Federated searches for outstanding performance of individual stocks. Federated identifies such companies from research reports, stock screens or personal knowledge of the products and services. As a secondary matter, using top-down analysis, Federated considers current economic, financial market, and industry factors and societal trends that may affect the issuing company and in order to assist in determining sector allocations for the Fund. 21 In addition, sector allocations are based on Federated's opinion as to which sectors are, as a whole, priced at a low market valuation when compared with the other sectors. Federated also considers such factors as the dividend-paying potential of the companies in each sector. Federated may invest in fixed income securities in order to increase the current income of the Fund or to generate total return. When investing in fixed income securities Federated invests in the sectors of the fixed income market that it believes offers the best relative value. Such sectors may include non-investment grade fixed income securities, emerging market debt and foreign non-dollar denominated fixed income securities issued by foreign governmental entities or corporations as well as U.S. Treasury securities and other investment grade securities. Federated anticipates normally keeping a portion of the Fund in cash in order to readily take advantage of buying opportunities. Federated may also increase the Fund's cash position to the extent Federated is unable to find a sufficient amount of undervalued or out of favor securities. Federated may seek to increase the current income of the Fund or to preserve capital by utilizing any of the following investment techniques: investing in fixed income securities, such as U.S. Treasury securities, non-investment grade securities or foreign non-dollar dominated securities; investing in foreign currency forward contracts; buying put options on individual securities and security indices; and buying put or call options on currencies (foreign and U.S. dollar). This investment strategy is designed to enable the Fund to pursue its investment objective while attempting to limit volatility. Federated may purchase convertible securities and REITs to provide total return and/or to enhance the Fund's income. The Fund may also invest in securities of companies engaged in the exploration, mining and distribution of gold, silver and other precious metals. The Fund may purchase shares of exchange-traded funds (ETFs). ETFs are open-end investment companies or unit investment trusts that are registered under the Investment Company Act of 1940 (1940 Act). The shares of ETFs are listed and traded on stock exchanges at market prices. The Fund may invest in ETFs in order to achieve exposure to a specific region, country, or market sector, or for other reasons consistent with its investment strategy. The Fund may invest in derivative contracts, such as swaps, options and futures contracts, to efficiently implement its overall investment strategies. The following examples illustrate some, but not, all of the specific ways in which the Fund may use derivatives. First, the Fund may invest in a hybrid instrument which is structured as a note that pays a fixed dividend and at maturity either converts into shares of an equity security or returns a payment to the Fund based on the change in value of an underlying equity security. Second, the Fund may buy or sell derivative contracts (such as call or put options), in anticipation of an increase or decrease in the market value of individual securities, currencies or indices (including both securities and volatility indices). Finally, the Fund may invest in derivatives contracts as part of its hedging strategies. Hedging transactions are intended to reduce specific risks. For example, to protect the Fund against circumstances that would normally cause the Fund securities to decline in value, the Fund may buy or sell a derivative contract that would normally increase in value under the same circumstances. The Fund may also attempt to hedge by using combinations of different derivative contracts, or derivatives contracts and securities. The Fund's ability to hedge may be limited by the costs of the derivative contracts. The Fund may attempt to lower the cost of hedging by entering in transactions that provide only limited protection, including transactions that (1) hedge only a portion of the Fund, (2) use derivatives contracts that cover a narrow range of circumstances or (3) involve the sale of derivatives contracts with different terms. Consequently, hedging transactions will not eliminate risk even if they work as intended. In addition, hedging strategies are not always successful, and could result in increased expenses and losses to the Fund. Additionally, the Fund may buy put options on stock indices or individual stocks (including when the securities are not held in the Fund) in an attempt to hedge against a decline in stock prices. 22 Under adverse or unstable market conditions, the Fund could invest some or all of its assets in cash, repurchase agreements and money market instruments. Although the Fund would do this only in seeking to avoid losses, the Fund may be unable to pursue its investment objective during that time, and it could reduce the benefit from any upswing in the market. PRINCIPAL RISKS The Fund is subject to the following principal investment risks: - STOCKS While stocks have historically outperformed other investments over the long term, their prices tend to go up and down more dramatically over the shorter term. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Because the stocks the Fund holds fluctuate in price, the value of your investments in the Fund will go up and down. - VALUE RISK The value approach carries the risk that the market will not recognize a security's intrinsic value for a long time, or that a stock considered to be undervalued may actually be appropriately priced. - FOREIGN SECURITIES Investments in foreign securities, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), involve risks relating to political, social and economic developments abroad, as well as risks resulting from the difference between the regulations to which U.S. and foreign issuer markets are subject. These risks may include, without limitation: - changes in currency values - currency speculation - currency trading costs - different accounting and reporting practices - less information available to the public - less (or different) regulation of securities markets - more complex business negotiations - less liquidity - more fluctuations in prices - delays in settling foreign securities transactions - higher costs for holding shares (custodial fees) - higher transaction costs - vulnerability to seizure and taxes - political instability and small markets - different market trading days - EMERGING MARKETS RISK Investing in the securities of issuers located in or principally doing business in emerging markets bear foreign risks as discussed above. In addition, the risks associated with investing in emerging markets are often greater than investing in developed foreign markets. Specifically, the economic structures in emerging markets countries are less diverse and mature than those in developed countries, and their political systems are less stable. Investments in emerging markets countries may be affected by national policies that restrict foreign investments. Emerging market countries may have less developed legal structures, and the small size of their securities markets and low trading volumes can make investments illiquid and more volatile than investments in developed countries. As a result, a portfolio investing in emerging market countries may be required to establish special custody or other arrangements before investing. - CURRENCY RISK Because the Fund's foreign investments are generally held in foreign currencies, the Fund is subject to currency risk, meaning the Fund could experience gains or losses solely on changes in the exchange rate between foreign currencies and the U.S. dollar. - FIXED INCOME SECURITIES The value of these securities may change daily based on changes in interest rates, and other market conditions and factors. Risks include: - fluctuations in market value - changes in interest rates: the value of a fixed income security generally decreases as interest rates rise - length of time to maturity: the longer the duration, the more vulnerable the value of a fixed income security is to fluctuations in interest rates - issuers defaulting on their obligations to pay interest or return principal - INTEREST RATE RISK The values of debt securities are subject to change when prevailing interest rates change. When interest rates go up, the value of debt securities and certain dividend paying stocks tends to fall. If the Fund invests a significant portion of its assets in debt securities or stocks purchased primarily for dividend income and interest rates rise, then the value of your investment may decline. Investors should note that short-term interest rates are still near historic lows. - CREDIT RISK The Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivative contract, is unable or unwilling to meet its financial obligations. - HIGH YIELD DEBT SECURITY RISK High yield debt securities, or junk bonds, are securities which are rated below "investment grade" or are not rated, but are of equivalent quality. High yield debt securities range from those for which the prospect for repayment of principal and interest is predominantly speculative to those which are currently in default on principal or interest payments. A Fund portfolio with high yield debt securities may be more susceptible to credit risk and market risk than a portfolio that invests only in higher quality debt securities because these lower-rated debt securities are less secure financially and more sensitive to downturns in the economy. In addition, the secondary market for such securities may not be as liquid as that for more highly rated debt securities. As a result, the Fund's sub-adviser may find it more difficult to sell these securities or may have to sell them at lower prices. High yield securities are not generally meant for short-term investing. When the Fund invests in high yield securities it generally seeks to receive a correspondingly higher return to compensate it for the additional credit risk and market risk it has assumed. - COUNTRY, SECTOR OR INDUSTRY FOCUS To the extent the Fund invests a significant portion of its assets in one or more countries, sectors or industries at any time, the Fund will face a greater risk of loss due to factors affecting the single country, sector or industry than if the Fund always maintained wide diversity among the countries, sectors and industries in which it invests. - CONVERTIBLE SECURITIES Convertible securities may include corporate notes or preferred stock, but ordinarily are a long-term debt obligation of the issuer convertible at a stated exchange rate into common stock of the issuer. As with all debt securities, the market value of convertible securities tends to decline as interest rates increase. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the price of the convertible security tends to reflect the value of the underlying common stock. - REITS Equity REITs can be affected by any changes in the value of the properties owned. A REIT's performance depends on the types and locations of the properties it owns and on how well it manages those properties or loan financings. A decline in rental income could occur because of extended vacancies, increased competition from other properties, tenants' failure to pay rent or poor management. A REIT's performance also depends on the company's ability to finance property purchases and renovations and manage its cash flows. Because REITs are typically invested in a limited number of projects or in a particular market segment, they are more susceptible to adverse developments affecting a single project or market segment than more broadly diversified investments. Loss of status as a qualified REIT or changes in the treatment of REITs under the federal tax law, could adversely affect the value of a particular REIT or the market for REITs as a whole. - HEDGING The Fund may enter into forward foreign currency contracts to hedge against declines in the value of securities denominated in, or whose value is ties to, a currency other than the U.S. dollar or to reduce the impact of currency fluctuation on purchases and sales of such securities. Shifting the Fund's currency exposure from one currency to another removes the Fund's opportunity to profit from the original currency and involves a risk of increased losses for the Fund if the sub-adviser's projection of future exchange rates is inaccurate. - DERIVATIVES The use of derivative instruments may involve risks different from, or greater than, the risks associated with investing directly in securities or other traditional investments. Derivatives may be subject to market risk, interest rate risk, and credit risk. Certain derivatives may be illiquid, which may reduce the return of the Fund if it cannot sell or terminate the derivative instrument at an advantageous time or price. Some derivatives may involve the risk of improper valuation, or the risk that changes in the value of the instrument may not correlate well with the underlying asset, rate or index. As a result of inaccurate market predictions by the sub-adviser, the Fund could lose the entire amount of its investment in a derivative and, in some cases, could lose more than the principal amount invested. Also, suitable derivative instruments may not be available in all circumstances, and there is no assurance that the Fund will be able to engage in these transactions to reduce exposure to other risks. - OPTIONS Investing in financial contracts such as options involve additional risks and costs. Risks include: inaccurate market predictions which may result in losses instead of gains; and prices may not match so the benefits of the transaction might be diminished and the Fund may incur substantial losses. YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND. These and other risks are fully described in the section entitled "Explanation of Strategies and Risks," in Appendix A of this prospectus. DISCLOSURE OF PORTFOLIO HOLDINGS A detailed description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Statement of Additional Information. In addition, investors should note that the Fund publishes its holdings on its website at www.idexfunds.com 30 days after the end of each calendar quarter. Such information will remain online for six months. INVESTOR PROFILE The Fund may be appropriate for investors who seek total return and can tolerate some market volatility. PAST PERFORMANCE No performance is shown for the Fund as it was not available until ______________, 2005. Performance information for the Fund will appear in a future version of this prospectus once the Fund has a full calendar year of performance information to report to investors. FEES AND EXPENSES Class A shares of TA IDEX funds are normally subject to an initial sales charge of 5.50% and a 12b-1 distribution and service fees of up to 0.35% of average daily net assets per year. The initial sales charge currently is waived for Class A shares, as these shares are currently being offered for sale only to certain asset allocation funds. There is no sales charge (load) or 12b-1 distribution and service fee on Class I shares, which are currently being offered for sale only to certain other asset allocation funds The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets, expressed as a % of average daily net assets)
CLASS OF SHARES --------------- A I ----- ----- Management fees 0.85% 0.85% Distribution and serve (12b-1) fees 0.35% % Other expenses(a) 0.20% 0.20% Total annual fund operating expenses 1.40% 1.05% Expense reduction(b) - - Net operating expenses 1.40% 1.05%
---------- (a) Other expenses are based on estimates. (b) Contractual arrangements have been made with the Fund's investment adviser, Transamerica Fund Advisors, Inc. through ______________, to waive fees and/or reimburse expenses to the extent that the Fund's total operating expenses exceed 1.05% (excluding 12b-1 fees). TFAI is entitled to reimbursement by the Fund of fees waived or expenses reduced during any of the previous 36 months beginning on the date of the expense limitation arrangement if on any day the estimated annualized total operating expenses are less than 1.05%. EXAMPLE This example is here to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. It shows the cumulative expenses you would pay if you invested $10,000 and held your shares for various time periods, with a 5% annual return and fund operating expenses remaining the same. This return is for illustrative purposes and is not guaranteed. Actual costs may be higher or lower.
SHARE CLASS 1 YEAR 3 YEARS ----------- ------ ------- A $ 143 $ 443 I $ 107 $ 334
23 TA IDEX FEDERATED CONSERVATIVE TACTICAL ALLOCATION ADDITIONAL INFORMATION MANAGEMENT INVESTMENT ADVISER: Transamerica Fund Advisors, Inc. (TFAI) 570 Carillon Parkway St. Petersburg, Florida 33716-1202 For additional information about TFAI, see the section entitled "Shareholder Information - Investment Adviser" of this prospectus. ADVISORY FEE TFAI receives compensation, calculated daily and paid monthly, from the Fund at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $30 million.................... 0.85% Over $30 million up to $50 million... 0.80% Over $50 million..................... 0.70%
SUB-ADVISER: Federated Equity Management Company 1001 Liberty Avenue Pittsburgh, Pennsylvania 15222-3779 SUB-ADVISORY FEE: The sub-adviser receives compensation, calculated daily and paid monthly, from TFAI at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $30 million.................... 0.50% Over $30 million up to $50 million... 0.35% Over $50 million..................... 0.25%
A discussion regarding the basis of TA IDEX's Board of Trustees' approval of the Fund's investment advisory arrangements will be available in the Fund's semi-annual report for the fiscal half-year ending April 30, 2006. PORTFOLIO MANAGER: STEVEN J. LEHMAN, CFA, Senior Vice President, Senior Portfolio Manager, joined Federated in 1997. From 1985 to 1997, he served as portfolio manager, vice president and senior portfolio manager of First Chicago, NBD. Mr. Lehman earned a B.A. from Ripon College and an M.A. from University of Chicago. Mr. Lehman has 20 years of investment experience. JOHN NICHOL, CEA, Vice Presidnet, Senior Portfolio Manager, joined Federated in 2000. Mr. Nichol is responsible for portfolio management and research in the equity area. He was previously portfolio manager for P.E.R.S. of Ohio. Mr. Nichol earned a B.S. and M.B.A. from Ohio State University. Mr. Nichol has 13 years of investment experience. The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the Fund. 24 TA IDEX MERCURY TACTICAL ALLOCATION SUMMARY OF RISKS AND RETURNS OBJECTIVE The investment objective of TA IDEX Mercury Tactical Allocation (the "Fund") is to provide high total investment return through a fully managed investment policy utilizing United States and foreign equity securities, debt and money market securities. PRINCIPAL STRATEGIES AND POLICIES The Fund's sub-adviser, Fund Asset Management, LP, doing business as Mercury Advisors (Mercury), seeks to achieve this objective by investing in a portfolio of both equity and fixed income securities, including money market securities and other short-term securities or instruments, of issuers located around the world. There is no limit on the percentage of assets the Fund can invest in a particular type of security. The Fund generally seeks diversification across markets, countries, industries and issuers as one of its strategies to reduce volatility. The Fund has no geographic limits on where its investments may be located. The Fund uses its investment flexibility to create a portfolio of assets that, over time, tends to be relatively balanced between equity and debt securities and that is widely diversified among many individual investments. While the Fund can, and does, look for investments in all the markets of the world, it will typically invest a majority of its assets in the securities of corporate and governmental issuers located in North and South America, Europe, Australia and the Far East. The Fund may invest in both developed and emerging markets. Mercury will consider such factors as the rate of economic growth, natural resources, capital reinvestment and the social and political environment when selecting a market. In deciding between equity and debt investments, Mercury looks at a number of factors, including the relative opportunity for capital appreciation, capital recovery risk, dividend yields and the level of interest rates paid on debt securities of different maturities. The Fund may also, from time to time, identify certain real assets, such as real estate or precious metals, that Mercury believes will increase in value because of economic trends and cycles or political or other events. The Fund may invest a portion of its assets in securities related to those real assets such as stock, fixed income securities or convertible securities issued by real estate investment trusts. The Fund can invest in all types of equity securities, including common stock, preferred stock, warrants and stock purchase rights of companies of any market capitalization. In selecting stocks and other securities that are convertible into stocks, Mercury emphasizes stocks that it believes are undervalued. Mercury places particular emphasis on companies with below average price/earnings ratios or that may pay above average dividends. The Fund may also seek to invest in the stock of smaller or emerging growth companies that it expects will provide a higher total return than other equity investments. Investing in smaller or emerging growth companies involves greater risk than investing in more established companies. The Fund can invest in all types of debt securities, including U.S. and foreign government bonds, corporate bonds and convertible bonds, mortgage and asset backed securities, and securities issued or guaranteed by certain international organizations such as the World Bank. The Fund may invest up to 35% of its total assets in "junk" bonds, corporate loans and distressed securities. Junk bonds are bonds that are rated below investment grade by independent rating agencies or are bonds that are not rated but which Mercury considers to be of comparable quality. The Fund will invest in these securities only when Mercury believes that they will provide an attractive total return, relative to their risk, as compared to higher quality debt securities. The Fund may use derivatives to increase the return of the Fund and to hedge (or protect) the value of its assets against adverse movements in currency exchange rates, interest rates and movements in the securities markets. While these instruments involve certain risks, the Fund will not engage in certain strategies that are considered highly risky and speculative. Under adverse or unstable market conditions, the Fund could invest some or all of its assets in cash, repurchase agreements and money market instruments. Although the Fund would do this only in seeking to avoid losses, the Fund may be unable to pursue its investment objective during that time, and it could reduce the benefit from any upswing in the market. PRINCIPAL RISKS The Fund is subject to the following principal investment risks: - STOCKS While stocks have historically outperformed other investments over the long term, their prices tend to go up and down more dramatically over the shorter term. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Because the stocks the Fund holds fluctuate in price, the value of your investments in the Fund will go up and down. - VALUE RISK The value approach carries the risk that the market will not recognize a security's intrinsic value for a long time, 25 TA IDEX MERCURY TACTICAL ALLOCATION or that a stock considered to be undervalued may actually be appropriately priced. - FOREIGN SECURITIES Investments in foreign securities, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), involve risks relating to political, social and economic developments abroad, as well as risks resulting from the difference between the regulations to which U.S. and foreign issuer markets are subject. These risks may include, without limitation: - changes in currency values - currency speculation - currency trading costs - different accounting and reporting practices - less information available to the public - less (or different) regulation of securities markets - more complex business negotiations - less liquidity - more fluctuations in prices - delays in settling foreign securities transactions - higher costs for holding shares (custodial fees) - higher transaction costs - vulnerability to seizure and taxes - political instability and small markets - different market trading days - SMALL- OR MEDIUM-SIZED COMPANIES Investing in small- and medium-sized companies involves greater risk than is customarily associated with more established companies. Stocks of such companies may be subject to more abrupt or erratic price movements than larger company securities. Small companies often have limited product lines, markets, or financial resources and their management may lack depth and experience. Such companies usually do not pay significant dividends that could cushion returns in a falling market. - CURRENCY RISK Because the Fund's foreign investments are generally held in foreign currencies, the Fund is subject to currency risk, meaning the Fund could experience gains or losses solely on changes in the exchange rate between foreign currencies and the U.S. dollar. - PREFERRED STOCKS Preferred stocks may include the obligation to pay a stated dividend. Their price could depend more on the size of the dividend than on the company's performance. If a company fails to pay the dividend, its preferred stock is likely to drop in price. Changes in interest rates can also affect their price. - CONVERTIBLE SECURITIES Convertible securities may include corporate notes or preferred stock, but ordinarily are a long-term debt obligation of the issuer convertible at a stated exchange rate into common stock of the issuer. As with all debt securities, the market value of convertible securities tends to decline as interest rates increase. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the price of the convertible security tends to reflect the value of the underlying common stock. - FIXED INCOME SECURITIES The value of these securities may change daily based on changes in interest rates, and other market conditions and factors. Risks include: - fluctuations in market value - changes in interest rates: the value of a fixed income security generally decreases as interest rates rise - length of time to maturity: the longer the duration, the more vulnerable the value of a fixed income security is to fluctuations in interest rates - issuers defaulting on their obligations to pay interest or return principal - HIGH YIELD DEBT SECURITY RISK High yield debt securities, or junk bonds, are securities which are rated below "investment grade" or are not rated, but are of equivalent quality. High yield debt securities range from those for which the prospect for repayment of principal and interest is predominantly speculative to those which are currently in default on principal or interest payments. A Fund portfolio with high yield debt securities may be more susceptible to credit risk and market risk than a portfolio that invests only in higher quality debt securities because these lower-rated debt securities are less secure financially and more sensitive to downturns in the economy. In addition, the secondary market for such securities may not be as liquid as that for more highly rated debt securities. As a result, the Fund's sub-adviser may find it more difficult to sell these securities or may have to sell them at lower prices. High yield securities are not generally meant for short-term investing. When the Fund invests in high yield securities it generally seeks to receive a correspondingly higher return to compensate it for the additional credit risk and market risk it has assumed. - INTEREST RATE RISK The values of debt securities are subject to change when prevailing interest rates change. When interest rates go up, the value of debt securities and certain dividend paying stocks tends to fall. If the Fund invests a significant portion of its assets in debt securities or stocks purchased primarily for dividend income and interest rates rise, then the value of your investment may decline. Investors should note that short-term interest rates are still near historic lows. 26 TA IDEX MERCURY TACTICAL ALLOCATION - PRECIOUS METAL RELATED SECURITIES Prices of precious metals and of precious metal related securities historically have been very volatile. The high volatility of precious metal prices may adversely affect the financial condition of companies involved with precious metals. The production and sale of precious metals by governments or central banks or other larger holders can be affected by various economic, financial social and political factors, which may be unpredictable and may have a significant impact on the prices of precious metals. Other factors that may affect the prices of precious metals and securities related to them include changes in inflation, the outlook for inflation and changes in industrial and commercial demand for precious metals. - CREDIT RISK The fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivative contract, is unable or unwilling to meet its financial obligations. - REAL ESTATE SECURITIES Investments in the real estate industry are subject to risks associated with direct investment in real estate. These risks include: - declining real estate value - risks relating to general and local economic conditions - over-building - increased competition for assets in local and regional markets - increases in property taxes - increases in operating expenses or interest rates - change in neighborhood value or the appeal of properties to tenants - insufficient levels of occupancy - inadequate rents to cover operating expenses The performance of securities issued by companies in the real estate industry also may be affected by prudent management of insurance risks, adequacy of financing available in capital markets, competent management, changes in applicable laws and government regulations (including taxes) and social and economic trends. - WARRANTS AND RIGHTS Warrants and rights may be considered more speculative than certain other types of investments because they do not entitle a holder to the dividends or voting rights for the securities that may be purchased. They do not represent any rights in the assets of the issuing company. Also, the value of a warrant or right does not necessarily change with the value of the underlying securities. A warrant or right ceases to have value if it is not exercised prior to the expiration date. - HEDGING The Fund may enter into forward foreign currency contracts to hedge against declines in the value of securities denominated in, or whose value is ties to, a currency other than the U.S. dollar or to reduce the impact of currency fluctuation on purchases and sales of such securities. Shifting the Fund's currency exposure from one currency to another removes the Fund's opportunity to profit from the original currency and involves a risk of increased losses for the Fund if the sub-adviser's projection of future exchange rates is inaccurate. - DERIVATIVES The use of derivative instruments may involve risks different from, or greater than, the risks associated with investing directly in securities or other traditional investments. Derivatives may be subject to market risk, interest rate risk, and credit risk. Certain derivatives may be illiquid, which may reduce the return of the Fund if it cannot sell or terminate the derivative instrument at an advantageous time or price. Some derivatives may involve the risk of improper valuation, or the risk that changes in the value of the instrument may not correlate well with the underlying asset, rate or index. As a result of inaccurate market predictions by the sub-adviser, the Fund could lose the entire amount of its investment in a derivative and, in some cases, could lose more than the principal amount invested. Also, suitable derivative instruments may not be available in all circumstances, and there is no assurance that the Fund will be able to engage in these transactions to reduce exposure to other risks. YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND. These and other risks are fully described in the section entitled "Explanation of Strategies and Risks," in Appendix A of this prospectus. DISCLOSURE OF PORTFOLIO HOLDINGS A detailed description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Statement of Additional Information. In addition, investors should note that the Fund publishes its holdings on its website at www.idexfunds.com 30 days after the end of each calendar quarter. Such information will remain online for six months. INVESTOR PROFILE The Fund may be appropriate for investors who seek to maximize returns and who can tolerate substantial volatility in the value of their principal. PAST PERFORMANCE No performance is shown for the Fund as it was not available until ______________, 2005. Performance information for the Fund will appear in a future version of this prospectus once the Fund has a full calendar year of performance information to report to investors. 27 TA IDEX MERCURY TACTICAL ALLOCATION FEES AND EXPENSES Class A shares of TA IDEX funds are normally subject to an initial sales charge of 5.50% and a 12b-1 distribution and service fees of up to 0.35% of average daily net assets per year. The initial sales charge currently is waived for Class A shares, as these shares are currently being offered for sale only to certain asset allocation funds. There is no sales charge (load) or 12b-1 distribution and service fee on Class I shares, which are currently being offered for sale only to certain other asset allocation funds The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets, expressed as a % of average daily net assets)
CLASS OF SHARES --------------- A I ----- ----- Management fees 0.80% 0.80% Distribution and serve (12b-1) fees 0.35% N/A Other expenses(a) 0.20% 0.20% Total annual fund operating expenses 1.35% 1.00% Expense reduction(b) - - Net operating expenses 1.35% 1.00%
---------- (a) Other expenses are based on estimates. (b) Contractual arrangements have been made with the Fund's investment adviser, Transamerica Fund Advisors, Inc. through ______________, to waive fees and/or reimburse expenses to the extent that the Fund's total operating expenses exceed 1.00% (excluding 12b-1 fees). TFAI is entitled to reimbursement by the Fund of fees waived or expenses reduced during any of the previous 36 months beginning on the date of the expense limitation arrangement if on any day the estimated annualized total operating expenses are less than 1.00%. EXAMPLE This example is here to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. It shows the cumulative expenses you would pay if you invested $10,000 and held your shares for various time periods, with a 5% annual return and fund operating expenses remaining the same. This return is for illustrative purposes and is not guaranteed. Actual costs may be higher or lower.
SHARE CLASS 1 YEAR 3 YEARS ----------- ------ ------- A $ 137 $ 428 I $ 102 $ 318
ADDITIONAL INFORMATION MANAGEMENT INVESTMENT ADVISER: Transamerica Fund Advisors, Inc. (TFAI) 570 Carillon Parkway St. Petersburg, Florida 33716-1202 For additional information about TFAI, see the section entitled "Shareholder Information - Investment Adviser" of this prospectus. ADVISORY FEE TFAI receives compensation, calculated daily and paid monthly, from the Fund at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $100 million........................... 0.80% Over $100 million............................ 0.72%
SUB-ADVISER: Fund Asset Management, LP, doing business as Mercury Advisors 800 Scudders Mill Road Plainsboro, NC 08536 SUB-ADVISORY FEE: The sub-adviser receives compensation, calculated daily and paid monthly, from TFAI at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $100 million........................... 0.44% Over $100 million............................ 0.32%
A discussion regarding the basis of TA IDEX's Board of Trustees' approval of the Fund's investment advisory arrangements will be available in the Fund's semi-annual report for the fiscal half-year ending April 30, 2006. PORTFOLIO MANAGER: The Fund is managed by members of a team of investment professionals who participate in the team's research process and stock selection. Dennis W. Stattman is primarily responsible for the day-to-day management of the Fund. DENNIS W. STATTMAN has been Senior Portfolio Manager since 2002. He joined Mercury (of which Mercury Advisors is a division) in 1998 as an Associate Portfolio Manager. From September of that year and until February 1996, he was also Senior Portfolio Manager of the Merrill Lynch Special Value Fund. Prior to joining Mercury, Mr. Stattman served as the Director of Research for Meridian Management Company and, before that, as Pension Investment Officer for the World Bank, supervising the management of U.S. equities in the Bank's Retirement Plan. Mr. Stattman earned a BS in Commerce from the University of Virginia and an MBA 28 TA IDEX MERCURY TACTICAL ALLOCATION with honors from the University of Chicago. He is a Chartered Financial Analyst. The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the Fund. 29 TA IDEX CREDIT SUISSE COMMODITIES SUMMARY OF RISKS AND RETURNS OBJECTIVE The investment objective of TA IDEX Credit Suisse Commodities (the "Fund") is to seek total return by investing in commodity-linked derivative instruments backed by a portfolio of fixed income securities. PRINCIPAL STRATEGIES AND POLICIES The Fund's sub-adviser, Credit Suisse Asset Management, LLC (CSAM), seeks to achieve this objective by investing in commodity-linked derivative instruments, such as swap agreements, commodity-linked notes, commodity options, futures and options on futures that provide exposure to the investment returns of the commodities markets without investing directly in physical commodities. Under normal market conditions, the Fund intends to invest at least 80% of its assets in a combination of commodity-linked derivative instruments, such as swaps and structured notes, and fixed income securities backing those instruments. CSAM seeks to replicate the performance of the Dow-Jones AIG Commodity Index ("DJ-AIG Index"). The notional amount of the commodity-linked derivative instruments the Fund enters into are expected to range between 70% and 100% of the Fund's net assets. However, the market value of the Fund's commodity-linked derivative instruments is not expected to exceed 5% of the Fund's net assets at the time of purchase. The remainder of the Fund's assets (other than amounts invested in structured notes and other derivatives) are expected to consist predominantly of fixed income instruments. The Fund intends to gain exposure to commodities markets primarily by investing in swap agreements whose value depends on the DJ-AIG Index. In a typical commodity swap agreement, the Fund will receive the price appreciation (or depreciation) of a commodity index, or a portion of an index, from the counterparty to the swap agreement in exchange for paying the counterparty an agreed-upon fee. The Fund may also seek to gain exposure to the commodities markets by investing in commodity-linked structured notes with principal and/or coupon payments linked to the value of the DJ-AIG Index. These notes may be issued by U.S. and foreign banks, brokerage firms, insurance companies and other corporations. These notes are debt securities of the issuer and so, in addition to fluctuating in response to changes in the underlying commodity index, will be subject to credit and interest rate risks that typically affect debt securities. The Fund may also invest in structured notes where the principal and/or coupon payments are linked to the DJ-AIG Index. The Fund does not intend to invest in commodities directly or in instruments linked to individual commodity sectors. The prices of commodity-linked instruments may move in different directions than investments in traditional equity and debt securities in periods of rising inflation. Of course, there can be no guarantee that the Fund's commodity-linked investments would not be correlated with traditional financial assets under any particular market conditions. In addition, while the primary driver of the Fund's returns is expected to be the change in value of the DJ-AIG Index, the Fund is not an index fund. The Fund will not concentrate its investments in instruments issued by companies in any one industry. However, 25% or more of its total assets may be indirectly exposed to industries in the three commodity sectors of the DJ-AIG Index. In addition, the Fund can invest more than 25% of its total assets in instruments (such as structured notes) issued by companies in the financial services sector (which includes the banking, brokerage and insurance industries). In that case, the Fund's share values will fluctuate in response to events affecting issues in those sectors. The DJ-AIG Index is a broadly diversified futures index composed of futures contracts on 20 physical commodities. The index is weighted among commodity sectors using dollar-adjusted liquidity and production data. Currently, four energy products, six metals and ten agricultural products are represented in the index. The DJ-AIG Index is rebalanced as of the beginning of each calendar year so that as of that time no single commodity constitutes less than 2% or more than 15% of the index, and each sector represented in the index is limited to 33%. However, following this rebalancing and for the remainder of the calendar year these percentages may change so that a single commodity may constitute a lesser or greater percentage of the index and different sectors may represent different proportions of the index. The Fund invests in commodity-linked derivatives that are swaps and hybrid instruments excluded from regulation under the Commodity Exchange Act, so that the Fund will not be considered a "commodity pool." From time to time the Fund may invest in instruments that are regulated under that Act. Under normal market conditions: - at least 90% of the Fund's fixed income securities will be investment grade; and - the Fund will maintain an average duration of the fixed income portion of the portfolio of one year or less. In determining the credit quality of a rated security, CSAM will use the highest rating assigned to it. 30 TA IDEX CREDIT SUISSE COMMODITIES Duration is a measure of the expected life of a fixed income security that is used to determine the sensitivity of a security's price to changes in interest rates. The longer a security's duration, the more sensitive it will be to changes in interest rates. Similarly, a fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration. The fixed income securities the Fund may invest in include, without limitation: - corporate bonds, debentures and notes - convertible debt securities - preferred stocks - government and agency securities - municipal securities - mortgage-backed and other asset-backed securities - obligations of international agencies or supranational entities - repurchase agreements involving portfolio securities - structured notes, including hybrid or "indexed" securities, event-linked bonds and loan participations - delayed funding loans and revolving credit facilities - reverse repurchase agreements - bank certificates of deposit, fixed time deposits and bankers' acceptances - commercial paper The Fund may invest: - without limit in U.S. dollar-denominated, investment-grade foreign securities - up to 30% of its assets in non-dollar-denominated foreign securities - up to 10% of its assets in fixed income securities rated below investment grade, or unrated securities determined to be of comparable quality (junk bonds) - up to 5% of its assets in emerging markets debt securities The use of swaps and other derivative strategies, such as commodity-linked structured notes, is a principal strategy of the Fund. Derivative strategies and the writing of uncovered (or so-called "naked") options are speculative and may hurt the Fund's performance. The Fund may attempt to hedge its investments in order to mitigate risk, but it is not required to do so. The benefits to be derived from the Fund's derivatives and options strategy are dependent upon CSAM's ability to discern pricing inefficiencies and predict trends in the commodities and other markets, which decisions could prove to be inaccurate. This requires different skills and techniques than predicting changes in the price of individual stocks or fixed income securities, and there can be no assurance that the use of this strategy will be successful. Additional information about the Fund's derivatives and options strategy and related risks is included in the SAI. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates. The Fund will hedge its exposure to foreign currency through the use of currency futures and options on futures, forward currency contracts and currency options. In addition to investing in swaps and commodity-linked structured notes, the Fund may engage in other investment practices that include the use of options, futures and other derivative instruments. The Fund will attempt to take advantage of pricing inefficiencies in these instruments. For example, the Fund may write (i.e., sell) put and call options. The Fund would receive premium income when it writes an option, which will increase the Fund's return in the event the option expires unexercised or is closed out at a profit. Upon the exercise of a put or call option written by the Fund, the Fund may suffer an economic loss equal to the difference between the price at which the Fund is required to purchase, in the case of a put, or sell, in the case of a call, the underlying security or instrument and the option exercise price, less the premium received for writing the option. The Fund may engage in derivative transactions involving a variety of underlying instruments, including, in addition to swaps, structured notes, equity and debt securities, securities indexes and futures. The Fund may also invest in common and preferred stock as well as convertible securities of issuers in commodity-related industries. To a limited extent, the Fund may also engage in other investment practices. THIS FUND IS NON-DIVERSIFIED. WHAT IS A NON-DIVERSIFIED FUND? A "non-diversified" fund has the ability to take larger positions in a smaller number of issuers. To the extent a fund invests a greater portion of its assets in the securities of a smaller number of issuers, it may be more susceptible to any single economic, political or regulatory occurrence than a diversified fund and may be subject to greater loss with respect to its portfolio securities. However, to meet federal tax requirements, at the close of each quarter the Fund may not have more than 25% of its total assets invested in any one issuer, and, with respect to 50% of its total assets, not more than 5% of its total assets invested in any one issuer. Under adverse or unstable market conditions, the Fund could invest some or all of its assets in cash, repurchase agreements and money market instruments. Although the Fund would do this only in seeking to avoid losses, the Fund may be unable to pursue its investment objective during that time, and it could reduce the benefit from any upswing in the market. 31 TA IDEX CREDIT SUISSE COMMODITIES PRINCIPAL RISKS The Fund is subject to the following principal investment risks: - COMMODITY RISK The Fund's investment in commodity-linked derivative instruments may subject the Fund to greater volatility than investments in traditional securities, particularly if the investments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss (including the likelihood of greater volatility of the Fund's net asset value), and there can be no assurance that the Fund's use of leverage will be successful. - DERIVATIVES The use of derivative instruments may involve risks different from, or greater than, the risks associated with investing directly in securities or other traditional investments. Derivatives may be subject to market risk, interest rate risk, and credit risk. Certain derivatives may be illiquid, which may reduce the return of the Fund if it cannot sell or terminate the derivative instrument at an advantageous time or price. Some derivatives may involve the risk of improper valuation, or the risk that changes in the value of the instrument may not correlate well with the underlying asset, rate or index. As a result of inaccurate market predictions by the sub-adviser, the Fund could lose the entire amount of its investment in a derivative and, in some cases, could lose more than the principal amount invested. Also, suitable derivative instruments may not be available in all circumstances, and there is no assurance that the Fund will be able to engage in these transactions to reduce exposure to other risks. - OPTIONS Investing in financial contracts such as options involve additional risks and costs. Risks include: inaccurate market predictions which may result in losses instead of gains; and prices may not match so the benefits of the transaction might be diminished and the Fund may incur substantial losses - STOCKS While stocks have historically outperformed other investments over the long term, their prices tend to go up and down more dramatically over the shorter term. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Because the stocks the Fund holds fluctuate in price, the value of your investments in the Fund will go up and down. - FIXED INCOME SECURITIES The value of these securities may change daily based on changes in interest rates, and other market conditions and factors. Risks include: - fluctuations in market value - changes in interest rates: the value of a fixed income security generally decreases as interest rates rise - length of time to maturity: the longer the duration, the more vulnerable the value of a fixed income security is to fluctuations in interest rates - issuers defaulting on their obligations to pay interest or return principal - FOREIGN SECURITIES Investments in foreign securities, including American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs), involve risks relating to political, social and economic developments abroad, as well as risks resulting from the difference between the regulations to which U.S. and foreign issuer markets are subject. These risks may include, without limitation: - changes in currency values - currency speculation - currency trading costs - different accounting and reporting practices - less information available to the public - less (or different) regulation of securities markets - more complex business negotiations - less liquidity - more fluctuations in prices - delays in settling foreign securities transactions - higher costs for holding shares (custodial fees) - higher transaction costs - vulnerability to seizure and taxes - political instability and small markets - different market trading days - CREDIT RISK The fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivative contract, is unable or unwilling to meet its financial obligations. - INTEREST RATE RISK The values of debt securities are subject to change when prevailing interest rates change. When interest rates go up, the value of debt securities and certain dividend paying stocks tends to fall. If the Fund invests a significant portion of its assets in debt securities or stocks purchased primarily for dividend income and interest rates rise, then the value of your investment may decline. Investors should note that short-term interest rates are still near historic lows. 32 TA IDEX CREDIT SUISSE COMMODITIES - CURRENCY RISK Because the Fund's foreign investments are generally held in foreign currencies, the Fund is subject to currency risk, meaning the Fund could experience gains or losses solely on changes in the exchange rate between foreign currencies and the U.S. dollar. - COUNTRY, SECTOR OR INDUSTRY FOCUS To the extent the Fund invests a significant portion of its assets in one or more countries, sectors or industries at any time, the Fund will face a greater risk of loss due to factors affecting the single country, sector or industry than if the Fund always maintained wide diversity among the countries, sectors and industries in which it invests. - MORTGAGE-RELATED SECURITIES Mortgage-related securities in which the Fund may invest represent pools of mortgage loans assembled for sale to investors by various governmental agencies, government-related organizations, as well as by nongovernmental issuers such as commercial banks, savings and loan institutions, mortgage bankers and private mortgage insurance companies. Although certain mortgage-related securities are guaranteed by a third party or otherwise similarly secured, the market value of the security, is not so secured. In addition to the risks generally associated with fixed income securities, the Fund's investments in mortgage related securities entail prepayment risk, which is the possibility that mortgage holders will repay their loans early during periods of falling interest rates, requiring the Fund to reinvest in lower yielding instruments and receive less principal or income than originally was anticipated. - INDEXED SECURITIES The Fund may invest in indexed securities whose value is linked to foreign currencies, interest rates, commodities, indices or other financial indicators. Most indexed securities are short to intermediate term fixed-income securities whose values at maturity (i.e., principal value) or interest rates rise or fall according to changes in the value of one or more specified underlying instruments. Indexed securities may be positively or negatively indexed (i.e., their principal value or interest rates may increase or decrease if the underlying instrument appreciates), and may have return characteristics similar to direct investments in the underlying instrument or to one or more options on the underlying instrument. Indexed securities may be more volatile than the underlying instrument itself and could involve the loss of all or a portion of the principal amount of, or interest on, the instrument. - REPURCHASE AGREEMENTS Under a repurchase agreement, the seller agrees to repurchase a security at a mutually agreed-upon time and price. If the other party to a repurchase agreement defaults on its obligation, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security and the market value declines, the Fund could lose money. - PREFERRED STOCKS Preferred stocks may include the obligation to pay a stated dividend. Their price could depend more on the size of the dividend than on the company's performance. If a company fails to pay the dividend, its preferred stock is likely to drop in price. Changes in interest rates can also affect their price. - CONVERTIBLE SECURITIES Convertible securities may include corporate notes or preferred stock, but ordinarily are a long-term debt obligation of the issuer convertible at a stated exchange rate into common stock of the issuer. As with all debt securities, the market value of convertible securities tends to decline as interest rates increase. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the price of the convertible security tends to reflect the value of the underlying common stock. - HIGH YIELD DEBT SECURITY RISK High yield debt securities, or junk bonds, are securities which are rated below "investment grade" or are not rated, but are of equivalent quality. High yield debt securities range from those for which the prospect for repayment of principal and interest is predominantly speculative to those which are currently in default on principal or interest payments. A Fund portfolio with high yield debt securities may be more susceptible to credit risk and market risk than a portfolio that invests only in higher quality debt securities because these lower-rated debt securities are less secure financially and more sensitive to downturns in the economy. In addition, the secondary market for such securities may not be as liquid as that for more highly rated debt securities. As a result, the Fund's sub-adviser may find it more difficult to sell these securities or may have to sell them at lower prices. High yield securities are not generally meant for short-term investing. When the Fund invests in high yield securities it generally seeks to receive a correspondingly higher return to compensate it for the additional credit risk and market risk it has assumed. 33 TA IDEX CREDIT SUISSE COMMODITIES - LIQUIDITY RISK Liquidity risk exists when particular investments are difficult to purchase or sell. The Fund's investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. - HEDGING The Fund may enter into forward foreign currency contracts to hedge against declines in the value of securities denominated in, or whose value is ties to, a currency other than the U.S. dollar or to reduce the impact of currency fluctuation on purchases and sales of such securities. Shifting the Fund's currency exposure from one currency to another removes the Fund's opportunity to profit from the original currency and involves a risk of increased losses for the Fund if the sub-adviser's projection of future exchange rates is inaccurate. - NON-DIVERSIFICATION RISK Focusing investments in a small number of issuers, industries or foreign currencies increases risk. Because the Fund is non-diversified, it may be more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio might be. - CORRELATION RISK The risk that changes in the value of a hedging instrument will not match those of the investment being hedged. - FOCUS RISK The fund will be exposed to the performance of commodities in the DJAIG Index, which may from time to time have a small number of commodity sectors (e.g., energy or metals) representing a large portion of the index. As a result, the fund may be subject to greater volatility than if the index were more broadly diversified among commodity sectors. - TAX RISK In order to qualify as a regulated investment company ("RIC"), the fund must meet certain requirements regarding the source of its income, the diversification of its assets and the distribution of its income. The status of commodity-linked swaps and structured notes in which the fund may invest under such tests to qualify as a RIC under the Internal Revenue Code (the "Code") is not certain, and the fund does not intend to obtain a ruling from the Internal Revenue Service. In the event these instruments are adversely treated under these tests, the fund will take all available steps to lessen any adverse tax consequences, although there can be no guarantee that it will be able to do so. If the fund fails to qualify as a RIC, the fund will be subject to federal income tax on its net income at regular corporate rates (without reduction for distributions to shareholders). When distributed, that income would also be taxable to shareholders as an ordinary dividend to the extent attributable to the fund's earnings and profits. YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND. These and other risks are fully described in the section entitled "Explanation of Strategies and Risks," in Appendix A of this prospectus. DISCLOSURE OF PORTFOLIO HOLDINGS A detailed description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Statement of Additional Information. In addition, investors should note that the Fund publishes its holdings on its website at www.idexfunds.com 30 days after the end of each calendar quarter. Such information will remain online for six months. INVESTOR PROFILE This Fund may be appropriate for investors who seek total return, are looking to hedge their portfolios during periods of rising inflation and who can tolerate significant risk and volatility in the value of their principal. PAST PERFORMANCE No performance is shown for the Fund as it was not available until ______________, 2005. Performance information for the Fund will appear in a future version of this prospectus once the Fund has a full calendar year of performance information to report to investors. FEES AND EXPENSES Class A shares of TA IDEX funds are normally subject to an initial sales charge of 5.50% and a 12b-1 distribution and service fees of up to 0.35% of average daily net assets per year. The initial sales charge currently is waived for Class A shares, as these shares are currently being offered for sale only to certain asset allocation funds. There is no sales charge (load) or 12b-1 distribution and service fee on Class I shares, which are currently being offered for sale only to certain other asset allocation funds The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets, expressed as a % of average daily net assets)
CLASS OF SHARES --------------- A I ----- ----- Management fees 0.70% 0.70% Distribution and serve (12b-1) fees 0.35% N/A Other expenses(a) 0.20% 0.20% Total annual fund operating expenses 1.25% 0.90% Expense reduction(b) - - Net operating expenses 1.25% 0.90%
---------- (a) Other expenses are based on estimates. (b) Contractual arrangements have been made with the Fund's investment adviser, Transamerica Fund Advisors, Inc. through ______________, to waive fees and/or reimburse expenses to the extent that the Fund's total operating expenses exceed 0.90%, (excluding 12b-1 fees). TFAI is entitled to reimbursement by the Fund of fees waived or expenses reduced during any of the previous 36 months beginning on the date of the expense limitation arrangement if on any day the estimated annualized total operating expenses are less than 0.90%. EXAMPLE This example is here to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. It shows the cumulative expenses you would pay if you invested $10,000 and held your shares for various time periods, with a 5% annual return and fund operating expenses remaining the same. This return is for illustrative purposes and is not guaranteed. Actual costs may be higher or lower.
SHARE CLASS 1 YEAR 3 YEARS ----------- ------ ------- A $ 127 $ 397 I $ 92 $ 287
ADDITIONAL INFORMATION MANAGEMENT INVESTMENT ADVISER: 34 TA IDEX CREDIT SUISSE COMMODITIES Transamerica Fund Advisors, Inc. (TFAI) 570 Carillon Parkway St. Petersburg, Florida 33716-1202 For additional information about TFAI, see the section entitled "Shareholder Information - Investment Adviser" of this prospectus. ADVISORY FEE TFAI receives compensation, calculated daily and paid monthly, from the Fund at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $500 million................... 0.70% Over $500 million up to $1 billion... 0.68% Over $1 billion...................... 0.65%
SUB-ADVISER: Credit Suisse Asset Management, LLC 466 Lexington Avenue New York, NY 10017 SUB-ADVISORY FEE: The sub-adviser receives compensation, calculated daily and paid monthly, from TFAI at the indicated annual rate (expressed as a specified percentage of the Fund's average daily net assets): First $500 million................... 0.25% Over $500 million up to $1 billion... 0.23% Over $1 billion...................... 0.20%
A discussion regarding the basis of TA IDEX's Board of Trustees' approval of the Fund's investment advisory arrangements will be available in the Fund's semi-annual report for the fiscal half-year ending April 30, 2006. PORTFOLIO MANAGERS: NELSON LOUIE, Director, joined CSAM in 1993 from Bankers Trust, where he was an operations specialist within its funds management group. Mr. Louie is currently responsible for overseeing trading and portfolio management of the team's derivatives-based hedging strategies, enhanced indexing strategies and excess return strategies. Mr. Louie holds a B.A. in economics from Union College. KAM T. POON, Vice President, is a fixed income portfolio manager/trader focusing on government and agency securities, as well as interest-rate futures. He also trades taxable and tax-exempt money market securities. He joined CSAM in 1997 from The Bank of New York. Mr. Poon holds BS and MBA degrees in finance from New York University's Stern School of Business. ANDREW S. LENSKOLD, Vice President, joined CSAM in 2003 as a portfolio manager for cash and enhanced cash portfolios, and provides trade support for the firm's derivative's group. He has extensive experience as a fixed income trader focusing on cash and short-term instruments. In 2001 he joined Abbey National Treasury Services, where he worked in sales and marketing for short-term fixed income products. In 1995 he joined GE Capital with similar responsibilities, and prior to that traded money market securities at Mutual Benefit Life Insurance Company. Mr. Lenskold holds a BA in political science from Yale University and an MBA in accounting and finance from Washington University. The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the Fund. 35 SECTION B -- SHAREHOLDER INFORMATION REGULATORY PROCEEDINGS There continues to be significant federal and state regulatory activity relating to financial services companies, particularly mutual fund companies and their investment advisers. As part of an ongoing investigation regarding potential market timing, recordkeeping and trading compliance issues and matters affecting Transamerica Fund Advisors, Inc. (TFAI), the investment adviser for TA IDEX and certain employees and affiliates of TFAI, the SEC staff has indicated that it is likely to take some action against TFAI and certain of its affiliates at the conclusion of the investigation. The potential timing and the scope of any such action is difficult to predict. Although the impact of any action brought against TFAI and/or its affiliates is difficult to assess at the present time, the funds currently believe that the likelihood that it will have a material adverse impact on them is remote. It is important to note that the funds are not aware of any allegation of wrongdoing against them and their board at the time this prospectus is printed. Although it is not anticipated that these developments will have an adverse impact on the funds, there can be no assurance at this time. TFAI and its affiliates are actively working with the SEC in regard to this matter; however, the exact resolution cannot be determined at this time. TFAI will take such actions that it deems necessary or appropriate to continue providing management services to the funds and to bring all matters to an appropriate conclusion. TFAI and/or its affiliates, and not the funds, will bear the costs regarding these regulatory matters. INVESTMENT ADVISER TA IDEX's Board of Trustees is responsible for managing the business affairs of TA IDEX. The Board oversees the operation of TA IDEX by its officers. It also reviews the management of each fund's assets by TFAI and investment sub-advisers. You can find additional information about the TA IDEX Trustees and officers in the SAI. TFAI, located at 570 Carillon Parkway, St. Petersburg, Florida 33716, serves as investment adviser for TA IDEX. The investment adviser hires investment sub-advisers to furnish investment advice and recommendations and has entered into sub-advisory agreements with each sub-adviser. The investment adviser also monitors the sub-advisers' buying and selling of portfolio securities and administration of the funds. For these services, TFAI is paid an investment advisory fee. This fee is calculated on the average daily net assets of each fund, and is paid at the rates previously shown in this prospectus. Each investment sub-adviser has confirmed, as of the time this prospectus is printed, that there are no ongoing legal proceedings that are likely to have a material adverse effect on the funds or on the ability of the sub-adviser to perform under its sub-advisory agreement. TFAI is directly-owned by Western Reserve Life Assurance Co. of Ohio (78%) (Western Reserve) and AUSA Holding Company (22%) (AUSA), both of which are indirect wholly-owned subsidiaries of AEGON N.V. AUSA is wholly-owned by Transamerica Holding Company, which is wholly-owned by AEGON USA, Inc. (AEGON USA), a financial services holding company whose primary emphasis is on life and health insurance, and annuity and investment products. AEGON USA is wholly-owned indirect subsidiary of AEGON N.V., a Netherlands corporation and publicly traded international insurance group. TFAI and/or its affiliates may pay, out of its own resources and not out of fund assets, for distribution and/or administrative services provided by broker-dealers and other financial intermediaries. See the section titled "Other Distribution or Service Arrangements" in this prospectus. AEGON/Transamerica Series Trust (ATST) received an Order from the Securities and Exchange Commission (Release IC- 23379 dated August 5, 1998) (Order) that permits TA IDEX and its investment adviser, TFAI, subject to certain conditions, and without the approval of shareholders to: (1) employ a new unaffiliated sub-adviser for a fund pursuant to the terms of a new investment sub-advisory agreement, either as a replacement for an existing sub-adviser or as an additional sub-adviser; (2) materially change the terms of any sub-advisory agreement; and (3) continue the employment of an existing sub-adviser on sub-advisory contract terms where a contract has been assigned because of a change of control of the sub-adviser. In such circumstances, shareholders would receive notice and information about the new sub-adviser within ninety (90) days after the hiring of any new sub-adviser. CLASS A SHARES PURCHASE AND REDEMPTION OF SHARES Class A shares of the TA IDEX funds in this prospectus are currently offered for investment only to the following 36 SECTION B -- SHAREHOLDER INFORMATION TA IDEX asset allocation funds: TA IDEX Asset Allocation - Conservative Portfolio, TA IDEX Asset Allocation - Growth Portfolio, TA IDEX Asset Allocation - Moderate Growth Portfolio and TA IDEX Asset Allocation - Moderate Portfolio. Class A of TA IDEX funds are normally subject to an initial sales charge of 5.50% and distribution and service 12b-1 fees of up to 0.35% of average daily net assets, annually. The initial sales charge currently is waived for the funds being offered by this prospectus as these funds are offered for investment only by the TA IDEX asset allocation funds mentioned above. If charged, these fees and expenses would lower investment performance. CLASS I SHARES PURCHASE AND REDEMPTION OF SHARES Class I shares of the TA IDEX funds in this prospectus are currently offered for investment only to the following AEGON/Transamerica Series Fund, Inc. (ATSF) asset allocation funds: ATSF Asset Allocation - Conservative Portfolio; ATSF Asset Allocation - Growth Portfolio; ATSF Asset Allocation - Moderate Growth Portfolio and ATSF Asset Allocation - Moderate Portfolio. FEATURES AND POLICIES HOW SHARE PRICE IS DETERMINED The price at which shares are purchased or redeemed is the net asset value per share ("NAV") that is next calculated following receipt and acceptance of a purchase order in good order or receipt of a redemption order in good order by the fund or an authorized intermediary. WHEN SHARE PRICE IS DETERMINED The NAV of all funds is determined on each day the New York Stock Exchange ("NYSE") is open for business. The NAV is not determined on days when the NYSE is closed (generally New Year's Day, Martin Luther King Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas). Foreign securities may trade in their primary markets on weekends or other days when a fund does not price its shares (therefore, the NAV of a fund holding foreign securities may change on days when shareholders will not be able to buy or sell shares of the funds). Purchase orders received in good order and accepted, and redemption orders received in good order, before the close of business on the NYSE, usually 4:00 p.m. Eastern Time, receive the NAV determined as of the close of the NYSE that day. Purchase and redemption requests received after the NYSE is closed receive the share price at the close of the NYSE the next day the NYSE is open. Orders for shares of the asset allocation funds mentioned above that invest in Class A and I shares of the funds and corresponding orders for the Class A and I shares of the funds are priced on the same day when orders for shares of the asset allocation funds are received. Consequently, receipt in good order and acceptance of a purchase request or receipt in good order of a redemption request for shares of the asset allocation funds before the close of business on the NYSE is deemed to constitute receipt of a proportional order for the corresponding Class A and I shares of the funds on the same day, so that both orders generally will receive that day's NAV. HOW NAV IS CALCULATED The NAV of each fund (or class thereof) is calculated by taking the value of its assets, less liabilities, and dividing by the number or shares of the fund (or class) that are then outstanding. In general, securities and other investments are valued at market value when market quotations are readily available. Fund securities listed or traded on domestic securities exchanges or the NASDAQ/NMS, including dollar-dominated foreign securities or ADRs, are valued at the closing price on the exchange or system where the security is principally traded. With respect to securities traded on the NASDAQ/NMS, such closing price may be the last reported sale price or the Nasdaq Official Closing Price ("NOCP"). If there have been no sales for that day on the exchange or system where the security is principally traded, then the value should be determined with reference to the last sale price, or the NOCP, if applicable, on any other exchange or system. If there have been no sales for that day on any exchange or system, a security is valued at the closing bid quotes on the exchange or system where the security is principally traded, or at the NOCP, if applicable. Foreign securities traded on U.S. exchanges are generally priced using last sale price regardless of trading activity. Securities traded over-the-counter are valued at the mean of the last bid and asked prices. Investments in securities maturing in 60 days or less may be valued at amortized cost. Foreign securities generally are valued based on quotations from the primary market in which they are traded, and are converted from the local currency into U.S. dollars using current exchange rates. Market quotations for securities prices may be obtained from automated pricing services. When a market quotation for a security is not readily available (which may include closing prices deemed to be unreliable because of the occurrence of a subsequent event), a valuation committee appointed by the Board of Trustees may, in good faith, establish a fair value for the security in accordance with valuation procedures adopted by the Board. The types of securities for which such fair 37 SECTION B -- SHAREHOLDER INFORMATION value pricing may be required include, but are not limited to: foreign securities, where a significant event occurs after the close of the foreign market on which such security principally trades that is likely to have changed the value of such security, or the closing value is otherwise deemed unreliable; securities of an issuer that has entered into a restructuring; securities whose trading has been halted or suspended; fixed income securities that have gone into default and for which there is no current market value quotation; and securities that are restricted as to transfer or resale. Valuing securities at fair value involves greater reliance on judgment than securities that have readily available market quotations. The valuation committee makes such determinations in good faith in accordance with funds' valuation procedures. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service. There can be no assurance that a fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the fund determines its NAV per share. MARKET TIMING/EXCESSIVE TRADING Some investors try to profit from various short-term or frequent trading strategies known as market timing. Examples of market timing include switching money into funds when their share prices are expected to rise and taking money out when their share prices are expected to fall, and switching from one fund to another and then back again after a short period of time. As money is shifted in and out, a fund may incur expenses for buying and selling securities. Excessive purchases, redemptions or exchanges of fund shares may disrupt portfolio management, hurt fund performance and drive fund expenses higher. For example, the fund may be forced to liquidate investments as a result of short-term trading and incur increased brokerage costs or realize taxable capital gains without attaining any investment advantage. These costs are generally borne by all shareholders, including long-term investors who do not generate these costs. THE TA IDEX BOARD OF TRUSTEES HAS APPROVED POLICIES AND PROCEDURES THAT ARE DESIGNED TO DISCOURAGE MARKET TIMING OR EXCESSIVE TRADING. IF YOU INTEND TO ENGAGE IN SUCH PRACTICES, WE REQUEST THAT YOU DO NOT PURCHASE SHARES OF ANY OF THE FUNDS. Each fund reserves the right to reject any request to purchase shares, including purchases in connection with an exchange transaction, which it reasonably determines to be in connection with market timing or excessive trading. However, because the shares of the funds are sold only to certain asset allocation funds, the funds' policies and procedures to discourage market timing or excessive trading are enforced by the asset allocation funds rather than the funds. Additional information about such policies and procedures are available in the prospectus of the asset allocation funds. Furthermore, reallocations in the funds by an asset allocation fund in furtherance of a portfolio's investment objective are not considered to be market timing or excessive trading. ASSET ALLOCATION FUNDS The TA IDEX and ATST asset allocation funds discussed above that invest in the TA IDEX funds described in this prospectus may own a significant portion of the shares of a TA IDEX fund. Transactions by the asset allocation funds may be disruptive to the management of an underlying TA IDEX fund. INVESTMENT POLICY CHANGES TA IDEX J.P. Morgan International Bond, TA IDEX Oppenheimer Developing Markets and TA IDEX Credit Suisse Commodities, as part of each fund's investment policy, invest at least 80% of its assets (defined as net assets plus the amount of any borrowing for investment purposes) in certain investments as indicated in this prospectus. Shareholders will be provided with at least 60 days' prior written notice of any changes in the 80% investment policy. Such notice will comply with the conditions set forth in any applicable SEC rules then in effect. NOTE: Unless expressly designated as fundamental, all policies and procedures of the funds may be changed at any time by TA IDEX's Board of Trustees without shareholder approval. To the extent authorized by law, TA IDEX and each of the funds reserve the right to discontinue offering shares at any time, or to cease operations entirely. DIVIDENDS AND DISTRIBUTIONS Each fund will distribute all or substantially all of its net investment income and net capital gains to its shareholders each year except TAIDEX J.P. Morgan International Bond which will distribute dividends monthly. DISTRIBUTION OF SHARES UNDERWRITING AGREEMENT TA IDEX has an Underwriting Agreement with AFSG Securities Corporation (AFSG), located at 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499. AFSG is an affiliate of TFAI and TA IDEX. Under this agreement, AFSG underwrites and distributes all classes of fund shares and bears expenses of offering these shares 38 SECTION B -- SHAREHOLDER INFORMATION to the public. Except as otherwise indicated, the funds pay AFSG, or its agent, fees for its services. DISTRIBUTION PLAN The Board of Trustees of TA IDEX has adopted a 12b-1 Plan of Distribution for class A shares of the Funds. Under this Plan, each fund may pay AFSG a distribution and service fee of up to 0.35% of the average daily net assets attributable to its Class A shares, annually, which includes a service fee of 0.25%. If the service fees rise, the distribution fee is lowered so that the total fees payable do not exceed 0.35% annually. Fees are based on the average daily net assets of Class A shares. OTHER DISTRIBUTION OR SERVICE ARRANGEMENTS Transamerica Capital, Inc. ("TCI") (an affiliate of TFAI, TIM and AFSG), TFAI, TIM and other fund sub-advisers, directly or through TCI, out of their own resources and not out of fund assets (i.e., without additional cost to the funds or their shareholders), may provide additional cash payments or non-cash compensation to some, but not all, brokers and other financial intermediaries who sell shares of the asset allocation funds that invest in the funds or render investor services to asset allocation fund shareholders. Such payments and compensation are in addition to the sales charges, Rule 12b-1 plan fees, service fees and other fees paid, directly or indirectly, by the asset allocation funds to such brokers and other financial intermediaries. These arrangements are sometimes referred to as "revenue sharing" arrangements. Revenue sharing arrangements are not financed by the asset allocation funds or the funds and do not result in increased expenses, are not reflected in the fees and expenses sections of this prospectus and are described in more detail in the prospectus of the asset allocation funds. DISTRIBUTIONS AND TAXES Each fund intends to elect and qualify as a regulated investment company ("RIC") under the Internal Revenue Code. As a regulated investment company, the fund will not be subject to federal income tax on ordinary income and capital gains, if any, that it distributes to its shareholders. The status of commodity-linked derivative instruments under tests to qualify as a RIC under the Internal Revenue Code is not certain, and, as a result, the qualification of the TA IDEX Credit Suisse Commodities (the "Commodities Fund") as a RIC is unclear. The Commodities Fund does not intend to obtain a ruling from the Internal Revenue Service on the status of commodity-linked derivative instruments. If the Commodities Fund fails to qualify as a RIC, it will be subject to federal income tax on its net income at regular corporate rates (without a deduction for distributions paid to shareholders). When distributed that income would also be taxable to shareholders as ordinary dividends to the extent attributable to the Commodites Fund's earnings and profits. TAXES ON DISTRIBUTIONS IN GENERAL Each fund will distribute all or substantially all of its net investment income and net capital gains to its shareholders each year. Although a fund will not have to pay income tax on amounts it distributes to shareholders, most shareholders will be taxed on amounts they receive. Shareholders who are not subject to tax on their income, such as qualified retirement accounts and other tax-exempt investors, generally will not be required to pay any tax on distributions. If a fund declares a dividend in October, November, or December but pays it in January, you will be taxed on the dividend as if you received it in the previous year. You normally will be taxed on distributions you receive from a fund, regardless of whether they are paid to you in cash or are reinvested in additional fund shares. A particular distribution generally will be taxable as either ordinary income or as long-term capital gain. Distributions that are derived from net long-term capital gains will typically be taxed as long-term capital gain. Other distributions will usually be taxable as ordinary income. Except as described below, the tax consequences of a distribution do not depend upon how long you held your fund shares. Current tax law generally provides for a maximum tax rate for individual taxpayers of 15% on long-term gains and from certain qualifying dividends on corporate stock. These rate reductions do not apply to corporate taxpayers. The following are guidelines for how certain distributions by the funds are generally taxed to individual taxpayers: - Distributions of earnings from qualifying dividends and qualifying long-term capital gains will be taxed at a maximum rate of 15%. - Note that distributions of earnings from dividends paid by certain "qualified foreign corporations" can also qualify for the lower tax rates on qualifying dividends. - A shareholder will also have to satisfy a more than 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower tax rate. - Distributions of earnings from non-qualifying dividends, interest income, other types of ordinary income and short-term capital gains will be taxed at the ordinary income tax rate applicable to the taxpayer. As a result, distributions from funds that invest primarily in debt securities, such as money market funds and bond funds, will not generally qualify for the 15% rate. Each fund will send you a tax report annually summarizing the amount of and the tax aspects of your distributions. TAXES ON THE SALE OR EXCHANGE OF SHARES If you sell shares of a fund or exchange them for shares of another fund, you generally will have a capital gain or loss, which will be long-term capital gain if you held the 39 SECTION B -- SHAREHOLDER INFORMATION shares for more than one year and otherwise short-term capital gain. Such gain or loss is computed by subtracting your tax basis in the shares from the redemption proceeds (in the case of a sale) or the value of the shares received (in the case of an exchange). Because your tax basis depends on the original purchase price and on the price at which any dividends may have been reinvested, you should be sure to keep account statements so that you or your tax preparer will be able to determine whether a sale will result in a taxable gain. If your tax basis in the shares exceeds your redemption proceeds (or the value of the shares received in the case of an exchange), you will recognize a taxable loss on the sale of shares of the fund. Any loss recognized on shares held for six months or less will be treated as long-term capital loss to the extent of any long-term capital gain distributions that were received with respect to the shares. Additionally, any loss realized on a sale or exchange of shares of a fund may be disallowed under "wash sale" rules to the extent the shares disposed of are replaced with other shares of that fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of that fund. If disallowed, the loss will be reflected in an adjustment to the tax basis of the shares acquired. If more than 50% of the value of the total assets of a fund consists of stock or securities of foreign corporations at the close of a taxable year, the fund may elect to treat certain foreign taxes paid by them as paid by their shareholders. If a fund makes this election, the amount of the foreign taxes paid by the fund will be included in its shareholders' income pro rata (in addition to taxable distributions actually received by them), and its shareholders will be entitled either (a) to credit their proportionate amounts of the foreign taxes paid by the fund against their federal income tax liabilities, or (b) to deduct their proportionate amounts from their federal taxable income under certain circumstances. WITHHOLDING TAXES As with all mutual funds, a fund may be required to withhold U.S. federal income tax at the fourth lowest tax rate applicable to unmarried individuals (currently 28%) of all taxable distributions payable to you if you fail to provide the fund with your correct taxpayer identification number or to make required certifications, or if you have been notified by the IRS that you are subject to backup withholding. Backup withholding is not an additional tax, but is a method in which the IRS ensures that it will collect taxes otherwise due. Any amounts withheld may be credited against your U.S. federal income tax liability. NON-RESIDENT ALIEN WITHHOLDING Shareholders that are not U.S. investors under the federal tax laws will generally be subject to U.S. withholding and are generally subject to special U.S. tax certification requirements. Additionally, a valid W-8BEN form is required if you are not a U.S. citizen or resident alien. Documentary evidence may also be required to accompany the W-8BEN form. OTHER TAX INFORMATION This tax discussion is for general information only. In addition to federal income taxes, you may be subject to state, local or foreign taxes on payments received from, and investment made in shares of, TA IDEX. More information is provided in the SAI. You should also consult your own tax advisor for information regarding all tax consequences applicable to your investments in TA IDEX. 40 APPENDIX A EXPLANATION OF STRATEGIES AND RISKS HOW TO USE THIS SECTION In the discussions of the individual fund(s) in which you invest, you found descriptions of the principal strategies and risks associated with such fund(s). In those pages, you were referred to this section for a more complete description of the risks of both principal and non-principal investments. For best understanding, first read the description of the fund you are interested in. Then refer to this section and read about the risks particular to that fund. For even more discussions of strategies and risks, see the SAI, which is available upon request. See the back cover of this prospectus for information on how to order the SAI. DIVERSIFICATION The Investment Company Act of 1940 ("1940 Act") classifies investment companies as either diversified or non-diversified. Diversification is the practice of spreading a fund's assets over a number of issuers to reduce risk. A non-diversified fund has the ability to take larger positions in fewer issuers. Because the appreciation or depreciation of a single security may have a greater impact on the net asset value of a non-diversified fund, its share price can be expected to fluctuate more than a diversified fund. All of the funds (except TA IDEX J.P. Morgan International Fund and TA IDEX Credit Suisse Commodities) qualify as diversified funds under the Investment Company Act of 1940 ("1940 Act"). The diversified funds are subject to the following diversification requirements (which are set forth in full in the SAI): - As a fundamental policy, with respect to 75% of the total assets of a fund, the fund may not own more than 10% of the outstanding voting shares of any issuer (other than U.S. government securities) as defined in the 1940 Act and, with respect to some funds, in other types of cash items. - As a fundamental policy with respect to 75% of the total assets of a fund, the fund will not purchase a security of any issuer if such would cause the portfolio's holdings of that issuer to amount to more than 5% of the fund's total assets. TA IDEX J.P. Morgan International Fund and TA IDEX Credit Suisse Commodities reserve the right to become diversified investment companies (as defined by the 1940 Act) at anytime without shareholder approval. CONCENTRATION Unless otherwise stated in a fund's objective or its principal strategies and policies, as a fundamental policy governing concentration, no fund will invest more than 25% of its total assets in any one particular industry, other than U.S. government securities and its agencies. INVESTING IN COMMON STOCKS Many factors cause common stocks to go up and down in price. A major factor is the financial performance of the company that issues the stock. Other factors include the overall economy, conditions in a particular industry, and monetary factors like interest rates. When your fund holds stocks, there is a risk that some or all of them may be down in price when you choose to sell fund shares, causing you to lose money. This is called market risk. INVESTING IN PREFERRED STOCKS Because these stocks come with a promise to pay a stated dividend, their price depends more on the size of the dividend than on the company's performance. If a company fails to pay the dividend, its preferred stock is likely to drop in price. Changes in interest rates can also affect their price. (See "Investing in Bonds," below.) INVESTING IN CONVERTIBLE SECURITIES, PREFERRED STOCKS, AND BONDS Since preferred stocks and corporate bonds pay a stated return, their prices usually do not depend on the price of the company's common stock. But some companies issue preferred stocks and bonds that are convertible into their common stocks. Linked to the common stock in this way, convertible securities go up and down in price as the common stock does, adding to their market risk. VOLATILITY The more an investment goes up and down in price, the more volatile it is said to be. Volatility increases the market risk because even though your fund may go up more than the market in good times, it may also go down more than the market in bad times. If you decide to sell when a volatile fund is down, you could lose more. Price changes may be temporary and for extended periods. INVESTING IN BONDS Like common stocks, bonds fluctuate in value, though the factors causing this are different, including: - CHANGES IN INTEREST RATES. Bond prices tend to move the opposite of interest rates. Why? Because when interest rates on new bond issues go up, rates on existing bonds stay the same and they become less desirable. When rates go down, the reverse happens. This is also true for most preferred stocks and some convertibles. 1 APPENDIX A EXPLANATION OF STRATEGIES AND RISKS - LENGTH OF TIME TO MATURITY. When a bond matures, the issuer must pay the owner its face value. If the maturity date is a long way off, many things can affect its value, so a bond is more volatile the farther it is from maturity. As that date approaches, fluctuations usually become smaller and the price gets closer to face value. - DEFAULTS. All bond issuers make at least two promises: (1) to pay interest during the bond's term and (2) to return principal when it matures. If an issuer fails to keep one or both of these promises, the bond will probably drop in price dramatically, and may even become worthless. - DECLINES IN RATINGS. At the time of issue, most bonds are rated by professional rating services, such as Moody's Investors Service (Moody's) and Standard & Poors Ratings Group (S&P). The stronger the financial backing behind the bond, the higher the rating. If this backing is weakened or lost, the rating service may downgrade the bond's rating. This is virtually certain to cause the bond to drop in price. - LOW RATING. High-yield/high-risk securities (commonly known as "junk bonds") have greater credit risk, are more sensitive to interest rate movements, are considered more speculative, have a greater vulnerability to economic changes, subject to greater price volatility and are less liquid. - LACK OF RATING. Some bonds are considered speculative, or for other reasons are not rated. Such bonds must pay a higher interest rate in order to attract investors. They're considered riskier because of the higher possibility of default or loss of liquidity. - LOSS OF LIQUIDITY. If a bond is downgraded, or for other reasons drops in price, the market demand for it may "dry up." In that case, the bond may be hard to sell or "liquidate" (convert to cash). Please see Appendix B for a description of bond ratings. INVESTING IN FOREIGN SECURITIES Foreign securities are investments offered by non-U.S. companies, governments and government agencies. They involve risks not usually associated with U.S. securities, including: - CHANGES IN CURRENCY VALUES. Foreign securities are sold in currencies other than U.S. dollars. If a currency's value drops, the value of your fund shares could drop too, even if the securities are strong. Dividend and interest payments may be lower. Factors affecting exchange rates are: differing interest rates among countries; balances of trade; amount of a country's overseas investments; and any currency manipulation by banks. - CURRENCY SPECULATION. The foreign currency market is largely unregulated and subject to speculation. - CURRENCY TRADING COSTS. Some funds also invest in American Depositary Receipts (ADRs) and American Depositary Shares (ADSs). They represent securities of foreign companies traded on U.S. exchanges, and their values are expressed in U.S. dollars. Changes in the value of the underlying foreign currency will change the value of the ADR or ADS. The fund incurs costs when it converts other currencies into dollars, and vice-versa. - DIFFERING ACCOUNTING AND REPORTING PRACTICES. Foreign tax laws are different, as are laws, practices and standards for accounting, auditing and reporting data to investors. - LESS INFORMATION AVAILABLE TO THE PUBLIC. Foreign companies usually make far less information available to the public. - LESS REGULATION. Securities regulations in many foreign countries are more lax than in the U.S. - MORE COMPLEX NEGOTIATIONS. Because of differing business and legal procedures, a fund might find it hard to enforce obligations or negotiate favorable brokerage commission rates. - LESS LIQUIDITY/MORE VOLATILITY. Some foreign securities are harder to convert to cash than U.S. securities, and their prices may fluctuate more dramatically. - SETTLEMENT DELAYS. "Settlement" is the process of completing payment and delivery of a securities transaction. In many countries, this process takes longer than it does in the U.S. - HIGHER CUSTODIAL CHARGES. Fees charged by the fund's custodian for holding shares are higher for foreign securities than those of domestic securities. - VULNERABILITY TO SEIZURE AND TAXES. Some governments can seize assets. They may also limit movement of assets from the country. Fund interest, dividends and capital gains may be subject to foreign withholding taxes. - POLITICAL INSTABILITY AND SMALL MARKETS. Developing countries can be politically unstable. Economics can be dominated by a few 2 APPENDIX A EXPLANATION OF STRATEGIES AND RISKS industries, and markets may trade a small number of securities. Regulation of banks and capital markets can be weak. - DIFFERENT MARKET TRADING DAYS. Foreign markets may not be open for trading the same days as U.S. markets are open and asset values can change before your transaction occurs. - HEDGING. A fund may enter into forward currency contracts to hedge against declines in the value of securities denominated in, or whose value is tied to, a currency other than the U.S. dollar or to reduce the impact of currency fluctuation on purchases and sales of such securities. Shifting a fund's currency exposure from one currency to another removes the fund's opportunity to profit from the original currency and involves a risk of increased losses for the fund if the sub-adviser's projection of future exchange rates is inaccurate. - EMERGING MARKET RISK. Investing in the securities of issuers located in or principally doing business in emerging markets bear foreign exposure risks as discussed above. In addition, the risks associated with investing in emerging markets are often greater than investing in developed foreign markets. Specifically, the economic structures in emerging market countries are less diverse and mature than those in developed countries, and their political systems are less stable. Investments in emerging market countries may be affected by national policies that restrict foreign investments. Emerging market countries may have less developed legal structures, and the small size of their securities markets and low trading volumes can make investments illiquid and more volatile than investments in developed countries. As a result, a fund investing in emerging market countries may be required to establish special custody or other arrangements before investing. INVESTING IN FUTURES, OPTIONS AND DERIVATIVES Besides conventional securities, your fund may seek to increase returns by investing in financial contracts related to its primary investments. Such contracts, which include futures and options, involve additional risks and costs. Risks include: DERIVATIVES. Certain of the funds use derivative instruments as part of their investment strategy. Generally, derivatives are financial contracts whose value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes. Examples of derivative instruments include option contracts, futures contracts, options on futures contracts and swap agreements (including, but not limited to, credit default swaps). There is no assurance that the use of any derivatives strategy will succeed. The value of a commodity-linked derivative investment generally is based upon the price movements of a physical commodity (such as energy, mineral, or agricultural products), a commodity futures contract or commodity index, or other economic variable based upon changes in the value of commodities or the commodities markets. Swap transactions are privately negotiated agreements between a fund and a counterparty to exchange or swap investment cash flows or asses at specified intervals in the future. The obligations may extend beyond one year. There is no central exchange or market for swap transactions and therefore they are less liquid investment than exchange-traded instruments. A fund bears the risk that the counterparty could default under a swap agreement. Further, certain funds may invest in derivative debt instruments with principal and/or coupon payments linked to the value of commodities, commodity futures contracts or the performance of commodity indices. These are "commodity-linked" or "index-linked" notes. They are sometimes referred to as "structured notes" because the terms of the debt instrument may be structured by the issuer of the note and the purchaser of the note. The value of these notes will rise and fall in response to changes in the underlying commodity or related index of investment. These notes expose a fund economically to movements in commodity prices. These notes are subject to risks, such as credit, market and interest rate risks, that in general affect the value of debt securities. Therefore, at the maturity of the note, a fund may receive more or less principal that it originally invested. A fund might receive interest payments on the note that are more or less than the stated coupon interest payments. A fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments. The following provides a general discussion of important risk factors relating to all derivative instruments that may be used by the funds: - MANAGEMENT RISK. Derivative products are highly specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself, without the benefit of observing the 3 APPENDIX A EXPLANATION OF STRATEGIES AND RISKS performance of the derivative under all possible market conditions. - CREDIT RISK. The use of a derivative instrument involves the risk that a loss may be sustained as a result of the failure of another party to the contract (counterparty) to make required payments or otherwise comply with the contract's terms. Additionally, credit default swaps could result in losses if a fund does not correctly evaluate the creditworthiness of the company on which the credit default swap is based. - LIQUIDITY RISK. Liquidity risk exists when a particular derivative instrument is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with many privately negotiated derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price. - LEVERAGE RISK. Because many derivatives have a leverage component, adverse changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. When a fund uses derivatives for leverage, investments in that fund will tend to be more volatile, resulting in larger gains or losses in response to market changes. To limit leverage risk, each fund will segregate assets determined to be liquid by the sub-adviser in accordance with procedures established by the Board of Trustees (or as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments. - LACK OF AVAILABILITY. Because the markets for certain derivative instruments (including markets located in foreign countries) are relatively new and still developing, suitable derivatives transactions may not be available in all circumstances for risk management or other purposes. There is no assurance that a fund will engage in derivatives transactions at any time or from time to time. A fund's ability to use derivatives may be limited by certain regulatory and tax considerations. - MARKET AND OTHER RISKS. Like most other investments, derivative instruments are subject to the risk that the market value of the instrument will change in a way detrimental to a fund's interest. If a fund manager incorrectly forecasts the value of securities, currencies or interest rates or other economic factors in using derivatives for a fund, the fund might have been in a better position if it had not entered into the transaction at all. While some strategies involving derivative instruments can reduce the risk of loss, the can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments. A fund may also have to buy or sell a security at a disadvantageous time or price because the fund is legally required to maintain offsetting positions or asset coverage in connection with certain derivative transactions. Other risks in using derivatives include the risk of mis-pricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indexes. Many derivatives, in particular privately negotiated derivatives, are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a fund. Also, the value of derivatives may not correlate perfectly, or at all, with the value of the assets, reference rates or indexes they are designed to closely track. In addition, a fund's use of derivatives may cause the fund to realize higher amounts of short-term capital gains (generally taxed at ordinary income tax rates) than if the fund had not used such instruments. COMMODITIES Commodities are volatile investments and exposure to commodities should only form a small part of a diversified portfolio. Commodities may not be suitable for all investors. Investing in commodity-linked derivatives that involve leverage could increase volatility and losses. TA IDEX Credit Suisse Commodities will attempt to limit credit risk for commodity-linked notes by engaging in transactions primarily with counterparties that have an investment-grade credit rating, or a letter of credit or some other form of credit enhancement. However, that fund can invest a portion of its assets in below-investment-grade securities that have greater credit risks than investment-grade securities. The status of commodity-linked swaps and structured notes under tests to qualify as a "Registered Investment Company" under the Internal Revenue Code is not certain, and that fund does not intend to obtain a ruling from the Internal Revenue Service. If that fund fails to qualify as a RIC, it will be subject to federal income tax on its net income at regular corporate rates (without a deduction for distributions to shareholders). When distributed, that income would also be taxable to shareholders as an ordinary dividend to the extent attributable to the fund's earnings and profits. 4 APPENDIX A EXPLANATION OF STRATEGIES AND RISKS INVESTING IN HYBRID INSTRUMENTS These instruments (a type of potentially high-risk derivative) can combine the characteristics of securities, futures, and options. For example, the principal amount, redemption, or conversion terms of a security could be related to the market price of some commodity, currency, or securities index. Such securities may bear interest or pay dividends at below market or even relatively nominal rates. Under some conditions, the redemption value of such an investment could be zero. Hybrids can have volatile prices and limited liquidity, and their use may not be successful. INVESTING IN STOCK INDEX FUTURES Futures involve additional investment risks and transactional costs, and draw upon skills and experience which are different than those needed to pick other securities. Special risks include: - inaccurate market predictions; - imperfect correlation; - illiquidity; - tax consequences; - potential unlimited loss; and - volatile net asset value due to substantial fluctuations in the value of these futures. INVESTING IN FORWARD FOREIGN CURRENCY CONTRACTS A forward foreign currency contract is an agreement between contracting parties to exchange an amount of currency at some future time at an agreed upon rate. These contracts are used as a hedge against fluctuations in foreign exchange rates. Hedging against a decline in the value of a currency does not eliminate fluctuations in the prices of securities, or prevent losses if the prices of the fund's securities decline. Such hedging transactions preclude the opportunity for a gain if the value of the hedging currency should rise. Forward contracts may, from time to time, be considered illiquid, in which case they would be subject to the fund's limitations on investing in illiquid securities. If a fund's manager makes the incorrect prediction, the opportunity for loss can be magnified. INVESTING IN FIXED INCOME INSTRUMENTS Some funds invest in "Fixed Income Instruments," which as used in the relative fund's prospectus include, among others: - securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises ("U.S. Government Securities"); - corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper; - mortgage-backed and other asset-backed securities; - inflation-indexed bonds issued both by governments and corporations; - structured notes, including hybrid or "indexed" securities, event-linked bonds and loan participations; - delayed funding loans and revolving credit facilities; - bank certificates of deposit, fixed time deposits and bankers' acceptances; - repurchase agreements and reverse repurchase agreements; - debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises; - obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and - obligations of international agencies or supranational entities. Some funds may invest in derivatives based on Fixed Income Instruments. ZERO COUPON SECURITIES Zero coupon securities do not pay interest or principal until final maturity unlike debt securities that provide periodic payments of interest (referred to as coupon payment). Investors buy zero coupon securities at a price below the amount payable at maturity. The difference between the purchase price and the amount paid at maturity represents interest on the zero coupon security. Investors must wait until maturity to receive interest and principal, which exposes investors to risks of payment default and volatility. VARIABLE RATE DEMAND INSTRUMENTS Variable rate demand instruments are tax exempt securities that require the issuer or a third party, such as a dealer or bank, to repurchase the security for its face value upon demand. Investors in these securities are subject to the risk that the dealer or bank may not repurchase the instrument. The securities also pay interest at a variable rate intended to cause the securities to trade at their face value. The funds treat demand instruments as short-term securities, because their variable interest rate adjusts in response to changes in 5 APPENDIX A EXPLANATION OF STRATEGIES AND RISKS market rates even though their stated maturity may extend beyond 13 months. CREDIT ENHANCEMENT Credit enhancement consists of an arrangement in which a company agrees to pay amounts due on a fixed income security if the issuer defaults. In some cases the company providing credit enhancement makes all payments directly to the security holders and receives reimbursement from the Issuer. Normally, the credit enhancer has greater financial resources and liquidity than the issuer. For this reason, the sub-adviser usually evaluates the credit risk of a fixed income security based solely upon its credit enhancement. INVESTING IN SPECIAL SITUATIONS Certain funds may invest in "special situations" from time to time. Special situations arise when, in the opinion of a fund manager, a company's securities may be undervalued, then potentially increase considerably in price, due to: - a new product or process; - a management change; - a technological breakthrough; - an extraordinary corporate event; or - a temporary imbalance in the supply of, and demand for, the securities of an issuer Investing in a special situation carries an additional risk of loss if the expected development does not happen or does not attract the expected attention. The impact of special situation investing to a fund will depend on the size of the fund's investment in a situation. PORTFOLIO TURNOVER The fund may engage in a significant number of short-term transactions, which may adversely affect the Fund performance. Increased turnover results in higher brokerage costs or mark-up charges for the Fund. The Fund ultimately passes these costs on to shareholders. Short-term trading may also result in short-term capital gains, which are taxed as ordinary income to shareholders. INVESTMENT STRATEGIES A fund is permitted to use other securities and investment strategies in pursuit of its investment objective, subject to limits established by the funds' Board of Trustees. No fund is under any obligation to use any of the techniques or strategies at any given time or under any particular economic condition. Certain instruments and investment strategies may expose the funds to other risks and considerations, which are discussed in the funds' SAI. GROWTH INVESTING Securities with different characteristics tend to shift in and out of favor depending upon market and economic conditions as well as investor sentiment. A fund may underperform other funds that employ a different style. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company's growth potential. Growth-oriented funds typically will underperform when value investing is in favor. VARIOUS INVESTMENT TECHNIQUES Various investment techniques are utilized to increase or decrease exposure to changing security prices, interest rates, currency exchange rates, commodity prices or other factors that affect security values. These techniques may involve derivative securities and transactions such as buying and selling options and futures contracts, entering into currency exchange contracts or swap agreements and purchasing indexed securities. These techniques are designed to adjust the risk and return characteristics of the fund's portfolio of investments and are not used for leverage. Use of such strategies may result in a fund manager's failure to achieve the fund's goals. Also, limiting losses in this manner may cap possible gains. TEMPORARY DEFENSIVE STRATEGIES For temporary defensive purposes, a fund may, at times, choose to hold some portion of its net assets in cash, or to invest that cash in a variety of debt securities. This may be done as a defensive measure at times when desirable risk/reward characteristics are not available in stocks or to earn income from otherwise uninvested cash. When a fund increases its cash or debt investment position, its income may increase while its ability to participate in stock market advances or declines decrease. Furthermore, when a fund assumes a temporary defensive position it may not be able to achieve its investment objective. INTERNET, INTRANET OR SECTOR RISK Certain funds may invest primarily in companies engaged in Internet and Intranet related activities. The value of such companies is particularly vulnerable to rapidly changing technology, extensive government regulation and relatively high risks of obsolescence caused by scientific and technological advances. The value of such funds' shares may fluctuate more than shares of a fund investing in a broader range of industries. 6 APPENDIX A EXPLANATION OF STRATEGIES AND RISKS SHORT SALES A fund may sell securities "short against the box." A short sale is the sale of a security that the fund does not own. A short sale is "against the box" if at all times when the short position is open, the fund owns an equal amount of the securities convertible into, or exchangeable without further consideration for, securities of the same issue as the securities sold short. INVESTMENT STYLE RISK Different investment styles tend to shift in and out of favor depending upon market and economic conditions as well as investor sentiment. The fund may outperform or underperform other funds that employ a different investment style. The fund may also employ a combination of styles that impact its risk characteristics. Examples of different investment styles include growth and value investing. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company's growth of earnings potential. Also, since growth companies usually invest a high portion of earnings in their business, growth stocks may lack the dividends of value stocks that can cushion stock prices in a falling market. Growth oriented funds will typically underperform when value investing is in favor. ISSUER-SPECIFIC CHANGES The value of an individual security or particular type of security can be more volatile than the market as a whole and can perform differently from the value of the market as a whole. Lower-quality debt securities (those of less than investment-grade quality) and certain types of other securities can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market, or economic developments and can be difficult to resell. 7 BOND RATINGS APPENDIX B BRIEF EXPLANATION OF RATING CATEGORIES
BOND RATING EXPLANATION ----------- ----------- STANDARD & POOR'S CORPORATION AAA Highest rating; extremely strong capacity to pay principal and interest. AA High quality; very strong capacity to pay principal and interest. A Strong capacity to pay principal and interest; somewhat more susceptible to the adverse effects of changing circumstances and economic conditions. BBB Adequate capacity to pay principal and interest; normally exhibit adequate protection parameters, but adverse economic conditions or changing circumstances more likely to lead to a weakened capacity to pay principal and interest than for higher rated bonds. BB, B, Predominantly speculative with respect to the issuer's capacity to CCC, CC, C meet required interest and principal payments. BB -- lowest degree of speculation; C -- the highest degree of speculation. Quality and protective characteristics outweighed by large uncertainties or major risk exposure to adverse conditions. D In default.
PLUS (+) OR MINUS (-)--The ratings from "AA" to "BBB" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. UNRATED -- Indicates that no public rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy. MOODY'S INVESTORS SERVICE, INC. Aaa Highest quality, smallest degree of investment risk. Aa High quality; together with Aaa bonds, they compose the high-grade bond group. A Upper-medium grade obligations; many favorable investment attributes. Baa Medium-grade obligations; neither highly protected nor poorly secured. Interest and principal appear adequate for the present but certain protective elements may be lacking or may be unreliable over any great length of time. Ba More uncertain, with speculative elements. Protection of interest and principal payments not well safeguarded during good and bad times. B Lack characteristics of desirable investment; potentially low assurance of timely interest and principal payments or maintenance of other contract terms over time. Caa Poor standing, may be in default; elements of danger with respect to principal or interest payments. Ca Speculative in a high degree; could be in default or have other marked shortcomings. C Lowest rated; extremely poor prospects of ever attaining investment standing.
UNRATED -- Where no rating has been assigned or where a rating has been suspended or withdrawn, it may be for reasons unrelated to the quality of the issue. Should no rating be assigned, the reason may be one of the following: 1. An application for rating was not received or accepted. 2. The issue or issuer belongs to a group of securities or companies that are not rated as a matter of policy. 3. There is a lack of essential data pertaining to the issue or issuer. 4. The issue was privately placed, in which case the rating is not published in Moody's publications. Suspension or withdrawal may occur if new and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons. APPENDIX B-1 Both the investment returns and principal value of mutual funds will fluctuate over time so that shares, when redeemed, may be worth more or less than their original cost. Transamerica IDEX Mutual Funds www.idexfunds.com P.O. Box 9012 - Clearwater, FL 33758-9012 Investor Services: 1-888-233-4339 - Sales Support: 1-800-851-7555 Distributor: AFSG Securities Corporation, Member NASD Shareholder inquiries and transaction requests should be mailed to: Transamerica IDEX Mutual Funds P.O. Box 219945 Kansas City, MO 64121-9945 ADDITIONAL INFORMATION about these funds is contained in the Statement of Additional Information, dated __________, 2005, and will be contained in the annual and semi-annual reports to shareholders, which are incorporated by reference into this prospectus. Other information about these funds has been filed with and is available from the U.S. Securities and Exchange Commission. Information about the funds (including the Statement of Additional Information) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the public reference room may be obtained by calling the Commission at 1-202-942-8090. Copies of this information may be obtained, upon payment of a duplication fee, by electronic request at the following e-mail address, publicinfo@sec.gov, or by writing the Public Reference Section of the Commission, Washington D.C. 20549-0102. Reports and other information about the funds are also available on the Commission's Internet site at http://www.sec.gov. To obtain a copy of the Statement of Additional Information or the Annual and Semi-Annual reports, without charge, or to make other inquiries about these funds, call or write to Transamerica IDEX Mutual Funds at the phone number or address above. In the Transamerica IDEX annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the funds' performance during the last fiscal year. The Investment Company Act File Number for Transamerica IDEX Mutual Funds is: 811-04556 TRANSAMERICA IDEX MUTUAL FUNDS TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE TA INDEX NEUBERGER BERMAN INTERNATIONAL TA IDEX OPPENHEIMER EMERGING MARKETS TA IDEX J.P. MORGAN INTERNATIONAL BOND TA IDEX FEDERATED CONSERVATIVE TACTICAL ALLOCATION TA IDEX MERCURY TACTICAL ALLOCATION TA IDEX CREDIT SUISSE COMMODITIES CLASS A AND CLASS I SHARES STATEMENT OF ADDITIONAL INFORMATION [____], 2005 TRANSAMERICA IDEX MUTUAL FUNDS 570 Carillon Parkway St. Petersburg, Florida 33716 Customer Service (888) 233-4339 (toll free) The funds listed above are series of Transamerica IDEX Mutual Funds ("Transamerica IDEX" or "TA IDEX"), an open-end management investment company that offers a selection of investment funds. Transamerica IDEX is registered under the Investment Company Act of 1940, as amended (the "1940 Act"). All funds, other than TA IDEX J.P. Morgan International Bond and TA IDEX Credit Suisse Commodities, are diversified. This Statement of Additional Information ("SAI") is not a prospectus, and should be read in conjunction with the Transamerica IDEX prospectus dated [__________], 2005, as it may be supplemented from time to time, which may be obtained free of charge by writing or calling Transamerica IDEX at the above address or telephone number. This SAI contains additional and more detailed information about the Transamerica IDEX operations and activities than that set forth in the prospectus. The Transamerica IDEX Annual Report to shareholders for these funds, when available, including the financial statements therein, will be incorporated by reference in the SAI. ISF 00065-11/2005 TABLE OF CONTENTS
PAGE ---- INVESTMENT OBJECTIVES.................................................... 1 INVESTMENT RESTRICTIONS, POLICIES AND PRACTICES.......................... 1 OTHER POLICIES AND PRACTICES OF THE FUNDS................................ 2 OPTIONS, FUTURES AND OTHER DERIVATIVE INSTRUMENTS..................... 2 FOREIGN INVESTMENTS................................................... 9 WHEN-ISSUED, DELAYED SETTLEMENT AND FORWARD DELIVERY SECURITIES....... 11 ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES................... 11 MORTGAGE-RELATED SECURITIES........................................... 12 INCOME PRODUCING SECURITIES........................................... 13 LENDING OF FUND SECURITIES............................................ 14 ILLIQUID AND RESTRICTED/144A SECURITIES............................... 14 MUNICIPAL OBLIGATIONS................................................. 15 LOANS................................................................. 15 EQUITY EQUIVALENTS.................................................... 16 EVENT-LINKED BONDS.................................................... 16 COLLATERALIZED DEBT OBLIGATIONS....................................... 16 REPURCHASE AND REVERSE REPURCHASE AGREEMENTS.......................... 17 PASS-THROUGH SECURITIES............................................... 17 HIGH YIELD/HIGH-RISK SECURITIES....................................... 17 WARRANTS AND RIGHTS................................................... 18 U.S. GOVERNMENT SECURITIES............................................ 18 TEMPORARY DEFENSIVE POSITION.......................................... 18 OTHER SECURITIES IN WHICH THE FUNDS MAY INVEST........................ 19 PORTFOLIO TURNOVER RATE............................................... 20 DISCLOSURE OF PORTFOLIO HOLDINGS...................................... 20 INVESTMENT ADVISORY AND OTHER SERVICES................................... 21 DISTRIBUTOR.............................................................. 25 ADMINISTRATIVE SERVICES.................................................. 25 CUSTODIAN, TRANSFER AGENT AND OTHER AFFILIATES........................... 26 FUND TRANSACTIONS AND BROKERAGE.......................................... 26 DIRECTED BROKERAGE.................................................... 27 TRUSTEES AND OFFICERS.................................................... 27 SHAREHOLDER COMMUNICATION PROCEDURES WITH BOARD OF TRUSTEES.............. 34 DISTRIBUTION PLANS....................................................... 34
-i- TABLE OF CONTENTS (continued)
PAGE ---- NET ASSET VALUE DETERMINATION............................................ 35 DIVIDENDS AND OTHER DISTRIBUTIONS........................................ 37 REDEMPTION OF SHARES..................................................... 37 TAXES.................................................................... 37 PRINCIPAL SHAREHOLDERS................................................... 40 MISCELLANEOUS............................................................ 40 ORGANIZATION.......................................................... 40 SHARES OF BENEFICIAL INTEREST......................................... 41 INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM............... 41 PROXY VOTING POLICIES AND PROCEDURES.................................. 41 PERFORMANCE INFORMATION.................................................. 42 FINANCIAL STATEMENTS..................................................... 44 APPENDIX A............................................................... 1 APPENDIX B............................................................... 1
-ii- INVESTMENT OBJECTIVES The prospectus discusses the investment objective of each fund of Transamerica IDEX, the principal types of securities in which each fund will invest, and the policies and practices of each fund. The following discussion of Investment Restrictions, Policies and Practices supplements that set forth in the prospectus. There can be no assurance that a fund will, in fact, achieve its objective. A fund's investment objective may be changed by the Board of Trustees without shareholder approval. A change in the investment objective of a fund may result in the fund having an investment objective different from that which the shareholder deemed appropriate at the time of investment. INVESTMENT RESTRICTIONS, POLICIES AND PRACTICES As indicated in the prospectus, each fund is subject to certain fundamental policies and restrictions which as such may not be changed without shareholder approval. Shareholder approval would be the approval by the lesser of (i) more than 50% of the outstanding voting securities of a fund, or (ii) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of a fund are present or represented by proxy. Each fund has adopted the following fundamental restrictions: 1. DIVERSIFICATION Each fund shall be a "diversified company" as that term is defined in the Investment Company Act of 1940, as amended ("1940 Act") (except for TA IDEX J.P. Morgan International Bond and TA IDEX Credit Suisse Commodities), and as interpreted or modified by regulatory authority having jurisdiction, from time to time. The TA IDEX J.P. Morgan International Bond and TA IDEX Credit Suisse Commodities shall be a "non-diversified company" as that term is defined under the 1940 Act. 2. BORROWING Each fund may not borrow money, except as permitted under the 1940 Act, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time. 3. SENIOR SECURITIES Each fund may not issue any senior security, except as permitted under the 1940 Act, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time. 4. UNDERWRITING SECURITIES Each fund may not act as an underwriter of securities within the meaning of the Securities Act of 1933, as amended ("1933 Act"), except as permitted under the 1933 Act, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time. Among other things, to the extent that the fund may be deemed to be an underwriter within the meaning of the 1933 Act, the fund may act as an underwriter of securities in connection with the purchase and sale of its portfolio securities in the ordinary course of pursuing its investment objective, investment policies and investment program. 5. REAL ESTATE Each fund may not purchase or sell real estate or any interests therein, except as permitted under the 1940 Act, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time. Notwithstanding this limitation, a fund may, among other things, (i) acquire or lease office space for its own use; (ii) invest in securities of issuers that invest in real estate or interests therein; (iii) invest in mortgage-related securities and other securities that are secured by real estate or interests therein; or (iv) hold and sell real estate acquired by the fund as a result of the ownership of securities. 1 6. MAKING LOANS Each fund may not make loans except as permitted under the 1940 Act, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time. 7. CONCENTRATION OF INVESTMENTS Each fund may not "concentrate" its investments in a particular industry or group of industries, except as permitted under the 1940 Act, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction from time to time, provided that, without limiting the generality of the foregoing this limitation will not apply to securities issued or guaranteed as to principal and/or interest by the U.S. Government, its agencies or instrumentalities. 8. COMMODITIES Each fund may not purchase physical commodities or contracts relating to physical commodities, except as permitted under the 1940 Act, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time. NON-FUNDAMENTAL RESTRICTIONS Furthermore, each fund has adopted the following non-fundamental restrictions, which may be changed by the Board of Trustees of TA IDEX without shareholder approval. 1. INVESTMENT IN OTHER INVESTMENT COMPANIES Each fund may not purchase securities issued by registered open-end investment companies or registered unit investment trusts in reliance upon Section 12(d)(1)(F) or Section 12(d)(1)(G) of the 1940 Act. 2. ILLIQUID SECURITIES Each fund may not purchase any security if, as a result, more than 15% of its net assets would be invested in illiquid securities. OTHER POLICIES AND PRACTICES OF THE FUNDS OPTIONS, FUTURES AND OTHER DERIVATIVE INSTRUMENTS The following investments are subject to limitations as set forth in each fund's investment restrictions and policies. OPTIONS ON SECURITIES AND INDICES. In an effort to increase current income and to reduce fluctuations in net asset value, the funds may write covered put and call options and buy put and call options on securities that are traded on United States and foreign securities exchanges, and over-the-counter. A fund also may write call options that are not covered for cross-hedging purposes. A fund may write and buy options on the same types of securities that the fund may purchase directly. There are no specific limitations on a fund's writing and buying of options on securities. A call option gives the purchaser the right to buy, and a writer has the obligation to sell, the underlying security at the stated exercise price at any time prior to the expiration of the option, regardless of the market price or exchange rate of the security, as the case may be. The premium paid to the writer is consideration for undertaking the obligations under the option contract. A put option gives the purchaser the right to sell the underlying security at the stated exercise price at any time prior to the expiration date of the option, regardless of the market price or exchange rate of the security, as the case may be. A call option is covered if a fund owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration if the underlying security is held in a segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio. A put option is covered if a fund segregates cash or other liquid assets with a value equal to the exercise price with its custodian. Put and call options will be valued at the last sale price, or in the absence of such a price, at the mean between bid and asked price. 2 When a portfolio security or currency subject to a call option is sold, a fund will effect a "closing purchase transaction" -- the purchase of a call option on the same security or currency with the same exercise price and expiration date as the call option which a fund previously has written. If a fund is unable to effect a closing purchase transaction, it will not be able to sell the underlying security or currency until the option expires or the fund delivers the underlying security or currency upon exercise. In addition, upon the exercise of a call option by the holder thereof, a fund will forego the potential benefit represented by market appreciation over the exercise price. When a fund writes an option, an amount equal to the net premium (the premium less the commission) received by the fund is included in the liability section of its statement of assets and liabilities as a deferred credit. The amount of the deferred credit will be subsequently marked-to-market to reflect the current value of the option written. The current value of the traded option is the last sale price or, in the absence of a sale, the average of the closing bid and asked prices. If an option expires on the stipulated expiration date, or if the fund enters into a closing purchase transaction, it will realize a gain (or a loss if the cost of a closing purchase transaction exceeds the net premium received when the option is sold) and the deferred credit related to such option will be eliminated. If an option is exercised, a fund may deliver the underlying security in the open market. In either event, the proceeds of the sale will be increased by the net premium originally received and the fund will realize a gain or loss. The purpose of writing covered call options is to generate additional premium income for a fund. This premium income will serve to enhance a fund's total return and will reduce the effect of any price decline of the security involved in the option. Covered call options will generally be written on securities which are not expected to make any major price moves in the near future but which, over the long term, are deemed to be attractive investments for a fund. Once the decision to write a call option has been made, a fund's investment adviser or a sub-adviser, in determining whether a particular call option should be written on a particular security, will consider the reasonableness of the anticipated premium and the likelihood that a liquid secondary market will exist for those options. Closing transactions will be effected in order to realize a profit on an outstanding call option, to prevent an underlying security from being called, or to permit a sale of the underlying security. Furthermore, effecting a closing transaction will permit a fund to write another call option on the underlying security with either a different exercise price or expiration date or both. If a fund desires to sell a particular security from its portfolio on which it has written a call option, it will seek to effect a closing transaction prior to, or concurrently with, the sale of the security. There is, of course, no assurance that a fund will be able to effect such closing transactions at a favorable price. If a fund cannot enter into such a transaction, it may be required to hold a security that it might otherwise have sold, in which case it would continue to be at market risk on the security. This could result in higher transaction costs. The funds will pay transaction costs in connection with the writing of options to close out previously written options. Such transaction costs are normally higher than those applicable to purchases and sales of portfolio securities. Exercise prices of options may be below, equal to, or above the current market values of the underlying securities at the time the options are written. From time to time, a fund may purchase an underlying security for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering such security from its portfolio. In such cases, additional costs will be incurred. A fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from the writing of the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by a fund. Where a fund may purchase put options, that fund is purchasing the right to sell a specified security (or securities) within a specified period of time at a specified exercise price. Puts may be acquired to facilitate the liquidity of the portfolio assets. Puts may also be used to facilitate the reinvestment of assets at a rate of return more favorable than that of the underlying security. A fund may sell, transfer, or assign a put only in conjunction with the sale, transfer, or assignment of the underlying security or securities. The amount payable to a fund upon its exercise of a "put" is normally (i) the fund's acquisition cost of the securities subject to the put (excluding any accrued interest which the fund paid on the acquisition), less any amortized market premium or plus any accreted market or original issue discount during the period the fund owned the securities, plus (ii) all interest accrued on the securities since the last interest payment date during that period. A fund generally will acquire puts only where the puts are available without the payment of any direct or indirect consideration. However, if necessary or advisable, a fund may pay for puts either separately in cash or by paying higher price for portfolio securities which are acquired subject to the puts (thus reducing the yield to maturity otherwise available for the same securities). Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. 3 Because index options are settled in cash, a call writer cannot determine the amount of its settlement obligations in advance and, unlike call writing on specific securities, cannot provide in advance for, or cover, its potential settlement obligations by acquiring and holding the underlying securities. A fund will segregate assets or otherwise cover index options that would require it to pay cash upon exercise. A principal reason for writing put and call options is to attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying securities alone. In return for the premium received for a call option, a fund foregoes the opportunity for profit from a price increase in the underlying security above the exercise price so long as the option remains open, but retains the risk of loss should the price of the security decline. In return for the premium received for a put option, a fund assumes the risk that the price of the underlying security will decline below the exercise price, in which case the put would be exercised and the fund would suffer a loss. A fund may purchase put options in an effort to protect the value of a security it owns against a possible decline in market value. OPTIONS ON FOREIGN CURRENCIES. A fund may buy and write options on foreign currencies in a manner similar to that in which futures contracts or forward contracts on foreign currencies will be utilized. For example, a decline in the U.S. dollar value of a foreign currency in which fund securities are denominated will reduce the U.S. dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of fund securities, a fund may buy put options on the foreign currency. If the value of the currency declines, such fund will have the right to sell such currency for a fixed amount in U.S. dollars and will offset, in whole or in part, the adverse effect on its portfolio. Conversely, when a rise in the U.S. dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, a fund may buy call options thereon. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to a fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange rates do not move in the direction or to the extent desired, a fund could sustain losses on transactions in foreign currency options that would require such fund to forego a portion or all of the benefits of advantageous changes in those rates. In addition, in the case of other types of options, the benefit to the fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. A fund may also write options on foreign currencies. For example, in attempting to hedge against a potential decline in the U.S. dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates, a fund could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the diminution in value of fund securities will be offset by the amount of the premium received. Similarly, instead of purchasing a call option to attempt to hedge against a potential increase in the U.S. dollar cost of securities to be acquired, a fund could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow that fund to hedge the increased cost up to the amount of premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium. If exchange rates do not move in the expected direction, the option may be exercised and a fund would be required to buy or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, a fund also may lose all or a portion of the benefits which might otherwise have been obtained from favorable movements in exchange rates. A fund may write covered call options on foreign currencies. A call option written on a foreign currency by a fund is "covered" if that fund owns the underlying foreign currency covered by the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for additional cash consideration that is segregated by its custodian) upon conversion or exchange of other foreign currency held in its fund. A call option is also covered if: (i) the fund holds a call at the same exercise price for the same exercise period and on the same currency as the call written; or (ii) at the time the call is written, an amount of cash, U.S. government securities or other liquid assets equal to the fluctuating market value of the optioned currency is segregated with the custodian. A fund may write call options on foreign currencies for cross-hedging purposes that would not be deemed to be covered. A call option on a foreign currency is for cross-hedging purposes if it is not covered but is designed to provide a hedge against a decline due to an adverse change in the exchange rate in the U.S. dollar value of a security which the fund owns or has the right to acquire and which is denominated in the currency underlying the option. In such circumstances, a fund collateralizes the option by segregating cash or other liquid assets in an amount not less than the value of the underlying foreign currency in U.S. dollars marked-to-market daily. 4 FUTURES CONTRACTS AND OPTIONS THEREON. A fund may enter into futures contracts, purchase or sell options on any such futures contracts, and engage in related closing transactions. Futures contracts are for the purchase or sale, for future delivery, of equity or fixed-income securities, foreign currencies or contracts based on financial indices, including indices of U.S. government securities, foreign government securities and equity or fixed-income securities. A futures contract on a securities index is an agreement obligating either party to pay, and entitling the other party to receive, while the contract is outstanding, cash payments based on the level of a specified securities index. U.S. futures contracts are traded on exchanges which have been designated "contract markets" by the Commodity Futures Trading Commission ("CFTC") and must be executed through a Futures Trading Commission merchant ("FTCM"), or brokerage firm, which is a member of the relevant contract market. Through their clearing corporations, the exchanges guarantee performance of the contracts as between the clearing members of the exchange. The funds may use future contracts to hedge against anticipated future changes in market conditions which otherwise might adversely affect the value of securities which these funds hold or intend to purchase. For example, when interest rates are expected to rise or market values of portfolio securities are expected to fall, a fund can seek through the sale of futures contracts to offset a decline in the value of its portfolio securities. When interest rates are expected to fall or market values are expected to rise, a fund, through the purchase of such contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. The acquisition of put and call options on futures contracts will, respectively, give a fund the right (but not the obligation), for a specified price, to sell or to purchase the underlying futures contract, upon exercise of the option, at any time during the option period. The funds also may purchase and sell put and call options on futures contracts. An option on a futures contract gives the purchaser the right, but not the obligation, in return for the premium paid, to assume (in the case of a call) or sell (in the case of a put) a position in a specified underlying futures contract (which position may be a long or short position) a specified exercise price at any time during the option exercise period. Sellers of options on futures contracts, like buyers and sellers of futures contracts, make an initial margin deposit and are subject to calls for variation margin. Futures transactions involve brokerage costs and require a fund to segregate liquid assets, such as cash, U.S. Government securities or other liquid securities to cover its obligation under such contracts. There is a possibility that a fund may lose the expected benefit of futures transactions if interest rates or securities prices move in an unanticipated manner. Such unanticipated changes may also result in poorer overall performance than if a fund had not entered into any futures transactions. In addition, the value of futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities, limiting the fund's ability to hedge effectively against interest rates and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions. Futures transactions will be limited to the extent necessary to maintain the qualification of these funds as a regulated investment companies and to avoid being deemed to be a "commodity pool" or "commodity pool operator" under the Commodity Exchange Act and be subject to registration or regulation as such under the Commodity Exchange Act. FORWARD CONTRACTS. A forward contract is an agreement between two parties in which one party is obligated to deliver a stated amount of a stated asset at a specified time in the future, and the other party is obligated to pay a specified invoice amount for the assets at the time of delivery. A fund may enter into forward contracts to purchase and sell government securities, foreign currencies or other financial instruments. Forward contracts generally are traded in an interbank market conducted directly between traders (usually large commercial banks) and their customers. Unlike futures contracts, which are standardized contracts, forward contracts can be specifically drawn to meet the needs of the parties that enter into them. The parties to a forward contract may agree to offset or terminate the contract before its maturity, or may hold the contract to maturity and complete the contemplated exchange. The following discussion summarizes a fund's principal uses of forward foreign currency exchange contracts ("forward currency contracts"). A fund may enter into forward currency contracts with stated contract values of up to the value of that fund's assets. The funds may enter into forward currency contracts in order to hedge against adverse movements in exchange rates between currencies. A forward currency contract is an obligation to buy or sell an amount of a specified currency for an agreed upon price (which may be in U.S. dollars or another currency). A fund will exchange foreign currencies for U.S. dollars and for other foreign currencies in the normal course of business. 5 By entering into a forward currency contract in U.S. dollars for the purchase or sale of the amount of foreign currency involved in an underlying security transaction, the funds are able to protect themselves against a possible loss between trade and settlement dates resulting from an adverse change in the relationship between the U.S. dollar and such foreign currency. However, this tends to limit potential gains which might result from a positive change in such currency relationships. The funds may also hedge foreign currency exchange rate risk by engaging in a currency financial futures and options transactions, which are described below. The forecasting of short-term currency market movements is extremely difficult and whether such a short-term hedging strategy will be successful is highly uncertain. It is impossible to forecast with precision the market value of portfolio securities at the expiration of a forward currency contract. Accordingly, it may be necessary for a fund to purchase additional currency on the spot market if the market value of the security is less than the amount of foreign currency such fund is obligated to deliver when a decision is made to sell the security and make delivery of the foreign currency in settlement of a forward contract. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency such fund is obligated to deliver. If a fund retains the portfolio security and engages in an offsetting transaction, it will incur a gain or a loss to the extent that there has been movement in forward currency contract prices. If a fund engages in an offsetting transaction, it may subsequently enter into a new forward currency contract to sell the foreign currency. Although such contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, they also tend to limit any potential gain which might result should the value of such currency increase. The funds will have to convert their holdings of foreign currencies into U.S. dollars from time to time. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (the "spread") between the prices at which they are buying and selling various currencies. While forward currency contracts are not currently regulated by the CFTC, the CFTC may in the future assert authority to regulate forward currency contracts. In such event, a fund's ability to utilize forward currency contracts may be restricted. In addition, a fund may not always be able to enter into forward currency contracts at attractive prices and may be limited in its ability to use these contracts to hedge its assets. SWAPS AND SWAP-RELATED PRODUCTS. T&A IDEX Credit Suisse Commodities may enter into swap agreements with respect to commodities, interest rates and indexes of commodities or securities, specific securities and commodities, and mortgage, credit and event-linked swaps, and to the extent it may invest in foreign-currency denominated securities, may enter into swap agreements with respect to foreign currencies, or in some instances, in order to attempt to protect the value of its investments from interest rate or currency exchange rate fluctuations, a fund may, subject to its investment restrictions, enter into interest rate and currency exchange rate swaps, and may buy or sell interest rate and currency exchange rate caps and floors. A fund's sub-adviser may enter into these transactions primarily to attempt to preserve a return or spread on a particular investment or portion of its portfolio. A fund also may enter into these transactions to attempt to protect against any increase in the price of securities the fund may consider buying at a later date. An investment in a commodity swap agreement may, for example, involve the exchange of floating-rate interest payments for the total return on a commodity index. In a total return commodity swap, the Fund will receive the price appreciation of a commodity index, a portion of the index, or a single commodity in exchange for paying an agreed-upon fee. If the commodity swap is for one period, the Fund may pay a fixed fee, established at the outset of the swap. However, if the term of the commodity swap is more than one period, with interim swap payments, the Fund may pay an adjustable or floating fee. With a "floating" rate, the fee may be pegged to a base rate, such as the London Interbank Offered Rate, and is adjusted each period. Therefore, if interest rates increase over the term of the swap contract, the Fund may be required to pay a higher fee at each swap reset date. Interest rate swaps involve the exchange by a fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments. The exchange commitments can involve payments to be made in the same currency or in different currencies. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually based principal amount from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a contractually based principal amount from the party selling the interest rate floor. A fund, subject to its investment restrictions, enters into interest rate swaps, caps and floors on either an asset-based or liability-based basis, depending upon whether it is hedging its assets or its liabilities, and will usually enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with a fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of a fund's obligations over its entitlements with respect to each interest rate swap, will be calculated on a daily basis. An amount of cash or other liquid assets having an aggregate net asset at least equal to the accrued excess will be segregated by its custodian. If a fund enters into an interest rate swap on other than a net basis, it will maintain a segregated account in the full amount accrued on a daily basis of its obligations with respect to the swap. A fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in one of the three highest rating categories of at least one nationally recognized statistical rating organization at the time of entering into such transaction. A fund's sub-adviser will monitor the creditworthiness of all counterparties on an ongoing basis. If there is a default by the other party to such a transaction, the fund will have contractual remedies pursuant to the agreements related to the transaction. 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. The sub-advisers have determined that, as a result, the swap market has become relatively liquid. Caps and floors are more recent innovations for which 6 standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps. To the extent a fund sells (i.e., writes) caps and floors, it will segregate cash or other liquid assets having an aggregate net asset value at least equal to the full amount, accrued on a daily basis, of its obligations with respect to any caps or floors. There is no limit on the amount of interest rate swap transactions that may be entered into by a fund, unless so stated in its investment objectives. These transactions may in some instances involve the delivery of securities or other underlying assets by a fund or its counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of loss with respect to interest rate swaps is limited to the net amount of the interest payments that a fund is contractually obligated to make. If the other party to an interest rate swap that is not collateralized defaults, a fund would risk the loss of the net amount of the payments that it contractually is entitled to receive. A fund may buy and sell (i.e., write) caps and floors without limitation, subject to the segregation requirement described above. In addition to the instruments, strategies and risks described in this SAI and in the prospectus, there may be additional opportunities in connection with options, futures contracts, forward currency contracts and other hedging techniques that become available as a fund's sub-adviser develops new techniques, as regulatory authorities broaden the range of permitted transactions, and as new instruments are developed. The funds' sub-advisers may use these opportunities to the extent they are consistent with each fund's investment objective and as are permitted by a fund's investment limitations and applicable regulatory requirements. CREDIT DEFAULT SWAPS. A fund may enter into credit default swap contracts for investment purposes. As the seller in a credit default swap contract, a fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default by a third party, such as a U.S. or foreign corporate issuer, on the debt obligation. In return, a fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, a fund would keep the stream of payments and would have no payment obligations. As the seller, a fund would be subject to investment exposure on the notional amount of the swap. A fund may also purchase credit default swap contracts in order to hedge against the risk of default of debt securities held in its portfolio, in which case the fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial instability). It would also involve credit risk--that the seller may fail to satisfy its payment obligations to the fund in the event of a default. EURO INSTRUMENTS. The funds may each make investments in Euro instruments. Euro instruments are U.S. dollar-denominated futures contracts, or options thereon, which are linked to the London Interbank Offered Rate (the "LIBOR"), although foreign currency- denominated instruments are available from time to time. Euro futures contracts enable purchasers to obtain a fixed rate for the lending of funds, and sellers to obtain a fixed rate for borrowings. A fund might use Euro futures contracts and options thereon to hedge against changes in LIBOR, which may be linked to many interest rate swaps and fixed income instruments. SPECIAL INVESTMENT CONSIDERATIONS AND RISKS. The successful use of the investment practices described above with respect to futures contracts, options on futures contracts, forward contracts, options on securities, options on foreign currencies and swaps and swap-related products draws upon skills and experience which are different from those needed to select the other instruments in which a fund may invest. Should interest or exchange rates, or the prices of securities or financial indices move in an unexpected manner, a fund may not achieve the desired benefits of the foregoing instruments or may realize losses and thus be in a worse position than if such strategies had not been used. Unlike many exchange-traded futures contracts and options on futures contracts, there are no daily price fluctuation limits with respect to options on currencies, forward contracts and other negotiated or over-the-counter instruments, and adverse market movements could therefore continue to an unlimited extent over a period of time. In addition, the correlation between movements in the price of the securities and currencies hedged or used for cover will not be perfect and could produce unanticipated losses. A fund's ability to dispose of its positions in the foregoing instruments will depend on the availability of liquid markets in the instruments. Markets in a number of the instruments are relatively new and still developing, and it is impossible to predict the amount of trading interest that may exist in those instruments in the future. Particular risks exist with respect to the use of each of the foregoing instruments and could result in such adverse consequences to a fund as: the possible loss of the entire premium paid for an option bought by a fund; the inability of the fund, as the writer of a covered call option, to benefit from the appreciation of the underlying securities above the exercise 7 price of the option; and the possible need to defer closing out positions in certain instruments to avoid adverse tax consequences. As a result, no assurance can be given that a fund will be able to use those instruments effectively for their intended purposes. In connection with certain of its hedging transactions, a fund must segregate assets with the fund's custodian bank to ensure that such fund will be able to meet its obligations pursuant to these instruments. Segregation of a large percentage of a fund's assets could impede implementation of that fund's investment policies or its ability to meet redemption requests or other current obligations. ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND FOREIGN INSTRUMENTS. Unlike transactions entered into by a fund in futures contracts, options on foreign currencies and forward contracts are not traded on contract markets regulated by the CFTC or (with the exception of certain foreign currency options) by the SEC. To the contrary, such instruments are traded through financial institutions acting as market-makers, although foreign currency options are also traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. Options on currencies may be traded over-the-counter. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the buyer of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Moreover, an option writer and a buyer or seller of futures or forward contracts could lose amounts substantially in excess of any premium received or initial margin or collateral posted due to the potential additional margin and collateral requirements associated with such positions. Options on foreign currencies traded on national securities exchanges are within the jurisdiction of the SEC, as are other securities traded on such exchanges. As a result, many of the protections provided to traders on organized exchanges will be available with respect to such transactions. In particular, all foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Office of the Comptroller of the Currency (the "OCC"), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting a fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of the availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in applicable foreign countries for this purpose. As a result, the OCC may, if it determines that foreign government restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on the OCC or its clearing member, impose special procedures on exercise and settlement. These include such things as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. In addition, options on U.S. government securities, futures contracts, options on futures contracts, forward contracts and options on foreign currencies may be traded on foreign exchanges and over-the-counter in foreign countries. Such transactions are subject to the risk of governmental actions affecting trading in or the prices of foreign currencies or securities. The value of such positions also could be adversely affected by: (i) other complex foreign political and economic factors; (ii) less availability than that available in the United States of data on which to make trading decisions; (iii) delays in a fund's ability to act upon economic events occurring in foreign markets during non-business hours in the United States; (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States; and (v) low trading volume. FOREIGN INVESTMENTS Each fund may invest in foreign securities through the purchase of securities of foreign issuers or of American Depositary Receipts ("ADRs"). Because foreign companies are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies, there may be less publicly available information about a foreign company than about a U.S. company. Volume and liquidity in most foreign markets are less than in the U.S., and securities of many foreign companies are less liquid and more volatile than securities of comparable U.S. companies. Fixed commissions on foreign securities exchanges are generally higher than negotiated 8 commissions on U.S. exchanges, although a fund will endeavor to achieve the most favorable net results on portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers, dealers and listed companies than in the U.S., thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. Foreign markets also have different clearance and settlement procedures, and in certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of a fund investing in foreign markets is uninvested and no return is earned thereon. The inability of such a fund to make intended security purchases due to settlement problems could cause the fund to miss attractive investment opportunities. Losses to a fund due to subsequent declines in the value of portfolio securities, or losses arising out of an inability to fulfill a contract to sell such securities, could result in potential liability to the fund. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, political or social instability, or diplomatic developments which could affect the investments in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. In many instances, foreign debt securities may provide higher yields than securities of domestic issuers which have similar maturities and quality. Under certain market conditions these investments may be less liquid than the securities of U.S. corporations and are certainly less liquid than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. Finally, in the event of a default of any such foreign debt obligations, it may be more difficult to obtain or to enforce a judgment against the issuers of such securities. If a security is denominated in foreign currency, the value of the security to a fund will be affected by changes in currency exchange rates and in exchange control regulations, and costs will be incurred in connection with conversions between currencies. Currency risks generally increase in lesser developed markets. Exchange rate movements can be large and can endure for extended periods of time, affecting either favorably or unfavorably the value of a fund's assets. The value of the assets of a fund as measured in U.S. dollars may be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations. A change in the value of any foreign currency against the U.S. dollar will result in a corresponding change in the U.S. dollar value of securities denominated in that currency. Such changes will also affect the income and distributions to shareholders of a fund investing in foreign markets. In addition, although a fund will receive income on foreign securities in such currencies, it will be required to compute and distribute income in U.S. dollars. Therefore, if the exchange rate for any such currency declines materially after income has been accrued and translated into U.S. dollars, a fund could be required to liquidate portfolio securities to make required distributions. Similarly, if an exchange rate declines between the time a fund incurs expenses in U.S. dollars and the time such expenses are paid, the amount of such currency required to be converted into U.S. dollars in order to pay such expenses in U.S. dollars will be greater. ADRs, which are traded in the United States on exchanges or over-the-counter, are issued by domestic banks. ADRs represent the right to receive securities of foreign issuers deposited in a domestic bank or a correspondent bank. ADRs do not eliminate all the risk inherent in investing in the securities of foreign issuers' stock. However, by investing in ADRs rather than directly in foreign issuers' stock, a fund can avoid currency risks during the settlement period for either purchase or sales. In general, there is a large, liquid market in the United States for many ADRs. The information available for ADRs is subject to the accounting, auditing and financial reporting standards of the domestic market or exchange on which they are traded, which standards are more uniform and more exacting than those to which many foreign issuers may be subject. Certain ADRs, typically those denominated as unsponsored, require the holders thereof to bear most of the costs of such facilities, while issuers of sponsored facilities normally pay more of the costs thereof. The depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited securities or to pass through the voting rights to facility holders with respect to the deposited securities, whereas the depositary of a sponsored facility typically distributes shareholder communications and passes through the voting rights. EMERGING MARKETS. Securities traded in certain emerging market countries, including the emerging market countries in Eastern Europe, may be subject to risks in addition to risks typically posed by foreign investing due to the inexperience of financial intermediaries, the lack of modern technology, and the lack of a sufficient capital base to expand business operations. Additionally, former Communist regimes of a number of Eastern European countries previously expropriated a 9 large amount of property, the claims on which have not been entirely settled. There can be no assurance that a fund's investments in Eastern Europe will not also be expropriated, nationalized or otherwise confiscated. A fund may invest in Brady Bonds, which are securities created through the exchange of existing commercial bank loans to sovereign entities for new obligations in connection with debt restructurings under a debt restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructurings have been implemented in a number of countries, including: Argentina, Bolivia, Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador, Jordan, Mexico, Niger, Nigeria, Panama, Peru, the Philippines, Poland, Uruguay, and Venezuela. Brady Bonds may be collateralized or uncollateralized, are issued in various currencies (primarily the U.S. dollar) and are actively traded in the over-the-counter secondary market. Brady Bonds are not considered to be U.S. Government securities. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par bonds or floating rate discount bonds, are generally collateralized in full as to principal by U.S. Treasury zero coupon bonds having the same maturity as the Brady Bonds. Interest payments on these Brady Bonds generally are collateralized on a one-year or longer rolling-forward basis by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of interest payments or, in the case of floating rate bonds, initially is equal to at least one year's interest payments based on the applicable interest rate at that time and is adjusted at regular intervals thereafter. Certain Brady Bonds are entitled to "value recovery payments" in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized. Brady Bonds are often viewed as having three or four valuation components: (i) the collateralized repayment of principal at final maturity; (ii) the collateralized interest payments; (iii) the uncollateralized interest payments; and (iv) any uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the "residual risk"). Most Mexican Brady Bonds issued to date have principal repayments at final maturity fully collateralized by U.S. Treasury zero coupon bonds (or comparable collateral denominated in other currencies) and interest coupon payments collateralized on an 18-month rolling-forward basis by funds held in escrow by an agent for the bondholders. A significant portion of the Venezuelan Brady Bonds and the Argentine Brady Bonds issued to date have principal repayments at final maturity collateralized by U.S. Treasury zero coupon bonds (or comparable collateral denominated in other currencies) and/or interest coupon payments collateralized on a 14-month (for Venezuela) or 12-month (for Argentina) rolling-forward basis by securities held by the Federal Reserve Bank of New York as collateral agent. Brady Bonds involve various risk factors including residual risk and the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds. There can be no assurance that Brady Bonds in which the fund may invest will not be subject to restructuring arrangements or to requests for new credit, which may cause the fund to suffer a loss of interest or principal on any of its holdings. WHEN-ISSUED, DELAYED SETTLEMENT AND FORWARD DELIVERY SECURITIES Securities may be purchased and sold on a "when-issued," "delayed settlement," or "forward (delayed) delivery" basis. "When-issued" or "forward delivery" refers to securities whose terms are available, and for which a market exists, but which are not available for immediate delivery. When-issued or forward delivery transactions may be expected to occur a month or more before delivery is due. A fund may engage in when-issued transactions to obtain what is considered to be an advantageous price and yield at the time of the transaction. When a fund engages in when-issued or forward delivery transactions, it will do so consistent with its investment objective and policies and not for the purpose of investment leverage. "Delayed settlement" is a term used to describe settlement of a securities transaction in the secondary market which will occur sometime in the future. No payment or delivery is made by a fund until it receives payment or delivery from the other party for any of the above transactions. The fund will segregate with its custodian cash, U.S. government securities or other liquid assets at least equal to the value or purchase commitments until payment is made. The segregated securities will either mature or, if necessary, be sold on or before the settlement date. Typically, no income accrues on securities purchased on a delayed delivery basis prior to the time delivery of the securities is made, although a fund may earn income on securities it has segregated to collateralize its delayed delivery purchases. New issues of stocks and bonds, private placements and U.S. government securities may be sold in this manner. At the time of settlement, the market value of the security may be more or less than the purchase price. A fund bears the risk of such market value fluctuations. These transactions also involve the risk that the other party to the transaction may default on its obligation to make payment or delivery. As a result, the fund may be delayed or prevented from completing the transaction and may incur additional costs as a consequence of the delay. 10 ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES Subject to its investment restrictions, a fund may invest in zero coupon, pay-in-kind and step-coupon securities. Zero-coupon bonds are issued and traded at a discount from their face value. They do not entitle the holder to any periodic payment of interest prior to maturity. Step coupon bonds trade at a discount from their face value and pay coupon interest. The coupon rate is low for an initial period and then increases to a higher coupon rate thereafter. The discount from the face amount or par value depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and the perceived credit quality of the issuer. Pay-in-kind bonds give the issuer an option to pay cash at a coupon payment date or give the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of the coupon payment that would have been made. Current federal income tax law requires holders of zero-coupon securities and step-coupon securities to report the portion of the original issue discount on such securities that accrues that year as interest income, even though the holders receive no cash payments of interest during the year. In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986 ("Code"), a fund must distribute its investment company taxable income, including the original issue discount accrued on zero-coupon or step-coupon bonds. Because it will not receive cash payments on a current basis in respect of accrued original-issue discount on zero-coupon bonds or step-coupon bonds during the period before interest payments begin, in some years a fund may have to distribute cash obtained from other sources in order to satisfy the distribution requirements under the Code. A fund might obtain such cash from selling other portfolio holdings. These actions may reduce the assets to which fund expenses could be allocated and may reduce the rate of return for such fund. In some circumstances, such sales might be necessary in order to satisfy cash distribution requirements even though investment considerations might otherwise make it undesirable for a fund to sell the securities at the time. Generally, the market prices of zero-coupon bonds and strip securities are more volatile than the prices of securities that pay interest periodically in cash and they are likely to respond to changes in interest rates to a greater degree than other types of debt securities having similar maturities and credit quality. MORTGAGE-RELATED SECURITIES The funds may invest in mortgage-related securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, and by nongovernmental entities, provided, however, that to the extent that a fund purchases mortgage-related securities from such issuers which may, solely for purposes of the 1940 Act, be deemed to be investment companies, the fund's investment in such securities will be subject to the limitations on its investment in investment company securities. Mortgage-related securities in which these funds may invest represent pools of mortgage loans assembled for sale to investors by various governmental agencies such as GNMA and government-related organizations such as FNMA and FHLMC, as well as by nongovernmental issuers such as commercial banks, savings and loan institutions, mortgage bankers and private mortgage insurance companies. Although certain mortgage-related securities are guaranteed by a third party or otherwise similarly secured, the market value of the security, which may fluctuate, is not so secured. If a fund purchases a mortgage-related security at a premium, that portion may be lost if there is a decline in the market value of the security whether resulting from changes in interest rates or prepayments in the underlying mortgage collateral. As with other interest-bearing securities, the prices of such securities are inversely affected by changes in interest rates. However, though the value of a mortgage-related security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages underlying the securities are prone to prepayment, thereby shortening the average life of the security and shortening the period of time over which income at the higher rate is received. When interest rates are rising, though, the rate of prepayment tends to decrease, thereby lengthening the period of time over which income at the lower rate is received. For these and other reasons, a mortgage-related security's average maturity may be shortened or lengthened as a result of interest rate fluctuations and, therefore, it is not possible to predict accurately the security's return. In addition, regular payments received in respect of mortgage-related securities include both interest and principal. No assurance can be given as to the return the funds will receive when these amounts are reinvested. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities issued by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of FNMA and are not backed by or entitled to the full faith and credit of the United States. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to the timely payment of the principal and interest by FNMA. Mortgage-related securities issued by FHLMC 11 include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to the timely payment of interest, which is guaranteed by FHLMC. FHLMC guarantees either ultimate collection or the timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable. The funds may invest in Collateralized Mortgage Obligations ("CMOs") residuals and stripped mortgage-backed securities ("SMSBs"). CMO residuals are mortgage securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing. The cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of principal and interest on the CMOs and second to pay the related administrative expenses of the issuer. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and the prepayment experience on the mortgage assets. In particular, the yield to maturity on CMO residuals is extremely sensitive to prepayments on the related underlying mortgage assets, in the same manner as an interest-only ("IO") class of stripped mortgage-backed securities. See "Other Mortgage-Related Securities--Stripped Mortgage-Backed Securities." In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to changes in the level of the index upon which interest rate adjustments are based. As described below with respect to stripped mortgage-backed securities, in certain circumstances a fund may fail to recoup fully its initial investment in a CMO residual. CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. The CMO residual market has only very recently developed and CMO residuals currently may not have the liquidity of other more established securities trading in other markets. Transactions in CMO residuals are generally completed only after careful review of the characteristics of the securities in question. In addition, CMO residuals may, or pursuant to an exemption therefrom, may not have been registered under the Securities Act of 1933, as amended (the "1933 Act"). CMO residuals, whether or not registered under the 1933 Act, may be subject to certain restrictions on transferability, and may be deemed "illiquid" and subject to a fund's limitations on investment in illiquid securities. SMBS are derivative multi-class mortgage securities. SMBS may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing. SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a fund's yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a fund may fail to recoup some or all of its initial investment in these securities even if the security is in one of the highest rating categories. Although SMBS are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet developed and, accordingly, these securities may be deemed "illiquid" and subject to a fund's limitations on investment in illiquid securities. INCOME PRODUCING SECURITIES Unless as otherwise disclosed, the funds generally will purchase defaulted securities only when the respective sub-advisers believe, based upon analysis of the financial condition, results of operations and economic outlook of an issuer, that there is potential for resumption of income payments and that the securities offer an unusual opportunity for capital 12 appreciation. Notwithstanding the sub-adviser's belief as to the resumption of income payments, however, the purchase of any security on which payment of interest or dividends is suspended involves a high degree of risk. Such risk includes, among other things, the following: Financial and Market Risks. Investments in securities that are in default involve a high degree of financial and market risks that can result in substantial, or at times even total, losses. Issuers of defaulted securities may have substantial capital needs and may become involved in bankruptcy or reorganization proceedings. Among the problems involved in investments in such issuers is the fact that it may be difficult to obtain information about the condition of such issuers. The market prices of such securities also are subject to abrupt and erratic movements and above average price volatility, and the spread between the bid and asked prices of such securities may be greater than normally expected. Disposition of Fund Securities. The funds generally intend to purchase securities for which the sub-adviser expects an active market to be maintained, defaulted securities may be less actively traded than other securities making it more difficult to dispose of substantial holdings of such securities at prevailing market prices. The funds will limit holdings of any such securities to amounts that the sub-adviser believes could be readily sold, and its holdings of such securities would, in any event, be limited so as not to limit the funds' ability to readily dispose of securities to meet redemptions. Other. Defaulted securities require active monitoring and may, at times, require participation in bankruptcy or receivership proceedings on behalf of the funds. Other types of income producing securities that the funds may purchase include, but are not limited to, the following: Variable and Floating Rate Obligations. These types of securities are relatively long-term instruments that often carry demand features permitting the holder to demand payment of principal at any time or at specified intervals prior to maturity. Standby Commitments. These instruments, which are similar to a put, give a fund the option to obligate a broker, dealer or bank to repurchase a security held by a fund at a specified price. Tender Option Bonds. Tender option bonds are relatively long-term bonds that are coupled with the agreement of a third party (such as a broker, dealer or bank) to grant the holders of such securities the option to tender the securities to the institution at periodic intervals. Inverse Floaters. Inverse floaters are instruments whose interest bears an inverse relationship to the interest rate on another security. The funds will purchase instruments with demand features, standby commitments and tender option bonds primarily for the purpose of increasing the liquidity of their portfolios. These investments are subject to credit risk and market risk. Credit risk relates to the party's ability to make payment upon demand; market risk relates to the fact that the value of the security will be impacted by the rise and fall of interest rates. LENDING OF FUND SECURITIES The funds, from time to time, may lend portfolio securities to broker-dealers, banks or institutional borrowers of securities. In accordance with guidelines from the SEC and its staff, the funds must receive at least 100% collateral, in the form of cash or U.S. Government securities. This collateral must be valued daily, and should the market value of the loaned securities increase, the borrower must furnish additional collateral to the lender. During the time portfolio securities are on loan, the borrower pays the lender dividends or interest paid on such securities. Loans are subject to termination by the lender or the borrower at any time. While the funds do not have the right to vote securities on loan, each intends regain the right to vote if that is considered important with respect to the investment. In the event the borrower defaults on its obligation to a fund, it could experience delays in recovering its securities and possible capital losses. The funds will only enter into loan arrangements with broker-dealers, banks or other institutions determined to be creditworthy under guidelines that may be established by the Board of Trustees. ILLIQUID AND RESTRICTED/144A SECURITIES Subject to its investment restrictions, a fund may invest a certain percentage of its net assets in illiquid securities (i.e., securities that are not readily marketable). 13 In recent years, a large institutional market has developed for certain securities that are not registered under the 1933 Act. Institutional investors generally will not seek to sell these instruments to the general public, but instead will often depend on an efficient institutional market in which such unregistered securities can readily be resold or on an issuer's ability to honor a demand for repayment. Therefore, the fact that there are contractual or legal restrictions on resale to the general public or certain institutions is not dispositive of the liquidity of such investments. Rule 144A under the 1933 Act established a "safe harbor" from the registration requirements of the 1933 Act for resales of certain securities to qualified institutional buyers. Institutional markets for restricted securities that might develop as a result of Rule 144A could provide both readily ascertainable values for restricted securities and the ability to liquidate an investment in order to satisfy share redemption orders. An insufficient number of qualified institutional buyers interested in purchasing a Rule 144A-eligible security held by a portfolio could, however, adversely affect the marketability of such portfolio security and the portfolio might be unable to dispose of such security promptly or at reasonable prices. TA IDEX's Board of Trustees has authorized each fund's sub-adviser to make liquidity determinations with respect to Rule 144A securities in accordance with the guidelines established by the Board of Trustees. Under the guidelines which may be amended from time to time, the fund's sub-adviser generally will consider the following factors in determining whether a Rule 144A security is liquid: 1) the frequency of trades and quoted prices for the security; 2) the number of dealers willing to purchase or sell the security and the number of other potential purchasers; 3) the willingness of dealers to undertake to make a market in the security; and 4) the nature of the marketplace trades, including the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer and/or other factors deemed appropriate. The sale of illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the OTC markets. The fund may be restricted in its ability to sell such securities at a time when a fund's sub-adviser deems it advisable to do so. In addition, in order to meet redemption requests, a fund may have to sell other assets, rather than such illiquid securities, at a time that is not advantageous. MUNICIPAL OBLIGATIONS The funds may invest in the following types of municipal obligations: MUNICIPAL BONDS. Municipal bonds generally are classified as general obligation or revenue bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and unlimited taxing power for the payment of principal and interest. Revenue bonds are payable only from the revenues generated by a particular facility or class of facility, or in some cases from the proceeds of a special excise tax or specific revenue source. Industrial development obligations are a particular kind of municipal bond which are issued by or on behalf of public authorities to obtain funds for many kinds of local, privately operated facilities. Such obligations are, in most cases, revenue bonds that generally are secured by a lease with a particular private corporation. MUNICIPAL NOTES. Municipal notes are short-term debt obligations issued by municipalities which normally have a maturity at the time of issuance of six months to three years. Such notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes and project notes. Notes sold in anticipation of collection of taxes, a bond sale or receipt of other revenues are normally obligations of the issuing municipality or agency. MUNICIPAL COMMERCIAL PAPER. Municipal commercial paper is short-term debt obligations issued by municipalities. Although done so infrequently, municipal commercial paper may be issued at a discount (sometimes referred to as Short-Term Discount Notes). These obligations are issued to meet seasonal working capital needs of a municipality or interim construction financing and are paid from a municipality's general revenues or refinanced with long-term debt. Although the availability of municipal commercial paper has been limited, from time to time the amounts of such debt obligations offered have increased, and the sub-adviser believes that this increase may continue. VARIABLE RATE OBLIGATIONS. The interest rate payable on a variable rate municipal obligation is adjusted either at predetermined periodic intervals or whenever there is a change in the market rate of interest upon which the interest rate payable is based. A variable rate obligation may include a demand feature pursuant to which the fund would have the right to demand prepayment of the principal amount of the obligation prior to its stated maturity. The issuer of the variable rate obligation may retain the right to prepay the principal amount prior to maturity. MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations may take the form of a lease, an installment purchase or a conditional sales contract. Municipal lease obligations are issued by state and local governments and authorities to acquire land, equipment and facilities such as state and municipal vehicles, telecommunications and computer equipment, and other capital assets. Interest payments on qualifying municipal leases are exempt from federal income taxes. The 14 fund may purchase these obligations directly, or they may purchase participation interests in such obligations. Municipal leases are generally subject to greater risks than general obligation or revenue bonds. State laws set forth requirements that states or municipalities must meet in order to issue municipal obligations, and such obligations may contain a covenant by the issuer to budget for, appropriate, and make payments due under the obligation. However, certain municipal lease obligations may contain "non-appropriation" clauses which provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Accordingly, such obligations are subject to "non-appropriation" risk. While municipal leases are secured by the underlying capital asset, it may be difficult to dispose of such assets in the event of non-appropriation or other default. LOANS A fund may invest in certain commercial loans generally known as "syndicated bank loans," by acquiring participations or assignments in such loans. Such indebtedness may be secured or unsecured. Loan participations typically represent direct participation in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates. The fund may participate in such syndications, or can buy part of a loan, becoming a part lender. The fund's investment in a loan participation typically will result in the fund having a contractual relationship only with the lender and not with the borrower. The fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing a participation, the fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any right of set-off against the borrower, and the fund may not directly benefit from any collateral supporting the loan in which it has purchased the participation. As a result, the fund may be subject to the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling a participation, the fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. When a fund purchases a loan assignment from lenders, it will acquire direct rights against the borrowers on the loan. Because assignments are arranged through private negotiations between potential assignees and potential assignors, however, the rights and obligations acquired by the fund as the purchaser of an assignment may differ from, and be more limited than, those held by the assigning lender. Because there is no liquid market for such securities, the fund anticipates that such securities could be sold only to a limited number of institutional investors. The lack of a liquid secondary market may have an adverse impact on the value of such securities and a fund's ability to dispose of particular assignments or participations when necessary to meet redemptions of fund shares, to meet the fund's liquidity needs or when necessary in response to a specific economic event, such as deterioration in the creditworthiness of the borrower. The lack of a liquid secondary market for assignments and participations also may make it more difficult for a fund to value these securities for purposes of calculating its net asset value. Investments in loans through a direct assignment of the financial institution's interests with respect to the loan may involve additional risks to the fund. For example, if a loan is foreclosed, a fund could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, a fund could be held liable as co-lender. It is unclear whether loans and other forms of direct indebtedness offer securities law protections against fraud and misrepresentation. In the absence of definitive regulatory guidance, a fund relies on its sub-adviser's research in an attempt to avoid situations where fraud or misrepresentation could adversely affect the fund. EQUITY EQUIVALENTS In addition to investing in common stocks, the funds may invest in other equity securities and equity equivalents, including securities that permit a fund to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of equity securities and equity equivalents include preferred stock, convertible preferred stock and convertible debt securities. A fund will limit its holdings of convertible debt securities to those that, at the time of purchase, are rated at least B- by S&P or B3 by Moody's, or, if not rated by S&P or Moody's, are of equivalent investment quality as determined by the sub-adviser. Debt securities rated below the four highest categories are not considered "investment-grade" obligations. These securities have speculative characteristics and present more credit risk than investment-grade obligations. Equity equivalents also may include securities whose value or return is derived from the value or return of a different security. Depositary receipts, are an example of the type of derivative security in which the fund might invest. 15 EVENT-LINKED BONDS The funds may invest in "event-linked bonds," which are fixed income securities for which the return of principal and payment of interest is contingent on the non-occurrence of a specific "trigger" event, such as a hurricane, earthquake, or other physical or weather-related phenomenon. Some event-linked bonds are commonly referred to as "catastrophe bonds." If a trigger event occurs, the portfolio may lose a portion or all of its principal invested in the bond. Event-linked bonds often provide for an extension of maturity to process and audit loss claims where a trigger event has, or possibly has, occurred. An extension of maturity may increase volatility. Event-linked bonds may also expose the fund to certain unanticipated risks including credit risk, adverse regulatory or jurisdictional interpretations, and adverse tax consequences. Event-linked bonds may also be subject to liquidity risk. COLLATERALIZED DEBT OBLIGATIONS The funds may invest in collateralized debt obligations ("CDOs"), which includes collateralized bond obligations ("CBOs"), collateralized loan obligations ("CLOs") and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust which is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. For both CBOs and CLOs, the cashflows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the "equity" tranche which bears the bulk of defaults from the bonds or loans in the trust and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CBO trust or CLO trust typically have higher ratings and lower yields than their underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CBO or CLO securities as a class. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus, are not registered under the securities laws. As a result, investments in CDOs may be characterized by the funds as illiquid securities, however an active dealer market may exist for CDOs allowing a CDO to qualify for Rule 144A transactions. In addition to the normal risks associated with fixed income securities discussed elsewhere in this SAI and the funds' prospectuses (e.g., interest rate risk and default risk), CDOs carry additional risks including, but are not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the funds may invest in CDOs that are subordinate to other classes; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. REPURCHASE AND REVERSE REPURCHASE AGREEMENTS Subject to its investment restrictions, a fund may enter into repurchase and reverse repurchase agreements. In a repurchase agreement, a fund purchases a security and simultaneously commits to resell that security to the seller at an agreed upon price on an agreed upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon incremental amount which is unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is in effect secured by the value (at least equal to the amount of the agreed upon resale price and marked-to-market daily) of the underlying security or collateral. A fund may engage in a repurchase agreement with respect to any security in which it is authorized to invest. In a reverse repurchase agreement, a fund sells a portfolio instrument to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase the instrument at a particular price and time. While a reverse repurchase agreement is outstanding, a fund will segregate with its custodian cash and appropriate liquid assets with the funds' custodian to cover its obligation under the agreement. The funds will enter into reverse repurchase agreements only with parties the investment sub-adviser for each fund deems creditworthy. Repurchase agreements involve the risk that the seller will fail to repurchase the security, as agreed. In that case, a fund will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security. In the event of bankruptcy or insolvency of the seller, delays and costs are incurred. 16 Reverse repurchase agreements may expose a fund to greater fluctuations in the value of its assets. PASS-THROUGH SECURITIES Each fund may, in varying degrees, invest in various types of pass-through securities, such as mortgage-backed securities, asset-backed securities and participation interests, which are fully discussed in this SAI. A pass-through security is a share or certificate of interest in a pool of debt obligations that has been repackaged by an intermediary, such as a bank or broker-dealer. The purchaser receives an undivided interest in the underlying pool of securities. The issuers of the underlying securities make interest and principal payments to the intermediary which are passed through to purchasers, such as the funds. HIGH YIELD/HIGH-RISK SECURITIES High-yield/high-risk securities (commonly known as "junk bonds") are below investment grade securities that involve significant credit and liquidity concerns and fluctuating yields, and are not suitable for short-term investing. Higher yields are ordinarily available on fixed-income securities which are unrated or are rated in the lower rating categories of recognized rating services such as Moody's and Standard & Poor's. VALUATION RISKS. Lower rated bonds also involve the risk that the issuer will not make interest or principal payments when due. In the event of an unanticipated default, a fund owning such bonds would experience a reduction in its income, and could expect a decline in the market value of the securities so affected. Such funds, furthermore, may incur additional costs in seeking the recovery of the defaulted securities. More careful analysis of the financial condition of each issuer of lower rated securities is therefore necessary. During an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress which would adversely affect their ability to service their principal and interest payments obligations, to meet projected business goals and to obtain additional financing. The market prices of lower grade securities are generally less sensitive to interest rate changes than higher rated investments, but more sensitive to adverse economic or political changes or individual developments specific to the issuer. Periods of economic or political uncertainty and change can be expected to result in volatility of prices of these securities. Past experience with high-yield securities in a prolonged economic downturn may not provide an accurate indication of future performance during such periods. LIQUIDITY RISKS. Lower rated securities also may have less liquid markets than higher rated securities, and their liquidity as well as their value may be more severely affected by adverse economic conditions. Adverse publicity and investor perceptions as well as new or proposed laws may also have a greater negative impact on the market for lower rated bonds. Unrated securities are not necessarily of lower quality than rated securities, but the markets for lower rated and nonrated securities are more limited than those in which higher rated securities are traded. In addition, an economic downturn or increase in interest rates is likely to have a greater negative effect on: (i) the market for lower rated and nonrated securities; (ii) the value of high yield debt securities held by a fund; (iii) the new asset value of a fund holding such securities; and (iv) the ability of the bonds' issuers to repay principal and interest, meet projected business goals and obtain additional financing than on higher rated securities. WARRANTS AND RIGHTS Subject to its investment restrictions, a fund may invest in warrants and rights. A warrant is a type of security that entitles the holder to buy a proportionate amount of common stock at a specified price, usually higher than the market price at the time of issuance, for a period of years or to perpetuity. In contrast, rights, which also represent the right to buy common shares, normally have a subscription price lower than the current market value of the common stock and a life of two to four weeks. U.S. GOVERNMENT SECURITIES Examples of the types of U.S. government securities that a fund may hold include, in addition to those described in the prospectus, are direct obligations of the U.S. Treasury, the obligations of the Federal Housing Administration, Farmers Home Administration, Small Business Administration, General Services Administration, Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Bank, Federal Intermediate Credit Banks, Federal Land Banks and Maritime Administration. U.S. government securities may be supported by the full faith and credit of the U.S. government (such as securities of the Small Business Administration); by the right of the issuer to borrow from the Treasury (such as securities of the Federal Home Loan Bank); by the discretionary authority of the U.S. government to purchase the 17 agency's obligations (such as securities of the Federal National Mortgage Association); or only by the credit of the issuing agency. TEMPORARY DEFENSIVE POSITION For temporary defensive purposes, a fund may, at times, choose to hold some or all of its net assets in cash, or to invest that cash in a variety of debt securities. This may be done as a defensive measure at times when desirable risk/reward characteristics are not available in stocks or to earn income from otherwise uninvested cash. When a fund increases its cash or debt investment position, its income may increase while its ability to participate in stock market advances or declines decreases. Furthermore, when a fund assumes a temporary defensive position, it may not be able to achieve its investment objective. OTHER SECURITIES IN WHICH THE FUNDS MAY INVEST CORPORATE DEBT SECURITIES. A fund may invest in corporate bonds, notes and debentures of long and short maturities and of various grades, including unrated securities. Corporate debt securities exist in great variety, differing from one another in quality, maturity, and call or other provisions. Lower grade bonds, whether rated or unrated, usually offer higher interest income, but also carry increased risk of default. Corporate bonds may be secured or unsecured, senior to or subordinated to other debt of the issuer, and, occasionally, may be guaranteed by another entity. In addition, they may carry other features, such as those described under "Convertible Securities" and "Variable or Floating Rate Securities," or have special features such as the right of the holder to shorten or lengthen the maturity of a given debt instrument, rights to purchase additional securities, rights to elect from among two or more currencies in which to receive interest or principal payments, or provisions permitting the holder to participate in earnings of the issuer or to participate in the value of some specified commodity, financial index, or other measure of value. COMMERCIAL PAPER. Commercial paper refers to short-term unsecured promissory notes issued by commercial and industrial corporations to finance their current operations. Commercial paper may be issued at a discount and redeemed at par, or issued at par with interest added at maturity. The interest or discount rate depends on general interest rates, the credit standing of the issuer, and the maturity of the note, and generally moves in tandem with rates on large CDs and Treasury bills. An established secondary market exists for commercial paper, particularly that of stronger issuers which are rated by Moody's Investors Service, Inc. and Standard and Poor's Ratings Group. Investments in commercial paper are subject to the risks that general interest rates will rise, that the credit standing and outside rating of the issuer will fall, or that the secondary market in the issuer's notes will become too limited to permit their liquidation at a reasonable price. INTERNATIONAL AGENCY OBLIGATIONS. A fund may invest in bonds, notes or Eurobonds of international agencies. Examples are securities issued by the Asian Development Bank, the European Economic Community, and the European Investment Bank. The funds may also purchase obligations of the International Bank for Reconstruction and Development which, while technically not a U.S. government agency or instrumentality, has the right to borrow from the participating countries, including the United States. BANK OBLIGATIONS OR SAVINGS AND LOAN OBLIGATIONS. Subject to its investment restrictions, a fund may purchase certificates of deposit, bankers' acceptances and other debt obligations of commercial banks and certificates of deposit and other debt obligations of savings and loan associations ("S&L's"). Certificates of deposit are receipts from a bank or an S&L for funds deposited for a specified period of time at a specified rate of return. Bankers' acceptances are time drafts drawn on commercial banks by borrowers, usually in connection with international commercial transactions. These instruments may be issued by institutions of any size, may be of any maturity, and may be insured or uninsured. The quality of bank or savings and loan obligations may be affected by such factors as (a) location -- the strength of the local economy will often affect financial institutions in the region, (b) asset mix -- institutions with substantial loans in a troubled industry may be weakened by those loans, and (c) amount of equity capital -- under-capitalized financial institutions are more vulnerable when loan losses are suffered. The sub-adviser will evaluate these and other factors affecting the quality of bank and savings and loan obligations purchased by a fund, but the fund is not restricted to obligations or institutions that satisfy specified quality criteria. VARIABLE OR FLOATING RATE SECURITIES. Subject to its investment restrictions, a fund may purchase variable rate securities that provide for automatic establishment of a new interest rate at fixed intervals (e.g., daily, monthly, semi-annually, etc.). Floating rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. The interest rate on variable and floating rate securities is ordinarily determined by reference to, or is a percentage of, a bank's prime rate, the 90-day U.S. Treasury bill rate, the rate of return on commercial paper or bank certificates of deposit, an index of short-term interest rates, or some other objective measure. These securities generally are structured as loans. 18 PREFERRED STOCKS. Subject to a fund's investment restrictions, a fund may purchase preferred stocks. Preferred stocks are securities which represent an ownership interest in a corporation and which give the owner a prior claim over common stock on the corporation's earnings and assets. Preferred stock generally pays quarterly dividends. Preferred stocks may differ in many of their provisions. Among the features that differentiate preferred stocks from one another are the dividend rights, which may be cumulative or non-cumulative and participating or non-participating, redemption provisions, and voting rights. Such features will establish the income return and may affect the prospects for capital appreciation or risks of capital loss. CONVERTIBLE SECURITIES. Subject to its investment restrictions, a fund may invest in debt securities convertible into or exchangeable for equity securities, or debt securities that carry with them the right to acquire equity securities, as evidenced by warrants attached to such securities or acquired as part of units of the securities. Such securities normally pay less current income than securities without conversion features, but add the potential opportunity for appreciation from enhanced value for the equity securities into which they are convertible, and the concomitant risk of loss from declines in those values. COMMON STOCKS. Subject to its investment restrictions, a fund may invest in common stocks. Common stocks are junior to the debt obligations and preferred stocks of an issuer. Hence, dividend payments on common stocks should be regarded as less secure than income payments on corporate debt securities. PORTFOLIO TURNOVER RATE Changes may be made in a fund's portfolio consistent with the investment objective and policies of the fund whenever such changes are believed to be in the best interests of the fund and its shareholders, and each fund will be managed without regard to its portfolio turnover rate. The portfolio turnover rates for all of the funds may vary greatly from year to year as well as within a particular year, and may be affected by cash requirements for redemptions of shares. High portfolio turnover rates will generally result in higher transaction costs to a fund, including brokerage commissions, and may have adverse tax consequences The portfolio turnover rate for each of the funds is calculated by dividing the lesser of a fund's purchases or sales of portfolio securities for the year by the monthly average value of the securities. The SEC requires that the calculation exclude all securities whose remaining maturities at the time of acquisition are one year or less. DISCLOSURE OF PORTFOLIO HOLDINGS It is the policy of the funds to protect the confidentiality of their holdings and prevent the selective disclosure of non-public information about the funds' portfolio holdings. The funds' service providers are required to comply with this policy. No non-public information concerning the portfolio holdings of the funds may be disclosed to any unaffiliated third party, except as provided below. The Board of Trustees has adopted formal procedures governing compliance with the funds' policies. The funds, or their duly authorized service providers, may publicly disclose holdings of all funds in accordance with regulatory requirements, such as periodic portfolio disclosure in filings with the SEC. A summary or list of a fund's completed purchases and sales may only be made available after the public disclosure of a fund's portfolio holdings. The funds will publish all portfolio holdings on a quarterly basis on their website at www.idexfunds.com 30 days after the end of each calendar quarter. Such information will generally remain online for 6 months or as otherwise consistent with applicable regulations. The day following such publication, the information is deemed to be publicly disclosed for the purposes of the policies and procedures adopted by the funds. The funds may then forward the information to investors and consultants requesting it. As the funds have not yet commenced operations, the funds' portfolio holdings are not yet available. There are numerous mutual fund evaluation services such as Standard & Poor's, Morningstar or Lipper Analytical Services, and due diligence departments of broker-dealers and wirehouses that regularly analyze the portfolio holdings of mutual funds in order to monitor and report on various attributes including style, capitalization, maturity, yield, beta, etc. These services and departments then distribute the results of their analysis to the public, paid subscribers and/or in-house brokers. In order to facilitate the review of the funds by these services and departments, the funds may distribute (or authorize their service providers to distribute) portfolio holdings to such services and departments before their public disclosure is required or authorized provided that: (i) the recipient does not distribute the portfolio holdings or results of the analysis to third parties, other departments or persons who are likely to use the information for purposes of purchasing or selling the funds before the portfolio holdings or results of the analysis become public information; and (ii) the recipient 19 signs a written confidentiality agreement. Persons and entities unwilling to execute an acceptable confidentiality agreement may only receive portfolio holdings information that has otherwise been publicly disclosed. Neither the funds nor their service providers receive any compensation from such services and departments. Subject to such departures as the funds' investment adviser's compliance department believes reasonable and consistent with reasonably protecting the confidentiality of the portfolio information, each confidentiality agreement should generally provide that, among other things: the portfolio information is the confidential property of the funds (and its service provider, if applicable) and may not be shared or used directly or indirectly for any purpose except as expressly provided in the confidentiality agreement; the recipient of the portfolio information agrees to limit access to the portfolio information to its employees (and agents) who, on a need to know basis, are (1) authorized to have access to the portfolio information and (2) subject to confidentiality obligations, including duties not to trade on non-public information, no less restrictive than the confidentiality obligations contained in the Confidentiality Agreement; and upon written request, the recipient agrees to promptly return or destroy, as directed, the portfolio information. The Board and an appropriate officer of the investment adviser's compliance department or the funds' Chief Compliance Officer ("CCO") may, on a case-by-case basis, impose additional restrictions on the dissemination of portfolio information and waive certain requirements. To the extent required by law, the CCO reports to the Board violations of the funds' policies and procedures on disclosure of portfolio holdings. INVESTMENT ADVISORY AND OTHER SERVICES Transamerica IDEX has entered into a Management and Investment Advisory Agreement ("Advisory Agreement") on behalf of each fund with Transamerica Fund Advisors, Inc. ("TFAI"), located at 570 Carillon Parkway, St. Petersburg, Florida 33716. TFAI supervises each respective fund's investments and conducts its investment program. TFAI is directly owned by Western Reserve Life Assurance Co. of Ohio (78%) (Western Reserve) and AUSA Holding Company (22%) (AUSA), both of which are indirect wholly owned subsidiaries of AEGON N.V. Great Companies, L.L.C., a sub-adviser to the funds, is a 30% owned indirect subsidiary of AUSA. AUSA is wholly owned by Transamerica Holding Company, which is wholly owned by AEGON USA, Inc. (AEGON USA), a financial services holding company whose primary emphasis is on life and health insurance, and annuity and investment products. AEGON USA is a wholly owned indirect subsidiary of AEGON N.V., a Netherlands corporation and publicly traded international insurance group. INVESTMENT ADVISER COMPENSATION TFAI receives compensation, calculated daily and paid monthly, from the funds at the indicated annual rates (expressed as a specified percentage of the funds' average daily net assets):
FUND PERCENTAGE OF AVERAGE DAILY NET ASSETS ---- -------------------------------------- TA IDEX AllianceBernstein International Value First $200 million: 0.88% Over $200 million up to $500 million: 0.81% Over $500 million: 0.77% TA IDEX Neuberger Berman International First $100 million: 1.00% Over $100 million: 0.95% TA IDEX Oppenheimer Emerging Markets First $50 million: 1.20% Over $50 million up to $200 million: 1.15% Over $200 million: 1.10% TA IDEX J.P. Morgan International Bond First $100 million: 0.55% Over $100 million up to $250 million: 0.52% Over $250 million up to $500 million: 0.51% Over $500 million up to $1 billion: 0.50% Over $1 billion: 0.47% TA IDEX Federated Conservative Tactical Allocation First $30 million: 0.85% Over $30 million up to $50 million: 0.80% Over $50 million: 0.70% TA IDEX Mercury Tactical Allocation First $100 million: 0.80% Over $100 million: 0.72% TA IDEX Credit Suisse Commodities 0.70% for the first $500 million; 0.68% for amounts over $500 million up to $1 billion; and 0.65% for amounts over $1 billion
20 ADVISORY AGREEMENT The duties and responsibilities of the investment adviser are specified in the Advisory Agreement. The Advisory Agreement provides that TFAI will perform the following services or cause them to be performed by others: (i) furnish to the fund investment advice and recommendations; (ii) supervise the purchase and sale of securities as directed by appropriate fund officers, and (iii) be responsible for the administration of each fund. The Advisory Agreement is not assignable and may be terminated without penalty upon 60 days' written notice at the option of either the fund, TFAI or by a vote of shareholders of each fund. The Advisory Agreement provides that after an initial term of up to two years, it can be continued from year to year so long as such continuance is specifically approved annually (a) by the Board of Trustees or by a majority of the outstanding shares of each fund and (b) by a majority vote of the Trustees who are not parties to the Advisory Agreement or interested persons of any such party cast in person at a special meeting called for such purposes. The Advisory Agreement also provides that TFAI shall not be liable to the funds or to any shareholder for any error of judgment or mistake of law or for any loss suffered by a fund or by any shareholder in connection with matters to which the Advisory Agreement relates, except for a breach of fiduciary duty or a loss resulting from willful misfeasance, bad faith, gross negligence, or reckless disregard on the part of TFAI in the performance of its duties thereunder. Each fund pays its allocable share of the fees and expenses of a fund's non-interested trustees, custodian and transfer agent fees, brokerage commissions and all other expenses in connection with the execution of its portfolio transactions, administrative, clerical, recordkeeping, bookkeeping, legal, auditing and accounting expenses, interest and taxes, expenses of preparing tax returns, expenses of shareholders' meetings and preparing, printing and mailing proxy statements (unless otherwise agreed to by the funds or TFAI, expenses of preparing and typesetting periodic reports to shareholders (except for those reports the fund's permit to be used as sales literature), and the costs, including filing fees, of renewing or maintaining registration of fund shares under federal and state law. EXPENSE REIMBURSEMENT TFAI has entered into an expense limitation arrangement with Transamerica IDEX on behalf of the funds, pursuant to which TFAI has agreed to waive fees and/or reimburse expenses, whenever, in any fiscal year, the total cost to a fund of normal operating expenses chargeable to its income account, including the investment advisory fee but excluding brokerage commissions, interest, taxes and 12b-1 fees, exceeds a certain percentage of the fund's average daily net assets. That percentage is listed by fund in the following table, as specified for that fund (expense cap). Transamerica IDEX, on behalf of such fund, will at a later date reimburse TFAI for operation expenses previously paid on behalf of such fund during the previous 36 months if on any day, the estimated annualized operating expenses of the fund are less than the expense cap. However, a fund will proceed to such recoupment only if, after such recoupment, the fund's expense ratio does not exceed the expense cap. The agreement, as amended, continues automatically for one-year terms unless TFAI provides written notice to Transamerica IDEX at least 30 days prior to the end of the then-current term. In addition, the agreement will terminate upon termination of the Investment Advisory Agreement, or may be terminated by Transamerica IDEX, without payment of any penalty, upon ninety (90) days' prior written notice to TFAI. The applicable expense caps for each of the funds are listed in the following table.
EXPENSE FUND CAP ---- ------- TA IDEX AllianceBernstein International Value 1.13% TA IDEX Neuberger Berman International 1.25% TA IDEX Oppenheimer Emerging Markets 1.45% TA IDEX J.P. Morgan International Bond 0.75% TA IDEX Federated Conservative Tactical Allocation 1.05% TA IDEX Mercury Tactical Allocation 1.00% TA IDEX Credit Suisse Commodities 0.90%
As of the date of this SAI, the fund have not commenced operations. As a result, no fees were paid for the fiscal year. 21 SUB-ADVISERS Alliance Capital Management L.P. ("Alliance"), located at 1345 Avenue of the Americas, New York, New York 10105, serves as sub-adviser to TA IDEX AllianceBernstein International Value pursuant to a sub-advisory agreement with TFAI. Neuberger Berman Management, Inc. ("Neuberger Berman"), located at 605 Third Avenue, 2nd floor, New York, New York 10158-0180, serves as sub-adviser to TA IDEX Neuberger Berman International pursuant to a sub-advisory agreement with TFAI. OppenheimerFunds, Inc. ("Oppenheimer"), located at Two World Financial Center, 225 Liberty Street, 11th floor, New York, New York 10281-1008, serves as sub-adviser to TA IDEX Oppenheimer Emerging Markets pursuant to a sub-advisory agreement with TFAI. J.P. Morgan Investment Management Inc. ("J.P. Morgan"), located at 522 Fifth Avenue, New York, New York 10036, serves as sub-adviser to TA IDEX J.P. Morgan International Bond pursuant to a sub-advisory agreement with TFAI. Federated Equity Management Company of Pennsylvania ("Federated"), located at 1001 Liberty Avenue, Pittsburgh, Pennsylvania, 15222-3779, serves as sub-adviser to TA IDEX Federated Conservative Tactical Allocation pursuant to a sub-advisory agreement with TFAI. Fund Asset Management, LP, doing business as Mercury Advisors ("Mercury"), serves as sub-adviser to TA IDEX Mercury Tactical Allocation pursuant to a sub-advisory agreement with TFAI. Credit Suisse Asset Management, LLC ("Credit Suisse"), located at 466 Lexington Avenue, New York, New York 10017-3140, serves as sub-adviser to TA IDEX Credit Suisse Commodities pursuant to a sub-advisory agreement with TFAI. As of the date of this SAI, the funds have not commenced operations. As a result, no sub-advisory fees were paid for the fiscal year. The sub-advisers receive compensation, calculated daily and paid monthly, from TFAI at the indicated annual rates (expressed as a specified percentage of the Fund's average daily net assets): 22
Fund Sub-Adviser Sub-Advisory Fee ----------------------------------- ---------------- ----------------------------------------------- TA IDEX AllianceBernstein Alliance First $200 million..................... 0.45% International Value Over $200 million up to $500 million... 0.36% Over $500 million...................... 0.32% TA IDEX Neuberger Berman Neuberger Berman First $100 million..................... 0.50% International Over $100 million...................... 0.45% TA IDEX Oppenheimer Emerging Oppenheimer First $50 million...................... 0.70% Markets Over $50 million up to $200 million.... 0.65% Over $200 million...................... 0.60% TA IDEX J.P. Morgan International J.P. Morgan First $100 million..................... 0.20% Bond Over $100 million up to $250 million... 0.17% Over $250 million up to $500 million... 0.16% Over $500 million up to $1 billion..... 0.15% Over $1 billion........................ 0.12% TA IDEX Federated Conservative Federated First $30 million...................... 0.50% Tactical Allocation Over $30 million up to $50 million..... 0.35% Over $50 million....................... 0.25% TA IDEX Mercury Tactical Allocation Mercury First $100 million..................... 0.44% Over $100 million...................... 0.32% TA IDEX Credit Suisse Commodities Credit Suisse First $500 million..................... 0.25% Over $500 million up to $1 billion..... 0.23% Over $1 billion........................ 0.20%
Each of the sub-advisers also serves as investment adviser or sub-adviser to other funds and/or private accounts that may have investment objectives identical or similar to that of the funds. Securities frequently meet the investment objectives of one or all of these funds, the other funds and the private accounts. In such cases, a sub-adviser's decision to recommend a purchase to one fund or account rather than another is based on a number of factors. The determining factors in most cases are the amounts available for investment by each fund or account, the amount of securities of the issuer then outstanding, the value of those securities and the market for them. Another factor considered in the investment recommendations is other investments which each fund or account presently has in a particular industry. It is possible that at times identical securities will be held by more than one fund or account. However, positions in the same issue may vary and the length of time that any fund or account may choose to hold its investment in the same issue may likewise vary. To the extent that more than one of the funds or private accounts served by a sub-adviser seeks to acquire or sell the same security at about the same time, either the price obtained by the funds or the amount of securities that may be purchased or sold by a fund at one time may be adversely affected. On the other hand, if the same securities are bought or sold at the same time by more than one fund or account, the resulting participation in volume transactions could produce better executions for the funds. In the event more than one fund or account purchases or sells the same security on a given date, the purchase and sale transactions are allocated among the fund(s), the other funds and the private accounts in a manner believed by the sub-advisers to be equitable to each. INFORMATION ABOUT THE FUNDS' PORTFOLIO MANAGERS Information regarding the other accounts managed by the funds' portfolio manager(s), the methods by which the funds' portfolio manager(s) are compensated, the methods by which each the range of securities owned by each portfolio manager and a description of the conflicts of interest policy applicable to each fund portfolio manager are provided in Appendix A of this SAI. 23 BOARD REVIEW AND APPROVAL OF ADVISORY AND SUB-ADVISORY AGREEMENTS At a meeting of the Board of Trustees of Transamerica IDEX held on July 26, 2005, the Board considered and approved for a two-year period the Investment Advisory Agreement between TA IDEX, on behalf of each fund, and TFAI as well as the Investment Sub-Advisory Agreement of each Fund between TFAI and each fund's investment sub-adviser. In approving these agreements, the Board concluded that the Investment Advisory and Investment Sub-Advisory Agreements would enable shareholders of the funds to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of shareholders based upon the following determinations, among others: THE NATURE, EXTENT AND QUALITY OF THE ADVISORY SERVICE TO BE PROVIDED. The Board considered the nature and quality of the services anticipated to be provided by TFAI and each sub-adviser. The Board concluded that TFAI and each sub-adviser are capable of providing high quality services to the respective funds, as indicated by TFAI's management capabilities demonstrated with respect to other funds managed by TFAI, TFAI's management oversight process, and the professional qualifications and the experience of the sub-advisers' portfolio management teams. The Board also concluded that the services anticipated to be provided by TFAI and each sub-adviser are appropriate in scope and extent in light of the funds' anticipated operations, and the competitive landscape of the investment company business and investor needs. THE ANTICIPATED INVESTMENT PERFORMANCE OF THE FUNDS. The Board concluded, based in particular on performance achieved by sub-advisers with respect to comparable investment companies and the Trustees' assessment of the nature, extent and quality of investment advisory and related services to be provided or procured by TFAI and each sub-adviser to the funds, that TFAI and the sub-adviser would be capable of generating a level of investment performance that is appropriate in light of the funds' respective investment objectives, policies and strategies and competitive with other investment companies. THE COST OF ADVISORY SERVICES PROVIDED AND THE LEVEL OF PROFITABILITY. On the basis of the Board's review of the fees to be charged by TFAI and the sub-adviser for investment advisory and related services, and the estimated profitability of TFAI's relationships with the funds and TA IDEX, the Board concluded that the level of investment advisory fees and the anticipated profitability is appropriate in light of the services to be provided. THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUNDS GROW AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE FOR THE BENEFIT OF INVESTORS. The Trustees concluded that inclusion of asset-based breakpoints in the funds' advisory fee schedules would appropriately benefit investors by realizing economies of scale in the form of a lower advisory fee rate as the level of fund assets increases. The Board also concluded that the advisory fees appropriately reflect the current economic environment for TFAI, and the competitive nature of the investment company market. In addition, the Board noted that it will have the opportunity to periodically re-examine whether the funds have achieved economies of scale, as well as the appropriateness of advisory fees payable to TFAI and the sub-adviser in the future. BENEFITS (SUCH AS SOFT DOLLARS) TO TFAI OR EACH SUB-ADVISER FROM ITS RELATIONSHIP WITH A FUND. The Board concluded that other benefits to be derived by TFAI or each sub-adviser from its relationship with a fund will be reasonable and fair, and consistent with industry practice and the best interests of each fund. In this regard, the Board noted that TFAI does not realize "soft dollar" benefits from its relationship with the funds, and that the sub-advisers would engage in "soft dollar" arrangements consistent with applicable law and "best execution" requirements. OTHER CONSIDERATIONS. The Board also determined that TFAI makes substantial commitments to the recruitment and retention of high quality personnel, and maintain the financial, compliance and operational resources reasonably necessary to manage the funds in a professional manner that is consistent with the best interests of each fund and its shareholders. The Trustees also concluded that TFAI makes significant entrepreneurial commitments to the management and success of the fund, reflected by TFAI's expense limitation and fee waiver arrangements with the funds, which may result in TFAI waiving a substantial amount of advisory fees for the benefit of shareholders. 24 DISTRIBUTOR Transamerica IDEX has entered into an Underwriting Agreement with AFSG Securities Corporation ("AFSG"), located at 4333 Edgewood Rd. NE, Cedar Rapids, Iowa 52494 to act as the principal underwriter of the shares of the funds. The Underwriting Agreement will continue from year to year so long as its continuance is approved at least annually in the same manner as the investment advisory agreements discussed above. A discussion of AFSG's responsibilities and charges as principal underwriter of fund shares is set forth in the prospectus. As of the date of this SAI, the funds have not commenced operations. As a result, no underwriting commissions were paid for past fiscal year ended. ADMINISTRATIVE SERVICES TFAI is responsible for the supervision all of the administrative functions and paying its allocable portion of the salaries, fees and expenses of all fund officers and of those trustees who are affiliated with TFAI. The costs and expenses, including legal and accounting fees, filing fees and printing costs in connection with the formation of a fund and the preparation and filing of a fund's initial registration statements under the 1933 Act and 1940 Act are also paid by the adviser. Transamerica IDEX has entered into an Administrative Services Agreement ("Administrative Agreement") with Transamerica Fund Services, Inc. ("TFS) on behalf of each fund. Under the Administrative Agreement, TFS carries out and supervises all of the administrative functions of the funds and incurs expenses payable by Transamerica IDEX related to such functions. The funds have entered into an agreement wherein each fund would pay 0.02% of its daily net assets for such administrative services. The administrative duties of TFS with respect to each fund include: providing the fund with office space, telephones, office equipment and supplies; paying the compensation of the fund's officers for services rendered as such; supervising and assisting in preparation of annual and semi-annual reports to shareholders, notices of dividends, capital gain distributions and tax information; supervising compliance by the fund with the recordkeeping requirements under the 1940 Act and regulations thereunder and with the state regulatory requirements; maintaining books and records of the fund (other than those maintained by the fund's custodian and transfer agent); preparing and filing tax returns and reports; monitoring and supervising relationships with the fund's custodian and transfer agent; monitoring the qualifications of tax deferred retirement plans providing for investment in shares of each fund; authorizing expenditures and approving bills for payment on behalf of each fund; and providing executive, clerical and secretarial help needed to carry out its duties. As of the date of this SAI, the funds have not commenced operations. As a result, no administrative fees were paid for the past fiscal year ended. CUSTODIAN, TRANSFER AGENT AND OTHER AFFILIATES Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, 16th Floor, Boston, Massachusetts 02116, is custodian for Transamerica IDEX. The custodian is not responsible for any of the investment policies or decisions of a fund, but holds its assets in safekeeping, and collects and remits the income thereon subject to the instructions of the funds. TFS, 570 Carillon Parkway, St. Petersburg, Florida 33716, also is the transfer agent for each fund, withholding agent and dividend disbursing agent. TFS is a wholly-owned subsidiary of AUSA Holding Company and thus is an affiliate of TFAI. Each fund pays the transfer agent an annual per-account charge of $19.60 for each Open Account and $1.50 for each Closed Account. There is no new account charge. Transaction requests should be mailed to Transamerica IDEX Mutual Funds, P.O. Box 219945, Kansas City, MO 64121-9945 or Transamerica IDEX Mutual Funds, 330 W. 9th Street, Kansas City, MO 65105 (for overnight mail). IBT is a provider of data processing and recordkeeping services for the Transamerica IDEX transfer agent. Each fund may use another affiliate of IBT as introducing broker for certain portfolio transactions as a means to reduce expenses through a credit against transfer agency fees with regard to commissions earned by such affiliate. (See "Fund Transactions and Brokerage.") As of the date of this SAI, the funds have not commenced operations. As a result, no transfer agency fees were paid and no brokerage credits were received for the past fiscal year. 25 FUND TRANSACTIONS AND BROKERAGE Decisions as to the assignment of fund business for each of the funds and negotiation of commission rates are made by a fund's sub-adviser, whose policy is to obtain the "best execution" (prompt and reliable execution at the most favorable security price) of all fund transactions. The Investment Advisory Agreement and Investment Counsel Agreement/Sub-Advisory Agreement for each fund specifically provide that in placing portfolio transactions for a fund, the fund's sub-adviser may agree to pay brokerage commissions for effecting a securities transaction in an amount higher than another broker or dealer would have charged for effecting that transaction as authorized, under certain circumstances, by the Securities Exchange Act of 1934, as amended (the "1934 Act"). In selecting brokers and dealers and in negotiating commissions, a fund's sub-adviser may consider a number of factors, including but not limited to: The sub-adviser's knowledge of currently available negotiated commission rates or prices of securities and other current transaction costs; The nature of the security being traded; The size and type of the transaction; The nature and character of the markets for the security to be purchased or sold; The desired timing of the trade; The activity existing and expected in the market for the particular security; The quality of the execution, clearance and settlement services; Financial stability; The existence of actual or apparent operational problems of any broker or dealer; and Research products and services provided. In recognition of the value of the foregoing factors, the sub-adviser may place portfolio transactions with a broker with whom it has negotiated a commission that is in excess of the commission another broker would have charged for effecting that transaction. This is done if the sub-adviser determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research provided by such broker viewed in terms of either that particular transaction or of the overall responsibilities of the sub-adviser. Research provided may include: Furnishing advice, either directly or through publications or writings, as to the value of securities, the advisability of purchasing or selling specific securities and the availability of securities or purchasers or sellers of securities; Furnishing seminars, information, analyses and reports concerning issuers, industries, securities, trading markets and methods, legislative developments, changes in accounting practices, economic factors and trends and portfolio strategy; Access to research analysts, corporate management personnel, industry experts, economists and government officials; and Comparative performance evaluation and technical measurement services and quotation services, and other services (such as third party publications, reports and analyses, and computer and electronic access, equipment, software, information and accessories that deliver process or otherwise utilize information, including the research described above) that assist the sub-adviser in carrying out its responsibilities. Most of the brokers and dealers used by the funds' sub-advisers provide research and other services described above. A sub-adviser may use research products and services in servicing other accounts in addition to the funds. If a sub-adviser determines that any research product or service has a mixed use, such that it also serves functions that do not assist in the investment decision-making process, a sub-adviser may allocate the costs of such service or product accordingly. The portion of the product or service that a sub-adviser determines will assist it in the investment decision-making process may be paid for in brokerage commission dollars. Such allocation may be a conflict of interest for a sub-adviser. 26 When a fund purchases or sells a security in the over-the-counter market, the transaction takes place directly with a principal market-maker without the use of a broker, except in those circumstances where better prices and executions will be achieved through the use of a broker. A sub-adviser may place transactions for the purchase or sale of portfolio securities with affiliates of TFAI, AFSG or the sub-adviser, including InterSecurities, Inc., AEGON USA Securities, Inc. or DST Securities, Inc. A sub-adviser may place transactions if it reasonably believes that the quality of the transaction and the associated commission are fair and reasonable, and if overall the associated transaction costs, net of any credits described above under "Custodian, Transfer Agent and Other Affiliates," are lower than those that would otherwise be incurred. Under rules adopted by the SEC, Transamerica IDEX's Board of Trustees will conduct periodic compliance reviews of such brokerage allocations and review certain procedures adopted by the Board of Trustees to ensure compliance with these rules and to determine their continued appropriateness. As of the date of this SAI, the funds have not commenced operations. As a result, no transactions with affiliates had been effected for the past fiscal year. DIRECTED BROKERAGE A sub-adviser to a fund, to the extent consistent with the best execution and with TFAI's usual commission rate policies and practices, may place portfolio transactions of the fund with broker/dealers with which the fund has established a Directed Brokerage Program. A Directed Brokerage Program is any arrangement under which a broker/dealer applies a portion of the commissions received by such broker/dealer on the fund's portfolio transactions to the payment of operating expenses that would otherwise be borne by the fund. These commissions are not used for promoting or selling fund shares or otherwise related to the distribution of fund shares. As of the date of this SAI, the funds have not commenced operations. As a result, the funds did not direct brokerage transactions to a broker because of research services provided for the past fiscal year. TRUSTEES AND OFFICERS The Trustees and executive officers of Transamerica IDEX are listed below. The Board of Trustees governs each fund and is responsible for protecting the interests of the shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the business affairs of each fund and the operation of Transamerica IDEX by its officers. The Board also reviews the management of each fund's assets by the investment adviser and its respective sub-adviser. The Fund Complex currently consists of Transamerica IDEX, AEGON/Transamerica Series Trust ("ATST"), and Transamerica Income Shares, Inc. ("TIS), and consists of 92 funds/portfolios. Each Trustee holds office for an indefinite term until the earlier of (1) the next meeting of shareholders at which Trustees are elected and until his or her successor is elected and qualified; or (2) a Trustee resigns, is replaced or his or her term as a Trustee is terminated in accordance with the fund's by-laws. The executive officers are elected and appointed by the Trustees and hold office until they resign, are removed, or are otherwise disqualified to serve. 27
TERM OF NUMBER OF OFFICE AND FUNDS IN LENGTH OF PRINCIPAL OCCUPATION(S) DURING COMPLEX OTHER NAME, ADDRESS AND AGE POSITION TIME SERVED* PAST 5 YEARS OVERSEEN DIRECTORSHIPS -------------------------- --------- ------------ --------------------------------------- --------- ------------- INTERESTED TRUSTEES+ Thomas P. O'Neill Trustee 2003-present President, AEGON Financial Services 91 N/A 1111 North Charles Street Group, Inc., Financial Institution Baltimore, MD 21201-5574 Division; Trustee/Director, (DOB 3/11/58) AEGON/Transamerica Series Fund, Inc. (ATST) and Transamerica Income Shares, Inc. (TIS) (2003-present); Director, National Aquarium of Baltimore Brian C. Scott Trustee, 2002-present Trustee/Director, President and CEO, 91 N/A 4333 Edgewood Rd. NE President ATST (2002-present); Director, TIS Cedar Rapids, IA 52499 & CEO (2002-2005); President & CEO, TIS (DOB 9/29/43)* (2002-present); Manager, Transamerica Investment Management, LLC (TIM) (2002-2005); President, Director & CEO, TFAI, Transamerica Fund Services, Inc. (TFS) (2002-present); CEO, Transamerica Investors, Inc. (TII) (2003-present) INDEPENDENT TRUSTEES Peter R. Brown Chairman, 1986-present Chairman & Trustee/Director, ATST 91 N/A 11180 6th Street East Trustee (1986-present) and TIS (2000-present); Treasure Island, FL 33706 Chairman of the Board, Peter Brown (DOB 5/10/28) Construction Company (1963-2000); Rear Admiral (Ret.) U.S. Navy Reserve, Civil Engineer Corps Charles C. Harris Trustee 1994-present Trustee/Director, ATST (1986-present) 91 N/A 2840 West Bay Drive, #215 and TIS (2002-present) Belleair Bluffs, FL 33770 (DOB 1/15/30) Russell A. Kimball, Jr. Trustee 2002-present Trustee/Director, ATST (2002-present) 91 N/A 1160 Gulf Boulevard and TIS (2002-present); General Clearwater Beach, FL 34630 Manager, Sheraton Sand Key Resort (DOB 8/17/44) (1975 - present) William W. Short, Jr. Trustee 1986-present Trustee/Director, ATST (2000-present) 91 N/A 7882 Lantana Creek Road and TIS (2002-present); Retired CEO Largo, FL 33777 and Chairman of the Board, Shorts, Inc. (DOB 2/25/36) Daniel Calabria Trustee 1996-present Trustee/Director, ATST (2001-present) 91 N/A 7068 S. Shore Drive S. and TIS (2002-present); Trustee, South Pasadena, FL 33707 Florida Tax Free Funds (1993-2004) (DOB 3/05/36) Janice B. Case Trustee 2002-present Trustee/Director, ATST (2001-present) 91 Central 205 Palm Island NW and TIS (2002-present); Director, Vermont Clearwater, FL 33767 Central Vermont Public Service Co. Public (DOB 9/27/52) (Audit Committee); Director, Western Service Co. Electricity Coordinating Council (Chairman, Human Resources and Compensation Committee); Senior Vice President, Florida Power Corporation (1996-2000) Jack E. Zimmerman Trustee 1986-present Retired Director, Regional Marketing 46 N/A 6778 Rosezita Lane of Marietta Corporation & Director of Dayton, OH 45459 Strategic Planning, Martin Marietta
28 (DOB 2/3/28) Baltimore Aerospace. Leo J. Hill Trustee 2002-present Trustee, ATST (2002-present) and TIS 91 N/A 2201 N. Main St. (2002-present); Owner & President, Gainesville, FL 32609 Prestige Automotive Group (2001 - (DOB 3/27/56) present) John W. Waechter Trustee 2004-present Trustee/Director, ATST (2004-present) 91 N/A 3913 Bayview Circle & TIS (2004-present); Executive Vice Gulfport, FL 33707 President, Chief Financial Officer, (DOB 2/25/52) Chief Compliance Officer, William R. Hough & Co. (1979-present), Treasurer The Hough Group of Funds (1993-2004)
OFFICERS
TERM OF OFFICE AND LENGTH OF PRINCIPAL OCCUPATION(S) OR NAME, ADDRESS** AND AGE POSITION TIME SERVED*** EMPLOYMENT DURING PAST 5 YEARS ----------------------- ------------------ -------------- ---------------------------------------------------------------- John K. Carter Senior Vice 1999-present Sr. Vice President, General Counsel, Secretary & Chief (DOB 4/24/61) President, General Compliance Officer, ATST, & TIS (1999-present); Director, Sr. Counsel, Secretary Vice President General Counsel, & Secretary, TFAI & TFS & Chief Compliance (2001-present); Chief Compliance Officer, TFAI (2004-present); Officer Vice President, AFSG Securities Corporation (AFSG) (2001-present); Vice President, Secretary & Chief Compliance Officer, TII; Vice President, Transamerica Investment Services, Inc. (TISI) (2003-present) & TIM (2001-2005) Glenn Brightman Vice President & 2005-present Vice President & Interim Principal Financial Officer, ATST & TII (DOB 12/01/72) Interim Principal (2005 - present) Financial Officer
+ May be deemed an "interested person" (as that term is defined in the 1940 Act) of TA IDEX because of his employment with TFAI or an affiliate of TFAI. * Each trustee serves an indefinite term until he or she is removed, reaches mandatory retirement age, resigns or becomes incapacitated. ** The business address of each officer is 570 Carillon Parkway, St. Petersburg, FL 33716. No officer of TA IDEX, except for the Chief Compliance Officer, receives any compensation from TA IDEX. *** Elected and serves at the pleasure of the Board of Trustees of TA IDEX. COMMITTEES OF THE BOARD The Trustees are responsible for major decisions relating to each fund's objective, policies and techniques. They review investment decisions, although they do not actively participate on a regular basis in making such decisions. The Board of Trustees has eight standing committees that each perform specialized functions: an Audit, Nominating, Valuation, Valuation Oversight, Governance, Contract Renewal, Compensation and Proxy Voting Committees. Except for the Valuation Committee, each committee is composed solely of Independent Trustees.
NUMBER OF MEETINGS HELD DURING LAST COMMITTEE FUNCTIONS MEMBERS FISCAL YEAR -------------------- ------------------------------------------------------------- ----------------------------- ----------- AUDIT Review the financial reporting process, the system of Peter Brown, Chairman; Janice N/A internal control, the audit process, and the Transamerica Case; Charles Harris; Daniel IDEX process for monitoring compliance with investment Calabria; Leo Hill, John restrictions and applicable laws and the Transamerica IDEX Waechter & William Short, Jr. Code of Ethics.
29 NOMINATING The Nominating Committee operates under a written charter. Peter Brown, Chairman; Daniel N/A The Nominating Committee nominates and evaluates Independent Calabria; Charles Harris; & Trustee candidates. The Nominating Committee meets William Short, Jr. periodically, as necessary, and met twice during TA IDEX's most recently completed fiscal year. While the Nominating Committee is solely responsible for the selection and nomination of potential candidates to serve on the Board, the Nominating Committee may consider nominations from shareholders of the funds. Shareholders may submit for the Nominating Committee's consideration, recommendations regarding potential nominees for service on the Board. Each eligible shareholder or shareholder group may submit no more than one nominee each calendar year. In order for the Nominating Committee to consider shareholder submissions, the following requirements, among others, must be satisfied regarding the nominee: the nominee must satisfy all qualifications provided in TA IDEX's organizational documents, including qualification as a possible Independent Director/Trustee if the nominee is to serve in that capacity; the nominee may not be the nominating shareholder, a member of the nominating shareholder group or a member of the immediate family of the nominating shareholder or any member of the nominating shareholder group; neither the nominee nor any member of the nominee's immediate family may be currently employed or employed within the year prior to the nomination by any nominating shareholder entity or entity in a nominating shareholder group; neither the nominee nor any immediate family member of the nominee is permitted to have accepted directly or indirectly, during the year of the election for which the nominee's name was submitted, during the immediately preceding calendar year, or during the year when the nominee's name was submitted, any consulting, advisory, or other compensatory fee from the nominating shareholder or any member of a nominating shareholder group; the nominee may not be an executive officer, director/trustee or person fulfilling similar functions of the nominating shareholder or any member of the nominating shareholder group, or of an affiliate of the nominating shareholder or any such member of the nominating shareholder group; the nominee may not control the nominating shareholder or any member of the nominating shareholder group (or, in the case of a holder or member that is a fund, an interested person of such holder or member as defined by Section 2(a)(19) of the 1940 Act); and a shareholder or shareholder group may not submit for consideration a nominee which has previously been considered by the Nominating Committee. In addition, in order for the Nominating Committee to consider shareholder submissions, the following requirements must be satisfied regarding the shareholder or shareholder group submitting the
30 proposed nominee: any shareholder or shareholder group submitting a proposed nominee must beneficially own, either individually or in the aggregate, more than 5% of a fund's (or a series thereof) securities that are eligible to vote both at the time of submission of the nominee and at the time of the Board member election (each of the securities used for purposes of calculating this ownership must have been held continuously for at least two years as of the date of the nomination); in addition, such securities must continue to be held through the date of the meeting and the nominating shareholder or shareholder group must also bear the economic risk of the investment; and the nominating shareholder or shareholder group must also submit a certification which provides the number of shares which the person or group has (a) sole power to vote or direct the vote, (b) shared power to vote or direct the vote, (c) sole power to dispose or direct the disposition of such shares, and (d) shared power to dispose or direct the disposition of such shares (in addition the certification shall provide that the shares have been held continuously for at least two years). In assessing the qualifications of a potential candidate for membership on the Board, the Nominating Committee may consider the candidate's potential contribution to the operation of the Board and its committees, and such other factors as it may deem relevant. COMPENSATION Reviews compensation arrangements for each Trustee Janice Case; Charles Harris, N/A Co-Chairs; Peter Brown; Daniel Calabria; Russell Kimball; Leo Hill; William Short, Jr.; & Jack Zimmerman VALUATION OVERSIGHT Oversee the process by which the funds calculate their net Leo Hill, Chairman; Charles N/A asset value to verify consistency with the funds' valuation Harris; & William Short, Jr. policies and procedures, industry guidance, interpretative positions issued by the SEC and its staff, and industry best practices. VALUATION Determines the value of any of the fund's securities and Certain officers of N/A assets for which market quotations are not readily available Transamerica IDEX and TFAI, or for which valuation cannot otherwise be provided who serve at the pleasure of the Board of Trustees PROXY VOTING Provides the fund's consent to vote in matters where the Janice Case, Chairperson; N/A Adviser or Sub-Adviser seeks such consent because of a William Short; Leo Hill conflict of interest that arises in connection with a particular vote, or for other reasons. The Proxy Committee also may review the Adviser's and each Sub-Adviser's proxy voting policies and procedures in lieu of submission of the policies and procedures to the entire Board for approval.
31 GOVERNANCE Provide oversight responsibilities and monitor certain Daniel Calabria, Chairman; N/A issues, in consultation with the Chief Compliance Officer and William Short, Jr.; Russell independent trustees' counsel, that affect the duties of Kimball, Jr. independent members of the Board CONTRACT RENEWAL Reviews contracts between or among the funds and their Russell Kimball, Jr., N/A service providers. Oversight responsibilities for the Chairman; Daniel Calabria; process of evaluating new contracts, reviewing existing Janice Case contracts on a periodic basis and make recommendations to the Board with respect to any contracts affecting the funds.
TRUSTEE OWNERSHIP OF EQUITY SECURITIES The table below gives the dollar range of shares of Transamerica IDEX, as well as the aggregate dollar range of shares of all funds advised and sponsored by TFAI (collectively, the "Fund Complex"), owned by each Trustee as of December 31, 2004:
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL DOLLAR RANGE OF EQUITY REGISTERED INVESTMENT COMPANIES OVERSEEN BY TRUSTEES NAME OF TRUSTEE SECURITIES IN THE FUND IN FAMILY OF INVESTMENT COMPANIES --------------- ---------------------- ---------------------------------------------------- Peter R. Brown(1) Over $100,000 Over $100,000 Daniel Calabria(1) Over $100,000 Over $100,000 Janice B. Case -0- -0- Charles C. Harris(1) Over $100,000 Over $100,000 Leo J. Hill(1) Over $100,000 Over $100,000 Russell A. Kimball, Jr. (1) Over $100,000 Over $100,000 Thomas P. O'Neill* -0- -0- Brian C. Scott* Under 100,000 Under 100,000 William W. Short, Jr. Over $100,000 Over $100,000 Jack E. Zimmerman Over $100,000 Over $100,000 John W. Waechter Over $100,000 Over $100,000
* Interested Trustees as defined in the 1940 Act due to employment with an TFAI affiliate. (1) A portion of the dollar range of equity securities in the fund for this Trustee consists of allocations made under the fund's deferred compensation plan. The deferred compensation amounts are based on the value of Class A shares of the fund elected by such Trustee (without the imposition of the sales charge). CONFLICTS OF INTEREST The following table sets forth information as of December 31, 2004 about securities owned beneficially or of record by each Independent Trustee or members of his or her immediate family, representing interests in the Investment Adviser, sub-advisers or Distributor of the fund, or any person controlling, controlled by or under common control with such persons. For this purpose, "immediate family member" includes the Trustee's spouse, children residing in the Trustee's household and dependents of the Trustee.
NAME OF OWNERS AND TITLE OF VALUE OF NAME OF TRUSTEE RELATIONSHIPS TO TRUSTEE COMPANY CLASS SECURITIES PERCENT OF CLASS --------------- ------------------------- ------- -------- ------------- ---------------- Peter R. Brown Marina D. Brown, Spouse TA IDEX A $1-$10,000 Less than 1% Charles C. Harris Mary A. Harris, Spouse TA IDEX T $1-$10,000 Less than 1% Russell A. Kimball, Jr. Martha A. Kimball, Spouse N/A N/A N/A N/A William W. Short, Jr. Joyce J. Short, Spouse TA IDEX A $1-$10,000 Less than 1% Daniel Calabria N/A N/A N/A N/A N/A
32 Janice B. Case N/A N/A N/A N/A N/A Leo J. Hill N/A N/A N/A N/A N/A Jack E. Zimmerman Patricia A. Zimmerman, TA IDEX A Over $100,000 Less than 1% Spouse John W. Waechter N/A N/A N/A N/A N/A
Disinterested Trustees receive for each regular Board meeting: (a) a total annual retainer fee of $20,000 from the funds, of which the funds pay a pro rata share allocable to each fund based on the relative assets of the fund; plus (b) $4,000 and incidental expenses per meeting attended. The Chairman of the Board also receives an additional retainer of $30,000 per year. Each Audit Committee member receives a total of $3,000 per Audit Committee meeting attended in addition to the regular meetings attended. In the case of a Special Board Meeting, each of the Disinterested Trustees receives a fee of $2,500 plus incidental expenses per special meeting attended, in addition to the regular meetings attended. Any fees and expenses paid to Trustees who are affiliates of TFAI or AFSG are paid by TFAI and/or AFSG and not by the funds. Under a non-qualified deferred compensation plan (the "Plan") available to the Trustees, compensation may be deferred that would otherwise be payable by the Transamerica IDEX and/or ATST, to a Disinterested Trustee on a current basis for services rendered as Trustee. Deferred compensation amounts will accumulate based on the value of Class A shares of a fund (without imposition of sales charge), as elected by the Trustee. It is not anticipated that the Plan will have any material impact on the funds. Although the funds have not yet commenced operations, the following table provides compensation amounts paid to Disinterested Trustees for the fiscal year ended October 31, 2004 by TA IDEX: COMPENSATION TABLE
AGGREGATE COMPENSATION FROM PENSION OR RETIREMENT TOTAL COMPENSATION PAID TO TRANSAMERICA IDEX BENEFITS ACCRUED AS PART TRUSTEES FROM FUND NAME OF PERSON, POSITION MUTUAL FUNDS(1) FUND EXPENSES COMPLEX(3) ------------------------ ----------------- ------------------------ -------------------------- Peter R. Brown, Trustee $ 71,000.00 $ -- $ 155,375.00 Daniel Calabria, Trustee $ 57,000.00 $ 41,333.33 $ 125,875.00 Janice Case, Trustee $ 66,000.00 $ -- $ 134,875.00 Charles C. Harris, Trustee $ 66,000.00 $ 13,200.00 $ 144,375.00 Leo Hill, Trustee $ 54,000.00 $ 20,400.00 $ 131,875.00 Russell Kimball, Trustee $ 48,500.00 $ 48,500.00 $ 21,375.00 William W. Short, Jr., Trustee $ 66,000.00 $ -- $ 43,875.00 Jack E. Zimmerman, Trustee $ 48,500.00 $ -- $ 48,500.00 ----------- ----------- ------------- John W. Waechter(3) $ -- $ -- $ -- ----------- ----------- ------------- Total: $477,000.00 $123,433.33 $1,006,125.00 =========== =========== =============
(1) Of this aggregate compensation, the total amounts deferred (including earnings) and accrued for the benefit of the participating Trustees for the year ended October 31, 2004 were as follows: Peter R. Brown, $394; Daniel Calabria, $41,406; William W. Short, Jr., $0; Charles Harris, $13,200; Russell A. Kimball, Jr., $52,177; Janice B. Case, $0; Leo J. Hill, $22,772; and Jack E. Zimmerman, $0. (2) The Fund Complex currently consists of Transamerica IDEX, ATST, TIS and TIF. (3) Mr. Waechter did not become a Trustee until February 25, 2005. The Board of Trustees adopted a policy whereby any Disinterested Trustee of the fund, who held office on September 1, 1990, and had served at least three years as a trustee may have, subject to certain limitations, elected upon his resignation to serve as a trustee emeritus for a period of two years. A trustee emeritus has no authority, power or responsibility with respect to any matter of the fund. While serving as such, a trustee emeritus is entitled to receive from the fund an annual fee equal to one-half the fee then payable per annum to Disinterested Trustees of the fund, plus reimbursement of expenses incurred for attendance at Board meetings. 33 SHAREHOLDER COMMUNICATION PROCEDURES WITH BOARD OF TRUSTEES The Board of Trustees of TA IDEX has adopted these procedures by which shareholders of a fund may send written communications to the Board. Shareholders may mail written communications to the Board, addressed to the care of the Secretary of TA IDEX ("Secretary"), as follows: Board of Trustees Transamerica IDEX Mutual Funds c/o Secretary 570 Carillon Parkway St. Petersburg, Florida 33716 Each shareholder communication must (i) be in writing and be signed by the shareholder, (ii) identify the underlying portfolio of the fund to which it relates, and (iii) identify the class (if applicable) held by the shareholder. The Secretary is responsible for collecting, reviewing and organizing all properly submitted shareholder communications. Except as provided in Section 4 and 5 below, with respect to each properly submitted shareholder communication, the Secretary shall either (i) provide a copy of the communication to the Board at the next regularly scheduled Board meeting or (ii) if the Secretary determines that the communication requires more immediate attention, forward the communication to the Board promptly after receipt. The Secretary may, in good faith, determine that a shareholder communication should not be provided to the Board because the communication (i) does not reasonably relate to the fund or its operation, management, activities, policies, service providers, Board, officers, shareholders or other matters relating to an investment in the fund, or (ii) is ministerial in nature (such as a request for fund literature, share data or financial information). DISTRIBUTION PLANS As stated in the prospectus under "Section B -- Shareholder Information," each fund has adopted a separate Distribution Plan pursuant to Rule 12b-1 under the 1940 Act) applicable to Class A shares (individually, a "Plan" and collectively, the "Plans"). In determining whether to approve the Distribution Plan and the Distribution Agreements, the Trustees considered the possible advantages afforded shareholders from adopting the Distribution Plans and Distribution Agreements. The Trustees were informed by representatives of AFSG that reimbursements of distribution-related expenses by the funds under the Distribution Plans would provide incentives to AFSG to establish and maintain an enhanced distribution system whereby new investors will be attracted to the funds. The Trustees believe that improvements in distribution services should result in increased sales of shares in the funds. In turn, increased sales are expected to lead to an increase in a fund's net asset levels, which would enable the funds to achieve economies of scale and lower their per-share operating expenses. In addition, higher net asset levels could enhance the investment management of the funds, for net inflows of cash from new sales may enable a fund's investment adviser and sub-adviser to take advantage of attractive investment opportunities. Finally, reduced redemptions could eliminate the potential need to liquidate attractive securities positions in order to raise the capital necessary to meet redemption requests. Under the Plans for Class A shares, AFSG is entitled to receive a distribution and service fee of up to 0.35% of average daily net assets annually. AFSG may use the fees payable under the Plans as it deems appropriate to pay for activities or expenses primarily intended to result in the sale of the Class A shares or in personal service to and/or maintenance of these shareholder accounts. In the case of funds or classes of shares that are closed to new investors or investments, AFSG also may use the fees payable under the Plans to make payments to brokers and other financial intermediaries for past sales and distribution efforts. These activities and expenses may include, but are not limited to: Compensation to employees of AFSG; Compensation to and expenses of AFSG and other selected dealers who engage in or otherwise support the distribution of shares or who service shareholder accounts; In the case of a fund or a class of shares that is closed to new investors or investments, payment for services to and for maintenance of existing shareholder accounts and compensation of broker-dealers or other intermediaries for past sales and distribution efforts; 34 The costs of printing and distributing prospectuses, statements of additional information and reports for other than existing shareholders; and The cost of preparing, printing and distributing sales literature and advertising materials. The funds do not currently charge a sales load because the funds are only sold to certain asset allocation funds. Under the Plans, as required by Rule 12b-1, the Board of Trustees will review, at least quarterly, a written report provided by AFSG of the amounts expended by AFSG in distributing and servicing Class A shares of the funds and the purpose for which such expenditures were made. For so long as the Plans are in effect, selection and nomination of the Trustees who are not interested persons of the fund shall be committed to the discretion of the Trustees who are not interested persons of the fund. The Plans may be terminated at any time by vote of a majority of the Disinterested Trustees, or by vote of a majority of the outstanding voting securities of the Class A shareholders. A Plan may be amended by vote of the Trustees, including a majority of the Disinterested Trustees of the fund that have no direct or indirect financial interest in the operation of the Plan or any agreement relating thereto, cast in person at a meeting called for that purpose. Any amendment of a Plan that would materially increase the costs to a particular class of shares of a fund requires approval by the shareholders of that class. A Plan will remain in effect for successive one year periods, so long as such continuance is approved annually by vote of the fund's Trustees, including a majority of the Disinterested Trustees, cast in person at a meeting called for the purpose of voting on such continuance. NET ASSET VALUE DETERMINATION The price at which shares are purchased or redeemed is the net asset value per share ("NAV") that is next calculated following receipt and acceptance of a purchase order in good order or receipt of a redemption order in good order by the fund or an authorized intermediary. When Share Price is Determined The NAV of all funds is determined on each day the New York Stock Exchange ("NYSE") is open for business. The NAV is not determined on days when the NYSE is closed (generally New Year's Day, Martin Luther King Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas). Foreign securities may trade in their primary markets on weekends or other days when a fund does not price its shares (therefore, the NAV of a fund holding foreign securities may change on days when shareholders will not be able to buy or sell shares of the funds). Purchase orders received in good order and accepted, and redemption orders received in good order, before the close of business on the NYSE, usually 4:00 p.m. Eastern Time, receive the NAV determined as of the close of the NYSE that day. Purchase and redemption requests received after the NYSE is closed receive the share price at the close of the NYSE the next day the NYSE is open. Orders for shares of the TA IDEX and ATST asset allocation funds that invest in Class A and I shares of the funds and corresponding orders for the Class A and I shares of the funds are priced on the same day when orders for shares of the asset allocation funds are received. Consequently, receipt in good order and acceptance of a purchase request or receipt in good order of a redemption request for shares of the asset allocation funds before the close of business on the NYSE is deemed to constitute receipt of a proportional order for the corresponding Class A and I shares of the funds on the same day, so that both orders generally will receive that day's NAV. How NAV is Determined The NAV of each fund (or class thereof) is calculated by taking the value of its assets, less liabilities, and dividing by the number or shares of the fund (or class) that are then outstanding. In general, securities and other investments are valued at market value when market quotations are readily available. Fund securities listed or traded on domestic securities exchanges or the NASDAQ/NMS, including dollar-dominated foreign securities or ADRs, are valued at the closing price on the exchange or system where the security is principally traded. With respect to securities traded on the NASDAQ/NMS, such closing price may be the last reported sale price or the Nasdaq Official Closing Price ("NOCP"). If there have been no sales for that day on the exchange or system where the security is principally traded, then the value should be determined with reference to the last sale price, or the NOCP, if applicable, on any other exchange or system. If there have been no sales for that day on any exchange or system, a 35 security is valued at the closing bid quotes on the exchange or system where the security is principally traded, or at the NOCP, if applicable. Foreign securities traded on U.S. exchanges are generally priced using last sale price regardless of trading activity. Securities traded over-the-counter are valued at the mean of the last bid and asked prices. Investments in securities maturing in 60 days or less may be valued at amortized cost. Foreign securities generally are valued based on quotations from the primary market in which they are traded, and are converted from the local currency into U.S. dollars using current exchange rates. Market quotations for securities prices may be obtained from automated pricing services. When a market quotation for a security is not readily available (which may include closing prices deemed to be unreliable because of the occurrence of a subsequent event), a valuation committee appointed by the Board of Trustees may, in good faith, establish a fair value for the security in accordance with valuation procedures adopted by the Board. The types of securities for which such fair value pricing may be required include, but are not limited to: foreign securities, where a significant event occurs after the close of the foreign market on which such security principally trades that is likely to have changed the value of such security, or the closing value is otherwise deemed unreliable; securities of an issuer that has entered into a restructuring; securities whose trading has been halted or suspended; fixed income securities that have gone into default and for which there is no current market value quotation; and securities that are restricted as to transfer or resale. Valuing securities at fair value involves greater reliance on judgment than securities that have readily available market quotations. The valuation committee makes such determinations in good faith in accordance with funds' valuation procedures. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service. There can be no assurance that a fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the fund determines its NAV per share. DIVIDENDS AND OTHER DISTRIBUTIONS Each fund will distribute all or substantially all of its net investment income and net capital gains to its shareholders annually, except TA IDEX J.P. Morgan International Bond which will distribute such income monthly. PURCHASE OF SHARES As stated in the prospectus, Class A shares of the TA IDEX funds in this SAI are currently offered for investment only to the TA IDEX asset allocation funds: TA IDEX Asset Allocation -- Conservative Portfolio; TA IDEX Asset Allocation -- Growth Portfolio; TA IDEX Asset Allocation -- Moderate Growth Portfolio; and TA IDEX Asset Allocation -- Moderate Portfolio. Class A shares are sold subject to a distribution and service 12b-1 fees of up to 0.35% of average daily net assets, annually. The initial sales charge generally applicable to TA IDEX Class A shares currently is waived for investments by the TA IDEX asset allocation funds mentioned above. Class I shares of the TA IDEX funds in this SAI are currently offered for investment only to the following AEGON/Transamerica Series Fund, Inc. (ATST) asset allocation funds: ATST Asset Allocation --Conservative Portfolio; ATST Asset Allocation -- Growth Portfolio; ATST Asset Allocation -- Moderate Growth Portfolio; and ATST Asset Allocation -- Moderate Portfolio. REDEMPTION OF SHARES Shareholders may redeem their shares at any time at a price equal to the net asset value per share next determined following receipt of a valid redemption order by the transfer agent, in proper form. Payment will ordinarily be made within three business days of the receipt of a valid redemption order. The value of shares on redemption may be more or less than the shareholder's cost, depending upon the market value of the fund's net assets at the time of redemption. Shares will normally be redeemed for cash, although each fund retains the right to redeem its shares in kind under unusual circumstances in order to protect the interests of the remaining shareholders by the delivery of securities selected from its assets at its discretion. TA IDEX has, however, elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which a fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of a fund during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation, the fund will have the option of redeeming the excess in cash or in kind. If shares are redeemed in kind, the redeeming 36 shareholder might incur brokerage costs in converting the assets to cash. The method of valuing securities used to make redemptions in kind will be the same as the method of valuing portfolio securities for purposes of calculating a fund's NAV, and such valuation will be made as of the same time the redemption price is determined. Upon any distributions in kind, shareholders may appeal the valuation of such securities by writing to TFS. Redemption of shares may be suspended, or the date of payment may be postponed, whenever: (1) trading on the Exchange is restricted, as determined by the SEC, or the Exchange is closed (except for holidays and weekends); (2) the SEC permits such suspension and so orders; or (3) an emergency exists as determined by the SEC so that disposal of securities and determination of net asset value is not reasonably practicable. TAXES In order to qualify as a regulated investment company ("RIC"), each fund must meet certain requirements regarding the source of its income, the diversification of its assets and the distribution of its income. The status of commodity-linked derivative instruments in which TA IDEX Credit Suisse Commodities (the "Commodities Fund) invests under such tests to qualify as a RIC under the Internal Revenue Code of 1986, as amended (the "Code") is not certain. Although the Commodities Fund intends to take the position that these instruments meet the requirements of the Code for qualification as a RIC, the Commodities Fund does not intend to obtain a ruling from the Internal Revenue Service, and the Internal Revenue Service may not agree with the Commodities Fund's view. In the event these instruments are adversely treated under these tests, the Commodities Fund will take all available steps to lessen any adverse tax consequences, although there can be no guarantee that it will be subject to federal income tax as a regular corporation. The remainder of this tax section assumes that the commodity-linked derivative instruments in which the Commodities Funds invests are qualifying investments for purposes of RIC qualification under the Code. Each fund expects to qualify, for treatment as a RIC under the Code. In order to qualify for that treatment, each fund must distribute to its shareholders for each taxable year at least 90% of its investment company taxable income ("Distribution Requirement") and must meet several additional requirements. With respect to each fund, these requirements include the following: (1) the fund must derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of securities or foreign currencies, net income derived from an interest in a qualified publicly traded partnership or other income (including gains from options, futures or forward contracts) derived with respect to its business of investing in securities or foreign currencies ("Income Requirement"); (2) at the close of each quarter of a 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 RICs 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 (3) at the close of each quarter of a 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 RICs) of any one issuer, in two or more issuers that the fund controls and which are engaged in the same or similar trade or business or of one or more qualified publicly traded partnerships. If each fund qualifies as a regulated investment company and distributes to its shareholders substantially all of its net income and net capital gains, then each fund should have little or no income taxable to it under the Code. Shareholders of a RIC generally are required to include these distributions as ordinary income, to the extent the distributions are attributable to the RIC's investment income (except for qualifying dividends as discussed below), net short-term capital gain, and certain net realized foreign exchange gains, or as capital gains, to the extent of the RICs net capital gain (i.e., net long-term capital gains over net short-term capital losses). If a fund fails to qualify as a regulated investment company, the fund will be subject to federal, and possibly state, corporate taxes on its taxable income and gains, and distributions to its shareholders will constitute ordinary dividend income to the extent of the fund's available earnings and profits. A fund will be subject to a nondeductible 4% excise tax to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and capital gains net income for the one-year period ending on October 31 of that year, plus certain other amounts. Each fund intends to distribute annually a sufficient amount of any taxable income and capital gains so as to avoid liability for this excise tax. Tax laws generally provides for a maximum tax rate for individual taxpayers of 15% on long-term capital gains from sales and from certain qualifying dividends on corporate stock. These rate reductions do not apply to corporate taxpayers. The following are guidelines for how certain distributions by the funds are generally taxed to individual taxpayers: 37 - Distributions of earnings from qualifying dividends and qualifying long-term capital gains will be taxed at a maximum rate of 15%. - Note that distributions of earnings from dividends paid by certain "qualified foreign corporations" can also qualify for the lower tax rates on qualifying dividends. - A shareholder will also have to satisfy a more than 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower tax rate. - Distributions of earnings from non-qualifying dividends interest income, other types of ordinary income and short-term capital gains will be taxed at the ordinary income tax rate applicable to the taxpayer. Upon the sale or other disposition of fund shares, or upon receipt of a distribution in complete liquidation of a fund, a shareholder usually will realize a capital gain or loss. This loss may be long-term or short-term, generally depending upon the shareholder's holding period for the shares. For tax purposes, a loss will be disallowed on the sale or exchange of shares if the disposed of shares are replaced (including shares acquired pursuant to a dividend reinvestment plan) within a period of 61 days. The 61 day time window begins 30 days before and ends 30 days after the date of the sale or exchange of such shares. Should a disposition fall within this 61 day window, the basis of the acquired shares will be adjusted to reflect the disallowed loss. Any loss realized by the shareholder on its disposition of fund shares held by the shareholder for six months or less, will be treated as a long term capital loss, to the extent of any distributions of net capital gains deemed received by the shareholder, with respect to such shares. Dividends and interest received by a 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. However, tax conventions between certain countries and the United States may reduce or eliminate these foreign taxes. In addition, many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors and most U.S. Tax conventions preclude the imposition of such taxes. Passive Foreign Investment Companies -- Each fund may invest in the stock of "passive foreign investment companies" ("PFICs"). 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 production of, passive income. Under certain circumstances, a fund will 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. If such a tax is imposed on a fund, the balance of the PFIC income will be included in the fund's investment company taxable income and, accordingly, will not be taxable to the fund to the extent that the income is distributed to its shareholders. If a 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, the fund will be required to include in income each year its pro rata share of the qualified electing fund's annual ordinary earnings and net capital gain (the excess of net long-term capital gains over net short-term capital losses). This income inclusion is required even if the PFIC does not distribute such income and gains to the fund, and the amounts so included would be subject to the Distribution Requirement described above. In many instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof. Distributions from a PFIC are not eligible for the reduced rate of tax on "qualifying dividends." In addition, another election may be available that would involve marking to market a fund's PFIC stock at the end of each taxable year (and on certain other dates prescribed in the Code), with the result that unrealized gains are treated as though they were realized as of such date although any such gains will be ordinary income rather than capital gain. If this election were made, tax at the fund level under the excess distribution rules would be eliminated, but a fund could incur nondeductible interest charges. A fund's intention to qualify annually as a regulated investment company may limit a fund's ability to make an election with respect to PFIC stock. Options, Futures and Forward Contracts and Swap Agreements -- Certain options, futures contracts, and forward contracts in which a fund may invest may be "Section 1256 contracts." Gains or losses on Section 1256 contracts generally are considered 60% long-term and 40% short-term capital gains or losses; however, foreign currency gains or losses arising from certain Section 1256 contracts may be treated as ordinary income or loss. Also, Section 1256 contracts held by a fund at the end of each taxable year (and at certain other times as prescribed pursuant to the Code) are "marked to market" with the result that unrealized gains or losses are treated as though they were realized. Generally, the hedging transactions undertaken by a fund may result in "straddles" for U.S. federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by a fund. In addition, losses realized by a fund on 38 positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which such losses are realized. Because only a few regulations implementing the straddle rules have been promulgated, the tax consequences of transactions in options, futures, forward contracts, swap agreements and other financial contracts to a fund are not entirely clear. The transactions may increase the amount of short-term capital gain realized by a fund which is taxed as ordinary income when distributed to shareholders. A fund may make one or more of the elections available under the Code which are applicable to straddles. If a fund makes any of the elections, the amount, character and timing of the recognition of gains or losses from the affected straddle positions will be determined under rules that vary according to the election(s) made. The rules applicable under certain of the elections may operate to accelerate the recognition of gains or losses from the affected straddle positions. Because application of the straddle rules may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected straddle positions, the amount which must be distributed to shareholders, and which will be taxed to shareholders as ordinary income or long-term capital gain, may be increased or decreased as compared to a fund that did not engage in such hedging transactions. Because only a few regulations regarding the treatment of swap agreements, and related caps, floors and collars, have been implemented, the tax consequences of such transactions are not entirely clear. The funds intend to account for such transactions in a manner deemed by them to be appropriate, but the Internal Revenue Service might not necessarily accept such treatment. If it did not, the status of a fund as a regulated investment company might be affected. The requirements applicable to a fund's qualification as a regulated investment company may limit the extent to which a fund will be able to engage in transactions in options, futures contracts, forward contracts, swap agreements and other financial contracts. Under the recently enacted tax law, certain hedging activities may cause a dividend that would otherwise be subject to the lower tax rate applicable to a "qualifying dividend," to instead be taxed at the rate of tax applicable to ordinary income. Market Discount -- If a fund purchases a debt security at a price lower than the stated redemption price of such debt security, the excess of the stated redemption price over the purchase amount is "market discount." If the amount of market discount is more than a de minimis amount, a portion of such market discount must be included as ordinary income (not capital gain) by the fund in each taxable year in which the fund owns an interest in such debt security and receives a principal payment on it. In particular, the fund will be required to allocate that principal payment first to a portion of the market discount on the debt security that has accrued but has not previously been includable in income. In general, the amount of market discount that must be included for each period is equal to the lesser of (i) the amount of market discount accruing during such period (plus any accrued market discount for prior periods not previously taken into account) or (ii) the amount of the principal payment with respect to such period. Generally, market discount accrues on a daily basis for each day the debt security is held by a fund at a constant rate over the time remaining to the debt security's maturity or, at the election of the fund, at a constant yield to maturity which takes into account the semi-annual compounding of interest. Gain realized on the disposition of a market discount obligation must be recognized as ordinary interest income (not capital gain) to the extent of the "accrued market discount." Original Issue Discount -- Certain debt securities acquired by the funds may be treated as debt securities that were originally issued at a discount. Very generally, original issue discount is defined as the difference between the price at which a security was issued and its stated redemption price at maturity. Although no cash income on account of such discount is actually received by a fund, original issue discount that accrues on a debt security in a given year generally is treated for federal income tax purposes as interest and, therefore, such income would be subject to the distribution requirements applicable to regulated investment companies. Some debt securities may be purchased by the funds at a discount that exceeds the original issue discount on such debt securities, if any. This additional discount represents market discount for federal income tax purposes (see above). Constructive Sales -- These rules may affect timing and character of gain if a fund engages in transactions that reduce or eliminate its risk of loss with respect to appreciated financial positions. If the fund enters into certain transactions in property while holding substantially identical property, the fund would be treated as if it had sold and immediately repurchased the property and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale would depend upon the fund's holding period in the property. Loss from a constructive sale would be recognized when the property was subsequently disposed of, and its character would depend on the fund's holding period and the application of various loss deferral provisions of the Code. 39 Foreign Taxation -- Income received by a fund from sources within a foreign country may be subject to withholding and other taxes imposed by that country. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. The payment of such taxes will reduce the amount of dividends and distributions paid to the fund's shareholders. So long as a fund qualifies as a regulated investment company, certain distribution requirements are satisfied, and more than 50% of such fund's assets at the close of the taxable year consists of securities of foreign corporations, the fund may elect, subject to limitation, to pass through its foreign tax credits to its shareholders. Furthermore, the amount of the foreign tax credit that is available may be limited to the extent that dividends from a foreign corporation qualify for the lower tax rate on "qualifying dividends." Foreign Currency Transactions -- Under the Code, gains or losses attributable to fluctuations in exchange rates which occur between the time a fund accrues income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time that a fund actually collects such receivables or pays such liabilities, generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of certain futures contracts, forward contracts and options, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. These gains or losses, referred to under the Code as "Section 988" gains or losses, may increase or decrease the amount of a fund's investment company taxable income to be distributed to its shareholders as ordinary income. Backup Witholding -- A fund may be required to withhold U.S. Federal income tax at the rate of 28% of all amounts deemed to be distributed The 28% rate applies to shareholders receiving payments who: a. fail to provide the fund with their correct taxpayer identification number, b. fail to make required certifications or, c. have been notified by the Internal Revenue Service that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld will be credited against a shareholder's U.S. Federal income tax liability. Corporate shareholders and certain other shareholders are exempt from such backup withholding Taxation of Non.U.S. Shareholders Dividends from investment company taxable income attributable to a fund's taxable year beginning before January 1, 2005 or after December 31, 2007 and paid to a shareholder who, as to the United States, is a nonresident alien individual, nonresident alien fiduciary of a trust or estate, foreign corporation or foreign partnership ("foreign shareholder") may be subject to a 30% withholding tax unless the applicable tax rate is reduced by a treaty between the United States and the shareholder's country of residence. Dividends from investment company taxable income attributable to a fund's taxable year beginning after December 31, 2004 or before January 1, 2008 that are attributable to short-term capital gains or "qualified interest income" are not subject to withholding tax. Withholding does not apply to a dividend paid to a foreign shareholder that is "effectively connected with the [shareholder's] conduct of a trade or business within the United States," in which case the withholding requirements applicable to domestic taxpayers apply. The treatment of income dividends and capital gains distributions by a fund to shareholders under the various state income tax laws may not parallel that under the federal law. Qualification as a regulated investment company does not involve supervision of a fund's management or of its investment policies and practices by any governmental authority. Shareholders are urged to consult their own tax advisors with specific reference to their own tax situations, including their state and local tax liabilities. Note that the 15% rate of tax applicable to certain dividends (discussed above) does not apply to dividends paid to foreign shareholders. PRINCIPAL SHAREHOLDERS The funds had not yet commenced operations and there were no outstanding shares as of the date of this SAI. 40 MISCELLANEOUS ORGANIZATION Each fund is a series of Transamerica IDEX, a Delaware statutory trust that was formed by a Declaration of Trust dated February 25, 2005. TA IDEX currently is governed by a Declaration of Trust ("Declaration of Trust") dated as of February 25, 2005. On September 20, 1996 in a tax-free reorganization, TA IDEX Janus Growth acquired all of the assets and assumed all of the liabilities of IDEX Fund and IDEX Fund 3 in exchange for Class T shares of IDEX Janus Growth which were then distributed on a pro rata basis to the respective shareholders of IDEX Fund and IDEX Fund 3. Upon closing of the reorganization, IDEX II Series Fund changed its name to IDEX Series Fund. IDEX Series Fund became IDEX Mutual Funds effective March 1, 1999. Effective March 1, 2004, IDEX Mutual Funds changed its name to Transamerica IDEX Mutual Funds. TA IDEX held a special meeting of shareholders on February 25, 2005 for the purposes of approving, among other things, reorganizing TA IDEX from a Massachusetts business trust to a Delaware statutory trust. The shareholders of TA IDEX approved this reorganization, funds that had been formed as part of the Delaware statutory trust, and which were identical to the then-current funds of TA IDEX, assumed the assets and liabilities of the then-current funds and the Delaware statutory trust assumed the registration statement of the Massachusetts business trust. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits Transamerica IDEX to issue an unlimited number of shares of beneficial interest. Shares of Transamerica IDEX are fully paid and nonassessable when issued. Shares of Transamerica IDEX have no preemptive, cumulative voting, conversion or subscription rights. Shares of Transamerica IDEX are fully transferable but Transamerica IDEX is not bound to recognize any transfer until it is recorded on the books. The shares of beneficial interest of each fund are divided into two classes, Class A and Class I shares. Each class represents interests in the same assets of the fund and differ as follows: each class of shares has exclusive voting rights on matters pertaining to its plan of distribution or any other matter appropriately limited to that class. Transamerica IDEX does not anticipate that there will be any conflicts between the interests of holders of the different classes of shares of the same fund by virtue of these classes. On an ongoing basis, the Board of Trustees will consider whether any such conflict exists and, if so, take appropriate action. On any matter submitted to a vote of shareholders of a series or class, each full issued and outstanding share of that series or class has one vote. The Declaration of Trust provides that each of the Trustees will continue in office until the termination of TA IDEX or his earlier death, resignation, bankruptcy or removal. Vacancies may be filled by a majority of the remaining trustees, subject to certain limitations imposed by the 1940 Act. Therefore, it is not anticipated that annual or regular meetings of shareholders normally will be held, unless otherwise required by the Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power to vote for the election and removal of trustees, to terminate or reorganize Transamerica IDEX, to amend the Declaration of Trust, on whether to bring certain derivative actions and on any other matters on which a shareholder vote is required by the 1940 Act, the Declaration of Trust, the Transamerica IDEX bylaws, or at the request of the Trustees. INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers, LLP, located at 101 East Kennedy Boulevard, Suite 1500, Tampa, Florida 33602, serves as independent registered certified public accounting firm for Transamerica IDEX. CODES OF ETHICS Transamerica IDEX, TFAI, each sub-adviser and AFSG each have adopted a code of ethics, as required by applicable law, which is designed to prevent affiliated persons of Transamerica IDEX, TFAI, a sub-adviser and AFSG from engaging in deceptive, manipulative, or fraudulent activities in connection with securities held or to be acquired by the funds (which may also be held by persons subject to a code). There can be no assurance that the codes will be effective in preventing such activities. PROXY VOTING POLICIES AND PROCEDURES Transamerica IDEX uses the proxy voting policies and procedures of the sub-advisers to determine how to vote proxies relating to securities held by the Transamerica IDEX funds. The proxy voting policies and procedures of TA IDEX, TFAI and each sub-adviser are attached hereto as Appendix B. 41 Transamerica IDEX files SEC Form N-PX, with the complete proxy voting records of the funds for the 12 months ended June 30th, no later than August 31st of each year. The Form is available without charge: (1) from Transamerica IDEX, upon request by calling 1-888-233-4339; and (2) on the SEC's website at www.sec.gov. PERFORMANCE INFORMATION Average Annual Total Return Quotation Quotations of average annual total return for a particular class of shares of a fund will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in the fund over periods of 1, 5, and 10 years. These are the average annual compounded rates of return that would equate the initial amount invested to the ending redeemable value. These rates of return are calculated pursuant to the following formula: P(1 + T)n = ERV Where: P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years, and ERV = the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period. Average Annual Total Return (After Taxes on Distributions) Quotation Each fund may, from time to time, include "total return after taxes on distributions" in advertisements or reports to shareholders or prospective investors. Quotations of average annual total return after taxes on distributions will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in a fund over periods of 1, 5 and 10 years (up to the life of the fund), calculated pursuant to the following formula which is prescribed by the SEC: P(1 + T)(n) = ATV(D) Where: P = a hypothetical initial payment of $1,000, T = the average annual total return (after taxes on distributions), (n) = the number of years, and ATV(D) = ending value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods (or fractional portion), after taxes on fund distributions but not after taxes on redemptions. All total return figures assume that all dividends are reinvested when paid. Taxes are calculated using the highest individual marginal federal income tax rates in effect on the reinvestment date. The rates used correspond to the character of each component of the distributions (e.g., ordinary income rate for ordinary income distributions, short-term capital gain rate for short-term capital gain distributions, and long-term capital gain rate for long-term capital gain distributions). The calculations do not consider any potential tax liabilities other than federal tax liability. From time to time, a fund may advertise its average annual total return over various periods of time. These total return figures show the average percentage change in value of an investment in the fund from the beginning date of the measuring period. These figures reflect changes in the price of the fund's shares and assume that any income dividends and/or capital gains distributions made by the fund during the period were reinvested in shares of the fund. Figures will be given for one, five and ten year periods (if applicable) and may be given for other periods as well (such as from commencement of the fund's operations, or on a year-by-year basis). Average Annual Total Return (After Taxes on Distributions and Redemption) Quotation Each fund may, from time to time, include "total return after taxes on distributions and redemption" in advertisements or reports to shareholders or prospective investors. Quotations of average annual total return after taxes on distributions and redemption will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in a fund over periods of 1, 5 and 10 years (up to the life of the fund), calculated pursuant to the following formula which is prescribed by the SEC: 42 P(1 + T)(n) = ATV(DR) Where: P = a hypothetical initial payment of $1,000, T = the average annual total return (after taxes on distributions), (n) = the number of years, and ATV(DR) = ending value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods (or fractional portion), after taxes on fund distributions and redemption. All total return figures assume that all dividends are reinvested when paid. Taxes are calculated using the highest individual marginal federal income tax rates in effect on the reinvestment date. The rates used correspond to the character of each component of the distributions (e.g., ordinary income rate for ordinary income distributions, short-term capital gain rate for short-term capital gain distributions, and long-term capital gain rate for long-term capital gain distributions). The ending value is determined by subtracting capital gain taxes resulting from the redemption and adding the tax benefit from capital losses resulting from the redemption. The calculations do not consider any potential tax liabilities other than federal tax liability. From time to time, a fund may advertise its average annual total return over various periods of time. These total return figures show the average percentage change in value of an investment in the fund from the beginning date of the measuring period. These figures reflect changes in the price of the fund's shares and assume that any income dividends and/or capital gains distributions made by the fund during the period were reinvested in shares of the fund. Figures will be given for one, five and ten year periods (if applicable) and may be given for other periods as well (such as from commencement of the fund's operations, or on a year-by-year basis). FINANCIAL STATEMENTS Because the funds have not commenced operations as of the date of this SAI, there are no financial statements to include in the SAI. Audited financial statements for the funds, when available, will be incorporated by reference from the Transamerica IDEX Annual Report to be dated October 31, 2006. 43 APPENDIX A PORTFOLIO MANAGER INFORMATION 1 APPENDIX A PORTFOLIO MANAGER INFORMATION TA IDEX ALLIANCEBERNSTEIN INTERNATIONAL VALUE ("FUND") ALLIANCE CAPITAL MANAGEMENT INC. ("SUB-ADVISER") OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS The Portfolio Managers may also be responsible for the day-to-day management of other accounts, as indicated by the following table. None of these has an advisory fee based on the performance of the account.
Registered Investment Other Pooled Investment Other Accounts Companies Vehicles -------------------- ----------------------------- ----------------------------- ---------------------------- NAME Number of Total Assets Number of Total Assets Number of Total Accounts ($m) Accounts ($m) Accounts Assets ($m) -------------------- -------------- -------------- -------------- -------------- -------------- ------------- Henry S. D'Auria - - - - - - Kevin F. Simms - - - - - - Sharon Fay 0 0 1 525 3,126 696 Giulio Martini
TEAM DESCRIPTION: The management of and investment decisions for the Fund's portfolio are made by the Global Value Investment Policy Group, comprised of senior Global Value Investment Team members. The Global Value Investment Policy Group relies heavily on the fundamental analysis and research of the Adviser's large internal research staff. No one person is principally responsible for making recommendations for the Fund's portfolio. The four members of the Global Value Investment Policy Group with the most significant responsibility for the day-to-day management of the Fund's portfolio are: Sharon Fay, Kevin Simms, Giulio Martini and Henry D'Auria. Ms. Fay was appointed CIO -- Global Value equities in 2003, assuming oversight for all portfolio-management and research activities relating to cross-border and non-US value investment portfolios. She also serves on the firm's Executive Committee, the group of senior professionals responsible for managing the firm, enacting key strategic initiatives and allocating resources. Between 1997 and 1999, Ms. Fay was CIO -- Canadian Value equities. Prior to that, she had been a senior portfolio manager of International Value Equities since 1995. Ms. Fay joined Bernstein in 1990 as a research analyst in investment management, following the airline, lodging, trucking and retail industries. Before joining Bernstein, Ms. Fay served as director of research at Bernard L. Madoff. She earned a BA from Brown University and an MBA from Harvard University. Location: London. Mr. Simms was named co-CIO -- International Value equities in 2003, which he has assumed in addition to his role as director of research -- Global and International Value equities, a position he has held since 2000. As research director, he was instrumental in implementing significant enhancements to Bernstein's cross-border research process. Between 1998 and 2000, Mr. Simms served as director of research -- Emerging Markets Value equities. He joined Bernstein in 1992 as a research analyst, and his industry coverage over the next six years included financial services, telecommunications and utilities. Before joining the firm, Mr. Simms was a certified public accountant with Price Waterhouse for three years. He earned a BSBA from Georgetown University and an MBA from Harvard Business School. Location: New York. Mr. Martini was appointed to head the newly created quantitative strategies team within the value-equities unit. Mr. Martini was named chief international economist with responsibility for currency strategies and senior portfolio manager on the international and global value equities team in 1992. Prior to that, Mr. Martini had served as a senior economist concentrating on US research since joining Bernstein in 1985. Previously, Mr. Martini conducted economic research and taught at the Institute of Employment Policy at Boston University for three years. He earned a BA from the University of Colorado and an MA in political economy from Boston University. He also completed all course and examination requirements for the PhD program in economics at Boston University. Location: New York. Mr. D'Auria was named co-CIO of International Value equities in 2003, adding to his responsibilities as CIO -- Emerging Markets Value equities, which he assumed in 2002. Mr. D'Auria was one of the chief architects of Bernstein's global research department, which he managed from 1998 through 2002. Over the years, he has also served as director of research -- Small Cap Value equities and director of research -- Emerging Markets Value equities. Mr. D'Auria joined the firm in 1991 as a research analyst covering consumer and natural gas companies, and he later covered the financial services industry. Before coming to Bernstein, Mr. D'Auria was a vice president and sell-side analyst at PaineWebber, specializing in restaurants, lodging and retail. He earned a BA from Trinity College. Chartered Financial Analyst. Location: New York. POTENTIAL CONFLICTS OF INTEREST As an investment adviser and fiduciary, Alliance owes its clients and shareholders an undivided duty of loyalty. We recognize that conflicts of interest are inherent in our business and accordingly have developed policies and procedures (including oversight monitoring) reasonably designed to detect, manage and mitigate the effects of actual or potential conflicts of interest in the area of employee personal trading, managing multiple accounts for multiple clients, including AllianceBernstein Mutual Funds, and allocating investment opportunities. Investment professionals, including portfolio managers and research analysts, are subject to the above-mentioned policies and oversight monitoring to ensure that all clients are treated equitably. We place the interests of our clients first and expect all of our employees to meet their fiduciary duties. Employee Personal Trading Alliance has adopted a Code of Business Conduct and Ethics that is designed to detect and prevent conflicts of interest when investment professionals and other personnel of Alliance own, buy or sell securities which may be owned by, or bought or sold for, clients. Personal securities transactions by an employee may raise a potential conflict of interest when an employee owns or trades in a security that is owned or considered for purchase or sale by a client, or recommended for purchase or sale by an employee to a client. Subject to the reporting requirements and other limitations of its Code of Business Conduct and Ethics, Alliance permits its employees to engage in personal securities transactions, and also allows them to acquire investments in the AllianceBernstein Mutual Funds through direct purchase, 401K/profit sharing plan investment and/or notionally in connection with deferred incentive compensation awards. Alliance's Code of Ethics and Business Conduct requires disclosure of all personal accounts and maintenance of brokerage accounts with designated broker-dealers approved by Alliance. The Code also requires preclearance of all securities transactions and imposes a one-year holding period for securities purchased by employees to discourage short-term trading. Managing Multiple Accounts for Multiple Clients Alliance has compliance policies and oversight monitoring in place to address conflicts of interest relating to the management of multiple accounts for multiple clients. Conflicts of interest may arise when an investment professional has responsibilities for the investments of more than one account because the investment professional may be unable to devote equal time and attention to each account. The investment professional or investment professional teams for each client may have responsibilities for managing all or a portion of the investments of multiple accounts with a common investment strategy, including other registered investment companies, unregistered investment vehicles, such as hedge funds, pension plans, separate accounts, collective trusts and charitable foundations. Among other things, Alliance's policies and procedures provide for the prompt dissemination to investment professionals of initial or changed investment recommendations by analysts so that investment professionals are better able to develop investment strategies for all accounts they manage. In addition, investment decisions by investment professionals are reviewed for the purpose of maintaining uniformity among similar accounts and ensuring that accounts are treated equitably. No investment professional that manages client accounts carrying performance fees is compensated directly or specifically for the performance of those accounts. Investment professional compensation reflects a broad contribution in multiple dimensions to long-term investment success for our clients and is not tied specifically to the performance of any particular client's account, nor is it directly tied to the level or change in the level of assets under management. Allocating Investment Opportunities Alliance has policies and procedures intended to address conflicts of interest relating to the allocation of investment opportunities. These policies and procedures are designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The investment professionals at Alliance routinely are required to select and allocate investment opportunities among accounts. Portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar accounts, which minimizes the potential for conflicts of interest relating to the allocation of investment opportunities. Nevertheless, investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons. Alliance's procedures are also designed to prevent potential conflicts of interest that may arise when Alliance has a particular financial incentive, such as a performance-based management fee, relating to an account. An investment professional may perceive that he or she has an incentive to devote more time to developing and analyzing investment strategies and opportunities or allocating securities preferentially to accounts for which Alliance could share in investment gains. To address these conflicts of interest, Alliance's policies and procedures require, among other things, the prompt dissemination to investment professionals of any initial or changed investment recommendations by analysts; the aggregation of orders to facilitate best execution for all accounts; price averaging for all aggregated orders; objective allocation for limited investment opportunities (e.g., on a rotational basis) to ensure fair and equitable allocation among accounts; and limitations on short sales of securities. These procedures also require documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. OWNERSHIP OF SECURITIES OF THE FUND As of June 30, 2005, Messrs. D'Auria, Simms and Martini, and Ms. Fay, had no beneficial ownership in the Fund. PORTFOLIO MANAGERS COMPENSATION Alliance's compensation program for investment professionals is designed to be competitive and effective in order to attract and retain the highest caliber employees. The compensation program for investment professionals is designed to reflect their ability to generate long-term investment success for our clients, including shareholders of the AllianceBernstein Mutual Funds. Investment professionals do not receive any direct compensation based upon the investment returns of any individual client account, nor is compensation tied directly to the level or change in the level of assets under management. Investment professionals' annual compensation is comprised of the following: (i) Fixed base salary: This is generally the smallest portion of compensation. The base salary is a relatively low, fixed salary within a similar range for all investment professionals. The base salary [is determined at the outset of employment based on level of experience,] does not change significantly from year-to-year, and hence, is not particularly sensitive to performance. (ii) Discretionary incentive compensation in the form of an annual cash bonus: Alliance's overall profitability determines the total amount of incentive compensation available to investment professionals. This portion of compensation is determined subjectively based on qualitative and quantitative factors. In evaluating this component of an investment professional's compensation, Alliance considers the contribution to his/her team or discipline as it relates to that team's overall contribution to the long-term investment success, business results and strategy of Alliance. Quantitative factors considered include, among other things, relative investment performance (e.g., by comparison to competitor or peer group funds or similar styles of investments, and appropriate, broad-based or specific market indices), and consistency of performance. There are no specific formulas used to determine this part of an investment professional's compensation and the compensation is not tied to any pre-determined or specified level of performance. Alliance also considers qualitative factors such as the complexity and risk of investment strategies involved in the style or type of assets managed by the investment professional; success of marketing/business development efforts and client servicing; seniority/length of service with the firm; management and supervisory responsibilities; and fulfillment of Alliance's leadership criteria. (iii) Discretionary incentive compensation in the form of awards under Alliance's Partners Compensation Plan ("deferred awards"): Alliance's overall profitability determines the total amount of deferred awards available to investment professionals. The deferred awards are allocated among investment professionals based on criteria similar to those used to determine the annual cash bonus. There is no fixed formula for determining these amounts. Deferred awards, for which there are various investment options, vest over a four-year period and are generally forfeited if the employee resigns or Alliance terminates his/her employment. Investment options under the deferred awards plan include many of the same AllianceBernstein Mutual Funds offered to mutual fund investors, thereby creating a close alignment between the financial interests of the investment professionals and those of Alliance's clients and mutual fund shareholders with respect to the performance of those mutual funds. Alliance also permits deferred award recipients to allocate up to 50% of their award to investments in Alliance's publicly traded equity securities.(1) (iv) Contributions under Alliance's Profit Sharing/401(k) Plan: The contributions are based on Alliance's overall profitability. The amount and allocation of the contributions are determined at the sole discretion of Alliance. -------------- (1) Prior to 2002, investment professional compensation also included discretionary long-term incentive in the form of restricted grants of Alliance Capital's Master Limited Partnership Units. TA IDEX NEUBERGER BERMAN INTERNATIONAL ("FUND") NEUBERGER BERMAN MANAGEMENT, INC. ("SUB-ADVISER") OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS The Portfolio Managers may also be responsible for the day-to-day management of other accounts, as indicated by the following table. None of these has an advisory fee based on the performance of the account.
Registered Investment Other Pooled Investment Other Accounts Companies Vehicles -------------------- -------------- -------------- -------------- -------------- -------------- ------------- NAME Number of Total Assets Number of Total Assets Number of Total Assets Accounts Accounts Accounts -------------------- -------------- -------------- -------------- -------------- -------------- ------------- Benjamin Segal
POTENTIAL CONFLICTS OF INTEREST Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts could include, for example, conflicts in the allocation of investment opportunities and aggregated trading. The Sub-Adviser has adopted policies and procedures that are designed to minimize the effects of these conflicts. OWNERSHIP OF SECURITIES OF THE FUND As of June 30, 2005, Mr. Segal had no beneficial ownership in the Fund. PORTFOLIO MANAGER COMPENSATION TA IDEX OPPENHEIMER DEVELOPING MARKETS ("FUND") OPPENHEIMERFUNDS, INC. ("SUB-ADVISER") OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS The Portfolio Managers may also be responsible for the day-to-day management of other accounts, as indicated by the following table. None of these has an advisory fee based on the performance of the account.
Registered Investment Other Pooled Investment Other Accounts Companies Vehicles -------------------- ----------------------------- ----------------------------- ---------------------------- NAME Number of Total Assets Number of Total Assets Number of Total Assets Accounts Accounts Accounts -------------------- -------------- -------------- -------------- -------------- -------------- ------------- Mark Madden
POTENTIAL CONFLICTS OF INTEREST Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts could include, for example, conflicts in the allocation of investment opportunities and aggregated trading. The Sub-Adviser has adopted policies and procedures that are designed to minimize the effects of these conflicts. OWNERSHIP OF SECURITIES OF THE FUND As of June 30, 2005, Mr. Madden had no beneficial ownership in the Fund. PORTFOLIO MANAGERS COMPENSATION TA IDEX J.P. MORGAN INTERNATIONAL BOND ("FUND") J.P. MORGAN INVESTMENT MANAGEMENT, INC. ("SUB-ADVISER") OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS The Portfolio Managers may also be responsible for the day-to-day management of other accounts, as indicated by the following table. None of these has an advisory fee based on the performance of the account.
Registered Investment Other Pooled Investment Other Accounts Companies Vehicles -------------------- -------------- -------------- -------------- -------------- -------------- ------------- NAME Number of Total Assets Number of Total Assets Number of Total Assets Accounts Accounts Accounts -------------------- -------------- -------------- -------------- -------------- -------------- ------------- Julian Le Baron
POTENTIAL CONFLICTS OF INTEREST The chart above shows the number, type and market value as of 12/31/04 of the accounts other than the Fund that are managed by the Fund's portfolio manager. The potential for conflicts of interest exists when portfolio managers manage other accounts with similar investment objectives and strategies as the Fund ("Similar Accounts"). Potential conflicts may include, for example, conflicts between investment strategies and conflicts in the allocation of investment opportunities. Responsibility for managing the Sub-Adviser's clients' portfolios is organized according to investment strategies within asset classes. Generally, client portfolios with similar strategies are managed by portfolio managers in the same portfolio management group using the same objectives, approach and philosophy. Therefore, portfolio holdings, relative position sizes and industry and sector exposures tend to be similar across similar portfolios, which minimizes the potential for conflicts of interest. The Sub-Adviser may receive more compensation with respect to certain Similar Accounts than that received with respect to the Fund or may receive compensation based in part on the performance of certain Similar Accounts. This may create a potential conflict of interest for the Sub-Adviser or its portfolio managers by providing an incentive to favor these Similar Accounts when, for example, placing securities transactions. In addition, the Sub-Adviser could be viewed as having a conflict of interest to the extent that the Sub-Adviser or an affiliate has a proprietary investment in Similar Accounts, the portfolio managers have personal investments in Similar Accounts or the Similar Accounts are investment options in the Sub-Adviser's employee benefit plans. Potential conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities. Allocations of aggregated trades, particularly trade orders that were only partially completed due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest, as the Sub-Adviser may have an incentive to allocate securities that are expected to increase in value to favored accounts. Initial public offerings, in particular, are frequently of very limited availability. The Sub-Adviser may be perceived as causing accounts it manages to participate in an offering to increase the Sub-Adviser's overall allocation of securities in that offering. A potential conflict of interest also may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by another account, or when a sale in one account lowers the sale price received in a sale by a second account. If the Sub-Adviser manages accounts that engage in short sales of securities of the type in which the Fund invests, the Sub-Adviser could be seen as harming the performance of the Fund for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall. The Sub-Adviser has policies and procedures designed to manage these conflicts described above such as allocation of investment opportunities to achieve fair and equitable allocation of investment opportunities among its clients over time. For example: Orders for the same equity security are aggregated on a continual basis throughout each trading day consistent with the Sub-Adviser's duty of best execution for its clients. If aggregated trades are fully executed, accounts participating in the trade will be allocated their pro rata share on an average price basis. Partially completed orders generally will be allocated among the participating accounts on a pro-rata average price basis, subject to certain limited exceptions. For example, accounts that would receive a de minimis allocation relative to their size may be excluded from the order. Another exception may occur when thin markets or price volatility require that an aggregated order be completed in multiple executions over several days. If partial completion of the order would result in an uneconomic allocation to an account due to fixed transaction or custody costs, the Sub-Adviser may exclude small orders until 50% of the total order is completed. Then the small orders will be executed. Following this procedure, small orders will lag in the early execution of the order, but will be completed before completion of the total order. Purchases of money market instruments and fixed income securities cannot always be allocated pro-rata across the accounts with the same investment strategy and objective. However, the Sub-Adviser attempts to mitigate any potential unfairness by basing non-pro rata allocations upon an objective predetermined criteria for the selection of investments and a disciplined process for allocating securities with similar duration, credit quality and liquidity in the good faith judgment of the Sub-Adviser so that fair and equitable allocation will occur over time. OWNERSHIP OF SECURITIES OF THE FUND As of June 30, 2005, Mr. Le Baron had no beneficial ownership in the Fund. PORTFOLIO MANAGER COMPENSATION The Sub-Adviser's portfolio managers participate in a competitive compensation program that is designed to attract and retain outstanding people and closely link the performance of investment professionals to client investment objectives. The total compensation program includes a base salary fixed from year to year and a variable performance bonus consisting of cash incentives and restricted stock and, in some cases, mandatory deferred compensation. These elements reflect individual performance and the performance of the Sub-Adviser's business as a whole. Each portfolio manager's performance is formally evaluated annually based on a variety of factors including the aggregate size and blended performance of the portfolios such portfolio manager manages. Individual contribution relative to client goals carries the highest impact. Portfolio manager compensation is primarily driven by meeting or exceeding clients' risk and return objectives, relative performance to competitors or competitive indices and compliance with firm policies and regulatory requirements. In evaluating each portfolio manager's performance with respect to the mutual funds he or she manages, the funds' pre-tax performance is compared to the appropriate market peer group and to each fund's benchmark index listed in the fund's prospectus over one, three and five year periods (or such shorter time as the portfolio manager has managed the fund). Investment performance is generally more heavily weighted to the long-term. Stock awards are granted as part of an employee's annual performance bonus and comprise from 0% to 35% of a portfolio manager's total award. As the level of incentive compensation increases, the percentage of compensation awarded in restricted stock also increases. Certain investment professionals may also be subject to a mandatory deferral of a portion of their compensation into proprietary mutual funds based on long-term sustained investment performance. TA IDEX FEDERATED CONSERVATIVE TACTICAL ALLOCATION ("FUND") FEDERATED EQUITY MANAGEMENT COMPANY ("SUB-ADVISER") OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS The Portfolio Managers may also be responsible for the day-to-day management of other accounts, as indicated by the following table. None of these has an advisory fee based on the performance of the account.
Registered Investment Other Pooled Investment Other Accounts Companies Vehicles -------------------- -------------- -------------- -------------- -------------- -------------- ------------- NAME Number of Total Assets Number of Total Assets Number of Total Assets Accounts Accounts Accounts -------------------- -------------- -------------- -------------- -------------- -------------- ------------- Steven J. Lehman John Nichol
POTENTIAL CONFLICTS OF INTEREST Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts could include, for example, conflicts in the allocation of investment opportunities and aggregated trading. The Sub-Adviser has adopted policies and procedures that are designed to minimize the effects of these conflicts. OWNERSHIP OF SECURITIES OF THE FUND As of June 30, 2005, Messrs. Lehman and Nichols had no beneficial ownership in the Fund. PORTFOLIO MANAGERS COMPENSATION TA IDEX MERCURY TACTICAL ALLOCATION ("FUND") FUND ASSET MANAGEMENT, L.P., DOING BUSINESS AS MERCURY ADVISORS ("SUB-ADVISER") OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS The Portfolio Managers may also be responsible for the day-to-day management of other accounts, as indicated by the following table. None of these has an advisory fee based on the performance of the account.
Registered Investment Other Pooled Investment Other Accounts Companies Vehicles -------------------- -------------- -------------- -------------- -------------- -------------- ------------- NAME Number of Total Assets Number of Total Assets Number of Total Assets Accounts Accounts Accounts -------------------- -------------- -------------- -------------- -------------- -------------- ------------- Dennis W. Stattman
POTENTIAL CONFLICTS OF INTEREST Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts could include, for example, conflicts in the allocation of investment opportunities and aggregated trading. The Sub-Adviser has adopted policies and procedures that are designed to minimize the effects of these conflicts. OWNERSHIP OF SECURITIES OF THE FUND As of June 30, 2005, Mr. Stattman had no beneficial ownership in the Fund. PORTFOLIO MANAGERS COMPENSATION TA IDEX CREDIT SUISSE COMMODITIES ("FUND") CREDIT SUISSE ASSET MANAGEMENT, LLC ("SUB-ADVISER") OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS The Portfolio Managers may also be responsible for the day-to-day management of other accounts, as indicated by the following table. None of these has an advisory fee based on the performance of the account.
Registered Investment Other Pooled Investment Other Accounts Companies Vehicles -------------------- ------------------------------ ------------------------------ -------------------------------- NAME Number of Total Assets Number of Total Assets Number of Total Assets Accounts Accounts Accounts -------------------- ------------- ---------------- ------------- ---------------- -------------------------------- Nelson Louie 7 119,268,310 1 21,235,937 2 78,301,095 Kam Poon 1 74,867,422 1 53,457,232 8 1,223,375,854 Andrew Lenskoid 3 512,017,015 1 338,679,554 19 2,048,563,504
POTENTIAL CONFLICTS OF INTEREST Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts could include, for example, conflicts in the allocation of investment opportunities and aggregated trading. The Sub-Adviser has adopted policies and procedures that are designed to minimize the effects of these conflicts. OWNERSHIP OF SECURITIES OF THE FUND As of June 30, 2005, Messrs. Louie, Lenskold and Poon had no beneficial ownership in the Fund. PORTFOLIO MANAGERS COMPENSATION Credit Suisse Asset Management, LLC's compensation to the portfolio managers of the Fund includes both a fixed base salary component and bonus component. The discretionary bonus for each portfolio manager is not tied by the formula to the performance of any fund or account. The factors taken into account in determining a portfolio manager's bonus include the Fund's performance, assets held in the Fund and other accounts managed by the portfolio managers, business growth, team work, management, corporate citizenship, etc. A portion of the bonus may be paid in phantom shares of Credit Suisse Group stock as deferred compensation. Phantom shares are shares representing an unsecured right to receive on a particular date a specified number of registered shares subject to certain terms and conditions. Like all employees of the Sub-Adviser, portfolio managers participate in the Sub-Adviser's profit sharing and 401(k) plans. APPENDIX B PROXY VOTING POLICIES AND PROCEDURES [TO BE FILED BY AMENDMENT] 1 TRANSAMERICA IDEX MUTUAL FUNDS OTHER INFORMATION PART C TRANSAMERICA IDEX MUTUAL FUNDS OTHER INFORMATION PART C ITEM 22 EXHIBITS List all exhibits filed as part of the Registration Statement. (a) Declaration of Trust (25) (b) Bylaws (25) (c) Not Applicable (d) (1) Investment Advisory Agreements (aa) TA IDEX Janus Growth (4) (bb) TA IDEX Transamerica Flexible Income (19) (cc) TA IDEX Jennison Growth (1) (dd) TA IDEX Transamerica Value Balanced (13) (ee) TA IDEX Transamerica Conservative High-Yield Bond (2) (ff) TA IDEX T. Rowe Price Tax-Efficient Growth, TA IDEX Salomon All Cap and TA IDEX T. Rowe Price Small Cap (4) (gg) TA IDEX Transamerica Growth Opportunities and TA IDEX Transamerica Equity (6) (hh) TA IDEX Great Companies - America(SM), TA IDEX Great Companies- Technology(SM) and TA IDEX Federated Tax Exempt (7) (ii) TA IDEX Templeton Great Companies Global (22) (jj) TA IDEX American Century International and TA IDEX American Century Large Company Value (9) (kk) TA IDEX Transamerica Money Market, TA IDEX Transamerica Convertible Securities, TA IDEX PIMCO Total Return, TA IDEX Salomon Investors Value and TA IDEX T. Rowe Price Health Sciences (26) (ll) TA IDEX Marsico Growth (15) (mm) TA IDEX Clarion Real Estate Securities and TA IDEX PIMCO Real Return TIPS (16) (nn) TA IDEX Transamerica Small/Mid Cap Value (19) (oo) TA IDEX Transamerica Balanced (22) (pp) TA IDEX J.P. Morgan Mid Cap Value, TA IDEX Marsico International Growth, TA IDEX Mercury Large Cap Value, TA IDEX T. Rowe Price Equity Income, TA IDEX Transamerica Short-Term Bond, TA IDEX UBS Large Cap Value, TA IDEX Van Kampen Emerging Markets Debt, TA IDEX Van Kampen Large Cap Core, TA IDEX Van Kampen Small Company Growth, TA IDEX Van Kampen Active International Allocation, TA IDEX Evergreen International Small Cap (23) (qq) TA IDEX Protected Principal Stock (13) (rr) TA IDEX AllianceBernstein International Value, TA IDEX Neuberger Berman International, TA IDEX Oppenheimer Emerging Markets, TA IDEX J.P. Morgan International Bond, TA IDEX Federated Conservative Tactical Allocation, TA IDEX Mercury Tactical Allocation and TA IDEX Credit Sussie Commodities (26) (2) Sub-Advisory Agreements (aa) TA IDEX Janus Growth (12) (bb) TA IDEX Transamerica Flexible Income (19) (cc) TA IDEX Transamerica Value Balanced (13) (dd) TA IDEX Transamerica Conservative High-Yield Bond (2) (ee) TA IDEX T. Rowe Price Tax-Efficient Growth and TA IDEX T. Rowe Price Small Cap (4) (ff) TA IDEX Salomon All Cap (4) (gg) TA IDEX Transamerica Growth Opportunities and TA IDEX Transamerica Equity (6) (hh) TA IDEX Great Companies - America(SM), TA IDEX Great Companies - Technology(SM) and TA IDEX Federated Tax Exempt (7) (ii) TA IDEX Templeton Great Companies Global (22) (jj) TA IDEX American Century International and TA IDEX American Century Large Company Value (9) (kk) TA IDEX Jennison Growth (1) (ll) TA IDEX Transamerica Convertible Securities and TA IDEX Transamerica Money Market (12) (mm) TA IDEX PIMCO Total Return (12) (nn) TA IDEX T. Rowe Price Health Sciences (12) (oo) TA IDEX Salomon Investors Value (12) (pp) TA IDEX Marsico Growth (17) (qq) TA IDEX Clarion Real Estate Securities (16) (rr) TA IDEX PIMCO Real Return TIPS (16) (ss) TA IDEX Transamerica Small/Mid Cap Value (19) (tt) TA IDEX Transamerica Balanced (22) (uu) TA IDEX Evergreen International Small Cap(23) (vv) TA IDEX J.P. Morgan Mid Cap Value(23) (ww) TA IDEX Marsico International Growth(23) (xx) TA IDEX Mercury Large Cap Value(23) (yy) TA IDEX MFS High Yield(23) (zz) TA IDEX T. Rowe Price Equity Income(23) (aaa) TA IDEX Third Avenue Value(23) (bbb) TA IDEX Transamerica Short-Term Bond(23) (ccc) TA IDEX UBS Large Cap Value(23) (ddd) TA IDEX Van Kampen Emerging Markets Debt, TA IDEX Van Kampen Large Cap Core, TA IDEX Van Kampen Small Company Growth, TA IDEX Van Kampen Active International Allocation(23) (eee) TA IDEX Protected Principal Stock (13) (fff) TA IDEX AllianceBernstein International Value, TA IDEX Neuberger Berman International, TA IDEX Oppenheimer Emerging Markets, TA IDEX J.P. Morgan International Bond, TA IDEX Federated Conservative Tactical Allocation, TA IDEX Mercury Tactical Allocation and TA IDEX Credit Sussie Commodities (26) (e) (1) Underwriting Agreement (Schedule I) (16) (2) Dealer's Sales Agreement (15) (3) Service Agreement (5) (4) Wholesaler's Agreement (1) (f) Trustees Deferred Compensation Plan (3) (g) Custody Agreement (14) (h) (1) (a) Transfer Agency Agreement (2) (b) Amendment to Transfer Agency Agreement (24) (2) (a) Administrative Services Agreement (14) (b) Amendment to Administrative Services Agreement (24) (3) Expense Limitation Agreement (16) (4) Consulting Agreement (19) (i) Opinion of Counsel (24) (j) Consent of PricewaterhouseCoopers LLP (26) (k) Financial Statements - AEGON/Transamerica Fund Services, Inc. ( now known as Transamerica Fund Advisors, Inc.) (24) (l) Investment Letter from Sole Shareholder (2) (m) (1) Plan of Distribution under Rule 12b-1 - Class A/B Shares (all funds) (19) (2) Plan of Distribution under Rule 12b-1 - Class C Shares (19) (aa) TA IDEX Janus Growth (5) (bb) TA IDEX Salomon Investors Value (5) (cc) TA IDEX Transamerica Value Balanced (5) (dd) TA IDEX Transamerica Balanced (5) (ee) TA IDEX Transamerica Flexible Income (19) (ff) TA IDEX Transamerica Conservative High-Yield Bond (5) (gg) TA IDEX Marsico Growth (5) (hh) TA IDEX T. Rowe Price Tax-Efficient Growth (5) (ii) TA IDEX Salomon All Cap (5) (jj) TA IDEX T. Rowe Price Small Cap (5) (kk) TA IDEX Jennison Growth (1) (ll) TA IDEX Transamerica Growth Opportunities and TA IDEX Transamerica Equity (6) (mm) TA IDEX Great Companies - America(SM) and TA IDEX Great Companies - Technology(SM) (7) (nn) TA IDEX Templeton Great Companies Global (8) (oo) TA IDEX American Century International and TA IDEX American Century Large Company Value (9) (pp) Amendment to Plan of Distribution under Rule 12b-1 - Class C Shares (11) (qq) TA IDEX Transamerica Convertible Securities, TA IDEX Transamerica Money Market, TA IDEX PIMCO Total Return, TA IDEX T. Rowe Price Health Sciences (26) (rr) TA IDEX Transamerica Small/Mid Cap Value (19) (ss) TA IDEX Protected Principal Stock (13) (3) Plan of Distribution under Rule 12b-1 - Class M Shares (Federated Tax Exempt) (26) (n) Amended and Restated Plan for Multiple Classes of Shares (12) (o) Reserved (p) Code of Ethics (1) Transamerica IDEX Mutual Funds (24) (2) Transamerica Fund Advisors, Inc. (24) SUB-ADVISERS (3) AEGON USA Investment Management, LLC (7) (4) Federated Investment Management Company (7) (5) Janus Capital Management, LLC (7) (6) Salomon Brothers Asset Management Inc (7) (7) Transamerica Investment Management, LLC (24) (8) T. Rowe Price Associates, Inc. (7) (9) Great Companies, L.L.C. (8) (10) Jennison Associates LLC (24) (11) American Century Investment Management, Inc. (10) (12) Pacific Investment Management Company LLC (13) (13) Banc of America Capital Management, LLC (15) (14) ING Clarion Real Estate Securities (16) (15) Templeton Investment Counsel, LLC (18) (16) Evergreen Investment Management Company, LLC(23) (17) J.P. Morgan Investment Management Inc.(23) (18) Fund Asset Management, L.P., dba Mercury Advisors (20) (19) UBS Global Asset Management (Americas) Inc.(23) (20) Morgan Stanley Investment Management Inc. (21) (21) Gateway Investment Advisers, Inc. (13) (22) American Century Global Investment , Inc. (26) (23) Alliance Capital Management LP (26) (24) Credit Suisse Asset Management LLC (26) (25) Neuberger Berman Management (26) (26) OppenheimerFunds, Inc. (26) ---------- All exhibits filed previously are herein incorporated by reference (1) Filed previously with Post-Effective Amendment No. 20 to Registration Statement filed on November 16, 1995 (File No. 33-2659). (2) Filed previously with Post-Effective Amendment No. 24 to Registration Statement filed on November 15, 1996 (File No. 33-2659). (3) Filed previously with Post-Effective Amendment No. 25 to Registration Statement filed on January 31, 1997 (File No. 33-2659) (4) Filed previously with Post-Effective Amendment No. 29 to Registration Statement filed on December 15, 1998 (File No. 33-2659). (5) Filed previously with Post-Effective Amendment No. 31 to Registration Statement filed on September 2, 1999 (File No. 33-2659). (6) Filed previously with Post-Effective Amendment No. 33 to Registration Statement filed on December 17, 1999 (File No. 33-2659). (7) Filed previously with Post-Effective Amendment No. 35 to Registration Statement filed on March 31, 2000 (File No. 33-2659). (8) Filed previously with Post-Effective Amendment No. 37 to Registration Statement filed on June 16, 2000 (File No. 33-2659). (9) Filed previously with Post-Effective Amendment No. 41 to Registration Statement on December 15, 2000 (File No. 33-2659). (10) Filed previously with American Century [California] Tax Free & Municipal Funds Post-Effective Amendment No. 30 to the Registration Statement filed on December 29, 2000, and incorporated herein by reference (File No. 002-82734). (11) Filed previously with Post-Effective Amendment No. 42 to Registration Statement on March 1, 2001 (File No. 33-2659). (12) Filed previously with Post-Effective Amendment No. 43 to Registration Statement on December 17, 2001 (File No. 33-2659). (13) Filed previously with Post-Effective Amendment No. 47 to Registration Statement on March 29, 2002 (File No. 33-2659). (14) Filed previously with Post-Effective Amendment No. 49 to Registration Statement on September 12, 2002 (File No. 33-2659). (15) Filed previously with Post-Effective Amendment No. 50 to Registration Statement on November 12, 2002 (File No. 33-2659). (16) Filed previously with Post-Effective Amendment No. 51 to Registration Statement on December 13, 2002 (File No. 33-2659). (17) Filed previously with Post-Effective Amendment No. 52 to Registration Statement on February 28, 2003 (File No. 33-2659). (18) Filed previously with Post-Effective Amendment No. 54 to Registration Statement on December 31, 2003 (File No. 33-2659). (19) Filed previously with Post-Effective Amendment No. 56 to Registration Statement on March 1, 2004 (File No. 33-2659). (20) Filed previously with AEGON/Transamerica Series Fund, Inc. Post-Effective Amendment No. 50 to Registration Statement on April 30, 2002, and incorporated herein by reference (File No. 811-4419). (21) Filed previously with AEGON/Transamerica Series Fund, Inc. Post-Effective Amendment No. 56 to Registration Statement on February 28, 2003, and incorporated herein by reference (File No. 811-4419). (22) Filed previously with Post-Effective Amendment No. 61 to Registration Statement on October 1, 2004 (File No. 33-2659). (23) Filed previously with Post-Effective Amendment No. 63 to Registration Statement on November 2, 2004 (File No. 33-2659). (24) Filed previously with Post-Effective Amendment No. 67 to Registration Statement on February 25, 2005 (File No. 33- 2659). (25) Filed previously with Post-Effective Amendment No. 69 to Registration Statement on May 27, 2205 (File No. 33- 2659). (26) To be filed by amendment. ITEM 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND To the knowledge of the Registrant, TA IDEX Janus Growth, TA IDEX Transamerica Balanced, TA IDEX Transamerica Flexible Income, TA IDEX Jennison Growth, TA IDEX Salomon Investors Value, TA IDEX Transamerica Value Balanced, TA IDEX Transamerica Conservative High-Yield Bond, TA IDEX Marsico Growth, TA IDEX T. Rowe Price Tax-Efficient Growth, TA IDEX Salomon All Cap, TA IDEX T. Rowe Price Small Cap, TA IDEX Transamerica Growth Opportunities, TA IDEX Transamerica Equity, TA IDEX Great Companies - America(SM), TA IDEX Great Companies - Technology(SM), TA IDEX American Century International, TA IDEX American Century Large Company Value, TA IDEX Transamerica Small/Mid Cap Value, TA IDEX Transamerica Convertible Securities, TA IDEX Transamerica Money Market, TA IDEX T. Rowe Price Health Sciences, TA IDEX PIMCO Total Return, TA IDEX Templeton Great Companies Global, TA IDEX Clarion Real Estate Securities, TA IDEX PIMCO Real Return TIPS, TA IDEX Evergreen International Small Cap, TA IDEX J.P. Morgan Mid Cap Value, TA IDEX Marsico International Growth, TA IDEX Mercury Large Cap Value, TA IDEX MFS High Yield, TA IDEX T. Rowe Price Equity Income, TA IDEX Transamerica Short-Term Bond, TA IDEX UBS Large Cap Value, TA IDEX Van Kampen Emerging Markets Debt, TA IDEX Van Kampen Large Cap Core, TA IDEX Van Kampen Small Company Growth, TA IDEX Van Kampen Active International Allocation, TA IDEX AllianceBernstein International Value, TA IDEX Neuberger Berman International, TA IDEX Oppenheimer Emerging Markets, TA IDEX J.P. Morgan International Bond, TA IDEX Federated Conservative Tactical Allocation, TA IDEX Mercury Tactical Allocation and TA IDEX Credit Sussie Commodities are not controlled by or under common control with any other person. The Registrant has no subsidiaries. ITEM 25 INDEMNIFICATION Provisions relating to indemnification of the Registrant's Trustees and employees are included in Registrant's Restatement of Declaration of Trust and Bylaws which are incorporated herein by reference. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to Trustees, officers and controlling persons, or otherwise, Registrant has been advised that in the opinion of the Commission such indemnification may be against public policy as expressed in the Act and may be, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a Trustee, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 26 BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISERS Transamerica Fund Advisors, Inc. ("TFAI") is principally engaged in offering investment advisory services. The only businesses, professions, vocations or employments of a substantial nature of Larry N. Norman, Brian C. Scott and John K. Carter, directors of TFAI, are described in the Statement of Additional Information under the section entitled "Management of the Fund." Additionally, the following describes the principal occupations of other persons who serve as executive officers of TFAI: Carol Sterlacci, interim Principal Financial Officer. Janus Capital Management LLC ("Janus"), 151 Detroit Street, Denver, Colorado 80206-4928 : Information as to the directors and officers of Janus, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-13991) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Jennison Associates, LLC ("Jennison"), 466 Lexington Avenue, New york, New York 10017: Information as to the directors and officers of Jennison, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-5608) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Salomon Brothers Asset Management Inc ("SaBAM"), 399 Park Avenue, New york, New York 10022: Information as to the directors and officers of SaBAM, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-32046) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * T. Rowe Price Associates, Inc., ("T. Rowe"), 100 East Pratt Street, Baltimore, Maryland 21202: Information as to the directors and officers of T. Rowe, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-856) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Transamerica Investment Management, LLC ("TIM"), 1150 South Olive Street, Suite 2700, Los Angeles, California 90015: Information as to the directors and officers of TIM, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-57089) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Great Companies, L.L.C. ("Great Companies"), 635 Court Street, Clearwater, Florida 33756: Information as to the directors and officers of Great Companies, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-13991) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Templeton Investment Counsel, LLC ("Templeton"), One Franklin Parkway, San Mateo, California 94403-1906: Information as to the directors and officers of Templeton, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-13991) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Federated Investment Management Company ("FMIC"), Federated Investors Tower, Pittsburgh, PA 15222: Information as to the directors and officers of FMIC, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-34612) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Federated Equity Management Company of Pennsylvania ("Federated"), Federated Investors Tower, Pittsburgh, PA 15222-3779: Information as to the directors and officers of Federated, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-62501) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * American Century Investment Management, Inc. ("American Century"), 4500 Main Street, Kansas City, Missouri 64111: Information as to the directors and officers of American Century, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-8174) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * American Century Global Investment Management, Inc. ("ACGIM"), The Chrysler Building, 666 3rd Avenue, 23rd Floor, New York, New York 10017 Information as to the directors and officers of ACGIM, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-63635) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Pacific Investment Management Company LLC ("PIMCO"), 840 Newport Center Drive, Suite 300, Newport Beach, California 92660: Information as to the directors and officers of PIMCO, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-48187) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * AEGON USA Investment Management LLC ("AUIM"), 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499: Information as to the directors and officers of AUIM, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-60667) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Banc of America Capital Management, LLC ("BACAP LLC"), 101 S. Tryon Street, Charlotte, North Carolina 28255: Information as to the directors and officers of BACAPLLC, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-50372) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * ING Clarion Real Estate Securities LP ("Clarion"), 259 North Radnor-Chester Road, Suite 205, Radnor, PA 19087: Information as to the directors and officers of Clarion, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-49083) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Fund Asset Management LP, doing business as Mercury Advisors ("Mercury"), 800 Scudders Mill Road, Plainsboro, NJ 08536: Information as to the directors and officers of Mercury, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-12485) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Gateway Investment Advisers, L.P. ("Gateway"), 3805 Edwards Road, Suite 600, Cincinnati, Ohio 45209: Information as to the directors and officers of Gateway, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-50824) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * MFS Investment Management ("MFS"), 500 Boylston Street, Boston, Massachusetts 02116: Information as to the directors and officers of MFS, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-17352) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Third Avenue Management LLC ("TAM"), 622 Third Avenue, New York, New York 10017: Information as to the directors and officers of Third Avenue, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-27792) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Morgan Stanley Investment Management ("Morgan Stanley"), 1221 Avenue of the Americas, New York, New York 10020: Information as to the directors and officers of Morgan Stanley, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-15757) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * J.P. Morgan Fleming Asset Management Inc. ("J.P. Morgan"), 522 Fifth Avenue, New York, New York 10036: Information as to the directors and officers of J.P. Morgan, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-15757) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Evergreen Investment Management Company, LLC ("Evergreen"), 200 Berkeley Street, Boston MA 02116: Information as to the directors and officers of Evergreen, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-8327) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * UBS Global Asset Management (Americas) Inc. ("UBS"), One North Wacker Drive, Chicago, IL 60606: Information as to the directors and officers of UBS, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-34910) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Alliance Capital Management, LP ("Alliance"), 1345 Avenue of the Americas, New York, New York 10105 : Information as to the directors and officers of Alliance, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-56720) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Credit Suisse Asset Management, LLC ("Credit Suisse"), 466 Lexington Avenue, New York, New York 10017: Information as to the directors and officers of Credit Suisse, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-37170) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * Neuberger Berman Management, Inc. ("Neuberger"), 605 Third Avenue, New York, New York 10158: Information as to the directors and officers of Neuberger, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-8259) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * OppenheimerFunds, Inc. ("Oppenheimer"),Two World Financial Center, 225 Liberty Street, New York, New York 10281: Information as to the directors and officers of Oppenheimer, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-8253) filed under the Investment Advisers Act of 1940, and is incorporated herein by reference thereto. * * * ITEM 27 PRINCIPAL UNDERWRITER AFSG Securities Corporation (a) The Registrant has entered into an Underwriting Agreement with AFSG Securities Corporation ("AFSG"), whose address is 4333 Edgewood Road NE, Cedar Rapids, Iowa 52494 to act as the principal underwriter of Fund shares. (b) Directors and Officers of Principal Underwriter
Name Positions and Offices with Underwriter Positions and Offices with Registrant ---- -------------------------------------- -------------------------------------- Larry N. Norman (1) Director and President N/A
Lisa Wachendorf (1) Director, Chief Compliance Officer N/A and Vice President John K. Carter (2) Vice President Senior Vice President, Secretary, Counsel and Chief Compliance Officer Linda Gilmer (1) Assistant Treasurer N/A Frank A. Camp (1) Secretary N/A Thomas R. Moriarty (2) Vice President N/A Emily Monroe Bates (3) Assistant Treasurer N/A Teresa L. Stolba (1) Assistant Compliance Officer N/A Clifton W. Flenniken III (4) Assistant Treasurer N/A Priscilla I. Hechler (2) Assistant Vice President and N/A Assistant Secretary Darin D. Smith (1) Vice President and N/A Assistant Secretary Kyle A. Keelan (1) Vice President N/A
(1) 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001 (2) 570 Carillon Parkway, St. Petersburg, FL 33716-1202 (3) 400 West Market Street, Louisville, KY 40202 (4) 1111 North Charles Street, Baltimore, MD 21201 ITEM 28 LOCATION OF ACCOUNTS AND RECORDS The accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules promulgated thereunder are maintained as follows: (a) Shareholder records are maintained by the Registrant's transfer agent, Transamerica Fund Services, Inc., P.O. Box 9015, Clearwater, FL 33758-9015. (b) All other accounting records of the Registrant are maintained at the offices of the Registrant at 570 Carillon Parkway, St. Petersburg, Florida 33716 and are in the physical possession of the officers of the Fund, or at the offices of the Custodian, Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116. ITEM 29 MANAGEMENT SERVICES The Registrant has no management-related service contract that is not discussed in Part I of this form. See the section of the Prospectus entitled "Investment Advisory and Other Services" for a discussion of the management and advisory services furnished by TFAI, Janus, Jennison, T. Rowe Price, SaBAM, TIM, AUIM, Great Companies, Federated, Gateway, American Century, ACGIM, Clarion, BACAP, Templeton, PIMCO, Evergreen, J.P. Morgan, Mercury, MFS, TAM, UBS and Morgan Stanley, Neubager, Oppenheimer, Credit Suisse, and Alliance pursuant to the Investment Advisory Agreements, the Sub-Advisory Agreements, the Administrative Services Agreement and the Underwriting Agreement. ITEM 30 UNDERTAKINGS Not applicable SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Fund certifies that it meets all the requirement for effectiveness of this registration statement under rule 485(a) under the Securities Act of 1933 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the city of St. Petersburg, and state of Florida, on the 18th day of August 2005. Transamerica IDEX Mutual Funds By: /s/ Brian C. Scott ------------------------------------ Brian C. Scott* President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933 and Investment Company Act of 1940, this Post-Effective Amendment No. 70 to its Registration Statement has been signed below by the following persons in the capacities and on the dates indicated: /s/ Peter R. Brown Chairman & Trustee August 18, 2005 --------------------------- Peter R. Brown* /s/ William W. Short, Jr. Trustee August 18, 2005 --------------------------- William W. Short, Jr.* /s/ Daniel Calabria Trustee August 18, 2005 --------------------------- Daniel Calabria* /s/ Charles C. Harris Trustee August 18, 2005 --------------------------- Charles C. Harris* /s/ Jack E. Zimmerman Trustee August 18, 2005 --------------------------- Jack E. Zimmerman* /s/ Janice B. Case Trustee August 18, 2005 --------------------------- Janice B. Case* /s/ Thomas P. O'Neill Trustee August 18, 2005 --------------------------- Thomas P. O'Neill* /s/ Russell A. Kimball, Jr. Trustee August 18, 2005 --------------------------- Russell A. Kimball, Jr.* /s/ Leo J. Hill Trustee August 18, 2005 --------------------------- Leo J. Hill* /s/ John W. Waechter Trustee August 18, 2005 --------------------------- John W. Waechter* /s/ Brian C. Scott President, Chief Executive Officer August 18, 2005 --------------------------- and Trustee Brian C. Scott* /s/ Glenn E. Brightman Interim Principal Financial Officer August 18, 2005 --------------------------- Glenn E. Brightman /s/ John K. Carter --------------------------- * Signed by John K. Carter Attorney in Fact